All Forum Posts by: Joe Splitrock

 In the absence of providing a reason, the applicant may believe they were wrongly denied or discriminated against. For that reason, I am transparent with the tenant about why they were denied. My personal opinion is that if someone pays money to apply to rent my property, offering the courtesy of telling them why they were denied is reasonable. 

Even if you don't provide a reason, you should always document a reason. You also need to ensure you are fairly applying your approval criteria. For example, if you deny one applicant for 625 credit score, then approve another with 600 credit score, that can appear discriminatory. Telling people you "decided to move forward with a different application at this time" assumes you had a different applicant that was more qualified. I would only state this as the reason if it was true. For denials where you have not accepted another applicant, tell them they didn't meet approval criteria. I would also document how the chosen applicant was better qualified than other occupants. 

The reason you want to document these things is to dispute discrimination charges. You want to be able to cite specific reasons where someone didn't meet your criteria. 

There are some situations where you may be legally required to provide a reason. Some states may require you provide a reason if asked. Federal credit protection laws require a denial letter stating it is based on credit if you pull the credit report (versus tenant pull and share). Check state laws.

 Based on the price point an engineered study would probably be cost prohibitive. People do the DIY algorithm based studies and they can cost under $1000. This may or may not hold up during an audit because nobody actually visits the property. Also be aware that cost segregation accelerates expenses that you would otherwise get over time. That can be great your first few years, but also means less in your later years. Make sure that is really what is best for you. It can be a big surprise in future years when you get hit with huge tax bills due to little depreciation expense. 

 That is the problem, you can't owner occupy two properties. Look at the loan documents you signed during your 1/31/2022 refinance and it likely has time period requirement for owner occupancy. Taking out a second owner occupied mortgage in March, means you cannot owner occupy both properties. One of them needs to be an investment loan. The low down payment options are ONLY for owner occupied, not for investors. These programs are designed to encourage home ownership, not for investors to profit from. You can move out of owner occupied and keep your owner occupied loan only after occupancy time frames have passed. That could be 6 or 12 months, but either way it is more than 2 months.

Just be cautious when you are being given a story. Sometimes the story is half truth or even complete lies. People will say divorce or medical debt when they have bad credit, because these two things are seen as out of their control. This is where you need to read beyond the credit score. Look at payment history since the bankruptcy and make sure there are no missed payments. You can even ask to see bank statements for the last 2-6 months to see what balance they carry. 

An 8 year landlord reference can be good or bad. Make sure whoever you talk to for that reference is reliable. Hopefully it is a large apartment complex, so you are dealing with professional property management. You want to call and office where you can verify the number is real. Unfortunately people will give out their friends phone number or the current landlord will lie to get a bad tenant out. 

The other interesting detail is that he has lived at this address for 8 years. So assuming he was divorced right before his bankruptcy, that means he would have lived there with his wife. It is possible that she moved out, but it also could indicated missing address history. Look at the credit report and see what addresses are on there. I have found apartment addresses on credit reports and contacted them for reference. It can be very enlightening. Also get a photo of his drivers license and make sure the address matches his current address. People try to hide previous addresses, so make sure he is not lying to you. If you get proof that he lied on his address history, it needs to be automatic denial.  

This is a tough situation, because they may expect special treatment based on the business relationship. They may think you will just approve them, since you know them. They may expect you to be flexible on rent or other lease terms. If you have a problem, it could affect your business relationship. Maybe you increase rent and all the sudden your subcontractor increases their rate. They just tell you, "cost of living is going up". 

On the flip side, it could seem unfair to them that you are unwilling to consider their application. If you do entertain their application, explain to them up front that they would need to follow the same standards as other tenants. I would even consider building rent increases into the lease agreement, so they are not surprised later. It is best to over communicate your policies in this case, being clear that things like late fees are non-negotiable. 

Most people will be good tenants, so this can definitely work out. Just be careful with screening and setting the right expectations.

I am with @Austin F. on this one. Given all the scams that tenants have been victims of, it is hardly unreasonable for them to want to verify your identification. A small mom and pop landlord in particular is risky to tenants. They are not meeting you at your place of business. You probably don't have a website or registered business entity. You could literally be anyone out to scam someone.

Landlords ask tenants for their SSN and photo ID all the time. I take a photo of every applicants drivers license. Some landlords even require full application before even showing a property. With all that we ask for from our tenants, how is it unreasonable for them to verify us?

That all being said, there are solutions that don't involve giving them a personal information (like your home address). You could just show them your license, so they can verify your photo matches your name. You can offer them your license with the address blacked out (or just take a photo covering it). As @Linda S. suggested, you can direct them to tax records where owners names are listed. This may even be better, because it shows the owner of the property. 

One thing we have done to establish credibility is setup a Facebook business page and website. Our business phone number is public information and we watermark our phone number on listing photos. We also have a US post office box mailing address that is published. All of these things pop up if tenants try to research our identity. My Facebook page has years of property listings, so if I am a scammer, I am playing a really long game scam. 

One of the responsibilities as a business owner is building a brand and building credibility. If you have that, nobody will ask for your drivers license.

@Scott Lyons my best tenant moved into one of my houses from a condo. He had lived in the condo for almost ten years when a family with kids moved in next door. He complained to the manager, they did nothing, so he just gave notice and moved out. He has been in my house four years and it is in better condition than the day he moved in. 

Unfortunately if that tenant is making that much noise, it also means they are probably being hard on the property. I know you don't want to lose the new tenant, but is it worth losing the old tenant? In an ideal world, tenants will work through issues, but when they don't it can become your problem. 

I am not sure if you have kids or not, but there are two types of parents. Some parents control their children and have consequences. Others dismiss their bad behavior as "kids will be kids". They seem to believe (incorrectly) that parents have no control. This can lead not only to noise, but also damage in the property. I have seen writing on the walls, spilled paint or juice stains in the carpet, holes all over the wall. In all those cases, the parents claimed "kid will be kids". Strange how my child never did any of those things.

 I really believe "investor friendly realtor" is mostly a marketing phrase. Ask any "investor friendly realtor" if they are capable of selling you a $3M mansion, vacation house, new construction or any other specialty. Magically they will specialize in that too... The skills to be a good realtor translate to any type of sale. It is possible your family member is just a bad realtor in general. 

The tough part is how do you walk away from a family member without damaging that relationship? I would also question what skills you think they lack to help you buy investment properties? You should be doing the deal analysis. You should be an expert in the market. You should know the top price you are willing to pay. At that point a realtor is mainly just your interface to the sellers agent. They need to be responsive and carry out your wishes. 

If you explain the issue in more detail, that may change my advice. Good luck.

 No because depreciation is based on the purchase price of the property and cost of rehabs (costs you can prove on receipts/invoices with checks to prove payment). Your loan value and loan payment have nothing to do with depreciation. Think of it this way, if you paid all cash your depreciation would be the same as if you financed 100%. The only difference with financing is you can claim interest expense as a deduction. Just to be clear ONLY the interest portion of a loan payment is deductible. You will also deduct your property taxes and insurance. 

 Whether you can evict is very regional. I think most places have removed any COVID related eviction bans and the Supreme Court removed the Federal bans. In some places you are prohibited from evicting if you are a landlord waiting on rental assistance. Usually this is only the case if the landlord accepts the rental assistance. Typically you sign something when the tenant applies or the organization reaches out to you directly. I would be very skeptical of documents sent over by the tenant. It appears the property is in St. Paul so I am guessing this is the organization. There is contact numbers here:

https://caprw.org/

You are probably not required to take the assistance and you can just end their lease. You may still be stuck evicting if they refuse to leave. If you agreed to rental assistance, that may block your eviction. Talk to a local attorney. This is VERY local.