All Forum Posts by: Cara Lonsdale

Sometimes that only applies to a property that actually completes the Trustee sale/Foreclosure process. If you are in pre-foreclosure, you are still dealing with the Servicer, not FHA.  So, this is probably being handled as a short sale.  Plan on 30-120 days to complete the sale.  If there are other moving parts like water damage, be sure the lender will take their time to evaluate.  Their goal is to find the highest net to Lender.  If they think they will get more for the property at Trustee sale/Foreclosure, they will let it go there, and not accept any offers ahead of time.

You CAN do any of those things.  It is YOUR place. lol
The question is whether it is wise to do so.  Your lease is the road map of your relationship with the Tenant.  Yours states that the lease is up in April, with no move-outs processed in the Winter.  That sounds like a pretty clear term.  So, if the Tenant secured another lease elsewhere before her lease term is up, she had to know that she would be responsible for the current lease.  Now, anyone can ask, because it doesn't hurt to ask, right?  However, be sure that she knows that she is on the hook for the rest of the lease per the binding contract she signed with you.

Now, if you are open to this process she is suggesting and/or you do offer terms in your lease for breaking the lease, then determine what is acceptable for you.  If breaking the lease is okay, but breaking the lease in the middle of the Winter is not, then make that your policy.  If subletting is okay, then set ground rules.  Obviously you have to approve the Tenant and screen them properly.  The Tenant needs to know that she is on the hook for the rent until an approved Tenant is found.  Be prepared as this will be a point of contention between you and the Tenant if she brings a Tenant prospect (or 5) to you and you find fault in all of them.  It may be legitimate, but she will only see it as you are not allowing her to break the lease.

Just make sure that whatever you agree to, it must be a solution for ANY of your Tenants.  Policies have to be consistent in order to avoid litigation.  So, if you are going to let her out of the lease, then you have just opened up the opportunity for lease breaking to all of your tenants.  If you allow subleasing, then it applies to all of your Tenants.  And lastly, if you allow a Tenant move-out in the Winter, you now must allow it for all Tenants.

Business credit is different from personal credit, and does not intertwine EXCEPT when the personal credit is used to secure the business debt.  So, if your business partner is using his SS# to be a co-signor, or guarantor, then be sure that it will report on his personal credit.  Otherwise, the business debtor would not take his personal info like SS#.  They should only be using the business tax ID.
Suggestion for you to get started...Open a credit card in the business' name and use the tax ID#.  Capital One does this fairly easily.  Establish a few months of business charges and payments to at least put your business credit on the map.  Then you should be able to go from there.  Also, you should have a checking account that also is attached to the business and tax ID#.  Somewhere like Kabbage will be an easy start for raising small capital easily.  Then you can build up to larger resources as you go, establishing stronger business street cred along the way.

On a separate note, what are you funding?  Is it a new real estate business for becoming a Realtor or other position within the Industry, or are you referring to funding as your source of funding for flip projects?  If it is the later, you don't need credit to request funds for a project.  The hard money lender will look at your project, and not you.  It is still a good idea to set up your business and tax ID# to use for the HML, but the lender will only be concerned with what the project can bring them in the event of your default, and your experience and/or abilities to do what it takes to flip it successfully.

Originally posted by @Nadir M.:

Hi Cara,

Going through policies, you brought up many great points of things to include in the listing. Is there a breed of dogs that you will absolutely not accept and if so, how do you proceed with notifying/denying a tenant? I also made sure to include that a minimum credit score of 600 is a must. 

Love the Tenant binder idea. Never crossed my mind. I think that's huge and will also reduce the numbers of times my phone will ring. I definitely need an all around handyman. This is something I'll need to work on asap. 

A problem I find while advertising on Zillow is that when potential Tenants apply for my listing, they apparently pay a $30 fee for using Zillow. This allows them to apply to as many properties as they want within a 30 day period. If I use Cozy.co for the background and credit check, then they'll need to pay the $40 in order to run those reports. So i'm think of keeping Zillow to find a Tenant but also list the property on Cozy.co and run all managment through Cozy.co. What are you thoughts? Why would I want to have Tenants who uses Zillow more now to use Cozy.co. Seems like they'll just ignore the listed due to the added expense UNLESS they're really interested in the property. Does that make any sense? 

You are correct  each platform charges for app/screening.  The tenant can use their app/screening the same way on cozy. They can pay for it once and send it to anyone on cozy who they want to consider them.  Since it’s free to post your rental listing, there’s no harm to you to have it on both platforms.  The Tenant’s looking on Zillow will use that app.  The Tenant’s on Cozy will use that app (and my guess is those will be stronger tenant apps).  
Consider Redfin as well.  That is a growing platform with some good traffic to it.

Originally posted by @Peter Forrest:

@Cara Lonsdale thanks for the detailed response. I am facing a similar dilemma. My personal non-W2 income always appears as zero or there abouts on my personal returns. In reality, i use the depreciation of properties held in an LLC (which files taxes separately), and invests everything else back in the business. Do banks typically consider looking into a this depreciation as my personal income?

There are a lot of things that lenders add back into your rental income. Depreciation is one of them.  Car expenses (miles) is another.  Some other expenses too  so best to consult with a lender to get the best picture of what they will use for income  

Originally posted by @Nicole Heasley Beitenman:

@Cara Lonsdale I did not include my side hustle money last year because it was only $15, and my CPA told me it wasn't necessary. It will be reported this year, and I've always reported my rental income and expenses since I became a landlord in 2016.

I will be buying properties and rehabbing them with cash and/or lines of credit I've already established. They would be rented before refinancing. Would that make the process any easier?

Thank you for the input! It's very helpful.

I like your model.  It's a solid plan.  The lender will be able to count the rental income on the refi.  It will be a percentage of the actual rental rate because you don't have tax reporting history for the rental income.  So, be prepared for that.  It is usually about 75% of the rental income that they will use.  However, once you have a 2 year history of the rental income on your taxes on your schedule E (and it is a positive number), they can add that to your income to qualify you. 

So to clarify, before 2 year history on the Schedule E, the lender can figure 75% of the rental rate.  After the 2 year history, the Lender can use the average of the 2 years listed on the Schedule E of your taxes.

Also, someone mentioned the hard money lenders. They are a great asset for acquisition, as they qualify the project, and not you, or your $$. Some people like to acquire the property with the HML, then rehab it if necessary, and place a tenant and THEN refi using a traditional lender to either do a rate and term refi or a cash out to recoup some of the out of pocket rehab expenses. Again, the rental income would help you qualify if you were short on showing income from your side hustle (turned permanent self employment income) for the first few years when your averages are lower.

Hopefully that makes sense.  Sometimes when you are new to all of this, it is hard to grasp all of these moving parts.  I don't want to confuse you.  :)

Do you include your side hustle money on your taxes?  You will need at least a 2 year history for your self employed income as a requirement for traditional lenders.  Lenders take a 2 year average of the income, and that is what they use as your income to debt ratio for figuring how much you can borrow.  You could start that clock now, while you are still a W-2 employee.  That way, when you are ready to become self employed full time, you already have a good history established and can start from day one.
Also, lenders will count rental income against the property debt, so if you write offers on properties that already have Tenants in place, that would also work for you, especially if your debt to income ratio is low in the beginning.  The property rental income can offset that for you.  Some lenders can also estimate a rental income on a property that isn't currently Tenant occupied.  However, this is usually a percentage of the average rental rate for the area, and you better believe the lenders are conservative on what number they use.
So, the answer is....Yes, it can be done.  Start now by establishing your self employment income by including it on your taxes so that it can be documented, and the 2 year clock can begin.
Best of luck to you!

To start, sit down and list all of your policies and rules.  Will you allow smokers?  Will you allow pets?  If so, what kind?  What kind of deposit do you want for them?  Pet rent?  Do you allow short term leases (under 12 mos)?  Do you allow felons?  What is your credit policy?  What is your income to debt ratio?
You get the idea.  By listing these things, you have a guide for when they come up.  DO NOT BREAK YOUR POLICIES!!!  If you do, it is always the one Tenant that will be your problem Tenant.  It always bites you in the end.  So, just stick with your policies.  IF you see a trend that requires you to change your policies, that is okay.  However, don't make exceptions for 1 Tenant here and there.  That is when you get into trouble.

I would also suggest that you create a Tenant binder that provides the Tenant with the contacts for who to call for things.  If you have boots on the ground there, add them to the binder.  A good handyman is a must.  Emergency services is a must.  If a pipe bursts in the middle of the night, you want them to call the company YOU have already vetted, and not some random contractor off the Internet.  Give the Tenant instructions for making their rental payment to you.  Include their move in inspection, and their move-out checklist so they know the expectations, as well as the initial condition that will be used to compare to their exit condition.  I would also suggest providing some contacts for landscaping/snow, even if it is their responsibility.  If they decide not to do it themselves, they can call your contact.

For marketing, Cozy.co is a great resource.  Did you know they take apps and run background and credit as well?  They also allow you to create a landing page for the property with pix and info so that you can send the link to anyone interested, and it has a link to the application process. 
Redfin also allows you to post, and they seem to have better lead generation than Zillow (at least that I have seen).  You can include your Cozy link there as well so that it points people to the application.
Consider a smart lock that can allow for self guided tours of the property if you don't have anyone to show it for you.  There are some good ones out there that you can control from your phone for single entry access.

Research a good eviction attorney.  Hopefully you NEVER have to use them, but better to already have a good relationship with one than to be fumbling later to find one who can jump on your case right away (time is crucial in this process).

Self management is doable if you have all of the necessary pieces.  Best of luck to you!

So here is my take on Casa Grande, and there will be a lot of investors who disagree, and I am okay with that. 
Greater Phx is spread out. We have a lot of areas that make up Greater Phx, and it keeps expanding. Back in the day, Mesa was “way out there”, and Chandler too. Then came Gilbert, which was a path of progress heading East and South. Then you had Queen Creek come along as an extension of Gilbert. Now you have San Tan Valley as an extension of Queen Creek. 
my point is, there is a clear path of progress, and I can get on board with that in terms of being confident about appreciation and development. I see the infrastructure going in to support the community. Because we are so spread out, we rely on that infrastructure to cater to our specific area because no one wants to drive 20-30 minutes to get to a movie theater or Costco or Walmart (we are spoiled here. We don’t like to go outside of our Hub, which is usually a 1-2 mile radius). 
then there is an area like Casa Grande. I would consider this to be more of an island as there really isn’t a path to progress that ties it to Greater Phx like the examples I gave above. So , you need to consider it like more of a small town instead of an extension of the Phx market. 
Now, historically, those “islands” don’t do well. I would site AZ City as one of those “islands” that didn’t work out well as I previously spoke about on this thread. 
So while I see some investors excited about Casa Grande, I tend to lean toward areas where I can see a clear path of progress. Historically, that has always done better than these islands. 
But again, that’s just my opinion, and I am happy to continue the conversation with anyone who wants to discuss or explore the area. I have nothing against the area, but as an investment, it isn’t on my list. 

You register on the government site, and that will give you access to the Do Not Call List.  This will give you the ability to match your list up against the DNC list and remove any numbers in common.  Some services will do this for you.

Here is the link  https://telemarketing.donotcall.gov