How to Retain Single-Family Tenants with Matt Hawkins
Are you a landlord looking to retain tenants in your property so you could maximize cash flow? Well, in this video I interviewed that the lumberjack landlord, our special returning guests, and he's going to give an overview of how to retain tenants. And really make sure the property that you provide is an A class property.
Ariel Herrera 0:00
Are you a landlord looking to retain tenants in your property so you could maximize cash flow? Well, in this video I interviewed that the lumberjack landlord, our special returning guests, and he's going to give an overview of how to retain tenants. And really make sure the property that you provide is an A class property. My name is Ariel Herrera with the analytics erielle channel where we bridge the gap between real estate and technology. I love being able to provide data solutions, and to be able to provide great tips for real estate investors. If you're new to them, please subscribe to my channel and like this video, so I know to make more content like it. Alright, let's get started.
Hey, Matt, welcome to the analytics area channel. Happy to have you here.
Unknown Speaker 0:54
Super pumped to be back. We had a lot of fun in segment number one. So looking forward to segment number two today.
Ariel Herrera 1:00
Yes. And if you could just give a brief overview of who you are and what you do currently in real estate investing?
Unknown Speaker 1:07
Sure. So I am the lumberjack landlord, not self named. People ask all the time, if I named myself I did not I was called a lumberjack. Because I worked in tech, I made the mistake of showing up in a flannel shirt one day, like, Oh, is it lumberjack that was like, Oh, that's funny. And then then I became a landlord lumberjack word. So I have 43 buildings, 124 units, we're gonna be expanding that, again, another couple of weeks into a couple closings on more buildings. And I've been doing it for 20 years. So I invested through, I just started around the the the.com bomb, and I made it through the Great Recession. We kept all of our properties and and did pretty well there and then just really started to grow and build the business during the great recession. And what we learned and we've just continued that path. And so now 20, about 22 years, about 21 years in. So it's been an amazing journey and we self manage. So I'm happy to help people with products and answer their questions on that stuff. That's kind of what our specialties.
Ariel Herrera 2:06
Incredible. Yeah. And you've helped me throughout this time, so much as well. So I'd like to share my screen. And this is regarding a recent article that I was reading on a survey that was done by building them. And their question, here was why or two thirds of single family renters consider considering to move, they basically did a survey. And even though a lot of people have been shifting towards single family homes as rentals to have more space, especially after 2020. They did survey these individuals. And if you could see this chart here, a good percentage of those who are thinking about moving towards the end of 2023 Sorry, 2022, or 2023 39% of them said they plan to buy a home for their own. Some have affordability concerns, and then some are looking for better amenities. So as someone who's a landlord myself, I've had to deal with some tenant turnover. And one of the things that I've always heard is that you want to aspire to have a tenant in place for a long period of time, not leaving every year, every two years, because that could really kill your cash flow. I'd like to hear from your perspective, what are some strategies to take to keep a tenant in place, have them happy, and have that relationship continue to grow?
Unknown Speaker 3:35
Sure. So I think the top three things that we saw, the first thing was that they're ready to buy a home, that's going to shift because of DTI, that's going to keep some people in place, even though they have a plan to buy a home, they're not going to find the home that they want, or for the price that they can afford. With rates now in the sixes and probably soon to be in the sevens in 2023. And pricing will come down, but I don't think it's going to come down enough to lessen the payment to the point where they then all of a sudden are going to re qualify. So I think the first thing is the thing that helps out the most is gonna be the market. The second thing is if you have a nice unit with modernize, its modernized with amenities, largely that will keep people there. So if you have things like without that one center light, a lot of contractors call it it's crass, but a lot of contractors call it the boob like to just fill the room, get rid of those things, you know, and so there's cool things like that, that we've done where people are like when we go and look at other places. It's not as nice as ours, right? It's because we paid attention. We did a nice light setup with something called pancake lights. They look like this. They're in my lumberjack landlord review series. These are about seven bucks apiece. So you can put four of these into a room with an electrician for about a couple 100 bucks. If you do four or five important rooms in your house or in your rental, guess what you might spend 1000 bucks sucks. But now you've got a beautiful lighting setup. And they might not think that they're moving because of lighting, but they're moving because of amenities and like just generally, you know, when people come in or do, they're like, Wow, this place is so bright, it's so pretty. Yeah, you hear that a lot, then design something accentuates the, you know, the nice pink work that's been done around something that hasn't been painted 400 times, like a lot of time, like a lot of stuff going on. But it's I think it's the little things that add up washer and dryer, having them in Unit nine point, having a dishwasher. That's something that people are just like, I'm sick of doing a dishwasher, or a super cramped kitchen, you know, being able to take out a beam and do a LBL in that room, and it might cost you 10,000 bucks once, then because it's a modernized concept. And because it looks more modern, that place is always going to rent out super fast. So we have affordable housing that we do. And what we do is we make that clean, and nice. But we're not gutting it redoing it because we know that's going to raise the rent for 500 bucks, and we have tons of those. But literally those those rent the fastest those go to market and it's usually an A class property and a B class area. And that is that is our secret sauce is doing a class level updates into a B class area. And because you're not in the class area, you're not going to get that much higher rent, but that renter is going to get all that value. So I think what landlords really have to focus on is the amenities package, like what was said there. I think the other big piece is affordability was number two, outside of buying our own home. And so I think the interesting thing is, depending on your state, and you have to check it out, you can do a multi year lease. So when I talk to tenants, they say yeah, you know, I'm kind of concerned, you know about about the costs, tell you what,
Unknown Speaker 6:52
I'll do a two year lease with you. I won't raise the rent for two years, I'll do a two year lease with you. And they're like, really, so then there's no ability for me to raise the rent in a year. That has attracted a lot of people. So I get it. Yep. Watch your local laws, because in some states one years, okay, two years, you actually have to get it notarized. So just watch what your local laws are there. But that two year lease thing, everybody, every single person that my broker mentioned it to, they're just like, really a two year that'd be awesome. She's like, yep, you can't raise your rent, nothing changes. It's two years. Yeah. Now for me, I know that I had to pay the same amount to evict them. If it's one year or two year or three years, it doesn't matter. That's the first thing. Second thing is that also sets you up for a progression where if they want to renew again, my buddy Dion talk financial freedom, Dr. McNeely, he came up with something called the binder strategy. I do the binder strategy book, I do a different but what we do is, is we don't actually tell the tenant what the new rent is. We asked them what they think it should be. Yeah, I'm sure people are like what you ask them? We do. We do. And we come with proof, though, which is, hey, here's three or four bedrooms, here's three or four units in your proximity. Here's what they were on the market for in the last month or currently. These are what the numbers are. Let me know what you think is fair. And if I can do it, I will if I can't, I won't. The challenges is that that works. And that works for a number of years that will get you rent increases, etc. But you'll always be below market. So he did have Diem recently had some turnover, where he was able to increase the rent $500 A month after that tenant left. So how many years were you behind, but you kept the tenant right and at 500 bucks, most turns meaning going from old tenant to new tenant, or less than five grand, there might be a couple two, three. And that means that in six months it paid for itself. So for us, we just recognize for we want to book a business that's as predictable as possible, will sign those two year leases. And the worst thing that the 10th and feels empowered to pick the number and recognize that they're basically negotiating with themselves. Because if it's too low, I just say I can't do it for that. I wish you guys all the best,
Ariel Herrera 9:15
right? And where do you buy these rental comparables to show them what it goes for in the market.
Unknown Speaker 9:21
So we'll use we'll use Craigslist, we'll use Facebook marketplace, we'll use the places that we typically advertise our units. Okay, so that's typically what we're doing is we're using and I do what's called a rent box, which is I list the units that are for rent, I list what they were asking for I grade them ABC or D when it comes to area and I grade them ABC or D when it comes to quality. And then what the number was and then I just reach out to the rep I look up the ad and I send an email and and say is this one still available? And if not, what did it rent for? And they'll almost always answer back. Oh, that's excellent. So yeah, that managing that rent box because when you're going to market with something you only have to do that for you Have two weeks, two or three weeks to really track it and really understand. Or you can have 124 units and know what the rent market is. And then just say I can cite these other units because I own them. Right here are these other units that are available in your area or what they just rented for in the last month. And we share those numbers and then they make a decision from there.
Ariel Herrera 10:21
Excellent. So you're using like factual based material and bringing it over? That's excellent advice. I've used the binary strategy myself before it does work. And yeah, if others wants to learn more about the design aspect to have an A grade type property, but in a B neighborhood, how they find more about you and your channel and what you show.
Unknown Speaker 10:45
So check out lumberjack landlord on YouTube or on Instagram and I do a live stream for free on Sundays 11:30am Eastern time where I just answer questions about the construction projects. We've done kind of what we do to enhance units, but if you want to go something on the regular way, you can do it on your own time. You can look at the lumberjack Lynwood review series, you can take a look at all the different products that we review there and those are all products that we use ourselves.
Ariel Herrera 11:08
Excellent. Thank you so much, Matt. Really appreciate your time.
Unknown Speaker 11:12
You're welcome. Thank you area
Transcribed by https://otter.ai