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Archive Monthly Archives: August 2017

Should I qualify a not so good tenant is they have a co-signer?

I often run into this scenario where a prospective tenant does not meet the requirement I have in place but are willing to find a co-signer to strengthen their application. It can be a difficult decision based off the persons previous history weather or not its worth putting a risk on them, in the event I decide I am willing to take the chance here is what I tend to look for and run away from

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If the prospective tenant has a recent or multiple eviction I will most likely not rent to them even if they get a co-signer. If they eviction was a one time thing and more than 5 years old and since then they were in good standings I will allow a co-signer. Of course either way with a co-signer or not you have to be sure the person(s) can financially afford it. Generally the co-signer will not be the one paying the rent they are more of an insurance if they don’t pay it for whatever reason they will be on the hook to help.

In regards to what requirements I look for in the co-signer they must have a steady job and make steady income they must have a credit score of 700 or higher and its even better if they own not rent. There stronger the co-signer the better the chance you have of getting your rent money because the co-signer will most likely not want to jeopardize their credit since they have kept if clean this long or they won’t want you to put a lien on any property they own.

Chances are if they are willing to co-sign for someone and meet all the requirements listed above they are confident the prospective tenant is going to come through and pay their rent and not cause them any issues. Another thing to make sure of is to always add the co-signer on the lease as financially responsible and have them sign and be sure to get their contact information incase the tenant does to something wrong you can notify them immediately.

Written by Scott Esmail

What is a 1031 Exchange?

Have you ever want to sell one of your properties or regret buying one in a specific area. This happens to a lot of investors and often the find themselves contemplating whether its worth it or not due to a hefty capital gains tax bill they may incur at the end of the year. The IRS has offered a unique way to help investors in such cases and its called a 1031 exchange. By doing a 1031 exchange it allows the investor to sell their property and reinvest the proceeds in a new property and to defer all capital gains taxes. IRC Section 1031 (a)(1) states: “no gain or loss will be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged only for property of comparison which is to be held either for productive use in a trade or business or for investment.

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This may sound little complicated and of course there are rules you have to follow. In order to complete such a transaction you must go through an authorized 1031 exchange company to conduct your transaction. They generally charge between $750-1000, these fees will come out of your hud proceeds. This companies will go over all the guidelines and explain the steps to ensure your transaction goes smoothly. The most important thing to remember is to not sell the property before you plan on doing this. There are rules which involve you having to find the property you are exchanging it for within a 45 days of selling and have 6 months to close on it. You cannot sell and collect any funds and then try to find a property to replace it. The transaction must go through he 1031 exchange company in order for it to be valid. Also this will only work if the property is in a company name not person and names cannot be changed between properties.

 

Written by Scott Esmail

What is a 15 day notice

A 15 day notice is a notice you can give to tenants if they are not in a lease contract and are on a month to month tenancy. The purpose of this notice to be given is if you no longer wish to rent to the current tenants. You would need to check with your State or County to make sure this notice is applicable where you live, but this is what applies in the State of Florida.

Here is some information listed that can be found on the notice instructions “15 Day Notice – If the landlord needs possess of this property and it is not for any of the previous reasons and the rent is paid on a month to month basis, this form would be used giving the tenant a fifteen day written notice to vacate the premises. This notice should be given fifteen days prior to the rent being due. If the tenant does not vacate, the landlord would file his complaint for eviction. If a written lease agreement has been entered into, this section does not apply.”

 

 

Along with this you would have to complete and fill out the required information which would include the date of vacancy which would be counted from 15 days after the notice is served ( do not include the day it was issued count from the following day). The date it was issued must be included as well as how the notice was served, whether the be posting on the premises (which is the best way in my option) hand deliver, or certify mail which you need to make sure any previous agreement that you may have had that has expired prohibits this.

 

Written by Scott Esmail

Should I let prospective tenants see the house before they rent it

Some might think this is an obvious yes you should show tenants the house before they decide if they want to rent it but there are a lot more factors that go into planning than you might think. For an example the first thing people think are “lets put a for rent sign so we get a lot of inquiries on the property” This is not always a good idea depending on the are the house is for rent because if its not in a particularly good area you run the risk of break ins and possibly teens hanging out there cause they know its vacant (believe me I’ve seen it all) Other factors are it could be time consuming if you are renting it yourself and have to go by every time someone wants to see it. If you are using a realtor it could be quit expensive having to pay them to show it, usually they will require the first months rent as payment. Here are some strategies I’ve used that have helped me save money and time.

Realtor showing empty house

Have an open house, this is a really good effective way to show a lot of people at one time and only having to designate one visit. I usually have this day in the ad when I post it for rent. You also avoid the phone calls of people asking when they can see and asking questions this way they save everything for when they come. If you didn’t want to do it yourself you can pay a friend or family member to save costs its much cheaper that way.

Secondly and this is very discretionary I will leave the key in a lock box on the door and give them the code to go look. Of course this wouldn’t be my first option but seeing I feel really good about the person I would first request a copy of their photo ID and would have absolutely nothing in the house that is worth any value to steal would I take this route. Ive personally done it before using these steps and have never had an issue. I found both these methods to be very effective in saving time and money while still not missing out on the opportunity to find a renter.

 

Written by Scott Esmail

Should I Invest for Cash Flow or Appreciation?

I get asked this question all the time “what is a better investment for my rental property monthly cash flow or appreciation?” The best answer I can honestly give is both, but sometimes thats not always an option so here is a little insight from my experience on both sides

Cash Flow in my option is always great! If you can find a way to do this with enough properties you can steadily increase your income and even replace it, in a lot of cases people end up giving up a job they may have been not to fond of and living off the monthly income. These types of properties are generally lower cost homes to purchase and can be more challenging to maintain. For example if you were to purchase a cash flow home it is most likely going to be in a lower income area, not necessarily a bad area but the higher the cash flow usually the worse the area will be. I tend to stick in the middle decent range. This will obviously cost some time in managing or paying for management as well as maintenance from having a tenant live there. These home however do tend to appreciate as well just not always as quickly but at the end of the month you should see a 8-10% return on your money.

 

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Appreciation is also another great avenue to consider when buying a rental property. You won’t necessarily see any money right away and would have to wait until you sold the property but if you buy in the right area the price can drastically increase within a reasonable amount of time. One thing to remember when renting seeing what you paid for the home your monthly rent may not cover the mortgage or you might be just breaking even. Once you sell you should recover all the money you put in and more. The key to doing it this way is to buy in the right area at the right price.

 

Written by Scott Esmail

15 Day Notice for Possession of Premises

A 15 day notice is a notice you can give to tenants if they are not in a lease contract and are on a month to month tenancy. The purpose of this notice to be given is if you no longer wish to rent to the current tenants. You would need to check with your State or County to make sure this notice is applicable where you live, but this is what applies in the State of Florida.

Here is some information listed that can be found on the notice instructions “15 Day Notice – If the landlord needs possess of this property and it is not for any of the previous reasons and the rent is paid on a month to month basis, this form would be used giving the tenant a fifteen day written notice to vacate the premises. This notice should be given fifteen days prior to the rent being due. If the tenant does not vacate, the landlord would file his complaint for eviction. If a written lease agreement has been entered into, this section does not apply.”

keyindoorimage

Along with this you would have to complete and fill out the required information which would include the date of vacancy which would be counted from 15 days after the notice is served ( do not include the day it was issued count from the following day). The date it was issued must be included as well as how the notice was served, whether the be posting on the premises (which is the best way in my option) hand deliver, or certify mail which you need to make sure any previous agreement that you may have had that has expired prohibits this.

 

Written by Scott Esmail