All Forum Posts by: Michael Craig

@John Gach great thinking outside the box but avoid penalties! One thing to look into is are you able to take a loan against your 401k? Usually, taking a 401k loan has no penalties, no tax implications and the interest you pay goes right into your 401k account.

@Mal K. I understand these situations are frustrating and uncomfortable. By law, you are required to send a security deposit return letter to their forwarding address (hopefully you have it). This letter should have an itemized list of deductions from their security deposit (missed rent, damages, etc.). Explain in the letter that legal action will be taken to reclaim the amount they owe. 

I have had better luck with having an attorney sign the security deposit letter, it may cost you a little more up front but it beats the alternative.

@David VanWinkle good questions. In NY, if you want to terminate/change a month-to-month agreement you will need to deliver a 30 day written notice.  Note, the 30 days begins on the next billing cycle (so if you deliver on 14 January, 30 days begins 1 February), learn your local laws.

Once you close and get situated, I would have a professional conversation with the tenants that sets the expectations - also, present the new lease with the new rent amounts and security deposits. Let them know that if they want to continue living on premise they need to be under the new lease agreement (month-to-month may not be a bad idea since you do not know the type of tenant they are and you haven't screened them - this will make it easier to evict if need be). Let them know they have a week (or what you feel is adequate) to review and sign new lease and provide the new security deposit. If they do not meet the deadline, present the 30 day notice and get them out.

@Dan Maciejewski exactly what I was getting at. Thank you

@Dan Maciejewski thanks for the response. Any wireless solutions?

Happy New Years BP. 

I have a question about adequate walkway lighting on a 3 family property. 

-Off street parking is in the back

-Units 1 and 2 can be accessed from the back

-Unit 3 access is in the front, which requires using the rear to front walkway (when coming from off street parking)

-Units 1, 2 and 3 have patio lighting, the rear to front walkway does not - resulting in poor lighting at night

Am I responsible for providing adequate lighting for the walkway? Any recommendations for alleviating this?

Thank you

Hi @Sharon Williams, first you want to get very familiar with the tenants existing lease (is it month to month, who paid a security deposit, who pays the utilities, how much is rent, etc.). 

You will want them in agreement with you ASAP (not with the old lease), so if they are month-to-month and you decide you want them living on your premise, be sure to have your own lease drafted and ready to go under agreement. If they are not month-to-month then existing lease is in effect.

@James Nix good choice of loan.

1. This is a good question and to be honest I was in the exact situation when I closed on my first deal. Firstly, I hope you have a place to stay while you get one of the tenants out because it doesn't happen over night. Next, you need to feel out the situation, have a conversation with the tenants and see what they want - who knows, maybe one of them might be looking to move out on their own terms. 

If the tenants both plan on staying a method to choose which one leaves can be based on which lease ends first. 

If both tenants are month-to-month then you have to decide. Take time whenever you are at the property to talk with the tenants, find out who they are and how they treat the property. Talk with existing owner/manager and see if they can tell you anything about the tenants.  When I had to choose between which tenant had to leave it wasn't easy and to be honest, the one I decided to have stay was the one I initially wanted to leave, first impressions are not everything.

3. I can see that strategy being a good one if you were partnering on a larger deal where you were not living on site. Because it is just one other tenant and you are living onsite you want to be honest as possible. I found with existing tenants they feel as though they have seniority since they have been there longer so just be straight up with them and set the expectations - you are the new owner. They will respect you for it.

@James Nix congrats, you are making a good move! 

How are you funding this deal? Are you getting a loan? If so be sure to follow all steps from the lender in order to be approved.

You will want the tenants in agreement with you ASAP (not with the old lease), so if they are month-to-month and you decide which tenant you want to have living on your premise, be sure to have your own lease drafted and ready to go under agreement - this will convey the message that you are the new landlord. You may want to continue month-to-month in the beginning since you haven't screened the tenant. This will make it easier to get rid of them if you decide you do not want them living at your house.

To get an existing tenant out you will need to provide them with a notice of non-renewal, stating that their lease is terminated and they need to move out within a certain amount of time (this applies only if they are month-to-month). If their lease is still valid you will need to wait until it expires to provide them with the notice of non-renewal. 

Be upfront with the existing tenants and tell them your motives. They may agree to moving out on their own terms. 

Again, congrats and finish strong!

@Parker Lewis great questions:

1. you are absolutely right about both statements, you have to decide which fits your needs better. If you are young and do not mind living onsite with multiple tenants, go for the 3-4 family. If you don't mind taking investing a little slower to get experience, a duplex is just as good. The main thing is that you are taking action. The irony is duplex contains a higher risk because of the smaller returns. Also if you have a tenant move out you have 100% vacancy where as it would be 33% vacant in a 4 family (assuming owner occupied). 

2. FHA allows you to purchase a home with only 3.5% down. The amount you need to save depends on the price of the homes in your market. Just an FYI, closing costs ran me about $8,000 all said and done. If you are afraid you have spread yourself out too thin after you close, consider utilizing a 0% apr credit card just to get you started and to get your units rented out. Also, have you considered taking a loan against your 401k to put towards your down payment?

3. Keep scanning the market and analyzing deals. Utilize an agent who sends you every multi-family in your market. Drive the neighborhoods you wish to purchase your house in to learn the markets. If you just don't give up, the right deal will come along.

4.The biggest help for me was listening to the podcasts daily (there are over 300 now) and utilizing real estate calculators to figure out cash flow and monthly expenses.