Month: August 2023

Categories
Landlords

5 Signs that a Guest Is Now a Tenant

Photo from Unsplash.

So, you’re a landlord, and you suspect that one of your tenant’s “guests” has somehow transformed into a tenant themselves, without your knowledge. They’ve been staying for months in your property, and yet they’re not on the lease.

This can be a tricky situation to solve. That’s because you must allow your tenants to live peacefully on your property as part of their tenant’s rights, which means you can’t disturb or harass them unnecessarily. But it’s also your right to know if someone is staying for an extended period in your rental unit, be part of the lease agreement, and be held accountable for rent.

When you have unwelcomed residents on your rental property, they can threaten the well-being of your unit, since you won’t be able to hold them accountable for any damages they cause.

In this article, we’ll help you navigate this tricky situation and shed some light on why having unwelcome tenants can harm your rental business.

The Shift from Guest to Tenant: Why It’s A Big Deal

When you own a property and decide to rent it out, you have a particular set of expectations and agreements with your tenants. These agreements often involve things like rent payment, lease duration, and the overall management of the property. As a landlord, you have the right to control who occupies your property and under what conditions.

When a guest starts behaving like a tenant, it can cause serious complications. Let’s take a look at a few reasons why:

  • Unauthorized Occupancy: When a guest becomes a tenant without your approval, it means they’re occupying your property without going through the proper screening process. And every landlord knows a thorough screening process is vital for success in the rental industry. Without it, you’re faced with a security concern, as you do not know the occupant’s background or ability to meet your rental criteria.
  • Lease Agreement Violations: As a landlord, you have a lease agreement in place with your tenants, which outlines the rules, responsibilities, and terms of their tenancy. With unauthorized occupants, you can’t enforce the rules you laid out for your property. Add to that, you’ll also worry about potential violations beyond the property, such as noise complaints, parking violations, or HOA issues with little recourse.
  • Financial Implications: Guests who become tenants without your consent might not pay the proper rent amount or adhere to the agreed-upon payment schedule. This can result in a loss of income for you as a landlord, and enforcing the appropriate financial arrangements becomes challenging without a formal lease agreement.

So, the shift from being a guest to an unauthorized tenant can be problematic for landlords.

Let’s move on to the signs indicating a guest has turned into a tenant without your knowledge.

Signs You Have Unauthorized Tenants

Courts recognize various contracts to determine who is a tenant of your rental property. These contracts can include a written conversation, a written document, or a series of acts to be considered part of a lease.

However, different states have laid out different thresholds for the evidence showing a mutual arrangement for the rental unit.

#1 Extended Stay

One of the most apparent signs is when a guest exceeds the typical length of stay expected for temporary guests. If they have lived in your property for an extended period, they have likely transitioned into a tenant.

#2 Financial Contribution

Guests do not pay rent or share utility costs because they stay temporarily. But, when “guests” start contributing to rent, maintenance, or utilities, they’re considered a tenant.

#3 Belongings in the Unit

If you notice that a guest starts moving their belongings into your rental unit, they’re considered tenants. Whether they move their clothes or pets to the apartment, that’s a sign that they should start paying rent.

#4 Changes to the Property

Guests often don’t change the property significantly since their stay is temporary. If you notice alterations like new furniture, decorations, or maintenance work done without your knowledge, it could be a sign that they now consider themselves long-term residents.

#5 Change of Address

When they change their permanent address to the rental unit, you can consider guests a tenant. You may notice they are getting mail or delivery packages to your rental unit’s doorstep.

What Landlords Can Do With Unauthorized Occupants

At one point in your life as a landlord, you’re bound to deal with unauthorized occupants. The key is knowing how you can deal with the situation or avoid it entirely by having a well-written lease and thorough tenant screening. Here are five steps you can follow:

1. Include A Guest Clause In The Rental Agreement

As a landlord, include a clause in your rental agreement about guests, which outlines various factors when you can start considering a guest as a tenant. You can also include how to handle any issues with unauthorized tenants.

Having a guest clause protects your property while ensuring that your tenant knows the consequences when they violate it.

2. Reach Out to Your Tenant

The next step is to talk with your tenant and remind them of the lease terms regarding long-term guests. Use this opportunity to gather information on the names of the guests and how long they’ve been staying at the apartment. Once you address the situation with the tenant, it lets them know that you know about it and are willing to enforce the rental agreement’s policies.

Ideally, the unauthorized occupant will vacate the property after bringing this to the tenant’s attention.

3. Remedy the Situation

If talking to the tenant didn’t resolve the situation, you can send a 3-day notice to your tenants to remedy the violation or vacate the property. Once the notice period specified in the notice has passed, landlords can proceed with a formal eviction process if the unauthorized occupant continues to stay in your unit.

4. Document Everything

Keep detailed records of any communication, payments received, and evidence supporting your claim that the guest has transformed into a tenant. Having a hold of this documentation will be crucial if you need to take legal action later on.

However, as a warning, Never accept any form of financial contribution from guests or agree to accept payments. Because once you do that, you’re entering into an informal landlord-tenant agreement. Guests can become tenants with a verbal agreement, and they will have all the rights of a paying tenant, even though you don’t have a written contract!

5. Seek Legal Advice

If the guest refuses to comply with your requests or if the situation becomes more complex, it’s advisable to seek legal advice from a professional who specializes in real estate law. They can guide you through the necessary steps and help you protect your rights as a landlord.

Protect Your Property From Unauthorized Tenants

Maintaining control over your property and ensuring that guests respect the boundaries you’ve set is essential for the success of your rental business. And determining whether a guest becomes a tenant is vital to ensure your property is not at risk from unwelcome “guests”.

That’s why you have to keep an eye out for signs guests have become tenants so that you can take appropriate action and keep your property under your control.

Want more tips on investing in the Metro Detroit area? Sign up for our newsletter or attend one of REIA of Oakland’s meetings for more professional insights.

Categories
Wholesale Wholesaling

Responding to Seller’s Objections to Wholesale Offers

Caption: Image byAnnika Wischnewsky on Unsplash

You’ve made your offer to a seller. You did your due diligence and made a great offer, and they have some objections. How you respond could make or break this deal. Understanding the seller’s objections and how to respond is crucial to obtaining the assignment contract.

Making the Initial Offer

Having a thorough offer will help you justify your offer. Include a detailed market analysis that includes comparable properties in the area that have sold within the last year to back up your proposal.

Add a list of your transaction costs. Being transparent about your costs will help you justify your offer price and show them the expenses you pay within the purchase price.

Being upfront and honest will go a long way in making the seller see your offer as genuine and lead to increased trust.

Seller Objections

Sellers voice objections for multiple reasons, below are the most common. Your understanding and response to their objections can help persuade them in accepting the offer you have on the table.

  • I’m Just Not Ready

The seller is procrastinating. They want to sell the house, they just need a nudge in the right direction.

Suggestion: Explain you’re there to close the deal and be respectful. Do not be condescending! They were interested in selling and you wanted to buy the property. Remind them time is money for both of you, the sooner they sign the sooner they will have the money they need. Have everything they need to sign at that moment. As you speak, hand them the pen and the contract. Worse case, set a followup date with them.

  • Why Should I Trust You?

Sellers may need reassurance about your credibility due to all the online scams and warnings..

Suggestion: All you can do is be patient, be confident and perhaps share addresses you’ve previously wholesale.

  • I Need to Think About This a Bit Longer

The seller may not be serious.  Your number one goal should then be to find their “hot button” and what motivates them. Reinforce how selling the home will benefit the seller. Remind them about the contracted time agreement and you would hate to see them lose the opportunity to get the assignment. Be empathetic but firm.

Caption: Image by Bruno Guerrero on Unsplash
  • I Think You Are Low Balling Me

The seller wants the best price possible, but you do too. Ask why they feel you are low balling them. Go over the numbers in your proposal to justify your offer. Reassure them you are offering the best price you can. Use your transaction analysis as your proof.

Remind the seller that you can close quickly with no inspections or other delays. Again, focus on their motivation! You can even ask them, “Do you want to list with an agent and wait 6 months or close with me in 6 days?”

  • I Need to Run This By My Significant Other (or someone else)

They wouldn’t be this far into the deal if they hadn’t already discussed it with their significant other (or someone else. This is just another delay tactic for them to solicit other, hopefully higher, offers.

First, ALWAYS be sure to confirm who the decision-maker is before making an offer. You may even want to confirm this over the phone before setting an appointment. If they still stall, you may have to play hardball with them and tell them your offer is only good until you leave. 

  • There are Other Buyers Interested in the Property

Just another stall excuse to solicit higher offers.

Again, your options are to find their motivation and focus on that or play hardball.

  • What Makes You a Better ChoiceThan Someone Else

Sometimes sellers are emotionally attached to a property. Maybe they grew up there or often visited and have fond memories. The only way to overcome emotional objections is with empathy and establishing rapport. This can be time consuming, so be prepared. 

Keeping Your Eye on the Prize

At the end of the negotiation, you want to walk away with an assignment contract. Listening to the seller and using some psychology to understand a seller’s objections and how to respond can  help persuade your seller that the offer you made is exactly what they need. Being empathetic, respectful, and professional and having a thorough market analysis, can be the solution to your seller’s financial objections.

REIA of Oakland members receive a monthly newsletter, industry-leading resources, and informative monthly meetings. If you haven’t taken advantage of what they offer Michigan property investors, contact them today and become a member!

Categories
Short Term Rentals

STRs: How Short-Term Rentals Can Handle a Recession

Photo from Pexels.

As the months of uncertainty go on, one thing that keeps Airbnb owners up at night is the potential for a looming recession. And it’s not a questionable concern, especially when Americans have been constantly told since mid-2022 that a recession is just around the corner.

In fact, as of May 2023, the New York Fed recession probability indicator suggests a 68.2% chance of a recession happening in the US in the next 12 months—the highest reading in over four decades. That in itself is already a great reason for distress.

So, before you frantically search for a panic room, let’s navigate how you can best leverage your property investments and make them recession-proof.

Airbnb in a Recession

During a recession, it’s common for travel patterns to shift as people adjust their spending habits. While luxury travel may experience a decline, the short-term rental industry, including Airbnb, has shown some resilience in previous economic downturns. For example:

  • In the travel industry’s post-2020 recovery, big hotel chains, like Hilton, only started to see positive earnings in the fourth quarter, with revenue per room increasing by 60.4% from the previous year—still nowhere near pre-pandemic levels. In contrast, Airbnb exceeded pre-pandemic sales with a fourth-quarter revenue of $1.5 billion, a 38% increase from the same period in 2019.
  • A report by Airbnb showed that long-term stays of 28 days or more have become more popular as it doubled in the first quarter of 2022 compared to the same period of 2019. The reason cited was growing work flexibility and the rise of remote working.

While short-term rentals may demonstrate relative resilience during recessions, market dynamics can vary based on location, local regulations, and individual property factors.

For instance, short-term rental investors must be informed about the local market during an economic downturn, because some travel destinations may experience an unwelcome shock from traveler elasticity.

How to Recession-Proof Your Airbnb

If your property is in a tourism destination, you will likely stay profitable during an economic downturn. But, if you’re located in an area saturated with STRs and limited tourism attractions, staycationers are spoilt for choice—making staying afloat challenging.

But worry not. You’re not alone. After all, no company or industry is 100% safe from an economic recession.

Here are five ways you can navigate a recession:

1. Accept Medium and Longer-Term Guests

Think about embracing monthly and extended stays to maintain high occupancy and a steady flow of income. Doing so prevents you from keeping your calendar empty for days and keeping your property consistently booked.

Plus, you can encourage more guests to book longer stays if you offer a discount on monthly bookings—it’s always good to strive for customer retention.

2. Offer Flexible Pricing Options

In an economic recession, you have to factor in that demand might become more price-sensitive, and competition within the short-term rental market could intensify. Often, most property owners will bring prices down, and you can also do that and see if it brings you good results. If not, you can do the exact opposite by charging higher than your local competition. A bit ironic, but this capitalizes on the concept of “perceived value.”

You have to let your customers recognize your property’s value so they’ll be more willing to pay your asking price. On top of exceptional property and service, you can add a few more amenities, like:

  • Bikes or scooters if your property is in the suburbs
  • Dog-walking services for pet-friendly places
  • Fast and reliable wifi to attract co-working

Just to name a few.

3. Focus on Exceptional Guest Experiences

Delight your guests with experiences they’ll remember. As we mentioned earlier, adding amenities that guests want will help you capture more customers. According to Airbnb, most travelers say amenities are their top priority for a great trip—which is more crucial if you want guests to stay longer.

So, pay attention to interior design & cleanliness, provide essential amenities, and add thoughtful touches that make your guests feel special. Word-of-mouth and positive reviews are priceless. In fact, 88% of consumers trust online reviews as much as personal recommendations.

4. Build Relationships with Local Businesses

Form alliances like the Avengers!

Partner with local attractions, restaurants, and shops to offer exclusive deals to your guests. This will enhance your customers’ experience and strengthen your ties within the community.

Remember, collaboration is vital in tough times.

5. Leverage the Power of Social Media

Maximize the power of social media to boost your property’s visibility, engage with potential guests, and drive bookings. Here are three ways social media can help you recession-proof your Airbnb:

  • Showcase your property: Use platforms like Instagram, Facebook, and Pinterest to visually highlight your Airbnb property’s unique aspects. Share high-quality photos and videos that show your amenities, decor, and local attractions to entice potential guests.
  • Engage with followers: Respond promptly to comments, messages, and inquiries on your social media platforms. Engage in conversations, provide helpful information, and address potential guests’ concerns. Active engagement builds trust and shows your commitment to providing an exceptional guest experience.
  • Provide local insights: Share tips, recommendations, and insights about your location. Be a valuable resource for travelers and staycationers by sharing information about local attractions, events, restaurants, and hidden gems that potential guests might appreciate. Position yourself as a trusted source of local knowledge and build customer relationships to get repeat bookings.

Thriving Beyond A Recession

No one can predict the future with certainty, but historical data and trends indicate that the short-term rental industry, including Airbnb, has shown resilience during previous recessions. As travelers seek cost-effective options and prioritize domestic leisure travel, STRs offer an attractive alternative.

However, staying informed, monitoring market conditions, and adjusting your approach to cater to evolving guest demands is vital to stay afloat.

Remember, it’s crucial to remain prepared and proactive to navigate any economic climate successfully. So, keep a positive mindset and adapt your Airbnb business to thrive even during challenging times.

Join a REIA of Oakland meeting for more tips on managing your property investments.

Categories
Flipping

3 Best House Flipping Shows on Discovery+: Lessons Learned and Caveats to Keep in Mind

Source: Annie Gray from Unsplash.

Are you looking for inspiration and a bit of entertainment to fuel your house-flipping endeavors? Look no further than Discovery+’s selection of top-rated shows featuring experienced professionals.

Each show offers valuable lessons on how to achieve success in the world of flipping. From navigating tricky negotiations to making quick decisions for maximum profit, these transformation stories will both surprise and entertain you.

While it’s important to approach these shows with a grain of salt, there’s still much to learn from them. Here are the three best on Discovery+ to get you started.

#1 Flipping 101 With Tarek El Moussa

Flipping houses can be a daunting task, but Tarek El Moussa’s show FLipping 101 makes it easy. With over 300 homes flipped in his career, Tarek is a seasoned expert in the real estate industry.

Source: HGTV

He uses his wealth of experience to help novice investors navigate the tricky waters of house flipping and turn a profit. With Tarek’s guidance, viewers can learn how to assess a property, create a budget, and manage a team of contractors. Flipping 101 is a must-watch for anyone interested in turning their passion for real estate into a lucrative business.

What sets FLipping 101 apart from other house-flipping shows is Tarek’s emphasis on function over form. While a pretty bathroom might be tempting, Tarek understands that it needs to be functional for everyday use to avoid wasting space and money. By sharing his own mistakes, Tarek helps viewers avoid costly errors and achieve success in their own flipping endeavors.

Don’t miss out on the opportunity to learn from Tarek’s expertise—watch Flipping 101 With Tarek El Moussa on Discovery+.

#2 Fix My Flip

When it comes to flipping houses, doing things right is critical to achieving success. After all, why invest time and money into a project that won’t yield the desired outcome? That’s why I always say, “What’s the point in doing something if you’re not going to do it right?”

But if you’re struggling to achieve your flipping goals, don’t despair. Help is at hand with Fix My Flip.

Source: HGTV

With their expert knowledge and skills, they can take any fixer-upper and turn it into a masterpiece, so you don’t have to settle for a sub-par renovation job.

One of the most valuable lessons from Fix My Flip is the importance of making decisions based on numbers rather than emotions. Flipping houses can be an emotional experience, given the significant time and money investments involved. Remain objective and analyze the numbers to ensure that your project is profitable: that’s the moral of this show’s story.

So, if you’re ready to learn from the experts and transform your fixer-upper into the home of your dreams, tune in to Fix My Flip on Discovery+ today.

#3 Property Brothers

Well, well, well… If it isn’t the Property Brothers.

With over a decade of experience in the industry, the Property Brothers are the go-to experts for anyone looking to buy or sell a property. Their ability to stay within budget while still overdelivering on their clients’ dreams is a testament to their exceptional skills.

Source: HGTV

Whether you’re a first-time homebuyer or a seasoned property owner, these household names can make all your wildest real estate dreams come true. From finding the perfect home to transforming it into a stunning masterpiece, these brothers have got you covered.

For inspiration and guidance in your own real estate endeavors, tune in to Property Brothers on Discovery+. With their expert and captivating transformations, you won’t want to miss a single episode.

Caveats to Keep in Mind While Watching Flip Shows

While these shows can be inspiring and entertaining, remember that they may not always reflect the real challenges and risks involved in flipping houses. It’s crucial to approach them with a grain of salt and consult with professionals to ensure that you’re making smart decisions.

Here are some caveats to remember:

  • Flips always have some risk, no matter the cost of repairs and market conditions. These shows make flipping look easy, but it takes hard work and knowledge to be successful in this business.
  • Don’t expect your flips to turn out just like the ones on TV. The timelines, budgets, tools, and markets in real life may be completely different.
  • TV shows often leave out important details and show the most attractive parts of a flip. There’s no way to predict whether your flips will turn a profit or even break even—and that’s okay!
  • Flipping houses takes time, money, and experience to set yourself up for success. Working with experienced professionals can help you learn the ropes and reduce risk.

Ultimately, these shows are fun entertainment, but shouldn’t be taken too seriously when considering your own house flipping projects. Do your research and consult trusted experts before embarking on any major renovation project—it’s never as easy as it looks.

Learn From These Shows, But With a Grain of Salt

Discovery+ offers a great selection of top-rated shows that provide valuable insights and lessons on how to achieve success in the world of real estate flipping, such as how to deal with difficult situations and interact with others in a variety of contexts.

From Tarek El Moussa’s emphasis on function over form in Flipping 101 to the importance of making decisions based on numbers rather than emotions in Fix My Flip, and the Property Brothers’ exceptional skills and expertise, each show offers something unique for real estate flippers.

With the right guidance and hard work, you too can turn your passion for real estate into a profitable business. Tune in to Discovery+ today to take your flipping endeavors to the next level.

And, once you’ve feasted on several episodes, join as a REIA member, and join our community of flippers and other real estate investors by subscribing to our newsletter, and joining our upcoming REIA meeting.

Categories
Landlords

Should You Allow Tenants with Pets? If So, How?

Source: Justin Veenema on Unsplash

Though most of us have pets that we love more than our children, you may be hesitant to allow pets into your precious rental properties. It’s understandable—but do the benefits outweigh the risks?

Pet owners are everywhere, especially here in the US. According to the American Pet Products Association’s National Pet Owners Survey, there are approximately 65.1 million households that own at least one dog, while 46.5 million households own cats.

As a landlord, allowing pets in rental units can be difficult. On the one hand, there are pet-owners out there who will only rent properties that allow pets—they consider their furry friends a family member. But on the other hand, pets can cause property damage and create noise disturbances for other tenants (especially if it’s within an apartment building or multi-family complex).

In this article, we give you a low-down on the risks and benefits of allowing pets and include info on protecting your property while avoiding liability.

The Risks and Benefits of Allowing Renters with Pets

The majority of renters own pets, and businesses outside of real estate are capitalizing on the trend by catering to pets and their owners. For example, brands like Starbucks are offering pet-friendly products and experiences, promoting a positive attitude among pet owners.

Source: bark.co

Like any business, landlords pet owners are a lucrative market to tap into.If you consider allowing pets into your property you run into an equal amount of benefits and issues:

Be vigilant with your pet and tenant screening, and you’ll reap the benefits and mitigate risks. Here’s how.

Decide and Inform What You’ll Allow

It’s crucial to be clear about what is and isn’t allowed when it comes to pets in your rental property. That’s why it’s a good idea to include pet requirements in your lease agreement, as well as a pet addendum.

The pet addendum should outline specific rules and regulations related to pets. It should include:

  • The number of pets allowed
  • The types of animals permitted on the property

The addendum should also include clauses that protect you as a landlord:

  • Allowing you to remove aggressive or dangerous pets while allowing the tenant to remain
  • Revising pet rules with 30 days’ notice, and outlining penalties for violating pet-related rules

What to Pet Rules to Include

When creating your pet addendum, consider the following:

  • Common pets in your area
  • Potential damage each pet could cause

You can then include specific requirements in your lease agreement and pet addendum to address these concerns. For example, you may want to limit the number of pets each tenant can bring and exclude larger dogs or exotic pets.

To protect yourself as a landlord, include key clauses in the lease explaining the agreement for responding to problems concerning pets. These clauses should clearly outline the procedures for dealing with pet-related issues and any potential consequences for tenants who violate the rules.

By including a pet addendum in your lease agreement, you can ensure that both you and your tenants are on the same page regarding the expectations and guidelines surrounding pets in your rental property.

Get Insurance and Follow the Law

Before allowing tenants with pets, check your insurance policy for any limitations, exclusions, or coverage requirements. These regulations will vary from one state to another.

For instance, Michigan landlords must also comply with state pet laws, such as requiring pet vaccinations and enforcing proper pet waste disposal. Landlords should also ensure responsible adult supervision of pets in common areas. Visit the Michigan government website for a complete list of pet laws.

Follow Fair Housing Laws

Be mindful that a Fair Housing Law protects disabled people who need animals for their emotional well-being and physical safety. The term “disabled” now includes the blind, paralyzed, those with clinical depression, and those with post-traumatic stress.

You can request a note from their physician to verify their condition and animal assistance requirements to keep things documented.

Charge Higher Fees for Pet Owners

Landlords can charge pet-owning renters a premium in three ways due to the additional risks involved in allowing pets into the property. Here are the three:

  • The first is a pet deposit, which is refundable and ranges from $100-$300, collected at the beginning of the lease to protect the property from damages related to owning a pet.
  • The second is a nonrefundable pet fee, collected at the start of the lease, usually 25% of the first month’s rent, acting as compensation for the property damage risks resulting from allowing pets.
  • The third is a “Pet Rent,” a monthly fee for keeping a pet on top of the rental price that ranges from $25-$50/month.

Screen the Tenant and Pet

Conduct thorough screenings that include feedback from references and past landlords. During interviews, landlords should ask about the pet’s vaccinations, licensing, and past behavior.

Clear expectations for pet owners should be outlined in the lease agreement, including requirements for keeping shots, licenses, and tags up to date, registering the pet with the landlord, and taking responsibility for any harm caused by the pet.

Also observe physical and behavioral characteristics of the pet, such as aggression or friendliness, interaction with the owner, and whether the pet is spayed or neutered. By taking these factors into consideration, you can make informed decisions about whether to allow pets in their rental units.

More Tenants and Extra Income: Consider Allowing Pets

With nearly 90 million households owning a pet, it’s safe to say American love their fuzzy friends. So, ignoring that fact might lead to lost profits if you’re a property owner. As long as you follow our tips above and be careful with your contracts, allowing pets into your properties only has upsides.

Learn more about your rights as a landlord over tenants’ pets, reach out to us today to connect with our team of experts. Join REIA and subscribe to our newsletter to get the latest news in real estate.

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