If you have ever owned a house or duplex that you have rented out and you feel like you are ready to move to the next level, I have a few guidelines to help you get started. First and foremost, you’ll need to decide what asset class you would like your next investment to be in. Here are a few different types of assets that you can focus on:
As a new Investor you will find that most of the time you will inherit a tenant from the previous owner and you think this is a great thing; you won’t have to pay for advertising and you have a built in rental stream already coming in.
This could be true however it is your responsibility to make sure this tenant is someone that you want to keep or legally have to keep. Like everything else in a new acquisition, DO YOUR DUE DILIGENCE.
Make sure that you receive an estoppel certificate signed by the tenant. An estoppel certificate is a document that outlines that everything is the way you were informed. The certificate refers to the current lease and the terms of the existing lease (if there were any changes). The tenant signs off that they agree everything in the lease is as it seems and there are no additional terms agreed upon, nothing else is owed by either the landlord or the tenant. It should at the very minimum include the below:
1) The lease dates (commencement and expiration)
2) The date when rent is due
3) The amount of rent
4) Any deposit amounts
5) If any modifications have been made to the lease
6) If additional agreements have been made, a list of what those agreements are
7) That no party to the lease is currently in default
Read the lease thoroughly, you may not love the terms of the current lease, but you are bound legally to abide by the lease until the date of expiration. At this point, you will have the chance to either renew and sign a new lease with existing tenants or give the proper legal notice that you will be ending their tenancy with you. If you decide to start over with a new tenant at the end of their lease, you will want to give yourself plenty of time to market the property.
Set up your own criteria for picking out a new tenant. Complete a rental survey for the area so you can determine what rent amount you will be requiring going forward.
If you find that your rents are below market, there are several items to consider.
1) Will you lose tenants if you raise too much?
2) How much can you legally raise them
3) Should you offer some sort of concession ie: accent wall or an upgraded appliance?
4) How long will it take to release if you do lose your tenant
5) How much will it cost to make the unit ready to relet if you lose the tenant
Lastly, keep in mind that not all of these tips will apply to everyone, be aware of any local ordinances that may affect what you can do when inheriting a tenant, and don’t forget, to introduce yourself!
Resident retention in the real estate industry is a critical part to an investor’s success. Several factors go into the cost of acquiring residents, marketing, and make ready costs. There is also lost revenue from vacant units, making it a key part of your ROI. We put some tips together to help you retain your residents.
If you are considering taking on the management be sure to speak with several investors that have already made this choice, managing a property can be a lot of tedious work and very time consuming. Also, many times a professional management company will actually save you money, budgeting for large expenses, having preferred pricing with vendors, or by just being aware of local legislature and how to navigate it efficiently.
An exclusive Buyer/Tenant (“Client”) representation agreement is an agreement that says that a specific Broker/Agent will represent the Client for the purchase or lease of real estate. It can be for a designated duration of time, a specific geographical area, a particular type of property, one specific property or a combination of any of the above.
The Agreement creates no obligation on the part of the Client to purchase or lease real estate yet it assures that the Broker/Agent will be paid a commission in the event a transaction occurs for the Client. The fee may or may not be paid by the Client, many times the agreement specifies that any commission due by the Client is offset by any fee collected from the other side of a transaction (Such as a Seller offering a commission).
For the Broker/Agent it will spell out how they will perform their obligations under this agreement through the individual signing on behalf of the Broker, another real estate licensee assigned by Broker, who is either the Broker/Agent individually or an associate-licensee (an individual licensed as a real estate salesperson or Broker who works under Broker’s real estate license). This is of course subject to the Client’s approval, which shall not be unreasonably withheld or delayed. Broker and the Client will agree that the Broker’s duties are limited by the terms of this.
For the Client the agreement gives representations to the Broker/Agent that there are no other Broker/Agents that the Client may be working with for this proposed transaction. The Client further represents that the Client has disclosed to the Broker/Agent information about any properties that the Client has previously visited, or that the Client has been shown by any other real estate associate(s). When disclosing this, the Client can “carve out” exceptions to the exclusive representation agreement by disclosing that if they were to move forward on one of these properties, another agent would represent them, thus protecting the Client from claims arising from multiple Brokers/Agents and limiting the Client’s liability
As for the Broker/Agent, it goes without saying that a Broker/Agent who has a contractual relationship is going to be more committed to the job. Before they begin the often tedious task of searching for the right location, demographics and price range for your investment, they want to be assured that they are going to be compensated for their time and effort. Their time is just a valuable as any other professionals’ time after all, would you expect an attorney to give you free legal advice, or work on your case without an engagement letter/contract? By showing loyalty and trust, most people will work that much harder knowing they are protected for the work they do.
The Client should consider this agreement because there are equal and mutual protections to both parties with respect to their interests. The Client can hold the Broker/Agent accountable for performing fiduciary services (some of which they would not be aware of without the contractual definition). Some Clients don’t want to feel they are being “tied down” to one agent, and mistakenly think that getting several Brokers/Agents to work for them will get them a better deal, this is not necessarily the case, as a key strength of the real estate industry and most successful agents is their communication network. The agents will talk to one another and if they find out their client is working with other agents, that client may soon not have any agents working for them, or just not be taken seriously.
