YFP REI 123: Deep Dive: Vacant Unit Decisions

Nate Hedrick and David Bright outline six essential steps for maintaining and preparing properties between tenants to help minimize vacancy and maximize profitability.

Episode Summary

In this episode, Nate Hedrick and David Bright delve into the intricacies of managing vacant rental properties. They outline essential steps for maintaining and preparing properties between tenants, emphasizing the importance of thorough inspections and necessary repairs or upgrades. The discussion includes:

• Property Inspections: Conducting detailed video walkthroughs to document property conditions and compare them to original move-in lists.
• Market Understanding: Analyzing market rent trends and comparable properties to set optimal rent prices.
• Security Deposits: Managing security deposits in compliance with state laws to avoid legal issues and ensure fair treatment of tenants.
• Property Upgrades: Planning and executing upgrades in advance to enhance property value and minimize vacancy periods.
• Expense Tracking: Keeping detailed records of all expenses, including receipts and maintenance costs, for tax purposes.

Nate and David highlight the importance of being active in the management process to reduce vacancy periods and ensure a profitable investment. They also touch on the decision-making process between self-management and hiring a property manager, depending on personal preferences and circumstances.

Treating rental properties like a business, setting aside time for proper planning and execution during tenant turnover can help maximize profitability and create a safe living environment for future tenants.

About Today’s Guests

Nate Hedrick is full-time pharmacist by day, husband and father by evening and weekend, and real estate agent, investor, and blogger by late night and early morning. He has a passion for staying uncomfortable and is always on the lookout for a new challenge or a project. He found real estate investing in 2016 after his $300,000+ student loan debt lead him to read Rich Dad Poor Dad. This book opened his mind to the possibilities of financial freedom and he has been obsessed ever since. After earning his real estate license in 2017, Nate founded Real Estate RPH as a source for real estate education designed with pharmacists in mind. Since then, he has helped dozens of pharmacists around the country realize their dream of owning a home or starting their investing journey. Nate resides in Cleveland, Ohio with his wife, Kristen, his two daughters Molly and Lucy, and his rescue dog Lexi.   

David Bright is a pharmacist with a heart for teaching. He’s been a full-time professor since 2009 with a passion for implementing and improving pharmacy services. Themes of “implementing and improving” in the pharmacy space are quite similar to themes of “building and fixing” in real estate, which has been a growing hobby for David and his wife, Heather, who bought their first house more than ten years ago. That fixer-upper house became a live-in house flip, which they sold a few years later, only to repeat the process with their next house. When David and Heather got sick of perpetually living in a construction zone, they pivoted to fixing up rental properties in West Michigan, where they now live. 

David invests in real estate as a way to bring greater diversity to financial planning and to fund memorable life experiences with family and friends.

Key Points from the Episode

• Managing rental properties during tenant turnover. [0:06]
• Property inspection and maintenance tasks. [4:16]
• Security deposit laws and how to handle excessive wear and tear. [7:23]
• Analyzing property for renovation and sale, considering market trends and upgrades. [12:15]
• Planning and executing property upgrades, marketing, and managing a rental property. [15:49]
• Managing vacant rental properties, including tracking expenses. [21:47]
• Preparing for tenant turnover and treating rental properties like a business. [26:53]

Episode Highlights

“Whenever I do a tenant turn, it always feels like the most stressful part of the process. I think there’s a nudge to do this the easy way, get done with it and move on. But if you’re ever going through this yourself, just slow down and make sure you’re doing it all right. Rerenting the property is a big opportunity. And it’s something you’re locked into, for in almost all cases at least a year. And so doing it right and following through in a way that it’s going to be beneficial for you and your tenant for the coming year, it’s gonna save you so much headache down the line.” – Nate Hedrick [26:45]

“If you want this to perform like an investment that is doing well, you need to treat it like a business and take it seriously,  analyze the rents make sure you’re you’re maximizing profitability, maximizing that opportunity for the next tenant to have a safe and respectable living situation or if you’re going to sell it, the next homeowner to have a safe and respectable house to move into.” – David Bright [28:12]

Links Mentioned in Today’s Episode

• YFP Real Estate Investing Podcast 61: Keeping vs. Selling in a Hot Market
• Subscribe to the YFP Newsletter
• YFP Disclaimer
• Your Financial Pharmacist
• YFP Real Estate Investing Facebook Group
• Nate Hedrick on Instagram
• David Bright on Instagram
• YFP Real Estate Investing Website
• David Bright on LinkedIn
• Nate Hedrick on LinkedIn

Episode Transcript

Nate Hedrick  00:06

Welcome to the YFP Real Estate Investing Podcast. I’m Nate Hedrick.

David Bright  00:09

And I’m David Bright. We’re both pharmacists and real estate investors that believe that real estate investing does not have to distract from a meaningful career in pharmacy.

Nate Hedrick  00:18

Each episode we share stories that educate and inspire pharmacists to leverage real estate investing as a part of your financial plan.

Nate Hedrick  00:30

Hey, David, how’s it going?

David Bright  00:31

Hey, good, thanks. How you doing, man?

Nate Hedrick  00:33

Good, man. It’s it’s full on summer here. We’ve been dealing with a heatwave here in Ohio this week. But it’s good. It’s vacation time. It’s it’s move in and out season for a lot of rentals right now. But it’s a it’s a good time of year.

David Bright  00:45

Yeah, having moved in summer up and down flights of stairs like this is not the fun time to move. Right. But I know at least in my neck of the woods, it’s like 11 months out of the year, it seems there’s snow. So do you want to move while you’re sweating or move while it’s snowing? So this is a pretty popular time to move. Right. And so aside from the unique weather here, there are other factors that cause people to move in summer, right?

Nate Hedrick  01:08

Yeah, and some landlords leave and set up their rentals that way where it’s like, Hey, we’re about June to June rental or July to June rental that way that that time period between school being open and when people are maybe changing jobs or getting out of residency or you know, all that stuff is kind of built into that that summer move pattern it just kind of a natural fit. Yep.

David Bright  01:26

And since you and I are both dealing with that we thought this would be a good time to talk through what happens in that inevitable time, right? Like if you have a rental for a long enough period of time, inevitably, you will have someone move out of that rental, you’ll have to deal with what do we do with this open unit? Right. And there’s a lot of decisions. There’s a lot of things that go on there. So we thought this is a great time to talk through the six steps of dealing with a vacant rental unit. 

Nate Hedrick  01:54

I like it. And I think you know, obviously both of us are going through tenant turnovers right now. It’s as we said, It’s the season. So this kind of gives you a breakdown of some things to think about if your units are turning over right now. So just to kind of give you a forecast the episode, we’re gonna go through six different things and break them down for you in terms of things to think about. We’ll talk about inspecting the property, the security deposit, we’ll talk about the current market conditions, we’ll talk about any repairs or upgrades you want to make. We’ll talk about marketing the property. And then of course, we’ll talk about documenting expenses and things like that. So a bunch of stuff to talk through. But we’ll get into the nitty gritty on each one of those. So you can kind of have an idea of of what to start thinking about.

David Bright  02:30

Yeah, and I think different parts of these are probably going to be fun. For some, they might feel like a lot of work. So this is definitely a team sport, right? Like one of the things we talk about often is that as a pharmacist, it may not be your best task to get in there and paint a rental, for example, right? Like that may be something that you and hire someone out. Other folks really enjoy the sweat equity, and you can take your weekend off, and you can go paint the inside of a rental unit. And you can you can do that. So depending on how you’re wired, don’t feel like all of these six steps have to be your responsibility. But at least it’s your responsibility to manage these to make sure that you’re maximizing your investment.

Nate Hedrick  03:09

Yeah, I mean, I think that’s a really good point, there are a lot of people that are going to turn over most of this to a property manager, right. But if you aren’t managing the property manager, a lot of this stuff can get missed or not done correctly. It’s one of the things that I think we people that tend to use property managers and have not had a lot of experience with them might jump in and say, Oh, great, I give it to the property manager, I pay my 10% and just turn it off. But but the reality is you have to manage that person, this is a business, you have to run it that way. They’re like an employee of yours, essentially. So you have to kind of be overseeing these things and aware of how this process should go. 

David Bright  03:43

I think doing so being more active and involved in the management, just knowing what are the right questions to ask at the right step of the process can also help this to move a little faster, because one thing that rental property owner doesn’t like is vacancy, right? And so you don’t want this vacancy period to be four or five, six months where you’re paying the mortgage, and nobody’s paying rent. So the better you can manage this process, this is how you can keep your vacancy down and help keep it as a profitable investment.

Nate Hedrick  04:11

Yep. So alright, let’s jump right in. We this is actually something I’m doing in three days. I got I’ve got a scheduled appointment on Monday to inspect a property on someone that’s moving out. So David, maybe give us a little bit of breakdown on on what things you’re looking for when you’re going through, and either inspecting the property yourself or having the property manager do that and what things you’d expect to come back from them. 

David Bright  04:32

I really like being involved in this part of the initial inspection because it can help you better understand the condition of the property and what things may need to be addressed. And there’s going to be preventive maintenance type things. For instance, if you get in there, you can pull the furnace filter out and it’ll probably need replaced, you can replace that and that’ll prolong the life of your furnace to change your filters, right. You could walk into a room and flip a switch and have a light not come on. Maybe you want to fix it light bulb like, they’re just going to be those kind of maintenance things that no matter what it needs to get fixed. Oftentimes we find that we hang blinds in our units. And those blinds can get broken, maybe someone’s moving in or out, they dig a wall, and they make damage like that. So there’s things like that, that can certainly happen. One of the things that we like to do though, is walk through and do this all on video, which one makes it really easy to communicate with the team as you walk in, and you do things like pull out every drawer in the kitchen to make sure that every drawer is functional. And if there’s garbage or things you can, you can notate that so that you can drive next steps. But doing that through video, can help with communication, and then documentation, if there’s anything that needs to be built from that.

Nate Hedrick  05:47

I really like the idea of that documentation idea. I mean, as pharmacists, right, we’re thinking if you didn’t document you didn’t do it. It just gives you that, that credibility and that that ability to go back to the tenant and say, hey, look, we noticed this, is this something that has been like this for a while was this something that you did was this you know, and it gives you an idea of, of just where things are at and proof behind all those items? 

David Bright  06:07

It can, it can help too. And it may end up being a long video, and that’s okay, but to go in and just kind of slowly pan through each room. So you’re looking at every wall, ceiling, floor, you’re opening up every cabinet, you’re opening up every drawer, you can kind of shake door handles to make sure that they’re tight. There’s just a lot of those maintenance kind of tasks, that if you just have a list, and it’s all right there, each thing is maybe two minutes of work to tighten something up or adjust a window or you know, the lock was broken off a window, let’s get another lock, you can put a shopping list together, you can put a list of tasks together. And what can initially seem pretty overwhelming, might end up only being a day worth of work to someone that really knows what they’re doing about managing a property. 

Nate Hedrick  06:49

And that day where the work could turn into several weeks of coordination if you wait until that new tenant has moved in, and then they find all this stuff, right? Like you don’t want to set this up for someone else to move in their first experience is a bad one. Because they’re finding all this broken stuff that you didn’t take care of. And then you’ve got to call separate people and separate occasions, coordinate timing with the tenants deal with them, you know, being disruptive trying to live in their house, if you can get it all done before that move in, it’s just gonna make everybody’s day easier down the road. 

David Bright  07:17

No, definitely. And and eliminating those calls. eliminating those costs can be really huge. And, and cost is something that really plays into this equation too, particularly if the prior tenant had some legitimate damage to the property where they need to be billed to their security deposit. Right. I know, that’s the second thing on the list is analyzing the security deposit and returning a security deposit if appropriate.

Nate Hedrick  07:40

Yeah, so in most states, and again, I’m going to really hang my hat on this most states or state specific idea, because every state has different laws about how security deposit should be handled. There are limits to how much you can collect, there are limits to what that security deposit can be used for. There are requirements in terms of if you’ve collected it for a certain period of time, and it’s in excess of a certain amount, do you have to pay interest back to the tenant. I mean, there are a lot of state specific laws. So take everything we’re gonna say with sort of a grain of salt and look up your your specific state requirements. But in general, when a tenant moves in, you’re going to collect some sort of security deposit. It’s typically and again, state specific, but typically, it’s going to be one month’s worth of rent, or some some smaller amount than that, as sort of a hold back to say, look, if we have you move out, and we see that there’s excessive wear and tear, we’re going to take that out of the security deposit before we return it to you. There’s also requirements from a standpoint of how quickly that money has to get back to the tenant. So again, this is an area where a property manager can be really helpful in terms of making sure you’re following the state specific guidelines. But you should also know them yourself. Because if you violate them, they’re going to bother the property manager, but they’re also gonna come after you as the owner, right? You have to get this stuff, right. So definitely worth looking at and making sure that you’re following. And then, like you said, when you’ve got this video and this inspection, you can walk through and see okay, are there things that are beyond the norm that had been damaged? Right, maybe they, as I’m moving out, and the couch went through a wall, right, and it just took a big chunk out of the drywall on the stairs. And I’d say that’s pretty excessive wear and tear, I’ve got to get somebody in to replace the drywall to patch it to paint it. I might have to paint a big section. So it doesn’t look weird. That to me would be considered pretty excessive right. Now if it’s just some some dirt and some staining on some walls. Like that’s probably pretty normal. I mean, I’m looking at my walls now, right, like the place I live in. So you’ve got to be able to go through and evaluate what is excessive and what is a sort of a normal wear and tear.

David Bright  09:41

Yeah, I think another one that’s really popular and that is carpet, right. Carpet has a fixed life expectancy and if you have a tenant in a property for I don’t know, 10 years, like I don’t know if you can really expect the carpet to look brand new and they move out of 10 years. Right. So you’re really talking about excessive wear and tear, right? 

Nate Hedrick  09:57

I think this is something that it’s important to talk about to be Because I see a lot of, honestly bad landlords out there that will flag just about everything as excessive wear and tear and try to keep the entire security deposit from their tenants. And I really think that’s unfair. I mean, the idea of a security deposit is to be there for things that are beyond normal living wear and tear, right, just just the day to day stuff that I would consider very, very normal. Again, even something as simple as like, the light bulbs are burned out, like, yeah, it’d be nice if the tenant replaced that. But like, come on, this is something you can handle do not charge your tenant security deposit for a couple of missing light bulbs. Like that’s just just bad practice, in my opinion. So I think there’s some some bad actors that make this kind of a more difficult thing than it needs to be. I, I have the volition that in most cases, unless there is significant damage to something, the tenant should be getting all their security deposit back.

David Bright  10:51

Yeah, I know, there’s a property manager that we work with, where they will put together an itemized list because, again, I don’t think that a pharmacist has to do every part of this, right. So I’m not going in there and doing this walkthrough myself. But I get an email with a video link and a list. And from that list, it’s they go through and they mark, this is normal wear and tear, this is excessive wear and tear needs to be billed. And so they do that on a very consistent basis. Because I know you talk a lot about consistency in how you treat tenants, right? 

Nate Hedrick  11:21

So one of the things that I do is when a tenant moves in to actually get a little printout list of some of the areas of the house, and it basically breaks down like living room, and it talks about like floors, and it actually lets them fill in the condition of those particular locations. And talking about how that how the property looks when they move in. And then what I do is, like I said, I’ve got one of these coming up on Monday, I go back with a tenant, when they move out, we walk around the house together and look at the condition and compare it to that original list. Right? Very consistent, it’s all laid out. It’s very objective. And so if they moved in and said the floors are, you know, they’re perfect, you just refinished the hardwoods and I come in and they’re scratched to  high heck, because the dog was running through it all the time. Like, that is probably excessive, we can talk about that when I’m there with the tenant. I just tried to be really real with the individual like, do you what do you think about this? Like, does this feel excessive to you and and most people are pretty reasonable if you actually have that face to face discussion with them.

David Bright  12:14

Nice. I like it, I like it. So you’re analyzing the property to figure out what needs to be done and what those next steps are. But in tandem with that you’re also analyzing the market because as a part of the rehab process, or the renovation process, the refresh that you do between tenants, there’s always this question of, well, is this the time to make some kind of upgrade? Right. So that’s, that’s another piece of this that, that you bring in right, analyzing the market.

Nate Hedrick  12:42

Yeah, and I’m doing this well, before that tenant actually moves out, again, just talking about the property that I’ve got coming up next week. I’ve already been doing this looking at other rentals that are out there. So the first thing I’m doing is comparing well, what’s market rent in general, right? Is it going up? Is it staying flat? You know, where are we to when the tenant moved in the first time. And so like this, this particular tenant, they moved in about a year ago, maybe year and a month or so. And so I’m just comparing to a year ago, like where our market rents in general starting there. Then I’m looking at comparable properties to see okay, what are those comparable properties running for now, so that I can get an idea of price. And also, when I’m looking at those properties, I’m looking at photos, I’m looking at listing descriptions to see are there things that differentiate those properties from my own, right, because if there are other properties out there, and all of those other properties are nicer than mine, because of you know, whatever, granite countertops, or whatever it is, right? Just I’m trying to evaluate those those nicer than mine things. So that if someone is out there in the market, and they’re looking at three rental options in the same city, in the same location, relatively the same price, I want them picking mine first, right? I want to be the nicest one of those options. And so you can do that well in advance to start to kind of figure out, hey, what changes do I need to make, if any? And then how does that affect my rent price? 

David Bright  13:57

I think another another piece of this because we’ve got a vacancy here coming up the next few days. Also, in one of the analysis, things that we’ve been walking through, if we if we think back to Episode 61, we talked about the decision of keep versus sell. This is one where the neighborhood has grown up quite a bit in value, but rents haven’t followed. And so as we’re looking at this one, when this tenant moves out, we’re probably going to use this as a time to put this property on the market for sale and capitalize on the price increase, absent of that rent increase. 

Nate Hedrick  14:31

and we’ve done that as well. And you really have to know that up front because if you start making changes as a rental property, it might be different than the changes the upgrades you make as a for sale property right. So that that’s good to know up front and something you can work on well before the property ever changes hands. 

David Bright  14:51

One example of that that I’ll just share for this one is in my area, one of the things that that is really popular in flips in this neighborhood is everybody’s putting in butcher block countertops. It’s like the cool thing of the week, right. But I can’t imagine the maintenance of butcher block countertops in a rental, because it just feels like it’s too easy to get destroyed if you’re not taking care of that, and, you know, oiling it and the things that you’re supposed to do right to maintain butcher block over time. So we don’t generally put butcherblock in rentals. But as we go through and we look at, you know, it’s been several years since there are new countertops, we’re probably going to do new countertops. This was this is our decision point of do we put in the same laminate that was there? Or do we make an upgrade because it’s time to sell? And so you’re right, those are the things to be thinking about, not necessarily when you walk in, although it’s fine if you need to pivot at that point. But as much as you can plan on that in advance gives you time to order materials, and to then better execute those updates.

Nate Hedrick  15:47

Yeah, and that’s, that’s really our next point, right? Is, is planning and executing those upgrades or those repairs. And so let’s talk about that next. It’s kind of a now that you’ve have a sort of a plan in place, like what does that look like?

David Bright  15:59

Yeah, this is this is the part of the process where I still get pretty involved and because I really enjoy the the nuts and bolts of of getting something like this done, right. And like we’ve shared I’m if you see me swinging a hammer at a rental, there’s something wrong, right? Like I am not good at actually doing this work, but I enjoy the planning and the staging of the of the work so that it all gets done, and it gets done pretty quickly. So one of the things is going back to your notes from that initial walkthrough, if you need doorknobs tightened, or light bulbs replaced, or another one that’s really common is smoke detector batteries, just going through and replacing all the batteries and all the smoke detectors, you just get a pack of batteries. And it’s really simple at this stage in the process, so that when someone well, I mean, if someone walks through the house, and the smoke detectors are chirping, that doesn’t give a good indication that this house has been well taken care of, right. So those kinds of things, just spending a few dollars, knocking that all out, making one big list. As much as I’m really bad when I do any of this personally and making just one trip to the hardware store, right, I always make like five in one day because I can’t remember all the things but as much as you can do about making that list and, and getting one trip down so that you have all your materials or hire a contractor to knock out that list. That can that can be really helpful. But another piece of this is if you’re planning for some of those major upgrades, how much of this can be done in advance, like we mentioned flooring, that may require getting a carpet measure for the house. And that carpet measure can be done 30-60 days before the tenant moves out so that you’ve got the rooms figured out, you can order the carpet, you can set the install date and those things that have to be planned quite a ways out, could happen just a few days after the tenant moves out.

Nate Hedrick  17:41

And I’m glad you mentioned that I’m going through that myself right now. I actually am planning on replacing all the first floor windows and putting new siding on the house. It’s painted wood siding right now in this place. And it looks good right now, it’s starting to peel in a couple little spots. And so I want to get in front of it and cover that up with basically a new vinyl siding. So I don’t have to constantly do the maintenance on this thing. And that’s something I don’t want to do while a tenant is living there, especially the window replacement, that’s pretty disruptive. It doesn’t take that long. But like you said, you’ve got to order those windows, you’ve got to order the siding, you’ve got to have it on stock. And so if you wait too long, you might have that property vacant way longer than you need to, or you’re going to be disturbing that new tenant right as they move in. So this is the kind of stuff that that can be planned in advance. Measurements done while there’s still somebody living there so you don’t have to worry about it down the road.

David Bright  18:28

Yep, yeah, absolutely. And even though we’ve seen the supply chain improve a little bit where you might not have to order windows several months in advance, right. But everybody seems to be so busy now on the contractor side, then yeah, booking good people so that you can get them there in the right window of time can be very, very helpful to make sure you don’t have many months of vacancy, right? 

Nate Hedrick  18:52

Yeah, agreed. Yep, absolutely.

David Bright  18:54

So then once you’ve got those upgrades, you’ve decided, are you going to re-rent it? Are you going to sell it? Are you going to make some upgrades to try to get the rent rate higher? Are you going to say this is right on par with the neighborhood and we’re just going to kind of tighten it up and make sure it’s safe and respectable for the next tenant. Once you’ve got all that done. Now comes the marketing of the property right? Like you have to let people know it’s available. And I know with your realtor hat on you do marketing all day. So So tell us a little bit about that.

Nate Hedrick  19:21

I mean, there’s a lot of steps here, right? You’ve got to figure out you know, how am I going to market this? How am I going to price it? This is an area where a lot of people will lean on their property manager, right. This is a great asset that they provide is that they know the market, they know the rentals. They know what people are looking for, they know what things are going to hold back a property. And so you can you can really lean on them to help with pricing and making any changes that might benefit the property overall. It’s also a time to kind of reevaluate that property manager. It’s difficult to do a property manager change while a tenant is still in the property. It can be disruptive, you’ve got to deal with key transfers and most of it can be done behind the scenes, but like if they’re paying to the wrong entity. And there’s not security deposits that are changing over like, it’s just a lot easier if you’re doing it when there’s no tenant in place. So it’s a good opportunity if you are thinking about changing property managers, or even if you’re not, but it’s a time to reevaluate, this is a good time to do all that. And then if you decide to market it yourself, you know, where are you going to list that property? Is it a Craigslist, only kind of a thing, Facebook marketplace? Or is this more legitimate? Where you’re gonna put it on the MLS with an agent? And try to get it posted that way? So you’ve got a lot of options to consider, depending on the property and the location.

David Bright  20:34

Yeah, and what about the pharmacists that may have been self managing a property and now they’re maybe thinking, you know, I’ve got two or three more units than I had when I last marketed this property? Maybe I’m just getting ready to be done with self management or vice versa. They’ve had a property manager and they’re thinking to themselves, this can’t be all that hard. I want to try this for this round. What would you say to that pharmacist that’s on the bubble there?

Nate Hedrick  20:56

Yeah, I mean, well, if it’s me, right, anything local, like, I like having my hands on it. But that’s, that’s a personal decision, I think it really comes back to like, what do you want to do like either of those is viable? I think it can be. It can be intriguing or enticing. To look at that and say, Man, I’m paying that guy, 10% a month in the last six months, he basically did nothing like there was no tenant interaction, like, I should be collecting that 10%, right. So it can it can be enticing to try that. Then there’s other days where like, just the other day, I had a garage door that wasn’t working for a tenant, I was dealing with a bunch of offers that I was trying to put in for a house, I was listing a property, I was home with the kids. And like, this is just one more thing added to my day. And it can be a lot. So you have to kind of weigh all of those options when you’re making that decision. Both are completely viable. It’s just a matter of personal preference.

David Bright  21:47

Yeah, and I think you’re right, I think a lot of that comes down to like, what else is going on in the world, there could be seasons of life where that’s a really good fit, and you want to get your hands dirty, and build that sweat equity and do some of that yourself and other seasons where it’s like, yeah, like, for me, I am happy right now that when there’s a dripping faucet, I’m not getting in the car and driving 45 minutes to this house and trying to figure all that out. Right? Especially because I wouldn’t be able to figure it out anyway. So no, that’s, that’s for sure.

Nate Hedrick  22:13

Well, I’ve definitely dragged the kids to a problem before and taught them how to fix it. And so that’s my, that’s my parenting for the day. I don’t know if they like it or not. But that’s my parenting occasionally, it’s like, we’re, we’re going to the house, this is how you maintain these properties. 

David Bright  22:25

I like it. Well, then I know one thing that we’ve talked about is, when you are going to these houses, you are far better than me at tracking your mileage and tracking your expenses, right, because as you do this more and more, there becomes a lot of those little expenses that add up over time. And I think that’s the sixth thing on this list is when you’re between tenants, and you’re making these repairs, and you’re doing this work, there are a lot of legitimate expenses there. And tracking it is important, whether that’s tracking it so you can apply properly with a security deposit to your actual expenses and receipts and things like that, or a tracking it for your end-of-year books and tax or tell me a little bit about how you do some of the tracking on this to make it a fit. Yeah,

Nate Hedrick  23:09

and again, these are the ones I self manage. I mean, we’re tracking everything ourselves. That like you said, the mileage is super important, we add that to get our all of our logs, because you can get a deduction on that from from the government at the end of the year. So it’s all part of that. And you’ve got expenses that are broken down when you look at the standard, like how they want you to track it for your for your rental expenses tracking, there’ll be things like management expenses, and marketing fees, and like all those things are baked in. And they’re all separated out line by line. So I really try to separate out as best I can and break it down into the the like the IRS approved categories so that when I send it to my accountant, at the end of the year, it’s very cut and dry, like okay, here are the dollars and the mileage and here’s where it was all spent. And I have folders, because again, I’m A super type a pharmacist, I’ve got folders in my Google Drive broken down by those expense categories. And every folder gets the appropriate receipt, just PDF dropped right in there or picture on my phone dropped right in there. And so again, I can share that entire folder with my accountant. And if they ever want to look through like, Hmm, Nate said he had 10 items in repairs, like what were those and you can open it up and see every single one of those right there and then.

David Bright  24:22

There’s there’s two things that I really like there. One is you’re organized. I just love taking pictures of receipts, right? Because they’re so easy to get lost, like you leave Lowe’s or Home Depot or whatever. And you just sit down and like that receipt is gone instantly. Like I don’t know how they disappear as quickly as they do. But yeah, the picture right away is really helpful or the email receipts that you can just PDF and put in a folder right? I think that’s huge. 

Nate Hedrick  24:45

I have Google Drive like right on my phone. And so literally as I’m checking out at Lowe’s, I’ll lay the receipt down on the counter, snap a quick picture, hit upload to Google Drive and like it’s done and then not to worry about it.

David Bright  24:57

Yeah, that’s such a helpful tip for tracking your expenses. Because not only is it is it necessary for some of the the reporting that you have to do, but also some of the proactive planning for the next thing that you need to do if you do three or four of these, and you realize that, you know, every time I have to go through and repaint a property, even if I’m doing it myself, you always think paint is cheap. But yeah, there’s maybe six or 800 bucks by the time you have roller trays and plastic and tape and paint and all these things, right, like, that starts to add up. And so if you get those kinds of figures, then you can think, Oh, well, for the next one, I need to make sure I’m setting aside and planning for this amount for this thing. And you know, when we go to replace doorknobs, it’s this when we go to replace windows, my average cost per window is this. And so it can really help you with those planning stages when you go to repeat this process for the next property. 

Nate Hedrick  25:50

And even taking it a step further. You know, for someone like myself, who tracks all this stuff for my real estate professional status, if you’re trying to qualify for REPS like this is where you get a lot of your hours isn’t tenant turnover. And so having those those hours lined up and and really well documented. Again, I’m I’m over the top with my documentation on that, but it’s a good opportunity to just lay all that out, put it in a really clear cut, you know, this is where this is coming from, this is my trip, this is this is the stuff that qualifies. That’s the time to get it all put into appropriately. 

David Bright  26:19

I like it. So that that caps off are six things right, the six things, we covered her inspect the property, return the security deposit, analyze the market, make your repairs and upgrades, market the property, and then document and track all these expenses. So Nate, I know we’ve covered a lot of ground quickly there any parting thoughts or any big picture things that someone should keep in mind when they’re getting ready to deal with this vacant rental property?

Nate Hedrick  26:46

Yeah, I think this always comes up whenever I do a tenant turn, it always feels like the most stressful part of the process. And I don’t know that it should, it just it just certainly does. I think there’s a there’s a nudge to, to make it like like, I’m just going to do this the easy way, get done with it and move on, right. But I really want if you’re ever going through this yourself, like just slow down and make sure you’re doing it all right. I mean, rerenting the property is a big opportunity. And it’s something you’re locked into, for in almost all cases at least a year. And so doing it right, following the the state guidelines on everything, first of all, but also just just following through in a way that it’s going to be beneficial for you and your tenant for the coming year, it’s gonna save you so much headache down the line, just just spend the time to get it done right? Plan ahead. This should not be a surprise, right, you should not be writing your leases where you find out that the tenant is moving out next week. Like that’s not an option as far as my leases are concerned. I want to know 60 days in advance or 30 days in advance at an absolute minimum. So I can plan for this stuff and prepare and quite frankly, if you’re gonna be doing it yourself, you have to be setting aside the time to do this, right. You can’t just just hope it shows up and find two hours somewhere like you’ve got to be setting aside the time when that tennant turnover occurs to be involved in the process. So take the time do it right. That’s that’s probably the the biggest piece of advice I can give you.

David Bright  28:08

And that feels very much like how we often talk about treating this like a business right? If you want this to perform like an investment that is doing well, you need to treat it like a business and take it seriously,  analyze the rents make sure you’re you’re maximizing profitability, maximizing that opportunity for the next tenant to have a safe and respectable living situation or if you’re going to sell it, the next homeowner to have a safe and respectable house to move into. So treating it like a business will help it to be really successful also. So for folks listening, if you have a tenant turn story, if you have a question to ask or, or any good before and after photos, we love those right? We’d love to see that on the YFP REI Facebook group. So go ahead and post those there.

Nate Hedrick  28:51

Yeah, absolutely. And if you guys are in the market for again, listing a property or finding the property manager, and you know, just needing an agent needs some help with that, don’t hesitate to reach out like that’s one of the things that we can help with. If you go over to yfprealestate.com We have a Find an agent tool right there. We can find somebody in your area that’s investor friendly, so just don’t hesitate to reach out we’d love to help. Hopefully that’s helpful to you guys. And when your next tenant turn comes up, you’ll be way more prepared. So with that, enjoy the hot heat out there if you’re if you’re in my neck of the woods and have a great rest of the day.

David Bright  29:26

Thanks for listening to the YFP Real Estate Investing Podcast. If you like what you heard in 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 guest or want to connect with us head on over to yfprealestate.com and join the growing YFP Real Estate Investing Facebook group.

Nate Hedrick  29:45

As we conclude this week’s episode of the YFP Real Estate Investing Podcast, an important reminder that the content of this podcast is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in this 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 their financial advisor with respect to any investment. Furthermore, the information contained in our archive newsletters, blog posts and podcasts is not updated and therefore may not be accurate at the time you listen to it. Opinions and analyses expressed herein are solely those of Your Financial Pharmacist unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer. 

David Bright  30:37

Thank you for your support of the YFP Real Estate Investing Podcast. Have a great rest of your week.

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