All Forum Posts by: Joe Splitrock

@Emily Weaver your lease renewal form should have stated that "30 day notice is required per your lease terms". We ask tenants to send an email or physical mail notice to vacate. It is fairly irregular to accept 20 day notice, but if you are fine with it, that is up to you. You should have followed up long before February on this. If the decision was due at the end of December, you should have contacted them at the end of December. I would text or call if you had no response. You need to be more proactive in your business or you will have big problems going forward. It is very common for my tenants to drag their heels on responding, but we send reminders and contact them before the deadline. We also have a default option if they do nothing. If they don't respond, the lease changes to month to month at a higher rate. That way if they don't respond you just start charging them more. Our M2M rate is $100 more than lease term rate. 

 I will take a few daggers for saying this, but I like the new forum look and I have more than a few posts;) 

To be fair, I have used the new forums for three months now. I was on the beta testing team. It took me some time to get used to it, so I encourage you to hang in there. Nobody wants to lose you or any other top contributors. You will get used to it and forget what the old forums even looked like. The BP team is very open to making tweaks and addressing concerns, so your feedback is being heard. That is why this thread is open for comments.

 There are buttons at the top to sort by Newest, Trending or Unanswered. They actually got rid of the category that would yield several year old posts randomly. Really the same sort and filter functions are there, but they are not on the drop down menu. They are at the top of the page. It defaults to newest posts first, but you can change it.

@Grant Farrington first of all, you don't just "keep the security deposit". You have to itemize cleaning and damages, then DEDUCT the amount from their deposit. Then you have to send a letter that itemizes deductions and stats how much money they get back or how much money they owe. It should never match the security deposit amount. My guess is refinishing the floor will be more than the security deposit. Get a quote for the expense to substantiate your deduction. Say the deposit was $1000 and the refinishing is $1432.25, then you request them to pay the $432.25 additional. Some states require you to provide receipts/quotes for deductions, so have that documentation ready or just include it with the bill. Again, you are not keeping the deposit, you are deducting damages.

As far as the ESA, the tenant has a right to an ESA with proper documentation, but they do not have a right to damage. You can deduct any ESA damage from their deposit and bill them for the remainder. Based on what you are saying, these are legitimate deductions and I would charge the tenant.

As @Greg Weik mentioned, hopefully you have good documentation in case the tenant disputes. I take over 100 photographs and a video of every property before move in. I also have tenants sign a move in checklist attesting to condition on move in. You don't need this to take the deduction, but you may need it to defend yourself if the tenant challenges you in court. In that situation you could also get a signed statement from the previous tenant or other witnesses who saw the condition of the floor prior to move in. 

@Amy Raye Rogers you missed an important step:

- Pick a company name. Preferably one with your last name in it, so everyone knows you are a big shot. Then print business cards to hand out to everyone, so they call you first with deals.

@Steve Vaughan I almost stopped reading after the LLC step, but I saw your comment and realized it was meant to be funny.

@Tania Reuben I tend to agree with your accountant and just because someone else is doing it another way, doesn't mean they are doing it the right way. Having read thousands of posts from other landlords, people are doing all sorts of things wrong. 

I would question what it is the purpose of having your corporation involved? You own the property personally, so you are just using the corporation as a management entity. Even on your permit, you will likely need to put your name as the owner and the corporation as the manager. At least that is how our permits work here for STR, you list the owner and manager. So basically you will be charging your corporation to manage the property and creating taxable income. That is complex and unnecessary. It also affords you no liability protection. Your entity will not hold up in court when you self manage and live on the property. This is called piercing the corporate veil and it is easily done when an attorney can prove there is no difference between you personally and the business.

One other factor that may be an issue is that cities have been limiting short term rental permits in some cities. There is often an exemption for owner occupied, so in that case being the owner has an advantage. Maybe not an issue in your case, but my point is being an owner operator can be protection if STR legislation is passed.

I have seen some crazy legal structures for STR advocated here and on Youtube. It is almost scary how clueless some of these people are and unfortunately they have a platform to share their bad ideas. Listen to your accountant and attorney. They know your personal situation best and they are the ones who will defend you when things go wrong. Friends will just say "bummer, hope it works out".

There is basically two parts to this problem, remediation and restoration. Remediation stops the damage from continuing and restoration restores the property back to pre-damage condition. The proper way to fix any problem is doing both. @Will Barnard gave a couple good tips for inexpensive repair. Even what appears to be cosmetic problems should be corrected to prevent intrusion from water or pests.

@Jay Flaggs lots to unpack in your question, so I will summarize some of my key points:

- Lease should spell out responsibilities. There is usually general clauses that, although not specific, can apply to the things on your list. There are some things that need to be specifically spelled out like lawn care, because some landlords provide it and others don't. Lawn care should even be spelled out in your property listing, so people know who is responsible before viewing the property. There should be some clause about maintenance, repair, etc. in your lease, so read back through it.

- Your rent rate and local common practices may guide your tenant towards expecting certain things. If most landlord in the area charge $5000 a month for a house and include pool maintenance, then for lack of spelling it out in the lease, the tenant may expect it. That being said, the first time they ask for something is your opportunity to say YES we cover that or NO that is your responsibility. If you hesitate or seem unsure who should pay, the tenant will insist that you pay. Firmness is required in any response. This is true not only in landholding but also parenting, management and generally any time you want to be treated with respect.

- I have heard of the $100 or less is tenants responsibility and I think this is a sloppy landlord policy. It only leads to your tenant not reporting problems or coming up with their own solutions. It could even lead a tenant to make sure the repair costs more than $100! Also keep in mind some policies sound great for a landlord, but annoy tenants and will lead to them moving out. So although you can push a $100 policy, it may not be in your best interest.

- Some things are important to avoid bigger costs later. You could blow off fireplace maintenance or pool maintenance, but that could just result in a more expensive repair later. Preventative maintenance needs to be done by the landlord or have a process to ensure the tenant is doing it. 

- Generally speaking, landlords do not pay for general leaning, damage or consumables. Landlords are responsible for items that are normal wear and tear or things that break due to no fault of the tenant. Landlords are also responsible for preventative maintenance, like HVAC cleaning. Of course be aware that things break, even with normal use and that is not the tenants fault. Here are some examples of cleaning items. Pool or jacuzzi cleaning would be on the tenant. Fireplace cleaning would be on the tenant, but it would be cleaned prior to move in. HVAC filters are generally on the tenant, but furnace/AC cleaning is often done by the landlord. Wood floor refinishing should not be required every few years. I had friends with big dogs that destroyed a wood floor in less than two years, but that is not normal wear and tear. Consumables should be on the tenant, which includes light bulbs, batteries and filters. Just make sure when they moved in that all the light bulbs worked, fresh batteries in smoke detectors and new filters. Same is expected on move out.

@Bruce D. Bolton based on the limited details you provided, I would say no. You are loosing "$3000 monthly net" and avoiding $1700 monthly debt service, so you will reduce monthly cash flow by roughly $1300. 

That being said, there are many factors that play into this decision, including:

- Is the multi property you would be selling a desirable long term asset? In other words, will it have strong appreciation? Is it easy to rent? Does it have low cost on repairs? Is it easy to manage? If it is a dog, maybe selling is the right choice. If it is desirable, you may not want to let go.

- How much debt is left on all the buildings? If they are going to be paid off in 4 years, it is totally different than if they all have 30 years left. Holding on a little longer will net you more monthly cash flow in many cases.

- Stage of life is also a factor. I see the grey beard, which means wisdom of course;) Later in life, you may choose to have paid off assets that support your life style, where in your earlier investing years you may leverage more for growth. This comes down to several questions. How much do you need, how long before you retire, etc. Only you can answer that.

@Manan Patel the Fed is phasing out purchase of mortgage backed securities which is driving rates higher. They are doing this to cool down the overly hot real estate market, although it is not having much effect yet.

I have seen several posts recently with people quoting interest rates and for non owner occupied investment, people have been quoted between 4.5% and 4.8%. You can expect those rates to be about .5% or so above owner occupied. Based on that, your quoted rate is right in line with what people are seeing right now. I also checked interest rate sites and the range today is 3.9% to 4.25%, but it also depends on other factors like credit score and the lower rates may have added fees.

@Scott Trench if you look at bankrate.com, they have a tool that allows you to search interest rates at various lenders. They just have a feed setup and get daily rates from their lenders. You have to adjust criteria to get an accurate rate, due to the variables that affect rates. The website is funded by referrals. BP could absolutely setup something similar. It would be a useful tool for members and it would generate revenue for BP, allowing you to continue producing awesome content. You could also do something similar for credit card offers and savings accounts, which are both common questions on BP. There is no reason that BP shouldn't keep these people on site searching. Most of the travel sites out there are partially funded by credit card offer referrals, so I know it is a good revenue stream. Maybe some vendors would even have special offers for BP members!