Archive for the 'Tenants' Category

Don’t Be Afraid To Put Minnesota Tenants Out In The Cold

said on February 7th, 2014 categorized under: Tenants

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There are a lot of misconceptions about investment property ownership in Minnesota.

The two that I hear most often, however, are that a landlord must give a tenant 24 hours notice before entering their unit, and a tenant cannot be evicted in the winter for non-payment of rent.

It is easy to trace the origins of the latter. In Minnesota, the Cold Weather Rule applies to utilities. While it does not prohibit companies from shutting off a customer’s utilities for non-payment, they must reconnect any customer whose household income is at or below 60 percent of the state median income. (Governor Dayton increased the percentage from 50 to 60 percent on February 4, 2014.)

This law requires utility companies to be willing to enter in to payment plans with tenants.

It does not, however, apply to rent whatsoever.

As human beings, the thought of putting someone out in sub-zero temperatures is difficult for many of us. Sometimes tenants take advantage of that; going all winter without paying rent.

Remember, we are running a business; one many of us hope will fund our retirement. A business can only suffer losses for so long, or it ceases to exist.

Of course, if you live somewhere other than Minnesota, be sure to check your local laws and regulations regarding winter evictions.

How To Never Evict Duplex Tenant

said on November 4th, 2013 categorized under: Tenants

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Eviction Notice on DoorWhat is the easiest way to never have to evict a tenant from your duplex?

Screen them thoroughly before you let them move in.

If you’re new to rental property ownership, it may seem like a good credit score is enough to prevent getting stiffed on rent. But that’s just the beginning.

According to the Minnesota Multi Housing Association (MMHA), you should write down your screening criteria before you ever take tenant rental applications. This sets an objective set of criteria which a tenant must adhere to, which may be referred to when declining an applicant.

In your written criteria, you should consider including:

  • Credit: If someone doesn’t pay their other bills, what makes you think they’ll pay you? People who don’t pay their credit cards, make their car payments or cover other bills should be avoided.
  • Rental History: Call the applicants previous landlords; not just the last one, but the one before that. If yoCriu choose to use a screening service, ask them to investigate whether a tenant has previously been evicted. After all, the tenant is likely to treat you the same way.
  • Income: It’s clearly a good idea for a prospective tenant to have a job if you expect them to pay you on time.  A good guideline is to require an income of 2.5 to 3.0 times the amount of monthly rent.
  • Criminal Record: You should always check criminal background records everywhere a prospective tenant has lived. Be sure to pay a bit extra to drill down to records on the county-level, which generally include lesser charges of the type that may impact the living environment of your property.

Nobody likes the expense of having a vacant unit. However, taking a little bit of extra time to make sure you get the right tenant may save you more money and heartache in the  long run.

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Beautiful view of the duplex porch.Do you ever hear about something so often in such a short period of time that before long, you’re pretty sure the universe is trying to tell you something?

That’s the case for me, as a number of clients have recently shared stories of renting their investment properties to non-traditional tenants.

What’s so unusual about their tenants?

They typically don’t stay very long.

While it may be difficult to imagine anybody ever thinking of your duplex as a vacation getaway like a cabin in the Smokies, thanks to web sites like Flipkey.com, Homeaway.com and vrbo.com, it’s now possible. And investors are receiving rents for their furnished properties roughly twice the market average for a traditional tenant.

These tenants range from people looking for a weekend getaway to those who are here for several months on a work assignment.

In exchange for an annual advertising fee (usually starting around $300), these websites allow you to feature a dozen or more photos of your property, describe its amenities, the amount of nightly, weekly or monthly rent, as well as offer a calendar of availability.

To reserve the property, the prospective tenant contacts the owner directly, who may accept payment via credit cards or Paypal. Fees may not only include rent, but a security deposit and cleaning charge has well.

Owners having success with this new way of maximizing cash flow tell me a number of things are critical to ensure success. A property must be:

  • Clean
  • Freshly painted
  • Well staged with quality furnishings and linens.
  • Well photographed. Just like listing a duplex for sale, photos must jump out at online viewers, who are making their decision to stay at the property almost entirely on what they see on the Internet.
  • Well reviewed. While properties new to this program may not yet have reviews, pleasant stays make for better reviews, which ultimately makes the property more appealing to future visitors.

While this appears to be a great way of maximizing return on your investment, it’s important to note owning extended stay rentals does have some down sides. For example, if you’re in a seasonal climate where it snows, bookings may be sparse over the cold winter months. Also, due to the more transient nature of the tenants, you will be faced with cleaning, as well as washing sheets and towels after every guest departs.

Finally, while this may, on the surface, look more like a hotel than a traditional rental property, many cities (including Minneapolis) nonetheless require the property owner to have a valid rental license.

Why Being A Minneapolis Landlord Is A Bad Way To Get Dates

said on July 16th, 2012 categorized under: Tenants

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post it noteA client recently had a vacancy in his Minneapolis duplex.

He ran a Craigslist ad, and when an attractive young woman showed up to look at the unit, he asked her out on a date.

As a woman, I have to tell you, his actions felt creepy; so much so, in fact, that I stopped to re-read the federal Fair Housing Act, as well as any state and local anti-discrimination acts.

While the Fair Housing Act prohibits discrimination against tenants on the basis of their sex, it does not clearly prohibit landlord sexual harassment of tenants.

Is asking a prospective tenant out on a date sexual harassment?

It’s a matter of personal interpretation.

According to the Equal Employment Opportunity Commission, sexual harassment  can take two forms:

Quid Pro Quo sexual harassment – This occurs when the conditions or terms of a tenant’s residency are contingent upon sexual favors. For example, a landlord won’t make a repair unless a sexual favor is granted.

Hostile Environment – This occurs when there are constant verbal or physical advances by the landlord, or unwelcome sexual advances.

In order to prove sexual harassment, the tenant must prove the landlord intended to discriminate against her. The landlord may be able to rebut this claim by providing a legitimate, nondiscriminatory reason for the action taken (not renting to someone, not making a repair, etc.)

Next, the tenant must prove the advances were unwanted or unwelcome. Finally, the tenant must prove the landlord is liable for these actions.

If a tenant decides to pursue a federal claim against the duplex owner, they can file a claim with HUD. If the tenant prevails, they may win civil penalties of up to $10,000 for a first-time offender.

The tenant may also file a lawsuit against the offending  landlord, which may result in punitive damages and the recovery of attorney’s fees.

While asking a prospective tenant may or may not be sexual harassment, it’s always best to steer clear of any situation which may be considered discriminatory.

Duplex Owners Can Let The Meter Run

said on January 24th, 2011 categorized under: Tenants

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Electric Power MeterThere are two types of duplexes; those where the tenants pay the utilities and those where the landlord does.

And because two comparable properties cash flow differently because of the expenses, each, of course, has a different value.

Many times the reason a duplex owner pays for all of the electric or gas in a building is because of the expense of having separate meters installed, not to mention the considerable cost of installing a second boiler, furnace or water meter.

What can a landlord do if she would like to increase her cash flow but doesn’t have a chunk of change to perform all the utility separations?

Bill the tenants.

In order to do so, the landlord must first provide prospective tenants with a notice of the total utility bills for the year on a month by month basis.

Next, she must have a fair way to split the bills and invoice the tenants. The Minneapolis duplex investors I know who do this usually divide it up proportionately according to the tenant’s share of the total finished square feet of the building. Regardless of the method, however, it must be detailed in the lease.

While it isn’t required, most landlords include a copy of the utility bill. However, the landlord must be willing to provide these bills if the tenant asks.

Billing tenants for utilities also triggers one more requirement. By September 30 of each year, a landlord who bills for utilities on a single-metered building most let tenants know in writing that there may be low-income energy assistance programs available. This written notice needs to include the phone number for that program.

Of course, the landlord doesn’t determine how tenants within the unit split a utility bill among themselves.

It’s important to note that under this rule, a landlord who causes the interruption of utility services may be required to pay tenants triple the amount of damage the interruption caused or $500, whichever is greater, as well as attorneys fees.

Minnesota Duplex Owners Face January Deadline

said on January 10th, 2011 categorized under: Tenants

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Vector Ornate Certificate TemplateIt’s January in Minnesota. If you’re a duplex landlord, you know what that means.

Time to fill out your Certificates of Rent Paid(CRPs).

The state of Minnesota requires anyone who was a landlord in 2010 to fill out a CRP for the amount of time he or she owned the rental property.

And no, these aren’t formal certificates. Rather, they’re a form the state of Minnesota requires investment property owners to fill out.

It can be found here.

Owners should give one CRP to any married couple, and invididual forms to any adult, unmarried tenant.

If two or more unmarried adults shared a unit, take the total amount of rent they paid for the year, and divide it by the number of adults living there; regardless of how much each of them paid.

Caretakers who received rent credit are entitled to a credit equal to the amount they would have paid in rent had they not exchanged labor and services for all or a portion of it.

Section 8 tenants are given credit only for the amount of the rent they personally paid; not the amount subsidized by the government.

It’s important to remember you should also in your calculations any rent a tenant paid for a storage space, garage or parking space. However, you should not include damage deposits, late fees or delinquent rent.

CRPs must be mailed by January 31, 2011, so we procrastinators still have a little bit of time.

Of course, the rest of you probably already have yours done!

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Full sack locked by gold lockThe other day a tenant asked me if the duplex owner would be refunding her damage deposit before the property sold.

Shortly thereafter, a seller asked if he would need to do the same.

The answer in both cases is “no”.

Most real estate investment agents include an addendum to any purchase agreement that asks for any damage deposits and interest they’ve accrued to be assigned to the buyer at closing. In addition, the addendum should include language that assigns the leases to the buyer at closing.

The seller is also not allowed to make any deductions for any damage the tenant may have already caused.

The reasons for this are simple. The tenant is protected by the lease, which survives the sale. Any transfer of a security deposit prior to the end of that lease is a recipe for drama.

For example, what if the seller gives the tenant her money, and she never gives you a deposit? How long will it take to evict her? How will you pay for any damages the property suffers?

What if there never was a damage deposit at all?

And from the tenant’s perspective, what if the seller decides to withhold the entire deposit because of perceived damages that may or may not be there; leaving both you and the tenant in a financial hole?

A properly drafted purchase agreement signed by both the seller and buyer is a legally binding contract and when it comes to leases and security deposits, ensures the protection of everyone involved.

Can You Rent Your Short Sale Duplex?

said on November 18th, 2010 categorized under: Short Sales/Foreclosure, Tenants

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for rentThe other night I stopped by a Minneapolis duplex to see if I could help the owner avoid the potential credit and tax consequences of foreclosure.

Guess what I saw in the front yard?

A “For Rent” sign.

Mind you, the sheriff’s sale has already happened on the property; meaning the owner has six months or less to either redeem the loan or lose it to the bank.

And the owner is within his rights to collect rent (unless the lender has told him otherwise).

But if you were a tenant and knew the duplex was in foreclosure, would you want to move in? If so, would you expect a discount on the rent?

Perhaps the owner simply planned not to tell them.

Trouble is, Minnesota state law requires him to.

A duplex owner in foreclosure must notify a prospective tenant, in writing, not only that the building is in foreclosure, but also the date the redemption period ends.

What’s more, the owner cannot lawfully sign a lease that extends beyond that redemption period.

So what’s the worst that can happen? After the bank reposses the duplex, the tenant can sue the landlord; not only for rent, but also for defending against an eviction case brought by the bank.

Seems to me like this guy’s got enough trouble already.

Have You Increased Your Duplex Cash Flow Lately?

said on October 21st, 2010 categorized under: Tenants

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Water tap dripping dollar bills, Water waste conceptLast night I spoke a with a long-term duplex owner struggling to decide whether or not he should sell.

His property has a positive cash flow every month, but with children and a house miles away, he no longer wants to be a landlord.

He also knows his duplex is no longer worth what it once was. Knowing that, he grudgingly leaned toward keeping it.

I asked him what his decision would be if he had a better cash flow.

His mood and his position quickly brightened.  The answer was easy. He’d keep the duplex.

I reminded him there might be ways to do just that; by reviewing the property’s expenses.

I asked if he’d shopped his insurance rates lately. No.

Had he reviewed the water bill? Installed low flow toilets or water-saving shower heads? No.

Had he increased the fees for laundry by 25 cents a load? No.

Had he passed on any rental increases? No. He was afraid his tenants would leave if he increased the rent.

I asked whether he thought they’d rent a truck and bother their friends for help moving heavy furniture over $10-25 a month. He didn’t think so.

By the end of our conversation we’d found ways to increase his cash flow by more than $100 a month.

He still didn’t want to be a landlord, but the raise in pay helped ease his pain.

Get Out More Than You Put In To Your Minneapolis Duplex

said on October 14th, 2010 categorized under: Tenants

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Granite CountertopI have a client who insists on putting granite counters in the kitchens of every duplex she buys.

She argues that upgrade is why her properties stay rented.

She may be right.

Most of us would agree that many of the foreclosed and short sale duplexes on the market today are in need of a face lift. But when looking at them for rehab and rental, it’s important to keep in mind the return you may or may not get on your improvements.

For example, will granite countertops mean you can charge $50 more a month in rent? Or will they just help you avoid vacancies?

And if they will generate more income, how long will it take you to recoup the cost of the improvement? For example, if the granite counter tops cost $500 to install, and they result in $50/month more in rent, they’ll have paid for themselves in 10 months.

But will granite countertops generate more income? Or would your rehab dollars be better spent fencing the back yard or installing an air conditioner?

That’s why it’s important to know who your prospective tenant is, and to consider what’s important to them when making your decisions.

My clients properties are in an outer ring, affluent suburb with a highly respected school system. They are all three bedroom units, so her typical tenants are likely to be a families with children.

While a fenced back yard might be enormously appealing, I should also share that while this suburb has very few duplexes, most of them are within a two block radius of one another.

A granite counter top may help distinguish her property from the competition. But is it worth $50 more a month in rent? Or would a fenced back yard bring a better return?

The neighborhood will decide. So too will yours. Consider its personality when you’re fixing up your duplex. Not only will it save you money at the Home Depot checkout, it will help you make more on the first of every month when rent comes due.