All Forum Posts by: Kyle J.

@Chris K. I don’t know about Florida, but in California COVID has caused the pricing for in-ground pools to skyrocket over the last year. And I mean like triple the price of what they used to be in some cases.

Everybody is stuck at home (and so are their kids), so they want to make being home as enjoyable as possible and give their kids something to do. Which in many cases has meant putting in a pool. So pool companies have been swamped with business (at least on the west coast), and their prices reflect it. 

I can’t imagine it’d be worth the price to put in a brand new pool in a long term rental, or that you’d ever make that money back. But if you end up deciding to go down that path, I’d suggest getting some quotes or talking to someone who’s put one in recently (last 9 months or so) to get a true idea on price. Because anything from a few years ago may no longer be relevant or in the ballpark.

Just my two cents.

@Deborah Hickman Usually, when dealing with real estate loans/private money loans, the interest rate quoted is an Annual Percentage Rate (APR). So a private money lender loaning you $250k at 10% interest, is most often loaning you that money at 10% APR (as opposed to a fixed return on their money whether you have it for one month or 12 months).

If that's also the case here, then no - you would not be calculating this correctly. 

Most private money loans are interest-only (as opposed to fully amortizing like your home mortgage loan probably is), so let's assume that this is too for this example. If you were to borrow $250k at 10% interest (APR) from your private lender, that would equate to a monthly interest-only payment of $2,083.33 ($250k x .10 = $25k divided by 12 months).

Now, if I was your lender, I would require you to pay me that payment every month. However, let's say for the sake of your hypothetical that your lender didn't require monthly payments and allowed you to just pay them when you sold the flip. Whether it takes you 3 months, or 6 months, you're going to owe them $2,083.33 per month because that's how much 10% interest (APR) equates to. Make sense?

Of course, you should confirm this with your private lender and it should all be documented and spelled out in the terms of the note.  However, this is how it's normally done. 

For what it's worth, and so you're aware, doing it the way you proposed may not even be legal under some circumstances and in some states. For example, in my state, anything over 10% interest on an ANNUAL basis (APR) is usurious (illegal) unless I go through a broker or there's some other limited exemption that the loan qualifies under.

So, if I personally negotiated/originated a $250K loan as the lender (I'm not a broker) for 10%, and it took the borrower a full year to pay me off (and I only collected a year's worth of interest), there would be no problem with that. However, if the borrower paid me off in only 3 months, but paid me the full year's worth of interest ($25k) in that short time, that would likely be an illegal loan in my state and all the risk is on me as the lender. (Since the interest rate as an APR would then actually be well over 10% APR.)

Anyway, just something for you to be aware of.  Hopefully all that wasn't too complicated and made sense.

@Ian Thompson Well, I guess I don’t really see the benefit to your mom. You want her to “gift” you a $450k asset that she only owes $150k on so she can then pay you rent? 

Sounds like a good deal for you, but I’m struggling to see the benefit for your mom. It’s not like she can “gift” you the mortgage, so she’s still going to be liable for that. Doesn’t seem like a good way for her to enter into retirement. Perhaps there’s something I’m missing though. 

@Jay Hinrichs It’s interesting that you say that. I don’t often have vacancies, but on one of my last ones, I was actually contacted by an insurance company who inquired as to whether I’d be willing to rent to one of their clients (a family who was displaced I think due to a fire).

The insurance company was willing to pay a premium significantly above what I was asking. However, it was only for a limited number of months. 

I ultimately declined because that’s not my business model (short term tenants and high turnover), and even the offer of higher rent didn’t make it worth it to me.

I like long term tenants (most of mine have been with me for 5 to 8+ years) and low turnover. Turnover can be a lot of work, and the longer you do this you realize that turnover/vacancy between tenants can really eat up any cash flow / profits you thought you had. So it just wasn’t for me. 

But I’m sure someone else could make a nice business model out of it. Assuming they could get consistent referrals from the insurance companies, as one here and there like I got just wouldn’t cut it. 

@Casey Penland  I think it largely depends on your market and your target renter. 

For example, could there be a need for something like this if you're in a trendy area and marketing to young millennial-aged professionals who are just starting out and don't have much/any furniture?  Or you're near a hospital and trying to attract traveling nurses?  Or near a higher education institute and marketing to students finishing up their schooling (i.e. graduate students, doctors doing their residency or fellowship, etc) where it doesn't make sense for them to buy a house and furnish it because they'll likely move as soon as they're done?  Then perhaps it's a good idea. 

And in these cases, many states do allow you to charge a larger security deposit for a furnished unit than you can for an unfurnished unit.  (In my state, I could charge a deposit equal to 3x rent for a furnished unit, whereas I'm limited to a deposit equal to 2x rent for an unfurnished unit.)

With all that being said, I think there's many markets and types of renters this would NOT work with.  For example, I rent mostly 3 bdrm, 2 bath single family houses.  The typical people who apply for (and ultimately rent) my properties are established families with kids, and a houseful of furniture.  So not only would it be an unnecessary expense for me to pay to furnish my places, it would likely end up eliminating my entire tenant pool.  Because it wouldn't be a convenience for them to have the house already furnished, it would actually be an inconvenience. 

Realistically, they're not going to get rid of their lifetime accumulation of furniture.  So either I'm going to have to pay to empty the house back out, or they're not going to be interested in renting it, and I just lost a tenant.

So I guess ultimately, you'd need to do a lot of market research, and really know your market and your target tenant.  Because I could see there possibly being a market for it, but not always.

@Shelby LeBlanc As the new owner, you’ll have the right to terminate their tenancy. But what if they don’t voluntarily leave or claim they’re covered by one of the eviction moratoriums in effect? 

At a minimum, it could delay your ability to get them out. And with a flip, speed is often important. (Especially if you have a hard money loan, or any loan where you’re incurring a relatively high daily interest.)

Ultimately, you would likely be better off if the seller could deliver the property vacant, like Mason suggested. That way, you could get to work right away. 

@Vijay Aruswamy If the tenant has lived in the property for over 12 months, they are covered by the “just cause” protections of AB1482. That means they’re entitled to the relocation assistance payment or waiver of last month’s rent.

It doesn’t matter that they were/are now a month-to-month tenant. What matters is how long they’ve lived in the property. 

@Luis Limon  As it sounds like you're already aware, the Governor signed another new bill (SB91) into law last week that extends the previous tenant protections enacted under AB3088 (the COVID-19 Tenant Relief Act of 2020).  SB91 not only extended some of the previous tenant protections, it also added some new ones.  On a positive note though, it does provide an opportunity for landlords to get direct rental assistance for past due rent.  I actually made a post about this last week in this post the day the Governor signed it.

In any event, I actually went to some training on this new law (SB91) recently since these new laws tend to be very complex and I like to stay educated on them.  So I'll try to answer some of your questions.

1. Regarding sending the tenant's debt to collections = SB91 prohibits the sale or assignment of all COVID-19 rental debt (amounts due between March 2020 and June 2021) until July 1, 2021.  After July 1, 2021 you MIGHT be able to turn it over to a collection agency (it depends on whether the tenant meets certain eligibility criteria).

2. Regarding cancelling of garbage service = I have rentals serviced by multiple different garbage companies and none of them would even allow me to cancel garbage service.  (Would the garbage people be expected to check every address to see if they're paying before they picked up their garbage?)  So I don't even know if that's a realistic option.  But even if you were allowed, I don't think it's a good idea.  Especially given that your property is a duplex.  Do you really want the garbage to not be picked at just one of the sides?

3. Regarding the idea of cash for keys = Might be a good idea in this scenario given our current political/legal climate.  I know there's people who are against the idea of paying a non-paying tenant to leave, and honestly I used to be too.  However, I've come to realize it's just a business decision.  Would you rather pay someone two months rent to move away?  Or allow them to stay in your property rent-free for 6 more months?  If you look at it as a business decision, and not an emotional one, the answer should be clear.

4. Regarding how to get money without the tenant's cooperation = While the exact process for landlords to apply for these funds still has yet to be ironed out, it's not likely that you will be able to do it without the tenant's cooperation.  Eligibility is based on the tenant's circumstances/income level and they will almost certainly have to submit something in the form of proof of income in order for the landlord's application to be processed/approved.

Ultimately, like with most of the other tenant protection laws that have passed since COVID started, this isn't for the casual hobby landlord.  You'll likely need professional legal assistance, as there are a lot of complexities and nuances to this new law. 

You can read more about it here if you're interested: https://caanet.org/ctra/

(Pay special attention to the deadline mentioned of February 28th by which you MUST provide a specific Informational Notice to any tenant who is behind on rent as of February 1st.  If you fail to provide this notice, you will NOT be able to serve any new 15-day notices until you have complied with this requirement.)

In the end, I would suggest following @Chad Hale 's advice and getting an experienced local landlord-tenant attorney to guide you through this process, as it is now more difficult than ever for a landlord to go at it on their own.

Best of luck to you.

@James H.  The laws in your state don't appear to "clearly state that rent is legally due on the first and late on the second".  They just seem to state that tenants generally have a nine-day grace period after the due date (whatever date that is in the lease) passes during which landlords may not start legal proceedings to evict the tenant or charge a late fee.  It doesn't seem to say anything about when it's "late".  

Here's a couple sources where you can read more on this if you're interested:

Connecticut Office of Legislative Research: Late Rent Grace Period and Fees

State of Connecticut Judicial Branch Superior Court: Rights and Responsibilities of Landlords and Tenants in Connecticut

Regardless though, in my experience, while us landlords may generally focus on due dates, most tenants focus on a different date.  And that date is when does the grace period end and the late fees begin.  So your tenant may see nothing wrong with paying you on the 3rd if the late fee can't kick in until the 10th. 

When you think about it, it's not really that different from how your mortgage payments work.  Your mortgage payment is likely due on the first, but a late fee doesn't kick in until usually at least the 15th.  (I'm sure your mortgage company would prefer you pay on the 1st though.)

Ultimately, I agree with the others who said to let this one go.  If you have a tenant who needs to pay on the 3rd because that's when they get their check, and their unit is "well kept and clean", then I'd be totally fine with it.  It's certainly not a battle worth fighting.

@David Nacco I’ve always emailed them at support @ biggerpockets.com. Don’t think it’s changed. They’ve always been very responsive at that email address (sometimes as quick as under an hour). 

If you’ve been trying that email address though and haven’t got any response in more than a day or two, maybe check your spam folder?