Renting During a Recession Means Making Concessions

Every landlord hopes for a dream tenant to walk through the door, someone who’s friendly and clean with excellent credit, solid employment, good references and no criminal record. While these tenants do exist, it’s getting harder to find renters with spotless credit reports and an unblemished employment history. These last few years of layoffs and pay cuts have wreaked havoc on families across the country, and plenty of upstanding citizens, many who’ve owned their own home before, are facing hard times.

Landlords can’t become bleeding hearts, opening their doors to every victim of the recession. It’s still important to do a thorough tenant screening on applicants and think long and hard about the risks associated with allowing someone to sign a lease. But if the potential tenants you’ve been screening have lower credit scores than what you’re used to accepting, consider a few things:

1. Don’t make a foreclosure a deal breaker. The number of people who have a mortgage in foreclosure or mortgage payments significantly past due is rising. While those people couldn’t hang onto their homes, they more than likely are good prospects for renting because they’re used to caring for and maintaining a home, and they’re determined to improve their financial situation, which means they’ll pay their rent on time.
2. Reduce the security deposit but make it nonrefundable. Reducing the security deposit gives a break to those who will probably be good tenants but don’t have a lot of cash lying around to drop all at once. And making the security deposit non-refundable helps alleviate some of your risk in renting to someone with a lower credit rating.

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Try Partnering With Tenant to Make Eco-friendly Changes

Have your heard about how Internet giant Google is partnering with its landlord, McKinley Inc., to make several eco-friendly renovations to the building it leases in Ann Arbor, Mich.? According to reports, they’re also collaborating to build a huge outdoor rooftop deck, among other things. Representatives for McKinley, which is based in Ann Arbor, say they hope the partnership can stand as an example of what can be done between landlords and tenants to adopt renewable energy technology to enhance the workplace.

It’s an idea that makes sense from a business perspective and an environmental perspective, and it’s one that can be translated on a simpler level to smaller businesses and even residential buildings as well. If you’ve thought about making sustainable changes to your properties, why not talk to your tenant about them and see if splitting the cost is an option. The tenant has a right to refuse, of course, but if they see themselves staying put for the long term, they might jump at the chance to make a few changes that could substantially cut their utility bills and help the environment as well.

Even if tenants don’t go for such a partnership, it’s a good idea to make a list of what changes you could make to your property that would enhance its sustainability and save tenants — and you — money in the long run. Then methodically knock things off your list, starting with the least expensive and moving up toward the bigger projects. Eco-friendly changes will give your property great appeal to future tenants, and could make you eligible for special tax credits as well.

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Not everybody wants a one-year lease

A yearlong lease is a pretty standard length of time for a rental property that is a tenant’s primary residence. But sometimes a tenant will ask to do a longer lease or a shorter lease. Landlords should consider the pros and cons to both when deciding whether to grant a special request for the least term. First and foremost, perform a thorough background check, credit report and rental history on the applicant as part of the tenant screening process. This will give you a clear indication of what type of lease will suit both of you best.

Two-year lease. If a tenant applicant requests a lease term that is longer than the standard one-year lease, and they have excellent credit, references and employment history, don’t be scared to sign them up for the long haul. Not all tenants wish to be nomads, moving every year to a different place. Sometimes really qualified, respectful renters just want the stability of knowing they can stay put for awhile in a home they love. If you find these folks, count your blessings.

Six-month lease. If a tenant wants a six-month lease and they pass the tenant screening process with flying colors, talk to them about the reasons behind the shorter lease. Will they be going on an extended trip? Will they be moving for their job, or getting married? Are they in the military and might be deployed or transferred to a different base? Get to the bottom of the half-year request, and if you feel comfortable with possibly having to find new tenants twice in one year, go for it.

Month-to-month lease. If you find a tenant who is interested in a month-to-month lease, beware — especially if they don’t have a good credit score or employment history. However, if you just want someone in the property for as long as you both can make the situation work, it might be worth it. The benefit is you can easily kick out the tenant at the end of the month if they aren’t paying rent. And if they do pay the rent on time, then you bought yourselves one more month of a mutually beneficial arrangement.

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Thinking about Property Management? Do Your Research First

Are you considering trying your hand at the business of property management? There’s a lot that goes into property management besides coordinating tenant screening reports  and collecting rent. You have to know what property owners in your area expect from a property manager, you have to know what your strengths are, and you have to know how much to charge to stay competitive.

First, decide what kinds of services you’ll offer, and what you’ll need in terms of staff, equipment and other resources in order to effectively offer those services. Then decide which types of properties you want to manage. Commercial properties or residential? Single-family homes or multi-family housing units? Then do some research to figure out what services are most important to those property owners and those types of properties.

Then you have to study the marketplace and figure out what is being offered and at what rates. When you find the clients you want, sell them on your ability to give them better service or more for their money than they were previously getting. Help them to understand the benefit of unloading the more stressful aspects of property ownership to a professional property manager.

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Know the Laws — and Hazards — Regarding Lead Paint

Most homes built before 1978 have some lead paint, and homes built before 1960 have the most lead paint. Even if fresh coats of paint have been put on windows, trim, doors and railings, dangerous lead paint can still be lurking underneath, and tenants are still at risk.

There are a few things you should do — and must do — if you suspect lead paint might be present in your rental property.

1. Get a lead inspection to find out if and where lead paint is located in the home.
2. Watch out for lead dust when you repair, repaint or renovate the home. Lead dust can be released from peeling or sanding lead paint, and it can settle on windowsills and floors where young children can accidentally ingest it.
3. If your rental property was built before 1978, by federal law you must give your tenants both the EPA Lead Paint Pamphlet and a disclosure of your knowledge of lead paint hazards in the rental unit, along with the lease agreement. This has to be done before a new tenant signs a lease, and before an existing tenant renews a lease.
4. Tell your tenants to report peeling paint, damaged windowsills or other painted areas, and repair it promptly.
5. Keep all painted areas in good shape. Before doing any renovations, especially ones that involve sanding, scraping or repainting, do some research about the safest way to handle such repairs and renovations in order to minimize exposure to lead paint dust. 

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Use Several Websites When Advertising Rental Property

For a long time landlords had but a few options for advertising a rental property. You could take out a classified ad in the newspaper, put up flyers around town, and stick a “For Rent” sign out front. These days, though, landlords have the Internet — an invaluable tool for finding qualified tenants and getting the word out about your property and/or your property management business.

While many landlords now use the Web to find tenant applicants, they typically use just a couple websites to do so, unaware that there are several quality websites out there that are either dedicated to rental properties or include rental properties as part of their listings. After you list your property on Craigslist and the local newspaper’s online classifieds, you should cover all your bases by making sure your listing is being cross-referenced and picked up on other reputable websites dedicated to rental properties. A few to check out are: Rent.com, HotPads.com, and Cazoodle.com.

The next time you’re in the market for a pool of qualified tenants who are searching for a property to rent just like the one you have, try one (or all!) of these services in addition to your tried-and-true internet outlets. (But don’t disregard the power of that age-old “For Rent” sign.)

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Up in Smoke: When a Tenant Smokes, the Damage Can Be Devastating

If you asked, some landlords would say they wish there was one more detail a tenant screening service could tell them about a prospective tenant — whether or not the person smokes.

Many landlords don’t like to accept tenants who smoke because of the damage that cigarette smoke does to walls, carpeting and furniture (let alone the potential for burn marks on the floors and complaints by nonsmoking neighbors who live close by and prefer to breathe smoke-free air.) But many applicants are good at hiding the fact that they are smokers.

If you ask an applicant whether he smokes and he says “only outside” or “only occasionally,” consider that answer to be “yes.” Someone might usually smoke outside, but during those long cold winter months, you can’t be sure your tenant isn’t staying curled up in his living room for a smoke instead of shivering on his porch.

When you advertise your property, be sure to include that you’re looking for nonsmoking tenants only; that should help weed out many regular smokers. And even if the tenant you find says he or she doesn’t smoke, include the rule in the rental agreement that there will be no smoking on the premises, and make sure they initial it. You might even want to stipulate that if smoke damage is found on the premises, the needed cleaning and repairs will come out of the tenant’s security deposit. 

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