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The Laurex Process:
Investment Management
How To Get Your Renters To Think Like Home
Buyers
By Jeffrey Taylor
Most
rental residents treat their dwellings like renters, not home buyers.
That's because rental residents "think" like they are renters, in almost
all cases. However, I've found it is to the landlord's advantage if
tenants think like "future home buyers."
Residents who think like home buyers act in the following manner:
- Take better care of property than average
tenants.
- Pay rent on time and fulfill other
obligations.
- Handle minor repairs and needed
maintenance.
- Add upgrades/improvements to the property.
Therefore, from the very first month a rental
resident moves in, one of my major management objectives is to change
their mindset from renter to future home buyer. In fact, my opening
letter of introduction, or cover letter, to announce my rental policies
starts off: "Welcome Future Home Buyer".
The process to change a resident's mindset from renter to future home
buyer is not instantaneous, but can be gradual yet continual and very
effective. Here's how I suggest you start the transformation.
WELCOME "FUTURE HOME BUYER"
In the first month, welcome the resident as a "future home buyer" and
use that term in both oral and written communication.
Give on-time thank you vouchers.
At the start of the second month, after the resident pays the rent on
time, send your resident an On-Time Thank You Voucher - valued at either
$25 or $50 good toward the purchase of the home they are living in (or
toward any one of your homes if that is an option you would consider).
The first time your residents receive this voucher, they will probably
not call you up in immediate urgency to buy your home. But this strategy
will start their minds thinking a little about the possibility of
buying.
Oh, I almost forgot to mention, one small but significant point about
how the on-time thank you vouchers system works. If a resident is ever
late, any vouchers received up to that point are considered null and
void. This point is spelled out on each voucher as a reminder to
residents.
This is significant because when residents first start receiving the
vouchers, it effects them. Even though they may not be sure if they will
ever buy something; most people don't want to lose out on something of
high perceived value that they can receive. Residents will keep paying
you on time so they can keep getting the $25 or $50 vouchers.
The vouchers begin to add up to significant amounts after several
months, up to $600 in a year. Residents don't want to simply throw that
much money away or lose it. Some owners offer a one-time only, or once a
year only, late payment without complete loss of accrued voucher total.
With a late payment, owners deduct a penalty of 25% or 50% off accrued
total instead of penalizing the full amount. Whatever method you
utilize, the penalty should be significant to be effective.
Your residents will do everything within their power to be able to keep
paying the rent on time each month, to keep from losing the possibility
of using the vouchers. Don't be surprised if the residents begin paying
a week to ten days early to insure they don't come close to missing out.
HOLD HOME-BUYING DISCUSSIONS
By the middle of their first rental year, you will want to ask the
resident if you can have a home-buying discussion with them.
Hold home-buying discussions twice a year. They are an important part of
the transformation process. During home-buying discussions, you share
with your resident the buying possibilities, outright purchase, lease
option, land contract, etc. As the owner, you should also mention your
criteria for choosing whom you would sell the home to under favorable
terms. Home buyer criteria should include someone with good payment
history and good maintenance and upkeep history.
As the transformation from renter to future home buyer continues because
of your home-buying discussions, your resident will take excellent care
of your property.
It's important that you understand that the objective of changing the
resident's mindset is to get residents to "start" to think of themselves
as future home buyers, but it is not necessary that they actually buy a
home. In fact, please note that you do not allow residents to cash in on
their vouchers until an actual closing to buy the house takes place.
Even though you are starting to change the resident's mindset, in most
cases you will not see the final transformation from renter to future
home buyer to actual home buyer.
However, just getting residents to think differently of themselves, as
future home buyers, during their stay in your rental, will cause them to
perform differently. Even if they end up not buying one of your homes,
and rents or buys elsewhere, the steps I've suggested you follow to
start the transformation from renter to buyer, will greatly benefit you
the rental owner. You will get rents on time, residents will take care
of all minor repairs and maintenance headaches for you, because you are
not dealing with a renter, you are working with a future home buyer,
whose performance is determining whether he or she will be able to buy.
Stay in control and make the most of your assets.
Jeffrey E. Taylor, C.P.L. is CEO of Mr.
Landlord, Inc., a national property management consulting firm -
coaching over 50,000 landlords annually. He is the publisher of the Mr.
Landlord Newsletter, the largest circulated real estate newsletter in
the country, with over 10,000 monthly subscribers. Jeffrey Taylor has
been interviewed on numerous radio talk shows and quoted in hundreds of
publications, including The Wall Street Journal, Smart Money, and
Personal Finance Magazine. Known to thousands as Mr. Landlord, Jeffrey
Taylor is the author of a dozen publications, books, and reports on
various aspects of rental property management.
Article Provided by:
Jeffrey Taylor
Mr. Landlord, Inc. |
