Managing Tenant Turnover
Jared Wonders returns to the show to share how he manages tenant turnover as a real estate investor and busy full-time pharmacist.
About Today’s Guest
Jared Wonders graduated Pharmacy School in 2012 and completed his PGY-1 general residency at the Dayton VA in Dayton, Ohio. Jared has been working as an ambulatory pharmacist specializing in Geriatrics since 2014 in Columbia, SC serving our nation’s best! He married the love of his life on June 9, 2017 and is a happy father to a son, Theo, who was born in May. Jared and his wife are in active pursuit of FI in order to leave a legacy for their son and have both committed to incorporate real estate as a portion of their portfolio. They currently own 4 long-term rentals and one short-term rental and are hoping to acquire more!
Episode Summary
On today’s episode of the YFP Real Estate Investing Podcast, we welcome back Jared Wonders, an inspiring, goal-oriented pharmacist we’ve had on the show before and one of the people that took host Nate Hedrick through his first investment. In this episode, Jared walks us through his recent rental acquisition and how he handled multiple tenant turnovers. Leaving no stone unturned, Jared shares with us every step of his timeline, from the moment of purchasing a property to handing over the keys to the tenants. In this episode, you’ll hear his actionable advice on everything in real estate investment, from market rents and communicating with tenants to dealing with one property at a time. Jared even shares and explains some top rehab and repair tips on creative options for supply chain issues and the importance of dealing with deferred maintenance. If you are like Jared, in the delicate balancing act of being a busy full-time pharmacy professional with a family, this conversation is for you. Jared shares in-depth details on what it looks like to be a property manager yourself and manage your rentals during turnover, maintaining the delicate work-life balance through it all.
Key Points From This Episode
- Jared explains how a new multi-family property meant multiple new tenants and tackling the turnover all at once.
- Some details about these two types of properties, and communicating with the tenants.
- Doing an Estoppel Certificate, and knowing your market rents when inheriting tenants.
- What action steps Jared took when two of the three tenants gave their 30-day notices.
- Talking about turnover; septic, new windows, appliances, and supply chain issues.
- Jared chats about the repair standpoint specifically and having a flexible timetable.
- How previous experience will give you the confidence to tackle the next property.
- Some creative options to solve supply chain problems.
- What is LVP, how to get great pictures, and why he did only one property at a time.
- How and when Jared listed the properties for rent again.
- Hear about the time frame before the first showing and what factors affected this.
- Scheduling viewings outside professional hours, and why he likes individual showings.
- The importance of following the Fair Housing guidelines, and having clear criteria.
- Jared talks about his tenant application process and verifying their income.
- Taking care of deferred maintenance by dealing with it during tenant turnover.
- Jared’s final words of advice on screening and how to treat the tenant like your client.
Highlights
“We’re not the type of people that are just going to kick people off the street, so we just want to make sure that we were doing right by [the tenants] as well. So we let them know, we wanted to make sure they were situated and getting other areas, other locations.” — Jared Wonders [0:08:39]
“[Supply chain issues are] a problem that you just got to get creative and figure things out.” — Jared Wonders [0:17:42]
“If [a potential tenant] is treating you like you wanted to be treated, they will probably, hopefully, treat the house like you want the house to be treated.” — Jared Wonders [0:28:11]
“The biggest thing is just taking care of deferred maintenance. If you noticed that there is a situation that may potentially come up in the future, you have to deal with it with a tenant turnover, honestly.” — Jared Wonders [0:036:52]
“The biggest thing to remember when you’re real estate investing and investing is that the tenants are our client. The tenants are your clients.” — Jared Wonders [0:39:17]
Links Mentioned in Today’s Episode
- Learn More About the None to One Group Coaching Program
- Email the YFP Real Estate Investing Podcast: [email protected]
- Join the YFP Real Estate Investing Facebook Group
- YFP Real Estate Investing 38: New Years Goals for Real Estate Investing
- Your Financial Pharmacist Webinars
- YFP Real Estate Investing 02: Long Term vs. Short Term Rental Property Investing – One Pharmacist’s Perspective
- YFP Real Estate Investing 28: Property Management Fundamentals: Criteria and Pets
- Apartments.com
- BiggerPockets: Leases
- YFP Real Estate Investing
- Your Financial Pharmacist Disclaimer and Disclosures
Episode Transcript
[INTRODUCTION]
[00:00:07] NH: Hello and welcome to the Your Financial Pharmacist Real Estate Investing podcast, a show all about empowering pharmacists to achieve financial freedom through real estate investing. I’m Nate Hedrick. Each week, my co-host, David Bright and I explore stories from pharmacists all over the country, who are achieving their real estate goals, while maintaining a meaningful career in pharmacy. Whether you’re a first-time investor or a seasoned pro, we’re here to provide education and inspiration about the world of real estate.
Please note, this podcast is intended for educational purposes only, and should not be considered financial or investment advice.
[EPISODE]
[00:00:41] NH: Hey, David. How’s it going?
[00:00:43] DB: Hey, good. Thanks, man. How you doing?
[00:00:44] NH: It’s good. As this episode drops, we’re going to be one week into 2022. Really starting to focus on goals for the year, which is pretty fun.
[00:00:53] DB: Yeah. I know, my wife and I have been talking about that for our own real estate goals and our own personal goals and things that we want to achieve in 2022. I feel a little bad, because we feel almost like we’re cheating. We were working on getting a rental property under contract in late 2021. It didn’t happen by the turn of the year, but should be closing on it right about the time this podcast goes live. We’re going to count it as a 2022 win. We’re going to use that as our initial momentum for getting started here. Yeah. Hopefully there’s, other people out there that are setting those goals and charting out those wins and are just diving in.
[00:01:30] NH: Yeah. Love it. If one of your goals in 2022 is buying your first rental property and you’re serious about it, David and I have actually launched our very first course, related to that. We’re beta testing a course. It’s a None to One group coaching program, where we’re going to take you from not having a rental property to owning and tenanting a rental property within 90 days. We’re taking a very small pool of applicants this first time around. Applications are open right now. We encourage you to apply if you’re interested in doing that. But we’re going to beta test this and see how it goes and see if it’s something that you guys are interested in, and if it’s helpful.
If you want to learn more, you can head over to yfprealestate.com and find the link for the None to One Group Coaching Program, you’ll find right there on the main page. You can also send an email to [email protected], we’ll hook you up that way. Or as always, join the YFP Real Estate Investing Facebook Group. We’ve got tons of links on there. We’re promoting this on social media recently. It’s even on my LinkedIn page, things like that. Definitely take a look at that if you’re interested. If you’re looking for a way to jumpstart, getting into your first investment property, this course is going to be the thing to do it.
[00:02:36] DB: If you skipped Episode 38 on your way to Episode 39, if you jump back to Episode 38, there’s much more of a description on there as well. We go into more detail and a lot, because this came out of one of the recent webinars that we did. We asked what would people find helpful in terms of future resources, is it more webinars? Is it certain podcast topics? So many people wanted some specific help with this None to One. That as detail-oriented pharmacists just sometimes need a little hand-holding, a little push, and so if we can help with that, then that’d be a lot of fun.
[00:03:11] NH: Yeah. I agree. I guess, to transition to the episode, Jared is actually someone we’ve had on the show before. Jared Wonders, really awesome pharmacist, actually cool story. He’s the one of the people that took me from None to One, so big shout-out to Jared for being the motivation to get me where I’m at. We had to have him back on the show. He’s been doing some really great stuff since we had him back way, way back on Episode Two. It felt a really great way to start the year with Jared. Excited for the episode we had him on today for.
[00:03:39] DB: Yeah. He talks about expanding his rental portfolio and efficiently turning over units. He’s got some really motivating stories in there. It just shines through that he’s definitely obviously a goal-oriented pharmacist and achieving those goals is something that he wants you too. So it just felt a great fit for kicking off 2022, to hear someone as inspiring as Jared.
[00:04:00] NH: Yeah. If you’re looking for encouragement, this is the episode, Jared is your guy. I won’t delay it any further. We’ll jump right in. Hope you guys enjoy it.
[INTERVIEW]
[00:04:08] NH: Hey, Jared. Welcome back to the show, sir.
[00:04:11] JW: Yeah. Thanks a lot for having me again. Always looking forward to talking real estate with you guys. You guys have been doing some great things in the podcast, it sounds like, so really looking forward to having another conversation with you guys. Thanks for having me on.
[00:04:22] NH: Appreciate that. I know, you’ve been kind enough to let me bug you, since you’ve been on the show with all things short term rental. You’re my go-to source on that recently. I appreciate that. We’re talking recently about a couple of things going on with some tenant turnovers and I just, I thought it’d be great to have you back on the show. You can update us on what’s going on and talk through some things with that turnover. So maybe, start us off, tell the audience what you’ve been up to. It’s been all the way since episode two that we’ve had you on, so what’s been going on since then?
[00:04:48] JW: Yeah. Well, I got to say first and foremost, I feel honored and privileged that you come to me with the short term rental stuff. I’m sure there are a lot of people that know a lot more than I do. You’re going to get your first one man. It’s going to come soon.
[00:04:59] NH: I’m waiting for it. I keep trying.
[00:05:01] JW: Yeah. Exactly. No, I honestly this last man, I can’t remember last time we discussed or talked, but it’s been a whirlwind last couple months having a kid, trying to get the kid on board. He’s about a year and a half old now, which is crazy, just getting those things unraveled. I was – in the last couple of months, we’ve done two tenant turnovers with two upbringings. It’s actually, I wouldn’t say at the same exact time, but fairly at the same time. And at that point, this unique, it’s a very unique property in where it’s located. It’s a single parcel, but three individual houses are on the unit. When we had purchased it, the septic system with the two of the properties needed a significant amount of work, so we knew that going in.
So we knew what this tenant turnover, this is something that we’re going to have to be dealing with and repairs were going to be something that we’d have to definitely hone in on for sure for these two properties that we were getting turned over. Another really interesting thing was too, we knew that the since we inherited the tenants from this property that we would be able to increase rents a pretty substantial amount just based on what market rents doing, which is obviously, it’s nuts in Charlotte. I’m sure it’s very similar to Ohio. It’s market rents are crazy right now.
[00:06:11] DB: Yeah. They’ve really been going up and especially in the markets where the school districts are better or that B plus neighborhood, those rents have just been skyrocketing recently for us.
[00:06:22] JW: Yeah. But it’s been busy man. It sounds like everybody else is keeping busy too, which is great.
[00:06:26] NH: Yeah. The name of the game, I think that’s perfect. Again, we were talking recently, you and I about some, your had two tenant turnovers going on at the exact same time through all of this. So I thought it might be good to bring you on to talk specifically about that process, because you self-manage, right, these particular properties, there’s no property manager and you do it with a partner and your wife helps, I know and there’s a lot of people involved, but still you are the one doing that work.
I think what I want to dive into today, what David and I thought would be a good topic would be to speak about those particular properties, what the process looks like when there is a tenant turnover? Just dive into some of the details there. Let me kick us off with some background, what types of properties were these? Why were the tenants moving out or why was there a turnover going on?
[00:07:08] JW: Very interesting, unique parcel and how the land situated. It’s a share driveway, between the three tenants. They have their own separate driveway, but there’s a shared space in there for three, like three individuals or for three tenants as well. Basically, what we knew it was going to happen as we knew that these market rents were low. So we basically advise the tenants, “Hey we’re going to be increasing rents on such and such date.” Because these tenants that we inherited were actually month to month.
By doing that, we gave them 30 day notice like, “Hey, your rents going to be increasing in the next 30 days, just keep us posted as to what you guys want to do, we’re willing to work with you guys and keep you guys around for the next couple months, if you want.” Because they were great paying tenants, I mean, we had no issues with them, but just that the market rents, just didn’t work with what we really wanted to do. And we wanted to make improvements to these properties too, because they definitely needed improvements like substantial improvements, when we walked in we knew going into that, that that would be happening.
Yeah. Basically we advise the tenants, “Hey, you guys have a month to month lease. We’re going to be increasing rents on such and such date.” Two of them, had actually notified us pretty quickly that they – actually, I would say one of them notified us pretty quickly that he was going to be leaving at the end of the month, which again we assumed that that might be the case. The next one gave us a little bit less notification, so we had, we still were able to get them out 30 days after they let us know, because again, we wanted to work with them, because we were obviously increasing the rents.
We’re not the type of people that are just going to kick people off the street, so we just want to make sure that we were doing right by them as well. So we let them know, wanted to make sure they were situated and getting other areas, other locations. And it worked out to where, again, two of the tenants left. We went through that process of saying, “How did we do? What can we improve on as property managers? Do we bring all the things to your attention or do we take care of, and then resolve any issues that came up with you guys? What can we do to keep moving forward to improve our aspects as far as property management goes?” That was a good feedback that we got from them. Moving forward, were able to have them vacate the premises and then we were able to go into it to do the repairs that needed to be done.
Then for the third tenant, it was great, because obviously with these properties, we actually paid cash for these. By having that third tenant in there and signing them to a year-long lease. We were actually able to cash flow a good amount of the rehab costs that were necessary with two of the properties. That worked out really well actually. We thought all three of them might leave, but one did stick around for a year-long lease. They’re still in there, still paying every month. They’re paying under market rent, but the property still needs to be rehabbed a little bit and we realize that, so we gave them a little bit under what we rented out the other two app.
[00:09:53] JW: Now so there’s a couple terms in there. I want to make sure we hit real fast. You mentioned inherited tenant, what’s an inherited versus a tenant that you placed?
[00:10:01] JW: Yeah. Absolutely, so when we purchase this property, we did what’s called an Estoppel Certificate, which you don’t necessarily have to do when you’re getting into a property where you may inherit a tenant. So basically, we went in before we had the tenants that were actually there with a previous owner, we had them go through and just say, “Hey, is this actually what you’re paying in rent? Is this what you’re doing? Do you feel your needs are being met? What things can be improved on the property?”
Those types of things are what are on a standard Estoppel Certificate. So we went through that process of getting those completed. Again, like I said, we basically inherited a tenant as when the previous owner, they’re basically on the previous owners lease. So you know, you have inherited tenants that are just there, when you purchase the property, basically.
[00:10:49] DB: Yeah. We found as well, that getting a lot of those details clarified can be super helpful to clear up misunderstandings between the prior owner, if anything wasn’t in writing, I mean, that’s definitely super helpful to have that information there. It also sounds like there are times when buying a property with tenants in it, when those tenants are paying below market rent sometimes that creates even just a distress situation that lets you buy that property a little cheaper than you might otherwise if it was fully fixed up had market rent tenants, all those things. So was that your experience as well, that you got a little bit of a deal on the property?
[00:11:25] JW: That’s a really good point. I don’t think it was because of the tenant situation. Honestly, all three tenants, when we met with them and had good communication discussion with them. All of them are super nice, super friendly, they’re really approachable. They communicated really well with us. I think that the reason why we got this property at the price point that we did, was because of the tenant was – or the tenant, the property owner was out of state. They weren’t really able to see and put eyes on the property, whereas we – even just being there for five minutes could see exactly what needed to be done. We knew that market really well, because honestly, we live, oh, man, maybe three or four miles away from where these properties are located. We live super close. We know what the market rents are in this particular location.
By knowing that information, having that information are at our disposal was super helpful and honestly the previous owner was really good too, because he had good solid leases in place, like the leases were good, they were really helpful. He actually switched them over from a year-long lease to a month-to-month lease, like right – basically when we were doing the turnover from changing ownership. The owner did actually pretty well by them too, by putting them on a month-to-month lease and giving them the option of what to do just in case, moving forward, it was working out for either the owner or the tenant. Because if they wanted to make a change over, they could. So honestly, they did – really both parties were, it worked out really well for both parties honestly. Both us and the previous owners, I think.
[00:12:54] NH: That’s great and nice that the previous owner got that thing set up for you. So okay, so just to recap, the tenants gave you notice, “Hey, we’re leaving in 30 days” or whatever. What action steps are taking place at that point? What things are you starting to prepare to make sure that that process goes smoothly, that they’re going to be able to move out okay and that you can get ready for the next round?
[00:13:15] JW: I think the biggest thing was, again, we knew that septic was going to be the biggest issue with this. With going through that process and I think, I knew more about septic systems than I care to know honestly at this point. But going through that, going through the proper channels of getting environmental health involved, getting proper permitting, that just takes a lot of time and in it of itself.
We really wanted to make sure those things were in place when we got new tenants in. I didn’t want to have to deal with a tenant saying like, their toilet was backing up, because obviously I know that, oh, I mean, I don’t want to sound, pun intended, “Oh, crap. We have issues going on here.” That was the thing. We knew that new windows were needed. Man, I don’t know if you guys had to deal with this, with any turnovers. The whole supply chain issue, man, that was real. Because we were having problems getting fridges. We were having problems getting stoves. Because we want to do a full turnover with that, and we knew that all the appliances need to be upgraded.
Actually, the tenants brought in fridges, so they left with their fridges. We had to figure out that whole situation. Yeah, the supply chain issue was a real thing. We had to get a little bit creative in that aspect. Typically, we would have a guy that would help out with using more used, like refrigerator, used appliances. That wasn’t even really an option, just because he didn’t have any inventory. We had to buy new, which worked out great, because we were able to still find things and still find things that really worked out and made us actually probably be able to increase rent a little bit higher than where we may have previously done it. It all really worked out.
Yeah, the windows and the septic were big ones. Windows, especially with supply chain was also a mess. We had to get creative there for sure. Luckily, one of the partners that I work with, he’s super handy. He was able to probably problem-solve and figure out the window situation with us not having to order specialized custom windows, which is helpful, because the age of these properties was another thing. The windows were really old. They were also not retrofitted. They were really interesting, and how the openings were, basically. That was fun.
[00:15:21] NH: Goofy old houses make those repairs extra exciting.
[00:15:24] JW: Definitely, definitely. Yeah, it is crazy. But a good time. It’s always fun with real estate. Always fun.
[00:15:31] DB: Well, and I know that there’s newer investors out there that are sweating right now, as they’re thinking like, “Supply chain and all these things take forever. Oh, my gosh. It’s a massive repair. When do I have time to learn about a septic system? You mean, there’s different kinds of windows?” I think, that there’s a lot in there that can stress people out. I think, too, that the turnover time in and of itself, even if you have a very simple, like shampoo the carpets and do the new paint, even that I think is stressful for a lot of people. Can you talk a little bit about that process of the turnover from a repair standpoint? Also, what that timeline means from a repair standpoint, when it comes down to the numbers and the profitability?
[00:16:13] JW: Yeah. That’s a great point. I think, the biggest thing there is the reason why we were able to make this work for us ourselves, like we had a timetable in mind, but we realized that we have to be flexible with this timetable, especially considering we have 9 to 5 jobs. And we have a kid, there’s a lot of things that are coming into play. For these two properties, too, we definitely hired out a lot more work than we did for our first rehab, which I think I discussed that at the last one.
We definitely hired out a lot more work. By buying cash, and knowing we’re in a good position when we purchased the property, we knew that we could outsource a lot more work. We were able to outsource a lot more work, especially for septic. I’m not getting in there and doing septic stuff. I mean, that’s the thing that’s just not going to happen.
A lot of stuff with like, electrical, we did the painting ourselves. We did a lot of that stuff ourselves. I think, the biggest thing is we knew what we could tackle with this property just because we’ve done rehabs before. I think, that’s another thing too, is having experience and knowing what your market wants and dictates. Also, knowing exactly what you’ve done before. Using your previous experiences to help you out with future turnovers, and future issues that come up. Because I will say, that with our first one that we sold in South Carolina, when we did a rehab and sell that one, I learned so much from that experience that I was able to take into the these rehab experiences and just knowing costs and knowing other things that come up with that.
I don’t definitely mean to scare people by the supply chain thing, but it’s a problem that you just got to get creative and figure things out. If stuff’s not going to come in for a month, two months, okay, is there another distributor? Is there another person that I can touch base with to actually get me these things that I need quicker? Again, if you can find good help that you know and trust, then that’s another thing that can really go a long way.
[00:18:06] DB: Yeah, absolutely. A lot of that stuff can be solved with creativity and phone calls and talking with other people and getting good advice. A lot of times, yeah. Contractors can help solve those kinds of problems, calling different suppliers, even when we ran into a supply chain issue for appliances this summer, we jumped on Facebook marketplace and went and picked up a stove. That was what we had to do to get that solved. Yeah. I think, a lot of that stuff can definitely be handled.
You mentioned the experience of the prior rehab, too. Was there anything that you learned from that project that you applied to this one, in order to tenant proof of property, or to minimize the repairs that will happen the next time you have to do a turn?
[00:18:47] JW: Yeah. I think, the biggest thing with that is knowing exactly what we’re using, like with paint, we’re knowing what we’re using with – because we switched out the countertops. We just did a lot of things that we knew we wouldn’t have to necessarily deal with. These properties were interesting too, because they were all oak hardwood, too, which is pretty good. Luckily, you don’t really have to worry too much about issues with tenants coming up with that, unless they scratch up the floors and stuff, which you can always say them a little bit.
We put out VPN to a couple of the rooms that had carpet. That was another thing we were able to fix. Not necessarily fix, but able to improve on. It just looks better. You don’t have to necessarily deal with it as much. They’re fairly durable, and you can avoid some of the issues that go over for future turnovers as well. By solving the windows situation now, we don’t have to do it in the future. Taking care of those big CapEx expenditures that come up beforehand, then, okay, I know that the tenant’s not going to call me about the window leaking, or something leaking through the window. I know that that work was completed. I know it was done well. Not necessarily something I’ll have to worry about, hopefully, hopefully, fingers crossed in the future, unless something crazy comes up.
[00:20:00] DB: No, that makes sense. You mentioned LVP. I think, that’s one of my favorite solutions on making a property look really sharp, too. Can you define what LVP is for the listeners?
[00:20:11] JW: Yeah. LVP is just Luxury Vinyl Plank. Basically, you just attach these two pieces. This is a very crude way of specifying what this is. The floor is all on one piece. You’re putting it on piece by piece, but then when it’s all done, it’s this whole fluid, one solid piece that is just there, and it just floats above the sub-floor. There’s a nice little waterproof buried underneath. If there’s stuff that gets spilled on the floor, then you’re basically good to go. You just wipe it up, and you don’t have to worry about it. No carpet issues, no spillage or anything.
I will say, though, that my wife spilled wine on the carpet a year ago. That was her excuse to basically have me put LVP in our one room that we had to do on our own personal house. That was carpeted. That was an excuse that she made to have me do that.
[00:21:04] DB: I love it.
[00:21:05] JW: Now that we have the LVP, we don’t have to worry about wine spills. We’re good.
[00:21:09] NH: I love it. All right, so you’ve got these repairs rolling, you’re getting everything sorted out. Talk to me about how and when did you list the properties for rent again. Where in that process does that take place? Are you doing it while the tenants are still there? Are you waiting till the repairs are done? Because we want to minimize vacancies, but we don’t want to try be doing everything at the exact same time. How do you balance that? What does that look like in actual practical terms?
[00:21:36] JW: Yeah. There are a lot of things that need to be fixed with these properties. However, we wanted to get them done quickly, which is great. That we can get pictures. Because once we get pictures, then you can list. Once you get pictures set, or once you get the property to where you can actually get good solid pictures in there, then you can list it. Then you can take care of some of the other things that that are still need to be fixed, but they can be fixed later after pictures have been taken, and actually, after you can get the property posted.
We did a lot of the exterior work that was able to be done to make the property look a little bit nicer. We did some a little bit of exterior painting. The interior was the big one where we did a lot of interior painting. We did some LVP in some of the rooms. We wanted to make sure they were ready for a photo op and ready to be listed on the MLS – not on the MLS, but on Zillow, or wherever they need to be listed, basically.
We went one property at a time. The reason why we did that is that way, again, we had that property finished, then when we’re able to show it, then we’d be like, “Well, we have another property coming that’s literally about a 100 feet away, that is basically the same exact layout.” There’s basically no difference between these two houses. Just keep this in mind in the future, if this is something that you’re interested in. If you like this house, and it doesn’t necessarily work out with us, think about us for the other house, that’s literally the exact same thing, because it’s the exact same model, exact same floor plan, exact same everything.
By getting one of them done at a time, we were able to – just with how unique these properties were, it was able to work out for us. We actually weren’t able to share it with tenants then, just because the tenants have left already previously. That was when we were able to get into the nitty-gritty and really get those repairs all finished. I think, just getting ready for pictures, I think would be the best. You understand that and learn that by what you see from your previous experiences with rehab experiences.
Also, just glancing through some of the properties on Facebook marketplace and seeing how some of those pictures are set up, or even Zillow, other rentals that you can see, you compare. That’s where we’re at with that.
[00:23:40] DB: I want to make sure that everybody caught that about the taking pictures part, because there’s so many times that we will have paid buckets and all this stuff, just barely out of the shot and we’re taking a picture, because there’s a gap of time there where you need something that looks good. You don’t need to have a photo of every square inch of that property, but you need a few that look good to give the flavor of that property to people that are looking, because there’s a time gap between when the property lists when you do your first showing. What’s that time gap look like in your world, particularly when you’re self-managing?
[00:24:14] JW: Yeah. I think, that it all depends on your previous tenants. The tenants that come in, how well they were able to take care of the property. Like if there was a lot of deferred maintenance that you noticed, I would say that there were definitely some issues that we were surprised that they didn’t call us on, honestly. When we saw these issues that came up, we were able to get in there, and then create a list of exactly what we needed to complete, when we need to complete it. Prioritizing things was really important.
I think that that timeframe, like what we were looking at, we’re looking at wanting to get them done within 20 to 30 days, with also realizing that all four of us have 9 to 5 jobs. Our partners actually have a kid, too. We factored all that in. There were definitely some early mornings. Definitely some late evenings. But it is what it is, what you have to do to leave a legacy, I think, by just working hard, again, through some of those things. Having a timeframe in mind, again, prioritizing, I think, is just the biggest thing.
We have, again, one of our partners is great. She could probably be a project manager for some big company more than likely, because she just knows how to keep everything on track and keep everything a go.
[00:25:22] NH: I love that. Leaning on the strength of your team. That’s huge. I have to say, as a real estate agent, the photos that are out there sometimes of the realtor taking it with their iPhone 4, somehow that still works and their thumb is halfway over the lens for all their – there are some really bad photos out there. You can set yourself up pretty well just buy some nice high-quality photos right off the bat.
[00:25:43] JW: Absolutely. Some of my favorites are when you see you see some of these photos, and people were taking pictures of the mirror. Some other mirror gets in there, and then their reflection is there. In some of these rentals, I’ve seen that happen in North Carolina, which is really interesting. We’ll see this on some of our short-term rentals, too. We’ll go through and look some of the pictures of some of the short-term rentals that are around us. We just shiver at some of these pictures. I’m like, “Oh, my God.” Why would you post that? What are you doing?
[00:26:10] NH: Exactly, exactly. When you get to the point where you’ve got the pictures, of good quality pictures up, and you’re ready to actually get showings in there, how do you guys coordinate those showings? Are you doing group showings? Are you doing an open house? Is it just every night you’re out of the property with somebody? How does that work for, again, busy professionals like yourselves?
[00:26:30] JW: We had set nights that we utilized. We basically would say, okay, and I’ll just give an example. Tuesday, Wednesday evenings, we’ll do it. Then Saturday afternoon, after 12 to 1 is when we’re doing showings, which obviously restricts you a little bit as far as timing goes. You just have to figure out some of those things, like when you’re doing property management. Because obviously, you only have so many people, and they only have so many time periods and time slots that can be open. We didn’t do the group. That’s something I’m definitely interested in trying in the future, because I think that there are definitely strengths, and there are definitely pros and cons to it, I think.
I personally right now like the individualized, like being able to see a showing with just an individual, individuals, or tenants that you may see. Because that way, you get an idea of their personality. You get an idea of what they’re driving in on. Okay, is their car clean? If they treat their car nice, this is how they’re going to treat our house thing.
In my mind, I like that a little bit. I’m an extrovert, too. I like to do some talking and just discuss things. You get a feel. When you walk in and have do an individual showing, you’re like, “Okay, well, you guys just take a look around. Do what you need to do. I’m here if you guys need me to answer any questions for you, obviously. You can overhear some conversations, too. You’re not eavesdropping, but you overhear things, especially in the small of house that are like, okay, well, they would probably take care of this property pretty well. They seem like really nice people, really nice family.
Obviously, you can’t judge all that based on one conversation with prospective tenants, but it’s definitely a piece to it, I think. Because if somebody is treating you like you wanted to be treated, they will probably, hopefully treat the house like you want the house to be treated.
[00:28:18] NH: Yeah, I love that. I’m of the same volition, trying to get that personal connection. Super important. Typically, when I do my showings, I’ll say the same idea, right? “On Thursday night and Saturday afternoon, we’re having this two-hour block. Feel free to show up if you want to see the house.” Because again, otherwise, you’d be there a thousand different times.
The one thing I’ll mention here very, very briefly is that make sure whatever you’re doing, no matter what process as you’re talking about how we operate, that you’re following Fair Housing guidelines, if you are out here, that you don’t want to be making decisions based on that personal interaction. You want to be making it based on – that’s a big component, but you don’t want to be excluding somebody based on that. There’s factors to follow. Again, just really follow those Fair Housing guidelines. Don’t get yourself in trouble by excluding that.
[00:29:04] JW: Yes, thank you for mentioning that, Nate. Yeah, that’s a great disclaimer. Yeah. The follow fair housing law is wherever your state and local municipalities have to have them set, because you can get yourself in a lot of trouble by not doing that. Yes.
[00:29:16] NH: I’ve mentioned this before, I think, on another episode, perhaps, or on the Facebook page. Just that what I like to do is write my criteria down in advance and say, “Look, these are the criteria that I’m following. The first person that applies that meets all that criteria, and that has all the things in place, boom, they’re the one that gets accepted first.” That really protects you from any liability, if you can clearly show your documentation. I mean, just like in pharmacy, right? If you didn’t document it, you didn’t do it. Put that down in paper somewhere at a time. Save it for that property, and then you know, I’ve got this documentation. I can back this up if somebody ever asks.
[00:29:50] JW: Absolutely. We have some of those. We do initial phone screenings, before we actually do the showing. Just so that way, we discuss the criteria, and that way they know if the criteria is upfront. Just so that way, they are aware like, “Hey, this is what income we’re looking at. This is what our credit criteria is. No previous evictions.” Those types of things are all things that we incorporate in the pre-screening.
Then, we want to have them see the property, too. Okay, there’s mutual interest here. There’s an interest, like I’m not – Since we do have the application fee is a thing, we go through an application through a third party, so we don’t actually collect any of the money. That’s one of those things where a person might not necessarily want to put all these applications if they’re not actually truly interested in the property. These people are trying to look and rent a property. They may or may not, like their financial situation might not be able to afford that. That’s just something to keep in mind.
The pre-screening definitely takes – that will definitely take off a lot of your time. We’ve had a couple of no shows too, which is always super frustrating when I’m doing showings. Like, man, just so frustrating, when you have somebody just no show when they seem interested. That’ll happen.
[00:30:59] DB: Yeah. I was hoping you could talk a little more about that application process too, and what you do from a due diligence standpoint. I was just talking to the property manager in our area. I guess, one of the things that they’re running into is people that are either forging pay stubs, or somehow buying online, photoshopped pay stubs or something like that, so that you can “have an income that meets the qualification.” It’s just becoming a mess. What are you doing to protect yourself and make sure that you’ve got qualified tenants, and that this property that you put a lot of time and blood, sweat and tears into, that you’re protecting that property?
[00:31:35] JW: I’m so glad you mentioned that, David, because actually, we have an example of that, actually. With COVID coming up, obviously things happen. I think, the most important thing there is having the application process and actually looking through the application, and actually calling employers and verifying employment, and actually verifying income. I cannot stress that enough, because we actually had that situation come up, where a guy said he was – “Hey, I have this position.” I ended up calling his employer, or what I thought was his employer, and well actually, yeah. Then she was like, “Oh, yeah. He’s not actually employed.”
Oh, okay. Well, that changes some things. Then you have to circle back a little bit. On paper, he looked great. Then, if you don’t do your due diligence there, like you said, you can really get yourself in a lot of trouble. The biggest thing there is, when you’re doing those screenings and doing those applications, and you see it on paper, you need to verify it. Verification, you need to verify it. It just has to happen. Or if it doesn’t happen, you’ll run into a situation like that, where, okay, you thought his income is verified. How is he going to come up with the money? Or how is the tenant going to come up with the money?
[00:32:49] DB: Pro tip that I’ve used before as well is actually going to the tenant, the prospective tenant and saying, “Hey, I’m going to be contacting your employer. I need permission. Here’s the form that I need you to sign that gives me permission to access this information.” Because some employers don’t want to give it. Sometimes you can even catch things right there where they’re like, “Oh, I don’t want you to call them, because –” and then it becomes more obvious. You can do it in two different ways to make sure that you get access to that information. Great tip.
[00:33:12] JW: That’s also a very good tip, too, actually. Yeah.
[00:33:15] NH: Then, when you actually accept the application, right, so we’ve gone through all this, we’ve verified, we accepted the applicant, what did the next step look like for them? When’s the deposit come in? How does all that work, just very briefly, so that people can understand that process?
[00:33:28] JW: We didn’t do deposit, hold or anything. Just to clarify, sometimes you can do a security deposit to hold the property for a certain period of time. Then, if that doesn’t work out, basically, both parties will move forward. Once you accept an applicant, what we would typically do is we go through the background checks, we go through all of that information. We do verification, everything goes through all that process is handled.
Everything seems to be good on both ends. I’ll give a shout out to apartments.com, because that’s what we use for verification purposes, income purposes, and those types of things. Once we actually go through that process, that’s when we would actually move forward with the lease signing. We have a standardized lease that we’ll use in that aspect. Once we got to a situation where we felt comfortable with the lease signing, we would have the lease signing at the house, go through the process like, hey, if there are some things with the property that we need to make sure we talk about beforehand, so that way you know, there are no surprises here. We would have them do pre-moving in screening, have the actual tenant that’s moving in, prospective tenant, actually go through, do a little checklist. Okay, everything’s in good working order here.
Now, this is something that I noticed. Like, oh, there’s a scratch on the wall. That way, there are no surprises for the tenant that’s moving in, for the resident that’s moving in. That way, you have documentation of all that being taken place. That’s all been documented. That way on the backend, you’re good from that end, or if there’s something that comes up that you may need to pull from their security deposit, then you can point at that and say, “Well, this wasn’t on the pre-screening, or the pre-notification, or pre-checklist, so we’re going to have to take off your security deposit.”
This varies state by state, how much security deposit you can take. Whether or not you can do pet security deposits, pet rent, all those types of things. I’m not really going to get into the specifics of mine, just because it’s going to vary from state to state, and it’s going to all vary. That’s something that that’s going to be important to do. I would say, that a really good resource, I would just use Bigger Pockets is a really good resource for that. They have a lot of good state specific leases that they’ll use. They have a lot of good, in-depth law that they’ll do state by state, too, that I’ve seen, which has been pretty useful for us as far as that goes.
Once we do end up getting the security deposit, we have all that verified, we actually would receive the security deposit first. Again, at the lease signing, all that stuff is handled, we’re good to go. That’s when you just do the key handoff, and you’re on your way, and the property is in the tenant’s hands at that point. That’s when you hope to get paid the next – at the beginning of the month and we have been paid, knock on wood, fingers crossed, by both tenants that we got moved in every month and on time. Actually, on the first of every month. They’ve been great.
[00:36:12] DB: No, that’s huge. I know, sometimes it feels like, once you hand them those keys and you walk back to the curb, it feels like, that’s the finish line. I know, sometimes there’s those rude awakenings that you get three or four days later, where you get a report that something’s broken, or something needs repair, or something that was noticed in those first few days. Oftentimes, it’s no fault of anyone. It’s just a property sat vacant for a period of time and something just happens. Is there anything that you do to try to either minimize those, or to batch those, or to tell people like, “Wait three or four days, or wait a week, collect this and then call me.” Is there anything that you do to try to minimize those first few repair expenses
[00:36:53] JW: I think, the biggest thing is just taking care of deferred maintenance. If you noticed that there is a situation that may potentially come up in the future, you have to deal with it with a tenant turnover, honestly. That’s what from what I’ve gathered with the turnovers that we’ve had. Because if you don’t deal with it, you’re going to get that call. It’s just a matter of time. It’s going to happen. Then when you get that call, you’re not going to be happy about it more than likely. The biggest thing is, I think, with tenant turnovers is just trying to take care of as much as you can take care of during the turnover. Like, okay, we have appliances that may be on their last leg. Let’s just go and replace them. Yeah, we’re going to have that expense upfront, but we’re going to have a happy tenant and a happy paying tenant, hopefully, on the back-end of that.
Same thing goes with water heaters, with roofs, with any capital expenditure that you’re going to see. That’s the thing with real estate that you have to keep in mind is there are going to be deferred costs that you are going to have to pay for. It’s only a matter of time before you have to pay for those costs. In my mind to have the sunk fund, and to buy real estate in a position of financial strength, I’ll just mention that again, it is of utmost importance that you do that. Because you can really get yourself up pretty quickly with a roof repair, if you don’t have funds in place to deal with when it comes up.
[00:38:08] DB: Yeah, absolutely. When you get yourself in a position where you’re trying to cheap out and not fix all those things, even just little things, like we find, putting new LED light bulbs and fixtures, so that when someone moves in, they flip the switch, it’s not like two of the three, but all three of the three bulbs in the vanity light up. In our area, we’re required to do the 10-years sealed lithium battery smoke detectors. Those will start beeping and things like that. If they’re getting old, they’re close to that 10-year mark, just pitch them to get new ones. Those kind of things that aren’t a huge thing, but they can create headaches if you’re not proactively keeping those in mind like you’re doing.
[00:38:44] JW: Yeah. Again, that’s the biggest thing. In pharmacy, we do the same thing. We’re trying to be – if you’re proactive, and dealing with a situation before it actually comes up and being reactive, then you’re going to be in a much better spot. You really just are. I mean, there’s no ifs, ands, or buts about it.
[00:39:01] NH: Love it. Well, Jared, I really appreciate you coming on. I think, this is a great look at what it actually looks like to be a property manager yourself and managing your own rentals as it turns over. Any final parting thoughts for our audience as you leave? Again, we appreciate you being here.
[00:39:16] JW: Yeah, absolutely. Well, I think that the biggest thing to remember when you’re real estate investing and investing is that the tenants are our client. The tenants are your clients. You have to look at it as that aspect in the business. If you trust a person to pay rent on time, and you trust that they’re going to take good care of your property, and again, you follow the Fair Housing laws in getting your tenants in, you make the property something that you’re proud of. Like, you’re proud of putting somebody in there and you know that somebody that’s going to be in there is going to be in a much better spot, because they have a roof over their head.
Looking at that way, I think is important, because I wouldn’t be in real estate if it wasn’t for my tenants. Just because if I didn’t have good paying tenants, then I know that it would not be near as fun of a situation, and you’ll learn from the experiences as you go forward. The screening, I can’t emphasize how important the screening is. Screening just is so important. Because if you have a good paying tenant, your life is going to be so much better with real estate investing, and your time will not be spent dealing with headaches.
[00:40:25] DB: I love that. I think it’s so important to refocus on that sometimes about that these are people, this is the place that they’re living, and it’s really important to take care of them the best way that we can. Just like they would do if they’re our patients, our friends, family. That’s a great parting thought, Jared. I again, really appreciate you coming on the show, just sharing your knowledge with everybody, because there’s a lot of it and it’s fun to have you on and talking about it. Thank you.
[00:40:44] JW: It’s great to discuss. I got to talk a little bit more long-term rentals on this podcast. Yeah. No, it’s great. I really appreciate it. Thanks to your audience. I mean, man. It’s just so inspiring to see other pharmacists doing a lot of times, a lot more than I’m doing in real estate. It’s a really humbling thing to be able to talk to you guys and just see how many other pharmacists are being successful in real estate. It’s truly, truly inspiring. Really is.
[00:41:11] DB: Well, thanks again, Jared. Really appreciate it.
[00:41:13] JW: Yeah. Thank you, guys.
[00:41:14] NH: Thanks so much.
[END OF EPISODE]
[00:41:16] ANNOUNCER: Thanks for listening to the YFP Real Estate Investing Podcast. If you liked what you heard on today’s show, please leave us a review and subscribe to the show, so you never miss an episode. If you have a question, know someone that would make a good guess, or want to connect with Nate or David, head on over to yfprealestate.com and join the growing YFP Real Estate Investing Facebook group.
As we conclude this week’s episode of the YFP Real Estate Investing Podcast, an important reminder that the content in this podcast is provided to you for your informational purposes only and is not intended to provide and should not be relied on for investment, or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation, or offer to buy or sell any investment, or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.
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