All Forum Posts by: Penny Clark

@Beau Bundy, You are at the right place for real estate investing! Welcome to BP and thank you for your service!

@Nicholas Gallinot, I would only hire them if ithe agent is part of an actual PM company affiliated with those real estate brands, mainly because they have systems in place to deal with tenant screening, maintenance requests, collecting payments and issuing notices. The one thing I'd avoid is hiring an individual  agent who does property management as a "side business" when sales are down and business is slow - the issue here is these agents don't have a support system or consistent method for handling problems and your property business suffers. A visit to your local REIC or professional housing association should provide you a referral or two.

@Steven Lewis, Yes you'll either have to wait until you acquire two years of experience at a full-time job or part-time job in order for a traditional lender to accept it as verifiable income. You can find a private lender who will underwrite you, but you'll still have to show a track record of consistent pay in your new field. If you use hard money, you will pay through the nose in interest rates and need to have a super hot property whose value guarantees the investment. I went through this income source challenge while transitioning from tutoring to guest teaching. I've learned the best answer to your question is to have MULTIPLE STREAMS of INCOME, whether it be 1099, passive partnerships, W-2, rental income, a small business or royalty income. That way, you are never dependent on one source, which could dry up if you get laid off, fired, or you quit.

 I currently do guest teaching, property management, rental income and real estate sales, I am co-owner in a corporate business, a caregiver and most recently, a blogger. As my real estate and property business are growing, I will do less teaching for the schools but use this skill to help educate my clients, and conduct PM classes for owners who want to manage their own rentals.  I do care giving for a family member with special needs, and have considered investing in a property to operate my own care giving home or help others who want to get into that business find homes that would work for this type of business. I'm part owner of a pest control company and so have helped build that business by referring PM clients and clients of other realtors. I'm currently developing a blog of my own geared for the accidental or first-time rental owner who wants to either manage their own properties or learn how to manage the property manager. 

Doing all these things keeps me from being dependent on one income source to qualify for financing. 

I know this doesn't help you solve your problem now, but while you are building your real estate career, decide on a couple of ways to generate income while working in your field. Be creative - offer to advertise a business by putting signs on your car as you drive around neighborhood streets; operate a staging or cleaning business for sellers and their realtors; act as a vacation rental host for out of the area owners who cannot do it themselves but would like their guests to receive the concierge treatment. I'm sure if you put your mind to it, you can think of some other options. The point is, limiting yourself to one source of income is well....limiting.

Good luck! 

@Carole G., I'm assuming you've already replaced the windows. This is a tenant charge because a tenant is responsible for the actions of those he allows into your property. This is why landlords require their tenants to carry renter's insurance which covers vandalism, theft and liability. Yet even then, proving it was all her work and your tenant didn't play a part in it, may be difficult. If he filed a restraining order, that might hold water. Anyone can make a police report about anything. If you can't get the tenant to pay up, save the repair receipt and deduct it from tenant security deposit.

Bad tempered tenants and their partners, friends are the worst, so you have my sympathy!

@Ray Cruz, Welcome to BP! Before you do any deal, or connect with others in real estate, start checking out the BP podcasts that air every Thursday and read the "Ultimate Beginner's Guide to Real Estate Investing" by Brandon Turner, a free e-book. This should give you some necessary base knowledge. When you go to your local REIA, you will at least be able to speak to more experienced investors in their language and won't feel overwhelmed. It will take time but don't give up and share on the forum your experiences.

Good luck! 

@Ronald Laurion, hope for the best but prepare for the worst. Sue is spot on, but you'll have to get the owner's cooperation in this prior to your owning it. When we purchased our first property, we had to help the owner get the tenant out. Decide right now how you want to handle this tenant. If this is a screaming good deal, then roll getting rid of this tenant into your "reno" costs. It would be nice if the owners would be proactive, but like Michael said, she may be one of the reasons they're selling. If access is necessary for the appraisal to be accepted by the bank or for you to do the deal, guide the owner through the inspection process (for Alaska) so it can be completed. Before the deal closes, be sure to get information from the owner regarding the status of each tenant (payment history, Estoppel certificates, copies of leases so you know what you are up against should it be you who performs the eviction). Some tenants will stonewall you because of fears they will be forced to leave when a new owner takes possession. By not being cooperative this tenant's fear will become a reality.

Good luck! 

@Garrett Amundson, Welcome to the best real estate investment support system ever!  Take advantage of all the tools and free resources here BP has to offer! If you have any questions at all on property management feel free to PM me.

Joe, I just wanted to add it'd be a good idea to include a projected plan and income statement for the subject property detailing expenses and potential rental income so the bank knows you'll be in the black with the  property from the start

Yes, I would definitely include your landlord experience, project management and home improvement experience too. Your IRA and 401 K may be used to count as an asset but the bank will want to see cash reserves in an account that has seasoned for a while. If there are any large deposits that appear in your account used for proof of funds, the bank will want to see a letter of explanation of the source. The less revolving debt you have the better, so pay those off.

The spreadsheet idea and rental income statement showing your monthly net profit is great idea too.

The bank always pulls their own credit report from all three bureaus which is why you want to pull it first so you can see what the bank sees.

PM me if you have any more questions.

@Joseph Morris, I'm not a lending expert but my husband and I have done our fair share of conventional financing and refinancing for properties. You will want to provide items listed below:

- Tax returns w/W2s for last two years; If you are self-employed, two years worth tax returns and profit and loss statements

- Two months of most recent pay stubs

- Six months of PITI reserve funds for all mortgages including subject property

-Two months of most recent bank statements (any account you are using to fund closing costs, down payment, etc.) BTW - you should have this ready to show listing realtor and seller to prove you're a serious buyer

- Letter of explanation on the source of any large deposits recently put into your account

Once you select the property, you can provide an outline of expenses and market rent to show potential positive net of at least $300.  

Make sure to ask for a PREAPPROVAL Letter not a PREQUALIFYING Letter from the lender with qualifying amount. 

Put all these items in an easy to read format (binder/notebook). You may also want to include a letter about yourself to showcase any skills and abilities you have in real estate investing, landlording, finance, remodeling, etc.

Before you talk to a lender, check your credit to see where you stand. Go to freeannualcreditreport.com or creditkarma.com. The higher the number, the better the interest rate.

I would also look at your current debt to income ratio - what you owe now compared to your income and what you owe now in addition to the subject property PITA to your income. Aim for both of those numbers to be no higher than 35-37%. If you purchase a residential income property - like a 2-4 unit - you may be able to apply a percentage of the gross rents to your income, however, some lenders like to see two years of landlord experience to do this - check with your lender. 

Questions I'd ask the lender would center around flexibility for financing:

- Do all your loans get sold on the secondary market or do you keep some loans in house if borrower meets specific criteria (portfolio lender) If you state it this way, the loan officer will know what you're talking about

- What loan packages are available to first time home buyers or first time buyers of investment properties (FHA, FHA/203K, VA, etc.)

I'm sure some of our BP loan professionals  can provide more in depth, expert information, but this should get you started.

Good Luck and share your story when you get your first property!