Real Estate Customer Life Cycle

Recently, my wife and I have been searching for new tenants for our rental property.   That’s an irritating customer cycle.   We’ve had more no-shows at the showings than we’ve had prospects show up.   Most people who call seem to think that the rent on a 2 bedroom, 1.5 bathroom house with a big yard and a 3 car garage 5 minutes from downtown Minneapolis is going to match their little subsidized Section 8 apartment.

Not going to happen.

So we keep looking.  In the meantime, it’s interesting to look at how a real estate trainer breaks down the life cycle of a customer.

Enjoy!

NEC Online Degrees

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Property Managers

As of last Monday, we don’t have any tenants in our rental house.

English: Farmhouse at Little Renters Farm This...

English: Farmhouse at Little Renters Farm This farm stands on Beckingham Street. (Photo credit: Wikipedia)

That makes me sad.

It makes me sadder that we were too nice and gave them an extra week free to get their stuff moved out.

Now we get the fun job of painting, replacing the linoleum, and probably cleaning the place up to get it ready for new renters that we haven’t found yet.

New renters.

Ick.

Now, we could put an ad on Craigslist and try to find renters ourselves.

Background checks.

Credit checks.

Interviews and walk-throughs.

Then, when we find someone, we’ll be collecting rent and dealing with any whiny issues that come up.

Yuck.

Or….

We can hire a property manager.  The big name property management company in our area charges a $99 set-up fee plus $80 per month.

That covers:

  • Rent collection
  • Coordinating maintenance
  • Accounting
  • All of the other mundane details

If we add on the tenant-finding service, we’ll be paying them one-month’s rent, but they’ll handle the showings, advertising, background checks, and the lease.  And their average tenant placement is 19 days.  Another house in the neighborhood that used them had the house rented in about a week.

That moves our landlording firmly into the passive side-hustle category and all it costs us is (essentially) one and a half month’s rent with the added bonus that we’ll be asking the right amount for rent according to the market, instead of guessing.  Our last tenants were probably paying $300 too little.

I think the property managers are the way to go, but I have absolutely no experience here.

Have any of you used a property manager?  Was it good?  Bad? Hell-on-Earth?

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So You’re Getting Evicted…

Last week, I had the opportunity to visit eviction court, though not for anything having to do with my properties.

It was an interesting experience.  Eviction court is a day when nobody is at their best.  Landlords are fighting to remove bad tenants, sometimes questioning their desire to be a landlord, while tenants are fighting to keep their homes, often with no backup plan.  Occasionally, you get someone who just wants to get out of their lease because the landlord is a creepy peeper who digs through the dirty laundry.

Nobody goes to eviction court in a good mood.

If you ever find yourself in eviction court, here are some things to remember:

Everyone

  • If you don’t show up, you lose.  Period. Landlord or tenant, judges don’t like waiting around.  You will get the worst possible outcome if you stay home.
  • The first day is a hearing.  The judge will either accept a settlement between the two parties, or he’ll check if there is a valid reason for a full trial.  The trial will be schedule for another day.  In Minnesota, that happens within 6 days of the hearing.
  • Don’t make faces at the other side while they are talking to the judge.  Do you want to go to jail for being a smartass?  It’s called contempt of court.

Landlords

  • Fix the mold, rot, and other habitability issues.  You’ll have a hard time getting your rent back if you are a slumlord forcing your tenants to live in a biohazard.
  • If you’ve got an automatically renewing lease, don’t file the eviction notice with the renewed lease for violations that happened under the old lease.    If you do, you’ll be handing a win to your tenant.
  • Make sure you lease has an eviction clause.  If it doesn’t, you may not have the right to kick out your tenant for any reason.
  • Your tenant’s dirty underwear is not a toy for you to play with.  Creep.

Tenants

  • Pay your rent.  If you are withholding rent to get something fixed, you’ll be expected to put that in escrow the day of the hearing, so don’t spend it on vodka or a new stereo.
  • Read your lease and the filing.   It may have a backdoor that lets you escape the eviction.
  • Try not to get evicted.  An unlawful detainer can make it hard to rent again for a couple of years.
  • Dress nice.  I’m amazed by how many people showed up in ratty jeans and uncombed hair.  Look professional.  The judge will appreciate the effort.

All in all, it’s best if landlords and tenants try to keep each other happy.  The whole business relationship will go much smoother if you do.

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Net Worth Update

The remodel of our inherited new house is about done.   The bills have basically been paid and the insurance checks have been cashed.

Now that it’s all (more or less) done, I’m finding my financial situation has changed a bit.   My credit card is paid off, except for our regular monthly expenses and a couple of remodeling expenses that will be paid off in the next week or so.   Our mortgage is within site of being paid off, and we have a rental property that is mortgage-free.

With all of the changes, I took the time to measure the difference.

 Net Worth

Let me tell you how nervous this post makes me.   My business partner is under the impression that I no don’t care about our business because I no longer have any worries.

That’s crap.

Yes, our net worth has gone up $329,000.   That’s not nothing, but it’s hardly enough to retire on.

$113,000 of it is in retirement accounts.  I mean, great, we’re a bit ahead of where we need to be, but it’s not like that money is putting food on the table for us this week.

$177,600 of it is in our rental property.   Which doesn’t start driving income until February.   Today, it’s a $25,000 money sink.  That’s money we would have had to spend to sell it, even if we didn’t want to keep it.

There’s a $10,000 car that we need to deal with, we’ve paid off our credit card debt, and we have an extra $10,000 in the bank.

So, yes, we are in a much better place financially.  That’s a comfort, long-term.   Day-to-day?   Our credit card payment has been pushed to our mortgage, so that’s not extra spending money.   We don’t know exactly how much of the $10,000 in the bank still needs to be spent on the house, and we don’t know how we’re going to reorganize our vehicle situation.

That’s a lot of uncertainty that, at most, involves $20,000.   Again, it’s not nothing, but it’s not a lot.   It won’t cover our barebones expenses for 6 months.    We pay $15,000 per year just in daycare, and we need to put braces on a kid next year.

We are in a much better place, but I can’t stop hustling.

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