Tag Archives: lease

It’s Not About the Journey, It’s About the Destination

What does it mean?

The Maanlord has been asked by a couple people so far what exactly this tag line means that ends each one of our blog posts. Ever hear that oft repeated adage, it’s about the journey, not the destination? Well in the world of real estate investing, particularly that part journey  destinationwhich involves long term holding and landlording, the opposite is actually true. The destination is what it is all about, not the journey. I’m not discounting that in some instances the role of landlord can be very rewarding and fulfilling, but more often than not, landlording is a frustrating and nerve wracking experience, even for the most experienced and efficient property managers and landlords.

the-light-at-the-end-of-the-tunnel destinationWhat we relish is the concept of keeping our eyes on the prize, the fact that someday, we will be able to either liquidate our mostly paid for or appreciated portfolio, or we will have a nice little nest egg of free and clear properties, that we can really have the pain managed away from us and live a life of real passive income.  And for the more deftly acquired properties, there is actually a good amount of cash flow and depreciation write-off in the now as well.

The key to surviving is to work smarter and not harder, to do things and effect policies and guidelines in our landlording duties that keep our expenses down, and maximize our rental income over time. That involves writing as bulletproof lease as possible, having a solid Leaseapplication and deposit process that minimizes rental losses and maximizes collections and garnishments, outfitting your rentals to be durable, and sticking to a set of set in stone rental policies and procedures to reduce drama and keep everything strictly business. If you need help with this, that’s fine, we all needed help or advice at some point.

That’s why this blog exists. But if you want MORE help, through the Maanlord’s investment arm, Equity Momentum Investments, we do offer landlord coaching to turn that landlord frown upside down and get you as close to a stress free and cash flowing situation that is possible for your case.  If we can help you at all step back from the cliff and set goals, priorities and establish a solid core of policy and procedures, please contact us directly at jeff@eqminvest.com.

About the author: Jeff Sullivan has been buying, holding and selling investment property for over ten years. He currently has over 40 units in his private portfolio and consults others on doing the same through his Real Estate Investment Consultancy, Equity Momentum Investments. He can be reached at jeff@eqminvest.com.

Eliminate Disputes over Spoiled Food Loss with Lobster Claws

Whoops…I meant with a Lobster Clause.

You may not have been there before, but eventually you will, and sooner rather than later if you own multiple properties. Scenario:

Tenant’s out for the day, or away for an extended period. Electrical malfunction results in the fridge circuit going down, and by the time the tenant returns, all their food has gone bad. It could even be that the fridge went on the fritz, and by the time you could get another one over there or get it repaired, all the food has gone bad.

lobster clause
“I’m not sure that covers it”

And they want YOU to pay for it all.

Oh, and by the way, they just went shopping.

Oh, yeah, and all those groceries rang up around $300.

If you haven’t clearly defined in your lease who bears responsibility for food spoilages as a result of legitimate equipment failure, then you are leaving the fridge door open for all kinds of claims of iceboxes full of shrimp and caviar that will be demanded to be reimbursed for spoilage from your tenants.

Lobster Clause
Didn’t your Mom ever tell you not to leave the fridge door open!?!

There are a few ways to insure that when a tenant comes a knockin’ for money for food loss, your budget won’t take a rockin’.

A few years ago, we built into our leases language that stated very clearly that failure of appliances was commonplace and unexpected, and tenants should be prepared to relocate food from refridgerators in the event of equipment failure. Another thing we did was to inform them that loss or damage of ANYTHING in their unit was to be covered under an appropriate renter’s insurance policy. We even pointed them to several insurance company’s in their move-in package so that they couldn’t claim later they couldn’t find anyone that sold those policies. Now, we have even gone the route of requiring rental insurance policies for certain properties (mainly newly renovated ones), and mandated that we be added as an additional insured until their move-out, but that is a topic for another post.

"Oh, Shrimp in Lobster sauce Lean Cuisine meals, sorry"- lobster clause
“Did I say REAL Lobster? Oh, I meant  Shrimp in Lobster sauce Lean Cuisine meals, sorry”

Any type clause in a lease designed to (justifiably) deflect liability for food spoilage back to the tenant as a result of food loss is known as a ‘Lobster Clause’, as a joking reference that whenever such claims are made, suddenly the spoilage consisted of $15/pound Maine Lobster, instead of what it actually is, like, say TV Dinners and Chicken Thighs.

I recently read a post on an investment group site that I’m on, where a landlord takes it one further, making the appliances on move-in all as-is. Here is how his Lobster Clause reads:

Although there may be appliances in the unit, their availability is not included in the rent. If TENANT wishes to use the appliances, they agree to assume all responsibility for care and maintenance. If TENANT wishes to use their own appliances, they may request that those in the unit be removed or stored.

An argument could be made that this clause may degrade your ability to attract a renter as a result of the possibility of having to buy new appliances at some course in their lease, but in that most its ok its a rental-500x500 lobster clauserenters treat appliances about as well as you or I treat rental cars, it certainly could be a substantial cost saver over time as appliances break. Only drawback is the moveout where the tenant bought their own appliances and takes them with them, and now you are forced to show without appliances, or offer to buy theirs. It still pushes an expense down the road a bit, though.

I hope that this discussion is yet another tool you can put into your lease to prevent drama in your landlording experience, and more importantly, hits to your cash flow.


The MAANLord