Author Topic: First time landlord in Minnesota  (Read 3249 times)

SalmonSlayer

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First time landlord in Minnesota
« on: May 27, 2014, 06:37:30 PM »
Hello, first time, long time, etc.

My wife and I are about to purchase our second house and are going to hold onto the townhome I purchased before we were married. This is obviously our first foray into RE investing, so the more education I can get the better. I've read through this forum a bit and biggerpockets as well, but I'm hoping to get some insights from fellow mustachians who have blazed this not quite accidental, but not exactly deliberate landlord trail already. If you know specific Minnesota details, all the better.

Disclaimer: I'm fairly confident the numbers make sense to hold onto it. I was able to purchase in 09 when prices were ridiculously low and the rental market is pretty strong in our area, so we should be able to net ~$350-$450/mo after PITI and HOA.

  • What are the main benefits of creating an LLC and placing the property there?
  • What do you find to be the most effective way to collect the actual rent?
  • Any recommendations on landlord insurance?
  • Preferred service to screen tenants?
  • General advice for a noob...

Any and all input appreciated.


Daleth

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Re: First time landlord in Minnesota
« Reply #1 on: May 27, 2014, 06:43:22 PM »
Not a fan of LLC's for that. We had an LLC but it was more hassle and expense than it was worth--business insurance is much more expensive than landlord insurance that you can get as individuals, the tax returns were more complicated and thus for us at least had to be done by an accountant... total PITA.

For collecting the rent, I encourage tenants to set up an automatic payment where their bank mails me a check. For the ones who haven't done that, it varies. I have some tenants who are students near where I work so we just meet in person monthly and they give me the check. For other tenants, they just mail it.

For insurance, that is very state dependent so you just have to shop around. Start with whoever is your current insurer and tell them what you need (landlord insurance, liability coverage of $X, replacement cost or whatever for the house, deductible of $Y). Then call around and get quotes from other insurers.

For screening, I've used YouCheckCredit.com. Easy and good.

waltworks

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Re: First time landlord in Minnesota
« Reply #2 on: May 27, 2014, 06:49:50 PM »
Do you mean that it cash flows after accounting for maintenance and vacancy and such, or just that you have an extra $350-450 a month after PITI and HOA? Does it make the 1% rule?

For payments, I like dwolla (assuming you have tenants with internet access and checking accounts). Easy to use for everyone, 25 cents for a transaction, etc. If you bank at the same bank as your tenants you can just do an EFT directly and it's even easier.

Background/credit checks can be done by a variety of places but I like the super-easy service from Experian: http://www.experian.com/connect/landlord.html?utm_expid=67468160-115.MpbcL4B3Q_q8DY0quiknuA.0&utm_referrer=https%3A%2F%2Fwww.google.com%2F

I don't have any super cheapo rentals where I am all that worried about criminal records so I mostly just do a credit check.

Talk to your insurance agent about swapping your existing homeowners on the property to a landlord/investment property setup. Probably cheaper to bundle and any homeowner's insurance outfit will offer commercial/liability/landlord insurance as well.

-W

mnstachian

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Re: First time landlord in Minnesota
« Reply #3 on: May 28, 2014, 08:34:53 AM »
Quote
I don't have any super cheapo rentals where I am all that worried about criminal records so I mostly just do a credit check.

I understand your intention here, but the poor are no more "criminal" than the wealthy.

waltworks

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Re: First time landlord in Minnesota
« Reply #4 on: May 28, 2014, 08:37:12 AM »
Well, the kinds of crimes committed by the wealthy tend to show up on their credit reports! :)

Quote
I don't have any super cheapo rentals where I am all that worried about criminal records so I mostly just do a credit check.

I understand your intention here, but the poor are no more "criminal" than the wealthy.

GrayGhost

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Re: First time landlord in Minnesota
« Reply #5 on: May 28, 2014, 11:10:32 PM »
An LLC may not be necessary if you're going to do small-time real estate stuff, like buy-and-holds on a few townhomes and single families. In fact, unless you're already using an accountant, it's probably a lot more trouble than it's worth. It can help shield you from liabilities, I've heard.

As for collecting rent, if they're blue collar workers or higher, they should be willing to set up direct deposit into your bank account. As was mentioned, Dwolla is pretty promising too.

I have used MySmartMove to screen tenants, it's pretty much instantaneous and the fee is only $30, paid by either you or the tenant.

Fishingmn

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Re: First time landlord in Minnesota
« Reply #6 on: June 01, 2014, 07:20:59 AM »
Salmon,

I have 10 rental properties in the Twin Cities - all townhouses or condo's.

MySmartMove is great - I use that for screening.

I don't use an LLC - I have a $1M landlord liability policy through State Farm on each unit. Costs me $170/year/unit. This also covers some of the deductible gap between the HOA policy.

Right now I just have tenants either mail me check or drop it at my bank. My bank is supposed to be adding mobile deposit soon so that will help avoid trips to bank. I know I should just set up direct deposit to bank.

Remember to budget for maintenance, vacancy, insurance. If you price it right it will rent immediately, vacancy isn't really a problem right now and most of my tenants are renewing 12 month leases so there's little turnover.

Feel free to PM with questions.

fidgiegirl

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Re: First time landlord in Minnesota
« Reply #7 on: June 05, 2014, 03:56:53 PM »
When are you renting it?  I have a friend who needs a spot for a July 1 move in date in the east metro.  PM me if it could work out!!

Bearded Man

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Re: First time landlord in Minnesota
« Reply #8 on: June 06, 2014, 09:41:08 AM »
LLC's have more disadvantages, such as property transfer/tax/insurance complications. People usually blindly recommend LLC's as a way to shield yourself from liability, but if you check, most states allow charging orders against an LLC. So someone can still take that paid off rental that is owned byt the LLC. The courts allow it, and most attorneys know how to work it.

SalmonSlayer

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Re: First time landlord in Minnesota
« Reply #9 on: June 06, 2014, 10:39:01 AM »
Thank you for all the responses and advice. I, and more importantly my wife, are starting to feel a lot more comfortable with the idea.