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Improve Your Cash On Cash Return To Maximize Your Investment - Nashville Property Management

When you own one or more rental properties, you naturally want to see a good return on your investment. If you don’t, then it’s probably time to sell it—and fast.

Calculating return on investment (ROI) for a rental property, though, doesn’t quite give you the whole picture. Instead, you should calculate your cash on cash return (CCR).

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What Is Cash on Cash Return?

Your CCR, also referred to as the equity dividend return, is calculated a bit differently, according to Investopedia. “Calculations based on standard ROI take into account the total return on an investment. Cash-on-cash return, on the other hand, only measures the return on the actual cash invested, providing a more accurate analysis of the investment's performance.”

It looks like this:

Cash on Cash Return = Net Operating Income/Total Cash Investment

Your net operating income is the total amount of rent you collect, minus expenses on things like building maintenance, utility bills and property taxes. Keep in mind that all of this is calculated beforeincome tax. Calculating your CCR can help you determine whether you need to take steps to improve your property and thus improve your CCR. First, let’s look at a quick example to help you see how CCR is calculated.

Calculating Cash on Cash Return - Nashville Property Management

Let’s take a simplified scenario to illustrate how CCR is calculated.

You bought a property for $100,000 (and let’s assume that includes closing costs). You then spent another $50,000 on improvements so your total investment is $150,000.

Cash on Cash Return = Net Operating Income/$150,000

You sign some really great tenants and charge them $5,000 a month. After 12 months, you’ll collect $60,000, before taxes and expenses. Let’s say your expenses over those 12 months are $5,000. So your net operating income is $55,000.

Cash on Cash Return = $55,000/$150,000

Here’s your result:

36% = $55,000/$150,000

Of course, this is an over-simplified scenario that assumes you paid cash for your property and all improvements. If you took out a mortgage, you’d have to consider the original mortgage amount, the remaining balance and the mortgage rate. You’d also have to consider the value of the property now and in the future.

To avoid the headache of all that math, check out this very handy cash on cash return calculator.

How to Improve Your Cash on Cash Return

Unfortunately, experts don’t really agree on what exactly a good CCR is. Some say 8 percent, while others insist on nothing less than 20 percent. No matter what the number, if you’re not comfortable with your CCR, there are ways you can improve it.

Improve to the Unit or Building Property Management Company

Look around your property. Are there simple improvements you could make to increase its value? Even a coat of paint goes a long way in making your rental more attractive.

If you have bigger projects to tackle—a new roof, a new furnace—it may reduce your CCR in the short term, but it should increase it in the long term. But don’t stop at the basics. Consider adding amenities that will attract and keep tenants. Nashville Property Management

Things like smart appliances or heated bathroom flooring could be a real draw. If you own a building with several units, think about adding bike storage, a small fitness area or a common room with table-top games to attract community-minded tenants who are willing to pay more for extra amenities.

Find Long-Term Tenants to Cut Turnover Costs

Everyone knows keeping a tenant costs a lot less than finding a new one. Talk to tenants before they move in and gauge whether they’re looking for something long-term or if they just need a place for a year or less. Once you’ve found them, give them every reason to stay. Build a good, professional relationship, be attentive to their needs and keep the unit in good shape.  

Make the Neighborhood More Attractive

Get involved in your neighborhood and work to bring the kind of businesses and amenities that attract tenants. Do you have a run-down park with an old playground? Start or join a group to restore the park to appeal to families. Are there vacant storefronts? Partner with business associations on new events that can help bring attention to the unique qualities of the neighborhood.

Expand Your Renter Base - Nashville Property Management

Without realizing it, you may have gotten yourself into a bit of a tenant rut, attracting only a small part of the market. Think about how and where you advertise and how you can attract other segments of the tenant population that would see value in your units.

You could, for example, consider allowing pets if you don’t right now. While pets can damage apartments, you can ask for more rent to cover those potential costs. And since rentals that allow pets can be few and far between, most tenants are willing to pay a little more for a dog- or cat-friendly place.

The point is, the more value you add to your rental property, the more you can charge for rent. That, in turn, will increase your CCR. In the end, making your current tenants happy and offering value to future tenants will work wonders for your cash on cash return, and your investments.

Laurie Mega

Laurie Mega has planned, written, and edited content on a variety of subjects. Her work has been published by, The Economist, Philips Lifeline, and FamilyEducation, among others. She lives in the Greater Boston Area her husband and two boys.

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7 Ways To Spot Fake Landlord References - Nashville Property Management

When you have an empty rental, finding the right tenant can be a challenge, especially as you feel the financial pressure a vacancy brings. As a property owner or investor, that’s why you have screening procedures for rental applications in place (like our top 10 tenant screening tips)  to protect your investment and ensure you’re filling the unit with a top-notch, trustworthy renter. In addition to the standard background and credit checks, get one or two former landlord references. You know, landlords tend to look out for each other and will give you solid info. Nashville Property Management

However, it’s surprisingly common for some potential tenants to ask a friend or pay a service that specializes in fabricating references and documents to fake a letter or phone call detailing their key qualifications as a tenant. Don’t believe us? Just check out this real world scenario—this really happens. A quick Google search also reveals shady companies like Paladin Deception and Reference Pal willing to act as a bogus reference in exchange for money.

Maybe the tenant didn’t pay their rent on time, or severely damaged the unit, so they know they won’t be able to get your rental with a real reference. What property owner wants a tenant with that kind of history? Definitely not you. As the landlord, you want to select renters with clean track records to create a landlord-tenant relationship built on trust, communication, and transparency. So, how can you step up your screening process to know what’s real and what’s not in the hopes to find your ideal tenant? Check out the seven tips below and get ready to play detective.

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#1: Call the Number Looking for a Rental

Instead of calling as a landlord (what’s expected), it’s time for you to brush off your acting skills. Pretend to be a renter interested in seeing any available properties. An obvious imposter may be confused, stumble over their words, or hang up immediately, signaling a red flag, whereas another landlord would have a simple yes or no answer. However, this isn’t foolproof as deception services and even friends/family can expect this call. That’s why it’s important to dig deeper—be bold and schedule an appointment to see the property. Imposters won’t want to take it that far, or will cancel at the last minute to keep up the charade.

#2: Analyze the Responses about the Tenant

Now you’re inquiring as the landlord. Putting your sleuthing skills to work when getting answers about the tenant. Be wary if they are too vague. If the reference is passively agreeing to what you’re asking about the tenant or isn’t sure what to say, that could also be a sign of a false reference. If you can’t get concrete details about the tenant (e.g. if they paid rent on time, if they caused trouble, how they communicated with the landlord, etc.) or if they have a sudden excuse to hang up (use your imagination), chances are this person isn’t a landlord. Granted, some landlords can be very busy or might not remember each tenant.

Also be wary if the responses are too personal—such as info only a friend or family member might know, like just how clean the bathroom is and how loud they play their country music at night. While landlords can have good relationships with their tenants, it’s not common for them to become close friends. Do you hang out with your residents? Unlikely. However, this isn’t a total reason to think the tenant roped in a phony reference as some landlords can have amicable relationships with their residents.

#3: Check Facebook and Instagram

Take it to social media. Search the reference’s name and see if there are any ties to your applicant’s profiles, whether they’re each other’s friends or followers, or if they’re tagged in each others’ pictures/posts. If there’s some overlap between the profiles, chances are it’s a personal relationship rather than a landlord-tenant relationship. You probably don’t have pictures with your tenants, right? Dig a little more into the reference’s profiles, but remember some landlords can be more personal with their tenants and also might not have information specific to being a landlord on their pages. Nashville Property Management

#4: Request Verifying Details

Landlords usually keep files on their tenants even after they move out. Meticulous record keeping is a good quality in this line of work. Definitely verify information such as move in date, move out dates, social security number, and birthday. Pro tip: Ask the reference to give you the information rather than you dictating the details so all they have to do is agree. Note that landlords with smaller portfolios may not keep the best of records, but if all of the landlord references can’t verify this info, something is definitely off.

#5: Research Tax Info

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Property tax and land records are publicly available. It’s easy to check the landlord’s name and see what comes up, or search for records concerning the property. If the name matches the address given, the reference is fairly legitimate. However, discrepancies can also exist if the landlord sold the residence or if the tenant actually provided the property manager’s contact information.

#6:  Cross Reference the Phone Numbers

Search the phone number you were provided. See if it matches up with the name of the reference. Or do it vice versa—search the landlord’s name and see if the same number pops up. Visit the landlord’s website or see if it matches the number advertised with the posting, if either exist. Some tenants may give you the landlord’s cell phone number, especially if the landlord only has a few rentals and isn’t in the business of property investment. If you find a different number advertised with the property listing, give that a call and find out why it’s different.

#7: Ask for Specific Info Only the Landlord Would Know about the best property management company in Nashville TN

Go full-property-owner now. Ask for specifics on the property, like how many units are in the building, the square footage of the unit, what kind of amenities the unit offers, other idiosyncrasies, etc. Or, give inaccurate information about the unit’s details like the cost of rent, or if parking was included, and see how the reference responds—if they correct you or not. Also ask for landlord-specific advice, like handling late rent or inspections, and see if the reference is able to give legitimate tips.

Stick With Legitimate References

None of these tips are foolproof as each property owner often has a completely different way of conducting/organizing their business. And, some imposters might go to far lengths with knowing specific information or creating a combination of false details to keep up the facade. We recommend using a combination of these tips to verify references, and if something seems off, dig deeper.

You must thoroughly investigate before fully eliminating a potential tenant with grounds of false info to avoid a lawsuit—simply going with your gut or using one tip isn’t enough. The Fair Housing Act (FHA)makes it illegal to refuse to rent based on an applicant's race, color, national origin, religion, sex, family status, or disability, so it’s important you do your due diligence in screening. When considering multiple tenants for a rental, set minimum qualification criteria, measure each applicant against them, and then choose a fair way to pick the tenant. You can include criteria that immediately disqualifies lying applicants.

Avoid getting fake references in the first place by informing applicants of the consequences of lying on the application. This applies to all the info you’ll find in the background check and credit check, including landlord references. Make it clear that applications with false information will immediately be rejected and you will not consider them in the future. If you’re struggling to fill a unit and need help screening applicants to find the right one, consider bringing on a property manager who is well-versed in resident screening procedures as well as with the FHA, and can help you navigate the screening process with confidence. Most property managers have access to professional applicant screening tools that ensure you sign the lease with ideal tenants.

Even tenants with good references might not work out. It’s necessary to dig into the details and consider each element of the application to find a person who’s the right fit for you and the unit. After all, you want to create a good relationship with a reliable and dependable tenant so your unit stays full long-term, your income is stable, and most importantly, you can focus on growing your investment.Nashville Property Management

What To Do When A Tenant Leaves Their Stuff Behind - Nashville Property Management

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When a tenant moves out, regardless of the reason, turnover is always a whole lot of work. Every property owner wants this transition to be seamless, but the reality is that it can be a time-consuming, and even expensive hassle.

Before you do anything, it’s important you inspect the unit to get an idea of the condition of your property and create a plan to get the rental ready for an incoming tenant. Upon inspection, you might see how much cleaning is needed, if you need to make any repairs/maintenance, or if there’s damage. However, you might even find the previous tenant left a significant amount of their belongings—not cool.

Dealing with abandoned property can become a major chore. At best, it’s a simple case of forgetfulness and at worst, it’s a lengthy and complex process—from removal and storage, to communicating with the tenant, to either returning the items or disposing of them. Here’s what to do if you find yourself in a situation where your tenant left a lot of their things behind, and how to prevent it from happening again.

Tenant Property Defined

Before you decide to remove your tenant’s abandoned belongings, you should know which items are actually theirs. Tenant property is defined as any personal possessions owned by your tenant or their guests moved into the rental unit or onto the property (e.g. stored in a garage or yard).

Per the lease, the tenant is required to restore the property back to its original condition at the conclusion of the lease—that means moving out their personal property. Nashville Property Management

That’s why it’s important you complete a walk through every time the lease turns over—you don’t want to end up with years of past tenant furniture left behind that you didn’t know was there! It’s one thing if you deliberately rent the unit partially furnished and are aware of what property belongs to you. It’s another if tenants leave pieces that just get carried over each time there’s a new occupant.

Regardless, when you complete your walk through and find property has been left behind (e.g. clothing, furniture, electronics, etc.), there is a certain process you must follow to either return or get rid of the abandoned property. As the property owner, you have the duty to securely store a tenant’s possessions for a reasonable amount of time without damaging them, and allow the tenant to reclaim their belongings within that time frame. You become liable for the property and you want to be sure to follow protocol so you don’t put yourself at risk for a damages claim. Just because you might think it’s junk, doesn’t mean you can treat it that way.

Though you might assume if a tenant leaves belongings behind after vacating they don’t want them anymore, you are only in the clear if your lease agreement explicitly states what happens to abandoned property, or you have written confirmation the tenant will not be returning to claim their items.

#1: Determine the Reason Why the Tenant Left

Depending on why the tenant left, you have certain guidelines you must follow—some of which allow you many freedoms, and others you have to be more careful about .Nashville Property Management

Lease ended or they gave you a termination noticeYou have the most flexibly here because the tenant moved out of their own accord within their legal rights.

You served them a termination noticeIf you followed the due process and gave the right number of days’ notice, more states also afford you maximum flexibility with your choice on how to dispose of the belongings.

EvictedThings get dicey here. Depending on the state, you probably cannot simply put their belongings on the curb. There might be a more detailed protocol to ensure the tenant gets their belongings back. It’s likely local law enforcement will handle the eviction and documentation, including property removal, and they’ll inform you what you are entitled to sell to get compensation for unpaid rent.

DisappearanceIf the tenant left without notice, their property has to be handled more delicately than those who have deliberately moved out. They still have rights to the property left on site and you cannot withhold personal property to get them to pay rent.

To add a layer of complexity, each state has different property laws on the landlord’s responsibilities for tenant property. We recommend getting acquainted with your state’s legislation before proceeding with removal.

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#2: Survey the Property Left Behind

The tenant could have left a variety of things behind. Again, there are different rules for handling their discarded items.

Dealing with Garbage

If you find garbage in the rental, you can toss it. If there are perishables that are rotting or obvious trash laying around, you’re well within your right to throw it away.

Dealing with “Fixtures”

If a tenant installs anything to the walls that appears permanent and doesn’t remove them upon moving out (e.g. bookshelves, coat hooks, light fixtures), those kinds of items become fixtures of the unit. That means these additions become the property of the rental owner and do not have to be returned.

If there’s nothing in the lease agreement that says it’s the tenants’ responsibility to remove fixtures, it’s up to you to decide whether you want to keep them as part of the unit, or if you want to remove them. You don’t have to share your tenant’s taste in disco-ball inspired lighting just because it’s there. This is what the security deposit is for—you can use these funds to cover removal and damage. Nashville Property Management

Dealing with Motor Vehicles

Any kind of vehicle left on the premises, whether it’s perfectly functional or an inoperable junk car or even a scooter, should be handled through local law enforcement. State laws regarding abandoned property don’t apply to motor vehicles because they’re classified as a different category of personal property. Check out  laws for example, for guidelines on what’s considered an abandoned vehicle and who to contact to get one towed.

Call the non-emergency number for your local police and provide the vehicle’s license plate number (if it has one), make, and model, and let them know where it’s parked. After concluding that it’s abandoned, the police will arrange to have it towed.

Dealing with Furniture and Other Personal Property

This is what you’ll most likely find left behind. You’ll have to follow a due process, and possibly get the local government involved depending on the total value of the abandoned property. Simply put, you’ll need to inventory the belongings, safely store them, and then either return, sell, keep, donate, or trash them after a certain amount of time.

#3: Itemize Abandoned Tenant Property

After any trash had been dumped, create a list of all of the items the tenant left behind and take photos of their condition—this will protect you from being liable for any damages claims. We suggest organizing this list with an inventory app. The Balance recommends Sortly because it allows you to organize items into folders, add eight photos per item, add a detailed description, and add a value.

#4 Securely Store the Property

You are not required to keep the property in the unit—especially if you’re preparing it for an incoming tenant. However, you do need a place to safely store the belongings. You can keep the property in a commercial storage unit or container, elsewhere on the rental property (e.g. a basement or garage), or even your own garage. In some states, you cannot store the abandoned property outside of the state, so we recommend finding a nearby storage unit. Pro tip: Get a neutral witness, like a neighbor to watch you move the items to a secure place.

If there are costs involved for removal and storage, keep a list of these expenses so you can be reimbursed through the security deposit, sale of the items, or by payment if the tenant claims the items. Itemize the costs and make sure they’re fair market value in case the state or tenant disagrees.

#5: Contact the Tenant Regarding the Abandoned Property

Part of your due diligence is to try to get in touch with the tenant regardless of how they vacated the rental. Refer to their application to get their last known address or any other relevant addresses on file—a cosigner or emergency contact’s address may prove helpful. Then you must deliver a written notice of the abandoned property either by hand or first class mail with a return receipt to the address(es) on file. You must make a reasonable effort to notify the tenant of the belongings, which many include delivering multiple notices.

The written notice should include the following details:

  • The itemized list of the property with images

  • The deadline for claiming the property (your state’s laws might specify a minimum time frame, typically 5-45 days depending on the value of the items, or you may have allowed more time than the minimum state requirement in your lease)

  • Where the property is stored

  • The charge for storing the property

  • Information regarding what you’ll do with the property if the tenant does not claim it (sell/auction, donate, keep, throw away, etc.)

#6: What to Do If the Tenant Claims the Property

If you’ve been able to get in touch with the tenant (success!) and they’ve reclaimed the property within the specified time frame, you must make the belongings available for the tenant to retrieve at a reasonable time and place.

Depending on the size of the items, landlords might have a specific time window to return the belongings after the tenant claims them. For example, California landlord-tenant law specifies landlords must surrender small items (e.g. clothes, electronics) within 72 hours. However for larger items like furniture, both parties must act reasonably and negotiate a time for removal.

Keep the cost of removal and storage handy. This is so you can make sure you’re reimbursed by the time the tenant retrieves their possessions (either by deducting from the security deposit or requesting payment upon retrieval). Nashville Property Management

#7 What to Do if the Tenant Doesn’t Claim the Property

Depending on your state’s regulations, you can sell the property at either a public or private sale. You can also choose to donate it, keep it (tip: rent the unit as partially furnished to get higher rent), or throw it away.

Can You Sell Abandoned Tenant Property? Yes.

This is where the estimated value of the abandoned items come into play. Some states have a dollar threshold in their landlord-tenant laws that draws the line where landlords are free to do what they want with the property versus having to hold a formal sale. In California, landlords can keep, sell, or dispose of abandoned tenant property if it’s valued under $700. If it’s over $700, landlords must contact the county about selling the items at a public auction.

A landlord can typically keep a reasonable cost from the sale that covers the expense of sending notice, removal and storage, and any unpaid rent. State laws may also define how much additional money a landlord can pocket from the sale before forwarding the rest to the tenant or county.

Preventative Steps You Can Take to Ensure a Clean Move-Out

Screen Tenants to Find Responsible Renters

When looking to fill a unit, carefully screen your potential tenants to find ones who have good track records. This includes conducting background and credit checks—you’ll see who is financially responsible and abides by the law. Also contact landlord references—you can ask questions regarding how the applicants left previous rentals upon vacating. If they have a history of leaving abandoned property, you might want to pass on them—just make it clear to them why they were declined to keep the tenant selection process fair. Nashville Property Management

Write an Abandoned Property Clause in the Lease

To avoid a lot of this headache, you can write an abandoned property clause in the lease that may be able to release you from much of this obligation, especially if you ask them to waive rights outlined by the state laws. As mentioned before, your lease should include the requirement that they return the rental to the same condition as it was when moved in—you can choose to include requirements for removing fixtures as well. You may also include some or all the following details regarding abandoned property:

  • What would be considered abandoned property

  • How long you’d store it (either the minimum time based on state laws or if you allow more time)

  • The disposal fee for storage and removal (either a flat rate based on fair market value, or that you’ll bill the tenant for it)

  • How you would get payment for storage and removal (withholding security or requiring for payment)

  • What you’ll do with the property if it goes unclaimed

You can adjust the clause below to fit your needs, or check out other sample abandoned property clauses for inspiration. And as always, consult your lawyer first.

Sample Abandoned Property Clause about property management company in Nashville TN

After the expiration or earlier termination hereof, if Tenant fails to remove any property from the Building or the Premises which Tenant is obligated by the terms of this Lease to remove within X (X) business days after written notice from Landlord, as required by the state of X, such property (the “Abandoned Property”) shall be conclusively deemed to have been abandoned, and may either be retained by Landlord as its property or sold or otherwise disposed of in such manner as Landlord may see fit. If any item of Abandoned Property shall be sold, Tenant hereby agrees that Landlord may receive and retain the proceeds of such sale and apply the same, at its option, to the expenses of the sale, the cost of moving and storage, any damages to which Landlord may be entitled, and to any arrears of Rent.

Send a Move-Out Checklist to Tenants for Property Management

When a lease is about to expire, a good practice for landlords is to send a move-out checklist to tenants. This reiterates the expectation set in the lease for tenants to restore the property to its original condition. You can customize yours to your property, or you can use a sample list.

Consider including tasks in your move-out checklist:

  • Cleaning requirements

  • Repainting walls to the same color as they were upon move-in

  • Removal of all personal possessions

  • Disposal of all trash

  • Leaving behind appliances and other pieces that are fixtures of the property

  • Removing self-installed fixtures

  • Notifying the landlord of any damage or issues in the unit

Many property managers use a resident site, which makes it easy, quick, and convenient to communicate with renters regarding move-out policies and other common requests, such as rent payment, maintenance issues, and documentation.

Set the Expectation of Withholding Security

Withholding security can be disputable, but as long as you present the expectation that if the tenant does not leave the unit in the same condition as it was during move-in, you can withhold a portion of the security deposit, fair to the market costs of repair. However, know the difference between wear and tear vs. damage.

If there is labor and repair that go along with removing tenant-installed fixtures, keep your contractor receipts. The same goes for cleaning and trash disposal if you find the unit had been left in a state of disarray with garbage everywhere. If you withhold the security deposit for the storage and removal of abandoned property, itemize those costs as well.

Hire a Property Manager in Nashville TN

Property managers are skilled when it comes to tenant turnover. They assume the responsibility of all the work involved with move-outs. So if a move-out is particularly messy, either because of an eviction or an excessive amount of possessions/trash left behind, they handle all of it. Dealing with abandoned tenant property is definitely complex procedure between understanding state laws and best practices, so it’s good to have an expert on your side.

Property managers also can also screen potential tenants and write leases. You can trust everything will be all set and just enjoy the passive income of owning property without any of the time- and energy-consuming management. If you’re ready to start looking for property managers in your area, we’re here to help.

Follow the Process

No property owner wants to deal with abandoned property when a tenant moves out. However, when you enter a vacated rental and find a mess, following these steps is unavoidable. Though this process might seem long and aggravating, you’ll dodge legal disputes, your former tenant will (hopefully) appreciate it, and you might make an extra buck. And if you can, take preventative action to ensure this kind of situation doesn’t happen to you.

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