All Forum Posts by: Jo Bradley

I always show the property first. I think in my area if I required prospective tenants to fill out an application first it would scare off some potentially good tenants who want to make sure you are a real landlord before disclosing all their personal info to you. Landlords here advertise a lot on local Facebook groups, but there are also a lot of scammers on those sites. 

In my case, I require prospective tenants to attend a showing in person in order to pick up an application. I will not send them electronically. If they have taken the time to view the property and complete an application I know they are actually interested in that particular property. If their mom comes to view the property for them (lol, this actually happens), I interpret that that as a red flag.  

On the property listing I describe the property and also disclose that a background check will be done by Transunion Smartmove and that according to the company, it will not affect their credit. As you probably know, Transunion is one of the 3 big credit reporting agencies in the U.S. so they know everything about everyone. 

At the viewing, I explain that Transunion Smartmove will do a credit, criminal, and rental background check (they check the eviction database). I like using the program because I do not need to collect a tenant's social security number. I send their email and phone number to Transunion Smartmove and the company contacts them directly to collect the information they need. Incidentally, Transunion Smartmove also verifies whether the tenant's self reported income seems reasonable or should be verified, and it also does a social security number check (against death records, etc.) 

By the way, I have no affiliation with Transunion and I think there are other companies out there that perform these services. I only mention it because it has been a very helpful tool for me in screening applicants. 

I have bought a few houses after reading the foreclosure notices in the legal section of the newspaper but mostly I find opportunities by just talking to people. I tell other investors that I am interested in buying new properties. I do not seek these people out to talk about this specifically, but bring it up in casual conversation. Sometimes they will contact me directly when they are getting closer to retirement and decide to downsize some of their holdings. Or they will tell me about other opportunities. For example a contractor I hired told me another investor had just offered him a bundle of five homes. He wasn’t interested but knew I might be. When I am fixing up houses I often get into conversations with the neighbors. I mention to them that I would be interested in their house if they ever think of selling it. I mention to the banker that if they come across anyone that is looking to sell they can give them my name. I generally chat with the electricians, plumbers, and flooring installers when they come to work on one of my properties and mention that I am looking for a house to buy. They usually know someone who is fixing up a house to sell it but hasn’t listed it yet. Also, I have a real estate agent that will call me as soon as he gets a listing and before the house is posted if it is something he thinks I will be interested in. Finally, I occasionally buy things for a rental on Facebook Marketplace. I rent homes unfinished for the most part but sometimes, if a space would look better with something extra, like a coffee bar or a patio table, I will pick one up. If the seller is getting rid of a lot of furniture I will ask if they are selling the house. I have come across multiple opportunities this way. It gets easier as time passes and more people learn you are an investor.  

Personally, I would keep your current home as a rental, manage it yourself, and downsize nearby. It will get much easier as time passes and your rents increase. 

Option 3 may sound tempting to you, but before considering that route I would interview prospective property managers and house-cleaning services in the area you are considering. Here is my perspective as a landlord in a lower-cost community:  

1. Keep in mind that residents in communities with a lower cost-of-living (thus lower-priced housing) often make a lower average-wage. If they can afford high-rent, they can usually afford to just purchase one of these lower-priced properties for themselves. For reference sake, local factory workers and starting teachers make between $41,000 and $60,000 in one of my local communities. Given a 30% spending limit on housing, they can afford a maximum of $1025. per month. The gross rents not high to start with and property insurance will take a large bite of that if you live in a state will a lot of storms.

2. Also, keep in mind that some areas of the country that have lower-cost properties have a limited supply of property managers. Because  rents are lower, they struggle to charge a fee large enough to make it profitable. If you can find one, it is difficult to find one that will take new clients. Sometimes they will, but the cost takes all the profit out of your deal. (And sometimes, the property managers that advertise locally, actually live more than 50 miles away which means they might not have the necessary contacts with the local contractors or be as responsive as you would wish, so watch for that). You can certainly buy a property that cash flows immediately, but once you add a property management fee and the cost of someone to clean it between rentals (which can be much more expensive than an average cleaning if they have to do a trash-out), it may negate the benefit of buying in a lower-cost area.

3. If you rent your home in California, it seems likely, (although not guaranteed) that both your rents and the value of your property will increase more rapidly in comparison with a lower-income / lower cost-of-living state. 

Interviewing property managers should give you a better idea of the prospective rental market in the area you are considering. Ask them for their average rents and vacancy times (broken down by number of bedrooms). I verify that information by charting all the available rentals in an areas I am considering.

Consider, also, that there are tax advantages if you manage the property yourself. 

I have done this before and for me, this worked out very well. I never regretted keeping my first house as a rental because it cash flowed very well from the beginning and as years passed and rent increased it became an outstanding decision .

However, our home was significantly less expensive than yours. I live in an area with a shortage of rentals and a strong rental market but the homes at the price point you are talking about do not rent nearly as well as the less expensive homes. In my area, there seems to be a ceiling on what people will pay for rent and if they have enough income to rent a $500,000 home, they will just buy one instead. So my advice would be to verify the rental market for homes in the same price point as yours. If it were me, I would probably list my original house for rent to gauge the interest before pulling the trigger on buying the second house you have selected. 

Also, how will you feel if a tenant destroys the high-end finishes of your existing home? If you are okay with someone painting over your original woodwork (even though the lease says they can't) or ruining your marble countertops when they dye their hair (true stories) then you may be emotionally hardened enough to rent your original home that you have lovingly designed.

Consider, also that at times you will have to carry two large mortgage payments and decide if you are willing to do that. Sometimes it takes a long time to evict a tenant for non-payment of rent and remember that not long ago (during Covid) landlords could not evict someone for non-payment if they were currently making less than they were in the previous year.

Depending on your answers to the above, you may be better off keeping your real-estate transactions in two different "lanes".  Sell a primary to buy a primary.   Then buy lower priced rentals if being a landlord is something you are interested in. Two starter homes in a modest suburb may cash flow better than a higher-priced one and it is easier to offset the cost of a vacant rental with the rent that the other property is generating. 

I move everything to a garage, if I one is available and it is able to be secured. Then I get a written estimate for a local storage locker with a similar amount of square feet of storage because in my state the tenant must pay the reasonable costs of storage before taking possession of the personal property.

It might take longer than 15 days because the notice may be the time they have to respond, but they may have an additional amount of time to pay.  In my state, the notice must give the tenant at least 14 days to make a claim for the property. If they make a claim within that time, they have 5 additional days to pay me the storage costs. Once they do, I must return the property within 3 days.  The notice must also state whether the landlord believes the property to be worth more or less than $2,000.00. If it worth more than $2,000 there is more involved, including selling the property and turning the proceeds over to the state as unclaimed property. I have never had abandoned property over $2,000. 

I send the notice to the tenant at his new address, or last known address if the new address is unknown. I send it with USPS proof of delivery but no required signature verification. I include a generalized listing of items such as " Property including, but not limited to: clothing, toys, cookware, and other items." 

For the last 20 years or so, I have given a discount to teachers. I do not advertise it that way. I do it because I have had so many family members that were teachers. 

Quote from @Dave Kush:

Also, check out lightstream, similar. They close loans fast. 

Another vote for a personal loan for repairs like Lightstream, Marcus, or So-fi. These companies usually do not charge any fees, including origination fees and you can often get the money the same day (Lightstream). Then you will have the time to apply elsewhere for a home equity loan to pay it off early if you are interested in a longer term or lower interest rate.