Dealing With the Irrational Mind

Dealing with the irrational mind is a fundamental requirement of property management, unfortunately. We're all irrational at times, so this isn't something unique to tenants, but you'll find that generally emotions overrule logic in the mind of a tenant more often than in other circumstances. Perhaps this is because since housing is such an important decision it becomes more emotional (the bigger the decision, the more likely we are to make it emotionally rather than logically has been my observation), or perhaps there are other things in play, such as a cultural expectation we've created today for others to take care of all our problems or at least be blamed for them. We want to think of ourselves as creatures of intellect and logic, but the truth is that most of the time we make decisions and interpretations based on emotions, and then attempt to justify them afterwards with logic. So strong is this need for self-justification, that people can often remember things incorrectly. To be less, polite, they make stuff up. This is why a tenant who gets taken to court invariably is convinced that the landlord "wouldn't fix anything" as justification for their non-payment, even though the tenant has no proof of what they say, or that they've given no notice to the landlord, etc. We'll illustrate with a story where we'll call our tenant Gary.

Gary was a fairly typical tenant, hard-working family man. Sometimes a bit too much of a family man from our standpoint, as he would move his kids and their families in with them periodically as they hit some financial rough patch or another (overloading our unit's capacity, and not putting them on the lease, getting approvals, etc.). One day we got a strange maintenance request call from him where he said the refrigerator was keeping things "too cold". We advised him to try turning it down and to call us back if that didn't work. We never got another call. He did, though, skip out the next month owing rent (and leaving the unit in a rather undesirable condition). The first thing I did on entering was to check the refrigerator, and found it still set on the maximum cold setting.

It was fairly easy to track him down and get him served with a claim for damages. His response was very emotional, railing against the perceived evils of our doing, and instead of seeking some sort of settlement or payment plan he hired an attorney. The attorney filed a fiery answer using the claims of us not fixing anything (using the proper legal terminologies). Eventually the attorney withdrew (I'm sure because he got stiffed by Gary as well), and we got to our day in court. There Gary threw a fit about how he had a right to break the lease because we wouldn't fix anything; he got so emotional the judge had to lecture him and the bailiff came and stood next to him. Gary had rationalized things to the point that he truly believed he had been done a great evil and was reacting accordingly. Of course, emotions don't win court cases, proof does, and we were the ones with proofs. Upon losing the judgment, Gary threw another tantrum, and even after he left the courtroom was loudly uttering threats so all could hear. He also swore we'd never get a dime.

The too cold refrigerator thing was obviously his way of justifying what he was about to do; when he called us, he'd already decided to move and his mind worked out a plan to provide a rationalization, no matter how flimsy. He internalized the falsehood to where he believed it passionately. Facts didn't matter to him at that point, but they did matter in court.

A few months later I saw him in court again; he and his family were being evicted, and they made all the same arguments in court - landlord wouldn't fix anything etc. He glared at me as if he had seen Satan incarnate, even though I was there on another tenant issue. In talking to that property manager, I heard a familiar story of rationalization and emotion; the difference was that after Gary was put out of that unit, the manager found it infested with bedbugs!

True to his word, Gary has not paid anything on his judgment yet - he's quit working, doesn't even own a car, and is just living off his wife's disability check. He has chosen to deliberately live in poverty, all to back up a rationalization, a justification, that is absurd. This demonstrates just how powerful these rationalizations on the parts of tenants can become. Your weapon against this is verification - take pictures of everything, get everything in writing, keep maintenance record notes, etc. Then, don't try to meet emotion with emotion. Arguing back and forth with an irrational mind is playing on their playing field. Take the argument to court or similar arbitration, where logic and facts win over emotions. While dealing with court issues can be somewhat intimidating, as a landlord they are inevitable, and you are better off learning the ropes and doing it when needed, rather than hoping you don't have to. Not all tenants get as emotional in court as Gary; many, in fact, begin to see the illogic of what they are saying only when they are forced to present it to a judge. Too many landlords are hesitant about having a judge decide issues between them and their tenants, as if going to court were a bad thing. While it shouldn't be the first resort in attempting to work with tenants, it should happen as soon as it becomes obvious the tenant isn't working with you or only wants to live in emotions on the issue. Some tenants will learn from the experience and become better tenants. You will become better and more effective at managing your properties. Landlords down the road will have the benefit of seeing that you had to take this tenant to court (it's public information if they'll just look it up as part of the approval process), which is very valuable information for them.

Will we ever collect from Gary? Hard to say - if he's that determined to stay off the radar that he's willing to live below the poverty line he may just succeed at cutting off his nose to spite his face. However, we do end up collecting from many of the ones like Gary. Eventually they need to get a job, or want to buy a house, etc. and we'll be there to garnish or place a lien. In my state judgments are good for 15 years and they collect 12 percent interest. Not a bad investment even if we only collect half of them!

What To Do When They Put "Paid In Full" And It's Not

People like to try cute things in hopes they can get away with them. One that some "smart" tenants will try is to mark their payment check to you "Paid In Full", when they know good and well it isn't. Most commonly, they'll pay late and not include the late fees. In essence they want you, by accepting the check, to enter into a new agreement declaring that they are current. They figure you will do this rather than return the check - tempting you with a bird in the hand so to speak. However, you have another, better, option.

The Uniform Commercial Code is something that every person involved in business transactions (which is nearly all of us) should become at least superficially familiar with. It was an effort by private organizations (the American Law Institute and the National Conference of Commissioners on Uniform State Laws) to create a basis for easier commerce between the states. It was the work of a number of legal scholars and was originally published in 1952. The UCC isn't itself law, just a suggestion of how states should establish business and contract laws. It becomes law when a state legislature adopts the UCC as such - which all 50 states have done to some degree (individual states have some variations, usually minor). § 1-308 of the UCC says this:

(a) A Party that with explicit reservation of rights performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. Such words as "without prejudice," "under protest," or the like are sufficient.

(b) Subsection (a) does not apply to an accord and satisfaction.

While that certainly sounds a bit complicated, what it says is that you don't just have to choose between returning the check or accepting a lesser amount than what you think is owed. By writing "without prejudice" with the deposit endorsement, you preserve your claim of more money owed under your agreement with the tenant. We simply had deposit stamps made that said "For Deposit Only - Without Prejudice" and use that for all deposits. Writing "Without Prejudice" doesn't guarantee you money, but it does preserve your right to claim that money is owed - which means you can take the tenant to court if necessary, or if you withhold that money from the tenant's deposit they'll need to prove to a judge that they don't owe it. If you don't preserve your claims with a phrase like "Without Prejudice", it's possible a court could find that you gave up that claim by accepting a check with "Paid in Full" marked on it. As an honest and straightforward landlord, your preference will be that irresolvable disputes with tenants be heard in court. If you've acted in accordance with the lease agreement, kept good records and evidence of what has occurred and preserved your claim, then your chances of success are very good. If you just keep going back and forth with an angry or spiteful tenant, you'll not get very far. A tenant might say "Ha ha, you deposited it marked 'Paid in Full' so now I don't have to pay you". You then can respond, "Please notice that I preserved my claim under the UCC with the 'Without Prejudice' endorsement". There's a good chance they won't know what that is and want to keep arguing back and forth with you. It would be a waste of your time at that point. Just tell the tenant they can tell their side to the judge.

The Vista Virus

Nearly everyone in business relies on computers, and real estate management is no exception. We operate a website, communicate with tenants and prospects via email, prepare statements and legal documents, etc. etc. So, while my focus is not primarily on technology, sometimes we have to look at it and how it affects us. So, I will occasionally pass along some of our experiences and suggestions. The first and most important suggestion I can give to PC users is this: stay as far, far away from Windows Vista as you can. While it is supposed to be the most secure version of Windows yet, it is – in effect – pre-loaded with a bunch of viruses and malware created by Microsoft which are guaranteed to waste many hours of your time and cause you frustration to no end. Of course, when I talk with the folks at Microsoft, they are offended at the suggestion that they put viruses in Windows, but just because the virus comes from them, that makes it no less a virus, which most would define as unwanted software which intentionally infects your computer causing it to have poor performance, data loss and even loss of functionality.

Understand also, that I’m not a Microsoft hater or Apple fanatic. I’ve used every version of Windows since 3.1 and was reasonably satisfied with XP, so these are not rantings from the fringe, but rather honest assessments from someone who simply depends on computers functioning properly in order to make a living. Here are a few of the lowlights (covering all of them would turn this into a book) of Vista:

Incompatibility: this massive bug is pretty well known, but a lot of folks thought that if they waited for the first service pack (where Microsoft supposedly patches bugs), maybe that would help. Forget it. If you change to Vista, you can count on having to waste money replacing perfectly good software and peripherals that simply will not now, nor ever, work with Vista – perhaps starting with your printer and going from there. Every change in Windows produces some incompatibility with older software and peripherals, but there has never been anything on this massive a scale. Even some very current software and peripherals will not work with Vista.

UAC: This stands for User Account Control, which is supposed to be the biggest security feature of Vista. Instead, it should stand for Under Alien Control, which is what you will think is happening to your computer. Most people get irritated at the UAC constantly asking stupid questions like whether you want to open or install a program when you just clicked to do so, but it goes much deeper. The UAC will literally lock you out of your own files at times for no reason, refusing to let you do simple things like rename them, or even refusing to let you open your own files, especially if you have brought these files over from another computer or hard drive. This will cause you to delve into an unbelievable labyrinth of administrative control level settings, trying everything, only to discover that nothing helps (occasionally rebooting will help with the renaming). Eventually most serious users and small businesses learn to turn off the UAC – which generates all kinds of warnings from Vista. Even that doesn’t help with all of the file lock-out problems caused by the Vista virus, though. All of my wife’s old files from her XP computer which died, and some files which I have even created under Vista are still beyond the reach of Vista and the most able of Microsoft technicians. Unfortunately, there are some legitimate security functions of the UAC, so turning it off makes your computer less secure than XP, but ultimately most find that they have to turn off the UAC to get any reasonable function from their machine.

Windows Genuine: Microsoft has loaded Vista with aggressive anti-piracy measures. The problem is it doesn’t work well, gets fooled all the time, and in some cases simply shuts your computer down (remember the definition of a virus). Vista checks for hardware changes to determine if it is genuine (which, when you think about it, makes no sense for the consumer). Say your motherboard goes bad and has to be replaced, for example. Vista will shut you down. It will force you to “prove” that it is “genuine” at their website, and then almost always incorrectly decide that your copy of Vista isn’t genuine, and insult you further by asking you to take a survey where they ask you questions like “how did it make you feel to find out you had an illegal copy of Windows?”. It will put you in a great mood for when you finally get that poor tech support person in India on the phone. Sometimes Vista just randomly decides that it isn’t “genuine”, even without hardware changes. Note: the Office 2007 suites of software are even more aggressive (and more malfunctioning) in this area than Vista itself is.

DRM: This stands for Digital Rights Management, which is fancy for software that is supposed to prevent you from playing pirated copies of movies and music on your computer. Of course, like the previous, it acts more as a virus. The DRM data link libraries are easily corrupted, and when that happens your Windows Media Player and Media Center will mysteriously start having strange malfunctions. And, of course, the DRM malfunctions regularly. Even when you are playing legitimate copies, the DMR can easily think they aren’t legitimate, in which case it will either shut you down, or force your sound and video cards to play back in a degraded level. Reading the specs on this software is really scary stuff. It’s beyond Big Brother.

Aero: Microsoft bragged and bragged about how wonderful all the new graphics features would be under Vista. It was apparently a red herring to distract from all the viruses they were loading it with. In fact, the graphics changes are very minor, yet are a tremendous resource hog that will noticeably slow down even dual core machines. Most everyone who hates waiting on their computer eventually gives up and turns the graphics enhancements off.

So, Vista is just about the worst thing to happen to PC’s in years. What are the options?

1) Stick with XP. Of course, Microsoft is fighting this by ending support for XP, and if you need a new computer it’s hard to find one that still has XP. However, the backlash against Vista has been so strong, and demand for new computers that still have XP so great, that most Manufacturers still offer it, though you probably have to special order it.
2) If you already have Vista, downgrade to XP. A lot of folks are doing it. The problem is that in some cases Microsoft will charge you money to return your machine to XP, and the downgrade can be complicated. However, consider what your time is worth, and how much of it Vista is wasting, and you may find it worthwhile to pay whatever it takes, hire a techie, etc. to get away from Vista.

3) Get an Apple. Apple can run various incarnations of Windows and PC software. This isn't a good solution if your hardware isn't in need of upgrading, but if it's about time for you to move up from your old PC, you'd be better off buying an Apple before buying anything with Vista on it (don't think, though, that Apple has a perfect OS either).
4) Move to Linux. Linux is an open-source operating system that is free. Really. I won’t go into the history behind Linux, but it is interesting and has always been there as an alternative to Windows. There are a number of issues with doing this, though. Linux isn’t supported by a company, so there isn’t a tech support line to call. It is supported by a community of users and authors. Often this isn’t so bad, because in my experience I’ve found most solutions to Windows problems not from Microsoft, which seems to often be clueless about common bugs experienced by wide numbers of users, but from the community of Windows users. However, expect a lot of driver and other issues with Linux, including the fact that not everything which runs under Windows will run successfully on Linux. Most will, but often with some tweaking required. If you aren’t at least a little technically oriented in using your computer, Linux may be something of a struggle. However, there are some real payoffs if you can make the switch. Linux doesn’t care about piracy issues (it’s free, after all), and while Microsoft deliberately writes Windows to be permanently attached to one machine, Linux doesn’t care what it boots on. This means you could back up your desktop to an external hard drive when you travel, then plug that hard drive into your laptop and have everything right there, booting up just like you were in front of the desktop. Linux also allows for multiple simultaneous users. In other words, Windows forces you to have a separate computer if there is someone else in your home or office who wants to work at the same time you do. With Linux they just need their own monitor and keyboard, not a whole computer. Support for Linux is growing, and has already been popular with some businesses. The Vista debacle is causing a lot of others to take a look at Linux. It is possible to set up a “dual boot” where you can have both Linux and Windows on the same machine (though Vista was intentionally designed by Microsoft to try and prevent this – there are work-arounds, but they aren’t simple). This would allow you to move what you can now to Linux, and then over time work on the rest, but still be able to run them under Windows as needed.

None of these four solutions is perfect, but for many of us there is almost no choice but to move away from Vista, even after many years of using Windows products. In our case, we’re trying a transition to Linux. If that doesn’t work, it will make my Apple dealer happy. I’ve had long conversations with managers at Microsoft about the problems with Vista. Initially they are trained to try and convince you that it’s just because you aren’t used to the “enhancements”. After a few minutes though, it finally gets through to them that I’m talking about serious systemic flaws in the operating system design and they will quit pretending. Some of them even get pretty honest about the huge blow-back they’ve had in response to Vista and promise that they are already working on the successor to Vista and things will get better. The problem is, though, that Microsoft has lost my trust. The design behind Vista and Office 2007 shows that they forgot who actually owns the hardware and operating systems that we pay our hard-earned money for, and they feel free to take great liberties with my property. That’s a violation that gets a little bit personal, and I’ve seen nothing out of Redmond yet which indicates remorse or a direction away from such invasive design. Microsoft has a right to try and prevent piracy, but they don’t have the right to do it by invading my machine and causing it to deliberately malfunction, especially when their systems for invoking these malfunctions malfunction themselves so regularly.

The Dirt Insurance Scam

Lenders require you to do a lot of things to protect them. They require title insurance - even if you're refinancing property you already purchased title insurance for (another scam), sometimes they require you to get mortgage insurance (yet another scam), they sometimes require you to escrow money for taxes and insurance, to make sure those are paid. If somehow you don't have property insurance, they will invoke "force placed" insurance, where they buy very expensive insurance and put a lien on your property to pay for it. Some of this is understandable - a mortgage holder has a big investment in your property and doesn't want it to be uninsured in case of fire. Much of it, though, is wasteful overkill. One of the most common, in these days of 90 to 100 percent loans, is what my insurance agent and I refer to as insuring dirt.

Land is something that is hard to damage; if you have a fire that burns your house to the ground, it still won't harm the ground to where you couldn't use it to build another house. Typically, the land is considered about 20% of the value of a property. This can vary, of course, and 15-25% is a range accepted pretty much without question. If you have a unique property (a high-rise apartment building, or a lot of acreage) then maybe the land is worth much less or more than this range, but we'll deal with the typical 20%. Insurance agents and mortgage companies know this very well. It's why your insurance agent (if they're honest) will tell you not to insure the dirt (land) against property damage. If you have a duplex property worth $150,000, then if 20% of that value is in the land, your building is worth about $120,000. There's little need for you to have more than $120,000 in property insurance. Even if it burns to the ground you've still got $30,000 of land that hasn't lost its value.

The problem has been coming from 90-100% loans, where the mortgage company is insisting that the property insurance amount be for the full amount of the loan. In many states, including my own, this isn't legal. There are laws against insuring dirt, so to speak (or thin air). I would imagine the main intent of the laws was to prevent overvaluing buildings with insurance, then burning them to collect, but it also should keep people from wasting money on insurance they simply don't need. However, mortgage companies by-and-large have gotten away with this. I'm sure, in the hot go-go real estate markets of the recent past, they felt like this would be workable since the property values were likely to rise. In a short time they could see all their loan value as insurable in just the value of the structures on the property. That didn't make it right, though, and now it really works against the borrower in the flat-to-down real estate markets in most of the country. Yet, the mortgage companies still insist you over-insure your properties on the 90-100% loans. There are three problems with this:

1) It may not be legal, and you may have a hard time finding an insurance agent who will do it.

2) It costs you wasted money insuring dirt.

3) It can cost you too much in property taxes.

The reason for number 3 is that your property tax assessor also knows that your land is worth something like 20% of your total property value. When you challenge the property value (and you should from time to time - that number they assign your property for taxing is just a number, not a hard fact), the first thing the tax assessor will look at is how much insurance you carry. If, from the above example, you are carrying $150,000 of insurance on a property where the land is worth about 20%, the assessor will say you've provided your own proof that the property is worth more like $187,500 and will want to tax you for that much. They will figure the $150,000 insurance is on the building only and add in some value for the land. You can appeal further, but you'd have to get current appraisals and other proofs to fight it. The tax assessor won't care that the mortgage company forced you to get too much insurance.

So, what to do? In spite of the fact that insuring dirt isn't right (and sometimes isn't legal), you're going to have little luck getting the mortgage companies to change their ways. Maybe eventually state attorney generals will take them on to stop this waste and abuse, but you aren't going to have much luck on your own. If you have to have the loan, then you have to have the loan, and you'll pay for a little more insurance, and you'll find an insurance agent who will look the other way on the dirt insurance (there are plenty who will - to a point). But, you're not stuck. Your mortgage note will have some requirement that you have adequate property insurance. This would be typical: "Borrower shall keep the improvements now existing or hereafter erected on the Property insured against loss by fire, and any other hazards for which the lender requires insurance. This insurance shall be maintained in the amounts and for the periods that the Lender requires."

While it sounds rather iron-clad, no contract can force you to do something illegal, and I doubt many courts allowing the mortgage holder to force you to insure beyond their interest. A court would apply standards of reasonableness to this apparently unlimited requirement. In short, no one can force the mortgage company to give you a loan (so you play along if you want it), but in the long run the mortgage company can't force you to carry illegal insurance. Laws overide what is in a contract. You can sign a contract selling yourself into slavery, but slavery is illegal so the contract would be void, for example. So, after you've settled in to your new loan, some time before you go down to discuss with the property tax assessor what your property is worth, call your insurance agent and reduce your coverage to a correct amount (it wouldn't hurt to consult with a Realtor or appraisor to get their ballpark idea of a number). Within a few days you'll receive a new "dec sheet" or declarations page, showing the coverage from the insurance company. That is what you take to show the tax assessor. Doing this also lowers your insurance costs to what they should be.

What happens after that? Maybe nothing. The mortgage company may not react at all. However, often you might get a letter saying you need more coverage. You just write one back explaining that you've discussed this with your insurance agent, and they felt you had the property over-insured. In fact (in states where it applies), you have discovered that carrying that much insurance isn't legal (your insurance agent will know, but most state laws can be searched on the internet now). Chances are, that will be the last you'll hear from the mortgage company. They know they shouldn't require more insurance than is necessary, and fighting with you, possibly in court about it wouldn't be worth it. I suppose it's possible a mortgage company could try to play hardball and try additional force place insurance, leaving you with the choice of whether to take them to court, but I've not seen it happen. If they do try to be hard about it, try negotiating - maybe there is a number a little higher than yours and a little lower than theirs that you can agree on.

To my knowledge, no one has tried to measure how much money is wasted on extra insurance and taxes by mortgage companies requiring too much insurance, but it has to be a very large number - and it is all money that could have been used to pay on the mortgage itself; no small matter in these days of high foreclosure rates. It's always a good idea, though, to see if you are paying for insurance you don't need.

A Hidden Enemy: Dryer Lint

Don't laugh. Dryer lint. It causes more problems than you think. If you have rental units with washer/dryer hookups, or you provide washer and dryer, there are some cautions for you to be aware of. This week a fire in Birmingham, Alabama that destroyed 23 apartment units was caused by a clogged dyer vent (clogged with lint, of course). This was not an isolated incident. A study from 2000-2004 by the National Fire Prevention Association showed that there were 8,900 dryer fires a year (nearly all caused by lint buildup) in the U.S. There are other problems that cost you money, though, from dryer lint.

One very nasty one is when there is a break in the vent line and lint is sent directly under the house. The problem is that your furnace intake is likely nearby and will suck that lint right in. Then it gets into the fan and the coils and you've got another big problem. Your unit will work too hard and may shut down from overheating. This can also cause your tenant's heating/cooling bill to rise and leave them in a pinch to pay the rent. Cleaning the lint out of the fan and coils is costly and time-consuming. Not doing this, though, will shorten the life-span of your furnace. Now we're talking serious dollars.

Another odd problem we've seen from lint back ups: defrost lines on refrigerators. We have some small apartments where we supply the washer and dryer. Of course the tenants take full advantage, and often don't clean the lint every time they use the dryer. We then started getting calls about refrigerators not working properly, such as water forming inside the refrigerator or them not cooling. What we found was the defrost drain lines were getting clogged. Modern refrigerators will briefly heat the freezer section in order to melt the frost and ice buildup up. Long ago, you just had to take everything out every so often and let it melt. There is a drain line to take this water to a location where it can simply evaporate, usually a pan below the refrigerator. When the drain lines clog, that water has no where to go and will either pour into the refrigerator from the freezer or refreeze in the line, backing everything up. Water in the air (measured by humidity) will condense on objects when cooled (notice what happens to the outside of a glass of ice water). Raindrops form around dust particles in the atmosphere. Dryer lint is perfect for this. At the end of the line that goes into the freezer, the water will condense and then freeze around lint particles and block the line.

We've also seen the problem in the condensation lines for air conditioning. Poor design caused the drain line and the dryer to be next to each other. Lint gets in the line until it blocked up completely and the water that condenses around the cool parts of the central air unit has no where to drain. Then the tenant calls saying water is coming from their utility closet - often thinking they have a leak in the washing machine.

Sending someone to unclog these lines won't necessarily bankrupt you, but it's one more cost, aggravation and danger you can live without. What you can do:

1) Emphasize to tenants how important it is they clean the lint from the dryer filter every single time they use it. Write it into the lease, put signs on the dryer reminding them (if you own the dryers), when you change the furnace filters and it seems the filter is gathering a lot of lint, ask the tenant if they've been cleaning the lint filter on the dryer as they should. Be firm on this and if they don't understand why, explain the dangers and problems to them.

2) Check the vent and lines yourself every year or so. If you see lint/dust accumulating in the crawl space, you likely have a break in the line. Also, if you have a flexible line, look for sags and repair those (lint will gather in the low spots and clog the line).

3) If you have the type of flexible line that looks like it's a foil but when you touch it, it feels crinkly like dry plastic, replace it. Even though it was nearly a standard just a few years ago, it really is plastic, and easily gets breaks or catches on fire. Many areas have changed their building codes to make this stuff illegal, and it voids the warranties on new dryers to hook them up to it.

4) The most critical point is the place where the vent plate meets the vent line at the floor. If you get a clog here then it's close to the dryer, where the vented air is the hottest. This point takes a lot of heat/abuse, so replace the plate if there is damage, even if there isn't a clog yet. We've seen a lot of clogs at this point.

5) If you want a very simple test, just have the dryer turned on and check to see if there is good air flow out of the vent outside. If it's weak, you've got blockage somewhere. Another thing, you can ask your tenants if it's taking a long time for their clothes to dry; it's a symptom of clogging.

6) If you have concerns, the lines can be cleaned, either by professional or you can purchase the brushes and run them yourself.

Living units are supposed to be designed so that the distance from the dryer to the exterior is short and straight - the longer the line and the more turns it makes the more potential problems - but home designers have gotten away from that standard. If you have units with long lines or ones with multiple turns, be more vigilant. While only about 2% of residential fires are cause by dryer vent blockages, it's one of the more preventable fire causes for a landlord, and the other maintenance headaches that lint can cause make a few minutes of checking the lines a good investment.

The One "Utility" You Want To Pay Yourself

If your properties are in communities where the government provides garbage pickup (and therefore you pay for it through your property taxes), or you're only dealing with complexes where you already provide dumpsters for the tenants, then you can skip this post. However, if you are like me and have properties like houses and duplexes where people pay for a garbage service, you need to keep reading.

In general, you want to avoid properties where the landlord pays the utilities - energy and water costs are probably going to be rising faster than general inflation for some time to come, and when you're paying the utility cost your tenants are going to never even think about conserving. In the case of garbage pickup, though, you should pay it. We pay it and then have the tenant agree in the lease to add an amount to what they pay each month to reimburse us. Why do this?

You know there is actually garbage pickup. Sure, leases require tenants to have garbage pickup, but you will be surprised at how many tenants won't get it. They will try to pawn their garbage off at work, or in random dumpsters, or worse let it pile up. Most cities in which the government doesn't handle trash have laws requiring residents to have (pay for) garbage pickup. Eventually the cities figure out that tenants won't do this, and will change the laws to require the property owner to make sure there is garbage pickup. They realize that a tenant who doesn't have the wherewithal to pay for garbage pickup is going to be difficult to levy and collect fines against, but you - the property owner - can't hide. They'll put a lien on your property if nothing else. So, are you willing to risk fines and more, trusting that your tenants will pay their garbage bill? That's not a bet I want to take.

In my town, in fact just down the street, there was a small fire in a rental house last week. According to the paper, "I've never walked into anything like that," said one captain with the police department. Just what had he walked into? "Garbage," said the deputy fire chief, "Floor to ceiling, 20 foot wide, 16 feet deep - garbage."

The mayor was called in, and ordered the garbage removed by a hazmat team. The tenant admitted to not paying her garbage bill for over a year.

The kicker, though, is a paragraph further into the story: "The bill for the cleanup, which took about five hours with heavy equipment, will be charged to the owner of the property..." and then they published his name. The tenant was the one who broke the law (and likely the lease) by not paying for garbage pickup, the tenant was the one who piled garbage until it completely filled the house, but the owner is going to be stuck with the bill - which you can figure will be enormous. The city government isn't dumb; they know there is little chance they would be able to collect anything from the tenant, so they go after the owner.

While not experiencing anything this bad, we had seen a pattern with tenants not paying their garbage bills, especially, of course, the ones who end up skipping out on rent. So naturally they left quite a bit of trash for us to deal with, which we couldn't always get to right away because it can take a week or two to get a herbie delivered and pickup service started. Several years ago we decided that paying the garbage and getting the tenants to pay us was the way to go, and haven't regretted it at all. It puts us on very good terms with the garbage company and the city as well.

There's also a lesson here in doing periodic inspections, but that's a topic for another day.

The Free Month Syndrome Part II

So you've researched your market, things are dead, and you feel you have no choice but to offer a rent special, typically the "free month" deal. You are still not completely vulnerable. There are things you can do.

The first thing you must do is be extra vigilant on your screening process. By advertising free rent, you are putting something of a bullseye on you that tells some unscrupulous souls to try and take advantage of you. Free rent also sounds great to people who don't pay their rent like they are supposed to. Dig hard on the background check. Don't forget to require a full month's rent for the deposit (and never, never take checks for the initial rent and deposit - cash, cashier's check or money order only - trust me).

Next, consider whether you have to give away a full month. Try advertising a half month free if you think that might do the trick. There are usually a few days from the time you approve the tenant to when the lease is signed anyway. We allow seven days as a matter of course ("one week free rent" the ad could say, I suppose). Reduce the seven days to one day from approval to sign the lease in this case and then giving away half a month isn't quite as much pain as it sounds.

If that doesn't work and you have to give away a whole month, remember that you are giving something in a business transaction - it's fair for you to ask for something in return. What we ask for is that the tenant guarantee they will fulfill the entire term of the lease. We have a clause written into the lease (as an addendum) which spells this out. If the tenant doesn't stay for the whole lease, they have to pay back the free month they took. It's only fair, really. Initially we tried a prorated formula, where if they stayed, say, for half of the lease then they only had to pay half of the free month back. Eventually I had to ask myself why we even bothered with that, and now it is the simple deal: stay or pay. If it's a 12-month lease and you stay 9 months, then you have to pay the free month back. Period. You will appreciate it when you get some difficult tenant who drives you crazy then and skips out. It also makes life a little harder on the serial tenants who love to skip from free month deal to free month deal every two to four months. So far we have never had an applicant balk at this offer, but we sure have benefited on a few that turned out to be less than desirable (it's a bad feeling when you look back and think "we gave them a free month?" after they've skipped and left the place a mess). Yes, you have to actually find a way to collect the money they owe on the free month when they skip, but that is a subject for other posts.

There is one more thing that can help when you are forced to offer free rent, and have multiple units vacant. The free month's rent doesn't always have to be the first month (in fact it's better if it's not the first month). It can be any month of the lease. So, what we do is list the units included in the offer, and then let people know that the first one to rent gets their first full month free, the second one to rent gets their second month free, and so forth. This tends to get the first unit or two rented pretty quickly as they realize it is "first come, first served". It's also a big help when someone who has the fourth month free skips out after two months - you've not given away the free rent yet. There is one other thing we add to the free rent addendum for these folks as well, which is that the free rent is void if any monthly payments due before it are late. You want to give free rent to good tenants, not late payers. You'll get your rent on time for three months if the fourth month is free in most cases.

Taking these approaches allows us to put our "free month" ad in there to compete with the rest, but it doesn't leave us giving away as much rent to deadbeats, and that's a big deal.