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I am seriously giving up real-estate

Question: I am thinking of giving up real estate . I bought one property to rent out and am now trying to rent out a second property. The problems I have experienced over the past year is unable to find good quality tenants. I am trying to rent to upper middle class professionals.

Almost 90% of people who see my property have some serious issues, such as:

1) have children – i see kids as destructive , noisy, unpredictable and a lawsuit time bomb when they get injured

2) have pets – too many people have stupid cats and dogs that are just dirty and unpredictable. replacing a ruined carpet is a huge cost, not to mention barking dogs can annoy neighbours.

3) foreigners – tend to be dirty and irresonsible as far as looking after property .

4) roommates – there is no guarantee they are going to stay together. More than likely they will be asking to break the lease and then I am stuck renting the place out again.

5) smokers – one word, yuck!

6) bad credit people – people with bad credit and bankrupticies are not the kind of risk I want to deal with

Plus I have found most condo boards are a pain to deal with as far as approving renting. I can fully understand their concern if I picked any of the above people to rent my place out.

I wouldn’t mind renting to the above people if I could charge extra on a case by case basis, but I have never hear of any landlord doing this.

Am I being too cautious? How do other landlords do it and make money consistently over the years? It must be even harder to find good tenants in the lower income brackets.

Answer: How come I never get the cool email name? Anyone thinking of paying lot’s of money for real estate investment advice that involves renting property should read your letter first. For the most part your concerns are real. Rentals can go bad in so many ways.

You mention “upper middle class professionals”. This is excellent thinking. Define who you want your renters to be and then rent the kind of properties that they would want. Putting up “for rent” notices in a lunch room frequented by professionals is more likely to pay off than the 24 hour liquor store. Same thing for personal referalls. I’ve ended up selling properties that I just couldn’t rent to the right type of people. Correct your mistakes and move on. Personally I’ve found families and retired people make the best renters.

Screening is very important. I always call references and try to ferret out inconsistencies in the stories. People always lie, but they don’t know what lies the other references are telling. Become as skilled at this as possible.

Rental Agreements. I use a pre-printed form AND add a “Word(c)” document I made myself. Everytime I run into a problem I add a paragraph to my addendum. Unfortunately there are an infinite number of ways for tenants to be annoying. Who knew the guy played tuba in high school and likes to practice at night?

I go over every paragraph of the rental/lease agreement with the tenant personally. This minimizes the “I didn’t know” when issues arise or when they move out. If the tenants eyes glaze over and they just want to sign without understanding the agreement, that is a very bad sign. This might be a good time to remember that one of their references never called back.

1) Yes, children can be very destructive. They are just a fact of life. Talk about them when running references. “Would you want their children living in your house if you rented it out for 6 months?” Housing discrimination can get you in big trouble. Just don’t do it. You dislike poorly behaved, destructive children. You love well behaved children. The good news is that children are where renters come from

2) Rent “no pets” and evict if they break the rule.

3) Wrong. I’d rent to the Indian Engineers I used to work with all day long. I know foreigners with spotless houses and straight A children. Everyone is an individual. You have to evaluate them individually. Even saying this can get you in huge trouble with housing discrimination authorities.

4) Roommates can be huge trouble. Having unrelated single adults living in a house really increases the wear and tear. One person, or husband and wife legal entity, must agree to be responcible for all damages. If more than one person is responcible, no one is responcible. It’s always the other guy who did it. Each of them is like a small family. Girls love moving in their “bad boy” boyfriends. Guys love moving in their “really needy” girlfriends. Roommates never, ever evaluate tenants as landlords would. “No subletting” and enforce it. You rent only to the people on the lease. You are probably stuck if members of the immediate family want to move in.

5) Non-smokers will not rent a place once occupied by a smoker. “No smoking”

6) You CAN discriminate equally based on bad credit. FICO scores indicate how likely someone is to make payments. Low FICO scores are really bad. (My apologies to people with medical bills.) Remember the asset you are lending the renter costs much more than most Mercedes and can be as easily damaged.

Just don’t rent to bad renters. You will never make up the damage that they do.

If you decide to stay on, then Good Luck!

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Filed under: Bad Credit