All Forum Posts by: Daryl Luc

Originally posted by @Nancy P.:

Daryl Luc,  I know two people who got into trouble with the Feds by setting such limits,  as it effectively violates the family status portion of the Fair Housing Act.

Without any other information, there's really no way I can respond to your anecdote directly but I do disagree as to whether my clauses would violate.  Let me just say this, the 'directive' you point to does in no way force anyone to make their property into a dormitory.....for adults or kids.  

The key to family status occupant limits as written in the Act, is the use of the term 'reasonable' specifically as it pertains to numbers of occupants and relationship to each other.  Reasonable is ill defined within the Act's wording.  In fact, it's not defined at all beyond any standard dictionary use. 

Also, while not true in every state, making application is not a right, it's a choice that must be mutual. I submit, it is prudent business to not accept applications on demand from a tenant prospect, but to invite them to submit.  If a request is made, you have every right to let the prospect know that you have additional showings scheduled and when they have happened, you will reach out to those that make the cut and invite them to apply, pay their application fee and proceed.  This is legal too.  As others in this thread have stated, there are creative ways to escalate prospects ahead of others.

I have access to both our family owned real estate company and attorneys that share my last name (not used in this forum for that reason) who have more than assured me that my lease stands up to any federal, state and local ordinance for where we operate.

I hope your friends made out ok.

An llc isn't a solution. Yours is a process problem, not an ownership problem.  As others have learned, an llc deed flip creates a whole lot of warts and hair.   I'm only surmising here, but your 'leases' look more like AirBnB to an underwriter than a rental agreement.  Perhaps someone else can show up with how they did it without a lot maybe's and guessing.

Could be a legality in your jurisdiction to check on, but in mine, the lease clearly indicates various breaches, non payment on time being one.  It also specifies that an unresolved breach automatically forfeits the security deposit, which can no longer be held to offset damages once a notice to vacate has been issued for the breach.  At my discretion, I can then pursue payment to reimburse for repairs in any fashion permitted by law.  These are initialed clauses which makes a small claim judgement a gavel drop.  Such judgements, when filed, show up on credit reports.  This puts the ex tenant in a bind when their credit report is needed for a car, a new rental etc.  Sharing this with them at signing is the best time.  But any time may make a check show up sooner, not later.

I have done this. Successfully, but in another state and with another bank. Xfer of a deed to an LLC creates a path of warts and hair that only you can fix with a lot of heavy lifting. The named insured must match the named mortgagee in order for the invoice to be 'seen' by the bank. (Your insurer will use exactly what is on the deed as recorded after you flip to the LLC.) Nothing else works unless your bank will give you a waiver! When that doesn't happen, they throw the invoice from your insurer into the trash, contact you after you are delinquent, and while you're on the phone with an intern customer rep...they start the clock ticking. After so many days without coverage, they will notify you in writing that (one of these two things will happen)...1. they will insure their exposure using their choice of insurer and bill you directly or 2. invoke the due on sale clause. Their insurance will not protect you...it protects them. Not the option you want to pay for.

I'm sorry to say this, but your attorney failed you.  An attorney in your jurisdiction with experience doing this, would have given you a heads up and how to navigate.  Now is not the best time to find one, but it's most likely your only option at this point since you don't say how many days you're delinquent.

I think it's both a waste of time and your money.  It only benefits tenants in a very small and select way...per the three credit agencies, less than one percent of reports ordered have any rent information. 

When I want to know how someone is in making their rent payment, I look at court filings and talk to previous landlords..not just the current one.  I'm not sure who accepts rent payment history except the Vantage program from TransUnion.   A mortgage broker told me that they don't use any of the Vantage info in their underwriting. Per her, the most commonly used version of FICO in the mortgage world doesn't report rent history.  Your car dealer could care less.  If you find who uses those payment records for anything, let us know.  
Now, with that said, if it's your tenant that want's you to report, then let them pay for it. Here's a fairly good read on the process and costs.....     https://www.nerdwallet.com/blo...

The ordinances are in place to create a Maximum inhabitants limit based on a formula.  This is not a dictated directive that you have to allow that many residents within a dwelling unit.  A residential lease is a Private contract.  Your only responsibility to not breach protected classes with a bias.  With four bedrooms, my standard lease limits tenants to no more than two unrelated adults.  No more than two bodies per bedroom.  Everyone over 18 fills out an application and pays for a background and credit check..  All over 18 are also signatories to the lease.  This makes each one a guarantor of payment even if all leave but one.

You can, if wanted, create a limit of max inhabitants of 5 with a four bedroom home, you can also limit to two inhabitants total if that's your wish....regardless of state or local formulas.  Again...your lease is a Private contract and the only gotchas on who and how many... are when you violate protected classes.

Those are all steps that I take before I even accept an application if the initial interest on my part makes me want to pursue a prospect. It only costs time and no FCRA releases have to be signed to do a credit and background check...although I will do those if I take an application. The service I use gets me access to the Lexis/Nexis national database.

Here's how my leases read:

AMENITIES:The following checked items are furnished by Management as a courtesy to Tenant and are not to be construed in any manner as a part of the rental paid by the Tenant:

[ ] Stainless Kenmore Refrigerator [ ] Stainless Kenmore Stove/oven [ ] Window Coverings, 10 mini-blinds and one four panel drapery.

This/these items are personal property which have been left at the Premises for your convenience. Should one or more of these items need repair or any maintenance due to tenant misuse or negligence, Landlord will not be responsible for the cost of such repairs/maintenance. The Tenant may have the appliance(s) repaired at their own cost by an approved appliance repair company. All items must be left in the same clean, working condition as supplied on move in when the Tenant vacates the property. The Tenant will assume the cost of maintenance and/or repairing the items if it/they are nonworking  or needing repair/maintenance upon vacating the property. In the event of a failure of an appliance during tenancy, it may be that the appliance would not be repaired or replaced by Landlord and just discarded due to the cost to restore. In such a case, the tenant would be given the opportunity to accept or reject owning the repair or a replacement with their own appliance as long as it complies with safety etc.

Here, this thread, while a couple of years old, is populated by people local to you and most likely contains what you're looking for.  https://www.biggerpockets.com/...

If you have 'super low' rates, that implies to me that you may have mortgages that were extended to you as primary residences. I guess that's a question, since I'm not aware of super low rates on investment property. So, anyway, I can tell you this, flipping the deeds from individual name(s) to an LLC will begin two balls rolling that can really take you down. One is if any clause exists in your mortgage that identifies the property as excluded from use as a rental. Most do if presented as a primary residence, to which you signed an affidavit at least twice..once on application and again at closing. If any of this is true, then the mortgage company can call the loan due the minute and second they discover the LLC ownership and it's purpose. The other problem that surfaces, and perhaps first, is when the insurance company submits to the mortgage company a request for payment of the property coverage (even if they knew all along it was being rented and the coverage was a landlord policy). The policy invoice will reflect the LLC naming, not the naming that is on the original mortgage documents. This puts them into a tail spin and they usually will throw the invoice away. After not getting an invoice that reflects what they are looking for (correct name per their records) they assume that coverage was dropped. This starts a series of nastygrams coming at you and a whole lot of phone calls back and forth that may or may not end well.

Consider your moves carefully.  Talk with a lawyer that has successfully done what you want to accomplish and has dealt with all the gotchas.  There is another way that can work in certain situations, and again, you will need the advice and counsel of an attorney that knows this stuff from experience....a trust.  It may work as an irrevocable, it may be revocable, it may not work at all in your state.  In any event, it would still  be work to keep the mortgage company in line since names on deeds and policies will change.