All Forum Posts by: Joe Splitrock

@Steve Anderes and @David Niles not sure if you noticed, the original post was from 2011 and the user has not posted on BP since 2016. They probably won't reply;)

Many of our rental properties have damaged wood under the sink from old leaks. Most of our cabinet had particle board, which gets damaged quickly by water. We take out the damaged board and replace it with plywood. We build up the plywood a little bit in the back, so it slants towards the front. Then we take scrap vinyl flooring and glue it to the board. I always keep the extra pieces when flooring is redone, so there is no cost. When there is a leak, water runs out and the tenant sees it. This prevents leaks from going unrepaired. 

Quote from @Gary Robert Burnham Jr.:

In the 12 years being a property manager of my own properties I have meet some great tenants.  I have also turned away some potentially great tenants because they simply did not have enough cash to move into my units despite 750 credit scores and ended up taking vacancy for a month.  I started asking myself why I was turning away these people simply because they didnt have enough cash to move in at the time.  So instead of turning these people away I simply work with them.  Lets say my 2 bed rents for $1500 here in West Hartford, CT.  I need a total of $18000 in the 12 months they are renting.  What I did was make the rent light in the beginning first 3 months, added more in the next 3 months......etc......This way it helped my 750 credit score tenant get the security deposit back from the previous apartment and get comfortable in the unit with my property.  Is it somewhat risky, yes....but I'll take a 750 and great person all day and bet on them then taking vacancy.  Any other ideas let me know but I found an escalating lease to work great when a great tenant is light no cash to move in.  

 Requiring rent and deposit upfront is part of my screening process. If someone can't come up with the equivalent of two months rent, they will struggle to cover rent. If people want it bad enough, they will get credit card cash advance, borrow from relatives, etc. I have broken up security deposit in the past and it has worked out, but I probably just got lucky. 

Another option today is security deposit insurance through companies like Rhino (sayrhino.com). The tenant pays them a small monthly fee and Rhino insures them for damage. If there is damage, the landlord places a claim and Rhino pays the landlord. Many property managers offer this option. It is especially useful in states that have strict rules around security deposits. It avoid the hassle of return deadlines and interest bearing accounts, etc.

I agree that breaking up a deposit is low risk if the tenant has good credit, but I am also surprised someone with 750 credit wouldn't have the cash.

@Joel Betances you have to apply for unemployment when you lose your job and you have to provide proof you are looking for a new job. The rules vary by state, but the maximum period you qualify is 26 weeks (6 months) and that is with regular recertification. She may be eligible for rent assistance, but given the facts, I would not renew. 

FHA is for owner occupied only, failing to occupy is mortgage fraud. You will sign a document stating you will occupy the property. During the underwriting process, they will verify that a unit is vacant or has a lease that can be terminated. They will not write the loan if all the tenants are locked in a lease term. If there is a month to month tenant, you need to serve notice to vacate and if they don't leave, you need to evict. 

As far as enforcement, they do have testers that verify occupancy, but it is sporatic. Your drivers license, voter registration, utility bills and tax address are all proof of occupancy.

Only a small number of people committing any crime get caught. When you say "more important is enforcement" this kind of mentality is what gets you in trouble. You think you won't get caught, so you take a chance. You may even think you outsmarted the system. Then you get confidence and do it again, but next time you take bigger chance. Eventually people get caught, sometimes on their first attempt. 

You may need to open walls which could increase expense. There is a wide range.

Quote from @Kristina Anderson:

All good points, thanks everyone. I was pressure testing what I'd heard. We definitely have the seller going on lease as part of closing package, and there will be a security deposit payable at that time, as well. Because we aren't moving into this space, we will consider the seller another tenant at that time and obligated to all the rules and policies stated in the lease. 

 The problem can be that the tenant was the owner. They often have trouble shifting the mindset. An owner can do what they want. Keep a close eye on them. Do you have local PM to help?

Quote from @Kristina Anderson:

@Joe Splitrock - the escrow would be equivalent to a security deposit, correct? In this market, it is possible we could have lost the deal if we hadn't given the 30days "Free" but yes - the lease starts after that and we're charging market rates. At that point, I'm happy to have them stay as long as they want :-)

 I have heard of escrow being much higher than security deposit, like $10,000. This is so the seller has big motivation to leave. The problem is you are likely not screening them as a tenant, so you are not sure what you are getting. I have heard some nightmare stories of sellers that stayed behind. I hope your experience turns out better. 

I would tell her, no increase, but she needs to start paying the water bill. Obviously that is the equivalent of a $75 increase, but she also has some control over the cost by monitoring her water usage. Just make sure the water is metered separately for each unit. If the $75 water bill is for all three units, then I would push a small increase like $25. 

Nobody is going to move over $25. Increasing $100 when other comparable properties rent for a $100 more, that could get them property shopping.

Actually one caution on the water bill... See if your city/county holds the owner responsible for water bills not paid by tenants. This could be a good reason to leave it in your own name. I have heard of tenants not paying a water bill for over a year and the owner gets stuck with the bill. They can even put a lien on your property. This is why some owners choose to pay the bill and just include the cost in rent. 

When we sold our last house, we negotiated 45 days in the property after closing. The buyers had us sign a lease with specific move out date and penalties for not complying. They charged us $1 to live there. In our case, we needed extra time because our new construction home was not done yet. Find out why they need to stay. If you let them stay, I recommend two things:
1. Have them sign a lease.
2. Hold back some money in escrow at closing that is payable after they leave. 
These are just precautions to make sure they leave on time. I have heard of sellers asking for 30 days, then telling the buyer "we need more time". If there is no lease or no monetary incentive, your only incentive to get them out is eviction. Cover yourself upfront with the escrow money.

Quote from @Dawn Brenengen:

A BP favorite is @Natalie Kolodij! 

 Natalie is good, ask her for the Joe Splitrock discount.