I just got a duplex and now I Don't know what to do!!
Member since 2021 · 34 posts · 44 votes
I just got a duplex and now I Don't know what to do!!
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
5yOriginally posted by @Gerardo Hernandez:
Hello Everyone, I just got my first house hack. I am extremely excited for what's to come but I am not sure what to do with the following. The renters on the other side are paying 790 for rent at the moment but I need the rent to be 900 and above to make the numbers make sense. Their lease is done in August and I want to know how to go about raising the rent? I also see that in their current lease it says they shouldn't have a dog but they do have one. How do I go about charging for a pet fee and how much do people normally go for? 25? 40?. Also I think I am going to have them sign a new lease with me but I have no idea what needs to be on a lease to watch my back and so its all in writing.
Also, I know there is a lot of tax breaks now that I am a landlord. Let me know if you know any resources that might give me more information on that!
Start educating yourself ASAP.
My favorite book for the last 16 years is "Every Landlord's Legal Guide" by NOLO. It gives you a TON of practical information about managing a rental and it includes your state-specific laws. They also have a great website and sample forms.
You can buy the Landlord Package from Biggerpockets ($100 or upgrade to a Pro account and it's included) and that will give you the lease and some other handy forms that were developed by actual investors and vetted by state attorneys.
As for the tenants, I recommend raising the rent with 30 - 60 days notice. Don't increase the rent over a period of time because that is more likely to cause confusion, problems, and animosity. Pull the band-aid! Give them notice of the new rate and stick to it. If they can't qualify and afford it, let them move on and find a new, qualified renter that will pay market value.
Dog is unauthorized. Give them notice today, not next week or next month or at renewal. If they are willing to violate your lease and sneak in a pet, they're willing to violate other terms. You don't have to be mean or emotional about it. Just notify them the animal is a violation and then charge them a monthly fee, demand they remove it, or whatever you want to do. I recommend you conduct a walk-through inspection to see if there's any pet damage.
Lots to do. Take it one step at a time. Educate yourself on one issue (how do I handle an unauthorized animal?) and get it under control, then work on the next thing (how do I raise the rent?) so you're not overwhelmed.
The DIY Landlord Book4.7248 Reviews
16 Replies
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes5y
Originally posted by @Gerardo Hernandez:
Hello Everyone, I just got my first house hack. I am extremely excited for what's to come but I am not sure what to do with the following. The renters on the other side are paying 790 for rent at the moment but I need the rent to be 900 and above to make the numbers make sense. Their lease is done in August and I want to know how to go about raising the rent? I also see that in their current lease it says they shouldn't have a dog but they do have one. How do I go about charging for a pet fee and how much do people normally go for? 25? 40?. Also I think I am going to have them sign a new lease with me but I have no idea what needs to be on a lease to watch my back and so its all in writing.
Also, I know there is a lot of tax breaks now that I am a landlord. Let me know if you know any resources that might give me more information on that!
Start educating yourself ASAP.
My favorite book for the last 16 years is "Every Landlord's Legal Guide" by NOLO. It gives you a TON of practical information about managing a rental and it includes your state-specific laws. They also have a great website and sample forms.
You can buy the Landlord Package from Biggerpockets ($100 or upgrade to a Pro account and it's included) and that will give you the lease and some other handy forms that were developed by actual investors and vetted by state attorneys.
As for the tenants, I recommend raising the rent with 30 - 60 days notice. Don't increase the rent over a period of time because that is more likely to cause confusion, problems, and animosity. Pull the band-aid! Give them notice of the new rate and stick to it. If they can't qualify and afford it, let them move on and find a new, qualified renter that will pay market value.
Dog is unauthorized. Give them notice today, not next week or next month or at renewal. If they are willing to violate your lease and sneak in a pet, they're willing to violate other terms. You don't have to be mean or emotional about it. Just notify them the animal is a violation and then charge them a monthly fee, demand they remove it, or whatever you want to do. I recommend you conduct a walk-through inspection to see if there's any pet damage.
Lots to do. Take it one step at a time. Educate yourself on one issue (how do I handle an unauthorized animal?) and get it under control, then work on the next thing (how do I raise the rent?) so you're not overwhelmed.
The DIY Landlord Book4.7248 Reviews - Member since 2021 · 34 posts · 44 votes5y
@Nathan G. Thanks you so much! I will definitely educate myself and get myself in the right path.
- Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes5y
Based on your post, I'm guessing you have done little research before jumping in. I would avoid making any moves until you are well versed in the laws (local, state, and federal). You will also get more relevant answers if you let us know where the property is located.
They're paying $790 and you need it to be $900 for the numbers to make sense. You didn't mention if $900 is a realistic number. What you need is meaningless if the market won't allow it.
Does their current lease say no pets or just not mention allowing pets? FYI, even if it says no pets, the prior landlord may have verbally agreed to it. The prior landlord may have voided their right to enforce that clause if they knew about the dog and did nothing for long enough. It may be an ESA or legitimate service animal and you have no control over it.
Do rentals in your area typically charge pet fees or is it standard to allow pets? In my area I almost never see people charge pet fees. It might be better just to allow pets and adjust the rent higher for everyone.
- Member since 2021 · 34 posts · 44 votes5y
@Greg M. I apologize for the lack of information. The property is located in Wisconsin and 900 for a 2 bedroom with a garage is still charging under the market. Most 2 bedrooms go for 950 and above depending on how nice they are. I have also noticed a lot of the apartments available are saying no pets at all.
It sounds like they got the dog right before their last lease ended and the landlord let them stay anyway. I don’t mind them having the dog but I do want to make sure it’s accounted for and that I save up for any additional repairs that would need to be done because of the dog.
I did do my research but I know there is more out there and since I am talking with more experienced investors here I am sure I will be pointed in the right direction on what I need. Thank you!
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes5y
Rent increases or lease renewals need to be given with proper notice. Some states have certain legal requirements but for the most part, 30 days notice is common. If they lease is done August 31st, I would send notice of lease renewal by the middle of July. I wouldn't charge anything separate for the dog, since it is already in the property. Just include that in your rent increase amount, whatever that is. On the notice I would give them three options.
1. Sign a new 1 year lease at $900 per month with the dog included signing a new lease
2. Continue on a month to month basis at $950 per month signing a new MTM lease
3. Provide 30 day written notice to vacate and be out by August 31st
Have them select one of the options and request response within 1 week. That gives you time to get paperwork signed. You will probably need to follow up with them. We state on the notice that failure to respond by X date results in default of option 2.
As far as tax breaks, don't get too excited. You are only allowed to expense realistic business expenses for the half of the duplex you are not living in. That means half of your mortgage interest and half of any shared utilities. Half your insurance and you get to depreciate half the structure. Owning only one door and having it next door limits other deductions. I wouldn't expense a cell phone, internet or similar business expenses because there is no business justification to support it. You really need to talk to a tax professional now so they can tell you what expenses to track and get you setup with a strategy. People will use Turbotax which is fine for plugging in numbers, but they don't tell you what you can legitimately claim, so in an audit you are left holding the bag.
- Rental Property Investor · Waupaca, WI · Member since 2018 · 89 posts · 30 votes5y
What do you mean by "their rent needs to be $900 for the numbers to make sense"? I wouldn't stress to much about the "numbers making sense", especially if making sense means "cash flowing." The fact that you're house hacking is already a huge step forward, and at this point, you're still having $790 of your mortgage being paid by someone else which is a big chunk of your living expenses. I would echo everyone's comments above about raising the rents though, especially if $900 is market rent.
- Member since 2021 · 34 posts · 44 votes5y
@Joe Splitrock That great information! Thank you! I have been wondering about that and being an starter investor I didn’t think I would use a tax person but it might be worth the extra investment to get an expert to do my taxes.
- Member since 2021 · 34 posts · 44 votes5y
@Mitch Kennedy Well with the current market I didn’t get an amazing deal but I would break even if I rent the other side for 900. That is with vacancy 5% and repairs at 10%. I know I don’t need that to make this make sense because of the house hack but it would be helpful. I also will invest that little bit of extra cash in improving the property since it does need some updating. Thanks for you input!
- Rental Property Investor · Waupaca, WI · Member since 2018 · 89 posts · 30 votes5y
Absolutely, makes sense. Definitely shoot for that $900! I hope you reach it, but more importantly, congrats on the house hack! Huge first step and good luck!
- Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes5y
You can raise the rent to what the market rate is. It doesn't matter what you "need" the rent to be, if people won't pay that
- Real Estate Agent · Westchester, NY · Member since 2021 · 77 posts · 35 votes5y
@Gerardo Hernandez
Bigger Pockets Pro’s get residential leases for each state. They are landlord friendly and (from what I understand) written by attorneys. I would have them sign a NEW lease with you. Give them 60 days notice that you will be increasing their rent by $110/month and will include the $50/month (or whatever you decide) pet fee in that $110. 60 days will give them enough time to find a new place if they decide to move and you can start planning your renovation to raise the rent even higher.
- Member since 2021 · 34 posts · 44 votes5y
@Shanna Vataj Thank you! Very helpful information and I will for sure use it.
- Member since 2020 · 57 posts · 24 votes5y
Hang in there and learn. Use a CPA for taxes, to help you learn-get up on the learning curve faster. It pays to own real estate. You need strategies and a plan. Look for seasoned investors to work with in your inner circle. Build relationships before you need them.
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes5y
@Gerardo Hernandez we have been pet friendly for over ten years and have had mostly good experiences with pet owners. If you have a clean tenant, they will keep the pet clean as well. The opposite is probably true as well, I have never tried that. We charge $25 per month, that's on the low end for Milwaukee, I see up to $50. I think we had 2 or 3 issues with a sctrached up door and the resident was very apologetic and more than happy to pay for the damages. Kids can be more destructive than pets.
House hacking is such a big topic, types of duplex, maintenance to lease contracts and financing.
- Member since 2021 · 34 posts · 44 votes5y
@Louie Gabriel @Marcus Auerbach Thank you both for the information and tips!
- Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes5y
Put together a pitch for why their rent should be increased then let them know 60-90 days before their lease ends. If you feel confident you can lease the space if they decide to vacate then the risk is probably worth it. That being said, a long term tenant that pays on time is sometimes worth a slightly lower rent. Just have to weigh out the risk vs reward. For leases you can get a state specific boiler lease on legal blank.
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