Howdy to all the BP folks from Austin, TX!
I have a few questions related to Rental Forms, Tenant Screening, Automatic Online Payments (site recommendations and setup), Utility payments, so here they are:
1) Can someone point me to where I can download a Texas rental pdf contract to Condo/Apartment/Town-House, that I can also send to a new tenant to complete and sign? It would be great if all can be completed online with signatures (as it will save a lot of time, as well as paper). I am hoping the lease will allow me to tweak it a little (example: allowing/disallowing pets, specifying how early in advance to vacate, early termination penalty fees, adding parents as backers to the lease, etc).
2) What's the best way/website to screen tenants (and specifically students and younger adults) and how can I add another individual (parent probably) to the lease to guarantee timely payments? Is there a preferred/trusted site where I can run credit-history/criminal-background/employment-verification checks without paying too much? Are there any other checks I need to account for (not sure if bank-balance is also attainable).
3) How can I setup automatic payments (automatic bank-draft) between the tenant and landlord with reduced fees (as it saves time dealing and cashing checks). And how much $ deposit do you recommend before move-in?
4) How are utilities (gas, electricity, sewage, water, garbage, energy, etc) handled between tenant turn-over? (Who collects bills?) And do you have to switch them back to your name and then to the new tenant, do you keep them in the first tenant's until the new tenant signs the new new lease, or is there a third option (assuming most of which are not covered through HOA)?
5) Are there any recommendations as to where to post the Condo/Apartment rental property online (besides realtor.com to avoid losing the first rent on realtor fees) - not sure?
6) Any tips you recommend to watch out for (based on your personal experience) and/or are there areas to always consider/account for before a tenant gets a hold of condo/apartment keys?
Thank you all very much and in-advance,
#6 other tips:
A) tips of things to watch out for: the way a tenant keeps their car interior may very well indicate how they'll keep their home (your investment)
B) over-engineering your rentals during the rehab portion with thicker drywall, tile vs carpet, and Quartz counters (in higher ends) to withstand children or student abuses.
I'm pretty sure both of those are from BP podcast #48 with Darren Sager. It had quite a few other good tips as far as contracts, utility requirements, and tenant retention. WELL worth a listen.
Oh! And his tip on putting the paint brand and color code in his contracts was awesome. That way any touch ups later don't need to be guessed.
Hello @Eli N.
If you don't want to get a lease from a local real estate attorney, you can go to Legal Zoom or Nolo Press to find one specific to your state. To sign electronically, you can use Hello Sign. It is a free digital signature website.
For background checks, look into Cozy.Co. It is free for landlords and will cost $40 for applicants to have a credit and background check done. They also do online payments, which are again, free. However, the payments take about 4-6 business days to process - a little on the slow end. If you are willing to pay $3 per month, erentpayment is a bit faster. There is also Dwolla, which I think is 25 cents per transaction. I'm not sure on its speed.
I had to switch utilities into my name between renters. But I had a two week vacancy last time. I imagine if you have zero vacancy days between tenants, you can direct the new tenant to contact the utilities to switch to their name.
You can advertise you rental on Craiglist and Postlets. Again, both are free. I got plenty of response just from Craigslist last time I listed. But I live in Silicon Valley, so YMMV.
Make sure you have first month's rent and the security deposit before turning over the keys. Go through the rental thoroughly with your new tenant and document the condition of everything in writing and with pictures. Zinspector is a free app that can manage that for you.
#2 - Tenant Screening
We use SmartMove by TransUnion.... It can be setup where the Tenant pays the fee directly, OR where you pay the fee. Where this may be helpful is if you want to make a profit off of the application fees. Ex if it cost $35 for the checks and you charge $45 to the tenant... you make the $10 spread...
We just allow the tenant to pay the fee when they fill out their information to submit it. It just makes it easier for us.
#3 - One thing I need to implement myself. Here are the BP suggestions for this one:
#4 - You'll want to put the utilities back in your name to be able to clean and show the property to new tenants. You'll definitely want the utilities in the tenants name when they are occupying the property.
#5 - We use Zillow (Postlets) to advertise our rental. That works in my market, but not sure if Zillow is popular in your market. Good thing it's free to try :D
#6 - Make sure all background checks are complete and make sure the first months rents and deposts are paid with certified funds... Nothing would be so crappy as to have first months rent and deposit checks bounce then have to go through the eviction process on top of not receiving any cash up front... especially if you live in a tenant friendly area where it takes forever to evict someone.
Hope this helps.
I purchased my first lease from Nolo. I have continued to tweak it over the years after reviewing other leases in the area. You will have trial and error going this route. It may be simpler to pay a real estate lawyer to draft one up for you, but it will cost some money. You have to decide if you want to learn from experience or pay for it.
I assume you are just starting out. Once you get to a certain size, then you should definitely look at Buildium. I love it.
Screening can be done through SmartMove as other have suggested. I used it before switching over to Buildium. Follow the BiggerPockets Guide to Tenant Screening and you can't go wrong.
You can have the tenant do a transfer to your bank account if you both use the same bank. In the early days, I would open an account at my tenant's bank just for simplicity. Buildium has solved that problem for me now, I can accept direct payments for $.50. I think there are a few smaller third party companies that let you accept payments for a fee.
My local utility company has a "leave it on" program. You register your property with them so whenever service is disconnected by the tenant, the utilities are switched over to my name without the normal connect fee. The new tenant switches to their name when ready to move in. Check with you utility company.
Post your ads on Craigslist. That's all I ever did in the early days. Never had a problem finding a tenant. Tell the tenants your minimum standards before showing the property. Again refer to the BiggerPockets Guide to Tenant Screening and you can't go wrong.
3x income to rent
Clean background and rental history
The security deposit is going to be dependent on the area. I have some units that I charge $200, because that is the standard for that area. Others I charge $1,000.
Verify Employment - call them
Verify Rental History - call them
Use a basic move in/move out checklist.
Require renters insurance.
Require proof of utility transfer.
Explain the lease thoroughly in person.
Define an emergency and set limits on when they can contact you outside of the normal maintenance request procedure.
Thank you guys so much!
I'll begin using the recommended different tools, sites and software and will let you know if I run into any challenges.
I was wondering @Jake and @Will what precautions and tweaks you had introduced to your lease contract to possibly include in the form that I download?
@Jeff and @Jennifer, how do you charge your tenant for the application/background check without losing too much time while making the process smooth and efficient?
Thanks again y'all!
@Eli N. The last time I rented, I had the applicants bring their credit reports and documentation to prove employment, bank balances and income. I didn't charge an application fee. The tenants I chose both had credit scores over 800, verifiable employment, and glowing reviews from their former landlords. I didn't do a background check on them, but have absolutely no concerns.
When it was time to sign the lease, my tenants asked for an automatic payment option. I had checked with my credit union and they didn't have a way to do it. I told my tenants that I would look into it. That is when I found Cozy.
Now that I have been collecting rent through Cozy, I'm even more impressed with what the website can do when it is time to find new tenants. I will have my potential tenants apply through Cozy and pay for their own credit and background checks through them. I'm not sure what the turn around is on getting the reports, but I'm guessing it is fast. I'm simply not interested in collecting money for application fees.
With Smartmove you get the tenants email address and put it in the system. They get an email immediately with a link to fill out the form. Once they fill out the form and enter their credit card info, the criminal background, credit and eviction checks all start. You get notified usually within 10 minutes that the report has been created. You login and check the report.
If you do it this way its totally free to you... If you do it the other way where it charges you and then you have to worry about collecting money from the tenant up front ect...
We do not collect application fees either.
So you can see its a fairly quick and smooth process with smart move... I think they also have an option to collect payments as well... they may even "report" those payments to the credit bureaus being TransUnion is one of the big 3... something to dig into further.
Join the Largest Real Estate Investing Community
Basic membership is free, forever.