All Forum Posts by: Penny Clark

@jason leu, if you did live in the area it would be to your advantage to manage the unit yourself and save that 10% fee. However since you don't and you are new to being a landlord, you should strongly consider hiring a property manager.

A good manager does a lot more than cordinate maintenance requests. Showing the unit screening the applicants as well as serving notices and appearing in court on your behalf if needed are just a few of the tasks that a property manager will do for you. I would check with other investors in the area for recommendations as well as on line reviews. Ask for a copy of the management agreement too and see how responsive they are to your questions. 

Whoever you decide to hire always remember that there will be times when you will need to manage your manager. For this reason I would also recommend that you become familiar with the land lord tenant laws in your state. 

Best of luck in your new venture!

Providing a major appliance can help in marketing the unit however there are some caveats when you do. What I tell my owners is if you are supplying a refrigerator washer or dryer, that you state on the lease agreement that it is for the tenants convenience and that the tenant agrees to be responsible  for any repairs and or replacement. 

Tenants and landlords are often surprised when I tell them that a landlord in California does not even have to provide a stove but usually does so because it helps with marketing the unit.

Best of luck in your decision.

@Brian Dickerson, You almost always have to re-train (yes, retrain) inherited tenants in your way of doing things, whether the property has been managed by the owner or another property management company. Hopefully, you already asked to see the following items:

- lease agreements (look for: special maintenance clauses and what items the tenant is responsible for repairing if any, late fee dues and dates, security and extra deposits, what the owner pays vs what the tenant pays for utilities, landscaping, pest control, etc)

- payment ledger

- notices given (if any)

- copies of annual inspection reports

- Estoppel Certificates (show rent, amount of security deposit) if you do not have an agreement

You will need the current property management company to also provide you with current tenant contact information, keys to the unit, and any paperwork listed above. If the property management company is performing satisfactorily (collecting rents on time and issuing notices promptly if tenant is late), handling maintenance requests in a responsive manner and doing regular inspections, there may not be a need to change companies. You'll want to be familiar with the lease agreements so you can call the manager on any term they are failing to enforce.

If you are local, you may choose to manage the property yourself and save the fee.

Good luck and congrats on your purchase!

@Account Closed, Credit is important but I would rather have no score with proof applicant meets other financial obligations (current on utilities, cell phone bill, etc.) then an applicant who has a 720 score but is maxed out on all their credit cards and installment loans and whose debt to income ratio is off the charts. If they lose their job or get reduced hours and have little or no savings, they will buy food, keep the heat on and car going before they pay your rent. 

Credit score requirements should also be reflective of the type of rental you have. For example, an A-Class property should demand a higher score than a D-Class. Owners need to learn to look past the score and focus on what is inside the credit report - late pays, active collections, judgments, repos - anything of that nature spells D-E-A-D-B-E-A-T. While these can sink a score so can foreclosures, short sales, medical debt and a three year old bankruptcy, which in my opinion, don't represent the same risk.

Credit score is also only one of three critical components for verifying an applicant's tenancy. Income and rental history (current and previous) are just as important.

@Vishal P., I think Brie is spot on about warning prospective applicants about the condition if you know it is going to be messy or some obvious repairs need to be done. You could try offering an incentive to your tenants to neaten up the place (provide an itemized list) by offering them a rent discount or cash payment per show. 

If your rental is in a hot area of town, and your tenants are cooperative in helping the property show well, then just do it. As long as you provide assurances and follow through that the repairs will be done and the unit will be professionally cleaned, applicants will understand if it isn't perfect. 

Hi All,

Does anyone have a recommendation for a skilled appraiser for assessing value of small apartment buildings? Please pm me if you do and feel free to add any information for what they would be including in their appraisal. How is it different from doing residential buildings? This is for a refinance.

Thanks!

Hi Terry,

We were able to accomplish our dreams of investing in real estate by replacing expensive vacations with staycations, driving beater cars rather than dump cash into new vehicles and vowing to never put money into depreciating assets unless we could absorb the financial impact with ease. 

The tips you provided in your post are invaluable to newbie investors who desire  being financially independent through real estate. But the flip side of Desire is discipline and it is what turns that dream into a reality!

@Rashad Colton, If you are getting your first rental and have no landlord experience, it's unlikely the bank will count rental income from the property to help your debt to income ratio which should be less than 37 percent (please weigh in here loan experts!) 

Before we got into investing, we paid off our credit card debt and had only a home mortgage but no car payments either.  Our credit score has always been in the high 700s because we pay off  bills every month and always pay on time. If you have a high income and solid job history in same field, you can carry more debt and still qualify.

 It also helps to have a seasoned  chunk of cash in a bank account so you can show you have at least six months of reserves to cover not only your investment property but also any other mortgages you carry - including your home. The banks want to know you are not putting everything into the down payment and loan fees.

As you acquire more properties, it also makes sense to pay down your mortgages. If you choose to carry the debt, then get creative by splitting title/loan obligation with your spouse/partner so you can qualify for more mortgages. Personally, we choose to carry only so much debt, but some here are okay with it. Bottom line is keep your credit pristine and debt to income low. After a year or two you can use up to 75 percent of your rental income to help you qualify for a larger loan for commercial properties - that is our next goal.

Good luck in your venture!

@Ashley Shearer First, congrats on your first rental and welcome to the roller coaster world of landlording 101! I would not promise anything until you have seen the lease/rental agreement. True, tenants will always tell you about repairs needed or ask for improvements whenever new ownership or property management changes. No need to stress yourself out. Always address health and safety issues that impact tenants first (smoke detectors, electrical or plumbing problems, etc), then items that could compromise the integrity of the building ( dry rot needs repaired, for example) and then tackle cosmetics.

I also would not recommend you allow a tenant to do their own painting. Tenants offer to do this because they think they're being helpful and want to be pro-active, but painting a room requires some skill and is expensive to have a professional come in and re-do. 

Simply tell your new tenant that you have noted these items for consideration in their file and will re-visit them with the signing of a new lease/agreement. In the agreement, this is where you add in a clause regarding repairs/maintenance and what you allow/disallow a tenant to do. I usually don't allow them to do more than changing light bulbs and air filters. For a good lease/agreement, look to your local housing or real estate association. Do not use an internet lease because it may not be specific to your area and local codes and ordinances.

Since you're new to being a landlord, I would put any inherited tenant on a month to month agreement rather than a lease because if it doesn't work out, you both can exit the relationship quickly.

Please let us know how it goes for you. You'll find you have a lot of support here!

@Steven Clough Welcome to BP! It's good that you can do your own maintenance because that will save you a ton of money. Managing your own property can also significantly help your bottom line - even if there is cash flow since this is the second largest expense. Before you dump your current rental, I would check to see if your rent is at market rate as well as see if you can pass on the utility cost of garbage, sewage and water to the tenants. When I'm signing new owners, many just assume those costs and don't consider charging these to the tenants.