All Forum Posts by: David Bennett

Rene,

To me it really depends on the market you are in. what percentage of the rent and monthly expenses does $100 represent? What is your Annual Rental Rate Increase look like? What is your expected reserve for maintenance and CapEx expenditures?

$100 is very lean, but if this is after budgeted Maint/CapEx, then it might work. Maint/CapEx can be "found" money in the budget at the end of the year, but only if it budgeted. Only having your reserve and the $100 cashflow can be risky. But if your property is in good shape and you have reserves for unexpected issues it might be fine. The appreciation and annual rent increase could give a good IRR with a reasonable holding period.

IMO, I guess it depends on what is your appreciation and turnover strategy.

It is fine to take a gentle approach when talking to them, but those provisions are in your lease for a reason. And as far as looking the other way - if things go bad with the child, you have nothing to stand on.  Adding a person to the lease does not mean the rate changes but allows you to screen the person; but they are also adding a pet, which may necessitate more deposit and/or pet rent; the vaping is just a reminder for them to tell the child - NO.  Be polite, be nice, but do not ignore the lease violations.  That is the road to h**l.

I think your approach is probably a good one for the adult child.  But how you approach should be based on the provisions of your lease. 

Do you have extended stay and roommate (or additional tenant) provisions in the lease? i.e. does it state that they must be added or get out after a specific period? 

Does your lease require notification and approval for any pet not on the lease? 

Does your lease have the tenant responsible for the actions of guests and are to enforce the provisions of the lease with the guest? 

Stick to the lease and provide the correct notifications.  They may pay on time, but they seem to take liberties with some of the lease.  It does not have to be adversarial, but people can be unreasonable about their family. However, if it is just enforcing the lease, they have little to complain about - they agreed to it already.

...and if instead of a hurricane you just got a bad storm and a lot of rain? A water claim on a personal property I had 20 years ago cost over $130K. Even with the deductible I was still out $15-20K all in - water gets everywhere and destroys/damages everything along the way. You have shown that you know the problem exists.  If you do not address it the insurance adjustor may simply deny the claim due to willful negligence.  Get it fixed, even if it costs more than $1,200. 

Tim is correct that you should consult with someone familiar with your laws.

But best practices for Security Deposits (and last month's rent or other funds held in TRUST) is to keep it separate from your operating funds to avoid commingling and using funds for other than their intended purpose. Always remember that these funds are NOT yours.

From your post about Missouri laws I will highlight a few words:

2. All security deposits shall be held by the landlord for the tenant, who is a party to the rental agreement, in a bank, credit union, or depository institution which is insured by an agency of the federal government. Any interest earned on a security deposit shall be the property of the landlord.

You are holding them for the tenant, not for you. But is your brokerage account federally insured? If so, maybe...

But a brokerage account implies securities, which implies potential loss. Are the funds simply gaining interest (which you are entitled to keep) or is there a potential for loss? If there is a potential for loss of any kind, then you are using their funds for your benefit - i.e. gambling with other peoples money - so definitely a place you don't want to go.

You should send an adverse action letter to those that you decline. That is a requirement in Washington and likely in your state also. 
btw  - as a best practice, I suggest you avoid comparing applicants to each other. Take the first qualified applicant. We all have conscious or unconscious biases. By comparing we let those come out and is where you can get into fair housing violations. Not saying you are doing that, but you seems to be processing them in batches. 

Jerell,

Credit and rental history are probably your biggest worries - i.e. do they have the funds to pay and will they pay, and do they owe to their prior landlords.  But for figuring out their income ratio, the Section 8 program will pay for a percentage of the rent, typically 70%.  The remaining percentage, again typically 30%, is subject to the income ratios you require.  So for a $2000 rent, $1400 might be covered by the program.  The remaining $600 is the tenant responsibility.  For a 3x requirement, they must have a verifiable income of $1800 (3 x $600).  Any other rent items, such as pets, etc. must fit within those same calculations.  

For Deposits, unless the program will also provide the Deposits (some do, some don't) they must have the appropriate funds. Be sure, before you offer the lease, that you know what is provided and what they need to bring to the table.  Last Month's Rent is often not allowed under these programs because the program is guaranteeing the funds (or portion thereof).

Otherwise, stick to your qualifications and screening criteria.  Be fair and be consistent. There are many good people under these programs, but likewise there are many looking to sell a sob story. If they do not meet the criteria, show a bad history of paying on time, or owe a prior landlord then it doesn't matter how nice they seem - they will continue being who they have been in the past.

David, you will violate Fair Housing laws unless you fit under some very specific exceptions. Seattle has a host of additional classes that you have to deal with above and beyond the federal seven. The two that come to mind are marital status and parental status, both of which will hit you limiting to one person.  Is your property in Seattle of one of the surrounding cities?  I, btw, am in Bothell. 

Not to disagree with Thomas or Jaron, but a question I would have is more to the termination requirements for your jurisdiction.  In Washington State, where I am, when you go to M2M on a lease you cannot then terminate that lease without just cause.  This makes M2M undesirable in many cases. Your tenant sounds like a good tenant otherwise, but you should be sure that your jurisdictional rules changing from a term to M2M do not change in a way you are not prepared to handle.

1) what are the notification requirements for a tenant in your jurisdiction? Being Texas, I am guessing they are somewhat LL friendly.  Make sure they are not jumping through a loophole.

2) What does the lease state regarding notice and responsibility of rent should they terminate early?  If you don't have such clauses you might not be able to do much or might be limited on the damages.

3) What is the damage/condition of the property?  You may be spending that deposit on getting the property back into rentable condition.  So you may not be covered for a month's rent - don't count that chicken yet.

4) Assuming you can hold them responsible for rent, you should still get the property turned as quickly as possible to avoid the vacancy loss.

5) Determine the loss in physical damages, vacancy, etc. and send them a bill.  When they don't respond, file a claim.

Sorry for your situation, but my best advice would be to move past them as quickly as possible, then deal with the financial aftermath separately.