Got my duplex yes!... Now what??
Virginia Beach, VA · Member since 2015 · 13 posts · 4 votes
I got the duplex I even have a quick response from my craigslist post. Then reality strikes. I'm clueless.
How much of a deposit?
Do I charge a application fee so i can cover cost of screening? How much?
Is there some legal "no no's" outside of common sense that I should be aware ofl, that are easy to make? Any words of wisdom or direction is appreciated
You need to read up and understand your local landlord laws now. Don't wait any longer. Google it and many times you can find it on a state/county website. Go to local landlord/REIA groups and learn there.
Stick to your lease. Do you have a lease? Draw one up now. A strong one...that reflects your local laws. Yes, security deposits are typically equal to one month rent. Stick to application standards such as minimum of 3X the rent earned in *gross* income.
Don't make promises to tenants. Don't be friends with tenants. Don't believe tenants when they say "i'll pay rent in a couple of days." File for eviction the very day it's late. Many times with non-paying renters, filing for eviction/starting eviction process is your only insurance to get your money. Magically they have the money once they see you're serious.
Oh, and only accept cash or money order when an applicant pays first month rent and sec deposit. They don't sign the lease until you count that cash. A personal check could bounce, so never accept those on lease-signing day.
Common sense is great, but you really need to know your local landlord laws. You should have been reading up on that before you even closed on this property. :-)
Get started, Mr. Landlord!!
@Joey Arata Most landlords change a deposit equal to one month's rent. You may have laws in your state that limit the amount of deposit you can collect, check that out.
Alot of people charge an application fee, some dont. Its your choice, but keep in mind that application fee's are non-refundable, so I would suggest not taking a fee from someone you know you wont rent to (due to past eviction, lack of income, etc).
I would definitely recommend having thinks like rents documented (dont charge different rents for different folks), and do everything you can to avoid discriminating against anyone for a protected class (sex, race, etc).
Alot of landlord have min. income requirements (I use 3x rent of gross income per month as the min.), some use credit scores, almost all use past evictions as factors to determine who they will rent to. I limit the occupants to 2 persons per bedrooms, but other dont.
Good luck. Tenant screening is the best way to make your path to landlording as easy as possible. Try not to take the first applicant if they dont meet your standards. Future damage, lost rent, eviction will wipe out any additional rent you get from placing them in the house early.
Thanks Mike. Your words are a tremendous help.
You need to read up and understand your local landlord laws now. Don't wait any longer. Google it and many times you can find it on a state/county website. Go to local landlord/REIA groups and learn there.
Stick to your lease. Do you have a lease? Draw one up now. A strong one...that reflects your local laws. Yes, security deposits are typically equal to one month rent. Stick to application standards such as minimum of 3X the rent earned in *gross* income.
Don't make promises to tenants. Don't be friends with tenants. Don't believe tenants when they say "i'll pay rent in a couple of days." File for eviction the very day it's late. Many times with non-paying renters, filing for eviction/starting eviction process is your only insurance to get your money. Magically they have the money once they see you're serious.
Oh, and only accept cash or money order when an applicant pays first month rent and sec deposit. They don't sign the lease until you count that cash. A personal check could bounce, so never accept those on lease-signing day.
Common sense is great, but you really need to know your local landlord laws. You should have been reading up on that before you even closed on this property. :-)
Get started, Mr. Landlord!!
I got the duplex I even have a quick response from my craigslist post. Then reality strikes. I'm clueless.
How much of a deposit?
Do I charge a application fee so i can cover cost of screening? How much?
Is there some legal "no no's" outside of common sense that I should be aware ofl, that are easy to make? Any words of wisdom or direction is appreciated
Hi Joey,
Great questions! First thing you need to do is have them sign an authorization form, which allows you to look up their credit report and do a background check. Never simply look at a credit SCORE, but make sure you look at the whole REPORT. Someone could have a good score, but owe a lot of money on collections. (I know, but it happens)
With regards to charging - it depends on what system you use. We normally charge exactly what the system requires to run a background check (Around $30 or $40)
Analyze their credit report and if you feel comfortable, do a background check and 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.
Always fill out a hard copy of the application. We let people apply online or in person. If they apply in person we simply input the data ourselves. It is always handy to have he hard copy when needed.
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.
Please let me know if you have any questions!
Thanks Nicole. I truly have a lot to learn and I'm excited for this opportunity. I currently live in the property and the main criteria I set was as a primary residence for purchasing. I am so thankful for your direction. I was all over Google looking and never thought to look on my city's web page. I really don't want to accept cash or personal checks. I've been reading on some payment processors. Have you had any experience with some?people
Tom I think you saved me from my own ignorance. I was just going to process a check off the info they give. I will certainly get a authorization form. I definitely want a quality tenant. But is 3x rent gross income standard. My unit rents for 850, making gross monthly income would be 2550. Not sure if that's too high or too low. But seems like a good benchmark. I think I'm going with copy of license with authorization form. Don't want to be doing checks without verifying identity. If I go through I online agency for credit and background do they provide more then just score normally, or each service different? Thanks again! Bigger Pockets community proving to be enlightening.
Tom I think you saved me from my own ignorance. I was just going to process a check off the info they give. I will certainly get a authorization form. I definitely want a quality tenant. But is 3x rent gross income standard. My unit rents for 850, making gross monthly income would be 2550. Not sure if that's too high or too low. But seems like a good benchmark. I think I'm going with copy of license with authorization form. Don't want to be doing checks without verifying identity. If I go through I online agency for credit and background do they provide more then just score normally, or each service different? Thanks again! Bigger Pockets community proving to be enlightening.
Hi Joey,
I'm happy to help! Yes some companies will give you a simple score, and others will give you a detailed report which will let you know how they got that score. (good standing accounts, collections, etc.)
3x will most likely be good. Sometimes it's just simple math. You can estimate how much the bills would cost (gas, electric etc.) and how much they owe on their current accounts (you should see that in the report.) Add it all together and see if they make enough money to pay for everything. It can be a detailed matter and everyone has their own system.
Please let me know if you have any other questions!
Tom I think you saved me from my own ignorance. I was just going to process a check off the info they give. I will certainly get a authorization form. I definitely want a quality tenant. But is 3x rent gross income standard. My unit rents for 850, making gross monthly income would be 2550. Not sure if that's too high or too low. But seems like a good benchmark. I think I'm going with copy of license with authorization form. Don't want to be doing checks without verifying identity. If I go through I online agency for credit and background do they provide more then just score normally, or each service different? Thanks again! Bigger Pockets community proving to be enlightening.
I think the 3x income rule is a benchmark from the mortgage industry, where you must earn 3-4x monthly mortgage payments to qualify for the loan.
Not sure if that helps, but they was my impression.
Thanks for sharing @David M. Nicole mentioned it as well. I'm going to follow that guideline, seems to be the wisest option.
Joey,
I would like to understand how you got into the business and wanted to buy a multi-family property which is in essence becoming a real estate investor without knowing what your next steps were going to be. There are a few major items which you need to get educated about which the people on this sting have made you aware of and introduced you to but you ultimately need to understand the landlord tenant act in your area so you can abide by those guidelines and act accordingly; as the courts will ultimately use that info to support any type of case with which they get presented (should you find yourself in court with a "professional tenant"). These forums are great as you can post your questions of what to do and people respond with their experiences and advice. I would suggest you find a one stop shop partner who can work with you to assist you in all aspects of your new venture.
Our clients prefer the philosophy where we come along side of them providing them services they need which give them the tools and "teaches them to fish" if you will. Then as they gain more understanding and experience they take more of the lead. This approach allows our clients to become successful right away, stay successful as they continue with their venture learning the ropes at their pace and ensures they make decisions which will keep them compliant. Hope this helps you find a path forward. Passive income is great but the tenants can drive you crazy if you don't mitigate them as a risk.
@Joey Arata For most of my units, they rent for less than $1000/month, so 3X gross is the absolute min. I would consider. That would be gross, not take home. Although take home could be similar, as someone making $36k per year is not likely to have alot of paycheck with holdings. As rents increase ($1500 and over), you could maybe relax that to 2.5X, but I would not. Remember that your tenant still has other bills like car payments, cell phone, etc. to pay.
Most of my problem tenant have been right on the border of the 3X income requirements.
Since you live in the property, accepting cash is not a dangerous as it sounds. Think about that, as your tenant is not likely to rob you as you live there, nor are you likely to get setup for a robbery. But it is a pain to have to meet face to face. Also, since you live there, a personal check is not much of an issue, as they can simply drop it in your mailbox. That being said, I dont accept cash from my tenants. I once did when I lived in my first duplex. I now use an electronic payment service (rentpayment.com) and encourage all of my tenants to use it (I pay ACH fees, so they pay the same rent as sending a check). I also accept personal checks, as I believe in trusting the person you are renting your very expensive unit to, but I also understand other's concerns (I just don't agree with them).
Hi Joey!
I am new myself and have found that the guides on here have helped me quiet a bit! Check out, "How to screen a tenant". Might be something useful for you!
Awesome to see people providing such useful information on here! All of you have helped me as well. Great post.
Hey Jeremiah. Well, I wanted to own a duplex for quite sometime. Up until this summer I always was the tenant. And never thought of going out and buying a home. When the opportunity presented itself and I was approved, my past ambitions reemerged. I now own my own home with a second unit as a bonus. I have in the past analysed things til exhaustion (classic " paralysis of analysis") Now I decided to be proactive and just get this ball rolling and learn as I go instead of procrastinating. It's just that first prospective tenant rattled me a bit. Hope that clears up my situation. I haven't been totally sitting on the sidelines doing nothing. In fact with all the forums, podcasts, YouTube videos, and books, I've got a little info overload and don't know which ways up.
@Joey Arata For most of my units, they rent for less than $1000/month, so 3X gross is the absolute min. I would consider. That would be gross, not take home. Although take home could be similar, as someone making $36k per year is not likely to have alot of paycheck with holdings. As rents increase ($1500 and over), you could maybe relax that to 2.5X, but I would not. Remember that your tenant still has other bills like car payments, cell phone, etc. to pay.
Most of my problem tenant have been right on the border of the 3X income requirements.
Since you live in the property, accepting cash is not a dangerous as it sounds. Think about that, as your tenant is not likely to rob you as you live there, nor are you likely to get setup for a robbery. But it is a pain to have to meet face to face. Also, since you live there, a personal check is not much of an issue, as they can simply drop it in your mailbox. That being said, I dont accept cash from my tenants. I once did when I lived in my first duplex. I now use an electronic payment service (rentpayment.com) and encourage all of my tenants to use it (I pay ACH fees, so they pay the same rent as sending a check). I also accept personal checks, as I believe in trusting the person you are renting your very expensive unit to, but I also understand other's concerns (I just don't agree with them).
Agreed. Paying by check or online most likely the best option. I would NEVER accept cash for any reason. It can be way too messy. Especially if the tenants claim the pay the whole thing (when the short paid) or they over paid and you owe them money. Always use something traceable. That will help in the end.
Hey, I wonder if we're related? My husband is an Arata from California. Anyway, welcome to the adventure of landlording! In fact, a book you should order from Amazon is "landlording" by Leigh Robinson.
Since you are the owner/occupant of the building, it is legal to discriminate under federal law (not sure about your state). Of course, it's not nice to discriminate and I don't recommend it, but you don't have to worry about being falsely accused as much as other landlords do.
My best advice for tenant screening is to use the credit report to make sure they told the truth on the application about previous addresses. You want to call previous (not current) landlords for references. Match the landlord to the address and if they skipped one, that's a red flag. If it's been a long time and the landlord can't remember the person, it's not a big deal. We seem to only remember the names of the terrible ones! I can think of at least 4 times when this has saved me from renting to a tenant who would have been a nightmare.
Enjoy your new home!
Hey, I wonder if we're related? My husband is an Arata from California. Anyway, welcome to the adventure of landlording! In fact, a book you should order from Amazon is "landlording" by Leigh Robinson.
Since you are the owner/occupant of the building, it is legal to discriminate under federal law (not sure about your state). Of course, it's not nice to discriminate and I don't recommend it, but you don't have to worry about being falsely accused as much as other landlords do.
My best advice for tenant screening is to use the credit report to make sure they told the truth on the application about previous addresses. You want to call previous (not current) landlords for references. Match the landlord to the address and if they skipped one, that's a red flag. If it's been a long time and the landlord can't remember the person, it's not a big deal. We seem to only remember the names of the terrible ones! I can think of at least 4 times when this has saved me from renting to a tenant who would have been a nightmare.
Enjoy your new home!
Amy makes some valid points! Always double check the background check and make sure they fit your criteria. Keep an eye out for anything that you might consider a flag.
Hey Jeremiah. Well, I wanted to own a duplex for quite sometime. Up until this summer I always was the tenant. And never thought of going out and buying a home. When the opportunity presented itself and I was approved, my past ambitions reemerged. I now own my own home with a second unit as a bonus. I have in the past analysed things til exhaustion (classic " paralysis of analysis") Now I decided to be proactive and just get this ball rolling and learn as I go instead of procrastinating. It's just that first prospective tenant rattled me a bit. Hope that clears up my situation. I haven't been totally sitting on the sidelines doing nothing. In fact with all the forums, podcasts, YouTube videos, and books, I've got a little info overload and don't know which ways up.
That is understandable and I commend you for taking the leap, however this leap needs to be calculated and well thought out as there are professional tenants out there looking to take advantage of landlords who need some schooling (hard knox is the school's name) and the judges generally hold the landlords to a higher standard as they are the business owner. just like as a realtor I am held to a higher standard than the general public. Well, if we all are ready to assist so keep up the hard work and remember to find a company who offers all the services you are going to need this way you can build a relationship versus just being a customer. I think of an applicant as a blank canvas and as I use my tool box to paint I begin with a black and white painting. The more tools I use the more my painting comes to life e.g. now a color painting. As I develop my process of screning out applicants I begin painting HD pictures because now I can use all the tools in my toolbox to validate and extract info out of my potential applicant. here's a good example. using the credit report to validate previous address they might use as previous references, or spellings of their last names which you would validate with a possible criminal history so if they have multiple spellings of their name, it doesn't always indicate a spotted past but it allows you the indicators to be aware of and checkout. An ounce of cure is better than a pound of remedy...is that how that goes? So, as you complete all the reference checks, criminal histories, credit, evictions, and FBI search lists you now know the due diligence is complete and you can now validate your in person meeting and if you feel comfortable as you converse with them. Living in and screening your tenants as a neighbor will give you a great experience on the environment you want to create for your other tenants as well as for the neighborhood. Should other landlords be so thoughtful as well, as to create better communities by screening their applicants the same way. Hold tenants accountable and create better neighborhoods for us all!
Regards,
Jeremiah Stephen
Hi @Joey Arata,
It seems everyone has already covered most of the basics, and at the end of the day it will be up to you to learn the subtle nuances of landlording (some, unfortunately, by trial and error). That being said you should still strive to work smarter instead of harder, so I thought I could provide you with a few useful online tools to get you started in the right direction.
1) www.mapliv.com is a nifty tool that can give you a solid idea of how much money your property could bring in each month. Essentially it scrapes craigslist listings and puts them on a map of the area surrounding your property. It sorts them out based on size, price, and location in regards to your property. It is a great place to start, but should not be the sole tool used to set your rent rate because it neglects interior upgrades, size of the lot, etc. I'd recommend starting with it to get an idea, then cross checking by identifying the quality of other properties (meaning interior upgrades and proximity to transportation/shopping centers) by viewing the actual listings and pictures. Keep in mind that it is not uncommon to adjust the rent rate based on the amount of interest you receive, so don't be afraid to adjust it once the listing is posted.
2) postlets.com is a great way to blast your listing out to over a dozen different listing sites, including craigslist, trulia, zilllow, and hotpads. You make one, uniform listing and it will be on the other sites usually within 24 hours of completing it.
3) tenantify.com is a popular tenant screening service, charging only $15.00 for a background and income check. That being said there are a ton of these services online so I would recommend researching them yourself to see which fits your needs the best. When doing this check to see if they are instant services providing soft background/credit checks, or if they are providing more thorough hard checks like iscscreening.com.
4) Here is a link to the national Fair Housing Laws, which I strongly recommend familiarizing yourself with. Not knowing little details such as the illegality of discriminating against an applicant's source of income can lead to big problems down the road.
I hope these tools are as useful to you as they have been for me in the past.
Good Luck!
Hi Joey,
A lot of great advice provided by other Bigger Pockets members.
Have you considered getting a property manager? Obviously they take a cut of gross rents (8-10% in my area), but having a pro manage your unit for a year could give you some peace of mind. You would see their lease and screening process from the owner's perspective and get more comfortable with the mechanics of these arrangements.
Nice job on the duplex.
Evan
Hi @Joey Arata,
It seems everyone has already covered most of the basics, and at the end of the day it will be up to you to learn the subtle nuances of landlording (some, unfortunately, by trial and error). That being said you should still strive to work smarter instead of harder, so I thought I could provide you with a few useful online tools to get you started in the right direction.
1) www.mapliv.com is a nifty tool that can give you a solid idea of how much money your property could bring in each month. Essentially it scrapes craigslist listings and puts them on a map of the area surrounding your property. It sorts them out based on size, price, and location in regards to your property. It is a great place to start, but should not be the sole tool used to set your rent rate because it neglects interior upgrades, size of the lot, etc. I'd recommend starting with it to get an idea, then cross checking by identifying the quality of other properties (meaning interior upgrades and proximity to transportation/shopping centers) by viewing the actual listings and pictures. Keep in mind that it is not uncommon to adjust the rent rate based on the amount of interest you receive, so don't be afraid to adjust it once the listing is posted.
2) postlets.com is a great way to blast your listing out to over a dozen different listing sites, including craigslist, trulia, zilllow, and hotpads. You make one, uniform listing and it will be on the other sites usually within 24 hours of completing it.
3) tenantify.com is a popular tenant screening service, charging only $15.00 for a background and income check. That being said there are a ton of these services online so I would recommend researching them yourself to see which fits your needs the best. When doing this check to see if they are instant services providing soft background/credit checks, or if they are providing more thorough hard checks like iscscreening.com.
4) Here is a link to the national Fair Housing Laws, which I strongly recommend familiarizing yourself with. Not knowing little details such as the illegality of discriminating against an applicant's source of income can lead to big problems down the road.
I hope these tools are as useful to you as they have been for me in the past.
Good Luck!
Thanks @Tucker Smith. Alot of great links. I got alot of homework ahead of me. Do you have any personal experience with iscscreening.com. i want a thorough check. Was considering TransUnion service SmartMove, but not sure which easy to go. So many options my head is spending. I'm getting alot of interest. Which gets me thinking. If I have multiple qualified applicants, (not a bad think) what criteria should I consider to narrow it down to one?
I use Cozy to screen potential tenants - they offer credit and background checks. I simply send interested parties a link directly from the site, they pay the fee, Cozy runs the reports and I get to view them.
They also process rent payments. This is initially why I started with Cozy, but have used them for tenant screening as I got more familiar with them. They link directly to the tenants checking account and deduct rent automatically on whatever date you agree upon with your tenant. I believe they just started offering to link to credit cards (insert comment on risk here.)
Also, they are super responsive! Any time I've had questions, or set something up incorrectly and needed to change it, they have responded to emails within 24 hours.
You can find them at https://cozy.co
That's awesome. Thanks @Justin Brooks. I was considering TransUnion SmartMove and rentpayment.com, but an all-n-one service sounds convient.
Hi Joey,
A lot of great advice provided by other Bigger Pockets members.
Have you considered getting a property manager? Obviously they take a cut of gross rents (8-10% in my area), but having a pro manage your unit for a year could give you some peace of mind. You would see their lease and screening process from the owner's perspective and get more comfortable with the mechanics of these arrangements.
Nice job on the duplex.
Evan
I has considered it. There was a property manager with the downstairs tenant. They moved out before closing. I has opportunity to allow them to fill vacancy and retain them for term of that lease. Would have been great to have tenant paying rent right from closing. But spoke with previous tenenat while doing inspection that were not positive. And had some slow responses from the manager that I felt better of it.
Hey, I wonder if we're related? My husband is an Arata from California. Anyway, welcome to the adventure of landlording! In fact, a book you should order from Amazon is "landlording" by Leigh Robinson.
Since you are the owner/occupant of the building, it is legal to discriminate under federal law (not sure about your state). Of course, it's not nice to discriminate and I don't recommend it, but you don't have to worry about being falsely accused as much as other landlords do.
My best advice for tenant screening is to use the credit report to make sure they told the truth on the application about previous addresses. You want to call previous (not current) landlords for references. Match the landlord to the address and if they skipped one, that's a red flag. If it's been a long time and the landlord can't remember the person, it's not a big deal. We seem to only remember the names of the terrible ones! I can think of at least 4 times when this has saved me from renting to a tenant who would have been a nightmare.
Enjoy your new home!
That's funny @Amy. I have a California address that I never been to, keep showing up on background/credit checks is your husband named Joey also by chance lol.
I was going to use a 3rd part service. Will they call previous landlords or just pull records?
@Joey Arata There are some screening services that call for you. But most don't.
I think as a landlord it is a good idea to be making those call yourself so you can feel comfortable and asses the situation personally.
Do get a credit and background check. And as mentioned definitely learn your landlord-tenant and fair housing laws.