Any rental property owners?

[snatfinder]

Who do you have for your homeowners insurance? amfam has a utility on their site

[Whatever Dude]

USAA. i'll check there.

Lo and behold...they have a partnership with a company that provides them. Good work.

[Whatever Dude]

Listed my place on Craigslist June 8th. Had 8 showings, one no-show at a scheduled showing, and a handful of "i gotta talk to my wife/girlfriend/roomate and I'll call you back" and I never hear from them again.

Today this woman shows up saying she lost her job, has bad credit, is selling her house and closes next week, will have a chunk of change after owning her home for 14 years, and wants to pay for one year in advance.

So i do some brief google work, look her up in the town assessors records, online sales listing for her home, search the stats judicial system website for her...all seems legit. How can I turn that down?

[jbswear]

Make sure the check clears first! And write into her contract that she cannot move out early without a very stiff penalty. Even then, put all that money into a savings account and only pull each month's rent from it just in case things go south for some reason.

[Whatever Dude]

Thanks. I've already got my atty. reviewing the draft lease for this and created the separate checking acct. weeks ago.

[TeeRiver]

Originally Posted by Whatever Dude

... Today this woman shows up saying she lost her job, has bad credit, is selling her house and closes next week, will have a chunk of change after owning her home for 14 years, and wants to pay for one year in advance.

So i do some brief google work, look her up in the town assessors records, online sales listing for her home, search the stats judicial system website for her...all seems legit. How can I turn that down?

Please don't do it, WD. This prospect with no job and bad credit is muy bad news. I've been a landlord for 17 years and own and manage several buildings. I've made lots of mistakes, but the biggest lesson I've learned is you must screen and rent to quality tenants. Good credit and stable job is a must. No exceptions. It can be painful waiting for the right tenant, but I promise, it is worth it.

The biggest red flag here is the 1yr advance rent. Why is this woman so desperate as to offer that? Answer: She has been looking and looking and found no one in their right mind willing to rent to her. And what happens 1yr down the road? Tenants like this often bring other problems too, not necessarily financial.

Top 3 advice from my experience.
1. Only buy income property with positive cash flow. Factor in vacancy, repairs, and maintenance. Be conservative. If you buy an alligator (negative cash flow), you are screwed no matter how well you manage the property. Yes, the tax advantage is nice, but keep that as margin.
2. Screen carefully, only rent to quality tenants. This means good credit, good income, prior job/housing stability a plus. Small families are good; mother and father with one or two kids are generally stable. NEVER rent to a group of friends.
3. Never refinance and suck money out! Instead, go the other way; try to payoff on a 15yr schedule, think about how nice it will be to have rising rents coming in with no mortgage payment. Great inflation hedge too.

Congratulations on your new property, it can be a great investment. Best of luck to you!

[Whatever Dude]

I forgot to mention that she got a new job about 3 months ago. I verified her employment and salary info and it's acceptable (3X rent). If she had absolutely NO job I'd be more worried.

The place is cashflow positive, even with vacancy, repairs, and maintenance. Are you suggesting I use the positive cashflow (or personal money?) to pay off the mortgage early? I've never heard that strategy before. Wouldn't I be losing out on 15 years of mortgage deductions, and have no mortgage deductions to offset the rental income for those 15 years?

Since I have a full-time job and don't need this income to live on, I thought the best strategy would be to generate a small cashflow for repairs, maintenance, etc. and try to show as nearly a net zero income as possible, while building equity by paying off the mortgage with other people's money and hopefully rising housing prices over the next 25 years.

[jbswear]

Using mortgage deductions to make money is like spending a dollar to get $.40 back. It makes no sense. Even with deductions, you're STILL losing money to interest payments. Pay it off as quickly as safely as you can.

[Whatever Dude]

But I'm paying off the mortgage with O.P.M. (Other People's Money). I'm not losing any money to interest payments, cause the rent more than covers the PITI. (assuming it's occupied of course).

I might agree with you about a primary residence mortgage, but somebody else is paying the mortgage and I'm getting all the tax breaks. Why would I want to spend my extra rent money on expediting the mortage (when I could save it for a new AC unit, hot water heater, etc.), and even more crazy why would I want to spend my own personal after tax money to pay off a mortgage when others will do it for me?

[Currently]

Good way to screen tenants is after they are interested and want to sign on the dotted line ... say, "let's take a ride and see where you are living right now."

No advanced notice and NEVER skip that step ... no matter what the excuse is.

You want a quality tenant, it is the only way. My wife's ex-brother in law does this and has never been burnt by a bad tenant since he started doing this. This is non-negotiable, if they refuse, he just waits with the empty rent until the right tenant comes up.