The INVESTMENT / RENTAL PROPERTY thread!!!!!!

orangetabby said:   I recently moved to a new place and will have my condo rented out soon.

I am not working with a realtor to find tenants so I need to check tenant credit by myself.

Would experienced landlords here kindly provide some suggestions on where to get tenants credit checked?

I noticed that Experian now offer to check tenant credit for $14.95. The drawback is that tenant would have initiate the process therefore landlords would loose control over timing?

Any suggestion is greatly appreciated.

Thanks in advance.

JaxFL and rufflesinc gave good replies. There is/was an extended discussion here: http://www.fatwallet.com/forums/finance/1259501/

henry33 said:   dpa789kd said:   I'm curious if anyone does open house type showings with their rentals? I have tried to stack my appointments in the past and it never fails that half the people will not show, so I end up standing around for an hour between appointments. A rental I have coming open is occupied so to be as little of an intrusion as possible I think I'm going to ask everyone to come from 5-7 and not schedule individual showings. The only problem I see is having multiple prospective tenants show up at once, but I don't see that as being a "turn-off" to someone who is seriously interested. Anyone had any luck doing it this way? Thanks

It's a somewhat common problem. The worse part is that if you try to call them after they're late, half the time they won't answer the phone and you never hear from them again. What I used to do is schedule them every 1/2 hour, but sometimes if the property isn't right, they blow in and out in 5 minutes, but if they like it, they can go on for 1/2 hour. Now I just do them every 15 - 20 minutes. Usually I try to cut down on no shows by calling them a couple of hours in advance of the appointment, for some reason they're more likely to answer in advance than if you wait til they're late, then you get the dreaded no answer. Sometimes you do end up with the situation where there are people who show up early and some show up late at the same time. Some prefer to wait til one party is done and other times they can both go through at the same time. I'd still set a specific time that they should show up, if you did a 2 hour window, maybe only one or two would show up and then you've wasted a lot time. Yes, agree.... 20 min apart. I always call to confirm 1 hr prior to. If I don't get an answer I certainly wont be showing up for appointment.I ask if they can be reached at .... for confirmation call when setting appointment. Usually don't have that many on same day, so usually means can arrive later or leave earlier for those who cant reach. I also call few minutes after appointment time, if late. Often they will be riding around looking for the place instead of calling for further direction. So i'm waiting while they are lost. I may appear to be overbearing to some of them, but they should also consider how they are presenting themselves by not showing up on time.

I would not do open house, as you aren't getting the commitment from prospect to show up. You don't know how many are likely to show. You need to accommodate the prospects availability. So make appointments within 20 min of each other, do confirmation call, and make a late call if you want.

One of my friends only shows her vacant rentals during open houses. I think having multiple tenants show up can be good and creates a sense of urgency. Her houses rarely stay vacant long so it works for her. I haven't had a vacancy in years or I'd do this.

cajundavid said:   One of my friends only shows her vacant rentals during open houses. I think having multiple tenants show up can be good and creates a sense of urgency. Her houses rarely stay vacant long so it works for her. I haven't had a vacancy in years or I'd do this.We do the same thing -- and schedule no more than a two-hour open house. Most of the time, an hour is enough. It's a time-tested marketing strategy ("call before midnight tonight...") and works very well in residential, commodity-style properties as well.

Another strategy we use is to require a confirmation an hour before the appointment. This weeds out at least 50 percent of the tire kickers, and some balk, but it can be a test of what a future tenant may be like.

In low-end communities, we market them lawfully, but suggest that all potential applicants conduct a self-tour at their leisure before an open house or appointment showings. If they think they are getting a bargain five-star penthouse, which seems to be the case many times, a does of reality in the one-star communities while away from an agent's influence can eliminate those wasted appointments.

vadeltachi said:   cajundavid said:   One of my friends only shows her vacant rentals during open houses. I think having multiple tenants show up can be good and creates a sense of urgency. Her houses rarely stay vacant long so it works for her. I haven't had a vacancy in years or I'd do this.We do the same thing -- and schedule no more than a two-hour open house. Most of the time, an hour is enough. It's a time-tested marketing strategy ("call before midnight tonight...") and works very well in residential, commodity-style properties as well.

In low-end communities, we market them lawfully, but suggest that all potential applicants conduct a self-tour at their leisure before an open house or appointment showings. If they think they are getting a bargain five-star penthouse, which seems to be the case many times, a does of reality in the one-star communities while away from an agent's influence can eliminate those wasted appointments.
agree with these points. i do back-to-back as well as simultaneous showings. probably have more success with the simultaneous.

and absolutely suggest the drive-by. that has saved me hours and hours over the years.

rufflesinc said:   drew2money said:   rufflesinc said:   orangetabby said:   Would experienced landlords here kindly provide some suggestions on where to get tenants credit checked?

I noticed that Experian now offer to check tenant credit for $14.95. The drawback is that tenant would have initiate the process therefore landlords would loose control over timing?
I use transunion, they give a choice. You pay or tenant pays. They have very detailed credit and criminal. Less PITA than getting your home inspected...

I'm not sure what you mean about timing.

1) you submit request with tenant's email
2) tenant fills out info
3) you get credit info immediately.

If tenant delays, then you move onto next app.

[L=[L=www.mysmartmove.com]www.mysmartmove.co]www.mysmartmove.com]www.mysmartmove.co[/L]

Another reason to use these sites is that they ask the tenant for their SSN, not you. Thus you can advertise on craigslist that no SSN is required.

I WANT the SSN. If they skip out on me, that is the only way I can track them down.You must rent to deadbeats.

Really, is that all you got? You feel the need to insult me? Maybe you can loan me your crystal ball. I guess your foresaw Madoff, Clinton being re-elected and the Boston Bombings... Because no-one else did. Hell, you must be better than Carnac!!!

Hi Guys,

Wanted to get your opinion on a condo that I am considering. It would be my first buy.

Price: $500,000
HOA: $400/month
Taxes: $700/month
Total Monthly Cost: about $3000

I plan on living in it for a couple of years ( I guess an ideal first tenant, and gets me good rate and some deductions). The place can easily rent for 2500-2600. It is in nyc metro area and in a very strong renters market. I expect to live in it for ~ 3 years, by which time it would be a cash flow positive or slight negative ( and pay my mortgage). I've rented in the area for a few years and seen my rent go up every year, and I expect that to be the case for atleast a few years. I do not expect the property to appreciate ( infact its a bit overpriced due to lack of inventory in the market).

by my calculations, I would save about 10k/year buying over renting ( tax/interest deduction and contribution to principal) . In 3 years this would cover all the closing costs and any depreciation in the price of the condo. After that, I rent it out and hopefully the returns would be in the increase in equity.

Is this a horrible idea or makes sense. Am I missing anything.

Thanks

pibay said:   Hi Guys,

Wanted to get your opinion on a condo that I am considering. It would be my first buy.

Price: $500,000
HOA: $400/month
Taxes: $700/month
Total Monthly Cost: about $3000

I plan on living in it for a couple of years ( I guess an ideal first tenant, and gets me good rate and some deductions). The place can easily rent for 2500-2600. It is in nyc metro area and in a very strong renters market. I expect to live in it for ~ 3 years, by which time it would be a cash flow positive or slight negative ( and pay my mortgage). I've rented in the area for a few years and seen my rent go up every year, and I expect that to be the case for atleast a few years. I do not expect the property to appreciate ( infact its a bit overpriced due to lack of inventory in the market).

by my calculations, I would save about 10k/year buying over renting ( tax/interest deduction and contribution to principal) . In 3 years this would cover all the closing costs and any depreciation in the price of the condo. After that, I rent it out and hopefully the returns would be in the increase in equity.

Is this a horrible idea or makes sense. Am I missing anything.

Thanks

Does the condo association allow renters? You may go through all these motions only to find out that you can't rent it out at the end.

I would look for a place that is a little more cash positive, i.e. if the rents are $2500/month then you probably should not pay more than $250,000, but NYC is unique. Half a million dollars buys you 500 ft² hole in he wall with a window that looks into the fat hairy guy's bathroom.

henry33 said:   rufflesinc said:   That wasn't meant as an insult. There's nothing wrong with renting to deadbeats. You can make a lot of money that way. I'm just saying that normal people don't skip out on rent.

BTW, whats with "Clinton being re-elected"? It was so obvious even Dole knew.

You say a lot of things that don't make sense. If you have a lot of rentals, eventually things will trend toward the bell curve. Having good screening criteria only helps so much. People get sick, divorced, die, lose their jobs, become alcoholics, get hooked on drugs etc. You could have tenants that have been there for years and then something like that happens. You want to be able to track them down. Plus when they know you have it, it's an extra incentive for them to pay the rent if they can.

It's a numbers game, the more units you have, the more likely you will run into someone that fits one of those groups at some point in time.You're talking about the bell curve for all tenants. But not all tenants qualify for your rental because your rental costs X dollars and thus the tenants will need to make 3X dollars a month. So if it's a more expensive rental, then the tenants will have to make more money.

My tenants are self-screened in the sense that they make six-figures so they have to keep their nose clean if they want to change jobs. A lower income tenant has nothing to lose. Consider the three bell curves: people who make 25K, 50K, and 100K. Do you think they are all similarly likely to experience the problems you mention?

I do full credit check, criminal, and get a copy of their DL. I believe that's enough to goto court on and get a judgement.

BAREBEL said:   I had to recently move to a different city to take up a better job with better pay in a great company. However I was underwater by 20k on my townhouse which is in a very good school district and neighborhood.

Selling was not an option as I would be losing quite a bit of money at my current financial situation. So I rented the house through a Property Management company. Although the Prop Mgmt company rented the house in 15 days for a very good price, after the monthly commission I still need to chip in around 160 dollars to cover my mortgage, PMI, Taxes, HOA etc.

Now my question is: Every month the Prop mgmt company is charging 100-200 bucks saying that they performed some or the other repairs at the house. This house was in pristine condition when I left.(Its a 3.5 yr old house). I am freaking out as this is making me pay 300 out of pocket to cover the mortgage.

Here's the breakdown:

Total Mortgage : $1396
HOA: $160
Total Cost for me: $1556 ( This includes everything Principal+Interest+PMI+Taxes+Insurance+HOA)
House rented for : $1575
Prop Mgmt Commission 8%: $126
Other fees: $10
Rent after commission and fees: $1439 ( but after the repairs I am losing another 100 which brings me to $1335 approx)

I am a newbie to all this and I am forced to be a landlord as I cannot afford selling. Are these expenses normal for any rental? Please help. Is it worth holding off to this propertyFirst, are you receiving an itemized invoice detailing the repairs and materials? If not, you should demand one and not pay unless the repairs were necessary, reasonable and actually completed. Verify that they were completed. Is your property manager licensed? Is he or she affiliated with a broker? Next, all of those expenses are deductible, generally against your ordinary income assuming your AGI is less than $100k. Between $100 and 150k, the deduction decreases and after $150k ACI, losses are not deductible. BE SURE to check with your tax adviser on the particulars for your situation. If you can quality for the deductions, you should be able to adjust your tax withholding so that you are receiving more take-home pay.

BAREBEL said:   I had to recently move to a different city to take up a better job with better pay in a great company. However I was underwater by 20k on my townhouse which is in a very good school district and neighborhood.

Selling was not an option as I would be losing quite a bit of money at my current financial situation. So I rented the house through a Property Management company. Although the Prop Mgmt company rented the house in 15 days for a very good price, after the monthly commission I still need to chip in around 160 dollars to cover my mortgage, PMI, Taxes, HOA etc.

Now my question is: Every month the Prop mgmt company is charging 100-200 bucks saying that they performed some or the other repairs at the house. This house was in pristine condition when I left.(Its a 3.5 yr old house). I am freaking out as this is making me pay 300 out of pocket to cover the mortgage.

Here's the breakdown:

Total Mortgage : $1396
HOA: $160
Total Cost for me: $1556 ( This includes everything Principal+Interest+PMI+Taxes+Insurance+HOA)
House rented for : $1575
Prop Mgmt Commission 8%: $126
Other fees: $10
Rent after commission and fees: $1439 ( but after the repairs I am losing another 100 which brings me to $1335 approx)

I am a newbie to all this and I am forced to be a landlord as I cannot afford selling. Are these expenses normal for any rental? Please help. Is it worth holding off to this property

The answer is yes and no, it's somewhat normal for PM companies to do this, but that just means it's not a good one or it may be too good. It's why most landlords end up self managing or at least find a company to see what they cover and what they don't cover. If your PM is very good, every time something happens in the unit, the tenant calls them and they instantly send someone over so for every minor item, the tenant gets used to calling and you get charged for it every time. Also while you might be out of pocket by $100 per month, part of your mortgage payment is also principle. You do end up ahead after accounting for that. Plus if you can take the interest deduction, you should end up ahead at tax time. You can also tell the PM company not to do any work unless you authorize it so you will know in advance what the $100-$200 items are.

So, if you have great tenants, how often do you raise the rent?

We just did an upgrade of the windows and two exterior doors in a rental unit. The current rent is below market by a few hundred dollars. So I plan to raise the rent, but how much is the question. The tenants will not likely find a similar quality house at the same rate, even after I raise the rent.

GRM: In general, keep in mind that you cant really apply GRM to the broad market, or even urban neighborhood, as a whole. As purchase price is a factor, it reflects too many factors to be applied widely, other than on very like kind buildings and locations.I dont think that GRM ever ensured a profitable investment, but yes it is a way to gauge the investment.
I think its more applicable use is to determine Purchase price. You take the stats from what are comparable sold properties, derive the GRM, and apply the GRM to the rents on subject property to determine sale price. So while the subject is advertised at a GRM of x, it should sell for a GRM of Y. I don't think you should bypass a property bc it doesn't match your GRM, because that just means price needs to be negotiated. Use this calculation as part of your offer/negotiations, as you derived the number from properties that have sold.

Well, one tenant I raised $100 after 10 years with no increase. Another I raised $25. The third is paying the most rent of all 3 and their rent is $80 higher than the second highest. The lowest is a single guy who has lived there for about 15 years and never complains about anything. Also, my properties are located in Central California, and I have noticed that the bigger apartment complexes with comparable units have actually lowered their rents in the past 2 years. Like I said before, unfortunately my costs like insurance, water, home warranty, gardener all go up. My final words really are: GOOD TENANTS ARE WORTH THEIR WEIGHT IN GOLD. Especially in California, because if you have to go through an eviction, it costs a minimum of around $600, in addition to all the past due rents you have not collected, plus a minimum of 3 months time from the day you start till you get to court. In Fresno County you can wait on the Sheriff for more than 3 weeks after the eviction is executed.