You are probably asking yourself, how is that going to work? And why would the local Health Department take an interest in deadbeat tenants? Why would they want to help me? But also do they have the right to intervene?
The simple answer begins with utilities. Many communities, cities and counties across the nation have rules and regulations, simply put, laws for health codes and regulations. One of which is that it is illegal for residents to live without light, water, sewer or septic turned on and working. This also may become an issue of minor endangerment if children are in the home. The local Health Department has the power to remove people from properties violating this regulation.
Ironically enough, I never really stopped to think about this option as a landlord and how this might work to my advantage when it comes to delinquent tenants. In my time, I have seen it all, heard every excuse and as a result, I feel I can put these experiences to good use and share my advice.
When it comes to investment properties there are loopholes which create many options. For instance, Section 1031 of the IRS tax code permits real estate investors to sell their investment properties and in return allow a trade for comparable or similar matched investments in order to defer the tax as the capital gains amass. It seems that real estate is truly the most popular transaction permitted by this code. Something called the Triple Net or NNN otherwise known, as Leased Real Estate is considered appropriate as alternate property during such a transaction. What this really entails is a Net lease where a tenant foots the bill for all or most of the properties' active expenses over and above the rent. It is important that before we discuss the particulars of Net lease that we have an understanding of other kinds of leases as each serves a different purpose.
First there is the bond lease that makes the tenant completely accountable for active expenses encompassing the property's operating costs, which include regular maintenance, repairs and substitute costs for replacing materials etc. Second there is the Triple Net or NNN lease, which incurs actual restrictions on capital expenses. The tenant must pay for property expenses including tax, insurance and maintenance, as under this kind of lease, these are the tenants responsibility. Third taking from the NNN lease is the Net Net or NN lease. This is somewhat the same as NNN lease but returns the responsibility of the physical up keep of the structure to the landlord. They must make sure major items such as the roof are in good working order. Lastly the Modified Net lease infurs that the tenant pays for everything including utilities, maintenance, repairs and insurance. They do not pay property taxes.
For the NNN situation first the situation may allow less property management issues to be a problem for the investor. This is especially true for investors dealing with multi-family units, complexes considered commercial because they want the profit and income without the hard work or heartache. They also want to postpone their tax accountabilities without having to play the role of landlord 100% of the time. Savvy investors use NNN leases because they insure income but still allow for ownership to stay in their name and portfolio while maintaining a good level of capital. Another aspect of the NNN is that it also makes the transfer of real estate to beneficiaries easier.
Posted by: Investors Lounge Online in Tenant, Subject To, Sub Prime Lending, Refinance, Real Estate Investment, Owner Will Carry, Over Leveraged, Mortgage, Market Bubble, Loan To Value, lease purchase, Lease Option, Landlord, Investment, Financing, Credit Cards, Analyze on
Aug 14, 2008
There are different ways to structure real estate transactions that involve seller financing to benefit all parties. Of course the seller has concerns of protecting their property and the need for regular repayment. The following scenario explores this option in detail.
You know that your local market has many rental properties in the inventory and you have found one that meets your needs. You will be purchasing from a seller who is greatly motivated because the property has been on the market longer than a year. The property has an existing long-term fixed rate first mortgage with a balance of just $100,000. Your plan is to buy the property, rent it out and hold onto it as a long-term return on investment property. You know that the home is worth about $150,000 and the seller has it priced at a discount of $120,000.
The offer is as follows. You want to put $5,000 in cash as a down payment but also allow the seller to keep the title in their name with their first mortgage with only a balance of $100,000. The seller must also consent to taking a second lien loan for the remaining $15,000. This transaction may seem like it only benefits the buyer and the seller is left with all the risk. However due to the current lack of home sales in your area, the seller is motivated to continue the arrangement of the sales price, your down payment amount, and also is okay with you taking over the monthly payment for the first lien mortgage because they want to see the property sold in the long run. What bothers most sellers about this type of transaction and what makes it risky for them is that you are not assuming the existing loan. It still remains in their name but the title work protects them for your default. Still there is the concern of the loan remaining in their name and the $15,000 second lien is also risky for them should you fall into hard times but the goal of the sold property remains a common interest for all parties.
As part of the new housing bill recently passed in Congress, a new trust fund aimed at renters with little income will now have more access to affordable housing. A trust fund endowed to the tune of $550 million is the first of its kind since the creation of Section 8 housing, known colloquially as the "projects", was created in 1974.
This most recent incarnation of Section 8 is specifically aimed at a group of our society that has een neglected in the past, carrying on in the spirit of subsidizing housing costs for families with low economic resources that are currently unable to purchase homes.
As for the basic details of the program, a large portion of the fund, 75%, will go to those most in need of affordable housing: those whose incomes are 30% or lower than the state median income level or 30% below the national poverty line.
There is more reason to celebrate for those that champion these efforts. The housing coalition has stated that 90% of the fund will be dedicated to create, preserve, rehabilitate, and operate existing housing units currently in rental market. Furthermore, the remaining 10% will be allocated for first-time home purchases. Such assistance will go towards down payments and closing costs.
A landlord or property manager has certain responsibilities toward the tenants of each rental. They are expected to provide an inhabitable and peaceful space for each tenant to reside. These invaluable rights of tenants have prompted many states to create renter's rights and these laws protect and govern the proper care of rental properties. These laws ensure the landlord follows through. Still generally speaking the proper care of rental property by the landlord or property manager falls into two categories of maintenance and repair. It is important to distinguish the differences between the two.
Many people think along the lines that repair to the rental property includes every small detail when truly there are different levels of importance. Generally speaking repair would fall under if anything on the property breaks, malfunctions or fails to provide a service. Then the landlord or property manager is responsible for repair as soon as possible. Renter's rights include that the tenant should not be inconvenienced by such problems. With this in mind, there are such repairs that fall under the necessities of daily life, well being and hygiene.
These include clean running hot and cold water, air-conditioning and good aeration. In this respect, the landlord should maintain these items on a consistent basis so that in the long run, repairs are not costly to the property owner. Faulty plumbing and electrical can cause not only a tenant to leave and break a lease; end of rental income but also can be a violation of housing authority codes and result in legal and civil actions. Still there is a fine line for the landlord and proactive care.
If you drive down a street and see houses with boarded up windows, the first thing some people think is, uh-oh, how did I get in this neighborhood? But these days you don't have to worry that you've taken a wrong turn at Albuquerque. This sad occurence is happening and In the recent foreclosure crisis it seems no one is exempt.
Unless you've been living in a rose colored bubble you know that mortgage rates are off the hook, acquiring credit requires an sign from above; and despite what the D.C. fiction writers say, you know the economy is dismal at best, and the dreaded "R" word is looming, if not already here.
Across the U.S., some homeowners are not only bailing on mortgage payments that are three to twelve months in arrears, but leaving their homes behind completely. But it's not just blue collars who are throwing the towel, even some of the rich and famous like Michael Jackson, Victoria Hearst, Evander Holyfield, and poor old Ed McMahon are skating on their mortgage responsibilities.
Renters may think that because you pay your rent in full and on time every week, there's no way you could ever be evicted. But with the current housing crisis in the U.S., this isn't a safe bet.
The upsurge in foreclosures isn't just affecting homes owned by the people who live in them but is also causing trouble for renters when their landlords lose the home due to trouble paying the mortgage. According to the Mortgage Bankers Association, nearly 20 percent of recent foreclosures have been against borrowers who are renting their home to another individual or family.
Lawyers who specializing in helping renters with problems have said that these types of eviction cases are on the rise. For instance, in recent months, one in four calls about housing matters to the Legal Services of Greater Miami's renter advocacy phone line has been about foreclosures and possible evictions. The group says the rate of these types of complaints is up sharply from last year.
Section 8, also called the Housing Choice Voucher Program, is a Federal housing program which provides housing assistance to low-income renters and homeowners. This assistance comes in the form of the city pays the rent, and the federal government reimburses the city for that rent money.
If you are considering renting to Section 8 tenants, you first need to understand how the program works. There may be more in the process and more paperwork, but once you understand the process, there are usually few problems.
Most Section 8 renters are single mothers with children or grandmothers with grandchildren. These renters receive vouchers for housing costs, usually until the children are grown. However, the tenant's income will affect how much of the rent is paid by the government. Having a low-income tenant can actually be a bonus, since the government will pay most of the rent, and the government always pays on time.
Posted by: Shirley_Brown in Tenant, Landlord on
May 22, 2008
News about millions of homeowners losing their homes to foreclosure have been all over the news lately, but the outlook for renters is also alarming. According to a study by the National Low Income Housing Coalition, even rental housing is too expensive for the vast majority of working Americans.
The problem isn't just affecting high-priced urban markets but is happening around the country, but virtually everywhere in the country. The conventional wisdom says housing in rural areas is more affordable than in metro areas, but the coalition's report found otherwise. The coalition's study, called "Out of Reach 2007-2008", found that no state could assure a full-time minimum wage earner access to affordable rental housing even in non-metro areas. Further, the report says that no minimum wage worker could afford rental housing and even workers making significantly more than the minimum are paying more than half of their wages toward rent.
The Department of Housing and Urban Development estimates 30 percent of income to be the "fair market rent" (FMR) for an apartment a given area, and a worker making the median wage for most areas is paying a lot more than a third of his or her income. More than 9 million renter households paid 50 percent or more of their income for housing in 2006. That leaves less money to be used on insurance, food, and other necessities for these folks, who are mostly (98 percent) classified as low-income.
The study asked how much a family in a given community would have to earn to be able to afford a modest apartment. The answer was determined by comparing the "Housing Wage" in each area with the local wage and income for the residents of those communities. The Housing Wage is defined as the full-time hourly wage one would need to earn in order to pay that fair market rent for an apartment in each area.
Posted by: Nick Johnson in Tenant, Landlord, Eviction on
May 09, 2008
Being a landlord is not just about knowing who to rent to and how to manage the properties; it's also about working with tenants in adverse situations. You must be tight with the laws of the business. Whether you are the owner of the rental or involved in a "sandwich" lease, arming yourself with full knowledge of the laws that protect you and those that protect the renter can be critical for your success.
When removing a renter from one of your properties, you must follow the rules using an eviction notice, which is a lawsuit requesting the court remove the tenant. You would be unlawful to ever make an attempt to eradicate the renter yourself, and that includes lock switching, shutting down utilities or using a ruse of "needing to repair" anything to take the doors or windows off.
To begin the process of removal of the tenant, state law demands that you serve them with notice which will terminate the tenancy. When it is due to not paying the rent due, this notice is can take up to 5 days and the actual court proceedings could take up to 30 days and its similar to a smalls claims court and not very formal.
Once you have been awarded the winner in this proceedings against the lessee, a judgment, writ if you may, will be issued and someone in your area, could be the sheriff, will forcibly remove the tenant from your property. Most tenants will get out before this occurs and you could incur some vacating costs, but all worth it in comparison to the losses you could incur the longer they stay in your property. I strongly suggest that if you are going to proceed in this fashion, you become up close and personal with the schedules your county uses to precede in these types of situation. It is not that complicated and does not take a rocket scientist to figure out but because it is not hard to accomplish, little room is allowed for error of any kind. You wouldn't want your case dismissed for minor infractions and ending up being more costly due to not having your ducks in a row in up front. Thus, engaging a real estate attorney with some experience in tenant laws would be well worth the cost in the long run.
