All Forum Posts by: Penny Clark

@Cristian Yepez, I agree with @Anthony Espinal. I would look into qualifying for an FHA to purchase a duplex in your area. That way, you can live on one side and rent out the other. To save on costs, you can buy a fixer and apply for an FHA 203K loan combo which will provide funds inside your loan for fix up costs. If you are in a seller's market, however, where inventory is low and buyer competition is fierce, you should save enough to qualify for a conventional loan with 20 percent down.

Good luck!

@Jack Forester, although a pool seems like an attractive amenity for renters, it can create all kinds of liability and maintenance issues with a rental. If you decide to risk renting a home with a pool, this is what I'd do:

- Include pool maintenance cost in your rental expenses. Either build the cost  into the rent (recommended) or charge a separate maintenance fee to the tenant. It is reasonable to ask your tenant to dip out leaves from the skimmer and pool but use a pool service for everything else, including chemical maintenance and equipment. It would also be helpful if you rented to a tenant who is familiar with pools (how to operate equipment - particularly if it comes with a spa). 

-  Check your homeowner's insurance policy to ensure coverage for pools is not excluded. Some insurance companies as stated above will not offer coverage unless certain conditions are met. For example, having a locked gate surrounding the pool to control access  or removal of diving boards or slides. Even if it is not an issue with your insurance company, I highly recommend you do both of these things. I would also recommend you get an umbrella policy in addition to bumping up your liability coverage to $500,000 if you haven't done so.

- Make sure any plants, trees and other vegetation that surround the pool are low maintenance. This will cut down on maintenance and cleaning fees.

Of course, if you decide to buy the property anyway but don't want to deal with the pool, you can have it filled in a day for a few thousand dollars. If you search the forums, I'm sure you'll find a few posts from members who have done that.

Best of luck to you!

@Jeffrey Duck, finding a quality tenant for your rental takes time in some markets. You will want to continue doing due diligence on vetting applicants - credit checks, rental history, income and employment.  Verify identification by getting a copy of each applicant's driver's license and social security card too.

Even if the property is located in a "C" neighborhood, good tenants are possible to find if the place shows well, repairs are done and it is priced right. When you run your ad, be sure to list your criteria, include the renovations you made and consider staging a room or two. Price your rent competitively - perhaps drop it 5-8 percent below market rate, to help generate interest. 

Don't lower your standards because you're under pressure to generate cash flow. You have already put time and money into this asset and having it destroyed by a single bad tenant can crush the spirit of a first time landlord. 

Best of luck to you! 

That's awesome! @Mana Silva. There's a lot you can do with that extra cash flow too. I would set aside a percentage of that for each of the following:

• capital improvements or sink fund for big ticket items such as roof, HVAC, etc
• vacancy and normal maintenance repairs
• cash reserves (if you finance future property, you'll want need to show cash reserves for any properties with a mortgage). And cash reserves to purchase your next property.

Yes, you can grow your property business by refinancing and taking out a chunk of the equity to purchase your next property. Or you can bank your money and buy another property with cash. Ultimately, it's really about what you feel comfortable with doing.

Best of luck to you!

@Mindy Jensen, excellent post! However, after recently attending the annual legal seminar for Sacramento Valley Rental Housing Association, the attorneys there informed landlord owners to be wary of discriminating against applicants solely on criminal background checks. The reason? It may unfairly target and affect certain groups and that the courts are still reviewing these on a case by case basis.

What they recommended is that to avoid possible legal action, you don't deny an applicant strictly based on their criminal background history but on other rental criteria in addition to it. Usually if you have a stringent rental criteria based on that person's financial, rental, and credit history, you shouldn't have to use it as the sole reason for denial.  

@Levi Painter, having an owner who is willing and able to provide information about the property is a must before you should consider buying it. Here is a list of items you can get specifically from the owner:

• If the units are occupied, you will want a copy of all lease agreements, including each tenant's payment history. You will want to know that tenants are not only current in their payments but also if they have had rent increases. Unbelievably, I've seen some landlords not raise rents in years even though their expenses have increased.
• Six months of the most recent utility bills (garbage, sewage and water) and if the units operate on separate or combined meters.  Ask to see a copy of the actual bills. Doing so will help you determine expenses and confirm the owner has paid them. 
• Receipts for capital improvements made (new roof, counter tops, flooring, etc). Don't take the owner or realtor's word for it that the HVAC system was replaced. 
• CLUE (Comprehensive Loss Underwriting Exchange) report. This is a report provided by an independent database and can only be obtained by the current owner of the property. It reveals if any claims have been filed on the property in the past few years. Also I would ask to see a copy of the most recent landlord's insurance policy.

Most other items such as market rent, vacancy rates, property taxes, etc can be obtained through other sources. The items above, however, can only be provided by the owner. If the owner and/or property manager cannot or won't  provide this information to you, either walk away or prepare for the worst and hope for the best.

Good luck!

@Lee Scarlett, as noted above, your agent can help you with comps, but ultimately you're responsible for running the numbers for cost to complete the flip. Your agent should be able to get ARV comps too but you can too. Note the features and amenities of subject property with ARV. Then find similar homes in area that have sold in the last 2-3 months. Doing so, will give you a rough idea on what you can get for the property retail. Also, BP has a nice flipping calculator you can use.

Agents only do so much for you up front.

Best of luck to ya!

I'm in too! I'm thinking about starting up a women's real estate investment group in my area. 

@Christine Stone, no two applicants are alike - regarding their income, payment history, rental history... you get the idea. The stricter criteria you have, the easier it is to find a suitable applicant. Look over their background checks and read their credit reports. There's also debt to income and rent to income ratio to consider. What's important here is you don't discriminate against an applicant for anything that might be construed to violate federal or state fair housing rules. 

True, first in line who qualifies is standard practice. However, if your gut tells you something isn't right with this applicant, dig a little deeper. You will either find 1)there is something in the applicant's background that doesn't agree with your rental criteria  or 2) you're simply more comfortable with the other applicant. Be careful about the second one, though, because "nice" people you don't know can turn out to be scam artists and deadbeats too. 

Good luck!

Keep looking and putting in offers @Tommy Mosley. @Shonda Jimenez is spot on. It can take you 20 properties or more before you get a yes from the owner. Remember to keep your eye on the goal and don't get distracted by disappointment. My husband and I tried several routes to secure our first investment property. At auctions we were outbid, realtors wouldn't call us back for us to even put an offer in, the banks said we didn't have two years of required experience. It went on and on. 

When we finally got a duplex under contract, it took almost a year for it to close because it was a short sale that was on a duel track to foreclosure, we didn't have experience as landlords, the owner kept changing residences, and when we were at the end of the tunnel, we had to assist the owner with evicting the tenants who had lived there free for more than a year!

But it was worth the wait. One day you'll share your story with us and inspire someone else who is just as frustrated as you right now.

Best of luck to you!