All Forum Posts by: Ho Eun Park

Wow these answers were very helpful! Thank you everyone! 

Hello,

Kind of an odd question. I have a dilemma where my current property manager may retire in ~5years. I mean that's still awhile but I am the type of person that likes to think many years ahead.

I recently graduated with two degrees and started working full time M-F while managing the properties time to time on the side along with my PM. I got very lucky in finding my PM who also happens to be a landlord for many properties in Southern California. She has her go-to contractor/handyman but I think they all might be retiring in ~5 years since they are at the age for retirement and have been casually discussing about retiring sometime soon. Just thinking about is dreadful since my PM has made my life a lot easier throughout the years. 

I have been reading some forums where people will self-manage their own properties. Heck, I even read on the forums where some people will self manage out of state (I think that's amazing that you found a way to self manage out of state without a PM). 

So the question(s): for those that self manage your own property, how did you learn the basic handyman skills for fixing/repairing basic things without the need to call a contractor/handyman? I am reading on some forums where people will fix or do everything themselves and I am wondering how did you gain those experience/skills... especially if you are working full time and doing this on the side?

I am thinking about reaching out to a construction company or even a handyman to be a mentor or take apprenticeship/assistant (I have seen some companies and handyman working on the weekends) so that I can learn the basics. Is that feasible or not recommended? I think it will be nice to know the basics/fundamentals and I am always eager to learn new knowledge. I think it will be beneficial in the long run for future investments as well.

OR another option I am thinking is attending a vocational school? I have seen some with short programs with low/affordable tuition. 

What do you advise? Is it a bad idea? 

So from what I know (someone can correct me if I am wrong):

As a new owner, you have to abide by current lease term until its over. Since yours is month to month, you have to wait until that month term is over to make new contract. However at the same time, you have to give the tenant 30 days notice for a rent increase if its 10% or less and 60 days if its greater than 10% increase in writing.

Let the current tenants know with the certified mail stating that you are the new owner.

Send in a new lease contract under new ownership with new rental lease and maybe new rules like no pets, etc. that you want to input.

I would generally give them 30-60 days notice regarding new rent increase so that the tenants can adjust to the rent hike. It also gives the current tenant to have at least one month to look for a new place and allows them to decide if they want to stay or leave.

If they do leave, factor in the cost to remodel/fix/maintain the unit for the new tenant to come in. 

I would go on Craigslist, Facebook group for housing rentals, real estate website like Zillow/etc to compare rent. 

You can look up what other people are trying to rent and what other people are actually renting at. 

You want to stay at a competitive price because that $10-200 a month will make a difference to some people aside from location and condition. 

Some people don't mind driving longer for lower rent and vise versa. It's better to have tenant occupied home with lower rent than no rent. 

Well if you advertised that it's street parking and verbally agreed, then you may probably tow his car for "illegally" parking his car in the drive way. 

Do you have other house-mate tenant that can back up the oral agreement regarding the Parking situation? Like is everyone aware and agree what the Parking situation is?

Also, the laws are bit different when it's owner occupied/shared housing.... but you should check your state and local housing law. Sometimes it's more landlord friendly when the landlord lives with the tenant. Even better, talk to an attorney. The first consultation is usually free and they can guide you on your next step if you plan to take it to the court. It gives you an idea what to do next.

And for future lease agreements and contract, even if it's a small matter... write it down and have them sign the agreements along with the lease term. 

- parking 

-responsibility/roles: cleaning/ trash/ common areas / parties / pets / guest over / noise level / recreational drugs / etc 

There are so many things you need it written down, especially in shared housing with a tenant. It may be fine initially but the problem may come up in the future more frequently and hinder living situation for the landlord and other tenants living in the same house. You never know so it's better to be prepared than not to be prepared. Having rules and enforcing it is also good.

For example, I did shared housing during my college years. I would have my house mate tenants let me know in advance of minimum 1 week if you have guests over and require that they let everyone else in the house know as well. Also it has to be only on Friday and Saturday night on non-working/school night so people can go to sleep soundly. I eventually had to put a cap on number of guests a tenant can bring for future lease term agreements because one of the tenant thought if guests are okay...it's totally okay to bring 20 ppl over... NO. That was not okay for everyone else. The tenant's small "kickback" literally became a house party. I literally said I'm calling the cops if they are not gone in 1 hour. Needless to say, things became ugly and the tenant moved out. Never had a problem before until this tenant moved in and made it a problem that required to be written in the contract.

Have you ever wondered why some common sense laws/ rules are even necessary? It's because of THAT one person that made it into a law. 

In addition, if they have a guest over, usually bf/gf sleeps over. I had one tenant that had a bf over for 3 weeks. Extra person means eating up utility costs for shares utility and rent space for the landlord. So I would do weekly pro-rated rent with prior approval of long term guests with maximum stay of 2 weeks. And I would put single occupancy only per room in the contract as well... and then add an admendum of house rules. 

since verbal/oral contract is not really held high in court... if you can't sign the contract write away then use technology such as text message or emails or even voicemails. 

***Oh and save your ad  posting regarding the parking on the street in case if your tenant or you go to the legal route. 

@Jay Hinrichs

Correct me if I'm wrong but the way I read The Tax Cuts and Job Acts for upcoming 2018 tax is that standards deduction is 12k for single/24k for married, making many people not able to use the reduce SALT deduction.

Even if I'm to claim tax credit on my resident tax form for taxes paid in other state.....the property taxes, state income tax and local tax are only deductible up to $10k. 

For example if I paid over 20k in property taxes and over 20k in income tax...I can only deduct up to 10k due to reduced SALT deduction even if I paid 40+k in combined taxes.

I don't think the property tax, state and local tax will be applied towards the standard deduction for 2018 and forward unless they change it again. I believe they also removed certain things you can deduct as well. 

However I'm not too sure. This is how I interpreted it. 

I haven't invested in any properties outside of CA but I am looking at states with no income tax such as Texas and nevada.

1. no income tax means I pay tax for only CA state tax and federal tax. Easier tax filing.

2. Affordable Price but then... almost everywhere else seems to be a lot cheaper than CA so a lot of the price looks appealing. But can't compare apples and oranges. 

Potential list/location that I am looking into:

 A. Las Vegas Nevada

 - Very close to CA so I can either drive or fly short distance

- No income tax

- Can be maybe used for vacation rental

- Low Property Taxes

*** Worry is economy is heavily based on casino/hotel so if there is a downturn in the economy potentially have a lot of vacant properties in the area due to laid off/less tourist/etc 

*** Slight concern that I have is that I look at number of renters/landlord ratios (is it owner occupied or for investment?). I feel like a lot of the buyers are not looking to buy as primary residence home but as vacation home or rental investment.... meaning vacant home  can have squatters and home are not managed close-by and must use managment company that you can trust but could be un-reliable or reliable. 

B. Texas  - no income tax and looking into areas near major universities or downtown (Dallas, Houston or Austin areas). Price seems good as well. But I have to keep researching the areas since I am unfamiliar with the area and location is very important.

C. Tennessee - Price and "sort" of income tax free. I am still researching but it seems that there is a flat rate of 6% income tax on investments, interests and dividends such as stock. 

Not as much as interested anymore but possibly:

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D. I was thinking of Chicago, IL but their property tax seems to be constantly increasing a lot and seems pretty expensive. They do have income tax. But I believe Chicago is one of most affordable / cheaper metro areas to live in compared to places like SF or LA in California as an example.

You can talk to lenders right now and tell them your price range of properties you are looking for. They will ask for some information like your income, networth, debts, etc. 

They will crunch in the numbers and let you know the max amount you are eligible to borrow (with higher down payment your borrowing power increases).  I believe the pre-approval letter lasts for ~90 days depending on where you are borrowing from and with the interest rate that was offered. You should  browse around various lenders to see the interest rate that they offer and what your maximum borrowing power is  so that you can filter out the higher price ranged properties (try to know how much of a down payment you think you will have by then as well). 

I am not too keen on paying PMI. That is extra money that I could have invested else where. In addition, I feel like if I have to pay PMI, I am not ready to purchase another property. This is just my belief that I go by. I like to have some money saved up aside from down payment just in case something happens in your life (laid off, accidents, and other emergencies), so I believe that it is much more safer to have at least 20-30% down payment when purchasing a home or investment property. It shows that you are more ready to purchase and is able to handle the debt load.

If you cannot find a tenant in property one for awhile, you have to factor in the vacancies cost. If there is a big emergency repairs or something that has happen that would also have an impact on your cash flow.

I would wait until you have at least 20 % down payment before purchasing another property, unless your main day job can help cushion the expense cost (vacancy, repairs, taxes, insurance etc). When you crunch in your numbers, always think of the worst case scenarios possible. If the numbers still seems somewhat do-able/reasonable then go for it.

However, I have seen people doing it with below 20% down and buying investment properties after properties (I think it is pretty risky move). Some did good but few had bad luck with tenants/vacancy/ or other emergency that hindered with mortgage payments and had their properties go into short sale or foreclosure even with a decent paying full time job. I think it boils down to how well you manage and handle your properties and your money. 

But I personally will not purchase a property that requires PMI into the calculation.