The law does not require this to be a written disclosure.  However, by having a written disclosure in place, landlords can save a lot of the “he said/she said” type arguments that would pop up from not having the policy clearly outlined.

How do you ensure written compliance?  I’ve designed a simple and straight forward lease addendum that can be added to any residential lease.  This addendum outlines the smoking policy for a building, and informs the tenant as to the penalties for breaking the policy.

A copy of the lease addendum in DOC format can be downloaded here:  Smoking Policy Addendum.

Carbon Monoxide is a tasteless, colorless, odorless gas which is highly toxic.  Because it is tasteless, colorless and odorless, the only way to detect it is by using a carbon monoxide detector.  Detectors are available in battery operated (DC power), plug in (AC power), and hard wired versions.  In addition, they may be combined with a smoke detector.

Carbon monoxide is formed when organic compounds burn. The most common sources are motor vehicle exhaust, smoke from fires, engine fumes, and nonelectric heaters. One of the most common causes of carbon monoxide poisoning is poor exhaust from a carbon monoxide producing device.  Some devices that produce carbon monoxide include gas water heaters, kerosene space heaters, charcoal grills, propane heaters and stoves, as well as gasoline and diesel powered generators.

Carbon monoxide detectors should be tested regularly.  If you are using a battery operated unit, change the batteries when daylight savings time starts and ends, the same as you would a smoke detector.  Detectors can be purchased at most department and home improvement stores.

If you have a vacant property, it is a good idea to winterize your home prior to the snow actually arriving.  There are a lot of contractors that will provide this service, and the cost of the service certainly outweighs the cost of the damage that could result from not having a property properly winterized.  For the purposes of this article, let’s focus on occupied properties.

Did you know that a burst pipe can cause over 250 gallons a day of water loss?  If you have a 40 gallon hot water tank, this would be the equivalent of filling and draining that tank 6.25 times… IN ONE DAY!

Frozen pipe prevention is a fairly simple task, requiring a few hours of labor and materials that you can find at any hardware store.  You’ll need to get pipe tube insulation – this comes in many lengths and diameters.  Measure the outside diameter of your pipes before you head to the store.  The inside diameter of the insulation should match the outside diameter of your piping to ensure a proper fit.  In addition, you will want to get a roll of pipe insulation tape to run along the seams of your insulation.  Installation is very straight forward.  The insulation should come with a full depth cut running along the length of the tube – just slide the insulation over the pipe and seal it with the insulating tape.

Ideally you’ll want to insulate all of your pipes.  However, the pipes most prone to freezing are those along exterior walls and in crawl spaces, as well as floors and ceilings.  If your basement is especially cold, you may want to consider insulating all the pipes just to prevent a freeze.  If severe weather is in the forecast, and you think a pipe freeze may be a possibility, you can turn the faucets on just a trickle.  The movement of the water should help prevent freezing.

Outside the house, be sure to fully drain and detach any garden hoses.  Outdoor faucets can be covered with an insulated faucet sock, which run between $10 and $15 at most hardware stores.  You can also use a piece of home insulation in a pinch – just be sure to cover the entire surface area of the faucet up to the wall, and be sure to secure it with a strong, weather resistant tape.  This may not be the most aesthetically pleasing solution, but it beats a frozen pipe.

So, you didn’t insulate your pipes and now you have a frozen pipe?  There are a couple options at this point.  The first option is call a plumber!  Frozen pipes can burst if they aren’t heated correctly, and if you feel unsure, you may want a professional to handle the issue.  However, if you wish to do it yourself, read on!  First and foremost, do not use a blow torch to heat the pipe! The rapid heating action from the torch can cause the water to boil, which can lead to a burst pipe!  Instead, use a hair dryer.  Point it at the frozen area, and move back and forth along the pipe until the ice melts and the water flows freely again.

Frozen pipes can be a real pain, especially in Buffalo.  Armed with a little bit of knowledge, you can take preventative measures to help stop a problem before it starts.

The first line of the introduction in this book says it all:  “In this day and age, we’re lucky to have software that takes care of the nuts and bolts of property management accounting.  The second line puts everything in perspective:  “But even with software, you’ll find it much easier to keep accurate records if you have an understanding of the basic accounting concepts upon which these programs are based.”  This book does just that.

Before I jump into my full blown review, I feel that it’s relevant to include a little background.  I’m alright with accounting practices, in that I understand how money comes in and money goes out.  In addition, I’ve been using the Buildium software for around a year and a half now, and understand how to get the reports I want and need.  In college, I took Accounting 111, and passed with a C.  (My worst grade throughout my entire Bachelor’s studies, but hey, it counts.)  However, the intricate details of accounting were always a challenge to me.  I picked up this book partly out of necessity and partly out of curiosity to see if it could help me really get into the more intricate details of property management accounting.

The book is broken down into 3 main parts, with an introduction and an appendix.  Throughout the book, there are written explanations as well as charts of accounts and diagrams showing how the flow of the transaction works – everything is broken down step by step to provide an easy to follow path getting you from Point A to Point B.
The best part of the book, in my opinion, is that it builds sequentially.  The first chapter explains basic accounting terms, explains how the cash flow sheets work, and outlines the process a transaction goes through, from the time it takes place until the time you read it on a report.  The second chapter explains how books are kept for one property, and explains basic transactions such as recording rent and security deposits, paying bills, and managing security deposit funds at the end of tenancy (returning or applying to damages).  The third part of the book explains how the books work for a property manager, managing many properties.  This includes recording owner contributions and payments, collecting management fees, and other such tasks that a property manager would handle (assuming they wanted to stay in business!)

There is such a tremendous amount of solid information packed into the book that it will require at least a couple reads to really pick up on all the finer points.  In addition, it covers enough varying situations that it has earned a spot on my desk as a reference guide when I get stuck and need to answer a question.  I would certainly recommend “Property Management Accounting: A Survival Guide for Non-Accountants” to anyone who is struggling with the understanding of property management accounting, or for someone who wants a solid desk reference.  At a grand total of 82 pages, it won’t take up much room and the price point of $29.95 makes it a worthwhile investment in my opinion.

“Property Management:  A Survival Guide for Non-Accountants” can be found on Amazon.com.

Parking: We ended up parking about a block from Coca Cola Park, which cost us $5. This wasn’t too bad, but it does contribute to the overall cost of the event so I decided to list it here.

Admission: Another $5 just to walk in the door. This wasn’t too bad either, since they have to pay for all the park support staff, EMTs, security, etc. I felt it was reasonable considering I never saw a garbage can filled to the point it was overflowing. The staff was very good about keeping things neat.

Crowd: We arrived around 6pm, and the crowds were reasonable considering it was around dinner time. We never waited more than maybe 5 minutes at any stand we were at throughout the evening, and we were there about 2 hours.

Beverages: This was something I was disappointed in. The beer tents were way overpriced – $5.25 for a can of beer, $3.25 for a bottle of soda, and $3.00 for a bottle of water.

Taco WIngs!

The first place we tried was Swings from Buffalo, NY. I wanted to try their lemon pepper wings, but they were out. Apparently the people frying the wings for the entire event couldn’t keep up with the demand, which was rather aggrivating. They know what they were getting in to – expect to be able to cook enough wings! At any rate, they had a “taco” flavored wing. It was a very average wing. In all actuality, it tasted like a typical Buffalo wing sauce with a packet of McCormick Taco Seasoning dumped in it. I rated it a 3.5, Andy and Matt both rated it a 3.0. We all determined that it was a very average wing.

After Swings, we wandered over to The Wing Coup out of Salt Lake City, Utah. They had a Loco Lime flavored wing that smelled really good from a distance. Unfortunately, when we arrived they too were out of wings. Come on! We decided to swing back through after trying another place.

From The Wing Coup, we moved to Pesci’s Pizza out of Clarence, NY. We were all pretty pleased with these wings. They were very rib-like. Ultra tender, and fell right off the bone. Matt had the Cajun Bourbon wings, and described them as very smoky, more smoky than spicy. He rated them a 3.33333- you get the idea. Andy tried the Wild Turkey Bour-B-Q. When asked to describe them, all he could come up with was “Ribs.” I guess that gets the point across. He rated them a 4.2! I tried the Maple-Cini wings. They were pretty good. The best way to describe them was as a “dessert wing”. The sauce was super sticky, and it took a couple before I really started to enjoy them. I have them a 3.25, since they were good, but not something I would want a lot of.

Nasty Lime Wing

After Pesci’s, we headed back over to The Wing Coup. In retrospect, this was the worst decision of the night thus far. We all tried the Loco Lime wings, which was regrettable in so many ways. They smelled very strong of lime. Too strong in fact. But that was really just foreshadowing. These wings looked as though someone had dropped them into a soiled diaper and used that as the sauce. Not pleasant. As we tried these wings, we all cringed. Eating these wings felt like punishment.  Basically, squeeze an entire lime into your mouth. Then dribble some chicken grease on top. Then swallow. Just plain gross. Please stay in Salt Lake City. Andy rated them a 0.7. Matt rated them a 0.05. I gave them a 1.2, which in hindsight was probably too kind.

After grabbing some $3 bottles of water to cleanse our palates from the garbage we had consumed, we moved on to Alliger’s House Of Wings, from Sayre, PA. I tried the honey mustard wings, which were very tasty. You could taste the separate honey and mustard components, and it aws enjoyable. I rated them a 3.75. Matt tired the Honey BBQ, which he said was a very solid 4.0. Very sweet, very tasty. Andy tried the Sicilian (Hot Traditional) wings. He gave them a 2.8, and said that they were just plain garbage. Not what a “traditional” Buffalo wing should be at all.

Our final stop of the night was Arooga’s Grille House & Sports Bar. The waitresses were stunningly hot. Sadly, this was the only worthwhile thing they had going for them. We each ordered a separate type of wing and passed them around. We tried the Tiger style first. Basically, these were onion powder, clove, and garlic flavored. They were so overpowering that none of us could stand them. I gave them a 1.2, Andy gave them a 0.2, and Matt refused to score them. They were that bad. After that we tried the Kangarooga flavored. I gave them a 0.37. Matt gave them a flat 1. Andy gave them a -5.0. These were just awful. Matt’s comment: “Is that carrot I taste?” They were that bad. The last wing of the night was the Mango Habanero. We all gave these wings a 0.0. They were hard, the sauce was thick and gooey, and really, they tasted more like fish than chicken. Arooga’s could do well by staying away from the Buffalo wing altogether.

Overall the experience was good.  The crowds were not too bad, the prices were reasonable (considering it was a festival), and I had a good time catching up with Matt, and hanging out with Andy.  Would I go again?  Maybe in a couple years, but I don’t know if this is an event I need to hit up every summer.

Ingredients:
2 sleeves of graham crackers
1 1/2 sticks of butter (yeah, I know)
2 packages of either chocolate chips, peanut butter chips, or butterscotch chips (mix it up.  I used a bag of chocolate and peanut butter mixed and a bag of butterscotch)
1 12oz can of sweetened condensed milk
about 3/4 bag of mini marshmallows

Process:
Preheat oven to 350 degrees.  Toss your graham crackers in a large freezer bag and roll over them until crumbled into fine bits – almost to the point they are a powder.  Melt your butter in the microwave, and stir into the graham crackers until well coated.  Press the mixture into the bottom of an ungreased 9×13 pan, and toss into the oven for 5 mins.

After 5 minutes, pull crust from oven and sprinkle on your chips.  Make sure the entire crust is covered!  Drizzle your can of condensed milk over the chips, and then cover completely with mini marshmallows.  Toss everything back into the oven for about 20 minutes.  You’ll know it’s done when the marshmallows are starting to turn brown on the top.

Let this cool down a bit before you move it to the fridge, and let it solidify.  Cutting before it is completely cooled will turn it into a huge mess, so wait until it is cooled.  Cut into squares / small bars, and serve!  This dessert goes great with vanilla ice cream.

In seeking to change the mindset where the landlord just pockets the rent money every month, tenants should consider the following expenses that the landlord is ultimately responsible for. All of these expenses are deducted before the landlord even considers taking any sort of draw.

First and foremost, landlords have to pay the mortgage! Just because a landlord owns a property doesn’t mean that there isn’t a mortgage. The bank wants their payment each and every month on the first, just like the landlord! This is generally one of the largest debt loads the landlord will carry, and they carry it for a term of 15, 20, sometimes even 30 years!

Once the mortgage is paid, the landlord sets aside money for taxes and insurance. Depending on the mortgage, the landlord may have to set aside money for mortgage insurance, as well as for property insurance (to cover their losses – tenants should carry a renter’s policy!) Aside from insurance policies, the landlord needs to set aside money for taxes. Many areas will have a city, village, or town tax, as well as a county tax. In addition, some areas also require a separate tax for schools (while other areas include it in the city tax). The rate for insurance and taxes is higher on a rental property than for an owner occupied property as well.

In addition to taxes, many localities will also tack on additional fees which must be accounted for. For instance, Buffalo tacks on a “User Fee” bill every quarter to cover garbage pick up and totes, as well as charging for Rental Registration in buildings that are not owner occupied.

In some instances, the landlord will have to pay for utilities. Are there lights on in the hallway when you come in to your apartment at night? What about outside illuminating the parking areas or dumpsters? The landlord pays that electrical bill. Is your heat or hot water included in the rent? The landlord is paying that gas bill to ensure you stay warm. If you enjoy a shower in the morning, you will appreciate your landlord making sure that the water bill is paid up every time it comes due. And that waste water from toilet flushes and shower drains has to go somewhere. This is charged back to the landlord as well, either in the form of a line item on a water bill or a tax item.

And of course, nothing works forever. When the landlord comes in and replaces your faucet because the handle snapped off, that comes out of a maintenance budget that must be planned for. This can be a minor repair in and of itself, but what happens when the hot water tank dies and needs to be replaced? This is quite a bit more substantial. Staying dry is important (especially when you are in your apartment), so the landlord has to set aside money each month for larger repairs, such as a new roof, updating electrical service, or other large repairs.

Landlords are in the game to make money, and anyone who says different is trying to pull the wool over your eyes. However, understanding that there are a lot more expenses that go into owning a building is important, even as a tenant. The landlord is there to provide you with safe, reasonable accommodations in which to live. However, he has to cover the back end of things as well. Keeping these things in mind, and being a cooperative tenant, can get you a long way in the eyes of your landlord!

Without getting into a huge discussion on economics, the market rental rate will be determined by several factors.  One of these factors include supply and demand, where the number of available units may cause prices to go up in a desirable area, or lead to a “price war” in an area with many open units.  Another factor is the ever increasing cost of expenses related to the property.

Some areas have rent controls in place, which determine the maximum amount that can be charged for a specific type of rental.  These are generally found in metropolitan areas, and there are many arguments both for and against.  For questions on local rent controls, contact the municipality which the rental property is in.

When determining the price for a rental unit, the first consideration is making sure all expenses are covered.  Be sure to include things such as mortgages, taxes, utilities, repairs, insurance, and management.  This is called the Gross Operating Expense for a property.  However, this isn’t specific enough for our needs.  It is necessary to know the gross operating expense, per unit, per month!  For assistance in determining these factors, see the article on “What Do Your Rentals Cost You?”

Once the gross operating expense per unit per month is known, research is done to determine what the current market rate for similar rental units is in the area.  Comparisons should be based on rental units with the same number of bedrooms, with similar amenities,  and within a reasonable distance (a few blocks in the city to perhaps as wide as an entire county in a rural area!)  Below are three different methods for determining rental rate, in order of least to most technological.

1.  Newspapers & Rental Fliers – This is pretty straight forward.  Pick up the newspaper, flip to the classifieds, and see what other landlord are avertising for similar units.  Rental Fliers are often posted on bulletin boards in public areas, such as grocery stores, community centers, libraries, and in college areas, student unions.

2.  Real Estate Agents, Property Managers, Other Investors - This one is a bit more technologically advanced, as it requires picking up a telephone in many cases.  Real estate agents who are familiar with investment properties will often also know the local rental markets as well.  Property managers may not be willing to hand out information willingly to the “competition”, but will readily respond to requests for more information about an apartment from a potential renter.  Other investors can be contacted via local investment clubs.

3.  CraigsList and Rent-O-Meter – These two can provide a wealth of information very quickly.  Most metropolitan areas have their own CraigsList site, which can be found at www.craigslist.org.  If you aren’t posting your listings here, shame on you!  With a couple clicks, information can be found on apartment listings throughout a city or region.  Using Rent-O-Meter at www.rentometer.com is also a simple service.  By entering the address of the rental, number of bedrooms, and current rental rate, the data is compared to other rentals in the area.  Information such as median rental price, low price, high price, and distance are all provided.  In addition, there is a map showing where other units are located in relation to the unit being priced.  This site does not take into account any amenities, however.

Keep in mind that comparisons should be as close as possible – in bedrooms, location, and amenities!

Once research is compiled, a fair rental rate can be determined based on the data.  A fair place to start would be in the upper third of the price bracket, which will draw a more interested potential tenant, and allow for negotiation room if necessary.

Rental markets change over time.  Being aware of what a rental unit costs to operate, as well as the local trends, will keep a sharp investor on top of the market.  Using the three mthods outlined, a strong comparison of available rental units can be made, and a unit can be priced properly.

1. Mortgage payments
2. Taxes
3. Utilities (if included)
4. Maintenance and repairs
5. Management
6. Insurance
7. Legal and professional fees

Using a spreadsheet, an investor will lay out all of these costs for a year.  Adding them together gives the investor a figure known as the Gross Operating Expenses (GOE).  It may be necessary to estimate some figures, based on previous years, capital improvement plans, and other factors.  An example of this would be the need for a new roof on a property in a previous year causing a higher than average maintenance cost for the year.

Expenses for things such as taxes, utilities, and insurance are probably going to go up every year.  This inflation needs to be accounted for in the GOE.  Based on data available at the time of this writing, the average inflation rate on a per year basis since 1914 is 3.43%.  [InflationData.com] Using a figure of 5% is therefore well within reason.

Once a GOE + Inflation (iGOE) figure is determined, an investor will have a rough idea of what a building will cost to own and operate for a year.  This figure will then be divided by the number of units in the building, giving the Annual GOE for each unit (uGOE)*.  Further dividing the uGOE by 12 months delivers the Monthly Unit GOE (muGOE)*.  This may seem like a headache, but you can’t get where you want to be without knowing where you are starting!

The muGOE should be the absolute bare minimum that would be charged for rent, assuming the property never turns a profit!

Knowing what a building costs to own and operate over the course of a year is important to the investor, for planning purposes, as well as in the event of a building sale.  Knowing what each unit costs to operate on a monthly basis is just as important, as it will help determine the minimum acceptable rental rate, assuming the market will support it!

* These abbreviations are not standard, and are used only to assist with the flow of the article.

(This post is part of our “Landlord Basics” series, which seeks to help the new landlord / investor understand some of the basics of tenant relations and property management. Click here to view the entire Landlord Basics archive.)

From time to time as you purchase buildings, you may inherit tenants that come along with them.  If a tenant is paying their rent on time every month and taking care of the property, this is a very good thing.  However, if a tenant is not taking care of a property, it can cause issues down the line when that tenant moves out.  Some of these tenants will pay rent on time every month, and never call with concerns.  Others will make themselves more evident by either not paying rent, calling constantly, or both.

A tenant who is not paying rent should be evicted.  This really shouldn’t come as a shock, since you purchased the property as an income property, and a tenant not paying rent is not generating income.  This is the easy bas tenant decision to deal with.

A tenant who is paying but is not taking care of the property is another issue.  This could be an issue as simple as not cleaning properly, or not taking care of the yard.  Generally these tenants will respond to a formal letter requesting them to clean up their act. Over the course of several years, the “non-cleaning’ tenant could cause serious damage, such as mold build up.

However, some tenants do physical damage to the property.  For instance, some will throw things into the walls and create holes.  Another example would be a landlord story where the tenants knew they were being evicted the following day, so they removed both hot water tanks and both furnaces from their duplex (other unit was vacant), and sold them for scrap.  The repairs can become very costly very quickly!

So, what do you do?  Should you keep a bad tenant?  If a tenant is causing physical harm or destruction to the property, an eviction could be in order.  Catching them early in the destruction of the property will only SAVE you money on the inevitable rehab.  However, if it is an issue of cleaning, it may be better to send a strongly worded letter or make an appearance to tell the tenant that things need to change, or they will be facing an eviction as well.