Misc Real Estate

Tips for First Time Landlords

When it comes to being a first time landlord, there are plenty of things that need to be considered aside from purchasing flats to rent. Being a landlord is a great way to bring in some extra money and even make a living; this, however, is not to say that it is easy or [...]

When it comes to being a first time landlord, there are plenty of things that need to be considered aside from purchasing flats to rent. Being a landlord is a great way to bring in some extra money and even make a living; this, however, is not to say that it is easy or stress-free. Dealing with tenants can be rather difficult, and ensuring that they pay on time and do not cross you can be plain impossible. Fortunately, proper planning will ensure that you can make a prosperous career out of being a landlord.

That said, here are a few tips for first time landlords.

1.) Purchase the Right Properties
Buying the right flats to rent is one of the most important things that any landlord can do, and is usually the first step in the process of becoming a successful business person. You may also want to purchase a house, as many people would prefer to live in a house over a flat. Once you have purchased at least one property, you can begin fine-tuning your business.

2.) Choose Your Tenants Wisely
Choosing the tenants that you will rent to is one of the most important decisions you can make as a landlord. Remember that the majority of the money (most all of it, actually) in this business will come from your tenants, so you will want to be sure that they are good for it from the very beginning. Doing a credit check and holding a lengthy interview is the best way to ensure that a potential tenant is worth renting to. It is highly ill-advised that any landlord rents to a random tenant.

3.) Be Firm
One of the most common mistakes that first-time landlords make is that they let their tenants take advantage of them by allowing them to pay late (or not at all) for their rent. This is terrible practice, and can set you up for disaster in the future. Always be firm when it comes to rent.

Top Real Estate Investment Markets

Rob over at HomeRun Homes does a nice job of summarizing some of the top Real Estate investing markets on his recent blog post.  While Minnesota did not make his list, I would bet that it would be comparable to the Detroit example in some places in Minneapolis.  Otherwise, we are seeing Memphis numbers in [...]

Rob over at HomeRun Homes does a nice job of summarizing some of the top Real Estate investing markets on his recent blog post.  While Minnesota did not make his list, I would bet that it would be comparable to the Detroit example in some places in Minneapolis.  Otherwise, we are seeing Memphis numbers in the suburbs.  Maybe I should think about buying a home near Disney for $100k.  I could just rent it out to all my friends with kids when they go down there!

Run over and take a look at Rent to Own Homes.

Raising Rent on Your Section 8 Tenants

Despite being a landlord for over 6 years, I swear I learn something new in this business every month.  Have you ever leased your property to a tenant (Section 8 or not) for less than you were really trying to get?  Most of us have.  Maybe it is a slow rental time of the year, [...]

Despite being a landlord for over 6 years, I swear I learn something new in this business every month.  Have you ever leased your property to a tenant (Section 8 or not) for less than you were really trying to get?  Most of us have.  Maybe it is a slow rental time of the year, maybe you just haven’t had many calls on the apartment, maybe it is 2 weeks before the first of the month and you just want to get the place filled.  I bet every landlord has done this at one point.

So then, how do you get the rent back up to where you want it to be without upsetting anyone?  With non-Section 8 tenants, I tread lightly.  I would rather sacrifice $50 per month than have them decide to start looking and move out.  Each turnover costs me $1000-$2000 in painting and property repairs, even when they leave the place perfect.  Plus, that is assuming that I will NOT have any vacancy time.  In my book, that $600 that I am losing per year is cheaper than a turnover.

A friend of mine that does property management for about 250 units (60% of them get some rental subsidy like Section 8), told me something I never knew.  You can raise the rent on a Section 8 tenant dramatically in one year or every year and Section 8 will approve it.  This is even if it goes over the maximum rent amount for that unit. Me and another landlord just sat there with out mouths open, about to cry over all the money we had left on the table over the years!

Here is an example of how it works:

• You have a duplex with two 3 bedroom units.  Both units are identical.
• You typically rent each unit for $1200 per month.
• The previous tenant moves out in December and you are having a tough time finding a tenant.
• A prospective tenant calls you about the apartment and says they have a Section 8 voucher that will only pay $1095.
• In a pinch and desperate you decide to take them, despite getting $105 less per month that you normally get (after running the typical tenant screening process).
• You sign a lease at $1095.
• At month 10 (60 days before the expiration of the lease), you contact the tenant to see if they want to stay.
• If so, you draw up a new lease for $1200 and have them sign it.
• You submit the new lease and documentation of the rent for at least three other comparable 3 bedroom units in duplexes with the same amenities, in the same neighborhood, to justify your rent increase.
  • The other comps must be NON-Section 8 tenants.  You are trying to show what the market rent is for that property.
  • One small wrinkle is getting comps.  You can definitely use the other unit in this duplex in this example, but then you may need to figure out a way to provide proof of other units in the immediate area renting for the same amount.  Hopefully you either have other buildings nearby or maybe you can ask a neighbor landlord to give you a copy of his/her leases for this.
• There is no guarantee that Section 8 will approve this, but if you have a decent case with good comps, my friend said he has raised the rent $200 one year to get the property to the correct amount.

One question that got asked was, why would the tenant agree to a large increase.  The answer is that they may not feel the increase as Section 8 may simply pay the difference.  While you can’t guarantee this, it is worth mentioning.  Alternatively, I do know that Section 8 will mostly ignore smaller yearly increases of $25-50.  These just fly under the radar.

So…..Watch for your lease renewals on your Section 8 properties and bring your rent up to market standards.

Telltale Signs of a Bad Tenant

I am sure with that headline and what I am about to say will get me some hate e-mail, but I just tell like I see it (even if it is not 100% politically correct or polite). So I stopped by one of my units in Northeast Minneapolis this weekend to find that the tenant [...]

I am sure with that headline and what I am about to say will get me some hate e-mail, but I just tell like I see it (even if it is not 100% politically correct or polite). So I stopped by one of my units in Northeast Minneapolis this weekend to find that the tenant moved out in the middle of the night, owing me May rent.  Nice!  On top of that they left a couple pieces of furniture in the house, 2 beds in the yard, and no cleaning (surprise).  How did this happen to me again?

As I was having a little pity party in my unit, I had an epiphany.  This tenant had some telltale signs that I should have picked up on when I showed her the unit the first time.  While none of these are 100% reliable and I am sure there are many exceptions, and while I am sure I will get hate mail for saying some of these things, just chalk this up to my gut feeling and experience over the years.  Here are some correlations that I have noticed with bad tenants:

• One of my big pet peeves is seeing window screens pushed out or damaged on rental properties.  I don’t think I have ever wrecked a screen at my house.  I see tenants push them out all the time.  In fact I had a tenant last summer simply push the window air conditioner through the screen instead of removing it!  Bad tenants seem to treat the screens on the house like the treat the rest of the house.  They abuse it.  By stopping by and checking out their current living situation, you should be able to notice this.
• When you are running the tenant’s application, if there are any credit issues, collection items, or evictions, that is going to continue to be a problem.  Now I understand if you got laid off, went through a divorce, got sick and had a period in your life well that is explainable, but most bad tenants just seem to have no regard for payment of bills.  Just like any bad habit, once they get used to doing it often, it gets easy.

While I could go on and on, these are some quick thoughts that come to mind (and help me vent my frustrations).

Back on Market-Rehabbed Saint Paul Duplex

I love working with investors.  Maybe one of my favorite parts of my job is seeing people take properties that were previously run down, neglected, ugly (and sometimes almost destroyed), and bring them back to life and restore them to their beauty.  This Saint Paul home is no exception.
Downstairs this duplex had no kitchen left [...]

I love working with investors.  Maybe one of my favorite parts of my job is seeing people take properties that were previously run down, neglected, ugly (and sometimes almost destroyed), and bring them back to life and restore them to their beauty.  This Saint Paul home is no exception.

Downstairs this duplex had no kitchen left and someone had tried to combine two of the three bedrooms to make a larger master suite (removing the hardwood floors in the process).  The upstairs tenants had destroyed the bathroom and the property did not have a working heating system.  Once my investor purchased it, they found that the entire plumbing system was incorrect installed.

Needless to say, they spent considerable time and money to restore this 1928 Crocus Hill duplex back to its original glory.  I love it (I was tempted to tell my wife to start packing as we are moving in!).  Here is just a partial list of the work they did:

• New kitchens including cabinets, counter tops, appliances, and tile floors
• New bathrooms with all new plumbing and tile throughout
• Refinished hardwood floors and restored woodwork
• New Bryant furnaces in each unit
• Upgraded plumbing (both waste and supply) including 2 new water heaters

Each unit is 3 bedrooms and 1 bath.  This property will work for either an investor or an owner occupant.  The seller is very comfortable that you could rent either apartment for $1250 per month each.

Check out the website for 728 Dayton Avenue.

Home Prices Continue to Stabilize as Oversupply Issue Improves – March Stats

From the Minneapolis Realtor Association Newsletter-4/19/10
For the third consecutive month, home prices in the Twin Cities 13-county metropolitan area showed a year-over-year increase. We haven’t seen three consecutive months of progressively increasing year-over-year growth since June 2004.
The March median sales price of $165,000 was a healthy 7.1 percent increase from $154,125 last March. That’s the [...]

From the Minneapolis Realtor Association Newsletter-4/19/10

For the third consecutive month, home prices in the Twin Cities 13-county metropolitan area showed a year-over-year increase. We haven’t seen three consecutive months of progressively increasing year-over-year growth since June 2004.

The March median sales price of $165,000 was a healthy 7.1 percent increase from $154,125 last March. That’s the strongest year-over-year increase since May 2005. Part of the reason for the stronger upward movement is that a lower share of home sales are foreclosures as compared to last March. Short sales are another story.

“There are definitely some promising indicators and several positive trends at this time,” said Brad Fisher, President of the Minneapolis Area Association of REALTORS® (MAAR). “However, we need to keep a close eye on several submarkets, including short sales, new construction, and high-end properties.”

The median sales price of traditional homes (excluding foreclosures and short sales) in March was $199,900, down $11,600 or 5.5 percent from $211,500 last March.

Foreclosures posted a slight 0.3 percent increase to $118,000, while short sale properties posted a 2.0 percent decline to $147,000. Although short sales have become the new problem child on the block, the 10.0 percent decline in bank-owned new listings after a period of unprecedented growth is good news for everyone.

There were 5,051 signed purchase agreements in March, an increase of 14.6 percent from a year ago. The spring market continues to have a flurry of activity as we approach the April 30 deadline for the federal home buyer tax credit. Home sales are expected to continue to increase as buyers move to take advantage of this substantial market incentive.

This increased buyer activity has brought inventory down and restored some sense of equilibrium to the market. April’s supply-demand ratio of 4.39 means that there are 4.39 homes available per buyer for the month. In March 2008, that mark was 8.16. While the rate of inventory decline has been slowing in recent months, supply and demand is far more balanced than it was two years ago. This is a critical sign that the market is correcting oversupply.

“The oversupply issue has corrected in much of our market, and that has led to price stabilization,” said MAAR President-Elect, Pat Paulson. “This provides reason for cautious optimism.”