Re-positioning Properties – Part 2
ISSUE #3 – Lack of routine maintenance
Lack of response to tenant requests of routine maintenance is the number one reason for turnover and vacancy. This obviously results in negative cash flow which contributes to underperformance.
This issue is very easy and inexpensive to correct. Hiring a caretaker instead of a property manager who has handyman skills
allows payment of an hourly wage instead of an overall percentage rate and “padded” repair costs.
A caretaker can show units, perform tenant interviews, enforce leases, collect rents, deal with tenant issues and repairs as
well as oversee more significant repairs to ensure they are done satisfactorily in terms of budget, schedule and quality workmanship,
especially if you are an absentee owner.
It is also important to ask tenants to get a repair request sheet which forces the tenant to document each repair and creates a paper
trail. This helps avoid any hearsay if an issue arises and gives the landlord incentive to get the repairs done within a reasonable amount
of time. This goes a long way in creating long-term tenants, which in turn creates an efficient property.
ISSUE #4 – Letting properties get rundown by neglecting routine maintenance
The properties being referred to are neighbourhood eyesores. Common characteristics are unkempt landscaping, clearly visible overdue repairs to even a makeshift car (or appliance) repair/storage
facility on the driveway (or front lawn).
Not only does the incompetent investor have an undesirable looking property, but probably thousands of dollars of renovations.
These properties ultimately attract the type of tenant that nobody desires.
The good news is they can often be purchased for great deals and turned around into highly functioning properties with good
tenants and great cash flow. To understand if it is worthwhile to get involved in such a project, it is important to ask yourself the
• Is this an ugly property in a good area?
• Are the repairs required cosmetic?
• How much will the repairs cost?
• If I do repair the property, will I be able to raise the rents enough to offset the costs?
• At the proposed new rental amount, how long will it take to retrieve my capital expenditure?
• If I do the repairs and raise the rents accordingly, will the property attract the type of tenant who wants to live in the
neighbourhood and can afford the “new” rental amount?
ISSUE #5 – Not taking initiative in your eviction process
An incompetent owner who allows delinquent rent to perpetuate for months or is not familiar with the landlord/tenant guidelines can create an inefficient property producing negative cash flow and tenants who often take over the property.
These owners can be very accommodating when it comes to negotiation for purchase as they are often looking to get out fast.
Properties do not have to be in a bad area to get to this state, they simply have an inexperienced or neglectful landlord.
By demanding vacant possession, doing the necessary repairs and creating a new tenant base, these properties can be turned into gems.
ISSUE #6 – Records Mismanagement
Poor record keeping of rental income, repairs, employee payments, property management documents and even a lack of formal lease agreements can “catch up” and are signs of an incompetent owner. It is surprising the number of owners who run their business with cash and little documentation. This type of owner eventually must “wake up and smell the taxman”. A business can only survive like this for so long before the owner must change their ways or sell.
If you’d like more info, to find out about training/coaching or to learn about how you can participate in cash flow real estate which provide above average returns, schedule a free 15 minute call by filling out the form below. And we assure you, no pressure or sales will accompany the call. Look forward to speaking with you!