Insurance and Awareness

I am now going to recount a problem I encountered as a landlord living far from his rental. This problem could have been avoided if I had been more aware of the e-mails I received from my mortgage company and if i had updated my information with all of those associated with my business.

As a first-time homeowner purchasing my property through the FHA´s 3.5% down payment I was a bit skeptical of listing the home initially as a rental. I mentioned it to various lenders at different companies and they all stated that there would be no penalty if the government or lender found that I no longer lived at my property. I was fairly confident that I would be fine as long as I continued to pay my mortgage. At the same time, I did have an ounce of doubt in this fact so I decided to list my home address with the lender as my rental property´s address. This is what led to a huge problem.

I began receiving messages from my lender about six months after having closed escrow. This company was sending peculiar messages that asked me to check my account inbox with them. When I attempted to login to my account I was told that my account had been frozen. For this reason I began ignoring any and all of their messages. After about three months of this I received a call from my associate informing me that my insurance on the home had been cancelled. The insurance company had sent a letter to my home address, ¨my rental property¨, that stated that my policy had been cancelled because of a fault with the backyard fence. In my opinion, this is a poor reason to discontinue a plan but that is how insurance companies work.

Upon learning this I immediately called my lender and asked them to reset my account so that I could sign-in. After this tedious process I read my messages and found that it had taken my lender a few months to realize that my property was uninsured. But now that they had realized their latest message stated that if I did not purchase a new policy within a month they would purchase one for me. This new policy would not necessarily be the cheapest on the market either. The message was dated almost a month in the past so I knew I had to purchase a new policy soon.

When I purchased the new plan I saw that I had done it the day before my lender had said was the deadline. My new insurance contacted the lender that same day to inform them that a new plan had been purchased. After believing the situation had been settled, I received an e-mail the next day from my lender. Apparently, the lender decided to purchase their own insurance for my property. This meant that they would soon be charging me for this plan, and that I would be paying double the insurance for two plans. I decided to rectify this quickly by calling the lender immediately. They informed me that the plan they purchased would be cancelled, but that I would have to contact the insurance company they paid to get my money back. It seemed the trouble would never end.

After a month I received a check from the other insurance company. As a pleasant surprise I also received a fairly large check from my lender as well, for the money I paid for insurance all those months I didn´t have a plan. It is strange that it ended up working in my benefit, although it was a fairly risk move. As a landlord be sure to stay on top of your mortgage lender´s e-mails. If you become locked out of your online account be sure to reset it immediately. Failing to do so can become catastrophic if an accident were to occur while the property is uninsured.

Learning to Landlord (Unit B)

At the closing of escrow Unit B, a 3 bedroom 1 bath unit, was already occupied. After having done the physical inspection of the property and before having purchased the property I felt that this tenant would have to be evicted eventually. The house was a mess, they had a pitbull, and they regularly left alcohol bottles and cigarette butts at the entrance of the duplex.

After purchasing the property I softened my stance a bit and decided to give them the opportunity to change their ways. This also allowed me to have some sort of cash flow, to cover the mortgage, while the repairs were made to Unit A. This worked while the repairs were made, but after they were complete the property management company had trouble renting Unit A. They advised that it was best to give the tenants in Unit B notice immediately. Since Unit A had gone two months without having been rented I assumed something must have been unappealing about the property. I personally went to the property and inspected the interior. The interior of the unit was fine, but it definitely was the neighbors that were the problem. Unit B had taken over the entrance to the duplex and set up chairs and tables to drink and smoke. It would make it very awkward for any tenant to enter their own home. The green light was given and the tenants were given the notice of eviction.

Property management indicated that this could be a long drawn out eviction. It is not uncommon for the sheriffs to be called to enforce and eviction. While this speeds up the process it is also quite costly. I have heard in Bakersfield it is about a $500 fee. The tenant promptly moved on his own that same month. This was a surprise, as was the state he left the unit in. It was hard to believe anyone could live in those conditions. The tenant even had the audacity to ask for his deposit back. Fortunately after only 2 weeks the tenants moved out willingly. Unfortunately, they could not have left the apartment in worse conditions. The filthy tenants left furniture, trash, cats, and insects in the home. It was not a pretty sight. I won´t even begin to get into the odor.

The apartment took an 8 hour day to clear and the handyman charged me $100 dollars for the work. Taking the trash to the dump costed the usual $45 per dump. The next day it took the handyman half a day to remove the carpet. Underneath the carpet there were stains and what can only be described as scum. This was likely from the cat urine that the tenants had refused to clean. This being the likely cause of most of the odor, it had to be removed. The kitchen had laminate flooring that also needed to be removed and redone. I decided to get my hands dirty on this project and came in to work two days on the weekend with my handyman. The tools and products used to fix the unit were all purchased at Home Depot.

The materials included …… . The laminate used costed …… per foot. The entire house was covered in laminate as I believe it is a wise alternative to carpet. It does not stain like carpet and it is possible to keep after a tenant leaves the unit. As I´ve stated before, I believe is the best and most economical form of flooring in the long run but it costs the most up front. It is also very time consuming for a single handyman. The entire remodeling of the unit took approximately two weeks.

I learned a great amount from this unit, from dealing with tenants to refurbishing the physical apartment. It is important to be upfront with the tenant from the beginning. There can only be very little leniance when the tenant does not follow the rules of the property. It is better to remove them entirely and start anew when they are not your preferred tenants. I also advise that all landlords take some time actually working at their properties. The manual labor I did with the handyman that included removing carpet and prepping the floor for laminate was eye-opening. Without getting too far into specifics, it can save you loads of money if you learn how to make simple repairs. It also very satisfying to see the fruits of your labor. As a new landlord get to know your tenants from a distance and be sure to work on your property.