A new ordinance went into effect on January 1, 2009 that requires the owners of any vacant properties in Burnsville, MN to register them within 30 days of the property becoming vacant.  This registration requires you to fill out a form and pay a $200 fee.  The property may also not be occupied before the City of Burnsville does an inspection for any code violations.

They also expect you to keep the property secured and maintained including grass maintenance and snow removal. If the property sold and the fees are not paid prior to sale, the new owner has 30 days to pay the fees.

If you fail to register the building the city website if very clear:  “If the fee is not paid within thirty (30) days of being due, the owner shall be subject to prosecution as prescribed in Section 4-10-8.”

I was out with one of my rehab customers in South Minneapolis a couple weeks ago.  We were touring foreclosure properties for him to buy, rehab and rent out.  We were in a very nice area is Southwest Minneapolis (4xxx block, west of Chicago).

We pulled up to this cute story and half house on a quiet street.  It was getting dark and as always in foreclosures, there were no light bulbs in this property.  We enter the house and as my customer walks into the dining room, he falls.  It turns out the dining room is sunken about 6-8 inches like you would see in a 1980′s property (but this one is built in 1930).  Strange.

We walk around looking at everything.  I open a closet door and notice that the closet is also sunken.  Now we are really scratching our heads.  The rest of the trim and doors are original so we are unsure what is going on until we go into the basement.

According to my customer, it turns out this house (and the entire block) was built on an old garbage dump from the turn of the century.  Most of the houses in this area has similar problems.  The sunken dining room and closets are actually where the previous owner put in a new subfloor to level out the extremely out of level floor brought on by the sinking house.  In the basement, the floors are 6-12″ out of level in places, which has made the 1st floor out of level by 6-12″ in places.

Shame.  It was a nice house, but get the wrecking ball because this is not going to get any better!

Steve Howe with the Minnesota Real Estate Team, posted a concise article on what is a credit score, how to change it, and why you need it.  Go to his First Time Homebuyer Blog to read it.

The CRP’s are here, the CRP’s are here!  (Ok, I just had to say it.)  Minnesota waits until January 1 to publish the 2008 Certificate of Rent Paid (CRP) forms.  Here are the details.

If you owned an investment property in Minnesota during 2008, you are required by law to send each tenant a Certificate of Rent Paid.  You can find the form here.  Depending upon the tenant’s income, they may be eligible for a tax deduction for a portion of the rent they paid for 2008. Although you must send your tenant this form, this does not affect any Minnesota taxes you pay or anything else. It is simply for the tenants tax reporting purposes.

Like any other government form, the instructions are rather confusing and lengthy.  I am not attempting to interpret the instructions for you, but here are some of the tips that I have figured out over the years:

• Do not include any damage deposits, late fees, or other non-rent payments in the total amount.  Additionally, I typically only include actual rent paid, not rent billed (or accounts receivable).
• Section 8 or other rent subsidies are not included in the total line on the CRP. Only rent paid by the tenant(s).  In Quickbooks, I mark each subsidy payment in the memo field to make this easier at the end of the year.
• Fill in a copy of the form with your business information and make copies to save yourself time when completing many of them. With almost 30 rental units, you can imagine how much time this saves me!
• Alternatively, the Certificate of Rent Paid form comes in a PDF format, so last year I entered my business info once and then simply changed the property and tenant info and printed them out (I am faster at typing than writing!).
• I just wait for past tenants to call me and request them (again, there is no penalty for not sending these forms or for them being late).
• When calculating the total amount, you must divide the total rent paid by the total number of adults (married couples are considered 1 person) in the unit regardless of how much rent each paid. You should then send a form to each adult.  This may cause some frustration among roommates, but just tell them you are simply following the instructions.
• To save on postage, I send the CRP and monthly statement in the same envelope.
• Lastly, make a copy of all of them for yourself.  I will always get a least 2-3 calls in August (when the tenants turn these in for their taxes) from someone looking for a new copy.

You can purchase software packages or services to do this work for you, but I have always found that they are too expensive. Simply do a couple each night until you have them all finished. Turn the music or TV on and just fill them out!

Alex Anderson, with the MN Real Estate Team, wrote a great post that I experience all the time with newer investors.  I wrote about this same topic to wannabe real estate investors back in April 2008.  Many will consistently “let life get in the way” of actually investing in real estate.  They say ” when I have more money” or “when my kids are older” or “when I finish those house projects”, I will buy some rental property.

It is amazing how many will never do anything.  Make 2009 your year to do the research and either jump in or quit talking about buying investment property!  First step, attend our next Investment Property 101 seminar.

The holiday’s have kept me away from posting much.  John Gall shot over this question the other day and I want to respond with an answer:

I have technically three tenants in a SFH [single family house]. Two singles and one married couple. The lease goes until 5/31 and the tenants can’t stand to live together anymore. The two singles want to move out 4/1 and I’m guessing the married couple will also if given the chance. The set of tenants are mixed. Good on taking care of the property but mixed on rent collection paying late most months but always up to date by months end. I’d actually like to get rid of them and get a new tenant in place.

My strategy is to have them sign an early least termination agreement contingent upon my obtaining a new tenant for 4/1 with a signed lease. If I cannot secure a new tenant for a 4/1 move in and their stuff is not out then the original 5/31 lease date stands. My hope is to 1: get rid of the deadbeats and make them happy. 2: They now have an incentive to make things show worthy and make the property available to prospective tenants.

John, I think you are headed down the right path.  I am have zero patience or time for playing mother to bad tenants. I would prefer to just let them go and find someone else.

The positive is that they gave you plenty of notice to figure out a solution and re-rent the property.  I would remind them to keep the place clean and picked up as to help you rent it out by 4/1 (which also is to their benefit to get out early).  Most tenants will be fine with this.  If the property needs any upgrades, you may want to tackle these now (again using your leverage to get them out early to do it).

Unfortunately, I think you are going to have to pick a move out date now.  I would be concerned that if you found a tenant on 3/15, would the existing tenants then have enough time to find something and move out by 4/1?  If one or more of them couldn’t find a place to live, it could get dicey as the new tenant needs to move in and the remaining one(s) now need to be evicted as a hold-over tenant.  This could lead to some sleepless nights and could take 1-2 weeks to resolve.

My other option would be to talk to the married couple seperately (I assume they like living together!).  See if they want to stay and would start a new lease.  I assume since the had roommates, they can’t afford the extra rent, but it is worth a try.  Also, if you have any other vacant units, move one or more tenants over to that one.

I suspect that if you start advertising your rental now, especially in Craig’s list, you will have no trouble getting it filled by 4/1.  Good luck!