Ten Stupid Things Small Landlords Do By Vincent S. Castellano With apologies to Dr. Laura of Talk Radio, small landlords are among the dumbest people

Transcription

1 Ten Stupid Things Small Landlords Do By Vincent S. Castellano With apologies to Dr. Laura of Talk Radio, small landlords are among the dumbest people on the planet. They must be, because they do the dumbest things. 1. Landlords Give Keys to Strangers Would you give your car to a complete stranger? Of course not. But landlords give keys to their buildings (which are worth much more than any car) to complete strangers. Consider what typically happens when a landlord has an apartment for rent. The prospective tenant calls and makes an inquiry about the apartment. The landlord is so happy to get a call he spills his guts to the tenant, and makes an appointment for the prospect to see the apartment. The prospect comes over and the landlord shows the apartment, all the while telling the prospect how wonderful the apartment is. At that point, if the prospect says he wants the apartment and has the money, the landlord is so mesmerized by the cash that he will give the prospect the keys on the spot. What does this landlord know about the prospect? Nothing! This prospect could be New York's number one deadbeat. He could be in the process of being evicted from where he lives right now. He could be wanted in a dozen states for murder. He could be a convicted pedophile, or on the terrorist watch list. Yet the landlord just gave keys to property worth more than $500,000 (and often much more) to him. More importantly, once the tenant has the keys, then he has a legal right to occupy the apartment (whether or not he pays the rent) and the police and the courts will enforce that right. 2. Landlords Don't Get Rental Applications From Prospective Tenants The landlord-tenant relationship is a very odd one. The landlord is at the most powerful BEFORE the tenant is given the keys. Once the tenant has the keys, then the power shifts to the tenant. After the prospect has seen the apartment and has said he wants it, that is the point of the landlord's maximum power in the relationship. The prospect needs the landlord to agree to the tenancy. Therefore, the landlord can get anything he wants out of the prospect at that moment, but not later. That's when the landlord should give the prospect a rental application. Some owners make up their own (this can be very dangerous unless you know what questions you cannot ask), while others simply buy rental applications from stationery stores. This is also dangerous. State law governs what you can ask a

2 tenant, so if you are going to purchase a rental application make certain it was written in conformity with New York State law. A rental application has two purposes. The first purpose is to find out who this prospective tenant really is. The second purpose is to get enough information so you can find him later if he leaves town owing you money. Applications vary, but you must get certain basic information: the full legal name of the tenant, current address, prior address, social security number and date of birth. It's highly advisable to get the tenant's occupation, employer's name, driver's license number, car license plate number and bank. I once worked for a property owner who insisted that photocopies be made of the prospect's driver's license and social security card. The more information you get, the easier it will be to find the tenant if he skips town. Oh, by the way, if you don't get the information at this point, you can't get it later. Not that it is illegal to ask a tenant for the information later, but if you ask the tenant and he refuses to give you the information, what are you going to do about it? Evict him? No Housing Court Judge in this city would evict a tenant for failure to provide this information after he has signed a lease. 3. Landlords Fail to Check the Information on the Application It may come as a surprise to you, but people lie. Especially those with something to hide. The prospective tenant can tell you anything and you won't know they are lying unless you check it out. There is no excuse for that. Credit checking companies exist and the more sophisticated companies can get you a credit report on the tenant and a tenancy report (they can tell you if the tenant has ever been evicted before) in less than an hour by fax. But be careful. It is illegal to do a credit check on a tenant without his written permission. I know of one two-family homeowner in Brooklyn who was burned by the "tenant from hell." Now she visits the prospective tenant at their current address. She visits without warning because she wants to see how the tenant lives. Are they clean? Is the apartment damaged? Many owners call the prospect's employer to verify employment. Whenever a prospect gives me a check I routinely write on the application the name of the bank and the account number. Think of it this way, credit checking is so common today that if you don't do a credit check you are probably accepting a prospect that other landlords rejected. One word of caution if you call a prospective tenant's current landlord for information. Unfortunately, landlords lie too, even to other landlords. The reality is that if the tenant is a deadbeat, the landlord is very tempted to tell you the tenant is a treasure, simply to get rid of him quickly. Some landlords will even tell you a great tenant is a deadbeat so you won't rent to them, thereby, keeping the good

3 tenant in his apartment for a little while longer. You can call the prior landlord to check on a prospect, but the problem is that time fades all memories. So unless the tenant was the proverbial tenant from hell, you are very likely to get a good reference. 4. Landlords Don't Check Tenant Income It makes no sense to rent an apartment to someone who can't afford it. You will collect the deposit and the first month's rent, but if the tenant can't afford the rent, you are only setting yourself up for a very difficult problem a few months down the road. Some landlord's simply ask for the tenant's weekly (or monthly income) and assume that if the rent is no more than 30% (it used to be 25%) of the monthly income, then the prospect can afford the apartment. But that's not enough; life is more complicated today. You must talk to the tenant about the affordability of the apartment. Is the tenant biting off more than they can chew? Does the prospect have other obligations? An ex-wife collecting alimony, a big car loan, an elderly parent that requires support, etc.? How many dependents does the prospect have? Does the spouse work? Is there another source of income? You shouldn't ask these questions directly, as people are too inclined to lie. But a friendly conversation is imperative, and usually far more revealing. Oh, one more thing. Nothing can destroy the prospect's ability to pay rent faster than drugs (alcohol is a drug too) and gambling. So look for the signs. 5. Landlords are Suckers The image of the landlord is that of some cold, unfeeling rich SOB. The truth is that most small landlords are middle class homeowners. Many are just one generation removed from poverty or the old country, struggling to make the American Dream come true for themselves and their children. These are good people. They have a heart. And they are dumb enough to fall for any sad story by a prospective tenant in a hurry. The stories vary. Sometimes they say they need the apartment quickly because of a visiting or a sick relative. Or maybe it's a new job opportunity that will evaporate if they can't get an apartment quickly. Or maybe someone in the family is pregnant and they need a bigger apartment right away. Let me give you some critical advice: Don't feel sorry for the tenant. This is business, not social work. If the tenant is in a big hurry to rent the apartment and move in, don't rent it to him. He's probably being evicted where he is now and

4 that's why he's in such a hurry. Don't cut corners because the prospect is in a hurry. Remember what the old wise man said: "Act in haste, repent in leisure." 6. Landlords Trust Brokers Most real estate brokers are honest professionals, but some are unreformed used car salesmen. You won't know about your broker until it's too late. The role of the broker is to market the apartment, to bring to the landlord a number of qualified candidates to rent the apartment. Never permit the broker to select your tenant. That is your job and you must never delegate it to anyone. But the broker only gets paid if you actually rent to one of his prospects. It's common for brokers to "embellish" the qualifications of prospects; unfortunately some brokers go too far. Nevertheless, it's still the landlord's job to get the application from the prospect and CHECK HIM OUT! After all, if the landlord picks the wrong tenant, who will bear the costs of that mistake? 7. Landlords Don't Nurture the Relationship With the Tenant Some landlords act like petty dictators. Tenants are people. The overwhelming majority are quite decent, hard-working people. More importantly, the tenant puts "bread on your table" so to speak. He is your customer, so treat him with respect. In that sense, a landlord is just like the corner grocer. If the grocer treats his customers badly, pretty soon he will have no customers. So let me give you some advice. Return phone calls from tenants promptly. Don't ignore them. If the tenant calls about a dripping faucet at 2 a.m., tell the tenant (politely) that this could have waited until the morning. On the other hand if the tenant calls at 2 a.m. telling you of a broken pipe or a fire in the building, you should be grateful. You have to teach the tenant the difference between what can, and cannot, wait until the next day. If repairs are needed, try to make them promptly. If you can't do it right away, you at least owe the tenant an explanation. If the plumber was supposed to show up on Thursday and didn't, at least call the tenant and tell him you're sorry for the delay. A little respect here goes a long way when it is time to collect the rent. 8. Landlords Get Angry If Rent Isn't Paid on First of Month Landlords disagree about this. Some feel that since the lease says the rent is due on the 1st of the month, then it must be paid on that day. If the tenant doesn't pay on the first, some landlords will knock on the tenant's door and demand the rent. Some resort to screaming, yelling, cursing, etc. In my opinion, this is a mistake. In a small building, the key ingredient in any landlord-tenant relationship is good will. The two of you must get along. Screaming and yelling cannot be part of the relationship. The fact is that the landlord cannot compel the tenant to pay rent

5 without taking the tenant to Housing Court. That is expensive, time-consuming and destroys the good will in the relationship. Besides, if you have to rely on the Housing Court to collect rent, you are in big trouble. My approach is different. I usually wait until the first weekend of the month. If I haven't received the rent by then, I give the tenant a call. I don't ask for a check right then, instead I ask when I can get a check. Let the tenant pick the day. I never mention the word rent; I never mention the word money. Ninety-nine times out of a hundred, the tenant apologizes and tells me they will drop off a check the next day. If the check doesn't arrive on the specified date, I call again. At this point we need a conversation about the rent. The tenant picked the day yet the tenant didn t follow-up. Is there a problem? If the problem is only temporary, then I work something out with the tenant (but be mindful that if any tenant falls too far behind then it is virtually impossible for him to catch up). If I feel that the problem is more than temporary, then the landlord must switch strategies, and that will be the subject of another column. By the way, I NEVER go to the tenant's apartment to collect the rent unless I'm invited by the tenant. 9. Landlords Ignore Nuisance Tenants The tenant's apartment is his. He is entitled to privacy and quiet enjoyment. But there is one exception. When a tenant's conduct interferes with the quiet enjoyment of other tenants or neighbors, you MUST deal with it. This is called a nuisance and it could be anything. Maybe the tenant has an unruly child; maybe the tenant is a screamer; maybe he is a night owl; maybe the tenant is deaf and the TV is too loud at 4 a.m. The standard is simple, if other tenants complain to you, then you must deal with it for a very simple reason: good tenants won't stay in a building where another tenant is a nuisance. If you ignore it, your good tenants will move and you'll be left with a collection of misfits. You cannot deal with it by yelling, screaming, threats or name-calling. In this case, the tenant is acting like an inconsiderate child, but the landlord must act like the adult. If at all possible, I wait until the tenant pays the rent and take that opportunity to have a little heart-to-heart chat. I start by apologizing for sticking my nose into their private business. But I say other people are complaining. I never say who complained, but I relate the substance of the complaint. I also say I don't know if the complaint is true or not, but I say that if it is true, then the offending tenant must do something about it. I give the offending tenant every opportunity to fix the problem, only if that fails would I resort to court.

6 Evicting a tenant because they are a nuisance is very difficult. You must prove the tenant is a nuisance on the basis of eye witness testimony in court. Not only does nobody want to go to court, no one wants to live next to a neighbor you have testified against while the judge makes up his mind. The best solution here is to keep the lease terms very short. That way you can get rid of a tenant simply because the lease has expired. I give the tenant a lease when they first move in. After the lease is over I try to make the tenant a month-to-month tenant. I tell the tenant that we have to get along. If we don t, then we have to make a change. By then they know if we can get along, so the decision for the tenant is easy. 10. Turnover is Not Good For Business You can make money as a landlord, but only if you keep your tenants. Every time a tenant leaves I lose a couple of months rent and must do work in the apartment to make it appealing to the next tenant. Too many turnovers in one year and my profit evaporates. So I do two things: First, I try to keep my tenants happy. I am not a perfect landlord, so I don't expect perfect tenants. If a good tenant asks for something reasonable, I make sure he gets it. Secondly, I examine my apartments that have excessive turnover. Apartments have excessive turnover for a reason. What is the reason? How can I make the apartment more attractive? In one apartment I moved a doorway and turned a very large onebedroom into a decent two-bedroom apartment. in another apartment with excessive turnover I refinished the wood floors. In both cases the improvement made the apartment much more rentable. Not only did I reduce subsequent turnover, I got higher rent.