First Rental turnover
Hi everyone,
I was just recently notified by my current tenant of my first BRRRR property that she will not be renewing her lease at the end of February as she is moving back to Chicago. She has been in my home for two years and honestly, I am very sad to lose her, as she has truly been an excellent tenant. Home has always been clean, never once been late on rent, only contacts me the few times she's had an issue, etc. But regardless, she is leaving at the end of February, which brings me to my questions.
The first time I rented the home out, I had my realtor do it. He did the showings, background checks, etc. and I looked over all the applicants and chose this one. I want to tackle all that myself this time and need all your help.
So therefore, what company/companies do you recommend for doing credit/background/eviction checks?
I plan to advertise the home via Zillow on their Rental Property Manager page as well as Craigslist. Any thoughts or other ideas on that?
Dumb question, but I plan to start advertising the property at the beginning of February with the hopes of being able to find a new tenant to move right in March 1 to have no "rentless" time in between renters. But worst case, if that doesn't happen, I'm assuming I need to move all the utilities into my name to keep lights on, even if it is only for a few days before I find a renter?
Lastly, I don't have a LLC or anything set up. Current tenant just paid to my name and I deposited into a separate account just for this home. I want to look a little more professional this time and advertise the property with "my" company name that will be my business name eventually. Is it ok to advertise as a company name, for example Macal Rental Homes, but still have checks written out to just my name, Oscar Macal, for rent and deposit into the bank account that is in my name?
Obviously I'm not asking all my questions, but I think I have researched the forums and gotten most of my answers, but these are a few that I am still unsure about. Any and all advise is welcome.
Thanks.
Hey @Oscar Macal. First off love that you're doing BRRRR deals.
Rentlinx, Craigslist, Yard Sign, and Facebook Marketplace should get your some traffic. I would add a clause into your leases (if you don't have one) stating that you can advertise while they're occupied if they choose not to renew.
Transunion offers a "smart move" product that has been pretty solid in my experience. I believe they may offer a discount for Pro members. But you'd need to look into that.
You definitely want to make sure utilities stay on. You could ask the tenant to give you 2 weeks extra before she has them turned off and cover the cost. In my experience it's really not all that big of a hassle to just switch them in/out.
I would definitely set up an LLC. However you are losing any protection legally that a LLC offers by having the checks drafted to you personally. Why not just open a bank account with your new brand? You're already running a second account so it's not like it would add that much work for you.
I hope that helps man!
@ryan hit a lot of the salient points.
As for the company, I would look into both a DBA or LLC. Either will do what you need. If you’re looking to grow, I’d recommend an LLC. It won’t do a whole lot asset protection wise now, but many states it’s about the same cost either way.
Legalzoom or a lawyer can help, or you can do it in your own. Once you incorporate in your state, you can get a federal tax ID and a bank account.
#2 General Landlording & Rental Properties Contributor
Start advertising immediately. Waiting till February you risk getting applicants that are being evicted. The sooner you start the better quality applicants you will receive.
As soon as you have someone approved collect the deposit then FMR when you turn over the key. Cash only.
Utilities in your name? Not necessary, but I always add myself onto the account as a backup to the account to ensure that utilities remain on and especially the heat to keep pipes from freezing. This is especially useful should you have a tenant that fails to pay utilities on time leaving the utility company wanting to turn off utilities. I will pay it, but believe me I will pass it onto them plus any late fees. Thankfully that has not happened.
Background checks, I use RSI Tenant screening but I also use cozy.com for my rents so I suppose I could use cozy for my screening needs too.
Advertising: You have a good path. Zillow will advertise on its sister sites Hotpad and Trulia as well as other random sights. I would add on Cozy and Nextdoor. Never hurts to be all out there. Craigslist yes. Despite the issues that craigslist has had with scams, people still go there to find what they need.
Rent payments: Skip the mail or personally going there to collect setup. Use an online tool. It is convenient, saves you time and should you start eviction proceedings, you can simply put a stop on collecting rents to avoid messing up your eviction process.
LLC: Good idea to have as well as Rental Property Insurance and some kind of umbrella policy if needed. Advertising, yes I advertise as LLC, my leases have the LLC name and I have an LLC bank account where all rents get deposited by the 3rd party (cozy.com). Keeping the rents coming to you? Why? If you want a professional approach, why would you do it that way? Just curious?
Start listing it as quickly as you can in order to get applicants in all phases of looking for rentals. For example, i found that the first couple days of any month had a lot more inquiries because they had received a 3 day notice at their current residence. The red flag flies really high when they say 'I need to move asap, I can't wait a couple of days for an application.'
When you do set up showings I definitely recommend that at the end of the phone call you inform them that they need to text or call you 1 hour before the showing to keep the showing. One of the more aggravating things with showings is when they don't show and didn't tell you.
I would have to disagree with @Mike McCarthy about the DBA. If you're going to spend the money to set it up at least get the LLC that has some asset protection. DBA, from my understanding, doesn't protect your personal assets like an LLC can.
@Ryan Dossey Thanks for your advice Ryan. I appreciate it.
It's not the issue of running the second account, but rather the cost of setting up an LLC and all that. This is my first and so far, only investment property, so not sure if the cost of setting up the LLC right now is worth it, but I do want to start advertising my brand as soon as possible.
@Mike McCarthy Thank you for your input. I'm definitely looking to grow, which is why I want to start advertising my brand asap, but don't know if the cost of LLC is worth it right now with only one home?
@Thomas S. Good advice. Thank you.
@Anna M. Thanks for your response Anna. How do you add yourself to the utility accounts? I'm assuming you have to agree to this with tenant?
Any recommendations on online payment tools? It looks like you use Cozy.com? I would definitely be interested in setting that up as well. Although I never had any issues with this tenant and her rent getting to me, I'm sure the whole "It must have got lost in the mail" excuse will eventually come along in my landlording future.
The reason I was asking about advertising my brand name, but still having the checks coming to my personal name, is because since I only have this one house and don't have an LLC or any business set up yet, I did not think the cost would be worth it at this point to get the LLC set up and all, but I do want to start advertising my brand name asap. What are your thoughts? Should I go ahead and get the LLC now? Also, would I need to transfer the property into the LLC or keep the title/mortgage in my personal name and just run the payments and rent collection through the new business account and LLC? New to all this, so I appreciate any help.
@Steven J. Thank you Steven. I appreciate your advice. Same question as Anna, to get the asset protection you're mentioning, I would need to transfer the property into the LLC company name? Is that correct?
Thanks again everyone.
@Oscar Macal I see you referencing cost to set up an LLC. Unless I am mistaken and/or you are seeking an attorney to set it up for you, you can set it up for yourself for a fee of about $25 (Colorado) and annual reports cost $10. I believe the fee would not be that much off in TX so overall you are looking at Less than $50 to set it up. Then keep up with your annual reports, but you can simply have email alerts sent to you so you do not forget.
Registered agent LLC rules vary slightly from state to state. For the precise rules in your state, consult the website of the state agency that handles business filings. I have heard best not to list yourself if you are seeking anonymity. I however set it up myself and just have myself. I do not however, ever put down my physical address, I prefer to use a P.O. Box just to protect my home address/privacy. All in all, an LLC can be set up without exorbitant attorney fees, but if you feel much better you can certainly and should certainly have an attorney help you with setting it up.
Utilities? Contact the utility company and let them know you are the landlord and would like to be put on the account as 3rd party, they will send you a form and handle it that way. I use Xcel Energy for my Gas/Electric so that was set up that way. Water is already in my name. I use the RUBS system to split up utilities. You do want to check if you can use the system in your state, I've heard people say the RUBS system does not apply to all states, I did not bother to research which as I invest only in one state at the moment and that was what I focused on.
Asset protection: Yes ideally to get full asset protection you would need to transfer the property to the LLC, but be careful with that as you could trigger the due on sale clause. There is a lot of debate on this issue and some don't care for the risk, Personally I do, so I am careful not to and often when you have to refinance the banks most times not always, will ask you to remove the property out of the LLC. I use insurance to help cover me and the LLC I like the formality.
With McKinney being a fast growing and fast moving city, I would hold off on the advertising until February and focus on:
- Making sure I had the proper applications, lease agreements and addenda necessary as I assume your agent handled it last time
- Open an account with Smartmove
- if you have good insurance, I personally wouldn't feel the need for an LLC at this point. If you do, the cost to use one of the $49 services is approximately $400 or so to set it up
-Join Facebook is you are not already a member and join all the local Facebook groups and local for rent groups. Use craigslist and Zillow as well but Facebook in metro areas just seems to be so inundated with ads that your tends to get buried quickly
- I believe McKinney has their choice of electric providers, so you can't set up a landlord account. Freezing pipes at the end of February is not likely so I would just coordinate with the tenant. I would also try to see if she might want to leave a few days early to allow for cleanup and any needed repairs so a new tenant can move in March 1
- Feb 1, I would start my advertising blast
Additionally, take some time to read the law on deposit refunds. You need to document any deductions and return any unused deposit with 30 days of move out AND being given a forwarding address
Check out what is involved in getting an LLC in Texas. In Idaho, it is fast, cheap and easy and can be done entirely on-line. If you set up an LLC, your LLC will need a tax ID number.
CraigsList in our area no longer provides good leads -- you would be inundated with unqualified applicants with sob stories. If you have Class B or better, stick with Zillow, Trulia, Hotpads. Be sure to watermark your photos with your business name and phone number to prevent your ad from being stolen. I would avoid using "For Rent" signs because it is like a flashing neon sign for squatters and thieves. Set up a Simply Safe if your house is empty.
Get your rental criteria written out ahead of time -- helps avoid getting taken in by sob stories. Get your screening methodology in place. There was a delay when we set ours up because we needed an on site inspection. I don't know if the on-line companies require this.
Get your lease/rental agreement on your computer, with your company name and contact info. This will allow you to have professional, customized documents that avoid written in names.
We have a "Landlord Account" set up with our utility. Once he tenant calls to cancel, the electricity stays on in our name. See if you can do this with your utility.
Get a PO Box for your business address. You do not want tenants showing up at your personal residence.
I am not so sure about the need to look “professional” in ur name as this is ur only rental unit? I am not sure if tenants care about that much if you maintain the unit. Many landlords are mom and pop kind of setting.
And if you are warrior about liabilities make sure your insurance coverage are on point and look into umbrella policies.
Make sure you get an updated rental form as laws may have changed. And add in more protections, ex get a bedbug addendum.
Many people recommended Facebook local groups to find tenants and I haven’t try that out personally.
Do a new market rent research for your area would be a good start.
@Oscar Macal I use erentpayment.com that allows them to pay their rent online and at a very inexpensive cost and they can do the background checks, same as the Transunion smart move but at a $5 discount and the renter pays it all online so saves you all the hassle. I also have a separate bank acct set up for those that don't want to pay online, they can go to the bank that is close by and deposit into an acct I set up and I get notified when there is a deposit made and the renters send me a pic of the deposit slip as proof of payment, then I go in and transfer it to another acct.
For advertising I still stick with postlets.com that posts to zillow, trulia, etc all at once. I do still post to craigslist as well and just state the criteria to not waste time with unqualified people calling, earn 3 times rent, 600+ credit score, no smoking, etc.
I pretty much follow most of what is explained in the Book on Managing Rental Properties. I highly advise it!
@Oscar Macal I would look into the tools provided by the Idaho Apartment Association, they provide docuements and forms, management software and the ability to run credit/background checks. I use them here in Utah and they are super helpful and have great info. Good luck!
Not sure where you're getting Idaho here, but @Sam Newell makes a great point. LLC's and utilities are minor compared to making sure you have a very good state-specific lease in place.
The top two reasons that landlords get burnt is that they are not thorough/patient enough with tenant screening and having flimsy leases.
An apartment association membership is way cheaper and often more reliable than paying an attorney for a one-off. Maybe @Greg H. has some TX specific advice?
Hi Oscar, I think most of your answers have been answered, so I'll keep it short.
- Definitely recommend cozy.co
It covers a lot: listing, application/screening, rental insurance, collecting rent, fees & deposit payments online, and so on.
- Check out local attorneys that specialize in eviction law,and see if any of them have "bullet proof" lease forms. (I'm in Utah and use the free forms provided by Utah Eviction Law) Local Apartment Owner Associations would most likely have good resources and keep you informed of laws that you need to be aware of.
- Marketing: definitely list as soon as possible. Zillow, Facebook, local Craigslist equivalent sites. Take good pictures, clarify the lease terms and requirements as detailed as possible in the listings. Helps weed out applicants and eliminate unnecessary back and forths that take up a lot of your time. Not sure if it's possible with the tenant still living in it, but if you can, definitely shoot a walk-through video and post it or send it to the interested parties before scheduling a showing, so you're not flooding the current tenant with random showings.
I hope this helps!
Thank you everyone for your help and advice. Definitely helps me make some better decisions, and of course leads me to a few more questions.
Cozy.co is looking very convenient to me for doing my tenant applications/screening/background checks and rental payments. My plan, as some have suggested, is to advertise soon to have a good pool of interested applicants that I can phone screen before showing the property to. Since I live in Dallas currently, and the property is located in Houston, I'm thinking to do sort of an "open house" showing, where I only let the prospective tenants I've already phone screened attend on a Saturday morning/afternoon. Figure this could save time instead of having to go back and forth to the property all weekend while I'd be in Houston. Thoughts?
Also, for those that have used Cozy.co or similar screening sites, do they offer the ability to send the "Adverse Action notice" if I decline the applicant for something found on their screening through that site or would I still need to send it out myself to them via mail, email, etc?
Thanks again for all your help. I'm excited/nervous about doing this all myself this time around.
Oscar
Originally posted by @Oscar Macal:
Hi everyone,
I was just recently notified by my current tenant of my first BRRRR property that she will not be renewing her lease at the end of February as she is moving back to Chicago. She has been in my home for two years and honestly, I am very sad to lose her, as she has truly been an excellent tenant. Home has always been clean, never once been late on rent, only contacts me the few times she's had an issue, etc. But regardless, she is leaving at the end of February, which brings me to my questions.
The first time I rented the home out, I had my realtor do it. He did the showings, background checks, etc. and I looked over all the applicants and chose this one. I want to tackle all that myself this time and need all your help.
So therefore, what company/companies do you recommend for doing credit/background/eviction checks?
I plan to advertise the home via Zillow on their Rental Property Manager page as well as Craigslist. Any thoughts or other ideas on that?
Dumb question, but I plan to start advertising the property at the beginning of February with the hopes of being able to find a new tenant to move right in March 1 to have no "rentless" time in between renters. But worst case, if that doesn't happen, I'm assuming I need to move all the utilities into my name to keep lights on, even if it is only for a few days before I find a renter?
Lastly, I don't have a LLC or anything set up. Current tenant just paid to my name and I deposited into a separate account just for this home. I want to look a little more professional this time and advertise the property with "my" company name that will be my business name eventually. Is it ok to advertise as a company name, for example Macal Rental Homes, but still have checks written out to just my name, Oscar Macal, for rent and deposit into the bank account that is in my name?
Obviously I'm not asking all my questions, but I think I have researched the forums and gotten most of my answers, but these are a few that I am still unsure about. Any and all advise is welcome.
Thanks.
yes, you will need the utilities in your name. We keep forgetting to do it, but several of the electric companies have landlord rates that let you switch them in and out of your name.
We usually just use our realtor to advertise and show our tenants. Keeps us from having to deal with the hassle of showings etc. After that we do the management.