Advice for New Landlord?

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Not exactly home repair, but here's what I'm up against.
Last year my wife and I had some inheritance money to spend so we bought two ca. 1890 houses in our community...but ended up taking out a home equity loan on our house to pay for repairs on the two houses. (about $73,000)
House #1 cost $50,000 with about $15,000 in repairs, some things still to be done. (Value of house today, I estimate at about $80-85k).
House #2 cost $32,000 with easily $25,000 in repairs. (Value of house today, I estimate at about $75-80k).
We decided to rent out the houses for a year or two cause the real estate market currently sucks, especially in this older suburb of Cincinnati, Ohio.
We rented to friends from church whom we knew were having a hard time. We have a lease with $700 rent, not including utilities. (I would say that rents in our community are about $700-$800 right now for houses). If the rent is paid in full, we have a profit margin of about $200 for each house, which doesn't include repairs/improvements or paydown on the principle of the mortgage (does pay mortgage interest).
Both tenants have been late with the rent almost every month and we've only received one half of one house this month. I sent a certified letter reminding them that the terms of the lease will be strictly enforced from now on and that unpaid balances needed to be paid immediately. We also gave one tenant $100 for Christmas and offered to reduce the rent on the other house from $750 to $700.
Still no payment. Tenant #1 has not said anything in response to the letter; tenant #2 left a snotty voice mail on my cell phone that there were repairs that I had not performed but that basically I "will be getting my money." The discount on the rent was not mentioned. I"m really peeved.
Both tenants, on a positive note, do take care of the houses. One even did some concrete work this year (but also called the health department about lead paint...which was really stupid).
Anyway, I needed to vent a little but will appreciate any advice that you guyz can give.
Thanks
Dean in Cincy snipped-for-privacy@aol.com
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Deano wrote:

Both myself and my dad were landlords at different times, in different citys.
Lets assume you make a stink now and they leave, whats the rospects at this time of year to rent them?
do a credit check before renting?
some olks who have a hard time atre that way r a reason, they dont care about paying bills.
for ow i would ake your lumps and hope the real estate mrket improves, sadly i think home values are headed down. too many people refinance repeatedly rolling too much debt into their homes, a ecnomic downturn can really hurt.
right now i know of 5 couples like that who owe more than their homes are worth, 2 are in foreclosure, one couple isnt even bothering to work thinking it hopeless.
look your running a BUSINESS, as such you must treat it like a business, with credit checks and all the rest!
Or run it t help people, and know it wouldnt make a profit, and be happy if it just covers its operating costs.
trying to do both will esult in doing neither well:(
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wrote:

I always did them, they still turned out to be assholes.
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snipped-for-privacy@UNLISTED.com wrote:

One of my best tenants was a guy that I almost didn't rent to because of a bankruptcy. But he owned a house in another city, the bankruptcy was the result of a failed business venture, and he had a good job, so I took the chance. He took care of the place, and was never late with the rent.
My relatives had a rental house where the tenants put an addition onto the house. It was illegal, and they had to pay to bring it up to code, and get the permits. They ended up buying the house at a very high price.
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Deano wrote:

Won't do you much good now, but NEVER, ever rent to "friends," especially church friends. What you're experiencing right now, is something that just about every landlord that rents to friends has gone through. By the time this is "over" either you or they won't be going to that church anymore, and you certainly won't be friends. Hope you get out cheap. Been there, done that.
--
Grandpa

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Most especially people who "you knew were having a hard time."
Business is one thing, charity is another. If you try to do both at once, you just screw them both up.

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Two replies already that addressed some key points. If they are taking care of the houses you are better off than a lot of us. Sell them as soon as you can would be my advice because you haven't experienced any of the bad stuff YET.
BTW, if you rent them again be sure to get them to sign the Federally mandated lead paint warning disclosure and give them the required booklet.
Colbyt
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Check to see if there is a landlords association in your area and join it. If you are new to landlording you need to get advice from experienced landlords in your area. The association in our area charges $150 a year and they provide a monthly magazine, forms, classes, and lots of professional advice for your area. Last month I had to evict a tenant and the association provided me with samples of all of the forms to fill out and even reviewed them with me before I filed. The bottom line is you CAN'T be a nice guy or they will take advantage of you. In the future always do a credit check and get references before renting. The family I just kicked out, their future landlord didn't even call me for a reference(he'll be sorry)... Well I'm glad they are no longer my problem.
Good luck, Kick them out the sooner the better,
Oh btw. this isn't the best time of year to be finding new tenants. Most people looking to move in December, January, and February usually aren't the kind of people you want to rent to.
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best move I ever made as a landlord was to find a section 8 recipient. Rents are direct deposited into my account the first of every month. If the tenants get troublesome all I have to do is threaten to go to the agency and report them. This jerks a knot in them quickly. They do not want to lose that voucher so they straighten up quick. Just be sure to go to where they live before you rent to them to see how they are taking care of the place they are currently living. Life is good. :)
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Don wrote:

I wish the lady who owns the rentals down the street from us did that. She bought these places sight unseen then turned them into section 8 (2 duplexes, before she bought them she had 3 single females and one recently married couple in there). She jacked the rent way up, one of the girls left. In came section 8 family. They didn't even have the car unloaded (everything they owned, which consisted of some clothing, a playstation and a TV) before they were fighting. Cops came 3x that night.
She didn't run checks, if she had she would have discovered those gems have been evicted out of public housing 3 times in 5 months. After 6 months and 3 trips to noise court she finally evicted them. They broke the toilets AND the tub (there was a hole in the bottom of it). The toilet was destroyed and someone had used each room for their personal toilet.
Sadly she tried to go to the section 8 people and they said there was nothing they could do!
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The one and only Section 8, I rented too had a Counselor. The County Housing Authority sent this Counselor to do a walk-through, move in inspection with prospect tenant,
Same case with the move-out. I can say in my/this case things worked out well. I can only guess when they go bad.
-- Oren
"Well, it doesn't happen all the time, but when it happens, it happens constantly."
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This is good advice, but I would go further. I had a teacher in college that was also a landlord and the first thing he would ask prospective tennants is "Let's go look at you car" You can tell a lot about people from how well they take care of their vehicles. In addition he would also go look at their current residence to see how they kept it up as they would do the same in a new place.
--Ben
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Ben, you haven't seen MY car. :-)
Ben Phlat wrote:

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I hear a lot of people complain about renters, But in reality there has to be more renters that won't screw a place up, will pay there rent on time or who would invest in rentals. Eventually your going to get a renter that will pay and take care of the place. Your also gaining the equity in the house at somebody else's expense.( the Market will come back) Plus as motioned never do anything with Friends or Family. From my experience contracting with Friends or Family do it for free or charge so much they leave you alone.
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The most successful landlord I know of does this; He interviews 4 times, 2 times at his place, once an unannounced drop in to where the live now, once at the intended rental. He has never had a bad tenant.
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I know 2 people with rental houses who only who only go through realtors. They swear the 10% fee the realtors charge is the best money they ever spent. They say that the deadbeats will not even try to rent through a realtor, because they know they will be checked out thoroughly first. One guy actually lives directly across the street from his rent house--says he never even met the renters. Larry
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The friend of mine that tried that got renters that didn't even meet the "no-smoker" or "no-pet" requirements she requested of the manager.
Bob
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Deano wrote:

You are on the cusp. I have often wondered whether SOBs become landlords or whether being a landlord turns them into SOBs.
I rented a house to the Consul General of the Dominican Republic. He damn near burt it down (his family evidently left a vat of boiling pig fat on the stove in case they needed a snack - like a banana). They also put door hooks on all four bedroom doors. On the hallway side of the door(!?).
After his exit, I rented the house to the owner of one of the largest portrait studios in Houston. At the termination of his lease, we found (I'm not making this up), over 100 giant, empty, Tide detergent boxes secreted in every closet and cabinet. There were also over 300 empty pop bottles and uncountably many empty liquor bottles. He broke out a window pane to use as a doggie-door. And so on.
I sold the house.
Anyway, steel yourself to tenants not acting like responsible people, or at least the responsible people you know. You can protect yourself somewhat by an extensive vetting process before accepting the lease and requiring a substantial deposit. You should also not skimp on insurance.
(Afterword) The new owner of the cursed house wasted no time in connecting a garden hose to the gas log lighter, snaking the hose down the hall from the family room to the bedroom, turning on the gas, and going to sleep (evidently a suicide attempt). Some time later, he awoke and attempted to light one of those mary-hoo-wanna things - with predictable results.
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You are not alone. I used to be a landlord and I got so fed up with it all that I sold the place. Tenants all seem nice until they move in, then they turn into assholes. I shouldn't say ALL of them, I did have a few decent ones, but very few. I had one that paid the rent the first month before moving in, and never paid on time for the 14 months they lived there. I dont mean a couiple days late, I mean weeks. I finally evicted them, so they trashed the place. Thats when I said the hell with renters.
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You must know the real problem by now. People having a "hard time" don't pay their bills. It does not matter that they are friends, church members, etc. if they don't have the money, you won't be getting it. If they have the money, but have other things they deem more important, you won't be getting yours.
What you have to do is consider the next move. Are kids involved? Lease term? It is harder to evict when tenant have kids and if the lease term is not up yet. You want these people out as quickly and as gently as possible. Local laws vary, but it can be a very long and costly process to get rid of a tenant. You may want to talk to a local lawyer that specializes in real estate of this sort.
It may also pay you to enlist professional help in finding the next tenant. It is far cheaper to pay some sort of fee and commission to a rental agent that $200 to a lawyer.
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