The "be all" investment properties thread

[Frank]

I have a lot to learn and this subject and there seems to be a lot of people on the board with this experience. Of course I plan to research more on my own, but I want to hear it from the people actually doing it now, in today's economy, in North Texas.

I am considering renting out my current house when I build our next one. I have put in new floors in the living room, halls, kitchen. New counter tops in the kitchen (nothing fancy though). I built a nice deck over the summer and spruced up here and there. The outside AC unit was replaced last summer and the water heater about 5 years ago. I don't anticipate any big ticket repair that would be needed unless possibly a roof. Its 1600sq' 3/2/2 in a decent area of Mesquite. (I realize you ballers have a different definition of "decent" )

1. How many rent houses do you have and for how long have you had them?
2. What was the longest any of them remained empty just waiting for a renter?
3. How long is a lease? 6mo? 1yr?
4. What improvements are worth doing to a house versus leaving alone or going cheaper?
5. How often do you raise rent? By how much and why?
6. How do you perform background checks?
7. Do you regret not being more thorough on a check or maybe learned something you missed checking that you do now?
8. How much do you typically owe on the houses you are renting out?
9. Do you accept Sec 8? Why or why not?
10. So what do you use for a contract? Is it some standard form or something custom you drew up?
11. How long before you evict from lack of a payment? How much slack do you cut people and what reasons did you?

[Treasure Chest]

I have a lot to learn and this subject and there seems to be a lot of people on the board with this experience. Of course I plan to research more on my own, but I want to hear it from the people actually doing it now, in today's economy, in North Texas.

I am considering renting out my current house when I build our next one. I have put in new floors in the living room, halls, kitchen. New counter tops in the kitchen (nothing fancy though). I built a nice deck over the summer and spruced up here and there. The outside AC unit was replaced last summer and the water heater about 5 years ago. I don't anticipate any big ticket repair that would be needed unless possibly a roof. Its 1600sq' 3/2/2 in a decent area of Mesquite. (I realize you ballers have a different definition of "decent" )

1. How many rent houses do you have and for how long have you had them?

One, I gave it to the ex in the divorce, but I still show it because I'm nice.

2. What was the longest any of them remained empty just waiting for a renter?

One month, tops. But it's advertised for lease and shown as soon as notice is in.

3. How long is a lease? 6mo? 1yr?

12 month minimum unless 6 months and a non refundable deposit are paid in full, with approved circumstances.

4. What improvements are worth doing to a house versus leaving alone or going cheaper?

Updates are minimal; a new coat of paint in heavy traffic areas, flooring was updated based on what would need the least upkeep. We tiled the house.

5. How often do you raise rent? By how much and why?

We kept the rent to $100 less than comps to turn it quickly.

6. How do you perform background checks?

My godfather owned a property mgt group, so I ran checks through him. I've also asked people to pull a credit report through the credit bureau, in a pinch, and called on references myself.

7. Do you regret not being more thorough on a check or maybe learned something you missed checking that you do now?

The biggest regret I've ever had was taking someone with a great background check and references that I didn't have a good gut feeling about. They turned out to be POSs that I successfully took to court.

8. How much do you typically owe on the houses you are renting out?

We only owed $40,000 on it

9. Do you accept Sec 8? Why or why not?

No. No. No. No. No!!!!! You get people who treat the property like section 8 housing, and the reletting is a nightmare. The house will be trashed.

10. So what do you use for a contract? Is it some standard form or something custom you drew up?

Standard form for applications and lease agreements.

11. How long before you evict from lack of a payment? How much slack do you cut people and what reasons did you?

We've worked on rent or deposits for special cases. We had a mechanic that worked at a shop that went under. His wife was pregnant and on bedrest, so we cut his rent in half for the rest of her pregnancy. I've BTDT, and couldn't imagine risking the health of her and the baby putting them under the stress of catching up on rent, finding a place in their current price range, and moving. We lost about a month of rent, but they stayed on at full rate for a year after. We may have been out a month's rent plus reletting, had they moved, so it evened out.

[Frank]

Good stuff! On the Sec 8 stuff I am on the fence. My friend rents out nicer homes in nicer areas and has had some good renters. He loves that the rent comes direct deposited to his account and always on time which takes away a lot of headaches. He likes that the government is basically paying the mortgage for him. As I understand, if there is a problem with the tenant, they risk losing their Sec 8 voucher which is really hard to get in the first place so they tend not to be so flippant with how they treat it. May be he has just been lucky so far. I need to ask how many tenants he has on it and where and if he has had to take action against any of them.

[STANGGT40]

...

i agree with a lot of what you said, but i don't agree on the section 8 thing. there are only so many people that will get section 8 assistance, before it runs out for the year. the section 8 portion of the rent is guaranteed to get to you on time, so all you have to worry about is the renter's portion. (which is sometimes very little) the renters will generally pay on time and treat the house well, because they know that if they screw up, they'll lose their section 8 assistance. a section 8 rep will visit the house before a renter moves in (to make sure that everything is in good working order and up to section 8 specs) and visit after they leave to make sure that they didn't do any damage. there are some things that they expect, such as the garage has to be painted...a lot of houses will just have tape/bed in the garage. it's not over the top, though.

[jewozzy]

This has potential to be a good thread... I've been considering section 8 on my home and getting a new one so I'm gunna watch this one.

[Silverback]

i agree with a lot of what you said, but i don't agree on the section 8 thing. there are only so many people that will get section 8 assistance, before it runs out for the year. the section 8 portion of the rent is guaranteed to get to you on time, so all you have to worry about is the renter's portion. (which is sometimes very little) the renters will generally pay on time and treat the house well, because they know that if they screw up, they'll lose their section 8 assistance. a section 8 rep will visit the house before a renter moves in (to make sure that everything is in good working order and up to section 8 specs) and visit after they leave to make sure that they didn't do any damage. there are some things that they expect, such as the garage has to be painted...a lot of houses will just have tape/bed in the garage. it's not over the top, though.

If I had any questions, this is one of the first people I would talk to. Brad is the best slum lord in the business

[03mustangdude]

I've heard people say you get the best tax benefits from renting a house, anyone comment on that?

[DamonH]

1. How many rent houses do you have and for how long have you had them?

I just have the one that I've been renting for 6 years now. My parents have 2, and my father-in-law has 14.

2. What was the longest any of them remained empty just waiting for a renter?

I've never been more then a month, but as mentioned previously it helps to price it right. Trying to get a few more dollars out of the rent isn't generally worth it if it sits empty for an extra month.

3. How long is a lease? 6mo? 1yr?

I do year long leases, and I always have them end on June 30th. They are much easier to lease in the summer. If someone moves out early, I'll just make the term until that date.

4. What improvements are worth doing to a house versus leaving alone or going cheaper?

I had everything tiled except the bedrooms. The bedrooms get cheap carpet. I've really been debating on a locked sprinkler system. Tenants never water, and I had to really stay on them about keeping the foundation good and watered during our last summer.

5. How often do you raise rent? By how much and why?

I pretty much have it set and leave it at that. The only time I'd think about it is if I wanted to encourage a set of PITA tenants to move.

6. How do you perform background checks?

Lots of online services you can get to do this.

7. Do you regret not being more thorough on a check or maybe learned something you missed checking that you do now?

I've been mostly lax, and my current tenant has me pretty concerned. Long story, but in the future they'll all get background checks on ALL tenants, + credit check, + calling previous landlords.

8. How much do you typically owe on the houses you are renting out?

I owe right at 80% currently. You'll see bigger write-offs if you still owe money, but you'll be on the hook to pay the mortgage if you have any problem getting tenants or they don't pay.

9. Do you accept Sec 8? Why or why not?

I've never had anyone approach me on section 8, but I've heard the same things STANGGT40 said.

10. So what do you use for a contract? Is it some standard form or something custom you drew up?

I use the standard Texas Real Estate Commission lease / forms.

11. How long before you evict from lack of a payment? How much slack do you cut people and what reasons did you?

Best advice I've gotten is to not delay. Send them a late notice the day after the grace period ends (set in your lease). If rent isn't received within 5 days, send a notice to vacate with a specified date of filing. On that date, file for eviction. There are professional slackers who scour Craigslist (where I advertise) looking for landlords they can possibly take advantage of. If you go lax on them, they'll milk you for several months of rent. Luckily I've never gotten past the notice to vacate stage before rent has been paid up.

[Treasure Chest]

i agree with a lot of what you said, but i don't agree on the section 8 thing. there are only so many people that will get section 8 assistance, before it runs out for the year. the section 8 portion of the rent is guaranteed to get to you on time, so all you have to worry about is the renter's portion. (which is sometimes very little) the renters will generally pay on time and treat the house well, because they know that if they screw up, they'll lose their section 8 assistance. a section 8 rep will visit the house before a renter moves in (to make sure that everything is in good working order and up to section 8 specs) and visit after they leave to make sure that they didn't do any damage. there are some things that they expect, such as the garage has to be painted...a lot of houses will just have tape/bed in the garage. it's not over the top, though.

As for guaranteed income, yes. I know they stand to lose their section 8 if they trash a house, but from my mom's experience as a section 8 rep, there is no way I'd take the gamble, having a single property.

[flybye70ss]

I have a couple questions as well. If you live in a house that is your primary residence, and want to relocate to a different state, what all is needed if anything to convert it to a rental property? Different homeowners insurance? Do you need a different mortgage?

[barronj]

All of the things below apply to section 8

I manage a few properties for my investor clients, and 4 of them have section 8 tenants. I've also taken on other section 8 clients to lease other houses to.

Section 8 properties will be occupied by a single female with multiple children, usually. You have to ask yourself if you want a boat load of rugrats spilling koolaid & melting crayons on your carpet.

Dealing with the section 8 inspectors is a headache. They never return phone calls or emails, and you don't find out if you've passed the inspection unless you go to the property & read their report. Zero communication skills.

Section 8 usually pays as 70% of the rent amount, but can pay more, or less, depending on the tenant's # of dependants, and how much they make at their job.

They will also almost never be able to start the rent mid-month, as Sec 8 pays on the first of the month, does not pay deposits, and will not pay for overlapping rents. All of your Section 8 leases will start on the 1st.

You will not get your money from Section 8 the day the person moves in. You will get a "signature notice" in the mail, letting you know that you can go to the section 8 office (this will be your second trip there) & sign their agreements, and provide them a copy of the lease. The rental amount (as stated on the lease) has to be the same or less than the voucher is for; it cannot be for more than, and you get the tenant to pay the rest*. Section 8 determines what fair rents are, and doesn't want their people paying the landlord over & above what has been agreed to. You will get your check from the housing authority (section 8) sometime within 30-45 days after the person has moved in. You will have collected the tenant's cash portion of the rent.

I've had ONE section 8 who was able to come up with a full month's rent for deposit. If you have a sign in your yard, you will get 30 calls that will go nowhere after you tell them you want a full month's rent deposit, which is the only way to go.

I've not been managing the section 8 properties for long enough to know what condition they'll be returned in, but I'm betting that the deposit will not cover the damages, and you can't get blood from a turnip. I'm not expecting a bunch of outright damage, but all the walls will be dirty & require paint, and any carpet will be tossed.

[Diabolic]

I have 8 rental properties but do not accept section 8. I require a minimum of 600 credit score. I ask for the 1st months rent, deposit, and last months rent up fromt if the score is 600-649. Anything above 649 is just rent and deposit. I prefer married couples vs single tennants. BF's, and gf's can cause tension between roomates. My longest running tennant is going on 8 years, followed by 6 years, 5 years, and another 5 years. The rest are new with 24 month leases. Take care of your tennants and they will treat you right.

[barronj]

10. So what do you use for a contract? Is it some standard form or something custom you drew up?

I drew up a contract for my MIL on her property in Colorado using EZ Landlord, and because I've written 100's of Texas leases, I knew what else to add & where/how to write it. If you don't know a realtor who can write one for you, use EZ Landlord.

11. How long before you evict from lack of a payment? How much slack do you cut people and what reasons did you?[/QUOTE]

You start the paper trail the day the first rent payment is late. Send a notice of late payment the next day, or walk it down to the property & deliver it. Have stiff late penalties ($50) and each reoccurring day ($20), and don't let them have a pass. If you charge them $50 the first time they're late, they won't be late again. If you give them a pass, expect repeat performance.

[DamonH]

I have 8 rental properties but do not accept section 8. I require a minimum of 600 credit score. I ask for the 1st months rent, deposit, and last months rent up fromt if the score is 600-649. Anything above 649 is just rent and deposit. I prefer married couples vs single tennants. BF's, and gf's can cause tension between roomates. My longest running tennant is going on 8 years, followed by 6 years, 5 years, and another 5 years. The rest are new with 24 month leases. Take care of your tennants and they will treat you right.

Your property must be nicer and in a nicer area then mine. I don't think I've ever had anyone apply that had over a 649, and consider it pretty lucky when they have over a 600. Everyone I seem to run has crappy credit and a "story".

[347Mike]

I have 8 rental properties but do not accept section 8. I require a minimum of 600 credit score. I ask for the 1st months rent, deposit, and last months rent up fromt if the score is 600-649. Anything above 649 is just rent and deposit. I prefer married couples vs single tennants. BF's, and gf's can cause tension between roomates. My longest running tennant is going on 8 years, followed by 6 years, 5 years, and another 5 years. The rest are new with 24 month leases. Take care of your tennants and they will treat you right.

This is my ultimate goal. I would like by the time I am thirty have a few rental properties. I almost pulled the trigger on one a few weeks ago but that money is much more rewarding right now in the stock market.