All Forum Posts by: Jennifer T.

In some of my duplexes, I use window units with heat/a/c for rooms that have two egresses (other than the interior door).  And, for bedrooms that only have one egress, I use a portable a/c and a wall heater.  The rooms with the wall heaters are only about 100 sq. ft. and my wall heaters are rated for a space larger than that.

I've never had any complaints, about either the rooms being too cold or about the electrical bill.  BUT these houses are also in New Orleans, where it only drops below freezing a few times in the winter and almost never snows.

Not quite the same, but I rented to a tenant who was coming from out-of-state, so I didn't meet her and her family until move-in day.  Oh, huh.  Look at that.  An extra child (daughter) that was never mentioned.  Who was supposedly living with grandma in FL (they were from GA), but they changed their mind at the last minute and brought her.

I swear I wasn't even trying to pry, lol.  But, during their move-in day, I happened to be in the kitchen with the daughter for a couple minutes and made friendly chit-chat about the iguana (in a cage on the kitchen counter).  She tells me ALL about that it is HER iguana.  It was a birthday present.  She loves it and takes good care of it.  Interesting.  Because the iguana was on their application, but this girl was not, lol.

During our discussions beforehand, I had even made mention to her that, while it was a good-sized 2 bedroom, it was still just a 2 bedroom and might be a bit cramped for four people so I just wanted to make sure she was thinking about the size and was good with that.  Plus it had a shotgun style layout (no doors between rooms).  She assured me all of that was fine.  Cool, great.

In month #3, she wants to break their lease because the house is too small.  But, of course, the terms she wants to break it under are outrageous.  Including "living out their security deposit".

They were some of the worst tenants I ever had.  And many, many much more serious lies were discovered during their tenancy.  I was a newbie landlady at the time and they must have seen me as such an easy mark.  At least they were a relatively inexpensive wake-up call and I hardened up my procedures big time after that. 

Before closing, have the tenant and seller sign an estoppel agreement so everyone is on the same page as to what the rent and security deposit is.  At closing, the seller will have to turn over the tenant's security deposit to you plus whatever the pro-rated rent is.  For example, what if the seller says "They don't have a security deposit, they used it for July's rent last year when they were laid off."  But the tenant says, "Yes, of course I have a security deposit that is still fully intact."  An estoppel agreement protects from situations like that.

You can and should have the tenant sign a new lease with yourself, because the contract will now be with you.  BUT, you cannot have different terms if the current lease is still in effect.  However, if the current lease is in a month-to-month status, then you can make changes to it, but will need to give appropriate notice after closing.  Usually a 30-Day notice for an amendment to a lease, but check your local laws.

You're right.  You have no way of knowing the condition of the house when the tenant moved in.  But it really doesn't matter.  Because you know the condition of the house NOW and that is what you are already buying.  For a security deposit with an inherited tenant, I will only subtract for NEW damage that happened after I bought it.  I'd suggest taking pictures so you have evidence of the current condition around the time you are buying it.

I personally don't run background checks on inherited tenants.  They're already living there anyway and, even if there was something in their background I didn't want, I couldn't make them move over that unless it was already a month-to-month lease.  But I've seen other people on BP who feel differently.

I don't have a lot of experience with inherited tenants.  But the experience I have had is I "100% would never have rented to any of them, if I'd done the original vetting", lol.  I could also see it being a situation where it works out fine.  It becomes more problematic, if you will also be raising the rent when you are able to.  Which you should do!  I'm not saying that.  But it can understandably cause hard feelings on the tenant side.  For an inherited tenant, I will put the new rent at slightly below market rate if I want to keep them.  Basically, make it cheaper for them to just stay, but without my feeling like I'm subsidizing an almost stranger's rent!  

@Marc Winter, I think your solution sounds perfect.  Especially since it is 1,000x easier for the government to seize bank accounts and garnish wages when someone owes them money, than it is for people and businesses to do.  The do it ALL.THE.TIME.  For child support.  For IRS debt.

But I know you are phrasing it as "this is what should happen", in a perfect world.  Not in the actual world we live in where, unfortunately, this is a pipe dream.  We have now seen that most politicians think nothing of illegally screwing over the real estate industry, because most of us are small businesses that don't have lobbyists like the oil/gas and grocery store industries do.  Or make the kind of campaign contributions (as one large group) that industries like oil/gas and pharma do, so the politicians who "favor" them stay in power.  And their voters who are renters are always going to be louder and much more numerous than we are.

The other sad irony is, just like @Adam Martin mentioned, in the long run, they are just setting renters up for escalating prices when they make owning rentals riskier and more onerous with laws that are much too heavily one-sided.

As an example, my New Orleans market has been at a crisis level for years with uninhabitable properties.  From my understanding, a "crisis" level is 5% of housing as being uninhabitable.  NOLA is at 13%.  Over the last nine years, I have personally brought 6 buildings with 11 doors (total) back to market.  And have kept them all as rentals, except for the one "door" that is my personal home.  Though still in a duplex that had sat vacant for over one year, until I bought it.

Even though I thankfully have not been affected by the ridiculous eviction moratoriums, I think I'm done.  I don't plan to sell the rentals I own.  But I'm not improving the real estate stock in my city any further, unless I plan to flip.  Rehabbing to rent...or even just buying a rental property...is risky enough.  Potentially having no or few laws to protect me, puts the risk level too high for me and I'm looking into other avenues to invest my money instead.  And I even live in a state that, normally, has fair landlord-tenant laws!  It's probably just as well I don't have most of my eggs in the real estate basket anyway.

It will be easier and better terms if you have the money up front for the rehab and are just trying to get a loan for the property itself.  If not and it's a fairly extensive repairs needed, you'll probably need to get a bridge loan like everyone else is recommending.  I learned all about them last year, lol!  When I kept running into walls trying to get a more typical, long term, lower interest loan for properties that needed extensive rehab.

But I recommend looking at the silver lining.  Yeah, bridge loans are higher interest.  But they're short-term.  They're intended to be short-term.  When you refinance it back out, you should be able to get the 30-year term you are looking for. 

5 years ago, I was able to score a typical property loan with my local bank that included $20K in rehab funds. I knew the actual rehab was going to be more like $35K, but had the resources to make up the difference and not have to steer off into shorter-term loans with worse terms. So you never know what you might find speaking to lenders. However, that property was purchased under my LLC, so it was the commercial lending division of that bank.

I agree with you. I focus on buying distressed properties and fixing them up so that my "all in" price becomes an amazing ROI once I get the units rented out. But the last "R", for refinance. Meh. I haven't bothered for a variety of reasons. By the time you are accounting for only a 65% or 70% LTV, I'm not getting much of my money back anyway so I'd rather just keep it in the original loan.

But I am getting ready to do my first BRRR...all the way to the last R. What's the difference this time? It's an 18-month bridge loan. So I HAVE to refinance it back out, lol.

Here are some of the details. Total purchase price of the properties (two duplexes) was $146K. I rolled $86K in rehab costs into the loan. Assuming I max. out the rehab plus my 20% down payment, my interest-only loan is for $206K. The ARV for each property $150K, so $300K total. My one major screwup is the rehab took way longer than we expected, which skyrocketed my holding costs and decreased the income I should have been getting. So, including holdings costs, I'm "all in" for around $250K. Not bad considering my gross rent for all 4 units is $1150-$1200/per. Three are already rented out and I have a tenant lined up for the fourth one that will be (finally!) done next week.

But now let's look at what I'm expecting for the refinance numbers. $300K value at a 70% LTV is a new loan for $210K. $206K will pay off the bridge loan. Oh look. I'll have $4K left to cash-out. Whoops! Forgot about closing costs. Bye-bye $4K. And I might even have to introduce you to some new friends out of my pocket to make the closing costs, lol.

No cash-out back for my original down payment or holding costs.  But I do have a property with a great monthly cash flow and $90K in equity.  I just can't access the equity until I sell it, which I have no intention of doing anytime soon.

Talk to the tenant and explain your predicament.  I'd think most people would be reasonable with that.  Since you'd be re-doing the lease anyway, I'd just set it as a 3-year term from whatever that date is.  So, you're really only cutting the lease by less than 2 years because she has already lived there for a few months.  You could also include in the new lease that it will automatically re-up for one year or month-to-month at the end of the lease term.

I agree about giving her some perks for her cooperation, like a new bathroom vanity and/or something else she wants.

I wouldn't offer this up front but, if she still seems hesitant, you could also write into the shorter lease that her rental amount will not increase until XYZ month/year, ie whatever month/year the current lease ends on.

In the future, like @Kyle J. mentioned, don't do long multi-year leases like this.  It's a real handicap for a lot of reasons, including a major loss of flexibility on the landlord's part, and there isn't any good reason to do it.  Your tenant can still break the lease whenever it suits her.  You'd still have to re-rent it to mitigate your damages, just the same as if it was a 1-year lease and most courts wouldn't make her pay more than 2ish months of rent.  None of them would make her pay the remainder of the lease.  For example, if this tenant gets a job next year with a big pay increase but she has to move out of the area, she will be a gone-pecan and won't care in the slightest that she is breaking this long lease, even though that was what she originally wanted.  

I have a loan like that with a local bank, though it is for a single property not a portfolio.  Also a 20-year amoritization schedule.

I got lucky in that when I took the loan out 5 years ago, I was told it would need to be paid off or refinanced 5 years later. But my bank changed that policy last year and greatly simplified it. So, when my loan was coming due this year, I was able to re-up it without much hassle. They didn't even pull my credit! Or check my DTI or require tax returns or anything like that.

However, the fees were $600-$700 for a $43K loan and the interest rate was reset to current economic conditions.  Though I have to admit I don't really understand what happened on that because interest rates are lower than when I originally took out the loan but my new interest rate went up 0.5%.

Going forward, I will not have to re-up it again.  But the interest rate will automatically recalculate every 5 years.  In my case, because it wasn't a refinance, the loan will still has the same maturity date, ie 15 more years.

I'd suggest shopping around and see if there are other banks/lenders that have terms you like better.  But, if not, that seems like a good option despite the cons.

You could also mitigate some of your concerns either now or in refinances for the future by not refinancing for the full 80% LTV amount every time. Then you would still be paying the loan off over time and your closing costs would (probably) be less as you take out a lower and lower loan amount.

But those are flexible choices to decide at a later date, depending on future interest rates and your own RE goals. For right now, a 3.25% interest rate is cheap money...even considering a potential $8K-$10K closing cost 5 years from now. I'd assume you can earn substantially more ROI than the interest and future closing costs by leveraging the extra $300K to earn more rental income (or another investment vehicle).

You might be able to figure out through Googling about how many gallons of water watering for one hour uses.  Offer that proof to the property owner and request the cost equivalent of what that many gallons x2 is either taken off the rent or reimbursed back to you each month.

Even better, if there have been months where they didn't do any watering, you can show them the differences in the bill between "months that had watering" and "months that didn't have watering" and then come out to a fair monthly reimbursement from that.

As an aside, when I was a renter, I lived in a duplex that had a grandfathered-in one water meter for the two units.  One of the tenants was required to have the water bill in their name and collect half the bill from the other one.  It sounds like the potential for disaster and hard feelings all around, lol.  But we lived there for 5 years and had a number of tenants on the other side from us without it ever being an issue.

My own personal duplex also has a grandfathered-in one water meter.  I keep the water bill in my name, but charge my tenant on the other side half of it each month.

With all that said, both of those situations were/are known up front to all parties.

You can still issue a 30-Day Notice to Vacate for lease violations and, if they don't comply, evict them for things that are not related to non-payment issues.  BUT, just because that is what you can legally do, doesn't mean it's as easy that.  Eviction courts are backed up.  Some of them haven't reopened at all.

Plus, your main focus should be getting them to comply with these fairly minor and reasonable requests.  Not necessarily kicking them out.  This is all pretty standard tenant stuff and you can't let yourself get extra upset over it.  They sound a little worse than average with sneaking the dog in and being uncommunicative, but I'm not picking up on anything that's really terrible either.

I'll give you some tips on talking to them.  You have to let go of your anger and annoyance, at least while speaking/texting/writing to them.  Keep in mind this is a business relationship and don't let it feel personal.  I know that's easier said than done!  Communicate with them in a calm and confident manner.

Sometimes it helps to restate what they are upset about...no matter how ridiculous...and then explain your reasoning and why it needs to be XYZ.  I also try not to get involved in "circular conversations".  By that, I mean they keep making the same argument that you have overruled them on.  I will rinse and repeat something like, "I'm sorry you disagree but, as I've already explained, it's XYZ."  And then I end the conversation if nothing more productive is being said.

Also, I NEVER refer to the few days between when rent is due and when I charge a late fee as "grace period".  Because that is exactly what happens.  They start thinking of the 5th as being the due date and are then mad when they're only "1-2 days" after that.  "Conveniently forgetting" that 2 days late after the grace period is an entire WEEK the rent is late.

Here are some statement examples.  Late rent:  said with a slightly confused expression on my face, "But your rent was X days late.  There is a $25 late fee because money has a time value.  That's why credit cards and loans charge an interest rate.  And you are actually mistaken.  I would much rather have the rent be paid on time then collect a late fee."

"I'm sorry you feel I am nitpicking you, but these are serious concerns for me.  The hammock needs to be removed because it is very dangerous.  You have it hooked to two points that are not meant to hold a person's weight.  It is also your responsibility as a dog owner to pick up after it.  Dog feces left lying on the lawn is disgusting and a horrible smell for anyone exposed to it, including the neighbors (if applicable).  Plus, it will ruin the grass and sod is not cheap."