How to get/keep good tenants

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Below is a typical question we receive from a landlord & so I thought it better to write a proper response, for the benefit of all owners.

I personally have a large property portfolio myself, have been managing rental apartments for more than 17 years & running a respected property business in Brasov & Bucharest since 2007. These are my views. Controversial maybe, but its a proven system that works.

As an owner of a property, you are basically managing an asset. In my case, its mostly the banks assett, with me keeping the capital growth part when I eventually sell, pay my taxes & repay the mortgage. The growth, especailly these days, is not necessarily massive & you can find yourself managing an asset for 5 years, selling up & coming away with nothing if you waste the income or don’t collect it. All you have then is 5 years of hard work & stress, with no reward for the stress. Therefore, you must do your best to get the most from the property.

On one hand, you ‘must’ keep it working, functional, desirable, rented, legal & not be exposed to blackmail by the tenant, & on the other, you cant waste money on things that don’t add to the above ‘musts’ & you also need to ensure you get as much of your rent as possible.

In Romania of all places, you really need to keep on top of a rented property, continually, without being annoying, as there is an entrenched national culture by some people of not respecting debts where possible. Soft debts, such as money owed to ‘friendly’ people such as some landlords, friends, relatives etc are the first casualties when money is in short supply (as is often the case here for many of course) whereas hard debts, such as to the bank, police fines, car maintenance etc receive a whole different level of respect despite the same hardships in obtaining the money.

At White Mountain, our job is to ensure your due rent does not become a soft debt, whilst still maintaining an excellent relationship with the tenant, in order for them never to wish to leave.

So, to answer the question posed in an email to me:

Buna ziua as dori sa stiu daca pot apela la serviciile DV. ptr. administrare (management) al unui apartament. As vrea sa stiu; / Hello I would like to know if I can use the services of your administration (management) of an apartment. I want to know;

Question 1. cum selectati un chirias, ca sa nu fie probleme pe durata de inchiriere? / how do you select a tenant, so as not to be problems during the rental?

Answer:

Firstly, instinct is everything. In the same way you would not choose a life or travel partner if 1st impressions were wrong, so too, you should never let your property be in their care if you have doubts. Secondly though, we obtain professional sponsors or referees from them, eg accountant, banker etc from people that they need to maintain a good relationship with. Any relationship, including the one between you & a freind can turn bad in an instant. You cannot usually win 100% by being aggressive or outsmarting them. Even if you win a bar fight outright, you dont feel comfortable drinking there next time, so winning in that way is always going to bring sleepless nights.

When the relationship fails & your are exposed, eg they have control of your property, or simply that you need your apartment back, or want to rent it for a higher sum to a more premium type of tenant, you have to basically treat it very gently & step carefully. Obey the rules & laws, give the correct notice period, do things in writing, firmly & gently. Even of you think they are the worst tenants on the planet. Wait until they have left to tell them! Telling them ahead of that might make you feel better but they only have to put sand in the washing machine, or crack the bathtub, & you will pay many times over.

We have procedures that we use to follow the rule book, but we try never to use them. I have personally drilled locks out & thrown tenants belongings into the hallway when they really abuse their position & I would do it again in an instant, but if a relationship has gone that far, you probably did not address it cleanly & robsutly when the problems became apparent. As a fallback, we try to have the up to date contacts for the tenants referees, who should by definition, be important relationships that the tenant does doe want to ruin by us calling to explain our experiences.

Question 2.In cit timp se poate gasi un chirias (ca sa nu tin apartamentul gol si sa minimalizez pierderile) ? In how long can I find a tenant (not to keep the apartment empty and minimize losses)?

Answer

It really depends on what you give us to work with. If the apartment is in a poor location, run down, smelly, bad area, poor access roads, poor quality fittings or the rent is too high, or your demands are too high in the contract, it will remain empty for tens of years. Some landlords insist on 6 months rent up front. The don’t suffer tenant problems as they have none to worry about sadly.

Understand 3 critical points as an owner. every empty month, looked at it over a one year window is THE SAME as an 8% rent reduction. 3 months empty = 25% reduction!

So, asking 500e for a flat that is barely worth that will definately take 3-6 months to fill. Drop it by 25% to 375 from 500 & it will go in days! The happy medium, is somewhere in the middle, 425-450 say. Don’t aim for peak values, or you will wait at least, normal waiting periods of 3-6 monts if not longer, AND you will have a tenant who resents you becuase he & all his colleagues know, he is paying top dollar! If its worth 475, ask 425-450, not 500! Keep below the radar & in the long game, 60-100 months, you will be significantly less stressed & better off that the person that seeks top rent all the time.

A study was done recently where 10 people in the USA were given big-game football tickets as gifts in an experiment on perceived value & then asked what price they would sell them for. All ten said they wanted 100 or more dollars to let them go, as it was a critical game. Then 10 different fans were separately asked what they would pay for a ticket. All said ten to twenty dollars, not more. Recognise this. You may be certain your ‘ticket’ is worth xyz but is only worth what someone else will pay for it. Perceived value often differs between buyer & seller. Only when a compromise by both parties is made does it become possible to have a trade.

Lastly, you might think your apartment is simply incredible if the viewer simply ignores factors a, b, c & d, but no tenant is emotionally attached the way you are, nor is he going to make allowances for things that are not as they should be. They don’t own it, so they won’t feel in any way bonded to it. in fact, they very definitely know they will never own it as you do & that will be clearly highlighted in their mind. Be prepared for that mentally, so it does not stress you when they ask you to fix say, a washing machine, or replace the shower. They are probably only asking because it needs doing.

3. Ce mijloace folositi pentru cautarea rapida a unui chirias serios, de incredere? / 3. What means used to dial a tenant looking for serious, reliable.

We spend time talking to tenants to get to know them. We try to locate prevous landlords as well as professional referees. We are not afraid of turning tenants away if we cant help them. 2 examples: the financial director of a large local music club refused to give me a referee, stating that everyone knew him & I should trust his word. I sent him away empty handed. Another wanted to pay 3 months in advance but his referee, supposedly his accountnant, could not tell me his last name, nor his business address.I sent him away empty handed. Dont forget, very often it is us who have to manage the mess after the tenancy agreement is written so it is important to us we do not create problems from the start for ourself. We want good tenants just as much as you, or more.

4. Ce masuri se iau daca chiriasul nu plateste? / What happens if the tenant does not pay.

Answer:

Early detection of this is key. Already, we know about the tenant’s manerisms frm the start, but we also monitor, every month, utility bills, administration bills & of course rent payments. Constant & gentle pressure, just like door-security at a disco. They aren’t there to fight. They are there to stop fights. So are we. Constant gentle pressure is key. detached, professional, fair, but firm & continuous. The tenant is a valuable asset to you & needs treating with care & respect, but he has responsibilities to you also. That is the bulk of our job. Managing that relationship. You will from time to time, lose some rent. Its a fact of renting. Factor it in. It might be 2 months in 3 years, but it will happen. Better to detect it early, move the tenant out as gently as possible, using whatever explanation gives the quickest result, get past it & start again. Spending a fortune with lawyers chasing 1000e in lost rent will cost you dearly in stress, anxiety & non-returnable loss of time. This is why continuous management is so key, to detect problems & resolve rapidly, if required.

5. Cum se procedeaza ca sa nu fie incasata intretinerea marita ptr apatrament daca chiriasul pleaca? (apt locuit s-au nelocuit) ? / How do you prevent me not incurring maintenance or repair costs if the tenant leaves (apt becomes uninhabited) ?

Answer:

See 4. Contact monitoring of bills. Periodic property inspections also to ensure the property is being treated properly. The very knowledge of this process tends to have an impact on usage patterns.

6. Cum se procedeaza cu plata . ( Ptr. comisionul dv., cum sint platita eu, taxe,..apa, elecrticitate, intretinere, (ce alte cheltuieli am omis?) As vrea sa imi fac o imagine clara a oricarei situatii posibile, ca sa nu apara neintelegeri. Aveti un formular ptr toate cele mentionate mai sus.? Aveti experienta? Ce puteti sa imi spuneti din experienta DV ? / How do you proceed with money matters. (your commission, how I am paid, taxes,water , elecrticity, maintenance, anything else I have omitted?) I want to dome a clear picture of any situation possible, so as not to have misunderstandings. Do you have a formula for all of the above.? can you speak from experience?

Answer:

Simple, we charge 10% of the rent for basic cover, & slightly more (negotiable) for more intensive management. Anything non standard, we simply charge 15 euros per hour. So, an insurance claim, paying your rental income taxes etc, we charge by the time taken. If you have ever carried out such duties yourself, you will know that it can be a very cost effective alternative. Working with state offices & utility companies can, not always, bring you to your knees with needless bureaucratic restrictions. In terms of bills, we ensure the tenant pays all he should. When empty, we make sure they all get paid on time & we will get that back from the owner. Sometimes the tenant pays the owner directly, other times they pay us & we pass it on to the owner in a variety of ways.

But, from my experience, owners rarely need more than 2 to 10 hours in the most complex cases. Some need none at all if they are lucky to have got everything right at the start, or bought a perfect property ready for use. Most properties seem to go through a difficult patch sooner rather than later in the ownership period. It might be at the furnishing stage, if might be a hard winter when all the weak points show themselves & you need to change a boiler (800 euros!), it might be a roof leak that finally becomes unacceptable, or damp etc. But everyone goes through that & once its resolved, it could be 6-10 years before you need non standard intervention again.

 

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