When you screen tenants as we teach you in this blog, your odds of having a successful lease term with your tenant and a profitable business is very high. As you approach the end of the lease term, you need to start preparing for the tenant move-out. You want this to be as smooth as the rest of the tenancy was, so that will be the topic of this post.
First, let’s analyze your tenant profile again. If your tenant selection criteria is set up to allow only very well qualified people into your property; people who have good credit, good income, good history etc., then it is entirely likely that they are qualified to purchase a house and were your tenants only because they needed a place to stay till they located their home. So, you shouldn’t be surprised that they want to move out. Judge a tenancy by how successful it was during the lease term, not by how long you can have the same tenants. If you prepared the property as we teach in this blog and priced it under market, you should have no problem attracting well qualified prospects and so you should not be concerned when your tenant wants to move out.
Notice: The first step to the move out process is the notice. About 70 days before the lease ends, send your tenant an email (or letter) asking them what they would like to do at lease end. If they want to renew or if they are planning on moving out. Note that the lease has a clause where you specify when they should provide a move out notice and when you are authorized to start showing the property again. This is called the notice period. Let’s assume you have a 60 day notice period. About 10 days before the notice period begins, send that email (or letter) to your tenant. In that note provide both options and forms for both options. The renewal form is called extension of lease and will stipulate the new term and the new rate. If there are any new conditions, it must state those as well. There may be State limits as to how much you can increase the rate, but most certainly there are market limits. Let’s talk later about when and by how much to increase the rate. The other form you include is the move out notice. It has their names and a declaration that they will be moving out at such date (or end of lease term) and that this is their notice. If your tenants are moving out, they can simply sign this form and return it to you. Note that move out notice is a duty under the lease and so you should receive this 60 days prior to lease end (or as stipulated in your lease).
Pre-showing walk-through: Once a notice is given, you should schedule a pre-showing walk through with your tenant and identify things that may have to be corrected before showings can begin. Cosmetic items that may deter prospects, layout of furniture, addressing pet restraints, showing times and lockbox arrangements are all discussed at the pre-showing walk-through. This is an opportunity to take some pictures as well, if you decide that with furniture as set up, the property shows better with some features accented. Be sure to get your tenants approval or better yet, let them take the pictures and email them to you. Let your tenant know that this is not the final property condition inspection. The final inspection will occur only after they have moved out. Moving companies can cause damage that even the tenant may be unaware of, so make sure they understand that the pre-showing walk-through is only to prepare the property for showing and not the final inspection. At the pre-showing walk through make sure all the lights are working, in case you have a showing after dark. Rental units in the Dallas, Fort Worth, Denton area or the DFW metroplex are required to have keyless deadbolts on all exit-doors. These can be set from the inside and when set even a person with a key cannot access the property. Remind your tenants about these deadbolts and that they need to device a method that ensures that authorized personnel can enter the property for showings. Note that often the tenant enters and exits the property using the access through the garage and prospects will enter through the front door.
Showings: We talked about showing the property when it is vacant after the first rehab earlier. Now, let’s talk about showings when your tenant has possession. If you are working with a real estate agent, you can install what’s called a ‘Supra’ lock-box that only agents can access. It’s best to get your tenant’s approval to show the property without too much of an advanced notice. This is often possible, if there are no unrestrained pets and if the tenants are out most of the day. In evenings and weekends more of a notice might be needed. When agents show your property, remember, they are showing other properties as well. So, it’s best to keep scheduling as simple as possible. It is hard for agents to work your property in if there are too many rules for showing. Agents work with a showing company like CSS (Centalized Showing Service), that schedules showings with tenants and property owners for listed properties. Have CSS directly call the tenant to schedule showings. Usually, if they call you, you have no choice but to call the tenant. So that’s a waste. Have CSS call you if the tenant is unreachable, so that you know how smoothly the process is working. At the pre-showing walk-through, let your tenants know that CSS will call them and only if they are not reachable will call you. Your tenant has a duty per the lease to accommodate showings during the notice period and so your tenant is sensitive to CSS calling you.
Sign in the yard: A huge marketing tool is the sign in the yard stating that the property is available for rent. Even when the tenants are living at the property, you want to install this sign – during the notice period. You must have this right covered in your lease and remind your tenants that the sign will be installed in the yard. Install the sign at the pre-showing walk-through. This sign must have a phone number for prospects to call. It will either be your real estate agent’s sign with their phone number or yours. ANSWER THE CALL. When your tenant is living at the property and a prospect calls the number on the sign and you don’t answer – what is likely to happen? They are going to go ring the doorbell. That is extremely discourteous to your tenant. Make it clear to your tenant that they do not have to accommodate any one who approaches them directly about renting the property. They need to call the number on the sign and book showings through appropriate channels. If you are unable to answer the call, leave a clear greeting asking callers to not disturb tenants – but, seriously, just answer the call!
Prospects who do not work with agents: You are going to get calls from prospects who do not work with real estate agents. Prospects who are out-of-state or know the area well, or simply can’t find a realtor who wants to take lease clients, or prospects who have had a bad experience working with agents in the past. For one reason or another, you are going to be placed in a position of directly working with prospects. In that event, go back and read the post on how to talk to prospects and follow that to make sure you are making the best use of your time and now your tenant’s time as well. In any event, do not authorize or ask your tenant to authorize an unaccompanied prospect. You do not want that liability.
Shorten the showing period: Even though you have a 60 day notice period, if you do your part and price the property right and your tenants do their part by keeping the property in a show ready condition, then the property will rent quickly and you can end the showings. Mention this to your tenant at the pre-showing walk-through. Both of you have the same motivation here: to find a tenant quickly.
Move-out Condition Report: Just as you had a move in condition report, ask your tenants to fill out a move-out condition report. Mail them the move in condition report. You can do this about 30 days before lease end. That gives them an opportunity to correct any issue they may have caused and disclose to you ones that they’d rather have you correct. If your tenant selection process is as we teach in these articles, you will find that your tenants are more than willing to disclose and address damages they have caused. If there is something that a professional should fix, your lease should require such things be addressed only by a professional. Note that when you get possession, you will have damages corrected professionally. We will discuss this in more detail when we talk about finalizing the security deposit and the settlement statement.
Final Inspection: This happens after your tenants have moved out and the property is returned to you. That means they have returned the keys, garage door remotes etc., such that they do not have means to access the property any longer. It is important to conduct this only after final move out as this inspection report is what you will use to make security deposit deductions if any. So, you can’t get into a situation where you do this before the property is handed over to you, as conditions may be corrected by the tenants, unbeknownst to you. Your tenants may ask that they be present during the final inspection. In that case, you can schedule an inspection with them after they have moved out their furniture before they hand over the keys to you, but you must make sure they understand that per the lease and the lease addenda they signed, condition of return is only finalized well after their move out. There may be latent defects that are only apparent when the property is put in use again, like a blocked drain for example. You have 30 days after their lease ends to finalize condition and return their security deposit balance. That we’ll discuss in detail in the next post. At the final inspection document and take dated pictures that clearly show any damage.