All Forum Posts by: Tom Ott

Since I only have two years of REI under my belt, this is more of a check in to see if I'm going down the right path here and if there's anything else I could be doing.

I have trouble tenants that I inherited and their lease expires 3/31/16. I'm hoping they will not renew by raising the rent significantly—thinking of going from $1,295 to $1,500, the median rent for the area. I would give them more than 60 days’ notice (and would also provide the new lease at least 30 days in advance with the new rent amount). Any experience with how effective this will be? I’ve been told to raise the rent to $2,000, but I really wouldn’t be able to rent to new tenants at that rate. How would that look to a judge if I ultimately have to go to court?

I previously offered cash for keys due to other issues, but they wouldn’t budge. Due to the angry texts and phone calls from them, not to mention their other criminal behaviour (assaults, shoplifting with child in tow), I don’t want to reason with them or talk in person any more.

I’m hoping the rent increase and the extended notice to find something else will get them out.

Anything else I should be doing?

Hi Renee,

That is an excellent question! Sadly in most situations raising the rent might not fix them how the tenant acts. You could raise the rent and they renew their lease, and nothing could change! I'd suggest when it comes time to renew simply telling them you wish to part ways and no renew with them.

You are very close the rent expiration date. I would just wait it out and when it comes time tell them they have to find a new place. In fact, you're getting close 60 days prior to that date. I would let them know as soon as possible so they have a place to do.

Once they are out you can spend your tent vetting new applicants as soon as possible.

Please let me know if you have any questions. We deal with this a lot at my company.

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Originally posted by @Brian Adams:

I have always been fascinated with real estate.

I started in 2000 investing in a couple rental houses.

My "AHA" moment came in 2008 to move away from the single rentals and graduate up to large apartment complexes.

My background is a CPA with real estate taxation and forensic accounting experience. I got to see wealth creation happen with real estate as I would advise my wealthy tax clients on various tax strategies to save them money for their own real estate businesses.

One late night when I was working at the office, I was reviewing a client tax file and they were making a boatload of money and building their wealth with apartment buildings.

Have you ever had that feeling like…"if this person can do something I know I can?"

Sometimes this feeling comes from a position of feeling pain. As a CPA and working crazy hours especially during tax season, I was barely home to see my wife and two girls. I was missing the “magic moments”. I knew I had to make a change.

I took to the internet learning about apartment buildings.

I read books.

Any chance I had I was educating myself, listening to trainings in the car, etc. It was a priority to figure out the education side so I knew the nuts and bolts of buying apartment buildings.

Once I felt comfortable, I went out and bought a duplex. Based on the numbers the property was already cash flowing, but one of the units was vacant. I filled that vacancy and the additional rent went directly into my pocket.

It was definitely a cool feeling.

Now granted this was a small property, but working with my tax clients who were making money with large apartment deals, I knew the model worked and it was scalable.

Although I was still working full-time as a CPA, I went from buying the duplex in 2008 to trying to acquire a 130+ unit deal in 2009. The deal at the end of the day didn’t work out. Using my CPA background, apartments are all based on the numbers. The deal just wasn’t good enough for my investors.

In 2010 my partners and I bought a 270+ deal. The deal was bought for $4.5 million and it appraised for $12 million.

In 2011, I decided to quit my CPA job at a top 100 law firm in the world to pursue my real estate business.

Was I scared – you betcha.

Did I have fear – yep.

Did people think I was nuts and crazy – Oh yes.

Getting a real estate business started is tough. But with determination, passion, commitment, desire, focus, I know what my end result would be.

In 2013 I bought a 140+ unit deal for $10.3 million.

In 2014 I bought a 200+ unit deal for $6 million that appraised for $7.4 million at purchase.

In 2015, I will be closing on a 100 to 400 unit deal.

So if you ever want to “graduate” up to buying large apartments, my friends, it can be done.

Just know going in that the road and pathway has challenge. There is no easy button.

I believe that with a clear understanding on your “WHY”, anything can be accomplished.

Hello Brian!

I know the conversation has changed a lot since this was first posted, but I wanted to say congratulations! That is such a great story and one that many people can relate to! I know many people in the finance (and other) fields who has decided to take the great leap into REI. There are many options out there and once you get started you almost feel like you can't stop! I commend you on your success and wish you the best in the future.

3 Votes

Originally posted by @Andrew P.:

I just purchased my first investment property! Finally...

Well I actually don't close until this afternoon, but I went ahead and put it on Postlets yesterday and got a bite. The gentleman emailed me asking if I allow pets. Initially, I was against dogs AND cats, but I feel I may be losing an opportunity at a potential tenant.

It's a single family home in the 130-150kish range. I have a big backyard, but no fence.

What are your opinions on this? Am I jumping the gun, since it's only been 1 day on the market?

Hello Andrew,

This is a great question, and one that I deal with a lot. It is a hard decision because you could turn down a great tenant with a dog, and either wait awhile for another tenant or lease to a bad one.

It ultimately may come down to what is your unit like? By that I mean, is it carpeted or hard wood floors? If it is hard wood then you may want to consider allowing SOME dogs and cats. Hard wood is MUCH easier to clean after an animal has lived there. If your unit is carpeted you might want to reconsider. Animals can easily destroy your carpet.

Of course, you can (and should) have a pet deposit as part of your lease. You may either charge a monthly fee or charge a one time non-refundable payment. Explain that this is for cleaning (which you'll most likely need to do.)

If you do allow dogs/cats I recommend having a weight limit and a limit on dog breeds. You want to have some guidelines if you're going to allow animals.

It really comes down to you and where your property is located. If there is high demand for rentals and you have plenty of options for applicants, then maybe hold off on allowing pets until you have to reconsider.

Please let me know if you have any questions.

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Originally posted by @John Morey:

THANK YOU everyone for the input. I appreciate it.

Happy investing.

John

Great, John. Happy to help! Please let me know if you need anything else.

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0 Votes

Originally posted by @Chelle Knijnenburg:

Hello,

I have been reading and following many posts. This has given me the courage to pull the trigger. We have decided to rent our townhome in the Shops at Legacy. I have some varied questions.

--- Regarding Bigger Pocket's "Smart Move", what experiences have any had with this?

-- How do we write a lease that allows us to keep it on the market while we are renting it?

-- Can I take a flyer to the corporate headquarters as a rental space for their corporate clients. There are about a dozen corporate HQ's within a few miles.

-- Should we furnish it for corporate?

Thanks so much.

Hello Chelle,

Great questions! Unfortunately, I have never read "Smart Move" although it is on my summer reading list.

In terms of keeping your property on the market while you are renting it...I would recommend putting it on the market when the lease is close to expiring. Maybe 60 days or so? It is very difficult to show a unit while someone is living in it! It normally doesn't go well for the tenant and for the prospective tenant. It will never look as good as it would when it is staged. Just make sure you put it in your lease so your current tenant knows you reserve that right.

You may take a flyer to the corporate offices. Never having done that I am not too sure how that will be looked at. Some might be very excited at the idea, others might not like being solicited at work. Go ahead and give it a try (as long as they don't have a sign stopping you)

If you want to furnish it for corporate, I would recommend only if that is all you are doing with it. If you are going between corporate and regular tenants it might be frustrating to remove the furniture in between tenants. If you are going to ONLY rent to corporate then keep it furnished. That would really play into your interests.

Please let me know if you have any questions.

1 Vote

Originally posted by @George Fredriksen:

Hello, I am a new landlord and 2 months into my first tenants lease his 16 year old son was caught and arrested for breaking and entering a neighbors home. He was caught VIA video footage. I did a background check on the father and he cleared with flying colors come to find out that his son has been on house arrest and arrested for burglary multiple times before. What are my rights as a landlord. The crime at question did not happen on my property but 2 houses down. But the stolen property was recovered in my rental property when the probation officer and cops did a "random" inspection after the neighbor reported it to the authorities. IS this ground for eviction for criminal actions even though the crime did not happen on the rental property.

Hello George,

This is a great question, for a not so great situation. As a LL or PMC you never want to find out your tenants (or their kids) have done anything illegal. Sadly, sometimes, these things do happen and depending on the situation action can be taken.

As it seems many people have said, it really depends on what language you have in your lease. Many leases state nothing illegal can be done ON the property. If the crime was committed down the street you may have a problem. The best thing you have going for your case is that the stolen property was stored in your unit. Unfortunately, if this is taken to housing court, you may have trouble receiving a favorable ruling.

A few options you have are:

-Wait for the lease to expire and do not offer a renewal

- Unfortunately, wait to see if another crime happens, and if it is on your property go forward with eviction.

-Try to bring the currently situation to housing court (but it might be difficult)

Bare in mind you do have options, just consider them carefully. Hopefully since he was caught while on probation he might not even be living there anymore!

Please let me know if you have any questions.

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Originally posted by @Kyle D.:

Im looking for a online rent payment service that i can convert all 29 of my tenants to. But the problem is that a few of my tenants dont have internet access or a phone mostly my few section 8 tenats. The rest are good. I would like a service that also has a app where you could pay rent. If possiable i would like to have the service handle converting the tenants over with like letters i can mail or something.

Hi Kyle,

This is a great question! Online payments are of the greatest things to happen for LLs. It makes for amazing convenience when managing a property and handling all of the rent payments.

I've heard AppFolio is a pretty good system. It has tenant profiles and can set up online payments for them. They can create an account and pay online. I'm sure there are many more out there, but that is the one I have heard of the most.

Please let me know if you have any questions.

0 Votes

Originally posted by @David M.:

Originally posted by @Tom Ott:

Originally posted by @David M.:

Hello,

Would anyone be willing to share his or her scoring system when evaluating applications? What variables do you consider, how much weight do you put on each variable, etc.?

We have a portfolio of lower-income rentals, which means hard and fast rules that meet serve higher-end property owners well simply don't work as well for us. We have to delve mute into the"grey area" of sometimes...less than stellar financial or criminal pasts.

Does anyone score their applications on a universal system?

Hello David!

Great question, but can you give me some more information? Do you mean what system to use to determine if a tenant is good or not?

Yes, exactly. I know BP has a flow chart for whether to approve tenants, but in $20,000 SFHs that rent for $650 a month, I'll never rent the property if I have to wait for good credit scores, no evictions, no criminal history, a year at their current employer, etc.

I'd just like to develop somethingmore standard than 3x monthly rent and my impressions based on background and credit checks.

Hello David,

There are many different services out there. It might be a bit difficult to find a program that does the decision making for you. Many of them will present all of the information to you and let you make the decision yourself. The reason for this is that many people have different ideas of what makes for a "good tenant."

Some programs are:

screeningreports.com
myrental.com
mysmartmove.com

Some information I like to have from reports are:

A full detailed credit report. Make sure it is a report and not just a score Someone could have a good score, but owe a lot of money on collections. (I know, but it happens)

Background check included. Make sure their criminal history checks out.

Another key factor is employment history. Make sure they have a job of course! You also want to make sure they have had the job for more than a few days. Remember their ability to keep their job (or have a steady income) will directly effect their ability to pay the rent.

We always have them submit pay-stubs. 2 - 3 most recently ones give us the information we need. You want to use that information to check to make sure they have enough money to pay their bills, including the rent. We don't normally ask for a license until they are signing documents, but that might be different depending on your state.

Make sure they can pay their bills including the rent, have a good background, have been good tenants before, and don't have poor credit. Those are the major aspects, everything else is case by case.

Please let me know if you have any questions!

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Originally posted by @Jennifer Clancy:

Thank you all for your replies! The tenants I was talking about in this post have since moved out after their one year lease expired and I have given the management of the property to a local PMC.

I like my tenants so much more now that I don't have to interact with them. It gets old hearing excuse, after excuse. It's worth it just to pay someone else to handle the everyday issues and enforce the rental agreement. Hats off to all of you who can take the abuse of being a LL. I've learned property management is not for me. I still enjoy finding deals that cash-flow, but now PMC costs are part of the monthly expenditure.

Hi Jennifer,

I'm happy to hear you found a solution! PMCs are a really great way to help create a buffer between you and some of those tenants that can get to you. Hopefully this is just one stepping stone in your path in REI. I wish you luck.

Please let me know if you have any questions.

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All Forum Posts by: Tom Ott

Tom Ott has started 941 posts and replied 4593 times.

Post: Rent increase on bad tenants

Post: I quit my CPA Job to buy Large Apartment Buildings

Post: To allow pets, or not.....

Post: Best Tenant Screening Service - which one?

Post: 100% Turnkey SFR Investment! - 22% ROI - 2015 Rehab!

Post: Smart Move and screening/finding renters Plano townhouse.

Post: Renters Arrest for Burglary in Neighborhood.

Post: Online rent payment servies

Post: Rental Application Scoring System

Post: Tenants that push the grace period every month