All Forum Posts by: Daniel A.

Hello Ellie,

Essentially what it boils down to is this: Their current lease is effective until its expiration date. If you plan to release the property management company from their role in the management of the property, it's likely that their leases will leave with them. Their leases will be valid until the month is up. You can choose to continue the lease if you feel it is in your best interest, but I'd like to outline a few reasons why it's better that you give the tenants a new lease - your lease.

To start, a lease is what protects your investment from tenants doing things that aren't in the best interest of the property. Property management companies have different goals from you, and while their leases are usually pretty sound, I've seen some property management companies providing leases that miss a lot of valuable clauses. If you take the time to make your own lease, you get to decide whether it's okay for tenants to park rusty, dilapidated cars on the front lawn. You get to decide whether it's okay for tenants to hang political flags from their windows, visible for all to see and for all to make assumptions about your property. You get to decide whether a tenant is allowed to sublease their unit. Assuming the property management's lease will cover such things is assuming that your tenants will respect your property -- it's unwise.

I generally err toward year-long leases for a variety of reasons, but each time I renew a year-long lease, I provide the tenants with a new lease. It's essentially the same lease, occasionally with an update. It also includes the new dates. So, my assumption with month-to-month leases is that you would need to provide them with a new month-to-month lease with the updated tenancy dates. If there is no property management company, there is no way for you to extend the lease another month unless you copy their lease. (And some property management companies have copyrights on their leases.)

And with contract law, if anything is changed or revised, you must have both parties acknowledge the change. The reason for this is that, suppose a landlord decides to cross out the $800 / month rent and replace it with $1000 / month. Both parties must be apprised of the change and must agree with it. In writing. Even if it's just the change of name.

May I ask why it is that you are looking to avoid having them sign anything? I understand that it might be "a process" to have to go to them and inconvenience them with something that is seemingly mundane, but it would give you a chance to meet your tenants and let them know who you are and that you are happy to help with any issues that may arise. I would even go so far as to ask them how they've enjoyed living there and inquire into any unresolved complaints they may have.

Hello Moriah,

Here is the advice that I give everyone: get out and ask questions. That's what you're doing here, and that's great. Hopefully someone will have some more precise information than I, but I like to toss out ideas; you know, provide some diversity in perspective. 

When I first started seeking out lenders, what I did was I went to my local bank and asked to speak with a loan officer. She sat me down and we went over hypotheticals. (When I say "hypotheticals," I refer to me telling her where I thought my credit score was and how much I made hourly, so on and so forth. Nothing was verified at that point. It was just a, "Hypothetically, if your credit score is X, and your annual income is X, and your debt-to-income ratio would be X, here is what you could expect.") They printed off all the information and I walked away baffled at how many factors go into their decisions.

What I would recommend is going around and talking to the people who have all their particular criteria and algorithms, and see where they place you. You might not think that you have enough, but maybe the fifth or sixth lender you talk to will say you've got more than enough. I am pretty sure most lending institutions will take the time to work up a proposal for you. After all, by giving you money, they stand to make money.

Also going out and speaking with lenders will clue you in to precisely what it is that they're looking for. You might come to find out that you've been focusing on the wrong thing. And if you're genuine about your endeavors, that will shine through and when you go back to the lender that you feel fits you best, you'll have a foot in the door. You'll be able to return with a folder with all the documents they want in the order that they want it. 

Keep your head up, keep saving up money, and keep asking questions.

Hello Ellie,

While I have lived in Oregon and have spent a great deal of time educating myself on Oregon Landlord/Tenant Law, at the moment I am working on acquiring properties in Texas and unfortunately don't have the time to find the applicable law to send your way. But I do have a moment to toss out some ideas.

For one, since they are on a month-to-month lease, it's not really a matter of you having addendums for them to sign or not to sign. What you do is instead of renewing their current month-to-month lease, you provide them with  your  lease and your addendums as a means of continuing tenancy after you have provided them with the appropriate notices. The lease they likely have now is from the management company. Once you buy the property, I don't believe you're obligated to continue on with that management company. You just need to let them know that you are the new owner and that you no longer require their services. You (or the seller) will also be advising the tenants that a new owner is in town, and that you will be advising them of the new procedures. This includes where to send the payment and who to call when maintenance issues crop up.

Of course, if the management company has a contract with the previous owner for management services for a certain period of time, then you'll have a situation to deal with. But, in all honesty, I haven't really spent too much time with management companies, so I couldn't elaborate on the particulars there. (You could probably also ask the current owner to contact the property management company and have him cut ties for you.)

By and large, if you have any documentation that changes anything in regard to the tenants, they have to sign those documents. If you could create documents and the tenants weren't required to sign them to make them legally binding, then that essentially opens the door for ill-intentioned landlords to incorporate new rules and procedures without the tenant knowing, and then take legal action against them when they (the tenants) didn't know. Having all documents signed by all parties also ensures an easier process for you, the landlord, should a tenant claim they had no idea. If you get verbal confirmation but don't put it in writing, the courts generally won't side with you.

As to the property management company, I have pasted a couple links below for you to read:

https://secure.sos.state.or.us...

https://www.thebalancesmb.com/...

Hello Drew,

You are making a wise choice in deciding to house hack. The joy of house hacking is that there are so many different variations, and most all of them will work. 

As to the idea of you living in the garage apartment and renting out the house, you do set yourself up to merit a higher rent payment for renting out the house. A house offers considerably more than a garage apartment and people are willing to pay a premium for that -- assuming the house is in decent condition. If you are content with the garage apartment, then there really isn't much of a reason why not to reside there while making an extra hundred or two (or more) by renting out the house.

I don't know whether you plan to have a washer and dryer in the house or in the garage (or both or neither), but that is something you want to consider.  If they're in the house and you're in the garage, it might be somewhat uncomfortable for you to have to venture into the house to do laundry. The tenants are sitting in the living room, entertaining guests, and then here you come along with a bag of dirty clothes.

Other than that, I can't really think of too much of a downside to you living in the garage apartment while tenants have the house.

If there are amenities or accommodations that are in the house or that are "communal" (i.e., the backyard, the parking, etc.), then I would recommend that you try and work out the logistics before you bring in a tenant. Last thing you want is to come home and find three cars taking up all the driveway parking spots. 

I would also take into consideration how you plan to structure utility payments. Are you going to be paying for electric? Water? Because the house will likely take up more than the garage. Same with water. I would hate to see you lose a large portion of your profits because you pay for utilities and your tenants keep the A/C on when they're gone for the day. While getting them separately metered is financially unadvisable, you could always structure a payment method where you determine the square footage of the garage and that of the house, then figure out what percent of the total square footage garage is, then tell the tenants that they are responsible for the percentage of the house. For the sake of simplicity, if the total square footage is 2,000 square feet for the garage and the house, and the garage unit is 500 square feet, then the garage takes up twenty five percent of the total property. Therefore, if you get a $100 electric bill, you would pay $25 and your tenants in the house would pay $75.

Or if you have a good idea of what the monthly utility bills are without tenants, you could tell them that you will cover the bills up to a certain point. If electricity goes above X in a billing cycle, then they must pay the overage. 

Keep your head up and enjoy house hacking.

Hello Manny,

I hope that all is going well and I hope that I can provide some advice in this matter.

Each state has their own laws regarding abandonment. These laws outline what constitutes abandonment, when you can enter the property, and how to deal with left behind items. 

Really, your best bet is to allude to the state statutes regarding landlord/tenant law. Take a look at the following:

http://www.leg.state.fl.us/sta...

That link outlines how you must notify the previous tenant that you have their property. You must give the tenant an opportunity to reclaim their property.

See also:

http://www.leg.state.fl.us/sta...

That link guides you to Florida's Right of possession upon default in rent; determination of right of possession in action or surrender or abandonment of premises. (Read this one carefully; I caught some wording suggesting it's not for dwellings.)

Those are just two links, but essentially you must figure out when Florida deems that a tenant has "abandoned" your property. You then figure out what process you must take to enter a property deemed abandoned, and you must figure out what you to do upon taking possession of abandoned property. Some states require that you document and itemize every item that you retrieve from the abandoned unit. Some states allow you to sell off the property after giving adequate notice through approved means (again, allude to state-specific statutes outlining the process). Some states require that the local authorities retrieve the property.

I know this doesn't answer everything and I apologize. I am not familiar with Florida law regarding abandonment, but the law is what prevails and if you ignore it or skirt it, you open yourself up to paying hefty fines (to the tenant) should the tenant come back for their things, even if it's many months later.

Hello Kris,

Despite the job situation preventing you from getting a loan from a lending institution, there are some options you could consider. The main one that I want to outline here would be seeking out owner financing opportunities. I also would note that you might want to just keep shopping around various lenders and see if any are willing to work with you.

Finding a property that works for you and that the owner is willing to finance can be tricky, but persistence is key. I am constantly on the lookout for Zillow listings that pique my interest. When I find something, I generally don't hesitate to send a message to the agent to ask if their client is willing to entertain owner financing. Most of the time they aren't, but if you keep at it, you'll happen across one.

You can also get your shoes muddy and hunt down properties that may look a little distressed that might not be on the MLS and ask the owner(s) if they're willing to sell to you. Apartments or duplexes that seem unkempt could prove worthwhile. The owners might not care anymore but are so used to getting a check in the mail, then you come along.

Do you have a business plan in mind? Are you looking to start acquiring single family homes? Or do you have your eyes set on multifamily? Or something else? If you can find yourself a property that you can House Hack and that the owner is willing to owner finance for you, then that would be a great start, given the circumstances you outlined. You'll have a place to live, you'll be able to rent out some rooms (if it's a single family house) or a unit (if its a multifamily), and you'll start building experience. If you happen across a house that has a shed in the back, consider renting that shed out as a storage unit.

I'd like to think that with $30,000 of liquid cash, you'll be able to find a pretty decent property. Again, though, this is just my position, and I am sure that others will have some worthwhile thoughts, but get out there on the real estate websites, find some properties that you like, and strike up a conversation with the real estate agent. If they tell you that their client isn't interested in owner financing, ask them if they know of any properties whose owners would be interested.

You could even go so far as to post ads on places like Craigslist saying something to the effect of: "Looking to sell your property and get a check in the mail each month? Consider owner financing." Then in the ad you can detail why owner financing could prove beneficial to the seller. Read up on the pros and cons of owner financing and craft an ad based on what you read. Some sellers might not be aware of what owner financing entails, but if you sell them on it, you might just land yourself a great deal.

_______________

You bring up a valid point, one that I keep meaning to elaborate on. You mentioned that naysayers allude to the "uncle who lost everything." When I first started telling people about my desire to get into real estate, I heard story after story of how things went wrong. One commonality that I picked up on was that most of the horror stories came from people who either didn't plan on being a landlord, or from those who elected not to educate themselves. They brought in tenants without knowing how to screen them. They gave them generic, one-paged leases they found online.

While knowing how to vet tenants and having a solid lease can't guarantee a smooth ride, it goes a long way in preventing you from becoming that Uncle Who Lost Everything.

Hello Michael,

I want to congratulate you on deciding to take the leap into real estate. It's a great choice and so long as you keep continuing your education, you'll do great.

I will start by saying that I likely won't be able to give you any information about the particulars of loans, but what I will do is give you some motivation. What I would recommend is that you go to your bank and ask to speak with a loan officer. (Well, nowadays you might need to schedule an appointment.) I did this when I was looking to get a loan for my start in real estate, and the information the loan officer provided me was illuminating. There are so many factors that go into calculating the rates you get. I had gone in thinking a loan on a particular house would be around 800 bucks a month. That's what the Zillow estimate said and that's what the loan amortization calculator yielded.

After about an hour of exploring hypotheticals (i.e., asking about my credit score and my income, without verifying any of it), my proposal for an FHA loan came to a $12,000 down payment, and about $1,200 a month. I was blown away as the property I was looking at was about $130,000. I thought FHA loans were supposed to be affordable. And they are, I was just thinking it was going to be substantially less. Getting a proposal lets you know of all the various fees the banks want for facilitating the transaction. It lets you know how points play into the calculation.

What I am getting at is that I learned the most about the loan process by having a loan officer explain everything to me, face to face. There is an obscene amount of factors that come into play. 

But along with getting a good grasp on what goes into calculating a loan, simply going out and talking with loan officers (or anyone regarding anything, for that matter) really gives you a sense of motivation - even if you hear disheartening news. It makes you feel like you're making progress. It makes you feel like an investor doing investor things.

I am sure this isn't what you were looking for. I can imagine someone a little better versed can provide some more solid information for you, but I just wanted to reach out and tell you to get out there, start asking questions, get some momentum going. Best of luck to you.

Hello Corey,

Ah, the joys of landlordhood. While trying to navigate the eviction process is exacerbated by the COVID-19 issues, I feel like you have given this tenant more than enough leniency. Some people just don't realize that they could get much more leniency if they reached out to the landlord and discussed their situation. There are people who refuse to believe that some landlords are actually willing to help.

Whatever the reason may be for his silence, I think it might be wise to consider upping the stakes. This tenant might well be aware of his rights and the position the city and the state have adopted during these times, but just because they are putting a pause on evictions doesn't mean that rent isn't still due. And as the word implies, a "pause" is just that. Even though he doesn't appear to be responding to you, you might want to write up a letter letting him know that rent is still due, that you have given him chances to work with you, and that if he continues to ignore you and fail to pay rent you will be taking his situation to court when they reopen. It might be a good idea to let this tenant know that an eviction on his record will severely limit his ability to find a respectable rental down the road and that if he has unpaid rent, it will impact his credit score once it's sent to collections. You can remind him that most apartments call past landlords to check for references.

Also, make sure you keep thorough documentation of all of your correspondence with the tenant. If you do take it to court and you can prove that you've actually reached out to him, that will be to your benefit. Many a tenant have played the dumb card: "I didn't receive any calls or nothing."

Giving him a 5 day notice might be as futile as trying to get the court to process an eviction right now. And once you give that notice, from my understanding you can no longer collect rent payments. I personally would give him a letter outlining what I mentioned above along with your notice that you will not be extending his lease. If you want to give him another chance, send him the letter and also add in that if you don't hear back from him with a day or two, you will be sending him your notice of not extending his lease.

And I am sure someone will tell us why this isn't a great idea, but you might even consider trying to find another accommodation for him. See if you can't find another comparable apartment in the area and tell the tenant that if he cleans up the apartment to your satisfaction, you'll refund his security deposit in full so he can use that to move into another place. 

Despite that a problem tenant generally causes you more problems and headaches, I always feel like its a reasonable thing to give them the two options: clean the unit up to the point where I don't have to do anything to rent it out again, get your money back, and move on with your life; or deal with the eviction process, the collections process, and then having the eviction on your record. Even if the tenant for some reason prevails in the eviction process, the fact that an eviction has been filed against him will still be public record. This method, commonly referred to as "cash-for-keys," is just as beneficial to the landlord as it is for the tenant. You don't have to pay for the eviction process. If the tenant agrees, cleans up the unit, and moves out in the allotted time frame, then you can get another tenant in rather than spending a month or two without receiving rent, then having the tenant leave your unit as messy as can be.

I wish you the best of luck in working with this tenant. If you have any other questions or concerns, please feel free to reach out. 

Hello Javier,

So far as I know, the easiest and cheapest way to create a POA is to find a blank form online, fill it out and then have a notary notarize it. Notary costs vary, but usually banks have notaries who can notarize it for you cheaper than an attorney would be.

Just make sure that when you fill out the power of attorney form you specify what it is that you are allowing a particular person to do on your behalf and how long you are granting such permissions. Generally, the more specific you get the better. But, if you trust the person that you are designating on the POA, you might want to err toward open-ended options. Such as: "I am allowing [Name] to conduct real estate transactions on my behalf." Or, "I am allowing [Name] to conduct real estate business in regard to [Property]." Make sure if you are allowing them to access your bank account that you specify this. Outline which bank and which account. If you know the numbers, then outline the total they are allowed to withdraw.

You can be as specific or as vague as you want. Just make sure if you choose the vague route that you provide enough information for varying places to know that they are included. For instance, if you just say "conduct real estate transactions" some banks might not accept that as granting them permission to allow that person to access your accounts.

I wouldn't take what I have said here as an authority by any means. I've dealt with POAs before and have a baseline understanding, but I am sure there is someone else who can provide you some better, more sound guidance.