All Forum Posts by: JR T.

Welcome and congratulations on your first investment property! Two pieces of advice: 

Be a stickler about your rents from day one. It's hard to be lax and then tighten up procedures. Rent is due on the first by close of business and a late fee equal to the maximum allowed under your state law should be assessed on the second. That late fee when paid in the month when rent is due is a 60% APR return on the rent payment. Don't ever pass up an opportunity to collect one!

Never develop personal relationships with your tenants. Do not get involved with their family affairs or socialize with them in any way. You are in a different social group from your tenants - act like it.

Enjoy, it's an exciting and rewarding business!

It's not a change in a lease if your Dad waived prior late fees and your want to enforce this month's fee. Most tenants will dislike you when you're a dick about collecting late fees but it's not something that causes them to move. Avoid any personal relationships with your tenants and you're less likely to care what they think about you ;)

My understanding is it's a possible means of receiving some form of monetary compensation if the tenant accidentally screws up the unit. My tenants are not tenants you bother suing for even small amounts when they move out. Right now I'm calling it better than nothing; if one day I collect on one of these policies I will be sending up the Internet balloons to celebrate. 

We are beefing up the language in the tenant liability portions of the lease. For example our leases hold the tenant liable for introducing non-transitory pets, such as bedbugs, into the unit.  We added clarity about the tenant's third party liability for failing to properly remove snow and ice and having someone slip and fall. We want to see if we prosecute the tenant's liability on items we'd normally never get them to pay if we can trigger their coverage. Of course this will probably vary from policy to policy. Getting some of those items covered would be a home run for this project. I'll probably modify the language again after we review some policies and get some claims rejected.

It remains to be seen if requiring them to buy this $150 policy once a year is going to impact our rent collections or lease renewals. More to come!

It never hurts to try and sometimes going to a seller and humbling yourself by telling them that you misevaluated the property by plugging in those two units that aren't there yet, your financing partner rejected your evaluation BUT then offering to get him $285 if he delivers it turnkey or for X lower price that management has approved in consideration of your mistake, etc. etc. 

P.S. I am not surprised that the deal looks better every time you get them to lower the price ;).

I own four vehicles. Three of them are normal cars I carry just liability on. It's a difference of about $800 per year per vehicle. I have a fancier Cadillac that I drive in Maryland that I have full coverage on. I expect to collect on that policy at some point though because I'm an awful driver and am in lots of accidents. The other 3 cars are probably worth $8-12k ea. and if they got wrecked I'd chalk it up to an earned loss and that's that. The way I look at it is I've had one accident where I had to have body work done and that was $400 over the course of four years. In just that short time I've saved a little over $6,800 in insurance premiums so if a car gets wrecked then I guess the premium was a fair predictor. I have little expectation of collecting on any sort of policy other than liability in the case of the rentals. I'm just getting pushed into the wrong products by lazy insurance salesmen.

@JD Martin Your tax rate is not 100%. You do not have free insurance as a result of your tax deduction. You should look forward to paying more in taxes - means you made more money :). I admit the choice of title was in poor taste. I wanted the thread to get glanced at by as many people on the site as possible so I made it kind of challenging hoping that while reading the post readers would understand I'm writing about this because I'm uncomfortable with the current setup and looking for better solutions. I will post a follow up when I have the issue closer to resolution.

@Jason Bott I hope we won't have trouble getting the COIs out of the insurance companies. I'll post a follow up on implementation in a few weeks.

In my leases rent is due by close of business on the 1st, late fee is due on the 2nd and it calls for us to file an eviction on the 6th. Evictions cost a whopping $20 to file and serve here in Maryland and the tenant has a right of redemption anyway so we are fine with filing them against anyone we haven't heard from on the 6th day. It took a long time, a little over a year at just harping away at this policy but we have started to receive rents around the 25th and these are low-income tenants. We have other tenants who choose to pay the late fee and inform us in advance to avoid reimbursing us for the eviction too. Paying the rent late after communicating with us and including the late fee is great in our eyes. The late fee represents a 60% APR on the rent (5% monthly late fee). There aren't a lot of things I could do with their rent to earn a 60% annual rate of return for 30 days.

Bottom line on our properties: A sheriff will be at your door within the first full week of the month if you haven't paid your rent.

The good news is with a $600/mo rental(s) in your portfolio you will not have to wait very long to put what you learn to use again in the future. That is part of the business in this class of rental and is a big part of why the returns are frequently triple what you see on higher rent properties.

I plan to be around for a year or two to collect @Jason Bott. It's something we can make all of our tenants get and them having something is better than the nothing we have now. Even if collection is a remote possibility. I do not see people posting happy stories of collections, but I also don't see accounts of landlords trying to collect and claiming they couldn't. I think it's fairly untested.

I know a lot of folks here say it's important to be listed as an additional interest but our attorney sent me the lease language this morning with additional insured. I told him there were some concerns about that in things I'd read and he said the additional insured gives us more paths to collection. He's a big real estate attorney in the area with an MBA from Wharton so I'll take his advice on this one. If I get a detailed explanation I'll post a follow up.

Even more than pricing it correctly the seller shouldn't get paid for your good ideas @Thomas Brady!

I was envisioning no plumbing and thus the $30k pricetag for two units. It really does not matter. The seller shouldn't get paid on potential.

I don't think that property is a home run, but it's not a bad deal either. It's just a run of the mill cashflow opportunity with the possibility for more. If you could find a 10 cap comparable I'd go back for another price reduction and settle there.

@Don Cuffy Yellow letters are good. You can also just by yellow copy paper at the store and print them out yourself. 

If you're doing a serious mail I suggest a letter vendor. The cost for 500 or more snappack mailings is around $1 ea. Shop around and negotiate - the postage is the biggest expense that they're selling you. Letter vendors produce 49 cents of postage and about 5 cents of materials. Between now and April you will get a lot of traction from snappack mailings. For those unfamiliar a snappack is the piece of heavy bond paper that comes sealed, you tear off the perforations on three sides and it unfolds into a letter. The outside is typically printed with security print type mesh so you can't read the letter printed on the other side of the page when sealed. Here's an example of a vendor who provides free graphic design services for each letter, I've never used them, but if you Google snappack you'll find tons of companies like this one:

http://www.snappackmailproduction.com/

In my experience when we did our pilot program a couple of years ago we saw response rates to mail triple. Interestingly, they don't work well between April and October. To consolidate our mailings even out late notices get printed into snap packs and mailed. Very efficient process once you sign up with a letter vendor and do the software integration.