All Forum Posts by: Chris B.

Interesting insight.  Keep in mind that the proposed utility billback method is not legal everywhere.  In many areas, when utilities can not be discretely divided accurately between different tenants with meters, (think different tenants each with their own lease or contract and not a big happy family under one lease) then the landlord cannot arbitrarily assume a percentage of the total is due.  In the example provided, there is a long term tenant and Airbnb tenants and the proposal is to divide utilities based on percentage of the property.  What if there is 1 person in the LTR and the Airbnb portion has an average of 3, 4, or 5 guests a night?  What if an Airbnb guest left the shower on and all of the lights on for a week?  The LTR tenant isn't going to be pleased.  Of course if the Airbnb is vacant all month, then the landlord won't be pleased (with the vacancy and for footing half of the utilities.) Dividing by percentage of square feet, or number of people, or any other metric that doesn't precisely corelate directly to the percentage of the utilities used may appear unfair and a legal opinion may agree.  

Generally a best practice is to raise monthly rent by an appropriate amount and include utilities in the rent. (as you currently do with the Airbnb side.)  Alternately, install meters as needed, but this can be expensive.

 Thanks for this link.  I think it will be helpful if the state the professional is located in is added along with a link to their website if they have one.  Speaking for myself, I'm not comfortable cold calling a few random CPAs.  I'd prefer to look at their website and also try to find one that is local before I start calling.

Permits must be pulled if the work requires it.  What type of work is being performed?  If you are getting new cabinets and flooring for example, then no, its not needed.  If you are having any electrical, plumbing, or structural work done, then yes, that is almost always a situation where a permit is required.  Permits should be pulled prior to start of work and periodic inspections need to be performed as outlined by the county throughout the construction.  As the county stated, you probably do need permits.  I would tend to trust the advice of a county inspector over a contractor if the ideas conflict.  That's not to say the inspector is always right.  Just think about what you are having done and if it reasonably falls within the bounds of needing a permit.  Even a tiny bit of falling within the bounds still counts.  Permits don't need to be expensive or much of a hinderance for small jobs.

Assuming a permit should be pulled... Can it be done without permits?  Sure, the contractors can go ahead and get their work done, get a paycheck, and move on.  Are they licensed and bonded?  These contractors still sometimes skip permits, but generally are a bit more responsible.  Will not having permits come back to bite you in the future?  Possibly.  Less likely if you will be living there for a long time.  More likely if you ever sell the property or if you have renters and something goes wrong.  In addition, your insurability may be impacted.

As long as you never have a day out of town or some lunch time meeting or similar issue popup, then this sounds great.  Extra cash for your hard work.  Have a backup or two ready for the days you can't make it.  In Yuma, it should be very easy to line someone up as a backup.  You also take on the risk of late departures or needed repairs before the next guest arrives so plan for accommodating that also.

The physical things mentioned such as the car are things I observe and take note of, but are not my primary decision making points. I think viewing the applicant's current residence will be even more valuable.  These things I take note of, but I put more weight into the behavior of the applicants and family.  Of course I have my standard list of requirements which takes top priority.

If someone smokes or vapes at their car before or after a showing, it is a red flag for me as that is a prohibited activity in my listing.  I've rented to families that state they will only smoke outside and this has never happened.

If the family has kids running all over the house slamming doors and screaming during a showing, this is a bad sign.  I've rented to families like this and the wear and tear and negligent damage from these families has been substantially more then well behaved families.

Everyone should present their best during a showing.  Any issues like this will only be worse after move-in.  I look at all behaviors and pay attention to how they talk.  Simple, clear, confident answers to questions with a reply I'm looking for go a long way.  Excuses are considered, but frequently indicate the hiding of something.

As someone who has no experience with owner financing, I'm curious why an owner would accept 3% or 4% when they can flat out sell the property, invest the money and make maybe 10% in the markets?  Why not at least charge close to current mortgage rates if not slightly under at around 7%?  I know 10% isn't guaranteed, but pretty darn likely.  QYLD will give this fairly consistently. (I'm not advocating it as a best fit investment for everyone; just an example)  3 or 4 percent is below inflation.  Do they sell it for an above market price to compensate?

That's a lot of work, hassle, and risk for a up to $300 savings over 10 months.  (but more likely near zero savings)

Work: you will need to pack up and move.  You will need to collect and pay rent on time every month as well as with utilities.

Hassle: you will need to move, and find someone who will be a good tenant, and perform due diligence background checks and screening, and have them sign a good quality sub-lease lease contract with you, and trust them to not screw up with payments or destroy the unit, and you will need the consent of the owner.  To do this properly, and with presumably no prior experience, its not going to realistically happen.

Risk:  Who will you let move in?  Are you certain they will be crime free, pay rent and utilities on time, and take care of the place?  If they were this good of a tenant, they would rent from the owner directly and skip the hassle of a sublease with you.  The only incentive for them is that a) they are are a problem tenant and have a history and cant find housing elsewhere, or b) you are willing to sublease at a rent rate that is significantly cheaper than the current going rent thus incentivizing them to go through you.  

This is rental arbitrage and not worth it.  Your best bet is to stick it out for the next 10 months and then move out to your cheaper option.  I think you are better off if you have a roommate move in with you.  You can split your rent and utilities 50/50 while you still manage everything and probably be a lot better off.

I have a separate personal checking account for rentals. All rental income and expenses go through it. Expenses that are beyond current funds of this account are paid out of my personal non-rental account. I also have a separate personal credit card for rental expenses. Separate accounts and cards just make organizing things so much easier. I agree, an LLC is usually not a best fit in your scenario for many reasons beyond the STAR tax credits. As your personal wealth goes up, consider an umbrella insurance policy.

This is a great learning opportunity!  I've suffered through many similar tenants myself so I speak from 100% personal experience.  I have transformed from a weak landlord that constantly got stepped on to one that is now fair but significantly more firm.  I follow the lease and the law and expect the tenant to follow it also.  I only allow adults to sign the lease so we are all adults.  Right?  Any deviation from that agreement ultimately costs me hundreds or thousands of dollars in losses.  If I mess up, I'm financially responsible.  If the tenant messes up, I now choose to not be financially responsible for their issues.  My rental education was quite expensive so I'm hoping you can find a cheaper university for yourself.  

You need to shape up your tenant requirements and screening process.  A solid screening process will screen out 90% of the bad apples.   Here are some of my core requirements.  Verify everything the applicant provides 100%.

Require 3X rent or more in income.
Require a minimum credit score.  I use 620, but your risk appetite may vary.
Perform full background checks including payment history, civil, and legal issues.
Take a serious look at problems revealed in the background check.  If the tenant didn't tell me about them on the application, they are denied for lying. 
If they did tell me and I allowed them to move forward to the background check, I will consider infractions on a case by case basis but may still deny the applicant.  Many times issues are downplayed but actually are serious.
Don't rent to people who have been evicted.
Don't rent to people who don't have a steady job history.  
Call the landlord before the last landlord and ask about the applicant.
Collect a complete security deposit and full 1st month's rent before handing over the key.
Never sign a 2 year lease.  There is no benefit for the landlord.

The reason of non-payment really isn't something I'm interested in hearing any more and is not my problem.  I clearly explain this to every tenant at the time of lease signing now.  I tell them I'm flexible on a lot of things but I have zero flexibility for late rent, crime at the property, and negligent damage to the property.

I do tell my tenants that I will allow one late payment and only if there is a good reason AND they tell me before its due AND they have it paid in full by the 5th of the month.  Zero exceptions to this policy.  Even after this, I've had late payments, but never had a tenant reach out to me proactively before its due to let me know.

If a tenant doesn't pay rent but instead uses that money for a new toy, vacuum cleaner, car payment, vacation, food, medical needs, or otherwise, I don't care.  You can finance most of this stuff or pay for it later.  You showed me you made 3X or greater income when we signed the lease and therefore you have the money.  If you lost a job, you had better showcase your great skill that allowed you to make 3X rent and get another job quickly.  I am not your parent and I won't use my emergency fund to support you.  Where is your emergency fund?  It is important to make it more important for the tenant to pay your bill than any of their other bills.

A chargeback as you mentioned is without a doubt an automatic eviction.  Period.  It is FRAUD and illegal.  The excuse that their information got stolen and then the criminal just so happened to have the correct apartments.com login credentials and then made a payment on your behalf flies like a lead weight.  And even if this miracle happened, rent was paid.  Why would they do chargeback for a rent payment that was rightfully due?  No judge would believe that for a second and neither should you.  This tenant paid you late multiple times, discovered you do nothing, and then took it up to the next level.

Through similar experiences I now have zero tolerance.  I have no grace period.  A rent due date of the 1st and a grace period of 5 days means to the tenant that the rent is due on the 6th as that's the real date they must meet.  I now charge a daily late rent fee.  Its reasonable, but adds up over the course of a week.  On the 5th with no rent, I'm submitting a pay or quit  5 day notice.  On about the 10th day, if not paid in full, I'm engaging my attorney to deal with this.

I also use an online payment system and only accept payment in full with all fees and fines.  No partial payments for me anymore.

A tenant will either pay late fees each month, or may get themselves evicted, or more likely, they will shape up and become a great tenant.

I've looked into this and there are multiple factors.  Assuming my current understanding is correct, you have at least the following to consider:

1. The tenant and landlord work out the amount of monthly rent between themselves.

2. Renewing tenants also work out the new rent with the landlord.

3. The government comes in and determines if they feel the amount agreed upon is acceptable.  Remember the government will usually be footing 70% of this bill.

4. The government sets upper limits for each area, city, town, county, etc...  The amount the government will pay for YOUR property is usually somewhere below these limits.  They assess your property and neighborhood and pull a number out of their magic hat.  If your number is at or below this magic number, you get a gold star.  If you are above this rate, you can lower to match or move on to non Section 8 clients.  

5. The government aims to pay a rent that is at the 40th percentile of median rents.  So they aim to pay slightly less than the average rent.

All of these mixed together can result in two identical units right next to each other having slightly different rent rates especially if the landlord negotiates each lease at different times.