1. Visit your properties

This is usually a no-brainer, but it’s easy to get into a groove where the cheques show up and you don’t get out to check on something that appears to be working fine. If nothing else, this is a great chance to drop off a Christmas card and gift (see #5 below). Make special note of what needs to be fixed, if you tenant needs extra supervision and try asking them if there’s anything they’d like renovated/fixed/replaced.

2. Get repairs done in the quiet time

This has been a mild winter, meaning trades are less likely to be running around dealing with cold-weather emergencies. This is also a good time get some work done since trades are less likely to be working on big jobs and may have time to slot you in. I’m a big fan of giving my trades as much latitude in terms of work/cost/time/material as possible, putting them in touch with my tenants to get time/access set up and trusting in their work. One of my mantras is that you get three options – fast, cheap or good – but you only get to choose two. The quiet parts of winter are the best time to get cheap and good, since you’ve got lots of time to give.

3. Decide how much money you want to make this year

Tax planning is a very large topic and generally beyond the scope of this blog. That said, you should have some idea of how you did in the past two years, how much money you’re likely to make this year, and then how much you’re planning to make in the next 2-3 years. For myself, I’ve started a new business this year which means I’m going to have a smaller taxable income this year than the next couple years (hopefully). If I can, I’m going to make sure that I keep as much income in this tax year as possible. The reverse applies as well – if I can push out expenses to next month (next tax year) then I’ll do so.

That said, there’s always an important consideration when it come to saving on tax. When you have a low taxable income, you also have low mortgage qualifying income. Brent and I spent an interesting hour with our accountant discussing a corporate structure that’ll save some tax when it counts, but also gives us the best possible income for mortgage qualifying.

4. Capital Gains and Losses

It’s almost tax time, so here’s some important year end tax stuff you should discuss with your accountant. Capital losses can only be applied to capital gains, so if you’re making a bunch and (for example) want to dump a stock you own but are losing money on, do it before the year end to get ‘er done. Also, when deciding what deductions to take and where/when to apply them, remember that home office expenses cannot be used to create a loss, but you can carry the deduction forward indefinitely.

5. Be Smarter than the calendar

While you’re doing things like checking the postal code of your property to send Christmas Cards, take a flip through your calendar and record important dates:

• Birthdays
• Lease renwal dates
• Last/next rent increase dates and the notice period (90 day notices should be in your calendar 105 days before the actual increase so you remember them)
• Anniversary dates or other important dates

6. Start shoe-boxing now!

And you’ve got the files out, so now is the perfect time to start compiling your paperwork for tax time! Sort by income, expense (categorized/dated) and tax information. You should have an ongoing tax file so you have a history of what you’ve claimed against the property. A perfect example of this is Capital Cost Allowance (CCA, aka depreciation).

7. Send out Christmas Cards and Gifts!

Love your tenants! Make sure you send out a card – even a simple one. Gifts are always a good idea – keep it simple with gift cards or try nicer gift baskets like the ones we buy from Little Helpers. Remember, even a tenant paying $800/month for a little basement suite is still paying you almost $10,000 a year!

8. Write two ads

Even if you don’t have any vacancies, sit down and write two ads right now. Make one appeal to a family with a new baby; make the other appeal to an older couple looking to downsize. It doesn’t matter what theme you’re using, write a couple so you have some prepared for when you eventually do have a vacancy and are feeling less than inspired

9. Take a week off

Give yourself a full week with no phone. The week between Christmas and New Years can work, even thou you’re likely to be busy. A week in February is even better – go skiing and give the phone to someone you trust. You’ve got to sharpen the saw sometime.

Photo Credit: Aforeo on Flickr

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Things have started moving a little more quickly in the Edmonton rental market this spring. Incentives have almost totally disappeared, and many Property Mangers and investors have said they’re starting to test the waters, moving rents up by $50-200/unit. Vacancy is down more, slightly below 4% according to Colliers, and things are (usually) renting quickly. I’m still seeing positive cash-flow in detached single family houses without a suite, with nice units renting very quickly. In one case the bank did a rent appraisal which came in $150/month higher than our assumption before purchase!

Here’s the July 2011 update to my Edmonton Rental Market Survey. We had another 36 units updated, bringing the total to over 750. I’d still like more input from investors, managers and brokers, so please subscribe and I’ll email you next time I’m pulling the data.

You can download the PDF version of the Rental Market Survey here and you can signup for updates here. Happy Renting!

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1. Buying Multi-Family – Sellers’ Market Tips It’s 2011 and Edmonton’s still a funny market when it...

First, thanks to Chris for allowing me a guest post. I am a fellow Real Estate investor and spent seven years with REIN, so I really appreciate many of his insights in his posts.

This particular post is actually in regards to a post by Brian Persaud quite a few months ago in regards to Problem Tenants in Ontario. Its reading information like Brian’s, that really make me appreciate owning properties in Alberta. Similar to Ontario, making the wrong move with a problem tenant can be costly and can quickly evolve into even more lost money and extra stress.

Fortunately, for Alberta landlords though, there are some great laws and systems in place to make landlording considerably easier than most other provinces, in my opinion anyway. Two of the biggest positives for landlords here in Alberta are security deposits and a system for resolving landlord/tenant issues called the Residential Tenancy Dispute Resolution Service or RTDRS for short.

As a landlord, security deposits are a vastly superior option than tenants paying first and last month’s rent as they do in Ontario. Security deposits can be used to cover cleaning costs after tenants leave, or to repair any damages that tenants may have caused to the property. With the tenant understanding their deposit could be partially withheld it can work as a tremendous incentive for tenants to leave the properties in the same condition as they initially rented the premises.

In Ontario, any repairs or cleaning have to be added to the last month’s rent. This now puts the pressure on the landlord to try and collect additional funds from tenants. This can become an even more time consuming adventure than actually evicting a tenant in some cases. Of course, there are landlords who abuse security deposits as well, which bring us to my other favourite item about being a landlord in Alberta.

This is the RTDRS, which was introduced in Alberta around 2008. The RTDRS is a system designed to streamline the process of settling landlord and tenant disputes through the courts. This service allows landlords, and tenants, to bring their disputes to a less formal resolution using court appointed hearing officers. These hearing officers have the ability to make legally binding decisions regarding almost everything under the Residential Tenancy Act in Alberta.

This can range from setting eviction dates for tenants who have breached their lease agreement, to helping tenants recoup improperly withheld security deposits from landlords. All of this for just a $75 filing fee and in a much timelier fashion than the old very formal court system. Many hearings can even be arranged within about seven to ten days after the filings occur, which can shave days and weeks off the original process.

This simple system manages to work for both sides. Now there does seems to be a slight bias towards preventing tenants from being put out on the street, which no one really wants, but overall it’s still a very fair and impartial system that should be a model for many of the other provinces.

Ed Note: Bill Biko has been investing in Real Estate since 2003 and has become an expert at evictions due to his experiences owning multiple rooming houses. He can be found at www.AlbertaEviction.com and www.Investors.Housez.ca.

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Knowing what a potential revenue property will rent for is the most important and most difficult part of establishing a rental portfolio that has positive cash-flow and creates serious passive income. To help out my clients, readers and all you investors, I’ve teamed up with several investors, Realtors and property managers to come up with some ballpark numbers which should help make your lives a little easier.

Here’s the basic info for you. A screenshot follows and you can download the whole report free of charge. You can signup to recieve future updates here.

There’s a significant variation between the different areas of Edmonton, and within the different property types. Here are the highlights.

• The survey receieved responses from companies and individuals managing 744 units, with specific data for properties rented out in the past 30 days. Some additional data has been gathered by conversations with property managers. There are still gaps, so if you can contribute to the next edition of this report, please feel free to contact me.
• The greatest variance is seen in 4-bedroom houses, from $1400-1800/month, likely owning to the wider variety of product quality.
• Apartments and Townhouses made up the largest classes of properties held by contributors.
• St Albert, the South, West and Millwoods seem to hold a $100-200 premium over comparable units in the North.

Thanks to Davies Management, Prestigious Properties, Avangarde Property Management, 911 Rent, Jason Scott at Urban Mortgage Edmonton, Rentex, Candema Property Management and Glenn Simon Inc..

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There comes a point in every landlord’s life where you have a tenant who:

• Doesn’t pay on time
• Damages their own unit
• Damages the common property
• Fights with other tenants
• Does something illegal on the property
• Threatens or attacks you
• Is paying old and very low rents
• Doesn’t play well with others
• Hasn’t paid in several months

Often it’s when you’ve just taken over a new property. If you’ve just bought a multi-family property then it can be even more frustrating, because you’ve inherited 10-200 tenants all at once.

Brent’s going to be talking about this topic at the upcoming October Edmonton and Calgary REIN workshops, and he’ll also be on a panel at the Advanced Landlording and Investing Fundamentals Expo in Calgary October 16th and 17th. (I’ll be there for the Friday and Saturday I think.) If you’re at either meeting, you’ll hear him and Don talking about some strategies to kick out the deadbeats, and how we approached the reality of handling well over a thousand tenants.

To help him get ready and cover the common and interesting situations we’ve encountered in many, many years of dealing with other people’s properties, Brent and I sat down and ran through the types of situations where you’ll need to deal with a payment issue, a legal issue or just want to change the tenant demographic. One of the things we figured out is that for the tenants we’ve put into buildings that we’ve managed for a while, we have start disciplinary proceedings on less than 2% of them. For buildings we take over with poor management by the owners it’s closer to 10% and sometimes as high as 20%. (Note I said poor management by the owners, because in our experience it’s almost never the property managers’ fault, but that’s another topic.)

I’ll cover a bunch of what we discovered in a post after the ALIFE weekend, but I want your input before we finalize things.

• What was your most frustrating tenant issue?
• How have you successfully changed the tenant profile in a building?
• What are the most important parts of your tenant screening system?

Photo Credit: “Woodfall’s Law of Landlord and Tenant” by umjanedoan, on Flickr

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There’s a scam that comes around every few years. You put an ad up for one of your units. Someone copies it, drops the price and ends up suckering someone out of a damage deposit or a month’s rent and running away. It’s the oldest trick in the book – sell something you don’t own. Here’s six tested and proven tips to help prevent people getting screwed and your name potentially being smeared by angry people.

1. Watermark your photos. Include your website and/or phone number. There’s a number of free options to do this, including the Picasa desktop app.
2. Pick a unique sentence that’s just in your ads and set up a Google Alert for it (in quotes). Then every time it shows up on the web you’ll get an email about it, which should only be when you put up a new ad. **You should also do this with your personal name and the name of your business.
3. Include several references to your name, phone number or website. This means in the body of your ad, not just in the fields where they say to put your name/phone number/email.
4. Inform your  caretakers or existing tenants when you’re advertising and if there’s a property that’s been hit by fraud like this. Also let them know when there’s people who are coming to view the suites.
5. Take your ads down when you’re done with them. This should be a no-brainer, but lots of people go for a shotgun strategy with their ads, meaning they’ll take forever to get them down. (You should be smarter and use a more focused approach to online advertising, but that’s another post.)
6. Include a link to your website and keep an eye on your Web Analytics. You should see each site under ‘referring sites’, or if you want to get sophisticated create URLs that label each site and then shorten them using a service like bit.ly so even if people share the link or copy and paste it you’ll get the referring information.

Photo Credit

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There’s something that you start to learn after 15 years of property management and thousands of tenants. There’s nothing that will surprise or disgust you anymore. I don’t claim to have seen it all, but I’ve seen enough.

1. The Giant TV of Doom – They’ll  bounce the rent cheques, struggle to have any sort of savings and probably live in a 2-bedroom apartment  till the day they die, but they’ll have a giant 50″ Plasma TV. If you’ve ever wondered who takes those ads from the Brick that say Don’t Pay ‘Till Stardate 2075.364, it’s your tenants. Pull a couple credit histories and you’ll see what I’m talking about. Apparently you can rent-to-own a coffee maker….
2. Slippery & Slimy, Creepy & Crawly – I love animals. I actually studied pre-veterinary medicine my first two years of University.  For lots of units (houses in particular) I have no problem with a cat or dog. Anything else starts to raise red flags. Fish? The tank seal goes and you’ve got 100 liters of water destroying the carpet, walls, ceiling and pissing of the tenant in the suite below. Lizards? They eat bugs, and even if 1% of their dinner gets out, you’ll have several thousand crickets in your building within a month. (This one I know from painful experience) Birds? You try and shut a bird up. A tenant who moves in with birds is a fight waiting to happen. Also, if they let the birds out, you end up with the same problem as most statues. I used to have a budgie who liked to hang out on top of the cabinets. Snakes? They fit just about anywhere, including down pipes and into vents. They also eat rodents and bugs, which means their food supply is a big risk (see Lizards above). One day I’ll tell you the story of the snake who died in a hot air vent.
3. Dead Bodies – You might think you’re an experienced landlord, but until you’ve found a few dead bodies, you’re still a rookie. Two of the times it’s happened to us still give me nightmares. The first was a suicide (drug OD) that managed to leave a dirty suite plus a bunch of body fluids (your muscles relax when you die…you put the dots together). That’s the most likely example, and it still took $3,000 to disinfect the suite, plus hauling away the junk, replacing the carpet and underlay.The second example was an old man who died of a stroke, but wasn’t found for 2 weeks until the smell alerted another tenant. That was in a fairly ethnic building, so strange smells from cooking masked the strange smell from the decomposing body. That suite had to be peeled back to the sub-floor and replacement of some drywall.
4. Grow Ops – What’s a little pot between friends? A couple little plants? Get a grow-op in your suite and you’re going to be pretty screwed. As the RCMP reminds us, you’re looking at little hazards like:
   Fires – lots of electricity plus lots of water equals a quick way to short something out. They also adjust the furnaces to blow exhaust (CO2) into the growing room, increasing the risk of fire and explosion.
   Mould and Fungus – humidity, plants and an enclosed space? It’s party time for the Kingdom Fungus. And just try to rehab a grow op with a mould problem. You’d be more likely to get the Green Party elected.
   Poisons, Gases and Chemicals – fertilizers, insecticides, pesticides, herbicides, and fungicides are extremely common and extremely dangerous.
   Booby Traps – They’re criminals, and they’re trying to discourage people from finding the grow op, and concealing the evidence. If you think you have a grow-op, call the cops. Don’t mess around.
   Electrocution – plants require water, light and heat. All three need power to get things moving, and criminals aren’t interested in paying for it, or being found because they’re using lots of it. They’ll tap directly into power lines, leaving you on the hook for the bill and the repairs.
5. Obsessive Compulsive Disorder – No joke, some of the most frustrating, heartbreaking and irritating to deal with. Beyond the people who have 50 years of newspapers piled up, or racks and racks of clothes, or 15 VCR’s, I’ve seen people who would go to a social gathering and take the leftover coffee home and freeze it. Years of collected, dried and stored food, ‘personal items’ and more. Also, years of that area not being cleaned. Once you get an OCD tenant out, count on new carpet, paint, appliances and more before you can get some new tenants into your unit.
6. The Porn Suite – There’s one in every good sized multi-family building. You open the door and come face-to-face with a life-sized poster of a naked lady. You turn left into the kitchen and there’s two more. And a giant stack of DVDs. Hopefully there’s no weird stuff, open sex toys or anything else you’d rather not tell your grandmother about.
   Just back away quietly and go wash your hands…..
7. Big Dogs – I love dogs, but more than one is a big problem. The US Environmental Protection Agency estimates that the typical dog excretes three quarters of a pound of waste per day—or 274 pounds per year. Besides destroying your yard, I’ve had tenants turn the den, back entry or entire basement into a giant litter box. After a couple months the house is nearly beyond repair.
8. Drug Addicts -  I’ve seen suites where chemical drug users have done so much meth that you could see crystals on the wall. Besides the fact that drug addicts aren’t typically the most attentive people when it comes to cleanliness or physical hygiene, the drugs themselves are a significant risk. They also attract others involved in the drug trade, and that’s never a good thing.
9. Hookers and Johns – I don’t have a problem renting to hookers in general, as long as their business stays outside of the building.
   I have, however, seen fights break out between the boyfriend, the john and the hooker, resulting in stabbings, holes in walls and broken doors and locks. Your best defense is a good resident manager.
10. The Party Place – More often in a house than an apartment, it’s the 24/7 party place, often combined with a bit of drug dealing or other illegal activity. Just trying to visit the property will scare the pants of you, and I’ve been to more than a few of them. They’ll destroy everything and scare your other tenants away. Get in there early and get them out.

One of the biggest reasons why people invest with me is my experience and my team when it comes to Property Management. I worry, they don’t.

The best thing you can do as an investor is to learn lots, ask questions and visit your properties frequently, without harassing your tenants.

Know that you’re not going to catch everything, don’t feel too stupid when something expensive and embarrasing happens.

Plan for the unexpected.

Learn and grow.

Photo Credits: http://www.flickr.com/photos/mugley/ / CC BY-SA 2.0 http://www.flickr.com/photos/pinksherbet/ / CC BY 2.0

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My parents were renovating a property of theirs after a tenant has moved out. You find all sorts of funny things tenants leave, but this was a new one.

Pretty ladies’ garment.

Size 40. Not bust of 40. Size 40.

Which wasn’t that scary until my friend mentioned that it might be for a guy. Call me a prude, but that freaks me out.

Remind me to tell you about the time we found an S&M Dungeon in the basement of one of our houses….

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It’s easy to understand how you can make money when you buy real estate. You find undervalued properties, motivated sellers, sweat equity or tenants from hell.

The real money, as well as the potential to lose it all, comes from what you do in the years after you buy. You can find 300%+ returns if you manage it right, or end up putting money in every month and selling for less than you bought it.

What you can get from a well managed hold is more than just good cash-flow. It’s a good looking property that’ll be on the leading edge of a market increase, first to benefit from an area in transition, will bring you more properties to buy and help attract new potential investors.

Like a VW Bungalow

I bought a 4-year old VW Golf TDI because it’s still better made, nicer looking and more reliable than the new North American cars (and VW is less likely to go bankrupt). When you buy a revenue property, you want the C-class building in a B-class neighborhood. Then you want to carefully bring it up to be one of the best B-class buildings around. You don’t want to make it shiny beyond reason (unless you have a very specific exit strategy), but you do want it to stand out in a good way.

I also invest in older townhouses. They’re simple, reliable, easy to fix and easy to fill up with tenants. They also have more exit possibilities than other types of investment real estate. There’s always a buyer: first time homeowners when prices are high (because they’re affordable) and investors when prices are low because they make sense. They’re easy to rent because they’re a natural step up from a walk-up apartment building; great for professional couples or new families. They’re never going to shine like a well renovated detached house, but they’ll be a reliable old Volkswagen.

Pay Now or Pay More Later

Every investor draws up a little budget before they buy a property. So much for mortgage payments, condo fees, utilities, property management, vacancy allowance, insurance and repairs.

Why do 80% investors fail to use their repair budget proactively? It’s good to know you have money to replace the hot water tank. But I’ve seen lots of investors go through a 5 year streak with no serious costs, and one day they discover that things are shabby looking and falling apart. Suddenly everything needs repair, renovation or replacement.

At least once a year, or hopefully once a quarter, you should do a quick walk-through and fix something little. This means painting before things peel, replacing fixtures before they completely stop working and spending money. However you’ll be shocked at how a new light fixture and painting a door every few months will silence the complaints over a $200 rent increase.

It’s also about managing cash-flow effectively. It might look good on a statement for the first two years if there aren’t any major expenses, but there’s likely to be twice as many repairs in the third and fourth years. That’s not good management. Putting a little effort in now will save a lot of headaches later.

How Much Does $18,000 Weigh?

Just over 300 pounds. That’s what two adult tenants weigh, and $18,000 is what they’ll pay in rent at $1,500 per month. Particularly if you’re a new investor, get to know your tenants. It’ll help you in the future as you develop a profile of what your preferred tenant is like. There’s a good reason well run multi-family apartment buildings have a live-in caretaker who helps lease suites. It’s because they get really good at telling which people will fit in and be good tenants.

I have a two week break between jobs and I’m spending it doing some consulting for a property management firm, helping to train resident managers. It’s such a great way to help improve a business and I know it’ll have a real impact on owners.

Managing well will bring much higher returns than buying $20,000 under market. Failing to manage well could cost you the $20k and a whole lot more. Take the time to be a good landlord, improve your property and find good tenants.

Photo Credits:

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While I’m taking some time off at Christmas I’m recycling some of the best old posts here. Enjoy, and Merry Christmas!

The hardest part of investing in real estate is property management. Sometimes it’s more tenant management than property management, but either way….

Next to concerns over cost and market projections, dealing with tenants is the biggest worry for someone looking to invest in real estate. And it should be. Why?

YOU FIND DEAD BODIES

Not that often, and it’s not always that bad, but you still find them.

My family owned a property management firm for over 20 years, and I drew my first paycheque from them at age 12. When I left, we were managing well over a thousand units. That can be well over 2,000 people in our buildings. We’ve had at least three deaths I can remember, and one close call (but that’s another story I’ll let my Dad tell).

The typical death in a rental is an older person with few family or friends in the area. They die of natural causes. Then one of three things happens:

1. The resident manager (if you have one) or a tenant notices they haven’t seen Bob around lately and goes to knock on the door. No answer. They try again the next day. No answer. So they call you, and you deliver a 24-hour notice to inspect. Note: If you have cause to believe that they’re actually dead or injured, and there’s no response, go in anyways, right now. You might save someone’s life, and it’s better to piss someone off than to walk away from someone who has suffered a stroke. And yes, I’ve seen it. This is part of why everyone should take Standard First Aid.
2. Bob’s had a heart attack and fell out of his lazy boy onto the floor before he died. He’s been there about 2 weeks, and you get a call from another tenant, neighbor, or your all-star resident manager about a smell. If your dead-guy radar (as opposed to your slob/OCD radar) is tingling, it may make sense to call the cops before you leave the office.
3. Bob happened to have a heart attack while in the bathroom with the door closed and the fan on. The only reason you figure something is up is he hasn’t paid the rent. You deliver a 14-day eviction notice for non-payment. It expires. You try the door to see if he skipped…..and find a month old dead body. This is the least cool part of the three options. I supposed there’s always a fourth option, but you can use your imagination on that one.

Now you’ve found the dead body.

You’re going to have to call 911, tell them you found a tenant who is dead, and would they please send an ambulance. The cops will come over too. They’ll ask you some questions about the person, so now is a good time to step into the hallway, close the door, and call the office to get the dead person’s vital stats, info, and next of kin contact for the cops. They’ll haul the body away, and you’ll be left to clean it.

In one case, we found a tenant who was dead about 2 weeks. Cleaning up the suite was a very expensive proposition. We had to rip the flooring out all the way down to the sub-floor. Sometimes it’s as simple as having someone haul away the junk (the normal junk haulers may not touch this, as there can be a bio-hazard element), and having a disaster company clean the carpets and ozone it. Sometimes it’s more complex. Either way, just be thankful you’re still alive.

When you’re dealing with a situation like this, don’t start skimping on costs. You need to contact a professional. If there are pathogens breeding under the carpet, you’re going to have a nightmare like never before. Get the pros, and accept that it’s going to cost you.

Be sure to consult with the applicable laws for the disposal of the person’s effects. While you can, under certain circumstances, sell them to pay for unpaid rent or cleaning costs, it’s often better to just let the family take it all. They’ll often pick up the costs, or you can make a claim on their estate. In at least one case during the summer of 2008 I had a suicide in a building, with no known family. The Alberta Government was settling the will, and we submitted a claim for the $3000 in cleaning costs and a month’s back rent. So far as I know we still haven’t seen any money out of it, but the suite is clean and rented to a new tenant (who has no idea the former tenant didn’t move out in the usual way).

And pray for the dead person. I can’t imagine how much it must suck to die and not have anyone find you for a couple of weeks.

Originally published April 22, 2008.

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