All Forum Posts by: Christopher Gilbert

I also do not like carpet and use tile as much as possible.  Be careful with laminate as it can get water damage easily from spilled cups/kids/pets and tenants often use the wrong cleaners on it which can ruin the look in less than a year.  If you get mad after new carpet is dirty after a year wait until you see that $2000 laminate job ruined.  Leave a bottle of laminate wood cleaner when you get new tenants and let them know that only that type of product can be used to clean the floors.

I just keep a notepad in my truck to record mileage.  At the end of the year I put it all in a spreadsheet and add it up.  Also use yahoo maps or google maps to to get mileage when I forget to put it in the notepad.  Mileage can be a pain to keep track of but the deduction is large so worth doing in my opinion and anything that can help make it easier sounds interesting.

If the house is vacant when you get possesion then there are no tenant rights to worry about unless your local juristiction requires a posting/notification period.  Change the locks immediately regardless and leave a note with your contact information.  That way if the previous owner's family has any issues they can contact you, never leave the house unsecured where someone else can access it without your knowledge.  We have seen issues in the past where neighbors/kids would go in an loot or damage the places when the previous owners moved out and they know it was going to the auction.

Where I live any possessions in a vacant house also transfer over with the exception of registered vehicles, boats, etc.  Those you can get impounded or you may have to tow away at your expense.

If the bank owns the mortgage in-house you will probably have a much better chance of success trying to work with them.  We have purchased almost all of our rentals as short sales from the bigger banks and it can be a long and frustrating process.  I would try to leverage whatever you can  but usually the asking price is less than what is owed on the short sale so you might be better off trying to negotiate new financing through them. 

If you are willing to put some money down then you might be able to leverage the lower asking price but you will probably not get both zero down and less than asking price.

If you are flipping houses the local "months supply of inventory" (MSI) seems to be the one that we get the most use out of.  When this number is increasing that means that either more houses are coming on market (competition) or the buyers are not as active (market slowing down).  For us anything less than 4 months is pretty bullish and we will buy just about any deal that meets our minimum requirements if we can flip it within a month or two.  4-6 months MSI we take a second look and only pick houses that are really safe and quick 1 month flips.  Anything over 6 months and we stick with the low-end starter home properties and flips that we can market to rental property investors.  The buyers really start drying up with a high MSI and you can end up sitting on even nice houses for a long time.

If you are a buy and hold investor for rentals we usually save cash or do flips when the MSI is low and when it gets higher we start looking for prices to drop and that is the time to start picking up rental properties for the long term.

I have looked at many different indicators, price change, sales volume, etc. but none of them really seem to correlate to performance for a property better than MSI.  Just remember that it is a lagging indicator and like most of them, it goes up faster than it comes down. 

I do not worry about any national indicators since they really do not apply to my local market.

Historically I have always screened tenants one at a time (mainly because the applications tend to come in every day or two) and have chosen the first qualified.  This method has worked well for me, never have to worry about any legal issues with rejecting tenants and have never had a property sit empty for more than a week. 

I know that ideally you would have a pool of tenants to pick from and choose the best one but how do you handle the rejection notices to people that meet all of your criteria without getting into legal issues or getting a bad reputation for being an application fee troll? 

Especially in a hot market where even great applicants have to apply to many different places and can spend hundreds in application fees.

National Tenant Network (ntnonline.com)

RentPrep (rentprep.com)

I use NTN and their interface is pretty simple to use and gives you options for national background check and tenant score based on the inputs that you give or their standard formulas.  They also provide a rejection letter which can help get you out of any legal issues in regards to screening tenants.

We do real estate through two LLC's in Texas and have not had any problems, it is a very landlord and business friendly state. You have to register your LLC with Texas anyway to do business here so no sense paying twice in another state as well. We know a few people that have out of state LLC's and they work OK as well but it is usually easier to get credit checks, local banking, insurance, utilities, contractors, etc. with an in-state corporation.

I submit a written list of requirements to the applicants so there are no questions about any rejections.  I have a no felonies policy as well as a no violent or drug related crimes.  These are mainly because I do not want any of my rentals becoming police magnets.  As far as the other things like DUI or public intoxication I let one slide but if I see a trend of them stringing out for multiple years I usually pass because that tells me that this person has a habit of making poor decisions and it is tough to hold a job or pay rent when they are in jail.

For background screening I recommend National Tenant Network (NTNonline.com) or RentPrep (Rentprep.com).  Both of these services will perform a state and national criminal background search as well as rental history (eviction)/credit check.  For about $35 per person they will do a full background check as well as give you a rating and recommendation.  If they reject the candidate they also provide a notification that you can give to the applicant which is very important because it gets you out of the liability of being the one that rejects the candidate.

Hope this helps.

The drop in credit score is usually temporary and comes back in a few months.  We have been buying 1-2 houses a year on average and our credit scores have never dropped below 800.  It might drop a couple of points but over time more rental property (good) debt you have that is paid on time will raise your credit score even more.  Usually banks lend on a tier system and as long as your score is not bouncing between two tier levels then it does not affect your ability to get loans.