Q: Should I be the one to hire the gardener/pool cleaner? Or can I let the tenants do that?
A: YES YES and YES. The tenant will NEVER do any yard work or maintenance. You can easily hire a weekly gardener for under $100 to come by to cut the grass, spray the weeds, etc. For pools it's about $150 once a week. Unless you want dead overgrown jungle grass and a pool of green algae, always contract out the work. You will be 1) preserving your investment and 2)keeping your tenants and neighbors happy.
The last time I didn't hire the work I had a weed jungle and a pool that became a habitat for stray turtles. Don't be cheap, build it into the rent if you want. But do not neglect maintenance.
Saturday, December 22, 2007
Sunday, November 11, 2007
Section 8? Your thoughts?
Q: I've heard a lot about the government Section 8 housing program. Can you tell me a little more about this? Is it worth participating?
A: Section 8 is a government program by the Dept. of Housing and Urban Development (HUD). This program is administered by the Housing Authority of Santa Clara County (for those of us in Santa Clara county obviously). The short explanation is that low/no income persons get subsidized housing vouchers and have to pay very little to no money out of pocket. The size of the grant is determined by income and the # of people on the voucher. The subsidized portion is guaranteed.
Ex. Rent is $1500, gov't subsidizes $1300, and tenant pays $200. So in theory, it shouldn't be too hard for a tenant to come up with $200 a month and the $1300 is guaranteed.
So why is this bad? Without stereotyping, just think about the kind of persons that do not have jobs or very much money, they are good people but not all of them will be very good tenants. I do section 8 all the time and have been doing so for over a decade. My advice to you is that a section 8 tenant probably takes MORE work. The upside is the guaranteed rent or if you really need to find a tenant. There are more rules/regulations but that's a real basic overview. Be happy to provide more information.
A: Section 8 is a government program by the Dept. of Housing and Urban Development (HUD). This program is administered by the Housing Authority of Santa Clara County (for those of us in Santa Clara county obviously). The short explanation is that low/no income persons get subsidized housing vouchers and have to pay very little to no money out of pocket. The size of the grant is determined by income and the # of people on the voucher. The subsidized portion is guaranteed.
Ex. Rent is $1500, gov't subsidizes $1300, and tenant pays $200. So in theory, it shouldn't be too hard for a tenant to come up with $200 a month and the $1300 is guaranteed.
So why is this bad? Without stereotyping, just think about the kind of persons that do not have jobs or very much money, they are good people but not all of them will be very good tenants. I do section 8 all the time and have been doing so for over a decade. My advice to you is that a section 8 tenant probably takes MORE work. The upside is the guaranteed rent or if you really need to find a tenant. There are more rules/regulations but that's a real basic overview. Be happy to provide more information.
Monday, March 19, 2007
What is a necessary repair?
In a word: everything
Q: When you own the property, who suffers if an item is not repaired? (no matter how small)
A: You (the owner)
Ex. If there is a broken door knob, say the cost is $20, are you going to insist the tenant fix it/pay for it? or are you just going to do the right thing and fix it? The average house in the Bay Area is about $600,000. The average door knob set is about $20.00. You see where I'm going with this. If you don't fix the door knob your tenants are going to kick/slam the door. Then the door will become damaged and you have to replace that for $2-300 dollars (materials + labor).
A house is like a car and it needs constant maintenance. In theory, if everything is used properly it will never break. But do you think your tenants will take the best care of everything? It's human nature to not take care of things that you don't own.
Q: Are you saying I need to pay for everything?
A: No, but what I am saying there are alot of little costs that as the owner, you have to accept. If a tenant breaks a window, you need to fix it right away. You cannot wait for the tenant to give you money and then you go repair it. If you don't fix it, you are allowing a safety hazard to exist and that might be more trouble down the road if the house is burglarized because there was no window. In the case of the window, yes you can bill the tenant and you should. Also, you can collect the repair bill from the security deposit after the tenant moves out if they refuse to pay you at the time of the damage.
Q: When you own the property, who suffers if an item is not repaired? (no matter how small)
A: You (the owner)
Ex. If there is a broken door knob, say the cost is $20, are you going to insist the tenant fix it/pay for it? or are you just going to do the right thing and fix it? The average house in the Bay Area is about $600,000. The average door knob set is about $20.00. You see where I'm going with this. If you don't fix the door knob your tenants are going to kick/slam the door. Then the door will become damaged and you have to replace that for $2-300 dollars (materials + labor).
A house is like a car and it needs constant maintenance. In theory, if everything is used properly it will never break. But do you think your tenants will take the best care of everything? It's human nature to not take care of things that you don't own.
Q: Are you saying I need to pay for everything?
A: No, but what I am saying there are alot of little costs that as the owner, you have to accept. If a tenant breaks a window, you need to fix it right away. You cannot wait for the tenant to give you money and then you go repair it. If you don't fix it, you are allowing a safety hazard to exist and that might be more trouble down the road if the house is burglarized because there was no window. In the case of the window, yes you can bill the tenant and you should. Also, you can collect the repair bill from the security deposit after the tenant moves out if they refuse to pay you at the time of the damage.
Friday, March 9, 2007
The Cheap Landlord
Some tenants/people live paycheck to paycheck.
A successful landlord and real estate investor cannot live rent check to rent check.
If you cannot afford to have a property vacant for several months, if you don't have reserves for major unexpected repairs, if you can't be bothered on nights/weekends to visit your house, you have no business in being a landlord.
Real estate is about cash flow and investing. An investment generates positive income/cash flow. Real estate is a long term play. You need to invest your time in finding the right property at the right price with the right renter.
A successful landlord and real estate investor cannot live rent check to rent check.
If you cannot afford to have a property vacant for several months, if you don't have reserves for major unexpected repairs, if you can't be bothered on nights/weekends to visit your house, you have no business in being a landlord.
Real estate is about cash flow and investing. An investment generates positive income/cash flow. Real estate is a long term play. You need to invest your time in finding the right property at the right price with the right renter.
Monday, February 5, 2007
Home Owners Associations
Q: Should I get a place with a homeowner's association?
A: No (if you can avoid it). HOA's are in place to make sure the entire community runs smoothly. They take care of the pool, mow the grass, make sure people aren't abusing the parking lots. The problem is that 1) there end up being a lot of rules that are pretty ...inflexible and 2) the HOA needs to be paid and those fee rise over time. The average cost I have seen in the greater SJ area is $300 a month for your typical HOAs. So if you are collecting $1500 in rent and $300 goes to the HOA. You've just lost 20% of your income. This $300 doesn't go into the house, you aren't paying down your mortgage...you get some maintenance and some insurance and a pool (maybe). Pretty steep for $3600 a year.
If you add fees for a property manager, that original $1500 is down to about $1050. You're almost down 1/3rd from the gross rent on the property. Little things add up in real estate and it's about cash flow. Try to limit those as much as possible.
A: No (if you can avoid it). HOA's are in place to make sure the entire community runs smoothly. They take care of the pool, mow the grass, make sure people aren't abusing the parking lots. The problem is that 1) there end up being a lot of rules that are pretty ...inflexible and 2) the HOA needs to be paid and those fee rise over time. The average cost I have seen in the greater SJ area is $300 a month for your typical HOAs. So if you are collecting $1500 in rent and $300 goes to the HOA. You've just lost 20% of your income. This $300 doesn't go into the house, you aren't paying down your mortgage...you get some maintenance and some insurance and a pool (maybe). Pretty steep for $3600 a year.
If you add fees for a property manager, that original $1500 is down to about $1050. You're almost down 1/3rd from the gross rent on the property. Little things add up in real estate and it's about cash flow. Try to limit those as much as possible.
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