All Forum Posts by: Carl Millsap

@Deven Singh what does your lease say? 

1. Hopefully your lease has a clause that addresses owner re-occupation.

2. If you don't have a clause and there is a valid lease in place you more than likely have to honor the lease unless you can come to an agreement i.e. cash for keys.

3. I would meet with them, discuss the  situation and give them a reasonable time to vacate 90 days or more. They've been there 10 years, I imagine they've accumulated a lot of stuff. 

Bottomline they sound like they've been good tenants, give them the easiest way out. 

@Donald Hatter 

We send the information to a collection agency who attempts to recover the money; after they make several attempts they place it on their credit report. 

We've had some success recovering money owed, and we've seen it on credit reports.

Recently a former tenant attempted to co-sign for another prospective tenant. The name (former tenant) looked familiar and sure enough when we looked at the credit report there was the debt from us from 2023. 

1. Our lease contains a clause stating that any unpaid debts will be turned over to a collection agency and the debt can be placed on their credit report.

2. Our lease contains a clause stating the security deposit cannot be used for the last month's rent. 

3. If you want the name of the agency we use, message me I don't think we can promote a company here that isn't a BP sponsor or Pro etc.

Hope this helps.
 

@Polat Caglayan

I've never seen a formula but here is a general rule of thumb for multifamily:

The class of an apartment refers to the quality of the building, which can be determined by a number of factors, including age, location, and condition:

• Class A: These are the highest quality apartments, typically built within the last 15 years. They are often located in desirable neighborhoods and are close to good schools. These usually have the latest amenities. Pools, gym, etc. 
• Class B: These apartments are built between 10 and 20 years ago.
• Class C: These apartments are typically over 30 years old and are in fair to poor condition. They are often located in lower-income neighborhoods and may need maintenance or renovations. Class C properties are considered the riskiest investment, but they can offer good cash-on-cash returns.

This is a general rule of thumb.

I have a C property based on age and condition that is in an A / B neighborhood. The property when it was built in 1980 was an A property but as time, and ownership changed it has gradually gone down the scale. 

If you're talking about single family homes/ duplexes etc. the neighborhood it's in will generally give you the risk profile.

Hope this helps.

@Kwanza Price tips for managing contractors:

1. Type up your scope of work. Use bullet points or # system so it's clear what you want done. Get 3 bids from contractors, get a copy of their insurance etc.- verify the policy is current. 

2. Provide the supplies. I put supplies on the job site. A) it controls my cost. B) I don't have to give the contractor any money upfront for anything.

3. Determine at what percentage of completion you'll pay for work done. i.e. I'll pay so much when demo is done, I'll pay some when painting is done, balance due when the job is complete. 

Here is the key: Don't pay for anything until it's done to your standard. Also, don't pay money upfront - they haven't done anything yet. 

4. Inspect what you expect. Don't take the contractors word for it. Check their work.

5. All changes MUST be in writing. During demo, if they open up a wall and find a leak that requires a change order. the change order should be specific to that repair and have a cost associated with it. 

6. Find a real estate attorney in your area, ask them to draft a contract for you, if that's what you want. 

You can also find various contracts online, develop your own then have an attorney review it to ensure it has teeth, and is legal in your area.

7. A contract is only as good as the person enforcing it. When you get an agreement with a contractor follow it, don't go against the contract...trust me the above are expensive lessons learned..you're benefitting from my pain.

Hope this helps.

@Robert Hsu, I don't know those markets but what I can share is:

1. What is your goal? Do you want cashflow, do you need the tax benefits to offset your W-2 income or do you want to cash-out when / if it appreciates? 

I invest for cashflow, I take the appreciation as it comes. 

Each approach has it benefits, you can have them all but let the one that is most important to you drive the decision. Know your numbers whichever option you chose...weigh the pros and cons of each. 

2. Can you carry a mortgage on any property for 2-3 months if it doesn't rent? Just my experience but I'll let a unit sit vacant before I put the wrong person in it. Which leads to #3.

3. As you're looking to buy, research / develop your screening process now. Don't wait until you buy a house and have the mortgage hanging over you to try and figure out how you'll screen people. This is a business....trust me I learned this the hard way.

4. There are a couple hundred thousand people in the Houston area, all you need is 1. Don't let the number of houses available deter you. Some people / realtors / property managers keep units on Zillow etc. just to have leads coming in.

Hope this helps.

Hello Rose,

What type of property are you renting? Is it a room in your house? 

Our process:

1. Schedule showing.

2. Prospective tenant views apartment and decides if they want to apply.

3. We outline our criteria if they express interest so they know upfront.

a. No evictions within the last year.

b. Gross incomes must be 3x the rent. $1k rent means $3k in gross income minimum

c. Background check

1. Current landlord questionnaire - we send the current landlord a couple questions about on-time payments, cleanliness, eviction status, etc.

2. We run a background check to look for drug distribution charges and sex offenders

3. Credit report - We review their credit report for payment history and ongoing bills. If you have gross income of $3k but ongoing bills of $1800 we know it may cause a financial hardship so that reflects in our scoring system.

Hope this helps, but in my experience an interview is:

a. Time consuming - if you have 10 applicants are you going to interview each?

b.  Not likely to produce the result you think you'll get. Everyone has a story, don't get caught up in their story. Current and past behavior is a good indicator or what they'll actually do, thus our process above.

Good luck!

Brendon congrats on the purchase.

To my knowledge and from experience you should charge late fees if they're late on their portion. 

Your new tenant is like any other tenant, with two exceptions:

1. A government agency pays part of their rent.

2. If you decide not to renew their lease or increase their rent they need a 60 day notice, and you have to notify S8 as well.

Outside of those 2 exceptions your tenant should follow the lease like everyone else. Connect with the case worker for that tenant ensure you get a courtesy copy of notices they receive from S8 so you're in the loop about recertification dates, etc.

Confirm the information above w/ your State S8 office but I can't imagine they won't allow you to charge late fees. 

Good morning Yosef, 

Here is a solution:

1. Take your inspection checklist and have the contractor complete the work he's already been paid for, make that part of the mediation.

2. I wouldn't use them to complete the job, they've already shown they aren't doing quality work. I would also look at suing them for the cost / expense to finish the job. 

3. I wouldn't pay them anything upfront...I recommend you always pay for labor AFTER the work is done. Pay for supplies upfront.

4. Hire an inspector /independent person to manage the job site for you, someone with your best interest at heart. Make it clear that you'll only pay when that person signs off on work done. Ensure your agreement with that person has teeth so if they sign off on something that isn't right they can be held liable for it. 

Answers to your questions:

1. Try mediation first, lawsuits can get expensive and only the lawyers win.

2. Removing a lien is challenging because you need the person who placed the lien to sign off to remove it. I'd make this part of the mediation process. Part of whatever agreement is they can't place a lien. I'm willing to bet you may have to pay some of their demand to ensure this doesn't happen.

3. Have 2-3 contractors look at the job and get written estimates on what it's going to take to finish the job, correct the mistakes, pass occupancy certification etc. use those estimates in your countersuit / mediation process. 

4. This sounds like it's going to be an expensive lesson. 

a. You started off good with cost being paid in stages, but it sounds like you paid before you verified they actually hit their benchmarks.

b. Hopefully you can show where he didn't honor the agreement that cost changes had to be approved...hopefully that approval was supposed to be in writing. He may have to eat those additional expenses if he can't prove he had approval prior to doing it.

c. Consult a good real estate attorney.

Trevor, 

1. Contact a couple contractors to see what the cost would be to add the addition. Labor and supplies.

2. Check w/ the City / County to see what the permitting process is, and what if anything you would have to do regarding plumbing / electrical. Do you need to add an additional fuse box? Can your existing box support the addition? Plumbing same questions.

3. Are you renting or selling the house? If selling how much can you get for it above and beyond the cost of adding the 900-1000 sqft? If renting how much will it increase the rent and how long would it take you to make the investment back via the increased rent. 

Increased rent $500 per month, cost of renovations $65,000 = 10 years to recover the $65k investment. Of course that doesn't take into account rent increases so it could be less time.

@Brittany Farrell my recommendation is you take this post down and let your lawyer handle it. 

1. You've possibly stated in writing that you (may have) violated several laws ie. working as a property manager w/o the proper licenses etc. 

2. You've laid your case or lack there of out for anyone to include the opposition to see.

3. Do what you need to do to get in compliance w/ local laws to serve as a property manager. Hopefully you have the correct insurance in place etc.

Hope this helps