All Forum Posts by: Kevin Sobilo

@David Fanning, maybe you should post what you're trying to do as withdrawing from your pension plan would be closer to a last resort than a first choice when investing for most people. 

What are you trying to do real estate investment wise? Why do you think you want to withdraw from your pension?

There are only very limited circumstances where someone can receive both SSA and SSI. So that would be unlikely. 

If you are interested in doing something like section 8 housing that is probably a more likely option but it could take a whole before they get approved.

@Charles F Dominie, I'm in your market. I'm an agent and an investor myself. I'll message you. 

@Ryan Irwin, is it SSI?

That is different than a normal Social Security retirement benefit. SSI (Supplemental Security Income) is a need based program for people who never worked enough to earn a retirement benefit. 

If it is SSI, it is need based with a relatively LOW limit of assistance. So, if the surviving spouse is on SSI, they may be able to do back and document their change in living circumstances showing they were splitting rent with someone before but that person died so now they have to pay it all. If they aren't maxed out on their benefit amount, their monthly benefit might increase a little.

@Gladys Cepeda, a few thoughts:

1. You mention being on the cusp of a college rental area. This is the middle of a semester. If you are targeting college renters wouldn't you have timed the rental to be in between semesters.

2. This is the off season for long term rentals. We are still in winter as spring weather has not quite arrived. So, demand is usually slower in cold weather markets.

3. Pricing is a whole other topic. There is a tendency to focus on the rental price when that doesn't solely determine what ends up in your pocket!

If you were to look at comparable rental listings, you might hope to rent yours for something near to the more expensive comps. That's human nature. However, if you studied these listings over time you might find they sit vacant on the market longer, get reduced in price, AND TURN OVER MORE OFTEN!

Vacancy/Turnover is EXPENSIVE! Figure out what you put in your pocket if you rent for top dollar and the place turns over every year and sits vacant 3 months versus if you reduce the price 10% and it only turns over every 3 years sitting vacant only 6 weeks.

My point is that when you try to determine "market rent", you need to determine what your approach to pricing is and understand how it will affect vacancy/turnover. My personal definition of market rent is the price where I can READILY attract a GOOD QUALIFIED tenant and also KEEP that tenant AT LEAST 2 years. So, my goal is to exceed 2 years on average between turnovers because that is what I budget for when I set money aside for turnover/vacancy.

@Andi Quinn, I don't know what your local laws require but perhaps to drive a point home, calculate the 2 week abatement and then subtract the cost of what you spent to accommodate them during that time period.

So, for example, if the 2 weekend abatement would be $900 and you spend $1000 on hotels, space heaters, etc, then send them an itemized statement showing they owe you $100. Then ask if they still prefer the abatement. 

Where I am, I am under no obligation to do those things. A tenant can use their renter's insurance to get a hotel. I am required to try to remedy the issue in a "reasonable" amount of time. So, depending on the sequence of events that can vary somewhat. If the unit is uninhabitable for 2 weeks, then the tenant would have the option to terminate their lease and get their deposit back and move on. 

I am not providing a hotel service. I am doing long term rentals. I ask them how their experience would differ if they owned the home? That is my obligation to them. As long as I am responsibly getting things taken care of I have met my obligation. I am not responsible for making their experience a perfect one. 

@David Schmiediche, after COVID tenant demand was CRAZY. So, I don't think anyone had trouble finding tenants. It has certainly abated. Here are a few comments on what you mentioned:

1. 600+ credit score. That is not unreasonable. However, in my market I get a lot of renters under 30 where they may have little credit history and only small negative things impacting their score. If I have a 25 y o with a 575 score who has very little credit history and a $200 cell phone bill in collections from when they switched carriers, I will often accept them. I will usually ask them questions about the items on their report and make a decision depending on the level or responsibility they show.

So, for me a good score is an easy YES, but a bad score just means I need to look more carefully and ask follow-up questions.

2. Income 3x rent. That is a very good metric to use but commonly landlords make the mistake of using NET income when it should be GROSS (before tax) income. This is the same way a lender would qualify borrowers for a mortgage.

3. In addition to the Income 3x rent metric, I go a step further! Sometimes people have enough income, BUT they have an outsized amount of debt! So, I additionally require that:

Monthly Rent + Monthly Debt Payments <= Monthly Gross Income x 45%

Again, this is similar to how lenders underwrite borrowers for mortgages.

4. You mention co-signers. I personally RARELY use them. I will only consider them if the co-signer is "collectible". If I have to sue or evict the tenant, a co-signer is of no use unless I can reliably FORCE them to pay. Usually that means they need to own real estate because a unpaid judgement can be made into a lien on their property and that makes eventual payment MUCH more likely.

5. Have you looked at your value proposition for tenants? In my area the average rental has improved noticeably in the last 5 years. So, the competition is higher.

When I have a B class rental, I will look at other B class rentals and determine what I think are "much haves" for that type of rental and then I will determine a list of features that are "nice to haves". I will try to add whichever "nice to haves" are cheapest and easiest to my rental. That might be providing a washer/dryer or allowing pets as those things are far from a given in my market. This is one way I set myself apart from the competition.

6. Another way to set yourself apart is pricing! MANY MANY landlords focus on the monthly rent solely as their measure of success. I don't. Vacancy/Turnover is VERY costly, so I price my rentals to meet or exceed my budgeted Vacancy rate. 

I budget 5% of rental income for Vacancy. Since I typically take 4-6 weeks to turn a property, that means a turnover every ~2 years. So, if I price my properties to exceed that on average, I'm actually making MORE money overall than if I priced the rent higher and had tenants staying less than 2 years on average. 

@Stephen P Embry, first talk to an accountant!

You see your parents have rented that property to these tenants for ~20 years and may have owned it even longer! They get a yearly depreciation deduction on their taxes for the house and may have nearly depreciated it to $0. That means if they sell it, they will pay taxes on nearly the entire sale amount which could be a hefty tax bill.

However, if they pass away and you inherit the property, then you inherit it at its current value at that time. So, if you sell it you don't have to pay that tax bill.

So, talking with an accountant might be a better first step to even see if you want to sell before they pass away or to keep renting it. 

@Kevin Turano, that appears to be a deed not a lease. So, yes the rights granted in that deed should remain for that period of time unless you agree to a change even if the property is sold during that time. 

If it had been a lease, then it could be different. I believe in some states leases over a certain length of time need to be recorded like a deed to be enforced.

I would certainly check with a real estate lawyer in your state because the devil is in the details sometimes. 

FHA loans use the appraiser to inspect property condition. So, the loans are "supposed to be" more strict about condition. However, depending on the appraiser what your experience is can vary widely.

It will have nothing to do with the local lender because they don't get to choose the appraiser or influence that at all. Keep in mind your lender doesn't care too much because they are almost always only originating the loan. They aren't planning to keep the loan even if they remain the servicer you make payments to. 

I don't know if this can be proven or not, but if the appraisal business is slow, an appraiser might choose to be more strict when checking out houses during FHA appraisals because for the deal to close all the issues cited need to be fixed and they pay the appraiser to go back and reinspect. So, the appraiser stands to collect a re-inspection fee!

However, when appraisers are busy, they may not want those re-inspection fees as they probably make more money just doing more appraisals instead. I don't know if that can be proven, but it gets mentioned time to time and the narrative seems to track.