Rental Property Number 5 is Rented!

013184600_320x240I was beginning to get a little bit worried because we have an extremely hot rental market right now and it took a little while to get rental property number 5 rented.  However, today a lease was signed, money collected and we are getting $1,200 a month.  Rental property number 6 is almost done and should be ready to rent  in a week or so and rental property number 7 is also getting very close to being finished.

Advertising

We spend nothing on advertising for our rental properties.  All we do is stick a for rent sign in the yard, list the home in Craigslist and list it on Facebook.  Those three marketing techniques usually result in the phone ringing constantly for prospective renters.  We had a ton of calls on this house, but most of the prospective renters either did not like the house or we did not like their application.

Application

I use a very simple application I found online.  Basically I want to know who is living in the house, employment history, rental history, any pets and that is about all.  I don’t run a credit check or background search unlike many landlords.  My excuse for not running a credit or background check is I am super busy and I don’t like collecting application fees.  I like to base my decisions off of a gut feel more than numbers.  I will call references and make sure they paid rent on time and I will verify work history.  If those two items check out and the renters are on time, follow-up well and show me they are responsible than I usually will rent to them.  So far I have not gotten burned by this technique (knock on wood).

Lease

My sister is a property manager and I use a modified version of her lease.  It is very landlord friendly and very clear on exactly what can be done and what cannot be done on the property.  No smoking, no pets(unless I specifically okay it in writing), no modifications without consent, no illegal activities, etc.  The lease also says exactly what day to rent is due and what the penalties are for being late.  We always do at least a 1 year leases and anything that is promised or expected of either party is put in writing.  Every state has different laws regarding tenant and landlord rights.  I would consult an attorney or a successful property manager if you are looking for a lease.

Lead Based Paint (LBP)

If you are selling or renting a home that was built prior to 1978, you must provide a lead based paint disclosure to the buyers or renters.  I make sure a state disclosure that I have access to through my MLS is signed by all parties and provide a LBP pamphlet explaining the dangers.

Why this home did not rent quickly

I completely overlooked a huge deficiency when I purchased this home last year.  Rental property number 5 has no dining room or any type of significant eating space.  I usually go through houses very quickly when I am looking at potential deals and apparently I looked at this one a little too quick.  There is a fairly large kitchen in this home, but most of the space is long and narrow and one side of the kitchen has the stair case leading to the basement.  There is no room for a table with more than three chairs in the kitchen and there is no separate dining room either.  Most potential renters who saw this home loved it until they realized there was no place to put a table unless you put it in the living room where space is limited.  Luckily we found someone who was okay with the layout, but it took a lot of man hours showing the home.

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9 responses to “Rental Property Number 5 is Rented!

  1. congrats

  2. I’ve often wondered about the value of a credit check. It seems the biggest drivers to rent are 1. you have bad credit and/or 2. you can’t make a down payment. I know there are many other circumstantial factors that cause someone to rent vs buy, but I just generally wouldn’t expect great credit from most renters.

    Also, how did you pay the mortgage on this house while it set idle? Do you have a specific fund for this? Does the money come from other rental income? From your other articles, it seems like you keep rental income fairly separate from your other income streams.

    • As far as funding the rental I have a checking account just for this LLC. I fund the LLC from my personal checking account to begin with, enough to pay for repairs and any other costs until it is rented and can pay for itself. When I calculate my cash on cash returns I am taking all that money into account and consider it all the initial investment. I keep all the cash flow from my other rentals going toward paying off one loan at a time.

      If I were just starting out and short on cash, I may save all my cash flow in order to build up enough funds to purchase more properties.

  3. Mercedes Wetmore

    Why do you use a separate LLC for each property?

    • From what I have been told, if you use one LLC for all properties and get sued, all your properties are at risk. If you have a separate LLC, with separate checking accounts, then it is much harder for someone to go after more than one property. Not legal advice.

      • Mercedes Wetmore

        Thanks for the advice. I am 21 years old and I play basketball for the University of Washington. I have been so competitive in sports my whole life and I feel like if I bring that much energy and focus to real estate, I can make it big here too. I have been telling my dad for years that I want to own 100 rental houses, so when I found this site, you mad me believe I can really do it. Ive taken notes on everything. As soon as i graduate, i’m diving right in 🙂 I’m looking for portfolio lenders that have unlimited mortgages right now. This is the most exciting website i’ve ever been on because I understand what you are doing. Thank you for creating this! I’m building a plan similar to yours, but at a slower pace because I am a bit younger. I worry about interest rates drastically rising. Do you over the next 5 years?

      • Thank you Mercedes, I am glad you found so much inspiration from my site. I love basketball and that was always my favorite sport to play as a kid, but I never went past high school. It may seem silly to many people, but I don’t worry about much at all. Part of my coaching taught me I can’t change the past, I can’t predict the future, so why worry about either one? All I can do, is do my best right now and prepare as best I can. Will rates keep rising, maybe, probably likely they will. But people were able to buy investments in the 80s when rates were double digits and make it work. If rates go up, I may have to adjust, but I am not worried it will ruin my plan.

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