Was Scooge really so wrong? Christmas is expensive and stressful. It is also not optional. It comes at the end of every year whether you like it or not! 2011 was a tough year. It is very hard to get into the spirit of giving. I’d like to opt out this season. Bah humbug!

And yes, Scrooge was wrong. Generosity is a great business tool all year long. As a successful property manager, one of my greatest resources are the people I work with. My successful strategy includes paying my workers well and quickly. I treat them with consideration and respect. In return, they are loyal, fast responding and create a great environment for my tenants.

During the recent 100 mile per hour winds in California, we sustained a lot of damage on my properties. We had trees down, broken windows, roofs blown off, gates and garage doors torn off hinges. Thanks to all my wonderful handymen everything was fixed and cleaned up in a week. Several tenants commented on how quickly we responded.

So as this year winds down, I will be gifting my friends and family. I will also give generously to the people I work with and the charities I support in order to support the people who make my world a better place. Next year is right around the corner with challenges and hopefully great payoffs. I am ready. Bah humbug be gone!

Definition: Investments are instruments that allow us to receive a higher amount of money than was spent. Sounds simple right? When I first started buying property my best friend said to me “remember, buy low and sell high”.

Somehow in the current market we have lost sight of the simplicity of our goals. Both the real estate market and the stock market are shaky. The middle class seems to be caught in a game of musical chairs and every time the music stops we have LESS. As a result, we have a crisis of confidence. No one knows where to invest.

A few years ago when the economy was going strong I defined myself as an investor not a speculator. The difference is that my investments were made for the long term. I was willing to sit out any downturn the economy with the anticipation that there would be a payout in the end. I anticipated the cycle for real estate would be approximately 10 years.

Like everyone else, I have taken a 40 percent hit on my residential property 4 units and under. I have a duplex that is currently upside down in value. Fortunately, it is rented and does cash flow. My commercial real estate investments have held value better. I have actually seen an increase in value for my apartment buildings.

As an investor, I plan to keep polishing my nut and sticking to my plan. Even my upside down duplex gets paint, landscaping upgrades etc. When the market reaches an upturn, I have confidence that my properties will give me the return on investment that I anticipated.

Right now, I am open to finding my next great investment project. Interest rates are low and I like investing in apartment buildings. People will always need a place to live. It seems to be as good a time as any to “buy low” for the long term investor.

Lets face it. We are landlords primarily for the economic benefits. It is not really a job that people do for pure pleasure. Plus most of us have financial obligations like mortgages that are associated with our rentals. That is why it is very important to have tenants paying in a timely fashion.

In the words of Mr. Roper from the 70’s hit TV show Three’s Company:

Stanley Roper: I want my rent!
Helen Roper: Stanley, where are your manners? You’re supposed to say hello when you walk into a room.
Stanley Roper: Hello, I want my rent!

You can have the best relationship in the world with your tenants but it is worth nothing if they are not good payers.

Firstly, don’t let tenants get into the habit of paying late. If you do allow it it becomes a snowball rolling downhill. I had a tenant who was paying on the 5th. Soon it became the 10 and then the 15th. “That is when I get paid” She told me handing me another late rent check. She now expected that she was allowed to pay late. She never did catch up and ended up leaving and owing me money.

Interestingly enough the law sees it that way too. If your tenant has a history of paying late you are essentially giving them permission. At least this is the case in my town.

Secondly, make it as unpleasant to pay late as possible and bring on the unpleasantness as soon as possible. In my town, there is no grace period so my rent is due on the 1st and a penalty exists after. If the tenant is a couple of days late I contact them. If it is not resolved I post a three day notice. And so on and so on….

It sounds rather harsh I know. The net result for me is that I have gotten some lazy payers to pay on time. They make me a priority and our relationship is better. My mother in law has a tenant who is always months late and has been for years. She is always having to call and hound them. It is uncomfortable for both parties.

Thirdly, I make it as easy as possible to pay on time: local drop box with weekend hours, online same day service, post dated checks for advanced payment etc.

I start the initiation during the lease signing. I outline the dates and the penalty. It is amazing how many people are not paying attention at this point. About 10 percent seem to need the follow up. Interestingly enough, it doesn’t correlate to the quality of the credit either.

While this may seem very hard core, the end result is more efficient use of time and resources and leads to better tenant landlord relationships. It is well worth playing the heavy.

Princess Murray was a tenant of mine several years ago. He received this illustrious title because nothing was just quite right. He and his rotund Argentine wife moved into a Spanish single family dwelling after it had been on the market for several months. I had already spent mucho dinero on the renovation and watched it sit empty through the holiday season while I dutifully paid the mortgage and creeped further into the red.

I was thrilled to see Murray and his wife as they pulled up in their Porsche Boxster. They wanted to move in ASAP and they loved the place but needed more parking and access to the backyard from the bedroom. French doors would be nice. Ok, I thought. $2800 more in improvements and I will have a year lease. I agreed immediately and completed the desired renovations within a week. They moved in and seemed happy.

Except that I came to realize that they liked having us around a lot. Lots and lots. I would get a call one day that his car was getting water spots from the sprinkler. The next day I would hear from his wife that the kitchen drain was clogged and upon inspection found and entire pot of pasta in the drain. I guess she thought the garbage disposal worked like a food processor.

“We don’t mind having you around” she would say when I called to schedule one of many repairs. The problem was I minded. I would come over to find Murray in his robe on the couch and wifey wearing some impossibly short sun dress. Murray would point to a spot on the wall and say “we really could us an electrical outlet here”. Was he kidding? Sadly he wasn’t. The world revolved around Murray. He was a male Jewish American Prince. We could never do enough.

The breaking point came when Murray called me one day to tell me the toilet was too tall. First of all I had no idea that they came in different heights. Nor would I have noticed if I lived there. It wasn’t like you needed a step ladder to reach the seat. They were both normal in height. Murray went on to tell me that it was a big problem and had to be changed immediately because his wife was having trouble inserting her gynecological cream. Yikes, that was too much information!

Murray did pay to have the toilet changed and soon after we sold the property and used the proceeds to buy our first apartment building. Our new apartment building was predominantly one bedroom units so our new tenants were single or young couples with less time to manufacture complaints. We received fewer calls and were much happier.

Murray’s new landlord was much less accommodating and soon after we sold the property Murray moved out. The new landlord was able to replace Murray rather quickly because after all the renovations everything was “just so”.

Other peoples money refers to the concept that if you are savvy you can get loans to fund your real estate empire. That is how I started. I borrowed a small amount on my personal residence and kept trading up.

For all of you that have trust funds or make $250+ per year and need places to put your money. We love you! You can skip this post and move on to the next. Will you please stimulate the economy? Will post regarding this topic in the future.

For the rest of us read on. I started in 2002 which was a much better time. Money was free and everyone got financed. Some people took advantage and some were scammed. It is irrelevant at this point. The economy dived. The ramifications were epic. Since 2006 we have been jinked like the curse of the Shoe Bomber. We all suffer. Getting a loan is so arbitrary now and the rules change constantly. The good news is that the guidelines will vary bank to bank. I have been refused at one bank because I own too much property and was happily refinanced by another. Never give up. If you have a project you believe in keep shopping from bank to bank. Eventually you will find financing.

Now is the time. The economy may not have reached the bottom but there are values to be had and Other Peoples Money is at a record low interest rate.

So far I have talked primarily about how to accommodate tenants. I am always open for reasonable requests. Sometimes though a tenant can have a very strong point of view even if it is contrary to reason. What do you do then?

Tenants have a lot vested emotionally and financially. They pay a lot especially in Southern California. They have a big security deposit. Plus, it is their home and it is human nature to become possessive of where they live. The only problem is that it belongs to me.

My first rule is always to respect a person’s privacy and then to refer to the lease and the California Codes. A good contract and knowledge of the law can correct most disagreements very quickly. Especially if you have utilized good boundaries and both parties have adhered to the terms of the lease and the law to this point. I am a stickler for this. I do my part and my expectations are the same.

Most conflicts can be resolved quickly. Every once in a while, Small Claims is the only answer. I have had two instances this year where I took a tenant to court who moved out, used the security deposit for last months rent which is not allowed and was planning to leave and stiff me for cleaning and damage. My solution? I served them before they moved out. Otherwise I would never find them.

I do not like going to court at all. Chances are you get a judge pro tem in small claims and they don’t know the law and have limited time on the bench. I have had some good ones but it is a crap shoot. If I do go to court, I go ready to get the job done and I mean leases, photos, citing the law. PREPARED!

Most disagreements can be resolved with just plain diplomacy. Currently, I have a tenant who moved out on the 12th but had a lease effective until the end of the month. The place was a wreck and discussed at length before he left what measures I would be taking to return my bungalow to move in condition. That was fine and fair. I emailed him with a couple of questions after me moved and out of the blue got some very, very long emails about how he had a lease until the end of the month and no on could come in without his expressed permission and he was not going to do this back and forth thing, etc, etc, etc. I did not read the whole email. It was impossibly long and I was frankly surprised that anyone who just moved cross country had that kind of time. He was very emotional and it seemed out of the blue. I could move back in there if I wanted to he threatened. Hmmm, yes, I thought except that you live 3000 miles away.

This is another case of people being passionate and possessive about their homes and their money. Obviously it makes no difference to him whether I am there or not. He had every expectation of paying until the term was up. So what did I do? I clarified with him the parameters of the California Codes and the return of his security deposit. I told him I owed him his refund within 21 days of his move day which started when he returned his key on the 12th. I did not want to nor could I legally delay the return of his money. I also explained that the back and forth thing was called a conversation in which he got the opportunity to express his point of view. His next communication was much more reasonable.

I will call him in the am tomorrow as he requested. I will focus the conversation on the return of the security deposit and hopefully some pleasant small talk. Disaster averted. Hopefully….

Adding value to your unit is essential in today’s competitive rental market. Renters are pickier that ever before and they have lots of choices.

Lowering your rent of course is the easiest. Who doesn’t like getting more for less? The problem with this solution is that the value of your building suffers. Commercial real estate values are largely determined by the income generated. The more revenue the building generates, the higher the appraised value.

My solution is to make my units as up to the moment trend wise as possible. If you don’t feel that you have a designers eye, hire one for a consultation. A couple of hours of design time to help you update the look of your units will be well worth it. Also check out design magazines. You don’t have to buy the most expensive items advertised of course. Once you decide on the look you want you can shop quite affordably at discounted retailers and get the same look. They are all also following the current trends.

My units are Spanish. People in Southern California love the Spanish Bungalow Court style. I have an designer interior color pallet that is standard for all of the interiors. I choose a bold accent color for the front door to make it inviting. Hardwood floors are preferable. Some of my floors are not in the best condition and refinishing them would be too expensive. Actually, some of the floors are in very poor condition including having rude screws and rough texture. I have gotten around this by using a gel stain, usually cherry color. After lightly sanding I apply it with a brush texture that almost looks like a wood grain. Then I coat it with polyurethane. I can’t tell you how may people walk in and comment how beautiful the floors are.

Lighting is also critical. I install wall sconces in the living rooms to create mood lighting. I always use the brightest bulbs. Light creates the illusion of space. I also get sheer white drapes from Big Lots. They are $5 each and they allow light to come into the windows and make the unit seem private. In one building there are big french windows and I accentuate the look by getting extra long sheers and hanging them higher than the window. I creates a beautiful line and the room has a much more spacious look. I go for an elegant tailored feel.

I think kitchens and bathroom should have a cheerful approachable look. I have been painting my kitchens a pale yellow with bright white trim. Recently, I found a black and white checked vinyl floor that looks amazing. It looks retro and people love it.

All this probably sound very bold I know. Common thought dictates the use of navajo white and muted everything to appeal to the broadest audience. If you are going to do something creative, it is important to get it right. I chose a Pottery Barn type of look and it works. If I had a mid century property I would likely go more modern.

In the end, I am looking for the best affordable solution that makes people want to live there. Retailers sell people on trends and while it is not practical to make your units larger or cheaper you can make them more visually appealing and that alone will generate renters.

Tomorrow is Black Friday. The significance is huge for retailers and for the economy in general. How much people will shop of Black Friday supposedly will ultimately measure consumer confidence. Will people spend money this Christmas or are they too afraid. It is almost like: will the lemmings run into the sea or back into the hills? It is that scientific.

It seems to me that consumer confidence has adjusted a few rungs lower on the scale for everyone in the past few years. It is much harder these days to part anyone from their money. People will buy but they spend lots more time comparing like products. They are looking for value like never before. I have to say I think twice now before getting my wallet out. I have to be compelled to buy!

What does that mean for landords? We have to show the value like never before: neighborhood, amenities, style, cleanliness, allowing pets, outdoor space etc. If I don’t have something rented yet I keeping polishing and adding value it until it rents.

I have not had to lower my rents or offer incentives. In fact, prospective tenants tell me that my places are a good value. A couple of years ago that in itself would have resulted in a signed lease. Now I might show 5 or 6 people who think the place is absolutely perfect but need to be doubly sure so they keep looking. Lack of consumer confidence.

Fortunately I live near my rentals. It is no big deal for me to pop by an show the place. To use my time wisely I send people for drive by viewings, I qualify them heavily and I adjust my expectations. I don’t get discouraged anymore if it takes a while. I know it just takes longer for people to decide. Period.

That is OK. I’m in it for the long haul.

Tomorrow is Thanksgiving and frankly, I am just thankful to get through 2011. In my 9 years of being a landlord, I encountered the highest turnover this year by far. Fortunately there were just as many people moving in as moving out. But, just when I would get two places rented I would get a 30 day notice on another. It was like playing Wack A Mole.

What was the biggest motivating factor in my tenants leaving? Jobs. Like never before I see people moving for job opportunities and make career advances. People are moving to places they would never consider before like Mojave or Minnesota just for a chance at the American Dream.

Thankfully for me there just as many people moving in to Southern California. I have spoken to hundreds of people moving here from all around the globe. The net net for me personally was lots and lots of showing property, renovations to the property to make my places rentable, endless hours on the phone qualifying potential tenants, conflicts surrounding tenants expectations and very, very few days off.

This does not sound fun I know. Most people including myself bought real estate as a passive income stream. In other words, we have invested so we don’t have to work so hard. We don’t have to work for the man. But most of us depend on the middle class and the middle class in this country is under stress like never before. This year my passive income stream became very labor intensive. I now have a J-O-B.

What does the future hold? Thankfully again, the appraised values have held well for my residential income investment properties that are 5 or more units. The feedback I get from prospective tenants are that my units are well priced and desirable. I am hoping for consumer confidence and job security for 2012.

In the meanwhile I will roll up my sleeves and join the workforce.

If you saw the movie Pacific Heights about the couple who buys their dream home and rents the upstairs to tenant Michael Keaton you would have an idea how bad a very bad tenant could be. My tenant was worse. I landed the biggest fish their was. In the end, I found out that she was a serial offender and made a career of moving into peoples places, tormenting the landlords, being as destructive as possible and then extorting money from the landlord so that she would move and they could be done with her. Trust me. I would have paid almost any some of money to be done with her. She was that bad.

How did I get into that situation? Impatience is the answer. It was between Christmas and New Years and my place had been vacant too long. She came along and wanted to move in immediately. Two red flags should have warned me. First, she was an older woman with zero credit. How is that even possible? The second was that the lease signing took hours because she wanted to cross everything out and rewrite it. OK, so I sound pretty dumb you are thinking. The truth is at the time I was new to the landlord game and I was about to partake in a very steep learning curve.

Quite quickly I realized thing were headed south. There were lots of demanding emails. There were tree rats outside. There was a deafening sound of water rushing through the walls that only she could hear. The plumber was unable to convince her that there was no piping in the area where she heard the noise. Scary, right? It kept getting worse.

I was talking to a friend about how I was having a lot of trouble with a particular tenant. She laughed and said as long as her name isn’t Sybil Smith (not her real name) you are OK. Then we both looked at each other and my mouth dropped open. How did she know Sybil I thought. The next words that came out of her mouth were “Oh no, you are in a lot of trouble”. She had know one of Sybils previous landlords and the stories she told me terrified me.

I came home that day to a pile of citations from the health department. Sybil created her own violations. She ran the hot water in the shower for days to create moisture buildup. She flushed socks and the toilet paper roll down the toilet. She took all the light covers off so my place looked like a tenement. She took me to court for poisoning her dogs. Meanwhile I am the biggest animal lover on the planet and would not hurt a fly.

In the end, she stopped paying. I filed an unlawful detainer against her. She wheeled up the aisle in court with a huge file of paperwork and the best tenant attorney in town. She had turned my beautiful little studio house into a tenement dump and had lots of video to prove that I was a slumlord.

I too had an attorney. He was unprepared, in a cheap suit, and kept suggesting we settle and let Sybil stay a few more months for free. She had already done so much damage. I had to have her out. I had research online and found out about all the other landords she had cheated. Although this information was inadmissable in court, it made me determined to win and I did. Finally I had a judgment against her that would warn the next landlord. The sheriffs locked her out. As a little parting gift to me before she left she took the time to break off all the keys on the inside of the locks to make it extra hard for them to get in. She was extra hard.

The biggest lesson for me was to take my time and watch for the stop signs that spell trouble when it comes to new tenants. After all, it is true that patience is a virtue.