Podcast 360: How to Prove Rental Property Damage by Tenant

In this week’s episode, Podcast Host, Andrew Schultz, chats about how to prove damage to a rental property caused by a tenant.

Are you thinking about investing in a multifamily property? We’ll give you our best tips on what to look for when purchasing an investment property.

Last, but not least, we’ve got one story of a rental applicant who accidentally texted a landlord something that they shouldn’t have! Find out what it was by listening in.

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Show Transcription:

Andrew Schultz: (00:00)
Hey everyone. Welcome back to another episode of the Rent Prep for Landlords podcast. This is episode number 360, and I’m your host, Andrew Schultz. On today’s episode, we’re going to be talking about what to know when investing in multi-family properties, how to prove a tenant caused damage in a rental, and what to do when applicants accidentally send you personal texts as their landlord. We’ll get to all that right after this.

Voice Over: (00:25)
Welcome to the Rent Prep for Landlords podcast. Now your host, Andrew Schultz.

Andrew Schultz: (00:30)
Before we jump into today’s episode, don’t forget to check out the Rent Prep for Landlords Facebook group. It’s a great free resource for you to network with housing providers from around the country. And if you have a question or a situation that you’ve never dealt with before with over 12,500 members, chances are someone in the group has been there before and can lend a helping hand 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: (00:58)
Water cooler wisdom, expert advice from real estate pros.

Andrew Schultz: (01:06)
This week’s water cooler wisdom comes to us from a couple of first-time landlords who are just getting started and looking for some advice. Let’s go ahead and take a look. My husband and I are buying our first multi-family property here in New Hampshire. I had quite a few questions. Hopefully others from the area can also answer as far as buying a triplex or quadplex. Are there any regrets that I should be looking out for in regards to location, tenants, price range, et cetera, we’re going to be occupying one of the units so we can essentially live free and put money into renovating the unit we live in and then swap units as Lisa’s ends, we will offer the tenants, the new unit more than likely with a higher rent. Is there anything we should do to set rules so that our tenants aren’t knocking on our doors at all hours of the night?

Andrew Schultz: (01:47)
And this one comes to us from Reddit in the landlord subreddit. So let’s start with some regrets. And I think that most of these are going to be pre-closing that you’re going to discover a lot of the regrets. I’m going to start with this one, not knowing your numbers, not knowing your neighborhood, and not knowing the property are the three biggest regrets that you’re going to wind up having before the close. The first thing I’m going to tell you is to get a home inspection. It’s so critical. And so many people are skipping it right now, and then finding out after they close that there are major expenses on the back end of the deal. I’m talking about, you know, unsafe, electrical, bad sewer mains, things like that. So you really need to make sure that you are getting a home inspection. If you’re working with an agent that’s telling you that it’s okay to skip the home inspection, you need to find a new agent in my opinion, as well.

Andrew Schultz: (02:34)
And I think pretty much any home inspector out there would agree with me. I understand that having a home inspection on your contract automatically makes your offer a little bit less attractive than the other offers out there. That’s fine. Let those people get screwed over. Keep your home inspection clause, keep your home inspection and follow what you find in the report. You know, if you see that there’s a bunch of issues that are going to cost you tens of thousands of dollars to fix, maybe it’s time to walk away from that deal unless you’re getting a screaming good deal on it. The other thing is don’t kill a deal over nitpicky stuff. I mean, I’m talking about things like a GFI outlet. That’s not necessarily functioning properly or a piece of carpet that has a rip in it or something like that’s nitpicky type stuff.

Andrew Schultz: (03:17)
I wouldn’t kill a deal over that. You should be looking, especially on investment properties, more at the major mechanical systems and major structural components of the homes such as the roof and the foundation and things like that. So that’s what I’m talking about. The home inspection for an investment property should be focused on making sure that the property is going to be able to perform as you need it to perform. It’s not necessarily about the nitpicky stuff. The next thing I’m going to mention is to make sure that you read every single lease before you close on the property, do your due diligence on the tenants, read every single lease and make sure that they’re accurate as to what you’re being told as part of the sale. So here in the state of New York, when you buy an investment property that has tenants in it, you get a rental property writer that will list things like the tenants’ name, their initial security deposit.

Andrew Schultz: (04:03)
How much of the deposits left, what their rent is when it’s due, what utilities are included, what appliances are included, things like that. It’s a two-page form. It’s very straightforward, but it’s not the lease. You need to actually read the lease and make sure that the lease correlates to whatever it is that you’re seeing on that form. And if you’re not seeing some sort of a rental property writer, maybe speak with your closing attorney about getting a stopple certificate signed by the tenants. And that basically what are the estoppel certificate is, in a nutshell, is basically the tenant signing off saying, yes, this is the general terms and conditions of our lease, blah, blah, blah. Talk to your attorney for more information on that stuff. We just took over the management of a new client recently. And as we were doing the lease review, we found out that on four of the eight units in the building, the lease has had incorrect addresses on them.

Andrew Schultz: (04:52)
Some the building had two addresses and some of the units were, you know, the leases were written on the wrong address. Some leases didn’t even have a unit number on them. It was a mess and it’s going to create major issues for them down the road if they ever have to pursue a tenant for eviction or something along those lines. So definitely make sure that you are reviewing the leases and understanding what it is that you’re buying, get your home inspection and do your research on the leases, make sure that you are actually buying what you think you’re buying before you actually close on that property. Now, as far as the actual operating portion of the business, once you do close on it, there’s a couple of things that I would recommend here as well. First thing I’m going to recommend is get a PO box and tell the tenants that any sort of correspondence needs to go to the PO box and not just be dropped in your mailbox or whatever the case may be.

Andrew Schultz: (05:38)
Also, get a Google voice number they’re free and it gives you a completely separate phone number. So you can keep all of your phone calls and text messages between tenants and everything completely separate from your personal phone on the other nice thing is with a Google voice number. If you have to leave town for some reason, and you have someone covering for you, you can forward that Google voice number to their phone. And then you don’t have to worry about giving tenants a new number or whatever the case may be. So those are two good ways to set some boundaries right off the giddy-up. The next thing I’m going to recommend is if you can avoid the tenants, knowing that you’re the owner of the property, that’s a great situation to find yourself in. I don’t know if that’s going to be feasible for you, given what you’ve already said in the, in the post about doing the renovations and whatnot.

Andrew Schultz: (06:21)
But if you can give the appearance that you’re an onsite property manager, as opposed to the owner, that’s a much better situation to find yourself in try to be the live-in property manager at best. You have to have some limits or tenants will literally start knocking on your door for every single issue. It’s not like you can walk up to your attorney’s office or your doctor’s office at midnight and expect a response. If you knock on the door and it’s got to be the same case here, any other rules that you have should be outlined in your lease. And that’s a very good reason that you should be reading those leases here in the state of New York, Lisa survived the sale of the property. So you’re stuck with those terms and conditions until that unit actually renews. It’s a really good idea to understand that the rules, as well as the terms and conditions that are outlined in that lease regarding the unit swapping, be sure that you aren’t over improving the buildings simply because you’re the first one living in each apartment. There’s going to be that temptation to make it a little extra nice, simply because it’s yours. Just remember that a tenant’s not going to take care of it the same way that you did. And if you’re putting things in and getting an emotional attachment to a rental unit, that’s eventually going to lead to a substantial mess for you down the road.

Voice Over: (07:30)
Forum quorum, where we scour the internet for ridiculous posts from landlords and tenants,

Andrew Schultz: (07:38)
Our forum quorum this week also comes from the landlord sub-Reddit. This one’s interesting. It’s a take on who’s responsible for a repair, the landlord or the tenant, and the why I found this one to be pretty interesting simply because there’s a lot of questions left unanswered in the post. Let’s go ahead and jump right in here. I rent my previous home to a tenant. I lived in the home prior to that for a couple of years when I was there, I never had any problem with the kitchen outlets, but now the time it is told me that outlets are not working in the lease. It says that if the tenant is caused the damage, that they are responsible for the repair, otherwise the landlord will pay for the repair. But for this one, I’m pretty sure that the outlets were working when I gave them the key.

Andrew Schultz: (08:17)
How would I go about proving this? So the first thing I’ll say is there’s simply not enough information on the post to answer all the questions I have. My first question here would be what’s causing the outlets to not work. You mentioned that it’s a kitchen. Is this simply a GFI that needs to be reset or a breaker down in the basement that needs to be reset? Are the outlets tripping because they are overloading a circuit? Maybe they’re running a blender and a microwave at the same time on the same circuit. And there’s just too much of a water draw. You know, there’s really not enough information here to understand the true scope of the issue, which means that you need to do some research first to determine what your next steps are going to be. Chances are, this is something simple, like a GFI that’s popping or a circuit that’s overloaded.

Andrew Schultz: (09:01)
And just moving some appliances around is going to resolve the problem. You may have something as simple as a bad GFI. They do go bad over time, especially if they spend a lot of time tripping back and forth and being resettled a lot. Every time, those trip, they get a little bit weaker, and eventually, they just stop working. The way that they’re intended to work, chances are you need either a handyman or an electrician to find and resolve the issue depending on what the issue is. But again, with a lack of information here, I’d be hard-pressed to find the tenths responsible for this unless they were purposely shorting things or attempted to rewire the kitchen, you know, something along those lines, essentially, you need to get somebody out there to take a look at it and resolve the issue. This could be anything from a simple, short out to a more serious electrical hazard or a fire hazard.

Andrew Schultz: (09:46)
You know, once you know what the issue is and what caused it, then you can figure out if it was the tenant that caused it. And if the tenant should be built or not, but just taking a look at this one on the surface, I’m betting, this is going to wind up being the landlord’s responsibility, just because it broke while the tenant is in possession of the unit, doesn’t necessarily make it the tenant’s fault. You know, outlets can go bad. Wires can overtime, you know, the installation can rub against something and you might have a short or something like that. These are things that happen and they are not necessarily the responsibility of the tenant. So you really need to understand what you’re dealing with before you decide who you’re going to blame for it. So since we’re talking about charging tenants for things, I think now’s as good a time as any to remind you that you should double-check your lease to make sure you have a clause that enables you to backfill a tenant for damages that are caused by the tenant.

Andrew Schultz: (10:32)
Am I understand that you’re simply going to charge a tenant for something that gets damaged regardless of whether or not it’s in your lease, but having something in your lease that you can call back on when you wind up in front of a judge in court saying, no, judge, the tenant agreed to pay for damages during their tenancy. And here’s that language in the lease. You know that takes all the argument out of it, completely get it in writing, get it signed by the tenant. And then when you do run into a set of circumstances where you have to backfill a tenant for something, regardless of whether or not they’re going to want to pay for it, you at least have the ability to do it. And they don’t really have much in the way of an argument for being able to say, you can’t just bill me for things, blah, blah, blah.

Andrew Schultz: (11:08)
So I honestly don’t think that there are a lot of courts out there that would argue with landlord back billing, something to a tenant if it’s obvious that the tenant caused the damage anyway, but protecting yourself by having that extra clause in the lease just makes it that much easier for you. If you ever do find yourself in a courtroom or in an arbitration session where you have to, you know, appeal to a judge or an arbitrator’s sense of common sense. And I think that we’ve all discovered in the last couple of years, that common sense is not always quite so common. So protect yourself on the front end. So you don’t have to worry quite as much on the backend.

Voice Over: (11:43)
Feet on the street, real stories from real property managers,

Andrew Schultz: (11:52)
Have you ever sent a text to somebody and then immediately realized it went to the wrong person? That’s what happened to the applicant in this week’s feet on the street. This one’s provided to us from the Rent Prep for Landlords Facebook group. We’re going to go ahead and take a look at this one. My potential rental applicant just texted me instead of her father. She’s saying she doesn’t want him to put her up in a particular hotel while she’s looking for an apartment, because quote, I used to buy fentanyl at the hotel next door, unquote, whoops, classic. Mix-Up hoist those red flags, right back up to the top of the flagpole. You can’t make this stuff up. And again, that one comes to us via the Rent Prep for Landlords Facebook group obviously meant to be a little bit lighter-hearted, a later-hearted story here for the end of the podcast.

Andrew Schultz: (12:34)
But yeah, that’s absolutely a red flag. That’s probably one of the biggest red flags I’ve seen in a while. Like hurricane is coming close, the beach style, red flags. There’s not much more to say about that. I mean, obviously, this is a situation where someone sent a text message that wasn’t supposed to be received by the person who received it. And now that message has the potential to really screw up what they’re trying to do. Get into this apartment. You know, it’s one of those situations where sometimes getting sometimes seeing the red flag on the front end is, is worth every penny. So, you know, like at the end of the day, this is, this is why we harp on having a written set of rental criteria screening criteria that you follow every single time you screen a tenant, there are so many things that get caught, you know, the red flags when you follow a thorough process each and every time.

Andrew Schultz: (13:24)
I do want to mention a couple things about tenant screening that we don’t typically talk about. The first thing is the info you get is only as good as the info source you get it from. And what I mean by that is that if a county court is slow to update their court records and then the place that you’re getting your data from pulls from that old data, the information is only as good as the source that you get it from. So it’s possible to miss events that have transpired recently. If the court data is backed up, some courts are better than others. Some databases are better than others and some data providers are better than others. So make sure that you’re choosing a good source to get your information from a it’s super, supercritical to making sure the information that you get is actually accurate.

Andrew Schultz: (14:08)
The second thing I wanted to mention is that tenant screening represents a snapshot in time. And people forget that a lot things can change drastically after you’ve finished screening your tenant. Just because a tenant has a job when you screen them, doesn’t necessarily mean that they’re still going to have that same job two weeks after moving in. So what I’m saying here is that there’s risk to everything in this business and tenant screening is a risk mitigation strategy. One thing that I do want to say is that we’re starting to see the regular erosion of the data that we’re allowed to use when it comes to screening a tenant. For instance, here in New York state eviction data is no longer allowed to be used when you are screening a tenant, which in my opinion is a huge, huge misstep by our legislature. And the reason I say that is because, and I don’t know the exact percentage.

Andrew Schultz: (14:58)
I’m sure Steve white, the the CEO here at Rent Prep could certainly tell you this statistic right off the top of his head. But I want to say it’s something like after having one eviction, you were 75% more likely to have additional evictions. And at that point, you’ve been through the system. So you know how the system works. So it’s one of those things that not having access to information such as eviction data, when trying to make a determination really is detrimental to the landlord, to the housing provider when making those kinds of decisions. And it sucks. And the only way to prevent things like this is to stay involved, understand what’s going on in your state, in your local municipality, when it comes to landlord-tenant law. And if you see something that doesn’t make sense, or you see something that is for lack of a better term, anti-housing provider say something, you know, try to get involved and talk to politicians and argue as to why these things are wrong.

Andrew Schultz: (15:54)
One thing that I’m noticing is that a lot of the politicians that are out there regulating industries have never operated in those industries before, and really have no clue what’s actually happening on the day-to-day level inside of a rental property or inside of a property management company or whatever the case may be, stay active in legislation. It’s the one thing that’s going to keep you informed more than anything else, more than any Facebook group, more than any networking event staying on top of what’s happening from happening from a legislative perspective will certainly make you a much more informed housing provider. And it may just give you the opportunity to try to put a stop to a bad piece of legislation before it becomes law. All right. So let me hop off my soapbox here, and we’ll go back to talking about the matter at hand.

Andrew Schultz: (16:40)
So is this something that would be caught in a criminal background check? And the answer to that is kind of maybe, maybe not, as I mentioned, fit data sources, they certainly do matter as do the fair housing laws. So if this person was arrested and has an active case going on, it may or may not show on a background check. And the reason that I mentioned that is because there are times where you’ll find somebody in an active situation like you might find a news article saying that they were arrested and you know, that they’re in court for that matter, but it doesn’t pop up on their criminal background check. Sometimes it will. Sometimes it won’t. I think it depends on the state. It also is going to depend on the court more than likely whether or not it’s going to show up while it’s an active case.

Andrew Schultz: (17:22)
If it’s not even a court case yet the arrests only likely won’t show at all. And even if they do show, they likely aren’t going to be usable, even if they did, because it’s not a conviction. You know, there is HUD guidance out there as to setting your rental selection criteria. When it comes to dealing with people that have a criminal activity in their past, I definitely recommend going out, finding that guidance and taking a look at it when developing your criteria so that you understand to protect yourself from a fair housing standpoint, while still building a policy. That’s fair to the people who are applying for your properties, understand what you can and what you can not screen based on as essentially what I’m trying to tell you here. If you’re looking for ways to fill your vacancies quickly, check out Rent Prep guide on how to market your property in today’s market.

Andrew Schultz: (18:10)
Visit rentprep.com/blog today for more information. So that pretty much wraps things up for this episode of the red prep for landlords 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. 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 some of the other projects that we’re working on. We just launched a free investment property deal analyzer, which is available on that site over at whatsdrewupto.com.

Andrew Schultz: (18:54)
It’s truly free. There’s no obligation. And there’s also a companion video to teach you how I analyze deals and how to use our analyzing tool. If you’re looking for top-tier tenant screening services, head on over to rentprep.com, there are multiple products to choose from including tenant-paid options. 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 a couple of weeks with an all-new episode you won’t want to miss until then. I’m Andrew Schultz with ownbuffalo.com for rent prep.com. And we’ll talk to you soon.