Look for Properties with the Right Things Wrong

Look for Properties with the Right Things WrongI had an appointment to meet an investor at a bank owned property that had just come on the market.  As I waited for my buyer to arrive, there was a parade of potential buyers and Realtors looking through the house. I suppose the enticement was the very low advertised price. The house was a bank owned property and it needed considerable work. There was a poorly constructed addition at the back of the house and there was rotten wood all the way around. The outside stucco was unprofessionally done and was riddled with stair step cracks. One corner of the house was sagging. When we got inside we saw that the house needed to be gutted. The roof was leaking in various places and the ceilings were sagging.  There was no kitchen or bathroom and no flooring. It needed a new electric panel and appeared to need new wiring.  The inside and outside a/c units were missing. It was apparent that there were more issues than met the eye in this dilapidated old house. We agreed that it looked like a Pandora’s Box of problems.

In buying investment property consider a house with the right things wrong with it. The wrong house at the wrong price can be a buyer’s nightmare.  An investor putting his hard earned dollars and his sweat equity into a property should be able to build in some equity of his own. In real estate you make your money when you buy. In figuring purchase price, renovation costs, plus an additional cushion for unforeseen problems and the unprofessional workmanship throughout this particular house, it was a loss. The true value was in the land. In researching further we found no surrounding properties in the neighborhood or on the street to add value on this house after the cost of a renovation. And, the fact remained that when completed, the house would still only be a 2 bedroom, 1 bath.

Some investors may be enticed by a property with a price that seems too good to be true, but leave it for someone else. A bad investment can waste time and drain a pocket book of hard earned money. Look for properties with the right things wrong.

Should I Buy the Biggest, Nicest House on the Street?

Should I Buy the Biggest, Nicest House on the Street?

Should I Buy the Biggest, Nicest House on the Street?

Brevard County Real Estate and Investing

We have been getting calls from investors that are looking to purchase investment property. They want to take advantage of our low prices and interest rates. Some want to buy a beautiful house in a beautiful neighborhood, with top of the line appliances and amenities. The feeling is that the nicer the property, the better clientele will be attracted to the property, so the more money they will collect in rent, thus the more money they will make.

There are many fallacies to real estate investing, and owning the nicest and biggest house on the block is one of them.

Real estate is local in nature. And, each market across the country is different. So, I can only speak about and from my experience with Brevard County Florida real estate.

Real estate investing is all about the numbers. If the figures don’t work on paper, forget it. The property should bring you positive cash flow, today. Not tomorrow. Don’t buy with the thought that,  ‘I’ll hold it, and make a bundle when I sell.’  Look where that thinking got investors in 2005.  Stuck. Remember, tomorrow doesn’t always come in investing. Besides, in real estate investing, you make your money when you buy, not when you sell.

Houses in our area for over $1000 a month are difficult to rent and keep rented. The higher the rent, the lower the number of tenants that can qualify to rent the property. Often they sit empty for months, awaiting that “perfect” tenant.  The taxes and insurance are high. Often they have association fees.

And, what is a “perfect” tenant?  Some owners have told me that they want only tenants with no children (we aren’t allowed to discriminate, unless it is an adult only community), no pets, non smokers and perfect credit. In my opinion these qualities don’t make a perfect tenant. People with perfect credit don’t need to rent for an extended period of time, and can quickly move to buy a house. Then, an extended vacancy can gobble up an investors cash flow.

Bigger houses in an area where there are some small houses, will help pull those values up on those small houses.

Today, many of the calls on rentals that we get come from prospective tenants with blemished credit, due to an unforeseen short sale or foreclosure. If the rest of their credit looks decent, and they have good solid job history, often these people make exceptional tenants.

For me, as a landlord, I prefer smaller properties in the $650.00 to $850.00 price range. Smaller houses rent for more money per square foot than larger houses. Currently, in our area, this price range is where a high percentage of tenant calls originate. There are a larger number of tenants that qualify for these properties, as the rent is more affordable. They stay rented for longer than larger properties. I’ve had tenants with me for over 10 years now.  And, the taxes and insurance are less than on a larger property, often with no association fees.

It’s a great time to invest in Brevard County Florida real estate. But, do your homework first.  It’s not about how big and beautiful the house is. Sometimes the ugliest cow in the barn makes the most milk.

And remember, not everyone is cut out to be a landlord.

NOTE: As mentioned, real estate is local in nature, and this information may vary depending on what part of the country you are in.

Before Buying an Investment Property Do the Math First

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Melbourne FL Real Estate, Sandy Shores, Realtor

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Sandy Shores Melbourne FL Realtor

Sandy Shores, Melbourne FL REALTOR®

Specializing in Residential, Investment and Relocation Real Estate

Melbourne Real Estate / Palm Bay Real Estate

321-253-4545

SandyShoresMelbourne@hotmail.com

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Serving Brevard County Florida for 15 Years

Brevard County Resident for 36 Years

Melbourne, Palm Bay, Suntree, Viera, Rockledge,

Cocoa, Canaveral Groves, Titusville, Mims, Melbourne Beach,

Indialantic, Indian Harbour Beach, Satellite Beach,

Cocoa Beach, Cape Canaveral

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I buy, sell, rent, own and manage Investment Property.

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I Don’t Care for Upfront Deals with Tenants Prior to Move In

 

This morning I went out and met a prospective tenant at one of my rental houses. They were are a very nice family and their parents came to look at the house also.  They had a lot of good questions for me.  We have agreed that they are going to rent the home.

The tenant of 7 years moved out of the home a couple of weeks ago.  They left the home in impeccable condition, just normal wear and tear. Since my husband had been out of town on business, he hasn’t gotten over to the house to take an inventory of what needs to be done prior to a new tenant move in.  There are a couple of rooms that could use a quick coat of paint. 

The prospective tenant asked if they could paint the home prior to move in.  I know alot of landlords that allow this.  I prefer to give a tenant a property upon move in, in the condition that we expect to get it the property back in. 

We expect tenants of a couple of years to return a property in nearly move in condition.  As time progresses, and they’ve been with us for an extended period of time, I know there are going to be items that need to be addressed by us, plus there is normal wear and tear on the property.  I like to turn the key over to a new tenant with the house 100% complete upon move in. 

I don’t like to make arraangements with new tenants for them to paint or do any type of work before they move in.  I really just don’t care for this.  I have seen landlords get their house back a year or two years later, without the paint ever being touched or the agreed upon repair work having been done.  My feeling is that let’s make sure we get started on the right foot on day one.

Now, after they’ve been there for a couple of years and they ask if they can paint, I am more than happy to go ahead and supply the paint to the tenant and let them paint to their heart’s content.

This article is authored by

Sandy Shores Realtor, Melbourne FL Real Estate

Brevard County Real Estate & Investing

Palm Bay Florida Real Estate News

Things Aren’t Always What they Seem at this Time of Year

 

things aren't always what they seemMy phone has been ringing off the hook for the past two weeks.  Lots of calls for rentals.  I currently have rentals available, so this is a good thing. BUT BEWARE…at this time of year, as years in the past, the rental calls tend to be a little bit different than at other times of year.

Why, you ask?

Many people filed rapid refunds on their income tax and have a wad of money in their hand, today.  Many are moving because they have to, some because they want to. The tone of the phone conversations tend to be very different at this time of year.

Now, I’m not a stickler on credit for perspective tenants, on the rental properties that I own. I never have been. I believe that bad things happen to good people. Many people have found themselves in precarious positions, especially in the past couple of years. I have placed 5-6 tenants in rentals over the past couple of years that got caught up in the mortgage foreclosure mess, and they pay their rent on time every month and they take care of their rental homes.  I have no objection to taking a larger deposit to consider a tenant.  I don’t do last month’s rent.

But, I also know there are questions that perspective tenants ask that are ‘red flag’ questions.

“How much to get in?”  This means that’s all the money they have and all the money they’ll ever have. You’ll never get another dime out of this tenant once they move into your property.

“I have first, last and security today.” Yeah, because you haven’t paid the rent in the place you’re living in and you’re being evicted.

“I can give you 3 months upfront. Would you still have to pull my credit?” This one is a no brainer.  They figure they’ll pay their way into the property. They are hoping that the lure of upfront money will keep the landlord from pulling their credit and seeing just how bad it is.

“Can I move in tomorrow?” I really don’t care for this one.  How many people can move tomorrow?  Are they being evicted? My question usually is, “Do you currently have a lease?” And they say ‘yes, but it doesn’t matter, I can move anytime I want to.’  HMMMM.  This means they’ll do the same thing to me, and break their lease with me. No thanks. I like the ones that tell me their lease expires in 30 days, and they’ll need to wait till then to move.

“If it’s not ready, I can do the rest of the work for you.” Again, in too much of a hurry.  And 90% of the time that additional work nevers gets done.

“I’ve been renting from my mom for the last 3 years. I pay her $700 a month. She’ll vouch for me.” I had the mom of a perspective tenant call me last week to tell me how wonderful her son was.  As the conversation progressed, it was apparent that mom wanted junior out of her house yesterday.

And, beware of the perspective tenant that calls over and over and over again. I have had tenants try to reach me 6-8 times in an hour. Leave me one message and I will get back within the hour. If you call me this many times BEFORE you rent, then what happens when the toilet gets plugged when you are living in the house?  No thank you!

Be cautious at this time of year, in the more affordably priced rentals.  Many have received their income tax refunds and are out shopping for a rental.

BE CAREFUL: THAT INCOME TAX REFUND MAY BE THE ONLY MONEY THE LANDLORD EVER RECEIVES!  I’ve seen it happen to a handful of landlordsSo, prescreening is essential! It so important to continue to ask questions to get a better understanding of a perspective tenant’s complete situation.

FOOTNOTE: Every situation is different, and as I always say, every perspective tenant must be considered on a case by case basis. I prescreen all callers. If I didn’t I would be running around showing rentals to unqualified tenants; a waste of their time and mine.

 

 

This article is authored by

Sandy Shores, Melbourne FL Realtor

Brevard County Real Estate & Investing

Palm Bay Florida Real Estate News

The Tenants Have Been Living Rent Free for 5 Months – Lucky Tenants!

A dear friend of mine called me the other day to tell me that he has to get rid of his tenants.  They have his tenants have living rent free for over 5 months nownot paid the rent in over 5 months now – OUCH! This friend knows that he is much more tolerant than I am of a nonpaying tenant.

For me, if they don’t pay, they don’t stay. Period. It’s not rocket science.

It’s a business and I treat it like a business.

You do the math. If they don’t pay their rent, then the burden falls on me  to come up with the money to pay the mortgage payment.  I can’t just stop paying, just because they do, although I know many landlords that do.

I just finished an eviction. They had been with me for 15 months. The tenant’s wife left him, probably because he couldn’t get a job.

 I didn’t get the rent, called him, then went knocking on his door, “Oh just give me till next Tuesday,” he begged.

“Well, did I hear that your wife moved out?” I knew she was the one paying the rent.

“Well yeah, but I’ll have the rent Tuesday, okay?”

“Are you working?” I asked.  “Well no.”

“Are you starting a new job?” I asked.  “Well, no.”

“Do you have someplace you can go to get the rent? Do you have family here?”  I continued. “No.”

“Okay, so how are you going to have the rent for me on Tuesday? Do you have any of it right now?” I prodded,  “Well, no, not really.”

“Well, then you’ve got to go.  I’ll give you till the end of the weekend to get out. You can go peacefully, or I’ll have to evict you.”

The tenant got most of his things out and then decided to get belligerent. He told me he had no place to go, so he was staying. Apparently, he had spoken to some of his friends, as he was getting ugly about it. “It will take you months and months to get me out.” he hissed. I had never seen this side of him before, although I do know that money difficulties can change people.

This is not the first eviction I have done, nor will it be the last I ever do, unfortunately.  It’s the nature of the beast, with multiple rental properties.  Luckily, though, they are few and far between. Thank goodness!

I served him with a 3 day notice.  He didn’t pay or respond. So, I filed the eviction papers and had my final judgement and writ of possession inside of a month.  He left. His security deposit covered the loss of rent and there were no damages to the house.  The house is back up for rent.

It’s not a game for me.  The burden of the monthly payment falls on me if the tenant doesn’t pay.  It’s a business, and I treat it like a business.

Back to my friend of over 10 years, whom I love dearly. He has a heart of gold, to his detriment.  I have helped him buy and sell over 18 investment properties.  He is so lenient that he gets himself into a mess with tenants.  He gives too much and is taken advantage of.  I advised him years ago to stop buying rental houses. He knows I feel this way about him being a landlord, as I remind him that he is too nice. Tenants LOVE him! I really do not care to do his property management for him.

So, for his tenant living in his house, rent free for the past 5 months, time is overdue for getting them out!  He has served the 3 day notice. Don’t know where they’re going to go without any money. But, they always come up with something.

Landlords must cut their losses with a non paying tenant.  Some are of the attitude that maybe they’ll pay  money they owe someday.  The further they get behind, the less likelihood that the landlord will get their rent.

GET THEM OUT AND RE RENT TO A PAYING TENANT!

As a footnote, if you haven’t done an eviction before and are unsure of how to proceed, you may want to contact a real estate attorney that specializes in evictions.

Sandy Shores Melbourne FL Realtor

This article is authored by Sandy Shores, Melbourne FL Realtor, Brevard County Florida’s Space Coast.

Landlords and Property Managers – Do You Collect Last Month’s Rent Upfront? Be Careful if You Do!

 

landlords and property managersI see rentals advertised all over town.  Move in with first, last, and security deposit.  Hmmm.  That’s a lot of money.  How many people can afford to do this?  But, does the landlord understand what they’re really asking for? Not always.

As a landlord for nearly 13 years I have always required first month’s rent and a security deposit from tenant’s moving in.  The security deposit is typically about $150 to $200 more than the rent amount. So, for $800 rent, the deposit is usually $1000.

Many landlords require first month’s rent, last month’s rent and a security deposit for move in. Let’s think about this for a minute.  On an $800 rental, that’s $800 first, $800 last and $1000 security. If they have a pet that can be another $200 nonrefundable FEE. So, a perspective tenant could be looking at $2800.00 to move in.  And, that’s alot of money that many people just don’t have!

I find additional problems with doing this:

As a landlord you may be potentially ruling out over 3/4 of tenants in the market. 

As a landlord you are responsible for keeping track of the last month’s rent. Often times we hear of landlords spending the last month’s rent, and it’s gone by the end of the lease term.

If the tenant remains in the home for multiple years, and the rent continues to be raised over multiple years, the last month’s rent will no longer be enough to cover that rent.

As simple as this sounds, the last month’s rent is to be used for the last month of the lease term only and NOTHING else.

Now look at this… this has not happened to me personally, but in the past, I have seen and heard of it happening to other landlords. 

     A tenant doesn’t pay their rent, The landlord evicts for non payment of rent.  There is also some damage to the rental unit.  The lease usually provides the landlord with the right to retain the tenant’s security deposit to cover the lost rent and/or damages (with proper notification to the tenant).  But, maybe there is not enough money to cover the unpaid rent and/or damages.  So, the landlord assumes that he has a right to the tenant’s last month’s rent.  Makes sense, right?  Well maybe NOT!

BE VERY CAREFUL!

This may not be the case at all. In the past, in 2 instances, I have seen landlords in a court of law, fighting for the tenant’s last month’s rent. EVEN THOUGH THE TENANT OWED THE LANDLORD MONEY FOR UNPAID RENT AND/OR DAMAGES I HAVE SEEN JUDGES AWARD THE LAST MONTH RENT BACK TO THE TENANT! (WHAT???) I have heard them say the money is to be used for the last month of the lease term, ONLY. If the tenant is not staying the last month (but being evicted), I have seen it go back to the tenant (with money still owed to the landlord!) *see note below -and check the current laws in your area. I am certain that a judge must review every aspect of each case to make a final determination.

UNBELIEVABLE, RIGHT?

So as a landlord, you may consider collecting first, last and security from a tenant moving in, collect first and security.  If you are feeling a bit uncomfortable, then increase the security deposit.  Be careful if you decide to collect last month’s rent (and read my note below*- be sure to check with a real estate attorney in your area and follow their recommended guidelines).

 

*NOTE: I am not an attorney and I do not profess to practice law. I do not know the laws in your state nor do I profess to preach the law here in Florida. So please check with a real estate attorney. Find out what they advise in your area. Be sure the you know and understand the laws here in Florida, as well as in your state.