All Forum Posts by: Chris B.

One option to consider, assuming you and your siblings are fortunate enough to be in this situation is for the property to be assigned to you only and if there is enough other inheritance to equal things out for everyone, the rest can be spread around to level it out.  If its close, perhaps they will allow yuo to sign a loan with them to pay off the remaining amount.  I think this may need to be declared within the trust and as you mentioned yours is irrevocable, it may no longer be an option.

All three of those are REAL problems and can even be real problems in state also.  The rental business has many facets.  It can be honed to be relative easy to deal with but that's with an upskilled person / team.  My advice for anyone entering the market, not only study up, but get yourself a mentor with good experience.  This will save you years of learning and mistakes.  Investors not having the appropriate skill set, personality, and knowledge and deciding to just jump in - trouble.  Managing out of state yourself with no help.  How do you do this?  Do you fly in for everything that needs management oversight?  This may be illegal in some states and you frequently at least need an in-state official representative.  Agents leading us astray?  I know that that none the amazing agents here will lead someone astray, but this certainly is way more common than I'd like it to be in general.

Possibly Apple only.  I'm seeing nothing available for my Samsung.  And yes, I'd use it.

You have some great equity which will be a nice starting point if you use it. Interest rates are high and banks are tight on their property appraisals so definitely check first what you could first get by a refinance or HELOC and at what rate. If you currently have a good interest rate, you probably don't even want to consider a refinance. I applied for HELOCs on several properties a year ago. All had 40+% equity. All decently valued properties; not small stuff. I was offered only 1 HELOC of $18k on a single property and nothing else. Then, assuming you do have enough cash available, a lot of investments won't even positive cash flow without a significant down payment. Probably more than what you will have available. Competition is fierce and deals are snatched up before they become public. You may have a hard time finding any BRRR deals that make sense. Last time I checked with a few local wholesalers, they had nothing to offer of value. Their better offerings were likely taken by their established customers who get first dibbs. What I'm saying is it is very hard to find a deal. Can you knock on 300 doors? Yes! It takes a special personality and a lot of motivation, but that may be your best chance. You can increase your chances but looking for indicators such as a poorly kept property... and there are many other indicators and these may slightly increase your chance of success. You may also network and honestly, the more you network and the more you help others out, the better your chances are that someone will help you out and present a deal or partnership opportunity to you. Good Luck! I'm speaking from my area in AZ. Other markets may be different.

Coming from a brief experience where a house hack like situation was going on and 6 or so "friends" to varying degrees rented each room under their own contracts, it quickly became apparent that this doesn't work without tight management involvement.  One would leave and the tenants wouldn't find a replacement and when management found a replacement, there were conflicts.  This transitioned over to everyone signs a single lease, everyone is equally responsible for the rent and property.  If one tenant left, they were motivated to find a replacement including the tenant who left who was still on the lease.  If the general areas were messy or there was damage, that was on them as a group and they would pay for the resolution.

If you can't do this such as with a multi-family property and a shared playground or pool, I would likely charge more for rent and include a professional cleaning service.

This was all a long time ago and I'm not involved with this now.  I do support house rules in the lease and have them in my leases.  I think this still might be a challenge though with tenants and common spaces as you as a landlord will generally never have a view similar to your tenants causing the problem.  Tenants will always blame other tenants.  You can kick them out, but I prefer to try to create situations that are not likely to develop into problems and holding everyone equally responsibly goes a long way in the right direction.

In your case it sounds like you have college students or adults at an equivalent or lower level of responsibility which is very common renting out at the room level.  One lease that everyone signs will be your friend.  If they are under 1 lease and a problem happens and its an item the landlord needs to take action on, then hire a professional to fix the issue and add the charge to the rent.  They can decide who pays more amongst themselves and there is a chance they will not repeat the problem when a $X00 bill shows up.

The problem with individual leases at the room level is you need to have someone babysit everyone and its super time consuming.  Your average tenant is not responsible or they would have their own small unit.  Hopefully you are charging enough rent to make this hassle worth it.  You can mitigate some issues by charging more and hiring someone to clean up after them.  It won't solve all problems though and you may price out your target audience.  Eventually you will just kick out tenants, but there is a good chance they will be replaced by something similar.

I don't have time for this style, but do understand its a great starting point for many and has potential for higher profits.

I have a small number of rentals so my process is less efficient but works for me at my scale. With that said, I'm open to improvement. I personally show the properties and in doing so, I can start to build a sense of the applicant as well as the other way around. If the applicant is interested, I supply either a printed copy of the application for each adult to fill out or I offer to email the person the application to fill out. On the back side of this, they can scan in and email back the filled out applications or fill one out in person while viewing or return a filled out application later. All their choice. I tell everyone that I don't hold the property for anyone without full deposit and signed lease. After selecting a tenant and all background screening completes in their favor, I then set up a time to meet the future tenant at the property and we all meet then. Preferably ASAP as things can happen if you wait. They are notified to bring the full deposit, IDs, and all adults will need to be present for the signing. They can provide first month's rent payment now or before they move in, but they won't get the keys prior to that being paid. I bring my printed lease and printed addendum / pet contracts as applicable with backup copies. I have pre-signed my portion so that saves time. I spend time with the applicant going over each important point in the lease and get lots of initials and signatures. I also lug around my brother printer and make a copy of the government IDs and a copy of the lease which I provide them. I also email them a copy of the lease, the AZ tenants rights handbook, and any HOA regulations. With this process, there is no opportunity for a applicant to not sign the lease and pay all funds due. If they don't show up, which has never happened yet, I would assess the situation, but likely move on to the next qualified applicant.

I have recently started using an online service and they have an online application feature which I will push, but not require.  The other options I traditionally offered are still applicable.  They also have an online lease signing, but I'm not comfortable with it yet.  With regard to rent payment, I now require all tenants to pay monthly rent, after the first payment which is in person, online only.  It automatically adds late fees, violations, repair bills, etc..., it only collects payment in full, and I don't need to personally interact with tenants and their excuses for non-payment.

People buy into an HOA knowing the rules and the ability to create additional rules to keep the neighborhood a nice, calm family location. There are plenty of other non-HOA and even non-city options for STR investors to target. Around here, there are county islands all over. Please don't try to ruin my neighborhood for your income stream. As a landlord, through screening applicants, I see what percentage of the population is unfit to be my neighbor even in the nice areas where I have rentals. I absolutely do not want this percentage of STR rental occupants next door to me.

Separately, I don't know if housing for families in need of a rental is as much of a concern around here as there have literally been tens of thousands of units of apartments and condos built recently and SFH construction has not halted either. If it is a problem, there is a great effort underway to supply more. I don't count that specific argument as a reason to oppose STRs in my area.

"Income-generating potential is the largest factor in the valuation of real estate and despite emotional attachment we have to our houses, they are no different."  -- I disagree.  In AZ, 64% of all "homes" are owner occupied.  No state has less than 50%.  I bought the home I live in because I needed a larger home, near work, in a nice neighborhood, and near well performing schools.  While appreciation is appreciated :), there is no income earning going on while the property is owner occupied.

"The response I get most often when I ask this question is that it's disruptive to local lifestyles to have more frequently rotating tenants and as a result STRs can decrease property values. The first one is qualitative, but the second question is quantitative and pretty straightforward. Unless long-term occupants are willing to spend more per month than short-term occupants, any given property will always be worth more as a short term rental." -- The 1st point I agree with and that is the ONLY point that matters to the neighbors. The second point I don't. Generally speaking, I don't see a negative valuation impact on a property if the area has STRs. I'm curious why your audience has this opinion. In addition, your income potential argument doesn't fly either. It doesn't make my SFH I live in worth more when I sell it regardless if I was living in it or I used it as a STR for the past 6 months. Its sale price will fetch what the market will bear. Where this may make sense is in touristy areas such as Sedona mentioned above. When a primary income stream for a community as a whole is from tourism, I can see this being a significant factor.

I was in AZ since 2006 so I experienced the situation here with you.  It was earlier in our rental career so I really can't speak for other landlords but I can speak about plenty of neighbors around me.  At the time, I lived in a brand new neighborhood on the outskirts of town.  Home was purchased  in 2006 for just under $300k.  Crash happened and eventually the value of our property settled down to around $165k or so.  Everybody was in the same situation.  Plenty of the neighbors just walked away from the home and gave it back to the bank effectively wiping away $125k or so of their negative equity in the property.  For many, it seemed like a wiser choice to start over with bad credit than owe $125k greater than the current value of your home.  It makes sense.  That $125k saved (not counting interest) was equivalent to the value of about 110 months rent for a similar home.  Add interest and probably equivalent to 15 years or rent.  Did the neighbor's income change?  No.  I'm not aware of any of them loosing jobs.  Many were retired.  Did rent change?  No, but it was stagnant after this for years, but it didn't go down.  It was just the easiest financial decision.

One of my tenants on the other hand had owned a home, values went up, they refinanced it to cash out all of the equity, and spent that and then decided they couldn't afford the home.  I let them rent from me and guess what?  That was a problem and thus learning opportunity for me also.  They couldn't afford to pay my rent.  They had their same jobs and income, but just bought foolish stuff all the time and at the end of the month didn't have the rent.

We were also, near the bottom of the market, able to pick up a nice property in Gilbert for $210k that had last sold for $399k.

Thanks, that was the intent of my question.  Easy answer.  Regarding the actual holdover fees, I'll check local laws to see if there are any rules around this.

I have read several posts here on the topic of holdovers as well as researched the idea elsewhere.  Based on your advice (Nathan) I think I'll be adding the criteria that holdovers will be charged at 4X normal prorated daily including the day the keys are retuned.  

What I'm not sure about is the situation where a tenant does leave the property, but the property in a poor condition such as filled with trash, or excessively dirty, or in need of repairs and the like.  Lets say it takes you 3 days to get a crew in there to clean it up or it takes you 4 days to have a handyman to get it fixed up... or even just 1 day.  Maybe they screwed up your new flooring and that takes 2 weeks to get a repair scheduled and performed.  Do you charge something like a holdover fee for the loss of use you incurred while diligently getting the unit rehabbed?  I'm not talking about routine wear and tear repairs or typical cleaning I always seem to have to do, but something that is clearly above and beyond an expected return condition.  Do you suck it up?  Do you charge for lost rent?  Do you only charge for repairs / cleaning and not lost rent?  Or otherwise?  Any suggestions or a text blurb to consider for the contract are appreciated.  Thanks!