All Forum Posts by: Patrick Frueh

Howdy Bigger Pockets Folks,  

I'm exploring a form of arbitrage with a potential tenant who is looking to provide halfway/bridge housing to the formerly homeless. They take single tenants who have been approved for housing vouchers and need assistance getting out of the shelter system. In addition to providing housing, they connect residents to other social services they might need and work to get them to a point of self-sufficiency. They plan to have a live-in manager who would occupy the master suite, ensure tenant abide by the rules of the housing program (applying for jobs, observing curfew, etc). They're willing to pay a premium, prepay for several months if needed and self-manage the property, paying for all tenant-caused damage and general repairs up to an agreed-upon threshold. Currently they're using an LLC but are in the process of applying for 501 3c non-profit status.

My property is in Class C/D neighborhood, and up until now I've operated it as a by-the-room long term rental, and I house hacked this property before that.   I struggle to find tenants that match traditional criteria that are willing to live there despite low rent and recent renovations. I like the idea of getting a premium while my property is used to help those in need and freeing myself from my current roles as property manager and referee.

This potential with this model intrigues me; My question for the community is: how could I structure a legal agreement that would protect me from the potential downsides of this kind of arrangement?  Here's what I've thought of to ask for: 

* Require a guarantor outside the LLC/business entity

* Require they list me a as a beneficiary on their liability insurance policies and provide proof that policies are maintained throughout the tenancy.  

* Ask for 3-6 months prepaid rent upon executing the agreement with monthly rent to be applied to the next month not covered (If agreement starts in May, They'd pay for May/June/July and the rent paid in June would be applied to August, etc). 

* Require individual tenants sign a liability waiver along with their lease

* Require a contract with a professional property management company, or that all maintenance work be completed by a licensed and bonded contractor. 

* Include language that gives me final approval for any fixtures/appliances that need to be replaced over their tenancy. 

Open to other ideas, but these all sound reasonable to ask for when renting to a business entity instead of an individual. Let me know what you think and if you have any other advice. 

Hi Bigger Pockets Folk,  

I'm still very much a novice investor and I've run into a situation I've not encountered before.  I'd love to get some feedback from anyone who's been through it. 

I own a single-family rental property with three tenants on a lease through April 2023.  They have always paid me individually for their portion of the rent.  
One tenant informed me in July that he was relocating for work and would be moving out by September 1. He acknowledged that he was responsible for his portion of the rent until someone to take his place on the lease was found. The trouble is, I've been trying to get in touch with him via text and email unsuccessfully for two weeks now. I visited the property yesterday and found his house key in his room, along with a bed frame, mattress and desk. He hasn't yet paid September rent and I believe at this point he doesn't intend to. While the others on the lease are still technically responsible for the whole amount, I hesitate to make this their problem. I know that the extra cost would be more of a hardship for them then for me (their portion still covers the PITI + reserves), and they take good care of the property.

  How do I hold the tenant that skipped out accountable?  How do I move forward with disposing of their possessions and re-renting the space? I look forward to hearing from anyone who cares to throw in their 2 cents. 

Hey Joshua, similar to what Kamil says, it might not be illegal, but its not a best practice.  A lot can happen between contract acceptance and closing.  

I was in the same position when I bought my house.  The idea of making that whole mortgage payment by yourself can be intimidating, but don't let that pressure you into rushing things!  If it were me, I'd post on social media that I'm looking for potential roommates starting on _____ date, and use that as a funnel for referrals.  Then, follow up with anyone who expresses interest once you have keys in hand.  If you don't close, there's no harm done, and you'll have a head start on filling your rooms when you do. 

I bought my first property almost a year ago using an FHA loan, a 4 bed/2 Bath in Columbus, OH. I've been house-hacking it and have saved up for a down payment on a new property. My mortgage broker told me that to get pre-approved for a new loan, I'll have to make significantly more from my w-2 work, have my current property under a traditional lease, or plan to sell it.

Having the current tenants sign a traditional lease together while I'll still living at the property sounds tricky. My question is, could I declare the intention to sell my house during pre-approval, but have the current by-the-room tenants sign a lease together when I find a new property and get it under contract? 

It seems like a good work-around, but also have no interest in entering any kind of fraud territory.  Anybody have guidance on this issue, or any other advice on getting to/financing property #2?