What Experienced Landlords Wish They Knew at the Beginning

Becoming a landlord often happens by accident. Maybe you inherited a property or moved and decided to rent instead of sell. But what many new landlords quickly discover is that rental property ownership isn’t just about collecting rent — it’s about operating a regulated housing business.

In this episode we share the lessons experienced landlords repeatedly say they wish they had known before placing their very first tenant. 

We share personal stories from the early days of managing rental properties and the mistakes that taught us some of the most valuable landlord lessons. 

This discussion includes why maintenance planning, reserves, documentation, and professional boundaries are essential for long-term success. These systems help landlords avoid common pitfalls and protect both their property and their peace of mind.

LINKS & REFERENCES: 

Episode 49 – How to Read a Credit Report
Episode 32. – Lease Masterclass Series, Part 1

Episode 115 – Charging Tenants a Flat Utility Fee
Episode 28 – Cash Reserves Blueprint

Episode 39 - 50+ Must Ask Questions When Hiring a Property Manager

Episode 112 – Should You Self-Manage Your Rental Property?
Episode 6 – Standard Operating Procedures for Landlords
Episode 4 – Property Inspections Guide

Course Waitlist: From Marketing to Move In, Place Your Ideal Tenant 

TenantAlert, Our Preferred Tenant Screening Provider

Connect with Us: 

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🤳Text Us: 650-489-4447

📩Email us at: Stacie@YourLandlordResource.com, Kevin@YourLandlordResource.com 

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Transcript

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Kevin 0:00

Do you know, we always ask previous landlords, would you rent to them again? And we've actually had a couple who have said no. They snuck a dog in and they claimed it was an ESA, or they were just absolute slobs. Or they complained constantly about every little thing. Is that who you want in your unit?

Stacie 0:23

We don't. And we definitely learned that the hard way. And I'll tell you, a bad tenant costs way more than a vacancy. You could be dealing with missed rent, legal fees, property damage, your own time and money lost having to deal with a turnover. I think that landlords need to think of their tenants like this. You're not choosing a renter, you're choosing someone who will be like a business partner and controls your property daily.

Speaker 2 1:01

Welcome to Your Landlord Resource podcast. Many moons ago when I started as a landlord, I was as green as it gets. I may have had my real estate license, but I lack confidence and the hands-on experience needed when it came to dealing with tenants, leases, maintenance, and bookkeeping after many failed attempts. Fast forward to today, Kevin and I have doubled our doors and created an organized. Professionally operated rental property business. Want to go from overwhelm to confident if you're an ambitious landlord or maybe one in the making. Join us as we provide strategies and teach actionable steps to help you reach your goals and the lifestyle you desire. All well building is streamlined and profitable rental property business. This is Your Landlord Resource Podcast.

Stacie 1:50

Well, hello there landlords, and welcome back to the Your Landlord Resource Podcast, where we are real landlords talking about real rental property issues and solutions that have worked for us. So

2:05

I am your host, Stacie, and I'm here with

Stacie 2:08

my co-host, he was also my business partner and my partner in life, and my partner in crime. My husband Kevin Kilroy.

Kevin 2:17

Guilty on all charges. Hey landlords, thanks for taking time from your busy schedule to listen to us today.

Stacie 2:25

So Kev, I often talk about what it was like when I first started out as a landlord. It was not something I had really set out to do, but an opportunity arose within my family where I could run the real estate side of their investments and their developments that were happening.

Kevin 2:48

Basically, it was an offer you could not refuse.

Stacie 2:51

Yeah, well, I guess so. Yeah. So my late husband was ill and we had run a retail and wholesale lighting store that we had to close down. And where of course my hands were full taking care of him and our three boys who were quite young at the time. I think they were a ranging in age from five to 10 years old. And where my husband was working, he was not well, and I had to get a job so that I could help support the family. And given I have a degree in finance and accounting, I was looking for something along those lines. But a full-time corporate job, which I really thought I wanted, was not in the cards. My family had to come first, so I needed to find something that had some flexibility. At this same time, my brother, whose wife had recently passed, lost his corporate construction project manager job and was also trying to figure out what to do next. And so my parents, where my dad had worked at a pretty large, I don't know, venture capitalist firm where he was the fourth man from the top in charge of all manufacturing. He was in a position where they had just sold off a couple of heavy hitters of companies. One being Yakima Bike Racks and the other being Camelback Hydration packs. And so he had some money and he wanted to invest it to diversify his investment portfolio. And you guys, rentals were a great place for him to put his money. So our parents approach my brother and I, and ask if we would be willing to work together. He managing the building maintenance and potential developments and me handling the real estate and the general operations. Where we could be paid a regular salary with benefits and pretty much set our own schedule. So this opportunity would require I get my real estate license, which I did, and my brother got his contractor's license all up to date with proper insurance, et cetera. So we both jumped at this chance to start over. And where it was so exciting, it was truly terrifying at the same time. You know what the hell did I know about real estate, contracts, and operating rental properties? Absolutely nothing. I mean, talk about being thrown in the pool and having to learn to swim really fast.

Kevin 5:23

Well, man, you aren't kidding. I have to say I do like that story. I think I like it so much because I know how well you've done. And that's the point here you guys, today we are going to share some things that are important for landlords to know and understand when they're first starting out. We don't want anyone to feel like they're drowning because they don't know what steps to take when it comes to first owning rental properties. Which is pretty much why we started Your Landlord Resource. We want to be here to mentor you guys, to show you the way if you will. Because most landlords don't start out as experienced business owners, right? They start out accidentally. For example, they bought a home and kept the old one, or maybe they inherited a property, or they moved and decided not to sell with plans to someday return, like some in the military do or digital nomads who want to travel around.

Stacie 6:26

Yep. And, and we know people in all of those examples. Some very dear friends of ours had a nice big house and after their kids moved out of that five bedroom, three bath home, they decided they wanted to move to a small cottage on the coast. They weren't sure if they would like living out there, so they decided to rent their home near us and see how it went. And I'll say they did very well on that rental. The income from that rental essentially paid their mortgage on their new cottage home. And my cousin, who's a sweetheart, many of her family members have rentals. But anyway, she's a hairstylist and she had a client who had no family, and for years my cousin would care for her. When the client stopped driving, she would go to her house and cut her hair. And if I didn't know better, I imagined that she was also helping with meals and shopping as well. And I know she was very attentive to her client and went above and beyond. And when that client passed away, my cousin found out that the client had left her single family home to her. And even though her father and brother owned rentals and help her out from time to time, she knew nothing about how to operate the business side of things. And I'll tell you that helping my cousin way back when was one of the reasons why we started Your Landlord Resource. She was not the first nor the last to tell us, you guys should teach this stuff. Wow, you really know a lot, I'd be lost without all your help. And you know, new landlords, they don't fail because they're bad people. They fail because they don't realize they entered into a regulated housing business. So today we want to share some things that we and other experienced landlords repeatedly say, I wish someone had told me that before my first tenant.

Kevin 8:25

Yeah. I mean, Stacie's, right.

Stacie 8:27

I usually am.

Kevin 8:29

Okay, I wish you guys could see my eyes rolling right now. All right, anyway. I think one issue is that many landlords have the mentality or believe that because they own the house, they make the rules. And what they discover is when things don't work well, is that housing is one of the most regulated industries in the US. I mean, think about it, you don't have to, but for both parties, it is highly recommended that there are leases, which are legally binding contracts. All states have landlord tenant laws that control such things as notices, how security deposits must be handled, when owners can enter the rental, minimum repairs that have to be made, like doors have to lock, windows have to close, the unit must have heat and a working stove. Some rent control areas control how rent increases can be made. And of course, eviction procedures. And here's why those things matter. Because without regulations, it would be like the wild, wild west out there. You'd have landlords camping out to make sure tenants don't do their property wrong, and some would be keeping security deposits without having to prove the issues they kept the money for. It also means without laws and ordinances, the tenants could go in and do whatever they wanted to a unit. From hoarding to extreme filth, to having, I dunno, 15 people living in a two bedroom unit. Along with someone rebuilding their motorcycle in the middle of the living room.

Stacie 10:17

Sounds familiar, doesn't it? Well, I think most new landlords are very well intended. They understand that a happy tenant means a longer stay and consistent long-term income. So some common mistakes that landlords make early on, and I can say that I have done them all, but entering the unit without proper notice is one of 'em. And again, the mentality that I own the property, I can go in when I want. Charging illegal fees is another one. So think fees for administration, like a benefits package or excessive late fees or deducting from the security deposit for something that is common wear and tear. Mishandling deposits is a big one that I did a lot when I first started out. I've said it before, but I didn't even think about using the money to clean when an outgoing tenant didn't do it. I just figured it was normal. I also forgot to send someone their deposit back once, and of course there were issues like broken blinds and stained carpets that I could have collected on, but because I went beyond that 21 day notice period, I was forced to return the whole amount. So, you know, I lost some money there. Another one is texting notices instead of serving them properly. There was a couple times where I did not use proper forms to notify tenants of their rent increases. Because owning rentals doesn't give you unlimited control over how you manage tenants. And I think the one takeaway here is that the very first thing new landlords need to do is learn the landlord tenant laws for their state and their direct area. And there are ways to do this. Many real estate course companies offer property management courses for the laws of your state. In California, we have different forms of certifications that landlords can get. I believe one is called CCRM, which stands for the California Certified Residential Manager, and that's more for someone who would like to work in a large multi-family complex, right? That's through the California Partner Association. The other is called PMC or Property Management Certificate through the California Department of Real Estate. And honestly, that is really for someone who wants to be a professional property manager. And you don't need your real estate license to get that certificate, but you do need to work with someone who is licensed to operate a professional property management company if you plan to manage properties other than your own. The other is CPM or Certified Property Manager from the Institute of Real Estate Management, which is a nationally recognized real estate course company. And in these courses, they pretty much tell you what you can and cannot do. They explain state specific leases and addendums in detail. They teach you fair housing laws, ethics, and I believe there is even a financial course that they offer. And much like when you become a realtor, you have follow up courses and credits that you have to take to maintain that certification. So, Kevin and I have a course that we started and we need to finish, but it will be all about tenant screening.

Kevin 13:45

Which is perfect timing to talk about it because the next biggest area where landlords lack most is in tenant screening.

Stacie 13:54

Yeah, I imagine so, 'cause placing your tenant is the number one thing that landlords claim that they wish they knew more about.

Kevin 14:02

Oh, for sure. And in our course, when it's completed, we'll cover everything from marketing your property, like how to create your ad, to the application and how to accept and process those. Your lease, and what addendums it should include. Getting your unit ready for move in and all the way up to the tenant actually moving in. We will add a link in the show notes if you want to get on the wait list for that. But yeah, you said it yourself. When you first started, you would pull credit and if the FICO number fell in the right range, you just automatically rent to them.

Stacie 14:41

Yep. A number of times I did that.

Kevin 14:43

Because new landlords are focused on money. They want to fill that unit quickly so they can pay their expenses. So they rent to someone who they did not do a thorough background check on, or they fell for a sob story. Sound familiar?

Stacie 15:03

Way too familiar. I did that many times at the beginning. And once I figured out I needed reserves in place to cover our vacancies, then that allowed me to really take my time and thoroughly check out applicants.

Kevin 15:21

I think the thing that many landlords learn the hard way, is that the lease is there to protect them, but that it does not control the behavior of tenants. But the tenant selection does. Landlords, you need to do all you can to avoid placing the wrong tenant. Evaluate things like payment reliability by evaluating their credit history. Their stability, which means you're talking to their current employer to ensure their income is high enough. Uh, let's see, there's behavioral patterns, by calling the applicant's old landlords to check their residency history. Common mistakes in tenant screenings are, like Stacie just admitted to, not trusting her gut and falling for a sob story. Saying, but they seem nice when they applied. And then feeling bad about denying someone, especially a single mom or maybe an elderly person. Not verifying income by asking for paycheck stubs. Or not talking to old landlords thinking they just lie to me anyway. I mean, maybe the current one who wants them out, but older landlords will lay it all out for you. Do you know, we always ask previous landlords, would you rent to them again? And we've actually had a couple who have said no. They snuck a dog in and they claimed it was an ESA, or they were just absolute slobs. Or they complained constantly about every little thing. Is that who you want in your unit?

Stacie 16:58

We don't. And we definitely learned that the hard way. And I'll tell you, a bad tenant costs way more than a vacancy. You could be dealing with missed rent, legal fees, property damage, your own time and money lost, having to deal with a turnover. I think that landlords need to think of their tenants like this. You're not choosing a renter, you're choosing someone who will be like a business partner and controls your property daily. You need to set the criteria so that when you go through the evaluation period and they check all the boxes, you can start the relationship off trusting that that tenant will respect your rules, your property, and you as the owner.

Kevin 17:50

Exactly. And let me take a minute here to remind you all that we've done episodes, on how to handle these things. One being how to read a credit report. That's in episode 49, so just go to your landlord resource.com/episode 49 to give it a listen. We break it down step by step, including what company we use.

Stacie 18:17

Even though most software companies offer this as a paid service now, we still only use Tenant Alert. And mostly because we like to have all of our reports in one place. Plus it's nice because either we pay or the tenant can pay. And they essentially give us a tenant rating right off the bat. So if there are credit, eviction, and crime reports all come back looking great, they get a score of a hundred and it decreases if there's any issues. But yeah, that's a really informative episode.

Kevin 18:54

Now is that the one we had to make a correction on?

Stacie 18:57

Yes, it is. Tenant Alert offers like a tenant insurance, as you wanna say. I think they call it lease guarantee. It gives you the option to pay an amount starting at $299 for up to $10,000 worth of insurance coverage in case the tenant defaults or destroys the unit or if you have to evict. And that offer is only good right then and there when you pull the report. If you go on later to want to purchase it, the price goes up significantly. And the initial offer amount is determined on how good their credit is. So $299 bucks for up to quote unquote $10,000 worth of coverage is not a bad deal, but of course it's because they're low risk. The higher the risk, the higher the cost of the coverage. And in that episode, I stated that amount as if it was the offer all the time, and it's not. It's up to $10,000 and it could be more than $299. So anyway, you could certainly go on to Tenant Alert and you can purchase it, but it's gonna cost you much, much more. So check out episode 49 if you wanna learn more about how to read a credit report.

Kevin 20:22

And there are a bunch of companies that offer those lease guarantee insurance now. Other than the one through Tenant Alert, there's one that's called The Guarantors. There's several others too, just Google it if you want to learn more. We are not affiliated with anyone and really only can recommend Tenant Alert because that's what we know. Okay, so up next we want to discuss how your lease protects you. And many new landlords just totally underestimate the importance of a solid lease. So many of us landlords, who I can honestly say back in the day, I mean we're talking the eighties into the early two thousands, had a very simple lease, like four pages max. It consisted of the names of each party, so the landlord or property manager and the tenants. How much rent was, when rent was to be paid and where to send it. How much the security deposit was and the dates the lease was effective. Then, at least here in California, as laws began to develop to protect tenants, things like if the lease was not renewed, it would roll over with the same terms to a month-to-month lease. Lead base paint became an issue, as did asbestos and mold. As the laws developed to protect those tenants, landlords began to improve upon their leases where they still had control. So think about pets and if tenants could make improvements to the property. Appliances and who is responsible for the use and care of those. Tenants could run a business outta your rental and storage and parking details., So like if you could or couldn't park a boat or an RV in the driveway or on the side lawn. And that you couldn't store your broken down car on cement block. You know, things like that.

Stacie 22:25

And you guys might think that these things are not a big deal, but they really are. The less that you have stated at your lease, the more your tenants can try to get away with things. And your neighbors or the city might have something to say about it, which then forces you to handle it. You guys should think of your lease as like an operating manual because it will clarify your expectations before any conflicts arise. Now we did three back to back, very detailed podcast episodes on leases. And honestly, I can say they were like a free masterclass where we broke down our leases in our addendums.

Kevin 23:08

I think that we did title it as a masterclass.

Stacie 23:11

Ha, did we? Well, there you go. So go check those out. Start with episode 32 by going to your landlord resource.com/episode 32 Or you can go onto our show notes, we'll link it there as well. We go through our 50 plus page lease, paragraph by paragraph. Now, you may already have the least that you love, listen to why we have certain sections included, and see if any of 'em should be included in yours as well. Now the bottom line is a lease at minimum, along with all the pertinent information, like names, dates, amounts, et cetera, should include the following: Who is responsible for maintenance and to what extent? Guest rules. So how long can a guest stay before being considered an occupant? Late fees. This goes way beyond the standard one time, $25 fee that many of you are charging. Pets. That's a huge issue. Do you allow pets? And is there an additional rent for them? Do you have to approve of the pet? Do you limit how many pets they can have? Do you require renter's insurance to cover if that pet hurts someone else? Okay, we're gonna move on smoking. You know, now that weed or marijuana is allowed in many states, will you allow it? Same with vaping. So who has to take care of the yard? Do you have a service come and mow and blow and tender the trees and bushes, or does a tenant have to do that? Utilities could be a big expense for tenants if the landlord doesn't cover it. And up until recent years for multi-family properties, it was pretty much assumed that the landlord covered such things as water and trash, but not any longer. You know, we just did an episode on this, so go check that out. Do you require renter's insurance? If not, you should. And your lease needs to state this and how much that liability coverage needs to be. And finally, along with these things that I just mentioned, your lease needs to have move out standards stated. Can they leave it dirty and then you deduct a cleaning fee. Or do they have to clean it and make it nice like when they moved in? We are beginning to list fees that we're gonna charge in an addendum on our lease so that they sign it and they understand if they leave the place of mess, we're gonna be deducting those amounts from their security deposit.

Kevin 25:54

Yeah, and I, I think that's really gonna be helpful. Because in the past we'd send it out 30 days before move out and they have already mentally checked out. Plus if they know what level of cleanliness we're looking for from the get go, maybe, and that's a big maybe. They will be aware of how clean they keep their unit on a day-to-day basis.

Stacie 26:18

I doubt it, but who knows? Maybe subconsciously it will help. But the thing to remember is that many landlords and tenant disputes happened not because a tenant's a bad person. It's because expectations were never defined. So remember, the courts will enforce written agreement. They will not enforce verbal understandings or misunderstandings. No, he said, she said, if it's really important to you, you need to make sure that it's in the lease.

Kevin 26:50

Like your uncle has maximum size holes he allows without being charged.

Stacie 26:55

Yep. One quarter inch max, because otherwise it's a bigger deal to patch those, especially 'cause he has plaster walls.

Kevin 27:02

Oh, I know. Believe me. I mean, someone in this place hung TVs on the walls of every room and I had to call someone to patch 'em. I mean, it went way beyond my skill level. And because we had to pay them to have it fixed properly, that is why it's now on the lease. He has a fee listed, so if they do hang a tv, he can deduct from the security deposit to get 'em fixed.

Stacie 27:29

Yep. I mean, that's a very common live and learn situation, right?

Kevin 27:32

Yep. Every experience is a learning experience for sure. Okay, the next thing that experienced landlords wish they knew more about is maintenance. Now I speak from experience here. This one seems to always surprise new landlords. It's almost like every time we buy a new building, everything just breaks at once.

Stacie 27:55

Which is why inspections by someone who knows what to look for is so important.

Kevin 28:00

It is. This is why we pay our general contractor to come with this on inspections. He knows what to look for with plumbing leaks, appliances, water heaters, the roof, our hvac, the locks and seals on the windows and doors, dry rot. I mean, you name it, he can at least identify it. So by doing these inspections, not only of the units themselves, but the entire building, we can then plan our maintenance. And here's why that matters. The money you have to spend for planned maintenance is very different than money spent on reactive maintenance. Here's the case in point. If you have a roof leak, you have to pay a roofer a premium rate to go out there and patch it up so it will stop leaking into your unit. I won't go into all the other stuff that happens with roof leaks, but mold is a huge issue. Now if you pay attention to the life and age of the roof and do inspections every year, you should be able to plan when is a good time to get the roof replaced before the leaks and any other potential issues happen. This saves you money you have to spend on getting that emergency patch done, which is gonna be ripped off soon thereafter anyway. It also saves you from the repairs you have to do to the inside of the unit because water and sheet rock do not work well together. So you'll likely have to cut out the wet drywall, replace it, mud and texture it, prime, and then repaint. It also allows you time to save money or gather the funds needed to do your roof replacement, which is likely gonna cost you in the neighborhood of over $10,000.

Stacie 29:46

So you guys, that story that Kevin just told is exactly what happened to us. And you know, we like to think that we're pretty experienced and on top of our inspections. And I will say that we knew the roof needed to be replaced. And the property manager and the HOA, were working on getting bids for the whole complex. You know, there's 25 buildings in the complex for Idaho. And our roof started to leak before they could get it all together. So we had a couple of people out there and we found one company we really liked. They were willing to do the patch for free if we signed on to have them replace it when their schedule opened up. And we thought that was very fair so we went ahead with it. And for context, the roof, we just did it cost us $14,500.

Kevin 30:32

But we knew it was coming soon, so we had most of that set aside anyway.

Stacie 30:37

Right, we did. But I think the point Kevin is trying to make with regards to maintenance is that it should not only be an emergency expense, it should be a scheduled business expense. Everything has an expected lifecycle. Roofs are 25 to 35 years. Appliances are five to eight years. Hvac, depending on when it was installed, can be 15 to 20 years or maybe only 10. Toilets specifically, the guts in the tank and depending on usage, can last three, five, or maybe as long as eight years. And again, a lot of this depends on the quality of the product or machinery and the workmanship. We seem to notice that after doing a full remodel, things start having issues around 15 years in. In one of the mountain homes that was built in 2007 we're now having issues. In the last year or two the gas fireplaces have needed work. The boiler needed to be replaced. All of the toilets were either running or leaking, and a couple of our locks had issues. We needed to restain the deck, the refrigerator went out, the alarm had to be replaced, and the high tech lighting system is on its very last leg.

Kevin 31:54

Oh, that's a scary one. Yeah. Oh, and you forgot the washing machine where we could not find a replacement to fit under the built-in countertop and had to pay a contractor to come in and raise it up.

Stacie 32:07

Oh yeah. God, that was a hassle.

Kevin 32:10

I think one of the issues with that home is that the builder used state-of-the-art on most everything. Maybe with the exception to the toilets and KitchenAid refrigerator. Many of those other items are all operated by computer systems that are now outdated. So the replacements are not really just the expense of getting them parts and getting them fixed up, but the full replacement of several of those items. So most of you are not gonna use those high-end items and rightfully so. If we had to do it again, we would just get normal old light switches and a boiler that didn't need a computer panel to operate it.

Stacie 32:49

Yeah, well we bought the home already completed, and honestly, those things were really cool when they worked right.

Kevin 32:56

Well, what is it cool until it's not. And then we're left trying to figure out how to replace it all. But the whole point is that repairs are not bad luck you guys. They are to be expected and plan for, which is why we really recommend you keep reserves, plan for replacement cycles, and track your property age. We know people still using heaters from 70 years ago, so you know, you just never know. Just stay on top of tracking it all and use someone you trust to help you evaluate things you don't know anything about.

Stacie 33:32

Yeah, I, I think one huge issue is reserves. If you have reserves, then when issues happen, you have the relief of knowing that you can cover that expense. Because the anxiety that occurs when you get notified of a maintenance issue is bad enough. Now, add on top of that the stress, if now you have to figure out how to pay for it. We have an episode that we did, you know, it was quite a while ago, called the Cash Reserves Blueprint, Protecting and Expanding Your Portfolio. It's episode 28, and you can check it out by going to your landlord resource.com/episode 28. And we'll also link all these in the show notes as well. So let's talk about cash flow. Because a lot of new landlords think that if their incoming rent exceeds their mortgage then they are cash flowing in the positive. There are a lot of influencers out there who will tell whoever will listen that if the rent is equal to 1% of the purchase price of the rental property, then you likely will be making enough to cover expenses. Which honestly is not even possible here in California.

Kevin 34:50

Which honestly is not possible in most places now with interest rates up. And there's so many factors to this to make it work. One being the down payment percentage you are putting towards this investment. Because if buying multi-family properties, you could be looking at a down between 30 and 40% to even be close to making this concept work.

Stacie 35:14

Right. My point being is that people think they can just buy a rental and if the rents are good and they can cover the mortgage, then they should be able to have some cash flow coming in. Mortgage does not equal the total cost of ownership. There are so many more things that owners need to account for financially. One being what we just discussed, which is maintenance, and not just unexpected maintenance requests. This would be saving for those big items like a new heater or a water heater, or a roof, or to fix dry rotted repairs. Vacancy is another one. And again, many landlords will start to advertise their rental as soon as they get noticed to vacate, which in our opinion is not smart at all. 'cause you have no idea what you're gonna find or how much work that you're gonna need to do when that person moves out. Even us, when we think it should go easy, we always find something that needs attention. We prefer to list our units once it is clean and ready to go so it presents itself at its best. This allows someone to view the unit the same way that they're going to get it. No ladders, no buckets, no oh, that grease on the stove's gonna be cleaned up before you move in. This means that you have to have that missed month's rent set aside to allow you breathing room to turn and show the unit properly.

Kevin 36:41

And not just one month of rent. You should have three months of rent for each unit set aside in your reserves. And that's for two reasons. One, what if there's a market downturn and you cannot rent out the unit right away. We have absolutely experienced this both in California and in Idaho. We lowered the price of rent too, and it still took a while. The other reason is because, like Stacie said, you never know what you'll find what needs to be repaired during turnover. If you find a mold issue, there is no way you're gonna be turning that place in under a week. And that leads me into the next expense that many landlords do not consider when they are allocating reserves, and that is turnover costs. You might need to pay a cleaning person to do a deep cleaning or a contractor to make some repairs. Maybe a landscaper to clean up bushes and trees that need some attention. Unless we have a tenant only stay one year or less, we usually have something maintenance-wise that we need to take care of during turnover. For instance, a few years back on the Sixplex, we had some old exhaust fans in the bathrooms, I mean, they were odd. They looked like those cheap round, we call 'em booby lights, but in the outer metal rim there are holes for the fan to pull moisture through. Cool idea, and I'm sure they looked real nice back in the day, but moisture and metal do not go well together. And we got to a point where we could not remove the finial that held the glass on. They were all rusted on each of the fans. So as people moved out, we had Jim go in and switch them out for the traditional exhaust fans. And of course the opening for the new fan was different from the old, so there was drywall work that had to be done. Which meant we had to match the texture that's on the ceiling. I mean, you can see where I'm going here. We couldn't just clean the place until he was finished because if you've experienced drywall dust, I mean, lucky you, it gets everywhere.

Stacie 38:56

Oh, it's horrible. And since the units were going to be down a week or so, that is when we would change out the water supply lines to the sinks and the toilets. We'd put our smart locks on the front doors, and then anything else that we needed to upgrade or fix. If we had to pay him to be there and waiting on drywall mud to dry, we put him to work doing other things that we had on our preventative maintenance or unit upgrade list. Did we plan on switching out exhaust fans, so that we could make sure we had the money and that our turnover costs would now be way more? No, not until we went in to clean the fans and change out the light bulbs did we find that we couldn't open 'em up. So on a wing and a prayer, we deferred it in each unit until they had move outs. Capital expenditures is another one that new landlords underestimate. Roofs, driveways, fences, multiple water heaters or HVAC systems, all needing to be replaced at one time, usually will exceed your common reserves. Those are big ticket items. So if you don't have $15,000 you can set aside for that when you purchase your rental property, you should make sure you have a line of credit you can draw on. Because storms take down fences and they don't give you any warning, like a cracked driveway or old worn roof shingles do. Now raise your hand if you have experienced your insurance costs going up. Both of us are over here waving our arms as well. So if you think that a hundred dollars per door, you're earning a profit each month is gonna cover an insurance or even a property tax increase, you were sadly mistaken. The last expense most new landlords underestimate when considering cash flow is having to pay a property manager. You guys, we have done a couple really good episodes about hiring a property management company, and you should check 'em out. We did a two part series called 50 Must Ask Questions When Hiring a Property Manager. It's episode 39 and 40 and we'll link those in the show notes for you. And fairly recently we did an episode called Should You Self-Manage Your Rentals. In all those episodes, we went over unforeseen costs of using a property management company. Not that it's bad, you know, we're property managers, but there are a ton of hidden costs that landlords just do not consider when figuring if a rental property will cash flow or not. And the one thing you have to remember is that many properties look like they will be profitable for two to three years. Then boom, you need a roof or you need a new hvac, or you have a nightmare tenant with an eviction and then when you go in, you finally trashed your place, making your turnover costs skyrocket. Then you decide, I'm not dealing with this, and you go hire a property manager only to get sticker shock at what they charge. To be totally honest here, we do not consider our properties cash flowing in the sense that many others do, until that property is paid off. Because we are constantly putting money back into our units so we can be competitive in the market and charge higher rents.

Kevin 42:20

We also do that so if, and that's a big if, if we decide to sell or 10 31 exchange the property at some point so we can scale, we will have a building that we can confidently say is getting market rents and has been very well maintained. Which in turn should yield us a higher sales price. And there's a whole other tax benefit to doing improvements for 10 31 exchanges, which we won't get into, but keeping our properties maintained is a major priority for us. Okay, we're getting there you guys. For things, experienced landlords wish they knew in the beginning I think we have three more areas to cover. And where this next one is as equally important, I will only touch on it because I believe we have other episodes we can defer to. Okay, we have said this many, many times before, but as landlords you need to document everything. Document, document, document. You cannot rely on your conversations and memory, so take notes when you're done talking to a tenant, then shoot them a quick email going over the conversation so that you have a written document of what each of you expressed and the expected outcome. Never allow a tenant to give you notice verbally. Same goes with maintenance requests from tenants and your response regarding when they can expect work to be completed. You need to get invoices with details of what work was completed, on what unit or home, when you have a contractor or tradesman work for you. When you do inspections, whether it's before move in, during occupancy, or after move out, you need detailed notes and photos. Take that photo of the inside of the oven door and the inside of the refrigerator. Same goes with the window tracks. If you are going to charge them for not cleaning it, move out, you better make sure you can prove it was clean when they moved in. Believe me, you'll get very good at communications after a while.

Stacie 44:38

I think what you guys need to remember is to cover your ass. Because housing disputes are always and only evidence based. And legal situations documentation often matters more than who's right or wrong. So if you can't prove something, you likely will not be able to fight against it. Just think of it like this. If it isn't written and recorded, effectively it didn't happen. And the episodes Kevin was talking about before would be our standard operating procedures episode where we cover documenting everything, that's episode six. And our inspection episode where we discuss what to look for during occupancy inspections, and that's episode four. We'll link those in the show notes so you can check 'em out. Okay, the next one that honestly is not talked about enough is landlord burnout. Now, let me be clear here, it's okay to set boundaries. It's okay to have office hours and not return non-emergency calls, text or emails until you are reasonably able to do so. Because new landlords sometimes feel like they have to aim to please. They will be available at all hours and make exceptions against their better judgment. They also will do favors for tenants they eventually find out just made matters worse in the long run. The worst thing that you can do is act like you're friends with your tenants. And please do not confuse this with being friendly. Absolutely show interest in their hobbies or ask about their kids, but don't offer to babysit or wrench on their classic car with them. This is just gonna confuse a tenant and often leads to resentment. Which will just be more stress for you all the way around. So put your professional pants on and set boundaries. Like make office hours for yourself. Follow and maintain the procedures and policies that you created for your business. For instance, create procedures on how a tenant is to contact you with a maintenance request. As Kevin discussed before, make sure that all communication is written. And you guys stick to your guns regardless of how they make you feel. Because some people really know how to manipulate others to get what they want. And here's the wisdom of the day. Tenants don't need a friend, they need a reliable housing provider.

Kevin 47:15

Whoa. Drop the mic Stace.

Stacie 47:18

Right? That was pretty good, huh?

Kevin 47:20

I'm impressed.

Stacie 47:21

Yeah. Well, yeah, I know a few things. Okay. Why don't you take over the last thing that we wanna go over, and I think that's the good advice for newer landlords.

Kevin 47:32

Okay yeah. My absolute favorite thing to do, which is dealing with conflict management. Okay you guys may not think this is something that happens, but boy oh boy it does. Think about noise complaints between neighbors or just complaints in general about parking or if someone has a mess outside their place. Taking up parking is another one. Which is funny because from time to time we get complaints about street parking. And I'll let that sink in a bit. Why would anyone think we have control over public street parking? But yes, they do. They complain when complete strangers don't leave ample room to get in the driveway, sending us pictures and everything. And I pretty much have a nice little passage to send them, letting them know we cannot control public space and to contact the authorities. Alright, roommate disputes is another one, and this latest one was a real doozy. I won't spoil our upcoming episode on it. But the long and short of it is, one tenant felt they were being bullied by the other and was able to claim domestic violence, which covers bullying as well, as their means to get out of their lease halfway through. Uh, let's see what else? Oh, excuses for late rent is something no one tells you you'll have to deal with either. No fun there you guys. And this is definitely where you need to stick to your guns and follow your policy to the t. I think my wisdom for the day is that more often than not, landlords confuse housing problems as property problems when in reality they are people problems. Making your policies and being consistent matters way more than your personality, and if your tenant likes you, you'll get way more respect that way.

Stacie 49:35

Not bad wisdom. I mean, not quite the mic drop I offered, but you know.

Kevin 49:39

You know what can I say? You are the master.

Stacie 49:42

Yeah, most of the time. All right, let me close this episode up. As experienced landlords, we eventually learned and sometimes a hard way, to learn landlord tenant laws, to properly screen and do background checks on prospective tenants, to build a solid lease, to plan for maintenance, no matter what, to understand and track the true profit that we were earning. To document, document, document every single little thing. And we also maintain boundaries with our tenants. You guys successful landlords are not lucky, they're systematic. You don't have to learn everything the hard way. Start from the beginning and build your systems that work best for you. Join a local rental housing association to meet other landlords and network. Take classes to learn laws and listen to our episodes to help you along the way. This is exactly why we do what we do. And we want you to know all you need to do is just do your best, you guys. Okay, that is our show for today. Thank you so much for taking time out of your day to listen to all that we had to say. If you enjoyed this episode, would you do us a favor and leave us a kind review of the podcast because reviews help others find out that we're the real deal. And it helps us to know, where we can focus and do better. If you wanna hear more, follow or subscribe to the podcast so that each week the episodes are downloaded right to your favorite podcast platform. And this helps us know that we're doing a good job because the more subscribers that we have, and as we grow, the more we'll keep putting out the content. We have newsletters, we have free guides, and we have a private landlord Facebook page. So if you wanna learn more, just check out the show notes for this or on any of our episodes. Thanks again for sharing your time with us. We really appreciate it. And until next time, you've got this landlords.