All Forum Posts by: Carl Millsap

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

Tim Callahan...I'm not a lawyer but.....

1. Does your lease state the tenant is responsible for any fees you incur to include legal fees? If not I'd update the lease for future tenants. 

2. I found this articlehttps://www.hemlane.com/resources/maine-security-deposit-law...

3. Wait until she moves, do a thorough walk through. Get estimates for all repairs that are above fair wear and tear in advance. Video and/or take pictures of everything in case you have to pursue her in small claims.  

@Samantha Stephens my experience is the property is only available for those will OO to bid on during this period. If the home sits for a period w/o a viable bid from a prospective OO then it'll be opened to investors. Just my experience.

I think you'll have to sign an affidavit stating you plan to occupy it. 

As for the time of OO yes I think it's a year but I've never seen anything that states you have to move in immediately, just simply you intend to OO not flip or rent it.

Your realtor should be able to confirm or deny the above. 

Itay, 

In my experience Section 8 is based on the persons voucher/ situation. Although max rent maybe $2k they may only give $1k on the tenant's behalf, the tenant would pay the difference in your case $300-$400 it depends on their specific case. 

I've had properties listed for more than what section 8 wanted to pay, we had to provide comps that their estimate was wrong / out of date for similar apartments. 

I would contact the housing authority who manages the S8 program in your area to get an accurate ideal of how they determine what they'll pay on the tenant's behalf. I would also ask for the inspection checklist so you can ensure your place will pass inspection. 

Hope this helps.

Kevin, 

Congrats sounds like a great find.  Here's what has worked for me:

1. Intro letter to tenants requesting updated contact information, maintenance problems, how to pay rent / contact our office etc.

2. Fix the outstanding maintenance issues. 

3. Send each tenant a letter letting them know you need them to sign a new lease that will contain a rent increase schedule.  Give a deadline for notification of their intent to sign a new lease or their plan to move. 

Consider a $200 a month increase every 3 months may not be doable for most tenants. Depends on the class of property. 

Talk w/ each tenant, work with them if necessary on an increase schedule that won't cause them a financial hardship but helps you achieve the increase. Be prepared to work with them on a plan to move.

You can make the argument the cost of moving is more than the cost of the increase. Most tenants in my experience don't calculate the cost of a move. 

Calculate what it would cost you to evict them if they won't or don't move willingly, that's a very real possibility.

4. What if they all decide to leave, can you carry the mortgage, etc. while renovations happen? A way to protect against this is to stagger the new leases / rent increases. 

5. Consider holding 1-2 units slightly below market ie. $50-$100 a month. While I want to maximize profit, I also want to keep my properties stable. Think about your renovation and turnover cost. 

If it takes you $8-10k to renovate a unit, not including cost and time to find a new qualified tenant etc. a $50 -$100 a month difference in rent for a known / stable tenant in my opinion outweighs the the full turn prospect.  

Hope this helps.

Mitchell, 

I always encourage people to take action BUT I also try to ensure they count the cost before they move forward. 

Some things to consider:

1. If you refinance at 80% value ($365,000 *.80) = $292,000 - $258k balance = $34k net before refinance closing cost. Do you have something in mind to purchase that a $30k downpayment will make sense?

2. Can you make the payment on the $292,000 loan for your primary if the tenants don't pay rent? 

3. Can you pay all of your bills, mortgage for the rental and potential maintenance bills for a rental if the tenants don't pay their rent or if the place is vacant and needs rehab after the tenants destroyed it? i.e. deductible for a roof replacement or replacing an HVAC unit or replacing a hot water heater? 

You can always put in sweat equity to do repairs / renovations but you still have to pay for supplies and other associated bills.

4. Do you plan to manage the rental yourself or will you have a property manager? 

 Work through the questions above and figure out HOW to do it. This business is a thinking man's game...solving problems is what we do, this is just the first of many. 

A. I wouldn't put my personal residence at jeopardy that's just me. Keep the 3% rate.

B. What can you do to save / get the money to buy your first investment property? Work a 2nd job, cut back on current expenses?

C. Owner financing on a deal? Creative financing options, partner w/ someone?

There are options, some will take more thought but it can be done.

Hope this helps...