The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: FrugalFan on July 22, 2015, 07:28:20 AM
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So we've got an accepted offer on a nice small duplex. We need to meet all conditions by Friday and everything seems on track. We haven't had the inspection done yet because that would be the first money we have to spend on this place (aside form the refundable deposit) and we are not sure yet. The financials look good. There are better deals to be had, but we are looking to rent in a student area and the fall semester is fast approaching. The duplex has been fully renovated which could help us fill it even this late. I put a test ad up with real photos on Kijiji and got a lot of interest in a short amount of time (9 replies in a few hours). There is a bit more work required (install a washer dryer in both units, replace a stair runner, buy a few items since there is literally nothing in them, and a bit of landscaping), but nothing extreme. The main thing holding me back is the fear of renters. You hear so many horror stories. And everyone we talk to in real life says that student rentals are a terrible idea, whether they have direct experience with it or not. Is all this fear worth it for an extra $300-400 a month? Help!
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Go read threads on Bigger Pockets like this one - http://www.biggerpockets.com/forums/52/topics/97560-student-rentals-some-myths-and-facts
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I had my first vacancy in my 2.5 years of this and although there was some damage, it was not as bad as I thought it would be, even with a pit bull they got that was not authorized. Because I pick people carefully, I think it turned out OK in this case; they are going to fix up their own damage and paint the place. In fact they volunteered to do this without me saying anything. Knock on wood, let's hope they actually carry through and do a good job. Knock on wood.
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Forgot to mention I would likely not ever rent to students unless grad student and obviously not a party hound.
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Yes, I am hoping for graduate students. I may also get non-students as my ad attracted non-student interest as well. I guess I am fearful of all tenants! I'm sure the first time is the hardest, and I feel pressure to rent quickly but will try to get the highest quality tenants possible. I have zero experience with tenant screening though and although I am reading a lot, I still don't know all the ins and outs. I'm sure some of that comes with experience.
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Go read threads on Bigger Pockets like this one - http://www.biggerpockets.com/forums/52/topics/97560-student-rentals-some-myths-and-facts
Some good tips on that thread. Thanks!
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I think you "might" be committing a bit early on this duplex for where you seem to be psychologically. We are fairly new landlords (started in 2012) and we spent a full year researching, analysing, perusing case study after case study. We also opted for using a PM for the tenant facing duties which eased our minds. On top of that you are going to start with student tenants which is another level of scariness.
I personally think you are not ready yet. However, do not let yourselves get stuck in analysis paralysis!
Our first three years as landlords has gone very well, we've only had 2 vacancies (we have 8 doors) in that time, each one was easy peasy and the units filled quickly.
One way to get over your fear is to make that purchase. It cannot sit empty once you own it, that would be foolish:)
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I own a four plex in a beach town in Southern California (retirement investment). Finding good tenants is not that difficult but takes work, and tenant screening is vital. You need a good application which asks for past landlord references, gives you permission to run credit and background (criminal) checks, and gives you the tenant's employment info, at a minimum. There's great info on how to screen tenants on nononsenselandlord.com.
I've found if you provide decent housing at a reasonable rate in the market (my building is old but modestly charming, and in a middling but decent neighborhood), and stay on top of the maintenance, you can attract good tenants who stay in place for long periods and take care of your property, as so much rental housing is awful. (I rented for years.)
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Whatever you do, do not rush to get a tenant in if they don't 100% meet every qualification. Do not let them slide. I made that mistake on my first time renting, never again.
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Yes, I am hoping for graduate students. I may also get non-students as my ad attracted non-student interest as well. I guess I am fearful of all tenants! I'm sure the first time is the hardest, and I feel pressure to rent quickly but will try to get the highest quality tenants possible. I have zero experience with tenant screening though and although I am reading a lot, I still don't know all the ins and outs. I'm sure some of that comes with experience.
Tenant screening is what I've always thought is the key thing in this game, and it can make or break you. Not surprisingly, a lot of the investors who's blogs I read say the same thing.
Obvious DQ's in the background check are great, but judge the people based on personality as well. If the process of showing the house to them and putting the lease together is smooth and they are easy to get along with, there you go. But if they are dumb, demanding and difficult to deal with, don't be surprised when they become a PITA.
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Forgot to mention I would likely not ever rent to students unless grad student and obviously not a party hound.
This would likely be a violation of Fair Housing Laws, unless you have a set, objective formula to determine what a party animal is. Renting to only Grad students would be another major violation.
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Forgot to mention I would likely not ever rent to students unless grad student and obviously not a party hound.
This would likely be a violation of Fair Housing Laws, unless you have a set, objective formula to determine what a party animal is. Renting to only Grad students would be another major violation.
I am not a lawyer, real estate agent, or landlord but I'm pretty sure this is not true. Under the fair housing laws, you are not allowed to discriminate against people based on the following protected statuses: race, color, religion, national origin, sex, disability, and familial status (i.e. whether they have kids, or are pregnant, or are planning on having kids). In fact, in the city of Boston, there is a city law that says you can't have more than 4 unrelated undergraduate students in a rental unit. You absolutely can discriminate against people for reasons unrelated to their protected status - say "I will not rent to anyone who plays volleyball!" or "ABSOLUTELY NO MINNESOTANS ALLOWED!" or "NO UNDERGRADUATES."
Now, if by "only renting to grad students" you mean "not people with kids" that would be a violation.
Also, it's pretty easy to set an objective formula that screens out the vast majority of party-animal undergraduates: require a certain income level and don't allow cosigners.
*Just noticed OP is in Canada - where, maybe with variations by province, "a landlord cannot discriminate in tenancies based on a person’s race, colour, ancestry, place of origin, religion, marital status, family status, physical or mental disability, gender, sexual orientation, age or legal source of income." So maaaaaybe you could get in trouble under "age" or "legal source of income." And my comments about banning Minnesotans would probably be illegal in Canada, since that would be place of origin.
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I was not aware that undergraduates was a protected class. I'm pretty sure it isn't.
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I'm curious if anyone is worried about demand for student rentals dropping in the next few years? I used to work for a small private college and they were absolutely expecting a drop in applications in the next few years, mostly due to demographic change (the next generation is going to be smaller than the one that's finishing up college now). This probably won't have much impact on student rentals near well-respected schools (Ivies, flagship state universities, and the boutique small liberal arts colleges will still be making their enrollment numbers) but the second-and-lower tier schools are likely to see a decline either in their number of students or in the quality of their students.
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This would likely be a violation of Fair Housing Laws, unless you have a set, objective formula to determine what a party animal is. Renting to only Grad students would be another major violation.
I am not a lawyer, real estate agent, or landlord but I'm pretty sure this is not true. Under the fair housing laws, you are not allowed to discriminate against people based on the following protected statuses: race, color, religion, national origin, sex, disability, and familial status (i.e. whether they have kids, or are pregnant, or are planning on having kids). In fact, in the city of Boston, there is a city law that says you can't have more than 4 unrelated undergraduate students in a rental unit. You absolutely can discriminate against people for reasons unrelated to their protected status - say "I will not rent to anyone who plays volleyball!" or "ABSOLUTELY NO MINNESOTANS ALLOWED!" or "NO UNDERGRADUATES."
Now, if by "only renting to grad students" you mean "not people with kids" that would be a violation.
Also, it's pretty easy to set an objective formula that screens out the vast majority of party-animal undergraduates: require a certain income level and don't allow cosigners.
*Just noticed OP is in Canada - where, maybe with variations by province, "a landlord cannot discriminate in tenancies based on a person’s race, colour, ancestry, place of origin, religion, marital status, family status, physical or mental disability, gender, sexual orientation, age or legal source of income." So maaaaaybe you could get in trouble under "age" or "legal source of income." And my comments about banning Minnesotans would probably be illegal in Canada, since that would be place of origin.
Here is why it would be illegal. It is already a fact, that if you only advertise in a church bulletin, you are violating fair housing laws. If I say I only rent to republicans, and do not rent to any one who supports Obama, it would certainly be illegal. (even though at a Fair Housing seminar I went to, said you could discriminate against republicans...)
By limiting it to only grad students, you have adverse impact. Grad students likely have limited children, are predominately non-minority, and whether or not someone is a grad student doesn't make any difference to your business as a landlord. Someone with the same credit score and income could be just as good of a tenant.
If you want to be somewhat safe, you can only have criteria that has a direct business correlation to being a landlord.
Whether or not someone is a student doesn't mean they are a good or bad renter.
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Here is why it would be illegal. It is already a fact, that if you only advertise in a church bulletin, you are violating fair housing laws. If I say I only rent to republicans, and do not rent to any one who supports Obama, it would certainly be illegal. (even though at a Fair Housing seminar I went to, said you could discriminate against republicans...)
By limiting it to only grad students, you have adverse impact. Grad students likely have limited children, are predominately non-minority, and whether or not someone is a grad student doesn't make any difference to your business as a landlord. Someone with the same credit score and income could be just as good of a tenant.
If you want to be somewhat safe, you can only have criteria that has a direct business correlation to being a landlord.
Whether or not someone is a student doesn't mean they are a good or bad renter.
Limiting to grad students only would be potentially actionable, but I don't think anyone has said they're trying to restrict their rental to grad students - they're trying to screen out undergraduates. It's safe to discriminate against undergraduates, because they do not, on average, belong to any protected class. If you're in an area where the undergrads are mostly black or foreign or women or Deaf or something, then you could be accused of using undergraduate-ness as a proxy for their protected class, but that would be an atypical situation.
To draw a comparison to your housing seminar: undergraduates are like Republicans (on average, not members of a discriminated-against class), not like Obama voters (potentially used as a proxy for race).
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Limiting to grad students only would be potentially actionable, but I don't think anyone has said they're trying to restrict their rental to grad students - they're trying to screen out undergraduates. It's safe to discriminate against undergraduates, because they do not, on average, belong to any protected class.
I agree, somewhat, about being legal to screen out under graduates. As long as you do not restrict members of the general public, even those not going to college in the area. The rental is open to everyone, except people going to college that have not graduated, might be OK... Limiting applicants to grad students only would definitely be NOT a legal screening criteria.
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I've been a landlord for quite awhile. I have a mix of short term and long term rentals in varying types of neighborhoods. I do everything I can to make my apartments as renter damage-proof as possible. I do all tile floors, for example. No carpet. My SO and I also have the skill set to repair any damage.
That said, here is how I got over my fear of renting to the wrong person...I rented to the wrong person. She turned out to be a heroin addict who turned tricks out of the apartment. She smoked (and did all sorts of other disgusting things) in the apartment. She never paid rent after her initial payment. I had to evict her. The whole thing took 21 days and cost about $1000 including eviction fees, cleaning, window repair, other odds and ends. I don't know how much worse it can get than a heroin addicted prostitute, and even that just really wasn't that bad. We easily survived it, and the property still netted about $10k that year.
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I've been a landlord for quite awhile. I have a mix of short term and long term rentals in varying types of neighborhoods. I do everything I can to make my apartments as renter damage-proof as possible. I do all tile floors, for example. No carpet. My SO and I also have the skill set to repair any damage.
That said, here is how I got over my fear of renting to the wrong person...I rented to the wrong person. She turned out to be a heroin addict who turned tricks out of the apartment. She smoked (and did all sorts of other disgusting things) in the apartment. She never paid rent after her initial payment. I had to evict her. The whole thing took 21 days and cost about $1000 including eviction fees, cleaning, window repair, other odds and ends. I don't know how much worse it can get than a heroin addicted prostitute, and even that just really wasn't that bad. We easily survived it, and the property still netted about $10k that year.
Did she deserve an award for her acting skills during the rental interview?