Podcast 384: How to Request Tenant Ledgers

In this week’s episode, Podcast Host, Property Manager & Business Owner, Andrew Schultz, chats about requesting tenant ledgers from property owners selling their rentals.

Not sure where to dispose of old appliances? Have no fear, we’ll give you our best tips on how to get rid of older units from your rentals.

Last, but not least, should you change the locks between tenants? The answer may surprise you. Listen to the latest podcast to find out.

Andrew Schultz: (00:00)
Hey everyone. Welcome back to another episode of the Rent Prep for Landlord’s podcast. This is episode number 384. And I’m your host, Andrew Schultz. On today’s episode, we’re gonna be talking about disposing of old appliances, changing locks between tenants, and requesting tenant ledgers as part of a real estate transaction. We’ll get to all that right after this

Voice Over: (00:21)
Welcome to the Rent Prep for Landlord’s podcast. Now your host, Andrew Schultz.

Andrew Schultz: (00:29)
Have you checked out 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 large 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: (00:52)
Water cooler wisdom, expert advice from real estate pros.

Andrew Schultz: (01:00)
We’re gonna start this week off with our water cooler wisdom segment. And this week we’re pulling right from the Rent Prep for Landlord’s Facebook group. This week’s question is all about disposing of old appliances. Let’s go ahead and jump right in here. How do we go about disposing of old washers and dryers? I inherited three condos and I’m renovating them for rent. I need to buy new washers and dryers. Does anyone have tips on how to dispose of the old ones? Two vendors have already told me that they will deliver, but they do not take old appliances away. Getting rid of old appliances is actually one of the easier tasks to accomplish. When you’re talking about turning over an apartment, the nice thing about appliances is their made out of metal, which makes them very attractive for scrapers. If you put the appliances out to the side of the road with a sign that says free, I guarantee you, they won’t make it for more than a couple of hours.

Andrew Schultz: (01:48)
You could also hop on Facebook and post in one of your local buy, sell trade groups that you have free appliances. And I guarantee that you’ll get somebody that will come and pick these things up. You could even say something along the lines of whoever’s coming to pick them up, needs to remove ’em from the building. That’s kind of up to you depending on your situation, how easy it is to get the appliances out, you know, kind of whatever works in a situation like that. Uh, and if you’re not able to find anybody on Facebook, I would say that Craigslist is another easy place to put up a post. They have a free section on Craigslist, literally just put up a post and you will definitely find somebody who’s willing to come and pick these appliances up for you. The one thing that I would mention is to just make sure that you’re clear in your posting, that the appliances don’t work, and that way you don’t get somebody coming out thinking they’re getting a nice working stove or something like that.

Andrew Schultz: (02:34)
Just to find out that it’s only really worth the value of the scrap. In addition to that, there are a ton of used appliance stores out there that love to find non-working appliances that are in good cosmetic condition. Oftentimes whatever needs to be fixed inside the appliance is just something minor like a switch or a sensor, maybe a control board, something along those lines. So these smaller appliance shops will snap ’em up and fix them relatively inexpensively. And they can make a pretty, pretty decent buck on ’em. At the end of the day, some shops will even give you a credit towards an appliance. If you bring in something that doesn’t work. So if you have units that you need to put appliances in and you’re willing to put used appliances in your apartments, you might find a solution there. So I know there are a couple of places, at least here locally in Buffalo, that’ll give you, I wanna say it’s like a 25 or a $50 credit for every non-working appliance.

Andrew Schultz: (03:20)
You bring in towards a, towards the purchase of a, a new used appliance, a, uh, a new to you used appliance, if you will, is probably the better way to put that. So couple of options there, if you’re willing to do the used appliances in your unit, we prefer to put new ones in. Um, just because we think it’s less headache, but there are some options out there. I would say that the one caveat to all this is gonna be refrigerators. So with the refrigerator, the coolant has to be recaptured prior to the disposal of the unit. So generally speaking refrigerators need to be handled a little bit differently and you may actually need to have someone come out to remove the refrigerant from the unit. So in some instances, whoever picks up the trash will do this, but that seems to be becoming less and less common.

Andrew Schultz: (04:00)
It’s certainly worth a phone call to the refuse company, um, or to the municipality to see if that’s something that they take care of. Uh, and I also mentioned that sometimes the local municipality may offer like a hazardous materials clean-up. Uh, a lot of times you’ll get ’em where they’ll take like paint or they’ll take, um, unused medications or something like that. They may take an appliance, such as a refrigerator that still has the refrigerant in them. Because a lot of times there’s someone employed by the town who knows how and has the certification to actually reclaim the coolant and do what needs to be done to dispose of that appliance appropriately. But essentially until the coolant is removed from it, it cannot just be pitched out into a dump. Same thing applies to air conditioning units, whether it be a window unit or a central air unit, any kind of a chest freezer, anything that essentially has coolant running through it to keep it cold inside.

Andrew Schultz: (04:50)
You’re going to have to have that coolant recaptured prior to disposing of the unit. We actually recently had a brand new gas stove delivered to one of our rental properties and the stove that was in place worked, but it was kind of on its last legs. It needed a new control board. So the oven portion was only working kind of intermittently. And one of the burner assemblies was bad. Essentially the cost of the replacement parts was just gonna be more than the cost of a new stove. So we opted to just replace it. So the plan was that the appliance company was supposed to deliver the new appliance and hook it up and then remove the old appliance. And for whatever reason, the gas shutoff was not in the kitchen behind the stove where it should be, but it was actually underneath the kitchen floor in the basement level of the home.

Andrew Schultz: (05:33)
So the appliance company went down and turned off the gas to the stove that was still mostly working. It still had four or five working top burners and all of those functioned, it’s not like this thing was pouring gas into the house. They opted to just go ahead and unhook that stove. Then they decided that they couldn’t hook the new stove up because the shutoff valve wasn’t in the kitchen. And I can understand that and we have no problem moving the valve. We sent a plumber out and had the the valve move. That wasn’t a problem. The problem is that appliance company essentially decided that once the old stove was unhooked, it was just no longer their problem. So they left the old stove in place and disconnected, and they left the new stove sitting in the middle of this tenant’s kitchen. And they just left the only completed one of the three things that they were supposed to do as part of that work order, which was the delivery.

Andrew Schultz: (06:24)
Uh, and then they essentially refused to come back to complete the setup and removal once we had moved that valve. So we ended up having to remove the old appliance and hook up the new appliance and they still charged us for the delivery service. Um, they would not wa part or all of that charge. And I’ve gotta tell you, we buy a fair number of appliances throughout the course of the year. We manage enough units at this point that we’re buying multiple appliances on a yearly basis. And I can guarantee you that that appliance company will never see another dime from us moving forward, simply because of the way that they treated that situation. So that’s kind of a long route to go to, to share the story, but it is something to keep in mind, you know, as you’re ordering appliances, as you’re buying new appliances, make sure that you’re set up and ready for the new appliance delivery measure your doorways.

Andrew Schultz: (07:10)
That’s one of the most common things, um, that people forget to do, but just make sure that if you are setting yourself up and you are getting a service that’s coming in and removing an old appliance and installing your new appliance, that you’re actually prepared for the new appliance when it arrives our second water cooler wisdom segment this week also comes from the Rent Prep for Landlord’s Facebook group. This one’s all about locks and carpet cleaning. We’re gonna go ahead and take a look. Is it considered standard practice to change the locks to a rental house between tenants? What about professional carpet cleaning? If the carpets look totally fine, uh, and again, this one comes to us via the Rent Prep for Landlord’s Facebook group. And in many states, it’s actually codified into law that you need to change the locks in between tenants in some states.

Andrew Schultz: (07:52)
It’s not, I think Texas is one of the states. If I remember correctly, that does have it coded into law that you’re supposed to change locks between tenants. Um, but I don’t believe it’s actually written into the law here in New York, but honestly, it’s just a good general business practice to change the locks in between each tenant. At the end of the day, you really don’t have any idea how many keys the previous tenant made or the previous owner, if you just purchased the property, uh, you really have no idea how many people they handed keys out to. There’s just a lot of risk there in my opinion, to leaving an apartment on an old set of keys. So there are a lot of different key systems out there at this point. And some keys are incredibly hard to get duplicate copies made of like some of these systems.

Andrew Schultz: (08:35)
You literally have to special order a key from the lock manufacturer directly. I think that I think it’s Meco is the company that has the key systems like that. And I know NOx like the NOx boxes that you see securing the outside of commercial structures, those are actually controlled. All of the keys are controlled by the NOx corporation and you have to special order your keys for stuff like that. So there’s everything from buy it off the shelf at home Depot to spend hundreds of dollars per lock, to make sure that your system is secured the way that you want it to, and literally everything in between. So even in those situations where you have crazy hard keys, that you can, you know, it’s very difficult to get duplicate copies of those keys. Even in those instances, I would still recommend getting a fresh set of locks to put on the unit.

Andrew Schultz: (09:18)
At the end of the day, it’s simply not worth the risk of not changing the locks. In my opinion, not changing the lock really is only gonna save a couple bucks in most instances in the long run. And it does open you up to some serious potential liabilities. If you don’t change those locks and someone else comes back and accesses the unit using your keys or using the old keys, I should say. Uh, so my recommendation is to always, always, always change locks in between each tenant. There are about a million different lock manufacturers out there nowadays, and the technology surrounding locks and actually home security in general is improving by leaps and bounds all the time. A few years ago, we didn’t have locks that were wifi, Bluetooth enabled. We were just starting to see electronic deadbolts first entering the market and having a, a door that had two separate codes was like fancy technology.

Andrew Schultz: (10:05)
But now with the rise of Airbnb and other short-term rental platforms, I think that there is a lot more emphasis being put on locks and the technology that surrounds locks, especially when it comes to being able to set someone up with access without physically being present yourself. For instance, last Airbnb, I stayed in out in Cleveland area, there were no keys at all. It was simply a keypad. We punched in the code and that’s how we got in and out of the house. It was great because it made everything super simple for check-in and checkout. We didn’t have to worry about losing a key while we were out exploring. There are a lot of benefits to those locks that are set up that way. But honestly, for most long-term rentals, my recommendation is still to use a basic manual setup. I personally feel like there’s less ways for it to fail, and there’s nothing worse than getting a phone call at one o’clock in the morning, cuz your fancy digital locks not working in your tenant.

Andrew Schultz: (10:54)
Can’t get in. Uh, I personally feel like there’s a lot less ways for the manual locks to fail. And since we’re not doing short-term rentals, we’re not changing locks or lock codes so frequently that every unit has to have special locks and everything else. That’s just not a major concern for us in the short-term space. Obviously, the concerns are very, very different and you’re gonna be looking for one of those lock systems that you’re able to control remotely and things of that nature. Currently, my favorite lock for small buildings are the quick set, eight 16 dual key deadbolts. I think the part number may have changed to like 98, 1 60 or something like that. But if you go on Amazon or Depot or Lowe’s or wherever and search for quick set, eight, 16, they’ll pop right up. They come in pretty much every finish that you would expect.

Andrew Schultz: (11:40)
And the nice thing is like I’d mentioned, this is a dual key deadbolt. So what that means is that there are two separate places where you can insert a key into this lock and unlock it when it’s on the door and set up. Normally you would never know that there’s a second key hidden on the lock. The tenant key uses just a normal quick set, one key, a KW one, which I guarantee you already have on your key chain and just probably never realized it it’s the most common key out there in the residential world. So you can literally use any quick set one key and re-key that to the way any key that the tenant would want or any key that you would want in the KW. One family that makes it very easy to service the lock and change it out for a new key set, whatever you need to do whenever you need to do it takes about 15 seconds to, to change from one key to another key way on those locks.

Andrew Schultz: (12:26)
The nice thing is when you rotate the face plate of the lock, it reveals a totally separate key way that I U I believe it uses a KW 10, a quick set, 10 key set. That’s a little bit more challenging to get a hold of. They don’t typically have that key at Lowe’s or home Depot and you can’t physically fit the tenant’s quick set into the same slot. So even if the tenant discovered the hidden key, there’s not really much that they’re gonna be able to do with it. They’re not gonna be able to Ram their key in there or anything like that because it physically won’t fit. So what we do is set up at the entire building on these quick set, eight 16 locks with the landlord cylinder, basically being master keyed to one key. And then we distribute tenant keys for the tenants, the common locks, things of that nature.

Andrew Schultz: (13:08)
Uh, but the nice thing is when we roll up to a building and need to get in need to do maintenance, need to do whatever we can do it all from our one key, all we have to do is rotate the face plate and we can unlock the door using our master key. It’s sort of like master keying without the hassle of actually going through and master keying a building with a locksmith. It’s a lot more approachable for small buildings. When you, you know, like on our duplexes in Buffalo, it’s usually a front and back door for the lower apartment, a front and back door for the upper apartment, and then two outside doors. So we’re talking about six deadbolts. That’s not a lot, it’s actually a small system to master key it, but the, to make it cost-effective. I think the quick set eight 16 is really where you want to be on something like that.

Andrew Schultz: (13:48)
Anyway, with regards to the carpet cleaning, that was the second part of the question we do require all of our tenants to have the carpets professionally steam cleaned by a truck-mounted steam cleaner at the end of their lease term. They also have to provide us with a copy of the receipt showing that they had that work done. We explain it to the tenants upfront that if they send us a receipt for a rug doctor or they tell us that they use their own carpet shampoo or something along those lines, it’s gonna get rejected. And we’re gonna send a company in to actually properly clean the carpets. The problem with the rug doctor units, and most of the personal units out there is that honestly, they’re just playing garbage. They leave a lot of moisture and more importantly, a lot of soap behind during the cleaning process.

Andrew Schultz: (14:27)
And that soap will actually start to attract dust and dirt and things of that nature just simply because it’s not fully been extracted from the carpet. So you start to get more buildup in two weeks time with having people walk on your carpets, they’re gonna wind up looking as bad if not worse than they did prior to cleaning them, simply because you’re going to have more dust and dirt sticking to that residual soap in the carpet, the truck Mount steam cleaners are much more powerful and can draw a lot more powerful vacuum, which ultimately at least in my opinion, leads to a much better end result. In addition, most of the people that run the truck-mounted machines also have all the stuff on the truck to be able to do spot treatment or remove a stain or hit a difficult-to-clean area or something like that.

Andrew Schultz: (15:10)
That’s something that most people who go run a rug doctor or have a personal unit don’t think about, they’re just not set up for spot treatments and things like that. The one nice thing about always using a professional service to have the carpets cleaned is that they’re gonna provide you with an invoice showing that the carpets were professionally cleaned. Essentially you could have a complete chain from the time that carpet was installed until the time that that carpet is removed, showing every single time that the carpet’s been cleaned between tendencies. So if you’re ever required to provide proof that the carpets have been taken care of, you have it about the only time we’ve ever been questioned on something like that is after a new tenant’s moved in and had some concerns. I think they were smelling like a pet odor or something like that in a home that had never had pets.

Andrew Schultz: (15:49)
And we were able to say, oh yeah, we have had the carpets cleaned, and here’s the receipt. So it’s, it’s a matter of being able to say, yes, the carpets were cleaned. Yes, they were done by a professional insured company. You know, there’s whatever issue you’re having. It’s probably not coming from the carpet. So it is nice to have that proof when you do need it, be able to produce a receipt, goes a little bit further than just saying, oh yeah, we have the carpets cleaned because a lot of people just simply are not going to believe that that said, I don’t know of any way that they can really compel you to prove that you had the carpets cleaned. So, I mean, we might just be talking around in circles here. Uh, the one thing I would mention is that if you don’t have the carpets cleaned, don’t expect your tenant to have them cleaned on the way out.

Andrew Schultz: (16:28)
In theory, we want tenants to bring us back a home in the condition that they received it in. But in actuality, especially when it comes to carpet, you’re more than likely gonna wind up with something that’s seen some wear and tear. And if you don’t have them cleaned at move-in, the chances of getting them back cleaned at move-out are pretty slim, maintain your property to the level that you would want it maintained to if you were the tenant, that’s my best recommendation to any landlord. When you’re talking about maintenance, when you’re talking about living in a property, if you were that tenant and you were living in that unit, where would you want the unit maintained to? And that’s generally a good, a good theory on where to start when it comes to maintenance stuff. Good luck on your turnover,

Voice Over: (17:10)
Quorum forum, where we scour the internet for ridiculous posts from landlords and tenants.

Andrew Schultz: (17:18)
Our final segment this week is a forum quorum. This one comes to us via the landlord, subreddit. This is an interesting one on someone looking to make a property acquisition, but they wanna make sure that they’re not gonna get screwed over in the process. Let’s go ahead and take a look. I’m looking into purchasing an occupied single-family home with long-term tenants already in place. I’d like to purchase the property, but I want to see a tenant ledger first to see if payments are made on time and not missed. See what sort of maintenance is needed or has been done, et cetera. The realtor told me that they will show me the ledger after I make an offer. This sounds a bit strange to me because it’s, to my understanding that if I make an offer, that’s accepted that I’m legally bound to purchase the property, even with the ledger unseen.

Andrew Schultz: (17:59)
So is it normal for me to make an offer prior to seeing the payment history for the rental property? Or should I insist on seeing the ledger first before making an offer, I’d be paying in full upfront and have shown proof of funds already. Um, I also wanna mention that the seller is an out-of-state investor and has several other properties in the area. So I would expect that they would have ledgers with considerably detailed information. They’ve held this particular property since 2007. So unfortunately there was not a state listed in the question. So I’m just gonna give some generalized advice based on what would be true here in the Western New York market and a typical transaction. Um, however, real estate transactions do very widely, very widely from state to state. And honestly, even county to county, different municipalities may have different requirements such as a sump pump or a septic inspection that has to be completed prior to the property changing hands.

Andrew Schultz: (18:52)
And honestly, in one of the suburbs of Cleveland, the city comes in and does a full point of sale inspection. And then they write a violation list based on what they see when they do their walkthrough. And that ends up becoming part of the negotiation during the transaction in a lot of instances, uh, we’re a little off track here, but you get my point. My point is that real estate transactions take a lot of twists and turns from the time that you sign the contract until the time that you actually close on the property. And the process is a little bit different anywhere you go. So let’s jump into a little bit more specifics here in the Western New York market. Part of the contract for any property that has renters in it is a document called the rental property writer. It’s a pretty straightforward document, but essentially what it does is break out every unit in the rental, what the rent and deposit are when the lease starts and ends, what appliances are included, what utilities are included, stuff like that.

Andrew Schultz: (19:44)
It’s not a full-blown ledger, but it’s enough for you to be able to tell what the units are rented for how many vacancies there are, how much the current rents are, things like that. And then based on that, you can start to build out a financial profile of the property here in Western New York, we would provide the actual tenant ledger during the due diligence phase. So at that point you’ve already written your contract. The contract has been accepted. The home inspection has likely going on simultaneous to this. And as part of the attorney approval process, we’d request a copy of the tenant ledgers that essentially gives us the opportunity to take a look at the ledgers and make sure that the tenants are paying rent. Make sure that they’re paying rent on time. See how often they’ve been late or bounce checks or whatever.

Andrew Schultz: (20:26)
In other information, we might be able to ascertain from the tenant ledger. The reason we wait until after we’re under contract to provide tenant ledgers is because you are exposing someone’s private and personal information as part of this transaction. So realistically speaking, you have no right to look at a tenant’s ledger prior to at least being under contract on the property. This is also the point in the transaction where we would circulate the leases and such so that those documents can be reviewed as well. So here in New York, the lease survives the sale of the property. And even if there are terms in those leases that you don’t like, chances are, you’re still going to be bound to that lease until the next lease term can be negotiated. So it’s important to make sure that you are doing that due diligence, see those tenant ledgers, and read those leases so that you understand what you’re buying.

Andrew Schultz: (21:10)
Going back to that attorney approval process, uh, at least here in Western New York, essentially that’s a period of time written into every contract that gives the buyers and sellers attorney a chance to review the contract and any addenda prior to the transaction proceeding, if an attorney thinks that there’s something missing or they have an issue with the contract, they put that, uh, into their attorney approval letter. And then that letter goes out to everyone involved, typically the agents and the attorney on the other side of the transaction. And then it gets circulated back to the buyer and seller. So the attorney can request the ledgers and the leases in their attorney approval letter, which that’s typically done right alongside the title work and survey here in Western New York, all that stuff gets requested as part of the attorney approval letter. Typically when I see an attorney request additional documents, other than the title and the survey, because those are handled otherwise in the contract, they’ll also stipulate that they’re also including an additional approval period time or stipulating that the attorney approval time remain open for generally a few days after whatever requested documents are received so that they can be reviewed.

Andrew Schultz: (22:15)
That’s a pretty standard thing that we see happen here in Western New York. Generally speaking, it’s not a big deal when somebody makes that kind of a request, something to keep in mind is that a ledger is only as good as the paper that it’s written on. Somebody can completely falsify a ledger to make it look like these tenants are paying their higher rents, um, have never been late, whatever the case may be. So the Ledger’s only going to get you so far on a property, as small as a single family, one occupied single family. You’re not going to get certified bank statements from the seller. You’re not going to get tax documents from the seller or anything along those lines, more likely. Um, but really you’re sort of at the mercy of the seller when it comes to actually verifying that the information on the Ledger’s actually accurate.

Andrew Schultz: (22:57)
So you could go ahead and get an estoppel certificate put in place, which essentially verifies the terms of the lease, the rent, the security deposit, when it starts, when it ends key terms, things of that nature, uh, and that estoppel would have to be signed by both the tenant and the seller. And I mean, I’m not an attorney. I say that a bunch of times, pretty much every time I record one of these podcasts, but I would think that they could put something into that estoppel agreement, some sort of a stipulation in there as to the tenant’s ledger balance as of the day that the tenant signs that document. So that could give you a little bit more protection. We talked a lot more about estoppel agreements back in episode 3 75 of the podcast. If you’re looking for more information on that. So essentially the point that I’m driving at here is that you’re going to have a chance to review those ledgers during the contract period.

Andrew Schultz: (23:43)
And you should have the ability to walk away from that deal. If the information provided isn’t what you’re expecting to see based on what you’ve been told, having good conversation with your broker or your attorney, whoever’s handling the closing of the transaction on your behalf, make sure that they’re taking those considerations into mind. Most of them are going to take those into consideration by default, but just make sure have a conversation with your agent and attorney to make sure that everyone’s on the same page. Something like looking at a ledger or AISE would not have any impact on the strength of your offer. Uh, unless the seller knows that the information they’re gonna give you is bogus. And then they might take a little bit more time in thinking about accepting your offer. But if their information is good and looking at the leases and ledgers, it’s perfectly normal part of the transaction, and there should be no reason why you would not have the opportunity afforded to you to do that as part of the closing process, good luck wrapping that property up tenant scams are on the rise.

Andrew Schultz: (24:39)
Are you up to date on all the latest tricks? Rent prep recently released their guide on what to look for in 2022, to make sure you are not being scammed by potential tenants. Check it out today. over at rentprep.com slash blog. 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. 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 at Own Buffalo, as well as other projects that we’re working on.

Andrew Schultz: (25:23)
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 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 almost a decade now. And I can definitely tell you that it’s changed the way that we screen our tos. 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 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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