Property Management Blog

Eviction Free Landlording

Eviction Free Landlording

Tips for Tenants… Insight for Owners

This post was taken from Nate Armstrong with Midwest Equity Partner. Nate has always impressed me over the years and I found his post to be very well aligned with how we operate here at Legacy Home Management so I felt inclined to share.

I’d like to talk about eviction free landlording. Now, we’ve tried to outsource property management to other companies. There are some good ones out there, but there are really bad ones too — no different than anything else in the world. We found that third party property managers weren’t managing our houses as well as I wanted them to. Furthermore, they weren’t as dedicated to placing the best tenants that they possibly could, and all too often we wound up
footing the bill when we had to evict their carelessly placed tenants. We didn’t want any more evictions, so we decided to take management in house, and since then we’ve had zero evictions. A lot of people ask me how that’s possible, and I tell them that it boils down to three key elements: renovation quality, pricing, and screening.

Number one, it’s about the quality of the product that you produce. That means making sure your renovations are done well and thoroughly. Now, I know a lot of people like to come in and only do the bare minimum on rental-grade renovations, which is fine for them, but not for me. We do the carpet and paint, obviously, but we also replace the appliances, smoke detectors, fixtures, GFCI outlets, and add all the cosmetic touches you can imagine — every detail it takes to make the house cozy and appealing.

We also tend to the mechanicals. Tenants are getting wiser nowadays about how much their A/C & heat costs, and they want to know that their house has a new furnace or A/C unit, or at least a recently upgraded one. They want to know that the hot water heater’s going to be reliable. They want to know that
there are no roof or window leaks. When we do our renovations we adhere to the highest standards and get them done right. We still get renovations done at a great cost, though, because we buy materials at a dramatic discount thanks to how many we buy! Product quality is central to attracting and keeping a good tenant.

The second thing is the pricing. I know a lot of people like to stretch and get as much rent as they can, sometimes even at above market value. Our superior products rent relatively high, but we never stretch past what’s fair for their markets. When we charge too much for rent we stress out our tenants who then have to strive for the rent every month. Keeping rent fair and affordable improves our tenants’ quality of life and disposes them to stay happy and put.

The third but most important part of eviction free landlording is screening thoroughly. There are a lot of books out there that say the three things to scrutinize are credit, income, and landlord and personal references. Those are vital, but they’re not enough on their own. When you’re checking income you want to do it two different ways. Don’t only see that the applicant makes three times as much as their rent, but also check their debt to income ratio as well. Nowadays it’s so easy for people to go out and get credit cards, extra cell phones, and car loans that oftentimes they have way more debt than they can afford. Debt affects their ability to pay rent, so please check applicants’ debt to income ratio and see that they’re at good sustainable levels.

An important part of the thorough screening process is checking landlord references. You have to dig deep and make sure that you’re really finding out who you’re going to let live in your house. Our team calls every reference — if we don’t get voice verification then we’re not going to accept the applicant. Maybe a month ago one of our leasing agents called me to say he was very upset because someone on our team didn’t accept an application that he thought should have gone through. He said it had been denied because the applicant hadn’t provided a third reference, purportedly because they’d lived with their parents.

I went and talked to Kate, who’d personally denied the application, and asked for her story. Kate told me, “Well, Nate, they said that they’d lived with their parents during that time, but I noticed on their credit report that they had delinquent utility bills then. Anyone that has delinquent utility bills probably wasn’t living with their parents, because parents’ typically don’t put their utilities in their kids’ names. So, I researched the address where the utilities had gone delinquent and I saw that it was actually owned by an LLC. I found the owner’s phone number and called him to ask about the applicant. The owner confirmed that the applicant had in fact lived in his rental house, that they were a sloppy tenant, and that he’d have evicted them had they not moved
out first!” I was impressed with Kate’s work and I went back to the leasing agent to tell him that he had not dug hard enough! This two layer approach to scrutinizing tenant applicants is thorough and takes a little longer, but the value it adds is indispensable.

That’s our secret to eviction free rentals. I hope that you can go out there and replicate our approach so you can avoid evictions too, because evictions are expensive and you don’t want them!

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