Category Archives for "Things you should know if you’re a Landlord"

The lean process improvement tool for our property management company

A property management company is like a clockwork machine. If a gear or a cogwheel malfunction or become damaged, the whole system is affected on different levels. So, continuous maintenance is required. I’d like to talk briefly about one of the tools we’ve implemented in order to maintain and improve our quality of service, as well as boost our efficiency as a whole.

Small improvements lead to big improvements.

We call this self-improvement system the Lean Process Spreadsheet. And it is what it sounds like, it’s a huge spreadsheet, filled with a list of all of the issues related to bad service, errors or things that are just not working. The team has access to this spreadsheet, and they can add details pertaining the things that need improvement, follow up, and full fixes for them. In a similar way, once a solution for a problem is offered, the team is able to offer feedback on this, make additional adjustments or simply give a kudos to whoever fixed the problem. We based this method off a book we read, “2 Second Lean”, and we’ve found it very useful and efficient for scoping our set of processes and finding small things that need improvement.

This is just one way of maintaining a good level of service to our clients, and keep ourselves as productive as possible, but we believe that both in and out of work it’s always important to take a look at the big picture: whenever you fix or improve something -no matter how small or insignificant you might think it is, it will always find a way to somehow improve something larger than itself in the long run.

So, remember… little things matter.

How are pests handled?

Whether it is nesting mice, pesky bed bugs, or gnawing termites, pests are unfortunately a frequent headache to property owners. On one hand, professional extermination can be pricey, and in certain situations, there can be health concerns depending on the chemicals used and the level of care used by those doing the extermination process. However, in many circumstances, if you don’t get professional help in order to exterminate a pest problem, you can put your tenant’s health at risk as well as cause damage to your property.

But who should be addressing a pest issue? The landlord? The tenant? The answer to that question varies. When a call comes in for pests, we encourage your tenant to handle the issue themselves using easy to find, affordable over the counter pesticides. If the tenant can prove there is an infestation (defined as “to inhabit or overrun in numbers or quantities large enough to be harmful or threatening”), then the landlord will need to send out professional services. We normally ask for pictures to prove there is an infestation.

Pests can be a very frustrating issue for both landlords and tenants.

Any boring insects, such as termites, need to be handled right away as it’s damaging to the property. If it’s clearly not the tenants fault, you as owner would be liable. Bed bugs, however, are usually something that is brought by the tenants. We suggest you have them take care of it themselves. However, be aware that the tenants can call a city health inspector and they can make the landlord pay for a bed bug infestation.

The responsibility of pest extermination for multi-family properties often falls on the landlord because it can be hard to prove which one of the tenants caused the situation. On either case, it is important to keep an open channel of communication between landlord, tenant, and ourselves in order to get rid of any pest problem as soon as possible.

So what rights do landlords have in Cleveland?

Usually when we think about landlord and tenant rights, we think about how the law seems a little bit skewed towards tenants over landlords. This turns out to be especially true when speaking about giving tenants the benefit of doubt, and at times even extra rights outside what is outlined in the law, by a judge in certain situations. But where exactly do landlords stand in all of this? Let’s talk a little bit about the most important rights landlords possess at the time of being in a lease agreement with a tenant.

1.- You can ask for as much as you want.

It’s important that you know what you’re entitled to as a landlord, according to the law.

As a landlord, you are entitled to ask for as much money for your property as you want. This is something completely permitted by the law, and you can go as low or high as you desire. However, it’s not wise to go way too high or way too low – we will provide you with advice in regard to this, usually leaning to asking for more at the beginning, and then work it out with the tenant from that. As well as paying mind to market feedback in order to help you decide on a good starting price. Remember you CAN ASK for as much as you want, but you CAN’T FORCE anyone to pay as much as you want. So, sometimes it boils down to negotiating in good terms.

2.-You can set your own terms for the lease agreement

When entering into a lease agreement with a tenant, you have the right to set your own terms for the use of your property AS LONG AS they don’t enter into conflict with what is stipulated by the law. It’s also really important for you not to violate any of the anti-discrimination statutes that the law stablishes (which are ever expanding in different ways from state to state). One way to avoid falling into this when evaluating for possible tenants is to keep your focus on non-subjective aspects, and making your case from them, such as credit history, when trying to filter out potential tenants that have a heavy criminal record for example. You also need to keep in mind that the type of tenants your property will bring in will definitely depend on its level of attractiveness. When helping you find a tenant, we have a very specific screening process that we follow, designed to take all of this into consideration so we can help you find the best option.

3.- You can evict tenants for non-payment of rent and sometimes non-money related situations

The law states that if a tenant does not pay rent, he/she can be subject to eviction by their landlord. It is really important to pay mind to other types of payment besides the official rent amount when considering this option. For example, utility bills can be considered as a form of rent. If tenants are obligated to pay for these according to the lease agreement, their non-payment can be used as cause for eviction. This holds up even if the lease contract has been renewed or still has a longer period of time remaining before it ends. In our case, one of our lease clauses specifically states that non-payment of utilities is considered non-payment of rent and this can be cause of eviction if neglected.

At the same time, if the tenant enters into a violation that materially affects health and safety, you must give the tenant a 30-day window of time along with a notice, to resolve this issue. After this time has passed you can file for the tenant’s eviction if the tenant has not resolved the violation, even if they have been paying rent on time.

4.- You have the right to access the property after a 24-hour notice.

As long as you provide your tenant with a 24-hour written notice, you can access the property for inspection or any other purpose that you as a landlord deem reasonable. This can be made in form of the postal service, or even e-mail. We recommend that along with the written notice, a call is placed in order to let the tenant know a notice has been sent, this way it’s impossible for them to claim to have missed reading the e-mail or the document in paper. It’s important as a landlord though, to avoid entering in any behaviour that could be considered intimidation – as this is not permitted by the law. This becomes even more important for delicate situations in which the relations with the tenant have already deteriorated for other reasons or when an eviction process has been set in place and there is tension between both parties.

You can also access the property without notice if you believe as a landlord that an emergency-type of situation exists (a gas or water leak), and proof needs to be presented in relation to this emergency, in order for it not to be a violation.

5.-  You have the right to get your property back in the state you delivered it to the tenant

This pretty much holds up for every aspect of the property EXCEPT for what we know as “ordinary wear and tear”. We will speak more thoroughly about this aspect on a different post, but it’s basically really unclearly defined by the law. In order to counter this ambiguity, we have a very detailed process in which we take photos and videos; then we present potential percentage values of responsibility for both tenant and landlord, and we keep these open for negotiation – usually starting high and leaning towards the landlord’s favor and negotiating from there while making value judgements.

Our aim is to keep this out of court, but if you do wish to take it there, it’s important to consider that if your claim as a landlord doesn’t hold up and you lose, you will end up paying double the value of the tenant’s security deposit -hence why we try to negotiate out of court and try to keep it reasonable for both parties.

6.- Other rights

Just by owning the property, you’re pretty much entitled to a whole bundle of other rights, and you transfer some of these to the tenant, when entering into a lease agreement. For example, as a landlord, you never transfer your rights to your property’s title and deed through the agreement. The only thing you transfer from yourself to the tenant is the right of access for the period to the lease. You keep this right to a certain extent, but as we mentioned before, there are limitations.

This is just one example of those additional rights, and we consider that it’s important for you to be familiar with at least the most important ones, but if you’d like to inform yourself on the details on the rest we offer you a link to the document “Tenant/Landlord Rights and Obligations”, this is a pamphlet provided by the Ohio Bar Association. The link is below.

What should the LLC that holds my property be filed as?

I’d like to give you some information about corporate entity strategy in order for you to be able to better protect your assets. Even if you find this information useful, remember to always consult your attorney and your certified public accountant before you make any important decisions.

Choosing the right entity for your property can help you add an extra layer of protection to your assets and reduce expenses.

Let’s begin with taxes. Here at RTS we issue 1099s as required for most of our owners based on gross income received by us, when it is received by us. Your money comes directly to us, and when it does, IRS considers that money is becoming yours at that point. So, it’s not the net income you receive after it owner pay out, it’s the gross income we receive in your name. After we receive it, you can use our statements and deduct any expenses off your taxes from that 1099.

If you have a property that is in an LLC, you have certain level of choice in regard to the way you file it. This means you can basically choose how your LLC will be looked at by the IRS. You can file you LLC as a S corporation, C corporation, or a pass-through sole proprietorship. This means that the LLC lets all income and expenses pass through directly to the owning entity, whether it’s a person or another corporation.

Usually, if you have several properties, each with their own special LLCs we recommend to take them and turn them into sole proprietorships, passing all of the income and expenses directly to the owning entity. This allows you to reduce accounting expenses, since you will be doing fewer filings and movements for these properties. This is in general terms what we’ve seen most of our clients that own several properties do (as well as myself), but there could be other advantages or disadvantages related to doing this, depending on the amount of money and context that are being taken into consideration. Either way, always check with your legal advisor and accountant in order to know what’s best for you.

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