Handy Tips for First-Time Landlords

Jason Cohen has been an active investor within the Pittsburgh real estate community for nearly a decade. While he began his industry efforts by purchasing and renovating cheap residential buildings in high-potential neighborhoods, he has since expanded his investments to large-scale commercial and residential properties in vibrant neighborhoods. Here, Jason Cohen provides a few tips to new landlords.  

You’ve finally done it. You’ve purchased the building, touched up the paint, laid the carpet, and put your first investment property up for rent. But as the inquiries come in, you realize that the easy part is over – now, you have to deal effectively with your tenants. Jason Cohen Pittsburgh is an advising group operating in the city; as such, its veteran members have heard their fair share of first-time rental horror stories. It’s common for a first-time investor to be so caught up in the buy and the renovation process that they find themselves at a loss when they need to communicate professionally with the people living in their units. Unfortunately for landlords, the work doesn’t end when the contractors leave. Below, Jason Cohen, head of Jason Cohen Pittsburgh lists a few tips for aspiring landlords to take note of before opening their doors to tenants.

Be Assertive

Everyone has an off month now and again. Sometimes, a tenant can’t make a payment on the day it comes due – and in some cases, that’s okay. Landlords should be empathetic and understanding if a tenant faces tragedy or finds himself in a temporary financial crunch, so long as the tenant communicates the situation. If, however, the tenant chooses to go dark and refuse to pay the agreed-upon rental sum, landlords need to act assertively. You need the rent they owe you to keep up the building and make a profit. Being overly understanding to an elusive or underpaying tenant will only result in your missing needed funds. Be assertive! Don’t be afraid of pursuing a delinquent tenant for the money they owe you.

Check Credit and References

Never rent to someone who doesn’t have a job or has a credit score of under 600. Those without the means to pay rent or a history of regular repayment will inevitably leave you waiting for payments that may never come. Screen your potential tenants closely to ensure that they will be responsible, reliable occupants who will care for your unit and pay on time.

Make Smart Renovations

Don’t install marble countertops if your unit is in a low-income neighborhood. In all likelihood, those that inquire about your unit will be looking to pay a rent in line with those offered in nearby homes; if you try to cover a fancy renovation by asking a significantly higher rent, your prospective tenants will walk. Be smart, and don’t risk renovations that offer little return!

Be Organized

Organization is key to any successful business venture. After all, how will you know you made a profit if you have no documentation of the fact? Ensure your success by keeping organized and detailed records!

For more tips, advice, and real estate content, please visit Jason’s site at JasonCohenPittsburgh.org.

The Lease

A lease is the written legal agreement between a tenant and landlord, property manager, or property owner. Be careful when dealing with any legal document, as they represent binding terms. Certain information is necessary within the contents of the lease document, but sections can be tailored to match your (the landlord’s) specific preferences and that of the property. At Jason Cohen Pittsburgh, we know the importance of this document and cannot stress it enough. It is the basis for what youyou’re your tenant expect from one another. The Internet houses an abundance of sample leases, which you can use either as guides to write a tailored lease. A lawyer can also draw up a lease for a nominal fee.

The required sections of a lease are:

• The parties involved
• Property location
• Lease term
• Rental amount
• Acknowledgment or signature

The first section, parties involved, is simply a clarification of the names of the tenant and the landlord.  The property location should be listed in as detailed a description as possible. Include the unit number with the street address. The lease term should include the date that the tenant can take possession of the property and when she/he will have to vacate or renew the lease. The rental amount can be listed as a weekly, monthly, or annual fee — monthly is most common. Lastly, the lease must be signed by the tenant and the landlord, property manager, or property owner to be valid.

Within the section of the lease including the rental amount, it is advisable to detail additional terms. The deposit amount should be clearly stated in this section. The circumstances in which the deposit can be used can be explained in a separate section. The late payment policy can be included with the rental amount, or it could have its own addendum. The latter is more common.

Although a pet policy is not a necessary section in the lease, at Jason Cohen Pittsburgh, we advise you to include it in as much detail as possible. If an additional deposit is required for pets, describe it in this section. If pets are allowed, detail the types and sizes of the allowed and restricted pets. Consider all types of pets — from mice and hamsters to cats and dogs. Even take into account exotic pets, such as lizards and monkeys — you never know what you’ll encounter renting out a property. While many people do not consider fish a problem when it comes to rental unit, the size of aquarium should be limited to what the floor can support. Research the types of pets that residents may have before writing this section to be sure to cover all situations. Of course, the pet policy can be a simple “no pets allowed, ” but you may find the tenant pool shrinks with this strict rule. 

Sometimes a tenant will allow friends or family to visit or stay for an extended period. You can choose to include a section limiting the time that a guest can stay. Fifteen days is a common term for a guest. Detail the circumstances in which this can be allowed. For instance, a tenant caring for an ailing mother in the apartment can be viewed differently than a friend crashing on the couch for six months. Punishments for breaching this rule can either be listed in this section or in a section allotted to breach of contract for any reason. 

The words written in a lease agreement can be as important as the tenant’s signature. Including the mandatory parts of a contract make the agreement legal. Adding additional sections tailored to the property and your preferences will minimize issues later on in the renting process. 

The Pros and Cons of Renting to Section 8 Tenants

Sure, there are the horror stories of tenants turning your property into a veritable house of horrors, but renting to Section 8 tenants can have advantages. The U.S. Department of Housing and Urban Development runs this financial assistance housing program to help low-income families afford rentals. As with any demographic, there are risks and rewards to renting. At Jason Cohen Pittsburgh, we believe in thoroughly researching a program before either writing it off or diving in headfirst.

Pro: Rent comes in on time via direct deposit

Since HUD is responsible for the payments, rent is automated and deposited to a landlord on time every month. The federal government does not have medical or education expenses or vacation plans that make monthly payments late.

Con: Inspections

Local Public Housing Authorities conduct frequent inspections in 13 aspects of the property that must all meet their standards.

Pro: HUD takes care of payments if a tenant cannot

Even if a resident falls into unemployment, HUD will cover the rent until work is found.

Con: Lack of security deposits

The vouchers that HUD supplies for monthly rent payments do not cover security deposits. Obtaining the deposit directly from the tenant can be challenging, but it should be an essential step towards ensuring the state of your investment.

Pro: Higher profit margins

Because of the government assistance, you can charge more monthly rent in lower-income neighborhoods where properties are much cheaper to purchase.

Con: Limits on voucher amounts

Although you could receive more money in rent from HUD if you were to rent to non Section 8 tenants in the same depressed area, there are also limits on how much rent the government will pay each month. HUD calculates Fair Market Rents annually and allots voucher amounts based on those while factoring in number of bedrooms and condition of property. Even if your property is immaculate, there is a limit on how much HUD will pay.

Pro: Free marketing

Tenants are relatively easy to find by listing your property on the Section 8 web site. Keep your marketing costs low by containing your advertising on a free government site.

Con: Stigma

While you may not have any trouble renting your HUD-assisted unit, you may have issues renting other units in your building due to the stigma attached to Section 8 tenants. Even if the conception that Section 8 tenants are unruly is wholly untrue, it is still enough to drive other potential renters away from your property.

When dealing with Section 8 and any other tenants, screening potential renters is extremely important. If you are worried about the wear and tear that is often (whether fair or not) associated with HUD-assisted tenants, the onus is on you as a responsible landlord to thoroughly screen all applicants. At Jason Cohen Pittsburgh, we cannot endorse Section 8 housing either way. It is up to you as a landlord to decide if the pros outweigh the cons.

Jason Cohen Pittsburgh Explains Millennials as Renters

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Home Improvements that Don’t Add a Lot of Value to Real Estate Investors

The housing market is slowly recovering. Real estate investors are having success again. But it’s still a buyer’s market. Homebuyers are more cautious now. They know better. They’re not going to spring for the luxuries that they may have before the Recession. They know what they can afford.

It’s time for real estate investors to make sensible improvements that add real value, not add luxurious unnecessary features to entice buyers who may be trying to live beyond their means. Banks have wised up and are stricter with their lending. So, just like the homebuyer, a real estate investor should be cautious with their renovations. When flipping property, the following “improvements” should probably be avoided:

Creating a Home Office.

Sure, telecommuting is getting to be a more viable option every day, but home offices tend to offer less than a 50% recoup on installation expenses. They’re not for everyone — some buyers may see more value in the space as an extra bedroom — so it doesn’t make too much sense to add it to an investment property.

Adding a sunroom.

Again, not for everyone. Some people may not think that a solarium is a necessity. Some may not know what a solarium is. Either way, it’s not the best investment.

Adding a bathroom.

Though it may seem like a huge selling point, it’s usually not. The amount of money you’d have to add to your selling price to recoup your investment in adding a bathroom may scare away buyers who see it as a luxury that they’re not willing to pay for.

Luxury bathroom remodel.

Jacuzzi tubs and enormous glass showers with massaging heads may seem enticing, but they’re practically never worth it.

A pool.

Granted, a real estate investor is generally not considering adding a pool to properties that will be flipped, but it should be mentioned as a money-guzzling undertaking that does not offer a return.

Adding a master suite.

It’s not Versailles. It’s an investment property. Most homes don’t have wings, so a master suite may seem a bit much in the average home.

A roof replacement.

Unless this is really necessary, like you’re buying a house that was the victim of the tornado in The Wizard of Oz, you probably don’t need to replace an entire roof.

As a real estate investor, a general rule that you can follow when it comes to property renovations is that luxury may be, well, too much of a luxury.