Which tenants sounds best?

[Toon]

I am considering two offers from potential tenants & am trying to weigh up which to go with.

1. Family with 3yr old & 1yr old. Husband is a train driver. Wants to move in tomorrow, but wants to knock $10 p/wk off in return for 'assisting' me with getting the landscaping done. I still have blinds to put up & some network cabling needs to have faceplates put on & I probably need a week or 2 to get that done & don't really want to go in while the tenants are in there. Would be through PM & would end up with $304 p/wk after agent's commission taken out.

2. Family with 5yr old & 1yr old. Husband a manager, wife has PhD on hold while kids are little. Are supposed to give 28 days notice where they are but have offered to overlap & move in in 2 wks as well as offering bond now to secure it. Also willing to assist with doing the yard if I get materials delivered. Would be a private lease agreement at $325 with no PM involved.

I only have one other IP which is managed by a PM. Would more experienced investors recommend going this one alone or should I stick with a PM? The second person is the son of a work colleague, so although I don't know them personally, there is that link.

The first person wants an answer today. Any opinions & suggestions will be very welcome.

Toon

 

[s_t]

I'm not more experienced, but gut response on info presented is no. 2. Sound more proffesional, in occupation, and in ability to pay bond upfront and overlaping rents. Not as demanding (more rent etc). You want a week or two anyway don't you?

 

[Toon]

I'm not more experienced, but gut response on info presented is no. 2. Sound more proffesional, in occupation, and in ability to pay bond upfront and overlaping rents. Not as demanding (more rent etc). You want a week or two anyway don't you?

Thanks. That's the one I'm leaning towards at the moment, but people keep saying I shouldn't lease to people I know in any way. I can see the potential negatives but there also seems to be benefits as well. Is this a definite no no, or do some people find this can work OK?

 

[s_t]

Thanks. That's the one I'm leaning towards at the moment, but people keep saying I shouldn't lease to people I know in any way. I can see the potential negatives but there also seems to be benefits as well. Is this a definite no no, or do some people find this can work OK?

You didn't mention that earlier. What is your relationship with them, and do they and you both plan on doing it properly 'by the book' (ie. signed contracts etc)? My even more unqualified and inexperienced thoughts are it should be OK if you keep it profesional (though that would be impossible if they are your best friends!)

 

[Toon]

The second person is the son of a work colleague, so although I don't know them personally, there is that link.

So technically I don't know them, but know their mother. Would be doing by the book though, RTA forms & lodging bond officially etc. May not be a problem, but other workmates keep saying 'don't do it, it will get ugly if something goes wrong' etc.

 

[tobe]

I'd just always use a p.m. period. Wouldnt matter if it was the queen of sheba who wanted to rent the property. Its a business relationship, better to start on the right foot. If the diference in the rent you receive is only the pm fees, choose the one you like, but use a pm. Its just a cost of doing business, which is well worth it if you tally up the cost of getting burnt by tenants and stop investing in property as a result...

 

[tobe]

oh, and I wouldnt negotiate any decrease in rent for any work done until they are long term tenants, ie after a year. If you have the money, do the landscaping, and charge the appropriate rent. If you dont have the money to do the landscaping, reduce the rent, and do the landscaping when you do have the money, and increase the rent accordingly. IMHO...

 

[Toon]

Thanks tobe, think I'll have to pull my finger out & get this landscaping done over the weekend. So much for the PM saying it wouldn't make any difference in getting a tenant if it wasn't done straight away - it's been the biggest sticking point of all. With my other IP, (a 2bdrm unit), there's never been any haggling over rents & it's never sat empty. This new house is a totally different ball game.

 

[DavidMc]

So technically I don't know them, but know their mother. Would be doing by the book though, RTA forms & lodging bond officially etc. May not be a problem, but other workmates keep saying 'don't do it, it will get ugly if something goes wrong' etc.

I wouldn't do it. I reckon keep it 100% business.

How much do you value the relationship with the mother? If something went wrong, would you be comfortable with having to still see her every now and then?

 

[Toon]

I wouldn't do it. I reckon keep it 100% business.

How much do you value the relationship with the mother? If something went wrong, would you be comfortable with having to still see her every now and then?

Thanks DavidMc. I only work with the mother & I'm due to start a new job in late July, so I won't have to see her at all after then. I guess I'm more worried about going it alone, even though I will get more money that way.

 

[Rixter]

I agree with DavidMc.

 

[wylie]

I would go with No 2. If things go pear shaped, you don't have to see the mother at work.

Make sure that you spell out that this is "business" and that rent must keep up with market rates, so that they don't think they are getting special treatment.

Having said that, we are in the position of renting to somebody my mother knows and we have (knowingly) allowed the rent to stay low because of her situation, so maybe don't listen to me .

If they are prepared to pay the bond up front and two weeks' rent in advance, I would grab them. Don't just accept the bond. Make sure you get at least one week rent in advance, preferably two. That way, if they back out, you are covered for two weeks while you find somebody else. And make sure they sign a lease NOW. Don't leave it until they move in. Put the date on the lease for the day they move in, and don't give them a key until that day.

If you find self-managing difficult you can always hand it over down the track.

I like the money in MY pocket and find self-managing a walk in the park (with a few hiccups thrown in occasionally).

 

[GoAnna!]

I agree with Wylie.

Regardless of whether you go with number 2 or not I would reject number 1.

It really bothers me that they need an answer so urgently and need to move in so urgently. That can be a real warning sign. What is their situation? Are they even giving you time to research their history? I would also not accept lowering the rent. Bad precedent.

Personally I would have no issue with the second – its hardly close family. I would tell them that you will doing it all by the book but that if there are any issues you will places it with a PM. Follow everything by the guidelines and ensure that bond and rent is cleared before they move in.

 

[DavidMc]

I prefer to use a PM. It's one of those 'depends' questions. What value do you place on your time? Do you like dealing with people? Are you IPs in areas that attract tenants that will require a lot of energy to manage?

When I started out I self managed and it has worked out well, and I've also had a PM put in a bad tenant. OTOH I've also had a few issues that I would have hated to have dealt with that my PM has... check the recent thread I started in Property Management!

For me it's 100% business via a PM all the way.

 

[GoAnna!]

I guess there are two questions in this thread.

1. Which tenant

2. PM or self manage

I think they should be separated out as decisions

 

[Toon]

Thanks everyone. So much food for thought here. It hadn't even occurred to me that someone needing to move in so fast was something to be wary of in itself. I think I have indecision paralysis right now, better sleep on it.

 

[GoAnna!]

Thanks everyone. So much food for thought here. It hadn't even occurred to me that someone needing to move in so fast was something to be wary of in itself. I think I have indecision paralysis right now, better sleep on it.

They may be absolutely fine but the urgency is something I would want to check out and satisfy myself on. Whatever you do take the time you need to thoroughly check references and clear bond. If they wanted to move in immediately I would only accept cash. I would not accept any excuses whatsoever if they failed to turn up with the appropriate money on that first day. SOME people create panic and tight deadlines (or fantistic offers of 6 months rent upfront) as a way of slipping through the system. If a tenant makes you feel under pressure just make sure you don't take short cuts.

Perhaps this is an area of huge housing shortage and they have just been caught out but it does seem strange to me that with a young family you don't know where you will be living tomorrow. I assume if you said no they would have nowhere to live otherwise why the big rush?

 

[Toon]

Thanks GoAnna! I'll get the PM to check into them a bit more thoroughly. Coincidentally, when I got home last night, my agent's newsletter was in the mail with the main article about how thoroughly they check prospective tenants & how people wanting properties urgently set off warning signals. Maybe they need to practice what they preach

 

[GoAnna!]

Thanks GoAnna! I'll get the PM to check into them a bit more thoroughly. Coincidentally, when I got home last night, my agent's newsletter was in the mail with the main article about how thoroughly they check prospective tenants & how people wanting properties urgently set off warning signals. Maybe they need to practice what they preach

hahahaha that's funny!

You could always place the other tenants with PM you know....

 

[Toon]

I emailed the PM first thing this morning asking why these people are in such a hurry & isn't it a bit suss & has she checked out their backgrounds etc? She hasn't even bothered to respond. I didn't get pushed into giving a yes or no answer yesterday, but I would still expect she could at least reply