A Guide To Earning Passive Income on Investment Property
For individuals who take wealth creation and passive income seriously, owning and scouting investment property is critical. For these dreamers, the thought of getting a check in the mail every month keeps them up at night with excitement and anticipation. More importantly, they know how wealth can enable them to better themselves, their family and their communities as a whole.
And while this is a worthwhile goal to have, there's more to earning passive income from a piece of real estate than meets the eye. If you are considering making your mark in the world of real estate, here's what you need to know.
Picking A Winning Investment Property
Let's be honest with ourselves for a moment: not every piece of property makes sense from a financial perspective. While every property has potential, not every investment has enough upside to make the deal seductive or feasible. Knowing this, what are the criteria you should consider when purchasing an investment property for passive income? While there are a myriad of variables to consider, here are the main components of a good deal:
- The property is located in an area with good population growth.
- The local market has steady employment numbers.
- The surrounding area is low on crime.
- The property isn't perfect but can be upgraded by you to generate more rental income.
- Surrounding homes and pieces of real estate have sold within reasonable timeframes.
- The property is listed at a discount or less than it would cost to build it new.
In a perfect world, your property would meet all of these criteria and then some, but that's not reality. Instead, use your best judgment to calculate repair costs, upgrades and additions to negotiate a sale price that makes sense for your budget. By buying your investment property at a discount, you can fix the property up, increase rents and put more passive income into your pocket every month.
Property Management
To truly reap the benefits of passive income, you must save your mental energy for things that matter most, like buying more investment properties. For most real estate investors, the thought of waking up at 3 a.m. to change a tenant's toilet sounds horrible. That's why most investors, both big and small, use a property management company to deal with the ins and outs of their investment.
Finding a reputable Soledad property management company to deal with your tenants, property requirements and day-to-day activity is crucial for your success. These professionals are the face of your business, so you must do your homework and find a company that fits your unique situation. Here's what to keep in mind when consulting with a Soledad property management company:
- Have they worked with clients like you before?
- What kind of reputation do they carry within the local market?
- What property management services do they provide, but more importantly, what won't they cover or deal with?
- Are they easy to get ahold of and accessible?
- Do they treat tenants like a number, or do they specialize in the "human" side of property management?
- If a tenant leaves the property or does not renew their lease, what strategy does the company use to attract new, prospective tenants?
Early on in your passive-income journey, these questions may seem trivial to you. But the further into your career you go, you'll soon realize that finding a property management company that's efficient, effective and communicative is the difference between "making it" or "breaking it." More importantly, reputable property management companies can help you decipher appropriate property rental pricing to generate growth and expansion.
Diversification Opportunity
Many newfound investors think of real estate as a static domain with limited variation, but this couldn't be further from the truth. What makes investment property so lucrative is the amount of diversity it holds within the market.
Readers who desire passive income, take a drive through your town when you have free time and take note of what you see. For most individuals, their brief excursion will include residential homes, land, warehouses, industrial complexes, medical facilities and retail locations. What does this mean for you? A diverse pool of property types that can be leveraged to earn passive income!
More importantly, real estate also provides various opportunities to adjust your investment during chaotic financial shifts. Certain property types, such as commercial and industrial, can withstand the ups and downs within the market and provide consistent income. Other property types, such as residential homes, retail locations and commercial apartment complexes, can help passive-income earners capitalize on job and population expansion. Although your city's demographics will vary greatly, real estate provides a multitude of outlets to succeed and prosper.
Is Passive Income From Real Estate Right for You?
To put it simply, investing in real estate is for the individual who wants to have a better life, financial stability and the ability to take care of the people they care about the most. And when that person decides it's time to take a leap of faith and get an investment property under their belt, a property management company should be their next move.
For readers who know they want to make a great deal of wealth and put their hard-earned resources into domains that aren't going away any time soon, investment properties are the way to go. If you know you're capable of a great deal more, what are you waiting for? Get out there and find a reliable property that pays you passive income for many years to come!
Ten Tips for Buying Commercial Property in California
Buying commercial property in California is far harder and more complicated than most people realize, at least compared to a few other states. The entire transaction is a blend of rules and regulations set forth by the state and federal government. You will be required to look at it not just from a financial perspective but legal, structural, and environmental as well.
1. Researching the Property
Before you invest in commercial real estate in California, you need to get really clear about current laws governing this industry, which may also extend to other property types in the state. If you don't, you run the risk of losing the property to liens, lenders, or other parties that have interest in the property.
2. Researching the Seller
Sadly, far too many investors end up with spotless commercial buildings but owned by unscrupulous sellers. This means buying commercial property in California needs extensive research, planning, and due diligence. The investor/buyer should look into the reputation of the seller and his/her transaction record.
3. Land Use and Zoning
There are many different zoning types in California, all of which should be very clear to you before you invest in a commercial property. Non-compliance with one or more zoning laws can lead to irreversible and significant liabilities on the buyer's part. It's important, as an investor/buyer, to obtain everything related to the property, including originals and copies of licenses, permits, certificates of occupancy, and so on. Past code violations, as well as any pending violations, should also be researched thoroughly. Of course, you want to purchase real estate right away because it seems like a bargain, and it has great potential. But the clearer you are now about these issues, the easier it will be to ensure that the property is not a money pit.
4. Surveying the Title
Take some time to get a clear picture of the commercial investment in terms of the legal description of the property. The title company you hire will help you do that. Make sure you understand the clear motivation of the seller as well. There may be some sellers whose reasons to sell may be inherently misaligned with your expectations. The seller may be trying to sell the real estate that contains title issues, or he or she may be trying to dispose of it for potential defects. Inaccurate property identification can lead to a major issue down the road. Through a title company, you will not just obtain a commitment but also the ALTA/NSPS land survey, which is another element to add to the title's authenticity.
5. Environmental Considerations
Property contaminated with pollutants from current and previous activities around the area is subjected to environmental site assessments. You need to find out if such assessments took place for the property you are buying. And if it did, you need to obtain copies of the reports for the same. Certain concerns such as fire hazards, presence of mold, asbestos, and underground storage tanks also call for federal and state assessments. What impact these elements will have on you, your business, your employees, your vendors, and the entire logistics, the people living near the property, and the environment in general? All these areas need to be assessed as well.
6. Encumbrance Certificates
Buyers and investors in California are subjected to the same restrictions as that for sellers with regards to easements, covenants, and other encumbrances related to commercial properties. Most encumbrances for buying commercial property can be found in county records. However, you may find this an extra exercise or may simply assume that the seller has it ready for your perusal. The best thing to do is to put those assumptions aside and home in on doing the research yourself.
7. Current Valuation of the Estate
Some buyers may want to cut to the chase and skip the part of valuating the property professionally. But it's well worth your time and effort to get it appraised and for multiple reasons. First, your title underwriter may need this information, and your lender may demand it. Second, you may discover the difference between the real value and market value when professionals assess it in person. Spending some time upfront to make this happen is one of the best investments you can make to avoid the headache of dealing with the discovery that the property is worth much less than what you paid. This valuation may also come in handy for investigating property tax-related issues.
8. Paying Taxes
Finding and investing in commercial real estate requires that you have an idea about what your yearly tax bill would look like and how you are going to pay for it over the course of ownership. Remember, unpaid taxes can lead to liens followed by foreclosure quickly in California. Your decision to purchase, therefore, should be driven by your ability to pay property tax every year without fail.
9. Leases and Guaranties
It is not advisable that you be rigid and uncompromising when it comes to tenant leases if any. But most investors have commitments that are so important to them that compromising on leases would make it hard for them to carry on with business. Doing the due diligence on identifying leases and guaranties that are in effect and determining which one to carry over after the purchase is crucial before buying a commercial property. There are sellers who share your values and will be eager to furnish the necessary details.
10. Income and Expenses
You should obtain an accounting of all incomes, expenses, and security deposits held by the seller on the behalf of tenants as well. In California, it's mandatory that the seller provide rent rolls, financial statements, and other related documents to the purchaser. While rent is almost always straightforward, expenses may be in the form of common area maintenance, utilities, salary to employees, insurance premiums, and service contracts for which you need the ledger details.
Want to find out more about buying commercial property in California? Contact Coast & Valley, the commercial property management of Salinas CA right away!
Ten Ways to Prepare Your Rental Property for Summer
Summer is one of the busiest periods in the real estate market. At this time, new graduates join the workforce. Some students move to different cities for internships, and families also consider relocating when kids are out of school. As a landlord, you need to prepare your rental property to attract new tenants and even maintain the current ones. Here are various tips to help you prepare your rentals for the summer rush.
1. Inspect the Air Conditioning Unit
During summer, sometimes the heat can be very unbearable. Most tenants, therefore, appreciate a well-functioning air conditioning unit in their houses. Start by changing the filters, usually located along the return duct. Note that a dirty filter restricts airflow and can lead to the accumulation of hot air into the house.
Next, you need to have a professional clean the air conditioner coils and empty the condenser drain. Also, trim bushes and clear off any debris from the outside unit to prevent clogging the system.
Maintaining cooling systems can reduce energy use by as much as 50% which will keep your tenants happy and comfortable. If you have an AC older than 15 years, consider replacing it to avoid a frustrating breakdown in the middle of the season.
2. Test the Smoke Detectors
According to the Environmental Planning and Assessment Regulation, any rental property owner must install smoke alarms or detection systems. If your rental property is in areas prone to fires, regularly inspect the smoke alarms to ensure that they are in working conditions. Check and change the batteries to extend their useful life and improve your property's security.
3. Perform Yard Maintenance
Well-maintained outdoor spaces are among the top amenities that attract renters into your property. During summer most people enjoy spending time outside. Therefore, Salinas landlords should consider adding tables and chairs in the backyard to make the house more appealing.
Plant fresh flowers, trim the shrubs, and mow the lawn. Check the sprinklers and ensure that they are in working conditions so that the outdoor plant won't dry.
4. Insulate the Rental Property
Insulation helps boost the energy efficiency of your rental property. Note that air conditioning is one of the most energy-consuming appliances. In case of leaks, cracks, and holes in your property, the cooled air may seep out. Thus, the unit will have to work extra hard to maintain the desired temperature. It results in high electricity bills that can frustrate your tenants. To avoid this, caulk or weatherstrip the windows and doors. Remember also to seal off any gaps on the roof, floor, or walls.
5. Clean the Ductwork
Look through the duct for excess dust or mold signs. If there are any, it's essential to call a professional to clear out molds and eliminate irritants that can put off tenants. Duct cleaning removes pests' breeding grounds on your property. It also helps cut costs through improved airflow.
6. Prepare Outside Amenities
Summertime calls for entertainment in the outdoor spaces. Therefore Salinas landlords should provide functioning features to the tenants. If you are responsible for cleaning the pool per the rental agreement, do it in time. On the other hand, if the pool has an inbuilt cleaning mechanism, ensure that you instruct the tenants on using it. The pool should also meet all the safety measures like correct fencing and signage.
Other outdoor amenities like grills and fire pits will make your property stand out from others. Such facilities will also give you an added advantage during property rental pricing.
7. Perform Some General Repairs
Make prompt repairs upon request. Also, go through your rental property, check and fix any broken electrical outlets, a leaking roof, or clogged gutters. Ensure that all fittings are in the right conditions and replace any damaged furniture.
Additionally, fix any broken toilets or any other leaks in your plumbing system. Refer to your lease agreement and ask your tenants to make some repairs, for instance, replace damaged window screens.
8. Inspect the Basement And Attic
Sometimes, during winter or spring, your attic and basement can accumulate high moisture levels. As a result, it leads to mold growth, and the moisture can also compromise your property's structural integrity.
It's easy to neglect such areas since they remain unused most of the time. Therefore, inspect them for water damage or excess moisture to improve tenants' comfort and eliminate expensive repairs.
9. Prepare for Pests
The warm summer temperatures may attract bugs into your rental property. Watch out for ants, cockroaches, spiders, wasps, or other critters. You can keep them out by adequately sealing your doors and windows. Remember that any negative review can affect your property's popularity in the future.
You can use pesticides on your laws or insecticides within your property to stop pest breeding before becoming a significant issue. You can also advise the tenants on the best way to handle ants if they gain entry into the house. Remember to demolish wasp nests in your compound.
10. Ensure Overall Property Maintenance
If you have multiple rental properties, it's a good idea that you seek help from property management companies. They will maintain your houses in the right conditions throughout, which preserves the value of your property. A professionally maintained house will also attract tenants quickly.
Additionally, by hiring property management services, you won't have to deal with late emergency calls, evictions, or other time-consuming tasks. Such companies also screen your tenants thoroughly. Hence you will attract renters who pay on time, cause less property damage and fewer problems.
With such assistance, you can focus more on expanding your business. The property maintenance company can also advise you on the right investment based on your portfolio since they have a better knowledge of the industry.
Conclusion
You can prepare your rentals for the summer season by cleaning up and making some simple adjustments as outlined above. There is a projected rise for rental properties during the summer season. Failure to capitalize on such an opportunity could cost you considerably. Also, the competition between property owners is on the rise, and you need to maintain your houses in the best possible conditions to stand out. If it seems somewhat complicated, you can always seek help from a property management company.
Everything Salinas Landlords Need to Know About the CDC Eviction Ban
The CDC has issued an order and landlords are not supposed to evict tenants. The ban was supposed to end on December 31, 2020; however, it has been extended for three more months.
To qualify for the CDC eviction ban, a tenant should meet a particular criterion. The ban does not apply automatically to each tenant. It is in the form of a signed declaration that should be presented to the Salinas landlord.
The eviction ban came into play on September 4, 2020. The tenants and landlords are currently confused regarding the details of the CDC eviction ban. The order has also been misinterpreted by the judges and tenants who qualify for the CDC eviction ban have been evicted from their homes.
In October 2020, a guiding document was issued by the federal agencies, and it was meant to address the questions tenants and landlords have regarding the ban. The document has clarified many issues regarding the ban, and more questions have come about in the process. Landlords and tenants are worried about how the CDC eviction ban will be carried out and how it will be handled in each state and the courts.
Tenants should have a declaration that will allow them to claim protection under the ban effected by the CDC. The form has detailed instructions on how to determine whether the tenant is eligible for protection and how the form is supposed to be filled. Also, you will be guided on how to issue it to the landlord.
Below are the main questions that landlords and tenants have regarding the ban and property management:
A tenant is evicted by a judge despite qualifying for the CDC eviction ban. Which is the way forward?
When a person loses a court battle, and the issue revolved around property management, it is possible to file an appeal. The CDC does not have an appeal process, which means the tenants are supposed to rely on the appeal process in their state to challenge the verdict by the judge. File the required notice at the court. You should seek professional help from an attorney if possible.
The main issue is whether the eviction can be postponed by the trial judge as your case progresses through the appellate court. It is rare for a judge to rule in favor of the tenant since the issue, in this case, is non-payment. However, the judge may rule in your favor given the circumstances around the CDC eviction ban and current pandemic.
The guidelines released by the CDC in October recommend that if a tenant wants to appeal the decision by the judge, it is advisable to liaise with a private attorney to get the assistance they need.
After a tenant presents the CDC eviction ban declaration, are they eligible to stop paying rent?
In the CDC eviction ban, the tenants should state that they are working hard to clear the arrears. Other expenses are also taken into consideration.
If a tenant cannot pay rent as per current circumstances, they may not be tasked with paying rent until a more reasonable time. If the tenant can make partial payments and still put food on his or her table and purchase medicine, the landlord should allow so.
The Salinas landlord or property management agent is entitled to the whole amount and any fees as stated in the rental agreement. When the CDC's eviction ban comes to an end, the Salinas landlord can evict the tenant and file a lawsuit demanding the whole amount owed as rent.
Can a landlord evict a tenant based on other issues apart from nonpayment of rent, even the tenants qualifying for the eviction ban by the CDC?
The CDC eviction ban states that a tenant can be evicted by a Salinas landlord for the following reasons:
- When they pose a health threat to the other residents in the apartments (if a tenant has COVID-19 or similar symptoms, they should take the necessary precautions to ensure the disease is not spreading since they pose a health risk to other people)
- Partaking in criminal activity while residing in the rental property
- Violating the applicable health ordinance, building codes, or other regulations that relate to health and safety
- Damaging the rental property or posing a significant risk
- Violating the obligations present in the contract, including failing to pay the penalties and fees.
Is there any relief for a Salinas Landlord who is not in a position to evict a tenant because of the eviction ban by the CDC?
Unfortunately, for the property management experts and landlords, the government did not avail any funds for the individuals who are not receiving rent from their tenants. A landlord who relies on the monthly rent to cater to the mortgage payments is eligible for the mortgage forbearance. The landlords hit hard by financial hardships are supposed to get in touch with mortgage lenders and ask whether they can get mortgage relief.
Foreclosures have also been banned in some states. Although the loss of property is delayed in such instances, the issue being faced by the landlords will become a significant problem later because of the interest, late fees, and different charges put forth by the lender.
If dealing with tenant eviction all by yourself is too confusing or exhausting, consider hiring a full-service property management firm like Coast & Valley. This will allow you to relax and focus on your investment property without worrying about the hassle of tenant management. Coast & Valley will offer the same level of care and concern for your property as you, the landlord, would.
The 8 Important Laws Every California Landlord Should Know
Owning a property that you can rent or lease can be a great investment. It can also be a big headache if you dive in unprepared. A California landlord has specific landlord-tenant laws that protect you as the landlord as well as the tenant. Here are eight important laws you should know to make the transaction go smoothly right from the signing of the lease to handling the security deposit when the tenant vacates.
1. Security Deposit Law
According to California law, there are limits on how much a landlord can charge for a security deposit. For most people, it is no more than two months’ rent, but for service people, it is no more than one month’s rent for an unfinished house or apartment. If the residence is fully furnished, the California landlord can charge up to three month’s rent. If the tenant plans to bring a water bed, you can charge an extra half months rent.
The deposit must be returned to the tenant within 21 days after they move from the premises. The law does not allow any non-refundable fees.
2. Laws Pertaining to the Lease
To avoid any arguments or court cases at the time the tenant vacates the house, certain things must be clearly stated in the lease that the tenant signs before moving in. Having a professional property management team can make this much easier. The main things are:
- The amount of rent owed every month and when it is due. If you want to charge a late fee, it has to be appropriate concerning the amount of rent.
- Landlord-tenant laws provide rent control in certain areas of California, so check if it exists in the area of your rental property before setting the rental amount.
- The lease should state how to pay the rent if the due date falls on a weekend or holiday and the method of payment. This could be an online bank transfer, check or money order. If you want to charge a fee for late payment, it has to be specified in the lease. This fee must be a reasonable amount and not exorbitant.
3. When a California Landlord Can Increase the Rent
You must give your tenant at least 30 days’ notice before increasing the rent. If the amount of the increase is more than 10 percent of the lowest rent charged in the past 12 months, the landlord must give 60 days’ notice.
4. Non-Payment of Rent
The lease must also state that if the tenant simply doesn’t pay the rent at all, a California landlord must give at least three days for the tenant to pay or move out. California landlord-tenant laws state that you cannot file for eviction until the three days have passed.
In California, there are very strict rules for evicting a tenant after the required three days. This is where a property lawyer can be beneficial because if you don’t file the evection correctly, the tenant can find ways around it.
If you are in one of the 17 cities with rent control, the eviction rules may be different.
5. Disclosures from the Landlord
The tenant has the right to be informed of certain things about the property. The California landlord must disclose:
- Any registered sex offenders in the immediate area.
- The arrangements for the payment of utilities. Sometimes tenants share utilities and sometimes they are the sole users.
- The locations of any federal or state ordinances within a one-mile radius of the rental unit.
- Disclosure of any toxic mold on the premises that exceeds health codes.
- The use of pest control services and what pesticides were used.
- If there is any chance the premises will be demolished in the future.
- The areas where smoking is prohibited.
6. Tenants Have the Right to Withhold Rent
A tenant can legally withhold paying rent or deduct certain charges from the rent if:
- The structure does not meet health, safety and structural standards. A leaking roof is considered a serious problem that the landlord needs to fix. A leaking faucet is not.
- The problem should not have been caused by the tenant or a guest because of negligence or deliberate damage.
- The tenant must give the landlord notice of the problem in a reasonable amount of time to have it fixed.
7. Landlord Access to the Property
There are laws that protect the tenant from harassment by the landlord. This includes the restriction of the landlord’s right to access the property. The landlord must give 24-hours notice of entry or for a move-out inspection, 48-hours notice.
If you give proper notice and ender the house, if no one is at home, you or your property manager are required to leave written evidence inside the house of their entry.
Remember, you can’t, by law, just give notice and enter because you are curious. You must specify a legitimate purpose for the inspection, and the tenant has the right to refuse you entry if the purpose seems unreasonable.
These conditions should be clearly stated in the lease, so the tenant knows your legal right of entry.
8. No Retaliation Against a Tenant Who Exercises a Legal Right
Unfortunately, some landlord-tenant relationships are less than harmonious. And yet, the two are bound by a legal contract. Just because a tenant exercises a legal right such as deducting the cost of repairing a leaking roof from the rent, you can’t retaliate by raising the rent.
The best way to avoid this is to keep meticulous records of how you handle repairs and any other contact you have with your tenant. A full-service property management company can save you a lot of headaches in tenant relationships.
If you are a first-time landlord, it may seem a bit complicated to get started, but there is a lot of useful information given by the U.S. Department of Housing and Urban Development (HUD) that will help you. Another useful site in the California Department of Consumer Affairs. You can also get professional help from a California landlord-tenant attorney.
How Salinas Landlords Handle Tenant Damage
Salinas Landlords and Tenants
Tenants are the only clients for real estate property owners. If you are one of the Salinas landlords, you may encounter tenants who help you build equity in your properties through timely payment of rent. You find a good match, then meet your tenants' needs with your housing facility, and everyone maintains a harmonious relationship with one another.
Unfortunately, not all tenants tend to be the same. Sometimes the landlord-tenant relationship works for many years and other times, your tenants leave the property in a few months even before the lease ends. Worse yet, is to discover that the tenant has left your property in bad shape with majority of the repair cost coming from your own pocket.
The Dilemma
One of the hardest aspects of dealing with the damages done to your property by a bad tenant is to determine who pays for those damages. Tenants often assume that landlords own their properties free and clear and are rich enough to take care of anything that is thrown at them. From their perspective, they are handing out a bundle of cash each month to cover the landlord's lavish lifestyle or funding his or her retirement. So, when they are told to bear the expenses related to damages other than normal wear and tear, they either simply deny or threaten to take the matter to the court.
As a Salinas landlord, on the other hand, you will be expected to act with utmost patience and respect. You will curse yourself for not investing a great deal of time at the beginning of the tenant screening process that would have otherwise saved a lot of grief. You will also consult a local property attorney to make sure that whatever remedy is in your mind is not crossing the line of legality.
Agreement in Writing
Well, here is the answer you have been looking for. What you need is a comprehensive rental agreement in the first place, that contains all terms and conditions related to property damage during and after the tenant moves out. This agreement is a valuable piece of evidence that can come to your rescue should you encounter a problem like extensive damages to your rental dwelling. So, if arguments and disagreements arise later, you can immediately refer to the agreement signed by the tenant.
Salinas landlords are required to have rental agreement form at all times, according to real estate law in California. It is a good device to protect yourself from potential lawsuits and tenant damage situations. It provides you and the tenant proof of the condition of your property at the time of rental. It also serves as the determining factor for who pays for what when the damage is done. Signed copies of rental agreement and statement of condition should be kept for your records and one furnished to the tenant as well at the time of signing the contract.
If you run into problems with the condition of the property in the beginning of the lease, say within one month of renting, an addendum may be required to describe the property from that point on after rectifying the issue. Typically, it's the tenant's responsibility to pay for all costs related to repairs as a result of misuse, intentional damage, accidents and incidents not related to maintenance failure. Nevertheless, you need to re-establish the rules with the tenant and ensure that they understand the terms and conditions laid out on the agreement.
Deposit Policies
Every Salinas landlord faces the difficulty of how much of a security deposit to receive from the tenants during the lease, whether to take additional deposit to cover missed rent and damages. If they are asking too little, they are exposing themselves to a huge risk. Ask too much, the number of applications will drastically reduce. Here are the guidelines. No matter what the situation is, landlords in Salinas CA should never waive the requirement for deposit in the beginning of the renting process.
The purpose of the deposit is to prevent financial disaster as a result of non-payment of rent or, in this case, property damages. If the tenant disagrees to that full deposit, it is a clear indication that he or she has difficulties with planning financially. Your deposit amount should be set based on rent amount as well as other expenses that the tenant is responsible for while renting your place.
Dealing With Damages
Laws vary by state to state, but California's civil code in real estate law book states that you, as a landlord of Salinas property, can apply security deposit for cleaning, against unpaid rent, covering damages and much else. You don't have to distinguish two or more separate deposits for these purposes. So, if a tenant uses moving out as an opportunity to leave behind unwanted items that need hauling to the landfill, or if only a partial rent payment is made, you can cover these expenses plus additional related cost through security deposit. Some landlords collect first and last month's rent along with security deposit at the time of lease sign up. This could be a significant amount in the eyes of the tenant, but it's the only way to protect yourself from huge losses down the road.
Hiring Salinas Property Management Company
If dealing with tenants all by yourself is too tiring, hire a property management firm like Coast & Valley. This will allow you to insulate yourself from dealing directly with annoying tenants as well as protecting your assets from destruction. Property management firms like Coast & Valley take care of all the needs related to rental properties, such as screening tenants, paying utility bills, collecting rents and deposits on time, advertising property, even following up with the tenant for payment of damages and related expenses after move-out. When a tenant becomes a problem or repairs, which the tenant is responsible for, go unpaid, a trusted management firm will offer the same level of care and concern as you, the landlord, would.
Understanding HUD Housing Programs: A Guide for Salinas Landlords
If you're among Salinas landlords in California, this post is an excellent option for understanding everything about HUD housing programs. Do you want to make it a walk in the park for you and your tenants? It would be better if you have a crystal-clear understanding of these programs.
Although most property investors privately have their Salinas property management, it is essential to be familiar with government housing programs. These programs are super-helpful to ensure all renters and Salinas' property investors are equally treated and have excellent abilities living in safe and habitable conditions. As such, let's dive into details.
What is HUD Program?
HUD alludes to the Department of Housing and Urban Development. HUD came to light in 1995 under the ruling of President Lyndon Jonson. The aim and mission of these programs were to provide decent housing for all Americans.
HUD program include services such as community housing development, voucher assistance, senior housing, mortgage loans, education, and enforcement of fair housing and low-income housing.
Moreover, HUD programs are divided into sections dealing with specific property investing and management issues. Such divisions include:
HUD's Fair Housing and Equally Opportunities
This program focuses entirely on fairness to renters and landlords. Its mission and processing are as follows:
Mission
HUD's fair housing and equality program account for enforcing the fair housing act invented in 1968. According to the act, it is illegal to discriminate against anyone based on disability, family status, nationality, race, sex, religion, and color when selling a house, lending on a mortgage, or renting.
HUD's Fair Housing and Equality Program’s working Process
This HUD program follows a strict process for a seamless running of property investing and management protocols. If you feel you have been discriminated against a housing activity, HUD programs make it eligible for you to file a claim with the HUD authorities.
Based on your claim, HUD will carry out investigations following its process as well. First, HUD notifies the "Alleged" offending party of your claim and allows them to respond before heading further. Based on the offending party's response, HUD will then determine any merit to the claim before closure.
HUD Fairness Housing and Equality Program's Significance to Salinas Landlords
If you’re Salinas’s landlord renting out or selling your property, you need to exclusively understand and follow the Fair housing act to ensure you're not accused of discrimination.
Suppose you're getting a mortgage for your property; following the Fair Housing Act's regulations is also an excellent consideration for avoiding discrimination claims and more.
HUD Housing and Voucher Choice Program
This program is funded by HUD and enacted through local public Agencies {PHA}. The program's work provides low-income tenants, disabled and senior people subsidized rental vouchers under the housing ruling's Act section 8.
Housing and Voucher Choice Program's working Process
If you're approved for a section 8 voucher, you can use your voucher to select your choice's housing as long as the property owner agrees with the program's terms.
However, the accommodation you choose must comply with all the PHA's health and safety recommendations. If the property owner agrees, PHA will directly pay a portion of the agreed rental fees.
You will be responsible for any additional costs the government voucher does not cover. The housing and voucher choice program have the following disadvantages and advantages for Landlords.
Advantage
You're guaranteed a portion of the rent and sometimes all of it from the government every month.
Disadvantages
There is no chance for charging more than the determined amount by HUD under the Fair Market Rent {FRM}.
There are vigorous health and safety regulations to be strictly followed.
HUD does not always pay full rent and can be challenging for disabled and senior tenants to pay the remaining amount in time.
The HUD Homes Program
This program operates under the Federal Housing Authority {FHA} that insures mortgages. Through this program, if an FHA-insured mortgage has defaulted, lenders file claims with the FHA to recover the rest of their mortgages.
When FHA follows up, and a lender pays off the mortgage balances, HUD becomes the new property owner and may sell it to recover the money lost.
HUD ensures foreclosure single –family of 1-4 units and multifamily homes with five and above units through this process. Through the program, HUD single-families are offered the priorities for sale and rent, and when there are no takers, investors are allowed to bid on the property.
However, only single-families living in the property are offered a chance to buy before it's sold to investors within ten days.
Nonetheless, before selling or buying a home under this program, there are specific rules on HUD property management to be followed. First, you'll need to register and download a bid kit and deposit an earnest amount of money to bid at the auction.
HUD homes program's significant advantage is that it is more affordable because it offers discounts based on property repairs. Sometimes, the government still pays some sales commission and closing costs.
Better yet, the government sometimes overestimates the costs of repairs needed or undervalues properties on sale, which is a chance for you to make more money as a property investor.
Bottom Line for Salinas Landlords
Indeed, property investing and management is a profitable business for any investors. Many acknowledge the benefits and value of putting their resources in real estate properties to earn and have financial security.
Despite all the good about real estate investing and management, there are some drawbacks to note. The main disadvantage is the absence of liquidity or challenges an individual goes through, turning an asset into money and vice versa.
This is contrary to bond exchange and stock businesses, where you can convert an asset into cash straightforwardly. A real estate deal can take more time than anticipated.
However, real estate is one of the substantial resources easy to comprehend and improve the risk and return profile for an investor's financial portfolio. Through real estate, you are eligible for tax reductions, value building a chance to balance severe returns, especially under HUD programs.
How to Find the Right Rental Home
Looking for a new rental home is a necessarily complex process. This is going to be your home for a long period of time, so it's important that it meets your standards or needs. This will involve looking at a broad range of criteria, including some features that you might not consider as you tour the home. This guide will help you make a list of things to look for to ensure your new rental home is as ideal for your family as possible.
Determine What You Can Pay for a Rental Home
In searching for your new rental home, the first thing to do is to determine what you can afford to pay in rent. As a general rule of thumb, it's a good idea to limit your rent to 30% of your total monthly income. However, you may need to find something a little cheaper to fit it into your budget. In addition to rent, make sure your budget provides enough money to cover utilities, cable and internet, and other household necessities. It's also a good idea to consider renter's insurance to ensure your belongings will be protected.
Research Pet Policies
Even if you don't currently have pets, asking about each rental property's pet policy may still be important. If you have allergies or you're afraid of dogs, you may want to choose a property that doesn't allow pets. Conversely, if you do have a pet or plan on getting one, it becomes more important to ask about pet policies. In addition to finding out if pets are permitted, be sure to ask about any breed or weight restrictions. You should also find out how much you'll be expected to pay as a pet deposit and for a monthly pet rent. Gathering this information ahead of time will save you from getting into difficult situations later.
Look for Important Features
After you have narrowed down your search to those within your budget and meeting your pet requirements, you're probably ready to begin taking tours. As you tour each rental property, look for the amenities and features that are most important to your family. If you have young children, you may want to ensure outdoor play areas are gated and safe. If you live in a more moderate climate, looking for a property that has a fireplace can help you save on winter energy usage. More features to consider adding to your list may include swimming pools, extra bathrooms, balconies and patios, and outdoor grilling areas.
Research the Location Around the Rental Home
When searching for a house for rent in Salinas, you should also look beyond the property lines to see what the community has to offer. Is there a bus stop near the rental property? This may be important if you have children or if your own car breaks down. Having nearby access to a bus stop can save from having to spend more money on taxis to get around town. You should also look for other community services within a short distance from the property, including:
- Libraries
- Post Offices
- Banks
- Grocery stores
- Public parks
Investigate the Night Life
Typically, you'll be touring houses for rent in Salinas during the afternoon or early evening hours when the sun is still shining bright. While this helps you see the features of each property a little better, it won't give you a good impression of evening activity in the community. You'll want to be sure the area is safe at night, especially if you have children and want to keep them safe.
By visiting the property or driving around the neighborhood at night, you can get a better idea of the character of the neighborhood. More activity at night indicates that residents feel safer in their community. You should see a good mix of young and older neighbors outdoors in the evening hours as an indication that it's a low crime area. It may also be helpful to stop and talk to a few of the residents in the area. Talking to other parents who live nearby can help you get a better impression of crime, schools, and other important neighborhood factors.
Know Where to Look for the Right Rental Home
You can start your home search online, but it's also helpful to drive around town to find properties that may not be listed online. Often, a property owner will put a rental sign out in front of the property or post notices on a community bulletin board in a nearby grocery store. This is done to attract local families rather than making the property available to people from outside the community. When searching for a rental home, expand your search beyond online listings to find hidden gems in your city. If you want to move into a specific neighborhood, taking a drive through that area can help you pinpoint properties that are available in those communities.
Let a Real Estate Agent Do the Work
Searching for a new home to rent is also a very time-consuming process, which is just one reason putting your search in the hands of an agent can be beneficial. While you're busy at work or caring for your children, your agent will be doing their job. This can include keeping an eye out for new rentals that meet your specifications. This narrows down the time you spend considering properties that don't match your family's needs. Additionally, an established agent will be familiar with the local real estate market, and they may know of properties that are just coming onto the market. They can help you find your home that much faster so you can focus your energy on planning your move.
Bringing a list of "must haves" with you as you tour rental units can help you make a better choice. It's easy to fall in love with a unit and forget what you're looking for on the spot, buy keeping a list to consult will help you keep your mind focused on your family needs. This will help you choose a rental that's beautiful and meets all of your family's needs.
Tips on Getting Approved for a Rental Property Loan
Guidelines on Getting a Rental Property Loan
There has been an increased need for the rental property over the years in the country. National Multifamily Housing Council and National Apartment Association have statistics to back this up. These statistics show that by the year 2030, there will be an annual demand of more than 325,000 rentals. With this in mind, it can be extremely beneficial to invest in rental property in terms of revenue generation. It does not matter what you need to do to acquire finances. You can go as far as obtaining rental property loans for real estate.
Your Financial Position
Financial strength is one of the critical factors to consider investing in rental property. Following the risks accompanying rental properties, owners of these properties like it when the agreement between them and the acquirer are strict.
Therefore, before investing, it is wise to consider your financial position and know how to pay for it. Acquiring an investment property mortgage for investing in real estate is quite hard. It is undoubtedly incomparable with getting a mortgage to acquire a primary residential property.
Below are some tips and guidelines on how to get approved for a rental loan or an investment property mortgage.
A 20% Initial Payment
Property management financiers require a minimum of 20% deposit of the initial payment. However, this initial payment rate is not uniform in all states and firms across the country. Ideally, lenders need to see your interest in acquiring the property. If you are a low-income borrower, there are some considerations put in place to allow you access funds. These considerations, however, require you to have made an initial deposit of as low as 3% of the total pay.
Your Financial Position in Acquiring a Rental Property Loan
Purchasing a rental property requires you to show proof of your current financial situation. Some questions that lenders ask you will help you keep on track about the matter. Can you afford to repay the loan on time? Can you afford to acquire a loan while still having a mortgage on your home? What is your debt to income ratio? How capable is your cash reserve?
These and other questions help link lenders, mostly banks, to your financial position. If these questions are satisfactorily answered to the positive side, then you are good to go on the loan. However, there are two main factors to consider: the debt-to-income ratio and cash reserves.
Debt-to-income Ratio
This is the amount of income you get versus what goes to settling your debts. It answers the question, how much debt do other parties owe you, and how much or how far are you in clearing those debts. Most banks will require this ratio to be at a threshold of 45%. Or even better, much lower.
Some banks are lenient enough to add to your income, the projected revenue for your rental property to be. This gives an advantage to accessing the loan, especially if you are stranded with other debts.
Cash At Hand
Cash reserves statements are another parameter that lenders look into when lending to you. The higher the cash reserve to income ratio, the higher the chances of receiving a loan for rental property.
Brace for High Rates
There are a lot of risks involved in lending mortgages or finances for rental property. These risks are perceived as irreversible if they happen. Lenders for this kind of property management seek compensation for this kind of risk. The interest rates, therefore, are set at higher. Their rates sometimes scale four to five times higher than the mortgage rates charged on a primary residence. Others are as low as a 1% difference between the two.
The higher are set by private lenders who issue private loans for recipients interested in renovating and reselling the private property. The timeline for repayment can be as low as five years to as much as 30 years. Keep this in mind, interest rates for rental property loans are either fixed or variable. It is wise to expect the worst-case scenario.
Choose Your Lenders Wisely
Be open and optimistic for a diverse group of lenders. Do not just eye commercial and community banks. Be ready to embrace the different kinds of lenders out there - private and hard-money lenders. These "other" lenders may tend to offer the same loans on much lenient financial strictness. Their rates might be higher but for an extended paying time or vice versa. Do some research on the best loan providers for investment property financing.
Check on Your Credit Score
Leverage your chances of acquiring the loan by bettering your credit score. This is a score that shows how worthy you are in deserving of a loan. FICO credit score is the most commonly used by lenders to assess borrowers.
A score of 670 and above is considered above average in FICO. However, some conventional banks have more strict measurements on credit scores. Other credit score analyzers include LendingOne, which sets a minimum required score of 640. CoreVest looks into your activity on money transactions and your liquidity rather than a specified minimum score.
Parting Short
With all these tips and guidelines in place, there is one thing that you have to keep in mind. Rental properties are considered to be a risky investment area. This is because their management is low, their vacancies are uncertain, and costly repairs van eat up funds meant to clear the loans acquired in purchasing it.
But one thing is, however, inevitable. The revenue generation in rental real estate will be reasonable enough to outweigh the cost of purchase and maintenance.
How to Earn a Lease Renewal from Tenants
Finding great tenants can be daunting. Therefore, finding tenants who take good care of your rental property, pay rent on time, and strictly adhering to the lease agreement is a dream come true for most tenant management companies or landlords.
However, as a landlord, what are you supposed to do when the lease agreement comes to an end? If you kept the tenants happy, they would happily oblige if you ask them to renew their lease. On the other hand, if you weren't a great landlord yourself, it will be challenging to convince them to stay longer. Fortunately, you can always look for other tenants.
Advantages of Renewing a Lease
There are several benefits you can enjoy after a successful lease renewal. Here are the most common.
More Predictability
Renewing a lease will help you with the trouble of looking and adjusting to new tenants. Your current tenants are aware of what the lease entails and what the Salinas property management expects of them.
Saves Time
When you retain a tenant, you save a lot of time that you would have spent looking for new tenants, posting advertisements, going over lease clauses, and showing the property to potential clients.
Saves You Money
It becomes easier to increase the rent.
In most states, tenant management companies cannot increase the rent unless the tenant's lease is due for renewal. In the new agreement, you will highlight the new changes, and if the tenants agree, they will renew the lease. They will vacate the premises if they disagree with them.
How to Earn a Lease Renewal from Tenants
The primary purpose of a lease is to protect both the tenant and the landlord. Each gets to understand their responsibilities. It also states the amount of rent to be paid and the collection procedures.
Below are tips on how to earn a lease renewal from tenants.
Tenant Management
Dealing with tenants can be demanding. However, to effectively manage your tenants, you need to keep them happy and satisfied. Practical tenant management help foster strong relationships between you and your tenants. As a result, the tenant turnover rate drastically reduces. Below are some management tips that you should try.
Screen Your Tenants
The most common and important questions you need to ask a tenant include:
• How much is your monthly income?
• How many people will you be living with?
• Do you have pets?
• What is your source of income?
• Did your previous landlord evict you, and why?
• Are you willing to sign a lease agreement?
• Have you been convicted of a crime before?
Ensure that you verify the responses by doing a criminal background check, contacting previous landlords, and current employer.
Ensure That the Lease Agreement Is Detailed
When it comes to full service property management, a lease agreement is essential. To serve its purpose, it needs to use a simple language that both parties can understand. It should cover lawn maintenance, pest control, pet clause, parking, property use, and subletting.
Most importantly, a lease agreement must mention the consequences a tenant is likely to face if they don't pay rent or adhere to set guidelines and rules.
Be Professional
Additionally, you need to put a proper procedure for collecting rent in place. Tenants need to know when rent is due and which method they can use to pay.
Offer Incentives
A good gesture, despite how small, can boost your tenant retention rate. For instance, you can do the following to ensure that your tenants renew their lease.
• Offer a discount on rent if they sign a two-year lease.
• Replace doors.
• Re-paint the property.
• Pay for landscaping.
• Pay for some minor repairs.
• Install new flooring, etc.
It is advisable not to promise upgrades that are far within your reach.
Allow a Grace Period for Rent Collection
Address Any Complaints Quickly
Ensure that you resolve all complaints the same day or within a week. The happier the tenants are, the more they are likely to renew the lease. Also, make sure that you give your contact information to tenants when they move. It will be easier for them to contact you when they have a complaint or an emergency.
Ensure Regular Maintenance of the Rental Property
Frequent maintenance eases the frustration of tenants, making it difficult to vacate.
Inform Them of All Rules and Regulations Before They Move In
Letting potential tenants understand your set rules and regulation before they rent avoids confusion in the future. If they disagree with your rules, they will look for other options.
To earn a lease renewal from your tenants, you can ask them. Most Salinas property management companies wait for renters to show interest in renewing their lease agreement. However, the truth is that most tenants wait for property managers to remind them.
From the above, it is evident that renewing a lease can save a lot of your time and money. Following the above tips will help convince your tenants to renew their lease and, as a result, increase your occupancy rate.