Calling all successful landlords: Real estate investing questions

looks like your not ready to be a landlord,


http://realestate.msn.com/article...d=13108384

You have a lot of questions, and thats ok as long as you proceed correctly.

Firstly, if you plan on using an agent, let them do the work. Find one who works for a company that has a property management department. Have the agent check with the property management department to see if anyone is going to unload their property. You might find a shortsale opportunity or simply someone who needs to sell. The good thing about this is you already have a rental history on the property so know what rents it has been getting plus you may have a tenant from day 1.

By doing the above, you will also get a better idea of rentability and what rents to expect since you will be dealing with someone who has access to someone with experience and a track record in that area

I'm not sure what info you think would hurt you if you told your Realtor. Simply tell them you are looking for a property that yields X% in rent in an area that has demand for rentals.

I would also strongly recommend going with a property management company. You don't sound experienced enough to go solo right now and if you say 1 wrong word you can open yourself up to a lawsuit and headaches. Its also good to have a buffer between you and the tenants until you become more experienced. Property management companies typically charge 10% and will handle the marketing, paperwork, screening etc. My strongest advice to you is use a property management company until you get familiar with the laws and paperwork. You can always drop them later if you want once a tenant moves out or the management agreement expires altoough check the agreement to see what happens if a tenant is in place when the management agreement expires and you take back the property. Don't just sign an agreement.

Its a great time to buy. I'm doing the same, but i have many years experience as an investor, Realtor and as a property manager.

What area are you looking at?

Oh, and if you are thinking of investing in California, RUN!

Many things vary by state but don't let a tenant deposit directly into your bank account. Depending on your state laws, if they deposit $1 then you can't evict them as they made a partial payment. A partial payment in any amount means you can't evict them that month. Thats why its important you get yourself a property manager because not knowing the laws etc can cost you thousands.

And if you want to market it yourself, craigslist is the way to go.

Screening - depends on your thinking but when i was a property manager i would ignore medical bills, and considered repeat late payments on a cable bill a bigger deal than a foreclosure on someones record. You'd screen their credit, past places of residence, employment history and do a criminal background check.

Quote from BargainSnatcher : What area are you looking at?

Not in the People's Republic of California.

Thanks a lot for your advice.

Quote from EagleRiver55 : I've been reading this forum for a while and I've seen some good advice given regarding investment properties. I'm looking to begin investing in rental properties in the next couple of months or so and I have some questions I'd like to get some advice on. I'm not interested in flipping. I am not interested in high leverage. I will be investing in single-family homes with a focus on cash flow and long-term wealth through long-term ownership.

Good luck

Quote : When looking for an investment property, what should I tell and not tell my real estate agent? I want to make sure I don't disclose something that will work against me.

Never say how high you're willing to go on a property. The more you pay, the more they make on commission.

Quote : Is there any benefit to choosing my own closing attorney?

Trust.

Quote : Will the foreclosure bank that owns the property (if it is, in fact, a foreclosure) pay any agent's fees or closing costs like a private seller typically would?

Private sellers typically do to? Maybe in your neck of the woods.

Usually not. Varies by bank, of course, but usually no. You don't really get to negotiate with the bank at all other than the price you offer. Which is less of a negotiation and more of them grunting "ok" or "get lost" after weeks/months pass.

Quote : I'm already looking for properties on my own. If/when I find one, do I tell my agent and let them do all the negotiating and other work regarding the property? I'm trying to determine how the whole process works. I'm not sure how it works if I find the property rather than the agent finding the property.

If you're using an agent, never ever ever see a property without your agent setting it up.

Quote : How do I determine how much rent I should charge?

See what others in the area charge and go from there. It's called market value.

Quote : How should I receive payment: check in person, check in mail, automatic withdrawal, etc.?

There are online rent collection options out there. However, good ol' check or cash in person/mail is my preferred method.

Quote : What are the best information sources such as books, seminars on tape, websites, forums, etc..?

Yes.

Quote : How do I prevent from being on call at all hours of the night and while I'm on vacation?

Turn off your phone.

Quote : What happens if my tenant needs something while I'm on vacation? I don't always carry my cell phone with me. How easy to get in touch with do I need to be?

Depends on local laws. There's always an uneasy relationship between tenants and landlords, as each can screw the other. They probably should have your number in case a pipe bursts or the roof blows off or something. But if they're a PITA, then you can hurt them by not reupping the lease and refusing to give them a good rec to their next landlord.

Quote : What is the best way to market the rental?

The one that gets you a good tenant.

Quote : What is your criteria for screening tenants?

CYA big time. Store all applications for a few years in case someone files suit. Get recommendations from previous landlords. Make sure they have someone besides a family member who will vouch for them.

Quote : Any negotiating tips?

Same rules as gambling. Never reveal any info that isn't necessary and never be afraid to leave.

Quote : Any other advice?

Don't bet on the Cubs. Love like you've never been hurt, dance like nobody's watching, and other inspirational BS.

In terms of RE? Pray. CYA. Learn how to do your taxes well. And keep a good tenant.

Quote : Thanks in advance for any help with this.

Quote from EagleRiver55 : Not in the People's Republic of California. Thanks a lot for your advice.

You might get more specific advice if you put down your location, laws vary from state to state and there are different things to need to know for various areas etc.

Quote from bonkman : Good luck Never say how high you're willing to go on a property. The more you pay, the more they make on commission. Trust. Private sellers typically do to? Maybe in your neck of the woods. Usually not. Varies by bank, of course, but usually no. You don't really get to negotiate with the bank at all other than the price you offer. Which is less of a negotiation and more of them grunting "ok" or "get lost" after weeks/months pass. If you're using an agent, never ever ever see a property without your agent setting it up. See what others in the area charge and go from there. It's called market value. There are online rent collection options out there. However, good ol' check or cash in person/mail is my preferred method. Yes. Turn off your phone. Depends on local laws. There's always an uneasy relationship between tenants and landlords, as each can screw the other. They probably should have your number in case a pipe bursts or the roof blows off or something. But if they're a PITA, then you can hurt them by not reupping the lease and refusing to give them a good rec to their next landlord. The one that gets you a good tenant. CYA big time. Store all applications for a few years in case someone files suit. Get recommendations from previous landlords. Make sure they have someone besides a family member who will vouch for them. Same rules as gambling. Never reveal any info that isn't necessary and never be afraid to leave. Don't bet on the Cubs. Love like you've never been hurt, dance like nobody's watching, and other inspirational BS. In terms of RE? Pray. CYA. Learn how to do your taxes well. And keep a good tenant.

Outstanding advice! Thank you!

Based on your responses, i'm not sure you are ready. Spend the next year or so reading up on the topic. Find a forum that specializes in real estate and read all you can. Buying real estate is a big commitment.

And unless you are someone like Warren Buffett, sharing your location isn't going to kill the deal. You are not going to see a swarm of people snapping up all the good properties just because you posted about it on slickdeals. I'm looking to buy real estate on the west side of the Phoenix Valley, and posting that isn't going to change a single thing about availability.

Quote from bonkman : Never say how high you're willing to go on a property. The more you pay, the more they make on commission.

How, then, do I communicate to them what price range of a home I'm looking for without giving them numbers?

Quote from bonkman : Trust.

I've closed with a couple of attorneys before, none of whom I knew, and I couldn't see where they did anything other than pass me the papers to sign. I read every single sheet before I signed anything. I did all the work, they simply drafted the documents and passed them to me. Unless I'm missing something, I don't see any room for dishonesty.

Quote from bonkman : If you're using an agent, never ever ever see a property without your agent setting it up.

Why not?

Quote from BargainSnatcher : Based on your responses, i'm not sure you are ready. Spend the next year or so reading up on the topic. Find a forum that specializes in real estate and read all you can. Buying real estate is a big commitment. And unless you are someone like Warren Buffett, sharing your location isn't going to kill the deal. You are not going to see a swarm of people snapping up all the good properties just because you posted about it on slickdeals. I'm looking to buy real estate on the west side of the Phoenix Valley, and posting that isn't going to change a single thing about availability.

It will be in Georgia.

Quote from EagleRiver55 : How, then, do I communicate to them what price range of a home I'm looking for without giving them numbers?

Give them a range but maybe keep it less than what you're actually willing to spend.

But it's less important at that phase and more important when you're actually in negotiations. Don't tell your agent "I'd pay up to ___ for that house."

Quote : I've closed with a couple of attorneys before, none of whom I knew, and I couldn't see where they did anything other than pass me the papers to sign. I read every single sheet before I signed anything. I did all the work, they simply drafted the documents and passed them to me. Unless I'm missing something, I don't see any room for dishonesty.

It depends how you're using your attorney. If you have one for the P&S part and one for the closing, you're right. Closing attorneys don't do too much.

Quote : Why not?

Because you have a contract with that agent.

Once you see a house with one particular agent, THAT agent gets the commission. So if you see it with someone other than your agent, your agent doesn't make any money. Which is pretty jerky of you.

Or just get your own RE license, since any monkey who can fling poo at the walls can pass the exam. Then do all the RE stuff yourself.

Quote from bonkman : Give them a range but maybe keep it less than what you're actually willing to spend. But it's less important at that phase and more important when you're actually in negotiations. Don't tell your agent "I'd pay up to ___ for that house."

Ah. Makes sense.

Be completely honest with your agent, if you don't trust him/her get a new one. When I purchased my rentals I was completely honest with my agent and I trusted him. He also owns rentals so he was able to offer me some good insights.

If you're looking at shortsales/foreclosures find an agent with a lot of experience in them, not all agents are created equal when it comes to dealing with banks versus homeowners.

Sellers can/will pay closing fees but check with your mortgage broker to see what laws apply in your state when it comes to investment property. In MN the seller can only contribute 2% of the sale price.

The negotiating process should be very similar to buying your home. Let the agent negotiate for you, that's their job. If you have chosen the right agent he/she should be better at it than you.

To determine the appropriate rent use craigslist. Search for similar properties in the area and see what they're going for. When doing your analysis use a conservative number. When it comes time to list it put it at the top end of what you think you can get. List it every morning (you will need to modify the posting slightly to allow you to do this) and then drop the price $50 every 3-6 days until the phone starts ringing. Craigslist is a very efficient market, your phone will start ringing once you hit the right price.

Don't hold the place for anyone!!! No matter what they say don't hold it unless you have a security deposit in hand. If someone says they're going to apply keep showing it.

I like to pick up my rent checks in person, that way I get to peak through the door and see how they're keeping the place and make sure there are no pets etc in there (if you have a no pet policy) Also replace the furnace filter periodically, that gives you another reason to go in the place. Remember to give the tenants notice before you go over.

There are two ways to prevent being called in the middle of the night. First is hire a management company the second is buy a nice place that won't have as many issues. But at the end of the day if you NEVER want to be woken up in the middle of the night rental property is probably not a very good idea for you. I've owned properties for over 2 years now and have never been woken up in the middle of the night but I know it probably will happen at some point.

There are a lot of websites out there that will screen your tenants for you, do a google search and take a look at them.

Remember that the quality of your rental is going to dictate the quality of your tenant. Just something to keep in mind while you're looking.

Quote from EagleRiver55 : I've been reading this forum for a while and I've seen some good advice given regarding investment properties. I'm looking to begin investing in rental properties in the next couple of months or so and I have some questions I'd like to get some advice on. I'm not interested in flipping. I am not interested in high leverage. I will be investing in single-family homes with a focus on cash flow and long-term wealth through long-term ownership. When looking for an investment property, what should I tell and not tell my real estate agent? I want to make sure I don't disclose something that will work against me. Is there any benefit to choosing my own closing attorney? Will the foreclosure bank that owns the property (if it is, in fact, a foreclosure) pay any agent's fees or closing costs like a private seller typically would? I'm already looking for properties on my own. If/when I find one, do I tell my agent and let them do all the negotiating and other work regarding the property? I'm trying to determine how the whole process works. I'm not sure how it works if I find the property rather than the agent finding the property. How do I determine how much rent I should charge? How should I receive payment: check in person, check in mail, automatic withdrawal, etc.? What are the best information sources such as books, seminars on tape, websites, forums, etc..? How do I prevent from being on call at all hours of the night and while I'm on vacation? What happens if my tenant needs something while I'm on vacation? I don't always carry my cell phone with me. How easy to get in touch with do I need to be? What is the best way to market the rental? What is your criteria for screening tenants? Any negotiating tips? Any other advice? Thanks in advance for any help with this.