All Forum Posts by: Account Closed

Hi Joseph: Contact Doug Benson in this thread. Doug is very experienced in the area and the current president of the local REIA in Lansing.

Sounds like you need to join a local association that will have all the answers for you and classes you can take to augment your knowledge.  PM me for more information.

PM me and I'll give you some info on a course that will teach you this very thing--for $35-45.  Seriously.

You'll need to identify the property as a rental--at the very least--for property tax purposes.  If you're using a title company, that will likely be handled for you.  Every city is different regarding rental inspections.  Here's Lincoln Parks rental regulations:  http://www.lincolnpark.govoffice.com/vertical/site...

Here are some things to keep in mind when considering Rent to Own options:

• It's a lease--fail to abide by the lease or make your monthly rental payment you can be evicted.  For example:  If one of your guest commits a drug violation--even if you're not responsible--you could be evicted under the 24 hour drug notice.
• If you're evicted, you'll likely lose your down payment.
• Make sure the contract is very clear on the differences between the security deposit, holding deposit and the option fee--if any.  The down payment and/or option fee is NOT the security deposit, therefore, security deposit laws do not apply.
• The sale of a property as a rent to own is still covered under Dodd-Frank regulations, meaning that you must qualify as the buyer as you would for conventional mortgage, i.e. your credit and income must be satisfactory to meet the obligations of the "purchase."
• A rental property owner may ask you to pay for repairs, etc. to the property.  This may work in some communities, but in some, the municipality will still hold the property owner (landlord) responsible for all the maintenance, repairs, etc. under the local housing code.

For all those reasons, you may want to consider a land contract.  Just make sure you can fulfill all your obligations under the land contract as well.  And, Dodd-Frank regulations still apply.

All the best!

@Paul Leason has a lot of great ideas on how to handle water.  Here's a little more:  Grand Rapids may be doing away with the Guardian copy of the bills.  However, you can now pull a report online on all your properties and see the status of all of your tenants' water bills.  This report is a life saver for staying on top of the bills before they are past due.  I'm hoping to bring the Grand Rapids Water Department into the office for training on the new system and reporting for landlords soon.   So, keep on the look out for it--you'll all be invited!

Additionally, Michigan state law enables a landlord to file a "water affidavit" for each of their rentals where the tenant is responsible for the bill.  The affidavit prevents the municipality from putting a lien on your property for unpaid bills.  Each municipal water service handles the filing procedures differently.  The gist of most of these is that you must file a copy of the lease (or your tenant does) showing that they are responsible for the water bill and an affidavit signed by the tenant saying they understand they are responsible for the water bill, etc.  Some municipalities will provide you with the form they want you to use--some will accept yours.  Some (as in Grand Rapids) will also charge your tenants a water deposit--even if they don't charge other residents a water deposit.  The deposit in Grand Rapids is nearly $500.  (This of course increases the cost of rental housing in Grand Rapids and creates a disparate impact on tenants--but we'll not go there in this discussion.)  Of course, there is always a loop hole whereby the city can get your money, i.e. they'll hold water up for ransom and not turn on the service for a new tenant until the old bill is paid--so, it behooves you to get the cash from the tenant before they move on.

Good luck with all your investments!

Clay

Just be aware that, in Michigan, the water bill will stay with the property--regardless of who is responsible for paying for the water per the lease or per the water department.  So, if the tenant leaves a big water bill, you will be stuck with it.  Water departments will not turn the water back on until the bill is paid.  (Even if you file a water affidavit which prevents the water utility from putting a lien on your property--they will still hold you up for the payment of the past due bill.)  Some water departments are slow to shut off water for past due payments so bills can get rather pricey, e.g. $750 or more.  Just be prepared!

Check out the West Michigan REI MeetUp coming next Monday night at Buffalo Wild Wings on 44th Street in Wyoming, from 6-8 p.m.ish. There are usually 50-75 investors in attendance.

Hi Georgee:

As some have already noted, credit is only part of the equation. Those with great credit scores don't necessarily equate to a great tenants. I personally recommend using a "decision report" service whereby the tenant has to pass a certain level of criteria for credit and criminal histories. (I can recommend one if you want to contact me via BP message.) A score, as others have said, doesn't really give you a good picture of the rental worthiness of a prospective tenant.  Scores may have nothing to do with what makes or breaks a good tenant relationship. The applicant's rental history, criminal history and current employment status are, at times, a much better indicator of risk.  With all that said, if you're getting a full credit report on someone, reviewing and understanding the details and how the info might impact the tenant's ability to pay rent and utilities is what makes the difference.

Good luck!

Clay

Additional info:  In some communities, "grandfathered non-conforming" properties lose their status as legal if they are out of use as a rental for more than one year.  For instance, if one unit was not rented for three years, a community could say the non-conforming use is no longer valid and a variance must be obtained to continue renting that unit.  I've seen--even veteran real estate investors--have this happen to them...those that didn't do their due diligence.  I get calls from investors saying that they just rehabbed a 2, 4 or more unit property (spending $1,000's) and the city says it can only be used as a single family since the additional units are no longer legal non-conforming uses.  I've also seen this problem arise when the seller or previous owner reverted the property to an owner-occupied property for homestead tax treatment due to hardship.  Of course, the variance is always a possible solution, but it cost a chunk of change and is at the whim of the neighbors and politicians.  Due diligence is always king!