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.
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.
Please check with your CPA and Attorney for purposes of Legal Consequences and Tax Consequences. Coming from experience all properties should be set to companies, and the main reason for people not wanting to do so is because certain mortgages. From the asset protection standpoint it adds an extra layer of protection, and inexpensive. You can login to the Secretary of States website and pay a fee, and you receive the certificate. You can give this certificate to the local title company; this ensures an extra level of insurance. Another main reason is doing this step can protect you from being targeted personally. In regards to that this is not 100% protective as there is ways to pierce the Corporate veil.
An example is if you own ten properties and someone injures themselves on one of your properties and wants to hold you personally accountable for the situation the attorney who is hired to assess the situation will research the owner of the properties. In which seeing they (you) are covered will avoid making this more of a dangerous situation.
You have to be careful when it comes to collections.
Yes, as an owner you do have rights. But so do your tenants. And it’s critically important that you know what those rights are— yours and theirs— as spelled out in the Ohio Revised Code, as well as other collections-specific laws.
This is something we make a concentrated effort to keep up with because laws change all the time. We make sure that all of our employees are keeping up to date in these areas. There are multiple dangers associated with collecting rent on a property.
A local landlord here in Ohio even recently made the news because he carried out what’s called a “non-judicial” eviction. Basically, he went into the house and started evicting his tenants and the tenant told the police that he had no right to go in there. And he didn’t. That’s a criminal act. He actually went to jail for a short time for that.
Which is to say— our job at Realty Trust Services is to collect the money our owners are due… AND keep our owners from going to jail in the process.
One basic rule we try to follow is a process we use to demonstrate to the tenant that we really are serious. We prioritize rent over a lot of other things because a lot of tenants actually have the money, they just have bad money management skills. They get behind and one thing leads to another.
We try to prevent that from happening, but at the same time, we have to balance our collections tactics with a personal touch so that people actually WANT to pay.
It’s very easy to go too far with collections and press people too hard, too many times, which makes them decide not to pay just out of spite.
So we prioritize getting the rent as soon as possible.
Ultimately, that’s a lot more important than being someone’s friend.
Have a great day— be a great landlord.
Our experienced investment property management team can relieve you of the burden of managing your rental property while saving you some serious money!
Call us today at (440) 220-7300 to see how we can help you!
The concept of the Lease Option is excellent in theory. A property owner leases a home to someone who cannot currently qualify for a mortgage loan. They do so with a specific and separately written agreement that tenant will acquire and purchase the home in a specific period of time. Normally the tenant gives a significant upfront deposit that is forfeited if he or she does not follow through with the purchase. If executed as agreed, both parties mutually benefit. The home owner / investor sells a house for a profit and gets an income stream immediately while waiting for the purchase to be complete instead of letting it languish on the market. The tenant does not have to rent while they recover from the economic event that left them unable to purchase and they get to lock in today’s price for a time period that may be several years.
Unfortunately in practice, lease options are often plagued with challenges.
Today I will share with you the top 5 reasons lease options fail and why working with professionals like a qualified credit repair organization and property management company can help all parties circumvent some of the pitfalls and increase the ratio of closed sales via lease options.
5. A bird in the hand is not necessarily better than 2 in the bush:
Many property owners become overeager to place someone in their property. With tax payments and overhead, it is understandable. It can be enticing to accept the potential tenant’s word that they can resolve their credit issues. Without a third party opinion, there is the belief that the problem can be resolved even if it is near impossible.
A property management company can work in tandem with a credit repair company to help choose the best candidate as well as bring in a lot of candidates through professional marketing so that home owners have more options. As a homeowner you will have a much better idea up front of how things will work out.
4. The hurry up and wait scenario:
I cannot count how many property managers have sent applicants to us for a pre-screen, and then never require them to enroll in our program. The owner may even say, they have to enroll, but I am giving them the keys on Monday. Monday comes and the tenant creates 1000 excuses as to why they have to wait to enroll. 90% of these applicants never enroll and usually fail at closing.
Whether it is credit repair, consumer credit counseling or bankruptcy, the rule should remain the same. If the applicant needs financial or credit assistance, you MUST have them enroll in that program prior to letting them take occupancy. Think of it as getting married to a gold digger without a prenuptial agreement. Just don’t take the chance.
3. No skin in the game:
Another misstep we often see is that the property owner says they want to pay for the credit repair for the tenant. As much as we like getting paid, we literally will not allow property owners or managers pay for the entire service.
Tenants that have their credit services fully paid for, almost never follow through. They have no cash commitment and already have the keys to the home. This is a recipe for disaster and almost always ends up in an unhappy relationship.
At Credit Repair Resources our lease option clients must pay their own initial enrollment fee. We are open to, and encourage, reimbursement for success in our program, but require our clients show the commitment to lasting success. Some owners create an incentive plan to encourage the tenant to become mortgage ready ahead of the deadline. If you work with Realty Trust Services, they charge a non refundable option deposit which really commits the tenant to the process. Depending on the negotiations money from this might be applied towards the cost of credit repair.
2. Unrealistic expectations:
Recovering from an economic event can be extremely challenging. Credit repair is one component of the process of regaining financial control. Life continues to happen and the best laid plans… well you know. Some property owners put tight time restrictions in place for their tenants. “You have 12 months to get yourself straightened out or you are out” is a common statement we have heard. The philosophy behind this is to motivate the tenant to take action.
The challenge with this ideology in regards to lease options is that many times the property owner is not being realistic of the resources and capabilities their tenants have. If you ask a tenant if they can save $3000.00 by this time next year, they most likely would say yes.
Even if this is realistic in the moment, the day they get their keys there are countless places they will allocate their funds before adding to the $3000.00 fund. Couple this with the cost of restoring their credit and you have a losing proposition.
Our suggestion: consult with your CRO partner to get a true picture of what it will take to turn their credit around based on the income and resources they have available. Create a timeline and plan that can be reached comfortably and you will be much happier in the end.
1. Communication and follow through:
That’s right, the single biggest reason we see lease options fail is the lack of follow through by the tenant and communication between the two parties about the progress. As much as the tenant wants to make good on their commitment, restoring credit takes time and consistent effort. In some cases it takes more than a year to fully recover from a major economic event. Staying focused can be difficult.
Although the property owner has a vested interest in their tenants’ success, they have their own life and responsibilities to attend to. Micromanaging their tenants should not be a priority.
A strong CRO partner will provide detailed updates on a scheduled basis. These updates should reflect the true status of the credit repair process, the execution of the tenant’s action plan and the affect it is having on their credit scores. This will provide transparency for all parties and hold the tenant accountable throughout the life of the agreement.
Lease options are an investment and every investment has its inherent risks. I hope the above information provides some insight on mitigating some of them.
Chad Kusner is President of Credit Repair Resources. He has more than a decade of mortgage lending experience and partnered with 20 year consumer litigator. Chad has spoken nationally on industry practices and serves as Executive Director for NACSO, the credit repair industry’s trade association. Credit Repair Resources was voted the Best Small Agency in America for 2012 by the largest ranking site on the internet and continues to prove itself as an industry leader. Feel free to contact Credit Repair Resources at CR760.com or (888)9-CRR760