Episode 056 - How to Negotiate with LandlordsJul 26, 2021
When it comes to Rental Arbitrage, you have to know why what you have to offer a landlord is so much better than a regular long-term renter. Having a short-term rental business inside your rental units means they are being taken care of and that your income is consistent. In this episode, Michelle talks about negotiating with landlords by knowing their pain points and knowing exactly what puts us a step or two above a regular renter. This episode goes along well with our Rental Arbitrage Mini-Course, too, for less than $40!!
Transcript of this Episode:
Hi, this is Michelle, the master of money mindset, and you are listening right.
BNB dash boss podcast. And in today's episode, I'm going to be talking to you about how you should talk to a landlord. So last week we had Maria gr Donna on, and she gave us her negotiation techniques and they are amazing. I love watching Maria negotiate. She's really like, she's so good. I've seen her just like come up with the craziest deals.
I'm always amazed by her. She is gutsy, man. She is like a gutsy gutsy person. I am a little more conservative when it comes to stuff. I don't want to argue with people. I don't want to get in stuff. I will make low offers, but if I want something, I'll pay a little bit more for it. I don't mind looking for the win-win scenario because Maria doesn't believe in win-win, but I do, I do believe in the win-win scenario.
When I'm negotiating with landlords, it's super easy because I know that I will be the best tenant that they've ever ever had and that they will love me because all my landlords do love me. And so it's almost an arrogance when you're going in there, because you're like, what's not to love. I am better than a regular tendon.
I'm going to pay you on time. I am going to take care of your property. I am not going to cost you money or time or hassle. I have my own crew set up. So I have all these reasons that I feel very confident going in. Right. So confident that, like I said, it could be to the point of arrogance, but I think that always works in your favor.
It's kind of like Muhammad Ali. Remember how he used to walk around going, you know, I float like a butterfly sting, like a bee. And no one can beat me and blah, blah, blah. But the whole thing was his confidence really did help him. I mean, he was fantastic. And I think that confidence sometimes is like, you know what?
He's got confidence and he backs it up with his actions. So I think we can do all the same thing as we can do that. So when you're doing rental arbitrage, what that is, if you don't know is you're going to look for a place that is for rent and you're going to rent the place and then turn it into a short-term rental.
You never, ever, ever, ever do that without the landlord's permission. The landlord, when he rents out a place, he rented out to you as a person, or he might rent it out to you as a business. Right. But he has to know what's going on inside that property, especially if you are running a business inside his property, because it may or may not be zone that way.
I mean, there could be a bunch of different reasons, but when you do a short-term rental, you have to have an addendum to his lease. And that has to be signed. I always make them sign it first because here's the I'm like, I don't trust people. I am so bad about it, dressing people, but I'm like, here's the attendance.
It goes with your lease. I'll sign everything on your lease, but the addendum overrides the lease and it even states that my agenda was state that it overrides. And it also states that they know exactly what's going on in that property and that they're totally okay with it. And that it's legal, you know, both of us believe that is legal to the best of our knowledge.
Right. We've checked it out and we've backed it up, but we want to make sure that we are always on the up and up with landlords because I've seen some horror stories and it's really sad. When someone rents a place and then just screws over the landlord and puts an Airbnb in there and doesn't let the landlord know you don't have the right to do that.
You don't have the right to rent someone's place and turn it into a business without their knowledge or consent. You don't when you rent the place and you tell somebody you're going to be living there, you better be living there. You better read. They can Sue you for all kinds of things. And honestly, as we get started, The new national short-term rental association, we are going to suggest that there'll be major penalties for people who break laws like that, who go around and attempt to take advantage of landlords.
That's not what our business is about. And if you're that dishonest, you don't belong. Really shouldn't be listening to my show because honestly I would drag you through the ringer. I just don't have any respect for somebody who would take advantage of people. It's wrong, you just don't do it. So when you're going out to look at a place, you are going to be negotiating with land.
They're looking for a renter and believe it or not being a landlord myself or many, many years, it's easy for somebody like me because I know exactly what they're looking for. That's why I feel so confident. And that is why I feel so confident in what I have to offer to landlords. And you should too, because you have the very same thing to offer to landline.
A lot of times, landlords make a little bit of money every single month. But as soon as somebody moves out, they have so much to do right. They have the, all these repairs, they have to, a lot of times clean the carpets or sometimes replace the carpets. They've got to repaint. They've got to fix all the things that have been neglected by the current tenants.
I mean, it takes time to find a new tenant and you've got to go through a lot, a lot of paperwork and rigor Moreau so that you can make sure you're doing background checks and everything else. I mean, it is such a hassle. To do a turnaround in a longterm rental and it can take a month or two. And that's, if you're lucky, right.
A month of you're lucky, if you're really, really lucky, you got a waiting list. If you're pretty lucky, it'll only take you a month. The majority of time, it's going to take two or three months of that place being empty. Now think about this. If you're renting a place out for a thousand dollars a month and it takes you two months to fill it, that costs you $2,000, not to mention all the costs of the turnover, right?
The carpeting that you did and, you know, fixing the place back up to get it to rental readiness. Right. So. They've spent a lot of money in a lot of times, the money they spend doing that is more than they made the year or two years when you get an attendant in there. So when you're a landlord, it can seem like three steps forward, five steps back just like man, every time I think I'm making money, then somebody moves out and I'm spending a ton of money and putting it back in that property.
So when you come along as a renter, you are honestly, I mean, it's just like, ah, you know, like the heavens have opened and the clouds have parted and here light is shining down on you from heaven that says this guy is going to be a good renter. You need to present yourself in that way. So we always recommend to our students that they build a credibility kit.
And what a credibility kit is, is it's going to give them the credibility. They need to be renting this place, right. You're not going to go in there in t-shirts and cutoffs and inner tennis shoes and stuff, looking like, you know, whatever you want to look like a professional. If you have your own LLC for your BNB business, I want you to get a t-shirt and paid at least one and have it embroidered if you possibly can, but pay for it, get some logo t-shirts and you can do that super easy on Canva.
Canva is a really great website. We use it for practically everything. Get yourself a t-shirt with your company's name on it. I always tell people the credibility kit should include things. Like your business cards, a company phone number, a letter made out to the landlords. We even do flyers. And I really recommend if you can afford to do a flyer or at least use a letter with very thick paper.
So it's looks more professional, right? That's printed out very nicely. And we also recommend that you do a website. I don't care. If you have a one page landing page website, you should have your own website. And dress professionally. When you go in there, you're going to dress professionally and you're going to show up as a professional.
So this is your credibility kit. You come in looking like a professional. And that's super important. You want to be what one of my mentors used to say, the only logical choice for these things, right? You want to be the one that they pick and they, you go, you know, what, why would I say yes to anybody else?
These guys are going to be great. There's some things you have to do ahead of time, which is come up with your company name, create your LLC. Set up a bank account. Once you get your LLC, you're going to get an EIN number and you can go to a bank and set up a bank account and you create your logos. All that stuff can be done on Canva, even the business cards and the letter and the t-shirt can all be taken and done on Canva.
It's so simple. You create your business cards, you have them print it up. You have your flyers printed up or your landlord letters. And you create this wonderful website, all using branding? No. What branding is basically a company's brand is their logo, their colors, what they represent, right. Everything that they are about the look of brands.
That should be recognizable at 60 miles an hour, going down a highway. So for instance, if you're going down a highway and you see a can on the side of the road and it's red, you pretty much know that it's probably a Coca-Cola can, right. You can recognize it from very far away. And a lot of brands are like that little kids can recognize brands.
There's so good. Even before they can read, they know what McDonald's is. It's like, there's the golden arches. They don't have to read anything. They know it's McDonald's they know Starbucks before they start reading. That's branding. A company's brand tells you a lot about the company. Now there's more to branding, but when you are starting your company, We're just going to talk about the aesthetics of it.
So you're going to pick some colors. You're going to pick the name, right. And you're going to create a logo for yourself. And then your shirt is going to be your colors. Everything is going to match because you are branding yourself as a business inside our membership. You guys have a whole section on branding and it's really good.
So take a look at that and make sure you get it otherwise. Anyone, who's not on the membership. I want you to go, just read about branding. Branding is really important and you can, you can have somebody make up your logo. So incredibly cheap. Now you can go to a place called Fiverr, F I V E R R. And Fiverr is a place where you can get a lot of stuff done for five bucks.
Now, sometimes it's more than five bucks and that's okay. But I mean, they do everything. I mean, You can find people who will create logos, people who will put your website together, people who will write you a jingle. I mean, there's so much stuff on Fiverr. You can find somebody to do your stuff for relatively inexpensive.
And you can also look and see how highly they are rated by other people who have used them. So it's a pretty good website. You'll like fiber, very cheap, inexpensive, no reason not to do this. Okay. So when it comes to building your website, you can pick up a free website almost anywhere we suggest Wix.
It's not the only one. There are a lot more. If you're going to get a domain, I suggest go, daddy. There are a lot more, you don't have to use. You can get free pictures right on Canva. Canva is like, perfect. I don't know why anybody would do anything other than Campa canvas. Perfect. And you can get free pictures on Unsplash.
So there's a lot of different, you know, places, lots of tools out there for very, very. To get your website started now, what are you going to have inside this kit that you're making, right? Because it's going to make you look like the professional. What are you going to have in there? When you walk into this apartment or this house or whatever, you're going to rent, you want to have all these things with you.
And like I said, it's your business cards or flyers. Maybe a brochure because that's what we use and you want to have your website ready and you want to have your business card direct to your website. So make sure you've got that information on there. Right. But you want to make sure it's up and running with all the information that a landlord is going to be looking for.
So if you have a website that is active right now and it's live and it's just to get bookings, that's great. You know, they'll want to see that. And that looks really pretty, but you'll want at least a page that is directed at your landlords. That's going to have a lot of information there, right? You're going to want your attendance written up before you get there, because you want to make sure that when you are ready to sign a lease, they are ready to sign the addendum.
The lets everyone know that they know that you're running a business out of the property. Right. But before you do that, remember to check on the location, we're going to be assuming here that you did all your due diligence. You're in a good location that you checked out. Everything is legal. That you've gone through all the checks and balances for this property.
You went to air DNA and you said, oh, I'm going to be able to make this much. And you know, it's probably three times or more what your rent is and your expenses so that you're making some money, you're clearing some good cash. Right. And you want to make sure too, so look for ample parking for your guests.
You want at least two parking spaces. That's what I always say. And you want to make sure that it's clean or that you can get this place cleaned and that there's a space for your maid's closet that it's close to food and restaurants. And, you know, at some place somebody would stay right? A lot of times we'll look at places that already have hotels in the area because we know people are staying in the hotels.
They're definitely going to be staying in ours. That gives you a good idea of where people are staying. Now you've done all your due diligence. You walk into this landlord and you've got to know their pain points. What are their pain points? Well, remember I said that I was a landlord, right. And one of the things I know is that they hate turnover and they hate going in there and having to spend a ton more money on this place, repairing and fixing everything up because this person has left and it's just, you know, like I said, it's.
You know, a few steps forward, way more stuff's back. Right? They want to make sure they're going to be paid on time. They want to make sure you're going to be paying rent and they don't want anybody trashing their place. They want their place to look. What's really cool about our business is your place is going to look nice all the time.
Like pretty much all the time when somebody isn't there, your place is gonna look amazing and you could show them that you're like, Hey, I'll take you in, let you take a look around, you know, and I always do that. I make sure that once I'm in my place is up and running, that I take the landlord through and let them see just how amazing the place.
So they can see the well-oiled machine. That is my business. Right. And they feel way more confident to just relax. And then a lot of times there'll be asking me, you know, Hey, are you interested in some other places I've got, you know, this location and that location, or I have a friend or whatever, there'll be handing you more.
But your job is to make sure that they feel secure and you want to know those pain points before you go in and negotiate. Here's all the things that really hurt. And you want to know the pleasure points. These are the things that you have to offer that are going to be a huge benefit to them. So they're going to be making more money off of you because you're going to be paying them that rent and you can even offer to pay.
Uh, several months up in advance or you can offer to pay more than somebody else pays. So, you know, let's save the rent is a thousand a month. Maybe you say, I'll pay 1200. If you know, you're going to be making a lot of money, you can make them feel better going. You know, I'm going to pay you a little bit more.
You want to make sure that they know that you are going to be improving the value of their property because your place is always going to look amazing inside and out. And that way they know, wow. Not only is this person taking care of my property, but they're making my property look better and they're adding value to it.
So that's very important. You're also going to be offering them things that other people cannot offer them. And those are things like insurance. Most, I would say all other renters will not pay the insurance for their landlord, but you will, you will be able to pay the insurance for your landlord because you have to get a special insurance and they don't know that, but you can say, Hey, look, I'm going to.
A million dollar policy on here, that's through proper insurance who is backed by Lloyd's of London. And then also Airbnb does cover us too. But that coverage from Airbnb that's, you know, kind of at their discretion. So we have extra insurance and this is what our insurance covers. Now, if you do have proper insurance, it will cover the property.
And that way they don't have to double dip and have more property insurance, but you need to check those things out with your insurance company. And that offer looks really sweet to a landlord. Like what they're going to pay. My insurance. I'm like crazy about this. So when you go in, you take a look at the property, make sure it fits your scenario, what you think you need, right.
That it has everything that you need and then present your offer to the landlord. Now you should have already had your numbers because you know what their rent is before you go in there, they don't surprise you with that information. Nor is it a surprise for you? What that location can make? Cause you already went on air DNA and you checked it out.
You wanted to see what that property could bring in every year. Right. And you also wanted to see what your occupancy rates were and everything else. So you already did all your due diligence before you went in there. So before you hit this guy up with your identity, And the lease agreement, you are going to negotiate with your flyer or your letter, and that's going to have some really cool information on it.
And it talks all about your negotiation tips. You know, what you're able to offer that other renters cannot offer him. He's going to take a look at this and go, wow, this is awesome. I'm living the dream right now, because this is so amazing, but your letter's going to have everything about you and your company, right.
And what you do and who your guests are. We've got a sample one inside our mini course, the rental arbitrage mini course. And it's super good. I mean, you can just take it, copy it and, you know, make it your own. But basically it says, you know, who's going to be visiting the property. And is this going to require extra work for the landlord he wants to know, and you're like, no, sit back.
We've got all this. We even have maintenance crew. And so we cover any kind of minor maintenance issues. You won't even be called and we're going to fix them and repair them. A lot of landlords have trouble. People will have a leak and they won't tell them for the longest. And the leaks can cause, you know, major, major issues with not just that unit, but the units below it, but it's on an upper level or something.
And so knowing that somebody is going to be taking care of any challenges and problems. That is fantastic for a landlord. They love that. And they will want to know, like, what is the cost of all this? Once you start going and you tell them all these great things, they're going to want to know, like how much they have to pay you.
And you're going to say, no, we don't charge you anything. We're not a management company. We literally are running a business and we can do this because. We've got all the systems and processes lined up and we've had it lined up in our business for a long time. So basically you're going to let them know that you're going to cover all the things like the minor maintenance issues.
And you're going to have the place professionally cleaned. If you know what your turnover rate is. Uh, we know that, you know, on most of our places, it's going to turn over six times a month or seven times a month. That means six or seven times a month. This place is going to be professionally cleaned and it's going to look amazing.
It's also going to be pet free. It's going to be smoke-free right. They're going to have minimal use of water and appliances because when people come on vacation, They don't use the stoves and the washing machines like other people do. Right. A lot of times they won't even wash their clothes while they're there.
If they're only there for a few days, they just wait until they get home. So really your people are going to do a lot less damage than anybody else would do in that place because you know, they're not living there. They're staying there. So there's way less use. It's a big difference. You're going to set up automatic rental payments.
So they're going to be paid on time every time, every single month. And like I said, if you have the money in the bank, I would offer to pay the first six months upfront, you're going to have secured keyless entry. Like I said, the property is going to be insured. You can have all of this written down in a letter that explains just how awesome a tenant you are and that they will basically have no problems with.
I mean anything over X amount of dollars is going to be covered by them. So that's a negotiable amount. It just depends on where I am. But a lot of times I might say that we'll cover the first couple hundred of any repairs, anything over that, or any major appliances have to be fixed. They have to pay for it, but it has to be done right away.
For instance, the AC can't go out and they'll say, well, we'll get that fixed next week. No, the AC has to be fixed right away. And if we have to fix it, they have to reimburse us. And that's very important to have in your addendum because things for you have to be fixed. Now, if somebody goes in there and the AC is out and you're in Florida and it's hot, They need the AC on now, same thing with the heat.
If you are in the Midwest or somewhere in the north, Northwest of the United States in the wintertime and the heat goes out, that's not a good thing. You got to get it fixed right then and there, and you're going to pay for it. And the landlord's going to have to reimburse you. So you want to make sure that you have everything in writing.
And that it covers the fact that it has to be done immediately. If the landlord doesn't do it immediately, that you will do it and they have to reimburse you. And that's part of your lease. We don't usually pay that. We usually make sure that our vendors, when they have big issues again, let's say the AC goes out, then we're going to get our vendors over there.
We're going to pay them the minimal charge to go over. And get it done. And if there's any repairs, we're going to have them bill the landlord, not us. So that's how that goes. Now you can do this with a letter or you can do it with a flyer. I love having flyers. I think flyers are pretty cool. So we have a flyer and like I said, everything is negotiable.
How much you pay for rent is negotiable. You can ask to pay less rent. Now here's the reason why nowadays these guys are desperate. I mean, They've had, COVID knock them on their butts. They've had people not pay for months and months and months in some areas, and they're really hurting. I do not believe in taking advantage of people who are hurting, especially little guys.
Like if it's a big corporation and stuff, I don't care. But if it's a little guy and this is one unit, one apartment complex, I'm not going to twist the screw and two arm. It's just not who I am, but everything again is negotiable. So. You can negotiate on the cost of the rent. You can negotiate on maybe getting a month free so that you can fix things up and paint it and get it ready to go.
Right. So if you can't get it up and running, because you've got a long lead time, because of all the repairs that are going to have to be made. Paint and everything, before you get the place up and running, you can negotiate maybe the first month free so that you're not losing money while you're getting set up.
Right. So there's a lot of things that you can negotiate. And I think we covered those with Maria. I just want to make sure that we cover them here too. So when you go in, you're going to let this landlord know that this place is absolutely exactly what you need. Right? Like, I love this. It's exactly what I'm looking for in a great location that I'm looking for.
And then you're going to tell them what you did. Right. You're going to tell them all those things. You're going to go over this landlord letter with them and say, I do this, this, this, and this. Now you want to make sure that when you're telling them all this, that you let them know how difficult this is to set up like getting your cleaning crew and getting all your maintenance guys and everybody who is working 24 7 for you.
This took years of setting this up because otherwise if you make it sound too good, what happens is the landlord's like, well, why the hell am I doing the long-term rental? I should be doing a short-term rental and I'm going to go make one. So you want to make it sound more complicated than it is. I know that sounds bad, but it's the truth.
You know, you just don't want to shoot yourself in the foot because if you make it sound too good to be true, they're going to be like, I can do this myself and I don't need you to do it. So let them know. That you are plugging this into a well oiled machine, right? You handle all the marketing, all the maintenance, all the management.
Right. And there's just so, so much to juggle in this business. Then I would let them know it's way more complicated than they can see on the outside. But you know what you've been doing it for years. This is what you do. So you want to take him to a new level of real estate ownership, right? One where his investment is actually working for him and making him money instead of him constantly working for this investment.
I would, when I start off, start with a shorter lease, if you're not certain of the area and you didn't do air DNA rentals around it, because then you don't know exactly what it is and it could end up being a bust area, right. An area that's not good. If it's got hotels and stuff in the area probably is a great place.
So I wouldn't worry about it too much, but I like to get shorter ones just in case I don't like the landlord or I end up not liking the location. There's a lot of times where something will look really good and then you get in there and you find out he, I wish I knew this ahead of time, but there would be no way to tell until you got in there.
So again, let them know that you are going to pay for the interest. That you will provide proof of insurance. And obviously their name will be the policy holder with you as a secondary on it. You got to let them know that you have a maintenance crew and they handle all the minor repairs. He's not going to get any phone calls or anything.
So after you go through all of these things with him, you are going to negotiate on everything. Use those things, those pain points and use the pleasure points, right? I'm going to be doing this for you. And anytime you give him something, you get something, you make sure that all right, I'll take the year lease, but I want the first 90 days to set up my property or however many days you need.
So make sure that when you give them something, they give you something and vice versa. Like I never give anybody anything without getting something in return. There's always a retro prosody involved. Let them also know and keep stressing the fact that these properties aren't going to have the same wear and tear on them.
So they're going to look really good and that you are basically a property management company without the fees that you take care of. All of this. Now it's super easy for them. They can just sit back and basically almost collect a check. Right? You want them to know that all your negotiation for the price of the rent, for the length of the term for parking, all of that stuff is going to be negotiated with the landlord when you walk in there.
So I would practice back and forth with my spouse of fire where you say, I need honey. I need somebody to talk to. And pretend they're a landlord that way they can give you realistic feedback on your presentation because it'll start to flow. It'll start to flow so easy that when you walk in, you'll never need to remember anything, but until that time, just keep practicing, practicing, practicing it.
We've got a script inside. Again, the rental arbitrage program, you don't have to memorize the script. Just know it, just know the pain points and the pleasure points right now. Once you've negotiated your terms, then you want to make sure that you read through their lease very carefully and let them read through your agenda.
Very carefully. Because our agendum has things like they can't interrupt our business, they can't do anything that will interrupt the flow of our business. Therefore they can't start tearing out the tiles, uh, in the hallway, in front of the apartments. Like they can't do that. They can only do that when they get our permission to do it so that we know it's an empty day.
Right. So we have to work together as the tenant and the landlord to make sure that. It always stays in good shape and ready for a renter for us because we are running a business. And if we can't run our business out of there, What's the point. Right? So make sure that you're reading through everything. I really recommend that you take the rental arbitrage course, it's super inexpensive and they're really worth their salt.
We've minimalized them so that you get, you know, just exactly what you need. But at the same time, they are packed full of information and it pretty much is all you'll ever need. And you can also ask questions right inside. So hopefully that gave you the information you need to go in there and negotiate with a landlord.
If you have any questions, feel free to always send an email to [email protected] And I'll get back to you as soon as I possibly can with an answer or my team will, and somebody will answer you and we'll make sure that you get the answer that hopefully that you need and that you want. But, uh, you're going to love doing this because I'm telling you, after you do it a few times and you get a couple of landlords under your belt, then it just flows.
It seems like you don't even have to look for property. It becomes very, very easy. The more properties you do, the one or two you find will lead to more, will lead to more, will lead to more, but you have to make sure that they're going to cashflow for you because not all properties cashflow correctly.
And if you don't know your numbers, you don't want to duplicate a losing game. Right? So it's like if you've got a property that's making a thousand dollars a month and you buy 10 of those, you got $10,000 a month. But if you've got a property that's losing $500 a month and you duplicate that timestamp, you're losing five grand a month.
I mean, it's, it's bad news. So you don't want to duplicate bad. You only want to duplicate good. Right? Okay. Next week we've got a wonderful guest coming in. Her name is Erica Reiner and she is an interior designer and she's got some great, great information for. I think you will really enjoy this episode coming up next week and make sure you stay tuned for Friday's edition.
It's a replay of the short-term rental revenue. And every Friday we do that. And there's some great, great information clean up there as well. Have a great day. God, bless you. Go and grow.
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