Investor Mistakes that Can Really Bite - Tenants
by John Occhi REALTOR
Realtor Consultant to Foreclosure Investors
All Real Estate Investing boils down to one of two strategies. Granted, their are many subsets of each real estate investment strategy - but every investment is either a "Buy and Sell" investment scenario or a "Buy and Hold" your real estate situation. What else can there possibly be?
I prefer my involvement to focus on the quick cash flow "buy and sell" strategy - or flipping as it is often called. Flipping will generate huge amounts of cash flow, if done properly. I do believe though that the "Buy and Hold" method of real estate investing is the true path to long term wealth.
However, like so many others in the industry, I have my reservations about being a landlord and having to deal with tenants. Well, I recently had a conversation with a dear friend of mine who has a number of rental units here in Hemet, CA. He assured me that he never has a problem with a tenant, because he trains the right from the beginning.
His first advise is to never use a boiler plate rental agreement that you pick up for free or inexpensively as part of a catalog of forms. He tells me that like everything in life, you get what you pay for. He has a custom agreement that is revised annually by his attorney, accounting for every change in the law. He had his agreement crafted by an attorney and he has never lost in court with it yet.
When I asked to see what made his agreement so special, he informed me that based on the terms of his relationship with his attorney, the only way I could see it was if I were to rent a unit from him or pay his attorney. Smart man wh9o knows how to protect his assets, but now I want to go to the local court house and see if I can pull the file of an eviction he just finished, to see if I can find a copy of this "special agreement". (But that wouldn't be very Christian of me, now would it - I have no use for it, I just want to see what it says and I am not going to rent from him just to find out!).
The second issue my friend shared with me is training the tenants to take care of his property. If he ever has a tenant do any damage and calls him to fix it - he does and then he bills them for it. Stopped up toilet because of a feminine napkin - that will cost $75. Broken Window - that's $75.Replace the garbage disposal - $150.
He says if you don't charge them then you are telling the tenant they don't have to take care of your property and that you are giving them permission to treat you like their personal maintenance company. Next thing you know, you are getting calls at night, then the weekends and before long, you'll get a call on a holiday. Well, he charges a 50% premium for after hours and a 100% premium for holiday or Sunday emergencies.
My friend tells me his favorite is when he gets a call telling him that the rental unit has been broken into. He'll question what was taken and the tenant typically says nothing, but that either a window was broken or a door needs to be repaired. He knows the answer to the next question before he asks if they filed a police report. "Well, no" he is told and so he bills them for the repair - often upgrading the broken door to a brand new one. He tells me that it is very rare a tenant will file a false police report because they really don't want the police snooping around their rental unit.
My friend loves Hemet CA rental units - he has me looking for a nice four-plex to add to his inventory of over 60 rental units in Hemet California. He promises to teach me more on this topic and what I learn I'll bring back and share with you, so come back and check often - better yet, go ahead and subscribe to my blog to keep up to day.
Hoping to make your California Real Estate Investment...
A Pleasant and Profitable Experience,
John Occhi, Hemet CA REALTOR