All Forum Posts by: Ricardo R.

Rachel, if it is their intent to live together you should try to put him on the lease a mean after all you already did a background check on on him. If the law student meets your income requirement on her own 2.5x - 3x the rent then technically his employment verification is not too important. But perhaps you can ask for his previous employer if still wanted to verify concurrent employment, but like you stated he's leaving his current job and in my opinion if one applicant already satisfies your income requirement they should be good as far as that is concerned. I would however, put him on the lease... I mean that is their intention correct to live together correct? If he's filling out a background check already then I don't see why they would have problem with doing that. 

I have to agree with Dana Hoffmann in that you should have clauses in your lease to protect you against 'friends' or un-noted guests moving in. I hope I'm not too late but maybe for next time you should definitely have a 'guests' policy and probably under the 'Use of premises' section. Mine reads like so:

Tenant shall not allow any other person, other than Tenant’s immediate family or transient relatives and friends who are guests of Tenant, to use or occupy the Premises without first obtaining Landlord’s written consent to such use. Regardless of affiliation to Tenant any guest which: (a) stays on the property or in the Premises more than Fourteen (14) days or nights in any 6 month period; or (b) receives mail at the Premises; or (c) moves in their own furniture; or (d) pays Tenant’s rent; or (e) claims Premises as their residence, will be considered a tenant, rather than a guest, and must be added to the lease agreement; otherwise it is considered a lease violation and Landlord has the right to terminate this lease. Any party being added to the lease which is eighteen (18) years of age or older must first undergo and pass a background verification screening similar to the one undergone by Tenant initially; approval is upon Landlord’s discretion. Landlord may also increase the rent at any such time that a new tenant is added to the lease or premises.

It's extremely important that everyone which will be living there be accounted for aside from a liability standpoint, think of this 1 scenario (out of many more) your tenant pays in full then when 'tenant' 2 moves in they decide to split the rent... this goes on for awhile but then tenant 2 - which was never placed on the lease - doesn't pay their fair share -- the situation just got very complicated if #2 is not on the lease (jointly and severally may not apply) and much more so if you don't have solid 'guests' policy, outlining who is considered a guest and at what point they become a tenant, aside from rent, there are provision in your lease that tenants need to abide by, if someone did not sign the lease and it is not outlined in your guests policy, they don't really have to abide by them. 

I hope this helps and I hope I'm not too late. 

Alex

Hi BrannDon, I personally like to be involved in the screening process and application, since that is the only defense and chance you really have to seek a good tenant and avoid problems in the future. I don't mind property management companies but 1) you'll be loosing profit for something that you can do 10 times better (most charge 1/2 month rent for screening or 1 full month for letting and listing) and 2) if you are just paying them for screening and letting, then there really is no vested interest in them being selective and finding you the best tenant possible. 

I personally go back and forth between two services depending on the tenant. I use 'MySmartMove' and 'Cozy'. With 'MySmartMove' you have the ability to either have the tenant pay for their background check or you can pay on their behalf if you collect upfront application costs. With Cozy, the tenant has to pay for their background check but in my opinion it is a bit more comprehensive. Additionally with Cozy, applicants are able to fill out their application online (which is free) and then you prompt them to go through with the background check. Both services, check credit histories, evictions, criminal background, SSN verification etc. 

Whatever the case, I still highly recommend that you do some 'leg work' in verifying their employer, salary, position, and length of employment. Also, you need verify their current and PREVIOUS landlords as well (previous landlord is very important). They will state their income on the application, you have to verify this - yes a call to employer will help - but you should request 2 months of pay stubs or W2 for the past year. By now you have checked everything; employment, previous landlords, credit history, utilities, etc.... but how do you know they were who they told you they were when you met them? Could it be possible for someone to tell you they were 'John' when in fact they were 'Mike'? Their friend John could have passed the entire background process for them....my point... don't forget to verify their driver's license with their picture and name on it.  

I know this is long but one last thing... neither 'MySmartMove' nor 'Cozy' or any other screening service that I am aware of have a dedicated 'Information release and consent' form. With the exception of a few, every background check I have conduced I have had to use one to acquire needed info... apartment complexes, utility companies and major employers typically always require one and will not release information on your applicant until you have a dedicated form signed by the applicant.  

Hope this helps. 

Alex

 Tom, would you recommend Mr. Landlord for credit reporting. I use LPA but have not had to report any of my Tenants. Thoughts?

Nick, I haven't really had any issue using online payments. Typically once I explain to Tenants that they now have the ability to pay online from the comfort of their home or from a mobile device, they are all about it. Also, you can point out that their payments will be recorded something which they can then use to show future landlords of how they always pay on time and how responsible they are. On the recurring payments, this is my view -- rent is due every month on the day you both agree on, someone should not have issue with recurring payments, something which they have to pay anyhow. In my experience responsible Tenants don't see it as an issue because in their mind, rent is a non-negotiable thing, they always plan on paying it. If someone doesn't want to have recurring payments and that is deal breaker for them, considering everything else that goes into finding a suitable apartment/home is that really someone you feel comfortable will pay you on time every time? ...

If  you find it to be a mainstream concern or feel that demand for your rental is low, then maybe you can sway renters to choose recurring payments by offering to reimburse their payment fees every 6 months or every year. I have used an incentive ( I don't anymore because demand is high) where I would pay back $15 for payments which were 1)made electronically 2) recurring 3) cleared prior to the first, and I would pay that back to the tenant in a separate check every 6 months if 1) there were no disputes 2) there were no late payments for the period. Essentially I just set my rent $15 higher, so its not like it eating into your cash-flow but you incentivise the Tenant to do that, without really making them do it. 

It might but I think you've done your due diligence in having it in the lease and having their SSN, you can try to proceed with it. However, you should start including a dedicated 'Disclosure Notice: Credit Reporting and Tenant Performance', notice, which you would include when they first sign the lease. Landlords don't have very much success with debt collections for rent, so any little advantage you can gain to make it easier on your part and convey to the Tenant what the consequences are should be taken. With that said your lease might do since it does have that clause in there, but you again you should not only include a clause but a dedicated notice as well. As far as actually reporting it you can pay a third part to report it to the main 3 for you... I'm not quite sure you can report it directly to them yourself but you can definitely call them and find out. I personally use the LPA for that. 

Cosmo, you never know until you ask. You need double check that your numbers workout and if they still do, you need to move fast, like now. Sure you can start by calling your bank, but I would probably go to loan a broker first, try to hone in on a portfolio lender, just ask them... they will have a bit more flexibility and options for you if its possible. Also, don't forget the credit unions. If this can not be financed and only if it can not be financed as a rental property, can you purchase it as a primary residence meaning you would have live in it  for a year or so, could you rent the home you're currently living now for that time period? -------- If you cant do this, can you 'partner' up with possibly a family member that can lend you the down payment in return for a fee? -- Have all your stuff lined up and ready to turn in as that loan broker asks for it (2 years of tax records, 2 months of pay stubs, W-2's or 1099's for the past 2 years, 2 months of statements from your biggest bank accounts, etc. -- be ready to go).

Hope this helps. 

Alex

I go through the LPA... but you have to have done some ground work prior to make it easier on yourself. Jordan, did you either A) collect their SSN on their application or some other method; B) Did you have them sign a credit disclosure notice? and C) Does it mention in their lease that you will report late or non-payment to credit bureaus and or Tenant agencies? 

Alex

Susan, I too have gone over to online payments but with another service provider. Here is what our 'Rent' section looks like:

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Rent. As base rent during the Term, Tenant must pay Landlord, in advance and in FULL on or before the first day of each calendar month during the Term, the sum of Your Rental Amount Here ($0000.00). Payment must be made to Landlord, or his authorized agent, at the address first indicated above, or at such other place as Landlord may from time to time designate. Payments will be accepted online through Cozy, an online payment service, in which the Tenant must allow for recurring monthly rental payments and use as the primary rental payment method. Tenant may from time to time pay rent using direct deposit, check or money order, however a Ten Dollar ($10) fee will be charged for such payments methods which will be due at the time of payment. Partial payments will not be accepted. Any and all fines must be paid within ten (10) days of written notice from Landlord.

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I try to give them multiple options for payment just in case for some reason the rent collection service you go through isn't working or for some reason they do not have access to the internet. I know its pretty rare these day with smartphones and all but at least you remove any excuses for late or non-payment of rent. In any case I it completely up to you to accept cash but, understand that it carries a risk in not being able to be tracked, I personally stay away from receiving cash. 

I pretty sure you are aware but, I will mention it any way, you should also include a 'Late Fee and Returned Check Fee, Application of Payments' section in your lease specifically outlining what fees they will incur if rent is late, if there is a grace period, what happens when a check bounces and what order will funds be applied (our order is: $ is first applied to late fees, then to returned check charges, then to other amounts - excluding rent - then to rent due under the lease) - If you're going to report to credit or tenant agencies if they pay late then you need to have a separate clause in there for that too - and also if you charge a fee for having unauthorized pets or smoking the home.. you need to have those clauses in there as well. 

Lastly, ALWAYS, ALWAYS have the 1) the Security deposit, 2) the first month's rent (and any other fees your require) deposited prior to handing over the keys. You can collect those at the time of lease signing but you shouldn't if that is the same day you hand over the keys. We have them sign the contract before hand (online digital signature services are great for this) and they must also deposit the security deposit and first month's rent prior. Then we set a date usually withing 2-3 days to meet them at the property and hand over the keys and go over the property and anything they may have questions on. A big 3 is that you also need to make sure that the utilities (gas/electric) have been passed onto their name, don't just take their word for it, call the companies and verify... BEFORE you hand over the keys. Your lease should have a provision in it that states that if no keys are handed over within 10 days of the lease start date then the lease is void -- this protects you, of course however you would have to return all monies they have paid you up to that point. 

Hope this helps. 

Alex 

Chris, thank you for the input. Do you think this is the right way to go if I wanted to continue investing in say purchasing more buy and hold properties in the future?

UPDATE: Sorry I forgot to factor in the first house as a 5th house in cash-flow... so cash-flow on an a cash-out refi would be more like $24,000/year and I would save it for @ a year and half to purchase a sixth.