All Forum Posts by: Marcia Maynard

What is the most compelling reason for why you and your brother are considering this?

First, be clear about your investment goal.  Does it make sense to buy the property in the first place?  Is the price right?  What kind of cash flow do you hope to achieve? Is this property likely to gain in value over time?  How will you benefit? How will your brother benefit?

Second, separate the investment part from your brother as a tenant. 

• Going in 50/50, you would split the down payment and the mortgage debt service.  You would also split equally the maintenance and repair costs, as well as taxes and insurance. Put your agreement in writing and make it a binding contract, such as a partnership agreement.
• Will the property title and mortgage be in both your names? If only in one name, then there would be more risk for that person and they should be compensated for the extra risk.
• Determine how much money the unit would generate at market value. Or less if you want to give your brother a break. But basically, the entire unit would have a rent value. Then your brother would rent the entire unit from the partnership at that value. You would draw up a rental agreement, so the terms are clear. 
• Keep partnership accounting separate from personal accounting.
• The rent your brother pays would be paid to the partnership and you both could take draws from the partnership as you determine is prudent.
• Your brother can sublet the extra room or even both rooms, if you agree. It could be boon or bust for him. All profit or loss from the subletting would be your brother's.  There's his incentive.
• Your brother, as the tenant, will be responsible to establish and maintain utilities in his name. 
• You could share maintenance duties, or since he is living there he could take care of all maintenance needs. If he takes care of all maintenance needs, then he should be compensated fairly for doing so. Either way, as a partner, you need to be kept in the loop.

Good luck!

• Did the PM contact you about this matter at any point prior to the collection agency contacting you?
• Why was the tenant not held responsible for the bounced check? 
• What did the PM do to attempt to get the funds repaid by the tenant? 
• Why didn't the PM keep you informed along the way?
• Why is it the collection agency is going after you instead of the tenant?
• What does your contract with the PM say?

If you are in the same town as the property management company, I would respectfully ask for a face-to-face meeting with the owner of the company and a review of the books. If you are at a distance, see if you can video conference. An attempt should be made to sort this out between you and the property management company. You can't ignore this, as your credit is on the line since the PM sent this to collections with you as the debtor. I would also contact the collection agency to keep them informed about what is going on. You need to sort this out before they contact the credit bureaus and make a bad mark against your credit.

I'm not in the property management business, but @Nathan Gesner is. Perhaps he can shed more light.

Credit scores are not as important to us as rental history and a sufficient and reliable source of income.  There are many reasons a persons credit score could be low and not always indicative of a person's ability to be a good tenant.  When they sign the rental agreement as "jointly and severally liable" the person with the best score will mostly likely make sure the rent and utilities get paid.

I would show the unit to all of those you have scheduled. The more the better. You will benefit from a big pool of candidates. Interview the potential renters prior to the viewing to make sure they at least meet your minimum criteria to rent. Meet them at the viewing and answer questions they might have about the property. Observe their behavior and what they say. Take note on how they present themselves and what their car looks like (clean & tidy or trashed?).  Let all of those who are interested apply. Then review the applications and rank them, with the most promising first. Process one application at a time and offer to rent to the household who first qualifies. Return the application fee to those whose applications you did not fully process. 

When establishing minimum criteria to rent consider Residence/Housing History, Income/Employment History, Financial/Credit History, Legal/Criminal History. Let applicants know your rental criteria in advance so they can choose not to apply if they know they won't qualify. This will save you both time and money.

Here's our criteria regarding Financial/Credit History. Note there's no mention of a numerical score.

FINANCIAL/CREDIT HISTORY

1. No outstanding debt to previous rental property owners.
2. No outstanding debt to utility companies.
3. No outstanding debt in excess of $1000 that is not in a payment plan.
4. No excessive monthly financial obligations - more than 20% of income.
5. Lack of credit history or marginal credit history may result in additional security deposit.
6. Derogatory credit (past due accounts, collections, charge off accounts, tax liens, judgements in excess of $1000 and/or bankruptcy) may result in additional security deposit or denial.

Note: Sometimes the credit report is inaccurate. Double check. If the tenant has small unattended debt, we nudge them to pay that off now or we raise our security deposit by at least that amount or even double. :-)  Most will do the right thing and pay off their debt. It's a life lesson that will help them in the long run.

You will severely narrow the pool of potential renters by forcing them to pay by one means only. Tenants in class "C" properties are less likely to have bank accounts than tenants in "A" and "B" properties. Some may even have less access to online technology. There are other ways you can set it up for tenants to pay rent and have it deposited into your account. "PayNearMe" comes to mind. May require a mobile phone. Most tenants do have mobile phones, even if they don't have a bank account.

We had a tenant ask for a 6 foot high fence for the backyard. We asked them why and they replied, "So we can get our daycare licensed." We didn't know they had already started up a daycare. We told them we would not be building a fence and they would need to immediately stop the daycare business. They weren't licensed and insured for daycare. Then they backtracked and said they were only "babysitting" some of their friends kids. Either way, extra liability and extra wear and tear.

If you want to help your tenant set up a business out of your rental property, then you better go in with eyes wide open.

• Find out what licensing is required in your jurisdiction for this type of business. The health and human services department may have a say, as well as the local city/county planning department, and the fire marshal.
• Find out what property modifications would be required. How much square footage of play/care area per child. Indoor and outdoor safety considerations.
• Talk with your insurance broker about proper coverage for you and for their business, especially liability.
• Consider the impact on the neighbors.... noise, traffic, parking.
• Consider the extra wear and tear and how you would be compensated.

You say these tenants are just renting until they have enough in savings to purchase a house of their own. How far away are they from that?  I see you bending over backwards to help them make this happen and then they leave shortly thereafter. Not a win-win.

I suggest you order the booklet from EPA "Protect Your Family From Lead In Your Home" and give one to each household upon move-in. If you do any renovations while the tenants are living in the home, give them the booklet "Renovate Right", also from the EPA.

Most importantly, learn about lead-based paint. how to test for it, how to encapsule it, how to remove it, when it's considered a hazard and when it's not. Also find out if there are additional laws and ordinances in your jurisdiction that you must follow.

Keep the dated and signed disclosure form "forever".  You never know how many years down the road someone will suffer from lead poisoning and try to pin it on you.

I already have peace of mind.  :-)  Small potatoes.... an 8-plex with occupancy of one or two people per unit.  One washer and one dryer.  $1 per load for each, best bargain in town.  We collect the coins out of the machines once a month and take them straight to the bank. The machines came with the property when we bought it in 2005 and they are all mechanical, no electronic parts. We have a great appliance repair company that will come whenever there's a problem. I'm told the machines are easy to work on, rarely need service, and worth keeping since they are work horses.  The vent from the dryer to the outside exhaust is only 2.5 feet, easy to clean. Never had a clothes claim. Only changed the price once and saw how it was done; coin slots are simple. We have insurance too. One of our tenants keeps the laundry room tidy and clean for $30/month. Our tenants get along with each other fairly well and stagger their use of the laundry, so rarely is there a conflict. But thanks for the info. If we ever have a large complex with a large laundry room operation, I'd consider outsourcing.

Sorry. I don't follow you. Why would you say that? The whole point to deter the houseless/homeless from coming to the property.

• Consider CPTED... Crime Prevention Through Environmental Design... look up the principles on the internet and employ them.  
• People (homeless, houseless, or otherwise) won't hang around if their needs aren't being met, including the need to feel welcome and safe. Be clear about your boundaries and enforcement of your rules.
• Signage helps broadcast your boundaries and rules. So use it to deter outsiders and to reassure those who have a legitimate reason to be on the property.
• Secure the laundry room with proper locks, light, and surveillance. Consider leaving a light on at all times... LED bulbs use very little energy. Take handles off of the utility sink for awhile until you get this under control.
• As the new owner of the property, you will want to introduce yourself to the current tenants, get them on your rental agreement as soon as you can, and establish good property rules.  It won't take long for the current tenants to learn your management style is different from the previous owners if you spend some time up front at the property and your presence (or that of your designee) is visible.
• It may be that some of the current tenants are enabling homeless people. They may be turning a blind-eye to what is going on or even providing food and clothing. Set the tenants straight about who is allowed on the property and who is not.
• Look for resources in your community that serve people who are houseless and homeless. Make this information available to those who need it.
• Establish and maintain a good relationship with local law enforcement.
• Be respectfully firm and fair.

@Michael Calderaro   I see the coin-op laundry as an amenity we provide, but our business model is not based on that.  Our business is....

"We strive to provide safe, clean, affordable, comfortable, and quiet housing for responsible renters in the neighborhoods of West Vancouver."

I appreciate your post because it encourages me to think about why and how we provide this amenity.