Posts Tagged Credit Report

TENANTS – ALWAYS GET A CREDIT REPORT

Screening prospective Tenants can be difficult but here are a couple of tips that will help you to minimize your risk of getting a bad Tenant.

One of the main elements in screening your Tenants is to get a credit report. There are many other ways to check out your tenants but a credit report will do the best job of surfacing potential issues in their ability to pay rent and in general will help you to sort through your applicants. You can get a credit report in a couple of different ways; First, is to have your prospective Tenants run their own credit report. But be careful, free credit reports are available but rarely have a credit score. A credit score is key. Without the credit score you are subjected to reading through reams of credit information… some good and some not so good and having to figure out if this applicant is a good risk or not. The credit score will do all of that for you. Secondly, you can find many companies on the web that you can sign up with to run credit reports for your applicants. These companies will of course check you out first to be sure that you are trustworthy enough to be dealing with such sensitive information and that you will get the proper authorizations from your applicants.

As to what credit scores are good and bad; that depends on your market but I can give you some very rough ideas: a stellar credit score is 800+ and a score in the 500 range is going to be due to a lot of late payments, possibly judgments or even a bankruptcy.

In summary, a credit report will “tell the tale” about your Tenants. Be careful though not to be too restrictive; these are tough economic times we live in and you need to hear everyone’s “story”.

To view a short video on this subject go to: http://bit.ly/eCprVn

Thank you for Reading!

PAT & KRIS

Visit our website at: www.ManageToMakeMoney.com to see the full array of rental property management resources as well as our latest current live seminar schedule.

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Property Managment Fees – Know What to Expect

Managing rental properties is not for everyone.  When you make the decision to hire a property management company to manage yours, the information can be overwhelming and confusing.  This article will help to “untangle” the sometimes convoluted fee structures property managers use.

When you bought your rental property, more than likely, you did your homework to try and figure out whether or not it was the right deal for you.  Similarly, when we bought our property management company, we did a lot of due diligence also and learned that there are two basic types of property management fee structures out there: 1.) Low Base Fee and 2.) The All-Inclusive Fee.  Which one you choose has a lot to do with what services you may need.

The Low Base Fee is just as the name implies . . . it is a low fee for minimal services.  This fee structure provides for collecting rents, screening Tenants, writing leases and paying you, the owner, any funds left over at the end of the month.  The range of rates charged for this type of a property manager is between 4% and 6% of the monthly rent.  For a property Renting for $2,000 per month, assuming a rate of 5%, the fee adds up to $1,200 annually  ($2,000 per month X 12 months X .05).

The thing to watch out for with Low Base fee structure is the “Lease Up Fee” or “Leasing Commission” as many refer to it.  Most Low Base Fee property managers do NOT include this cost in their fees and they can double your property management fees right off!  If you figure a 5% leasing commission (which is common), that is another $1,200 per year just for the lease up fee!  Another thing to watch out for is that some of the Low Base Fee property managers may also charge a fee for any payments they make on your behalf; mortgage, property taxes, HOA dues, so do your homework!

The all-inclusive fee structure on the other hand, pretty much includes all of these fees in it’s single fee.  Now, don’t misunderstand me, at 8% to 12%, the all-inclusive fee structure usually will be higher than the low-base fees structure at first glance.  But when you add up all of the extras and compare them most times the all inclusive fee structure will work out to be less money.

One other thing to consider when assessing property management companies and their fee structures: the all-inclusive property manager typically pays the lease commission out of their pocket… up front.  So, they have a vested interest in finding you a good renter who will stay in your property for more than a year.

On the other hand, the property manager who charges extra for a lease-up fee or leasing commission each time they rent your property, has a vested interest in the other direction… to have you pay them the commission every year.  This could translate into more of a cavalier attitude about finding you a long-term renter.

In summary: If you will be performing some of the property manager functions like leasing your own property, paying your mortgage, insurance and property taxes then, the low-base fee structure may be best for you.  Conversely, if you don’t plan on having anything to do with managing your property, for instance if you will be living out of the area for a while; the all inclusive fee structure may be better suited for your needs.

If you found this article interesting, you can view a short video at: http://bit.ly/eWcFid

After selling their property management business in 2009, Pat and his wife founded and developed “Manage To Make Money” which is a resource for property managers providing Books, Documents and Forms, Live Seminars, E-Books, Free Webinars, Tips and Private Consulting.  The website is: http://www.ManageToMakeMoney.com

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ALWAYS . . . GET A CREDIT REPORT

Screening prospective Tenants can be difficult but here are a couple of tips that will help you to minimize your risk of getting a bad Tenant.

 One of the main elements in screening your Tenants is to get a credit report. There are many other ways to check out your tenants but a credit report will do the best job of surfacing potential issues in their ability to pay rent and in general will help you to sort through your applicants. You can get a credit report in a couple of different ways; First, is to have your prospective Tenants run their own credit report. But be careful, free credit reports are available but rarely have a credit score. A credit score is key. Without the credit score you are subjected to reading through reams of credit information… some good and some not so good and having to figure out if this applicant is a good risk or not. The credit score will do all of that for you. Secondly, you can find many companies on the web that you can sign up with to run credit reports for your applicants. These companies will of course check you out first to be sure that you are trustworthy enough to be dealing with such sensitive information and that you will get the proper authorizations from your applicants.

 As to what credit scores are good and bad; that depends on your market but I can give you some very rough ideas: a stellar credit score is 800+ and a score in the 500 range is going to be due to a lot of late payments, possibly judgments or even a bankruptcy.  If you are renting high-end properties, you probably would not want a Tenant with a credit score below 700.  If you are renting blue collar properties or low income properties scores in the 600’s would be “golden”!

 In summary, a credit report will “tell the tale” about your Tenants. Be careful though not to be too restrictive; these are tough economic times we live in and you need to hear everyone’s “story”.

 To view a short video on this subject go to: http://bit.ly/eCprVn

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