Stuck at ONE Rental Property? The Secrets to Scaling Your Portfolio

Summary

Real Estate Rookie Podcast: Episode Summary Title: Stuck at ONE Rental Property? The Secrets to Scaling Your Portfolio
Release Date: January 24, 2025
Hosts: Ashley Kehr and Tony J. Robinson
Podcast Series: Real Estate Rookie by BiggerPockets

---

Introduction to Scaling Real Estate Portfolios

In this episode of Real Estate Rookie, hosts Ashley Kehr and Tony J. Robinson delve into strategies for investors who are looking to transition from owning a single rental property to building a scalable real estate portfolio. The discussion is framed around real questions sourced from the BiggerPockets forums, ensuring relevance and practicality for novice investors.

---

Optimizing Current Rentals and Reducing Mortgage Expenses

Case Study: A new homeowner duo in Colorado Springs faces a monthly mortgage of over $4,000 at a 7.1% interest rate. They own a primary residence with an Accessory Dwelling Unit (ADU) rented out for $1,545 monthly.

Strategies Discussed:

1. Evaluating Short-Term vs. Long-Term Rentals:

   • Ashley: Suggested considering converting the ADU to a short-term rental, leveraging platforms like Airbnb to potentially increase revenue. “Check the local regulations and use tools like AIR DNA to assess revenue potential” [02:09].
   • Tony: Emphasized comparing current long-term rental income ($18,500 annually) with projected short-term rental earnings. “Could I potentially generate more than 18,500 as a short-term rental?” [02:37].

2. Refinancing the Mortgage:

   • Tony: Recommended exploring refinancing options if interest rates decrease, providing calculations to determine the cost-effectiveness. “Always do the math on potential savings versus closing costs” [07:39].
   • Ashley: Advised obtaining current interest rate estimates from lenders to make informed decisions about refinancing. “You can usually find that out before spending any money” [08:19].

3. Reducing Monthly Expenses:

   • Ashley: Suggested disputing property taxes through services like Ownwell and renegotiating insurance premiums by leveraging discounts for home safety features. “Ask for a list of discounts on your policy” [06:15].
   • Tony: Highlighted shopping around for insurance and challenging unfair tax assessments as viable methods to lower monthly obligations. “There are things you can do to reduce your property taxes” [06:15].

Notable Quote:

• Tony: “Your principal and interest are pretty fixed, but taxes and insurance might have some room for adjustment” [07:39].

---

Valuation and Financing for Unique Properties

Case Study: An investor owns an eight-acre glamping site in Dripping Springs, Texas, featuring yurt-style cabins. With significant investments totaling $500,000 and revenue challenges due to lack of comparable properties, traditional financing has been elusive.

Strategies Discussed:

1. Expanding Lender Outreach:

   • Tony: Encouraged approaching local and regional banks, credit unions, and mortgage brokers who might offer specialized loan products suitable for unconventional properties. “Talk to more banks to find the right loan product” [14:54].
   • Ashley: Reinforced the importance of targeting smaller financial institutions familiar with the local market and open to unique property types. “Small banks can tailor options to your needs better than larger institutions” [15:52].

2. Exploring Alternative Loan Options:

   • Ashley: Suggested considering SBA loans, which treat the property more as a business asset, potentially opening doors to better financing terms. “An SBA loan could be a viable option for your property” [16:32].
   • Tony: Mentioned commercial loans as another avenue, especially for properties resembling hotels or resorts. “Look at commercial loans if traditional residential lenders aren’t responsive” [17:14].

3. Valuation Techniques for Short-Term Rentals:

   • Tony: Explained why traditional cap rates might not be reliable for short-term rentals, advocating for appraised value-based assessments instead. “Cap rate isn't prevalent in the short-term rental industry” [17:14].

Notable Quote:

• Tony: “There’s probably a point as rates start to dip where refinancing makes sense” [07:39].

---

Effective Property Management and Handling Difficult Tenant Situations

Scenario 1: Dealing with a tenant who independently hires an exterminator and refuses to reimburse the landlord for unauthorized expenses.

Strategies Discussed:

1. Setting Clear Expectations:

   • Ashley: Emphasized the importance of defining maintenance response times in the lease to manage tenant expectations. “Let tenants know within what timeframe they can expect repairs” [25:11].
   • Tony: Suggested incorporating specific clauses in the lease that prevent tenants from hiring their own contractors without approval. “Include in your lease that tenants cannot hire their own contractors” [24:37].

2. Documentation and Communication:

   • Ashley: Recommended maintaining thorough documentation of all maintenance requests and actions taken to protect against disputes. “Document all communications and actions taken promptly” [25:11].
   • Tony: Advised reviewing lease agreements with tenants to ensure mutual understanding and prevent future conflicts. “Re-review the lease with tenants to clarify responsibilities” [30:41].

3. Handling Unauthorized Repairs:

   • Ashley: Suggested covering the unauthorized expense once to maintain goodwill but enforce lease terms moving forward. “If it's a minor expense, consider covering it to maintain a good relationship” [24:37].
   • Tony: Highlighted the importance of evaluating whether the cost justifies the dispute. “Is the expense worth the headache and potential conflict?” [29:12].

Scenario 2: Managing disputes with Section 8 tenants over maintenance issues.

Strategies Discussed:

1. Proactive Maintenance and Inspections:

   • Ashley: Stressed the importance of regular inspections and prompt maintenance to prevent long-term property damage. “Regular check-ins can prevent significant repairs down the line” [33:44].
   • Tony: Suggested involving housing specialists to mediate disputes and find resolutions. “Contact the housing specialist to help mediate the situation” [34:10].

2. Lease Enforcement and Tenant Communication:

   • Ashley: Recommended providing tenants with options, such as allowing them to exit the lease if conflicts persist, to avoid prolonged disputes. “Offer the option to end the lease to resolve ongoing issues” [34:45].
   • Tony: Encouraged thorough troubleshooting to identify the root cause of maintenance complaints before escalating. “Deep dive to understand the actual problem before taking further action” [34:10].

Notable Quotes:

• Ashley: “Expectations with you as a landlord and your tenants are crucial” [25:11].
• Tony: “Understand whether the issue is user error or a genuine malfunction” [34:10].

---

Conclusion and Community Engagement

Ashley and Tony concluded the episode by encouraging listeners to engage with the BiggerPockets community through their forums, Instagram, and Facebook pages. They emphasized the value of ongoing education and community support in successfully scaling a real estate portfolio.

Closing Quote:

• Ashley: “We’re here to arm you with the tips, tools, and roadmaps you need as you embark on your journey toward financial freedom” [31:12].

---

Key Takeaways

• Diversify Rental Strategies: Evaluate the potential of short-term rentals versus long-term leases based on local market conditions and property specifics.
• Optimize Financing: Explore a wide range of financing options, including local banks and SBA loans, especially for unique property types.
• Strengthen Lease Agreements: Clearly define maintenance responsibilities and communication protocols to prevent disputes.
• Maintain Thorough Documentation: Keep detailed records of all tenant communications and maintenance actions to protect against legal disputes.
• Leverage Community Resources: Utilize platforms like BiggerPockets for expert advice and community support to navigate scaling challenges.

---

This episode provides actionable insights for real estate rookies aiming to expand their investment portfolios thoughtfully and sustainably, ensuring both financial growth and effective property management.

Transcript

[Ashley Kerr]

Let's get your questions answered. I'm Ashley Kerr.

[Tony J. Robinson]

And I'm Tony J. Robinson. And welcome to the Real Estate Rookie Podcast where every week, three times a week, we bring you the inspiration, motivation and stories you need to hear to kickstart your investing journey.

[Ashley Kerr]

We are about to get into some questions from the BiggerPockets forums that other rookies like you have asked. Also, go check out the forums if you haven't already. They are honestly the best place for you to quickly get all your real estate investing question questions answered by the many different experts in there.

[Tony J. Robinson]

So here are a few of the things we're going to discuss on today's episode. So first we'll talk about scaling in this current market, especially when your family is going down to 1W2 income stream. We'll also talk about a refinancing strategy for maybe some untraditional type properties.

[Ashley Kerr]

And then we're going to end the show with a couple of property management questions on how to handle unusual or expensive tenant maintenance requests. Okay, let's get into the show.

[Tony J. Robinson]

All right, so our first question says my wife and I recently bought our first home in the Colorado Springs area close to the Garden of the Gods and other attractions in the area. Our interest rate is a whopping 7.1%. The main house has four bedrooms, two baths and our mortgage is just over $4,000 per month. The property that we bought has an ADU on the side of it, completely independent from the main unit that we live in. We we're currently renting it out for a two year tenant long term for 1545 per month. It's a one bedroom, one bath. So here's a question. What are some ways to scale, especially in this current market or what are ways to reduce our expenses on the mortgage every month? We both make about $105,000 each year, but with us planning to have kids in the future, my wife may stop working. Any advice is appreciated. All right, so we got a lot to unpack there. 7.1%, just over 4,000 bucks per month on the mortgage. Got a long term rental in the ADU at 1545. So reducing expenses or ways to scale. So what are you hearing? What are you picking up on that question? Ashley?

[Ashley Kerr]

I honestly thought when they started it off with that they were near attractions and they had an ADO and it was a long term rental. The question was going to be should I turn this into a short term rental. So Tony, if the where they live, if it is allowed, what are the steps that they would take to actually find out, you know, what their daily rate would be and if this would be a good investment for them and they could make more cash flow than they would as a long term rental.

[Tony J. Robinson]

Yeah, I think, you know, first, yeah. Make sure that it's allowed in your area. So check the, the local regulations to ensure that you can rent a, rent that property out. But yeah, I mean if you can, the first thing that I would do is and you can do it for free, but honestly that there are tools out there that will allow you to do it better. One of the tools that I like to recommend for market research and the initial deal analysis is AIR DNA. It's AIR DNA and AIR DNA allows you to look at other comparable airbnbs in your market and track the revenue that those listings generated. Now Airdna says their, their data is, you know, over 90% accurate. So I guess you can have some confidence in the way that they're tracking. But that's one of the first things I would do is check other comparable airbnbs in your market and see what kind of annual revenue they're producing. Now they said they're doing 1545 per month in revenue on this property. So 1545 over 12 months gives us just over 18,000, 18,500 in revenue for the year. So you just need to ask yourself, could I potentially generate more than 18,500 as a short term rental? And if the answer is yes, okay, cool, then maybe you've got a viable path forward, right. If you can get to 25,000, you know, maybe there, there's a case to move forward. But that those would be my steps, Ashley, is I want to understand the actual revenue potential and then compare that to what I'm getting from the long term rental.

[Ashley Kerr]

I just did a quick Google search and it does say, say the city of Colorado Springs does allow short term rentals, but you have to apply for a rental permit, special circumstances for residentially zoned single family homes. But if you are a owner occupant and your name is on the deed, then it's fine. So I'd look more into those regulations. So I think some other things that you could do in this is is there a way to section off the main house? So four bed, two bath, it's just two of you right now. I think it said wanting to start a family as to renting out a couple of those rooms, even one of those rooms, even better if you can kind of like separate a bed and a bathroom for somebody else and have, you know, a Separate entrance, maybe, you know, one of the bedrooms and bathrooms in the basement or something like that. I don't know if there's a feasible way to actually do that, but you could always just rent out a bedroom and they share the common areas with you.

[Tony J. Robinson]

I mean, yeah, four bedrooms, two baths. You know, two people. Do the math. You know, we talk about our good friend Craig Kerlop of the show who house hacked. I think his first property was that like a five bedroom and he slept on the couch. Right. So can you, can you make a little bit of sacrifice over the next couple of years to give yourself a, a better shot here? So the other part of this question was what are some ways to reduce expenses on the mortgage every month? There's not a ton of ways that I can think of to reduce your, like, kind of your principal, interest, taxes and insurance payments. You can shop around for maybe some other potential insurance providers and see if you can get a potentially better quote. You can maybe if you feel like that the tax assessment is not fair, you. You can ask for a reassessment. We're actually doing that on one of our properties right now where we filed an appeal because we, we didn't agree with the tax assessment. So there, there are things you can do in that way. But I mean, your principal and interest, aside from refinancing, is going to be pretty fixed. But the taxes and the insurance part of your payment is where you have maybe a little bit of room, depending on what the current numbers are.

[Ashley Kerr]

Yeah, there's actually a company I just saw, it's called ownwell, and they actually will do that, dispute your property taxes for you on your behalf. So I have no experience using that company. I had just heard of them and looked into it a little bit as to what they do, but that's. They'll help you if you don't want to go and do that on your own. There's like a grievance period where you have to like, you know, object to your property taxes within a period of time, at least in New York State. So that's something that that company could probably help you with. Insurance, you know, going to your agent, your broker, asking them to quote it out, see if there's, you know, any discounts going through your actual policy. Do know what you're paying for, what your coverage is as, you know, maybe you have something in your house that actually gives you a discount. Like there are some, like, little random things that give you discounts. Like, did you tell your, you know, person that you have Fire extinguishers. And maybe that will give you a discount on your insurance. So going through that, asking for a list of what are things that are discounts on your actual policy because you have these in place, like an escape ladder for the second floor floor, different things like that can come into play. So that's kind of where I'd start. The property taxes and then the insurance, getting that requoted too.

[Tony J. Robinson]

The other question here that I think is, you know, maybe one of the, the more pressing things is the, the interest rate at 7.1% first. I'll say that, I mean, that's not terrible. You know, there, there we've definitely heard and seen rates, especially the last, you know, 24 months that are higher than that. But there, there probably is a point as hopefully rates start to dip in the coming year, you know, 12, 18 months or so, where it maybe makes sense to do that. But you know, Ashley, what do you think is like, how do you know when to refinance? Because if rates drop to 6.99, maybe it doesn't make a ton of sense. In your mind, what is the best way to kind of gauge if going through the refinance and those costs is actually worth it or not?

[Ashley Kerr]

Well, I think it's pretty easy to get an accurate estimate of what your interest rate would be. So especially if you go to the lender who has your current loan, email them and say, especially if you're working with a small local bank, email them and say, I, you know, interested in refinancing to lower my interest rate. What are interest rates at today? So they can tell you exactly what interest rates are if you close today. So it'll kind of give you an idea. But you can rate lock. So say like, okay, yep, this is actually, I want this interest rate, let's rate lock. And you may, then you may have to do like, they may run another credit report, different things like that, before they actually rate lock you. But it's usually not like a really long, in depth, costly process for you to find out what your interest rate would, would be. You can usually find that out before spending any money. They'd give you your disclosure as to your closing, disclosure as to what you'd be paying and closing costs, things like that, pretty upfront front. So you can see if it'd be worth it for you to pay those closing costs again to reduce your interest rate. You can just kind of do the math as to, you know, what's the difference you're going to be saving and how long does it take you to actually, you know, save that amount that you're paying in the, the closing cost for that property?

[Tony J. Robinson]

We refinanced our primary residence when rates dropped and we were actually able to roll the cost of the refinance into the loan. So not only did we shave off, I think like a point and a half, maybe almost two points from our interest rate, but we also had literally zero cash out of pocket because we rolled those cost in. So for, it was, it was like a no brainer for us because rates had dropped a lot and we didn't have any, any out of, any, any out of pocket expenses. But as you're going through your refinance, maybe it is a question worth asking. It's like, hey, if I roll those cost into the new loan, how much I'm actually saving on a monthly basis and is it worth it?

[Ashley Kerr]

Yeah. And just keep in mind that is increasing the balance owed. So like, you should still know how much that is because if your closing costs are going to be $20,000, that's $20,000 added to the balance of your loan. So make sure you're still like actually seeing what that dollar amount is even if it is being rolled into your loan amount too. Rookies, before we jump into our second question, we have exciting news to share. We now have an Instagram and Facebook page. This is separate from our Facebook group where rookie investors can connect with each other and learn even more directly from Tony and I. So follow us @BiggerPockets Rookie on Instagram and Bigger Pockets Real Estate Rookie podcast on Facebook and get all the extra tips and insider advice to help you succeed this year on your real estate journey. Both are linked in the show notes for you guys. So I hope to see you guys in there.

[C]

Listener, A new year is finally here and if you're anything like me, you've got a lot on your plate. Habits to build, travel plans to make, mocktail recipes to perfect. Good thing our sponsor, NerdWallet is here to take one thing off your plate. Finding the best financial products, introducing NerdWallet's best of awards. List your shortcut to the best credit cards, savings accounts and more. The nerds have done the work for you, researching and reviewing over 1100 financial products to bring you only the best of the best. Looking for a balance transfer credit card with 0% APR? They've got a winner for that. Or a bank account with a top rate to hit your savings goals? They've got a winner for that too. Know you're getting the best products for you without doing all the research yourself. So let NerdWallet do the heavy lifting for your finances this year and head on over to their 2025 Best of Awards at NerdWallet.com awards to find the best financial products today.

[D]

Want to invest in real estate but don't have the time or know the best local markets? Rent to Retirement has you covered. Now look, here's the deal. They've helped thousands of investors just like you find turnkey homes across the best US Market. Best of all, they do all the heavy lifting for you. With over 255 star reviews on BiggerPockets, rent to retirement experts help you build strategies to retire early through real estate. And right now, Rent to Retirement offers some amazing incentives on turnkey new construction properties like up to $30,000 off of new build prices, 0% down loan options, 3.99% interest rates. So guys don't miss out. These deals won't last. Text REI to 33777 or visit biggerpockets.com retirement start investing in top cash flow markets today.

[E]

If you're in the landlord game, then you know the importance of solid tenant screening. That's where Rent Ready steps in. Now Rent Ready has a new feature, Proof of Income Verification. And get this with Plaid certified reports you'll see everything from income summaries to total earnings by month. So say goodbye to those gut check moments and say hello to confidence in renting with RentReady. Rent Ready is actually included in your pro membership at Bigger Pockets. If you're not a pro, they're offering a six month plan for one dollar. You can't beat that. Visit rentready.com that's R E N T R E D I dot com and use the code BP investor. That's BP like bigger pockets investor to get six months of rent ready for just one dollar.

[Ashley Kerr]

Okay, welcome back. We have our second question. Today it is I have an eight acre parcel in Dripping Springs, Texas outside of Austin that has two small short term rentals built on it. Both units are approximately 400 square feet. They are yurt style cabins with large decks. We have two full years of revenue history grossing just over 100k in 2024. After some investments in amenities, primarily hot tubS, our last 3 months have averaged 12k per month. This property is owned outright. Due to the size of the property, the small square footage of the units and the lack of comps in the area, we have found it difficult to lock down any financing. We have spent approximately 500,000 in improvements on the land, in the structures and the infrastructure. We also have infrastructure in place at a build site for a third unit on the property with it being a difficult property for an investor to find traditional financing for. How would I go about assigning a realistic valuation for the property if we were to entertain a sale for. From what I've been reading, cap rate is not a reliable metric for short term rentals. Any insight is greatly appreciated. We gotta get this person on the show to talk about their glamping site.

[Tony J. Robinson]

It also, it kind of sounds similar to Garrett who's you know, one of the short term rental experts from Biggerpockets. You know, he's been on the podcast a couple of times as well. He and I did a, did a podcast on the Ricky show here recently together and he had a similar issue where he bought property in Texas, built domes his weren't yurts. But also had a little bit of difficulty around the refinancing piece. I think the first, and I've mentioned this before, but I think the first thing is that I would say how many lenders have you spoken with and who are you speaking with? Because if you're only talking to bank of America and Chase, your options are probably going to be very severely limited. So I would put a really strong focus on local regional banks, on credit unions, on mortgage brokers who know the space a little bit better because the more people you can get in front of, the more options you'll have presented to you. And someone somewhere out there probably has a loan product that might make sense for this type of deal.

[Ashley Kerr]

Yeah, I think definitely the small banks in that market that are close to that property that have an idea of the area and you know, can definitely give you more options and basically tailor things to what you need than a larger bank where they have like more say in what they can do on the, the branch level, I guess. Did Garrett have any solutions? What did. Do you know what he ended up doing for his property?

[Tony J. Robinson]

Ooh, don't quote me on that. But I believe he's still in the process of trying to sort out that refinance. I believe he eventually found a bank. But yeah, I think he's still, still kind of sorting that piece out.

[Ashley Kerr]

But that kind of goes along with what you said. As to how many banks have you talked to and continuously reaching out to different. There's gotta be by now I feel like a bank that is specializing in this. I mean there's now there's banks that specialize in short term rentals for Investors for a long time. I feel like that was hard to get unless you had two years of rental income on your short term rental. And now there's more financing options on that side of the things too. The one thing I would look at is doing an SBA loan. So this is what a lot of people do have, campgrounds is looking at SBA loans. You're getting more of a business loan than actually, you know, a mortgage on the property. So that could be an option too.

[Tony J. Robinson]

One of the other parts at the end of the question here is from what I've been reading, cap rate is not a reliable metric for short term rental. So true statement cap rate is basically taking your net operating income. So it's basically all of your, you know, all of your income minus all of your expenses except for your debt service. And like any taxes that you would pay, that's your net operating income, you divide that by the, the, the, the value of that property. In typical commercial real estate, the cap rate is used pretty heavily as people are buying and selling properties, right? Like oh, it's an 8 cap, it's a 4 cap, it's 10 cap, it's whatever cap that, that is not yet prevalent in the short term rental industry. Most short term rentals do sell based on appraised value. So just for our Rickies that are listening, that's kind of what that, that part of the question was, was about. But yeah, I think to actually point, it's just you got to talk to more people, you know, you got to, you got to talk to more banks, you got to get more options in front of you to try and find the right, right partner to, to refinance with. I think the only other thing that I might consider because you talked about the SBA loan, but it's also maybe looking at like a commercial loan. Don't just look at like single family residential type lenders, but you've got, I think he said eight partials, two small short term rentals built on it. You've done half a million dollars in improvements, which is insane, right? That's a lot of money that you've dumped into the improvements already in space. Add a third. It's like if you go talk to a commercial bank, maybe they're willing to lend on this because they look at it more as like a hotel than a yurt or whatever it may be. Because I've seen like glamping resorts in different parts of the country that have commercial debt on them, you know, so it's like what does that process look like Rookies.

[Ashley Kerr]

We want to thank you so much for being here and listening to the podcast. As you may know, we air every episode of this podcast on YouTube as well as original content like my new series, Ricky Resource. We also want to hit 100,000 subscribers and we need your help. If you aren't already, please head over to our YouTube channel and subscribe. Subscribe at realestate. Rookie. We have to take one final ad break, but we'll be back with more after this.

[C]

Hey guys, it's Mindy from the Bigger Pockets Money Podcast. If you're anything like me, you've got a lot on your plate this year. You've got summer beach trips to plan, a work life, balance to balance, and pickleball opponents to Best Good Thing Our sponsor, Nerd Wallet is here to take one thing off your plate Finding the Best financial products introducing NerdWallet's 2025 Best of Awards List your shortcut to the best credit cards, savings accounts and more. The nerds have done the work for you, researching and reviewing over 1100 financial products to bring you only the best of the best. Looking for a lower rate on your auto insurance? They've got a winner for that. Or a balance transfer credit card with 0% APR? They've got a winner for that too. Know that you're getting the best products for you without doing all the research yourself. So let NerdWallet do the heavy lifting for your finances this and head over to their 2025 Best of Awards at NerdWallet.com awards to find the best financial products today.

[D]

Are current interest rates making you depressed about cash flow? What if it didn't have to be that way? Rent TO retirement has 2.99% seller financing available on turnkey properties. You heard that right, That's a seller financed 2.99% interest rate where the average cash flow is over $900 per month. They also have options where you can put as low as 5% down on multiple investment properties with no PMI. Rent to retirement is the nation's leading turnkey investment company that understands what it takes to be successful in today's dynamic real estate market. Their reputation speaks for itself, with more 5 star reviews than any other company on the BiggerPockets website. Rent to Retirement offers fully turnkey properties that are newly built or renovated, leased and managed, allowing you to invest with confidence in the markets that offer the best returns. To learn more, visit renttoretirement.com that's rent t o retirement.com or text REI to 33777 again, text REI to 33777 listeners.

[E]

I'm telling you now, it's not every day you find a game changer like Rent Ready. They're not just stopping with just tenant screening. They've rolled out proof of income verification. Let Rent Ready handle the heavy lifting with automatic checks on financial stability and earnings. Plus with Plaid Certified reports, you'll have all the info you need right at your fingertips. Rent Ready is actually included in your Pro membership at BiggerPockets. But if you're not a pro, they're offering a six month plan for just a dollar. How great is that? So visit rentready.com that's R E N T R E D I dot com and use the code BP Investor. That's BP like BiggerPockets Investor to get six months of rent ready for a dollar.

[F]

This is a message from sponsor Induit TurboTax now taxes is 100% free when you file in the TurboTax app. If you're a first time filer or didn't file with TurboTax last year. That's right, just do your own taxes in the TurboTax app by February 18th. Had a few jobs last year. It's free. Have a lot of forms. Yep, still free. Have a bunch of new invisible crypto coins. Heads up, it's still free. Convinced you saw Bigfoot? Even if your friends don't believe you, that has absolutely nothing to do with taxes. But you better believe it's still absolutely free. Just download and do your own taxes in the TurboTax app by February 18th. All tax forms, all 100% free. Now this is taxes. See if you qualify in the TurboTax app excludes TurboTax Live must start and file an app by February 18th.

[Ashley Kerr]

All right, let's jump back in. This next step section is all about property management. Our tenants informed us a night before about swarming bees around the apartment. We went to assess it and in the morning we texted them that we are calling for an exterminator. We used this exterminator before on our other homes. Two hours later I received a text message from the tenant stating that he hired someone, paid $430 already and they are coming before 6pm this happened around 2pm at this point we had not made an appointment with our exterminator because they had not called us back yet. How fast were we supposed to act? On this side note, the bees never made it into the home, but they were trying to get in their home. According to him, we don't want to pay for this very expensive service. We did not authorize. He knew we were hiring someone, but he did not want to wait for our exterminator because it was an emergency. These tenants have lived in their apartment two months only. And we have had several issues, similar ones. They are two young professionals with money and they have extremely high demands. Okay, so I think this is an example of it doesn't matter how well you screen someone that it does not mean they will be the perfect tenant. So word of caution, you got to.

[Tony J. Robinson]

Add that question to the tenant application, right? Like say that there's a swarm of bees trying to get into your house. You know, what would you do from.

[Ashley Kerr]

Now on that is going to be added to every, like pre application is to like go through these situations and let me know how you would handle each of these scenarios.

[Tony J. Robinson]

I think that's a great thing. You know, we do like disc profiling for employees. We should be doing something similar for, for tenants. You know, as we did the episode recently on long term rental management, and in that episode you talked about the importance of having a good lease. So let me ask you, how would you address something like this? Because I want to get into what he should do in the situation, but I think maybe even preventing something like this from happening, you can probably head that off with a good lease, with a good onboarding experience for your tenants. So is there anything in your leases that would speak to a situation like this?

[Ashley Kerr]

Well, I learned a lot of this from Ashley Wilson and we've had her on the show before and she's just an expert at asset management. And one thing that we've had a long conversation about is exactly expectations with you as a landlord and your tenants. So one thing that they do at all their properties is they let the tenant know at leasing. This is the time frame of when you can expect maintenance repairs to be made. So for example, if your closet falls off the the door tracks or something, it's one of the sliding ones. You can expect it to be completed in three days. If it is a plumbing issue, you can expect it to be completed in 24 hours. Whatever it may be. She has this whole list and it tells you exactly how long you should be expected. She said they always over exaggerate or over inflate this number so that when they can do it quicker, tenants are a lot more happy. It's like, oh, we thought this would be done in three days and they did it in two days. Like, yay, they're the best. They're awesome. We love this maintenance team. So that is one thing that you can do is kind of write out the expectations for when they can receive service. The second thing is documenting the communication. So when this tenant, if they. The way I would like it handled is they submit an online maintenance request, so the request is time stamped, what the problem is, then sending a message to follow up that you've received it and you've placed a call to the exterminator and you're waiting for a callback or whatever it may be. Okay, so you have that on record that you have already started to take action on that. There is no expectation that you can have somebody out of property immediately, super quick. And I think that where you're going to get yourself into trouble in this situation where it gets sticky is that this person is probably going to withhold rent saying, you didn't reimburse me for the $430. I paid that. And then now you are short rent and you either have to go and evict them or try to collect the rent in some other way, which really is a no win situation for either person to get into that kind of situation. So I think that like, if you really wanted to, you could go ahead, start the eviction process and you know, when it comes to court, show that you have documentation that you were going, that you had called the exterminators, that you were handling it. I don't think any judge would give any expectation that you should have had someone there immediately. You can also add, like, we have something about exterminating. I don't know offhand exactly what it is, but any extermination, like we have a company that services that. But here are the exceptions where it's your responsibility to actually do the extermination. Like if you're not cleaning your home and there's like ants or bugs that are only in your apartment, like that is your responsibility. We are not going to take care of that for you. Fruit flies, for example, like that is your responsibility. So we do have like those little things that are put into our lease as to like how extermination is handled. And also you could put in some kind of like nature aspect as to like, you know, critters, things like that, that we are not, you know, responsible for them. And this could be, you know, bees swarming. This could be a deer standing on your door, I don't know, like a raccoon getting into your garbage. Like there's some element of being a landlord, like of nature extremes. There has to be some give and take. But I definitely like, feel for this person that they're put into this sticky situation.

[Tony J. Robinson]

Now, just really quickly, because you mentioned Ashley Wilson, Ashley Wilson's episode, but we interviewed her back on episode 443, so. Episode 443. So if you want to check out everything that Ashley Wilson had to say about asset management, that's a good episode to go back and check. I think maybe one other layer here too, Ashley, is how much would their exterminator maybe have cost? You know, and if it was like, you know, $75 and yeah, maybe there's, it's really worth making a fuss. But if you're, if your exterminator was going to be $350, like, is it really worth kind of the headache and the, the bad juju between you and the tenant over, you know, 80 bucks? But I think what's kind of more concerning is that right at the end of this question, this person says, these tenants have lived in this apartment for only two months and we've already had several similar issues. I feel like what may be a good tactic here, assuming that you do have a decently lease set up with these tenants, is to maybe sit down and like re review the lease with them. Say, hey guys, look, we're happy to cover the $430 payment that you sent to this exterminator, but hey, let's also use this as an opportunity to re review the lease. So we're all on the same page about how to handle these things moving forward, right? That way there's clarity for both of you guys on what, what that actually looks like. And Ashley, let me ask you, like, is it in New York at least, are you able to, as long as both parties agree, make addendums to a lease during the lease term?

[Ashley Kerr]

So we've done addendums before, but it's more because like they want to add like a garage onto their lease agreement or something like that. I can't think of like anything that specific. I think maybe like who's taking care of the, the lawn maintenance? Like we had a guy that was taking care of it. We'd give him decreased rent and then we stopped that. So we made an addendum that he was no longer getting that discount or things like that, but not very often does that.

[Tony J. Robinson]

Is it necessary? But maybe in this situation it is. You know, that's the way that you can kind of prevent future issues with this tenant.

[Ashley Kerr]

Well, I think to. One very important thing to have in your lease is that they cannot hire anyone to do maintenance on your property, that you are in charge of doing that, and they can't have any, you know, unlicensed contractors. Anybody that they want to hire has to come, you know, and show proof of insurance and that you have to agree beforehand to cover that cost or it's on them for that contractor. But like in all of our leases, it says that you cannot hire your own contractor to make repairs. It has to go through us. Okay, so moving on to our final question. This one says, I inherited a section 8 tenant who pays way below market. Had an issue with the leaky toilet for years, which damaged the floor and cost me money to fix. She now says her heat is not working good at all. A contractor was there the day to fix the floor and said there was no problem with the heat. She denies and keeps texting me every day to fix the furnace. With the now being a weekend and going on to a holiday week, what would you suggest I do? I had a plumber inspect the furnace a couple of months ago and said it was in good shape. Thank you for your wisdom. So this kind of goes along with that other question too as to like, what's an emergency and how is it treated? So this person, they had the leaky toilet, damaged the floor. So, like, that's a big thing as a landlord, either, you know, like doing inspections or doing checkups with your tenants, you know, sending out a notice like every six months, like, hey, just want to check in if you needed any maintenance done, how things are going, or whatever. Because as much as you don't want to pay to do maintenance, it's better to protect your properties and make sure that the maintenance is done or else it could ruin your property more, such as, you know, damaging the floor from the toilet leaking and them never reporting it. So this one is specific to the heat and saying to fix the furnace. So, Tony, what do you, what do you think as a short term rental expert and no longer having to deal with tenants? What if you had a short term rental guest that texted you their whole stay that the heat was not working and you had sent someone out, they said it was.

[Tony J. Robinson]

And yeah, I mean, the first thing is I would just try and get some clarity from the tenant and say, hey, we've had multiple licensed professionals inside the unit and they've all stated that the furnace is working properly. So help me understand where the issue is here. Like, is it, is it user error potentially, or is it only working when they're there? Like, help me understand, did the Gas.

[Ashley Kerr]

Get shut off because you didn't pay.

[Tony J. Robinson]

Is your gas bill, you know, paid? So I think that's the first thing, like anytime an issue comes to us from. From a guest or from one of our cleaners, our first thing, and this is what we train our VAs on as well, is that we have to ask all of the questions to make sure we have all the right information to actually solve the problem. So, okay, the furnace isn't working. Have we troubleshooted, you know, like how you're starting it and what does that look like? So I think just deep diving at first to get clarity on what the actual root cause of the problem is. Because maybe you just sent someone out there, but she just doesn't know how to use the furnace the right way, you know, whatever it may be.

[Ashley Kerr]

Yeah, I think this kind of goes back to like documentation. So having the documentation that the furniture furnace is working per two different contractors that you've had go in there, the dates that they were in there, seeing the furnace is working, and then because she is on Section 8, in New York State, at least Section 8 does get yearly inspections where a housing specialist, they call them, comes in, inspects the unit and makes sure that everything's in working condition, it's habitable, and there's not anything that needs to be repaired, repaired. So there's not a ton to worry about with these inspections. They're fairly light because everything they're inspecting should be done. So it's more of a concern when the tenant doesn't actually report the maintenance to you. So then you're notified by the housing specialist that these repairs need to be made. So if this really is an issue and it continues on, maybe you can contact her housing specialist. So if they're on Section eight, there's. You should have like a caseworker and maybe contacting them and trying to work out some resolution between you and the tenant through the housing specialist, because they're the person that place them their point of contact for any concerns about you really too. So I would try to get ahead of it before they get involved, saying that you're not completing maintenance and talking to them and see if they can help you guide in a resolution with the resident. Because one thing is too, with Section 8, the waiting list is so long in so many markets to actually get a voucher for section 8. So this person probably does not want to lose their housing. And maybe it is operator error, or maybe they just don't think it's warming up enough because the house isn't insulated enough, whatever it may be, I would start there with the housing specialist. But, like, in any scenario where I just don't want to deal with it anymore and, like, there's nothing more that I can do and I've done everything to try to fix this issue, whatever is, I will give them the option to get out of their lease. I will say, you know, if this isn't, you know, a good fit for you, I am fine with, you know, ending your lease agreement. There'll be no fee, no expense, and you can go ahead and move out. So that's always, you know, as much as you don't want to have a vacancy and to turn over an apartment, that's also kind of an option for them to give them an ultimatum, like, you know what? I will let you out of your lease. You know, you've done everything that you can do. You have the documentation showing you that you have had contractors at the property, and it's not like you're neglecting it or not doing anything about the issue. Okay, well, thank you guys so much for joining us for this episode of Rookie Reply. If you want to get involved in the community like all these other real estate investors, go to biggerpockets.com forums. Make sure you follow us on Instagram at Realestate Rookie. And check out our new Facebook page, Bigger Pockets Real Estate Rookie podcast. I'm Ashley and he's Tony, and we'll see you guys on the next episode of Real Estate Rookie.