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How do you keep your good contractors?

A trade that is good, cheap, and dependable is worth his weight in gold. Finding one of these will relieve stress and make maintenance calls so much easier. It’s tough enough to find good trades. Once you have found one make every effort to keep them. Below are some things I do to help keep my best contractors:

Don’t over negotiate his price. If you are constantly complaining about paying too much, then they won’t be as eager to do your next job. I don’t have any issue paying a fair price for good work – stiff negotiating can get you a good deal every once in a while, but if you overdo it – You will always be hunting for new labor. This tactic is not worth it in the long run – Find someone dependable and pay them a fair price for their work.

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Pay them right away. Try and pay them right there on the spot in cash after they do the work. If they do mail you an invoice – get it in the mail the same day. Then next time he has several jobs to choose from he will choose yours as he knows he is getting paid right away.

Be flexible. Have backups and go with your #2 guy, if your favorite trade is just not able to do the work. Don’t keep calling and begging for his help. Also have multiple options for him to come out and make the repair. “The tenants will be home on Tuesday or Wednesday after 5.”

Stack your jobs. I also like to stack jobs when possible. This means if I have a small drip in a sink faucet that is not urgent, I will save this repair until something else comes up. Then when I call him out, he has multiple jobs. If this is preventive maintenance such as an HVAC checkup, then have him do several of these on multiple properties in the same area.

Make sure someone is home. Make sure your tenants are home when he comes by for the repairs. I like to be there myself if I can, but many times this is not possible for me. Verify with your tenants when they will be home, and make sure to send them a reminder text on the day he is to come by. Be very careful here, this is a great way to lose a good trade.

Help them out. My best handyman also does auto work. I give him many of my auto repair jobs that come up as well. Find ways that you can help them, but don’t give their number out too freely. This is a bit selfish, but longtime landlords will understand this – You want your trade to be available when you call, so you don’t want him off working other jobs.

A good trade is so critical to us and the way we manage our properties. Doing the things mentioned above and of course be nice, show respect, compliment their work, etc. Mine is certainly my MVP and Val and I are thinking he would be ideal to someday turn him into our property manager.

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Getting your current tenants to help with the make ready

Property 7 just deposited rent for June. It was great to get that one rented out so quickly. It is so nice to get notice of your vacancies. I am accustomed to my ‘C-‘ tenants moving out with minimal notice or in the middle of the night. I took note of several areas during this recent vacancy where you can use your current tenants to help you with the make ready.

  • Stress they need to take all furniture and personal belongings. I always go out of my way to stress this. Some tenants may think they are doing you a favor by leaving a couch and a bottle of catsup in the fridge. I want it ALL gone when they leave. I typically remind them of bulk trash days and give them the phone numbers for the local Salvation Army and Goodwill stores. These charities will pick up most items.
  • Advertise early, but get their OK. It’s in my lease that I can advertise the house early, but I always approach it so that they are agreeing and somewhat approving me to do so. I have never had anyone give me a problem with this. Once the exterior looks presentable, I get my sign in the yard.

moving day

  • Start the make ready before they move out. This can especially be done on the exterior of the property. (landscaping, fence, windows, roof, garage door issues, ext paint touchup, etc..)
  • Ask if anything needs to be repaired inside. This is certainly not something I ask when I pick up the rent each month, but now is the time to come out and ask this. Anything that needs repaired I get it done before they leave.
  • Incent them to clean. Remind them of what it takes to get their deposit back and that you want to be able to give them a good reference. You can “Wave the Carrot” a bit more by saying, “ ..although the lease says I can hold the deposit for 30 days after move-out, I will pay this out at the final walkthrough if everything looks good”. Be sure and get the garage door openers, fan remotes, etc. before they are gone.
  • Offer $100 to find a new tenant. If you have good tenants, they likely know people that would make good tenants. First just ask if they know someone (try and get it for free), then a week later offer $100 if they find your next tenant. So far, I have only offered this in the winter when I thought it might be harder to fill my vacancy.
  • Stress they need to be out on time. Stay in communication with your tenants during this vacancy period. I would even border on over-communication. You don’t want this scenario – “Well the house we were bidding on didn’t meet appraisal, we are passing on it – We need to stay until we find another home”. If you already have new tenants lined up, this will be a problem. Technically you could force them to move, but staying on top of your tenants every few days will eliminate this scenario and let them know they need to move out as agreed.
  • Confirm what appliances are yours. With all the activity around moving, movers, moving trucks, etc.. I sometimes fear my appliances will disappear. As I am walking around the house with them, I might say now that washer and dryer is not mine, is it? They will reply with No, that is mine. I say ok.. great, but I think that fridge is mine? Then they say Yep – that’s yours. I then follow-up.. Its working good? Ice maker still working? [Just a friendly reminder]

Move out notice is great. If you get it, then take advantage of it and get your current tenants to help out where possible. If you treat your tenants well during their stay, its surprising how far they will go to help you when they move.

Final numbers on Property 7

Our tenants are all moved in on Property 7. This was our first vacancy in almost 18 months, so I was afraid we might be a bit rusty in our make-ready preparations. This was not the case. With the ample move-out notice from our tenants, the great condition they left the property, and the time of year we had no problems filling this vacancy.

Property 7 being 3 miles from our primary really helps. Our biggest burden was putting out the For Rent signs at a few intersections each day for 2 weekends. I always put out my signs early in the morning and take them down at sundown. I think this keeps us legal and they can sometimes disappear if you don’t pick them up. Our other big time spender was on deferred landscaping maintenance. Once we got started, it was tough to tell where to stop. This is a strong Class B Property renting at $1,250 per month, so we wanted to err on the over improvement side.

In an earlier post, I mentioned our total make-ready would probably run $500-$750. We still have an estimate for an outstanding utility bill, but we are north of those numbers. Below are the detailed totals.

17 exp summary

As you can see the heavy investment was in the landscaping. I am terrible at remembering to take before pictures, but below are a few. The carpets had a few spots, so we had them cleaned as well. We did not hold back any of the deposit as the carpets were not this clean when we rented to our previous tenants. Carpet is in about 40% of the property, but we will be evaluating alternatives at the next vacancy.

One nice thing was our tenants called us several days before they were supposed to move in on the 9th. They wanted to sign the lease and get the keys early as we had a great weather weekend and they were eager to start moving. This allowed us to start the rent ahead of our original plan. This shaved a few more days off of our vacancy period and equated to over $200.

Front May 2014

 

 

 

 front landscape b4front landscape After

Are some landlords selling in this Market?

So on our recent vacancy the home rented fast. We had several good candidates and everyone seemed to be telling us the same thing – “Properties are renting quickly”. We noticed the same thing. There was only one other sign up in the immediate neighborhood of our vacancy. That sign was up one weekend and gone the next one.

Our signs were up for two weekends, but we were being conservative as we had a verbal commitment but had not received the deposit. Our candidate pulled through and we ended up pulling our signs as they paid the deposit on Sunday afternoon. We called on a few other rentals and those properties had also already been rented.

time to move
Several of our walkthrough prospects were telling us they were moving as their landlord was selling the property. Values have certainly come up in this neighborhood and we have seen a few flip projects lately as well. Not sure if this is just landlords taking advantage of the increased values, a seasonal thing, tired landlords, an anomaly or what? The neighborhood is predominately owner occupied homes, but we know there are a decent number of rentals as well.

We were certainly aware of the market and did take the advantage to raise the rent. We ended up raising the rent to $1,250 from $1,135. A significant increase, but it has been two years since we last raised the rent. Our current practice has been to never raise the rent during a tenancy. So far we have stuck to this trend, but it’s not a promise I make to any of my tenants for sure..

This trend of tenants having to look for other properties as their landlord is selling intrigues me. It is somewhat ironic as I recently sold one of my rentals as well. Albeit this was to my current tenant, but selling certainly appears to be on the minds of many. It would seem to me that as home values increase, demand for housing rises, and interest rates start to head north – at some point a few landlords will pull the trigger and sell. Has anyone seen this trend in your market?

“It’s already been rented”

We have been busy the last couple of weeks. We got notice on Property 7 that our tenants would be moving as they are purchasing a new home. These are good tenants that we hated to see leave. They gave almost the full 30 day notice and more importantly they left the place in excellent condition. The biggest challenge was the outside landscaping. They let it get out of control a bit, but some of this is just due to the Spring weather and everything taking off all at once.

We got notice a few days after they paid rent last month. They said they would be in their new house on May 1. The did advise they would probably have most of the belongings out the week before and they would use the last week to clean and leisurely move. “Wow..I have not heard that too often.”

Val and I walked through the house a few times before they moved out. We we were looking for what would need to be done, but were suprised at how well the house looked. It was all minor stuff. Our plan was to have the carpets cleaned (2 of the 3 bedrooms and a living area), minor touch-up on the paint, replace the microwave (cheaper to replace than repair) and then the landscaping.

All went according to plan. We placed our sign in the yard the weekend after we got notice. We used the tube flyer with a note at the bottom that said, “Do not disturb the tenants – Property Available May 1”. I put the directional signs at a few major street corners on the weekends.

We received lots of calls and some strong candidates. We had several good Applications filled out 2 weeks before they moved. We had a Mom and daughter with 2 jobs and a Social Security check that moved to the front of the line quickly. They were one of the first ones to inquire about the house. Their story was they were getting forced out as their current landlord was selling the home. We could not show them the house right away as our tenants had not moved out and we wanted to clean it up. In the meantime, Val got paystubs, tracked down the current landlord, verified previous landlord, etc. This was her obvious first choice even after we had numerous other good candidates drop by as were working in the front yard last weekend.

Tonight Val met them at the house for the first look inside the home. They loved it, put the deposit down and the house is rented. This was our first vacancy in almost 18 months and we learned quite a bit about the market in this area that we did not know.

This was a very smooth tenant turnover with a nice rent increase. There are lots of blog posts here…just been really busy. I can tell you the rental market for this niche (Strong Class B neighborhood) is very strong right now. We are going to have some people very upset next week when they call back and we tell them we have already rented the house.

A few numbers:

Previous Rent: $1,135

New Rent: $1,250

Tenant Tenure:  24 months

Days vacant: 9 days

Total Rehab: Not sure yet, but somewhere around $500 – $750

Reader e-mail on Acquisition vs Paydown

I had a reader drop me an e-mail with the question below. I thought it was a good topic for a blog post. If you have any questions, drop me a note at: landlordinvestor@gmail.com

I was writing to thank you for the high quality blog you write. I have learned a tremendous amount from you and am grateful you decided to share your knowledge with the world.

I am a young landlord (24 – have been a landlord for two almost three years now) and have made plenty of mistakes and been extremely lucky that they have not bitten me harder than they already have. Your blog is also opening up my thought process for avoiding future mistakes.

I was wondering if you would go into your acquisition against pay down strategy a little more in a future post? I currently have one property purchased for 147k in 2011 that I still owe between 69 and 89k on depending on how you count it (I’m in the army and USAA offers a “career starter loan” of 35k at 0.5% interest due in 5 years. My mortgage was for 111.2k at 3.75% interest due over 30 years. I’ve got 69k left on the mortgage and about 15k left on the 35k loan). I’m currently stationed in **** due to leave in 1 year and was trying to figure out if I should use my non-retirement savings of roughly 50k to essentially pay off the mortgage or finance a new house to rent. Obviously since you don’t know my exact situation you can’t answer that readily but maybe some pro/con discussion as well as your strategy would really help me out as have other parts of your blog.

Thank you again very much!

Respectfully,

X

 

X,

Thanks for the e-mail and reading my blog. Sorry it has taken me so long to respond. Keep commenting – it keeps me motivated. Congrats on starting to landlord at 24. I did not start until my 30’s, but sure wished I had started that young. So to your question…

Acquisition vs paydown is always a hot topic. I am going to give you my philosophy on this and I assure you it is not in-line with many Real Estate gurus and many of the RE books. They think you should leverage like crazy, take out as many mortgages as you can, always keep buying, then 1031 Exchange into multi-unit apartments, etc, etc.. Hell, I am not doing that.. I don’t need to be Donald Trump. I am fine being a ‘weekend warrior’ landlord. Keep in mind that my wife and I hold full-time Mega corp jobs and we self manage so our time is limited. Our main purpose with rentals is to build enough wealth and income that we don’t need our corporate jobs any longer. The key for us is to build that stream of income – And I feel the best way to build that quickly is to get the properties paid off ASAP.

Now with the above said. We do use leverage. It looks like you have done what I might have done. You used the .5% 35k loan for a down payment on a rental. Nice. Then you signed up for a 3.75% mortgage. Beautiful. It is very difficult for me to recommend paying off a 3.75% mortgage early. After the deduction this is close to sub 3%. Almost free leverage. Now that Val and I have been at it for a while we have several rentals paid off. This allowed us to open lines of credit against these properties. When we find the right deal, we pull from our line and pay cash. Our lines are currently at around 5% and variable. Not great, but not bad and we pay the lines off quick (2-3 years) so it does not really matter anyhow.

You then asked, “Should I use 50k in non-retirement savings to pay off/down the mortgage or finance a new house to rent?”   Hmmm.. tough to answer without knowing more about you. You sound comfortable being a landlord and you have good equity in the home so if it cash flows ok today, I would keep the mortgage especially at that rate. 50k is a decent sum of cash and will give you some options with RE investing. I will say that my wife and I both graduating from college and attaining full-time corporate jobs has been hugely beneficial to building our portfolio. With your service in the Army and various stations – I am not sure if you have had this opportunity. My first thought is you should think about using your funds for college. If you know real estate is for you, then a real estate or finance degree will allow you to do both.

If you have had the chance to get your degree, then I would consider using the funds for a down payment and rehab expenses on a fixer and live in it when you get back to the States. Fix it up, Rent it out, Rinse and repeat. Take your time and wait for good deals.
I hope this helps..

Best of luck to you.
Chuck

How do you find good cheap help?

This is a topic I don’t post about often, but I spend a lot of time in this area. You don’t read a lot about labor in the RE books, but I feel this is a critical area that should be discussed more. So here is my philosophy on contractors. Keep in mind that self-managing with full time day jobs limits our time – so surrounding ourselves with good help is key. At this point we have our faithful list on speed dial, but typically around vacancies and new purchases we are always looking for good trades.

Ask for a referral. My best help has come from asking a fellow investor, neighbor or tenant for someone they have used or might know. These always seem to be good references. They have a vested interest and their reputation is on the line to continue to offer good work. My best trades seem to only do some work on the side and are not full time plumbers, electricians, handymen, etc. They typically don’t even have a business card.

Walked up to people on various job sites.  I like finding someone working on a house. I can immediately view their work versus just talking with someone I don’t know on the phone. These trades are also familiar with the area.  Lawn people are ideal to find this way.  I am out rehabbing a property, lawn is getting long, and all of a sudden a lawn guy drives up to mow the neighbor’s yard.  I go over there when they are almost done and ask them if they can run over my lawn for $20. 

Trades walking up to your job site as you are working. OK, here I have found you have to be careful. I will give these people small jobs only to start if I really need the help. These folks could be just scoping out the place. History has shown to me they will provide a cheap bid, but are not any good. Never pay them up-front for anything. 

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Business cards stuck in the front door.  I use these on occasion and have had some luck. They obviously work in your neighborhood. I find them to be a bit more expensive than other sources, but I have found help this way.

Advertising. Lots of ways here: from pulling business cards off of a bulletin board, ads in local papers, craigslist, mailbox flyers, front door flyers, etc. Some luck here, but this is not how I have found my best trades.

Home Depot.  Not a great deal of experience doing this, but I did have a good painter approach me inside home depot at the paint department as I was loading a 5 gallon bucket into my shopping cart. They can also be found outside the Home Depot. These are typically day laborers and can be paid by the hour. I usually prefer to pay by the job, but I have had some luck here with basic work.

Spotting a truck. I can’t tell you how many times I am driving down the road and see someone’s truck that is advertising his trade. I will take a picture of these vehicles. Depending on my desperation I have called them before and had some luck here as  well. Finding someone local to the area is always a positive. I prefer the beat up truck, not the nice 2014 Big Ford truck. I want the 1976 truck with the ladder tied on with a tee-shirt. This guy will always be cheaper.

My final piece of advice here for landlords is that what you really need is a good handyman. You will want to have a good plumber, electrician, etc for the more serious jobs. A mistake we made early on was using a Licensed specialist for every repair. You just don’t need a fully licensed plumber to repair a toilet flapper. Handyman are designed for these small tasks. They are cheaper and exactly what you need for a quick fix.