Minnesota Investment Real Estate

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Here is an example of a recent email exchange that I had with someone interested in my 2 bedroom plus loft, new construction townhouse in Forest Lake, MN. I was using Craig’s List to rent this property. I decided to post the exchange so you can notice the interesting way they are trying to avoid having to complete a rental application and why red flags were going off everywhere [note the grammar and spelling errors are from the original text]:

Prospect:

Hi. Me and my fiancee are very intrested in your town home. When will it be available for renting? We just had our first child and need the space asap. Let me know, also quick note we would be willing to pay a few months up front if you’d take 1100 a month plus we got a dog. But we like what we saw so please let us know.

Me:
Thanks. It is available on June 1. I can take the dog (depending upon size and type), but I can’t take $1100. I would be willing to go to $1150 if you paid in advance. [rent is advertised as $1175]

Prospect:
OK we could do 1150 a month. Dog is a pointer terrier and about 45 pounds, does that work? Also were not looking to fill out application that why we’d paid a few months up front, does that work for you, you can also call or landlord now, would that work?

Me:
What is in your background that you prefer not to fill out an application?

I am OK with bad credit as long as you have good income (paying in advance will cover that also).
How long have you been at your current apartment?

Prospect:
We were on the market for buying and had our credit run to much, so we perfer to do what our current landlord did and meet us face to face and we liked each other. Wrote the check and have lived here for over a couple of years. It just tough because alot of people scam people so anyone that is interested in the face to face way is what were looking for. And that is why we want to pay a little extra up front to show that the trust can build. So what do you think?

Me:
I would be happy to rent to you, but it is simply my policy to run a credit, criminal, and rental check on every adult in every one of my properties.

A single credit check run for a rental application is going to do nothing to your credit. Even if it was run 10 times, your credit recovers quickly from those type of checks. Plus, unless you are planning to open new credit line in near future, it doesn’t matter anyway.

Attached is a copy of my rental policies for your review.

Prospect:
Yeah see were trying to by pass all that because were trying to not mark anything.

Me:
Thanks for your inquiry, but I can’t lease to you without a full rental application which includes credit, criminal and rental background checks and verifications.

Clearly this person is trying to hide something. Why else would they not want to fill out a rental application for an apartment they claim they are interested in? Plus, why not simply tell me what the problem is (felony, evictions, collections). I will not be renting to this person!

Scott Ficek owns and manages almost 30 investment property units from single family to multi-family. Find his website at www.minnesotainvestmentrealestate.com or receive his blog via your RSS Feed or in your Email. He is also a Minnesota Real Estate Agent with RE/MAX Advantage Plus in Minneapolis and helps new and seasoned investors buy and own Minneapolis Investment Property.

Popularity: 7% [?]

I probably look at 100 investment properties per week on a busy week. These days, 90% of the properties I tour are bank owned or REO properties. Every so often one comes up that is a short sale. Initially, I was pretty excited by short sales. Here were properties that were often in better condition, selling at REO pricing, and had less rules for submitting offers than foreclosures.

In the last couple months, though, my attitude and mood toward Short Sales has changed dramatically. Here is why:

1. Short sales can take weeks and months to receive any response from the bank regarding the offer.
2. During this time, you will get no information about the process or offer.
3. Despite the length of time it takes to get a response on a short sale, often the end of the redemption period deadline is looming.
4. After weeks and months, another offer can come in at the last minute and be accepted by the bank.
5. Banks have been doing foreclosures for decades and have systems and people in place to handle these. It seems like they make it up as they go along when it comes to short sales.
6. I have had full price, non-contingent offers turned down because the bank has decided to wait and let the property go into foreclosure.
7. Unfortunately, some real estate agents are not trained to do short sales and simply don’t understand all the intricate details of a short sale.

Of the last 5 purchase agreements I have written for short sales, 4 have ended in complete frustration. Knock on wood, but one is going OK to date (but we submitted it 4 weeks ago). Although I will submit any offer, I am advising my customers to avoid short sales at this point.

Have you always wanted to buy investment property, but never knew where to start? Don’t Wait! Get Started now.

Scott Ficek is a Minnesota Real Estate Agent with RE/MAX Advantage Plus in Minneapolis and helps new and seasoned investors with their Property Investment. He owns and manages almost 30 investment property units from single family to multi-family. Find his website at www.minnesotainvestmentrealestate.com or receive his blog via your RSS Feed or in your Email.

Popularity: 11% [?]

Amy Dickinson is a great read over at the Star Tribune. She writes a column called Rent in the Homes section and takes email questions from readers and answers them.  I suppose you could say she is kind of like a Dear Abby for renters and landlords!

A recent one article I found funny and tragic at the same time. It seems the landlord is actually a little too quick and helpful to fix things. He barely knocks before he uses his key to enter the apartment (one time catching the renter in a towel, just out of the shower). See the question and Amy’s response here.

Scott Ficek owns and manages almost 30 investment property units from single family to multi-family. Find his website at www.minnesotainvestmentrealestate.com or receive his blog via your RSS Feed or in your Email. He is also a Minnesota Real Estate Agent with RE/MAX Advantage Plus in Minneapolis and helps new and seasoned investors buy and own Investment Property.

Popularity: 12% [?]

After last week’s Stupid Property Repair #4, it seems to be the week for notches out of doors. This next one I just found at very nice, but vacant single family house in St. Paul. This property could be a good investment for a single family rental as it was priced at $165k.

I have seen my share of small bathrooms and creative layout. I have even seen the bathroom door almost touch the toilet, but this one seems extreme.

I didn’t take the picture, but that notch is so wide that you can actually see into the bathroom when the door is closed!

Popularity: 18% [?]

Managing the income and expenses of your Minnesota investment properties is probably as important as managing your tenants. Sadly, I realized that although I touched on it briefly when I talked about managing 28 investment properties, I have never really discussed how to set up and do the accounting for your property investment business.

Investment Property Accounting Software/Systems

There are many specialized property management software and accounting packages out in the market today. Although I have not tried them all, I understand that most range from expensive to terrible! Trevor over at REIbrain.com has done a good job of review a few of the specialized packages. Click here to see his property management software reviews.

While these specialized software packages may be nice and have all the pre-formatted tenant letters and hold all the tenant information, I prefer to use Quickbooks Pro. This is a standard off the shelf package used by one person companies up to multi-million dollar organizations. You can find answers to questions on the web, they are large enough that they will be around long term, and it is a true accounting package.

One of the most important reasons I use Quickbooks Pro is that my accountant, John Caylor, uses it. When tax time comes, I simply burn a CD with my Quickbooks file and send it to him. He prints the reports he needs and has all my data in case he needs to review an entry. It took me about 2 hours this tax season to compile everything for John (and most of that time was spent simply finding the papers I needed from the mortgage companies).

Quickbooks can have a steep learning curve initially, but once you work through the initial understanding of the software, you will come to love the features. Are you still keeping track of what tenants owe you on an Excel spreadsheet or paper? A true accounting package like Quickbooks will track accounts receivable for you. Every month on the 6th, I simply print an account receivable report and statements and call or mail each tenant that still owes money. Try that with Excel!

Streamlining Your Investment Property Accounting Process

• If you haven’t already, set up a new checking account and credit card just for your Property Investment business. It will be much easier to prove to the IRS the trip to Home Depot was for your rental property and not for your personal house.
• Set up a line of credit connected to your checking account to get you over the short falls of when your tenant doesn’t pay on-time (or when you have a vacancy). Make sure it is all automatic and ask for a large credit limit for those unexpected repairs (a new roof, furnace, or other).
• Set up all your bills on auto-pay. In this era, there is no reason to write checks and put them in an envelope to pay for something like your mortgage payment. You are protected by the bank from fraud and missing a mortgage payment or being late can put your investment property empire aspirations on the sidelines for up to a year!
• Sign up for electronic billing and electronic payments on all other bills. This will reduce your paper intake and filing requirements. Despite doing this, I still accumulate about 4″ of paper invoices and statements per month (with 28 rental units)!
• In your accounting software, set up reminders and automatic entries such as automatic entry of: tenant’s rent into accounts receivable at the first of ever month, your mortgage payments, and any other entries that happen when you are on vacation.

Streamlining Your Rent Collection

I have written many times about investment property rent collection. Ultimately, find a process that works for you, but years ago I found I was enabling my tenants bad behavior by agreeing to stop by their house at a time convenient to them to pick up rent. It is not your job to pick up rent, it is their job to pay their rent on time to the location designated on their lease.

If possible, set your tenants up on auto-pay. Have their rent automatically paid from their checking account on the 1st of every month. There are several companies out there that you can sign up with. I even have one tenant that has their work automatically transfer part of the rent directly into my account every pay period!

Watching Your Income and Expense Numbers

Periodically, run a report out of your accounting system to see how you are doing. Very often investors buy a property based on some expense and income assumptions and then never look back to see if their assumptions were correct. They finally wake up one day and realize they are not making any money.

By watching your rents you can also make adjustment to the market that will help offset your rising costs (electricity, taxes, insurance).

Don’t let the office work of owning investment property get you down. Through some simple changes and process engineering, this can easily scale from 1 to 50 properties without too much extra time.

Have you always wanted to buy investment property, but never knew where to start? Don’t Wait! Get Started now.

Scott Ficek is a Minnesota Real Estate Agent with RE/MAX Advantage Plus in Minneapolis and helps new and seasoned investors buy and own Investment Property. He owns and manages almost 30 investment property units from single family to multi-family. Find his website at www.minnesotainvestmentrealestate.com or receive his blog via your RSS Feed or in your Email.

Popularity: 24% [?]

Rent Your Property During the Republican National Convention

Do you or a client own property near the Xcel Energy Center in St. Paul? GOP Convention Strategies has contacted us seeking assistance placing their clients near Xcel Energy Center during the 2008 Republican National Convention (RNC) event. You have probably heard the hype and read the newspaper articles about the potential to realize income by renting your property during the RNC. It turns out that, in this case, some of that hype may be true. Some clients of GOP Convention Strategies coming into town for the RNC have expressed interest in staying in private homes or condos—specifically in downtown St. Paul, the Cathedral Hill area and downtown Minneapolis—for the week of the RNC, which runs from August 30 to September 5, 2008. Hotels are already booked in Minneapolis and St. Paul (and people don’t necessarily want to stay at the Maple Grove Holiday Inn). If you own a place in St. Paul or downtown Minneapolis that you’d like to rent out during the week to a private company (meaning, these people come with deposits, contracts, etc.), contact Leslie Wilcox of GOP Convention Strategies at 651.714.2008 or Leslie@GOPConventionStrategies.com. Renting out a condo/apartment/house during the RNC is not going to make the owner rich for life, but it could make enough for a really sweet vacation! Source: Eric Myers, GAD for North Metro REALTORS® Association; Leslie Wilcox, GOP Convention Strategies   TOP

Popularity: 26% [?]

I thought that I would give North Minneapolis Investment Properties a break this week. Unfortunately, I didn’t have to go far to find another funny installation. I was in South Minneapolis looking at a very nice $230k duplex. Although this property was in foreclosure, it was very well maintained with a perfectly landscaped backyard. It also had 2 garages: one double car garage for the owner that used to live downstairs and then a single car garage for the upstairs 1 bedroom apartment.

Today’s stupid property repair has to do with the below exterior light installation.

When I opened the door to the garage, I noticed it stuck slightly when it was open about 1-2 inches. I thought that was strange and realized that the light was hitting the door (not to mention the bottom of the light was at about eye level). Upon further examination, it appears the installer decided not to move the light over a little or buy a smaller light, but notching out the door was easier!

Well…I suppose it works!

Scott Ficek owns and manages almost 30 investment property units from single family to multi-family. Find his website at www.minnesotainvestmentrealestate.com or receive his blog via your RSS Feed or in your Email. He is also a Minnesota Real Estate Agent with RE/MAX Advantage Plus in Minneapolis and helps new and seasoned investors buy Minnesota Property Investments.

Popularity: 31% [?]

Craig’s List is an excellent place to advertise your investment property vacancies. I wrote a post about doing Reverse Prospecting for Tenants on Craig’s List about 6 months ago. Although this is a very effective way to find new tenants, you should plan to post your apartment for rent. Here are a couple tips to get your best response:

• Include your phone number as some prospects will want to call.
• Make sure to check the email address that you set up in Craig’s list often, especially in the first 24 hours. I have had emails from prospective tenants within minutes of posting.
• Always post pictures of the property. Many tenants will not even consider your apartment or contact you without pictures. The pictures can be from a few years ago, just insure they show the property well.
• Craig’s list does allow some HTML in their postings. Check with your friendly web designer, but you can do bold and change the color of text.
• I always put the available date in the heading to allow readers to quickly see it. Such as: “Avail-June 1″
• Highlight anything unique about the property (pool, freshly updated, hardwood floors) in the title also.
• If you are a licensed Minnesota real estate agent, remember that you are required to disclose that fact on everything you publish (this included).
• Take a trick from retailers, drop the rent just below the $00 mark, such as $999 or $1099 or $599, instead of $1000, $1100, or $600 respectively.

With just a few changes to your ads, you will find you will generate many more calls and have your properties leased faster.

Have you always wanted to buy investment property, but never knew where to start? Don’t Wait! Get Started now.

Scott Ficek is a Minnesota Real Estate Agent with RE/MAX Advantage Plus in Minneapolis and helps new and seasoned investors buy and own Investment Property. He owns and manages almost 30 investment property units from single family to multi-family. Find his website at www.minnesotainvestmentrealestate.com or receive his blog via your RSS Feed or in your Email.

Popularity: 34% [?]