All Forum Posts by: Denise Evans

Don't forget about things like licenses, rental taxes, legal and accounting. Also, even if you never have vacancies, you need to include a vacancy and credit loss factor. A property might be vacant for one week out of the year when you turn tenants, for example. A tenant might move out owing you money, creating a credit loss. You should also calculate a reserve for capital expenditures.  If you will need new appliances, or hvac units, or carpeting in a certain number  of years, you should put a certain amount of your cash flow in a savings account or "sinking fund" each month so you will have the cash when you want to make those purchases.  This is not an expense of the property, but it is a cash flow deduction.

What part of Houston are you targeting? We used to live in Cypress, I worked off the SW Freeway in the Arena Towers, and my husband worked just outside the Loop on Post Oak. Houston has so many distinct areas with their own personality, there are lots of opportunities.

A duplex is a good starter investment because it gives the economies of scale with multiple units, but without jumping into the deep end of the pool with apartments. It will also alert you to multi-tenant issues on a small, easily fixable, scale. For example, people who invest in single family homes rarely think about noise control issues, and extra insulation between units to cut down on sound transmission. If you go from SFR to apartments, you won't think to check insulation and firewalls as a due diligence item. They don't think about pets, their affect on common areas shared with other tenants, and the landlord's responsibility to provide safe common areas. Also you'll gain experience in trying to show a unit and the other tenant is helpful, or antagonistic, and how to handle that. If the numbers work--go for it!

@Tony Gunter

The Birmingham market is stable because of the healthcare and biosciences industries. Parts of town like Eastlake and Avondale are coming back, being gentrified. Trussville, to the NE of town, is a very strong market. Houses in the $50K range are being snapped up by REITs, who are doing $20K of rehab/upgrades, and then placing on the market for rents at $1,200 per month. They are staying vacant, because the market for those houses is down around $700. But, the REITs keep buying more houses. Must be something to do with funky REIT accounting, because nobody seems able to understand it. Properties in other price ranges are hard to find, but there are bargains, still.

If you are interested, I can connect you with someone who used to be a student of mine at University of Alabama College of Commerce, and who got himself through school on income from his real estate investments. He's now in Birmingham, doing well, but always looking for equity partners so he can do more deals. Very conservative, very solid, exceptionally smart and hard working. Never cuts corners. Analyzes everything six ways from Sunday.  Knows the market intimately.

There is a HUGE market of tax sale properties on the state inventory, located in Jefferson County. Contact me via PM, and I'll tell you about that play. It's rather more complicated than a BP post.

@Tony Gunter, greetings from a former UD alum, now living in Alabama.  You can get an eviction fairly quickly in Alabama, but it requires managing the lawyer and the process. For example, most lawyers will file the eviction lawsuit and also ask for damages for unpaid rent, damage to property, etc. This requires personal service on the tenant, which is often hard to do. If your initial lawsuit simply asks for the eviction order (you can amend later and ask for damages) then all you need is what is called "nail and mail" service.  The process server makes one attempt to serve the papers on an adult at the premises, if nobody is there, he tapes a copy to the door, and mails the papers via regular mail within 24 hours. Service is counted as effective from the date of mailing. I recommend they mail the same day--it cuts out one extra day in the process.  You can wait for a Sheriff's deputy to do this, or you can hire a private process server yourself, for around $50. It can be anybody except a party to the lawsuit. Once you have service, the tenant has 14 days to answer. No answer, and you get a default judgment. It's not automatic, you have to ask for it. That's where many lawyers let you down, by not doing things as quickly as they can. The tenant has 7 days after that to appeal to the next higher court (what you call District Court in Texas, but is called Circuit Court in Alabama), but must pay all past due rent into court or the eviction order will proceed.

I currently live in Alabama, but I'm a Texas-licensed attorney. Texas uses non-judicial foreclosure via a trustee's deed. Liens filed before the filing of the mortgage being foreclosed will remain on the property. Liens recorded after the mortgage that is being foreclosed will be stripped off the property. HERE is a link to an excellent article written by a Texas attorney.

We are all familiar with issues related to service animals (specially trained and certified dogs) and assistance animals (such as emotional support animals of any species or breeds).

This post suggests a compromise response to those issues.

Landlords who prohibit animals do so because they

• fear the damage that might be caused by those animals, 
• know it is highly unlikely they will be able to fully recover compensation from the tenant if there is damage, and
• fear litigation if the animals harm someone. 

Other landlords allow pets, but have strongly worded pet clauses or pet addenda to provide protections. If a tenant has an emotional support animal or service animal, none of the "pet" language applies, though.

You should create an Animal Addendum, or Animal Clause, that applies to all animals, whether they are pets or not.  You can't make it more expensive for the disabled person, such as charging a higher rent, additional deposit, or animal-related non-refundable fee. You can require ALL tenants to exercise responsible animal ownership, protect the property, minimize chance of harm to other people, and maintain acceptable noise levels that do not interfere with neighbors' enjoyment of their own property.

A well-written animal clause will require the tenant to:

• Provide proof of current shots, if applicable
• Provide proof of flea control medication, if applicable
• Disclose the name and contact information of the veterinarian caring for the animal, if applicable (hamsters, for example, probably do not have veterinarians)
• Keep dogs in a crate or on a leash at all times when outside the dwelling
• Use a pooper-scooper, whether on the leased premises or another's property
• Vary locations of dog urination, so as not to burn shrubs or lawn
• Empty cat litter boxes daily into outside receptacles
• Control  excessive barking that disturbs the neighbors
• Allow monthly inspections for pet damage
• Immediately clean any pet discharges and immediately report any damage
• Assist with Twice monthly HVAC filter changes for long-haired animals
• Keep pet food supplies in pest-proof containers

I think that if you approach the problem in this manner, you will be more comfortable complying with Fair Housing laws.

Alabama is relatively landlord-friendly.  Maximum 1 month security deposit; some states allow more. But, you can collect all the prepaid rent warranted and able. Fair Housing laws mirror federal laws, nothing additional. You must give 7-days notice of default and opportunity to cure, but if they default 4 times in 12 months, you do not have to cure the 5th time. With careful attention to deadlines and doing everything exactly when you are able, you can get a default eviction order in 30 days, and turn-out fairly quickly after that.  Eviction trials have to be set as priority cases.  Motion for summary judgment is available, so continuances usually not a problem.  Most claimed landlord defaults allow the tenant to terminate the lease, NOT to quit paying rent. If tenant appeals eviction, it must pay all past due rent into court or the eviction can proceed. "Nail and mail" service available for the eviction order itself, although you must get actual service if you are suing for damages.  Judgments are good fro 10 years and can be renewed for an additional ten years. Alabama does not have generous bankruptcy exemptions.

@Ron S., thanks for the input. I agree with you. And, thank you for the info about the 12.5% discount rate. Also, as you pointed out, things are different with regional banks and local banks. A local bank is MUCH less likely to forgive the deficiency, and much more willing to foreclose and take their chances on an REO sale. A regional bank is somewhat less likely to forgive the deficiency, but usually will do almost anything to avoid taking the property into inventory.

Ask your lawyer to take a look at UNION COUNTY UTILITIES AUTHORITY, PLAINTIFF, v. PAUL JOSEWITCH, et als.  Superior Court of New Jersey, Law Division, Union County, 269 N.J. Super. 218; 634 A.2d 1378; 1993 N.J. Super. LEXIS 887