All Forum Posts by: Dan Maciejewski

You should definitely check on that.  

I took a quick look at CT's Landlord -Tenant Act and I didn't see it address last month's rent at all.  It does state that you can't take more than 2 month's rent as a security deposit (one month if they are 62 or older).

I would call a lawyer that know how the judiciary interprets the local laws and see what they say.  You should do that before you write the lease, that way you have a good, waterproof lease before you find the tenant and ask them to sign.  You could even call one of the courts listed at the end of the linked Act -- they would definitely know.

I don't know the area, but that sounds like there is a ton of rental demand.  Do you have the rent rolls from the last owner yet?  Since duplexes are "residential," a lot of owners don't keep business records, but they should at least have rent rolls -- get them after you go under contract if they won't give them first.

This should be a law nationwide. If you’re going to sell, the people actually living there should have the right to buy their home. I don’t understand why that idea is so offensive to people.

@Tom Gimer
Because when you give them the "right" to do so, including a time frame within which the settlement date can be considerably delayed, tenants who actually have zero intention of purchasing can take advantage of the situation and squeeze the seller out of a portion of their sales proceeds through a negotiated waiver or assignment of their "rights". Blatant violation of the Constitution, imo.

Also, they DO have the right to buy, just like everyone else.  The law makes it so it can't be an open (free) market sale, which would most likely net the most money.  "Commercially reasonable terms" is a weasel-worded way of saying that someone else gets to determine a "fair-market" value, which sound a lot like the opposite of free market capitalism. . . 

@Tom Gimer

1.  I would let them out of the lease with no stress, BUT let them know they are responsible for my lease break fee.  Mine is 2 months unless I let it earlier, which I always do -- so really one month.  You don't have a lease break fee -- in my state, it means they are responsible for the lease until it's re-rented, I don't know about yours.  If I was in your shoes, I would chalk that up to the cost of a lesson and let them out and re-lease ASAP.  

2. NO subletting!  I find and vet my own tenants.  Their incentives are vastly different than yours -- they want  a warm body, you want a great tenant.

You'd have to know the area to know if there's demand. You can't just look at rental comps. Did your realtor just look on the MLS? Check Craigslist, Zillow, Apartments.com, etc. . . Any place rentals are posted.

It could be a sign of very high demand.  In a high demand area, there's not a ton of turnover and you don't need to advertise as widely.  Do an owner vs non-owner occupant search.  That should give you an idea of how many rentals there are.

Is there employment in various sectors?  Any other reasons to live there?  In general, rental demand IS housing demand -- is it an area where people want to buy?

Duplexes can be similar to single family. They are a nice blend of apartment and SFR.

When the appraisal comes in low, you have a few options.  You've heard most of them here.  To summarize:

1. Negotiate the sales price to the appraised price.  There are some negotiation tactics that can help -- hopefully your Realtor or you have used them before.  Surprisingly, a lot of people skip this step!  Always ask for the price reduction!

2. Negotiate to meet somewhere in the middle between contract price and appraised price.  Called "splitting the difference."

3. Find a new lender and get a new appraisal quickly.  Or get an extension from the seller while you find a new lender and appraisal.  

4. Cancel the contract and let them find a new buyer. Even if you're out of contingency periods, which it sounds like you're not, most sellers just release EMD in this market.

Will Gaston

hit the nail on the head.  Always look for the people that are actual experts.  Everyone thinks they are an expert until it's time to do something.  

For our last purchase, 9/10 people told us we were idiots, we were going to lose out shirts, we paid way too much, etc. . . The one thing they all had in common?  None owned any investments, let alone investment property.  

After we increased the value 200+% and are cash flowing, some have shut up and some have asked us how we found such a great deal. . . None have bought anything since -- some people can't see value even when you write them a 5 page business plan

 Those last 10%?  Property owners and investors.  They all saw the value as soon as we bought it.  Complete strangers' jaws dropped even before we started the value-add.  And that was before the cap rate compression of the last year. 

The point is to make sure you're listening to an expert.  Everyone seems to feel they need to have an opinion on everything.  And for whatever reason (we won't get into that), 98% of all opinions are negative.   Odds are that you know someone that is a quiet investor.  You probably know someone that flips a house or two a year, or owns a few duplexes in the next town.  They are quiet for the same reasons you're asking about.  Nobody cares except to disparage and make themselves feel better.

You've gotten some good, if conflicting, advice in here.  I'll just throw my two cents in, also.  

If you're not using a lease drafted by an attorney with specific clauses that you have found helpful, you should look into getting one.  I use my state's Realtor lease and have a few addenda that I have found helpful -- it grows every year.

To answer your question -- and this is something I let every client know -- a contract is only as good as you are willing to enforce it.  And what a judge will (how legal are the clauses?) enforce if it gets there.  If you put a 2 month lease break fee, are you willing to fight for it?  If not, don't put it in, just write month to month.  

I only write 1 year leases so far.  I don't have an issue with a tenant breaking it, they just have to pay the fee.  Just like I don't get emotional about late rent -- they just pay the late rent fee.  In the future just make sure that that conversation is part of your intake at lease signing.  Let them know up front the clauses that you find most tenants have issues with, what the penalties are, and how you will enforce them.  

If you are not going to enforce it, there is no point in having a contract.

Another option that I've found is great for relocations is an investor partner that will let you choose a house on the MLS, buy it, and then rent to you at a pre-agreed price.

Then they also give you a lease option to purchase at anytime for up to 3 years, also at pre-determined prices.  That way you can test-drive the house, neighborhood, and area.  The rents are usually market-rate, and so are the sales prices.  Actually right now, with the market going up 3-5% every month, the sales prices they will give you will beat that -- they go up 3-5% every year.  

You do have to fit their rental criteria but you're not buying a house anyway if you don't.  This isn't the typical lease option for bad credit risks, this is actually for relocations that don't know the area well and don't want to commit to a house just yet.

For what you paid for that, you could make a great profit if people are paying what they're paying here!  Almost everything is going for 5% cap rates.  BUT, I would hold onto it if it's cash flowing.