All Forum Posts by: Terry P.

As someone who "accidentally" got my first rental property in 2007, I saw this first hand. My wife and I had lived in, and rehabbed, an old house that we bought for very cheap in a rural area several years before. In 2007, we moved away to a new area in order to get better paying jobs.

We listed our old house for sale and purchased a new house in the new town. With the way too relaxed underwriting requirements, we easily qualified for our house.  I was shocked at how much we were approved for. Something like $350,000 while carrying our small mortgage on our other property. We instead went with a $200,000 house, with no money down. Looking back, there was no way the bank should have even considered that loan, but like others said, everyone got loans then, even if the math did not add up.

While our other house was up for sale, everything began to crash. Our old house did not sell, and our new house was way underwater. Fortunately, we used traditional 30 year fixed loans on our houses. If we had financed with an ARM, we would have been in deep, deep trouble.

Eventually, we began renting out our old house. That made all the difference. We immediately had cash flow. Even through we could not sell it in the market, we made a modest cash flow. 

Now, our new house was supposed to be something of a transition house. We were actually planning on selling it once we got settled in our careers and started a family. But everything crashed, including our home value. We spent the next 10 years (basically until now) trying to get equity in the place. At the same time, we worked hard and increased our income at our "normal" jobs. 

At this point, we are finally turning this house we currently live in, into a rental property (Thank you bigger pockets!). We just got a loan on a new place that is bigger than our current house and was ironically, cheaper than what we paid for our current place in 2007. 

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As a side note, the situation that created the "ready to burn" fuel for the crash was pretty much what was outlined in the big short. We also had government basically telling banks to give away loans. There was this "ownership society" thing that was pitched in politics as something that would reform and save America. 

All this fuel needed was a spark. People were way over-extended. When oil prices soared (gas went from sub-one-dollar to four dollars+) it was all that was needed to cause people to begin to miss payments. As soon as that started happening, it began to snowball. I know of at least a couple people, personally, that you could trace the rise in gas prices as the catalyst that pushed them over the edge. Even companies began having negative profit due to the spike in fuel prices. 

Soon, consumer demand dried up, as everyone was underwater on mortgages, credit cards, etc. You ended up with a situation that just needed to deflate. So much debt was issued on false expectations. And all this time, basic necessities went up in price. During the height of the recession, we had used car prices spike (due to cash for clunkers), corn prices spiked (due to ethanol mandates), and oil prices spiked. 

Everyone was just so over-extended, there was no margin for decline in "profit" in their personal finances. Everyone kept saying things were going up and up, so no need to plan for the downside. 

Is it possible to look up the tax records for the county? I know where I live it actually lists the one who payed in the county records online. You would think that at the very least, the city or county offices would be able to disclose that information. If someone is paying taxes, that would give you a good lead.

Try bringing a letter to the local post office desk and asking to pay for postage at the desk. There is a chance that you could ask if the post office box actually exists. The postal worker may say, "nope" or "it does, but it is full". That gives you valuable info as well.

You should also try knocking at the door and asking the tenants for information. 

Also, if it is a small town and the parents lived there for a long time, ask around. Somebody is bound to know where the daughter ended up. 

We are currently seeking tenants for our property nearby there. South St Paul people tend to have an affinity for the area and often want to stay living nearby. The biggest thing I have seen is that a number of people I have spoken with do not want to leave the area. There is a tight community and some sort of magnetism that gets people back to the area. This helps with finding good renters in my opinion.

You have to remember that Frogtown, Dayton's Bluff, etc, are part of the actual city of St Paul. As a bonus to buying there, you get the higher taxes and rental regulations. South St Paul, on the other hand, is its own town. So you get a little more friendly local government than you might find in St Paul proper.

 Not from what she told me. I guess that is the frustrating part. Some potential tenant gives half the answers, but "really, really, really..." wants you to accept them. The truth is, there are big holes in her history/current situation and I don't know if I can trust her. I wish I could, but she either lacks understanding of her own situation, or expects to hide something in that situation.

The lesson that potential tenants can take from it is have everything in order before you apply. If you are on some sort of government program, then state it, don't just say "there is a company that pays that for me." Think about weird parts of your particular explanation and be up front about them. It is the same if you are getting financing somewhere. The underwriters are more likely to just outright reject you because you skipped a part. 

When analyzing risk, I don't want to see a big "X" over part of your finances/income. I want to know that you would be a good tenant, and want to know up front where the potential difficulties exist. I can deal with difficulties if I know what they might be. However, I generally try to avoid a big "X" difficulty where the intensity of the problem could be anywhere from benign to insane.

Thank you all for your advice. I decided that it was too much of a risk to go with her. I have other "normal" renters interested now and might as well go with one of them.

If it really is the case that she was the victim of identity theft, I do feel really bad. But on the other hand, I've bent over backwards trying to validate her claims and there seems to be gaps that I cannot answer. Looking at the whole picture,  I could see that she "might" be a victim as she claimed. It seems really plausible. But it also seems plausible that it is some kind of scam. 

I would maybe be less worried if I was renting to her in the spring since Minnesota eviction laws make it hard to evict in the winter. But in this case, I have others that are interested, and some of her story just does not quite sound conclusive.

@Alexander Felice, that probably is a good point! However, I am also really wondering, do people actually file for bankruptcy due to identity theft issues? I've never heard of someone doing that?

I have a prospective tenant that has a bankruptcy on her record from about a eight months ago. She claims that it was due to identity theft issues. I am not that familiar with such a situation. Do people really file bankruptcy due to identity theft? When I ran the credit check, it did show a large number of inquiries followed by a number of accounts closed due to bankruptcy a little over a year ago.

She also said that a company handles all her bills so she would need a letter stating the amount of the deposit and rent and they would send us a check. 

Other than that, her background check did not raise much concern. She seemed like a nice person and begged me to look past the bankruptcy because of the identity theft. 

Does this seem legit? How should I approach the situation?

That is what I was thinking too. Our lease states that they cannot have a dish permanently mounted to the house without permission. They are very good renters... but I kind of want to keep my roof in tact. Are poll mounts common? Do you think we should have a big post put in for satellite dishes or do you just let your renters deal with that?

I have a tenant who wants to place a satellite dish on the roof of the house he rents. There are no restrictions in the community. However, I am concerned about possible damage to a relatively new roof. Should I be concerned? Are there other ways we could get the satellite without punching holes in the roof?

Thanks

I am going to meet with the bank this week to ask about getting a loan on another house. I need to know how I should organize my paperwork and what they want to see. 

Here is a little background on my situation. While I am not "Just starting out", I really fell into owning a rental several years ago because I could not sell my home and moved to a new one. Now that I've had that home for a number of years, I would like to repeat the process. I need a bigger home for my family, but I would like to keep my current home as a rental as well. 

My first home was tiny and I have about $70,000 in equity (house is only valued around $90,000). This is currently a rental home. I make a little profit on this, and the payments are tiny). I have a job that generates enough income for me right now and this rental home is just a tiny bit of side income. 

My current residence is valued somewhere around $210,000 but I still owe about $180,000 on it. 

I've got an opportunity to buy a bigger home than my own for a pretty good deal. It will end up being similar in price to my current residence. We will be meeting with a banker this week to ask about options for us in order to get into this new home and rent out our current home. If we were just selling, this would be easy, but since we want to keep the house as a rental, I want to go in prepared to the bank and put the best foot forward. 

What information should I bring to the bank and how should I lay it out and preset it? I really appreciate advice from someone who has done this recently. Thank you all for your input.