All Forum Posts by: Elenis Camargo

Hi BP! I just inherited my third set of tenants. They have lived in the property 12 years. Never had their rent raised. Don’t have a security deposit and are month to month. The property needs a complete rehab as they seem to be hoarders and everything is filthy and outdated. Literally everything has to be ripped out.

When I called to introduce myself they said the hot water didn’t work and the kitchen sink had very low water pressure. I got those two things fixed within the hour of hanging up the phone. I sent them a new lease for them to sign for a year. I am not asking for a security deposit since the place needs to be gutted anyway. Our plan is once the lease is up to give them a few months to move out and completely renovate the property to either sell it or refi and raise the rent price.

The previous landlords never bothered to fix anything for them. She seems pretty pissed about that, which I would be too. Now she emails me saying the laundry machine is “still” draining out the window and no one has fixed it. Also there is a shed (if you can call it that) that’s pretty destroyed from a hurricane Florida had several years ago. She wants that fixed as well. She also asked for a copy of the inspection report to make sure the property is “safe” to live in. I definitely won’t be sending that. The property is safe. The shed I will fix for sure because it’s a safety hazard. I will remove it completely. I don’t want them going inside and having it fall on them. But the laundry, I’m not sure. If the laundry machines are not ours then are we forced to fix that? I’d rather wait until next year when we fully rehab it. But maybe having it drain out the window will cause another issue? Just wanted to get everyone’s input.

Thanks!

@Jordan Vanherwynen No problem. I don't think I address it there. Here are a few reasons:

1. Unless you already know the area you're buying in, you have to learn the neighborhood 
2. You have to scour the MLS, or whichever method you're using, to find properties that fit your requirements
3. You have to do comps for purchase price and for rental price for each property you're considering
4. You have to estimate initial costs to acquire the property (as you're already trying to do) as well as monthly expenses -- we built a model over time to do this and BP also has a calculator you can use to help with your first deal
5. When all is done and you go through inspections, appraisal, and closing, the work of being a rental property investor is just beginning. You'll have to place a tenant (with this comes a whole new list of things to do), put processes in place to manage them properly, deal with late rent or tenants who disappear (it'll happen eventually), deal with maintenance issues which also comes with following up with contractors/vendors nonstop to make sure the work is done, etc. You can read about our first experience as landlords here: https://www.biggerpockets.com/blogs/11360/78720-ho...

I'll admit our first property was an easy one to acquire. We were looking at the right time and found a great property. It's been harder to acquire this last one just from not being able to find a good deal. Also each tenant is different. We have had inherited tenants with each purchase (coincidence, not on purpose) and I have to admit they are more work than placing your own tenant. If you screen well then you'll have good tenants and won't have to deal with hassles like we have. But it's all part of the business, so it's fine! Eventually a good tenant can turn bad when they come across a personal problem.

Anyways not trying to scare anyone away from RE investing at all! I don't want to come across that way because it truly bugs me when people try to stop others from doing something as exciting as this. I just want to make you aware of everything to come. I actually encourage a lot of people to do this. It's super rewarding and I love self managing our properties. Even when dealing with problems. I look forward to acquiring more and having enough cash flow one day to live off RE investing.

Again I'd be happy to answer any questions or help along the way  :)

@Shane Woodman That's great that you have attentive tenants. I would give them the $100 off their next rent then. They'll appreciate that and continue being good tenants  :)

@Jordan Vanherwynen I am currently writing a post on this and I'll share it with you when it's done but the quick answer is I did a conventional 30-year mortgage for each one. We saved the money for the down payment and closing costs for the first and second deals (20% down for each). First property was purchased in February 2018 and second in October 2018. For the third one we used a HELOC from the first property and some savings for the down payment and did 15% down. The HELOC we will pay within a year with monthly savings from our paychecks. It takes a lot of time and effort to do this but if you're dedicated and willing to put in the time and work, then it's not impossible :)

@Shane Woodman It depends. Did you know that it needed this part and it just took long to get the part in? Or did they not report the issue till the last minute? If you knew about it then you can deduct $100 off next month's rent and let them know it'll be a ONE TIME deduction due to the HVAC issue. I wouldn't go giving them cash or paying the bill directly at all. Now if they reported it late then it's on them to pay the extra $100.

@Luke H. I agree that you can't charge them for changing the locks. That's on the landlord whether they want to do that or not. But the other two issues I think it's reasonable to charge. If the Texas law doesn't state anything then just make sure you follow the rules for deducting from the deposit. For example, in Florida we have to send a certified letter to their last known mailing address within 30 days stating what we are deducting and why. The tenant has 15 days (if I remember correctly) to reply. Even if they miss the deadline they can still file a claim in court later on. Just make sure to follow the rules with this one.

@Rodney Wright What state are you in? I think this is illegal. You can let them know that if they do not return the EMD within X number of days, you will file a complaint with your state's real estate director. I can't think of the name of this right now but basically every state has several groups that manage the laws and make sure buyers/sellers/tenants are being screwed over and following the rules. It differs by state but they definitely can't hold extra money from you just because they feel like it.

@Carol Frome Woah!!!! PM's like that just give all managers a horrible name!!!! So basically she's supposed to pay her electric bill but she's stealing the one from the common area? If you suspect the old PM was overbilling you and doing something wrong, I would send some sort of letter with an intent to not pay. Get a new lawyer to help you, if this one recommended this horrible PM then they must be fishy themselves. 

To see if this niece is stealing the electricity, call your local electric company and have them check it out. If she is, send her a letter to terminate her lease effective immediately due to breaking the law. She's trouble and you don't want trouble in your property. If she doesn't vacate herself then proceed with eviction. It'll be painful now but worth it in the long run. 

Best of luck!

@Arion D. Definitely sending a certified official letter is what you have to do. They are breaking the lease and that's grounds for eviction. I did some googling and found this form for the state of Connecticut (link at the end). It is basically telling them they are breaking the lease and they have X days to correct it or you will pursue eviction. I've learned that with tenants, you have to be firm or they'll never take you seriously. Especially if you inherited them. The last landlords probably let them run wild and now you have to train them to be good tenants and respect your property. Junk cars bring down the appeal of your property so it's definitely a problem. Best of luck!

https://www.uslegalforms.com/ct/CT-1500LT.htm

@Jordan Vanherwynen I purchased a property for $90,000 in Florida last year and the closing costs were closer to $5,000. Definitely $1,500 seems extremely low. You want to add a good amount to make sure you're not underestimating. I also would never do a deal that gives me $76 in monthly cash flow. I have 3 properties and they have cash flow of $381, $344 and the last one is $250 (which came with tenants and we will rehab next year to sell for a profit). Those cash flows include capex and vacancy. Some things to consider:

• Things break so imagine you are only making $76. It would take you months or years to recoup maintenance issues if something major happens.
• Tenants stop paying, so if you had to evict that's several thousand dollars down the drain. And this WILL happen. It's just a matter of when. We already had one tenant abandon with our first property within 3 months of acquiring it and now our second property the tenant is super late but has been communicating so I'm working with her. They were both inherited tenants so if you place your own tenant you're less likely to have a problem.
• Are you hiring a PM to get you a tenant? Then they charge one month's rent for that. If not then okay you save some money there.
• When your tenants move out, remember you may have a few weeks or couple months of the property sitting empty. Another time where you'll have to invest more money paying the mortgage yourself rather than bringing in income. 

If you have a higher monthly cash flow, it helps ease the issues above. If you want to make this a long term investment and get into rental property investing heavily, then I advise to look for higher cash flowing properties and reconsider your closing cost numbers. Feel free to PM me with anything you need  :)  I'm happy to help! I felt lost a year ago with my first property but after the first one you learn so much that it becomes second hand eventually. Best of luck!