Keep Your Tenants, Keep Your Profits!

Finding great people to live in your house or apartments is critical for on-time payments, someone who takes care of your asset instead of destroying it, and having peace of mind as a landlord. So how do you keep these people, year after year after year? We know of one property manager whose average tenant stays 4.5 years!

Wow! How Much Can You Save?

Can you imagine the cost savings? If your average tenant stays 1.5 years, let’s look at the turnover cost over 4.5 years on a unit that rents for $1,000 per month.

Lost Rent 1 Month @ $1,000 Rent-ready costs (not covered by deposit) 250 Advertising, signage, etc. 50 Total Cost every 1.5 years $1,500 x 3 Total Cost Over 4.5 years $4,500

If you can get your turnover rate from 1.5 years to 4.5 years, you save $3,000 or $1,000 every year! If your cash flow is $200 per month, you just saved almost half of your cash! So, how do you keep these great tenants that you found and put into your properties? Let’s look at a few simple ideas.

Basic Tenant Retention Strategies

Treat Your Tenants Like Clients. They are your customers and should be treated as such. Your goal should be that your tenant feels good about your property and their relationship with you as a landlord. Good customer service includes:

Polite communications. Even for late fees, 3 day pay or vacates, etc. Most tenants will pay what they owe, so communicate politely and professionally.

Accurate billing and statements. A confused tenant will not feel good about paying anything. Would you?

Rewards for Good Behaviors- Provide a discount for on-time payments instead of a late fee for late payments, give a rent rebate for referrals to other properties you own, and provide positive feedback on good property inspections. Why dwell on the 2-3 things that may need to be improved when there are 50 things that are well maintained and in great condition?

Reduced Rent Increases- The next time contract renewals come around, bring the tenant’s on-time payment record with you. Talk to them about the “regular” rent increase rate and then reduce it based on their on-time record. Even consider NOT raising rents. Remember, it costs about 1.5x monthly rent if someone moves out! Is a 5% rent increase always worth the risk of a good tenant moving out?

Advanced Tenant Retention Strategies

Thank you gifts. Say “thank you” with a gift at the holidays or a birthday (you have their birthday from your application, right?) for your best tenants. Let them know that you appreciate them and they are one of your best tenants.

Tenant Rewards. Sign up for a tenant rewards service like blackledger.com to reward your tenants. The cost to you is minimal and your tenants win big.

“That’s it! I’ve had it! Let’s sell this place!”

It takes time, people skills, market knowledge and patience to be a good landlord. Sometimes it makes sense to own real estate, but you don’t want the hassle of being a landlord.

If that sounds like you, don’t call your real estate agent. Contact Clear Day Property Management instead. With a 94% occupancy rate for single family homes and an average turnover rate of 2.5 years (and climbing), they can take all of the hassle out of managing your property. Call them at 801.725.9044 and ask them how they can take the weight of property management off of your shoulders and put it onto theirs.

Are YOU an Investor or a Speculator?

Are you a real estate investor or a real estate speculator? What's the difference?!!?!How about a clear cut strategy, a set of goals, and a business plan on how to reach those goals?

When is a Strategy not a Strategy?

All too often when asked the question, “What’s your strategy with this property?” an investor will start talking about:

Repairs Paint FlooringUpdating

Landscaping HVACBathrooms Kitchens

These are short term tactics, not a strategy! These are the things that you need to do toget ready to execute your strategy! Here are some popular strategies:

• Fix-up and sell
• Long term financing and rent
• Lease option
• Long term financing with credit partner
• Pull out equity, create a cash reserve to cover negative cash flow, and then sell after one year to pay long-term capital gains tax
• Fix-up, move in for two years or more, and sell within five years to qualify for primary residence tax exemptions

Who Cares About "Tactics" vs. "Strategies?"

You should! All too often real estate "investors" are really "speculators," without a real game plan. A basic plan should be in writing and include some basics:

• Financial goals- long term, short term, annual, etc.
• Primary Investment Strategy
• See the list above for a start
• Backup plan if the primary strategy for a property is unsuccessful
• Ideal Property Profile
• Price range, including target discount below market
• Location, location, location
• Condition (new, touch-up, fix-up, major rehab, etc.)
• Key team members
• Title officer, appraiser, and inspector
• Real estate agent(s) & other property sources
• Long-term loan broker & short term loan sources
• Accountant, lawyer, and book keeper
• Contractors of all types

The Acid Test

How do you know that you have a business and are not just speculating? Well, can you sayyour business plan in 30 seconds or less if someone asks? For example,

"I invest in multi-family, residential housing in Webercounty for both cash flowand long-term capital gains.

I buy them in good condition for 90% or less of market value and then do everything I can to keep them occupiedand expenses down.

My goal is to have one new property every six monthsand I only sell properties if my business needs a cash infusion."

There is a BIG difference between Investors and Speculators. The biggest is that speculators loose money when the market changes, investors thrive!

OPM To the Next Level- Other People's Money is Just the Start!

Everyone knows about OPM- Other People's Money. If you are a professional real estate investor, you need to know about the other OPM- Other People's Minds!

Whether you are a brand new investor or a seasoned veteran about to retire, akey to success is knowing other people who can help you find, structure, finance, close, hold, and exit properties over and over again. Where can you go to find advice?  Of course, there are the usual suspects:

• Real Estate Brokers
• Loan Officers (Traditional)
• Loan Officers (Short-term)
• Contractors of all types
• Title Officers
• Property Managers
• Real Estate Lawyers
• Financial Consultants

These are all good sources, especially if you are their client!  The challenge is that their experience may be limited in scope to their area of expertise. Ideally, all of these people that you work with will be real estate investors themselves.

 

Give a Little, Get a Lot

Local real estate investment clubs are a great source of free or inexpensive advice.  Where else can you go to find dozens, maybe even hundreds, of other real estate investors who have understand the complete picture?!! Real estate investors are generally generous individuals and are willing to share with anyone who asks for help. 

 

What do they expect in return? Reciprocation.  Expect to give back through advice in your area of expertise, a lead on a good property that doesn’t fit your business model, or maybe just paying for lunch when you meet!

Here is the contact for a club thatt Clear Day Capital attends and supports:

Shawn Watkins  (801) 678-1901   investorsworkshops@comcast.net

Of course, real estate clubs can be found all over the country.  Find a state-by-state listing of clubs at http://www.reiclub.com/real-estate-clubs.php

OPM²

So what is OPM²?  Using other people money and minds!  The two together are a powerful combination.   Make sure that you are connecting with experienced real estate investors.  Your business will grow, and so will theirs!   

 

Reminders About Other People's Minds 

 

• Send an e-mail to Clear Day Capital.  We are all experienced investors and we would love to help you work out a deal or introduce you to someone who knows how to make things happen!
• Stay in touch!  We suggest e-mail and we use iContact.  It’s fast, it’s easy, it’s inexpensive.  Want a free trial?  Click here: Free 30-day iContact Trial