Being a rental property owner can we rewarding. It's a great way to build equity, when economic times are good of course, and the tax deductions are a great way to cut down on your tax bill too. But a deadbeat renter can ruin you.
Many lenders are beginning to require borrowers who own multiple properties to have at least six months of mortgage payment reserves to qualify for a loan. This means six months reserves for each property. So say you have a $1,500 mortgage payment on just one of your rentals. That would mean you need $9,000 in reserves. So imagine if you need to have that set a side for several homes. Although, this will undoubtedly continue to slow the mortgage industry, I can understand why this is being done.
We recently had a renter break their lease and move out. We have now had to scramble to get the property cleaned up and begin showing the house. No matter how much you take as first and last down, run a credit and back ground check, and screen your renter things happen. We have had problems with this particular renter from time to time. Even though she had good credit and a steady job she had been late several times on paying her rent. She always made good and even paid our somewhat high late fees. We charge $50 a day in late fees. Not to make a profit, but to deter renters from being late. Whenever the renter was late we had dish out the money from our own funds to make the mortgage payment. If you have to make the payments on your own, whether it is because the renter is late or the home isn't rented yet, it can cripple your finances.
We have gotten off pretty easily compared to other landlords we know. Our friends, who own the rental next door to ours, had to put $5,000 into their rental after their dead beat renter skipped out on the rent and left the house basically trashed. Leaving the the entire carpet to be replaced and the entire interior re-painted. Other friends have had to put mortgage payments on credit cards to keep defaulting on the the mortgage. We had to pay $300 to have our rental cleaned, $100 in spackle, paint, light bulbs, etc. and $100 to clean up the landscaping. So the $500 we spent was a drop in the bucket for what it could have cost us.
It is a prime time for scooping up investment properties, but be ready to have a few bucks in the bank to be able to qualify for a loan. Not to mention money sent a side with things that may need fixing: air conditioning/heater, hot water heater, garbage disposal, etc or cleaning up after the renter moves out.
People rent for different reasons. Some need a place to live while their waiting for their new home to be ready, some have recently lost their homes and some just don't want the hassle of maintaining a home. But some people don't own a a home for a reason. Some might be not only be deadbeat renters just plain debtbeat.
Many lenders are beginning to require borrowers who own multiple properties to have at least six months of mortgage payment reserves to qualify for a loan. This means six months reserves for each property. So say you have a $1,500 mortgage payment on just one of your rentals. That would mean you need $9,000 in reserves. So imagine if you need to have that set a side for several homes. Although, this will undoubtedly continue to slow the mortgage industry, I can understand why this is being done.
We recently had a renter break their lease and move out. We have now had to scramble to get the property cleaned up and begin showing the house. No matter how much you take as first and last down, run a credit and back ground check, and screen your renter things happen. We have had problems with this particular renter from time to time. Even though she had good credit and a steady job she had been late several times on paying her rent. She always made good and even paid our somewhat high late fees. We charge $50 a day in late fees. Not to make a profit, but to deter renters from being late. Whenever the renter was late we had dish out the money from our own funds to make the mortgage payment. If you have to make the payments on your own, whether it is because the renter is late or the home isn't rented yet, it can cripple your finances.
We have gotten off pretty easily compared to other landlords we know. Our friends, who own the rental next door to ours, had to put $5,000 into their rental after their dead beat renter skipped out on the rent and left the house basically trashed. Leaving the the entire carpet to be replaced and the entire interior re-painted. Other friends have had to put mortgage payments on credit cards to keep defaulting on the the mortgage. We had to pay $300 to have our rental cleaned, $100 in spackle, paint, light bulbs, etc. and $100 to clean up the landscaping. So the $500 we spent was a drop in the bucket for what it could have cost us.
It is a prime time for scooping up investment properties, but be ready to have a few bucks in the bank to be able to qualify for a loan. Not to mention money sent a side with things that may need fixing: air conditioning/heater, hot water heater, garbage disposal, etc or cleaning up after the renter moves out.
People rent for different reasons. Some need a place to live while their waiting for their new home to be ready, some have recently lost their homes and some just don't want the hassle of maintaining a home. But some people don't own a a home for a reason. Some might be not only be deadbeat renters just plain debtbeat.
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