All Forum Posts by: Nathan Gesner

If you are just getting started, I don't recommend you borrow the down payment. Why would you borrow now and then use your own funds for the next purchase? It makes no sense.

If you're serious, you'll put your own money down. Cut your teeth and make sure you can handle an investment before making plans to buy the next one. Once you've proven yourself, then you can consider a higher-risk situation with 100% leverage.

@Thomas W. do a search for @David Greene. He's a REALTOR in California that invests in other states. He has a good podcast that explains the basics and he has a good book "Long Distance Real Estate Investing" in the BP bookstore that is very good.

I manage around 300 rentals and most of my owners are out-of-state investors. It's pretty common. However, I think you are better off investing locally where you can watch the property and learn more quickly.

I think it's a mistake.

If this is a $200,000 home and you require 3.5% down, that's $7,000.

Tenant lives there for two years and fails to buy. He also fails to make two payments and you have to evict ($3,000+). Once you get the home back, you discover he tore out your carpet and replaced it with Pergo flooring that was installed improperly and has been damaged by water and animals ($6,000). The entire house reeks of dogs and cats, walls need to be painted $1,500), a couple doors and windows have to be replaced ($2,000), the sprinkler system is broke and the yard is full of weeds and dirt ($2,000). And the house will sit empty for at least two months while you try to get it back in shape ($3,000)

Without even trying, this occupant has cost you $18,000 in unpaid rent, vacancy, cleaning and repairs. The scenario I'm painting is not exaggerated. I haven't seen many rent-to-own situations personally but the ones I have seen and the ones I've heard about have a strong tendency to go this way. Also, the tenant will most likely bail when the market takes a turn for the worse so you'll have a hard time getting top dollar for it after they leave and you fix it up. 

I would only consider a rent-to-own with a significant, non-refundable option of 10%. Even then, I would make the entire deal contingent on them maintaining the home in good condition and subject to your inspections.

I don't think you have the experience and knowledge necessary to ensure you're protected so I recommend you reject the offer.

1. If you have a "No Pets" policy then the breed of dog doesn't matter. Give them a "Cure or Quit" notice and demand they remove the animal or face eviction. I also include a fine ($50 per day) for any pet violation.

2. Even if you accept pets, you can reject any animal considered a "dangerous breed" by your insurance company. Call them and ask for a list.

He should be able to provide pay stubs or something from his current employer. He should be able to explain why his credit report is blank (maybe he pays cash?).

Do some more research before throwing him out.

It's not necessarily a matter of time; it's a matter of risk.

You can hire a leasing agent to handle the screening which is probably the most important step. Once the tenant is in place, you handle the rent collection, maintenance calls, etc. However, you still run the risk of getting so busy with your regular job that you lose sight of the rental and things slip through the cracks or you don't have time to deal with late rent or you forget to do an inspection...

A property manger costs about 10% which is $2,400 yearly on a $2,000 rental. A bad tenant that fails to pay rent for one month and leaves the place damaged could easily cost you $5,000 - $10,000. To me it would be worth the peace of mind.

This doesn't mean you can hire any PM! You have to do your research, screen them, and choose one that will protect your income and your property. You can start by going to www.narpm.org and search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start.

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!

4. Review their lease agreement and addendums. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance or problem tenants. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

I hope this basic guide helps. If you have specific questions about property management, I'll be happy to help!

You can start by going to www.narpm.org and search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start.

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!

4. Review their lease agreement and addendums. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance or problem tenants. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

I hope this basic guide helps. If you have specific questions about property management, I'll be happy to help!

@Thomas S. gives good advice but I would recommend you hire a good property manager until you're situated and educated. You can start by going to www.narpm.org and search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start.

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!

4. Review their lease agreement and addendums. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance or problem tenants. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

I hope this basic guide helps. If you have specific questions about property management, I'll be happy to help!

Written lease, preferably one that addresses issues specific to a roommate situation, and ALWAYS follow the law.

You don't own the property so you can't sign contracts on it yet.

Once you own the property then you can sign a lease agreement and the bank may consider that income. Until you own it, you are probably out of luck.