Author Topic: Buying my first rental property. :3  (Read 13965 times)

bizzy

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Re: Buying my first rental property. :3
« Reply #50 on: March 27, 2015, 11:34:35 PM »
How I choose to take it has no bearing on your choice of behavior.  It is what it is.  The only reason I remember it is because that was one of the first threads I commented on and thought your behavior rather strange for a moderator.  Despite your unwelcoming comments I decided to keep participating and found some good information and people on these forums.  I would hate for somebody new like bizzy, or anybody else, to be turned off by a petty insult from you.  That's the reason I brought it up.

P.S. Unless you're a lawyer by trade, you should be careful about handing out legal advice in an open forum like this.  That's my non-legal advice to you.  Good luck.
I agree Poorman. I also thought that arebelspy has a weird behavior for being an administrator here. One thing is to give advice and another is to say nonsense about someone's phase in life as if he was so great. This is not the first time I deal with a person like him that thinks he is better then everyone because he is an "administrator." But hopefully he doesn't turn off other people here with his weird and offensive comments that have nothing to do with the discussion.

arebelspy

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Re: Buying my first rental property. :3
« Reply #51 on: March 27, 2015, 11:56:57 PM »
MOD NOTE: Please try to stay on topic.  If you'd like to start a complaint thread about arebelspy, that should go in the Off Topic forum.  Thanks.
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bizzy

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Re: Buying my first rental property. :3
« Reply #52 on: March 28, 2015, 12:00:26 AM »
As I mentioned earlier in the discussion. We can talk about what the rental law says and what the reality is.

Right.  And I prefer to follow the law.

Maybe the administrators here can shine light on what to do when you have many "qualified" applicants and you can only choose one? How do you explain in court that you didn't discriminate against the rest of the applicants.

You process them in on a first-come, first-serve basis.  The first one meeting your criteria you rent to.

Everyone has to comply with all the tax laws as well. According to Arebelspy he does not take chances and he follows the law to the letter. So in fact he is such a great American that he does not cut any corners and reports every expense and income to the cent. Right bro?

I don't know that I'd call myself a "great American" - I tend to be highly critical of our government, actually.  But you are correct in that I do report all of my income and expenses.
So you follow the rental laws perfectly, never discriminate anyone for any reason, and you do your taxes accurately to the cent? Good for you. You are perfect in every way! I can see now why you make your offensive comments and think you can look down on most of the people here.

arebelspy

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Re: Buying my first rental property. :3
« Reply #53 on: March 28, 2015, 12:10:14 AM »
Yes, I try to follow the laws.  It is weird to me that this is a surprise to you, or something to mock.

Send me a PM if you'd like to engage further bizzy.  I don't see a need to clutter up this thread anymore.  Thanks.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

accolay

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Re: Buying my first rental property. :3
« Reply #54 on: March 28, 2015, 04:30:23 AM »
Congratulations! I feel your excitement as I am also looking forward to purchasing a rental soon.

Quote
Oh, and what about taxes? How do I deal with that now? Do I need a business name and incorporate or what? Insurance?

This is something I'd like to hear more about too, especially the federal tax aspect. Are taxes a wash with any and all deductions? I've also read that since you're now a landlord and running a business, this apparently could open you up for a higher change of being audited, so it seems that keeping honest and good records would be a good idea. Can anyone else chime in on this? Concerning insurance, from what I've been researching, the insurance would be a rental insurance policy, and it seems many landlords have an umbrella liability insurance policy. Is this what more experienced landlords are doing?

As far as the rest of the hubbub in this thread: I took a tenant/landlord law seminar and the speaker, a tenant lawyer, said that the biggest thing he would be afraid of as a landlord would be discrimination. Everything I've read and researched echos this, as well as keeping a clear list of rental criteria and sticking to it, having a solid, lawyer-vetted lease, and maintaining your property. The devil's in the details.
« Last Edit: March 28, 2015, 04:44:49 AM by accolay »

arebelspy

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Re: Buying my first rental property. :3
« Reply #55 on: March 28, 2015, 08:41:06 AM »
Quote
Oh, and what about taxes? How do I deal with that now? Do I need a business name and incorporate or what? Insurance?

This is something I'd like to hear more about too, especially the federal tax aspect. Are taxes a wash with any and all deductions?

It very much depends on your tax situation, the property itself, etc.  With some properties that are very expensive and just above break-even the depreciation will let you show a paper loss and can actually help shelter some of your ordinary W2 income as well.  (Of course, it will all be recaptured at some point, besides w/ probate.)  With a cheaper property that cash flows a lot, the depreciation barely covers any of the property's profits itself, so you'll be paying taxes.

You can, of course, write off expenses related to it, but you wouldn't have incurred those otherwise, so I don't see that as a huge "benefit," just getting back the cost of doing business in most cases.

Check with your accountant to see how a particular property will affect your tax situation, it's a bit too broad to give a blanket one size fits all answer to.  :)

I've also read that since you're now a landlord and running a business, this apparently could open you up for a higher change of being audited, so it seems that keeping honest and good records would be a good idea. Can anyone else chime in on this?

I heard that initially as well, but I don't believe it's true, and have since heard subsequent statements from the IRS that they don't target due to that.  In a related example, it used to be the case that taking a home office deduction could raise your chance of an audit, but the IRS no longer raises a flag on that.  You definitely want to keep good records, however.  1) It never hurts, because you might be audited just like anyone else, but (more importantly, in my mind), 2) It forces you to treat it like a business.  Keeping track of what's profitable, and what isn't.  Keeping track of how it ought to be run, rather than letting things slide.  What's measured is managed, and all that.

Concerning insurance, from what I've been researching, the insurance would be a rental insurance policy, and it seems many landlords have an umbrella liability insurance policy. Is this what more experienced landlords are doing?

I do, personally.  A lawyer, and many of the seminars, will sell you on complex legal structures to protect your assets.  And again, talk to a lawyer, don't listen to some random on the internet for legal advice.  It will depend on your scenario.  But I do recommend the rental insurance policy (a good one) and an umbrella on top of it.

As far as the rest of the hubbub in this thread: I took a tenant/landlord law seminar and the speaker, a tenant lawyer, said that the biggest thing he would be afraid of as a landlord would be discrimination. Everything I've read and researched echos this, as well as keeping a clear list of rental criteria and sticking to it, having a solid, lawyer-vetted lease, and maintaining your property. The devil's in the details.

Yup, that is one thing many of us have had drilled into our head.  Thanks for the confirmation from your experience. 
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

WildHare

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Re: Buying my first rental property. :3
« Reply #56 on: March 28, 2015, 02:56:28 PM »
Congratulations. Your excitement comes through in your post.   I have several rental properties and my one piece of advice is to remember it is a business.  You need to educate yourself regarding the laws in your state.  Keep good records.  I take applications , read them, and also verify the information given.  I call references, prior landlords, etc. I may also drive by their last residence., if practical, At that point, if they can meet the income requirement and I have verified the info on the application, I run credit.  I do not take any deposit ' to hold the property' until I have a qualified applicant.
It is exciting when your house is ready and you have prospective tenants coming through.  Try not to get caught up in their personal stories or promises.  I can't count the number of people who have told me how perfect it is, and how much they want it, etc, and never even return the application.   Or the ones who lie through their teeth.   Or the ones who list their mother as a reference, and are shocked that she is the first person I call.
Get some good books, ask questions, follow the landlord tenant regulations, keep good records. You may  get a bad tenant somewhere along the line. The trick is to have all your ducks in a row and understand that it comes with the territory.


zinethstache

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Re: Buying my first rental property. :3
« Reply #57 on: March 28, 2015, 02:59:45 PM »
I know most folks on this forum are DIYers. But if you truly aren't ready to manage tenants directly you COULD, find a reputable PM company to manage that part for you. DH and I own multiple rentals now and he is NOT, I repeat NOT a people person, and I still work my day job and run my own little side gigs. I was totally unfit for successfully dealing with tenant selection or day to day tenant wrangling. So, we have hired a PM. I solicited them at random starting in 2012 before we even bought the first property, I asked alot of questions and found 2 willing to play the game and answer my rookie questions. I am very happy with my PM choice. One thing they do is ALWAYS call previous landlord's and they REQUIRE all people older than 18 living in the house be checked in some capacity. Pets are a higher damage deposit but are allowed  (as a pet owner I can't see restricting so many potential good tenants). I will say this, they are much slower to rent than I see talked about on the various forums because they DO stick to their criteria and yes right now lots of folks don't pass the credit check. note they have loaded up four units for us in three years, threeof them were empty units from our purchase in which we rehabbed and then they found tenants, and only one was because someone left /fingers crossed they all stay a long, long time!

Every tenant passing all their criteria is brought to me and I do make the final call. I love that I have that layer of experience working for me and find it well worth the fee I pay for it. It is not for everyone, but do consider it.

And most the most important thing I have to say is CONGRATULATIONS, may you take many checks to the bank! Or better yet, have them ACH the funds to your account each month.

Poorman

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Re: Buying my first rental property. :3
« Reply #58 on: March 31, 2015, 12:13:49 PM »
So here is the counterpoint to arelschleppy's legal advice...

Quote
I am always amazed at how often landlords, property managers, and real estate agents quote laws when they have no idea what the laws actually say! (Which is pretty pathetic, since some of us are actually required to take Fair Housing classes regularly!)

No, you absolutely DO NOT have to accept the first person who applies. You do however need to be ready to defend in court your reason for rejecting that person. If you are trying to decide between two qualified applicants, rate them! For instance, Zillow recently put out a free ebook which includes an Applicant Qualification Checklist that allows a landlord to score applicants based on income, credit, rental history, etc... Google "Zillow Lead Qualification Kit" and you'll find the ebook. This checklist is Appendix C.

Here is another interesting tidbit of information that is never discussed on these posts... Look at Section 803. [42 USC 3603] (b) - this paragraph outlines the EXEMPTIONS to the Fair Housing Act.

Basically, an owner (landlord) is exempt from the Fair Housing laws if they do not own more than 3 single-family rental units at one time and the rentals are being rented out without the services of a real estate licensee. Additionally, owner-occupied properties with no more than 4 units is also exempt.

What this means is that if you own 3 or fewer rental properties (either single-family homes, or individual apartments... don't get confused about what they are referring to as "single-family"!), or if you rent out rooms in your own occupied home, or if you own a building with 4 or fewer individual units and you live in one and rent out the others, you are exempt from Fair Housing.

What this exemption does is put a little bit of the decision-making and control back into the hands of small landlords with only a couple properties, and I think it's mostly a financial thing... For instance, as an example: You own one rental property. You are not making a fortune off that property, so you really cannot afford the expenses of vacancy, non-payment of rent, damages, etc... So, in that position, it may seem less risky to you to have a single person without kids (less wear & tear for you to be responsible for), or an older, more responsible and stable person (less turnover and risk of non-payment). If you owned several properties, it would be against Fair Housing and illegal to choose a tenant based on those preferences, but as a small landlord, it is NOT. However, NO ONE is exempt from discrimination based on race- keep that in mind! Also remember that this is the FEDERAL Fair Housing Act- each state, and even counties & municipalities, have their own laws. It's also important to be familiar with your local laws.

Read more: http://www.city-data.com/forum/renting/1251771-how-legally-choose-tenant-multiple-qualified-3.html#ixzz3VzE17Zst

So the part where arelbespy says they will be subject to big fines and jail time is absolute ignorance on his part.  If the original poster gets more than 3 rental SFR's, then yeah, develop a policy, but most mom & pop landlords with one or two units are not subject to the same rules as larger investors.

(Talk to your legal professional for specific advice.)

EDIT: Per babysteps' post, I changed the wording from 'units' to 'SFRs'.
« Last Edit: April 03, 2015, 09:32:10 AM by Poorman »

babysteps

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Re: Buying my first rental property. :3
« Reply #59 on: March 31, 2015, 12:59:22 PM »
...  If the original poster gets more than 3 rental units, then yeah, develop a policy, but most mom & pop landlords with one or two units are not subject to the same rules as larger investors.

(Talk to your legal professional for specific advice.)

Completely agree, always seek specialized local legal advice!

Ideally, new real estate investors can balance fear-of-the-unknown with information from experienced investors (just ask, they'll be happy to tell you their war stories) and a trusted legal advisor or two.  Don't get stuck in analysis paralysis, but don't jump without looking, either :)

I am not a lawyer.  However, I would caution us all to be careful not to conflate #units and #properties.  The advice I have received is that for a multi-unit property to be exempt, it has to be either owner-occupied or relative-of-owner-occupied.  Even then you have to follow the advertising rules.  In my experience, most mom & pop landlords are not living in their investment properties, so would not be exempt.

Here are links to two states' websites (in part) explaining federal exemptions to the Fair Housing Law that may help clarify
Vermont is http://hrc.vermont.gov/Exemptions%20to%20Fair%20Housing%20Laws
Pennsylvania is http://www.equalhousing.org/fair-housing-topics/?tab=exemptions-to-the-fair-housing-act

theoverlook

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Re: Buying my first rental property. :3
« Reply #60 on: March 31, 2015, 01:20:08 PM »
I realize I'm cluttering up Vitai Slade's thread, but I find the piling on to Arebelspy to be unseemly.  His responses were nothing but level headed and attempts to be helpful.  Responding with "lol sorry bro" was the start of the poor tone.  Maybe you don't see how that's inappropriate and dismissive - but it is.

Plus, please don't antagonize a forum mod, whose job is thankless, unending, and thoroughly needed.  The number of forums that end up useless to civil people far outnumber those that are helpful like this one.

accolay

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Re: Buying my first rental property. :3
« Reply #61 on: March 31, 2015, 01:37:03 PM »
Absolutely. Consult a legal professional.

However, I think it's bad to throw out such psuedo-advice to disregard federal discrimination law because there is something about not having more than three units and apply to a personal business situation. The exemptions are very specific in only very specific circumstances. And if the federal fair housing laws somehow don't apply, then you'd better check with your state and local fair housing laws.

Here's my bolding of the exemptions from the Fair Housing Act: http://www.justice.gov/crt/about/hce/title8.php

Quote
(b)Nothing in section 804 of this title (other than subsection (c)) shall apply to--


    (1) any single-family house sold or rented by an owner: Provided,
That such private individual owner does not own more than three such single-family houses at any one time:
Provided further,
That in the case of the sale of any such single-family house by a private individual owner not residing in such house at the time of such sale or who was not the most recent resident of such house prior to such sale, the exemption granted by this subsection shall apply only with respect to one such sale within any twenty-four month period:
Provided further,
That such bona fide private individual owner does not own any interest in, nor is there owned or reserved on his behalf, under any express or voluntary agreement, title to or any right to all or a portion of the proceeds from the sale or rental of, more than three such single-family houses at any one time:
Provided further,
That after December 31, 1969, the sale or rental of any such single-family house shall be excepted from the application of this subchapter only if such house is sold or rented (A) without the use in any manner of the sales or rental facilities or the sales or rental services of any real estate broker, agent, or salesman, or of such facilities or services of any person in the business of selling or renting dwellings, or of any employee or agent of any such broker, agent, salesman, or person and (B) without the publication, posting or mailing, after notice, of any advertisement or written notice in violation of section 804(c) of this title; but nothing in this proviso shall prohibit the use of attorneys, escrow agents, abstractors, title companies, and other such professional assistance as necessary to perfect or transfer the title, or
    (2)rooms or units in dwellings containing living quarters occupied or intended to be occupied by no more than four families living independently of each other, if the owner actually maintains and occupies one of such living quarters as his residence.

As it says on the MN Fair Housing Website FAQs for Housing Providers http://fairhousingmn.org/providers/faq/:
Quote
Assume that discrimination is illegal until you consult an expert.
« Last Edit: March 31, 2015, 01:44:09 PM by accolay »

bizzy

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Re: Buying my first rental property. :3
« Reply #62 on: April 02, 2015, 09:03:51 PM »
I realize I'm cluttering up Vitai Slade's thread, but I find the piling on to Arebelspy to be unseemly.  His responses were nothing but level headed and attempts to be helpful.  Responding with "lol sorry bro" was the start of the poor tone.  Maybe you don't see how that's inappropriate and dismissive - but it is.

Plus, please don't antagonize a forum mod, whose job is thankless, unending, and thoroughly needed.  The number of forums that end up useless to civil people far outnumber those that are helpful like this one.
Again, this is a forum to exchange ideas and advice. We are having simple discussion. So, If I used the term "lol sorry bro, I don't agree" it does not change anything to do with the context of the discussion. Arebelspy's offensive and unwelcoming statement about the phase in my life was not appropriate. And the fact that he stated that he does not take someone serious if they use the word "bro" is simply ridiculous. He is not my attorney nor a judge to act so serious in a forum discussion.
He has no right to make statements about what phase in my life I am in, as if he knows what's best in my situation. One thing is to know context of the law and another thing is to make comments about someone's personal life.

I also don't want to clutter up this thread but he turned this thread in another direction by making a personal insult. In fact, its clear that other members feel the same way.