Posts Tagged Property Managment Fees
Did you know that if your Tenants have no renter’s insurance, it could leave you liable? Always require that your Tenants buy renter’s insurance with $100,000 liability and, with you named as additionally insured. This is a win-win for you and your Tenant; the insurance is relatively inexpensive, it covers the Tenant’s contents in the event of a loss (water intrusion, fire, etc) and covers you in the unfortunate event that someone is injured in the property . . . fall down the stairs, slip and fall and so on. So what’s up with additionally insured language? That names you as insured just like your Tenant, that way should the Tenant cancel the policy or fail to pay the premium, you, just like your Tenant will receive the cancellation notice. Otherwise, you will have no way of knowing if the Tenant’s renters insurance is still in effect. Make renter’s insurance a requirement . . . not an option on your properties!
For more tips or an information form explaining the benefits of renter’s insurance to your Tenants, visit our website at: ManageToMakeMoney.com
To view a short video about renter’s insurance Click Here
One last note; there is still time to catch one of our “How to Profitably Manage Rental Property Workshops”. We are in the final stages of our Spring teaching tour and have only two classes left. Click on this link for the schedule and links for signing up.
As always, thanks for reading . . . and we are still waiting on your input about forms of property ownership!
Pat & Kris
LLC . . . LLP . . . S Corp . . . C Corp?!?! For the last week or so, we have been teaching our “How to Profitably Manage Rental Property” workshops around California. It’s odd how each of our teaching trips takes on a theme. Last time, it seemed that nearly every workshop we taught people were in the process of inheriting properties. The trip before that the theme was short sales and buying foreclosures. This trip . . . true to form . . . has revealed it’s theme to us . . . Forms of Ownership. People at every workshop are asking us “What is the best way to take ownership of my rental property to protect myself . . . Living Trust . . . LLC . . . LLP . . . S Corporation?!?!”
This is certainly not our area of expertise, but we can give you some guidance here. I can tell you that owning your property just as a sole proprietor or as a couple is the most vulnerable form of ownership you can have. You can mitigate any financial exposure with general liability insurance but will still have exposure above and beyond the limits of your insurance coverage.
Let me paint an example for you: Someone trips and falls on a loose floor board which had been reported to you as a problem by your Tenant previously. The person who fell is permanently paralyzed and their potential to earn income for their family has been severely impaired due to your negligence. The case goes to court and the judge finds in favor of the injured person;$3.5 million. You have $1,000,000 in general liability coverage. Your insurance company will pay up to the million dollars of coverage you have. But, you are going to have to figure out a way to pay the other $2.5 mil . . . in other words . . . for most of us we would be wiped out financially!
As I understand it (and you will certainly want to consult a knowledgeable real estate attorney on this), if in the example above, you had owned the property as an LLC, LLP or a corporation, you would at least have had a layer between you and the judgement of the lawsuit. That entity would take the hit and not you personally. Of course this all assumes that you are operating that entity as a bonafide business, keeping annual meetings and minutes up to date, etc. Now, that entity’s assets would be vulnerable but you would manage the structure of the entity’s asset holdings.
A living trust, as I understand it, is merely a way to structure your assets so that in the event of your death, your estate will not be subject to the full impact of estate taxes. I don’t believe it will afford you any protection in the event of a lawsuit or unfavorable judgement against the trust. But then I could be mistaken.
This is a great subject to explore at more depth. I would invite any comments or insight any of you may have. I would love to pass more information along to our readers. In the mean time, we will continue to research the subject and bring you new info.
Thank you for reading. We look forward your comments!
Pat and Kris
VISIT OUR WEBSITE for a full array of books, documents, checklists, videos and tips to help you to Manage to Make Money with your rental property.
Change of Terms
I remember the first time I heard the statement “The only thing in life that is constant is change” it was quite an epiphany for me. After all, in many cases, we would all love to keep things the way they are and in managing rental properties it is no different.
We all know that changes will also come along when it comes to our rental properties… changing of Tenants (typically in a roommate situation), extending the lease, allowing a pet and requiring a pet deposit or changing the amount of rent (typically along with the extension of the lease.) What about taking care of the legal side of these changes? Do you have to completely re-write the lease and all the documents that go with it (gee, I hope not!)? Well, the answer is NO! In fact, we strongly recommend that all of the original documents stay just exactly as they were when they were first executed. Changing everything only increases your chance of making an error or an omission… there are simply too many little check boxes and blanks to fill in to hope to get them all exactly as they were on the original. So what to do? We have found a document that makes dealing with all of these changes literally a “piece of cake” and it is a “Change of Terms”.
The Change of Terms actually relies on and embraces the original lease documents and it’s language is very simple. The Change of Terms state: “All terms and conditions of the lease for the property: 123 Change Street, Beautiful California, (your property’s address), Dated January 1, 2020 (original date of your lease document)remain unchanged except for the following: (this is where you spell out the change): The term of the lease has been extended until December 31, 2022, and the rent amount effective January 1, 2021 will be $2,050.00 per month.” Everyone signs and dates and life is great!
In summary: Change is nothing to be feared with your rental property. With the “Change of Terms” you can deal with the change handily and focus your efforts on something more productive like… looking for that next property!
As always, thank you for reading!
Pat & Kris
We have produced a short video on the subject of using the Change of Terms. CLICK HERE to see it.
If this tip has been helpful to you, please visit our website at: ManageToMakeMoney.com where you will find the “Change of Terms” I spoke of as well as many more tools, tips and techniques for managing your rental property profitably.
ALWAYS Collect Move In Funds in REAL Money
By: Pat Larkin
Don’t take unnecessary risks with people you don’t know. When you have a Tenant moving into one of your properties ALWAYS collect the move in funds in Cashier’s Check or Money Order.
When you have someone getting ready to move into one of your properties ALWAYS collect the move-in monies in “Real Money”. When you have a Tenant getting ready to move into your property, typically you will trade them the keys to the property for their final balances due; deposits and first month’s rent, etc. Always collect these funds in what we call “real money”… cashier’s check or money order. To help your case, be sure that you state in their lease agreement that “only cashier’s check or money order will be accepted when paying final move in amounts.” This way, you have discussed the issue with them and they have signed off agreeing to that. In fact, depending on how much time is between them paying their holding deposit and their move in, if there is not sufficient time for a personal check to clear their bank, you may want to require that all funds paid by them are “real” money also. If you do allow for the holding deposit to be a personal check, make sure that it has cleared their bank before you give them the keys to your property.
Why go through all this “dain bramage”? Well, unscrupulous Tenants have been known to pay their move-in funds with a personal check, get their keys and promptly stop payment on their check. Then the Landlord (you) have given possession to the Tenant, have no money, no income and a couple of months of legal wrangling to look forward to before you can get your property back. And don’t forget about the make ready costs to market your property again!
In summary, don’t take unnecessary risks with your property. Always collect move in funds in REAL Money.
To view a short video on this same subject CLICK HERE
Thank you for reading!
Pat & Kris
For more tips and forms and educational tools to help you to effectively manage your rental property, please visit our web site at: ManageToMakeMoney.com
RENTAL PROPERTY WORKSHOPS:
Don’t forget that we are in California for the next couple of weeks doing these very affordable rental property workshops all over the state. If you or anyone you know could benefit from learning more about the day-to-day management and how to profitably deal with the challenges of managing rental property . . . these workshops are just what the doctor ordered! CLICK HERE to find a workshop in a location near you. We hope to see you there!
Why Renter’s Insurance
Did you know that if your Tenants have no renter’s insurance, it could leave you liable? Always require that your Tenants buy renter’s insurance with $100,000 liability and, with you named as additionally insured. This is a win-win for you and your Tenant; the insurance is relatively inexpensive, it covers the Tenant’s contents in the event of a loss (water intrusion, fire, etc) and covers you in the unfortunate event that someone is injured in the property . . . fall down the stairs, slip and fall and so on. So what’s up with additionally insured language? That names you as insured just like your Tenant, that way should the Tenant cancel the policy or fail to pay the premium, you, just like your Tenant will receive the cancellation notice. Otherwise, you will have no way of knowing if the Tenant’s renters insurance is still in effect. Make renter’s insurance a requirement . . . not an option!
Click here to view a sample document we recommend you give to your Tenant’s AND have them sign. 03.17 Insurance Facts for Residents SAMPLE
We have a complete assortment of 62 documents, Forms and Checklists which can be easily downloaded from our website. Check them out.
Thank you for reading!
Pat & Kris
Collecting rent is really the “Ground Zero” of managing your rental property. If you are not receiving rent from your Tenant, then you can’t pay your mortgage, do maintenance (at lease not from your rent revenues) . . . . it can put quite a strain on the whole rental property system.
Collecting rent is really one of the main focuses of managing rental properties. After all, if you are not collecting rent, then a whole other set of actions have to come into play, like evictions and so on. But before you get to that point, when your tenants are not paying their rent on time, many times, they need some prodding or “encouragement”. The form of this “encouragement” that I recommend is issuing a “Three Day Notice to Pay Rent or Quit” which, essentially is a threat. I am telling my tenant that if you don’t pay rent within three days, I am going to evict you.
First of all, let’s talk about what the three day notice to pay rent or quit really is; as I said before, it is a threat. I like to think of it more like a promise . . . here is my resolve . . . this is the hill that I am willing to die on. This is my business, and I am sorry if you are having problems paying rent but if you don’t, then I will have to start the eviction process. The Three Day Notice is really much more than a threat or a promise; in many states, it is a legal requirement. In many states you cannot start the eviction process unless you can prove that you have served the Three Day Notice AND three business days have passed since you did serve the notice.
We are all familiar with the mother who makes the ever-familiar threat to her kids: “I’m counting to three . . . don’t let me get to three!”. She is threatening them with who knows what if she should ever get from 2-1/2 to 2-3/4 all the way to three! Just like that mom, we have to be prepared to act on our threat or just save ourselves the effort and let the Tenant be in charge of paying rent whenever they please. This is why I strongly recommend that you have a good relationship with a reputable eviction attorney . . . to back up your threat should you need to.
We have initiated the eviction process many times but followed through all the way to a full eviction very few times. Again, having that relationship with a good eviction attorney is worth it’s weight in gold when it comes to showing your resolve to your Tenants. Keep in mind, now that we have started the process, we have incurred some attorney fees and the Tenant will have to pay his rent, any late fees AND whatever the attorney fees at that time in order to be reinstated and stop the eviction process.
In summary, you will have to show your resolve to your Tenants when it comes to collecting rent. Having a good eviction attorney on your team is a good way to show them you mean business!
To view a short video on this same subject CLICK HERE
VISIT OUR WEBSITE to see the full array of rental property management resources as well as their latest live seminar schedule.
As always, Thank you for reading!!
Pat and kris
Returning Your Tenant’s Security Deposit
Many people don’t know that if you fail to return your Tenant’s security deposit within the time frame allotted by your particular state . . . there can be some very serious consequences. As an example, the state of California mandates that you are to return your Tenant’s security deposit to them within 21 days (3 weeks). In California as in many states, if you fail to return the deposit within that time frame then first, you will lose the right to charge the Tenant for anything! It doesn’t matter if your Tenant owes you for three months of rent, late charges and they tore up your property . . . by returning the money late . . . you waive your right to charge the Tenant for anything at all! But wait . . . there’s more! Also, in many states if you miss the deadline, your Tenant is entitled to TWO TIMES the amount of security deposit. Translation: if the Tenant paid a $2,000 security deposit and you miss the return date, you could have to pay them $4,000 AND not be able to charge them for any back rent or late fees owed or for repairing any damage they may have done to your property!
The requirements for returning security deposits varies widely from state to state. I suggest that you Google “Tenant-Landlord” of “Returning Security Deposit” and add the name of your state; example: Tenant-Landlord Kansas or Returning Security Deposit Texas to get the specific information for your state.
Thank you for reading!
Pat and Kris
This tip is part of the scores of information contained in the new Property Management Training Program; Manage to Make Money . . . . the Real Estate Series. This new series has been developed around the book: Manage to make Money . . . Your Guide to Profitably Managing Rental Properties written by Pat and Kris Larkin and is being offered at various locations throughout California and in Kansas City this spring. For a schedule of workshops CLICK HERE.
To visit our website and review our Property Management Training products ranging from books to forms click on this link: ManageToMakeMoney.com