The RentLikeAPro.com Team

Transcription

1 THE FEE BIBLE A DETAILED GUIDE TO PROPERTY MANAGEMENT AND LANDLORD FEES 3rd Edition The RentLikeAPro.com Team

2 Copyright 2013 The RentLikeAPro.com Team Third Edition ISBN-13: Book Cover & Design by PIXEL emarketing INC. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a license issued by the Copyright Licensing Agency Ltd. Legal Disclaimer The Publisher and the Authors make no representations or warranties with respect to the accuracy or completeness of the contents of this work and specifically disclaim all warranties, including without limitation warranties of fitness for a particular purpose. No warranty maybe created or extended by sales or promotional materials. The advice and strategies contained herein may not be suitable for every situation. Neither the publishers nor the authors shall be liable for damages arising herefrom. The fact that an organization or website is referred to in this work as a citation and/or a potential source of further information does not mean that the author or the publisher endorses the information the organization or website it may provide or recommendations it may make. Further, readers should be aware that Internet websites listed in this work may have changed or disappeared between when this work was written and when it is read.

3 This guidebook is dedicated to all the property owners, managers, and landlords who work too hard and get paid too little!

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5 CONTENTS Introduction Application Fee Appliance Rental Service Convenience Fees for Accepting Certain Types of Payment Emergency Network Service Garage Rent Highlight Wall Color of Choice Late Fees (and Rent Discounts for On-Time Payments) Lease Buy-Out (Re-Let Fee) Lease Initiation Service Leasing Fee (for Managers Only) Lease Renewal Service Lease Violation Charges Missed Appointment Fee or Rescheduling Service Month to Month Fee

6 15. Move-in/Move-out Inspection Scheduling Service NSF (Non-Sufficient Funds) or Returned Check Fee Parking Fee Pet Application Pet Inspection Service Pet Rent Routine Property Inspection Program (Manager Only) Service of Notice Fees Storage Space Rental Utility Processing Service Vending or Coin-op Laundry Weekend Move-In Service Weekly or bi-weekly rent payment plans The RentLikeAPro.com Team

7 INTRODUCTION When you first look at this guide, you might assume we want to nickel-and-dime every tenant and customer we have. This is far from the truth. Over the years, we have learned that the right charges actually help manage the property. Some of the fees discussed in this guide are used as a penalty to a tenant for causing additional work. These fees are only charged to bad tenants who cause bad situations. Your good tenants will never see these charges. Other fees in this guide are for additional services and conveniences you can offer customers. These allow you to provide better service and get compensated for it. Your customers will actually thank you for these additional options. A Little about Fees The word fees has been ruined by banks for years. You will see that, whenever possible, we use the word service instead of fee as the title of a charge. For example, there is an Early Termination Service. When implementing any of the techniques in this guide, feel free to change the title to whatever fits your business, and try to add value whenever possible. Don t Be Afraid to Get Paid Some fees, such as the Lease Initiation Service, are great revenue generators that we thought tenants would protest and cause problems, so we waited forever to initiate it. We decided to test this one out for a month at a smaller amount. After signing three leases, we instantly doubled the amount, 7

8 The Fee Bible and now we wonder why we ever hesitated. Now we have signed more than 2,000 leases and have gotten only one or two complaints. Other fees such as the Emergency Network Service, seemed that it would be nickel-and-diming tenants, but once we put it in place and explained it properly, tenants were thanking us for this service and the value and security it provided. Your investment property is your business and should be treated like one. The tenants know that if they do not pay their cell phone bill, then they are charged late fees and their service will get shut off. They also know if they go over their minutes or data usage, then there are additional fees they agreed to. If their landlord lets them get away with paying late or other abuses, then they will take full advantage, and you will be a lower priority than their cell phone bill. Options and Additional Services Many landlords have a my way or the highway attitude, and THAT attitude limits their income. We live in an on-demand world. People want options, and in most cases, they are willing to pay for them. As a landlord, find out what your customers want or what they need, and let them pay you for it. On many of these services, we are just offering them and not forcing their acceptance. The most common complaint we hear from landlords is, What about all the extra accounting and our reply is, Yes, you will need to account for all that extra income; sorry for the inconvenience 8

9 The RentLikeAPro.com Team Management Fees Explained Some of the fees in this guide are for third party property management companies only. This means they are getting paid by a property owner for their management services. Landlords and owners are welcome to read these sections to get ideas and improve their service as well. The same guidelines apply to these fees as the tenant fees. Make sure the additional costs add value; do not be afraid to make money, offer additional services, and use the fees to manage bad people who cause bad situations. 9

10 The Fee Bible 0I APPLICATION FEE How Much: Typically $25 $50 per person Who Pays: Applicant How It Works: The applicant pays this upon submitting an application to rent. This helps cover the cost of running criminal and credit screening and pays for your time to process the application. Check your local market and charge as much as possible. PROS Automatically screens out bad tenants Makes sure all application information is filled out before wasting your time CONS Fewer applications (but usually just from people who know they are qualified) Pays for criminal and credit screening and usually more depending on the rate you negotiate with the screening provider 10

11 The RentLikeAPro.com Team FOR TENANTS: Explanation to the tenant: A $xx application fee is due when you apply. This helps to pay for the screening services and the time to process your application. This really does not require an explanation as it has become standard in most markets. Information that needs to be in the lease: Nothing specific in the lease agreement, but this should be listed on your application or you may list it on your vacancy advertising. FOR PROPERTY MANAGERS: Explanation to the owner: We charge a fee to the tenant for processing their applications. We run nationwide criminal and credit checks, verify employment, and check with their previous landlord. There is no charge to you for this service. Information that needs to be in the management agreement: Property managers should disclose that they retain this fee in their management agreement. 11

12 The Fee Bible 02 APPLIANCE RENTAL SERVICE How Much: $15 to $85 depending on the cost of appliances and market Who Pays: Tenant How It Works: This is used most often for laundry machines, microwaves, and occasionally refrigerators. If you have laundry hook-ups in your property, you may want to consider renting a washer and dryer to the tenant for an additional monthly charge. You can typically pay for the machine after just eight to ten months of rent. Some landlords buy used machines as needed, and others have new machines delivered and installed when the tenant signs up for rental. PROS This is a nice amenity for tenants who do not want to buy laundry machines, refrigerators, or other appliances. You make sure the machines are hooked up properly. This service is a convenience you provide for the tenant. CONS You may end up having to move machines around and may need a place to store them if the tenant does not choose this option. You are responsible for maintaining the machines if they break. The machines should pay for themselves within 10 months. 12

13 The RentLikeAPro.com Team FOR TENANTS: Explanation to the tenant: The property has laundry hookups, and you can either provide your own washer and dryer or we have a set that you can rent for $xx per month. Information that needs to be in the lease: This could be an option in your move-in packet and should be added to the lease or as a separate agreement if the tenant decides to rent an appliance. FOR PROPERTY MANAGERS: Explanation to the owner: There is no need to explain this to the owner. It is an additional service you provide that the tenant pays for. Information that needs to be in the management agreement: None 13

14 The Fee Bible 03 CONVENIENCE FEES FOR ACCEPTING CERTAIN TYPES OF PAYMENT How Much: Typically $3 $15 per payment Who Pays: Tenant How It Works: In your house rules or move-in packet, you will want to list the ways that a tenant can pay rent (i.e., pay online, money order, cashier s check, personal check, etc.). You will want to charge a convenience fee for some of these payment types. It used to be the trend that a convenience fee would be charged for a tenant to pay online. However, some landlords like the opposite because if you have a system or software that allows tenants to pay online, this is much easier for you to process and is a huge time saver. Many landlords charge a convenience fee for paying with a personal check. PROS Incentive for tenants to pay the way you prefer Discourages payment types that are less convenient for the landlord CONS You have to track and enforce this fee Existing tenants will need to be notified and given time to make changes Helps pay for additional time needed to process payments 14

15 The RentLikeAPro.com Team FOR TENANTS: Explanation to the tenant: There is no charge to pay online, but if you wish to pay by personal check, there is a convenience fee of $xx. Information that needs to be in the lease: This may be disclosed in the lease, in the house rules, or in the move-in packet. FOR PROPERTY MANAGERS: Explanation to the owner: No explanation necessary Information that needs to be in the management agreement: Nothing needs to be in the management agreement unless you want to disclose the specific fee. 15

16 The Fee Bible 04 EMERGENCY NETWORK SERVICE How Much: Typically $3 $25 a month depending on service cost and volume of units Who Pays: Tenant How It Works: This is a monthly charge added to every lease that pays for outsourcing your 24-hour emergency calls. Whether or not you charge this, outsourcing your emergency calls to a call center is a great idea to reduce your stress. However, if you do outsource and have a 24-hour emergency line, this is an easy fee to charge, and tenants are happy to pay it when it is explained properly to them. You add this charge to the lease, and it needs to be paid monthly with their rent. If you are using software that allows you to put in reoccurring charges, then it will automatically add it to their ledger each month with the rent. However, you will want to make sure you define clearly what constitutes an emergency. PROS This helps to pay for outsourcing emergency calls. Most tenants like this service and are happy to pay for it when it is explained properly. CONS The tenant may feel nickeland-dimed if it is not explained properly You have to track and enforce this fee. 16

17 The RentLikeAPro.com Team FOR TENANTS: Explanation to the tenant: The emergency network service is $xx per month. We have contracted with an outside provider. This means that no matter what time of day you have an emergency, you can call and someone will answer the phone and take care of your concerns. Information that needs to be in the lease: This should be listed in the lease agreement by the rent and other monthly charges. FOR PROPERTY MANAGERS: Explanation to the owner: This is a small fee we charge tenants so that we can make sure the property is being cared for 24/7 in case of an emergency. This way, we can make sure the phone is answered and, for example, water can be shut off quickly before it causes additional damage. There is no charge to the owner for this service. Information that needs to be in the management agreement: Property managers should disclose this in the management agreement. 17

18 The Fee Bible 05 GARAGE RENT How Much: $25 $200+ depending on area, property, and size of garage Who Pays: Tenant How It Works: This is most common for multiplexes and apartments where there are detached garages. If your property has garages, you should consider charging extra for these spaces as you will typically get more than if you include them in the rental price. You also can rent these spaces to others in the area and get more money, especially if your property is in a downtown market. You will need to have a separate agreement for this service. PROS This is a nice amenity for the tenants who want a garage space. This service is a choice the tenant makes and a convenience you provide. CONS You must track and enforce this fee. You need to make sure these areas can be secured. 18

19 The RentLikeAPro.com Team FOR TENANTS: Explanation to the tenant: There are garage spaces available for $xx per month. Information that needs to be in the lease: If the tenant decides to pay for a garage, then you will want this included in the lease. You also may do a garage lease separate from the main lease, especially if you are renting it to someone who is not a tenant of your building. FOR PROPERTY MANAGERS: Explanation to the owner: This is an additional income source to the owner. The additional garage rent is typically given to the owner, but if you are a manager, you should get a percentage of this income as your regular management fee. Information that needs to be in the management agreement: For property managers, this specific item does not necessarily need to be in your management agreement. However, if you are charging a percentage-based management fee, you will want to specify a percentage of operating income rather than just rent. 19

20 The Fee Bible 06 HIGHLIGHT WALL COLOR OF CHOICE How Much: $150 $250 depending on the area and your costs Who Pays: Tenant How It Works: This is an option for the tenant to have a wall painted whatever color he/she would like. Large apartment communities do this, and they have good reasons for doing so. The tenant pays for this service. The theory is that if a tenant can customize the unit, then he/she is more likely to stay longer and renew the lease. You just let the tenant know that there is an option to pick a color swatch from whatever paint store you prefer to buy paint from. Then, you have your handyman paint the wall, and when the tenant moves out, you paint it back to a neutral color, if necessary. PROS This makes the tenant feel more at home and therefore more likely to renew the lease. You control the paint job to make sure it is done by someone you trust. This adds value to your property. CONS You need to have a good, inexpensive painter or handyman or this one could cost you more than it is worth. Remember that in many cases, you will need to paint it back to a neutral color after the tenant moves out. 20

21 The RentLikeAPro.com Team FOR TENANTS: Explanation to the tenant: We have a service available that allows you to choose any color you would like to paint this wall (typically you will want to have a specific wall in mind). You can choose the color from these samples, and we will have it painted for $xx. Information that needs to be in the lease: It could be an option in your move-in packet but is not needed in the lease. FOR PROPERTY MANAGERS: Explanation to the owner: It is an additional service you provide that the tenant pays for. This way, we can make sure the paint job is done by someone we trust, and it will make the tenant feel more at home. This will increase resident retention at no cost to you. Information that needs to be in the management agreement: None 21

22 The Fee Bible 07 LATE FEES (AND RENT DISCOUNTS FOR ON-TIME PAYMENTS) How Much: $xx per day after a certain date or percentage of rent are most common Who Pays: Tenant How It Works: There are tons of different methods for charging late fees. Every good lease includes late fees. The most common are an initial charge after the due date, a per-day fee after that, or a percentage of rent after the due date. Sometimes these will be combined. We have found that most problems landlords have with late fees are when they are not enforced. In some areas, judges throw out per-day and other late fees. In response to this, some creative landlords have simple late fees that are very stiff, such as 10% of the rent amount applied immediately when the due date passes. Other creative landlords are using discounts instead of fees. Rent Discounts: Some landlords do not have late fees but have rent discounts for on-time payments. For example, if the market rent is $500 a month, the lease would state the rent at $600 a month with an on-time discount of $100 if rent is paid before XX date each month. Rent is easier to charge and collect, and this keeps the amount owed under the rent category on the ledger. 22

23 The RentLikeAPro.com Team PROS Motivates tenants to pay on time CONS Requires enforcement and tracking Can be additional income FOR TENANTS: Explanation to the tenant: Tenants, like any human with a credit card or other bill, are familiar with late fees. It rarely needs any explanation unless you are using a more creative method, such as the discount program. Information that needs to be in the lease: Outline the late fee, due date, and additional charges as needed in the lease. FOR PROPERTY MANAGERS: Explanation to the owner: An explanation is only needed if the management company is retaining the late fee. Some management companies retain % of late fees. In this case, it is best to explain the additional systems you have in place for enforcing, tracking, and collecting late fees. Information that needs to be in the management agreement: None 23

24 The Fee Bible 08 LEASE BUY-OUT (RE-LET FEE) How Much: Typically equal to three months rent, plus fee ranging from $200 $600 Who Pays: Tenant How It Works: When a tenant needs to get out of the lease early, you have a buy-out provision outlined in the lease. This is typically used when a tenant gets a job transfer or just wants out and has money to pay and walk. The other terms of the lease remain in place; you are just letting the tenant change the end date. You still process the move-out normally, and he/she can get the deposit back based on your usual move-out process. PROS This gives good tenants an out when needed. Typically, you can get the property re-rented within three months. Employers will pay this if transferring an employee. This eliminates a lot of bad situations. Because it is a fee, this does not count as rent. CONS Many tenants cannot afford to pay this much. You could be burned if it takes longer than three months to re-rent the property. 24

25 The RentLikeAPro.com Team FOR TENANTS: Explanation to the tenant: Instead of sending you to collections for the remainder of the lease and nailing your credit, we provide a Lease Buyout. This allows you to leave in good standing, and if the property is in great condition, you are eligible to get your deposit back. Information that needs to be in the lease: In the lease, you simply need to put the amount (for example, equal to three months rent plus $xxx fee) and a short description that the Lease Buyout amount does not change any terms of the lease other than the end date. Thirty days notice and other moveout conditions apply. FOR PROPERTY MANAGERS: Explanation to the owner: Every once in a while, tenants have to move out early for reasons such as a divorce or job transfer. Instead of these situations getting really ugly and the tenant leaving the property in bad condition, we have a Lease Buyout arrangement allowing such tenants to move on and leave your property in great condition. We are typically able to get it rented within three months, so there is no loss of rental income to you. Information that needs to be in the management agreement: This does not need to be in the management agreement unless you want to specifically disclose this fee. 25

26 The Fee Bible 09 LEASE INITIATION SERVICE How Much: $50 $250 depending on your preference and area Who Pays: Tenant How It Works: This fee has many names. It is basically a move-in charge or an upfront charge for signing the lease. It is similar to a non-refundable portion of the deposit, but there are some advantages to calling it a Lease Initiation Fee. Defined as a fee, you can keep the money upfront and use it for whatever you want. If it is called a deposit, then you may be restricted on what you can use it for. PROS Great way to get a little extra cash upfront after going through a vacancy Fairly common in many areas, and tenants hardly ever question it Gets paid prior to tenant moving in CONS You will have to have this in your lease. 26

27 The RentLikeAPro.com Team FOR TENANTS: Explanation to the tenant: The move-in charges are first month s rent of $xx, refundable deposit of $xx, and a lease initiation service fee of $xx. Just list it as part of the normal fees, and it does not really need an explanation. However, if the tenant asks, you can say it is for the work that goes into preparing the lease and getting him/her set up in your system, etc. Information that needs to be in the lease: It should be listed on your lease agreement with the other move-in charges. If you have a move-in packet, this should be added as a requirement before the tenant gets keys. FOR PROPERTY MANAGERS: Explanation to the owner: There is rarely a need to explain this to the owner, but the explanation is the same for the owner as it is for the tenant. It is a fee charged to tenants to get them set up in your system, and it helps keep the owner s costs lower. Information that needs to be in the management agreement: For property managers, this should be disclosed in your management agreement. 27

28 The Fee Bible 10 LEASING FEE (FOR MANAGERS ONLY) How Much: Half to full first month s rent, depending on your local market and competition. Some managers charge a flat fee anywhere from $100 to $1,000 for this service. It is best to shop your competition. Who Pays: Owner How It Works: This is a common fee in most markets. The manager charges the Leasing Fee to the owner when the lease is executed. The fee is taken from the money collected by the manager from the tenant. The amount is determined in the management agreement. PROS This is typically a big chunk of money taken right up front. This helps pay for leasing agents bonuses, showings, etc. In many markets, this is a standard fee and requires very little explaining. In markets where rentals are listed on the MLS, this can help pay co-brokerage fees. CONS In some markets, this has gotten more competitive, and it may limit your growth if you charge it and your competitors do not. You may need to refund this or have some sort of guarantee if the tenant defaults early or goes to eviction. 28

29 The RentLikeAPro.com Team FOR TENANTS: Explanation to the tenant: The tenant does not even need to know this is being paid. No explanation is needed. Information that needs to be in the lease: None FOR PROPERTY MANAGERS: Explanation to the owner: This should be listed as one of your primary fees in the management agreement. The leasing fee is only charged once the property is rented. It is used to incentivize leasing agents and co-brokerages (if applicable) to show the property. It also covers marketing expenses. This will help reduce vacancy. For example, if your property rents two weeks sooner, this fee pays for itself. Information that needs to be in the management agreement: This fee does not need to be in the lease. It should be listed in your management agreement with your other fees. You also may want to spell out if this is used to pay co-brokerages, if applicable. 29

30 The Fee Bible 11 LEASE RENEWAL SERVICE How Much: $15 $200 or more depending on market and demand for rentals. Some property managers charge a percentage of the lease for this service. Who Pays: Tenant and/or Owner How It Works: When it comes time to renew the lease, a landlord can charge for this service. In areas where there are waiting lists for properties and high demand, the landlord can charge even more for renewals. Some landlords offer to lock in the rent for another year at the current price, but there is a convenience fee for renewal. This fee also can also be used to negotiate terms of the renewal. For example, we can waive the renewal charge if you renew for two or more years OR if you pay for the renewal service today, we can lock in your rent at $xxx for the next XX months. For property managers, it is a little different. The property manager can charge the owner and/or the tenant for this. Renewed leases are great for property owners. It means they do not have to experience vacancy or turnover. Property managers should have a renewal program that begins 30 to 90 days prior to the current lease expiration date. When the tenant renews, the owner is charged to compensate the property manager for negotiating new terms and executing the documents. Some property managers charge the tenant and the owner for this service. 30

31 The RentLikeAPro.com Team PROS Great for reducing vacancy Can be used to negotiate terms A high fee can be used to discourage bad tenants from renewing Compensation for your time CONS May discourage good tenants from renewing Need to have a renewal system in place FOR TENANTS: Explanation to the tenant: There are many ways to explain this charge. Here are just a few: We charge $xx to process your renewal. To lock in the rent price and secure the property for another xx months, there is a renewal service charge of $xx. To avoid rent increases for the next xx months, we recommend the lease renewal service. This will lock in your rate and secure the property. There is a charge of $xx at the time of renewal. Information that needs to be in the lease: The renewal can be an addendum to the lease, and the charge can be negotiated with the renewal. You can outline a solid fee in the lease as part of renewing. FOR PROPERTY MANAGERS: Explanation to the owner: We begin negotiating with the tenant 60 days prior to their lease expiration date. This service reduces vacancies and turnover on your behalf. To cover our added costs, we charge $xx per renewal. Information that needs to be in the management agreement: Property managers will want this fee outlined in their management agreement with an explanation that they retain it if you are charging tenants. 31

32 The Fee Bible 12 LEASE VIOLATION CHARGES How Much: $25 $300+ Who Pays: Tenant How It Works: Any time a tenant violates a clause of the lease, you may be able to charge a lease violation fee. This can be in addition to the service of notice fee. Typically, you can charge a fee and allow a certain amount of time to correct the violation. For unauthorized pets or smoking, the tenants also have to cover the damage caused. Lease violation notices can be served in person, taped to the door, mailed, or even ed. This is most often used after a first or second warning to stop the tenant from continuing to repeat the violation but not for something for which you would want to evict immediately. PROS Helps enforce the lease Compensates you for your time Makes the tenant more accountable and less likely to repeat violations If the tenant does not pay fee, it remains on the ledger and can be taken out of the next rent payment. CONS Difficult to track if you are not using a tenant ledger or accounting system Tenant complaints Violations must be in writing and documented 32

33 The RentLikeAPro.com Team FOR TENANTS: Explanation to the tenant: The charge and a statement like this should be on the notice you serve: As outlined in your lease, there is a charge when you violate terms. You violated in your lease. Please correct the issue and do not let it happen again to avoid further fines or possible eviction. Information that needs to be in the lease: A clause in your lease should mention the landlord s right to charge fines for lease violations. In some cases, such as pets or smoking, you may want to list specific amounts, such as a per-day fee for unauthorized pets on the property. FOR PROPERTY MANAGERS: Explanation to the owner: None are needed, but this pays for the time required for dealing with lease violations. It helps keep tenants in line and the property in great shape. Information that needs to be in the management agreement: None 33

34 The Fee Bible 13 MISSED APPOINTMENT FEE OR RESCHEDULING SERVICE How Much: $25 $85 depending on vendor service charges in your area Who Pays: Tenant How It Works: This fee is typically charged when a tenant puts in a maintenance request that gets scheduled and then does not show for the appointment. Good landlords require all maintenance requests to be in writing. Tenants are informed in their lease, or when making the request, that there is a rescheduling service charge if they miss the appointment. Most professional vendors will not make a service call for free; neither should landlords. When a tenant misses an appointment, the charge is applied and the appointment is rescheduled. PROS Reduces no-shows Increases commitment from tenants Covers the cost vendors charge for showing up Covers your cost for rescheduling CONS Needs to be tracked, charged, and collected 34

35 The RentLikeAPro.com Team FOR TENANTS: Explanation to the tenant: Vendors charge us $xx for a noshow. If you are not there as scheduled, you will be responsible for this charge as agreed. Please be on time to the appointment so we can take care of your maintenance request. Information that needs to be in the lease: This charge can be outlined in the lease or when the tenant puts in a service request. Either way, it should be in writing. FOR PROPERTY MANAGERS: Explanation to the owner: This is not needed but should be disclosed in the management agreement. Information that needs to be in the management agreement: None 35

36 The Fee Bible 14 MONTH TO MONTH FEE How Much: Typically $25 $100 a month or a percentage of monthly rent Who Pays: Tenant How It Works: The month-to-month fee is charged to tenants if they choose not to renew their lease and would like the convenience of going month to month. You add this charge to their ledger beginning the day after their lease end date. If you are using software that allows you to put this charge in for a future begin date, then it automatically kicks in at the end of the lease. Once the tenant renews, then you remove this charge. PROS This helps to negotiate renewals. Tenants are more willing to discuss their plans at the end of lease. Some tenants are happy to pay for the convenience of staying month to month. CONS Tenant may move out to avoid a fee at the end of the lease. You have to track and enforce this fee. 36

37 The RentLikeAPro.com Team FOR TENANTS: Explanation to the tenant: If you would like the convenience of going month-to-month, it is just another $xx a month until you decide to renew. OR If you would like the convenience of going month-to-month, it is just another $65 a month until you decide to renew, but if you choose to renew now, I can lock in your lease for another year at an increase of only $35 a month. (This is just an example; you can play with the pitch and amounts.) Information that needs to be in the lease: You need to add the month-to month fee amount and a brief description that this fee is charged if the tenant decides to allow the lease to go month to month. FOR PROPERTY MANAGERS: Explanation to the owner: We use a month-to-month fee as a negotiation tool when the tenant s lease is about to end. With this, we are able to raise rents and increase terms. We do not actually want tenants to go month-to-month, and this charge motivates tenants to stay in leases and communicate their plans with us. Information that needs to be in the management agreement: Nothing needs to be in the management agreement unless you want to disclose the specific fee. 37

38 The Fee Bible 15 MOVE-IN/MOVE- OUT INSPECTION SCHEDULING SERVICE How Much: $15 $85 depending on your preference and area Who Pays: Tenant How It Works: If a tenant wants to be present for the move-in and move-out inspections, you charge for the convenience of this service. Sometimes tenants want to be present when these inspections are performed, but scheduling these with the tenants can be difficult. Also, the inspection itself typically takes longer when a tenant is there asking questions. Charging for this service allows you to accommodate the tenant s requests and compensates you for your time. PROS Saves time by eliminating some inspections done with tenants present Pays you for the additional time and hassle of scheduling with a tenant A choice the tenant makes and a convenience you provide CONS You will have to coordinate the inspections. Tenants may feel nickeland-dimed at move-in. Some landlords prefer the tenant to be present, and this may deter that. 38

39 The RentLikeAPro.com Team FOR TENANTS: Explanation to the tenant: We can perform this inspection without you present. If you would like this performed at a specific time with you, there is an additional charge for this service. Information that needs to be in the lease: This could be an option in your move-in and/or move-out packet but not needed in the lease. FOR PROPERTY MANAGERS: Explanation to the owner: There is no need to explain this to the owner. It is an additional service you provide that the tenant pays for. Information that needs to be in the management agreement: None 39

40 The Fee Bible 16 NSF (NON- SUFFICIENT FUNDS) OR RETURNED CHECK FEE How Much: $15 $40; the maximum is regulated by state. Do a Google search of NSF fees state allowed for many resources. Then charge the amount your state allows. Who Pays: Tenant How It Works: If a tenant makes a payment, typically by check or ACH, and it bounces (is returned because the bank account balance is too low), then this fee is charged. You will need to inform the tenant of the new amount due. This may include the NSF fee, a late fee, and possibly the service of notice fee. Some landlords choose to accept only certified funds from these tenants after a bounced payment is received. Others consider bounced checks a revenue source and continue to accept checks from these tenants. 40

41 The RentLikeAPro.com Team PROS Covers the hassle of processing NSF payments Can be considered a great revenue source by some landlords Can be combined with other fees to generate more income (late fee & service of notice fee) CONS Time-consuming hassle Amount is regulated by states Sometimes the amount is barely worth it while others are good. For example, in the District of Columbia, it is $15, but in the state of Washington, it is $40. FOR TENANTS: Explanation to the tenant: This is a common fee, so the explanation is simple. Your last payment bounced, and the new amount owed is $xxx. Payment will have to be made in certified funds, such as a money order or certified check within X days or we will begin the eviction process. Information that needs to be in the lease: Some landlords just put that a fee will be charged but not the actual amount. This allows them to raise the fee if the state raises the amount allowed. You also can just put the actual fee amount and a disclaimer allowing the fee to be raised at any time. The lease can also state, The fee for NSF payments will be the maximum allowed as outlined by state regulations. 41

42 The Fee Bible FOR PROPERTY MANAGERS: Explanation to the owner: An explanation should not be needed except when the payment to the owner will be delayed. The tenant s payment bounced. We are pursuing payment and will begin the eviction process if necessary. Information that needs to be in the management agreement: None 42

43 The RentLikeAPro.com Team 17 PARKING FEE How Much: $25 $200+ depending on area and situation Who Pays: Tenant How It Works: This is most common for multiplexes and apartments where there is limited parking. The fee range is large because it totally depends on the area. You could charge $200 or more for parking if your property is downtown in a large city. However, even in smaller cities, you may be able to charge $25 $50 for additional parking spaces or RV parking, etc. For example, if you have a four-plex that has six parking spaces, you may want to charge for the additional two spaces to prevent arguments over parking and make some additional revenue. One way to enforce parking is to contract with a towing company to monitor the parking. Many towing companies will do this for free because they make money when a car is actually towed. If you choose this route, you will want to make sure you have a good system for distributing parking stickers or window tags. You will also want signage at the property saying that parking is enforced. Some towing companies will provide and install signs. Typically, their contact information needs to be posted. 43

44 The Fee Bible PROS This is a nice amenity for tenants who want a specific parking space or want extra spaces. This may actually reduce arguments between tenants if done correctly. This service is a choice the tenant makes and a convenience you provide. If the parking area is covered and/or secured, this adds even more value, and then you can charge more for these spaces. CONS Enforcement of this fee requires more effort than most. You may have complaints from tenants if they get towed and you do not have a rock-solid system in place. In some cases, you need to make and assign parking passes for these spaces. FOR TENANTS: Explanation to the tenant: There are additional parking spots available for $xx per month. OR There are only a limited number of parking spots available, so parking is not included at this property. However, if you would like an off-street space, it is $xx per month. 44

45 The RentLikeAPro.com Team AND (if you are planning on contracting with a tow company) Parking is enforced by an outside towing company to make sure only authorized cars are parked in the lot. However, tenants are responsible for making sure this sticker or window hanger is visible at all times or hung in the proper place. If it falls off or is not in the proper place and you get towed, there is nothing we can do about it. This also should be outlined in your lease or parking agreement. Information that needs to be in the lease: Any parking agreements should be done in writing and signed by the tenant. This can be in the lease or as a separate agreement. FOR PROPERTY MANAGERS: Explanation to the owner: The owner should be fine with this as a way to reduce arguments and make more money. The additional parking rent is typically given to the owner, but if you are a manager, you should get a percentage of this income as your management fee. Information that needs to be in the management agreement: For property managers who are charging a percentage, you will want to specify a percentage of operating income rather than just rent in your management agreement. 45

46 The Fee Bible 18 PET APPLICATION How Much: $15 $65 and can be charged per pet Who Pays: Applicants with pets How It Works: This fee is for processing the pet application. When applicants have pets, the landlord provides them with a pet application. Most management companies make this available online with their regular application. The pet application may request information such as type of pet, name, color, breed, weight, previous landlord reference, vaccination records, and even a picture. The tenant is required to complete the pet application when they apply to rent a property. PROS Can be used to screen out bad pets Good tenants with pets will have this information. CONS No real cons to being more cautious when it comes to pets Helps eliminate breeds not allowed by insurance companies Good people with good pets will pay for accommodations. 46

47 The RentLikeAPro.com Team FOR TENANTS: Explanation to the tenant: We are more than willing to accommodate good pets. We understand it is difficult to find rental housing that accepts pets. Most of the restrictions on pets are due to property insurance regulations on the owner. We have this convenient pet application to provide the property owner s insurance company the necessary information to allow you to have pets. Information that needs to be in the lease: No information is needed in the lease. FOR PROPERTY MANAGERS: Explanation to the owner: Owners who allow pets typically love the idea of a pet application and do not need further explanation. For extra security, we require the tenants to complete a pet application. There is no additional cost to the owner. Information that needs to be in the management agreement: Your management agreement should disclose that you retain application fees. 47

48 The Fee Bible 19 PET INSPECTION SERVICE How Much: $25 $145 per inspection depending on if you do a professional level with black light, video, and pictures or just a basic walk-through. Who Pays: Tenant How It Works: In order to accommodate pets, you require additional inspections. Typically, one inspection is performed within a month after moving in and then quarterly, semi-annually, or annually after the initial inspection. The frequency is up to you. You want to provide the extra security of these inspections without violating the tenant s personal space. Some landlords increase or decrease the frequency based on the number of pets or the condition of the first inspection. The inspection should be documented. Some landlords use applications on their cell phone or tablet that allow them to take notes and pictures per room and the results to the tenant and/or owner. 48

49 The RentLikeAPro.com Team PROS Finds pet damages before tenant moves out Able to charge tenant for damages immediately Additional revenue source that provides security CONS Has to be scheduled with tenant Charges need to be tracked. Additional documentation needed Can outsource this to an inspector Tenant pays for this FOR TENANTS: Explanation to the tenant: We are happy to accommodate good pets at our properties. We simply require additional inspections to ensure that no damages are being caused. The inspection takes less than 30 minutes and will be scheduled in advance. The inspections include (list what will be included here, such as a written report or pictures), and this information protects you from additional charges when moving out. The charge of $xx for these inspections can be paid with your rent or when the inspection is performed. Information that needs to be in the lease: This should be outlined in the lease with the cost and frequency of the inspections or at least a general statement allowing you to change it. 49

50 The Fee Bible FOR PROPERTY MANAGERS: Explanation to the owner: We have an additional inspection program for pets. We perform these every (quarter, six months, or year, whichever you prefer), and the inspection includes (tell the owner what it includes, black light, pictures, etc., and that you will provide them a copy of the completed inspection). If you do not want to send a full inspection report to your owner, then do not tell them it is included. This program allows us to hold tenants responsible for damages while they are still in the property instead of waiting to find surprises when they move out. There is no additional cost to you for this service. Information that needs to be in the management agreement: Your management agreement should disclose that you retain tenant fees and even inspection charges. 50

51 The RentLikeAPro.com Team 20 PET RENT How Much: $10 $65 per month and sometimes charged per pet Who Pays: Tenant How it works: This fee works just like rent but for pets. You charge an additional monthly amount for pets, and some landlords charge a fee per pet. Good people with good pets are willing to pay for the accommodation. With so many landlords choosing to not allow pets, it is acceptable to charge for the privilege to have pets. PROS Helps screen out people with undesirable pets Additional revenue for an accommodation CONS Potential damage caused by pets (see the Pet Inspection Service) No extra work just increase in monthly income Can be used with the other pet fees Allows you to accommodate the large group of renters who have pets; estimates state that over 60% of renters have pets 51

52 The Fee Bible FOR TENANTS: Explanation to the Tenant: Unlike a lot of properties that do not allow pets, we will make the accommodation for an additional $xx a month for pet rent. Information that needs to be in the lease: The additional rent must be covered in the lease. FOR PROPERTY MANAGERS: Explanation to the Owner: As a manager, if you want to retain this fee, you will need an explanation to justify the expense; for example, We perform more inspections, require a pet application, and document the condition of the property in relation to pets. To cover these added management costs, we charge the tenant additional pet rent, and there is no cost to you as the owner. If the manager wants to retain this charge, it is recommended to change the name from Pet Rent to Pet Liability Service or Pet Monitoring Service. You can choose a name that works for you. The point is that rent is typically passed through to the owner, but tenant fees can be retained. Some property managers choose to just charge their regular management fee to the extra rent collected on pets. Either way, it is best to have the owner agree to allow pets at their property and outline this in your management agreement. Information that needs to be in the management agreement: For managers, the fee and their share of it should be disclosed in your management agreement. 52

53 The RentLikeAPro.com Team 21 ROUTINE PROPERTY INSPECTION PROGRAM (MANAGER ONLY) Note: In some areas, inspections are regulated and a licensed activity. Managers change the name of this service to a Property Survey instead of Property Inspection. How Much: $35 $175 per inspection depending on report provided to owner Who Pays: Owner How It Works: Typically, move-in, move-out, and other violation inspections are included in the normal management fee charged to owners. However, additional routine inspections can be a service that property owners are happy to pay for. You can offer these semi-annually, quarterly, or let them choose the time based on their preference. There is a large gap in how much you can charge for this; it depends on whether you provide the owner with a detailed report and if it includes pictures and/or video. There are pros and cons of both ways, but this can be a big money maker. Basically, you either mandate it in your owner agreement or you allow the owners to choose if they want this as an optional service. Most managers suggest mandatory, semi-annual inspections and allow the owner to choose more often if they wish. Then track which properties are to be inspected and 53

54 The Fee Bible when. Notify the tenants and do your inspection. You also can perform some basic routine maintenance at this visit to add value to the owner (i.e., change furnace filters, do caulking, replace smoke alarm batteries, etc.). Some great mobile applications are available for documenting inspections electronically. PROS Most owners are happy to pay for a detailed report with pictures. Inspections can be a big revenue source (i.e., if you manage 100 units and charge $150 per inspection and you do inspections semi-annually, that equals $30,000 per year). This helps you avoid huge repairs by catching problems early (i.e., finding a water leak under a sink before it damages cabinets, subfloor, etc.). This keeps tenants responsible and catches lease violations (which can also be a revenue source see our lease violation and/ or service of notice fees). This demonstrates an ongoing effort for caring for the property (this can help in some court cases). CONS You will have to coordinate the inspections. If you provide a detailed report with pictures, it could raise more questions and concerns with owners who can sometimes be irrational about what is, and what is not, the tenant s responsibility. Conducting the inspections can be time consuming, and you may need to hire someone to do this. 54

55 The RentLikeAPro.com Team FOR TENANTS: Explanation to the tenant: Some managers prefer to explain this inspection to the tenant as if it were more of a technical issue with the heating or plumbing. Tenants are more likely to comply and less likely to hide their meth lab and five cats. We will be performing inspections on the HVAC and plumbing fixtures in your property on Tuesday, October 3, between 1 and 5 p.m. While inspecting these areas, you will see the entire property. Information that needs to be in the lease: None FOR PROPERTY MANAGERS: Explanation to the owner: Managers should take the time to develop an inspection program with a full description for their owners. It should include an explanation of what is inspected and what preventative maintenance is included. This program can be mandatory or offered as an opt-in for owners. Property owners who care about their asset should see the value in this program and be happy to pay for it. Information that needs to be in the management agreement: This could be in the management agreement itself or added as an addendum as an optional service depending on your preference. 55