All Forum Posts by: Ricardo R.

Hi everyone. I'm currently attempting to rent a 3bd/2.5 bath SFH. I have a group of 4 individuals which all know each other (2 couples) wanting to rent the home. Collectively their income is 5.4x's the rent, however individually neither make my 2.5'x income cutoff. For those of you that have experience or knowledge in renting to multiple non-family tenants could you point out some issues I need to address, in all aspects i.e. lease, rent, etc.

Any input would be appreciated.

@Kim Meredith Hampton rent is due on the 1st of each month and notice was given on the 17th of the previous month (a bit more than 30 days). 

Have a question for you guys and seeing if you can help me out.... 

We have tenant's that are moving out mid-month 16th. They gave us a 30 days notice (as per the lease). Our lease specifically states no 'partial payments'. 

Do you guys typically charge for the whole month regardless of when the tenant leaves and terminates the lease or do you pro-rate the rent?

Without know specific numbers its a bit hard to give you accurate advice. However, here is some generals food for thought... 

Why not keep the cash you have and not pay off your mortgage. Instead use the cash you have and use it to invest into another property. Additionally, why not also instead of getting a HELOC which is variable rate and usually has a balloon payment and instead get a cash-out refinance. This would also lower your interest rate (if it is high) but is a fixed rate which is ideal for investment so you can account for your numbers. A cash-out refi. usually lets you take out @ 75% of your appraised value. Some will argue that taxes are a con to paying off early however, no, if that's what you want it'll always be worth it however, consider that once you pay that money into the home to pay it off... its locked in there, frozen until you either sell, of refi. or heloc... either one you will still go back to owing someone. Personally I would cash-out refi. and then use that money plus the cash you have on hand and re-invest into other properties. If you did the math you would be able to pay off 3 properties that are cash-flowing faster than you could pay off one property.

Hope this helps. 

Alex

@Josh Liss looks like you have a good problem on your hands. So as I understand it, if you sell you'll net 300K which you will then apply to other investments on the other hand if you rent you'll net @1k/mo. so my input....

I looked up your area briefly on zillow - Littleton, CO and it seems like 3/2's start out @270K - @350K of course there are others that go above this price range but, I'm sure if you were to target a property for buy and hold you'd probably definitely try to stay on the low end of this. So here are my thoughts. 

If you sold and did net the 300K, you could theoretically split that into 4 down payments of 70K (20%) each plus closing costs and purchase 4 - $350K properties ... assuming that you could rent them for close to the profit that the one you currently have would make... you could then net about $4K/mo; 48K/year in profit. However, and this a big however you would have to find 4 awesome deals and be sure that they cash flowed just as high, additionally paying 4 different closing costs and then assuming that you could easily acquire loans for all 4 of them before they had time to 'season'. 

If you rented, you could make your $1k/mo; $12k/year in profit and then essentially instead of selling you could cash-out refinance. Cash-out refinancing usually only lets you take back out 75% of the appraised value (check with your banker) so assuming your place appraises for $440K that means you could take out @330K after you account for what you still you - you would be walking away with @ $200K cash in your pocket while still keeping this home and cash-flowing $1k/mo. You could then turn around and use the 200K in much the same way as above. So theoretically you could buy two other additional 350K properties and put down 70K (20%) plus closing cost and still have some money in your pocket. At this point you'd have 3 properties cash flowing you @ $3k/mo ; $36k/yr. --- Thus in 2 years you would have enough from saved from cash-flow ($72K) to go ahead and by another property... and so on and so on. Also keeping in mind that you could cash-out these other additional properties as well down the road if the numbers looked good. I prefer this method for a couple of reasons 1) you're not fully committing and going out into the investment world on a whim. 2) you can gradually build up to this plan i.e. you'll first rent out the place, then once you realize how much you're cash-flowing you can proceed with the refinance, then you can look for your next like deal and make this plan come together. 3) you already have one property why let it go if you can cash flow. 4) if all else fails, you can still sell. 5) You start right off the bat by being able to buy another home in 2 years and faster and faster with each and every additional home you buy. 

Other options for your money might also be to be the lender and lend the money privately to other real estate investors for a quick and high return; you could also possibly look at investing in multi-unit properties; flipping is an option.  

Just my ten cents, hope this helps. 

Alex

I'm in Howell

@Amber Shelters I'm in the Livingston County area too, Howell. Do you know of any good REI meet ups or things like that in the area?

Ok good...  I mean really you have a co-signer, people which offer rentals to students do that all the time requiring the parents to co-sign for the student which doesn't have any credit. I don't think its too big of a deal so long as the rent if paid on time. I would probably just make sure that my contact info for the 2nd roommate was solid (forwarding address), because as you said he will have more to loose if you went down the evictions road and would definitely hopefully make sure there was no issue with rent. When you send your notices send it to each one of them. 

Oops... one more got so carried away with possible application fraud that I almost forgot to address if everything checks out. So if you have verified that all parties on the lease are real and aware they are on the lease... then is it really that bad? I mean if they're paying the rent on time and the 2nd roommate is not living there essentially what you have is a tenant and a co-signer, whats wrong with that?

Michaela, just a few thoughts: Yes you can evict for things other than not paying rent, you can evict for illegal activity, you can evict for breaking lease terms, you can evict for health issues or destruction of property and offcourse for non-payment, although it may vary from state to state. However, one thing keeps bugging me with your scenario. So to my understanding you have NEVER met the 2nd roommate and have only had contact with him/her through email/phone/text, is that right? How do you know that the 2nd roommate is even a real person and not just a made up person? --- I noticed you ran a credit check (I hope you didnt just take a credit report some one just handed you) on the 2nd roommate so to some degree that person is real, but how about identity theft. Is it possible that the 2nd person doesn't even know they are on your lease (identity theft)? or that you haven't been emailing the second person at all rather emailing your first tenant to an email account they set up? --- You received their applications which is great, at this point continue with your background check on the 2nd roommate, you may have reason to believe this person does not even know they are on the lease. Visit their place of employment to re-verify employment, speak to the employer and then ask to speak to your 'tenant', if they are there and everything checks out just apologize for the inconvenience and reiterate what your concerns were. --- Take 2: If you did meet the 2nd roommate at some point, then obviously the 2nd roommate is 'real' or consenting but are they really? Did you ever verify the 2nd roommate's driver's license to ensure that the information on the application (to include the credit check) matches the person that was standing in front of you? ---- if at any point the information on the application  you received is fictitious, you have illegal activity and grounds for immediate eviction and possibly even charges. I hope I understood your situation correctly and hope this helps.