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Old 01-27-2014, 09:50 AM
 
Location: Silicon Valley
18,812 posts, read 32,262,905 times
Reputation: 38559

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Iowa, I think your idea is brilliant!

I just retired from a resident manager job I had for 8 years, in a building next to a university. Most of my tenants were students, renting tiny studio apartments from me.

My daughter rented a big house when she went to college in Santa Barbara, with a bunch of other girls.

Based on my experience on the above, here's what I suggest:

1) separate rental agreement for each tenant - don't list them all as co-tenants on one lease

Why? So you can kick one out without having to kick out everyone else.

2) month-to-month agreements only.

Why? 30 days notice and the roommate everyone hates is gone. The alternative is negotiating a buyout if you want to get rid of someone. Not worth it. And there's no guarantee they will all actually stay for the full lease period anyway.

This also allows you to raise rents, change the rules, etc., with just a 30 day notice.

3) no co-signers.

Why? Now your daughter is dealing with parents AND roommates (with bossy parents). If you have co-signers, by law you have more work to do - you have to also notify co-signers when there are changes in agreements, blah blah. This gives the kids their own credit reports - and an incentive to behave.

With my students tenants, I told them I don't care where the money comes from, but I will only deal with the person on the contract.

For student tenants, I ran a credit check and had them give me proof they were a full-time student. That's all I required of full-time students.

4) all utilities included

Why? Alleviates the arguments over who is turning up the heat, blah blah. I suggest that you put the temps in the rental agreement that the thermostat will be set at. So many degrees in winter, so many degrees in summer. When your daughter catches someone dinking around with the thermostat - 30 days notice. Bye.

5) Gardener and weekly housecleaner included.

Why? Again, no arguments over who cleans the floor when it's their turn, or doesn't do a good enough job, blah blah. Will be worth the money. Wrap it into the rent.

6) No pets - obvious

7) Limit overnight guests/parties. If abused - 30 day notice.

8) Don't provide a house landline. Let them use their own cell phones.

9) Advertise rooms for rent on the off-campus housing listings for the college first. Avoid Craigslist as much as possible. I had good luck with Craigslist, but your daughter will be bombarded with calls/emails and 99% will be people she won't want to rent to, then she has to be sure and do everything by the book under Fair Housing. It's completely legal to only advertise at the college.

I suggest you learn what your occupancy limits are per Iowa. Make sure you won't be breaking any fair housing laws if you say only one person per bedroom. You want to know what to say, within the law, if a student shows up with a husband and/or child.

I think you should be the owner of the house for now. Why? Because there is no reason to share the tax benefits with your daughter at this point. This way, your home office deductions are all yours, for instance.

This is a fantastic book. I got it for my daughter when she rented out her first house.

Every Landlord's Tax Deduction Guide - Legal Book - Nolo

All of the Nolo books are fantastic. I had the one they wrote especially for CA landlords. Unfortunately, they don't have an Iowa specific one.

I suggest you join an apartment owner's association so you can use their legal guides and contracts, etc. Not sure where you are, but here is the apt assoc for Iowa City. If that's not where you are, call them and ask which apt association would be best for you:

GICAA - Home

The apt assoc the owner I worked for in the SF Bay Area, also got a discount on tenant screening services.

Here is a link that includes a roommate agreement that might give you an idea on what to include in your contract, that will include some roommate issues:

Roommate Rental Agreement

Living with roommates is a pain even when you are all in love, lol! So, she will have some headaches, for sure. I think the key will be to minimize the things people generally argue over as much as possible. And use that 30 day agreement so she can kick people out with a 30 day notice.
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Old 01-27-2014, 10:03 AM
 
Location: southwest TN
8,568 posts, read 18,031,561 times
Reputation: 16701
Read the above response again - and then again. It's excellent advice.

And do read the Landlord-Tenant Statutes for that state before anything.

What's with your fascination for a QC Deed? They are barely worth the paper they are written on. Go for a full WD unless there's some serious cloud on the title. Why create one?

I would name your daughter as the "local" PM retaining the power in you. That way when a situation arises that may be a personality conflict with your daughter and one of the tenants - or even between 2 friends of hers, she has you to fall back on to resolve the issue. After all, the idea is for her to retain her full scholarship, not spend all her time dealing with roommate issues and whose boyfriend spends too much time and infringes on the privacy of the other tenants.
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Old 01-27-2014, 11:22 AM
 
53 posts, read 83,115 times
Reputation: 63
You do not receive any tax benefit from owning this property. Use of the property as the main home for a member of your family is treated the same as personal use. You cannot deduct expenses in excess of the rent income collected. You cannot report a loss. The accountant you consulted does not seem to have communicated this to you. Perhaps the accountant did not understand all of the facts that you've presented in this forum. Here is the link to the IRS publication if you wish to verify Publication 527 (2013), Residential Rental Property. On an earlier page in this publication, personal use is defined as any day that the dwelling is used by "any other person who owns an interest in it" or "a member of your family" -- both of which apply to your situation.
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Old 01-27-2014, 12:58 PM
 
2,737 posts, read 5,430,066 times
Reputation: 2305
If this kind of arrangement tended to pan out well, thousands of parents would do the same thing. Many have thought about it and many can afford it. I have been a landlord and again, I would encourage you not to dismiss the valid points many of us have raised. We have no dog in the hunt. But whatever you decide to do, best of luck to your daughter for a great college experience. She sounds like a good kid with a very supportive family.
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Old 01-27-2014, 01:02 PM
 
2,737 posts, read 5,430,066 times
Reputation: 2305
Quote:
Originally Posted by NoMoreSnowForMe View Post
Iowa, I think your idea is brilliant!

I just retired from a resident manager job I had for 8 years, in a building next to a university. Most of my tenants were students, renting tiny studio apartments from me.

My daughter rented a big house when she went to college in Santa Barbara, with a bunch of other girls.

Based on my experience on the above, here's what I suggest:

1) separate rental agreement for each tenant - don't list them all as co-tenants on one lease

Why? So you can kick one out without having to kick out everyone else.

2) month-to-month agreements only.

Why? 30 days notice and the roommate everyone hates is gone. The alternative is negotiating a buyout if you want to get rid of someone. Not worth it. And there's no guarantee they will all actually stay for the full lease period anyway.

This also allows you to raise rents, change the rules, etc., with just a 30 day notice.

3) no co-signers.

Why? Now your daughter is dealing with parents AND roommates (with bossy parents). If you have co-signers, by law you have more work to do - you have to also notify co-signers when there are changes in agreements, blah blah. This gives the kids their own credit reports - and an incentive to behave.

With my students tenants, I told them I don't care where the money comes from, but I will only deal with the person on the contract.

For student tenants, I ran a credit check and had them give me proof they were a full-time student. That's all I required of full-time students.

4) all utilities included

Why? Alleviates the arguments over who is turning up the heat, blah blah. I suggest that you put the temps in the rental agreement that the thermostat will be set at. So many degrees in winter, so many degrees in summer. When your daughter catches someone dinking around with the thermostat - 30 days notice. Bye.

5) Gardener and weekly housecleaner included.

Why? Again, no arguments over who cleans the floor when it's their turn, or doesn't do a good enough job, blah blah. Will be worth the money. Wrap it into the rent.

6) No pets - obvious

7) Limit overnight guests/parties. If abused - 30 day notice.

8) Don't provide a house landline. Let them use their own cell phones.

9) Advertise rooms for rent on the off-campus housing listings for the college first. Avoid Craigslist as much as possible. I had good luck with Craigslist, but your daughter will be bombarded with calls/emails and 99% will be people she won't want to rent to, then she has to be sure and do everything by the book under Fair Housing. It's completely legal to only advertise at the college.

I suggest you learn what your occupancy limits are per Iowa. Make sure you won't be breaking any fair housing laws if you say only one person per bedroom. You want to know what to say, within the law, if a student shows up with a husband and/or child.

I think you should be the owner of the house for now. Why? Because there is no reason to share the tax benefits with your daughter at this point. This way, your home office deductions are all yours, for instance.

This is a fantastic book. I got it for my daughter when she rented out her first house.

Every Landlord's Tax Deduction Guide - Legal Book - Nolo

All of the Nolo books are fantastic. I had the one they wrote especially for CA landlords. Unfortunately, they don't have an Iowa specific one.

I suggest you join an apartment owner's association so you can use their legal guides and contracts, etc. Not sure where you are, but here is the apt assoc for Iowa City. If that's not where you are, call them and ask which apt association would be best for you:

GICAA - Home

The apt assoc the owner I worked for in the SF Bay Area, also got a discount on tenant screening services.

Here is a link that includes a roommate agreement that might give you an idea on what to include in your contract, that will include some roommate issues:

Roommate Rental Agreement

Living with roommates is a pain even when you are all in love, lol! So, she will have some headaches, for sure. I think the key will be to minimize the things people generally argue over as much as possible. And use that 30 day agreement so she can kick people out with a 30 day notice.
Bear in mind that if one of the roommates leaves or is evicted mid semester, it is often very difficult to find a good replacement at that time. This is especially true if the university is in a small town.

Re co signers, without them, the landlord has a much more difficult time getting money from a roommate who fails to pay. College students typically have little income or assets.

Last edited by ACWhite; 01-27-2014 at 01:14 PM..
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Old 01-27-2014, 01:05 PM
 
2,737 posts, read 5,430,066 times
Reputation: 2305
Quote:
Originally Posted by iowa4430 View Post
thanks
Re your first point, remember the high costs of acquiring and selling the property. If the value does not increase substantially in 4 years, you will incur a loss, and very little of it if any will be deductible given recaptured depreciation.

Re your second point, typically, dorm rates include meals, but it is not clear whether you are comparing apples to apples.

With all due respect, I'm sure you have spent a lot of time thinking about this, but from your posts it appears that there are many considerations you still need to investigate.
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Old 01-27-2014, 03:59 PM
 
18,775 posts, read 27,204,822 times
Reputation: 20123
I worked for several years for a lady who had 2 rental houses basically downtown Seattle, close to Seattle Art Institute. She rid of them by now, as far as I know.

1. She never had lack of tenants.
2. She always had fast and furious tenants turn around and I always had things to do.
3. Where there was one tenant, it always ended in several more pals and gals tugged along; yeah, right, no pets. Like they will ask or tell you.
4. it was always a mess after they left. Always. Not trashed, but mess, yes. They simply do not care. This is why she had standard - oil black floor oil white walls. Was supposed to be hygienic but they often had their own ideas.
5. Overall, it was always like a gipsy camp. I don't think you can get this out of them.
So, if you up to all this - go for it.
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Old 01-27-2014, 08:24 PM
 
10,181 posts, read 10,202,497 times
Reputation: 9251
Quote:
Originally Posted by iowa4430 View Post
So my daughter is a freshman in college and we are interested in buying a rental property near her campus.

A couple reasons.

One is to help build credit for her

The other is that she wants to get out of college with as little debt as possible. She has full tuition taken care of already and wants to move off campus (expensive room and board on campus...it's nearly $10k per year) in order to live basically rent free the next 3 1/2 years.

The idea being that her roommates will pay the rent and also maybe provide a little extra cash flow.

The house is 5 bedrooms and 2 baths and she already has 4 room mates lined up.

Financing is already taken care of.

I was wondering if others can provide guidance on advice on do's and don'ts as well as a resource for a rental agreement as well as things to have in it.

Any other advice or input is appreciated.

Note that as of now, the plan is to co-own it with her. when she graduates and moves on, I will just take over ownership/management of the rental through quit claim deed (or sell it).

It's kind of a neat little situation as it's a small college and it sure seems like we will have a pipeline of good renters through the athletic programs.....

We plan for her to basically manage it, collect rent, keep the rooms filled and general upkeep etc.
Have you ever been a LL? I'm thinking no, because it's not as easy as buying a place, keeping rooms filled and performing general upkeep. And to put that on a kid? I don't care how motivated or smart that kid is, it's a lot. It will be a learning experience for sure, but not one I would put on my kid while in college.

I say this because I've been renting to college students for over a decade. All kinds. From pre-med to med students, kids in the engineering program, grad students of all types, PhDs candidates....

You've already received quite a bit of good advice. Let me just add a thing or two.

With respect to the lease and having the kids all sign an individual lease, you should check with the town/city this property is in. Make sure that you can have individual leases/collect individual rent checks - some towns/city won't allow that because you would be presenting your property as a boarding house and unless you are licensed to do so, you can't.

Also make sure you look in to the LL guidelines for the town/city. Where our properties are, inspections have to be done every two years or more frequently depending on the issue, paperwork has to be filed every year stating rents, rent can only be so much and increase a certain percentage every year....

Personally? I wouldn't let her tell her friends that she has any part of it. I get that it is in name only, but let her roommates think you have the final say in anything that goes on. As others have said, things can get "weird" when you rent from your friend.

She's essentially going to be the LL so when something breaks, does she have a go-to guy that isn't going to take advantage of a very young female home-owner?

Is she ready to deal with "Hey LL, the toilet keeps running, you need to fix it. Hey LL, the heat isn't working in my room, you need to fix it. Hey LL, the faucet broke off in my hand, you need to fix it. Hey LL, there's a leak in my bedroom ceiling, you need to fix it. Hey LL, SOMEONE broke [insert anything], you need to fix it. Hey LL, the fridge keeps freezing the lunch meat I bought, what's up with that and who is going to fix it? Hey LL, who pays for light bulbs? Hey LL, there's no hot water, you need to fix it. Hey LL, I'm going to be late with my rent, sorry. What do you MEAN I can't paint MY room THAT color?....etc. "

Is she ready to deal with being the "bad guy?".

For building credit, why not get a credit card in her name (that she isn't allowed to use, you keep) and charge tuition/books/food or whatever you help her with monetarily? Or if she's responsible, she should already have one in her name. Does she have a car? She can charge gas. She can charge her car insurance - you can use her card to pay yours, to help build her credit.

And definitely NO PETS.

Last edited by Informed Info; 01-27-2014 at 09:45 PM..
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Old 01-28-2014, 10:50 AM
 
4,567 posts, read 10,595,579 times
Reputation: 6725
She is going to be under enormous pressure just for school and you want her to worry about your rental property as well?

Your not a very good parent if you do this to her.
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Old 01-29-2014, 07:34 AM
 
Location: Silicon Valley
18,812 posts, read 32,262,905 times
Reputation: 38559
Quote:
Originally Posted by 399083453 View Post
She is going to be under enormous pressure just for school and you want her to worry about your rental property as well?

Your not a very good parent if you do this to her.
I call unnecessary snarkiness.
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