All Forum Posts by: Tyson Hill

Here is a tip and standard I go by and it saves me a lot of trouble:

I always require a prospective tenant to view the property. If they are out of town, I ask them to have a close friend or family member to view it. The reason for this is photos don't always tell the story and last thing I want is an unhappy tenant because it's not what they expected. 

I think meeting them is a great idea. I have showed properties to people that were rude and I could tell would be difficult tenants. Had nothing to do with discrimination and last time I checked "being a jerk" was not a protected class :) 

 It really boils down to minimizing your risk as an investor and protecting your liability. As investors, we are in this to make money. Putting a high risk tenant opposes that objective. 

I'll take option 1 and here is why:

• I like stability- option 2 is relocating and there is no guarantee they will like the area, new job, or whatever reason is causing the move. Texans love Texas and not much else :)  Option 1 lives in the area I presume so the likelihood of them not having issues with area, schools, etc. is higher. You mentioned option 1 would be no longer than a year. Take the best long term possibility.
• 2 year lease. The name of the game is avoiding turnover and down time. The fact that he is a doctor makes it nice and easy to garnish wages in the event they do not honor the lease. Furthermore if something changes and they need to move you can work a buy out. They make 9x the rent, so you should be able to be compensated well that will allow you to re-rent the unit without taking a financial hit. 
• Option 1 has no pets, just the icing on the cake!

My 2 cents, good luck!

@Wesley W.  Couple things pop out to me. If you do an increase, definitely do it when rents are peaking for your market. 

To me long term tenants are pure gold in REI. So being $75 under market is not unreasonable. The other thing is if a tenant is hard on the unit and you will have to drop some money to rehab it, I would get as much mileage as I can out of them.

Many times the long term tenant factor goes unaccounted for. Most investors use 5% vacancy rate which is common in the industry. That is roughly a turnover once every 2 years. If you are fortunate enough to have one tenant for say 10 years, you essentially avoided 5 turnovers! Add up the painting, repairs, flooring, etc. and you are talking about avoiding some serious expense. Not to mention the loss of rent! There is value to being a little under the market.

Two things to consider: first question is what does current market dictate? That is all that matters in making this decision.  An automatic increase when the market is going the wrong direction is basically saying "hey, can you please move!" I personally believe in making decisions that promote long term tenancy. Unless my rents are below market, no way I'm doing an automatic annual increase. In 2008 when the RE market was collapsing, I was actually lowering rents proactively because I knew if they moved, then I would not get the current rent anyway and units sat vacant for months on end. So I did what I could to keep occupancy. 

Don't follow a hard line rule, follow the market. If you try strong arming the market, you will lose every time. 

Secondly, it's all about risk vs. reward. Rent increases piss tenants off for the most part. So if I am not under market by a decent amount, am I willing to risk vacancy and loss of 1-2k to get that extra $300 out of my unit? To each their own, but not worth it to me if I have a good tenant. 

@Sarah Ziehr @Joe Splitrock

Yeah, the guy self manages and is one of those "rent to anyone" landlords. Constant turnover, trashed units, you know the story. I have reached out before on other issues and he is just one of those passive landlords. 

This particular property is nestled between 8 other 4-plexes owned by different owners. This is exactly why I purchase my tri and four plexes in areas not surrounded by other multi-unit buildings. You can't control you neighbors and that can ultimately hurt your investment!

@Jim Adrian Every state is different, in AZ everyone with in a certain radius is notified when a sex offender moves into a neighborhood. There is also an up to date map that you can reference to see where they are.

@Michaela G. I'll have to respectfully disagree. You might not be held responsible in the end, but do you think that will keep you from burning through funds defending yourself? As an investor I am 100% committed to minimizing my liability and exposure, and unfortunately renting to sex offenders and any other convicted felon does not accomplish that. 

@Michaela G.  I totally respect your opinion and see where you are coming from, but in a multi-unit situation I am not willing to potentially sacrifice good tenants, or the ability to rent quickly to good tenants to give a sex offender a second chance. It would have to be a single unit property for me to use that logic.

Something else to think about: If that sex offender ended up being accused of any type of sexual crime committed against one of your other tenants and you the Landlord knowingly rented to them, you will be in the cross hairs of a lawsuit. Just way too much liability to take on that risk. 

Just went into a recently vacated unit and found a "sex offender" letter on the fridge notifying my tenants that a sex offender just moved in to the 4-plex next to mine. Was this the reason my tenants moved? Who knows, but it wouldn't surprise me. 

Not only will this impact this investors 4-plex and his existing tenants, but it negatively effects everyone around this building. This investor was either short sided and wanted to take the quick cash or did not screen the tenant at all. Tenant screening is so crucial in the success of REI. If you don't have the tools to do it, partner with someone or a PM that can handle that aspect of your property. It could save you literally thousands by avoiding the wrong tenant.

@Jacob Sampson You keep making the point "conflict of interest" if the owner of a PM has rental houses of their own. Completely a false statement. When I market properties, it's on an individual basis. If I own property "A" and someone calls to see property "B", I show and try to rent "B." No conflict of interest whatsoever. 

Secondly, the fact that I am an investor too makes my relationship with my clients that much stronger. We are all in the game together. I can speak from both sides of the fence, not just the PM side. Nothing against property managers who don't invest, but they just don't look at managing the same as I do.