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REAL ESTATE Residential Real Estate Lessons Learned

yveskleinsky

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There's the old saying out there, "Sometimes you win and sometimes you learn". Since there is not enough time for each of us to "learn" each lesson we need to, (the hard way at least) I was thinking that it would be beneficial for us to post the lessons that we've learned so far.
 

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EasyMoney_in_NC

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Sep 9, 2007
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Wilmington NC
Great thread, here's few of my lessons. Cynical as they may be :)
- Always follow the landlord/tenant laws. Makes for a much easier time when you go to small claims court. Don't ever trust the tenant, no matter how well you've gotten along, follow all proper paperwork requirements and always treat your dealings like the business it is.

If you're in a state like NC, the laws are written for the losers......ah I mean tenants, and do nothing to protect us.....the ones doing the right thing.

- charge for everything you can get away with and as much as you can!
- never give an inch, they've already taken the mile you haven't seen!

can you tell I love my rentals? I just hate the people :D
 
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yveskleinsky

yveskleinsky

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Here are some lessons that I've learned so far:

1. A closing date is only tenative. Don't 100% count on moving in the same day- this date can be moved forward or back (most often back!).
2. For an investor, the "value" of a home depends on your strategy. If you are buying for cashflow, the value of the home to you is what you can rent it for- and this number is what your offer should be based on. If you are buying to flip, the number to look at is market value.
3. Not all improvements will yield a return. Know the improvements in your market that have the highest ROI and spend your time and money on them.
4. Your home/property is only worth what a buyer is willing to pay. Equity is phantom until you get a check.
 

Bilgefisher

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I have a one:

-close on a Monday. The inevitable issues that come up allows you to hopefully still close that same week.
 
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yveskleinsky

yveskleinsky

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Aren't those more "theories" of investing?

I thought you were looking for more micro lessons about real estate ownership/landlording, and day to day business lessons.
However you interpret them I suppose. I am unconcerned with semantics, more with sharing experience.
 

nomadjanet

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Aug 28, 2007
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Collect one month in advance then,
Collect your rents according to when the renter is paid.
for example if they are paid weekly, let them mail it in weekly.
They will think this is great, they don't have to control their spending, they pay as they go, you get your money before the first & if they are late you can get on it right away.

If your utility company offers the option, get a duplicate copy of utilites mailed to you or your manager. Our utility company charges us $1 per bill to do this & we can see if the renter is falling behind on the utilites we know a problem is brewing.

Have a relation ship with a pest control person, a carpet cleaner, a HVAC company & a plumber.

Standardise your rental contracts with the same wording everytime to avoid making mistakes in enforcement.

Find out the small claims court procedure for every precinct you own property in and start a file with that info so you are prepared before you have to evict or threaten to evict.

Do a credit check & income verification on every tenante: your tenante should not be spending more than 25% of his/her income for rent. Rent plus estimated utilies should be no more than 36% of his/her income. If you break this rule, they will have a hard time and be late & give you problems.

I will think of more later

Janet
 

EasyMoney_in_NC

Contributor
Sep 9, 2007
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Wilmington NC
Collect one month in advance then,
Collect your rents according to when the renter is paid.
for example if they are paid weekly, let them mail it in weekly.
They will think this is great, they don't have to control their spending, they pay as they go, you get your money before the first & if they are late you can get on it right away.
I would have to highly disagree. The one month thing is a must! But letting the tenant pay weekly.....and mail it in :nono: You let people make a choice on what is the right thing to do and they choose wrong every time. My rent is due of the first, and my people know that I expect them to have a check in their mailbox on the morning of the first so I can come by and get it.

To some it sounds like a lot of time spent......maybe. It allows me to A) collect when its due and in my bank immediately B) lets me see the properties every month so I know if they're keeping it up properly, and C) I'll know right away if I should be working on getting to the court house to file for eviction papers (only happened a couple times in 12+ years)

If you're going to collect week to week, then you have to write the lease (if you have one) week to week. The laws (at least here) in regards to eviction and deposit retention is all based on lease duration. Ideally to hold someone's feet to the fire, you write a lease for the entire amount owed for the entire duration of the lease (year, multi year....whatever) So if you have a $1000/month rental lease for a year, the lease states the tenant owes you $12,000, paid monthly, instead of lease for a year with a monthly rent of $1,000 (makes all the difference in the world). If the tenant bails, you get to collect for the entire amount owed ($12,000) not the maximum for a year/monthly paid lease of 1-1/2 times the rent.
 

nomadjanet

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Aug 28, 2007
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TX
I would have to highly disagree. The one month thing is a must! But letting the tenant pay weekly.....and mail it in :nono: You let people make a choice on what is the right thing to do and they choose wrong every time. My rent is due of the first, and my people know that I expect them to have a check in their mailbox on the morning of the first so I can come by and get it.

To some it sounds like a lot of time spent......maybe. It allows me to A) collect when its due and in my bank immediately B) lets me see the properties every month so I know if they're keeping it up properly, and C) I'll know right away if I should be working on getting to the court house to file for eviction papers (only happened a couple times in 12+ years)

If you're going to collect week to week, then you have to write the lease (if you have one) week to week. The laws (at least here) in regards to eviction and deposit retention is all based on lease duration. Ideally to hold someone's feet to the fire, you write a lease for the entire amount owed for the entire duration of the lease (year, multi year....whatever) So if you have a $1000/month rental lease for a year, the lease states the tenant owes you $12,000, paid monthly, instead of lease for a year with a monthly rent of $1,000 (makes all the difference in the world). If the tenant bails, you get to collect for the entire amount owed ($12,000) not the maximum for a year/monthly paid lease of 1-1/2 times the rent.
The annual rent information is quite intersting. I have my lease as paid week to week, the rent is due every Monday, they get paid on Friday drop it in the mail and I get it monday, works for me. I also have people who are paid bi weekly and pay that way. I have people who direct deposit the rent and people who authorize me to payroll deduct their rent. The only times I have had to hand collect my rent is when the people were marginal and they had to move eventually. But the annual thing is interesting I will need to think about that. We use the annual rent thing in commercial, never even thought about that in residential. Janet
 

EasyMoney_in_NC

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Sep 9, 2007
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Wilmington NC
Well, I suppose it all depends on your rental market. The total years rent total approach really is only there for the landlord. In truth, if people had 12 grand laying around, they probably wouldn't be renting. How many tenants have any of us had in the past that you felt like if you had to chase them through the courts, you could have actually collected any really money from? Even if you win the judgment, collecting is the hard part. Most renters have nothing and don't care about credit so a judgment doesn't bother them.

Of all my past tenants, I could probably limit the number of people I could collect from, to one hand. Luckily I've been fortunate that my tenants have all been pretty good payers.
But wow Janet, I couldn't possibly handle mine the way you have yours set up. Way to much to do to keep up with who pays how and when, and did I get it yet, should I have gotten it yet.......more power to you :)
 

rcardin

Contributor
Oct 30, 2007
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Arlington, TX
Our rent is due on the 1st and late on the 4th. Money order or cashiers check only. I explain to the tenant that this is for their own protection so I won't have to evict for a bad check. 3 different tenants in the last 3 1/2 years and none of them ever questioned this policy.
 

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Nov 25, 2007
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Louisville, KY
Interesting thread.

I am from the commercial world and have been hesitant to explore the residential market.

Waiting to see KYJoe's input. Has 100+ units.

Dave :thumbsup:
 

nomadjanet

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Aug 28, 2007
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But wow Janet, I couldn't possibly handle mine the way you have yours set up. Way to much to do to keep up with who pays how and when, and did I get it yet, should I have gotten it yet.......more power to you :)
Not really a big deal we have an on line calendar set up with due date for each unit on the calendar. the physical checks are opened by my secretary who checks them off as received in the calendar and deposits them for me. I receive an email allert when each automatic deposit is received which I drop into the calendar and she checks the calendar and uploads the payment into my quickbooks account. (she does not have access to my on line bank account emails & alerts for security reasons). Right now I have 3 people that are on bi weekly payroll drafts; these are physical checks and are mailed to me by the companies they work for. I also have 4 other people who pay with physical checks, everyone else is on direct deposit I am looking to convert more of these people to direct deposit. My direct deposit people are much easier to deal with. My ideal situation is that every thing is direct deposit so all I get is emails for my calendar. Of course I am not running 100 units I only run 20 so maybe I would not use this program if I did.
Janet
 

Bilgefisher

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Ideally to hold someone's feet to the fire, you write a lease for the entire amount owed for the entire duration of the lease (year, multi year....whatever) So if you have a $1000/month rental lease for a year, the lease states the tenant owes you $12,000, paid monthly, instead of lease for a year with a monthly rent of $1,000 (makes all the difference in the world). If the tenant bails, you get to collect for the entire amount owed ($12,000) not the maximum for a year/monthly paid lease of 1-1/2 times the rent.
I have been a tenant in this situation. I never sign a lease with those stipulations, I simply find another apartment. The ones I have seen usually have a months rent penalty for moving early. Have you lost any potential tenants because of that clause?
 

EasyMoney_in_NC

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Sep 9, 2007
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Wilmington NC
Well I have the theory as a tool.........one I have never used (see my comments about actually collecting) :)
Again, most actions are market driven. If I had my druthers, I'd be collecting a few hundred for cleaning deposits, deposits for any utilities I am responsible for, deposit, deposits, deposits. Unnnnnnfortunately, everyone and their uncle is a landlord here ( to many choices for tenants), so the best I can do is non refund pet fee's and monthly charges for each animal, besides the home deposit. There is no way I'd get away with a 12 month owed lease, its just a 12 month lease paid monthly. I tend to get away with whatever the apartment complexes do.
Like I've said, I've been extremely fortunate over the years to not have any major problems, but I know those that have and I only wish we could be more strict with terms.
 
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yveskleinsky

yveskleinsky

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1. Keep leases on file. I had one instance where a potential renters cried discrimination as the reason for me not renting (he was a guy, and thought that I didn't like renting to men!). Not true, and I had leases from other guys I'd rented to int he past.

2. Give deposits back within 30 days of them leaving with an itemized list for damages. You'll need to know what is considered normal wear and tear in your state and bill accordingly.

3. Economies of scale can really work in your favor. If you have a SFH, if you are vacant, you are 100% vacant. If you have a duplex you are only 50% vacant, 4 plex, 25% vacant and so on. Just something to consider. ...and a major factor as to why I am drooling over commercial right now! Of course, when it comes time to sell, having a SFH is much easier (generally) to unload.
 

Bilgefisher

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Couple minor ones from today alone:


-have paper towels and trash bags stored at the place. You never know what mess you'll find. Someone turned on the ice maker but left the freezer at the warmest temp. We had a nice puddle on the kitchen floor.

-Check the place every couple of days. Especially if several Realtors have shown the place. Went in today to find the heat turned off. Thank god we had no frozen pipes. Its been in the single digits lately.

-If you have had some traffic in the place. Use a carpet rake to freshen up the floor.
 
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yveskleinsky

yveskleinsky

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1. 3 day eviction notice instead of 30. You can figure out why!

2. Close at the beginning of the month. If you are buying a rental property and close at the beginning of the month, then you can request all deposits and rents for that month to be credited to you- in the form of cash at closing- not as a credit toward purchase price. (unless you want a credit)

3. Buy a house that makes sense as a rental. The first home I bought, I bought because I liked it- not because it made sense as a rental. ...I made it work, but I would have been better off buying something that had more bedrooms and living space. (no duh huh?)
 

andviv

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As soon as you get a second SFH in the same area, negotiate a better price from your property manager. If you have plans of keeping growing in that area then inform the PM, s/he will keep ears and eyes open for potential deals that will probably fit your criteria.
 

santiago

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Aug 20, 2007
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Regarding Rental Properties..
Regarding Renters..
1. Don't befriend them or tell them that you own the property (if you self-manage). Better to keep that relationship professional.
2. Don't let them slide on late payments. If it is due the 1st, it's due the 1st - don't give them any wiggle room. I learned the hard way the 5th becomes the 10th becomes the 15th, etc.

Regarding the Property..
1. As you make your money on appreciation, buy right. Right place, right market, right price.
2. Know a good general maintenance guy. I've given up on trying to self-manage maintenance issues - not interested in going out and checking a toilet at 10pm on a Sunday.
3. Try to buy (this is for SFH's) in an area where there aren't many rentals. Less competition, more stability.
 
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yveskleinsky

yveskleinsky

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1. Be proactive. Don't wait until winter to get a plan in place to handle pipes not freezing. ...Speaking from recent experience!

2. Make seasonal upkeep foolproof. We were relying on housekeepers/renters to leave the faucet dripping or the heat on. Don't do this! Figure out a system that takes renters out of the loop. Get a spicket under the house and/or tweak the faucets so they can't be turned off. Put a lockbox over the thermostat so they can't shut it off.

3. Learn how to evaluate a deal yourself. Don't rely on a Realtor's opinion if it is a good deal or not- or if you do listen to them, ask them to quantify why it is a good deal. The numbers need to be there.

4. Realize that you are accounting in your numbers for maintenance. Don't get stressed out when it actually happens. It's part of the ride. (Working on taking my own advice here!)
 

Runum

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3. Learn how to evaluate a deal yourself. Don't rely on a Realtor's opinion if it is a good deal or not- or if you do listen to them, ask them to quantify why it is a good deal. The numbers need to be there.
:iagree: You have to be the master of interpreting your numbers. +++ speed for yves!
 

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