All Forum Posts by: Penny Clark

@Mary D., I'm assuming this is the listing agent you're referring to, right? The only way to be sure is to ask to see the income statement or tax return, which many owners won't want to give out if they are not being honest. Many agents out there may not know what a moneymaker is because they fail to include all the calculations such as vacancy, repairs, cap expenses, etc. Before I'd buy anything, you're going to want to see the leases and payment history (so you know what is in them), estoppel certificates ( tenant agrees in writing what rent is they pay, what security deposit was they paid and other financial terms), six months of utility bills and make sure the building is insurable. 

If you have no idea on what the rents are, what the payment status is of each tenant, you can't do a proper assessment. I've seen some owners do huge rent increases just prior to putting their building on the market to make their bottom line look good. Oftentimes if the tenants know it's up for sale, they'll stop paying rent or pay partial rent - how would a buyer know this without written records?They won't. 

Unless you have the numbers from their tax records, or an accountant's expense/income report, you're buying blind. If you decide to risk it and buy it, make sure you get all inspections done and get an accurate assessment on market rate from a property management company  

@Steven Lopez, congrats on your decision to jump into real estate investing, and house hacking is one of the most affordable ways to do it! If I were you, I'd use either Airbnb (Al Williamson has had great success using this site for his month to month rentals) as well as Craigslist. 

When we did this for a house we rented rooms out of, we got a lot of response by showing pics of the room furnished as well as pictures of the amenities available to the tenant for their use (kitchen, living room, yard, washer/dryer, etc.) You will also want to include share of cost for utilities, internet, etc. @Donna Mixon gave a good suggestion regarding having an extra private space for tenant to use for storage. This could be a small shed in the back yard or inside storage area in the garage or something of that nature.

For background checks, Cozy.com is free and many investors on this site also use Smart Move which the prospective tenants pay for the screening process and the results are sent to you. Whatever service you use, screen credit, income, and rental history as carefully as you can because your ability to get paid is 99 percent dependent on it - seriously. I would also have a written rental criteria to hand out to each applicant (example - credit score minimum, income minimum, etc.).

Since you are renting out a room, you will want to find out what type of lease is required. For example, a lodger's lease is often used in these situations in California. You will also want to become familiar with the landlord-tenant laws in your state as well as take a Fair Housing class.

I would also set up some house rules that they agree to with a signed consent should problems arise in the future.

Good luck and share your house hacking experience with the Community here. 

@Katherine Rossel, Learn the laws in your state so you know your rights as a landlord and those of your tenant. If you live in a tenant friendly state, daily visits to ask for rent might be seen as harassment by the court. In the future, if a tenant doesn't pay, issue the three day or notice required by your state. The tenant will know you mean business and will budget accordingly to make sure rent is the first bill they pay.

Good luck!

@Mark S., Welcome to the BP Community! Don't let your age or disability discourage you, and by the way, thank you for your service. My husband and I didn't start RE investing until we were past 45. Being a vet, you can look into a no money down VA loan for your first property - maybe a duplex. However, before you start investing, get your feet wet and learn all you can by reading the forums, blogs and listening to the podcasts. A great free read on this site is Brandon Turner's The Ultimate Guide to Real Estate Investing. With the right knowledge and the support this community provides, you will gain success and reach your investment goals.

Good luck!

@Colter Orr, I'd do some research to first, make sure it is legal to add such a window and what the cost is to get the permit and inspection. As long as it's legal and just needs to be permitted and work inspected, use this as a way to negotiate down the price of the home with the seller. Have you done your homework to see if it'd even be worth renting out once done as opposed to just having the SFH as a rental?

@Chuck Win, much of what Robert said is correct. When interviewing property managers, the first question I'd ask is when can I expect gross rents to be deposited into my account? Most PMs collect rent between 1st-5th, send out 3 days no later than the 6th and start cutting checks to their owners no later than the 7th-12th depending on the timeliness of tenant payments. If you aren't seeing your deposits posted until the 20th, there is something wrong. Either the PM is not sending out 3 days until the 8th or the 10th and depending on how they were served, (nail and mail, personal service) late pays don't come in before the 16th or 19th. If this is the case, instruct your PM to shorten the time period before they send out a 3 day to the tenant (assuming the tenant's late pay is the problem). Even PMs will sometimes assume the rent is not late until it goes past the date that results in a late fee. That is not the case. Rent is late if it is paid ANY day after the first unless otherwise specified in the lease. 

As an owner, you are always in the driver's seat when it comes to making decisions about your property. Either educate your manager to collect the rent in a timely manner or hire someone else who will.

Good luck!

@Kimberly Renken, Welcome to BP! I hope to see you at one of the local events and would appreciate it if you could share one of your flip stories. My husband and I have only done buy and hold but I know flipping is something we would consider doing in the future with the right property.

@Matt Thielke, I think that is a wise move. Getting rid of student loan debt will improve your credit score, lower debt to income ratio so you can buy a better investment. If you can owner occupy a duplex or fourplex you will be way ahead of the game! Good luck and welcome!

@Aaron Bry, Welcome to BP! It's great to see someone so young thinking so far ahead about the future! There are still deals around in Sacramento, but many of them get snapped up quickly (market or off market) so you need to have financing lined up first (proof of funds, pre-approval letter, earnest money). Most decent areas for SFH won't cash flow unless there's serious repairs needed or a highly motivated seller. Have you considered looking at occupying a duplex or fourplex for a year or two? Financing is less expensive and it would help you gain experience in being a landlord. Most of the deals my husband and I did were bought during the Great Recession and were not listed on the MLS. Probate sales are another source to check for finding deals.

If you need any assistance with determining rental values in the Sacramento market, feel free to PM me.

@Elizabeth V., Welcome to BP! To avoid this dilemma in the future, I'd provide written rental criteria with each application that covers credit, income and rental requirements that are Fair Housing approved. Then if applicants ask you about the requirements and application process, hand out the criteria. I would adopt the policy to go with first arrive, first qualified, or do one at a time. Do not accept any incomplete applications. If you run credit checks on an applicant who was approved but didn't get the vacancy, offer to give them a refund and say another candidate was selected because they provided all required verification including secured funds.  As soon as you've chosen your applicant, let the others know so they can cross you off their list. I only send out adverse action letters to those applicants I reject based on not meeting certain set criteria (credit score too low, etc.). As a courtesy I send them a copy of the credit report.

You do not need to send such a detailed letter on why an approved applicant did not get the unit or discuss why another applicant did. Stating how the chosen applicant had a state pension and the others did not could be viewed as discriminatory since you cannot discriminate against someone because of their source of income. Screening one applicant at a time and following set criteria is the best way to go and will help you avoid legal hot water.