Inheriting Tenants: To Boot or Not to Boot

I am working on a transaction right now for a family member who is purchasing a rental property.  I have agreed to manage the rental of the property while the owner continues to live out of state.

One of the caveats of property management is know what to do with tenants that you inherit from the previous owners of a property.  Unlike utilities, you cannot just stop service on a tenant that has a lease on the property.  The new owner is obligated to honor the existing lease, whatever that is, with the existing tenant.

In this particular case, the tenant is a relative of the seller.  There is also no written lease agreement.   We call this kind of circustance a Tenant At Will situation.  The law stipulates that the tenant is, in the absence of paperwork to demonstrate the contrary, on a month-to-month lease.  That is good because when we initiated the contract on the property, the listing agent gave notice to the tenant that they would need to vacate.  However, the tenant asked if we would be interested in renting to him moving forward.

There are a couple benefits to keeping an existing tenant:

1.  Any existing deferred maintenance (i.e. fresh paint, upgrades, ect.) and cleaning can be deferred to the end of the tenants desire/ability to rent the property.

2.  Rent revenues begin immediately.

This would seem on the surface like a win-win situation.  The tenant wants to stay and the owner would like to defer any cash expenses he might incur working to get the place rented.   

However, when the tenant called to discuss the situation our conversation went something like this:

Tenant:  Hi, I would like to stay.  It would be a real problem for me to move right now.

Me:  Ok, are you working?  How much do you make?

Tenant: Yes, I make $1600 a month.

Me: Ok, what do you pay in rent now?

Tenant: Well I havn't paid in a while...

Me:  Hmm...our rents would be around $550-$600...

Tenant: Oh we can do that, that will work for us.

Me: Ok, do you have any felonies on your record?

Tenant: Well, I do but it was in 2001.

Me: Ok, that is fine.  I believe in redemption so as long as you have a plan and are making your life better we should be just fine.

We then discussed the plan for me to get an application to him.  About an hour later I get a phone call again.

Tenant: So I just got off the phone with my attorney and I want to be totally honest with you.

Me: Uh, Ok

Tenant: Last month, I was really hungry and my girlfriend and kid were hungry so I put a sandwich in my pocket and walked out of the store.  They caught me so now we are trying to plead down to a misdemeanor.

Me: Hmmm.....

After discussing the situation with the buyer we determined that this tenant was much too high of a risk to rent to.  If he was truly employed like he said he was, stealing from local stores would not be necessary.  Also, paying rent to the current owners would not be a problem either.  We notified the tenant and the listing agent that we would not be continuing the lease and the tenant was to vacate prior to closing.

This story is not always the norm but property owners need to be prepared for these kinds of situations as they acquire new property.  

Turning A Blogging Leaf

Since 2008, Ogden Insights has been the home to real estate infotainment and curiosity for those in the Weber County area.  It is with mixed feelings I announce the creation of our new website and blog.

www.Vesta-Real-Estate.com

Blogger has been a great home for the past 8 years.  Yet, there is a season for all things.  Wordpress beckons and with it a new chapter for our business.

Look for all the same great content but in a new refined package.

I will see you there!

JUST SOLD! Pleasant View Mid-Century Marvel

I just closed on the purchase of this property for some clients:

This early 1960's rambler was a custom built home in its era.  The home is made of concrete with the floor joists being reinforced concrete beams.  The home is an architectural gem from its period.

As would be expected of a home from this time, the floorplan embraces wide open spaces and vaulted ceilings.

A unique feature about this home is its large half acre yard with recreational amenities including a pool and tennish court.

My clients obtained this property at an amazing price.  It was a tremendous bargain.  Congratulations to my buyers on their new home!  If you are in the market for a home in Pleasant View, CONTACT ME, and let's find one that fits your lifestyle.  

FOR SALE: South Ogden Home With Accessory Apartments

I just listed this very interesting property for sale in South Ogden, Utah.

Located at 4090 S. Monroe Blvd. this home is less than a mile from Weber State University and comes with 2 accessory apartments.  Each apartment is 1 bedroom and current income is $1345/mo.  from these units.  The owners live in the main 3 bedroom 2 bathroom portion of the home.

The layout is very open and spacious and boasts 3562 SQFT.  The master bedroom is extremely large and hosts a sink and mirror station for the ladies to get ready in the morning.  The main living space has lots of updates which include two tone paint, new carpet, updated kitchen and top of the line appliances, and more.  The roof was replaced several years ago.

The property also has plenty of parking and garage space.  There are four garages to choose from.

If you are interested in this property, CONTACT ME, and lets set up a private showing for you.

Water Woes: The Case for Installing Gutters

This year has been unusually wet.  Being such, homes have been put under stress as extraordinary amounts of water have threatened basement spaces and roof systems.  When it comes to basements, there are some simple things that people can do to manage problems with wetness.

Water that runs off a roofline drips along the edge of the home. That large amount of water doesn't just magically disappear into the ground never to be seen again.  In some cases, it festers along the foundation and seeps into walls.

Here is a case of a basement space that had seen slow moisture intrusion over the past 50 years.  The walls are rough because wood paneling had been laid over top.  When we removed the paneling, we discovered the water damage underneath.  In this case, the walls fell apart in our hands.  We had to tear out the walls 3 feet up from the floors.  

Here you can see how consistent the damage was across this wall.  This wall happens to be along the drip edge of the roof.  Water had been intruding for an extended period of time.

Fortunately, sheetrock can be replaced and walls painted.

To prevent problems like this in the future, we ordered gutters to be installed with downspouts guiding water away from the building.

JUST SOLD! Triple Condo Combo

I just closed on the sale of three townhome properties in Ogden.

The sellers of these condominium townhomes contacted me in February to discuss a strategy for liquidating their investments.  They had purchased these properties in 2013 at a discount and had been utilizing them successfully as income properties.

Rather than flooding the market with all three units at once, we initial took an approach of liquidating one at a time.  We listed the first townhome for $114,900.  This was slightly above my recommended list price but we thought the market might catch up to that price point over the course of several months.  We had several showings but no offers.

Part of our trouble was the presence of the renters when getting the home shown.  The renters made scheduling showings a little awkward and they didn't always keep the property is perfect showing condition.  My experience has been that selling rental property to owner occupants is a pretty tall chore unless the property is in a highly demanded location.  In our case, there was nothing particularly special about our location.  So, we became frustrated with how the market was receiving the listing.

Later we dropped the price to $109,900.  Around that time, we also listed the two other units and decided to approach it from an investment perspective rather than trying to market to the owner occupant niche.  This strategy proved successful.  Shortly thereafter, we received an offer.  If was too low, but we were getting calls and attention from investors.

The sellers decided to move things more quickly and we reduced the price of all three units to $99,000.  The next day a buyer that had shown previous interest in the property made a full price cash offer.  The transactions closed a month later.

Congratulations to my clients!  If you are looking to acquire income property or need to sell to transition into another investment, CONTACT ME, and lets discuss a marketing strategy that will help you accomplish your financial goals.

Tenant Trouble: The Trick to Breaking Leases

Sometimes, though not very often, we encounter tenants who no longer want to fulfill their obligation to pay rent through the end of their lease agreement.  Sometimes these situations are brought about by job loss, illness, or sometimes even just impulsive behavior.

Regardless of the cause, a lease agreement is a legally binding contract.  The landlord promises to keep the premises habitable and the tenant promises to pay rents and maintain the good condition of the property.  A failure to fulfill the contract can potentially have significant legal and financial consequences for a tenant.  

So, what is a landlord to do in situations where a tenant wants out?  I have found there are two approaches to this issue that work:

The Buy Out

In The Buy Out option, we charge the tenant two months rent in a lump sum.  The tenant's lease is terminated upon receipt of the funds and they move out at that time.  In this case, we typically will refund the tenant's deposit if the home is returned in good condition with all outstanding bills paid.  While this is a fair option, I have only had a few tenants choose this route due to the high up front cost.  Nevertheless, when it has been used, it has worked out well for both the tenants and the landlord.

Rent Responsible

With the 'Rent Responsible' option, the tenant will move out and pay rent until the property is leased again.  However, the deposit is forfeited in the process.  This has been the most popular route for tenants to follow in exiting a lease agreement.  Typically, since they want the property to rent soon, they will clean it and make it presentable with little hassle.  If the property rents quickly, they will owe very little in rents.  This is typically a win win scenario for both parties as well.

Scorched Earth

A third (and perfectly legal) option is for the landlord to demand the full terms of his lease.  This, of course, is a very adversarial approach and means that the tenant who will not pay their rent must face a massive judgement in court when a judge rules in favor of a landlord who demands that the terms of his lease be upheld.  

I am a big believer in win-win scenarios when possible.  Landlords don't want to be left holding the bag for another person's poor decision making.  Yet, they understand that sometimes hard situations are difficult to avoid.  So, the next time you find your tenants between a rock and a hard spot and needing to vacate a rental property early, consider The Buy Out or Rent Responsible options to keep the mortgage paid while you market the property to a new tenant.  

BOOM! Housing Market Signals Strongest Since 2007

The Weber County housing market continues to surprise us in its robustness.  To make the point, I put together some charts showing recent sales and price movements.

Our first chart shows us year-over-year sales growth per month.  As you can see, when compared to the same month last year, the past 12 months have seen solid sales growth with the exception of October.

This growth shows up in the volume chart:

Amazingly, June sale are the highest they have been since June 2007!  The trendline has also taken a stiff trajectory change upward after plateauing for the last two years.

Finally, prices have seen significant movement:

Recent median sales prices are the highest they have ever been in Weber County.  We now have exceeded our 2008 peak median housing price and then some.

So what does all this mean?  While I don't expect a housing wipeout, I do expect housing prices to moderate and perhaps stagnate sometime in the near future.  A jobs recession would cool the acceleration in price increases but timing on that is anyone's guess.

In the meantime, it is a perfect time to sell your home.  If you want to know what your home is worth, CONTACT ME, and let's review the fair market price of your property.      

PHOTO GALLERY: Crazy Scenes From the Housing Market

Shopping with buyers in the housing market can be full of surprises.  Here are some photos from some recent experiences viewing property.

Not all bathroom sinks are created equal.

I wish textured roofs were an 'in' thing.  Unfortunately, they aren't.  

I imagine an accident happening where the person doing the dishes gets knocked out by the person opening the freezer to get ice cream.  

Look! It's a storage bathroom.  

No living room is complete without an attractive BBQ grill as a center piece.

Who knew that grease can put a nice patina on your wall?

The crime scene mattress is always a fun treat when viewing homes. 

This house comes with a dishwasher.  It even has the new blue film on the front so we know it can't be that old.  This house is going at the top of the list.

This is why we always tell the kids to wash their hands.

Can you spot the property line?

You know you waited 130 years too long to remove that junk tree growing along your fence line when...

When listing a rental home, please instruct the tenants to lock up their grow farm in the basement.

Look for more crazy photos in the future.  In the meantime, happy house hunting!

Things To Do Near Ogden: Bushwacking To A No Name Peak Summit

My good friend and college bandmate Jesse Meik came to visit recently.  To celebrate the occasion, we decided to pick a local area hike.  Our interests pointed us toward Gunsight Peak just north of the town of Plymouth in Box Elder County.

After doing some cursory research we believed the trailhead started on the South Divide Road east of Plymouth.

At the top of the divide there were a couple parking spots.

We then began our hike on the two track trail heading north.

The trail was easy at first but we could see the trail ascending steeply up the mountain nearby.

Sure enough, the trail got very steep very quickly.

The upside was being rewarded with some spectacular views of the Bear River Valley and Cache Valley.

Unfortunately, the trail faded and we began the arduous task of bushwacking our way up the hill.  The rocks were very uneven and the soil was unstable.  It was slow going.

We thought we knew where we were going based on some research we had done in advance.  As it turns out, we were off course.

The mountain we were on forms a parabolic incline toward the very end of the ascent.  Of course, there was no trail to follow as we scrambled over loose rock, tall weeds, and fought off the horse flies.  

When we reached the top of our climb we realized our mistake.  There was a giant canyon separating us from Gunsight Peak which is seen here in the background.  We grumbled for a few minutes deliberating on how we wanted to proceed.  But a check of our water supplies told us we needed to turn back.

The walk down was as tricky as the hike up.  The loose rock and soil made for a cautious descent.

Here is the no name peak we hiked.  Our course took us along the ridgeline to the right.

In all, our hike was 1.6 miles one-way.  We ascended 1830 feet.  If you want to relive our misguided adventure, you can follow our trail.  In the meantime, may we all enjoy the great outdoor recreation Northern Utah has to offer.  Happy hiking!