Podcast Host, Andrew Schultz, dives into holiday gift-giving for tenants. Is it appropriate to give your tenant a gift and if so, what are popular gifts to give?
Also in this episode, Andrew discusses the importance of something as simple as a shower curtain and how that plays into renters insurance.
Last, but not least, how do you get a tenant who is consistently paying late to change their ways? It may not be as difficult as you think.
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Andrew Schultz: (00:00)
Hey everyone. Welcome back to another episode of the Rent Prep for Landlords podcast. This is episode number 341. And I’m your host, Andrew Schultz. On today’s episode, we’re going to be talking about how to get a late paying tenant onto a payment plan. The importance of shower, curtains, and renters insurance, and giving gifts to tenants for the holidays. We’ll get to all that right after this.
Voice Over: (00:23)
Welcome to the Rent Prep for Landlords podcast. Now your host, Andrew Schultz.
Andrew Schultz: (00:27)
Listen up. If you’re a landlord struggling to manage everything during the pandemic, help is on the way Rent Prep has just released their 2020 coronavirus survival guide for landlords. This guide was written with you in mind. It includes resources, information on what to do. If you’re struggling with a mortgage payment, what the current state and federal eviction protections look like, what to do when rent goes unpaid and so much more, get educated and be better informed today over at rentprep.com/blog.
Voice Over: (00:53)
Water cooler wisdom, expert advice from real estate pros.
Andrew Schultz: (01:02)
At some point in the landlord end game, every single housing provider is going to experience a tenant that either doesn’t pay or short pays their rent. What do you do in a scenario like that to make sure that the tenant understands what their obligations are and how do you ensure that you get that rental payment in the door? That’s the question that one of our landlords has today. This question was pulled from the landlording subreddit and it reads as follows in eight years of renting. This is actually the first time I’ve run into this situation. Single-tenant rent is due by the third total of $980 per month. Last month, she contacted me as she had some car trouble. She paid $600 on the first and the remaining half on the 15th. This month with no communication, I got $700 on the first. I’m going to reach out today, but I’m unsure exactly how to handle this.
Andrew Schultz: (01:49)
I’m thinking of something along the lines of, I understand things are difficult right now, but I need to know when to expect the remainder of the rent. I haven’t imposed a late fee and I would like to avoid doing so in the future. Basically, I’m fine getting the rent by the 15th, but I worry that it will become a slippery slope situation. She’s an otherwise good tenant who is paid timely for six months and doesn’t call every time a light bulb burns out. How have you handled similar situations? Well, I would say that you’re exactly right. When you say that you’re concerned about it, turning into a slippery slope situation, do not ignore an issue such as this communicate immediately with the tenant, both invoice and in writing to let them know that you’re aware of the situation and that you want to work with them to get the situation resolved.
Andrew Schultz: (02:30)
And when you do speak with the tenant, you need to make sure that their understanding of the fact that they are in violation of their lease contract by not getting that rent payment in, in its entirety when it’s due. So they’re in violation of the contract already just by not making that entire payment when it was supposed to be made. Furthermore, they also need to understand that there are consequences to being in violation of the contract, such as late fees and things along those lines that are in place to essentially encourage tenants, to make rent payments in a timely fashion and things of that nature. And let’s not forget late rent payments generally lead to the ultimate end of the situation, which could possibly be an eviction, which realistically speaking, nobody wants to do. Now it’s about getting the issue resolved. If you’re talking to the tenant, find out what it’s going to take for them to get the issue resolved.
Andrew Schultz: (03:18)
Maybe they just need to wait for their next paycheck to come in and they could make the rent current or whatever the case may be. But just having a date is not enough. You need to get a payment plan in writing and you need to make sure that the tenant signs off on it. If you need a template for a payment plan, you can find one over at rent, prep.com, and the resources section. That’s a free resource that you can grab just to make your life a little bit easier as you’re dealing with this scenario. So at the same time that you issue the payment plan paperwork, my recommendation is going to be that you also issue whatever notice is required in your state to initiate an eviction for nonpayment, assuming that you can evict for nonpayment in 2020 in your state or in your municipality, given everything that’s going on with the pandemic.
Andrew Schultz: (03:59)
The reason I say that you should start this paperwork at the same time that you start the payment paperwork is that in the event that the tenant defaults on their payment agreement, you are already in place, um, or at least you were already taking down the days on your timeframe before you can file that an actual eviction. If you wait until after the payment arrangement has been broken and then issue that paperwork, you’re essentially losing all of those days between the day that the payment arrangement was issued. And the day that the payment arrangement was broken, you’re losing all of those days when you could be ticking down that timer and get this thing moving forward into a scenario where you can get this tenant into court and either get the rest of the rent money from them or get them out of the unit.
Andrew Schultz: (04:40)
So my recommendation, assuming your state will allow, it would be issue the nonpayment notice on the same day that you do the payment arrangement paperwork with the tenant. And then that way everyone is aware of the fact that yes, you are in a violation of your lease. We have this arrangement in place, but if you violate this arrangement, there are consequences for your actions. Those consequences are, you’re going to wind up in court and have to pay this sum, plus probably some attorney’s fees and everything else, or you’re going to be evicted from your home, which is something that neither one of us want the tenant and the housing provider. So making sure that everyone is on the same page and communicating in a situation like this is critical to making sure that a tenant is successful in getting back on track. Now, something that we do in our office as a courtesy to our tenants is we do actually have a late fee built right into our leases, but we do offer one late fee waiver per 12 month period to all of our tenants.
Andrew Schultz: (05:34)
And the reason we do that is because we understand that things happen. You know, it’s not every day that everything runs perfectly smoothly in every single person’s life. I think that we’ve figured that out by this point. So we understand that there’s going to be situations that occur where, Oh, shoot a payment was made late or forgot to mail a rent check or forgot to go online and, and made it make a payment. Whatever the case may be, we offer every single one of our tenants, one free get out of jail, free card in the form of a late fee waiver. After that, they have to pay that late fee every month, as you know, essentially a consequence for not being able to get their rent payments in on time. So that’s how we would handle a situation like this, where you’ve got a tenant that they’re trying to make it work. They just need a little bit of extra time to get that payment in, make sure you do a payment arrangement, get it in writing, and make sure that you’re following the laws in your state so that you know, that you can move forward with either an eviction for nonpayment procedure or whatever the case may be in the event that that payment plan does get defaulted on.
Voice Over: (06:34)
Feet on the street, real stories from real property managers.
Andrew Schultz: (06:43)
Down the street is a tenant horror story. It also comes with three special lessons that I think every housing provider needs to know, or maybe needs a refresher on let’s jump right in this one comes to us from the Rent Prep for landlords Facebook group. Our recently evicted tenants decided it was a great idea to not use a shower curtain inside the tub while showering. We ripped out the three-year-old subfloor two days ago and replacing it tomorrow because of the intense mold issues. We never thought to add it to the lease that a plastic shower curtain is to remain inside the tub. At all times during showers was a necessity. I swear we had something new every time a tenant moves out onto our Elise. Yeah, I would say that’s pretty accurate. There are a lot of clauses in our lease that are born and bred because of a bad tenant situation and you live and you learn and you add it to the lease.
Andrew Schultz: (07:30)
And that’s a, that’s a pretty common occurrence. We’ve got several clauses in our lease that are written specifically because of bad tenants in the past. So there’s three lessons that I think can be garnered from this situation. Um, the first is provide a plastic shower curtain like a set of shower rings, and a shower liner is under $10. You know you can walk into any dollar store and pick those things up for a negligible amount of money. And that alone might have saved you thousands of dollars in damage here simply by providing a shower curtain and some rings. And I understand that a lot of housing providers feel like it’s not our responsibility or the tenants just going to rip it down and replace it with their own. My response to that is who cares if they take it down and replace it with their own, it’s not about the tenant that takes it down and replaces it with their own.
Andrew Schultz: (08:17)
It’s about the tenant that doesn’t take it down and replace it with their own. You may be protecting your property, you know, from thousands of dollars of damage, just by spending $10 on a simple shower curtain liner and some rings. I think it’s a no-brainer to make sure that you have those shower curtains in place. When you run out a unit, think about the last time that you moved and got done at the end of the day. And just wanted to take a quick shower and get the sweat off of your body. If you’re in a situation where you’re a tenant and you haven’t unpacked anything yet, or even if you’re a homeowner and you haven’t unpacked everything yet, you know, you’re going to want that shower regardless. Are you going to take the risk of taking a shower without having that curtain in place?
Andrew Schultz: (08:54)
Some people are to do it. The other thing you have to keep in mind is there are cultural differences where some cultures, their bathrooms are set up in a different capacity where a shower curtain isn’t necessary or expected. We had this situation occur when we were renting to a lot of international students near the University of Buffalo campus, where we were constantly having issues of shower curtains weren’t being used, like basically this exact scenario. And we realized that, Hey, this isn’t our issue. This is a cultural issue that we need to, to kind of understand and work with. So it led to a little bit of tenant education and explaining to tenants that having these curtains in place prevents water from flying all over the place and causing damage and things of that nature. So, you know, it’s not always just because they’re a bad tenant it’s sometimes because there’s cultural differences that need to be explained as well.
Andrew Schultz: (09:45)
Lesson number two that I think can be garnered from this scenario is that you should definitely be doing semi-annual inspections of your rental property at a minimum. Uh, we talked about this back in episode three 36. I believe we go in and check all of our units at least twice a year as just a normal course of business type thing to make sure that there’s not a bunch of damage being done. This is one of those things that over the course of three years, you probably would have found this if you were doing inspections on at least, uh, at least a semi-annual basis. And I remember I mentioned in episode 336, that when you don’t do these inspections on at least a semi-annual basis, you’re really taking a lot of risk and liability on just by not knowing what’s going on inside the rentals that you have out there.
Andrew Schultz: (10:26)
So I think it’s a good idea to at least get in once every six months, take a look around, look under sinks, to make sure that you don’t have leaks check bathrooms, to make sure that people are using shower curtains, and make sure that things are going the way that they should be going inside of your property at least once every six months or so. Lesson number three here is in regards to renters insurance. If you’re in a state where you can mandate that a tenant has to have renter’s insurance, I would definitely make that mandate stick on the tenant, make sure that they have a renter’s insurance policy before they even move into the unit, and be sure that you are labeled as an additional insured on the property. What that means is that anytime there’s a change to the policy, you’re going to be notified either via mail or email or however, you’re set up to get the policy updates.
Andrew Schultz: (11:07)
You’re going to get notified whenever there’s a change to that policy, or even if the tenant removes you as an additional insured, you should be notified that you’ve been removed, but being listed as an additional insured is exactly what it sounds like. Essentially it’s giving you extra protection against the actions of the tenant inside of your rental. So definitely something to consider. If you’re in a state where you can mandate some form of renter’s insurance coverage to consider doing that, because that’s going to give you at least somebody that you can contact in the event of damages like this, to try to recoup some of that lost money.
Voice Over: (11:44)
Forum quorum, where we scour the internet for ridiculous posts from landlords and tenants.
Andrew Schultz: (11:54)
Well, folks, the new year’s just around the corner, but before we get to that, we have to get through the end of 2020. And that means making it through the holiday season. A lot of us are already starting to think about what the holidays are going to look like for us and our families this year, holiday meals, gift-giving, and so much more, but have you ever considered giving a gift to your tenants? One landlord comes to us within today’s forum quorum. This one comes to us from the landlord subreddit and reads as follows. I started my first rental in June. Our tenant has been pretty much hassle-free since then, even with coronavirus, they always pay their rent two to three days early. Any thoughts on getting them a gift card to Uber eats door dash, et cetera, the amount can be or whatever, as a small thank you for being good tenants.
Andrew Schultz: (12:35)
So I guess I’ll start this by saying, this is a lot different scenario than the first charity that we talked about back in episode three 38, if you haven’t had a chance to listen to that episode, yet you might want to pop over and listen to that two very interesting take where a landlord was essentially trying to force tenants into, uh, donating a month’s rent to the charity of the landlord’s choice. The landlord got to veto. If he didn’t like the charity, this is obviously a lot different scenario than that. So you might want to check that episode out as well, back to the matter at hand. However, I can tell you that we typically don’t give out any sort of a gift to our tenants at Christmas, whether it be a gift card or a discount on rent or anything like that, we just don’t do it.
Andrew Schultz: (13:15)
It’s outside of the scope of the things that we do in our business. We tend to keep our business business-oriented and try not to blur the lines between business and personal. Whenever it’s possible. That being said, I’m about to completely contradict myself in saying that whenever we hear that a tenant is having a unique situation, someone in the family is sick. Someone had a baby, um, something along those lines, a major life event. We will typically send a card to the tenant and let them know, Hey, we heard that you know, X is happening, hope that you get better soon, or, you know, Hey, I heard you just had a new baby, congratulations on the new life that you brought into the world. Like that completely contradictory to my no gifts thing. But I think it’s important to at least acknowledge the fact to tenants, that we do see them as people and not just as a source of revenue.
Andrew Schultz: (14:04)
Also, something to consider might be the scalability of something like this. It might be one situation. If you have, you know, one, two, three, a small number of units, but if your unit, your unit count starts to grow, this could very easily become unscalable for the average property owner. So that’s something to keep in mind as well. Is, is this something that you’re going to be able to continue to do into the future if it becomes an expectation or something along those lines? Uh, and since I’ve mentioned the expectations, I guess that warrants bringing up the point of, are you now creating an expectation from your tenant? Oh, I get a $50 gift card from my landlord every year for Christmas. And then suddenly you stop doing that. Is that going to change the way that your tenant looks at you because you skipped out on, on a $50 gift card?
Andrew Schultz: (14:49)
So there’s always these little that you don’t think about that completely changed the dynamic of your landlord-tenant relationship. So it’s definitely something to think about before you go ahead and issue out some sort of a gift to a tenant. So let’s talk about what you can do. If you decide you want to move forward and give a gift to a tenant. Uh, I did a little bit of research on gift-giving, uh, from businesses to people on the IRS website. And there is a maximum deduction of $25 per person per year when it comes to gifting. Um, so if you were to give somebody a gift, the maximum amount that you would be able to deduct for that gift is $25. So if you were to buy, say a $50 gift card to a restaurant, you would only be able to deduct $25 of that gift card.
Andrew Schultz: (15:33)
So that might be something that you want to keep in mind as well. One recommendation that I would have in a situation like this would be rather than giving the tenant a gift directly or knocking a little bit off the rent, ask the tenant. If there’s something in the house that is an annoyance or something that could be improved to make their living experience a little bit easier. So for instance, a couple of good examples of this could be maybe it gets particularly hot in the bedroom and they want to swap the light fixture for a ceiling fan. Well, okay. A ceiling fan is not going to set you back that much as the housing provider, and it’s going to provide the tenant a better living experience, which might lead them to stay a little bit longer. So for a couple hundred dollars for a ceiling fan, you might be able to improve that tenant’s living experience and it’s improving your property.
Andrew Schultz: (16:19)
Another good example is in a kitchen, we’re seeing a lot of housing providers will swap out just the basic outlets for an outlet that has a USB charging port on it. That’s a really great idea, especially in a kitchen where you have countertops, people are setting their phones down, having the ability for a tenant to charge without having to run around and find their charger. That’s kind of a neat concept. So that’s another very inexpensive upgrade that would benefit both the tenant while they’re living there and the housing provider in the form of an upgrade to their unit. So that might be a situation that works a little bit better for you. There’s generally not going to be a limit to the deduction in that instance. So if you wanted to deduct the entire amount of the ceiling fan install or the outlet swap or whatever you would be able to, you’re also getting the benefit of improving the unit and the tenant is getting that added benefit of whatever the improvement is in the property.
Andrew Schultz: (17:06)
You don’t even have to tie this to a holiday. You know, sometimes this is best tied to something like our lease renewal. When you approach a tenant and say, okay, well I have to increase your rent by, you know, $50 a month this year or something like that. You might be able to say, look, I have to increase your rent by $50 a month because the property taxes are going up, but I’d like to do something to make the property a little bit nicer for you. And it kind of lessens the blow a little bit. So that’s definitely something that you could consider as well. Uh, I don’t know, as though I would necessarily go out and grab gift cards for all of my tenants, but if there’s a way that I could improve the property such that it’s to everyone’s benefit, that would probably be the route that I would go in a circumstance like this.
Andrew Schultz: (17:46)
But what are your thoughts? Have you guys ever issued gifts out to tenants? Whether it be something physical or just a discount on the rent or something like that. We’d love to hear from you drop us a comment over at ownedbuffalo.com, right on the comment form. There, we do check that every day and we’d be interested to hear what you guys have to say. That pretty much wraps up 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, you can help us to reach that 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.
Andrew Schultz: (18:24)
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 ownbuffalo, as well as the other projects that we’re working on. There’s also a contact form over ownedbuffalo.com, where you can send me a message directly. 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. If you’re over 50 doors, ask about the enterprise-level programs and pricing. We’ve been enterprise users 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 next Thursday with an all-new episode that you won’t want to miss until then I’m Andrew Schultz with ownbuffalo.com for rentprep.com. And we’ll talk to you next week.