All Forum Posts by: Jeff Copeland

Only qualified applicants should be signing your lease, so the credit and background check comes way before the signing of the lease. 

You need to have published tenant screening criteria that address not only credit score, but also your income requirements, eviction records, criminal records, etc. 

And then you need to screen every tenant the same, using the same criteria, in order to avoid Fair Housing and discrimination claims. 

Note: Although I mentioned criminal records above, this is a very tricky subject. Make sure you understand the HUD guidance on the use of criminal records as grounds for denying someone housing. There are groups out there that will literally call you up and ask if you rent to convicted felons. If you say no, they hit you with a lawsuit. This is just one example of the many potential pitfalls associated with tenant screening. 

If you insist on self-managing, you'll need to learn a lot of stuff about a lot of stuff. I highly recommend a website called EvictTV.com - They have hundreds of explainer videos about landlord-tenant issues (and I'd recommend watching every single one!). It's produced by a Florida-based attorney's office, so some of the info is Florida-specific, but 80% of it applies across the board. 

The timelines are key here. 

Were you inside the timeframe specified for your financing contingency? Or had that expired?

And, as noted by others, most contracts also have a clause stating that time is of the essence and the buyer/borrower shall provide timely information to the lender for the purposes of meeting the financing contingency deadline. 

If you are in default, the seller is being generous by offering you half of your deposit back. 

There's plenty of free sage advice here on BP if you spend some time exploring the forums, bookstore, podcasts, etc. 

It struck me that 4-12 units is an odd range. One of these things is not like the other. 

2-4 Units = Residential property for financing purposes

5+ Units = Commercial property for financing purposes

You might consider spending some time exploring the difference between residential and commercial financing options, and researching/interviewing lenders and loan product options for both. Then you may end up with two different sets of search criteria, for example:

3-4 Unit Properties in a certain price range/location/property class (which will require a relationship with a residential lender), or

5-12 Units in another price range/location/property class (which will require a relationship with a commercial lender, and possibly even a different real estate agent/broker, depending on your market etc)

Having both options lined up in advance will allow you to pull the trigger on either if/when the right deal comes along, rather than having to start from scratch if one piece is missing. 

A HELOC is a great way to have access to your equity, but only pay for it if and when you use it. It could give you the best of both worlds. 

Note that you'll most likely need to remain and owner-occupant of the home in order to qualify, but many banks offer low closings costs and high LTV on HELOCs.

We have a similar situation here in Florida, but it isn't that taxes are higher for landlords. It's that owner occupants have a homestead exemption and an annual cap on property tax increases. 

When an owner-occupied property sells, the seller can "port" their homestead/cap over to a new homesteaded property, and the taxes on the sold property "reset" for the new owner (and often increase considerably once it is reassessed based on the new sale price). 

So to make it "fair", we wouldn't lower the taxes for landlords, we'd remove the exemptions and caps for owner occupants. Obviously, this would be politician suicide for any politician who'd dare to propose such a thing. 

And as someone who owns both a primary residence and investment properties here, it wouldn't benefit me in any way to jack up the taxes on my primary residence, so I'd have no reason to support such a measure. The only people who would have an incentive to support this would be out of state landlords, but they have very little say in our state politics, since they don't live here.  

There are a number of great property management software suites that do everything from publishing listings to online applications to screenings and background checks to rent collections, accounting, and maintenance - all under one platform. Buildium, Appfolio, and Propertyware are the big three. 

Some now even include e-signature options so you don't need a separate subscription to Docusign or one of its competitors. 

Digital recordkeeping is definitely the way to go, whenever possible. 

But note that state laws often requires the "posting" or "serving" of hard copy notices for certain things (like pay or quit notices, non-renewals, and terminations). You can often leverage the services of a process server for these. 

Much easier to pay to have it done right up front, than to pay to undo it and start over later on. 

Creating and filing your LLC is usually pretty easy, where the attorney's expertise comes into play is helping you draft your operating agreement, which will dictate things like (among many many others):

Who can sign for the LLC to buy or sell assets, open and close bank accounts, and generally conduct business?

Does one managing member need to sign off on transactions, or do all members need to sign off on everything?

Can you add additional members later on? How? And what percentage of ownership can be sold off to new members in the future?

How and when (how how often) are the LLCs income/profits distributed to members?

Replacement cost is generally want you want to insure for. 

Appraised or market value is MUCH less relevant in terms of insurance:

A 500 sq ft detached SFH on a tiny lot in Manhattan might be valued at $5M due to the location. But the replacement cost for the structure at $200 per sq ft would only be $100k. 

By comparison, a 4000 sq ft SFH on an acre of land in a remote rural area might be valued at $500k, but the replacement cost for such a large home at $200 per sq ft would be $800k. 

These are of course made up extreme examples just to illustrate the point. 

Here's another example illustrating the reason DOM is a tricky metric and does not capture actual vacancy:

- PM takes 30 days to get unit ready and listed.

- PM Lists Unit

- Unit rents in 7 DOM

- Tenant moves in 23 days later. 

DOM = 7 days

Actual vacancy experienced by owner = 60 days. 

This scenario stresses the need for:

1. Appropriate homeowner's insurance that covers your property for its current use (i.e. long term or short term rental) - There are a lot of properties out there that were converted from LTR to STR, or from primary residence to a rental, but the insurance coverages were never updated.

2. Maximizing the liability coverage on your homeowner's policy. Property and Casualty claims (roof damaged by a storm, floors damaged by a leak, etc) are usually in the tens of thousands of dollars. Liability claims (a person injured, permanently scarred, or killed on your property) are in the hundreds of thousands, and often exceed $1M in the case of a wrongful death. If the guy had fallen through the second story stairs and died, there is no doubt this would be a $1M+ lawsuit. 

3. Having an umbrella liability policy. Homeowner's policies often cap liability coverage at $300k or $500k, which isn't enough for a wrongful death or serious injury claim. Most landlords also need a $1M to $2M umbrella policy that kicks in where your homeowner's policy taps out. It's a relative low cost "get out of jail free card" (monopoly reference only, not meaning actual jail time in most cases!) you can likely use only once, but could save you a million bucks.