Renting properties out is a business. When you have four or five rental properties, managing accounts can become somewhat of a task. So, how do you keep your tenants’ accounts organized while still maintaining your personal life? Podcast host and Property Manager, Andrew Schultz, explores the topic.
Plus, we’ll discuss what to do if you’ve lost your tenant’s lease and how to handle tenants who ask for a reduction in rent.
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Andrew Schultz: (00:00)
Hey everyone. Welcome back to another episode of the Rent Prep for Landlords podcast. This is episode #331, and I’m your host, Andrew Schultz. On today’s episode, we’re going to be talking about how to handle a loss, lease, what to do when a tenant asks for a rent reduction, and how to handle the bookkeeping for your rental properties. We’ll get to all that right after this.
Voice Over: (00:22)
Welcome to the Rent Prep for Landlords podcast. Now your host, Andrew Schultz.
Andrew Schultz: (00:27)
Before we jump into this week’s episode, I just wanted to remind you to check out the Rent Prep for Landlords Facebook group, over at facebook.com/groups/rentprep. We’re coming up on 12,000 members over there, and it’s a great free resource for you to tie in to learn more from other landlords and housing providers throughout the country. If you have a weird situation, it’s a good spot to post because you can get a lot of perspectives from a lot of different people. Very, very quickly. Don’t forget to check that out today. It’s completely free over at facebook.com/groups/rentprep.
Voice Over: (01:02)
Feet on the street, real stories from real property managers.
Andrew Schultz: (01:10)
So this week’s feet on the street actually comes to us from a tenant. We’re going to take a quick look at this question. It’s actually a pretty unique one. The tenant asks my landlord keeps the lease and an online portal and texted me that she lost it, lost in quotes and that I need to sign a new one. I had just signed a one-year long lease while there’s no lease. Could I just move out with no repercussions? So the first thing I thought of after reading this question is how did the landlord managed to lose their copy of the lease? If they keep it in an online portal? It seems like if they put it into the portal so that the tenant could access it, they should still have a copy of it in the exact same portal. It doesn’t seem to me as though their copies should just magically disappear, but let’s assume that the landlord did actually lose their copy of the lease.
Andrew Schultz: (01:54)
Somehow in this instance, the first thing I guess I would do as the tenant would be offer them a copy of my original copy. Don’t give them my original copy, but I would offer them a copy of my copy. And then hopefully you can just set the whole thing aside. It sounds like that’s not really the route that this particular tenant wants to go. It sounds like this tenant actually wants to move out. So we’ll kind of move forward a little bit with what their options may be. And I guess before getting too deep into this, I should mention the fact that I’m not an attorney and that you should probably speak to an attorney if this is something that you are strongly considering. So if you are seriously considering this, and there’s no lease to be found, you may or may not have a copy, which obviously it doesn’t sound like the tenant’s real inclined to share.
Andrew Schultz: (02:36)
It sounds like the landlord doesn’t have a copy based on the question here, you may be considered a month to month tenancy. At that point, if there’s an absence of a one year lease, you may be considered a month to month tenant. And at that point, I would think that you would be able to just give the appropriate amount of notice to the landlord and move out at the end of that notice period, whatever the stipulated period is in your state, you can your state laws to find that information out. I don’t know, as though I would necessarily try to walk away without giving any notice. You could find yourself in some sort of a pickle going that route and that timeframe you may actually have your landlord locate their copy. In which case now you’re in a situation where you’re trying to break a lease and now there’s a lease that’s been found.
Andrew Schultz: (03:17)
Where does that leave you with when the dust settles? So there’s, there’s some risk to you going that route as well. I don’t know as though there’s really a good answer or a good solution to this situation. I think the best thing that you can do here is probably talk to your landlord. If you’re really not happy in the apartment that you’re in and they really don’t have a copy of your lease, you may be able to negotiate some kind of an early move out situation with your landlord or something like that. I don’t know as though I would necessarily just say, well, since you don’t have a copy of the lease, I’m just going to up and move out. That’s, you know, from a landlord’s perspective, that’s not what I would want to send it to do. I would want them to come and talk to me.
Andrew Schultz: (03:53)
But by the same token, we generally don’t lose signed copies of our leases. If you decide to entertain the idea of signing a new lease with the landlord, the first thing I would do would be to compare the existing lease that I have, assuming that you have your copy as the tenant with whatever the landlord presents as the new copy, just to see if there’ve been any changes that were slipped in or anything like that. I’m not saying that that’s necessarily what’s going on here, but I would definitely be comparing my previous lease versus my new lease. Just to see if there are any changes and realistically speaking, that’s a really good thing to do. Every time you’re presented with a new lease. Don’t just sign year after year after year, without taking the time to actually read through it because Lisa’s are legal documents and they do change from year to year. I know in our business, our lease gets updated at least once a year. So our tenants should definitely be taking the time to review those changes on a year, over year basis. Before they just go ahead and sign off
Voice Over: (04:52)
Forum quorum, where we scour the internet for ridiculous posts from landlords and tenants.
Andrew Schultz: (04:59)
So what do you do if your tenant approaches you and asks for a lower rent? What if you are already just barely making ends meet on the property and any reduction in rent would cause you to start losing money? So let’s take a look at this forum post here. This was found over on Reddit and this is a post from a landlord who’s in that exact position, single home landlord here. I had to move across the country and I’m renting out my condo due to COVID rental prices have gone down and it sounds like my tenants have renters remorse. They’re at least started at the end of 2019 a couple months before COVID struck. They want me to reduce the rent by 300 to $500 a month to be more market-rate and fair, which would not, or barely cover my mortgage and fees or threatening to break the lease.
Andrew Schultz: (05:44)
I think what they want is just a rent reduction and I’d like for them to stay as long as possible, at least through the end of their lease, which is up in the fall of next year. My question is, should I call their bluff or what is considered fair? Any advice about how handle this? So this is an interesting question to me. And the reason I say that is because my default here would be to fall back to the lease the tenants and the landlord both signed a lease in this case, I’m assuming they were not under any duress when they signed the lease or anything of that nature. So I’m assuming that this is a valid and enforceable lease. And in a lease agreement, both parties have obligations to one another. So in this instance, the tenants are asking you to reduce their rent, but they’re not actually asking you to reduce any of your obligation to them.
Andrew Schultz: (06:27)
The flip side of the coin is let’s say that rents had jumped up $500 a month. You would still be obligated to keep the rent at that existing level, at least until the next lease renewal period comes up. So that’s kind of the purpose of having that lease is it guarantees both parties are tied into the same contractual obligations for a period of time. All of that being said $500 a month is a pretty substantial jump in the market up or down. And it may be who view as a landlord. If these are good tenants to start considering a situation where you might want to renegotiate that, lease a little bit. So let’s look at this from a best-case scenario and a worst-case scenario, we’ll start with the worst case, worst-case scenario. These tenants move out of the apartment and you are stuck with a vacancy, which you may have some difficulty filling.
Andrew Schultz: (07:16)
And you’re also going to have some turnover costs more than likely. So that’s something that you have to take into account as well. Another bad option would be, they could just remain in the unit and stop paying you altogether. And you might be in a position where you’re not able to evict the tenant because of that situation. The end result of these worst-case scenarios is essentially the property owner’s going to wind up losing some money. It doesn’t matter if it’s a turnover, doesn’t matter if it’s vacancy time. Doesn’t matter if it’s, you know, can’t evict a bad tenant because they’ve decided to stop paying any of these scenarios are going to wind up costing the housing provider, some sort of money. And it sounds to me like, in this instance, the housing provider is pretty tight against what their actual expenses are for the property.
Andrew Schultz: (07:58)
It doesn’t sound like they have a whole lot of wiggle room here. So let’s talk about a couple of best-case scenarios here. If you were to say, no, I’m not interested in renegotiating this lease. We both are bound by the same terms and conditions. They may stay. They may continue to pay that rent the same rent that they’ve been paying for that entire lease term. At the end of the lease term, you may find yourself in a position where they, again, demand a rent reduction, or they just say, you know what? You wouldn’t work with us when we needed you to work with us, even though you might not have been able to work with them, we’re going to move anyway. So, you know, that’s, that’s one possible best-case scenario is you saying no to the renegotiation and they stay through the end of that lease term.
Andrew Schultz: (08:36)
And they may or may not renew. You could also look at it from a perspective of, okay, let’s try to renegotiate this lease and get them to stay. You may be able to meet them in the middle. It’s not like you necessarily have to say, I’m going to give you $500 off your rent every month. You know, they were asking for three to 500, is there a number there that makes the property work for you? Maybe not necessarily be cashflow positive or super cashflow positive. You just want to avoid losing money on the property on a monthly basis. And I think that that’s probably something that you can explain to the tenant as well. I think this entire question as a whole is actually really interesting because it goes to show that things in real estate are number one, negotiable, and number two more fluid than you would think in this circumstance.
Andrew Schultz: (09:23)
You have a tenant who apparently is struggling to make sure that their rent is getting paid on time. You have a landlord. That’s just trying to provide good housing for a tenant while still being able to make the ends meet on the property. And there’s probably a solution somewhere in the middle there. This is one of those circumstances where I think both parties would be best served by coming to the table to negotiate. I think taking a hard-line stance and following the Lee’s all the way to the end of the lease term here may not necessarily be the best play for this property owner. And ultimately the property owner has the ability to make a change to the lease. If the tenant agrees to make a change, the lease, this is one of those situations where you may find yourself better off negotiating and keeping on the path rather than not negotiating taking that hard stance and winding up in a much worse position at the end of everything.
Andrew Schultz: (10:13)
One little add on that I will throw in here is that you should check through your lease and see if you have any kind of early termination clause. You should also check your lease to see if there’s any sort of an early termination clause written right into the lease by default. In some leases, you’ll find that there’ll be an early termination clause. That’ll allow a tenant to walk away if they pay like a sublet fee or if they continue to pay the rent until a new tenant is found, or they may have to pay some portion of the remaining rent for the lease term. And they get to just walk away from the lease. That’s considered an illegal lease break at that point. So check your lease for that as well, just to see if you have one of those clauses that could be used in this set of circumstances,
Voice Over: (10:53)
Water cooler wisdom, expert advice from real estate pros,
Andrew Schultz: (11:01)
Keeping track of the accounting related to your rental properties can be a bit of a challenge. And it’s definitely become a challenge for one particular landlord out on Reddit. Hey everyone, how do you keep your tenant security deposits, income expenses, and everything else straight. I’m wondering how to do the bookkeeping as I have two to three rentals, as well as two other separate businesses, plus my own personal life, as well as savings and trying to figure out a way to keep everything clean. So the one thing I do want to mention right here at the start is that you should definitely be keeping your property books completely separate from any other business or personal income that you guys have coming in. It definitely makes your life a lot easier to have that income is separated out as well as the expenses separated out, just, you know, separate bank accounts and everything will make your life a lot easier when it comes to that.
Andrew Schultz: (11:47)
I did talk more in-depth about how to go about setting up your bank accounts and things like that. The structure that we use here at our office back in episode three, three 26, I believe it was. Yeah. So be sure to go back and check that episode out of your head, having some difficulty with accounts and which accounts you would need to set up and how to use those accounts and things like that, that would probably, probably be the best place to reference that particular information. I also have a book that I’m going to recommend here. You can find this over at Amazon. The title of the book is property management, accounting, a survival guide for non-accountant. This is a book that I picked up way back in the day when I first got into the industry and was struggling to get my mind wrapped around some of the accounting concepts that were going on.
Andrew Schultz: (12:29)
It’s definitely a good book. It’s not terribly long. I think it’s actually under a hundred pages, a nice little paperback, and it was actually written by the people over at Buildium who are one of the more popular software providers when it comes to property management software. It’s a nice little book. That’s definitely something that I would consider picking up. If I was in a position where I was trying to learn more about the actual accounting side of how properties work, definitely a good book to grab. If you’re interested in grabbing a copy of that book, I’ll make sure that there’s a link to that in the show notes, over at rentprep.com/podcast as well, and make it nice and easy for you guys to find a link so that you can grow that book. It’s definitely worth the read. It’s like $10 on Amazon. It’s not an expensive book.
Andrew Schultz: (13:10)
And I think that that would actually go a long way to help you understand some of the some of the ins and outs of the actual accounting beyond that. I think what you really need is some decent and software. There’s a ton of different property management softwares out there. And the software that you’re going to need is really gonna depend on the number of doors that you have, that you’re trying to make as well as how technical of a solution you need. So for instance, we use a software called app folio. Currently, we’re going to be hopefully switching by the end of the year. It’s a nice software, but there is a minimum number of doors that you have to have before. They’ll even talk to you. I want to say it’s 200 or 250 doors before they’ll even tell, talk to you. And it’s not necessarily meant for the individual landlord, the self-managing landlord it’s meant for more management companies and things like that.
Andrew Schultz: (13:58)
There’s other softwares out there that are geared more towards the individual landlord. If you want specifically something for rental properties, maybe check out something like cozy or, you know, another solution along those lines. So there’s a bunch of them out there. I know some people will do the entire thing off of Excel spreadsheets, which add two to three rentals is probably doable. But as you start to scale, you’re going to find out real quick that that’s not going to scale with you. Some people will use QuickBooks. I think there’s actually a QuickBooks version specific to rental property, but anybody that I’ve talked to that has tried to use QuickBooks to manage rental properties has told me that it’s just a nightmare and they would, they wind up moving away from that solution pretty quickly. So my recommendation would be find a good management software that will scale with you cozy.
Andrew Schultz: (14:44)
Buildium AppFolio. So property where there’s, there’s like a million of them out there. If you go and search for rental property management, there’ll be a bunch of them that pop up. So, so take your time. Do some research, find the software solution that works best for you, and then make sure that you get it implemented. And by the way, getting it implemented, that’s only step one. You have to make sure that you’re actually putting data into the system. Otherwise it’s completely useless. The system is only good as the data that you put into it. So if you’re not tracking your rent checks as they come in and you’re not tracking your expenses, as you make them, the software is not going to do any good at all. So you have to make sure that you are implementing the software and using the software on a regular basis to actually track things.
Andrew Schultz: (15:27)
Otherwise, the whole process was for not. So the best software is the software that you’re willing to use. I’ve heard that said about, you know, customer relationship management softwares, and it’s exactly the same for property management. Software’s the best software is the software that you’re going to use. So that pretty much wraps things up for this week’s episode of the Rent Prep for Landlords podcast. Thank you all so much for listening. We really do appreciate it. If you’re looking to get in contact with me, I can be found over at ownbuffalo.com, along with links to all of our various social media platforms and things of that nature. I also offer free 30-minute phone consultations over there as well. You can grab one of those over at ownbuffalo.com. If you’re looking for top tier tenant screening services, head on over to rentprep.com, there are a variety of different packages for you to choose from depending on what your needs are specific for your tenant screening. So be sure to check that out today, again, over at rentprep.com again, thank you all so much for listening and we will see you next week.