Dear Diary – 01/23/16: Rental Property Inspections

Happy Landlord_Happy Tenant_FinalHappy Landlord, Happy Tenants – It can be done!

When did I last “formally” inspect my property? At move-in/move-out!  Research recommends 4 types of inspections for rental properties.  These can be spread out so that they fall at the beginning, the end, and during the term of the lease.

SUMMARY INSPECTIONS THAT I HAVE BUILT INTO MY BUSINESS PLAN:

  • Inspection #1: Month 0 (day 1 of Lease) – Move-in Inspection. Inspection completed after tenants move in. Use Move-in checklist to document condition of unit at move-in. Photo documentation is recommended where there is question. Never a bad idea for Landlord/Property Manager to do a pre-inspection of the unit to have their own documentation to compare with what tenant provides. That being said, if a Move-out inspection was done then that should suffice , unless someone (sub-contractors) were in the unit since move-out, in which case a quick check never hurts to ensure that the property is move-in ready.
  • Inspection #2 : Month 4 into Lease (or as close to this as possible when schedule allows)– Routine Safe and Clean Inspection
  • Inspection #3 : Month 8 into Lease (or as close to this as possible when schedule allows) – Routine Safe and Clean Inspection
  • Inspection #4: Month 12 into Lease – Move-out Inspection: Inspection completed on the day of tenant move out. Landlord/Property Manager completes inspection together with tenant to determine condition of property at end of lease term. Use Move-in checklist for comparison.

Written and photo documentation recommended for all inspections. Signatures (Tenants & Landlord/Property Manager) are a must if one intends on making this a contractual document.  Copies of signed documents with any attachments (ex. print out of photo documentations) should be given to all parties involved.  So, just when is my next inspection? Friday 2/12/16!

A little more about what to expect from each inspection:

  • Move-In Inspection: “inspection not intended as a wish list for things the tenant’s want done to the property”. Check to see that property is move-in ready and do own inspection for comparison with what tenants reports back. I currently allow 48 – 72-hours of move-in for tenants to complete and return move-in checklist with attached photo documentation of any issues ex. Previous holes in the wall, stains on wall/carpet etc.
  • Routine Safe and Clean Inspections: Inspection intended to ensure the property is safe and clean. Research shows these types of inspections should be conducted every 3 – 6 months. For my property I have opted to do this every 4 months so that overall I have 4 inspections completed over a 12 month lease to allow for items to be addressed sooner rather than later.
    • What am I looking for with these types of inspections?                                                                                                                                                                  Tenant’s Responsibility:
    • Issues caused by tenants (ex. doors pulled off hinges) or
    • Unauthorized alterations to property (ex. Unauthorized changes to locks, unauthorized painting of walls, defacing any part of the premises, installing or removing any existing alarm systems). I will at times allow some flexibility on this if the alteration does little harm/damage to property and actually adds equity to the home. However that being said, tenants are encouraged to seek prior written consent prior to making any alterations to the premises and this requirement is included in the terms of the lease.                                                                                                                            Landlord/Property Manager’s Responsibility:
    • Items that I as Property Manager would be responsible for ex. leaking faucet.

Then what? Follow-up Inspection:  This will be scheduled in the event that an issue was discovered during the routine safe and clean inspection.  The purpose of this is to verify that the tenant has corrected the issues they are responsible for and for my part I get moving on issues that I need to address, prioritizing and beginning by addressing issues that cannot/should not wait.

  • Drive-by Inspections: for my part, I use these to primarily focus on curb appeal and external inspection of the property. I will often schedule these at the same time as the routine safe and clean inspections just to save myself time and schedule follow-ups with tenants accordingly.
  • Move-Out Inspection: I will often schedule this inspection at the time that the tenant is ready to hand over the keys to the unit and my preference is to have these inspections performed with tenant on premises. Some will opt to do this type inspection Landlord/property Manager only after receiving the keys from the tenants. However I tend to agree with reports that encourage one to do this inspection, “with the tenant on property on their last day on premises as specified in the lease agreement or extended accordingly”. This prevents the tenant denying everything that you find during the move-out inspection should you conduct this on your own after they have locked up and already handed over the keys. Reports suggest to have tenants date and initial by each inspection finding and sign the completed move-out inspection form prior to them leaving the premises. However, tenants may decline to sign believing that if they don’t sign they won’t be responsible, so this is where you camera becomes your BFF! Pictures don’t lie and tenants would have a tough time contesting this in court.

The above are all tips I have found to be great in helping ensure that I first and foremost help my tenants keep the property in good condition at all times. The ideal situation is to help them, help me so that I am not forced into having to dip into their security deposit.  I have, however taken the steps to ensure that should that happen, then I know how best to defend my security deposit decisions.

“Landlords may make deductions from a tenant’s security deposit, provided they do it correctly and for an allowable reason. Many states require landlords to provide a written itemized accounting of deductions for unpaid rent and for repairs for damages and necessary cleaning that exceed normal wear and tear, together with payment for any deposit balance.”

As a newbie landlord, I make an effort to educate myself on the Colorado Laws as pertains to itemizing and returning tenant’s security deposits. For my leases a period of no more than 60 days is provided for written itemization and statement of how the deposit has been/will be applied toward back rent and/or costs of cleaning, damage repair as well as whatever is left of the deposit.  Happy Learning!

References:

https://www.biggerpockets.com/renewsblog/2011/11/04/importance-rental-property-inspections/                                        http://www.nolo.com/legal-encyclopedia/colorado-landlords-guide-security-deposit-disputes-small-claims-court.html                                                                            http://www.nolo.com/legal-encyclopedia/colorado-security-deposits-36200.html

Dear Diary – 01/14/16: Finding the right accountant for my Real Estate Business

Funny_1Clipart owner unknown

Tax Season is here (gasp!)

What should my accountant be able to do?  According to research, 4 things are key:

    1. Find and leverage as many tax advantages as possible (of which there are MANY for real estate investors).
    2. Follow the legalities of our ever-changing tax code.
    3. Keep track of your ongoing business transactions.
    4. Stay organized, using a financial record-keeping system that makes sense.

Seth Williams in his REtipster article, “Finding The Right Accountant For Your Real Estate Business” provides a list of great questions to use in interviewing a real estate accountant for your business.   I have used his list of questions with great success and happy to report that I just may have found the right EA/CPA for my business.

To see the list of questions, reference the article by Seth Williams: Finding The Right Accountant For Your Real Estate Business http://retipster.com/real-estate-accountant/

I believe there may be plenty of other great resources out there, however for me, I found that Seth’s article provided the basics of what I needed so I decided to stop there.

 

Dear Diary – 01/10/16: Help! My turf is dying!

Help my tough is dying_2Help!  My turf is dying!

So the backyard is probably one of the best features of the property. During the winter months however I began to notice that parts of the grass were discolored and that is when it dawned on me that we might be having a case of “Dog Urine Burns on Lawn” particularly since the irrigation system was turned off for the winter and so there was little to no irrigation going on currently.  My once green grass is now covered with brown spots in random areas of the yard as a result of dog urine burns to the turf.

yard damage from dog pee_2

Dilemma: Shooting for a nicer, aesthetically pleasing back yard, but what do we do about the dog’s need to pee? How do we keep from killing the turf or is it a case of being forced to choose, dog over turf? (Gasp!) Any ideas/advice will be much appreciated.

Reports so far:

  1. “Dog spots on the lawn occur because urine is alkaline (has a pH above 7.0).”
  2. “Dogs spots can be “cured” by sprinkling the affected area with baking soda, gypsum, dishwashing detergent, etc.  to neutralize the urine.”

Further research indicates that these reports may be urban legends and are not entirely correct.

Dog Spots – the cause

According to the Colorado state University Extension (CSUE) Program, dog spots occur because a high concentration of nitrogen-containing (N) salts has been deposited in a very small area of the lawn.  In some cases, the added N causes dark green spots and rapid grass growth, without injuring the grass.  In other cases, the result is a brown spot – often surrounded by a halo of dark green grass.  The browning is caused by the concentrated nitrogen deposited in the center, which burns the leaf tissue, and may or may not cause tissue death.  The lower concentration of salts on the periphery fertilizes the grass – resulting in a darker green ring.

Curing Dog Spots

Watering Yard_5

The same CSUE program reports that the only “product” that can neutralize the urine’s negative effects is water.  Gypsum and baking soda (sodium bicarbonate) are salts and may compound the problem.  Dishwashing detergents, which act as wetting agents or surfactants, may enhance water movement into and through the soil.  While this theoretically could promote leaching and dilution of accumulated salts, some dishwashing detergents can burn grass plants.

Thinking face_5So how do we fix it?

A summary of ways to fix this problem from the CSUE report.

General

  • Train the dog to use a non-turf area in the landscape, such as an area covered with mulch or gravel, or select a location where dog spotting will not become an aesthetic problem and damage can be tolerated. As you can see in the pics below there is one such area already (snowing in Denver so lots of snow on the ground today), but it had not dawned on me what this area was previously used for until months later so I am hoping that we can reach an agreement to have tenants have their dog use this area to pee to help save the rest of the backyard because currently the dog is free to use any area of the backyard, “poor decision on my part”.

Dog Enclosure_1

Enclosed Area in backyard by storage shed

Dog Enclosure_1b

Area inside the enclosed area

Question: Can a landlord make changes to a lease mid-term?

I am aware of lease addendums and looking at taking this route because the dog spotting is getting slightly out of hand and at the end of the day, the goal is to shoot for a nicer aesthetically pleasing back yard while preventing further damage to the current turf. I do however want to familiarize myself with landlord-tenant laws on this issue so as to know how best to approach this.

  • Re-sod the area with new grass. This is the plan for spring time, however before doing this, I am hoping that we can reach an agreement and complete a lease addendum before any work starts.
  • Increase irrigation amount and/or frequency to help dilute salts that have accumulated in the soil.

Tips for tenant with dog(s)

  • Always provide adequate water for your pet; increased water consumption will dilute urine, reducing the potential for turf injury.
  • While the addition of salt, garlic, tomato juice and other “home remedies” to your pet’s food can increase water consumption (thus diluting their urine), your veterinarian should always be consulted before doing so.

NOTE: Except for the addition of water to a dog’s food, no additive or supplement should be fed to your pet without first consulting with your veterinarian.  Certain additives may increase a dog’s water intake, but can have detrimental and unintended consequences for its health.)

For more details on any of the above tips, please reference report by CSUE: http://www.ext.colostate.edu/mg/Gardennotes/553.html

So things I am currently looking to address:

  1. Can I make changes to a lease mid-term?  (Possibly)
  2. Does this qualify as “just cause” to amend the lease agreement in order to prevent further damage to property?  ( I think so)  It is going to take just a little more effort on the tenant’s part to re-train their dog to use the assigned area. I read a recent report that gave the following information on lease changes:                    “If a change in a rule affects the terms and conditions of the contract, that can be a problem. Any rule change that affects the tenant’s wallet or how they live in the rental property day-to-day can be considered a change in the terms and conditions of that lease agreement contract. Landlords simply cannot change that when they want.”

That being said, I believe it is not unreasonable to make changes to a lease mid-term if it is going to correct a behavior that is causing damage to property.

 

Dear Diary – 01/09/16: Subcontractors – Time to Narrow down the list, ooh and squirrels.

I made the choice to manage my own property rather than seek a  property management company for this, both to save some money as a newbie starting out with limited income as well as to better learn the process so that I know what to look for in a property management company when I grow my portfolio to where I eventually need the help.   There are tasks however that I cannot do on my own and previous attempts to do so have shown that there is a negative impact to my time.  I have therefore decided to delegate tasks that I cannot personally do due to lack of experience/tools or time:  Tree Trimming/Care and routine lawn care and maintenance.

Landscaping_3Backyard:  Some leaf raking required

Landscaping_1

Backyard:  With winter here, lawn care/maintenance is suspended until the Spring.

I received a number of quotes and have to start looking though those this weekend in order to make a final decision on which company to go with.  I am looking for a reputable company with great reviews, license, insured and fairly reasonable in pricing.  I will provide update on this once a decision is made at the end of this weekend.

Squirrels!
Baby-squirrel_Final

I struggle with this one because they are sooooo adorable, but can be a nightmare to any homeowner with trees in their yard.  They will chew at the tree barks often causing significant damage to trees particularly when food is scarce.  They also will chew at any wires/cables and my neighbor had to get the cable repair guy out to fix her cable only for them to discover that squirrels had chewed through it.  To protect the trees, some say to wrap metal sheets around the tree.  I was driving around and happened to see this in a yard (see below).

Squirrels out_2

Metal sheets placed around tree trunks to help keep squirrels from climbing trees.

So I am considering doing the same to help protect the trees on our property.  Will keep you posted!

Dear Diary – 01/08/16: How the Journey Began

May 4th 2015, we signed on the dotted line, shook hands and I was handed the keys! It was all happening so fast; I excused myself to step out briefly.  I ran to the car to grab the potted plants and cards that I had purchased at the local flower store as a small token of appreciation to the team that had stood by me through the process.  They were pleasantly surprised by the gesture, but it was the least I could do, I was ecstatic at the deal we had just closed!

When all was done, I sat in the parking lot of the title company in Lakewood, Colorado and watched as the rain drops rolled down the windshield…I was HAPPY! Or was I? It was a great house!  A multi-unit property with a great backyard,… in a great location, purchased at a great price and super awesome interest rate, my first home, this is exactly what I wanted! Was it really, or was I just kidding myself?  Gasp!  The smile that once was, began to fade from my face and in place of that came this feeling of nausea and exhaustion, this annoying headache as it finally hit me that I was a newbie property owner and newbie landlord and was going to have to do it alone, …  What?!!!!  single, young  female with a great renter history but absolutely no landlord history/experience! To make matters worse there was not going to be any more Real Estate Agent or lender  to walk with me through the process! The reality that I was a newbie property owner/landlord and was going to have to take charge of this boat and steer it to shore on my own was finally hitting home!  I noticed myself begin to hyperventilate, suddenly the cold car interior was getting uncomfortably warm.  How was I going to do this?  I had no experience owning or managing property, I had done everything right up to this point, but how was I going to take the next step and the next step after that through this seemingly impossible feat?  The initial phase of the purchase was over, now came something entirely new, was I ready for this?  Was this the right decision?  Should I have stayed renting?  What was I going to do with a property where I would have to take full control of everything, be responsible for everything all while keeping a full-time job!  It was hard enough having to adjust to the idea of owning my own home and being responsible for that, but I had other units that I was now going to have to be responsible for!  My panic increased as I began to second-guess the decision I had just made.

Fast-forward a couple of months later and I am still hanging in there and realize that I should have started this blog a while back, but better late than never.

The purpose of this blog is to document my journey in owning and managing my first real estate property as well as the journey in building my real estate portfolio.  Through this blog I hope to both share and learn from those that have been through the journey that I am embarking on as a newbie property owner and landlord.

I look forward to you joining me on this journey as I build my confidence, experience and knowledge in owning and managing rental property.

Special thanks to Carol Guzman of Your Castle Real Estate, Patrick Langhans  and his team over at Bank of England, Fleming, family and friends that supported me through the initial phase of this journey.  You are all dear to me and because of you I keep going.  Tom S. thank you for reminding me over and over of the need to document this journey in a blog.

See subsequent posts for more on this journey.