What advice do you have for a first time landlord in Oakland?

Question

Hi Team,

My wife and I just closed on a vacant duplex in Oakland. We're thrilled as we've been saving for 4 years! It was recently renovated by the long time owners and move-in ready. We've never been landlords before, so we're meeting with an Oakland landlord attorney tomorrow (Bornstein) for a final run through of gotchyas and edge cases to be prepared for.

What advice do you have for us, if any? Things like requiring renters insurance in case a tenants friend falls and breaks an arm or compounding late fees to encourage quick payment are all super valuable. Since Oakland is so tenant friendly and we could be paired with our tenants for a long time, we want to (try to) get it right the first time! Requiring all applications + background + tenant checks to be run through cozy.co which has been incredible.

Thanks!

Brian Garlington · Answer

@Stephen G.  I bought a vacant duplex in East Oakland 3 years ago and am house hacking it and self managing. Here's what to do....now some of this you may not agree with, but this is what I've done and it's worked out pretty darn well.

I posted on Craigslist, Zillow and a couple of other sites for tenants. In the ad I clearly outlined the following

No smokers of any kind at all, not even m%r8iju*na. (I don't care if it's legal, you're not stinking up my rental.

No animals or pets. (I love pets, but I don't want them scratching up and peeing all over my rental)

No felonies, ever.

No evictions, ever.

No illegal drug users.

Your gross monthly  income needs to be at least 3 times the monthly rent.  (Interestingly I had a number of people that reached out that had prior bankruptcies, and I actually don't mind this because that means they actually got rid of their debt.).

The ad also states that that they will be responsible for a $40.00 background check AND that if they are chosen as a tenant then they need to have a checking or savings account because the rent is collected electronically through erentpayment.

When the people called (And A LOT of people called) I let it go to voice mail. I then played the message back to see if it sounded like the potential tenant "sounded like they have sense".

Then I would call them back, ask them the same questions to verify that they really don't have felonies, etc. I would also ask them why they are looking at moving from where they are now? This gives you good insight as well. *Side note....If they say they have a service animal or an ESA I would NOT deny showing the place to them. Bad Kharma if you won't show to them.

Then if they did I scheduled a showing. I usually scheduled showings by appointment only, no open houses. The showings were scheduled 15 minutes apart and it inevitably created a bit of a frenzy because nothing gets a potential tenant on their toes more than when they show up 15 minutes late and someone else is already there looking at the place they want....or you have a potential tenant that showed up on time that likes the place and wants to talk your ear off....but then someone else shows up as well.

I also tell people that they pay for the background check, not me....and the background check is done through smartmove. If someone balks at this then that's a red flag. There's lots of info here on BP about them.

I also remind them that in the ad it states they need a checking account because I'm not the landlord who knocks on the door to collect rent even if I live next door. Rent is collected electronically, period. IF they are good with all of this then AFTER they see the place, I send them the link for Smartmove.

You may be tempted to farm all this out to a property manager, but believe me,...a PM will not be as motivated to get the right tenant in your property in a timely manner like you the owner will. Plus, it's also good "landlording" experience.

I would also buy a home warranty on your duplex. I have mine through First American Home Warranty. It's only about $40.00 per month and you actually may already have the first year covered on this through the purchase of your duplex. There is a certain piece of mind when a tenant lets you know that at 3:30am she noticed a water leak in her unit and I didn't have to wonder how many thousands it would cost to get fixed. Yes there is a $75.00 "co-pay" to have the contractor come out, but depending on the plan you have they will fix toilets, stoves, plumbing, HVAC, etc.

Good luck.

Jenna V. · Answer

Hey Stephen, congrats on the purchase!  I'm also a first-time landlord for almost a year now, and closed on a vacant duplex in Oakland last year. Some things I've learned along the way:

1. I hired a very good property manager who found my tenant. She did all the showings and interviews (I didn't have time as I had a FT job), and wrote in the lease that bed bugs are 100% responsibility of the tenant. I thought that was great foresight on her part, which protected me as a landlord.

2. Since you plan to self-manage (like I do), I've spoken to a different Oakland landlord who referred me to East Bay Rental Housing Association. I've never used them before, but they seem to have a lot of resources, and may be useful to check out.

3. One thing that's been invaluable to me, is having a reliable, affordable general contractor that I regularly call when the tenant tells me something doesn't work. Making sure the handyman is knowledgeable about all areas of a house is super useful so you don't have to call an electrician for electrical problems, plumber for water issues, etc, the general contractor pretty much knows it all.

4. You don't have to do this immediately, but another thing I would start doing is consulting with a CPA who specializes in real estate investing. My CPA wanted me to list all the deductions from last year, and since I didn't have all the receipts organized, just ended up guessing a lower number than I actually spent on the rental, to be on the safe side.

5. Get umbrella insurance. My financial advisor (who is also a landlord), highly recommends this for additional protection.

Other things I'm still learning is how to use Cozy.co, and managing my receipts better when tax time comes around!

Stephen G. · Answer

Wanted to update as we're here 2 years later. Some learnings:

• @Brian Garlington's feedback was spot on. I posted on Craigslist + Zillow which federated out to Trulia, Zillow, and I believe Zumper. Zillow had a ton of noise with people requesting views and not really following my requested process (email confirming you meet criteria, about yourself, etc) so I rarely had anyone come to the open house that initially came from Zillow. The power of Craigslist in the Bay Area is real. With Craigslist, I refreshed the post every ~4 days and filled the unit within 10 days. We probably had 30+ inquiries, ~9 back and forth conversations, and 4 final applicants per unit. 
• No smokers, pets, evictions, felonies, etc.
• Credit score >750, Gross income >3x monthly salary with a bit of cash cushion (we paid a premium to be in Glenview so we attract a high quality tenant).
• Once I could screen the applicant and they confirm they check all boxes above via email, I would tell them about a Saturday 11am-1pm open house to create a bit of excitement for all qualified tenants coming at the same time and seeing the competition (taking a learning from Oakland real estate brokers :).
• With the qualified tenants that showed up and shared excitement about the unit, we used cozy.co to have them apply and pay for the background/credit check themselves. This was an incredible service. Qualified tenants had no qualms about paying for this service, and the UI in cozy is unbelievably helpful. Background, criminal, credit/debt, income checks all displayed in a single dash to help you make a much more holistic decision. I can't stress how happy I was with cozy.co. We chose the top tenants that were the most qualified on all areas (great income, great references, great stable jobs, low debt to income ratio, etc).
• Once you make a decision, you can extend an offer and make an ask or two (eg do you mind maintaining the backyard a bit so I don't need to every couple weeks?) This helps cuts down on other annoyances/fees associated with managing a property. 
• We bought a home warranty and it helped us with a dishwasher breaking. All home warranty service is notoriously disappointing so be prepared.
• I have a handyman that I call when things go awry (maybe once every quarter). It comes with the territory of purchasing a 100 year old building. I chose my plumber from Yelp and they're fast, efficient, gracious, etc. My capex is averaged out to be around $300/month because we had a mold issue. 
• We accept rent every month via electronic transfer or check deposit into our checking account. 
• Our rental agreement was boilerplate by East Bay Rental Housing Association that Daniel Bornstein then tweaked to make more owner-friendly. 
•

Overall, we've been super lucky to have amazing tenants and have the mortgage paid down as our property appreciates 5% YOY. We do not break even however and probably cover around $500/month between all expenses but that will change when we formally convert the duplex into a triplex.

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Julian Gonda · Answer

Such a solid post, @Stephen G. Thanks for sharing your experience through the years, lots of nuggets to take away from this thread.

Congrats again on your duplex and glad to see it’s working out well!

Lois S. · Answer

The EBRHA is a good source for Oakland-specific forms.  They also advocate for landlords & have classes & mixers for landlords.  Your membership dues support advocacy at the state level.

Stephen G. · Answer

Amazing and exactly what I needed - thank you!!! The bed bugs piece is really helpful.

Brian Garlington · Answer

@Stephen G.   I'm glad it worked out for you my man.

Brian Garlington · Answer

@Stephen G. I hope this was helpful.

Brian Garlington · Answer

I did not go back to "The Final Four" and ask if they would pay more. Interestingly I had that very situation presented to me by one of them.

The way he did it, was 3 of them were standing inside the unit and.....

He said, "Maybe you should take each of us outside and talk to us one on one about renting this place, I know I'd be willing to pay more per month than what you are asking to get this place. It could be like a auction."

For better or worse, the way he said it in front of everyone actually set off red flags and alarms to me. I asked him, in front of everyone if he had done this before and "auctioned" for a place to be the renter at and he said, "Yes".

I asked him if he had been successfully chosen as the renter and he said, "No, and I know that I would have been the highest renter."

Ironically this came across as even more of a red flag of this potential tenant (If you would have paid more, but the landlord still chose not to rent to you then what else is there about you that I'm missing that made you not be the "Chosen One"?)

I did rent to one of the "Final Four" but not him.

The tenant I did rent to has been a very very good tenant,..going on 4 years now....each year her rent has gone up by a very small amount and in an ironic twist of fate.....one of the other "finalists" saw another rental unit I had available about a month later and she ended up being a tenant after all, just at a different address.

Mike Chern · Answer

In CA, there are professional tenants, don’t fall for them. Aalways credit check. Check employment. Never rent to people pay cash for 6/12 months rent in advance. Avoid people with a sad story.

You can hire somebody to help you find tenant. You will manage the property yourself. good luck,

What advice do you have for a first time landlord in Oakland?

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