Landlord Hank: Where Do You Draw the Line On Normal Wear & Tear?

Dear Landlord Hank: Where Do You Draw The Line On Normal Wear And Tear?

The definition of what is normal wear and tear in a rental can be somewhat subjective at times. That’s why veteran landlord and property manager Hank Rossi answers questions from other landlords and property managers around the country about their rentals.

Dear Landlord Hank:

Where do you draw the line on what is normal wear and tear, what is not, and what tenant should pay for?

We had a long-time tenant who lived alone and recently moved into an assisted living facility. While cleaning his rental, we found multiple red wine stains in the 5-year-old carpet in different rooms that are not going to come out so carpet has to be replaced. He is asking for his full deposit back. Seems to us five years is pretty good for useful life of carpet and probably due for replacement anyway. Place is fine otherwise. But where is the line on what is normal wear and tear and what is not?

-Landlord Sam

Dear Landlord Sam,

Normal wear and tear is not really defined anywhere regarding all the components of a property.

All landlords should expect for a unit not to look brand new when a tenant moves out.

In most cases, they have been living in a property, not taking their shoes off outside, hanging pictures, etc.

You probably will notice “heavy traffic patterns” in your carpeting as tenants have moved through doorways and around furniture. That would be normal and you can’t bill the tenant for that.

But any damage to your property due to tenant /tenant guests, accidents, carelessness, or negligence would be recoverable from damage deposit, following proper procedure.

Carpet wear and tear

Regarding the carpet: burns, stains, bleach marks, rips, loosened from tack strips, snags would normally be considered damage.

The quality of the carpeting is also an issue-very cheaply made carpeting will snag very easily sometimes with vacuum cleaners!

In another example, to me, if a tenant hangs a few pictures in every room, that I would consider normal wear and tear.

Hanging a TV from the wall is not normal wear and tear

Hanging a TV from the wall is a much more extensive repair and that is not normal wear and tear.

Sometimes tenants try to “fix” things by patching and painting.

I ask them not to do so, as their repairs usually cost more to fix correctly than if maintenance doesn’t have to re-do.

If I have a great long term tenant like your older gentleman, I would be very generous with “normal wear and tear.”

I think after 5 years, your carpet could be expected to be replaced, in most cases.

Sincerely,

Hank Rossi

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Zillow Says Home Values Climbing at Fastest Rate in 12 Years

According to the latest Zillow Market Report, the median U.S. home value rose 8.7% to $215,600, representing the fastest year-over-year increase since June, 2006.  Zillow says this gain is part of a general upward trend that started in early 2015 when values were climbing at less than 5% year-over-year.  In addition to rising values, Zillow says the median U.S. rent grew by 2.5% (year-over-year) to $1,449 a month and has been growing by more than 2% since September 2017.  Be sure to click on the interactive map below for more detail.

Click here to read the full report on Zillow.com.

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Right Now, It is a Seller’s Market

According to Gallup’s annual Economy and Personal Finance poll, 45% of non-homeowners say they plan to buy within the next 5 years, however only 22% of current homeowners plan to sell during that same time frame.  Gallup says that a favorable market for sellers will continue in the near future….Indeed!

“One reason homeownership rates have not increased is that the supply of available homes has not kept up with demand. This has led to higher home prices, which — along with higher interest rates — are making homes less affordable overall…”

Click here to read the full story on Gallup.com.

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10-Step Foreclosure Buying Process

Understanding the foreclosure process is a must for real estate investors who hope to pursue this profitable & tricky investing opportunity. The folks over at FortuneBuilders put together this handy infographic outlining the 10-step foreclosure buying process in order help develop a strategy that works for you.  Happy Friday!!!

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Best & Worst States to Flip a House

What are the best and worst states for flipping a house?  That could be a loaded question depending on what criteria you’re using.  With that in mind, the folks over at GOBankingRates, using data from Zillow and ATTOM, evaluated all 50 states by looking at a combination of metrics including medium listing price, average number of days to flip, and average gross return.  They found the best states for flipping houses were mostly in the East and the worst states for flipping were predominantly landlocked states west of the Mississippi.

“Flipping houses often sounds like easy money: Buy an older home, do a little fixing up, make it look pretty and sell it shortly thereafter. However, it’s not that easy — especially if you live in a state where house flipping just isn’t that profitable.”

Their 5 best states for flipping are:

  1. Tennessee
  2. Pennsylvania
  3. New Jersey
  4. Louisiana
  5. Colorado

Their 5 worst states for flipping are:

  1. Mississippi
  2. Hawaii
  3. Montana
  4. Wyoming
  5. South Dakota

 

Click here to read the full story on GOBankingRates.com.

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Renting is Becoming the End-Game for Many Millennials & Baby Boomers

Have American’s views about renting changed how we should be viewing homeownership?  

A recent article in the Washington Post by the President of the National Apartment Association suggests that it has – at least for Baby Boomers and Millennials.  In fact, he says that attitudes are changing and renting is no longer seen as a “rung on the housing ladder” but rather as a lifestyle decision that, in many cases, is more flexible than traditional homeownership.  Obviously, renting is not the best choice for everyone and there certainly is no one-size-fits-all rule for housing.  However, we are living in the “sharing economy” where people aren’t always looking to put down roots or make that capital investment…..and the millennials seem to be rewriting the rules.

“In today’s economy, we can rent almost anything we need, including music, movies, clothes and cars. Having all of these options available to us suggests that people’s view of ownership is shifting. It’s natural that this trend extends to our homes, giving people more choice over where and how they live.”

Click here to read the full story on the Washington Post.

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Yardi Says Multifamily Rents up 2.4% through April

According to the latest Yardi Matrix, U.S. multifamily rents rose $4 to $1,377 in April to a level, which they point out, is the market’s best performance since last spring.  Year over year, rents are up 2.4% through April and is within the 2.5% growth range that the market has averaged since early ’17.

“The big picture is that even though the occupancy rate is dropping slowly closer to the historical average, the market is in a healthy position for the long term. Demand is expected to remain high, while overall housing stock is growing at roughly the same number as new households.”

Click here to read the full report at Yardi.

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Landlord Hank: How Do You Handle Evictions?

Dear Landlord Hank: How Do You Handle Evictions?

How do you handle evictions which can be a sometimes messy part of our business? Veteran landlord and property manager Hank Rossi answers questions from other landlords and property managers around the country about their rentals.

Dear Landlord Hank,

How do you handle evictions? Is there an easier way? Unfortunately, we just had to do the first one in 10 years and had to show up at the rental with the sheriff, plus tenant left a bunch of stuff which we now have to clean out and store.

-Ellen

Dear Landlady Ellen,

Evictions are a messy part of the business, but sometimes it has to be done.

The key, in my opinion, to lessening the chance that you will have to evict, is to do extensive tenant screening.  We check credit, criminal, residential history (5-year minimum), employment history and income verification (2-year minimum), sexual predator/offender, terror watch list, and common sense.

10 years of no evictions means you are doing something right

Still, that doesn’t mean you won’t have to evict, but 10 years of no evictions means you are doing something right.

Do not let the process frighten you or make you slow to initiate.

The state laws vary, so become very conversant with your state laws to avoid any associated missteps. You want to go right by the book.

Refer to your lease to see when rent is due, when it is late and when to evict.

I always try to talk to my tenants first to see why the rent is late.  Sometimes it has been mailed, and they don’t know I didn’t receive it (There are some legitimate excuses for late rent).

Reach out to tenants if you can

However, other times, tenants do not respond to calls, texts and/or emails.

This reaching out by the landlord should be a one-day event. I never extend this outreach beyond one day. If tenant lost their phone, a notice on their door should bring their attention to this dire circumstance.

Make sure you give a three-business day notice (to cure-or “pay rent”) if required in your state (holidays and weekends don’t count). Then file immediately.

In some areas you can file on line. If not, go to the court house and bring all your info with you, including all tenant contact info, the amount the tenant owes in rent, late fee, etc.

Read and complete the forms, pay the filing fee, and then cease all contact with the tenant. Do NOT accept any rent after you have filed unless the tenant pays the rent, late fee and your cost for filing the eviction, AND provides a reason this happened and assurance it won’t happen again.

The court will send a copy of the filing to the tenant showing the amount owed, and the tenant can submit an answer to the court either accepting the debt or denying it and providing their justification for the dispute.

You can hire an attorney to take care of it for you

You can hire an attorney to take care of this for you, but find one who specializes in landlord-tenant relations.

I have never used an attorney and have never lost a case. I don’t like people trying to steal from me (by not paying what they owe to live in a nice home), and I don’t mind standing up for myself.

This would be too stressful for some people, in which case an attorney would be a great choice.

After you go to court, if you are really in the right and the tenants did not pay the rent for some reason other than deficiencies in the rental, the judge often will give the tenants a week to leave. You will have to get the writ of possession from the court and take it to the sheriffs office for service to tenants (another fee is due for service).

The sheriff will schedule an appointment with you for the eviction

The sheriff will schedule an appointment with you for the eviction. You are not required to notify the tenants when the eviction is taking place.

The sheriff will arrive and force the tenants to leave the property.  You are responsible for providing able bodied workers to cart the tenants’ belongings to the curb. Bring boxes, dollies, etc., because it all has to go.

After you are finished, make sure you CHANGE THE LOCKS on the door to prevent the tenants from reentering the property.  Make certain windows and doors are locked.

This is a painful process for all involved, but continue to treat the tenants with respect and proceed in a professional manner. You probably won’t know why they are not paying the rent, but whatever their reason, you aren’t a charity.

The easiest way to handle this is through an attorney and a company that moves tenants belongings to the curb. You will still have to consult with the attorney, provide your lease and tenant accounting for rent owed, and pay for these services.

Good luck, but you have a great record in this business so far.

Hopefully, you’ll have no more evictions.

Sincerely,

Hank Rossi

Editor’s note: Be sure to do your due-diligence and take the time to know & understand your state & local laws pertaining to evictions.  Your local REIA can be a great resource.

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Foreclosure Starts Increase as Storm-Related Cases are Filed

In Black Knight’s “First Look” for March, 2018 they report that as 2017’s hurricane impact shifts away from delinquencies, foreclosure starts rose by nearly 12%  – mostly in the hurricane-impacted areas of Florida & Texas.  However, overall, active foreclosure inventory continues to shrink, falling by 10k loans in March to its lowest level since late 2006.  Black Knight derives their mortgage performance statistics from its loan-level database representing the majority of the national mortgage market.

Key takeaways:

  • Nationally, there was a decline of 65,000 in serious delinquencies
  • Serious delinquencies attributable to Hurricanes Harvey and Irma saw a reduction of 19,500 loans
  • However, as the hurricane impact shifts away from delinquencies, foreclosure starts rose by 12%
  • More than two-thirds of that increase came from hurricane-affected areas of Texas and Florida

Click here to read the full report on BlackKnightInc.com.

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Zillow is Now Getting Into the Home Flipping Business

Photo: Zillow

Last year we posted about Zillow getting into the “instant offers” business where potential sellers submit their property address and get no-obligation offers from “qualified” investors. Their program has been going for about a year in Las Vegas and Orlando but recently they announced that Phoenix was being added to the mix.  Now, the Wall Street Journal is reporting (provided by MarketWatch) thatZillow is getting into the home flipping business.  According to the report,  Zillow will purchase homes in Las Vegas and Phoenix, renovate and flip them within 90 days.  There goes the neighborhood….

Click here to read more at MarketWatch.com.

Click here to read the release about their expansion into Phoenix.

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