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My very independent aunt, who is approaching 80 years old, is the owner of some rental units in Oakland. Although there are no present problems with her properties (that we are aware of), we want to be sure that the maintenance of the properties is up to the standard in terms of what landlords are supposed to do, i.e., strapping the water heater, assessing earthquake safety, doing routine inspections, etc. I'm hoping to get some advice for her about what the legal responsibilities are of a landlord along these lines, as well information and resources to guide her, in the form of inspectors and consultants who could look at the property, as well as books, etc. The impetus is both to be sure the tenants are safe and to protect the assets she has/needs as she grows older from any liability. Thanks in advance for any help!
Good for you for wanting to be conscientious landlords!
Becky
I am in debt (manageable debt) with great limits on my ability to earn - mainly because of the profession I have chosen. I am beginning to work on switching gears to something that pays more, but in the meantime, I have equity in my home, experience in managing rental property and fixing it up for resale, and want to invest. My credit rating is good and I have been told that I will be able to qualify for loans. I would be looking for property that I would hold onto for a fairly short time period - 1 to 3 years. Is there anyone out there who has done this on a small scale and can offer advice? I don't want to post my email but if you prefer to have me contact you, I would appreciate that
It is very hard to make money or break even on investment properties in this area unless you have a very large down payment (without having to take it out of the equity of your primary residence). What I would suggest if you want to expand your portfolio and invest in real estate is this:
1. invest in a REIT (contact a financial planner for info)
2. invest in rental property out of state where it has a better cash flow and is more affordable. consider investing in an area that you like to visit- so you may gain the tax benefits when you travel.
3. invest with companies that specialize in real estate and do the leg work for you- try SIFF investments (they specialize in Oregon investment properties and are based here in SF) or Open Door Properties- (they gather pools of investors for short term investing on real estate)
Last, you could invest in property in the Bay Area and be cash flow positive if you took a negative amortization loan. Your loan balance would go up instead of down so you'd be relying completely on the real estate market appreciating to make money in the long run. If you are looking for 1-3 years as your investment period- you are taking a big risk. Many experts believe the real estate market may flatten or decline during this period and are advising clients to invest for longer terms.
We have a property in Oakland and we're relatively new to the
rental game. We've gone to workshops, read up about being a
landlord, we're part of the rental association, have books and
cd's, etc. but it's still so hard especially because it is not
profitable at all and we've been burned a couple times now and
again we have a tenant who is not paying rent and is acting
like a complete jerk. At this point we are borrowing money
from family and friends so that we can pay for this jerk to
live in our home and we're getting behind on our bills. How
can we get him out quick? We've started the eviction process
but we really can't afford an expensive process and he has made
it clear that he's going to make stuff difficult even though he
doesn't even have a contract with us. At this point, I am not
above doing something illegal/unethical so that my own family
doesn't end up in a shelter with no credit over him.
frustrated landlady
I've been a landlord for a long time and have many wonderful experiences and one truly horrible one. My initial advice: Calm down, resist the urge to do something ''illegal/unethical,'' and strongly consider getting yourself a lawyer. A few observations:
(1) Landlords should never be in a situation where their own financial well-being is affected by a few months of vacancy. Being a landlord brings with it financial risk, including not only the loss of rental income but the very real possibility that you will be sued or have to provide a cash settlement of some kind to a tenant to get rid of him. (This is sometimes cheaper in the long run.) From your e-mail it sounds as if you may have counted a bit too much on the income from your rental. Maybe there's a way you can address that (refinance?). But it sounds to me like you need to consider seriously whether owning rental property makes sense for you financially.
(2) Nonpayment of rent is grounds for eviction. Period. But the law provides many protections for tenants at risk of eviction. You need to read your landlord books carefully and follow their advice to the letter regarding eviction. Be absolutely sure that your observe all deadlines and do all of the paperwork correctly (including getting a witness to your posting of various notices to him, etc.). Any mistakes you make will certainly lengthen the time the eviction takes and may also provide grounds for your tenant to sue you. I also recommend keeping a detailed written chronology of all of your communications with the tenant--phone calls, letters, encounters, etc. What, when, who.
(3) You don't specify what you mean by the tenant ''making things difficult,'' but his options are limited. He can refuse to move, in which case you can have his belongings removed at his expense (you will never collect on that, however--works better as a threat). In my case, what the tenant did was create an elaborate set of false accusations of harrassment and non-habitable premises, get an attorney and threaten to sue me unless I provided a $20,000 settlement (for an apt. that rented for $800!!!). So as bad as your situation is, remember it could get worse. In our case, the tentant eventually backed down and agreed to move out, then immediately sued us in small claims court (and lost, appealed, lost again). Despite our complete innocence (which was stated clearly by the judge, who was aghast at the insanity of the ''case'' against us), this cost us a fair amount of money (attorney's fees, court fees, process servers, inspectors to prove habitability, lost income, etc.) and a lot more anxiety and stress. What saved us was the help of a calm, reasonable, and expert lawyer who told us the facts (most landlord tenant law is designed to protect tenants) and helped us use the law to obtain a just outcome. Without his help, we would not have made good decisions or obtained the result we did. Our lawyer was R.C. Wong, who has an office in Berkeley. I recommend him highly. He is normally a tenants' lawyer, which was helpful to us because he understood the tenant perspective.
(4) Next time (if you do continue renting), be sure to check every reference (don't rely on letters alone and consider doing additional research like googling the tenant to verify employment, etc.--we later found out our tenant-from-hell had had disputes with previous landlords and that a ''clean'' recommendation was part of the settlement terms when he left his previous residence), get a good-sized deposit, and make absolutely clear that you will scrupulously observe legal deadlines with respect to payment of rent.
Good luck!! Been there
tia, fellow Measure EE landlord
Second, sometimes, rather than resorting to the eviction process, you can just pay someone to move out. Offer to pay them ''moving expenses'' if they get out by a certain date. Everyone has their price. I've had friends use this method to get rid of tenants.
Third, it's unclear whether your are renting a room or unit in your house, or if you have an apartment building or what. With Oakland and its Measure EE Just Cause Eviction law, getting tenants evicted can be difficult. I have a friend who highly recommends a company called ''The Evictors'' for evicting tenants. With all the rules and regs, he felt is was just easier to use a service like this. If you are renting a room or unit in your house, it may actually be easier to get rid of the person (single family homes are often exempt from various laws).
We are considering renting out our house and I am interested in any advice for or against becoming a landlord. We own a house in Oakland (Crocker Highlands area), but have an opportunity to rent a house in Moraga -- we had been considering selling our house and buying in Moraga/Orinda for school reasons, but with this opporutnity to rent there, we thought it would be a good chance to test things out out there before we take the plunge and buy. This would mean renting out our Oakland house temporarily (maybe a year or two). My questions: How hard is it to be a landlord (e.g., finding and maintaining good tenants, taking care of their complaints, worrying about your house being kept in good shape by them, getting them to move out when it's time to sell, and anything else I haven't thought of)? Does anyone have any advice on how this will work out financially for us? What are the tax consequences of renting out what was previously your residence (in terms of deducting interest on the mortgage, depreciation, etc.)? Should we be looking to get rental payments that equal our mortgage payment? Would less still let us cut even financially? Any words of wisdom on this subject would be greatly appreciated. Thanks. sharon
The biggest thing you should consider though is capital gains taxes, which you will be subject to after 2 years of not living in the property. The good news is that you only have to pay the tax on any gains the property makes when you sell it. The bad news is that it can really eat into property appreciation. I'm sure there is much more to consider but this is a start. I look forward to reading the responses. Good luck with you decision! Anon, please
We're considering moving to China with our 9-month-old daughter for at least a year but don't want to give up our Bay Area home. What are the pros & cons of renting our home in this market? Some say we should sell and invest the money rather than put up with the landlord headaches from thousands of miles away. We do have some relatives here, but we can't expect them to keep a constant eye on things. How much work would an agent do on our behalf? Thanks! Sean
Plus, should your tenant leave while you are still out of the country, there is now a law that they are entitled to a walk-though prior to vacating in order to give them a chance to mitigate any deductions from their deposit. It therefore is a great idea to have a specialist who can handle doing this so you don't have to come back to do it.
Also, you should be aware that you will pay a significant tax to the State of California should you decide not to return and you sell your rental house. Talk with a tax specialist about this. Been there, done that
2. The two most important things to check with renters are their credit rating and their references (i.e. current landlord). If their application is incomplete or information is inconsistant, that is a bad sign.
3. The NOLO books are pretty good. Also consider joining the Rental Housing Association of Northern Alameda County. Then you have access to lease forms, information and advice from the California Apartment Association, and credit reports.
Greetings, We are considering renting our 4 bedroom, 2 bath North Oakland home for a long-term period. As we are close to Cal, this would be perfect for a family here on sabbatical. We'd really love advice as to how to advertise this to the academic community and other responsible, long-term renters and/or leasers. Are there special websites for academics who are heading here on sabbatical? Any advice would be greatly appreciated. Thanks in advance, Deborah
There is no charge to list a home (or apartment or room) at Cal Rentals. If you would like more information about offering your home as a rental, please call 642-3644. Or, you can send an email to: homeinfo[at]uclink.berkeley.edu. Nancy
My mother's modest estate has been probated and us sibs (6) are considering whether to simply sell the house and go our separate ways, or retain joint ownership of the property and turn it into a rental. The house is 45 years old, a modest but large ranch style, 4 bed, 1 1/2 bath, with original kitchen and baths, and has received so-so upkeep throughout the years. However, it is in a community that has become very upscale, with high home prices, few if any single family rentals even exist, has great schools, is on a picturesque .9 acres of woodsy Conecticut, complete with babbling brook, and is communter distance to NYC. One of my sibs lives nearby and could help hire / oversee a rental maintaince company.
Has anyone done anything similar to this before who could provide insight into how to get this kind of thing set up, do's and don'ts, how you get a group of sibs to agree on a course of action, legal steps, etc.?
My feeling is that we could probably be a little in the black right away, and then in twenty years the house might provide a nice supplementery retirement income for all of us. Thanks in advance.
My advice about turning a family home into a rental is an emphatic: don't! Both in my extended family and in my husband's, we've seen siblings turned from tight and loyal families into implacable enemies by co-ownership of indivisible assets (ironically, one was Great Granny's beautiful farm in Connecticut, like your land, replete with babbling brook.) Managing a rental involves plenty of headaches all by itself, but the constant decisionmaking over big expenditures, chores, etc. becomes a real hazard to family harmony once a large number of co-owners are involved. What are the odds that all six of you will agree about how much risk to take, how much money to spend maintaining or upgrading your investment, or when to sell? What are the odds that your tax situations are all identical? Rentals are not too profitable if you have to pay people to do all the work for you, but I can tell you from personal experience that sharing these tasks among you will be difficult. The tendency is for those who are doing the tasks to have a different assessment of their value and difficulty than the siblings who don't do them: everyone feels burdened. Also, you want to be able to make demands on the person who does each task, and to ask tough questions and make sure things are done wisely and well. However, it isn't easy to call a sibling to account, or to ask him or her to justify decisions and actions, even if you are paying him or her for the work. Things only get more difficult once your spouses, (or, god forbid, ex-spouses) get dragged in. These folks rightly have a say over a couple's assets, but aren't always bound by the same generous sentiments as the siblings themselves. And then, of course, your children serially inherit the mess. Protecting their stakes in the house pits the first-orphaned nieces and nephews against their aunts and uncles, instead of keeping their relationship one of mutual aid and support. After that, the vast diaspora of cousins has to make joint decisions. Hopeless.
Political Science tells us that requiring unanimity results in paralysis. (And paralysis in managing an asset means financial losses.) Our experience of family life tells us that forgoing unanimity, and overruling some siblings, brings ill will and grudges. Your responsibility to your siblings begs you to accept financial losses to keep harmony among you; your responsibility to your spouse and children obligates you to do what is best for them economically. Co-owning a rental creates an inevitable conflict between these two responsibilities. Out of love for both groups, better to avoid it.
Capital gains taxes, and the tendency of property values to fluctuate, mean that it is a complex transaction for individual siblings to divest themselves of their stakes at different times, and zero-sum games are inevitable. Divestiture involves facing decisions that pit one sibling's interest against the others' and where there are no clear cut rules to guide one.
Worst of all is seeing what happens to one's family nest egg when the siblings can't agree, as happened in my spouse's family. Lawyers ate roughly a third of the total assets, and considerably more than the portion that was in dispute.
Now two families are scarred, and we are left with sad reminders like sparsely attended weddings, and birth and graduation announcements that fall on deaf ears. Gone for good are those happy sharings of rented beach houses and woodsy cabins, where, in a wild army cousins, each of us always found a soulmate. The more you love your family, the worse the heartbreak.
If you decide, as many do, to attempt co-ownership, please at least read up first on the management of family owned businesses.
It has always amazed me that, as a family-owned concern, the Mafia manages to make money. That they are driven to slaughter each other is no surprise at all.
Anonymous out of tattered respect for my disgraced lineage
1) You have to detach yourself from an emotional connection to the house, and see it as an investment. If this is the house you grew up in, and you would be sad to see it repainted or the old cherry tree cut down or whatever--or if any of your siblings would--you should sell it. Because eventually you will have these decisions to make, and monetary concerns will butt up against emotional attachments, and may cause problems for you.
2) Property managers can take an enormous cut of your profit--typically a monthly fee from you, plus the first month's rent (or 1/2 that sum) every time a new renter moves in, and then virtually anything else you have them do (e.g., fix pipes), paid at their rates. You pay them for their office time, if you ask them to fax stuff, etc. etc. Maybe this is not typical out in Connecticut, but it seems to be here. Also--and this is important--because they profit most when there's a new tenant, they have no incentive to choose people who will stay long-term. I rented a house myself recently and twice saw property managers give rentals to the first people to walk in the door with the deposit in hand. They didn't even check references.
3) Property managers and tenants don't do maintenance like you would do maintenance. They don't worry about that drip in the eaves that's going to rot the foundation mudsill in 5 years--the one that could be fixed in 10 minutes, if only you were notified about it. They worry about crisis situations, and whether the carpet and paint are new. Also, with few exceptions, tenants don't garden or do landscaping. So if you expect to make a tidy sum 20 years from now when the house is paid off, you need to make sure it doesn't look like it's been rented for 20 years, or need 20 years' worth of work. Your sib who is close by should maybe get an extra cut of the profits for keeping an eye on the maintenance.
4) Get Nolo Press's guide to being a landlord--it's invaluable.
The curmudgeonly landlady
A couple of years or so ago we ended up renting out a house which we'd been trying to sell in Vallejo to a family who had a credit situation that needed to be cleared. The agreement was that they would rent for a 6 to 12 month period while they cleared their credit record, then purchase the house. We, being trusting and wanting to be kind landlords, have let this arrangement drag on, and have been extremely patient and lenient about rent payments which have been late for reasons which may or may not be beyond the family's control. Thousands of dollars later, we are finally coming to our senses and would like to cut our losses by getting rid of these tenants and trying again to sell the house. We've considered and rejected the idea of trying to handle this ourselves. We've had some interest from a real estate broker who offered to evict the tenants then sell the house for us. Someone else has suggested going to Small Claims Court to try to recoup our losses. We're pretty! naive about what to do at this point, so any advice from others who have dealt with a similar situation would be really appreciated. What sort of professional(s) should we consider helping us out, how much should we expect to pay for someone to take care of this for us, etc. - Anonymous please
We just bought a house and are wondering about others experience with the sellers renting back from the buyers. The sellers were renting back from us for 3 weeks after we had closed escrow. They were reluctant to give us a key and we had to wait over 2 weeks to get one. According to our agent, it is normal for the sellers to give the buyers a key after closing, even during the rent back period, afterall the buyer has just purchased the house. However, according to their agent, in all the 15 (?) years of their experience, they have never heard of the sellers giving the buyers a key during the rentback period after closing. What is the proper procedure? We never signed forms that state anything regarding when we would get a key. As the buyer/landlord now, we know we are bound by certain rules to give notice if we need to enter the property with a legitimate reason, and we have no problems with that. We would like to know what to expect with the key if we are ever in this situation again.
Last updated: Jun 3, 2007
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