Dating back to the 1776 our troops have been going off to defend our freedoms. Some of those troops have been renters. The recent conflict in the Middle East is no exception. Recently, we have been getting more questions about troops being deployed to serve our country during a tenancy. I believe we have a moral obligation to support those that are willing to give everything to defend us while we are safe here in the USA. Further more we have a legal obligation to offer them assistance.
The Service Members Civil Relief Act guarantees that our troops will be treated fairly when deployed. If a service member, including his/her dependants has a month to month tenancy or a longer term lease they can terminate the agreement with out penalty or withholding of the security deposit.
They do have to provide some evidence that they are being deployed and need to give written notice. The written notice can be in several forms. They can just provide the landlord with a written notice to terminate or they can provide written orders as evidence of termination. We usually ask for both, if available, but do not require both. The written notice can easily be done online at our web site www.4RentDenver.com. It provides a forwarding address for the security deposit. The orders are usually easy for them to provide and we keep those in the tenants file.
The lease is effectively terminated 30 days after written notice coinciding with the end of the next month. For example, if the landlord is provide written notice on the 4th of July, rent will be due on August 1st or as written in the lease and then the lease will be terminated August 31st. The service member owes no further rent and is not liable for any losses due to early termination sustained by the landlord. The landlord can still withhold security deposit for damages, repairs, cleaning or other lawful provisions within the lease agreement.
I still shake the hand of our men and women in uniform and say “thank for your service.”
“Do you accept pets” is a common question I get from both owners and tenants. We have all heard the horror story of tenant with 100 cats and no litter box. Those stories make the news because these are so rare.
Pets fall under the risk vs, reward category of property investment. The Humane Society says that 39% of all households own a pet. I expect that percentage is even higher in Colorado. We all love the outdoors in Colorado and there is no better companion than a dog. Mine is a Black Lab named Koda.
The question you need to ask your self as rental property owner is, “do you want to eliminate ½ of all potential renters with your pet policy”? If you answer is No”, then you need a way to cover the risk of accepting pets.
We have found a simple formula of accepting pets. We ask for additional rent of $25/month per pet and $250/pet increase to the security deposit.
This eliminates the tenant that calls and asked if here and her 4 Pit Bulls can move in. They just can’t afford the deposit or the rent increase. It also provides the owner with some benefit to taking pets. Many times $50/ month rent increase and $500 deposit increase is more than enough to repair scratch marks on the door or replace carpet in one room if needed after the tenant vacates. Furthermore, most pet owners don’t cause any damage so the added rent is just a bonus to the owner.
Our owners have been very pleased with our added income and our vacancy rate on single family home has been below 1% over the past 3 years. The results speak for themselves.
We also have a list of restricted breeds provided by an insurance company that will not insure properties with these animals in the property. You can get that list from our web site www.4rentdenver.com
10 Tricks to easy Property Management
Here is a great presentation on how to make your life easier as a landlord. This was the introduced at 2010 Colorado REALTOR Rally in Denver, Colorado.
This is the Do’s and Don’t's of Property Management.
Click here to the presentation = 10 Tricks to easy Property Management
There are links to the Colorado Law regarding Security Deposit Law Section CRS 38-12-103 Return of Security Deposit. www.Michie.com
Links to free Colorado lease agreement www.4RentDenver.com
Where to get a Colorado Lease Agreement
INTERNET OR OUT OF STATE LEASES ARE GARBAGE
Free Lease Agreement www.4RentDenver.com
The Colorado Apartment Association l www.CAAHQ.org
Hopkins Tschetter Sulzer l www.HTSPC.com
Springman, Braden, Wilson & Pontius l www.sbwp-law.com
Frascona, Joiner, Goodman & Greenstien l www.Frascona.com
The best places to advertise your rental property.
Federal Fair Housing Laws.
If you own rental properties in the past few years you have heard many sad stories like this. The recent economic down turn does not just effect the foreclosure rate. Many of our tenants are already on the financial edge due to lower savings rates, change in marital status, or illness that has forced home owners to become renters. The stories are heart breaking.
What do you do when the tenant that has runs into trouble is not so sympathetic? Maybe you get that same call from the tenant that has been late every other month, has had the police called for noise violations, and has a barking dog, but always finds a way to avoid eviction. Both tenants are in the same situation, but you don’t like one and the other pulls at your heart strings.
Under Federal Fair Housing Laws, your actions may determine if you have violated a tenant’s rights. The fair thing to do would be to give the family a little extra time and use this opportunity to pounce on the bad tenant. Finally, that feeling of “I gotcha” over the bad tenant and finalize the eviction. That sounds “Fair” to me.
The word “Fair” in Fair Housing is a misnomer. Under Federal Fair Housing, if you evict one tenant and not the other, under the same circumstances, you have violated the evicted tenant rights. Under Fair Housing you must treat all tenants equally, to be fair. The more common violation of fair housing would to give the single mom extra time and not the bad tenant. That is also a violation of fair housing laws. You did not treat them equally under the law. One or both might have a viable legal Fair Housing Claim against you.
To avoid conflicts with the law we have standardized our procedures. Rent is due on the 1st of the month, late at 8:00am on the 4th of the month. We post all properties on the 4th with a 3 day demand for payment. This includes the 4th of July. On the 8th of the month we turn over the file to attorney for eviction. If we hear from the tenant with verbal or written request for extension, we will extend to the 15th of the month before legal action starts. There are “NO EXCEPTIONS”. Once we start the eviction process, we will not stop or accept payment, until the court rules on our demand for possession. After that period we have the option to accept payment. Any payment must be in full. We do not accept partial rent payment after the court order.
Being fair under the laws sometimes hurts, but that is why our clients hire a professional to make the tough decisions. Stay “equal” within the Federal Fair Housing Laws. You can find more answers to tough rental decisions at www.4RentDenver.com.
Instead of trying to convince you that winter fishing is a waste of time because it is cold, the there or no size #6 dry flies and the fish don’t bite. I will just describe my day on the Colorado this past weekend with my brother from Georgia. You decide if it interests you.
My brother from Georgia came to visit us with his wife. He always likes to go Trout Fishing with me when he is here. He only fishes when he comes here and only visits 1 time per year. Needless to say he is not quite an expert at the sport, but he is trying hard.
We left Boulder about 7:30am for a 2 hour drive to Hot Sulphur Springs Colorado. We arrived at the parking lot about 10 am to suite in a steady 25 mile an hour wind. We walk into the river valley along the river among the trees. The temperature was about 45 degrees. The trees and valley protected us from the wind. I took about 15 minutes to figure out what was biting. We hooked up our 1st double of the day on Barr’s Emerger and small Rs-2′s. We worked that area for about 2 hours.
We moved up into the Williams Fork Valley after lunch. We started above the confluence to pick up a few nice fish. We worked up above the old beaver dam hole. From there it was fish after fish. The small rainbows were 14″ and largest Browns were near 20″ . 
I love this time of year in the high country. The water is clear, crowds are non existant, the German Brown Trout are spawning, the Rainbow Trout are feeding on the eggs in the water and they are all trying to get fat for the winter.
I get asked about Section 8 Housing Vouchers all the time. Do we accept these from potential tenants and from landlords that have heard about the benefits?
For landlords there are some very tempting advantages that can draw them in. The number one reason is guaranteed rent payments. The 2nd can sometimes include higher than market rents if you market the property properly to Section 8 Clients. Accepting these will increase your pool of available tenants. Some areas or properties will be 75% Section 8 potential renters.
How Section 8 works: The local county housing authority, authorized by HUD, makes monthly payment to the landlord based upon the qualification for the tenants. Some tenant vouchers will cover the full amount of rent and other will require additional funds from the tenants. There is a pre move-in inspection and annual property inspections after that. The rent shows up around the 1st of the month. The landlord can ask for security deposit from the tenant. The lease agreement is between the tenant and the landlord. The amount of rent paid is based upon two issues; the tenant’s qualification and the property. The property amount rental value is based upon the area rents as determined by the housing authority and the number of bedrooms.
Some landlords have found a profitable niche marketing only to Section 8 vouchers holders the properties that have 4-5 bedrooms. These larger properties can garnish higher than market rents based upon the number of bedrooms from the housing authority. I have seen landlords get $1300-$1400 on a 5 bedroom house in an area that would only get $900 on the open market. That is a strong premium for the risks involved.
If everything goes well you can make a lot of money marketing to these niches.
I have found that the advantages stop there and are not worth the risks involved. If you have any problems the costs are very high. For example, here is a list of potential problems:
- During all eviction preceding the Section 8 Clients usually qualify for government assisted attorneys. You will pay $275/hour for your. Eviction proceedings can be very long and expensive.
- The security deposit is relatively low compared to credit history or non existent in some cases due to income qualifications.
- Pre move-in inspections can delay the move-in process. Annual inspection will require addition expense to the owner. The owner has to pay for tenants damages during the inspection. The tenant rarely has money to pay for repairs even if there are provisions in the lease for tenant caused damages.
- The housing authority can announce payment changes at any time. They are not a party to the lease. The Metro Atlanta Housing Authority budget was recently cut significantly so they sent a letter to all landlords that the rent will be reduced 15% effective immediately. The Little Rock Housing Authority announces a 5% decrease to all rents effective April 1, 2010. They don’t care about your lease agreement.
- The housing authority can delay payments to you if the tenant does not fill out the proper annual paperwork. I heard a story from another property manager where an entire multistory apartment building rent payment was held up for 2 months because of a problem with the housing authority. Try paying your venders for 2 month with out any rent.
- After the small security deposit is used for back rent or damages there is little chance of collection action. Most tenants have poor credit due to very low income.
- If there is a breach of lease by the tenant, there is very little negotiation. You can evict or settle for turning a blind eye to the issue. The housing authority typically works to help the tenant, not the landlord.
- Maintenance of the property by the tenant is a mixed bag; some are very good, but most are harder on the property than the average tenant. Your costs of maintenance will tend to be higher. I had a housing authority send a letter stating that the tenant is no longer required to maintain the lawn. That cost went back on the owner every summer.
This is just the tip of the iceberg. Ask any good eviction attorney to tell you few more horror stories about Section 8 cases. You will agree with us why we no longer accept Section 8 Vouchers at any of our properties. You can find more information and answers to rental questions at www.4RentDenver.com.
Rent to Own, the easy way to home ownership for the borrower’s with poor credit or no money down. That is what they sellers of rent to own deals want you to believe. The little yellow road sign written in black magic marker says “Rent 2 Own, $500 moves you in”. It sure sounds easy. I can have the American Dream even though my credit has been damaged due to no fault of my own. This all sounds too good to be true; it may or may not be depending on your credit and financial status.
There are 2 basic forms of a rent 2 own. There may be others, but these are most common.
Option to purchase contract: The seller sells the renter an option to purchase the property on a set date at a set price. There is no transfer of title. The renter pays the seller money for that option to buy. If you do not close at that time then the seller keeps the option money. If you do execute the option on that date and price then you close on the property at a title company like any other real estate deal. There is very little risk except the contract option money. Options can be from $1000-$15,000 on a typical option agreement in our area. The worse the deal for the buyer the lower the cost is how that usually works. A lot of shady characters are doing these because there is very little recourse and very little legal documentation. The bandit signs on the side of the road like “We Buy Houses” guys are big on those. They don’t actually buy the house. They wrap the whole deal in an option contract.
The finacial risk is small, usually equal to a security deposit so most renters do not check these out closely. The house can go into foreclosures, other leans can be recorded or the seller may not have an actual interest in the property to execute the sale contract. The more common risk for the buyer is that they may not be able to get a loan by the strike date to execute a purchase of the property. If you cannot close on or before the date on the option, then the buyer looses the option money. Most option sellers’ will then just sell the renter another option and downward spiral continues for another cycle and more money from the renter.
Land contract or Contract for Deed or Wrapped Mortgage deal: A Land Contract may or may not have a wrapped mortgage involved, but these have been described as such. This is the oldest form of real estate transfer known. This is how MOST land transactions were done before the 30 year mortgage came along. These work a little different and are much more complicated. These are actually a transfer of title between parties. The title is held in escrow at a title company or escrow agent. It is not recorded at the county like most sales in Colorado. This is a legal sale of the property between parties that can be adjudicated in court. The cost of these usually require $10,000- $30,000 from the buyer to close the deal. The title will be recorded when the renter/buyer fulfills the obligations outlined in the contract. This usually requires a new loan and the pay off of the original contract for deed.
The problem is that the deed is not recorded. If anybody records a deed ahead of you then, they own the property not you. You have to be dealing with a very solid seller. I have done these as the seller but my finances are strong. I have the financial strength and credibility to hold the deal together or pay off any claims against the property if those arise. In the 80’s they put people in jail for these deals going wrong. There were sellers, wrapping, double wrapping and even triple wrapping these mortgage deals until the property could no longer support the transaction. The renter has very little way to verify who they are dealing with on one of these expensive deals.
None of these transactions are illegal or unethical if every body does what they promise. I have done both types of transactions described here. I rarely conduct these types of deals because I am a licensed real estate agent in Colorado. I have NEVER completed one of these transactions on behalf of a client. I was always a party to the contract. All parties have huge recourse on me personally if anything goes wrong or even appears to go wrong. A competent attorney should draw up any documents.
For the renter there is no easy fix for credit problems and there is no easy way to the American Dream. Keep your monthly expenses as low as possible, including rent, pay your debts and bills off and save for a down payment. That is the real way to the American Dream of home ownership.
You can learn more about these and other uncommon rental transaction at our web site www.4RentDenver.com
Classifying repairs at your rental property:
Tenants can make the strangest repair requests. How do you handle these issues? We categorize these into 3 areas, emergency items, convenience items and future repairs. You may not consider it an emergency, but your tenant always thinks it should be fixed, NOW.
Emergency items: are those that pose and immediate health and safety to the tenants or the property. If it does not require a call to 911, it is not an emergency. A gas or water leak inside the house is an emergency and may require a 911 call to the fire or water department.
Here is an example that your tenant may consider an emergency, but we do not. For example, the tenant that gets home after work at 6:00pm in December to a cold house. Our response is that “We will have a service tech out in the morning, please bundle up for the night.” Neither the house nor the tenants will freeze by morning. The extra cost of an after hours service call does not justify the small inconvenience caused to the tenant needing extra blankets for the night. Keep in mind the internal house temperature may play a baring on your response time. If the internal house temperature is near freezing it is an emergency. These issues shall be addressed within 8-24 hours.
Convenience issues: The light switch in the bedroom does not work; the screen door does not lock, the microwave oven or the dishwasher does not work. These are all considered convenience items that will be addressed after out emergency issues have been addressed within one week turn around is not unusual. Keep in mind that many tenants consider a non working dishwasher as an emergency. You will have to address this in your lease agreement and the angry tenant. Most tenants are reasonable about the expectations and will wait for the service tech to call.
Future repairs: Painting the exterior of the house or putting a new landscape would usually be a future scheduled maintenance. Here is a recent repair request that your tenant might consider an emergency. We had several evaporative swamp coolers go out in early September. The weather was still hot, but it was near the end of the cooling season. We dispatched our repair tech within 24 hours to determine the problem. The tech determined the trouble but had could not find repair parts that late in the season. The parts could be special ordered at a significantly higher price plus the cost of shipping. We have placed those as a future repair status. In both cases the tenant was not happy, but would have to wait till spring.
Keep in mind you that some of these repairs may be covered by state or local laws that you must follow. In Colorado we have a “Warranty of Habitability” law that may apply. In addition, the tenant is still your customer. We all live and serve our customers to stay in business. Balance your costs and proper customer service to be successful in managing your rental property. You can see our repair request form at our web site www.4RentDenver.com under “Tenant Services.
I get this question from ALL of my owners. The answer is a function of several issues. #1, what will the market will bear. #2, how likely is your tenant to move out with a rent increase. Remember, vacancy is the greatest cost in any income property. It must be avoided at all cost.
The 1st question is easy to answer. Look for competing properties on rental web sites to see what the rent value should be for your property. Be realistic, because safe is better than aggressive. You can find vacancy rates and rental rates for most of the Denver area at our web site www.4RentDenver.com under “Landlord Resources” Page.
The 2nd question is the hardest issue to gauge. I have had properties that are in a great area in great condition and rent fast every time it hits the market. I might be more aggressive on price increases with that property. I have other properties that are always hard to rent due to condition, style, layout, or location. These I might be less aggressive on a price increase no matter what the Comparable Rental Analysis tells me.
There is a 3rd type of property. What will be the cost to owner if the tenant does move out. Here is an example. I had a property where the tenant had lived in the property for 12 years. He always paid on time and was handy around the house. However, he was a bachelor that lived like a typical bachelor. The place was a pig sty. Sorry guys, a woman can do wonders to home. In the last 6 years of the lease, I never raised the rent on him. I knew that when he moved I would have to spend $10-$15,000 in repairs and remodeling. When he finally moved out, we tore out the kitchen, 1 bath, all the carpet, new blinds, sanded the hardwood floors and even put in new windows. The cost was over $10,000. It was worth every penny. It is now my fastest renting property in the area.
I know I need to budget for long term capital improvements on a long term tenant. It will also know that I need to be careful with my rent increases in order to keep that tenant in place to prolong the expense.
Under CRS 38-12-103 “No security deposit shall be retained to cover normal wear and tear.” The legislators never went on to clarify what the terms means, “Normal Wear & Tear”. There is case law throughout the state supporting various positions on the terms. The term is still left up to the judge that hears the case. Some judges tend to learn pro-tenant and others tend to lean pro-property owner. You don’t ever want to be unprepared in front of any judge.
How we prepare to defend Normal Wear & Tear. We verify all items based on age at time of damage compared to the life expectancy of the item and the cost of replacement. The age is easy to determine by the receipt that was kept for tax records when the item was purchased. You do keep receipts, correct? If we have no receipt, then we do not defend the position and refund out standing Security Deposit immediately. Then we compare the age of the item to 1 of 2 documents that will support the life expectancy of any item from fridge to flooring. “The IRS Schedule of Depreciation of Rental Property Publication 527” and/or the “National Home Builders Study of Life Expectancy of Home Components.” You can find a copy of both of these documents at our web site www.4RentDenver.com under Landlord Resource Page. As always these documents are free of charge to you.
Most judges will allow you to deduct the life that was denied by the tenant’s abuse or damage. Evidence of that abuse is via photographs or receipt from an expert in repair of the item or both. Here is a good example. If the life expectancy of an item is 5 years, we have a receipt showing it was 3 years old upon move out date and is ruined. The owner has been denied 2 years of the expected life of the item. We can charge the tenant’s security deposit for 2/5th of the replacement value of the item. An item worth $100 with 2 out of 5 years of life expectancy left would be a charge to the tenant’s security deposit of $40.
Here is another common example we get from owners’ to charge the tenants security deposit. “The item was new when the tenant moved in 5 years ago.” We explain that the item is ruined and it was the tenants fault, but the owner has received its useful life expectancy. We cannot charge the tenant if there is no loss of useful life left in the item. The owner was not denied any value after 5 years of use. Paint and carpet is good example of this. Rental property must be painted and carpeted on a regular basis at the owner’s expense.
You can find all of these documents at our web site www.4RentDenver.com under Landlord Resource Page. As always these documents are free of charge to you. We hope you will find it a useful resource for your rental property business.
