In the beginning, like many landlords, I was out on a financial limb buying my first multifamily building (a three unit rental property) and I was counting on every bit of that rent each month to pay the bills for that building. If a tenant didn’t pay on time, my main worry was just getting the rent – never mind a late fee. In fact, I was afraid that if I tried to charge the tenant a late fee that they might get mad at me. I had envisioned a domino effect in my mind. It starts with no rent, then, I tell the tenant they now owe the rent and a late fee. With that, the tenant gets mad and doesn’t pay anything and starts damaging the apartment. I had an irrational fear of things spinning out of control.
So for the first few years, I never pursued collecting late fees. After I had acquired a few more investment properties and they were all running smoothly, I decided to start enforcing late fees. I was in a better financial position (and state of mind) to handle a tenant who might get mad over it and perhaps stop paying all together. What I found was that although you do have a few hotheads here and there who are going to give you trouble anyway, the majority of tenants understand their obligation (once you remind them about the fees they agreed to in the rental contract) and will pay what they owe. They won’t be happy about it, but most tenants won’t scream and holler over it either.
Additionally, the enforcement of late fees has a positive impact of increasing the likelihood of on time rent payments in the first place. Real estate author John T. Reed wrote in one of his books, “What you demand you get. What you tolerate you encourage.”
If I look back over my early years when I didn’t enforce the late fees, I see that I gave away over $3,000 that my tenants should’ve paid me. That was an expensive fear!
Lesson Learned: When I didn’t enforce my own rules, the person who lost was me! The solution is to simply enforce the rules that I went to all the trouble of including in the rental contract. Enforced rules tend to get followed. I once read in a management book: People do what is “inspected” not what is “expected”.
Everybody’s personality is different, so this may not sound like you, but I think many of us landlords started out with almost what you’d call a fear of tenants. When you’re thinking about buying your first rental, you think over and over about the downside of the tenants moving out, the tenants not paying, the tenants breaking all the rules, the tenants not taking care of things.
LOCATION, LOCATION, LOCATION!
One great advertising opportunity is to take advantage of location. In retail, it’s all about location, location, location. But this also applies to rentals. Where your property is located can be a huge asset. If it’s located on a busy street or near an intersection, you have automatic, free publicity. How?
Some obvious ways:
1. Put a “For Rent” sign in the yard of your rental.
2. A banner on the front of your apartment building.
3. Balloons and streamers on the front porch of your duplex or triplex.
The more exposure you get with passing vehicles and foot traffic, the better.
And some less obvious: Take a fresh look at your property to see what shops, businesses, parks, schools, colleges, or attractions are near to your property. The best way is to simply take a walk through the neighborhood. I’m always amazed how much I discover when walking through a neighborhood. Suddenly, I start noticing locations and features about the neighborhood that have always been there and I’ve driven by a hundred times but I have never seen before. Is there a dry cleaner, flower shop, restaurant, grocery store, auto repair shop, laundry mat, library, etc? Customers who shop at these locations tend to live close-by as well, and may be good candidates for your property.
• If you’re near a hospital, advertise on the bulletin boards or weekly newsletters distributed in the hospital.
• Is a business, shopping or retail park nearby?
• Near to a big manufacturing plant or large office building? Reach out to the employees of companies in the building as well as building maintenance, security, and reception with a “walk to work” offer targeted especially to them. Ask building management how you can reach tenants within the building. You may even be able to use the human resource dept. of the companies to get to interviewees and new hires alike. With the high price of gas and appeal of shorter commute times, your nearby property could be very attractive to people who are fed-up with a long commute and want to spend more time with their families and less time in the car.
• If you’re close to a college, advertise on bulletin boards, in the student lounge, in the student newspaper, and even at local on-campus sporting or social events.
• Is there a daycare facility nearby? Tout this in your advertising, on the phone with prospects, post a flyer or in an ad within the daycare. This way you can reach out to parents who drop their kids off. You can also put an ad in parent-teacher newsletters, circulars, or other publications to reach this target audience with your great location.
Does any big company have their headquarters nearby? Consider advertising your rental as a more convenient and cozy alternative to sterile, cold, and impersonal corporate housing. Renting your place out to visiting people could boost your occupancy rates. In addition to a steady stream of visiting business people as tenants, you may be able to charge a premium of 30-50% more than your standard monthly rental rate because the competition in the corporate housing market is typically mid-to-higher end hotels with daily rates of $200-$300 or more. Multiply this daily amount over a week, and you quickly get a pretty big number ($1,400 and up). If your standard monthly rental rate is $1,000 per month, then you could easily charge $1,300-$1,800 for a monthly stay. Visiting business customers will gladly pay the premium over your normal rates because of your relative value compared to options like corporate housing or a hotel. Plus, many business people are traveling on the company’s dime and will be reimbursed for travel expenses anyway. So, they tend to be less sensitive to price.
Same thing goes for any tourist attractions, big events, or seasonal activities that are nearby. By planning ahead, you can turn these opportunities into dollars! Think about destinations or desirable locations that are nearby your property, not just straight out the front door on the facing street. It’s kind of like the flight attendant’s safety instructions before takeoff to remind us that, “the nearest exit may be behind you.” Same idea here. There may be places to target that are behind or diagonal to your property – on small side streets or alleys, look for neat places like boutiques, restaurants, shops, or businesses to distribute flyers about your nearby property. Retail businesses depend heavily on the density of the surrounding market within a small radius of their location. I’ve seen cases where 80% of a store’s customers live within a one mile radius of the store location. Be aware of the role your property’s location has in your success. Think of your rental property as a retail business. Close to a mass transit or train station is good! Across the street from a school is great! Near to banks, grocery stores, or similar types of business is good because it means there likely is more pedestrian foot-traffic in the area.
The above tips are shared on the MrLandlord.com website and in the Mr. Landlord newsletter from landlord contributors and real estate advisors and authors featured on MrLandlord.com. To receive a free sample of Mr. Landlord newsletter, call 1-800-950-2250 or visit their informative Q&A Forum at LandlordingAdvice.com, where you can ask landlording questions and seek the advice of other rental owners 24 hours a day.