Thread: eliminating/recovering excessive damages

I have a couple of questions for you:

1. Do you rent these homes by the room or by the whole house?

2. What kind of deposits are you currently collecting, and what are your normal damage costs (average)?

3. If you were to walk thru every three months (which you would need to put in the lease ahead of time, as the tenants have a right to privacy), what would you be looking for--damages or just cleaning?


Possible solutions(?):

1. Get more as a deposit?

2. Get a parent to co-sign?

3. Raise rents to cover a bi-monthly housekeeper to go in and clean the bathrooms and the kitchen?

4. Don't rent to college kids?

5. Spell out what you think is reasonable wear and tear ahead of time?

6. Take them to small claims if the damage exceeds the deposits--and stick it to the parents if necessary?

Take advantage of that Insurance you are paying for annually. We have the same situation, from time to time, and it can definitely make a dent in the profit margin for a rental property portfolio.

In the beginning, we took it on the chin. A few thousand here, a few thousand there……quickly, it was clear in our reporting, that this was single handedly reducing our margins by several percentage points.

In speaking with our insurance agent, we learned that, unlike car insurance, there is no increase in premium, as a result of a claim, when it comes to property insurance. Although it does include some paperwork/documentation and a meeting or two out at the property, we have found it is well worth our time. Keep in mind that if you employ property management, this is something they can handle as well. Our property manager handles showings of the property, putting together a quick damage report and most of the correspondence with the Ins. Co.

This way, the damages are contained to the amount of your deductible. Plan for it once or twice a year and you should be good to go.

One word of advice – document, document, document. Take pics every time a new tenant moves in to a property (before) and then document as soon as damages are incurred. Again, property management can be of great assistance here. This will make life a lot easier when filing a claim.

Thanks Yveskleinsky -

1. Do you rent these homes by the room or by the whole house?

All homes are 4 or 5 bedrooms homes rented by the entire house. Each tenant signs the lease and each tenant assumes full responsibility.

2. What kind of deposits are you currently collecting, and what are your normal damage costs (average)?

We are collecting a full month rent for a deposit (average $1400). In the situation of a "trashed home" our normal damage costs are ~$4,000. As stated earlier though, we only have this issue in 2 homes a year.

3. If you were to walk thru every three months (which you would need to put in the lease ahead of time, as the tenants have a right to privacy), what would you be looking for--damages or just cleaning?

I'd be looking for only excessive damages. I understand the homes will be dirty many times.

Possible solutions(?):

1. Get more as a deposit?

2. Get a parent to co-sign?

3. Raise rents to cover a bi-monthly housekeeper to go in and clean the bathrooms and the kitchen?

4. Don't rent to college kids?

5. Spell out what you think is reasonable wear and tear ahead of time?

6. Take them to small claims if the damage exceeds the deposits--and stick it to the parents if necessary.

I'm not sure that we can get much more for deposits. That will be challenging in this market. A parent co-signing & a bi-monthly housekeeper is an excellent idea. We will look into those. We need to rent to college kids since these homes are right between 2 universities. If we didn't, I believe we would experience vacancy issues that would hurt us more than these damages. We do take these to small claims and sometimes recoup some money, while other times we don't. When you say stick it to the parents, what do you mean? (Or are you saying to do this only if the parents have co-signed?).

Thanks for your response and great suggestions!

Thanks phlgirl. Perhaps I'm misunderstanding you, but are you saying that property insurance can cover some of these tenant damanges? I've never heard of this before.

FreeYourMind,

Some thoughts on your situation:

Insurance - make sure you do your research. There are some properties (not sure about SFH, but definately in 5+ units) that lose the ability to get certain bank loans if there is a claim against them or excessive claims. As an insurer, I would likely be wary giving insurance to someone who consistently makes claims every year. I cannot see how your premiums would not go up.

Tenant Base - Your tenant base is among some of the hardest tenants you will ever find. College kids are extremely hard on living quarters because it is usually their first "place of their own", they party like mad, don't clean up (their parents probably used to do it), and most aren't paying for it anyway. Take this into account and plan accordingly. You already stated you get a premium, this is one of the costs. Make your homes indestructible (tile floors, knock down texturing, cast iron tubs, fiberboard cabinets) and your trash out costs will be lower.

Expectations - You should build into your expectations that college kids will eventually trash your property. 2 out of 20 per year is 10%, not bad. Look at the rent premium you are getting: my guess is over the 20 houses, you are still coming out ahead after you pay the trashouts.

BTW - 20 houses is pimp! Well done!

Insurance - make sure you do your research. There are some properties (not sure about SFH, but definately in 5+ units) that lose the ability to get certain bank loans if there is a claim against them or excessive claims. As an insurer, I would likely be wary giving insurance to someone who consistently makes claims every year. I cannot see how your premiums would not go up.

A business partner of mine is an insurance agent and he has never suggested that we could recover any costs so that is why phlgirl's comments struck me as interesting. I too can't understand how your premiums would not go up or how at a minimum you wouldn't at least become very difficult (or undesireable) to insure.

Tenant Base - Your tenant base is among some of the hardest tenants you will ever find. College kids are extremely hard on living quarters because it is usually their first "place of their own", they party like mad, don't clean up (their parents probably used to do it), and most aren't paying for it anyway. Take this into account and plan accordingly. You already stated you get a premium, this is one of the costs. Make your homes indestructible (tile floors, knock down texturing, cast iron tubs, fiberboard cabinets) and your trash out costs will be lower.

You are RIGHT ON about making the homes indestructable. We've started on this 3 years ago and have put in more tile and resurfaced more hard wood floors (to eliminate as much carpet as possible) than you can imagine!

BTW - 20 houses is pimp! Well done

Thanks! We're trying and learning alot along the way. I'm 5 years in and now I finally feel like we have things under control and can start to focus on some of the nitpicky things.

So far, I really like the idea of getting parents to co-sign wherever possible.

I'm still very curious about whether or not anybody thinks it is within reason to add a clause to the ACH rent drafting contract stating something like 'upon checkout, if deposit doesn't cover damages, the damages will be drafted just as rent is'.

Originally Posted by FreeYourMind

Thanks phlgirl. Perhaps I'm misunderstanding you, but are you saying that property insurance can cover some of these tenant damanges? I've never heard of this before.

These damages are by the tenant, yes. They go well beyond normal wear and tear - which is then categorized as vandalism or intentional damage, I suppose.

Interesting way to look at it. I will investigate this further with a few insurance agents that I'm good personal friends with to see if this may apply in my situation. Thanks!

Originally Posted by RealOG

Insurance - make sure you do your research. There are some properties (not sure about SFH, but definately in 5+ units) that lose the ability to get certain bank loans if there is a claim against them or excessive claims. As an insurer, I would likely be wary giving insurance to someone who consistently makes claims every year. I cannot see how your premiums would not go up.

Absolutely do your own research and discuss with agent(s). We do not have excessive claims - perhaps one major claim (or less) out of 40+ per year. We continue to purchase properties and get additional insurance policies, with the same insurance companies - in the same name. I have yet to see an increase in premiums (we are only 3+ years in though).

Just my experience. Good luck.

If its the same two properties that are near this college why not sell them and buy two in a better area where you can get higher quality tenants?

Out of your 20 rentals if you have two lame ducks that take up a lot of your time in repairs, I'd get rid of them.

Originally Posted by phlgirl

Absolutely do your own research and discuss with agent(s). We do not have excessive claims - perhaps one major claim (or less) out of 40+ per year. We continue to purchase properties and get additional insurance policies, with the same insurance companies - in the same name. I have yet to see an increase in premiums (we are only 3 years in though).

Claims will run with the real estate it is connected to. It's called a CLUE report and insurance companies will often look at it before giving insurance. It is definately something they look at when a bank gives a loan on commercial property.

FreeYourMind - one thing you can require is renter's insurance. It covers the interior of the house and is offered by a third party. I believe you can have tenant pay the cost with you as the beneficiary. That would cover the vandalism. However, collecting on the insurance is a whole nother topic...

Originally Posted by hatterasguy

If its the same two properties that are near this college why not sell them and buy two in a better area where you can get higher quality tenants? .

Perhaps I wasn't clear on this. Sorry. All 20 properties are near the university.

Out of your 20 rentals if you have two lame ducks that take up a lot of your time in repairs, I'd get rid of them

It's not the same 2 that are lame ducks. Lately it just seems that I have 2 a year that are much more heavily damanged than others.

In our experience, we've actually had BETTER luck with renting to college students than families because there are always 4 or 5 different sources of income (and names on the lease) as compared to 1 (or sometimes 2 bread-winners in a typical family. The premium rents we receive more than make up for the cost of repairs and renting to this target group, I'm always trying to improve and this is the area where I can get the most bang for my buck if I can figure out how to mitigate or recover these big losses.

I had a college rental once--one pointer that I learned is go where the "good" kids go and advertise there--meaning the library, the chess club, the drama club, the coffee house, etc. You may also want to offer incentives to these kinds of renters--like annual membership fee to local performing arts shows (if advertising in the drama club)--something to kinda stack the deck in your favor.

Have the tenant fill out a checklist (prior to moving in) marking off all of the things wrong with the unit. Make them understand and sign (as well as the parents if they are under 18) that they are responsible for any damages that are not on the list when the lease ends.


Call your bank about the ACH. Most students don't even have bank accounts. Would you be debiting the parents' account?

Ahh I see, than do what your doing, toughen those places up!

We redid one of my uncles rentals in water resistant sheet rock, tiled most of the first floor. What wasn't tiled we used the cheapest builders grade carpet we could find. All the interior paint is one color too, so our panting crew can do the whole inside fast. Trim, ceilings, walls everything is the same color.

This was his section 8 experiment, so far its working well.

Another tip that might be helpfull:
Our trim guy says what they do on rentals in really tough areas with doors is they don't nail the jams, the door just sits their and the trim holds it on. Since the renters or police tend to kick them down this makes for fast replacement. Don't nail the trim to well either...