All Forum Posts by: Kathy Henley

Hi @Ezra Richardson  On the day of close, the tenant needs to know where to pay rent and how/where to make service requests. Their current lease is in play, regardless of the owner. Until you own the property, you have no authority.

A hello letter announces the change of ownership and answers the above issues. You could also address the renewal issue, in the same hello letter. A month to month lease is renewed every month unless either party (Lessee or Lessor) says something. I use the hello letter to work as a legal notice by asking them to sign whether they want to vacate or to renew with the new owner (the current lease may have language of 30 or 60 day notice.) If they wish to stay ('which I hope you do', I say) the new rent will be 'X', starting on this date 'X'.  Negotiation and education may take a few days, or a month, but both parties know right away whether the inherited tenants will stay or go. The new lease agreement is negotiated, signed with the new terms and deposit is paid (how ever you want to collect it.)

@Quinten Jones Having my CPA own investment property was a prerequisite! You know stuff. Market your skills! Do you want to be passive or active? You are in the driver's seat. 

Maybe you would be interested in being a partner/investor with one of your successful clients? 

@Tri Nguyen College towns have plenty of property management companies. Call on a few and pump them for information / possibly working for you. They know stuff. Are you in town to see the property? Time to gather a team.

@Matthew Banghart I have been trying to get my mother to house hack in one of my vacants for years - no go yet. She asked if I would add a dishwasher for her tenancy and I said no, but she could pay for the upgrade. It's business. 

It would be no different than any other tenant - lease & security deposit. 

@Kathryn Schauer It depends on how long the inconvenience occurred and how high the rent rate. I might have delayed the move in date a week. $80? Have something in mind but ask the tenant to speak first. They often ask for less than I expected. 

@Austin Chau There is no income until the expenses are paid, so that will work itself out. Your name may be on the mortgage, but the monthly payment is typically paid from the rental income. Will you be doing this differently?  If all goes well, you might divide the cash flow quarterly, or yearly? You and your partner make an agreement. If expenses exceeds income, each of you contribute according to your equity share. 

How much a down payment? Typically it is 25%. This number usually describes the equity of the property. You and your partner are counting equity differently so, YES you need an operating agreement describing your relationship. There are many facets to owning the property. Each responsibility might be assigned a value which adds up to the equity in which you outlined.

How will you take title to the property? Who is paying the bills and keeping books? Who is the project manager to oversee the maintenance? Who deals with the tenants, collects the rents and signs the leases? Who schedules the inspections with the city and handles business mail? Who does the repairs? Where does the working capital come from?  Get this ironed out before you open for business, even if the partner is your spouse.

A separate bank account for all of the business transactions makes it easier to reconcile. LLC is not required.

@Ethan Griffel The down payment is the investment capital. Capital invested well should give us a return, like the stock market averaging a 8% return, or something. So the expense to borrow capital does affect the return. But why get bogged down? To give myself courage, I thought of the interest and paydown payments of the HELOC as if my personal rent had increased a bit (all fiction, since there was a mortgage on our primary home) but it was dead equity and I wanted to put it to use. I paid it off as soon as possible. My CPA did not consider the interest payments to be a business expense.

Income properties have a few things going for them - income, depreciation deduction each year, equity build up because of market conditions, equity increase because my tenants paying the mortgage, and as a hedge on inflation. Therefore, I make sure the deal brings in more money than goes out.

@Stelljes Tate Yes. I borrowed on the equity from our primary for the down payment of an invest property. It starts with an appraisal and HELOC application of the primary. I met a very smart loan officer at one of the big banks who walked me through it. The second step is to find a decent income property, which is in a solid area (where people want to live) that can pay for itself through its rental income. You will need to qualify for a loan for buying the income property and the tenants will pay the mortgage. There has to be plan on paying off the HELOC. There needs to be reserves for maintenance and repairs.

@Shawntinique F. When looking for a long distance manager, the web helps a lot. Many sites show current listings and phone numbers to area property managers. I went to yelp and read reviews the same companies (unhappy tenants express themselves well.) This gave me the names of companies to call. I interviewed many property managers until I found one which thinks like me, in how to care for the property and treat the tenants. Then I visited in person, my next time in town, and met face to face.

@Thomas DeRuvo Get a job in a property management office and keep your ears open.