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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.

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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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Landlords

How and Why You Should Set Up Recurring Rent Payments for Your Tenants

A mobile phone with an online payment showing on the screen.
Source: Photo by Mika Baumeister on Unsplash.

Collecting rent can be one of the biggest hassles of owning rental property. Not only do you have to keep track of when rent is due, but you also have to chase down tenants who are late on their payments.

Wouldn’t it be nice if there was an easier way to collect rent? Well, there is.

You can set up recurring rent payments so that your tenants’ rent is automatically deducted from their bank account each month. Not only does this make things more convenient for both you and your tenant, but it can also help ensure that you always get paid on time.

In this blog post, we’ll explain how to set up recurring rent payments and the benefits of doing so. By the end, we hope you’ll see just how easy and helpful an automatic rent payment system can be.

Why Set Up Recurring Rent Payments

As a landlord, having a reliable, predictable source of income is essential. That’s why automating recurring rent payments can be so beneficial. Here are a couple of benefits:

  • On-time payments: Your tenants will have their rent deducted from their bank account automatically each month. This means that you won’t have to worry about chasing them down for late payments or collecting checks in person.
  • Electronic processing: All payments are made electronically and on the same day each month, saving you the hassle of manually entering tenant information into your accounting software. Most systems can handle automatic payments for you with just a few clicks.
  • Incentivize recurring payments to encourage sign-up: Some payment processing providers include a discount function so you can offer incentives to your tenants for signing up for recurring payments. This can be a great way to encourage more people to use the system, making rent collection easier for you.

Protect your cash flow, and you’ll protect your investments—isn’t that the only thing that matters?

How to Set Up Recurring Rent Payments

Setting up recurring rent payments is relatively easy, and it’s worth taking the time to do so. Here are the steps you’ll need to follow:

  1. Choose a payment processing provider: Decide which payment processor you’d like to use. Some popular options include PayPal, Stripe, Square, and Apple Pay. Each company has its own set of fees and features, so take some time to compare them before making your decision.
  2. Set up an account: Create an account and link it to your bank. This will allow payments to be transferred directly into your account on the rent due date.
  3. Collect tenant information: Collect some basic information from your tenants, such as their name, address, bank details, and rent payment amount. Ensure that all information is accurate and updated before proceeding with the setup process.
  4. Set up automatic payments: Set up automatic payments for each tenant in your system. This typically involves entering their bank details and setting the payment amount and frequency (e.g., monthly).

Once you’ve completed these four steps, you’re good to go. Sit back and wait for the payments to come flowing in. Your well-deserved cash flow is on its way.

Best Tools for Recurring Rent Payments

We recommend the following payment processing providers for their ease of use and excellent security:

  • Avail: This landlord software is owned by Realtor.com and helps you streamline rent collection (even if you don’t work with a property manager). Avail allows upcoming payment scheduling by automatically reminding tenants before the due date. Tenants who split the rent with their roommates can also divide the bill accordingly.
  • Apartments.com: Previously known as Cozy, this tool automates rent collection and monitors all rental payments from one dashboard. You’ll see everything in one glance. The platform also sends reminders to tenants, just like Avail.
  • Buildium: If you have 50 or more properties in your rental portfolio, Buildium is your best bet. The software can set up recurring and one-time payments for tenants to pay online or offline, where the funds are transferred in a few minutes instead of a few days.

There are others, too, like Zillow Rental Manager, Rentec Direct, TurboTenant, PayRent, and ClearNow. Whichever platform you choose, you can rest assured that rent collection will take care of itself.

Automatic Payments, Automatic Cash Flow

Setting up recurring rent payments is an easy way to make collecting rent more convenient for both the landlord and the tenant. Not only does it help ensure that your rental income is always on time, but it can also save you time and money in the long run.

We hope this blog gives you a better understanding of how to set up recurring rent payments and why it’s a good idea to do so.

If you have any questions or need help getting started, join us as a REIA member today  and attend our upcoming meeting ! We also have a newsletter, so you’re never out of the loop.

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Marketing a Rental Property: Why & How Landlords Can Brand Their Rentals

: A young designer developing new branding styles
Source: Photo by Faizur Rehman on Unsplash

What do you think of when someone says “electric car”?

I bet you’re thinking of Tesla. And you’re not alone—most people will think the same.

Tesla has established itself as a high-performance energy automaker with a futuristic outlook. Tesla’s branding is so strong the company aptly grabs premium position in every market it’s entered—from solar panels to batteries, the big T is the front-row storyteller.

Wouldn’t it be fantastic if you could use the same strategy for your rental property business?

Good news: You can, and you should. Branding is a powerful marketing tool that enables you to put your business in any position you choose, regardless of whether you want to be known as the “best bang for your buck” apartment unit or the “most exclusive luxury” rental mansion.

Let’s discuss why and how you can brand your rentals to increase your property’s appeal.

Why You Should Brand Your Rental Property

Giving your rental units a brand helps them stand out from the competition, giving you an edge that gets the attention of potential tenants. Unique branding can especially improve your property’s recognition in areas with rentals similar to yours, like if you own one unit in a large apartment building, for example.

Here are three benefits you’ll get from branding your rentals:

  • You’ll attract more tenants. A recognizable brand boosts marketing efforts. Your reputation will spread, tenants will advertise word-of-mouth to their friends, and even when you’ve reached full occupancy, the fact that you’re “fully booked” increases the value of your rental and its demand. You’ll unlikely run out of prospective tenants to keep your vacancy rates low.
  • You’ll attract better tenants. Marketing to the needs of your target demographics proves successful when you attract the very tenants you want. Better tenants maintain the home well and are less likely to move out for trivial reasons, protecting your assets and returns in the process.
  • You’ll be able to charge higher rent and fill vacancies faster. You can potentially charge higher rent if you brand your rental as a premium place. There’s also the concept of perceived value, where tenants pay more for a distinctive experience—even if you didn’t necessarily spend more for the rental property. They’ll be hesitant to leave and likely to justify the higher rent.

The advantages of branding only becomes more apparent if you put yourself in your tenant’s shoes. If you’re choosing from various units to rent, and one of them provides an incomparable experience that’s just your style, wouldn’t you bet all your marbles there? Exactly.

How You Can Brand Your Rental Property

Branding goes beyond creating fancy logos and a unique color scheme for your walls. To brand is to create a compelling story that drives emotion and encourages prospective renters to join the experience.

The key to successful branding is authenticity and trust. Your goal should be to show your potential tenants that your business is valuable to them because they are valuable to you. Caring about your target demographic means showing up for them by offering properties that accommodate their styles.

Here are the best practices for a unique rental branding that’s one of a kind:

  • Communicate a clear message. What do you want your tenant pool to remember about your property? If Tesla is about high-powered and clean electric machines, what’s your rental’s selling point? Make your message memorable, impactful, and novel.
  • Connect with your tenant’s values. What does your tenant pool want out of a rental? What kind of lifestyle are they dreaming of? Prioritize what they prioritize by understanding their perspective. Tesla’s audience prefers luxurious comfort that’s fun. What does your audience care about?
  • Motivate potential renters to act. Branding is marketing, so be clear about what you want your tenant pool to do. Are you looking to fill units quickly? Do you want to make reservations for future openings? Or do you just care that the tenants you fill in are in-tune with your movement to, say, be sustainable or promote mental health, and 100% occupancy isn’t really the goal?
  • Create a sense of belonging. We all crave the feeling of being “home” with like-minded individuals. Create an atmosphere of support and transparency to gain the trust and loyalty of your tenant pool. They’ll see your rental as a safe haven—not just another roof over their heads.
  • Be consistent across all touchpoints. Ensure that your branding bleeds across everything you do and produce—from listing descriptions to how you talk with applicants and take care of your current tenants. Imagine if Tesla suddenly releases a budget-level electric motorcycle for delivery services. That’d be so jarring you’d doubt its entire branding altogether!
  • Stay updated with any changes in the tenant pool. Your target audience’s needs change. Keep a pulse on their demands and behaviors to ensure your branding stays relevant.

The goal is to set yourself apart from competitors to attract the best tenants into your rental business and keep occupancy high. Listening to one “secret sauce” to all successful brands, which you can apply to one or all of the homes in your portfolio.

Good Branding: The Not-So-Secret Ingredient to Business Success

Just because your rental business isn’t as big as the giant Tesla corporation doesn’t mean that good branding won’t work. In fact, branding is what makes a business grow to unprecedented heights.

So, craft a compelling message, connect with your target market’s needs and values, motivate them to do business with you, create a sense of familial belongingness, be consistent with your promise, and stay updated to remain relevant.

The more you understand the decision making process of your tenant pool, the more you’ll see the opportunities for using branding as a real estate marketing strategy.

Join our upcoming meeting for more investment tips! We are a growing community of like-minded individuals sharing our learnings in the real estate space. Subscribe to our newsletter as well and become a member to become the best property investor you can be.

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Your Essential Guide for STR Investing—With Video Tutorials!

Photo by Karsten Winegeart

As of 2023, there are more than 4 million Airbnb hosts worldwide and more than 6 million active listings on the website. Airbnb covers over 100,000 cities in the world, where 150 million users have booked over 1 billion stays on the platform.

With how much money the short-term rental (STR) industry is currently making, it’s no wonder that it’s a highly competitive market.

If you plan to enter the STR industry, you need to have a strategy to stand out. STRs are a dime-a-dozen in most tourist traps and high-traffic areas. If you don’t have a well-thought-out plan, you’ll end up with higher vacancy rates and high turnover—resulting in less cash in your pocket.

To help you set up the STR of your dreams, we’ve listed out all the steps you need to take and some extra videos to watch to learn more. Let’s get started! 

Step 1: Manage Your Finances

Before anything, you need to get your finances in order. And unless you’re planning to buy a property out-of-your-pocket, you’re going to need financing.

Ideally, you’re going to want to have a credit score of at least 620 to qualify for a property loan with reasonable terms. With your credit score in order and your loan secured, you can move on to the next step of the process.

For more detailed info, check out this video: Financing For Rental Properties 2020

Step 2: Find Your Location

With your finances secured, you can now start scouting for a location.

Above your property, location is the most important factor that determines success. Establishing an STR in a guaranteed market can reap good rewards. Take, for example, Lansing, Michigan, which is one of the top locations for STRs:

  • Average Property Price: $102,100
  • Average STR monthly income: $2,678 (the average STR host earns $924 monthly)
  • Average Cash-on-Cash Returns: 11% (you want to target between 8-12%)
  • Average Occupancy Rate: 64% (which is above the US average of 44%)

As with any big purchase, you want to have as much information about the area you intend to invest in. You can use tools like Mashvisor to find out these details.

For more detailed information on finding the best places, check out this video: Where to Airbnb  –  How to find the Best Airbnb Cities in 2021

Step 3: Learn the Laws on STRs

Depending on the area of your choice, local laws might have restrictions in place for STRs.

Take Detroit, MI, as an example. Currently, the local government is looking to heighten restrictions on STRs, but the federal government is against the proposition.

Now I know what you’re thinking: What about being unique? You want your STR to stand out of competition to attract more guests, but there are limitations to how “unique” you can be. You can offer cool features like workout equipment or an air fryer in your property, but you can’t go against local regulations, like establishing your STR in residential areas or near airports or highways.

Learn the laws on STRs in your area, and work with them instead of against them.

For reference: Michigan Abolishes Local Laws That Limit Short Term Rentals

Step 4: Buying Your Property

Now that you know the location and you have studied the laws, it’s time to look for your investment property. You can use the MLS to look up properties within your price range and ideal size. You can also look through sites like Zillow or Redfin to scout for properties.

You can also choose to work with wholesalers if you’re willing to go through the process of heavy renovations.

Another option available for you is to rent a property that you can turn into an STR. You’ll work with a landlord that’s willing to sublease their property. After coming to terms with the landlord, you can use their property as an STR.

Check out 7:03 to 8:43 of this video for more info: How To Buy Your First Airbnb Property | Beginner’s Guide

Step 5: Redecorate Your Property

It’s highly unlikely that the property you just bought is great for an STR right out of the box. So, you’re going to need to make some adjustments to attract tenants.

A good tip would be to paint rooms a neutral color. You want to appeal to the biggest audience possible, and to do that, your property has to give off a homey feel. Neutral colors can help achieve this. Another way to accomplish this is by fixing the property lighting. No one enjoys harsh lights, so setting up dimmer switches for lights can be a way to set mood lighting.

These are just some general tips for redecorating your property; feel free to give your personal touch.

Take a look at this video to see how to revamp your STR: Airbnb Hosting: 4 Interior Design Tips to Make Your Airbnb Standout! 🔥(2018)

Step 6: List Your Property on STR Sites

Now it’s time to list your property.

But before you do that, you need to take care of some things first. First‌, you can use Mashvisor again—or similar tools—to run comps on similar STR prices  within a one-mile area. You need to keep your rates within a reasonable margin of your competition.

The next step is to take attractive pictures of your property. For example, use paintings or artwork as background pieces to a listing photo. Also, make sure to thoroughly clean rooms when taking photos. Dust can make or break a tenant’s decision to book.

Lastly, highlight your STR’s amenities. A 2019 survey showed that a deciding factor for bookings is amenity availability; 74% of people are more likely to book your STR if it has Wi-Fi.

Once you have accomplished these 3 things, you can list your STR.

We recommend watching this video for more tips: How to make an airbnb listing LIKE A PRO (step-by-step tutorial)

Use this Guide to Navigate the Waters of the STR Market

Investing in STRs can be a scary prospect. You’re up against a lot of competition, and it might be challenging to stand out. With no guidance, it can be daunting to invest in the market.

But, with our online syllabus, you don’t need to worry. If you follow our guide, you won’t find yourself lost. We will guide you through every step of investing in an STR.

Do you have any expert advice for STR management? Let us know below!

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Landlords

What’s Happening with Rental Amounts in the City of Detroit?

Source: Photo by Andre Taissin on Unsplash

We’ve all seen the headlines—average rent prices are falling for the first time since the latter part of 2020 when COVID was the culprit. For those invested in Detroit rental properties though, the news isn’t as bad as in other parts of the country.

Let’s look at what happened in the Detroit market, for you to stay updated and vigilant in protecting your investments. (TL;DR? Don’t panic! It’s real estate market dynamics.)

Nationwide Rents Decline in Major US Cities

As the graph below shows, the August national average rent price, according to Redfin, was up 11% year-over-year from 2021. If you compare it to past trends, this figure is the smallest recent annual increase we’ve seen—down from a 19% gain in March 2022.

Even if we were to look at the month-on-month growth, the median rent only moved slightly by 0.4%, which is the slowest growth since late 2021 and a drop from the 1.6% increase last year.

Source: Redfin

“Rent growth will likely slow further as the Federal Reserve continues to raise interest rates. Higher interest rates impact the rental market because they put a damper on spending power in the economy as a whole, including renters’ budgets,” Taylor Marr, Redfin’s Deputy Chief Economist, said.

Rent Trends in the Detroit Housing Market

We can’t confirm if the data below only covers the City of Detroit or the entire Metro Detroit area, but we see that the market is included in the top rent price drops nationwide in August 2022:

Source: Apartments.com

Moreover, executive director of Detroit Future City, Anika Goss, shared, “During the pandemic… people living in the bottom quadrant of the income scale were not being supported. If rent softens and people are back to work in 2022, we might see an evening out… in a year or two years.”

Should Detroit investors lower their rent to attract and retain tenants? Fewer people are purchasing homes but they still need a roof over their heads, so they rent. But it seems like Detroiters in the lower demographics are struggling to pay rent, even with the supposed decline in rent average.

Then again, the data above might only reflect rent decline in the City of Detroit—excluding the rest of Metro Detroit which includes far more affluent areas like Oakland County. As we know, these areas aren’t as affected by economic downturns compared to lower income zones.

In fact, based on our observations as a property management company in Metro Detroit, rent averages have flatlined (not declined). The reason why reports show dropping rent averages in the City of Detroit is likely due to an increase in vacant properties instead.

Looking at recent statistics and trends, the city is actually doing pretty well:

  • The city still has exceptionally low home prices with a median sales price of $100,000—a growth of 38% from late 2021 to 2022. In terms of rent, it’s also the fastest-growing city in the metropolitan area, where rent averages are said to have increased by 32% from 2021 to 2022.
  • The average rent for a one-bedroom apartment in the city is $1,000, which is a 4% decrease compared to a year before (February 2022). For a three-bedroom though—which is more popular in the housing market—the median rent is $1,200, which is a positive 9% year-over-year change.
  • Plus, looking at Zillow data, the City of Detroit saw an  increase in average rent, where investors are charging $20 higher rent than last year:
Source: Zillow

The data above is good news for Metro Detroit investors. And if you do have tenants struggling to keep up with rent payments, we suggest that you reevaluate by asking the following questions:

  • Are you charging above neighborhood rent averages?
  • Are your tenants struggling with rent payments?
  • Are they paying on time and in full?

If you screened your tenants well, they might not have financial problems. But if the economy’s downturn caused them to lose their jobs that affected their income, you might need to help them out.

“Gas prices are coming back down, but rents are going up 10, 12, 15%. And rent can end up taking 40% of these households’ income,” Bank of America CEO Brian Moynihan said.

Ultimately, your cash flow depends largely on your tenant’s ability to pay rent. As much as you want to generate top dollar from your rental properties, you won’t get any returns if the renters themselves can’t afford your home in the first place.

Finding the Sweet Spot for Rent Prices in the City of Detroit

The City of Detroit (and certain areas of Metro Detroit) remains to be a landlord’s market, with rent prices increasing despite the economic downturn. It presents an opportunity for investors willing to lower their rents to attract more tenants than ever before, although doing so requires careful financial evaluation.

Screen your tenants carefully and keep an eye on the economy, and your rental properties will remain profitable even with all the market shifts happening. Your goal is to secure capable tenants while generating a healthy return on investment—find that sweet spot for a win-win solution.

Do you want more tips and guidance on navigating the Detroit market?

Sign up as a member, subscribe to our newsletter, and join us in our upcoming meetings. Let’s share information and expert tips to ensure that our investments adjust and adapt to the market.

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Landlords

Go Beyond Airbnb: Where Should You List Your Short-Term Rental?

A magnificent cabin nested in the forest
Source: Photo by Madhur Shrimal on Unsplash

Landlords of short-term rentals shouldn’t stop listing on Airbnb. While the platform is the most popular website for finding hotel alternatives, you should also consider other platforms that can increase exposure, generate more bookings, and gain consistent rent income.

So, here’s a list of Airbnb alternatives you should consider listing your short-term rental on.

1. VRBO: The Reach Multiplier

Listing your short-term rental on VRBO (Vacation Rentals by Owner) means that your property is listed on the platform’s affiliated sites: Expedia, Trivago, and KAYAK for increased reach.

Moreover, VRBO isn’t limited to one property type. Feel free to list your cottages, cabins, bungalows, townhouses, lodges, farmhouses, villas—even yachts, castles, and mills on VRBO. The exposure and possibilities you’ll get on VRBO are endless.

2. Booking.com: The One-Stop Shop

Booking.com is another platform that serves more than 1.5 million guests per day in over 43 languages. There are already millions of homes and apartments listed on this platform. Plus, landlords have complete control over their house rules, adding booking prerequisites, and reporting guest misconduct.

It says it’s “serious about your success” and has the safety features to prove its commitment. In addition, Booking.com is a one-stop shop where guests can also book flights and car rentals—so you wouldn’t want to miss the chance to leverage convenience.

3. Plum Guide: The Luxury Platform

Is your property a charming home for bougie guests? Then list it in Plum Guide, where only the most remarkable homes are shown. They are the benchmark for quality rental stays, focusing on providing guests with the finest luxury properties in the market.

Guests have even said that they prefer this platform over Airbnb because Plum Guide’s property photos match the actual accommodation, the reviews are accurate and not glorified, and there was excellent customer service and communication with the host.

However, note that Plum Guide vets and grades properties before allowing them to be listed. This is how it ensures quality over quantity and means that you’ll have less competition on the platform.

4. Agoda Homes: The Asian Market

List your property on Agoda Homes where you can earn extra income by having access to millions of quality travelers daily. There’s also zero commission and plenty of hosting tools to manage your property via desktop and mobile—so you can manage your homes on the road. Plus, Agoda Homes focuses on the Asian market, which means you can expand your reach to other countries.

Agoda Homes’ dashboard for short-term rental hosts is also uniquely designed for easy decision-making and task prioritization, so you’ll have everything you need to increase your bookings.

Expanded Reach + Increased Bookings = Multiplied Profits

Of course, there are other platforms, like Homestay, Sonder, and Blueground, that we didn’t mention in the list. But the point is to make you realize that you shouldn’t stop by only listening on Airbnb when there are many alternatives out there that can give you additional benefits.

Remember that the more you expand your reach, the more bookings you’ll generate—resulting in higher, more consistent profits from your real estate investments.

Do you need more help? Get in touch with me today. You can start by joining REIA as a member, so you can attend our upcoming meetings and receive helpful information via our newsletter.

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Landlords

How Should Landlords Handle the Recent Rent Price Decreases?

A woman opening her wallet and realizing there are no bills
Source: Emil Kalibradov on Unsplash

It might have come as a shock to a lot of landlords as market conditions have drastically reversed in the past year, bringing the 20-month streak of increasing rent amounts to a halt. Unfortunately, this drop in rent prices is seen across the nation, affecting many investors’ potential returns.

So, what can you do about it to stay profitable in your real estate investment?

Let’s discuss it below.

How did rent prices decrease significantly?

In recent months, the US real estate market slowed down, where rent decreased by 0.1% across 40 of the most extensive metropolitan areas in August 2022. Renters celebrate financial relief (excellent), but investors clutch desperately to their original investment returns (not ideal).

Here’s a snapshot of the rent price movements across 40 markets, where we see that our home area, the City of Detroit, has dropped 0.5% month-over-month:

Source: Apartments.com

Jay Lybik, CoStar Group’s national director of multifamily analytics, said, “We’re seeing a complete reversal of market conditions in just 12 months, going from demand significantly outstripping available units to new deliveries outpacing lackluster demand.”

Beyond that, places like the City of Detroit are experiencing a labor shortage in the construction and maintenance industry of the City of Detroit. While this news means that it’s harder to build homes (bad news for anybody developing a property), it means that the demand for housing stock is still increasing. And, more importantly, people are competing for a limited number of units (good news for landlords and rental property investors).

If you’re a rental property investor in the City of Detroit, ensure that you stay ahead of the curve and keep your properties in excellent shape to attract and keep tenants. And of course, always keep an eye on the market and prepare to adjust your rents accordingly.

What should landlords do when rent averages decline?

The most important rule in real estate investing is to stay updated with the market’s current status to change your strategy on the fly and avoid significant financial losses. For instance, if you know that there’s an oversupply of rental units in your area and not enough renters to fill those up, opt to lower your rent to attract quality tenants willing to pay for a comfortable space.

But if you think that the rent prices in your area will continue to decline, selling your property might be the best move to make. This tip is especially true if you’re carrying a lot of debt—the last thing you want is to end up upside down on your mortgage.

Of course, there are other strategies that you can do to stay profitable during a rent price decline. Here are 4 tips to maintain financial viability:

#1 – Review your financials and make necessary changes

Go over your finances and see where you can make adjustments. This might mean looking for ways to reduce expenses, like cutting down on maintenance and marketing costs. You should also consider ways to increase your income, such as by finding new tenants or increasing rent for existing ones. If you have vacant units, consider offering discounts or incentives to attract new renters.

#2 – Negotiate with your lenders

This could involve asking for a lower interest rate on your mortgage or a longer repayment period. You might also want to consider refinancing your loan so you can get more favorable terms. This could help you free up some extra cash each month that you can use to cover other expenses.

#3 – Raise rent for existing tenants

If you can, consider raising the current rent amount for your existing tenants. Doing so could help offset any decline in rent prices that you’re experiencing. Of course, you must be careful not to price your tenants out, so raise your rent slowly to keep occupancy up without dragging your returns down.

#4 – Diversify your portfolio

Diversifying your portfolio means investing in other types of property, like commercial or vacation rentals. Doing so could help you mitigate some of the risks that you’re facing with your rental properties and generate additional income to cover your expenses.

Rent Drops Doesn’t Always Mean Cash Flow Decrease

The biggest takeaway from all of these is that landlords should always be updated with the latest market trends so they can change their strategy accordingly. This way, they’ll be able to protect their investment and even grow their portfolio despite a rent drop.

No matter what strategy you use, stay proactive and adapt to the changing market conditions. By doing so, you can minimize the financial impact of a rent price decline and keep your business healthy.

One way to stay updated is by signing up as a REIA member. You can also subscribe to our newsletter and join our upcoming meetings, so you’ll be the first to know any tips or advice we have regarding the real estate market. The market is always changing, so you have to as well.

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Landlords

Pros and Cons: Should You Rent to Section 8 Tenants?

Source: Photo by Jem Sahagun on Unsplash

Section 8 tenants are individuals the government has approved for housing assistance. This program is for low-income families, the elderly, and the disabled to afford safe and clean housing. To be eligible for Section 8 assistance, a family must meet specific guidelines that show they require financial help.

Now, of course, there are pros and cons to renting to Section 8 tenants.

Some landlords may hesitate to do so because of the extra work and paperwork or because they have heard stories about problematic tenants. However, there are still benefits to renting to Section 8 tenants, as you’ll realize below.

We’ve listed all the pros and cons to help you make a good decision.

Pros of Renting to Section 8 Tenants

While most information online (especially in forums) list difficult situations with renting out to Section 8 tenants, there are advantages to accepting them that may change your mind. Here are 4 of them to consider if you’re a landlord:

1. Generate Stable Cash Flow

When tenants have Section 8, the government agency pays their rent directly to the landlord or property owner. This means you’re more likely to get paid on time and in full. In addition, the government will still cover the cost if the tenant does not pay their portion of the rent (usually 30%).

2. Increased Tenant Options

When you open your units up to Section 8 tenants, you may have a larger pool of potential renters. This can be beneficial if you live in an area with a tight housing market or if you’re having trouble finding suitable tenants in the area.

3. Opportunity to Help the Needy

By renting to a Section 8 tenant, you’re getting a good deal and helping someone in need.

Families who receive assistance through this program often have low incomes and would otherwise struggle to find affordable and safe housing. As a landlord or property owner, you can make a difference in their lives by providing them with a place to call home.

Cons of Renting to Section 8 Tenants

Of course, there are also some disadvantages to renting to Section 8 tenants—as with any type of rental agreement. Still some concerns are unique to this type of tenant. Here are 3 of them that you’ll need to consider before taking the leap:

1. More Paperwork and Regulations

Renting to Section 8 tenants requires more paperwork and regulation compliance. For example, you’ll need to keep detailed records of your unit and ensure that it meets all the housing standards set by the government. In addition, you may have to deal with inspections regularly.

2. Limited Options for Termination

If you end up with a troublesome tenant, getting them out of your unit may be difficult. The government has strict rules that protect Section 8 tenants, so you’ll need to have a good reason for wanting to terminate their lease.

The increased complexity of contract termination can be time-consuming and frustrating, especially since it’ll be on top of your already-difficult situation.

3. Possible Lowering of Rent

Contrary to the point earlier, if you live in an area with a lot of Section 8 housing, you may be required to lower your rent to stay competitive. In addition, if the government changes its regulations or funding levels, your rent could decrease as well. This may lead to financial problems down the road.

Find Quality Tenants—Section 8 or Not

There are pros and cons to renting to Section 8 tenants. So weigh all your options carefully before deciding. If you decide to rent to them, be prepared for the extra paperwork and regulations involved. You’ll increase your tenant pool, but you’ll need to know the caveats that come with it.

Do you need help finding good tenants? Join as a REIA member today!

We have regular meetings and newsletter that you can greatly benefit from as a landlord. Don’t miss out on this opportunity to further your investment knowledge and reach your investment goals wisely.

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Landlords

5 of the Most Important Clauses Your Lease Agreement Should Have

: A beautiful single-family residence along E Kirby St., Detroit
Source: Zillow

We’ve seen many poorly written leases – and the legal implications can be devastating. That’s why it’s important to avoid cookie-cutter leases that fail to give you the protection you need as a landlord.

Because the truth is this.

No matter what kind of property you’re leasing, you need to have a great, not just a good, lease agreement. This document will protect you and your tenant by outlining the lease terms, including the rent amount, length of tenancy, and rules for using the property.

To help you create a strong lease agreement, we’ve compiled a list of 5 critical clauses that every lease should have, in addition to term, lease payments and other basics.

1. Use Clause

The first clause in your lease agreement should be the use clause. This clause outlines how the tenant may use the property. For example, if you’re leasing a commercial space, the use clause might specify that it can only be used for retail purposes. If you’re renting a residential property, the use clause might determine that it can only be used as a primary residence.

2. Subletting Clause

The second clause in your lease agreement should be the subletting clause. This clause outlines whether or not the tenant is allowed to sublet the property. If you ‌allow subletting, include provisions about how it must be done (e.g., the tenant must get your approval first).

3. Maintenance and Repair Clause

The third clause in your lease agreement should be the maintenance and repair clause—this clause outlines who is responsible for maintaining and repairing the property. In most cases, the landlord handles major repairs, and the tenant is responsible for minor repairs and routine maintenance.

4. Utility Clause

The fourth clause in your lease agreement should be the utility clause—outlining who pays for utilities, such as electricity, gas, water, and trash service. In most SFR residential leases, the landlord is responsible for paying for trash service, while the tenant is responsible for paying for electricity gas and water.

5. Security Deposit Clause

Your lease agreement’s fifth and final clause should be the security deposit clause. This clause outlines the security deposit amount and how it will be used. For example, the security deposit can be used to cover damages to the property or unpaid rent at the end of the tenancy. Be sure to include provisions about how the security deposit will be returned to the tenant at the end of the lease.

Don’t Make Mistakes with Your Clauses

Including these 5 crucial clauses in your lease agreement can help ensure that you and your tenant are protected throughout the tenancy. And don’t forget that these aren’t the only clauses you should include in the agreement! Several other clauses are commonly included, such as a late payment fee clause, a pet policy clause, and a no smoking clause.

Do you need help drafting a strong lease agreement? We can help!

Join as a member today and get in touch with us. You can also sign up to our email newsletter so you never miss any important information like this.

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