AfterShockMedia: Rental Property Owners

[Barefootsies]

Just curious.

For your tenants, do you give them a discount, or one rate if they pay early, and another if they pay on time, or after?

Also, when you are first looking for tenants, or renters, do you offer them a free month, no deposit, gas card, etc?

How about if they sign a 2 year, versus a 1 year? Any incentive?

[beemk]

you give them a discount for paying on time and keeping the property up and when you advertise the rate you advertise it as "rate with discount". then the only late fee they have is $X per day for every day late. it looks better in court that way.

[Barefootsies]

Originally Posted by beemk

you give them a discount for paying on time and keeping the property up and when you advertise the rate you advertise it as "rate with discount". then the only late fee they have is $X per day for every day late. it looks better in court that way.

Interesting..

[Chris]

i have two and ive never given a discount for people who pay early
but with good tenants we are always friendly with and give xmas gifts and invite to bbq's n such

[baddog]

I hope my tenant doesn't see this.

[X Industry Jobs]

I need to find something like this

[Barefootsies]

Originally Posted by baddog

I hope my tenant doesn't see this.

[Sosa]

Unless you can't keep a tenant or have no one interested I wouldn't give away free months. Gift cards etc at xmas time is nice, but screw a free month of rent unless you have to get a tenant in the property right then. You better hope to lock them up for a year lease if you do that.

[After Shock Media]

I used to give a discount if they paid their rent a week before the due date. I no longer do that though as I have newer tenets.
My rents are due on a set day (last day of month) and is considered late as of the first day of the month. Late fee does kick in as of the first. I keep the late fee at 1.5% of the rent, not going any higher as that would already be running a fine line with California usury laws. They do not say exactly what the maximum can be (10% on most loans) for fines/service charges but have routinely upheld 18% per year in many cases.
Eviction paperwork also starts if rent has not been paid by the 2nd. They will get a 3 day or quit delivered that day with more paperwork started to speed along the legal process.
I do not give out free months and so forth in order to get a tenet. Have not had the need yet. Would only consider doing it if the unit was showing difficulty in getting rented out.
Them signing a lease actually protects them more than it does me anyways. The rules remain the same, minus the month to month part. A lease however does protect them from me raising my rents during the lease period, which I do raise my rents on the units yearly (unless a lease prevents me). I typically raise it by 5% per year as a minimum.

[candyflip]

I've never had any problem renting a place, so we haven't had a need to discount anything. I guess if you've got units sitting and not many potential renters, than I'd consider it on a case by case basis.

I guess it really depends on the market where you're at.

[woj]

What's your guy's take on the whole business? Decent $$, worth the effort, etc? I hear conflicting opinions, but it seems the opinion is generally negative.. profits if any are minimal, lots of headaches, etc...

[After Shock Media]

Originally Posted by woj

What's your guy's take on the whole business? Decent $$, worth the effort, etc? I hear conflicting opinions, but it seems the opinion is generally negative.. profits if any are minimal, lots of headaches, etc...

I think it is worth the effort. It does have lots of headaches and such though when you get a bad tenet. Biggest savior of problems and headaches is to have strict rules that are enforced no matter what.

[candyflip]

Originally Posted by woj

What's your guy's take on the whole business? Decent $$, worth the effort, etc? I hear conflicting opinions, but it seems the opinion is generally negative.. profits if any are minimal, lots of headaches, etc...

I have no major hassles. Good tenants. Nice property. We're not too concerned with the profits. So long as the mortgage, taxes and upkeep expenses are covered, anything above and beyond is just icing on the cake. This is wealth building, not not something that we are using to pay the bills.

[Barefootsies]

Originally Posted by woj

What's your guy's take on the whole business? Decent $$, worth the effort, etc? I hear conflicting opinions, but it seems the opinion is generally negative.. profits if any are minimal, lots of headaches, etc...

Almost everyone I have talked to tells me it is like a 401k. Long term profit, security, and capital gain. It's not a get rich, like AfterShockMedia, scheme.

[Phil21]

Them signing a lease actually protects them more than it does me anyways. The rules remain the same, minus the month to month part. A lease however does protect them from me raising my rents during the lease period, which I do raise my rents on the units yearly (unless a lease prevents me). I typically raise it by 5% per year as a minimum.

I'm curious.

If you had a good tenant who kept the place up, was paying at or just under market rates for similar units, would you still try to get the increase in if there was pushback? Or is keeping the good tenant and not rolling the dice on the next one worth it (not to mention the month at least the unit is not rented).

I'm the type that moves when I feel someone is trying to screw me due to "lock in" - and I'm a decent tenant, I never call my landlord, fix almost everything myself if it breaks if the cost is under $100, pay on time or early, etc. I also tend to stay put for years on end, and am out of town almost 50% of the time so it's even less wear and tear on the unit. If my landlord tried the 5% year on year increases, I would have considered moving the first year, and absolutely moved the second. Even if I stayed two years, you lose money on that month of rent you can't get due to having to put the unit on the market again, paint it, etc.

I guess this also depends on the housing market in your area as well. Here, I can get a similar place for roughly the same cost. Obviously if I was $100-200 under market for similar, I'd expect an increase.

-Phil

[baddog]

Originally Posted by woj

What's your guy's take on the whole business? Decent $$, worth the effort, etc? I hear conflicting opinions, but it seems the opinion is generally negative.. profits if any are minimal, lots of headaches, etc...

Well, my situation is probably a little different than most, but I have a great tenant and she pretty much makes the payment along with tax and insurance. So if property values continue to rise like I suspect they will, I am sure it will have been a great investment.

[BradM]

My wife's grandpa is a real estate investor, and owns about 10 properties in southern california. He has had the same tenants for years AND the places have been paid off since the early 90s. So for him he just collects checks and sends repairmen out when he needs stuff done.

He's said it would be different if he was replacing tenants constantly and/or having to be more hands on and dealing with mortgage payments and such.

[After Shock Media]

Phil I am not out to "fuck them" in any way. I often will use judgement on most cases. I also make it very clear that I typically raise rent once per year and that they can lock in a rate with a lease.
The standard in my area is roughly a 7-9% growth rate when it comes to rents. So in reality my rents are often lower than others anyways, even with the 5% raises. Please also keep in mind that in my area a 5% raise is only about 35.00 a month/420.00 a year.

Unlike many others I also am providing upgrades to my units as well. Most of my tenets have seen that the upgrades more than justify any increases they may see. Most recent example was that I replaced all of the windows with dual pane types. It increased value, yet also provides tenet with utility savings. Then right now we are seeding a units yard (was just a dirt area when they moved in), added a sprinkler system, and will be fencing it once grass takes. I delayed until this month due to wanting good weather for it. Though I never promised such, said I would do such, or even hinted at it. Hell they even never commented on it before hand or asked for it.

[Barefootsies]

Originally Posted by Phil21

I'm curious.

If you had a good tenant who kept the place up, was paying at or just under market rates for similar units, would you still try to get the increase in if there was pushback? Or is keeping the good tenant and not rolling the dice on the next one worth it (not to mention the month at least the unit is not rented).

I'm the type that moves when I feel someone is trying to screw me due to "lock in" - and I'm a decent tenant, I never call my landlord, fix almost everything myself if it breaks if the cost is under $100, pay on time or early, etc. I also tend to stay put for years on end, and am out of town almost 50% of the time so it's even less wear and tear on the unit. If my landlord tried the 5% year on year increases, I would have considered moving the first year, and absolutely moved the second. Even if I stayed two years, you lose money on that month of rent you can't get due to having to put the unit on the market again, paint it, etc.

I guess this also depends on the housing market in your area as well. Here, I can get a similar place for roughly the same cost. Obviously if I was $100-200 under market for similar, I'd expect an increase.

-Phil

My business partner, who has 30+ rentals, never raises rents until the tenant leaves. So if they are here for 10 years at $500.00 he prefers to have a unit filled, then to try and nickel and dime until they move out.

[Phil21]

Naw, wasn't meaning you were trying to "fuck them" sorry if that's how I came across. I simply wanted to see from a landlord's side if the increases really do pan out, or if you lose a lot of tenants over it. Having units in two separate cities, one with nearly zero rent growth, and one with rather high, I certainly can see the difference.

I was "fucked" once in terms of dealing with a large property management type company, in a standard apartment complex (50 units plus). That was my first experience as a renter moving away from home about 10 years ago now At that point, I vowed never again to live in a corporate-owned building, and it's worked out really well since.

You definitely sound like a good landlord, I've also gotten lucky on mine. Maybe one of these days I'll stop splitting my time between locations, and buying a property will make sense - but until then, I generally stay put as long as the landlord isn't an a-hole

-Phil

[slapass]

Turnover is very expensive but so is cheap rent. It is a blance but i like to be current on rents as why give it away? I do not do specials and I use a late fee that kicks in on the 5th. Pretty much follows local custom and law. The bad thing about specials etc is that lots of people can't or are too lazy to do the math so they can't tell it is a better deal.

[After Shock Media]

Sorry Phil I could not think of the proper term so I said "fuck them", when I was thinking nickle and dime. I did not think you insinuated that at all though and felt you had a valid question.

I have had some great tenets and recently got rid of a tenet from hell. They keep threatening to sue me to get their security back, which I hope and pray that they do, as they have moved out of state and I can not serve them for small claims myself. Not only did they burn me for some rent, cost me some legal fee's, numerous repair fee's (nothing broken but had to send out service people to cover my ass), and on top of it all a fucking huge plumbing fee to switch that unit from septic to sewer- Which provides zero equity or property value. In layman's terms, that unit will be in the red for around 3 years from the day I had it done. Assuming no other repairs, leaving out property tax and all of that etc.
Those tenets I got rid of knew every trick in the book and how to abuse landlord tenet law to no end. Had the city called on me 3-4 times for code violation complaints- never found any. Got the run around with serving them. Had repair issues called in all of the time. Rent withheld for fake reasons. Useless crap left on purpose when they vacated late at night that I had to inventory and legally store by law for a set period of time. Blah, blah, blah.

[Phil21]

Hehe, yeah. I've considered buying a property to rent out, as I've had some deals tossed my way here and there.

But man, having heard many stories like that it certainly gives me pause. Even with someone who's not purposely out to fuck you, but is otherwise a bad tenant is terrible enough.

My landlord in Chicago owns a 3-flat unit. One guy above me stopped paying rent, and it took about 6-7 months to actually get the locks changed. I went and helped clean the place out - and it was a huge shithole, basically what you hear about in the stories. Mountains of trash, never cleaned, etc. We probably broke some law somewhere by tossing all the stuff in the dumpster, but he luckily never heard back.

[Barefootsies]

Originally Posted by Phil21

Hehe, yeah. I've considered buying a property to rent out, as I've had some deals tossed my way here and there.

But man, having heard many stories like that it certainly gives me pause. Even with someone who's not purposely out to fuck you, but is otherwise a bad tenant is terrible enough.

My landlord in Chicago owns a 3-flat unit. One guy above me stopped paying rent, and it took about 6-7 months to actually get the locks changed. I went and helped clean the place out - and it was a huge shithole, basically what you hear about in the stories. Mountains of trash, never cleaned, etc. We probably broke some law somewhere by tossing all the stuff in the dumpster, but he luckily never heard back.

I have heard that now a days you REALLY have to do the background checks, pay for them, and check 3-5 references.

[After Shock Media]

Originally Posted by Phil21

My landlord in Chicago owns a 3-flat unit. One guy above me stopped paying rent, and it took about 6-7 months to actually get the locks changed. I went and helped clean the place out - and it was a huge shithole, basically what you hear about in the stories. Mountains of trash, never cleaned, etc. We probably broke some law somewhere by tossing all the stuff in the dumpster, but he luckily never heard back.

That is the nightmare part of it all. I just followed everything to the letter of the law and did not allow emotion to kick in at all during the process. I knew if I fucked up in one tiny area they would hang me on it as it was apparent they knew the system and how to fuck landlords. I understand the laws are in place to protect people, but fuck can they be abused and are slanted for the tenets. I can never say enough for potential and current landlords to read and learn the laws in your state, county, and city. Of course also make damn sure you are following them all from the start too, rental agreements, privacy laws, you name it. Then enforce, enforce, enforce. As a landlord you can not afford to be lax about rules and the agreement. When you start to bend the rules or get lax, that often is when shit goes horribly wrong or you learn the whole lesson of give an inch and they take a mile.

In my above story, I could of kept it on septic but decided it was time to upgrade it. Just picked the wrong time when you consider the tenets that were in the place. They had yet to show their ugly head yet and made me think they would be around awhile.

[After Shock Media]

Originally Posted by Barefootsies

I have heard that now a days you REALLY have to do the background checks, pay for them, and check 3-5 references.

Sometimes even that does not help. It can be a full on crap shoot even with full information. Oddly I have only had issues with people that looked good on paper/credit/background and had incomes that were way above my rents and cost of living indicators. I ask and check up on loans, credit card debt, etc. Then I figure out if they can afford the rent and living with their incomes. Well those that pass by flying colors have been my problem tenets. So now I pretty much just deal with people living paycheck to paycheck or barely above it.

[TampaToker]

Originally Posted by After Shock Media

The standard in my area is roughly a 7-9% growth rate when it comes to rents. So in reality my rents are often lower than others anyways, even with the 5% raises. Please also keep in mind that in my area a 5% raise is only about 35.00 a month/420.00 a year.

With a written lease here in Florida the landlord may not raise the rent unless the lease allows it. Is it the same way in your state?

[After Shock Media]

Originally Posted by TampaToker

With a written lease here in Florida the landlord may not raise the rent unless the lease allows it. Is it the same way in your state?

A lease locks in the rate, unless the lease states otherwise.
A month to month agreement is just that and the landlord can change the terms at any time and the tenet can either agree and remain there, or they can give their 30 day notice and move out. Typically though as a landlord you would want to give 30 days notice on any changes as well, or the courts may get a wee bit upset and you are then dependant on the judges whim.


Edit- Both are written agreements though.

[Barefootsies]

Originally Posted by After Shock Media

Well those that pass by flying colors have been my problem tenets. So now I pretty much just deal with people living paycheck to paycheck or barely above it.

VERY interesting!!

[MrMaxwell]

You will save your own ass doing thorough background AND credit checks AND *speaking with* people they've rented from, before. References can be fake and phony. DO YOUR HOMEWORK. There are even nationwide services you can join.

The national services help you weed out the rental hoppers. They're professionals at it. Avoiding them is golden.

Charge rent+late fee as simple rent price and discount the rent for early payment, that is, a day or more before due date you deduct what would have been the late fee. That way it is built right in. Gives them an incentive to pay on time AND they don't feel "stuck with a late fee" if they pay later. They just feel like they "missed out on" the discount.

FIND OUT WHEN THEY GET PAID- the due date should be the NEXT DAY. This way they get paid and try to get the money to you AS SOON AS IT IS IN THEIR HANDS in order to get the "discount".

Give someone something substantial as a free month or huge upgrades and they'll think you're loaded and/or expect more and more and more free bonuses and feel cheated when they don't come!!!

[Barefootsies]

Originally Posted by MrMaxwell

Give someone something substantial as a free month or huge upgrades and they'll think you're loaded and/or expect more and more and more free bonuses and feel cheated when they don't come!!!

Good tips chief.

Was just curious if the AfterShockMedia's of the world did the discounts, and bonuses. I know that a TON of rental companies around this area do. A free month rent, no deposit, $99 move in specials, free gas card, etc, etc.

[After Shock Media]

Originally Posted by Barefootsies

Good tips chief.

Was just curious if the AfterShockMedia's of the world did the discounts, and bonuses. I know that a TON of rental companies around this area do. A free month rent, no deposit, $99 move in specials, free gas card, etc, etc.

Your killing me those references.
I have fewer units than most on here do or claim to. I also have said many times that I am into mobile homes/factory built homes for rentals. I had tried houses before, and even two separate duplex units or whatever you would call two apartments that are hooked together by a common wall and on one piece of property in your area.

I am about to get some more though as there are many empty lots around here on streets that allow mobiles and or factory built homes on. Only big hold back is the fucking credit crunch which is making very damn few real estate loans at this time in my state it appears.

[Barefootsies]

Originally Posted by After Shock Media

Your killing me those references.
I have fewer units than most on here do or claim to. I also have said many times that I am into mobile homes/factory built homes for rentals. I had tried houses before, and even two separate duplex units or whatever you would call two apartments that are hooked together by a common wall and on one piece of property in your area.

I am about to get some more though as there are many empty lots around here on streets that allow mobiles and or factory built homes on. Only big hold back is the fucking credit crunch which is making very damn few real estate loans at this time in my state it appears.

Yeah, I remember you telling me about some of your stuff. Which is why I had to reference you in the subject header.

That way, 'da man', would be able to break off a few crumbs of wisdom for the rest of us.

[Barefootsies]

Originally Posted by After Shock Media

I have fewer units than most on here do or claim to.

I am sure the AfterShockMediaCashBucksGoldCoin is rolling with the lambos, pimpin wit da ballas, and your getting your salad tossed by super models like all the gfy BROS.

[beemk]

Originally Posted by After Shock Media

Phil I am not out to "fuck them" in any way. I often will use judgement on most cases. I also make it very clear that I typically raise rent once per year and that they can lock in a rate with a lease.
The standard in my area is roughly a 7-9% growth rate when it comes to rents. So in reality my rents are often lower than others anyways, even with the 5% raises. Please also keep in mind that in my area a 5% raise is only about 35.00 a month/420.00 a year.

Unlike many others I also am providing upgrades to my units as well. Most of my tenets have seen that the upgrades more than justify any increases they may see. Most recent example was that I replaced all of the windows with dual pane types. It increased value, yet also provides tenet with utility savings. Then right now we are seeding a units yard (was just a dirt area when they moved in), added a sprinkler system, and will be fencing it once grass takes. I delayed until this month due to wanting good weather for it. Though I never promised such, said I would do such, or even hinted at it. Hell they even never commented on it before hand or asked for it.

the taxes go up every year anyway, so you cant really not raise the rent on them or you are losing $.

[Barefootsies]

Originally Posted by beemk

the taxes go up every year anyway, so you cant really not raise the rent on them or you are losing $.

Good point.

[After Shock Media]

Originally Posted by beemk

the taxes go up every year anyway, so you cant really not raise the rent on them or you are losing $.

Our taxes are not adjusted yearly (property tax) and thankfully do not raise that often. Inflation and such on the other hand do. The cost to fix/repair things goes up each year, labor wise, material wise, whatever.

[Barefootsies]

Originally Posted by After Shock Media

Our taxes are not adjusted yearly (property tax) and thankfully do not raise that often. Inflation and such on the other hand do. The cost to fix/repair things goes up each year, labor wise, material wise, whatever.

But, in theory, wouldn't your costs go down over time as you pay down your mortgage?

[Barefootsies]

.... I mean, IF you refinance every 5-10 years.

[baddog]

Originally Posted by Barefootsies

But, in theory, wouldn't your costs go down over time as you pay down your mortgage?

I am waiting for the right moment to refi my primary and just pay off the rental. I have more than enough equity to cover that.

[Barefootsies]

Originally Posted by baddog

I am waiting for the right moment to refi my primary and just pay off the rental. I have more than enough equity to cover that.

Very nice.

I am having my CU crunch some numbers. There are a bunch of these small 1500 sq foot, 3 BR houses for sales in the village/small town south of me. I am thinking of scooping em up if the numbers are right. They need a little work, but I can use them for shoots, get rid of sister, rentals, etc.

Should be able to have them paid off in about 10 years. But we'll see how the numbers crunch.

[After Shock Media]

Originally Posted by Barefootsies

But, in theory, wouldn't your costs go down over time as you pay down your mortgage?

They are paid off, also with mobiles unlike the factory built and houses- I can depreciate their values each year. Tax law is different with mobile homes than fixed dwellings. I no longer have mortgages on them though. When I did owe the mortgage I accelerated payments as fast as I could. Mostly due to that when I acquired them I did not have the best credit score and such. Ended up paying around 9.7% on them so it was in my best interest to pay as fast as possible.

Originally Posted by Barefootsies

Very nice.
I am having my CU crunch some numbers. There are a bunch of these small 1500 sq foot, 3 BR houses for sales in the village/small town south of me. I am thinking of scooping em up if the numbers are right. They need a little work, but I can use them for shoots, get rid of sister, rentals, etc.
Should be able to have them paid off in about 10 years. But we'll see how the numbers crunch.

Curious to know what formulas you are using. What your predicted non occupancy rate is. Lots of small factors go into such formulas to figure out if a place could be a profitable rental or not. Even purely for equity purposes, making sure your not in the red at all is very key.

[RTP]

hey man, i really think it's the markets you are in re: accuracy of formulas and profitability. i also have a few properties and when the number gets over 5 may be outsourcing to property management they are cheap here like 8%. in terms of the socal/oc market we are looking at a median range for 2bd/2bath condos renting out at $1400-$1800 and SFR 3bd out at $2100-$3000. corresponding prices on properties at this range have dropped...2/2 condo 185k-200 in oc, SFR 3bd at around 300-500k

my most recent transaction was a 85k SFR, 3 bedroom (bank owned) in inland empire - it's now renting at $1500

no discounts on payment terms

[After Shock Media]

RTP I know markets can adjust the formulas, they do not overly change them to much though. The base fundamentals would remain fairly constant with just a couple areas that would alter by given area and past experience.
On a side note, I would never use another agency ever again and even 8% is crazy. Few if any even could give a rats ass about your property and all they really care about is vacancy issues. Your property is nothing more than product they can sell and fill. Good tenets, bad tenets, does not matter - nor does any real care or pride of ownership. All the maters often is their cut and the numbers.

[Barefootsies]

Originally Posted by After Shock Media

Curious to know what formulas you are using. What your predicted non occupancy rate is. Lots of small factors go into such formulas to figure out if a place could be a profitable rental or not. Even purely for equity purposes, making sure your not in the red at all is very key.

The places I am looking at are 900-1500 sq feet. They are 2-3 BR. These houses are running $25-40,000.00. Some are little more then those bread boxes in a nice neighborhood with good school district.

I've checked out some of them, and they are in decent condition. They could use some upgrades, but are not destroyed, rat infested, etc. But if I pick em up around $25,000 or even 30k. I can rent them out at $500-750 easy.