Tenant Payments Now

It surprises me how many property management companies and landlords rely on antiquated methods of payment from tenants.  No, I'm not referring to barter or payment in gold...I'm talking about personal checks!  Why in this age of 'instant' payment we are still using something so fraught with danger (including fraud) is beyond me.

One of the most common reasons cited is cost.  However, with numerous competitors in the marketplace, this excuse is simply not true anymore.  Companies such as TenantPlus offer electronic payment for .65% of the rent amount.  Others, like Buildium include payment services as part of an overall online services package.


I'd be interested in hearing from anyone that has had less-than-desireable results with electronic payments.  Because, as of yet, if there is a downside, I don't see it....
But I can be wrong once in awhile...just ask my wife!

Maximizing Your Rental Deductions

With tax season upon us, your non-owner-occupied rental property can be used to greatly enhance your deductions and maximize your return.  As always, consult your accountant first, preferably one familiar with real estate investments.  Remember, as a landlord you are a business owner and should treat it as such; so there are a few things you'll need to get the most benefit.


1. Keep all receipts from expenses accrued relating to rental property as well as any canceled checks from your tenant.  You'll also need a copy of your lease agreement.


2. Report any interest relating to the rental property. Interest can even be associated with credit cards used for repairs to the property and, of course, loans used for the rental, whether to purchase or repair.


3. Report any income from the rental property and any expenses accrued from the rental property on Schedule E of Form 1040. Report all expenses related to the rental property, including repairs, property taxes, depreciation and mortgage interest.  Don't forget insurance premiums too!


4. Report any fees accrued through legal services or other professionals that pertain to the rental property. Attorney fees to draw up lease agreements and expenses from any repair contractors are also tax-deductible.  Costs of any and all repairs and upgrades performed on the property are fully deductible the same year they are executed.


5. You can deduct any travel, gas, and wear and tear on your vehicle that was used as a result of responding to a tenant's request OR accrued as a result of errands relating to the rental property.

6. Finally, report any costs related to a home office used in conducting your rental business.  For example, report costs of a fax machine, computer, or other office expenses.

The bottom line is most of your real estate related expenses are deductible.  My recommendation, log ALL of your expenses and let your CPA tell you what is and is not a deduction.

Why Tenants Love to Hate Management Companies

Unfortunately property management can be a thankless job, where tenants are hyper-sensitive to mistakes and often resent the enforcer aspect of the management company’s role. Obviously, not all tenant/property manager relations are like this, but it isn’t uncommon either.  Here’s my breakdown of what makes this industry unique in garnering so much negativity.

The single biggest reason for low reviews from tenants is that the management company acts as an enforcer to uphold the interests of the landlord. This tension lies behind about 75% of the negative reviews. Granted, the complaints tend to deal with surface issues, but this enforcement dynamic in the relationship is a root cause for bad blood between tenants and management companies. In this respect, property management has something in common with professions like police officer, tax collector, prison guard, prosecutor, repo man, etc., which all have significant enforcement roles and suffer from the same negative sentiment.

This negative perception of the MC as an enforcer is amplified when it is the only frame of reference tenants have. Because much of rental housing is treated like a commodity (renters shop primarily on price) margins are low, leaving little room for the kinds of extra services that create a positive impression and relationship. This means that tenant interaction is limited to paying bills, trying to get broken things fixed, or reporting other problems, which isn’t exactly the foundation for a glowing relationship.

Together, these factors have a negative impact on both tenant AND management behavior making it easier to find fault than solutions. Constructive dialogue is quickly replaced with a willingness to jump to conclusions and demonize the actions of the other party. Once an “us against them” mentality takes hold, it isn’t long before the tenant views himself as the little guy “fighting the man” in a crusade against landlord tyranny. The flip-side is the property manager who feels totally unappreciated and is tired of getting dumped on resulting in cold or overly heavy handed in dealings with tenants.

All these emotions are amplified by the fact that people’s homes are an important part of their security causing strong reactions to any perceived threat.

Again, my goal is not to label one side as being primarily responsible. We can all recognize that there are bad tenants that don’t pay rent, as well as negligent management companies that fail in their responsibilities. My point is that the inherent dynamics of the tenant/manager relationship lend themselves to strife.

Is it fair? No, but does that really matter?

Clearly, tenants are not in a position to tell owners who they should hire, and yet their reviews can affect the reputation of the management companies and influence client perceptions.  While this can be a bitter pill to swallow, it’s imperative that you embrace the fact that you’re not in control of what is said about you online.

As consumers are empowered by review sites and social networks to share their experiences, businesses of all types are becoming acutely aware of the need for online reputation management.

Who is talking about you, what are they saying, and how should you respond?  Important items to consider.  I'll cover more on this in the future.

Facebooking Your Tenants

A great way to screen your prospective tenants is to "find" them on Facebook.  Not every person on Facebook makes their "Wall" public; however, with the ones that are, you can derive a treasure of information.  Many times, an individual will be very open with their information, such as "I just got evicted from my rental" or "We just got foreclosed and need a place FAST!"


This also works with existing tenants.  For example, a friend of mine noticed a post from one of his tenants stating that they were moving to Oregon in March.  This was a shock to the landlord because their lease is through June!


Social networking has become a public confessional for many and it can be a "non-invasive" way to discover who your tenants REALLY are.  Find 'em on social networks.  It may give your tenant a different "Face" than the one they're showing you!