Choosing the Perfect Investment Property

August 1, 2023

Seamus Nally, the CEO of TurboTenant, recently added a new rental property to his portfolio. Krista chats with Seamus about everything that went into his decision to purchase this property in this weeks episode of Be A Better Landlord.

Video Transcript

Krista:

Hi, I’m Krista. This is Seamus, and we’re here to help you be a better landlord. So, Seamus, when we get together, usually you are asking me questions, but today we’re actually going to flip the script. I have a bunch of questions for you. You just purchased a property, is that true?

Seamus:

Yes, I did purchase a rental recently to add to my portfolio.

Krista:

That is thrilling. I’m super excited. So, can you tell us first where you were looking and why?

Seamus:

Yeah, absolutely. So, first I was looking and just really opportunistically in the state of Wyoming where I live in Fort Collins. We’re about an hour away from Cheyenne, Wyoming, which means there’s an awesome opportunity for us to look at rentals up there. The market up there is definitely softer than Northern Colorado, which has seen a lot of increases in price. We were looking up there to try to understand what would be available for us. Brilliant, that makes a lot of sense. How did you pivot? But I know that you didn’t end up going with somewhere in Wyoming. Tell us about that, how did you pivot to your current property?

Seamus:

Yeah, so despite the fact that Wyoming had cheaper rental properties and has more friendly landlord-tenant laws up there, specifically around evictions, I think it’s really important to understand the laws before you make a purchase. The one thing that Wyoming has going for it is, in the worst-case scenario, you have to make an eviction, that process is very expedient. That was something that I was looking into. However, all that being said, we ended up coming across a listing that was posted within two miles of our primary residence.

Nice, yeah, it ended up being a great opportunity for us because:

  1. we completely understand the market in Fort Collins,
  2. I actually had a relationship with a listing agent already. I didn’t have a real estate agent bring this to me, but when we found it, I know that individual and trusted them really well.
  3. The third kind of thing that tipped us over the edge is because of that proximity, not only do we know the market really well, but we also are available in case we need to respond to any maintenance requests. I could use the contractor I do on my own house if I have any maintenance repairs or anything to do on the property.

So, it all just fit together really nicely. I mean, that sounds pretty perfect.

Krista:

Now, just to be clear, are you planning to manage this rental yourself?

Seamus:

Yes, we will manage this ourselves. We’re planning on managing the one in Wyoming ourselves as well. In my opinion, it’s definitely not worth the 10 to 14 property management fee for any property, even if it’s within 90 minutes or so of our house. Yeah, that makes a lot of sense.

Krista:

Now, tell me a little bit more about the property that you went with. How did you evaluate the deal?

Seamus:

So, we looked at a couple of different things.

The first thing, like I said, was instead of focusing on the price to start, we actually focused on what we think we could rent it for. So, we looked at comparables. We went to TurboTenant and used our rent estimate calculator to try to understand what is rent going for in the area. Within the calculator, there’s a whole lot of inputs for all the details you need to actually calculate your cash on cash return. What myself and my wife did is we went through and we saw what data points that we had readily available and then what data points we needed to go hunt for. Some examples of things that we didn’t have readily available were like our landlord insurance. What is that going to cost in that area? And what’s really awesome about the calculator is you can adjust it, $100, $200, and see how that changes your return. It also helps a ton to establish that relationship between you and your tenant as a professional one. A lot of landlords have a really hard time interacting with their tenants and not becoming kind of like a friend. And when you’re sending something that is official, a documentation of violation, they understand that this is not a suggestion, this is a serious matter that they have to take care of in order to continue to live in the property.

Seamus:

Absolutely. And sometimes that official documentation is enough to get someone to cure their behavior, especially if it is a behavioral issue or issues between tenants. That kind of very formal notice says, “Hey, stop this immediately,” and a lot of them will. If it’s a non-payment of rent issue, you might not see the same results, but you still need to follow the process because, again, documentation is your best friend. And document throughout the tenure of your relationship with this tenant. Don’t just start documenting things when you feel like you may have to make an eviction later down the road. It’s really important that landlords are documenting throughout the entire relationship with the tenant. All right, so what’s step three in the eviction process?

Krista:

Step three is going to be to notify your tenant with an official eviction notice. So that means you need to know how much time you have to give them in order to abide by your local laws. It could be as few as three days depending on why you’re evicting them, where you live, what’s in your lease. It might be as many as 91 days. That 91-day mark is actually a notification period that you have to use in Colorado if a tenant doesn’t pay rent in certain counties. So again, check back on your laws because that’s going to dictate how much notice you need to provide. And so that notice that you’re providing is: Is this how many days you have to wait before you actually give them notice, or it’s once you give them notice, how many days they have to vacate the process before you actually move forward with an eviction?

Seamus:

Yeah, so it’s the latter. It’s the amount of days that the tenant has to act before a consequence arises. You’re basically saying, “Hey, this is a list of what’s gone wrong here, the lease violations. If this is a non-payment of rent issue, here’s how much you owe and when that was due along with any kind of late charges, etc.” And then you want to outline their next steps. So whether that is a payment they need to give you by a certain date, or otherwise, just a quick notice where they have to vacate the property. Make sure to outline that along with the day that you need that to happen. Have all of that together and be sure that you’re sending it in a way that is provable and documentable. So certified mail is a great option, it’s also required in some counties. You could also perhaps post it to the door if that’s allowed in your county, as long as you can prove that the tenant received this notice. That is the most important part of moving forward.

Krista:

Yeah, and a lot of our viewers may be like me, a little stingy, maybe extra frugal. I think this is one of the places where certified mail is worth the expense in most cases. This is something that we feel strongly about, it’s something that we encourage you to pay for even if it feels uncomfortable to you. One, you’re not going to be the bad guy when you’re like, “Hey, I need you to sign for this,” that’s just procedural. And then two, if you are ever in a court of law trying to say, “Hey, I did this correctly,” the judge is going to be much more likely to listen to you if you have a certified letter. So it is something that is highly recommended to go ahead and pay that expense. This is also the time that you need to prepare yourself to move forward going to court.

Seamus:

Absolutely. So step four, what do you need to do here?

Krista:

So step four is the court filing. This is an official complaint that you’re going to be filing with the court that outlines exactly what’s going wrong in the process. This step is absolutely procedural, so make sure that you are doing exactly what you need to do. If you’re in a big city, you likely have local law advice centers. These are free clinics available to landlords to ask the questions, to make sure that they’re taking the right steps. If you don’t have that available, you’re going to need to hire an attorney or use legal documentation available in your area to make sure that you are filing this compliant correctly. This is also a great time to reach out to legal representation that you might want to use for the entire eviction process. So far up until this point, it’s been able to be a self-service thing, but when you are actually moving forward with a court filing, this is a great time to reach out to an attorney and say, “Hey, I am self-filing at this point. If I need you later, can you come in?” It’s a great time to start developing that relationship. Another thing to note is you’re likely going to have a fee associated with this court filing, so check on what that’s going to be in your area. Also, be prepared that if the tenant does not take the eviction notice seriously, if they do not leave the property on the timeline provided, you’re likely going to have legal fees moving forward. So make sure that you have those expenses in order, in addition to your loss of rent for potentially months moving forward.

Seamus:

Yeah, and those legal fees can really add up depending on the complexity of the case and how long it goes on, so definitely be prepared for that. So we’ve filed with the court, and now we’re moving on to step five.

Krista:

Step five, guys, this is the fun part. This is the part that’s also super unpredictable. This is the court appearance itself. This is where you as the landlord have to prove your case, and this is also where the tenant has the opportunity to defend themselves. So if you think that you’re just going to walk in and say, “Hey, they haven’t been paying rent for three months,” and the judge is going to be like, “Okay, cool, they need to go,” no. This is an opportunity for the tenant to come in and say, “No, this is why we haven’t been paying rent,” or “This is why this isn’t valid,” and then it’s your job as the landlord to prove that, “No, we followed every step of the process, this is why we need this eviction to move forward.” It is not a “judge is going to rubber-stamp the approval.” You really have to do your part, and it’s so important in this step that you have that legal representation. I know I said that this is the point where you might start it, but it’s important to have legal representation all the way through because they will be able to help you prepare for this court appearance.

Seamus:

Absolutely. And this process, as you mentioned, is unpredictable. It can vary greatly depending on the judge, depending on the specifics of the case, and sometimes depending on the jurisdiction. So this is where having that legal expertise really comes into play because they understand the local laws, they understand the local court procedures, and they can help present your case in the strongest possible way. So it’s definitely not a step to be taken lightly.

Krista:

Yeah, absolutely. And then once you’ve been approved for an eviction, the tenant does need to be notified and given a timeline on when they need to leave the property. Now, what’s nice is if you’ve been following these steps and you’ve really been keeping documentation throughout the entire process, this is not going to be a surprise to the tenant. They’ve already had at least two notifications from you in the process saying, “Hey, this isn’t working out, we’re moving forward with eviction.” So they should be preparing for it, they should not be blindsided by this moment. This is also the time when you might have sheriff involvement, where the actual eviction takes place, and they remove the tenants and their possessions from the property. Some counties require this, some do not. Again, this is the step where knowing your local laws comes in really, really handy. And I will say, don’t try to strong-arm this yourself. If your county requires the sheriff’s involvement, don’t try to be the tough guy. Make sure that you are having the sheriff do this to ensure that you’re abiding by all laws, you’re not breaking any rules, and that you’re keeping yourself out of legal trouble.

Seamus:

Yeah, absolutely. This is not a time to take matters into your own hands. This is where you need to be fully compliant with the law, fully compliant with the court’s orders, and let the legal process and the appropriate authorities handle the situation. So that’s a great overview of the five steps of the eviction process. I think it’s really important to remember that eviction is a last resort. It’s not something that anyone wants to go through, but sometimes it’s necessary for the protection of the landlord’s interests and the property itself. So, Krista, thank you so much for walking us through these steps.

Krista:

Absolutely, it was great to be here, and great to share the steps with you.

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