Podcast 340: Renting Out Gym Equipment to Tenants

Podcast Host, Andrew Schultz, goes over renting out gym equipment to tenants, liabilities to consider and whether or not it’s a good idea.

Also in this episode, Andrew discusses how to deal with contractors that decide to do work before ever having authorization to do so.

Last, but not least, have you heard about tenants flushing couches down the toilet? It’s happening. How about tenants flushing quikrete down the toilet? We’ve got some pretty entertaining stories for you this week, listen in to hear the full scoop.

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Show Transcription:

Andrew Schultz: (00:00)
Hey everybody. Welcome back to another episode of the Rent Prep for Landlords podcast. This is episode number 340, and I’m your host, Andrew Schultz. On today’s episode, we’re going to be talking about renting out a personal gym to tenants, paying contractors for unauthorized work, and tenants flushing their couch down the toilet. We’ll get to all that right after this.

Voice Over: (00:19)
Well, welcome to the Rent Prep for Landlords podcast. Now your host, Andrew Schultz.

Andrew Schultz: (00:26)
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, chances are someone in the group has been there before, and it can lend a helping hand. As of this recording. We’re at 11,851 members, and we need your help and the push to 12,000. Check it out today over at facebook.com/groups/rentprep. And don’t forget to mention the podcast when answering the question so that we know how you found us. One very unique aspect of 2020 is that more people than ever are trying to find ways to get in shape or stay in shape that don’t involve going to the gym. And in a lot of instances, that means building a gym at your own home. Would you ever consider renting your gym to the tenant that you have living on the other side of your duplex? That’s exactly the situation that one investor finds themselves in. Let’s jump right in here.

Voice Over: (01:18)
Water cooler wisdom, expert advice from real estate pros.

Andrew Schultz: (01:26)
I’m a relatively new real estate investor in purchased a duplex in Austin. Since I plan on being here through at least 2022, I purchased some home gym equipment, such as a squat rack, cable machine, dumbbells formats, et cetera, that my girlfriend and I use for our workouts. The tunnel asked if they could set up a gym for their own use. And I told them that it would be fine. Now the tenant has recently asked if they could rent the gym from my garage. So as not to purchase their own equipment, I’m wondering a few things. One is this something I should allow to, should I update the lease, and three, what are the potential liabilities? So I think my biggest concern about this on a surface level, like right off the bat, is obviously going to be the liability. You’re essentially operating a second business by renting out this gym, if you will, whether it’s a home gym or not, you’re, you’re essentially giving someone access to a fitness facility, um, as part of their rental.

Andrew Schultz: (02:19)
And if you’re not insured for such a thing that could really turn into a huge headache in the event that somebody gets hurt, um, a piece of equipment breaks and someone gets hurt as a result of that. Something along those lines, there’s a lot of liability in my eyes. At least when I look at a situation like this, you’re definitely going to want to talk to your insurance broker about this and see what your liability would be. Um, there might be some sort of a rider that you can attach to your insurance policy for a quote-unquote fitness facility if you will, or whatever, but you would definitely want to start by talking to your insurance broker and see exactly what they consider the liability to be. Uh, and that would probably be my first step in this whole thing because that would basically be the, the way that I plot the course for the entire rest of this.

Andrew Schultz: (03:03)
So assuming your insurance company says, yeah, this is not that big of a liability, or you can add a, uh, you know, a liability extension onto your policy or something along those lines. If that’s the route that you want to go, we’re going to assume that you’ve decided to move forward with this. So assuming that you’re planning on moving forward with us, there’s definitely some considerations that you need to take into account when it comes to your lease, as well as your moving procedure and things of that nature you’re going to need to, in some capacity, put access to the fitness facility, if you will, into the tenants’ lease. Um, this is something that I think is probably best handled by an attorney. Since you’re writing a brand new lease clause. This is not something that I would try to hand pen myself. There’s just too much risk there.

Andrew Schultz: (03:44)
If you forget something, you can be leaving yourself open to even greater liability or something along those lines. So this might be one where you, uh, you want to talk to an attorney and actually get some assistance in generating that new, that new lease terminology. The other thing I would do is make sure that it’s noted on the move inform to include the condition of the weight room equipment, as well as getting a set of excellent photos of the equipment so that you can show what the condition of it is. That being said, obviously, there is more than one person using this equipment. So you have to be a little bit more thoughtful when it comes to things like wear and tear and who caused damage and situations such as that in that same thread, you have to take into account the cleaning, the maintenance, and the upkeep of the equipment as well.

Andrew Schultz: (04:26)
So I mean, obviously this is I’m recording this on November 27th, 2020, we are still in the middle of the global pandemic currently. So that’s something that needs to be taken into account as well. If you were going to do something such as this, for instance, in the Buffalo market right now, all of our gyms are currently closed. There’s no public gyms that are available right now to go into, and if you’re doing this and you’re offering this and keeping it as part of the rental, do you now have to take into account? The equipment has to be cleaned every so often or sanitized or whatever. You know, it’s, there’s a lot of question marks here that would probably lead me to not be a super big proponent of jumping into a situation such as this. You can always talk about something like a liability waiver or something along those lines.

Andrew Schultz: (05:08)
But again, you’re going to need to speak to an attorney on something like that, because I’m not entirely certain that you can waive the liability of someone else using equipment that you’re providing. So that’s a that’s a question for an attorney for sure. There’s a lot of question marks in this scenario. My recommendation would be not to proceed with something like this. If the tenant wants to set up their own gym in their own garage and buy their own equipment, that’s one thing. But when you start leasing equipment out to somebody to use, you are starting to take on different liabilities in different aspects. Are you, are you creating a totally separate business by adding a gym? No, you’re adding an amenity for your tenants, realistically speaking, but how does the insurance company see it and how would the attorneys see it in the event that something went wrong?

Andrew Schultz: (05:50)
That’s ultimately how you would probably look at a situation such as this and ultimately make that determination for me personally, on a duplex property, where it’s me, in this instance, it would be the property owner and one other tenant. I’m not getting involved in that situation. Um, that’s, that’s too much risk for too little reward. In my opinion, if it was a larger facility, you know, several units, um, a 25 unit building that has a fitness facility is a completely different scenario because you’re spreading that risk over, over a larger number of units. But with it being just one duplex, I personally wouldn’t take that risk. I would not jump on that one. That would just be something that I would not want to do. So hopefully it works out for you. Uh, I’m interested to see the follow-up on this one to see if they opt to go with the, uh, leasing the gym equipment, or if they opt to say, you know what, just set up your own gym, do your own thing. Obviously, I’ve made my opinion known. What would you guys do though? I’m kind of interested to hear how you would handle a situation such as this. Um, you can drop a message to us over at ownedbuffalo.com. There is a contact form there where you can leave a comment for us, and we do check that stuff every day. So if you’re interested, feel free to drop us a note

Voice Over: (07:01)
Feet on the street, real stories from real property managers.

Andrew Schultz: (07:10)
All right, we got a pretty good feet on the street for you here today. I’ve got one story, one bad tenant story from Reddit. And then I have a second bad tenant story from our own business that I’m going to share with you guys. Let’s go right ahead here. Uh, I rented a large two-bedroom apartment to four male college students. This was in a multi-family property with about 30 units. We were apprehensive. So we had one of their fathers co-sign luckily he had great financial records. It came in handy when a couple months into their lease, we were getting multiple calls from tenants in the building saying all their plumbing stopped working. It took the plumbers and the maintenance staff about 24 hours to figure it all out. The mystery came together when an auger with a camera on it discovered what was clogging the pipes and the evidence.

Andrew Schultz: (07:52)
And the hallway led to the perpetrators. The boys had gotten rowdy in the apartment and broken their couch somehow. And instead of putting their couch out for the trash and getting a new couch, they decided to spend hours chopping it up into tiny pieces and flushing, millions of tiny little foam balls used for cushioning, uh, down the toilet. The father had to pay thousands of dollars in plumbing expenses, and we obviously terminated their lease. That one’s pretty bad. Um, that one is probably one of the worst dumb tenant stories I’ve heard. I don’t think there’s anything malicious there, to be honest with you. I think it just boils down to probably a few wobbly pops got consumed and some bad decisions were made a couch got broken and, uh, in someone’s drunken state, this probably seemed like the best possible solution to, to get rid of their couch.

Andrew Schultz: (08:37)
Um, I’m sure we’ve all made a bad decision or two back in the day. Hopefully nobody, you know, nobody was throwing couches down drains, but, uh, yeah, that’s, I I’m sure that’s what happened here is bad. You know, just dumb college students made a dumb decision and it cost them dearly. Well, it costs the one student’s father dearly by sounds of things. That’s a, that’s a pretty unique and definitely an unfortunate situation to be sure. And then the story that I wanted to share was actually it’s a, and so we had gone through the entire, your process with this tenant of getting them, uh, evicted from the property. And this was years and years and years ago. Um, probably 10 years ago at this point, now that I’m thinking about it. So we’d gone through the entire process and we were at the set-out date.

Andrew Schultz: (09:22)
So the way the set outs work in our area is the sheriff or the marshal service will come out and you knock on the door. If the tenant comes to the door, they tell them you got to leave. If the tenant doesn’t come to the door, you enter the apartment, they check to make sure that the place is empty and they throw the little you’ve been evicted notice on the door, you know, the notice of no re-entry or whatever you want to call it. And, uh, then you’ve got the unit. You can do what you need to do at that point. So, uh, on this particular instance, when we were doing this eviction, I was at the front door with the Marshall service and we’re pounding on the door and we know the tenant is inside because their cars in the driveway. And we can, we can hear them.

Andrew Schultz: (10:00)
We can hear movement inside the unit. Well, it turns out as we’re standing there pounding on the front door, Tennant was in the bathroom, pouring a bag of Quikrete down the toilet and flushing it as fast. And as many times as he possibly could to try to get as much quick Crete into our drain system, as he possibly could. And this was on a duplex property in the city of Buffalo. So, so eventually we just key into the unit because the tenant’s not coming to the door and the marshal has things to do. And we’re there for the set-out. And obviously, we uncover all this as it’s going down, the marshal removes the tenant from the building, the tenant leaves the property, and obviously, they left the property at disaster. There was debris and stuff all over the place. They moved about a quarter of their stuff and left the rest of it for us to deal with.

Andrew Schultz: (10:44)
Um, but the, a little plumbing issue that they decided to cause with the concrete going down the toilet that ended up costing over 10, $10,000 in repairs. Um, and obviously, you know, you can try to go back after the tenant and go to clay. You know, uh, actually wouldn’t even be small claims court. It would have to be civil court at that point because of the dollar value. Yeah. You can go and chase the tenant, but are you ever going to get blood from a stone? And in this instance, it was really, there was no reason to chase this tenant. There was, you were never going to get another penny back out of them for this damage. You were just going to throw more money away going after them in court. So unfortunately there was never really a positive resolution to that one. The floor of the basement had to be broken up.

Andrew Schultz: (11:21)
They had to pull up a big chunk of the, uh, of the drain, the main drain pipe running out to the street, and everything. It was quite a costly endeavor, unfortunately. And it’s one of those situations that, you know, you get one bad tenant and that’s the kind of thing that can happen. So that’s why we, we talk about tenant screening as much as we do here on the podcast because it’s just such a critically important step in the entire landlording process that you don’t want to take it for granted. And you don’t want to just skip over it. So take these stories that you hear on the podcast and learn from these mistakes, because it’s way easier to learn from somebody else’s mistake than they have to spend the money after you make your own mistake,

Voice Over: (12:01)
Forum quorum, where we scour the internet for ridiculous posts from landlords and tenants.

Andrew Schultz: (12:10)
Forum quorum comes to us via the Rent Prep for Landlords Facebook group. And this is a pretty interesting one. How would you guys handle this? Uh, give it a listen and then let us know a storm hit and knocked a tree branch onto my rental, the branch punctured the roof. I had a contractor take a look for an estimate. He gave me one. I sent the pics to my insurance company and told the contractor that I was waiting for the adjuster a week later, my contractor sends me photos of the repaired roof and the invoice that I had not approved. It’s about a thousand dollars out of pocket. I’m not concerned over the amount, but this is about the third time as a landlord that a contractor has asked me to pay for work, uh, that I did not authorize. Am I being irrational? No, absolutely not.

Andrew Schultz: (12:53)
You’re not being irrational. Um, so the way that we operate here at our company is if you don’t have a signed document, assigned a estimate saying that yes, we’re approving work, or we’ve not issued a PO number, uh, which we do a lot of times on like our smaller maintenance jobs and stuff like that. If you don’t have one of those two things, we’re not paying you for a job, if you did it because you’ve not been authorized to complete the work. Um, so my first thing would be go back to this contractor and say, do you have a signed copy of the estimate authorizing you to do that work? They’re not going to have that signed estimate. And that’s probably going to be the end of the issue right there because I can’t imagine that this contractor is going to try to chase this down after he realizes that he doesn’t have a leg to stand on.

Andrew Schultz: (13:38)
Granted, he did the work. He may try to say you gave me a verbal, okay. Or something along those lines, but short of having that signed paperwork, I don’t think that he’s going to have a lot of, uh, a lot of clout, especially if he was to try to take it to court and get the money via, uh, some sort of a, a court proceeding or something like that. Small claims court. I don’t think he’s going to have a lot of luck there. So I think that this guy probably just did some work for free for you to be honest with you. If this is a contractor that you work with on a regular basis, I think I would probably have the conversation and say what happened here? Like, did you, did you hear something that I never said, you know, did, uh, did you think that you just had the go-ahead on this?

Andrew Schultz: (14:15)
Like where did you come up with the logic of, yeah, I can go ahead and do this work? Not having any kind of authorization or anything along those lines, and if it’s not a contractor that you’ve used before, then chances are, I would not, uh, not be calling that contractor back for future work. That’s for sure. So it’s, it sounds to me like this is one of those situations where you can probably, uh, plan on not paying that particular bill. It sounds to me like this vendor is probably going to wind up eating that one, uh, as well. They probably should. I mean, it’s just, it’s irresponsible of them to be out there doing work. I mean, they were up on your roof. What if they had fallen and gotten hurt or something like that, and then to come back after you? So, fortunately, it’s not a more severe situation I suppose, but I think that it definitely warrants having that conversation to find out exactly what happened here, where the commute miscommunication took place, and how you can prevent something like that from happening in the future.

Andrew Schultz: (15:05)
So much of this business does require good communication between parties. That sometimes it makes sense to actually stop it while you’ve got somebody in front of you while you’re having this conversation, to make sure that you’re both on the same page in terms of what’s authorized and what’s not authorized and then get it in writing. You know, I don’t, uh, I prefer not to operate from a verbal agreement whenever possible, because verbal agreements can be forgotten or, you know, revisionist history. Somebody thinks that you said something that you didn’t say, or that you authorized something that you didn’t authorize, which might be the case here. And it turns into a sticky situation very, very quickly. So for that reason, my recommendation is over-communicate whenever possible and then get it in writing to make sure that everybody is on the same page. I think that’ll go a long way to help you in preventing from something like this from happening again, even outside of your life in real estate as well, the ability to over-communicate and then make sure everybody’s on the same page will generally get you a lot farther, whether it’s on a project at your employer, or just trying to get something accomplished in your personal life, as long as you know, that everybody who needs to be on the same page is on the same page.

Andrew Schultz: (16:09)
It definitely helps to make the project move a lot faster and a lot smoother. And of course, the real pro tip all the way at the end of the podcast, for those of you that stuck around to listen to the whole thing. If you have a conversation with somebody on the phone, don’t be afraid to follow up that phone conversation with an email confirming everything that was discussed on the call and end that email with, if there’s any disagreement on these points, please let me know immediately as soon as possible so that we can get back on the same page. What you’re doing there is basically saying, this is my version of the events. Do you disagree with my version of the events? What this does is it gives the other party, the ability to come back and say, Hey, we’re not on the same page here.

Andrew Schultz: (16:48)
Point three should have been, you know, X instead of Y or whatever the case may be, but it just helps to keep everybody on the same page. So that’s definitely my recommendation. If you’re having a phone call where decisions were made, follow that phone, call up with an email, just so that everybody remains on the same page and that there’s at least a little bit of written documentation as to what was discussed. 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 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 that goal. If you heard anything in this week’s episode or any of our other episodes 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 what’s drew up to.com from there, you’ll find links to everything going on with me over at owned buffalo, as well as other projects that we’re working on as well.

Andrew Schultz: (17:40)
If you’re looking for top tier tenant screening services, head on over to rentprep.com, there’s multiple products to choose from including a tenant paid option. And if you’re over 50 doors, ask them about the enterprise-level programs and pricing. We’ve been using Rent Prep for years now as an enterprise user. And it’s definitely changed the way that we’ve come to screen our tenants. Check that out today, over at rentprep.com. Again, thank you all so much for listening. We’ll be back next Thursday with an all new episode that you won’t want to miss until then. I’m Andrew Schultz with ownedbuffalo.com for rentprep.com. And we’ll talk to you next week.