The Expert Guide to Landlord Rental Insurance

Couple at new Rental PropertyThere are many ways that people get into rental property. Maybe you are an investor looking for a great way to have recurring income while building equity. Or possibly you were caught in the housing crisis a decade ago and decided to rent because you couldn’t sell. Others may have decided to downsize and rent to provide extra income.

Why not? Right now, interest rates are low and the stock market is doing well. So, maybe it is the right time for you to consider purchasing a rental property to provide great income for you in the future. In fact, many are doing just that, and the rental market is rising while home ownership is falling.

Now there are even more avenues to own rental property. Because of Airbnb and other vacation or travel rental services, you can rent all or part of your own house. With these opportunities come risks that you should be aware of. By taking on short term rentals, you are creating a new business, and you are also accepting the liabilities.

In any case, many landlords assume that their homeowner’s insurance will cover their rental property. That assumption could end up being very costly. Your insurance could completely deny your claim if they determine that you are acting as a landlord and didn’t switch to landlord coverage. However, we have put together the information that a landlord needs to know about getting landlord rental insurance for a rental property.

Two women going over landlord insurance pollicy

Getting Started: Finding a Good Policy

You should call your insurance company that provides your homeowner’s insurance, but be aware they may not even cover insurance on rental property. Some insurance companies see rental property as a higher risk, so you can expect a higher rate if they cover your property at all. The designated use of your property may change from personal use to commercial use, which involves an entirely different set of costs and liabilities.

This is especially true if you are still keeping your existing homeowner’s policy and renting out your home. You’ll need to read the fine print of the policy. You may find that your policy will not cover damages or losses if the property is not occupied by the owner, as in the case of long or short term tenants.

There may also be limitations to the length of time the property is rented. Some H/O policies may cover non-owner stays, but only up to a pre-set number of weeks. Others may require that you notify the insurance company if it is not going to be owner occupied for a while in order to cover the occupants.

Lastly, there may be limitations on the number of people that are considered ‘renters’. One policy that we looked at would only cover an owner occupied home with 2 additional renters. If you are constantly renting a property out to different tenants, it might be considered a vacation home business, and you could be required to have a license to do business in your city. Not having the proper license could affect the coverage on your insurance policy.

landlord repair for insurance

What about AirBnb and the other short term rental companies?

Yes, AirBnb now includes protection for you as a landlord, and right now that is just part of the arrangement, meaning no cost to you. That includes insurance for your renters getting accidentally injured on your property, but generally does not cover things they steal from your home.

HomeAway also offers insurance protection, but there is an extra cost for that. It covers damages to your property up to 5k with no deductible at the time of this writing.

Personally, I would not recommend depending on this coverage alone. There could be delays in getting paid if there are conflicting claims and you would have more piece of mind if you had a solid landlord insurance plan.

What is different about landlord policies?

Typically, landlord policies (or dwelling policies) are available in three different options:

  1. The least expensive type is DP-1. It covers only basic risks. Most likely, those would include theft and vandalism of the property. Typically this type of policy covers ‘actual cash value’, not ‘replacement value’. More on this later.
  2. The DP-2 policy adds more coverage, to include such things as windstorm damage, vandalism or fire. These are ‘named perils’ so you need to carefully determine what is ‘not’ mentioned as being covered.
  3. The most expensive and most comprehensive type of policy is the DP-3 policy, which covers all perils unless the policy expressly states that it is not covered. This is the closest to a good homeowner’s policy and most often covers full replacement costs.

Note: Be careful that you understand the differences in replacement or cash value, because it can have a big impact on you financially. A policy that only pays out ‘cash value’ will take the depreciated value into consideration, not the actual amount that you have to pay to replace the property or repair the damage.

One additional thing to consider is that your expenses for a landlord policy are most likely tax deductible, so check with your accountant and take advantage of it.

What about the rental income that I’m losing during a claim?

Just like having a vacant property, you might end up with an uninhabitable property. But your mortgage payments are still due, so it is a good idea to be covered for loss of rental income as well. This is a worthwhile insurance investment and might not raise the price as much as you would think.

What can I add on to the policy?

Of course, you can also protect other things. The most important thing is probably liability if your tenant gets injured. You could be accused of being responsible for that injury, and without liability coverage, you could be financially ruined. As a landlord, you also need to take your own initiative to make sure that your property is safe for the tenant. Be sure that everything is in compliance with the building codes, in good condition, and that you attend to maintenance issues promptly.

You might have other structures on your rental property, such as sheds, separate garages, or workshops. Be sure that your policy includes these as part of the main policy or additions to it.

Consider if you have other large equipment that is kept at the rental, such as hot tubs, riding lawn mowers, snow blowers, tillers, or tools. It is a good idea to cover these items under ‘personal property’ at the rental. Also, be sure that you don’t leave the keys around for the tenants to use the equipment unless you are absolutely sure that you are protected against any accidents they may have.

If your property is damaged, you may have to cope with ever-changing building code compliance. For a small extra fee, you can be covered for the cost of having to add additional ventilation, electrical wiring or other safety related items.

What is generally excluded?

Sometimes you may find that renting out ‘part’ of your owner-occupied home cannot be covered with a landlord policy. However, as mentioned previously, you may still be able to get coverage from the rental service.

Your tenant’s possessions are generally not covered, which is why you should require long term tenants to have renter’s insurance. That will cover their own possessions and possibly protect them from liability if one their guests get hurt in their rental. If the tenants are using your own furniture, you should consider getting additional insurance coverage that will cover your carpets and furniture in case of damage.

Wear and tear and maintenance issues are generally not covered. This would include such things as A/C units, heaters, dishwashers, disposals, refrigerators, and the like. So make sure that your tenants take good care of these items, and that they are instructed as to their proper care and operation.

Flood coverage, like your homeowner’s policy is generally going to be a rider on your policy. While the basic policy may cover the damage from damaged water heaters and broken pipes, they won’t cover damage from natural disasters (think hurricanes, tornadoes and earthquakes), flooding, and sewage backups. You’ll have to add that on. This is especially true if your rental is in a flood plain, you should have flood coverage, but there are still good reasons to have it even if you are not.

Vacant property may not be covered if it has been vacant for a certain period of time. Be sure to check this item on your policy, because it might affect if a claim will be paid on a vacant rental property.

rental home

This all sounds very expensive to get proper coverage …

Well, yes, it is more expensive, but a necessary evil. According to recent data, a good landlord insurance policy can cost 15 – 30 percent more than a similar homeowner’s policy.        The insurance companies see renters as being riskier than owners of a property which have more of a vested interest in taking good care of the property. You can alter the coverage amounts to save money, such as the cap on liability coverage or medical coverage.

Your costs for insurance a determined by a number of factors, such as the ones here:

  • The proximity to areas that are prone to natural disasters, such as the coasts for hurricanes, the tornado prone areas, and areas that are in danger of loss from forest fires.
  • The amount of crime that is committed in your area. If the crime rate is high (think break-ins, assaults, and vandalism) you can logically expect to pay a higher rate than a rental home in a senior living area.
  • The construction of the home. Like all insurance policies, homes that are more susceptible to fire, animal or insect damage will cost more to insure.
  • The proximity to emergency services and items like nearby fire hydrants. Of course, a very rural area might be in greater danger from fire or flood if the emergency services cannot get to it quickly.
  • The square footage of your rental property and other structures that the tenants have access to.
  • The age and condition of your property will affect your rate. Even if the property is newer, you can pay more if it is run-down.
  • Safety devices, such as indoor sprinkler systems and fire alarms will reduce the cost of your policy, so don’t forget to mention those things.
  • If you require your tenants to follow safety rules, such as no smoking or limits to the number and duration of guests, it could help reduce the costs of your landlord policy.
  • If you have a pool or hot tub, it will increase the cost of the policy. You have additional liability needs if you provide such items to your tenants.
  • And of course, if you have additional rentals, or if you have coverage with the same company for auto, boat, or health, you can get a discount.

The bottom line

If you are renting out an entire home or have renters in and out of even a partial property, you definitely need to have landlord insurance. Homeowner’s insurance doesn’t cover your needs as a landlord, and you might even find out that your claim is denied because you were running a business without switching to landlord coverage. The pricing is flexible depending on the factors listed in this article, and the amount of premium vs. deductible that you are willing to pay.

We hope this article has been informative for you. We have a lot more advice for landlords and property managers in our eBook “What ALL Landlords REALLY Need to KNOW”, so please get a copy.

About the author:

Wayne GathrightWayne Gathright has over 20 years experience in the rental property industry as a software developer, consultant, author, and mentor. He’s working with thousands of property managers and tenants, helping to formulate a better understanding of how to create and maintain better relationships between landlords and renters.

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Meltdown and Spectre – Beware of Major Cloud Computing Flaws

Tenant File Cybersecurity Warning

Once again, cloud-based computing takes a big hit. This time, it is ‘Meltdown’ and ‘Spectre’. And unlike before, these security flaws are affecting ‘processors’, not just specific web ‘sites’. The processors are built-in to every device that you use to access the Internet, such as phone, tablets, laptops, and other devices that run in cloud computing networks. That includes Windows, Apple, Google, and other processors.

Meltdown affects all Intel micro processors since 1995. Spectre affects ‘all processors on the market’ according to Dashlane’s report by Nicole Perlroth, the New York Times cybersecurity writer. How bad? Well, the flaws can allow the ‘entire memory contents’ of your cloud computing devices that run on cloud based networks to be accessed. For property managers using web-based software, that is everything you have.

The fix? Well, this one isn’t so easy. You can’t just change out the processor of every web device in the world, and there is no final fix for Meltdown announced as of this writing, but Microsoft and Apple are currently in the process of releasing patches. It is expected that software patches will be rolled out in increments to repair the flaws.

And it gets worse … it is expected that the Meltdown patch might slow down the processors by as much as 30%.  What? Are you willing to accept a sluggish computer system when you are posting rent and working on your accounting software?

For the Spectre fix, Google has indicated that while there is no fix to repair existing problems, there is a software update that will make processors ‘immune’ to the flaw available soon.

Here is more detailed information recently released by CNN tech online: https://money.cnn.com/2018/01/04/technology/spectre-meltdown-cpu-flaws-explainer/index.html

Cyber Security HackersThey explain that this will affect billions of devices and some may not even be repairable. According to Bryce Boland, chief technology officer for Asia at a major cybersecurity firm, “Resolving this issue will take time and incur costs,” Boland said. “Vulnerable systems will likely remain in operation for decades.” Others warn that even the mass replacement of computer chips may not necessarily help, and that no actual solution

At Tenant File, we are not running on a cloud-based system, it is right on your desktop. We suggest that you have one computer that is not even connected to the Internet, so that there is no possibility of a hacker taking over your computer and demanding ransom, a malware product stealing valuable tenant, owner, vendor and company information, or a bug that destroys your data.

Even if your processor has the flaw, nobody can get to it if your computer is not connected to the Internet. And if it is, then you should be absolutely sure that you have an antivirus software installed to protect your computer from the bad guys.

We feel that many people are not paying enough attention to what is going on. Our computer security is not keeping up with the dangers, and we all could be vulnerable to have our data compromised. Don’t be a victim when the inevitable happens.

Renter’s Insurance Through Tenant File – It is Critical

We’ve had an overwhelming response by property managers wanting to make sure their tenants are covered with renters insurance!

Now, we’d like to provide you with a sample letter that you can use (or edit) in a mailout:

Dear Residents, 

One of the requirements of your lease is that you must maintain personal liability insurance. The most common way to do this is with a renters insurance policy.

The landlord is not responsible for any damages to your personal property arising from fires, leaks, and other unforeseen events. A renters insurance policy generally will include personal property coverage to protect your belongings. This is an important component of your lease and failure to maintain the required coverage will be consider

ed a breach of the lease and is subject to any and all legal remedies.

If you do not have coverage, please reach out to an insurance provider or visit tenantfile.sureapp.com to get covered. The process is quick and hassle-free.

Sincerely,
Management

* Remember, you can send this email out through the Tenant File Program under the ‘Miscellaneous > Easy Email’ selection.

YOUR TENANTS PAY AS LITTLE AS $9.00 PER MONTH

For more information, click here

SureApp Insurance Graphic - Tenant File

* Renters Insurance is covered through a partnership with Sure. With Sure and their wide partner network including Nationwide, landlords and property managers can provide their tenants with a way to get comprehensive coverage from vetted, reliable partners at the best price — all in one, easy-to-use online app for computers,  iPhone and Android devices.

Questions? Call us at 1-800-398-3904

8 Ways to Insure that your Rental Property Doesn’t Rent

Rental Property SignAs a landlord you are super busy, so neglecting your rental property is easy to do. When your tenant vacates, you want to fill the vacancy as soon as possible. Balancing you time and money with the necessity for a quick turnaround is tough. At the same time, you want to insure that you get a great, long-term tenant. Of course screening and asking the right questions is very, very important, but the condition of your property will also attract the right clientele. What a dilemma! Too many landlords neglect simple things to get their rental property in rent-ready condition. Here a list in the WRONG things to do.

Mistake #1: Ignore Internet reviews

“They don’t really pay attention nowadays, there are so many reviews” you might think. Wrong. Reviews are as important as ever, and they are shared among your potential tenants. Respond to them, and contest those that might come from your competitors.

Mistake #2: Don’t bother painting

Painting is cost effective and makes a HUGE difference. It covers up holes in the walls, and can make your rental property feel inviting and comforting with the right colors. Neutral colors with bright accents work well.

Luxury Bathroom

Mistake #3: Bathroom upgrading is too messy

Oh yeah? Well, consider that the tenant is paying close attention to the bathroom. They don’t want to have to deal with leaky showers, toilets, or sinks. The bathrooms should ‘smell’ fresh and clean, and should have good lighting (NOT florescent bulbs). If you don’t need to replace faucets, be sure they are very clean and shiny! An electric scented candle is a really nice touch.

modern kitchen

Mistake #4: Ignoring the all important kitchen

Like the bathroom, tenants often make decisions based on the kitchen. If your appliances are up to date, consider easy repairs such as staining the cabinets, replacing knobs, or adding new flooring. You can sometimes add new flooring on top of the existing flooring at a more reasonable cost. Be sure that the inside of the stove is very clean, as well as the inside of the refrigerator. If those are dirty, that can really turn off a prospective tenant.

Mistake #5: Don’t bother with ‘staging’

Not sure what that means? Staging is attention to the little things that make your rental ‘earthy’ and aesthetically appealing. For a small investment, you can purchase some paintings to match your wall coloring, put area rugs in strategic places, and put pillows or throws in the right spots. Don’t forget that mirrors make the room look bigger, so add mirrors in the kitchen, bedrooms and other choice locations. Go to Pinterest for ideas.

signing rental property contract

Mistake #6: Don’t consider first impressions

When a prospective renter pulls up to your property, you should catch their eye right away. Isn’t that important when you first meet someone in person? You should dress nicely and professionally when meeting a tenant. Your property should give a first impression as well. Have a welcome mat outside the door, and make sure the door is painted and has polished hardware.  If an outdoor grill is visible, it will impress, and so will on outdoor chair or lounger.

Mistake #7: Don’t waste your time pampering

If you just consider your tenants as money generators, you are probably not a good landlord. They are people that want to start the next chapter of their lives in your dwelling. Make them feel at home by offering a welcome package, possibly with some snacks or chocolates and a bottle of wine. They will appreciate if you have a community newspaper, or some local guides that include local restaurants, nightclubs, and gyms. While you are at it, be sure to offer some incentives for your tenants to pay their rent in a timely manner and give them your contact info right away.

beautiful rental home interior

Mistake #8: Just use your previous photos

As you follow the previous advice, don’t forget to take new photos of your beautiful property. Now is the time. Use a high quality camera or cell phone and upload as large of an image as possible. Be sure to include all living areas, the kitchen, bathrooms, and storage areas. DO NOT include people, animals, or areas with bad lighting. You want to make your rental bright and inviting.

Ok, so all this may not be easy. But realize that you will get a return any time you improve your rental property, and you will fill you vacancies faster when your property makes a great first impression. And you will feel good knowing that you are being a good landlord that tenants will want to stay with.

Property Management Company vs. DIY Landlording

Rental Property InvestmentFor a business to be successful, there are a number of questions that you need to ask yourself. Therefore, as a property owner in the real estate business, one of the questions you will need to answer is whether to hire a property management firm or become the landlord and oversee your investment in person. It is an important decision that requires careful considerations for each strategy has both the negative and positive factors as well as the associated cost.

Despite the fact that you have options at your disposal, first things first. As a rental property owner, one of the critical and meaningful decisions you make is to identify and measure the advantages and disadvantages of each path. For sure, managing a rental property on your own can be very financially rewarding, but it comes with a lot of commitments in terms of time and effort. Conversely, hiring a property management company not only brings about a reduction in the day to day responsibility but also gives you more time to relax and engage in other activities. However, that freedom comes at a cost that can have a long term impact on your bottom line. In order to understand your options, we break down the strengths and weakness of each endeavor.

Becoming a Landlord

When you decide to manage your rental property in person, then you become your own investment property’s gatekeeper. More so, you have a responsibility to both your tenants and your rental business. Therefore, it is your job to ensure that the tenants’ expectations are met and also to make sure that operations run smoothly. You also have to ensure that your mortgage gets paid. The duties of a landlord include but not limited to finding new tenants and collecting rent as well as maintaining a clean environment.

Benefits of Self-Managing Your Property

 Save on Management Fees

No single management company works for free. They charge a fee for their services. Sometimes, the fee is as high as 10% to 15% of the collected monthly rent. However, when you choose to manage your property, you will keep 100% profits of your property. For example, if your property net worth is $20000, the property management company will take $2000.

Direct involvement in day-to-day activities and decisions

When you manage your own property, you will have the power to make all the important decisions without consulting someone else. More so, you will have total control over a number of issues that include where to advertise your vacant rentals as well as which contractors to hire for maintenance purposes. Nevertheless, you will also know how to collect rent from each tenant individually.

Cons of Self-Managing Your Property

Finding tenants

It is up to you as a manager to fill the void once your property becomes vacant. Typically, this is the most time-consuming and the hardest part of managing your own property. Therefore, you have to do marketing and advertising in order to attract tenants. Nonetheless, you have a duty to screen new tenants to ensure that you are leasing the property to the right persons. In addition, you have to collect the deposits from new tenants.

Legal issues

Since you manage you own property, you must know all the property laws so that you can know your stand when it comes to late payment and eviction.
landlord repair for insurance

Maintenance and repair

You are in charge of answering the maintenance calls as well as making sure that repairs are fixed. These are things you can do personally if you are the handyman type. Alternatively, you can hire contractors to make repairs but this will, of course, cost money.

Rental property management

Even though you can manage your own property, sometimes in business, it is better to pay a professional to do it for you In fact; a property management company adds a significant value to your investments as they deal directly with prospects and tenants. The property management company will save you considerable amounts of stress and also give you peace of mind for you know that the business is running smoothly.

Pros of a Property Management Company

Minimal vacancies

The property management company will aggressively advertise your property across a number of major platforms. This way, the vacant will reach the widest tenant pool possible. Therefore, the property will attract top-notch tenants that are likely to stay for long and pay on time as well as those that will take good care of your property.

Time-saving ability

Time-saving ability is one of the most crucial advantages of hiring a property management company. It will free up some time for you to do things you enjoy and especially when you have multiple investment properties. More so, with the property management company, you will not be responsible for the late night emergency repairs and annual inspections.

Fewer legal problems

A good property management company is well equipped with the landlord-tenant laws and will ensure that you are not vulnerable to potential law suits by undertaking stringent screening processes.

Tighter rent collection processes

Landlords can be lenient to tenants when it comes to rent collection. Timely rent collection is the only way to maintain cash flow. Therefore, your tenants should know that rent paying is not negotiable. By hiring a property management company, you put a buffer between you and your tenants for they will be involved in chasing down rents and even eviction when necessary.

Fluid infrastructures

Mostly, property management companies come as an all in one management package. These companies have standard procedures that ensure the leasing process goes smoothly in all stages. The procedures include screening and rent collection as well as eviction of tenants.

Cons of Hiring a Property Management Company

The only disadvantage of hiring a property management company is its higher cost that ultimately affects your profit margin. Most often, the company will take all or part of the 1st month’s rent as the first payment and then approximately 10% of each and every month’s rent after that. The company will use this first month’s rent for a number of expenses such as advertising the property and processing the applicant as well as administrative costs that come with setting up a new account.

Conclusion

So, if you have the time and are willing to learn all aspects of the property management business the DIY landlord option might work best for you. If you are expecting to keep purchasing rental property as an investment, you might want to start your own management business and hire your own personnel. However, it is a lot of work and mistakes can become very costly. You will have to learn about maintenance, find and purchase property management software, learn about the legal aspects of rental management, screen and work directly with your tenants.

If you can find a good property management company to work with, you will probably find that their experience and knowledge will be worth the time savings for you. You will be up and running in a short time and able to focus on new opportunities for investing.

10 Features Your Property Management Software Should Have

property management chartEven if you are an owner of a single duplex, you should have good property management software. This especially rings true if you are a professional property management company managing for a number of rental property owners. There are so many choices, and many of them are very good, but most likely none of them will have every single feature that you might want to have in your property management software.

The initial decision is whether you want web-based Internet software or desktop-based on-premise software. This article is not going to get into the pros and cons of either. The 10 features mentioned should be present in any decision that you make. However, you will need to consider if you want to have an unending monthly payment to use software online (web based), or if you would rather purchase your software once and own it yourself for as long as you need it (desktop based).

#1. Ease of Use – What good is software that is confusing and difficult to use? Generally, I have found that software created by programmers doesn’t ‘think’ the way property managers think. The software companies founded by actual realtors and rental property managers seem to be the most user friendly with the best flow. So when you are looking at software, be sure to see how easy it is to look up a tenant by their name, by the rental address, or by the owner of the property. Also make sure that the accounting for that tenant is not far away, meaning that it takes more than one click to access the accounting once you have displayed the tenant info.

#2. Separation of Accounts – You are managing two entities, so you will need to provide separate accounting and reporting for each. First, you are managing the tenant, so you’ll need accounting for the rent charges, rent receipts, tenant expenses and more. Your software program should provide statements clearly showing the charges and income that you receive from the tenant. Secondly, you are managing the accounting for the owner of the property. So, you will need to maintain accounting showing the rent received, management fees (if applicable), repairs and maintenance and other charges. Then, it should be able to provide reporting for the owner that is easy to understand.

#3. Notices and Invoices – You need to stay on top of money due from your tenants. So, your software should be able to easily send ‘Payment Due’ invoices’ and ‘Late Rent’ notices. Be sure that you test this out and see how easy it is to use. Since you may want to use your own wording in the notice, make sure the wording is not ‘canned’ in order for you to create a customized notice.

#4. Easy Date-Sensitive Reporting – Running a report shouldn’t be difficult. Basically, you should be able to click on a report and set the date range. A good property management report will be easy to understand, show totals at the end of the report, and allow you to run the report for any date range, including weekly, monthly, quarterly, or yearly.

#5. A Good Vendor File – Vendors are a big part of your business. They repair your rental property and provide goods that you need to maintain their condition. Vendors might be general contractors, handymen, insurance companies, building supply companies, mortgage companies, utilities, or landscapers. So, your software should have a vendor section with unlimited vendors and keep plenty of information on each vendor. You should look for a property management system that includes the vendor name, contact information, phone numbers, email, tax ID numbers, addresses, and plenty of note space for each vendor. Additionally, the program should be able to insert any vendor into any check.

#6. A Reminder System – When you are juggling tenants, owners, and your own business needs, you can’t remember everything. Let your software do it for you. A good rental property software should have a comprehensive reminder system built-in to the product. Tenants are constantly calling with questions, maintenance requests, and possibly complaints about other tenants. If your software has a reminder system, you can immediately log the call and set a future date to take action if necessary. Additionally, the reminder system should be able to remind you of tenants with outstanding balances, lease expiration dates that are approaching, owners that owe you money, and more. Use the reminder for PR as well by putting in reminders for tenant and owner birthdays, and send them well wishes. Be sure to insist on a robust reminder system in your software.

#7. Checks and Deposits – Be sure that it is easy to create checks and deposits. A good software for a property manager should include a check register with reconciliation features and the ability to sort by check number, date, payee, and amount. A single check should be able to be posted to multiple rental properties, such as a check for a vendor that works on multiple units.

#8. Emailing Features – While your software should include the ability to print reports, it should also be able to email to your tenants, owners, and vendors. I’d suggest that it be able to keep two email addresses for each, and have the ability to create and save emails. The email should also have the ability to send attachments, because you might want to include an invoice or receipt with your email.

#9. Paying Owners – At the end of the month, you’ll need to send your owners a check for their net income received. Your software should be able to create owner checks with only one or two clicks, saving you the time needed to write a check yourself. If you prefer not to mail checks, your software should have the ability to send payments to your owners via ACH to their bank account. Typically this will be a small additional fee, but it is well worth it.

#10. Backup Features – Few things are as heart-breaking for a business owner as finding out that their data has been lost. Backups are critical. If you have web-based software, you should not depend upon someone else to do it for you, no matter how safe or redundant they claim their servers are. With desktop software, it is easier to make local copies of your data, but you have to remember to do it. Be sure your software has a ‘reminder’ for your backups, and do it on a regular basis. The better software will be able to backup to any drive, such as a memory stick, flash drive, or network server.

Choosing the right property management software can be daunting, but if you know what to look for, you will quickly narrow down the choices. Be sure that you are able to download a ‘Sample Program’ allowing you to try out the software prior to the purchase. Look for a company that has been in business for at least 10 years and has a track record. Of course, look at online reviews, but be aware that reviews are sometimes written by the competition, so there is no alternative to actually trying out the software yourself and talking to a knowledgeable representative of the company. If you cannot speak to someone in person via a toll free number, you should be wary of their support down the road. Even if the software is easy to use, you should insist on a company that provides free phone support to help you get started, and has a plan for support after that. Too many companies leave you high and dry after you make the purchase.

I hope these suggestions are helpful to you! Please let me know if you have any follow up questions!

About the author:
Wayne Gathright is the founder and primary coder of the Tenant File Property Management Software company. He has been in the real estate and property management business for over 20 years. Other products created by Wayne are a Work Order Program, Work Processor for Property Managers, Tax Software, and an eBook “What ALL Landlords REALLY Need to KNOW”.

Hurricane Harvey – Our thoughts for landlords

HurricaneHarveySatellite-NASA
Photo credit: NASA

Hurricane Harvey in Texas has been catastrophic in so many ways and has affected millions of lives. I know because many of us at Tenant File are from that area and have friends and relatives living there.  Though the Tenant File headquarters is in Austin Texas, which was spared much of the fury, our friends to the south weren’t so lucky. Our best wishes and prayers go out to all of those affected as many of them are still going through rough times at the time of this writing.

Personally, my parents live in Victoria. Hurricane Harvey crept in to Texas around Rockport, which was devastated. Victoria is only 29 miles from the coast, and that is where Harvey parked itself for 3 days. Both my parents live in an assisted living facility, and we got word on Thursday night that they had a mandatory evacuation by 9:00 am the next morning. They told everyone in Victoria they had to get out. The city has around 80,000 residents, so you can imagine the panic and confusion.

The only place to go was my sister’s farmhouse 10 miles away, but my 87 year old mother passed out getting in the car and had to be rushed to the hospital in Victoria. She rode out the unrelenting lashing in the hospital with my sister, and my 92 year old dad hunkered down at the wood frame farmhouse. It was hit with the fury of Harvey but the 100 year old house withstood the winds and torrential rain. After the second night, they had to evacuate my mother from the Victoria hospital, because the hospital was filling up with critical patients. So my mother went to San Antonio. My father had been without electricity since the storm hit. Power came on Monday night for them, but many residents in Victoria are still without power now.

HurricaneHarvey-Boatdock-AdreesLatif-Reuters-50
Photo credit: AdreesLatif-Reuters

The point is, you never know what is going to happen. It could be a hurricane, a flood, earthquake, terrorist attack, fire, burglary or whatever … so you have to be prepared.  If you are a landlord, you are in charge of protecting your property but you also have a responsibility to your tenants. Of course there are legal responsibilities, such as providing a safe and habitable environment for them. But I’m talking about moral responsibilities. Is there a tree leaning over the rental, such as a Chinaberry tree that has a shallow root system? That is dangerous for both your tenants and your property, so you should deal with that before the worst happens.  Is it near a creek or in a low-lying area prone to flooding? Maybe you should consider barriers or improve the landscaping to handle the runoff. Are there loose shingles, siding, or stacks of lumber or other items that could become a hazard in high wind?  Fix it, or get rid of it. Do you have an evacuation plan or a means to contact your tenants quickly? Get one. Can your tenants get in touch with you if they have to leave quickly and need to know the status of their home? Be sure they have the information they need, by sending them a text or email explaining the situation, and keeping them updated on a regular basis. Let them know that you care.

HurricaneHarvey-AP
Photo credit: AP

Also, you should require renters insurance for your tenants. While the structure of your building has to be insured, many tenants mistakenly think that their own belongings are covered through your insurance. It is up to you, the landlord, to let them know that it is mandatory (or should be) that they get renters insurance for themselves. It is affordable and can be tailored to cover their pets, liability for visitors, theft, fire and natural disasters.

HurricaneHarvey-MarkRalstonAFP-50 Getty
MarkRalstonAF-Getty

And of course, don’t neglect getting insurance for your own property! That can certainly put you in legal jeopardy. A friend of mine knows a tenant in Houston that evacuated. Her rental home exploded because of a gas leak caused by Hurricane Harvey. The house burned down, but thank God she had already left. The landlord did not have insurance on the house, nor did it pass the compliance protocol for gas burners.  Image if that was your rental home… this will probably be a nightmare for the landlord as well as the tenant. And to think, what if the tenant didn’t leave in time? There is no excuse for neglecting your rental property, for your own sake, and morally for the sake of your tenant.

I guess the best thing to do is to put yourself in the shoes of your tenants, and think about what you would need if a disaster strikes. Then don’t put it off, because you never know what will happen and it might be too late later on. Fortunately, my parents are ok, but it could have been much worse. For millions of people in Houston, Galveston, Port Lavaca, Rockport, Port Aransas and hundreds of other cities along the coast and inland river ways, this is a nightmare coming true. Please provide whatever help that you can!

About the author: Wayne Gathright is the president of the Tenant File Property Management Software company. For more information, visit https://www.TenantFile.com.

Why Your Tenants Need Renters Insurance

Renters Insurance SalesmanMany landlords are now requiring that their tenants have renters insurance. If you are not one of them, you should consider the benefits for both you as the property manager (or owner) and for the tenant. This comprehensive article was created to help you make an informed decision about renters insurance for your tenants, and to provide some concrete advice about how to approach the subject and execute the plan.

The first thing to consider is whether or not you can ‘required’ you tenants to have it. Generally, but with exceptions, you are free to put a requirement in your lease saying that in order to rent from you, they must get renter’s insurance. You add other provisions such as quiet enjoyment and use of the facilities, so this is just another clause. There are a few exceptions, so you need to be aware of the regulations in the agreements you sign for subsidized housing and your local and state regulations. If you don’t currently require renter’s insurance, you can add that provision to your lease for new renters, and for existing tenants, you can sign a mutual agreement that is amended to your current lease. All of my daughter’s leases had that provision, including the amount required and that the ‘additional interest’ was to be the apartment complex management. In searching for insurance, I found that it really isn’t that expensive unless you (like any insurance) choose a low deductible and add optional c overages. More on that later.   Read the FULL ARTICLE

The Ultimate Guide to Keeping Your Tenants Happy

Tenant and Landlord Marriage

“With this lease contract, I thee wed”

It’s a marriage between the tenants and the landlord . . . and everything is wonderful! The tenants are so excited to have a new place to live. Decorating is exciting, there are new things to buy, parties to plan, a shorter commute to work, and anticipation is in the air. The landlord is happy, too… finally the money will start coming in again, no more advertising costs and … wait, did I hear the tenant say “parties to plan”?

That’s just life, and part of the things that both landlord and tenants have to deal with in the complex landlord – tenant relationship. Right, life happens, and landlords need to realize that there WILL be bumps in the road. Will you drive fast over the bumps and damage your car, possibly losing control? Or will you carefully maneuver around those bumps, saving your car and your piece of mind?

Tenant Landlord Potholes

Or is there an ‘out-of-the-box’ solution? Maybe, just maybe you can get the tenant to ‘fill in’ those bumps for you? Crazy? Not really, and this guide will give you some ideas on how you can work with your tenant to fill in the potholes of your long-term relationship.

I’m talking about ‘incentives’. Ways that you can work with your tenants to make sure that your rent is paid on time, that your tenants are happy with you as their landlord, and that your valuable assets are protected at the same time.

First, look at your tenants as ‘people’. Sounds silly, right? But many landlords just view their renters as money machines that only call them when they want something from you. Guess what? If that is your viewpoint, you are probably an unsuccessful landlord. You may get by with putting off a repair for a while, but then again your tenants may build resentment, damage your property, leave you, and then post a bad review on social media. Should you care? Of course, you should. Besides all of the expenses you will bear, you’ll soon be advertising for new tenants, and it will be even harder because like it or not, most tenants nowadays really will check for reviews about you on social media. If this sounds like tough love, maybe it is …your reputation matters.

Back to the wedding – what is the best way to have a marriage that lasts? Answer: Have a couple that knows each other well and accepts them way they are. In a relationship, that is by taking the time to develop love and understanding of one another. No, I’m not suggesting that you date your tenants – I’m saying that you need to do background checks! As a landlord, you need to know your tenants thoroughly by examining their credit history, employment history, rental history, criminal offenses, evictions and more. Hmmm, maybe that would also prevent some bad marriages too, but I digress. If you don’t do your homework at the beginning, it may not even matter if you take some of the other incentive steps I’ll mention later on.

 Get to know your partner

Tenant and Landlord Shaking Hands

The tenant usually pays for the background check, so failure to get one is like tossing a coin between getting a bad tenant or a good one. This is THE most important first step!

  • Verify that your tenant can pay the rent. That is spelled ‘J.O.B.’. Even if they do have a job that covers the rent you need to be sure that it can also cover all of the credit card debt (think Kohl’s, Target, Walmart, Amazon, and other retailers in addition to card companies), car payments, installment payments, living necessities, and an additional ‘cushion’. You have one, don’t you? Who provided the job information? Was it their previous supervisor (preferred) or ‘Cousin Louie’ (not so preferred)? A simple phone call will verify it, so don’t be afraid to punch those buttons. However, don’t ask them to verify how much they make, as that will breach the employers confidentiality with their employee. If you are renting to students, great, but just make sure that the parents are willing to be responsible for the rent as guarantors (I spell-checked that word, so blame Microsoft if it isn’t correct).
  • Lighting may not strike twice, but tenant history just might. If your prospective renter was a bad tenant in the last place they rented, it’s pretty likely they won’t be angels for you either. Then again, maybe there was an understandable reason that they broke their lease, so at this point, you’ll need to put on your detective hat and verify the reason for that black mark. Even if they have a decent rental history, you should contact their previous landlord and politely see if they don’t mind answering a few questions about a previous tenant. (There is kind of a secret ‘brotherhood’ (or ‘sisterhood’) among landlords, so most will be happy to oblige). Ask if they paid rent on time, if they maintained their rental property, if they got along with their neighbors, if they followed the property guidelines for use of the facilities, parking, noise, and more. You might find out they were great and just had to move to be closer to school or work, or then again they might have had bonfires on their patio and rehearsed their metal band on Wednesdays and Fridays.

Rental Property Crime

  • Criminal history … hmm seriously, do you want to take the risk? Again, this is another red flag that will cause you hours to investigate, so you need to decide if it is worth it. Was it a parking violation, marching at a peace rally, or did they murder their last landlord? Often minor violations won’t show up, but you’ll want to know if there were any DUI’s or sex offenses. You have an obligation to help protect your other tenants, so don’t even think about renting to someone with serious convictions.
  • The background check provides other valuable information as well, such as their creditors and credit score. A low credit score is not necessarily a deal killer, but you should know why. Like I said before, life happens. There might be a divorce settlement or medical problems that affect the score, but the ability to pay their rent after expenses should be your primary concern.

Meet and Greet

Landlord and Tenant Meeting

Ok, so now you are cool with the tenant screening part. Let’s get that lease signed! No, wait. You need to first talk to your tenants in person. If the tenant is a student, try to get the parent/guarantors there or at least on speakerphone. That way you can outline the responsibilities of all parties and have a clear understanding of what you expect of all of them. I like to have a separate meeting from the lease signing party because it is more relaxed and you don’t have to go over every provision of the lease in detail. Plus, you have a way to back out if things don’t go well. By that I mean, that you find out something that would be a deal killer, such as a roommate that isn’t confirmed, a problem with the parent guarantee, incorrect move-in or move-out dates, and so on. Plus, it is just fair to give the potential tenant time to go over the lease in detail so that they can ask questions prior to signing the lease with you. At the lease signing, be absolutely sure that you do go over the lease terms and make sure everyone understands it. Be super-friendly but also make it clear that this is a ‘professional’ relationship and you WILL enforce the terms of the lease strictly.  It is a contract, not a guideline, so prepare your tenant for their legal responsibilities. But you don’t get off that easy, you must guarantee to your tenant that you will also enforce YOUR responsibilities, like enforcing their ‘quiet enjoyment’ (keeping the neighbors quiet), fix things that break (your stuff, not their TV or Xbox), and respond to their request promptly. Remember, when you are married, it takes two responsible people to make both happy.

Watch What You Say

One more thing, I have to warn you about some of the things that you CANNOT ask your tenant. There’s this little thing called the Federal Fair Housing Law or your state might have a separate one – it is a big legal no-no to not pay strict attention to it. Here it is in a nutshell – don’t discriminate! Here are some fairly blatant examples of what NOT to ask a tenant:

  • Race – questions like ‘What race are you?’ or ‘Do you want to live with other minorities like you?’
  • Color – ‘You have dark skin, are you Hispanic or Caucasian?’
  • Religion – ‘I am a Buddhist, so I don’t want any Christmas decorations in your apartment’.
  • Sex – ‘I would be glad to have more good-looking women like you here’.
  • National Origin – ‘What is your first language?’ or ‘What country were you born in?’
  • Familial Status – ‘I don’t want my tenants having kids’.
  • Stupid Stuff – ‘A guy and his boyfriend might bother the others’ or ‘Are you divorced?’ or ‘Have you ever been arrested?’ because being ‘arrested’ and ‘convicted’ are very different. Additionally, you cannot only run background checks on select races or genders.

Don’t Be the Bad Guy (or Girl)

Happy Tenants

Now that you have let your tenants know that you will strictly enforce their lease, you can let them know you are not all that bad. There are ways that you can keep your tenant happy and even get them to work on your behalf (remember filling the potholes?).  Here are some ideas on how you can maintain happy tenants and keep that rent money filling up your mattress.

  • Reward your tenants for longevity. No, I don’t mean give preference to the elderly. If they keep your rental property occupied, that is a benefit to you. (Flashback to dealing with security deposits, eviction, legal troubles, and you with a bottle of Jack). For example, you can write a provision in your lease that when they renew their lease, you will give them something special, such as a free carpet cleaning or an interior paint job. This rewards your tenant, and at the same time, it improves your rental property. Another idea (maybe the second year) you could offer to plant some trees or improve the exterior of their rental. Again this is a win-win situation – you get a happy tenant, renewal of your lease, and improve the value of your property at the same time! Each year think of something new that you can do as a longevity reward.
  • Next, think of your tenant as a ‘good will ambassador’ for you. Maybe you can provide a financial bonus off a month’s rent if they bring in another tenant for you. Or maybe that incentive could benefit the new renter instead. Be sure that you can verify that the new tenant isn’t a result of your own marketing, and limit it to one or two tenants to protect yourself from abuse of your incentive. By the way, this incentive might also be something else, such as an upgraded appliance, Internet or networking upgrade, ceiling fan, or decorations. You’ll know what the tenants might want by actually spending some time ‘talking’ with them about what they would like to do to improve their ‘home’. Lack of communication is the main reason for so many divorces!
  • If they are renting your house, maybe you can get them thinking about buying the home by creating monthly credits toward that purchase. This is different from a ‘lease to own’, which is an actual contract where rent payments go towards purchase of a home. The way that it is different is that a ‘credit’ is applied each time they pay rent on time. ‘On time’ is the key here, because this rewards the tenant for not being late. You’ll have to keep a ledger (available to the tenant) with these credit amounts. After a set time, say 5 years, they will be able to use the credit towards the purchase of the house. This helps keep your renter in the home, and gives them a goal to work towards. Not to mention the ‘on time’ clause … if they pay their rent late, the accrued credit goes away…zilch…nada. (I didn’t take Spanish in High School for nothing!) Then it starts over with the next on-time payment. This is just an idea for out-of-the-box thinking, but you’ll need to provide your tenants with the details and make sure everything is good and legal.
  • One of the main reasons for tensions between landlords and tenants are the maintenance requests. This is where your lease is SO important. You only need to fix the things that you include on your lease agreement or those things which involve the health and safety of your tenants. That includes removal of pests (excluding children), locks, fire alarms, neighbors shooting guns, and unhealthy environments (think mold). Of course, things like backed up toilets, dripping faucets, broken ice makers and the like are things that may (or may not be) caused by tenant neglect. Generally you are obligated to fix those types of things, and that will keep your tenants very happy indeed (you hope). However, some tenants are pretty handy around the house, so one way to establish a good relationship is to let them do some minor repairs themselves. Do they do professional painting, plumbing or landscaping? Notice the word ‘professional’. They should be licensed and bonded for any work. But if they are, why not barter for some improvements on your property? Besides rent reduction, you can also wield some of the other incentives mentioned above. Non-professional work could include yard work, handing out flyers (for the non-technical or social media posting for others), installing hanging plants, minor painting or whatever your brilliant mind can conjure up. You’ll need to ok everything in writing and provide the materials in most cases.

Think Out of the Box

Young couple at New Home

These are some things that will help you keep your tenants happy. There are many other things as well, but those fall in the category of ‘amenities’. If you manage an apartment complex, tenants have come to expect an exercise room, laundry facilities, pools, and common areas. But you can always take that one step further by providing a meet-and-greet on a regular basis, movie nights at the pool, or with each new tenant lease agreement signed, send out a ‘welcome’ on social media to the other tenants. Here are more ideas:

  • Consider adding a common area for a dog park. It should be fenced, and separated into a ‘big dog’ area and ‘small dog’ area. If you really want to impress, add an obstacle course for the dogs. Be sure to add a sign upon entry that you are not responsible for anything that happens in that area. You don’t want to have to deal with little fluffy ‘Fi-Fi’ that got eaten by ‘Bruiser’. Draw the line on other pets like pigs, goats, horses, and tigers.
  • Barbecue areas are popular with tenants, maybe with a horseshoe area (not for real horses, see above), rope toss, Bocce ball, or washer toss.
  • Bike racks are a great idea. You tenants will appreciate not having to chain their bike to a tree, stair railing, or having to carrying their bike up 2 flights of stairs. Again be sure to post a ‘not responsible’ sign.
  • We can’t get enough. Consider adding electronic entry, security cameras, online applications, online rent payments, an app to alert when laundry is done, or maybe something shiny that just looks like smart technology.
  • Discount coupons or coupon books are popular. Contact the local businesses and see if they can provide your tenants with a coupon (available at your front desk), and in turn you might get a free meal or membership. Win-win.

Finally, be sure to keep your rental property clean, well maintained and communication open with your tenant. When you do that, you will have the type of tenant that will be loyal, timely, and together you will smooth over those ‘potholes’ in the road you are traveling on. Happy marriage!

 About the author:

Wayne GathrightWayne Gathright is the President of W G Software, Inc., which produces the Tenant File Property Management Software.  The Tenant File is used by over 5,000 landlords, property managers, and owners of rental property. The Tenant File was founded in 1995, and now manages over 200,000 rental units. Wayne has written several books related to property management including ‘What ALL Landlords REALLY Need to KNOW’, and manages a number of other websites related to real estate sales and rentals, tenant management, and rental property.  In his spare time, Wayne is an award winning songwriter in Austin Texas. Visit the Tenant File at: https://www.TenantFile.com.

 

 

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