Landlording

When you say units..do you mean apartments, SFH, condos, etc?

I've been gone from this site studying for my Florida RE license and dealing with LANDLORD issues. Just rented a property I purchased in January, hopefully to good tenants. And now dealing with leaky basements..MOTHER NATURE PLEASE give us a break here in Ohio!!

I have a question for all you landlords out there as well (RINA, I'd love your opinion as I think we think alike). I asked this question as well at a RE meeting yesterday and I'll tell you what the others said once I hear from you all.

Situation is that my tenants have had water in basement now 3 times.. once about a year, twice in past month..all very heavy and unusual rains (once being snow melting followed by a seriously heavy rain. They called me the time a year ago and actually tenant made a small repair that helped. Did not call me on next one, called me on one week later and also demanded I pay them for damaged items because they claim it is "structual inefficiency" (Is that a term?) to the tune of like $1400. Long story short..these incidents were unusual but I do feel badly and know it is frustrating. She revised list to $840. Of course, renter's policy (they claim they have one..) and my homewoner's is not going to cover a basement. So, do I open my wallet? They are moving. I don't feel it is my "fault" but like i said feel their frustration and all in all they have been pretty good (Just as an FYI, I have NEVER charged them a late fee even though it is in lease and they have probably been late like 9 or 10 times out of 12).

Love to hear from all of you..Kate

I know what you mean with the basement problem. Due to this same incident which happened to me, i now spell it out in my lease. "Landlord does not guarantee a dry basement and will not be held responsible for any items left in a basement" This particular tenant was cool about. Where the water came in at the foundation I used some waterproofing paint (Seals it up for about 6 months) and painted out around six inches from the wall. I have 3 single family homes and 17 duplexes (34 units). As far as late rents go.... I've become immune to the topic!!! Its basically, Late Rent is better than No Rent.

Hi Kate,
I am new too, same as Matt above, I also have 37 units. a few duplexes , 2
4-plexes, and the rest are single family homes.

What does your rental agreement say? There probably is a section that addresses this type of issue. Review the contract closely. Depending upon your contract the tenant is responsible for thier belongings.

Not much help, butI could send you mine if you want to change the verbage.
Donna

How did you get started in landlording? Did you finance your own deal, etc? I'm a new investor. I don't have money to put down yet, so my strategy is to first wholesale, pay off my debts and then start investing in property. Eventually, I want to have my income come from rentals and not have to keep a traditional J.O.B.!

I'm not familiar with wholesaling/assigning deals. I guess I will be after reading Dean's material. These techniques seem to be pretty popular. I've done my investing using lots of leverage both with cash and credit to the bankrupt lenders who I basically left no choice but to essentially give me the properties they had on there books. I cut my teeth with the single family homes which are where everyone should begin. I basically parlayed the experience and money I gained with those into my latest deal which was a giant multi family apt. complex. Multi family buildings are definately the way to go based on the income they generate.

Hi Kate, I just recently joined so you probably have this situation all taken care of but just wanted to tell you a little about how I would handle that situation.

I have been a landlord for 12 years, had up to 32 units (mostly 4-plexes) but down-sized for a while until my kids graduate high school. Have 15 units now (mostly houses).

Our lease states that we are not responsible for any of their belongs anywhere in the house but if it didn't, the way I would handle it is this:

1. Type up a letter explaining that you are not liable, heavy rains that are unusual is "an act of God" a term insurance companies use, that tenant was aware of the risk of their property being damaged from the knowledge of previous leaking.

2. Type up a "Deposit Itemization Statement". On this it should state the property address, the dates the tenant leased (move in and move out dates), the date of the statement, and a list of each room broken down & cost to clean or repair. Then a section for rent due, late fee's owed, etc. Whatever you can legally come up with that the tenant truly owes you, including utilities, another month rent if tenant failed to give you a written 30 day notice, etc.

3. Total those numbers and have a section that says:
1. Amount Landlord owes Tenant. ____
2. Amount Tenant owes Landlord. ____

It most likely will be more than what they are asking for and the deposit. When they see they owe you money, and that you are not giving in to their demands, you most likely won't hear from them again.

Also, VERY IMPORTANT, in our state (check with your state laws) we need to notify a tenant about their deposit within 20 days or they can sue for double the deposit. If you don't have repairs and work completed to give the accurate numbers, send them a letter at the last known address (the rental) stating that you will send them a "Deposit Itemization Statement" regarding their deposit once the repairs, utilities, etc are completed.

Lisa

and I will definitely incorporate your suggestions.

They had point blank asked me if I had ever had water in the basement when they looked at it and I did tell them I had previously when we had a 5" rain about 3 years ago. She is just SURE that I have had major issues with the basement previously and that I was not upfront which is not the case. Had it happened before? Yes. It never happened the 6 months I lived there or the with my first tenant who lived there nearly 3 years. I have also been enlightened to the fact that the storm sewers in the immediate area have issues and am going to call the city. Even my tenant who is in the construction business alluded to this as being a big part of the problem. There are pumps in the area everytime we have an unusual rain.

I just feel guilty because I did not Spell it out clearly. Does anyone know if I will be opening myself up to a can of worms if I do compensate some, like perhaps $500 since I did not have a clause in my lease about belongings even though most renters know that their possessions are not covered when renting?

Matt, you say multi family buildings are much better investment. Is it just that you can simply pack more compact units into the square footage? I went the SFH route, following in my mother's footsteps but I don't think I am made for landlording which is why I am pursuing my license..I'd love to assist other investors or even bargain retail shoppers.

Thanks again!

Don't get me wrong, I love single family homes, you definately have less turnover with tenants, but with multi family i've enjoyed the sheer volume. When you look at the typical spead on them, an example for me would be- expense- $500- income-$970. Multiply that over and over and it adds up too tremendous cash flow. You just have to really watch tenants, with these, apartment dwellers have a different mentality than renters of SFH. I'm in the market and always looking for duplexes, so if you come across something do let me know.

Thanks,
Matt

Yes that special seal paint is good. I wasn't sure if we could say the name here?

But 90 percent of leaking can be fixed by regrading around the house. My first house I bought and lived in had this problem. I used the paint and ordered a small load of dirt and regraded around the house and put downspout extentions and solved this problem. I do still get a little moisture on the walls but that is it.

I'm interested what do you all do for a tenant screening process? Also, what types of rental property marketing works for you? Thanks Alot

As I am just purchasing my first SFR as a rental - this is all very information to me. Especially the water part - as the quotes I received for insurance EXCLUDE water damange of any kind. One question - is rental insurance for tenants optional - or required? Is it landlord choice to stipulate they maintain that? Thanks - and I'm so impressed with all of you and all your duplexes etc! Great job!

My screening of tenants i think may be on the lighter side than most. It has been my experience that, It really is a luck of the draw so to speak. I have seen great tenants turn bad and stiff me and have seen tenants who pay like clock work and are slobs. Credit reports are a waste of money, I don't do them and never will. When you break it down, its all a roll of the dice. Check employment, and local county records for drug related offenses. I stick with those 2 things and go from there.
Good Luck

It was mentioned that some people don't really fit into the role of landlord, especially for anything larger than a 4-plex. It takes a certain type of personality to deal with any tenants, let alone 6-8 or more in one property. It is a good recommendation to cut your landlording teeth on single family residences, to make sure you are compatible with the territory. As an example, my daughter found herself renting out her condo after she got married. She wanted the tenant to take the same care of the unit as she herself did. Major stress, and she finally sold it (paid to get rid of it) in the previous decline. And wouldn't you know it, after the market recovered she expressed an interest in getting a rental. How soon we forget!

The advantage of larger apartment properties (12 units and up) is that they provide more bang for the buck. Expenses are more concentrated and efficient, and when someone moves out you don't have 100% vacancy. The income is more dependent on how the property is managed, and in some areas getting a management company you can rely on may be very difficult. You probably need a resident manager on the payroll, and good ones are hard to find. If you do the off-site management yourself, you learn a lot about government requirements, hopefully before you violate them. But if your comfort level isn't destroyed when a tenant destroys their unit, you can gain wealth (or lose it) faster with complexes than with houses. Management is the key, and nice guys usually finish last. You need to be fair, firm, and friendly. That's why some complexes are run-down and are the killer deals for someone who can get them back into shape - the previous owner was in over his head.

cactusbob

Thanks for the advice, I will use it!

I currently own and operate 37 total rental units. I attempted to have an outside mgmt company help me out. They were very professional and knowledgable. I hired them and 48 hrs later fired them. Will never make that mistake again. Several prospective tenants had called about a vacancy and they were told that no such vacancy existed. Few other things but that was enough for me. My thoughts are that I can handle another 13 units by myself before I will really have to examine my investment goals and or try and find some reliable help which is very difficult. If you have someone else manage for you then make sure you have money to lose because you will. With multi units the cash flow is tremendous. If you structure the deal right its almost impossible to lose. Vacancies happen but if you do what you can to minimize them by managing appropriately things work fine

Hi Guys:
I have 6 houses and all of them are rented out. My rental agreement is 10 pages. It pretty much covers me from everything and anything. Before people move in, I make sure to point out everything that may make them feel uncomfortable in my book. If anyone needs a copy, I can forward it, no problem. However, you still are taking a little risk when renting your house out. Over the years, I have come across so many dead-beats that I almost said "enough". If you are renting a property, make sure you do it in a close by area. Mine are 2 hours drive away, which proved to be a disaster at one point. I have been renting my properties for over 6 years, so I have seen it all, done it all and got burned enough times
If you need any more info, let me know, I will be happy to share it.

My thing now, I would like to wholesale properties for profit, but not sure how and what to do (that's why I ordered the books)

getting good tenants: Location is a HUGE factor, I think, for getting good tenants. Is it a neighborhood you wouldn't mind living in yourself? (safe/somewhat quiet/decent-looking). You should get a good pool to work from. First impression is very important, too, when choosing. And then, of course, doing your reference calling. If you find even ONE little discrepancy, out the door with that application (and name on the list of "no"s for future reference)
I agree with Matt on the screening. I've never run a credit report. They're never up-to-date for one thing, and your relationship with the tenant is more of a factor than anything WHO they will pay first if they DO get in a bind.

water damage: Should not be excluded in the insurance on your building (for the building's sake). As far as personal property, we just tell our tenants that we are not responsible for any kind of water damage to their belongings. If a basement does flood (from one of those circumstances like Kate described), we'll go in and help them clean it up. But the times that has happened to us, the whole city was having the same problem and the storm sewers were backing up from ice/heavy rain, etc. So it was not because of any fault of ours. That's just part of life. They should really have renter's insurance, but I guess that's up to them. Kate, I would hesitate to give them any money back. (Good suggestions from people here on getting around that)

The waterproofing paint does work REALLY well (maybe not on big cracks). It's actually pretty amazing. We just used it for the first time this fall and I'm really impressed. Solved "seepage" problem in the whole basement of one of the places we bought, thinking we'd have a major project to cure that. Eventually this summer we need to slope the ground away from the building like it should be, but the paint really took care of the problem for now.

multi-family: I would love to get into multi-families after hearing the pluses of owning them. I really love SFRs because once you get a family in you rarely hear from them again for months (or even years), except getting your check every month. If the cash-flow is better with not much more managing, though, sounds like multi-s are great. We have one duplex and I get many more calls from those tenants with little "annoyances". Probably a few times a year, which is still more than I care for. Maybe that's where a good property manager comes in? But then again, I wouldn't be happy if there were vacancies. Do you guys find much of that?

Single Family vs. Multi Family
My favorite house that I have rented, I put the tenant in there last August. Since then I recieved only one phone call from her. I agree with Rina, with single family once you rent it out, you better believe you won't be making daily trips there.

With my apartments, what a different story that is, yesterday I was at the complex 6 different times. I live about 3 miles from it so its not too bad, but when I get there, someone always needs something, i've become immune to it ha ha. Its the 20th of the month and i'm still collecting rents. I use a simple approach- late rent is better than NO rent. When you have a high volume of properties I think accepting late rents is usually what happens. Does anyone here do the same? Also, how does everyone else build themselves to tenants? I'm doing all of my business under an LLC so i'm simply viewed as managing agent of the company/property manager. I can't tell you how many times i've blamed the "Owner" for things that I couldn't do, that I could have done, just didn't think it made sense financially. May i recommend operating under a trade name, for this reason and many others.

3 day notices/Evictions- I post about 3-4 of them per month for non payment of rent... I find it hilarious that each and every time I do my phone rings almost immediately and its the tenant saying come on back and pick up rent. Its the same people every month, so we have a good working relationship if you can call it that.