I have to vent ! About a Tenant

[brin]

brin, the tenant paid 216 mortgage payments to you without one complaint (your original post stated none) in eighteen years! There are tens of thousands of home rental individuals that would take your tennant in a moment's notice. You seem to be quite disturbed that the past tennant/plumber presented a momentary inconvenience to you selecting and positioning your next tennant. 6480 days of the plumber paying rent and you are upset for him costing you a couple of days of inoccupancy?

nickle plate....If you really read my previous posts you would see that I had to coerce him into letting me upgrade the whole house eight years ago...So he had been there ten years and I completely remodeled the house and left his rent the same. Over the years I had helped this tenant find work on numerous occasions and done other favors for him so I am guilty of thinking he would be a bit friendlier toward me, I am also guilty of thinking he would live up to his word and keep me informed as to the status of his move and if indeed he was approved for his mortgage and would even be moving...He never called ...I had to keep calling him..He left the house a mess and never finished some work he had agreed to do on it.

So nickle, yes I am disappointed in him. As to him staying in the house for 18 yrs....that was his choice, it is a nice house in a beautiful private setting so why should that give him an excuse to not keep his word or at least be courteous and considerate..

 

[Riderguy]

The banks have it even worse. People are leaving their foreclosed homes and either taking or destroying everything they can take including lights, appliances, tub, sink etc.

What some have done is strip the house and sell everything including the windows before the foreclosure.

Others have taken all the electrical wire for the copper, and pipes and left nothing but a shell.

I can't feel sorry for the banks. These homeowners are basically tenents that didn't have enough money to rent a house much less buy one, yet were offered a ridiculous no-money-down mortgage. The banks approved them, and then wonder why the house is trashed when foreclosure is imposed on the property.

When it comes to human nature I try to subscribe to the adage: Given the opportunity, people will disappoint you.

I'm not negative, just a realist. When it comes to family, don't get me started!BTW, a statistic floating around says 80% of money loaned to a family member is never repayed. How's that for disappointment?

Scott

 

[Richard]

I've been biting my tongue on saying the next thing, lest it come across as some kind of a sales pitch and I don't want that to happen.

I do not know how much someone might make in net rental income after expenses (but perhaps before income taxes). Do you make 3%, 6%, 25%?

I know that in part depends on what if any loan you might have on the place and how much of the rental income goes towards paying the loan.

ok, so with that said.... you can avoid some of the headaches of owning rentals.

You can look at non-traded REITS (Real Estate Investment Trusts). Their goal is stability of principle, income and growth.

Right now, with one I know of, you can get 6 1/2% annual cash flow. Of this cash flow about 30% of it is tax favored because the REIT passes 100% of their depreciation through to the shareholders.

This is with zero mortgages, zero maintainence calls, zero tenants to deal with.... all of that is done for you. You simply do some appropriate research and if appropriate to your goals, write a check.

If you feel real estate is depressed right now then it could be an interesting time to look into something like this. (after proper research, reading the prospectus, talking to your accountant, blah blah blah...).

The way this specific one works is they take the funds, go out to buy either medical related buildings (hospitals, clinics, Dr's offices, nursing homes....) OR they buy apartment buildings. These are pretty specific in their asset base.

They buy the properties with plans of holding them for 7-8 years. During this time, they are (currently) paying 6 1/2%. These shares are cumulative and here's what I think is so interesting with them.

On the backside when they liquidate the properties, the company is allowed to keep 15% of the profits AFTER they meet two criteria:

1. They must first reimburse you 100% of your invested funds
2. They must cover ANY shortfall from what ever interest they have been paying you and 8%. If they fail to meet these, then they don't split the pie.

Once they meet those two criteria then they get to split what is left 85/15 with you getting 85% of the net growth. This means you have 100% return of principle, 8% simple interest for each year held (with tax favors) and then 85% of remaining profits (if any).

If someone thinks real estate might rebound over the next 5-10 years then it's something worth looking into.

Just so no one thinks I'm trying to do a subtle sales pitch, the company I use is Grubb & Ellis

Grubb & Ellis :: Healthcare II REIT :: Home

contact your investment advisor if you have any questions. This is not something exclusive to me.


Some nice features:

* Tax favored income
* Chance for growth
* Though there is a declining surrender charge, per the prospectus, after 4 full years of ownership, they are required to pay you "but in no event, less than 100% of the price paid per share" if you decide to totally liquidate and get out. (of course this means you are walking away from any potential real estate growth)

and the last thing I'll mention is, death. If something happens to a landlord and you die, then the rental place will have to go through probate. If the decision is made to sell then there are other issues with that. With something like this REIT, they have a clause that upon death, the beneficiaries have up to two years to decide if they want to keep the asset or liquidate it. If they decide to liquidate it then all surrender charges are waived.

If the shares are in an appropriately titled account or trust, they can bypass probate.

Oh, and you can reinvest the income at a discount if you prefer growth over income

 

[bdeboer]

I can't feel sorry for the banks. These homeowners are basically tenents that didn't have enough money to rent a house much less buy one, yet were offered a ridiculous no-money-down mortgage. The banks approved them, and then wonder why the house is trashed when foreclosure is imposed on the property.
Scott

Well said.

 

[bdeboer]

Deep,

For what it is worth I have been in real estate for 40 yrs. and a Broker for 35 of those..after all of these years and dealing with tenants in my humble opinion, it is a gut call as to whether or not to rent to a tenant. References are worthless, who is going to give you a reference to call if they know they will give them a bad one ? Security deposits are worthless, one months rent and the the tenant usually does not pay the last months rent on the lease so they get their deposit and leave you with the mess and damages ! Credit checks are absolutely worthless since that is only past behavior and by the time you get them as renters , their world has changed and credit reports only pick up credit cards and loans as a rule along with consumer debt..

The tenant interview is the best based on my experience...you have to go with your gut feeling. I have let tenants move in with no security deposit and no first months rent in exchange for them doing repairs and me buying the materials and had it work out great and when they left , they left it neat and clean and I have had the other but no credit check, security deposit or first months rent will ever save you so don't beat yourself up..

Even asking the current landlord doesn't work, as they will dump a slow pay or high maintenance renter by giving a good reference.

 

[brin]

Even asking the current landlord doesn't work, as they will dump a slow pay or high maintenance renter by giving a good reference.

bdeboer, So true what you say...the old landlord is just glad to get rid of them and gives a good reference to be sure they move...Ahh, the games they play !

 

[NorTracNY]

brin,
You talk about upgrading when he didn't want it. Why should he feel appreciative? I know that when I was single and rented, I didn't want the landlord coming in and disturbing me. You talk about helping him get jobs. He may just have seen it as you trying your best to keep a good tenant that paid the rent! When I had a business and rented, it was always a balance for the landlord on rent price versus me leaving for another location. This probably came into play too.

Clearly he was not a man of his word, but we all deal with them every day. Vent away, but I can't seem to find an ounce of sympathy. As you're aware, things can be A LOT worse for landlords.

 

[brin]

brin,
You talk about upgrading when he didn't want it. Why should he feel appreciative? I know that when I was single and rented, I didn't want the landlord coming in and disturbing me. You talk about helping him get jobs. He may just have seen it as you trying your best to keep a good tenant that paid the rent! When I had a business and rented, it was always a balance for the landlord on rent price versus me leaving for another location. This probably came into play too.

Clearly he was not a man of his word, but we all deal with them every day. Vent away, but I can't seem to find an ounce of sympathy. As you're aware, things can be A LOT worse for landlords.

NortracNY....Hey sport...did you notice I never asked for your pity or anyone else s --- Character is the issue here...think about it !

 

[bdeboer]

bdeboer, So true what you say...the old landlord is just glad to get rid of them and gives a good reference to be sure they move...Ahh, the games they play !

It has happened to me. Not a total deadbeat, but one that you have to chase down every month to get paid. When you look at the eviction process once you start, you can plan on 3 months no money plus court costs etc. Then a month to get the place rented and in shape again. Plus you have little chance of collecting the back rent. I know why they do it even if I do not agree with it.

 

[brin]

It has happened to me. Not a total deadbeat, but one that you have to chase down every month to get paid. When you look at the eviction process once you start, you can plan on 3 months no money plus court costs etc. Then a month to get the place rented and in shape again. Plus you have little chance of collecting the back rent. I know why they do it even if I do not agree with it.

Yep ..it really is a crap shoot when you choose a tenant...All of the credit checks, one month rent security deposits in the world and you can still end up losing months of rent and have a trashed property...so that is why I say in the end you just have to evaluate each prospective tenant, how they present themselves and go with your gut based on past experience. A prospective tenant will never give you bad references and credit checks do not reveal bad tenant histories or past due rents..