The Landlord Thread

[resolution]

I have had my first issue since I made my house into a rental 5 years ago. I have been the stereotypical landlord that just sits and counts the money as it is direct deposited by the management company each month.

This month the deposit didn't arrive, and when I checked my account there was no monthly statement. I was sick and not watching the books very closely so I didn't notice until a couple weeks later.  So I called the management company and they said the tenant had paid, but for some reason my account statement wasn't generated in their system. They ran it the same day and direct deposited the money. I need to stop taking things for granted and be more alert. Hopefully it was just an error due to me renewing the management contract last month.

[Deleted]

Resolution, this is probably due to years of problems with the Wonky Rental and the Wonky Property Manager, but I check our real estate account every month to make sure the rents have been deposited.

I called the agency that is closest to the studio and had a good first impression. They know the building, have recently rented other apts in the same building, and they are aware of the HOA issues. To my surprise they said they have rented those apts quickly, at fair market value, despite the building needing renovation. Our studio has double glazing and a river view, so they say it will rent quickly. If we go with an agency, we'll probably go with them. Their prices are standard: one month's rent for finding a tenant, and 7% management fees (9% with non-paying renter insurance).

I will try something else too: one of DS2's best friends, V, works on the local farmer's market circuit (every local suburb has one) and lives around the corner from our studio. DS2 told us to ask V if he knows anybody who is looking for a studio, since he knows a ton of people. I'll do that in the next week or two.

But I'm very tempted to just go with the agency and let them deal with everything.  

[Bonny]

Feb 22, 2015 3:09:45 GMT -5 @debthaven2 said:

Resolution, this is probably due to years of problems with the Wonky Rental and the Wonky Property Manager, but I check our real estate account every month to make sure the rents have been deposited.

I called the agency that is closest to the studio and had a good first impression. They know the building, have recently rented other apts in the same building, and they are aware of the HOA issues. To my surprise they said they have rented those apts quickly, at fair market value, despite the building needing renovation. Our studio has double glazing and a river view, so they say it will rent quickly. If we go with an agency, we'll probably go with them. Their prices are standard: one month's rent for finding a tenant, and 7% management fees (9% with non-paying renter insurance).

I will try something else too: one of DS2's best friends, V, works on the local farmer's market circuit (every local suburb has one) and lives around the corner from our studio. DS2 told us to ask V if he knows anybody who is looking for a studio, since he knows a ton of people. I'll do that in the next week or two.

But I'm very tempted to just go with the agency and let them deal with everything.  

Debt,

Do you need to go with both leasing and the PM? Here they are separate services.

For the AZ house I have to use a Real Estate Agent. My market is an older, wealthier crowd which doesn't do Craig's List. I am paying my agent 5.5% of the total lease amount (around $1,600). But I don't use the PM service. 

[Deleted]

Bonny, they are separate here too. I will see but after 10 years, I have less and less patience / time / energy to deal with the rentals. Also, every new school year, I have more hours than I had the year before (which also means more prep, more marking, etc).

We don't want to sell yet, so using a PM is a good compromise, and worth it to us.  

ETA: DS2 is home and spent the evening with his friend V. V says he doesn't know of anybody who would be interested in the studio, so it looks like I'm going to go with the agency.

 

[Peace77]

On another forum, the discussion was about having an emergency fund for rental properties.   The question was how much of an EF?    Separate funds for each property or one EF for 2 or more properties.

[DVM gone riding]

peace--right now mine are separate but that has some to do with ownership too. My mom and I own one together and I own the other by myself. I am planning on adding 2 more properties in the next 2-3 years. I plan to use one account for 2 of them and a separate for the third---again for tax/ownership issues. But it does make for a lot of accounts to keep track of!!!

I have yet to figure out the "how much question"!!!

[Bonny]

Feb 22, 2015 18:30:44 GMT -5 Peace77 said:

On another forum, the discussion was about having an emergency fund for rental properties.   The question was how much of an EF?    Separate funds for each property or one EF for 2 or more properties.

We keep approximately 3mo for each property in a property savings account separate from our personal EF. My logic was the cost/time of an eviction plus restoring some minor damage. Over the last 10+ years we've done two evictions. Luckily we haven't had any serious tenant damage other than the one idiot tenant who ruined my mother's expensive wool carpeting. We've also wound up using it for capital repair/replacement like our laundry room problem last year that wound up costing about $7k.

[Peace77]

Thanks Bonny.

[Deleted]

Our painter came back from his vacation today.  DH will meet him at the studio on Sat morning and give him the keys. He will repaint it and replace the mini-kitchen unit.

I've also made arrangements for the rental agency to see the studio.

[Deleted]

DH and I went shopping for the studio today at the Big Store about 30 min away. We bought a kitchenette, kitchen faucet, 2 small kitchen cabinets, shower hose, shower head, bathroom light fixture, and smoke detector for 384 euros ($430). I ordered a toilet seat and shower curtain (with hooks) from Ikea for 21.77e ($24).

We still need new sockets/switches and an extractor (we forgot to count / measure those). DH will get those at the local hardware / housewares store because it's just 2 min away. The painter starts on Monday.

This is the kitchenette we bought, if anybody is curious. It is very common here in studios or even small 1BR apts.

www.castorama.fr/store/Kitchenette-Simply-Reversible-prod5280002.html

And these are the wall cabinets we got, but we got them in white:

www.castorama.fr/store/Kitchenette-Silver-Taupe-vitroceramique-prod13310078.html;jsessionid=Q9MvmpmLyUbBMBl36WSJpg**.fo3atg3?navCount=0

ETA: Today we found 2 LR light fixtures for 10e total ($11), including bulbs! Total so far, 416e ($465). 

[lurkyloo]

Newbie to this thread!  We're moving from CA to MD and are planning to rent our current house out.  We want to keep the house for the long-term future, and market rent should be about equal to PITI plus property management fees.  I'm a little nervous about it because it's not a particularly low-maintenance house (2200 sq ft 1980s house, half acre lot, septic instead of sewer).  I'm in the process of looking for a property management company; any suggestions as to the key things to look for/questions to ask?  I have a shortlist of two that have good yelp reviews.  The first seemed competent but rubbed me a little the wrong way, haven't had a chance to call the second yet.

Thanks!  -- Bonny wannabe 

[Deleted]

Lurkyloo, welcome!

I was going to say, you need to tag Bonny LOL. 

Things have been insanely busy here and we haven't yet purchased what's left for the rental: switches/sockets, extractor fan. DH thought I was calling the painter/handyman this evening to see how much time we have before he's done, and I thought DH was. So, neither of us called him. 

One of us will call him tomorrow (I hope). DH will purchase the rest on Sat and take it to the rental while I drive DS3 (16) around and mark a ton of papers. 

I thought of something else. As I've said, the building is in pretty bad shape. There's a step up from the landing into our studio (as well as into the other 2 apartments on the landing). All the steps and the landing have really grubby carpeting. We want to recover the step into our studio, at least.  

We are tempted to do the entire landing as well as all 3 steps, but I'm not sure that would be welcome / wise. Plus, let's be honest, I'm not going to do it myself, with all the work / marking I have over the next two weeks. We have some leftover stair carpeting from out own house sitting in the basement. Otherwise, if it's cheap, we are thinking of putting in fake lawn (because it also acts as a doormat).

Remember, I'm talking about the landing and/or step up into our studio, not the studio itself (which is tiled). 

[Bonny]

Mar 5, 2015 13:12:24 GMT -5 lurkyloo said:

Newbie to this thread!  We're moving from CA to MD and are planning to rent our current house out.  We want to keep the house for the long-term future, and market rent should be about equal to PITI plus property management fees.  I'm a little nervous about it because it's not a particularly low-maintenance house (2200 sq ft 1980s house, half acre lot, septic instead of sewer).  I'm in the process of looking for a property management company; any suggestions as to the key things to look for/questions to ask?  I have a shortlist of two that have good yelp reviews.  The first seemed competent but rubbed me a little the wrong way, haven't had a chance to call the second yet.

Thanks!  -- Bonny wannabe 

LOL & Congrats on the new job!

I've never used a property manager even when we lived in Germany. I have used leasing agents for the houses in the more upscale neighborhoods. A leasing agent typically costs 5%-6% of whatever the term of the lease is.

A property manager will collect the rent for you and call for repairs. They typically charge around 10% per month. I've found that if you have a good network of repair folks you really don't need to use a PM. Most of my tenants do bank to bank transfers. One of my new ones is just depositing the check into my bank account. I have had couple do that in the past. Having a large physical presence is what kept us with BofA during their meltdown in 2009-2011. They are now much, much better.

A couple of recommendations if you haven't already done them;

1. Set up a separate bank account for the property. This will make accounting at tax time much easier and keep things separate from your personal finances. If, unfortunately, you ever have to go through an eviction you want to be able to shut this down quickly without messing up your personal stuff.

2. Read Nolo Press' Every Landlord's Legal Guide

3. Create a "Care and Maintenance" Guide to be included as an addendum to your lease. Go through the house with your husband and write down instructions for all the major systems and anything that needs special care. For example, for the septic system for our AZ house we have the tenant put in a scoop of Roebic every month to keep those bugs happy. We also require that the tenants pump the septic when they leave.

4. Attach photocopies of the business cards of the regular service people so they have that info handy. We have spas at two of the houses. I always make sure that the spa guy demonstrates to the tenant how to use it.

Feel free to tag or pm me if you have further questions. alwaysbeoptimizing, @debthaven2 & phil5185 are all long time LLs who are very helpful.

Good luck on your new adventure!

[Deleted]

DH met the painter at the studio today, and then bought all the plugs / light switches for 45.05 euros (about $50).

We've decided to use the carpet remnants from our basement stairs for the two steps up to the studio. We may need to buy glue for that, but we shouldn't need to buy anything else at this point. We've also decided to keep the current extractor fan in the bathroom, because although the plastic has yellowed, it works perfectly.

The studio should be ready to rent out by the middle or end of next week. 

Total purchases so far, 461e ($500). Of course that doesn't count the painter or the paint.

It's been quite painless this time (since all we've done is shop lol), but we'll still be very happy when the studio is rented and bringing in income again. The rental agency is going to see it this week (the woman was on vacation last week. But that didn't bother me, because I'd rather she see it when it's nearly done.)  

Also, the fact that it's 7 min away really makes a difference. A round trip takes 15 min. A round trip to the Wonky Studio took about 1.5h. BIG difference. 

[Bonny]

Mar 7, 2015 19:57:08 GMT -5 @debthaven2 said:

Also, the fact that it's about 7 min away really makes a big difference. A round trip takes 15 min. A round trip to the Wonky Studio took about 1.5h. 

I don't think you've given yourself enough of a challenge.

[Deleted]

Ooooh Bonny, them's fighting words LOL.

[lurkyloo]

Mar 5, 2015 22:58:21 GMT -5 Bonny said:

LOL & Congrats on the new job!

I've never used a property manager even when we lived in Germany. I have used leasing agents for the houses in the more upscale neighborhoods. A leasing agent typically costs 5%-6% of whatever the term of the lease is.

A property manager will collect the rent for you and call for repairs. They typically charge around 10% per month. I've found that if you have a good network of repair folks you really don't need to use a PM. Most of my tenants do bank to bank transfers. One of my new ones is just depositing the check into my bank account. I have had couple do that in the past. Having a large physical presence is what kept us with BofA during their meltdown in 2009-2011. They are now much, much better.

A couple of recommendations if you haven't already done them;

1. Set up a separate bank account for the property. This will make accounting at tax time much easier and keep things separate from your personal finances. If, unfortunately, you ever have to go through an eviction you want to be able to shut this down quickly without messing up your personal stuff.

2. Read Nolo Press' Every Landlord's Legal Guide

3. Create a "Care and Maintenance" Guide to be included as an addendum to your lease. Go through the house with your husband and write down instructions for all the major systems and anything that needs special care. For example, for the septic system for our AZ house we have the tenant put in a scoop of Roebic every month to keep those bugs happy. We also require that the tenants pump the septic when they leave.

4. Attach photocopies of the business cards of the regular service people so they have that info handy. We have spas at two of the houses. I always make sure that the spa guy demonstrates to the tenant how to use it.

Feel free to tag or pm me if you have further questions. alwaysbeoptimizing, @debthaven2 & phil5185 are all long time LLs who are very helpful.

Good luck on your new adventure!

Thanks!

I hear you and agree on PMs overcharging for their services, and I appreciate the detailed advice.  However, the decision to go with one anyway in this case is based on a number of factors and is non-negotiable.  Let's just summarize that if $2400 in (tax-deductible, I think?) annual PM fees is what it takes to keep me off anti-depressants, it's well worth the money.   Maybe if we didn't have two high-energy jobs, a toddler who for all intents and purposes acts like he's on speed, and an 8-10 hour trip each way to check on the property we'd be more interested in self managing.  As it is, leisure is more important to us than a couple thousand a year right now.  

On the bright side, I got us pre approved for a 900K house today, based just on DH's income and not counting any projected rental income from the current house.  They used my credit score because my middle score was lower than his; all the way down at 815    I'm such a deadweight! We're much more likely to wind up with a 600Kish new house, but we'll be crunched for time on the purchase so nice to have the built-in flexibility.  And yes, I had them generate a 600K pre approval letter as well.

[Bonny]

Congrats, lurkyloo.

I don't mean to imply that PMs overcharge for their services. After all that WAS my title for a few years (but for an institution-I did a little residential on the side)

But I do think a lot of folks can handle the PM duties on their own nowadays. With the bank to bank transfers and the internet it's much easier than 20 years ago. Also don't forget to make your annual tax deductible inspection trip regardless of whether you have a PM or not. If you don't already use one get a CPA who is familiar with both CA and MD taxes.

Also you are likely to have some paper losses on this property for a few years that you won't be able to deduct. But still keep good records. Those "carry forwards" will come in handy when your income drops in retirement or when you go to sell.

Good luck!

[TheHaitian]

I figure this is the best place to ask... We are still waiting on another quote before deciding.

We are contemplating turning our basement into a full fledge MIL suite or apartment and to rent it out.

First quote came in at about 35k.

Rent expected would be ~$1,000/month everything included for about 700 sqft of finished space.

Do you think it would be worth it? Rent? Resale?

Thank you

[Peace77]

Mar 8, 2015 12:47:05 GMT -5 TheHaitian said:

I figure this is the best place to ask... We are still waiting on another quote before deciding.

We are contemplating turning our basement into a full fledge MIL suite or apartment and to rent it out.

First quote came in at about 35k.

Rent expected would be ~$1,000/month everything included for about 700 sqft of finished space.

Do you think it would be worth it? Rent? Resale?

Thank you

How are you planning to fund this?  I recall that you were saving up for a fence.

[Blonde Granny]

I thought it was a different job and a baby.

[lurkyloo]

Mar 8, 2015 9:52:43 GMT -5 Bonny said:

Congrats, lurkyloo.

I don't mean to imply that PMs overcharge for their services. After all that WAS my title for a few years (but for an institution-I did a little residential on the side)

But I do think a lot of folks can handle the PM duties on their own nowadays. With the bank to bank transfers and the internet it's much easier than 20 years ago. Also don't forget to make your annual tax deductible inspection trip regardless of whether you have a PM or not. If you don't already use one get a CPA who is familiar with both CA and MD taxes.

Also you are likely to have some paper losses on this property for a few years that you won't be able to deduct. But still keep good records. Those "carry forwards" will come in handy when your income drops in retirement or when you go to sell.

Good luck!

Oh, I know we could do it.  We're just stretched too thin already right now.  And frankly, one reason I'm excited to move is because it's a total PITA to get out here from the Midwest or East Coast, even before we had a kid to worry about--I'm looking forward to NOT having to come out here!  Maybe DH can make a side trip on one of his business trips to LA.

Ironically enough, I'm happy to take care of taxes on our own    

[TheHaitian]

Mar 8, 2015 14:20:28 GMT -5 Peace77 said:

How are you planning to fund this?  I recall that you were saving up for a fence.

Right now it is irrigation system this spring (2.5k) and maybe fence before the end of fall (10k) depending on how life goes (past two months had over 5k in unexpected expenses that came out of savings).

We basically got everything else on our list covered (besides some minors things) that finishing the basement would be the next big project. Cash flowing and financing it I guess...

But that would be more like 2-3 years down the line. If it is for us we can do it as cheap as 15k
- bathroom
- heating/cooling
- keep it basic

If we go full rental potential that is where we are looking at 25-35k

It is already pre-plumbed for the bathroom and insulation is in...

[TheHaitian]

Mar 8, 2015 14:33:17 GMT -5 Blonde Granny said:

I thought it was a different job and a baby.

Put my application in and now I wait
And baby will be out of daily cash flow and winging it!

[Bonny]

For what purpose are you doing this?

It's one thing to do a quickie "remodel" for a family member. It's another to create a formal in-law unit whereby you have a stranger moving into the unit. If everything isn't permited and up to code a disgruntled former tenant can make your life difficult...and expensive.

First stop is with the Planning Dept to see if they allow "in-law" units and whether there are special requirements. In my town if a property isn't zoned multi-family they will allow a "accessory resident unit" but only if the main house or the unit is occupied by someone 55 or older. I'm sure that folks break the rules all the time but it's expensive if someone turns you in.

[Bonny]

Mar 8, 2015 16:06:15 GMT -5 lurkyloo said:

Mar 8, 2015 9:52:43 GMT -5 Bonny said:

Congrats, lurkyloo.

I don't mean to imply that PMs overcharge for their services. After all that WAS my title for a few years (but for an institution-I did a little residential on the side)

But I do think a lot of folks can handle the PM duties on their own nowadays. With the bank to bank transfers and the internet it's much easier than 20 years ago. Also don't forget to make your annual tax deductible inspection trip regardless of whether you have a PM or not. If you don't already use one get a CPA who is familiar with both CA and MD taxes.

Also you are likely to have some paper losses on this property for a few years that you won't be able to deduct. But still keep good records. Those "carry forwards" will come in handy when your income drops in retirement or when you go to sell.

Good luck!

Oh, I know we could do it.  We're just stretched too thin already right now.  And frankly, one reason I'm excited to move is because it's a total PITA to get out here from the Midwest or East Coast, even before we had a kid to worry about--I'm looking forward to NOT having to come out here!  Maybe DH can make a side trip on one of his business trips to LA.

Ironically enough, I'm happy to take care of taxes on our own    

OK Just make sure you know what you're doing. The biggest trade-off I see is if you have a lot of appreciation of your home prior to converting it to rental property service after 1/1/2009. That means means bifurcating the capital exemption even if you move back to take advantage of the 2 out of 5 year rule.

ETA: The bifurcation does not take into account when the appreciation actually happened. If you get caught up into big appreciation before you converted too bad, so sad.

[TheHaitian]

Mar 8, 2015 17:31:56 GMT -5 Bonny said:

For what purpose are you doing this?

It's one thing to do a quickie "remodel" for a family member. It's another to create a formal in-law unit whereby you have a stranger moving into the unit. If everything isn't permited and up to code a disgruntled former tenant can make your life difficult...and expensive.

First stop is with the Planning Dept to see if they allow "in-law" units and whether there are special requirements. In my town if a property isn't zoned multi-family they will allow a "accessory resident unit" but only if the main house or the unit is occupied by someone 55 or older. I'm sure that folks break the rules all the time but it's expensive if someone turns you in.

Already did that, I would never spend 35k without checking first.

Where my house is located it is zoned for both business or residential home.

My basement is what a combo of walk up basement / look out basement:
- exterior entrance via a stairwell
- basement walls extend sufficiently above ground level that the windows are above ground level.

Everything would be up to code, passing inspection, etc. Even if we do it just for us that is what we will do.

Consequences of doing something not permitted is so not worth it.

[Peace77]

What Bonny tried to say was that is more than 1 kind of residential zoning.  There is single family and Multi-family.   You'll need to find out if you're zoned for multi-family or MIL units or not.

[lurkyloo]

Mar 8, 2015 17:37:35 GMT -5 Bonny said:

Mar 8, 2015 16:06:15 GMT -5 lurkyloo said:

Oh, I know we could do it.  We're just stretched too thin already right now.  And frankly, one reason I'm excited to move is because it's a total PITA to get out here from the Midwest or East Coast, even before we had a kid to worry about--I'm looking forward to NOT having to come out here!  Maybe DH can make a side trip on one of his business trips to LA.

Ironically enough, I'm happy to take care of taxes on our own    

OK Just make sure you know what you're doing. The biggest trade-off I see is if you have a lot of equity in your home converting it to rental property service after 1/1/2009 means bifurcating the capital exemption even if you move back to take advantage of the 2 out of 5 year rule.

Can you clarify that?  It looks to me like that kicks in if we rent it for more than 3 years, at which point the capital gains exemption of $500K is multiplied by the fraction of time we used it as our primary residence, correct?  That doesn't change based on PM or no, does it?  Also looks like claiming depreciation might limit the capital gains exemption, so I'll need to be careful about that. I'll read up on it before April 2016 rolls around, but I don't really see much that we can easily do differently--it's not practical to use it as our primary residence anymore; even if we returned to CA in a year or two it would be a vacation home at most.  Also, if we did sell right now, we wouldn't get back much more than the purchase price; most of the equity is from the down payment or paying down the mortgage.  

[resolution]

The IRS will want depreciation recapture weather you take the write off or not, so there isn't any benefit I am aware of for failing to take depreciation.

I have been very satisfied with my property management company, other than the episode last month. However I will be watching the bank account very closely next week for the scheduled deposit.