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. I’ve found it is to the landlord’s advantage if tenants think like future home buyers.
Residents who think like home buyers:
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Take better care of property than average tenants
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Pay rent on time and fulfill other obligations
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Handle minor repairs and needed maintenance
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Add upgrades/improvements to the property
Welcome, Future Home Buyer
Therefore, from the very first month a rental resident moves in, one of my major objectives is to change their mind set 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 mind set from renter to future home buyer is not instantaneous, but gradual yet continual and very effective. Here’s how to start the transformation. 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 $25 or $50 good toward the purchase of the home they are living in (or any one of your homes if that is an option you would consider).
The first time your residents receive this voucher, they probably will 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; one small but significant point about how the voucher 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 affects 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 continue 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 landlords offer a 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 choose, 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 discussions, your resident will take excellent care of your property.
It’s important that you understand that the objective of changing the resident’s mind set 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 mind set, 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 will cause them to perform differently.
Even if they don’t buy one of your homes, these steps start the transformation from renter to buyer and will greatly benefit you, the landlord. You will get rents on time, residents will take care of minor repairs and maintenance.
You are not dealing with a renter; you are working with a future home buyer whose performance determines whether he or she will be able to buy. Stay in control and make the most of your assets.