All Forum Posts by: Anna Laud

@Vania Nettleford

Hi Vania! 

This is a little different if your tenants don't have bank accounts, but there are a few options. Number one, as far as I'm aware of, anyone can deposit money into any account- just not take it out. 

So if you set up an account at a bank where it was easy enough for these other tenets to reach it, it seems like they would just need to know your name (or LLC, whatever it is) the account was held under to do a cash deposit. Basically they are walking in and requesting to deposit 'X amount" into "Vania N's" account and that's it- they don't need the account number or anything else from my experience as long as they are at the correct bank.

That's the free way to go about it anyway. 

There is another option from a mobile bill pay like Square, where you can manually type in a card number from any card that has a 'chip' or magnetic strip on it- like a prepaid Visa card. The issue here is going to be paying the terminal or transaction fee, which will add up quickly. 

This usually has to be a registered card as well (like a 888 or 800 #) to call at purchase to comply with National Anti Money Laundering laws. One more down side here is usually a fee at purchased the card (around $5 usually) and a 'reload' fee. 

Along these same lines, an app like Venmo may work with a prepaid card (registered to a network brand like American Express, Discover, etc), but the issue with the daily/monthly send limit would be an issue I think. 

Zelle won't work as they don't accept prepaid cards at this time (at least last I checked) so that free option is out if there are no bank accounts.

Any other option apart from the bank will have a fee attached to it if there are no bank accounts involved, at least that I know of. To even go to a big box store like National grocery or Walmart and wire money would be a fee and hassle for the lines it seems. 

Again, the easiest (free) thing that I can think of is just to set up an account an an easy to reach bank (even if not my regular bank) and have the tenants do cash deposits that way. They in no way have to be attached to it, again that's my experience in lending to friends and family without any of them having same last name, address, etc as me and how they've paid me back- so I don't know why this wouldn't work for you the same.  

Shouldn't raise any red flags under a certain dollar amount coming in (usually it's one large transaction, or in the amount over $5K that gets held for verification by the bank's holding fees - again National Anti Money Laundering laws)  but if you needed to leave it set for a few days until it did clear, still shouldn't be an issue unless you're using these funds for immediate use. 

Hope that helps! 

@Michel Allen

Hi Michel!

At first glance it may seem like you would be thinking along the lines of a S/C-Corp VS. LLC situation, but I would recommend speaking with a syndication attorney first.

With that in mind here's why;

Moving real property out of a S/C- Corp is taxable when it comes to capital gains and a personal suit of judgment against you or one of your shareholders can filter through to the corporation. Not the other way around as the 'corporate veil of protection' is still valid while incorporating a business entity mind you.

I think you're asking if alternatively an LLC would suffice as a way to organize, but this can easily be determined with an SEC lawyer (even an initial consultation).

Your question indicated about ten people involved in this particular business plan and could be covered under the LLC as well in the ability of 'unlimited owners' (people involved)- but again that's where a consult with an SEC legal professional comes into play.

There may be things that even your LLC would be involved with that (if you started there) would pop up on the SEC radar- and it seems better to know how to most legally organize from the start.

There are various podcasts and books on this topic for folks in your exact situation, but I would consider maybe just skipping those and going for a meeting with an SEC lawyer from the gate- better safe than sorry, and you may be advised an LLC would work just fine for you.

Here's a link that may help you find an SEC lawyer quickly and I'll include another one of a general overview of SEC guidelines which may help you know what you don't know to ask about.

https://www.bestlawyers.com/un...

https://www.sec.gov/info/small...

Hope that helps! 

@Thomas Dunsmore

Congrats first of all to you both on your first rental property like this! 

As far as tax breaks go - if by break you mean deduction, yes. Any 'ordinary and necessary expenses' you'll be able to deduct at tax time and these include regular maintenance, supplies for upkeep, insurance, taxes, utilities, etc.  

https://www.irs.gov/businesses...

The specific IRS outline to these deductions you'll be able to find in that link. 

The amount you listed at $4300 should be deductible, whether you're filing jointly or separately as you're under the limit for both for 2021 tax guidelines- $10K filing jointly and $5K filing separately. 

I would probably suggest getting with a CPA in your area if this is your first overall investment property at tax time just to be sure you've taken every single deduction that you can.  

In the meantime, I would also suggest saving everything and creating your IRS 'paper trail' so when tax season rolls back around, nothing is forgotten or overlooked. 

Hope that helps! 

@Eric Salgado

Hi Eric! 

If you're trying to avoid the emotional component if REI and not necessarily looking to invest where you've got family, it's most often a numbers game and researching markets. There are a few 'tried and true' investor favored markets that tend to fall on out of state investing lists for reasons that are mostly all numbered based.

This means; not based on trends and reactive markets (TX, Vegas, etc. at the moment for example) and those that fall into historical predictability - as 'predictable' as REI is anyway.

This is going to range on what you yourself feel personally comfortable with in terms of your numbers/financial goals and what key things you decide are important. Industry (projected job and therefore population growth) for example is one thing some investors look at beyond the basic points of; 

1. Average purchase price point

2. Average rehab cost per Sq Ft

3. Average monthly rental yields for buy and hold (% based as it pertains to relative mortgage payment/holding costs)

4. End user 'pool'- the why for Flippers at the end of the day 

5. Landlord or Tenant Friendly State legislation 

6. Tax rates 

7. High occupancy/low vacancy rates

8. Unemployment rate

You're correct that 'low profile'  by comparison to other markets is easier to begin in, if nothing else than purchase price point alone. I'm more than happy to tell you about Indianapolis and what the Hoosier State has to offer for some investors. 

I would say that many folks try to connect with other investors by means of platforms such as Bigger Pockets yes, also getting involved with a few REIA (right now is a great time for online meetings and the ability to be a part of REIAs all over) and connect with some agents just to chat in the markets that you're looking into- I can help you there if you'd like for Indy and other areas.

There are going to be various podcasts, articles, blogs, etc on markets and what's trending, but I would personally suggest using numbers as my point of guidance and not follow trends as much as historical/long term results.  

Hope that helps at least answer questions about how some people evaluate markets and who to talk to = ) 

https://www.rentometer.com/ - in the meantime keep that link handy for quick rent checking 

https://www.propstream.com/-  this one can be helpful when used in conjunction with Zillow, Realtor.com, etc. 

https://www.fortunebuilders.co...- quick reference of landlord friendly states 

@Kyle Keller

Hi Kyle- 

Yes I mean I agree with @Dave Poeppelmeier here in easier from the start rather than later on while tenants  are in place, higher quality tenants on average, and your friendly neighborhood CPA advisement on expense deductions etc.

Needing to and seeing the economic benefit to doing so, are two different things here and while comps in your area are basically apartments and one other SFR, you're 'marketing' for quality renters, a little higher monthly rental yield and should you choose to cash out refinance (BRRRR)- your appraised value.

I would say in most cases it's easier to 'bite the bullet' now then do this later on. If nothing else- let the numbers decide for you. Take your one to two year REI goal, reverse engineer it and it should be pretty easy to evaluate what a couple to a few hundred dollars a month more coming in each month would do in terms of principal balance (if financed), what these costs (expenses you're talking a out with your tax pro on) mean for cash out refinancing and appraised value and onto other investments etc mean.

Factor in minimal tenant turnover, lesser chance or probability for evictions, etc and again it may make more sense. 

Hope that helps 

@Kyle Keller

Hi Kyle! 

I would say that usually easy on the eyes upgrades overall tend to boost renter satisfaction and can allow for higher rent rates to be charged in a lot of cases. 

While making it livable is obviously necessary, maybe a few things that could be added to keep appeal in mind- basically putting you in line with area comps/level of finish.

Good news is that there are a few updates that can be pretty inexpensive like paint and carpet- although carpet isn't usually a go to in recommendation for a rental , but I realize that laminate is more costly. 

I think I would go into it with a plan that would keep me in line with what comps in the area are like and in my logic, use the tax deduction standpoint as the offset for expenses. 

One risk that I could see running into in some areas would be renter quality if you've got the lowest end house in the area. It seems like it might be best to find that middle 'sweet spot' and go with the median level of finish then in your case (sounds like not wanting to invest a lot to update, and want to keep cash flow at max.)

If I were to run comps and see on the high end of area rentals it meant all new countertops, appliances (high end), hard wood/laminate, kitchen cabinets etc and on the low end it meant more of an 'apartment level' finish - I personally would go for the middle road to this and maybe choose to refinish countertops, refinish kitchen cabinets and go strictly mid-range on appliances (I would pick up the extend warranties personally).

In hitting the kitchen and baths, getting some fresh paint up and addressing flooring- I would know the heavy 'where the eyes are drawn to' items were checked off my list, take it all for expenses come tax time and be pretty happy to know I was right in the middle zone for the area- I wouldn't have the lowest quality of renter pool in the area, or be worried about overpricing myself out of the competition on the high end in my mind. 

Basically, getting the most stretch from my dollar to move into the 'safe zone'- I'll include a few links on refinishing some basics that are cheaper that replacing if you can do yourself. 

Hope that helps = )

 https://www.thisoldhouse.com/p...

https://www.diynetwork.com/how...

@Kenneth Gonzalez

Hi Kenneth! 

I think one of the main things to consider in this scenario is keeping your property in it's move in state or as close to it as possible for refinancing- which shouldn't be an issue with quality renters, students or otherwise. 

I also think its probably good to communicate with your lender about your plan here and make sure you're your both on the same page as it would come down to the writing of your loan product terms- and it sounded like you're already planning to do just that. 

With these two things in mind, I'll kind of lay out the best practices for making sure you've got quality student renters in place;

The first thing that runs through the minds of many investors is wild frat house parties and total property destruction - but there is a ‘beyond this’ outlook to it too, and it can actually be a decent idea in some areas.

Most of the time having a buy & hold investment in a college town, you can be assured of a decent size tenant pool- for both student and faculty alike. The draw for students living ‘off campus’ is huge, especially as housing costs mount for some schools (it’s just more logical to rent with others and split costs in a lot of cases).

There are a few different types of renters college towns can provide;

-Typical ‘in session’ student renters

- Year round student renters (usually those out of state or from abroad, or university/residency renters)

- Faculty/staff renters

Your typical ‘in session’ renters are going to make up the bulk of your tenants in most cases, and this can be a pretty ideal scenario. They are in most cases not looking for anything fancy, and a house offered at ‘apartment’ level finish would work in most cases. Meaning they usually have their parent’s predetermined budget in mind, so cheaper is better.

In most cases this means you won’t need to dump in a lot of funds for updates- just the basics that are in good repair usually work. Only in areas that are bringing in more money for tuition (such as private college/universities) would it be considered advantageous to ‘compete’ with a few upgrades (basically keeping renters closer to a lifestyle in amenities they might be used to)

Perks here are -

• Minimal ‘basic needs’ updates only needed most of the time
• Rent often paid by someone else (first bank of Mom and Dad in a lot of cases)
• Never really a need to market property/have scarce renter pool

A lot of folks are worried about the lack of credit history with student renters, worried about property damage and this is the key to help with that;

1. Add the parents/legal guardians to the lease and screen their credit/background just the same as any other renter
2. Get the maximum allowed by your state in terms of security deposit
   
3. Have utilities paid by renters (this lessens the likelihood of seasonal utilities being out of control)
   
4. Use an app/online payment system to ‘remind’ of payment due/accept payments automatically (like AHC deposit)
   
5. Use an online (or even via text on group with co-signer) to report damages/issues
   
6. Use this same app or text thread to respond to anything abnormal/red flag likes noise complaints, too many overnight guests etc- keeps a ‘report’ in to parents as well and can be used as leverage for offering ‘responsible housing’
   
7. Offer a GPA discount; this sounds silly maybe but it takes responsibility to make good grades and carry a higher GPA. Car insurance companies do the EXACT same thing for this very reason- it promotes responsibility. For incoming Freshmen, senior year GPA’s will work just the same.
   

This covers your property for not only rent payments, but also any damages in most every case.

In terms of what happens during summer break to the renters? This is a time where you can consider Airbnb options as well as your yearly rental income kind of leveling out ‘offseason’ payments. If you’re much closer to campus and know walking distance will allow you to charge more rent than a house 10 blocks away, while purchase price is the same as other said house, use this difference in charged rent ‘in term’ to help offset your ‘off season’ bottom line.

You might consider breaking down the rent in a more ‘per person' way than a monthly flat fee as well- and this can increase your monthly ROI quickly. As this is a common place practice, just make sure you're competitive, and don't overprice yourself out of the running.

One more commonplace thing is to offer a discount for repeat renters- especially those that are in good standing - this would be like a ‘discount’ for signing a new lease agreement at the second semester end of one year, for the upcoming fall semester etc.

Keep in mind too the perk of ‘family’ discounts along these same lines and renting to siblings (again, if you know parents are qualified co-signers- you’re setting yourself up for another good renting situation in most cases)

You could also consider a month to month with another tenant during this time as well- just be sure to let them know in advance and screen them accordingly before going this route. Bottom line is, you can account for year round payments, even while school isn’t in session.

Renting to faculty, out of state students, students from abroad and more of year round (such as residency) students will not carry the same short term renter displacement, but may require a higher level of finish in some cases as this becomes a year round home.

Perks here are-

-Year round rent under the same renter/ as your lease terms apply

-Some renters having supplemented housing stipends paid in the form of allowances, stipends, and other arrangements

-Lesser degree of potential property damage for those in graduate/residency programs (simply based on age and maturity - again, use the automobile industry here in why most car rental places won’t rent below age 26)

-Less need for obtaining co-signers (allowing tenant to solely establish some credit history as well)

When your tenets do move on and out, as a ‘thank you’ for being such great renters for the span of their academic career, it can be nice to offer a letter of reference as well for future renting needs. Informing your tenants you’re willing to do this is simply one more reason to be kind to your property as well as make timely payments. Not needed necessarily, but can be nice to offer!

Hope that helps some and gives you an idea of what to keep in mind = ) 

@Steven Silbert

Hi Steven! 

Usually comps in the area give the most accurate depiction of fair market value and average rent accordingly. In some cases, room by room rent (or a 'per person' rent) can be more lucrative like renting to college students for example, than a 'whole house' rent. 

It depends on what you're saying these similar homes are renting for, and I would tend to go more off of % based comparison, than more amenity based as you've described them- unless of course you have something that others don't. New build and newer appliances might not be enough alone to charge a lot more for rent, as much as having an attached garage would if this is less common in the area for example.

Generally speaking (in most places ,not all of course), if you're valued around $100K FMV, it's much more likely to get 1% (+ in some areas) in monthly rental yield. The closer you stray from $100K, the more common it is to get less than 1% monthly rental yield (.8% on avg.) Not a hard rule for all areas, but a general trend.

What is more of a hard rule is using these area comps in rent to determine a reasonable monthly rate- if your area trends higher on average than 1%- go with that, less than 1% just the same. 

You can take these comps and find the average for your property as a baseline - then look to the high end of these comps and determine if you're competing in level of finish (grade of appliances etc if this is what you see as the biggest draw to your property is)  to get a pretty good idea of what your property will rent for.

The great news is that you are likely still under warranty for many of your appliances, and may have purchased a home warranty as well that could save you some cash if something happens during these first couple of years - especially as your margins might be tighter if there are loan payments being made. 

I would suggest maybe asking for the highest allowable security deposit that your state allows, just as everything is new and should be in excellent repair still 

I'll include a link too that may be of some use- in conjunction with current Zillow, Realtor.com, etc. listings in your area 

https://www.rentometer.com/

Hope that helps some

@Hugo Jimenez

Hugo, you bet and always happy to try and help. 

It seems you'll need to give the 60 days notice without it being month to month as you stated, but that she may be willing to sign it sooner than this. 

You're right to think that there is a kind and respectful way to deliver dialogue and have leverage mentioned in an honest way that isn't disrespectful to the situation or 'cut throat' -which again, truly sounds like you're trying to avoid. 

I think it sounds like, based on your discussion with her thus far, that you've established a relationship that might allow you to have just this conversation. Pointing out that you could exercise the option to execute the estate's coverage of the lease, however you really don't want to do that and if you can mutually (always in writing, even on friendly terms) agree to another, lesser timeframe it's probably beneficial for both sides. In a way it's kind of like 'cash for keys' and while you're not offering cash per say, you're offering the estate to keep the cash to cover the lease if that makes sense. 

It doesn't sound like you're trying t apply pressure at all and that a reasonable date - maybe 30 days as she did pay first month (just a thought, obviously not legal advice) rent would be enough for both parties. 

I hope that helps a little in clearing up timeline- but I would say that if she really feels it will take 60 days, it might be the full 60 days then you're bound to without mutually agreed upon resolve. 

@Hugo Jimenez

Hi Hugo,

This is an unfortunate situation and I must say after reading what you've written about it, I think you're handling it with appropriate resect and integrity. 

You have noted the importance of taking a ledger account in whom takes what from the unit- it may not be as accurate at this point, but maybe not irrelevant to continue on as you can. 

Some landlords find it appropriate or necessary to accompany anyone enter the unit for collection of possessions, but this can possibly be an uncomfortable thing to do, given the circumstances. 

While you had a verbal notification from your realtor, which in this case seems maybe enough to proceed with allowing heirs  to collect belongings- I'm basing that on the tenants age and this not being a more objectively muddy situation as can happen in certain circumstances.  

It depends on the relationship that you have or would have with her heirs or executor of her estate in how to proceed. In some cases landlords will change the locks and only give a key to the named executor. This prevents every cousin, grandchild, etc. from coming in at all hours and opening the landlord up to higher liability. 

I would say that you're clear on the timeline of 60 days per the lease as you noted, but would maybe want to consider limiting access to the executor alone, consider going with them maybe and just kindly explain to them that you would prefer only they come in to claim possessions. 

Deciding to change the locks and only give the executor the key is up to you and how comfortable you feel with them, unless of course there's a legal loophole in FL that requires this to be done that I'm not aware of.

When it's all said and done, you can have them sign off on a Release to Right of Possession and I'll include a link to one example here too. 

Hope that helps some, and again seem like you're thinking ahead to taking care of with the best of intentions and respect

https://www.printablecontracts...