Friday, May 22, 2015

Finding tenants for our rental property

We picked up our first rental property in March.  We finished our renovations by the end of April.  The renovations will help reduce future maintenance, and helped get our unit rented out faster.  Our first tenants moved in May 2nd.  Today I will talk about how we found and approved our tenants.    

Deciding on a rental rate
We searched listing sites such as Zillow,, and Craigslist to help us decide on a fair market rental rate.  There are plenty of other sites where you can search for comparable rentals in your area.  People won’t pay $2,000 a month for an apartment with a nice kitchen if comparable options are available for $1,500.  I also got some input from our agent as well as a local property management company. 

We did not go with any property management because their services can really eat into your profits.  It’s harder to make a big profit if a property management service is taking 6 to 10% of your profits.  Another good tip I recently read on the Bigger Pockets forum is to visit your competition to check out the amenities they offer.  This is more time consuming but may help you with coming up with a fair and competitive price. 

Creating a listing
According to Postlets, listings with 11 to 15 photos get 70% more page views than listings without photos.  This seems pretty obvious to me since I would not want to bother visiting a property without first getting a photo preview of the location.  I used Postlets to create a free ad for our rental property.  Ads created with Postlets get listed on Zillow, Trulia, and Hotpads.  Postlets will create an html template for you to post an ad on Craigslist (photos need to uploaded separately on Craigslist).

People must have liked the advertisement that I put up, because I was getting calls and emails within minutes of listing the rental property.  I took some tips from this Zillow article titled “15 words that could add value to your listing.”  Words such as luxurious, captivating, stainless, remodel, beautiful, gentle and upgraded can help attract tenants to your property. 

Showing the property
My real estate investing friends all recommended that we try to have potential applicants to come to view the property on the same day(s) scheduled closely together.  This helps to save you time.  I’ve also read that some real estate investors online recommend doing an “open house” type rental viewing to get applicants to all show up at the same time.  The thought is that this creates a sense of urgency for potential applicants, especially when they see that the property is highly desirable.  We kept our showings individual because it gave us a better chance to get to know the applicants better. 

My real estate investing friends warned me that we would get a lot of last minute cancellations and no-shows to the property viewings.  This is true.  We had about 25-35% of our scheduled viewings canceled – mostly last minute.    

Screening tenants
Once we had a few good candidates to rent to, it was time to screen them to assess their potential for being good tenants.  I used the Bigger Pockets tenant screening guide as a quick and easy reference for properly screening for tenants.  I made sure I read the Bigger Pockets ultimate comprehensive guide list of tenant red flags and this other Bigger Pockets article on tenant red flags.  This gave us an idea of what to look for and what to watch out for with potential candidates.  The federal Fair Housing Act protects all potential tenants again discrimination based upon race, religion, national origin, sex, handicap, and families with children.  You must not deny a potential tenant based on any of those factors, or you could find yourself in legal trouble.

We used the standard California Association of Realtors application form, which asked basic questions such as:

- Name, address, phone number
- Date of birth, social security number, driver’s license
- Income
- Current and past landlord information
- Current and past employment information
- Whether patient has ever had an eviction filed or broken a lease
- Release of information signature

Other questions that friends suggest we should ask our potential tenants include:

- What is your requested move-in date?
- Do you have any pets?
- Why are you looking for new housing?
- How many people will be living here?
- Is there anything that may interrupt your ability to pay rent?
- How many bankruptcies, convictions or evictions have you had?

There are different companies you can use to run credit and background checks on your potential tenants.  We charged all potential applicants a $25 application fee, which mostly went towards running credit and background checks.  As a courtesy, I provided each applicant a copy of their tenant screening results. 

Saturday, May 16, 2015

$555 off your next smartphone with the Citi AT&T Access More Card

Since switching a lot of our spending to cash back credit cards, an interesting new promotion has come up for a way to earn an almost free no-contract smartphone from AT&T.  With the Citibank AT&T Access More Card, you can earn a $650 statement credit towards purchase of a new unlocked phone from AT&T Wireless.  This card does have a $95 annual fee not waived the first year, so your net discount is $555 ($650 - $95).  For AT&T Wireless customers, this is a great deal for those interested in getting $555 off a no-contract smart phone from AT&T.  If you’re not with AT&T, you can still take advantage of the deal in other ways: see this flyertalk thread for deal discussion.   

While my wife and I have very simple (frugal) desires and wants, one thing we don’t mind splurging on is having nice smartphones.  Our cell phones provide us with productivity and entertainment.  I am grateful that my company pays for our cell phone bill.  We are with AT&T because it provides excellent coverage in our area – and I need to be on-call regularly.  If my company did not pay for our cell phone bill, we would go with much cheaper telephone service options like T-mobile and Republic Wireless. 

Once you are approved for the AT&T Access More Card, a special purchase link will be emailed to you.  From this link, you can purchase any new smartphone at full price with no annual contract.  After spending $2,000 on purchases made with your AT&T Access More Card within the first 3 months of account opening, Citibank will credit your account up to $650 for the cost of the new phone (exclusive of taxes, shipping, fees & wireless service).  The purchase of a new phone will count towards the $2,000 spending requirement!

Aside from the initial sign up bonus, the AT&T Access More Card earns 3x ThankYou Points on purchases made online at retail and travel websites and 3x ThankYou points on products and services purchased from AT&T.  All other purchases earn 1 ThankYou point per $1 spent.  If you spend $10,000 in a cardmembership year, you will earn 10,000 bonus anniversary points.  You can think of it like a card earning 2x ThankYou points on all purchases up to $10,000.  These ThankYou points can be combined with ThankYou points earned from other Citibank credit cards.

What’s not to love about this card?  Well first of all, don’t forget that this card has an annual fee of $95.  While many premium credit cards also have annual fees, most of the time the fees are waived the first year, giving you a chance to earn the sign up bonus and test the card out for a whole year.  When the annual fee does finally post, you can then decide whether to keep the card (and pay the annual fee), downgrade the card to one without an annual fee, or cancel the card (and get a fee refund). 

At the end of the day, the Citibank AT&T Access More credit card is still an easy way to get a $555 off the price of a brand new and unlocked smartphone from AT&T.  You can apply for the card here. 

Before applying for any credit card, make sure you check your credit score to make sure you have a good chance of getting approved (ideally any score over 720).  I like using Credit Karma, Credit Sesame, and Quizzle to regularly monitor my simulated credit score for free.

My wife just applied for this card and she was instantly approved! 

Note: I have no affiliations with Citibank and do not get any commission from them.   

Monday, May 11, 2015

Rental property repairs, updates, and remodeling

We picked up our first rental property in March.  Since the property was built in 1964 and had never been previously updated, we needed to do some work to freshen up the place.  The color of the paint on the walls was very dull.  The carpet had deep and permanent stains.  The stair railing was falling apart and not up to code.  The old windows were worn out and did not have proper heat insulation.  The lights were old and not energy efficient.

For the last 2 months, we have worked hard on remodeling and preparing the place for tenants.  Investing money into a property helps to increase its value and rent-appeal.  It has been very time consuming interviewing potential contractors as well as getting multiple quotes on work that needed to be done.  I’ve also put in some sweat equity by doing some of the more manageable work myself.   

Before finalizing the purchase of our rental property, we had a general contractor (recommended by our agent) give us an estimate on the costs of all remodeling work.  The estimate was ridiculously high: $44,050.  This estimate was for the work to be completed in 5 to 6 weeks, and did not include the costs of purchasing appliances we wanted to add (new faucet, sink, electric oven, kitchen range hood, and refrigerator). 

The benefit of going with a general contractor is that they will take care of every little aspect of a home remodel.  They will coordinate all of the different types of work that need to be done, including electrical, dry wall, painting, plumbing, carpentry, cleaning, etc.  And most importantly, they will make sure everything gets done on time.  The downside of going with a general contractor is that they mark up all of the work significantly.  $44,050 was just way higher than we wanted to pay to have this work done.
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