All Forum Posts by: Mario Valenzuela

Investment Info:

Single-family residence buy & hold investment in Phoenix.

Purchase price: $295,000
Cash invested: $40,000

After loosing my shirt and investment property in the 2008 housing crash I have recouped my finances and have started investing in real estate again.

How did you find this deal and how did you negotiate it?

It was a tough one considering the current state of the market with prices being so high. However after reviewing the details of the property and the markets trajectory I believed this to be a good deal. There were a lot of ups and downs with this deal, but in the end I was able to get it done. The sellers were playing hard ball, which was there right with the market and all, their agent put some of his commission into the deal to make it all work. It was a nail biter for sure!

How did you finance this deal?

I saved money where I could until I had enough for a down payment, and financed the rest through a conventional mortgage.

How did you add value to the deal?

I put my commission into the deal to give the sellers a break.

What was the outcome?

I was finally able to get the house!

Lessons learned? Challenges?

It was actually really good clinic on how to deal with very difficult sellers, I'm glad this was my deal and not a deal I was working for someone else.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes, the agent was very helpful where he could be, he went above and beyond the call of duty on his part.

Hello!

We've found that word of mouth referrals seem to always work best.

Our second options when we need vendors is to scour the internet for vendors and read through their reviews for insight. We also go by how professional they are on the phone and we have questions for them, such as what is their billing cycle, scope of work and level of expertise.

Visiting the house and driving around to see if there are vendors outside working is a good method, since landscapers and handymen tend to work in a specific area. They sometimes leave their cards on the doors of the houses in those areas. 

We sometimes use websites that specialize in vendor referrals, but we find these vendors to be a bit expensive as well they don't always provide the level of service the site promises. Our agency has a dedicated vendor referral program but again these vendors pay into the program so there's no vetting process, any vendor able to pay into it can join.

All in all nothing can beat going through the motions yourself and coming to find vendors who you know and trust through working directly with them. It can take years but in time you'll be able to build your vendor list, and even then you'll always want to keep an eye out for new and good vendors. You can streamline this by keeping track of all of the vendors you encounter and keeping notes on them, keep the good ones and leave the others out of the line up.

Hope this helps. 

Hi there Sai! It'd definitely depend on what City and Sate you're in, as they all have different landlord and tenant laws.

Here in Arizona we require new roommates to fill out and submit applications and pay the application fee, just as if though they were applying to rent the unit. The difference would be, if the first tenant met the income requirements then the second person's income and or employment may not be of as much concern. But their criminal background and rental history would be.

Out here the landlord has the right to deny the new roommate, they don't have to accept them. However working things out with tenants is always suggested over eviction, since they might just move the person in and try to keep it a secret. It can be difficult to prove that they have an unauthorized person living with them.

The important thing is to get the new roommate's information really, so even offering to not charge, or to discount the application fee might move things along. If you choose to deny the new roommate start to document everything so if you do have to evict you have proof of an unauthorized occupant.

Hope this helps!

HI there! We get this a lot as we are on the border being in AZ.

From what I understand the ITIN (Individual Tax Identification Number) is issued by the IRS for foreign individuals to use as a tax ID number in lieu of a social security number. This being the case it's supposed to be used just like a social security number in such instances.

We're not allowed to discriminate on the basis of nationality, so someone being foreign to the U.S. is not enough reason for denial. However, if we're not able to find credit information using their TIN then this may be reason to deny, as this happens if the TIN holder has no credit. We've rented to tenants who have a TIN and we have been fine.

I'd say treat it as any other rental application, if you're unable to find what you need using the information provided by the applicant or the info that you find is undesirable then you may need to deny them.

I think some landlords fear that the TIN holder might move back to their home country leaving the landlord high and dry. This is a risk all landlords take when renting to anyone regardless of nationality. As well, it's likely that the person with the TIN very much wants to live in the U.S. and is looking to stay for as long as they can.

Hope this helps!

Hello! This is such a good question to post.

Problems between landlords and property managers are usually based on communication. Landlords might fail to express their expectations and some property managers may fail to express their obligations or level of service they're able to provide. Doing so on the first call can save so much time for both parties.

Your expectations listed aren't out of line or to high, you just have to find the right property manager that meets these criteria. Going with a licensed agent is suggested, as well as going with someone who is a member of a property management based organization such as NARPM (National Association of Residential Property Managers) or is certified as a property manager within their state.

My personal and professional thoughts on your expectations are in bold below, please let me know if you have any other questions at all, thanks for your post! I hope this helps.

...

Is it unrealistic to have a manager drive by the home once every few
months to see if the landscape is dying or over run with weeds or beer
cans?
Not if they agreed to do so in the property management agreement. If this is something the agent agreed to do, then they'd be expected to. We rely heavily on HOA inspections for this, if there's no HOA we rely on neighbors and the city's compliance enforcement. We would do drive-by inspections if there are red flags we're made aware of, such as you have expressed here with the mess in front. Placing good tenants and providing them with clear expectations helps with this not being an issue.

It’s depressing and expensive to remove old dead trees. I had one
manager tell me they visit the home once per year, additional visits are
$70 each.
If this was agreed to or put in writing as a notice to you then the $70 after the first visit would be allowed.

Wholesale Prices vs Retail for Repairs: Should
a property manager have a handful of repair people that they can call
upon who charge wholesale prices rather than retail prices? My thinking
here is that a manager should be able to negotiate lower repair costs
since they can offer the service person more business.
PM's should have vendors on hand for contracted work, the prices might be negotiated to provide a discount since the PM most likely gives the vendor continued business. However this is not mandatory unless agreed upon in your PMA. 

Good marketing: Bright, clean photos of the
home. Ability to post the home online on multiple venues if needed and
drive applicant interest and take applicant calls. My first property
manager somewhat lax at marketing and answering the phone. This created
increased vacancy times and lowering the rents. Eventually I had a
friend call the manager to express interest in a rental and she never
returned his call. I realized this was happening all of the time
A PM should be able to get vacancies filled in a timely manner and will usually have their own processes for filling vacancies that work. We ask for autonomy in this area but definitely take suggestions from our clients. Not answering back potential tenants is not professional, there should be systems in place to insure this does not happen. 

Good judge of character: Screening applicants but also looking at the unwritten things such as sloppiness or the condition of the applicant’s vehicle.
Our landlords make the final decision on accepting or denying applicants going by a summary of the application we provide. We include all pertinent information found during the application process in the summary along with our thoughts on the applicants. We're always careful of what we specifically deny for to stay in line with Federal Fair Housing laws. Sometimes it may not be as simple as denying someone for having a dirty vehicle, as they may be borrowing the vehicle, it may be their second vehicle, or maybe they were just unable to clean it for some outside reason and it's a one off, etc. We've honed our application process and we feel it's resulted us in getting good tenants, but even then there's no guarantee since even the best tenants can go bad.

Financially Responsibility/fiduciary: Honest

accounting, timely payouts and paying of rental taxes. My second
property manager was great… or at least I thought they were until they
were shut down by the Arizona Department of Real Estate for embezzling
all of the security deposits. 
It is not too much to ask for a property manager to be honest, this is not negotiable. An PM who is honest then they're not going to be perfect, if they claim to be perfect then they're not honest. Property management requires a huge level of trust. Mistakes will be made, it's how the property management office deals with them. It also takes diligence on the side of the landlord to check their statements regularly to find mistakes or in the worst case scenario to find signs of embezzlement or other nefarious activities.

Hello, you may want to check TX law, but in a some cases Constables are used to serve people with subpoena, civil papers or some other court order. 

A county constable in Texas
has the following duties: Serves as a licensed peace officer and
performs various law enforcement functions, including issuing traffic
citations. Serves warrants and civil papers such as subpoenas and
temporary restraining orders. Serves as bailiff for Justice of the Peace
Court.


Hope this helps.

My pleasure! Good luck on this:)

I'd consult a CPA for this, and not rely on any books as things in the tax world are ever evolving. Whether you're making reference to an actual Tax Playbook as there are many or if you are using the term to describe any tax planning ideas.

A professional tax advisor can get you started on the right foot and they shouldn't charge very much and even if, it'd definitely be worth it.

Hope this helps! 

I don't think they're legal issues with this unless there's a trade embargo on the items or country you're purchasing them from. But as the old saying goes, you get what you pay for...

My concerns would be:
1.) Is there a warranty on these AC units?
2.) Are there parts here in the U.S. for these AC units?
3.) Are there companies here in the U.S. that can fix these types of units? 
4.) Lastly I'd be worried that since they're made in a different country they might have different standards regarding the refrigerant as well as the power supply.

It's inevitable that AC units will break down sooner than later depending on what part of AZ you're in.

But to answer your question directly I don't think there's any issues with this other than the ones I mention above. This is a business decision so it looks like you're free to make the best decision for your given circumstance.

Personally and professionally I think it's taking a bit of a chance just to save a few bucks. 

Hello DJ, our legal advisors suggest never accepting prepaid rent. As a policy we don't accept prepaid rent but it is legal to do so if it's done correctly.

Our reasons for not accepting prepaid rent: 

1.) Prepaid rent is usually offered to compensate for an applicant being unemployed or not meeting other important criteria such as lack of credit or rental history. This being the case you may be inviting trouble, and if the person is unemployed how will they pay the rent once the prepaid rent is used up? 

2.) Prepaid rent is not the landlord's money until the rent is due, each month the landlord would be able to take from the funds, but only as rent is charged. The property management office will have to hold this money in a trust account until it's due to the landlord and adds additional liability to the PM. If anything happens to the tenant such as they pass away or even if they get evicted for material breach, the remaining money would have to be refunded to them. 

3.) If the funds are illegal, such as drug money or money owed to the IRS, etc, these funds could be placed on hold or even confiscated by law enforcement. Not all prepaid rent comes from illegal activity, but who has this much money to just give someone to hold, as it doesn't really benefit anyone. The funds are NOT the landlord's and the tenant at anytime can request the funds be returned, and would you know, the landlord would HAVE to return it.

4.) Lastly, paying the rent when it's due is an inalienable right of the tenant. Withholding rent for self remedy is one of the only forms of recourse a tenant has to insure things get repaired as agreed, as a PM you cannot take that right away from a tenant. Prepaying in such a way makes self-remedying by withholding rent difficult for the tenant.

These are our reasons for not accepting prepaid rent, it's not all what it's cracked up to be and can even be a liability. My advice, only rent to applicants that meet your rental criteria and have gainful employment so that you can garnish their wages if they leave you owing money.

Hope this helps!