You Bought an Investment Property …. Now What?

by MARK STILES on OCTOBER 27, 2014

Buying Investment Property


Last time, we took a look at the reasons why it is still a great time to invest in real estate. There are many types of investment properties ranging from multi-family homes to a vacation rental. This week, we’ll focus on real estate investments that include tenants. Many investors will focus exclusively on the acquisition of a property and the long term management of tenants that occupy it. Many first-time investors gloss over an important part of the process: establishing the landlord-tenant relationship. Here are the tips that you need to know before a tenant moves a single box into your new property.


Why Can’t I Save Some Money and Find My Own Tenant (on Craigslist)?

There is a recurring theme in many of our articles and that is: utilize the services of a Real Estate Professional. Finding a tenant is no exception. First and foremost, a good agent will act as a screen, minimizing the risk of getting saddled with a crummy tenant. Though you probably already have a general idea from information gleaned from your research before buying the property, an agent will also help you set the proper rental amount for the market. Perhaps most importantly, finding your own tenant will increase the likelihood that you will have to re-read our next article dealing with the eviction process in Massachusetts.

What do I need to do to Protect my Investment?

Your property is a valuable income-generating asset. The wrong tenant can cause damage to the premises, disturb your other tenants, and occupy your property while not paying rent, here are four quick and inexpensive ways to minimize the risk of being hitched to a bad tenant:

  1. Check their Credit Report: Documented history of timely payment of debt is a useful indicator that the Tenant will make timely rental payments to you. Further, making payments on time is a hallmark of a responsible consumer which supports the inference that the prospective tenant will treat your property responsibly.
  2. Ask for References: Some clients are surprised to hear this, but who would be a better judge of a tenant than their prior landlord? If the tenant refuses, that supports the inference that they didn’t get along with their prior landlord and that they may not get along with you.
  3. Don’t Settle: This is the time to trust your gut. Meet with your prospective tenant face to face. Your life experiences should give you a good idea of how they will perform. While you certainly want to push cash flow into the black, don’t settle for a tenant that you feel isn’t going to be a good fit. You may be able to cover your new mortgage payment, but you’ll likely spend many thousands of dollars (and many hours wishing you listened to your gut) to fix your new headache.
  4. Call Back: Call from a few different phone numbers that the prospective tenant won’t recognize. If they don’t answer, they may be ducking other creditors.

So I Found a Tenant–Now What?

  1. Get it in writing: Let me say that one more time: get it in writing! Your experienced attorney who helped you purchase the property can also help you to draft a written lease. This document will guide the landlord-tenant relationship. Resist the urge to use a form lease you found in a dark corner of the internet as most are not well drafted nor designed with Massachusetts law in mind. A written lease settles issues ranging from the monthly rental amount to the types of pets, if any, your tenant can keep. In the event of a dispute, it will be helpful to reach an expedient solution. Be sure to provide your tenant with signed copy of the lease as soon as possible.
  2. Establish a Record of the Property Conditions: We all carry a camera in our pocket–now let’s use it for something more useful than taking pictures of your food and posting it online! Before your tenant moves in, take pictures of every room, every fixture, down to the last detail-preferably with the tenant in each picture. If your tenant is camera shy, email the pictures to your tenant and ask that they respond with an acknowledgment that each is a fair and accurate representation of the current condition of the premises. It’s tedious and feels silly, but in the event of a dispute, you’ll have strong evidence to refute your tenant’s claim that the damage was a preexisting condition.
  3. Hold Your Tenant’s Money Properly: Nothing is more deflating in an eviction proceeding than the tenant claiming you’ve mishandled her money–especially the security deposit. This mistake can cost the landlord thousands of dollars in damages and months of unnecessary legal proceedings. Save your deposit slips. Keep a ledger of every payment with the date, amount, and what the payment is being credited to (remember: unlike a mortgage, rent is paid in advance–usually on the first day of the month). Contact your attorney for advice on this subject.

These tips should help to protect the hard-earned dollars that you’ve invested in your new property. Additionally, and perhaps more importantly, it will help you to avoid the eviction process. If you are forced into that undesirable situation, these tips should help you to prevail, more quickly, more inexpensively, with less inconvenience.

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

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Gallup Poll: Real Estate Best Long-Term Investment

Posted: 29 Oct 2014 KCM Crew

Gallup Poll: Real Estate is Best Long-Term Investment | Keeping Current Matters

The Gallup organization conducts an annual report entitled the Economy and Personal Finances Poll, which asks Americans to choose the best option for long-term investment. It was no surprise that real estate returned to the top position over other investment categories (gold, stocks/mutual funds, savings accounts/CDs and bonds). Back in 2011, gold was the most popular long-term investment among Americans. However, with the housing market improving across the U.S. and home prices rising, more Americans now consider real estate the best option for long-term investments.Gallup Poll: Real Estate Best Long-Term Investment | Keeping Current Matters

The poll also revealed that real estate was considered to be the best long-term investment by all four subgroups by age and two out of three by income:Gallup Poll: Real Estate Best Long-Term Investment | Keeping Current Matters

Gallup Poll: American’s believe real estate is the best long-term investment. #KCM2014
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Gallup Poll: Real Estate Best Long-Term Investment | Keeping Current Matters


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Understand Your Credit Scores, October 29th, 2014
Lenders want to give you a mortgage, but they also want to minimize their own risk. The easiest way to retard risk is for them to use your credit scores to make their lending decisions.
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Is Airbnb The Goldmine You’ve Been Waiting For?, October 25th, 2014
With Airbnb, you can list your home, or even just a room if you’re so inclined, for travelers from all over the world. They stay, you get paid. It’s a growing alternative to hotels and works particularly well for those places that are located in a desirable travel spot or one that attracts large sporting or entertainment events or conventions.
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3 Questions to Ask Before Buying a Home

Posted: 27 Oct 2014 KCM Crew

3 Questions to Ask Before Buying a Home | Keeping Current Matters

If you are thinking about purchasing a home right now, you are surely getting a lot of advice. Though your friends and family have your best interests at heart, they may not be fully aware of your needs and what is currently happening in real estate. Let’s look at whether or not now is actually a good time for you to buy a home. There are three questions you should ask before purchasing in today’s market: 

1. Why am I buying a home in the first place?

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances. A study by the Joint Center for Housing Studies at Harvard University reveals that the four major reasons people buy a home have nothing to do with money:

  • A good place to raise children and for them to get a good education
  • A place where you and your family feel safe
  • More space for you and your family
  • Control of the space

What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.

2. Where are home values headed?

When looking at future housing values, Home Price Expectation Survey provides a fair assessment. Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts into a single number. Here is what the experts projected in the latest survey:

  • Home values will appreciate by 4% in 2015.
  • The cumulative appreciation will be 19.5% by 2018.
  • Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of over 11.2% by 2018.

3. Where are mortgage interest rates headed?

A buyer must be concerned about more than just prices. The ‘long term cost’ of a home can be dramatically impacted by an increase in mortgage rates. The Mortgage Bankers Association (MBA), the National Association of RealtorsFannie Mae and Freddie Mac have all projected that mortgage interest rates will increase by approximately one full percentage over the next twelve months.

Bottom Line

Only you and your family can know for certain the right time to purchase a home. Answering these questions will help you make that decision.Line-Break

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Five Ways Bargain Hunting for Homes can Backfire, October 24th, 2014
It’s natural to want to save money when you’re making a purchase as large as a home. You want to buy the best home in the best neighborhood at the best price, and to do that, you may think you have to shop in the bargain bin. Here are five ways a low price can backfire on you:
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Your House Usually Isn’t Worth as Much as You Think, October 24th, 2014
It’s a seller’s market! Those two words get everyone that’s about to put their house on the market all giddy. But “seller’s market” doesn’t mean license to be a real estate snob. Somewhere between what the last people paid for a house like yours and the highest price suggested to you by a REALTOR – that’s your sweet spot. But pinpointing it isn’t always easy. Here are five tactics that will help.
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