All Forum Posts by: Anthony Thompson

I search by street name and then sometimes have to make a few calls. It's admittedly a bit hit-or-miss. But it's free (other than a few minutes of your time) and when it does work, it feels great :)

I also find it helpful to look at the credit report for addresses that they didn't put down on their application. Then, if possible I track down and call those landlords and see if the tenant lived there, how they were, etc.

Sometimes in those cases they don't remember the tenant, or the ownership changed, etc. But one time I did that, the voice on the other end of the line said, "Oh yes, we know them. In fact we're evicting them right now."

Aly, you're smart to check the tax assessor records, I do that as well. One time I was speaking to an alleged past landlord, and asked him why there was a different name on the property tax records (even looking back into the past ownership). He replied, "Oh man, you're checking records and sh**?" That was all I needed to know :) (i.e., it was a fake previous LL reference)

Another "trick of the trade" is giving the previous LL incorrect information and seeing if they correct you. For example, if the tenant supposedly paid $600 and lived on the 2nd floor, say you understand the tenant paid $1000 and lived on the 1st floor. If it's really the landlord, rather than the applicant's friend, they should correct you - though obviously the farther you go in the past the less reliable that becomes.

As you said, it is hard to track down a previous LL. That's why I hope and pray I get a hit when I try the Craigslist trick (i.e., hope they have a vacancy and have a good phone # posted). There are other methods too, such as searching state corporate records databases, out of state landlord registry if applicable, whitepages.com, etc. but they are time consuming.

Some would suggest that your time is valuable, so use a screening company instead. It's not a bad idea actually, especially from a "no discrimination because the screening company never even saw/met the applicant" standpoint. But I don't know if any of those screening companies actually check with previous landlords either - I suspect they only pull credit and criminal and verify employment.

The best approach, depending on your # of units and time available, might be a hybrid - do the quick and easy checks yourself, and then only if someone passes those, turn it over to a screening company to complete the rest.

For example, in my state it's free to do a criminal check - one of the few things my state gets right btw :) So I'm usually checking that within a half hour of getting the application. If something bad pops up there, no need to incur the cost of a screening company.

(Small note on that though, be sure to check for intentional misspellings of the applicant's name, so if you pull credit go back and check all spellings of the name on the credit report, in the criminal search, or make sure the screening company does that also. I've had people intentionally misspell their names, knowing that court records are only filed by name. For the same reason I also recommend checking ID when you get the application, and looking at the name spelling.)

@Aly Yes I've been surprised I haven't gotten calls from other landlords, ever. Kind of amazing actually. I think it's a mixture of 1) not that many people doing screening, and 2) the ones that do, do it on the computer and rely much more heavily on the credit check. That can be done instantly on a computer, while tracking down a previous LL can be a PITA.

(Quick tip on that though, if you're trying to track down a previous landlord, try searching for their property in Craigslist. Many times if they have a vacancy, BAM, you have a direct cell phone number :)

@Bill I agree re: data points on a checklist. In fact it can help a lot to have a written checklist and procedure you always follow, in case you are ever accused of some kind of discrimination. The only thing is, it is often very hard (at least in my area) to get two past landlords. Many times it's hard to even get one. I insist on it, but I have no doubt I've passed on good tenants that way.

As others have said, I don't bother with current landlords. Either they tell you glowing things (which could be because the applicant is a great tenant, or a horrible tenant they want to get rid of), or they're scared of liability so they'll say nothing at all (q.v., Dawn's great story).

I check with the previous landlord, multiple if I can get it but that's rare. When there is no previous landlord, as is often the case with students or young people, I ask if their parents own property and will co-sign the lease with them (and then usually have to explain what that means).

If the parents don't own anything, there's no point in getting them to co-sign because there's nothing to attach if there are damages. And if the parents own something but aren't willing to help their child rent her/his first apartment, well that tells me all I need to know.

That's a good tip actually. Some investors (and agents) call that "farming" an area - getting to know it really well, even down to the street level. So when something comes up in that area you spot it quickly and already know most of the relevant info, and can act quickly if desired.

Also good notes re: out of state landlords registering. Related, it's important to know that in many towns you have to register also - so, effectively, you have to register twice, once with the Secretary of State (which is free) and once with the town (which often has a small yearly fee).

See http://sos.ri.gov/business/nonresident/ for more info on registering with the Secretary of State. Also if your town requires you to register they may take the Secretary of State form so save that for re-use with your town :)

The lead and fire regulations are entire discussions on their own, but definitely important to know about. My understanding is that the RI lead laws are actually better than the equivalent Massachusetts laws (for landlords), but still not easy in the grand scheme of things.

The trick with the lead laws is that you have to comply with both state and Federal regulations. For example, did you know that there is a special RI version of the EPA "Protect Your Family from Lead in Your Home" pamphlet? It has an extra 4 pages (I think) at the end with RI specific info that you're supposed to provide to the tenants. See http://www.health.ri.gov/materialbyothers/LeadPoisoningProtectYourFamily.pdf

The trick with the fire regulations is that each fire marshall can effectively interpret the rules differently - for example, some towns will let you use wireless detectors, others will not, even though by code you should be able to - in my admittedly-imperfect understanding of this area

Staying up on these law changes is a big reason why I attend our local REIA (rireig.com) every month, by the way. We talked about asset protection at last night's meeting, but have had lead inspectors and minimum housing inspectors (i.e., a city official) do presentations at previous meetings.

Tim, yes you will generally get better cash flow with a 3 or 4 family than a single or duplex. But as I mentioned, the tenants have a different mindset so it can be a bit more work to manage them. Good experience, though :)

Providence is big, so it really depends on the area. I know some investors who still won't go into Providence - a lot of folks were burned in the crash - but I think there are opportunities in every city/town. I wouldn't personally make a blanket statement, especially since there are so many different neighborhoods.

You'll get as good, or better, info being "on the ground" and driving through neighborhoods, and especially talking to neighbors, than you will by researching a city/town on the Internet and looking at "appreciation rates".

Talk to people, read the ProJo, check out the area yourself, to get a sense of what's happening and whether an area is improving or not. You can look at other indicators like sale prices, rents etc. but they shouldn't be the only part of the picture.

And of course, if you're going to live there you have to ask yourself if you want to live there. And similarly, how likely will potential tenants be to want to live there?

Shawn, I've been investing in RI since 2004 and have done a number of wholesale deals (40+ at last count) and also own & manage a good # of rental units in the state.

While I wouldn't hold myself out as a "mentor" to anyone (definitely check out Mehran's recommended link there :), I'd be happy to speak with you, or get coffee etc. if you like.

There are also a few good groups in the area such as the RI Real Estate Investors Group (rireig.com) and Black Diamond REI (blackdiamondrei.com) which I recommend mainly because 1) I've been there, 2) they don't seem to try to sell you stuff, and 3) they're run by investors and have good info.

The RIREIG group has a meeting tomorrow night 3/20 in Warwick near the airport, if you're able to make it - see their website for details.

Feel free to send me a private message if you want to speak or get together, or if you can make it to the group tomorrow night I'll be there also.

Apologies for the multiple posts. The BP site kept timing out and giving me an error when I tried to post, so I hit Refresh, not knowing that the post apparently went through even though I was getting an error.

I don't seem to be able to delete the duplicates, only edit them... Actually after 15 minutes have passed I can't even edit them.

Can a moderator please delete the duplicate posts that the BP site posted on my behalf in this thread? (thanks)

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Tim, if you can get 100% financing that's great - it gives you more money to invest elsewhere. Of course, it makes your loan higher which means higher monthly payments so be sure you can make those monthly payments.

Leverage is great, but it cuts both ways - it can magnify your return in good times, but it can also magnify your losses in tough times because you have a fixed payment that needs to be made every month whether the unit is rented or not, whether the rents are high or cover the expenses, or not.

I would caution you to ask yourself, if your other unit was vacant for 6 months, could you carry the loan payment on your own without difficulty?

If yes, then you're probably in a good position to take on that loan. If not, then you may want to re-evaluate whether it would be better to put a downpayment down (if you have it) to lower the monthly payment, or maybe look for a cheaper property (and thus, a lower loan amount).

(6 months vacancy may seem too conservative but believe me, I've seen 3 months before without extraordinary circumstances - tough rental market, area declines, you missed something that makes the unit a harder sell to tenants, departing tenant caused major damage that takes a lot of time to fix and then bring it back to rentable condition, you do things on your own so you save $ but it takes longer, etc.)

It sounds like you're comfortable with a 2 family and if you're just getting started that can be a good way to go. Just be careful that, as I said, you can afford the monthly payment on your own - the rent from the extra unit should be "gravy" (bonus), not needed-or-you're-in-trouble.

Also, while singles and duplexes are good for lower maintenance (tenants have a little more "owner" mindset), you'll also pay more per unit that way, mainly because you're competing with owner-occupants who are buying primarily for the "use benefit" (they like the house, the neighborhood, schools, etc.) and not looking at it as an investor. It sounds like a worthy trade-off for you, to do a duplex, especially if you're going to live in one of the units, but it's just something to be aware of.

I'm not sure what you mean about "profitability of the long term investment over time". If you mean, planning/projecting for a big profit down the road, I would forget about that. You're buying at a good point in the market cycle, if you sell down the road and make more profit, that's more "gravy" (nice to have), but don't count on it. Focus on whether the property will cash flow in the first couple of years and whether you can support the property if you have an extended vacancy.

If you haven't already seen it, check out http://www.biggerpockets.com/rei/real-estate-property-analysis/? for analyzing whether a rental property will cash flow (i.e., produce enough profit after expenses).