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Updated 6 months ago, 07/03/2024
Family Inherited a House, completely new and I really need a someone suggestion here.
My relative died and left his fairly new home to my mother, and we were wondering whether to Airbnb or rent it out. She is very stubborn and says she’s tired of maintaining and paying the bills every month, she is eager to just move a tenant in. Im the opposite, I recently had to sue a company for a product defect, so evictions and court proceedings imo can make you go insane.
She has screened a few people interested from Facebook, and she’s set her mind on a couple living in a very bad apartments from another state, who want to move in immediately (like next week). Home is worth about $200k, my mother wants to rent it out for 1400/month.
The tenant she wants to move in is a woman with 3 kids and a guy, income is $2720 (but my mother says the guy makes the same income). I listed the home on Zillow so they could do a background check, and the woman is the only one who has done it (guy says he will do his shortly). Here’s what Zillow shows:
Credit score is about 640
one time payments: 81%
total debt $15k
open accounts are all student loans which has a note that says dispute resolved - consumer disagrees.
Closed accounts has an auto loan for $9k that says B2 (chapter 7,11, or 12 bankruptcy). This is from 2022 up to now in 2024.
Collections has $3200 in creditors from several creditors (southwest credit system, Louisiana recovery services, etc.).
Here’s what I have a funny feeling about. She says she is moving to get out of that place and do better for her kids. These are apartments they are living are the worst in the city. Like imo if your household income with that guy is like $5400, you have no business being there (literally my other was shot at multiple times). They claim they are religious (he is a youth pastor) and don’t smoke (but they look like the do) and image wise are tatted from head to toe and don’t come off like they say.
I am posting this because my mother goes off on me and says I’m negative because over the last 2 months of tenants applying through Zillow I have seen so many collections, 500 credit scores, and applicants saying on thing, but then asking can she accept housing. So I told her BP members are experts and know more than both of us. I think she should Airbnb, she thinks she should go with these applicants.
I’m a complete novice to Real estate, so I suggested that she does a first, last months rent, and a 25% deposit, plus background check fee (all of which they said they have and will do). I tell her she should get a contract, which my mother tells me she can go to Walmart and get a contract and that will settle that, and my relative left his entire home furnished, so imo that makes more sense to air bnb but I’m not expert
I’m wondering are there anything to look out for or avoid a migraine with? I suggested Airbnb because that avoids moving all these TVs, beds, and everything so hastily, and it’s basically turn key. She has it made up in her mind these are the right tenants and wants to empty the home asap.
Thanks in advance!
Quote from @Brandon White:
My relative died and left his fairly new home to my mother, and we were wondering whether to Airbnb or rent it out. She is very stubborn and says she’s tired of maintaining and paying the bills every month, she is eager to just move a tenant in. Im the opposite, I recently had to sue a company for a product defect, so evictions and court proceedings imo can make you go insane.
She has screened a few people interested from Facebook, and she’s set her mind on a couple living in a very bad apartments from another state, who want to move in immediately (like next week). Home is worth about $200k, my mother wants to rent it out for 1400/month.
The tenant she wants to move in is a woman with 3 kids and a guy, income is $2720 (but my mother says the guy makes the same income). I listed the home on Zillow so they could do a background check, and the woman is the only one who has done it (guy says he will do his shortly). Here’s what Zillow shows:
Credit score is about 640
one time payments: 81%
total debt $15k
open accounts are all student loans which has a note that says dispute resolved - consumer disagrees.
Closed accounts has an auto loan for $9k that says B2 (chapter 7,11, or 12 bankruptcy). This is from 2022 up to now in 2024.
Collections has $3200 in creditors from several creditors (southwest credit system, Louisiana recovery services, etc.).
Here’s what I have a funny feeling about. She says she is moving to get out of that place and do better for her kids. These are apartments they are living are the worst in the city. Like imo if your household income with that guy is like $5400, you have no business being there (literally my other was shot at multiple times). They claim they are religious (he is a youth pastor) and don’t smoke (but they look like the do) and image wise are tatted from head to toe and don’t come off like they say.
I am posting this because my mother goes off on me and says I’m negative because over the last 2 months of tenants applying through Zillow I have seen so many collections, 500 credit scores, and applicants saying on thing, but then asking can she accept housing. So I told her BP members are experts and know more than both of us. I think she should Airbnb, she thinks she should go with these applicants.
I’m a complete novice to Real estate, so I suggested that she does a first, last months rent, and a 25% deposit, plus background check fee (all of which they said they have and will do). I tell her she should get a contract, which my mother tells me she can go to Walmart and get a contract and that will settle that, and my relative left his entire home furnished, so imo that makes more sense to air bnb but I’m not expert
I’m wondering are there anything to look out for or avoid a migraine with? I suggested Airbnb because that avoids moving all these TVs, beds, and everything so hastily, and it’s basically turn key. She has it made up in her mind these are the right tenants and wants to empty the home asap.
Thanks in advance!
There is a lot to unpack there.
First - realize that AirBNB usually makes a lot more money than a long term rental (based on having a good occupancy rate <# of days rented per month>) ... but that all comes with the responsibility of continuous turn-over - where you likely need a cleaning service, etc as a support staff - unless you are going to do that yourself.
Second - When looking at renters - the reason many renters rent is that they DO have poor credit scores. So in my opinion a credit score isn't the greatest indicator on a renter. It's definitely an indicator - but unless you are dealing with a white-collar person who just doesn't want to own a home - it's more common than not to see a lower credit scores.
I'm not a huge fan of out of state renters. You can often miss the bigger picture there. The bankruptcy tells you something about their finances - that they had issues at least at one point. I would try to look them both up on the county clerk's office website for the county they report to live in... and maybe a few of the surrounding counties. You can see felonies, evictions, drug offenses, etc. by doing that. It gives you perhaps a more thorough view of the type of person they are.
Wanting to move "immediately" is often code for "We are about to be kicked out / evicted from where we live, so we desperately need somewhere to go." I would definitely want to know about their future income. If they are moving out of state - do they already have jobs lined up? What is bringing them to your area? If they are operating under the "We'll figure that out once we get there" approach - that is a bad sign. One of the big things we use for qualifying tenants is their income. We usually want to see 2.5 - 3x their income as compared to the rent. So if you were renting the unit for $1,500/month - we would look for income of $3,750 to $4,500 at a minimum. This is pretty much how banks do things too - the idea is that not only do you have to afford your rent - but also your electric, your food, your car, your insurance, your gas, internet, etc. You also want it to be VERIFIABLE income. Paystubs and / or double check their offer of employment with their employer. If they were down at the 2x income level, I would almost consider that disqualifying by OUR standards. There just isn't enough income left to make someone's world go round. This later translates to - We decided to pay the electric and phone bill, instead of our rent.
As you sort of infer - we look at mitigating risk by how much security deposit we require. The more iffy we are, the more deposit we want. I can tell you that 3 kids can do a number on a house - especially if you add in a dog as a 'bonus'. We find our units with kids need far more rehab at turn-over when there are kids involved. Think crayons and dirt smudges on walls, spills on carpets, etc. I would say First and last month's rent, plus a matching security deposit that is equal to the rent. So if you were renting it for $1,500/month - that would be $4,500 to move in. That puts you in a pretty secure place. It can be harder for people to come up with though... so it can cut both ways.
As for rental rate - try going to rentometer.com and put in your rental address and see what it tells you it thinks the rent should be. Just like with appraising a house, you want your rent to be close to the rents of the properties surrounding it - so that you aren't under-renting your property.
As for contracts - you will not find a lease at Walmart I'm betting! - but you can find them online by googling for them (if no better option). If you are a paid member of Bigger Pockets I think they have landlord forms as well - so that might be an option. But if nothing else you could start off by googling "your state" and "Lease" or "Residential lease" - something along those lines. Then read through the results and choose carefully. Some would say a lawyer should draw them up - which makes sense. But many people I know take one they found, and modify it to fit their needs.
You mention your mom "paying the bills every month" and that it's a newer house - but you don't mention whether it is financed or not? If so, given everything you have described - another option might be to cash out of it and take the money and run. Sure - this is bigger pockets - so if you are interested in being a landlord and such - great - but it doesn't really sound like that interests YOU that much from your "migraine" comment. So I would ask yourself, who is it that is up for this?
You could always start off one way, and then go another. I sort of lean your direction and say, "Why don't you try the AirBNB for a couple of months - see how you like it - and then reassess. You also need to verify the requirements of the city you live in as to AirBNB and such. Some cities require permits and have other restrictions, etc. If the constant turn-over bothers you, but you like the idea of rental income - maybe the long term rental is the way to go. Or maybe you decide that, "This is not my gig" and you bail out and sell the property.
Hope it helps a little!
Randy
#3 Managing Your Property Contributor
If the relative left it to her, it is up to her to decide what she wants to do with it. If I was her, I'd sell it and put the money in a high yield savings account. With the current interest rates, it is a lot less work than a rental and she'd probably make about the same (if not more factoring in property taxes, insurance and repairs). My mom sold her house and downsized and rather than buy a rental, she put the money in a savings account.
Quote from @Theresa Harris:
If the relative left it to her, it is up to her to decide what she wants to do with it. If I was her, I'd sell it and put the money in a high yield savings account. With the current interest rates, it is a lot less work than a rental and she'd probably make about the same (if not more factoring in property taxes, insurance and repairs). My mom sold her house and downsized and rather than buy a rental, she put the money in a savings account.
Quote from @Randall Alan:
Quote from @Brandon White:
My relative died and left his fairly new home to my mother, and we were wondering whether to Airbnb or rent it out. She is very stubborn and says she’s tired of maintaining and paying the bills every month, she is eager to just move a tenant in. Im the opposite, I recently had to sue a company for a product defect, so evictions and court proceedings imo can make you go insane.
She has screened a few people interested from Facebook, and she’s set her mind on a couple living in a very bad apartments from another state, who want to move in immediately (like next week). Home is worth about $200k, my mother wants to rent it out for 1400/month.
The tenant she wants to move in is a woman with 3 kids and a guy, income is $2720 (but my mother says the guy makes the same income). I listed the home on Zillow so they could do a background check, and the woman is the only one who has done it (guy says he will do his shortly). Here’s what Zillow shows:
Credit score is about 640
one time payments: 81%
total debt $15k
open accounts are all student loans which has a note that says dispute resolved - consumer disagrees.
Closed accounts has an auto loan for $9k that says B2 (chapter 7,11, or 12 bankruptcy). This is from 2022 up to now in 2024.
Collections has $3200 in creditors from several creditors (southwest credit system, Louisiana recovery services, etc.).
Here’s what I have a funny feeling about. She says she is moving to get out of that place and do better for her kids. These are apartments they are living are the worst in the city. Like imo if your household income with that guy is like $5400, you have no business being there (literally my other was shot at multiple times). They claim they are religious (he is a youth pastor) and don’t smoke (but they look like the do) and image wise are tatted from head to toe and don’t come off like they say.
I am posting this because my mother goes off on me and says I’m negative because over the last 2 months of tenants applying through Zillow I have seen so many collections, 500 credit scores, and applicants saying on thing, but then asking can she accept housing. So I told her BP members are experts and know more than both of us. I think she should Airbnb, she thinks she should go with these applicants.
I’m a complete novice to Real estate, so I suggested that she does a first, last months rent, and a 25% deposit, plus background check fee (all of which they said they have and will do). I tell her she should get a contract, which my mother tells me she can go to Walmart and get a contract and that will settle that, and my relative left his entire home furnished, so imo that makes more sense to air bnb but I’m not expert
I’m wondering are there anything to look out for or avoid a migraine with? I suggested Airbnb because that avoids moving all these TVs, beds, and everything so hastily, and it’s basically turn key. She has it made up in her mind these are the right tenants and wants to empty the home asap.
Thanks in advance!
There is a lot to unpack there.
First - realize that AirBNB usually makes a lot more money than a long term rental (based on having a good occupancy rate <# of days rented per month>) ... but that all comes with the responsibility of continuous turn-over - where you likely need a cleaning service, etc as a support staff - unless you are going to do that yourself.
Second - When looking at renters - the reason many renters rent is that they DO have poor credit scores. So in my opinion a credit score isn't the greatest indicator on a renter. It's definitely an indicator - but unless you are dealing with a white-collar person who just doesn't want to own a home - it's more common than not to see a lower credit scores.
I'm not a huge fan of out of state renters. You can often miss the bigger picture there. The bankruptcy tells you something about their finances - that they had issues at least at one point. I would try to look them both up on the county clerk's office website for the county they report to live in... and maybe a few of the surrounding counties. You can see felonies, evictions, drug offenses, etc. by doing that. It gives you perhaps a more thorough view of the type of person they are.
Wanting to move "immediately" is often code for "We are about to be kicked out / evicted from where we live, so we desperately need somewhere to go." I would definitely want to know about their future income. If they are moving out of state - do they already have jobs lined up? If they are operating under the "We'll figure that out once we get there" approach - that is a bad sign. One of the big things we use for qualifying tenants is their income. We usually want to see 2.5 - 3x their income as compared to the rent. So if you were renting the unit for $1,500/month - we would look for income of $3,750 to $4,500 at a minimum. This is pretty much how banks do things too - the idea is that not only do you have to afford your rent - but also your electric, your food, your car, your insurance, your gas, internet, etc. You also want it to be VERIFIABLE income. Paystubs and double check it with their employer. If they were down at the 2x income level, I would almost consider that disqualifying by OUR standards. There just isn't enough income left to make someone's world go round. This later translates to - We decided to pay the electric bill, instead of our rent.
As you sort of infer - we look at mitigating risk by how much security deposit we require. The more iffy we are, the more deposit we want. I can tell you that 3 kids can do a number on a house - especially if you add in a dog as a 'bonus'. We find our units with kids need far more rehab at turn-over when there are kids involved. Think crayons and dirt smudges on walls, spills on carpets, etc. I would say First and last month's rent, plus a matching security deposit that is equal to the rent. So if you were renting it for $1,500/month - that would be $4,500 to move in. That puts you in a pretty secure place. It can be harder for people to come up with though... so it can cut both ways.
As for rental rate - try going to rentometer.com and put in your rental address and see what it tells you it thinks the rent should be. Just like with appraising a house, you want your rent to be close to the rents of the properties surrounding it - so that you aren't under-renting your property.
You mention "paying the bills every month" and that it's a newer house - but you don't mention whether it is financed or not? If so, given everything you have described - another option might be to cash out of it and take the money and run. Sure - this is bigger pockets - so if you are interested in being a landlord and such - great - but it doesn't really sound like that interests YOU that much from your "migraine" comment. So I would ask yourself, who is it that is up for this?
You could always start off one way, and then go another. I sort of lean your direction and say, "Why don't you try the AirBNB for a couple of months - see how you like it - and then reassess. You also need to verify the requirements of the city you live in as to AirBNB and such. Some cities require permits and have other restrictions, etc. If the constant turn-over bothers you, but you like the idea of rental income - maybe the long term rental is the way to go. Or maybe you decide that, "This is not my gig" and you bail out and sell the property.
Hope it helps a little!
Randy
Also, I mean just utility bills (the home is completely paid off and only 2-3 years old, built from the ground). The woman who wants to rent it income says $2700/month, but she claims her husband makes the same amount (they work at the same job same position).
Also, can you elaborate a bit more on the bankruptcy b2 part and background checks? Do you mean that will be on the county clerks office they resided?
also, you are correct about the $4500 upfront cost. That’s my mothers main argument saying that’s hard for people to have that, and that I’m too negative and will spend for every looking for the perfect tenant (that I’m finding a problem with everyone) and the utility bills and expenses are costing her money.
Thank you for your help!
#3 Managing Your Property Contributor
Quote from @Brandon White:
Quote from @Theresa Harris:
If the relative left it to her, it is up to her to decide what she wants to do with it. If I was her, I'd sell it and put the money in a high yield savings account. With the current interest rates, it is a lot less work than a rental and she'd probably make about the same (if not more factoring in property taxes, insurance and repairs). My mom sold her house and downsized and rather than buy a rental, she put the money in a savings account.
Quote from @Theresa Harris:
Quote from @Brandon White:
Quote from @Theresa Harris:
If the relative left it to her, it is up to her to decide what she wants to do with it. If I was her, I'd sell it and put the money in a high yield savings account. With the current interest rates, it is a lot less work than a rental and she'd probably make about the same (if not more factoring in property taxes, insurance and repairs). My mom sold her house and downsized and rather than buy a rental, she put the money in a savings account.
Quote from @Brandon White:
Quote from @Randall Alan:
Quote from @Brandon White:
My relative died and left his fairly new home to my mother, and we were wondering whether to Airbnb or rent it out. She is very stubborn and says she’s tired of maintaining and paying the bills every month, she is eager to just move a tenant in. Im the opposite, I recently had to sue a company for a product defect, so evictions and court proceedings imo can make you go insane.
She has screened a few people interested from Facebook, and she’s set her mind on a couple living in a very bad apartments from another state, who want to move in immediately (like next week). Home is worth about $200k, my mother wants to rent it out for 1400/month.
The tenant she wants to move in is a woman with 3 kids and a guy, income is $2720 (but my mother says the guy makes the same income). I listed the home on Zillow so they could do a background check, and the woman is the only one who has done it (guy says he will do his shortly). Here’s what Zillow shows:
Credit score is about 640
one time payments: 81%
total debt $15k
open accounts are all student loans which has a note that says dispute resolved - consumer disagrees.
Closed accounts has an auto loan for $9k that says B2 (chapter 7,11, or 12 bankruptcy). This is from 2022 up to now in 2024.
Collections has $3200 in creditors from several creditors (southwest credit system, Louisiana recovery services, etc.).
Here’s what I have a funny feeling about. She says she is moving to get out of that place and do better for her kids. These are apartments they are living are the worst in the city. Like imo if your household income with that guy is like $5400, you have no business being there (literally my other was shot at multiple times). They claim they are religious (he is a youth pastor) and don’t smoke (but they look like the do) and image wise are tatted from head to toe and don’t come off like they say.
I am posting this because my mother goes off on me and says I’m negative because over the last 2 months of tenants applying through Zillow I have seen so many collections, 500 credit scores, and applicants saying on thing, but then asking can she accept housing. So I told her BP members are experts and know more than both of us. I think she should Airbnb, she thinks she should go with these applicants.
I’m a complete novice to Real estate, so I suggested that she does a first, last months rent, and a 25% deposit, plus background check fee (all of which they said they have and will do). I tell her she should get a contract, which my mother tells me she can go to Walmart and get a contract and that will settle that, and my relative left his entire home furnished, so imo that makes more sense to air bnb but I’m not expert
I’m wondering are there anything to look out for or avoid a migraine with? I suggested Airbnb because that avoids moving all these TVs, beds, and everything so hastily, and it’s basically turn key. She has it made up in her mind these are the right tenants and wants to empty the home asap.
Thanks in advance!
There is a lot to unpack there.
First - realize that AirBNB usually makes a lot more money than a long term rental (based on having a good occupancy rate <# of days rented per month>) ... but that all comes with the responsibility of continuous turn-over - where you likely need a cleaning service, etc as a support staff - unless you are going to do that yourself.
Second - When looking at renters - the reason many renters rent is that they DO have poor credit scores. So in my opinion a credit score isn't the greatest indicator on a renter. It's definitely an indicator - but unless you are dealing with a white-collar person who just doesn't want to own a home - it's more common than not to see a lower credit scores.
I'm not a huge fan of out of state renters. You can often miss the bigger picture there. The bankruptcy tells you something about their finances - that they had issues at least at one point. I would try to look them both up on the county clerk's office website for the county they report to live in... and maybe a few of the surrounding counties. You can see felonies, evictions, drug offenses, etc. by doing that. It gives you perhaps a more thorough view of the type of person they are.
Wanting to move "immediately" is often code for "We are about to be kicked out / evicted from where we live, so we desperately need somewhere to go." I would definitely want to know about their future income. If they are moving out of state - do they already have jobs lined up? If they are operating under the "We'll figure that out once we get there" approach - that is a bad sign. One of the big things we use for qualifying tenants is their income. We usually want to see 2.5 - 3x their income as compared to the rent. So if you were renting the unit for $1,500/month - we would look for income of $3,750 to $4,500 at a minimum. This is pretty much how banks do things too - the idea is that not only do you have to afford your rent - but also your electric, your food, your car, your insurance, your gas, internet, etc. You also want it to be VERIFIABLE income. Paystubs and double check it with their employer. If they were down at the 2x income level, I would almost consider that disqualifying by OUR standards. There just isn't enough income left to make someone's world go round. This later translates to - We decided to pay the electric bill, instead of our rent.
As you sort of infer - we look at mitigating risk by how much security deposit we require. The more iffy we are, the more deposit we want. I can tell you that 3 kids can do a number on a house - especially if you add in a dog as a 'bonus'. We find our units with kids need far more rehab at turn-over when there are kids involved. Think crayons and dirt smudges on walls, spills on carpets, etc. I would say First and last month's rent, plus a matching security deposit that is equal to the rent. So if you were renting it for $1,500/month - that would be $4,500 to move in. That puts you in a pretty secure place. It can be harder for people to come up with though... so it can cut both ways.
As for rental rate - try going to rentometer.com and put in your rental address and see what it tells you it thinks the rent should be. Just like with appraising a house, you want your rent to be close to the rents of the properties surrounding it - so that you aren't under-renting your property.
You mention "paying the bills every month" and that it's a newer house - but you don't mention whether it is financed or not? If so, given everything you have described - another option might be to cash out of it and take the money and run. Sure - this is bigger pockets - so if you are interested in being a landlord and such - great - but it doesn't really sound like that interests YOU that much from your "migraine" comment. So I would ask yourself, who is it that is up for this?
You could always start off one way, and then go another. I sort of lean your direction and say, "Why don't you try the AirBNB for a couple of months - see how you like it - and then reassess. You also need to verify the requirements of the city you live in as to AirBNB and such. Some cities require permits and have other restrictions, etc. If the constant turn-over bothers you, but you like the idea of rental income - maybe the long term rental is the way to go. Or maybe you decide that, "This is not my gig" and you bail out and sell the property.
Hope it helps a little!
Randy
Also, I mean just utility bills (the home is completely paid off and only 2-3 years old, built from the ground). The woman who wants to rent it income says $2700/month, but she claims her husband makes the same amount (they work at the same job same position).
Also, can you elaborate a bit more on the bankruptcy b2 part and background checks? Do you mean that will be on the county clerks office they resided?
also, you are correct about the $4500 upfront cost. That’s my mothers main argument saying that’s hard for people to have that, and that I’m too negative and will spend for every looking for the perfect tenant (that I’m finding a problem with everyone) and the utility bills and expenses are costing her money.
Thank you for your help!
Yes - if you go to the county clerk's website, you can usually see the 'dockets' - which is all the filings associated with whatever activity was being transacted. So everything from a traffic ticket, to a drug offense, etc. Bankruptcies are likely confidential - so you might see the bankruptcy - but wouldn't be able to see the documents inside of it. But for most types of public records you can actually click and read the documents. So if it were a drug offense you could follow it from the person being pulled over and read the police report, all the way through adjudication where you can see if they just had to pay a fine, or went to jail, or whatever.
What I can tell you is that you want to be picky about placing a good tenant. And "good tenant" is sort of a multi-layered concept. Does the tenant fit the house (like a family of 6 for a 2 bedroom/1 bath apartment) isn't a good fit. Too many people - not enough beds, and such. Income, payment history, etc. Choosing the wrong tenant can be costly if for some reason they quit paying rent, they fall behind, then you have to evict them, etc. You can be out 3 months rent real quick - plus have to pay court costs to solve you problem. 3x the rent is a tall order for many people - but not all people! There are a number of red flags for the tenant you are considering - the bankruptcy, the charge offs - all of those indicate they aren't handling their finances well - and YOUR RENT is about to become the biggest part of their future finances... so that should give you (and your mother) pause.
What I can tell you is that it is easy to latch on to a tenant out of convenience factors (bird in hand). Then, another tenant comes along and they are SOOooo much better. So your mom might be just wanting to go with them because she found them and has them in hand. But that isn't a great reason to go with a 'just ok' tenant.
One thing to know is that everyone has a background. For instance, have you ever bounced a check? Gotten pulled over by the police, etc. The ticket created an entry with the clerk's office. But the items that are specific to financial performance and the safety of yourself and the neighbors, etc should be the ones you pay more attention to. A bankruptcy that is years old is less concerning than an eviction that is 2 months ago. The currency of such an eviction tells me that type of person is not financially stable - which would be disqualifying for us. Theft, armed robbery, domestic violence, etc are safety concerns that would cause me pause.. If it was years ago - I could look past a minor drug offense. If it was 6 months ago and it was something violent, not so much.
Randy
Yes, you SHOULD spend a lot of time looking for great tenant (none are perfect), but better be a good one. Screening is your most important step above all others, don't blow it, and DONT be in a hurry. Those 3 kids will tear that new house to shreds. Have you checked out their place and whether they are mindful and careful with their previous rental? New House? Sell it and buy two rentals if you wanna get into the biz. OR, sell it and enjoy the current 5.5% interest. Your mom should be taking it easy, not stressing. Step 2. How much time have you spent on preparing a bullet proof lease, with every rule pertaining to your property imaginable?
#3 Managing Your Property Contributor
Quote from @Brandon White:
Quote from @Theresa Harris:
Quote from @Brandon White:
Quote from @Theresa Harris:
If the relative left it to her, it is up to her to decide what she wants to do with it. ...
Quote from @Brandon White:
My relative died and left his fairly new home to my mother, and we were wondering whether to Airbnb or rent it out. She is very stubborn and says she’s tired of maintaining and paying the bills every month, she is eager to just move a tenant in. Im the opposite, I recently had to sue a company for a product defect, so evictions and court proceedings imo can make you go insane.
She has screened a few people interested from Facebook, and she’s set her mind on a couple living in a very bad apartments from another state, who want to move in immediately (like next week). Home is worth about $200k, my mother wants to rent it out for 1400/month.
The tenant she wants to move in is a woman with 3 kids and a guy, income is $2720 (but my mother says the guy makes the same income). I listed the home on Zillow so they could do a background check, and the woman is the only one who has done it (guy says he will do his shortly). Here’s what Zillow shows:
Credit score is about 640
one time payments: 81%
total debt $15k
open accounts are all student loans which has a note that says dispute resolved - consumer disagrees.
Closed accounts has an auto loan for $9k that says B2 (chapter 7,11, or 12 bankruptcy). This is from 2022 up to now in 2024.
Collections has $3200 in creditors from several creditors (southwest credit system, Louisiana recovery services, etc.).
Here’s what I have a funny feeling about. She says she is moving to get out of that place and do better for her kids. These are apartments they are living are the worst in the city. Like imo if your household income with that guy is like $5400, you have no business being there (literally my other was shot at multiple times). They claim they are religious (he is a youth pastor) and don’t smoke (but they look like the do) and image wise are tatted from head to toe and don’t come off like they say.
I am posting this because my mother goes off on me and says I’m negative because over the last 2 months of tenants applying through Zillow I have seen so many collections, 500 credit scores, and applicants saying on thing, but then asking can she accept housing. So I told her BP members are experts and know more than both of us. I think she should Airbnb, she thinks she should go with these applicants.
I’m a complete novice to Real estate, so I suggested that she does a first, last months rent, and a 25% deposit, plus background check fee (all of which they said they have and will do). I tell her she should get a contract, which my mother tells me she can go to Walmart and get a contract and that will settle that, and my relative left his entire home furnished, so imo that makes more sense to air bnb but I’m not expert
I’m wondering are there anything to look out for or avoid a migraine with? I suggested Airbnb because that avoids moving all these TVs, beds, and everything so hastily, and it’s basically turn key. She has it made up in her mind these are the right tenants and wants to empty the home asap.
Thanks in advance!
What I would tell you is that now is the best time to sell your property if you were thinking of going that way. It’s fresh, no wear and tear, etc and the market is high right now as to home prices, etc.
I think you need to ask yourself if you want to be a landlord or not. Just beause the house dropped in your lap doesn’t mean you have to go that direction.
If you do want to be a landlord, it doesn’t have to be with that house. You could cash out, buy a cheaper house using just 1/4th of that money (financed) and have options with how you utilize the rest of those funds. If you really got into rentals you could buy 4 of them for the money you have tied up in the one you inherited. If you run the numbers you will make far more money with 4 than the one you currently hold - even financed. Plus you get depreciation on 4 as well, as well as market appreciation on 4 - which long term is where you can make a lot more money. We have 37 doors that we bought between 2018 and 2021. The have pretty much tripled in value in 6 years. In retrospect - great timing! But even at 3-5% market appreciation - which is more the long term norm, that is $3,000-5,000 a year increase in value. If you owned 4 - $100,000 properties - that is $60-100k in market appreciation in 5 years. It’s way better than 5% on your money in the bank!… but takes effort to run the properties, etc.
all the best!
randy
Quote from @Randall Alan:
Quote from @Brandon White:
My relative died and left his fairly new home to my mother, and we were wondering whether to Airbnb or rent it out. She is very stubborn and says she’s tired of maintaining and paying the bills every month, she is eager to just move a tenant in. Im the opposite, I recently had to sue a company for a product defect, so evictions and court proceedings imo can make you go insane.
She has screened a few people interested from Facebook, and she’s set her mind on a couple living in a very bad apartments from another state, who want to move in immediately (like next week). Home is worth about $200k, my mother wants to rent it out for 1400/month.
The tenant she wants to move in is a woman with 3 kids and a guy, income is $2720 (but my mother says the guy makes the same income). I listed the home on Zillow so they could do a background check, and the woman is the only one who has done it (guy says he will do his shortly). Here’s what Zillow shows:
Credit score is about 640
one time payments: 81%
total debt $15k
open accounts are all student loans which has a note that says dispute resolved - consumer disagrees.
Closed accounts has an auto loan for $9k that says B2 (chapter 7,11, or 12 bankruptcy). This is from 2022 up to now in 2024.
Collections has $3200 in creditors from several creditors (southwest credit system, Louisiana recovery services, etc.).
Here’s what I have a funny feeling about. She says she is moving to get out of that place and do better for her kids. These are apartments they are living are the worst in the city. Like imo if your household income with that guy is like $5400, you have no business being there (literally my other was shot at multiple times). They claim they are religious (he is a youth pastor) and don’t smoke (but they look like the do) and image wise are tatted from head to toe and don’t come off like they say.
I am posting this because my mother goes off on me and says I’m negative because over the last 2 months of tenants applying through Zillow I have seen so many collections, 500 credit scores, and applicants saying on thing, but then asking can she accept housing. So I told her BP members are experts and know more than both of us. I think she should Airbnb, she thinks she should go with these applicants.
I’m a complete novice to Real estate, so I suggested that she does a first, last months rent, and a 25% deposit, plus background check fee (all of which they said they have and will do). I tell her she should get a contract, which my mother tells me she can go to Walmart and get a contract and that will settle that, and my relative left his entire home furnished, so imo that makes more sense to air bnb but I’m not expert
I’m wondering are there anything to look out for or avoid a migraine with? I suggested Airbnb because that avoids moving all these TVs, beds, and everything so hastily, and it’s basically turn key. She has it made up in her mind these are the right tenants and wants to empty the home asap.
Thanks in advance!
What I would tell you is that now is the best time to sell your property if you were thinking of going that way. It’s fresh, no wear and tear, etc and the market is high right now as to home prices, etc.
I think you need to ask yourself if you want to be a landlord or not. Just beause the house dropped in your lap doesn’t mean you have to go that direction.
If you do want to be a landlord, it doesn’t have to be with that house. You could cash out, buy a cheaper house using just 1/4th of that money (financed) and have options with how you utilize the rest of those funds. If you really got into rentals you could buy 4 of them for the money you have tied up in the one you inherited. If you run the numbers you will make far more money with 4 than the one you currently hold - even financed. Plus you get depreciation on 4 as well, as well as market appreciation on 4 - which long term is where you can make a lot more money. We have 37 doors that we bought between 2018 and 2021. The have pretty much tripled in value in 6 years. In retrospect - great timing! But even at 3-5% market appreciation - which is more the long term norm, that is $3,000-5,000 a year increase in value. If you owned 4 - $100,000 properties - that is $60-100k in market appreciation in 5 years. It’s way better than 5% on your money in the bank!… but takes effort to run the properties, etc.
all the best!
randy
Thanks. That’s how I would look at it, but my mother wants something simple. She won’t want to go looking for more properties and the money will be spent I think if they gave her 200k out right (or at least a 4th of it will).
Now she could go to my banking direct and get 5.5% or fidelity I think CMA is able to get around 5%, but that is based on the federal reserve so that could be less in the future. So that's why I wanted someone good take on things.
Quote from @Brandon White:
Quote from @Randall Alan:
Quote from @Brandon White:
My relative died and left his fairly new home to my mother, and we were wondering whether to Airbnb or rent it out. She is very stubborn and says she’s tired of maintaining and paying the bills every month, she is eager to just move a tenant in. Im the opposite, I recently had to sue a company for a product defect, so evictions and court proceedings imo can make you go insane.
She has screened a few people interested from Facebook, and she’s set her mind on a couple living in a very bad apartments from another state, who want to move in immediately (like next week). Home is worth about $200k, my mother wants to rent it out for 1400/month.
The tenant she wants to move in is a woman with 3 kids and a guy, income is $2720 (but my mother says the guy makes the same income). I listed the home on Zillow so they could do a background check, and the woman is the only one who has done it (guy says he will do his shortly). Here’s what Zillow shows:
Credit score is about 640
one time payments: 81%
total debt $15k
open accounts are all student loans which has a note that says dispute resolved - consumer disagrees.
Closed accounts has an auto loan for $9k that says B2 (chapter 7,11, or 12 bankruptcy). This is from 2022 up to now in 2024.
Collections has $3200 in creditors from several creditors (southwest credit system, Louisiana recovery services, etc.).
Here’s what I have a funny feeling about. She says she is moving to get out of that place and do better for her kids. These are apartments they are living are the worst in the city. Like imo if your household income with that guy is like $5400, you have no business being there (literally my other was shot at multiple times). They claim they are religious (he is a youth pastor) and don’t smoke (but they look like the do) and image wise are tatted from head to toe and don’t come off like they say.
I am posting this because my mother goes off on me and says I’m negative because over the last 2 months of tenants applying through Zillow I have seen so many collections, 500 credit scores, and applicants saying on thing, but then asking can she accept housing. So I told her BP members are experts and know more than both of us. I think she should Airbnb, she thinks she should go with these applicants.
I’m a complete novice to Real estate, so I suggested that she does a first, last months rent, and a 25% deposit, plus background check fee (all of which they said they have and will do). I tell her she should get a contract, which my mother tells me she can go to Walmart and get a contract and that will settle that, and my relative left his entire home furnished, so imo that makes more sense to air bnb but I’m not expert
I’m wondering are there anything to look out for or avoid a migraine with? I suggested Airbnb because that avoids moving all these TVs, beds, and everything so hastily, and it’s basically turn key. She has it made up in her mind these are the right tenants and wants to empty the home asap.
Thanks in advance!
What I would tell you is that now is the best time to sell your property if you were thinking of going that way. It’s fresh, no wear and tear, etc and the market is high right now as to home prices, etc.
I think you need to ask yourself if you want to be a landlord or not. Just beause the house dropped in your lap doesn’t mean you have to go that direction.
If you do want to be a landlord, it doesn’t have to be with that house. You could cash out, buy a cheaper house using just 1/4th of that money (financed) and have options with how you utilize the rest of those funds. If you really got into rentals you could buy 4 of them for the money you have tied up in the one you inherited. If you run the numbers you will make far more money with 4 than the one you currently hold - even financed. Plus you get depreciation on 4 as well, as well as market appreciation on 4 - which long term is where you can make a lot more money. We have 37 doors that we bought between 2018 and 2021. The have pretty much tripled in value in 6 years. In retrospect - great timing! But even at 3-5% market appreciation - which is more the long term norm, that is $3,000-5,000 a year increase in value. If you owned 4 - $100,000 properties - that is $60-100k in market appreciation in 5 years. It’s way better than 5% on your money in the bank!… but takes effort to run the properties, etc.
all the best!
randy
Thanks. That’s how I would look at it, but my mother wants something simple. She won’t want to go looking for more properties and the money will be spent I think if they gave her 200k out right (or at least a 4th of it will).
Now she could go to my banking direct and get 5.5% or fidelity I think CMA is able to get around 5%, but that is based on the federal reserve so that could be less in the future. So that's why I wanted someone good take on things.
I too received an inheritance. I felt a fiduciary duty to respect the gift I was given (and the person who gave it to me). I saw it as an opportunity to create generational wealth for my family. In 6 years I have seen it quadruple in value… so off to a very good start!
You are right though… you / your mom have to get to know yourselves on a new different level if you have never been in such a situation. Determine if you have the discipline to manage cash, or want to be a landlord. The 5% easy money in the HYSA will begin to drop later this year when the Fed starts cutting rates. Then where do you turn? the buzzword is diversification - but with the purchases I made at the time - real estate far outperformed the stock market. I have about 3/4 of my investments in real estate. Today though - I’m not sure the same advice would necessarily hold as to that percentage. I think it boils down to looking at the performance of any investment consideration. The long term stock market return is 7%. Run the numbers on your investment. If you can get $1,500 net per month on your $200,000 house - that is a 9% return ($1,500 x 12 / $200,000). But you are also getting many other benefits - appreciation and depreciation to name the bigger ones - so your long term return is even better. The difference for me was that at prices from 2018 - 2021 I was averaging a 23% return up front because both houses and money were way cheaper! That’s not to say it can’t still be done - but it’s just much harder to find those that perform to that level. So the percentages today for me might very well have been more towards the stock market side of things.
BTW, There is nothing wrong with your mom buying herself something nice with a portion of the money if she does liquidate the house. In some since, it can settle you down to be more disciplined with the balance of the money. But don’t squander a huge portion of it on a depreciating asset (think sports car, jewelry, etc). And if your mom does not have a house for herself she owns (ie. if she currently Rents )- then that would not be a bad place to start in my opinion with some of the money she might gain from selling the house. That could be her personal path toward an appreciating asset and not wasting money on rent. But I would say to finance such a house (maybe when rates come down) and leave the other money as a resource for investment purposes.
We cannot tell you the best path forward.., only point out tidbits and point you in directions which you must then weigh against your personal circumstances.
Another thing to know is that there are many people who will be more than happy to assist new investors like you - but with less than fiduciary intentions. You have to turn on possibly a new skill of protecting your new found assets.
You need to learn that a broker who charges you 1.3% a year to manage your money can cost you upwards of 1/3 of your future gain on said money from that 1.3% fee over a long period of time. Some can argue that they will hopefully earn you more than that - but few can beat the average return of the stock market or everyone would be flocking to them in droves (inside secret - most don’t). I split the money I had invested in the market between a broker and self managing it through Vanguard and did a 1 year comparison. I out performed my broker by $50,000 by investing in 6 ETF Index funds - the ones Vanguard said were performing best if you want to know what my secret was!!!). I showed it to my broker and pretty much said - tell me why I should leave my money with you and pay you for the privilege when you just cost me $50,000 in one year!!?! I then moved all my money to be self managed. So even those you may see as professionals aren’t always the best option. But that is not to say they don’t have their place for those who can’t do it for themselves. It was a little scary investing myself the first time…. But easy enough to work through that now it is no different than buying something on eBay or something similar.
You just have to learn the process and follow some broad pieces of advice such as - don’t invest a lot in individual stocks because you are subject to much higher variances in performance. ETFs and other index funds divide those ups and downs across hundreds - if not more stocks to protect you from that volatility. Pretty simple concept - that even my old broker didn’t follow - which is very much why I out performed him in my opinion.
Likewise, in real estate there are Mentors by the dozen that all have “the secret to your success” available for purchase ranging from $289 to $50,000 (no joke on that upper number). Many will swear by them. Just know that most of what they will package up for you in a fancy seminar (or whatever) is available (albeit unpackaged) on this website through your own due diligence and inquiry. So be careful as a newbie not to get suckered into losing too much money that way either.
Enough soap boxing on my part! lol!
All the best!
Randy
I agree with Randall's comments about the red flags with those tenants: collections, recent bankruptcy and wanting to move in immediately.
I think the AirBnb is a possibility given the location you described but it's a lot more work if you're doing all this yourself.
As far as screening tenants for a long term rental, what about having a Property Management company do the advertising and screening of tenants? It would typically be a one time fee. Some of them have an option for owners who want to self manage but don't want to screen tenants themselves. Or have a PM screen and do the monthly management so you or she doesn't have to interact directly with the tenants? You could tell your mom that "I think it's better if a professional screens the tenants since they've done this hundreds of times and know what to look for with good tenants"
It may be worth it to talk to a PM to see what comparable properties in the same condition are renting for. I've found that Rentometer either overestimates or underestimates the rent depending on the location and condition of the property (e.g a house with updated kitchen, bathrooms and flooring will have a higher rent than a house where everything is 15 to 20 years old but still functional).
@Brandon White will your mom respond to a reasoned discussion. I wouldn't throw just things at her, lay the pros and cons out on paper. First what are her goals? Not just with the house but with the $ value of the property and where she wants to be personally. Then look at the scenarios. You have to have cons for the option you are pushing too.
In the end its not about this couple. Let them go. Tell her a just as good tenant will come up. Does she even want to be a LL. In the end, it is about what she wants to get out of the house and where she wants to go from there.
I hope she doesn't blow it all in Vegas but it's her inheritance.