All Forum Posts by: Nancy L.

@Nalo Coban A little off-topic, but just wondering if this property is in Charlotte or somewhere else? Do you find that to be a good place to live/invest? I've heard great things about the city and it pops into my mind on occasion as a possible nice and reasonably affordable place to move to escape the freezing cold winters!!!!

I have a good friend closing on his first property today, a 4-plex in a lower income area outside of philly, he will be self-managing. I am trying to put together some first steps, but being only part-time myself, wanted to get some input. I didn't realize he had moved ahead with this property until I got a text this AM that he was closing, or would've gone over stuff more gradually! He really needs a win on this, and it will be helpful for me to have this input for next time too! If there are other threads or resources to check out, please let me know...

My most immediate question is about running credit on applicants as he has two vacancies and has asked me about this. I have my tenants pull their own reports from a free site. I haven't been able to figure out how to run credit. The companies I looked at for running credit seem to require some verification of your business/office address, or some such thing? How does a person working out of their home run credit??

What I have so far:

- Join BP! :-p check out landlord/tenant articles and threads

- An introductory letter to tenants covering where to send rents and maintenance requests (reiterate lease terms for late payments? anything else?)

- Business/rental license

- Transfer utilities (did I read somewhere that it's a good idea to take pics of the meters?)

- Get landlord insurance

- Find out when trash fees and taxes are due

- Inspect all units, list any repair needs, appliances, mechanicals, age and condition; check smoke detector batteries and for leaks (take pics?) (I believe he did have a home inspection, and I imagine a walk-thru today, but still feel this is important to do...)

- Create a budget

- For the vacancies: Address any repair needs, create ads, screen tenants, create leases

- He lives a bit far from the apartment, I'm going to STRONGLY advise him to try to find a nearby property manager who will be on-call for repair emergencies. Any thoughts on locating someone to take just this aspect of the job?

What am I missing???

Is it viable to scale back and do a smaller project? 70K cash could certainly get you in the door somewhere in my area. If it were me I'd be looking to borrow maybe 20K more somewhere, which may be easier to find (and cheaper to carry), but I have no doubt others in Philly have managed on 70K all in. Deferred interest credit cards would also be a possibility which is safer with a smaller amount borrowed. Once you had a profit from the first flip, you'd be able to reinvest in increasingly larger projects. However if nothing in that price range is possible near you, you'd be looking either at a long commute or remote management (the later of which I've never considered personally but is covered elsewhere on BP I believe).

@Bruce Kozak I do not do this personally, but know someone who charges a fee of $12.50 per adult for water, with a provision in the lease that says any leaks reasonably observable by the tenant must be reported within 1 day or there will be a charge for the additional water use from that month's bill.

The "norm" is to have a job at whatever minimum salary will keep a person working to benefit someone else's bottom line, and then turn around and spend every dollar earned, again to the benefit of someone else's bottom line. Many people don't have the vision, inclination, or self-direction to move beyond the salary way of life, but over-consumption is a vice, which IMO is deliberately perpetuated to the detriment of those who are caught in it, and the benefit of those who profit from it. But here there's a whole network of people who question at least one end of this status quo! How you would define over-consumption, as @Serge S. points out, is relative. To me, it's any spending that can reasonably be avoided and gets in the way of larger goals.

@Steve B. everyone likes free things/discounts... If it means one month less vacancy to offer something like that, even without raising the rent for the other rents, you've broken even. I'd be a little hesitant to collect too little rent up front under the theory that people who can come up with 2 months rent up front show a sign of financial stability. However, I might offer a 50% first months rent discount in your situation, and possibly additionally offer a larger incentive for those with good credit...

@Account Closed I like the idea but would question how many people are good at associating far off rewards/consequences with their current choices (as in, if I pay on time now, I'll get something 10 months from now). Particularly people who are earning an appropriate income but are inclined to pay late anyway aren't the best at this, otherwise they might be stronger at budgeting.

An idea I heard that was similar that seems like a good one to me (and offers an immediate benefit to the tenant) is to raise the rent by, say, $20, and then offer a "paid on time reward" of a $20 discount. This is actually more a less a different way of describing a late fee, but it sounds much better somehow! Also, this gives a way to collect late fees in an area where they are not able to be included when suing for back rent.

I do $10/day late fees, so in this example, on day 2, the tenant would lose the $20 discount, on day 3, would owe a $10 late fee, on day 4, a $20 late fee, and so on. (I do cap the late fees at a certain point, but have never hit that point with any tenant.)

That being said, I don't actually implement this idea personally because I want to be able to advertise the lowest rent possible. I do my best to avoid or manage potential late payers in other ways. 

@Steven Hamilton II Good to know! Thank you for the reply.

@Steven Hamilton II Thank you for the clarification. What's the advantage of the C-corp for those with a small volume of flips? @J Scott , I appreciate the example, that makes a lot of sense.

@Steven Hamilton II , @Jon Holdman , @J Scott Thank you so much for this conversation!!! It answered many questions and cleared up a lot of confusion for me as well.

As an aside, does anyone think that perhaps the IRS is vague on purpose to dissuade people from taking advantage of loopholes in the letter of the law? 

Also, I read this today on s-corps, which if I'm understanding correctly, would reduce self-employment tax? "The S-Corporation files an informational return (1120S) and any profits or losses “pass through” to shareholders who pay income tax on their personal income tax returns. The S-Corporation sends K-1s to shareholders (stating the % profit or loss). Shareholders can also deduct ordinary corporate losses on personal tax returns. This income is not subject to Self Employment Tax (SE Tax) and offers the ability to reduce the Social Security Tax ("SS Tax") burden as long as the officers take a reasonable salary. SS Tax is roughly 15%." (http://www.dealmakerlibrary.com/which-entity-is-best-for-flipping-properties.aspx)