All Forum Posts by: Adam Johnson

@Deborah Burian - I would recommend against shredding too soon. I don't know if it would be an issue or not, but I save the applications indefinitely. I also put my notes directly on the application from when I check income, references, etc. If I was ever questioned, I want to have an abundance of information to show that I ACCEPT applications from anybody, but APPROVE only those that meet my qualifications. If they are approved, the application goes with their lease file. This way, I can go back and re-verify information if I have to. Generally, I ask many of the questions I will need answers for in the event of an eviction and judgement so that I can still try to get paid. Everybody is friends in the beginning, so getting answers then is much easier than after you have thrown them out.

I am licensed as a real estate broker, so the potential for me to be "checked" is probably higher than the average landlord. To avoid problems, I try to deal with every potential contact the same, even if I know there is little chance that I will approve the application (it's amazing how many people apply with NO income source or public assistance!) Frankly, race, color, family status, sexual orientation, etc. don't matter to me. It comes down to - can/will you pay the rent on time, will you not destroy my apartment, will you be a good neighbor to other tenants in the building.

Back to protecting the information, yes, if you possess it, it needs to be secure.

Michael Stole - don't be too concerned about this. It is fairly common for an appraiser to essentially "agree" with the market (you) that the value is what a ready, willing and able buyer would pay for it when discussing 1-4 family properties. Many appraiser's can't/won't stick their necks out any more by saying in their report that you got a good deal. This is a result of the shakedown from several years ago. Many appraisers put out falsely inflated appraisals (above purchase price) to grease the financial wheels and get people qualified that weren't qualified. Now, they simply say that the market has spoken and it is worth what you offered. It relieves the appraiser of much future liability. In a nutshell, the appraiser was covering his butt.

Unless this is holding you back on financing, I would smile, take the appraisal to the tax assessor, and enjoy the lower taxes. Use it to get your assessment lowered if it can be. You can laugh on the way to the bank!

I would recommend you read a little about fair housing laws. As long as your decisions aren't based on any of the protected classes, then you shouldn't have any worries. Develop financial benchmarks so that you are comparing applicants the same way. For example - rent is less than "x"% of household income. Income verification is done the same way. Try to ask the same questions, use a standard application that MUST be filled out by everyone. Doing things the same way every time reduces the risk of future problems due to fair housing laws.

Regarding storage of sensitive information, yes you have some liability. Keep it locked and secure and don't share the information.

Don't let this keep you out of the game, just consider this part of the rules to play.

I am on the opposite end of the spectrum. Unless I am placing a Section 8 tenant (which requires 1 year lease), I ONLY do month to month. It is much easier to "fix" a problem. I do have long-term tenants and have an average turnover rate for my area.

Real life story explains why I do this - tenant "Randy" is a problem, a big problem. He lives like an animal, leaves garbage everywhere in common areas, lot of police calls, different woman (and her kids) every week, none approved by me. Randy is well known in the local courts/police stations. Yes, I could have done better screening him, but that is water under the bridge. Fast forward to eviction court. Randy owes me just $ 50 in back rent and I jump at the chance to get rid of him. The judge asks me why I didn't bring up any of the other problems in the Petition to Recover. I answered simply and honestly ..."because it is easy for me to prove he didn't pay, and if he is evicted for non-payment, all the other problems are solved by default!".

Moral of my story, if you get stuck with a bad tenant for WHATEVER reason, if you are on a month to month lease they are much easier to get rid of. Most tenants like this are always a little behind on payments and a little is enough. You can also schedule "major repairs" in their unit which requires it to be vacant, give them 30-day notice and get rid of them.

I honestly don't think having month to month tenants has hurt my bottom line. It may, in fact, help it because I can solve problems when they are smaller instead of having to wait until they grow. Bad tenants are like cancer and quickly drive away really good ones that don't want to, and don't need to, put up with it. Many of my tenants have been with me for several years.

My reply won't help much, other than to give insight as to why it might be on the list. I do property preservation work and one of the properties we have maintained for about 4 years as the mortgage company does their thing to get title back is a good example. Nice area, the house is dated but sound, a fair amount of deferred maintenance but not extreme. Much better than what you described your property to be.

It boils down to this - the neighbors are tired of looking at a vacant house next door and they are blowing up the phones at the Town Hall! They don't want to answer their phones anymore, so they are trying to push it to be demolished. This particular property is "stuck" somewhere in the foreclosure process, likely due to being a reverse mortgage with a borrower that died. It makes no sense, in my opinion, to tear it down, but that is the way it is headed.

Like your deal, if somebody with the means to actually do SOMETHING with the property comes along, then this one might be saved. I wouldn't give up yet, but I also wouldn't waste a lot of time on it if the heart of Code Enforcement is set on tearing it down no matter what.

Bryce Y. - nobody seems to have suggested this yet, so I will. Why not have a roofer give you a price to replace only the shingles damaged to the point that they may fail? From what your picture showed, there is still a fair amount of life in the roof in general, so why waste it with an early replacement?

My guess would be one or 2 bundles of shingles and 1 guy for 1/2 day, maybe up to a day if there are a lot of scattered repairs. I don't think that would break the bank and you get the full life out of the rest of the roof. You may see slight variation in color due to fading, but it shouldn't be too bad, especially since it isn't a color.

If the shingles are old enough to be brittle, this may not be a workable option. A couple minutes gently trying to lift one will tell the story.

Perfect credit might help, but if you don't have it, don't give up. Many investors I know (including myself) have ok credit scores, but not perfect. The nature of our business, however, tends to hold scores down somewhat. Credit inquiries, number of loans, etc. all come into play. I still rely on flawless payment history as a result of buying cash flowing properties and managing them effectively. Do what you say you will do, walk the walk. Seize every opportunity to prove yourself and your ability to buy and manage properties. Soon enough, people will ask you if you want to borrow some of their money to do more deals.

I prefer non-conforming loans mostly out of necessity, but also because it is easier to get a deal done. Those lenders tend to look closer at the applicant than they do at the application solely. I get to be a person with a story to tell. Doesn't mean guaranteed approval, but it gets deals done.

Greg Fend and Aaron Mazzrillo- thank you for your service and good points.

Nicolaas W. - good point on the security clearance too. Depending on the MOS the tenant plans to pursue, this may or may not "inspire" a more positive reaction. If his MOS requires a higher security clearance, a judgement may put a quick stop to his career.

Tim G. - I really like your suggestion and will expand on it slightly. I would go to the tenant and explain your military experience and possibly some of the thoughts shared here. Use that to guage his reaction. If he shrugs it off, casually suggest that you are a veteran and that this is something that none of the military branches take lightly and never have. I would also express to him that you can/will contact his recruiter to get more information as to how you might be able to pursue him after he leaves for boot camp. If THAT doesn't get a reaction, I would say it is worth a call to any recruiter, I would think that they will act quickly.

Recruiters have quotas and tend to push to not lose a new recruit over something stupid. I would suspect that the recruiter will lean on him and may mediate to try to work out a solution that works for all.

I recall one guy in my unit while in the Air Force that spent a LOT of time in the commander's office discussing his and his wife's spending habits. His bills were paid involuntarily out of his paycheck on a very regular basis. With a little luck, firing the "warning across the bow" will get your tenants attention and inspire him to pay up.

Paul Timmins - good information indeed. I can now say that I learned something today!

Paul Timmins - one concern with including the heat comes from bonehead tenants regulating the heat by opening windows. My preference is to have the tenants pay their own heat, especially if there are already separate utilities and/or furnaces.

Another down side locally is if you rent to Dept. of Social Services tenants, the formula they use to calculate rent gets thrown off if heat is included in the rent. With HEAP (Home Energy Assistance Program I think is what it stands for), they can get help paying the heat bill if the heat is paid for by them and in their name. If it is in the landlord's name, guess who gets stuck paying the bill?

These have been my experiences. There are ways to take advantage of energy reduction grants and still have separate utilities/heating. My preference is to have all utilities in the name of the tenant if at all possible. I do have one 5-unit building with only one heat plant and I have a very difficult time getting the higher rent approved due to that.

I don't understand why they can't approve an extra $ 50/month for heat and water when it is included in the rent, but they will pay $ 75/month plus if it is in the tenants name. I guess logic doesn't come into play with government programs!