All Forum Posts by: Ana Marie B.

@Charlie MacPherson and @Tom Gimer - Thanks for responding.  I agree that the title company dropped the ball.  We purchased this property in WA where it's not customary to use attorneys.  Would you or anyone else have advice on other steps we can take from this point on? 

Our realtor recently requested a copy of the title report and unfortunately, it shows nothing about this sewage charge.  Very odd.  The Sewage Dept. rep. did tell me that this "septic to sewage" conversion process started back in 2010 (long before we owned the property), but that due to a "billing cycle breakdown," they didn't know to bill our property until an audit in Jan. 2017.  Essentially whoever owned the property at that point in time was responsible for the past-due sewage bills from Oct. 2016 onward.  

Hi BP Family!  I'm writing to get some insight from any landlords who may have experienced a similar situation as myself.  About 1 year ago, my husband and I bought a rental property (single family home) from a flipper.  We rented out the house and all was well.  Recently, we received a past-due Sewage Treatment Capacity Charge for the rental, mailed to our primary home, totaling ~$500 (includes late fees, etc.).  The statement threatened a lien if left unpaid. The total sewage charge will cost ~$9,000, payable in 15 years on a quarterly basis. 

I immediately did 3 things:  1.) I phoned the Sewage Dept to obtain some history/background and explained that this is the first time we're ever hearing about such a bill; 2.) I emailed our realtor and sent him a screenshot of the bill and asked how the Title co. didn't catch this; 3.) I paid the ~$500 bill in order to avoid any further penalties.  

What I learned from these calls is that the "former, former" owner (the owner before the flipper who sold us the house) in fact signed a document agreeing to the sewage capacity charge.  However, the flipper (last owner before us), bought this property at auction and never made any payments toward the sewage charge.  Our realtor also consulted with the Title co. and came up empty-handed.

My reason for writing this is two-fold:  1.) I want to warn other investors to be mindful of such a charge and perhaps ask their realtor to be as thorough as possible to help ensure these charges are brought to light before the transaction ends; and 2.) see whether any other landlords have any clever ideas for possible courses of action we can take aside from what we've already done.  

Obviously, we'll have to raise the rent on the tenants come renewal....Anyway, thanks for reading!

@Oliver Santiago - Since I live in the SF Bay Area, it's nearly impossible for me to find a deal in A to B- neighborhoods without spending a great deal of money.  Therefore, I invest out-of-state.  The way I select a city is by thinking about areas I enjoy visiting for leisure.  The idea is that if you have a rental in that location, you'll need to visit from time-to-time so might as well choose a city that you enjoy spending time in.  And usually these tend to be nicer areas (otherwise you probably wouldn't want to visit often).  

@Athena Lei - I may not be "pro" status on this board, but can say that I do inform my property manager in advance that I want to be kept in the loop as to who the "top contenders" are before a selection is made.  My property manager has no problem with this and gives me a call to provide some background on those top contenders (i.e. types of pets if any, special circumstances, potential red flags, etc.).  

Of course, my property manager is always careful to remind me that we need to be sure to abide by applicable laws/statutes when making a selection, which we do. 

But in the end, I make the decision as to which tenant(s) to rent to.  

@Travis Dawson - I agree with you that one must be careful about using a HELOC as a downpayment, as it essentially creates a second loan aside from the mortgage. HELOCs generally have a lower interest rate than a "Home Equity Loan," but the rate is variable, so it would be wise to pay off the HELOC as fast as possible (at least that's what I did).

However, I have to respectfully disagree on the point you make about it being "very hard to close on a conventional loan" using a HELOC. I had absolutely no problem using my HELOC to partially fund a downpayment for one of my rentals. For folks who don't know, once you're approved for a HELOC, you are issued a type of checkbook. All I had to do was write a check for whatever amount of the HELOC I wished to put toward the downpayment. As far as any downtime, I do recall having to wait 2-3 days for the funds to enter my account, but that was it. No months of waiting.

Our mortgage broker also advised that HELOCs are very commonly used this way.

Just say NO to partial rent payments. You'll save yourself a heap of trouble.

Note that in many places, accepting partial payment will void any legal actions you may have previously taken.

@Matt K. - 1031 exchange or sell it outright for profit.

@Jayme Jahns - My husband and I own a "break-even" property in Ballard, Seattle and don't regret it one bit.  That property has appreciated by $100k in the last 2 years!  This is a long-term play for us.  However, we both have high salary jobs and can easily navigate those months when we are slightly in the red.  As we "gradually" increase the rent on this particular tenant (we inherited a good tenant and that means something to us), we'll be consistently in the green in the near future. 

In sum, I'd only proceed with the "break-even" transaction you mention above if you have ample funds to weather the months when you'll be in the red (and do expect to be in the red with that marginal cashflow projection.) Repairs, property tax increases and other unforeseen expenses do happen (more often than we like in Wa)! 

@Jameson Cesar - Just a word of encouragement.... For one, you're not an idiot.  As you stated, you became a landlord, but "not by choice."  Given that, there's a whole lot of learning to be had. 

I think you've gotten a lot of great advice above.  My only $0.02 (aside from improving your tenant screening process, perhaps hiring a professional property manager to decrease potential headaches, etc.) is to NEVER ACCEPT PARTIAL RENT.  It truly is a recipe for disaster.  

If your tenant cannot furnish the full rent payment, then you have the right to issue the tenant an eviction notice for non-payment of rent. Obviously, you'll want to review New Jersey housing laws, but it's still a good rule of thumb.  Take care and I hope everything works out for the best.

Several red flags with this tenant.  I'm also willing to bet this tenant situation won't end well. 

I wager this tenant will either try to break the lease by leaving early or become such a pain in the butt that William S. will have to try to force her out...Hopefully this isn't the case.