All Forum Posts by: JD Martin

Anything that constitutes a major threat to the health or welfare of the tenant or the property is a maintenance/repair emergency. Anything that constitutes a major inconvenience to the tenant, such that a reasonable court would find one negligent for not addressing quickly, constitutes an urgent maintenance need.

Example of the former: leaking water, gas, exposed live electrical wires, smoking in electrical panel, dangerous leaning tree, etc.

Example of the latter: poor heat performance of heating system; clogged gutters overflowing causing basement dampness; etc. 

As Matthew stated you can absolutely avoid Section 8 here in TN. You have to sign up to accept Section 8, have your premises inspected, and repair/replace any deficiencies in order to even participate in the program. If you don't want Section 8, you simply decline to sign up in the first place. Tenants can ask, and they can also ask if you would be willing to sign up for the program, to which you simply respond "No". 

We advise straight away that we do not accept Section 8. I have Zero interest in meeting the inspection criteria, nor in renting to that level of low-income renters. Our housing is intended for working, stable lower and middle-class individuals/families. 

As for the OP, you cannot legally do what you suggested. I would be cautious going forward that you do not give the impression of discriminating, as "secret" shoppers sometimes check rental listings for such issues, especially if someone complains. 

I think your father is right on the money. You will have to honor the $1150 but you don't have to accept a labor swap for cash, especially since you don't own one of the properties. I can't see any court upholding the labor swap, but there is a financial value placed on that labor and that illustrates what the rent amount was intended to be, ethically or not. 

I would say you would probably get nowhere in court for things involving "your time". Actual expenses are another story altogether and are completely recoverable, especially if you have been diligent about trying to re-rent the unit. Actual advertising costs, transportation costs, repair costs that are reasonable. If the guy wasn't on the lease, I would pretend as if he were a ghost and not even talk to him. 

A good lease has the tenant responsible for $X amount of money, broken up into equal payments. IE if your rent was $1,000/mo, your lease should state that the tenant is responsible for payment of $12,000, payable in equal installments of $1k per month. When they move out, it doesn't absolve them of the remainder of the lease provided you act responsibly in attempting to re-rent the unit. 

I have an early lease termination agreement that tenants can use if they want to just walk off into the sunset, wherein they pay up front to end the lease and I take the utilities back over, and they have no further obligation; otherwise, they are responsible for rent and utilities and costs up until the point I get the unit re-rented. 

In my experience, houses like this fall into one of three categories:

1. The owner found out it is going to cost *a lot* more than he thought to renovate the place, relative to what it is worth, and is looking to find another sucker to take it off his hands.

2. The owner found out that the ratio of profit to work involved is going to be much smaller, or non-existent, than he thought, and has lost interest in the property.

3. The owner has run out of funds to complete the renovation, and either wants or needs to sell to recover whatever he's got invested. The project may or may not be worthwhile.  

If you give each possibility equal weight, you can see that there's a 67% possibility that this project is not worthwhile. Thus, you must due serious due diligence to make sure you're landing squarely in category 3, and that there's enough profit. It sounds like you have done some cursory calculations, but you would be well advised to ignore what a "typical" project would entail, and get inside this unit, do a complete walk-through, put pencil to paper for worst-case scenario based on what you see, and if the numbers work at that point, then move forward. This also supposes that you are good at putting numbers to paper so that you know what you are getting into with this house.

Total renovation projects can be your worst nightmare if you don't know what you are doing. The longer you have to hold a property without renting/selling, the greater your sunk costs are going to be, even if you are paying all cash. What you hope you do in situations like this is capitalize on someone else's folly or unfortunate situation, and what you hope not to do is be the next sucker!

 Ask for a copy of his signed federal tax return and bank deposits. You are buying a business, and like purchasing any other business you would do some due diligence to make sure it is actually profitable. I would also want to verify how long these people have been tenants, as it is possible to "pack" a rental house with friends/family and pay the rent on their behalf so that it appears that the place is a successful rental - then, suddenly, when you close, the tenants float off into never never land. 

You could also make lease terms part of the sales contract. Or, you can ask for a sales discount of X dollars based on some term of the rental (say 6 months) with an agreement to provide all rent income collected for those 6 months back to the original owner. There are a lot of ways you can protect yourself, but I doubt writing something up about him lying is one of them. The only real protection you have is cash in hand, either by satisfying yourself through proper due diligence, or getting concessions from the seller to protect yourself in case it is not so. 

PS: You should have done your own homework first to ascertain what type of rent you can reasonably collect in this type of unit for your area, irrespective of what the owner says he gets from these tenants. Then, it won't really matter if the tenants leave if you can re-rent at that rate. 

I supply dishwashers in my units. Expecting a tenant to bring their own dishwasher is a bad idea IMO because it needs to be plumbed and wired into place. For W/D we provide hookups, though if I had a place like Steve mentioned I would also provide the W/D. I am always on the fence about W/D because you don't want to maintain it, but at the same time you don't want it hooked up improperly or the house beat to death bringing them in and out. Luckily, my units have W/D hookups immediately next to an outside door, so transporting is not a big issue. 

I supply refrigerators if tenants don't have their own. Our local market more or less dictates this approach. 

Make sure nothing is broken or worn when the appraiser comes through. I would skip the carpeting for either a good quality laminate or hardwood, which is worth more and lasts longer. Can't really say about the updated bathrooms - if the house is only 11 years old, unless it is really obvious low-quality builder materials. Maybe put hardwood on the steps with a good quality runner, it makes a very nice impression and protects the hardwood. 

I hold tight right there. You bought a place for 24k and are getting 600k per month. That is fantastic, unless the property taxes are 4 or 5 grand a year. You have 8 year tenants. I would be loving life in a situation like this. 

I am both, and I don't consider it a job - it is managing my investments. Only a disgustingly rich person, who couldn't care less what happens with the investment, doesn't spend some time managing the investment, even if that's just discussing strategy with their portfolio manager once in a while. Which is more work, thinking and worrying about where to park upcoming stock funds, or painting a wall? Neither is more, it's just different. 

I don't really look at the idea of landlording in some romantic notion. I like my houses but I recognize their primary purpose as it pertains to me is to generate income. I like the fact that I provide good, safe, quality housing to working-class people, but if I couldn't make a very good profit from the endeavor I would do something else.