In this week’s episode, Podcast Host, Property Manager & Business Owner, Andrew Schultz, chats about how to charge for a high-end rental.
So, your tenants call and complain about a drainage issue on the property from the garage to the basement. What are the most common ways that drainage is set up around a property?
Lease renewals: Find out how much to notice to give to a tenant when thinking about renewing a lease.
Andrew Schultz: (00:00)
Hey everyone. And welcome back to another episode of the Rent Prep for Landlord’s podcast. This is episode number three 80, and I’m your host, Andrew Schultz. On today’s episode, we’re gonna be talking about how to rent out high-end rental drainage issues at a rental property, and how much notice to give for a lease renewal. We’ll get to all that right after this.
Voice Over: (00:24)
Welcome to the Rent Prep for Landlord’s podcast. Now your host, Andrew Schultz.
Andrew Schultz: (00:30)
Have you joined the free Rent Prep for Landlord’s Facebook group? We’re on the push for 13,000 members. If you have a question or a situation that you’ve never encountered, or you just need to bounce an idea off a big group of housing providers, this is the place. So if you haven’t checked it out yet, do it today. Over at facebook.com/groups/rentprep. Don’t forget to mention the podcast when answering the questions. So we know how you found us.
Voice Over: (00:53)
Water cooler wisdom, expert advice from real estate pros.
Andrew Schultz: (01:01)
We’re gonna start off today’s show with a water cooler wisdom segment. This one comes to us via the landlord sub reddit and it’s all about what to do when you’re thinking about renting a property out for the first time. Let’s go ahead and jump right in here. My wife and I are planning to spend a year out of the country to evaluate a permanent move while we’re gone. We’d like to rent out our current home, just outside a major us Metro. It’s a well maintained family home in a top-notch school district. We’re close to bike trails and parks. There are a lot of people moving here. So I have high hopes, but at the same time, I haven’t had much luck finding comps. So I’m not sure what we can reasonably expect to rent it for or how long it might take to find renters. Does anyone have any tips and or experience?
Andrew Schultz: (01:42)
Are there any sites or professionals I should be looking into? Do you think renting it furnished or unfurnished will help or hurt our search for renters? It’s actually a really good question. There’s a lot of the things that we can cover here. I wanna start off by saying that this is an absolutely huge decision. The decision to become a landlord is never an easy one to start with. And in this instance, you’re taking it a step further and you’re not even gonna be inside the country where the property is located. Obviously this presents a lot of unique logistical challenges with you not being local to the property and depending on where you’re going, you might be on completely opposite sides of the day. You may find yourself in a situation where you can only talk to this tenant or this tenant can only talk to you when it’s massively inconvenient for the other party, 1:00 PM here versus 1:00 AM there or vice versa.
Andrew Schultz: (02:28)
My strongest recommendation here would be to hire a property manager, realistically speaking. I think that most people, that own property outside of the geographic region, that they’re living in need to have good property management in place, strong property management in place at that, not just a real estate agent that can fog a mirror. You want someone whose specialty is property management, or you want to look specifically for a property management firm that can handle your property on your behalf. If you’re looking for information on how to interview a property management company, you can actually find that over on my website, whatsdrewupto.com. There’s a button right on the homepage where you can request a copy of the 10 questions you have to ask before hiring a property manager. It’s free of charge, check it out. But honestly, yeah, my strongest recommendation here would be higher, competent property management, because this is definitely not something that you’re gonna wanna be dealing with from halfway across the world.
Andrew Schultz: (03:21)
I do wanna spend a couple minutes talking about tenant screening. Obviously when you’re talking about running out a high end property, you need to be very cautious in your screening, have a written set of criteria and follow that criteria on every single applicant you choose to screen. If you need help getting a set of criteria, head on over to rentprep.com and take a look as there are multiple articles that talk about setting up your selection criteria. At the very least, you need to be doing credit and background checks, um, as well as verifying income and possibly a landlord reference. If one is available, some states are still allowing eviction searches. If you’re in one of those states, I strongly recommend that as well, different states do have different restrictions on what you can and cannot check. So my recommendation is again, get with a good property management company that can handle this tenant placement for you.
Andrew Schultz: (04:07)
It’s well worth, whatever the cost may be, which is typically gonna be somewhere between half and one full month of rent. Uh, but as far as renting furnished versus unfurnished goes, I think that that’s gonna depend somewhat on your market and ultimately on the tenant that you wind up bringing in on a lot of high-end rentals, at least here in the Buffalo market, we tend to be contacted by either relocation companies who are looking to place tenants, either shorter, long term for like corporate clients and things of that nature. Um, and the other thing that we get a lot of on our high end rentals is requests from insurance companies who need to place a customer after their customers had some sort of a catastrophic loss, such as a house fire. And the insurance companies are nice because they tend to overpay versus market value because they almost always want a shorter term lease.
Andrew Schultz: (04:52)
And then they almost always wind up extending those leases, uh, past the short term length. Anyway, so the insurance companies are a nice play. If you get one of those phone calls, typically in these instances, whether it’s insurance or a corporate re relo, they’re gonna request the home to be furnished. As a matter of fact, we did want a couple years back for a client and the home came to us unfurnished, uh, but the tenant’s company needed the home to be furnished. So essentially they wanted the tenant to be able to walk in and unpack a suitcase and go to work the following morning. So we located a company that was able to supply us with basically an entire household worth of everything from furniture, for every room to betting in towels, to pots, pans, cups, plates, literally everything was taken care of. And that’s exactly what the tenant got.
Andrew Schultz: (05:38)
When he arrived. He was able to walk into the home, unpack his suitcase, and he did go to work the very next day. Uh, at the very least I think making furnishing an option for your incoming tenant is a good idea. I’m not saying that you have to stage the place when you go to list it for rent, but putting something in the listing description that indicates that you’re willing to rent the home fully furnished for, you know, however many more dollars per month that may help you land an even better quality of tenant. And yes, some tenants will pay big money for that as an option. If the furnishings that you’re planning on leaving in the home are the furnishings that you’re using in your home right now, which it kind of sounds like it might be based on the question here. My strongest recommendation would be to write every single stitch of your stuff off that you’re leaving in this house.
Andrew Schultz: (06:21)
Don’t plan on seeing it again. And if you do see it again, expect it to be damaged. This is the best possible way to prepare yourself for any damages that may occur and, and how to separate yourself from that stuff. Before you even rent the property out, you have to take the emotion out of a situation like this because you are renting out. What’s currently a primary residence as a rental, and no one is gonna treat your primary resident the same way that you would treat it yourself. My recommendation to every client when they onboard with us as a management client, is to remove everything from their property that they care about or that they would be upset if it got damaged and then it’s on them. We put it right in our management agreement that anything that’s left behind on the property is not our problem.
Andrew Schultz: (07:01)
So if something gets damaged or thrown out by the tenants or by our staff, even if we’re doing a turnover, we don’t wanna hear about it. We already outlined that expectation at the start of the management agreement. And it’s written right into our agreements that you knew that anything that was left at the property may be damaged or disposed of in terms of where to market a high-end rental. Typically the MLS is gonna be one of your best options to maximize exposure. You may also consider listing it on the big three being Zillow truly and hot pads. I will say that you should be extra cautious of people trying to scam off your listing by repurposing your photos and saying that the place is for rent at a much lower dollar value. Obviously that’s a pretty common scan going on all over the nation. And high-end rentals are more prone to this because one of the ways that they make the scam work is to basically con people into thinking that they’re gonna be getting an incredible deal on a home, which is even easier on luxury rentals, where they could be playing with the price a lot more, say you’re $5,000 luxury rentals on the market for $2,500.
Andrew Schultz: (08:00)
That’s pretty appealing to somebody who doesn’t know any better. A lot of this sounds scary, but if you make the right decisions on the front end, you’re probably gonna avoid a lot of the headaches on the back end. I do wish you the best of luck in your quest as first time landlords, and definitely speak with someone who knows what they’re doing in the property management field. Our second water-cooler wisdom segment comes to us via the Rent Prep for Landlords Facebook group. If you’re not a member yet you probably should be facebook.com/groups/rentprep. We’re gonna go ahead and jump right in here. This is a maintenance issue that the landlord is trying to figure out how to resolve. Hello. I have a funky issue and I’m looking for some ideas on how to resolve. I have a garage door that has a door inside of it to access the basement.
Andrew Schultz: (08:42)
The steps go down to the door, which results in water that is sitting in the garage, making its way inside the basement. This has been happening at least once a week with the spring rains, I’ve shown it to several contractors. And so far, the two options I have are to number one, build a drain outside the garage door, or number two, build a concrete step up to block the water from coming inside the house. It would still stay inside the garage though. No contractor can guarantee that either of these methods will work though. I wanna do it right the first time. What should I do? And again, this one comes to us via the Rent Prep for Landlord’s Facebook group. This one’s kind of tough to diagnose without seeing photos of the space, but I’m gonna try to give it a shot. It sounds like you have water.
Andrew Schultz: (09:22)
That’s flowing into your garage under the overhead door. Maybe the driveway slopes down towards the house or whatever. The reason you’ve got water coming in the garage. And obviously that’s a concern based on the information that we have here. I think that installing a French drain outside your garage, overhead door is gonna be the right solution. Usually they’ll install these just outside the front of the garage overhead door, and they run the full length of the garage door. So that any water that would be heading in that direction hits the drain before it gets to your garage door and has an opportunity to sneak underneath of it. Typically speaking a French drain, like this would be tied into whatever storm sewer system you have in place around your house using whatever PVC piping would be available. So if your gutters are all going into some sort of a storm sewer, you would pipe your French drain into that same storm sewer setup.
Andrew Schultz: (10:11)
Typically, if your gutters are just run out to grade, you may be able to do something similar with your French drain setup, depending on the terrain around your property and how much space you have to work with. You would just have to run that French drain either out to grade at some point lower in grade than the garage doors, because you know, gravity, um, or, you know, you could, in my head, I’m kind of envisioning running it across the front of the garage with the French drain, tying it into PVC at that outside corner, then kind of running down the side of the garage towards the backyard and dumping the water off somewhere in the back of the property, if that’s appropriate, uh, something else that might be an option depending on the code in your area is to run that perforated drain tile off the end of your French drain system so that the water can be dealt with completely underground.
Andrew Schultz: (10:56)
The water would just reenter the water table as it hits the holes in the drain tile and leaks through the piping. You may even want to consider adding a drain inside the garage that ties into the outside drain system as well. Some areas won’t let you do this because there are concerns about contaminants from your garage, getting into the groundwater, such as oils and fuels and things of that nature. Um, rock salt is another one. That’s a big issue, especially in cold weather climates, people rinsing their cars off and the rock salt getting back into the groundwater. It could cause some issues in some areas. Um, the idea of building a concrete step up to block the water from coming into the house, doesn’t really resolve the issue. You still have a bunch of water sitting in your garage and eventually that water does need to be dealt with.
Andrew Schultz: (11:38)
So really all you’re doing by adding a concrete step is creating a new problem that you’re gonna have to deal with at some point in the future. I’m not sure why the contractors are unable to guarantee that either of the methods that they’re recommending to you will work. It seems like either one of these would resolve the problem depending on how much water you’re dealing with and what the lay of the land is, et cetera. There’s probably some more information here we simply don’t have without access to photos or the actual quotes from the contractors. But the one thing I do wanna key in on here is the last couple sentences in your question, I want to do it right the first time. What should I do? This is an excellent attitude to have as a property owner. I don’t know of any state that doesn’t have some sort of a warranty of habitability law, essentially saying that apartments need to be maintained in a safe condition for the occupants.
Andrew Schultz: (12:24)
Obviously we’ve all heard the term slum Lord thrown around a ton, probably more in the last couple years than at any other point in history. There’s a reason for that. Quite frankly, some landlords just planes shouldn’t be in the industry. It’s landlords that let their properties fall apart and ignore critical safety issues. They find themselves exiting the industry quickly and typically at a massive loss. I understand that when we have non-paying tenants and things of that nature, it makes it very difficult to upkeep the property in a lot of instances, by the time you factor in holding costs, mortgages, things of that nature, some properties really don’t make that much money. If any, I know a lot of investors who are banking on an appreciation play, which I personally wouldn’t do, but they operate their properties at a net negative every month to try and bank on that appreciation play.
Andrew Schultz: (13:09)
This seems to be real common in Canada, for instance, in the Toronto market, frankly, the second that they have a tenant that stops paying they’re really up the creek without a paddle. Like they don’t really have a whole lot of options other than to start working through that eviction process and hope that they have a great big pile of money to get them through that timeframe. Um, unfortunately it costs a lot of money at this point to get a bad tenant out of a unit. And it takes a lot of time. I’m a little bit derailed here, but getting back to my point, property maintenance is something that cannot be ignored when you own income property. It’s funny because I see people skip it on their deal analysis all the time. And I pointed out to them every single time, not factoring for maintenance and hoping for appreciation are too surefire ways to fail in this industry. Not factoring for maintenance will pretty much guarantee that you fail. At some point you’ll wind up not having the money to complete a critical repair. When the time comes, you’ll wind up scrambling or you’ll wind up unable to rent units because you can’t afford the turnovers. It’s one of those situations where planning ahead is critical to your success as an investor. And I would say that not planning for maintenance is essentially guaranteeing that you’re going to fail
Voice Over: (14:21)
Quorum, where we scour the internet for ridiculous posts from landlords and tenants.
Andrew Schultz: (14:29)
Our final segment of the day is a forum quorum. And this one comes to us via the Rent Prep for Landlord’s Facebook group. This one’s all about lease renewal, and we’re gonna go ahead and jump right in here. My tenants lease will be expiring on August 10th and I’ve told them I’m going to be raising the rent by four and a half percent and ask if they want to renew for another year. They said that they’re not sure yet, but they will be closer to a decision in June. Should I give them a deadline such as June 15th, if they’re not going to renew and wait until August to make a final decision, I will have an empty unit for a period of time, please advise. So we’re lacking some information here such as state, which would make this question a little bit easier to answer, but I can give some general advice based on our operations here in Buffalo.
Andrew Schultz: (15:13)
Every state is going to have rules. How much notice you have to give for a lease renewal in some states, it’s gonna depend on how much you’re raising the rent in others. It’s gonna depend on how long the tendency is in some states, it may be a multitude of factors. And in some states, unfortunately you may not be able to just say, I’m not willing to renew your lease. It really depends on the laws in your municipality. And the only way that you’re gonna find that out is to do some research or speak to someone who knows what they’re talking about. My recommendation would be an attorney that practices landlord-tenant law in your state, and make sure that that’s the specialty of that attorney. You don’t want an attorney that practices business law handling a landlord-tenant matter if they’re not intimately familiar with the landlord-tenant law in your state.
Andrew Schultz: (15:56)
So let’s assume that you’re following all of the guidelines laid out by your state or your municipality or whoever’s setting the guidelines. Typically speaking, we like to give our tenants as much notice as possible to make a decision. I’m not an attorney. I’m a real estate broker, and I’m pulling back the curtain a little bit on our property management operations. So you can kind of see what our process is, but talk to your attorney. Don’t just take whatever I’m saying, as you know, the, what you should do. So here in New York, we have to give 30, 60 or 90 days notice depending on how long the tenants lived in the property and how much we’re increasing the rent. That means that we now start our lease renewal process 120 plus days out. We require tenants to give us notice no less than 30 days before the end of their lease term.
Andrew Schultz: (16:37)
So if a lease is ending at the end of August, and this is the first year of that tenant, I need to know no later than August 1st, what the tenant’s plan is, if that tenant has lived in the unit for one to two years, we have to give them 60 days notice. Um, so I wanna know by essentially July 1st in that instance, whether the tenant is staying or not, anything more than two years requires 90 days notice. So you can kind of see where we’re coming from. When we say that we’re starting at that 120 plus day point before the end of the lease term, to make sure that we’re catching everybody within the guidelines set up by our state. We sign a fresh lease with our tenants every single year. We also send non-renewal notices. If we haven’t heard from a tenant by the time their responses do, generally speaking, if a tenant gets a non-renewal notice in the mail and they plan on staying in the apartment, they’re gonna reach out real quick to remedy that situation.
Andrew Schultz: (17:27)
Uh, and then you can start the process of getting them on that, lease renewal or increasing the rents or whatever it is that you’re attempting to do. The other thing that this does is protects us in the event that the tenant does not move at the end of their lease term. It gives us the ability to move forward with eviction court in the event that it’s required without having to restart this entire process all over again, or issue a new notice or anything else, it feels a bit drastic sometimes. But I think that the pros outweigh the cons in this instance, the bottom line here is yes, you can and should set up some sort of a deadline as to when a tenant needs to let you know, if they intend to stay in a unit or not. It’s the only way that you can effectively operate your business and plan ahead in the event that you’re going to wind up with a vacancy that needs to be turned over and marketed.
Andrew Schultz: (18:09)
Don’t forget that in some states you have to do pre-inspections before a tenant moves out New York state being one of them. So again, knowing if your tenant is staying or going becomes even more important in instances such as that, where you have legal requirements that you have to adhere to. My advice is to talk to a landlord-tenant attorney who can steer you in the right direction and best of luck on renewing your tenant’s lease. So you’ve heard of credit score, but if you ever heard of resident score, find out the difference between the two and what it means for landlords everywhere, by checking out our latest post on rentprep.com/blog today, that pretty much wraps up this episode of the Rent Prep for Landlord’s podcast. Thank you all so much for listening. We truly do appreciate it. Our goal with the podcast is to help as many people as possible make educated decisions when it comes to real estate, and you can help us to reach our goal.
Andrew Schultz: (18:57)
If you heard anything in this week’s episode or any other episode that will help someone, you know, please do us a favor and share it with them. If you’re looking to get in contact with me, I can be reached over at whatsdrewupto.com from there, you’ll find links to everything going on with me over at Own Buffalo, as well as other projects that we’re working on as well, grab a copy of our free deal analysis tool today over at whatsdrewupto.com. There’s no obligation and it comes with a free companion video showing you how to use it. If you’re looking for top tier tenant screening services, head on over to rentprep.com, there are multiple products to choose from including a tenant paid option. And if you’re over 50 doors, ask about the enterprise level programs and pricing. I’ve been an enterprise user of Rent Prep for years now, and it’s definitely changed the way that we screen our tenants. Check that out today, over at rentprep.com. Again, thank you all so much for listening. We’ll be back in two weeks with an all new episode that you won’t wanna miss until then I’m Andrew Schultz with ownbuffalo.com for rentprep.com and we’ll talk to you soon.
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