All Forum Posts by: Jeff G.

@Jeff McCaskey you're welcome sir!

That depends. I have never personally had to get a judgement on a tenant. (I'm a wholesaler, I don't own any units of my own just yet.) But, I have several friends who are landlords and we "talk shop."

One friend (lets call him Steve) has four triplexes and lives in one of the units himself. Because he's on site and does all of his own management and repair work he also just handles evictions and collections himself. He just gets a judgement and waits. Sometimes he collects and sometimes not. I do think he's tired of going to housing court so, last we spoke he's looking at getting himself a flat rate eviction attorney for his own sanity.

Larger institutions (think several large apartment complexes) tend to farm out their evictions via flat rate service and then pass them off to a collection agency. Or, so I've been told at meet-ups by those who would know.

But, it seems most people around here just wait for tenants to care enough about their credit to want the judgement removed. Because, judgments show up on credit reports for 10 years and are renewable for another 10 years (in many states) this might seem like a bad idea. Don't forget, these debts can collect enough interest (I forget how much) to generally offset the steady decline in purchasing power of the dollar (inflation) over time.

My gut says, I'd sell the debt to a reputable collection agency and be done with it. I'll see when I get there.

@Jeff McCaskey is right, some people just don't give a rip about their credit and simply won't pay you--ever. Collecting on half the judgments you're forced to get is doing pretty good. Jeff, are you farming those out to a third party collection agency? Or, are you pulling that percentage all by yourself.

Just remember @Stacy Eisenberg , judgments are returnable. So, keep track of your old judgments as they get ready to expire and file the appropriate paperwork for their renewal. 

I have no experience with lease options as of yet. @William Allen you may want to have a look at this post: http://www.biggerpockets.com/forums/83/topics/167048-lease-options-safe-act-and-dodd-frank

Bottom line, don't just find someone who has done this before (pre Dodd Frank) and might be operating under obsolete understandings. Rather, seek out a qualified investor friendly attorney in addition to whomever you consult with to shepherd you through the process.

I agree with @Michael Noto run your numbers assuming the worst possible scenario. 

@Coy Barnes I think you mean ask them to sign once escrow is complete and you're the legal owner. You might be able to work out some leasing concessions with the current owner during the sales process but don't hold your breath.

Some Tips

• Check https://www.rentometer.com/ to see what market rents are in your area.
• If they're paying substantially below market rent you might have a fight on your hands. Be professional and courteous. 
• You might want to also send out a survey to each of your tenants to make sure you know the names and contact information of everyone occupying each unit, the total number of minor children, etc. 
• Most landlords I know require their tenants to get Renter's Insurance. You might consider requiring this in your lease in addition to the security deposit. Why? Because it gives you one more avenue to collect if the tenant destroys the property.
• "Cash for Keys" might be your most effective option. But, in that case you may be putting out $500 to $1,000 (or more) per tenant to get them out. Factor that into your numbers!
• Going forward, do yourself a favor and find a flat rate eviction attorney. You send them the paperwork, they take care of the process for you for a fixed dollar amount. Everybody wins.

@Colleen F. is right. I forgot to mention that there may be local laws or ordinances which limit the number of unrelated people who can live in a single residence.

Check with a lawyer. There are a lot of persistent myths about this sort of thing.

Do yourself a favor and reach out to @Tom Kroll he's a major wholesaler about an hour north of you. He'll be able to get you started on the right path. He's been wholesaling for about two years now. He went from a nobody to a major player in that time.

@Justin Bernsten you make the lease a standard 12 month lease. So what if they're away between semesters? If I go take a two week vacation I don't get to pay half of the note on my house that month!

If you have a common area and assigned rooms be careful. You might suddenly find yourself classified as a boarding house. This could have legal implications, talk to a qualified attorney for more information. (Or, maybe someone here could speak to that as I'm not remotely qualified to address that point.)

If you're really worried about something bad happening:

• Get an umbrella policy, a big one.
• Get flood insurance even if you're in a non-flood zone. If someone has a rough night on a waterbed and it springs a leak you could be in trouble. Most policies expressly exempt flood damage.
• Insurrection insurance. Don't laugh. If you read virtually any policy it will have a clause indicating that it's void with respect to damage caused by "war or general insurrection." So, your collage town has a riot due to a lost football game... your claim will get denied. A riot of any kind is "general insurrection." Is that overboard? Maybe, maybe not. It's your call.

@Jacob Vavra be careful. Make sure that the universities you're near allow students to live off campus. I was looking at some multi-family properties near a university until I discovered that their entire undergraduate population was required to live on campus. Go figure! So, this is something you're going to want to check.

Some other things to consider:

• Parking. Believe it or not I personally had a hard time finding properties with decent parking. I didn't feel comfortable renting to students and then requiring them to all park on the street. Your mileage may vary.
• The Two Mile Rule. If you're renting to students you want to be within two miles of the college or university. Why? Because because a lot of college students would rather walk to class and save the money on gas. Your grandfather may have walked five miles to school (up hill both ways) but don't expect that from a Millennial.

About the Lease and Getting Paid (on Time!)

• Make the parent a co-signer on the lease. Check the parent's credit if it stinks you might want to move on. If the parents have good credit they're much more likely to care of little Johnny spends his money on beer and not on rent--because they're on the hook!
• Talk to your attorney about what's called a "joint and several liability" clause in your lease. This holds everyone who is a lessee liable for the entire sum of rent. So, if some people stop paying (or move out) the rest are liable for the difference.
• Check with other landlords renting to students (easily done via Craigslist in your target market) typically student housing rents at a premium, especially if the Two Mile Rule is obeyed. 

Stop Loss

• Do yourself a favor and replace all carpeting with hardwood or laminate. Why? Because the first time someone has a keg party there will be spilled beer on the carpet and nobody is going to clean it up. A year later when you do your summer clean-out, the stains will still be present.
• Require everyone to get tenant's insurance, period. Talk to your insurance agent about what kind of policy you need them to have to cover damage arising from their actions. This will go much farther if the house is damaged in excess of the security deposit.
• Hold them to their 12 month lease even during the summer months. You'll get push-back because they left for two months... too bad.

@Nicholas Miller is correct: most of their money is coming from academic funding (not to mention mom and dad) so they are an excellent tenant pool in the right areas. 

@James S. welcome to BP!

You might be interested in the Western Mass REI Club it started out as a thread on BP a little over two months ago. We'll be having our third meet-up in a few weeks. I hope to see you there!

@Ned Carey repeat after me, "If it isn't written it isn't true but the converse does not follow." :)

@Mark Alphonse I have to echo what just about everyone here has said, if you proceed promptly get a new lease from your tenants within a few days of purchasing the property. If they won't sign, start the eviction process.

Other CYA Steps

Tenant Survey

You might want to also send out a survey to each of your tenants to make sure you know the names and contact information of everyone occupying each unit. I'm sure you can Google for something that works for you. Most forms I've seen are 1 page long and folded over like a brochure. This is useful for making sure your records are as accurate as possible from the start.

Require Renters Insurance

Most landlords I know require their tenants to get Renter's Insurance. There are some policies (I forget which ones off the top of my head) that allow you to sue the tenant's insurance company for damage or loss arising from the tenant's misdeeds. Others simply cover the tenant's stuff and no liability from their actions. It usually costs the tenant something like $150 per year for a decent policy. You might consider requiring this in your lease in addition to the security deposit.