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Category: Inspirational Current Grade: A Total Views: 2332 Member Comments: 6 |
Posted on: 02/15/2007 Posted by: crystalwillett Blog Points: 5079 View all blogs >> |
I just got a tax bill from the city that wasn't escrowed into my mortgage payment on one of my houses. I don't know why it wasn't, because the county and insurance is. BUT... now I have this bill. Since the people lease optioning my house is now paying the taxes and insurance, would you send the bill to them? Or would you count it as a 'mistake' that wasn't brought into light when they moved in and eat the money. We are talking about $580.00. It's a big bill for both of us. Let me know what your thouhts are on this, please!
I have another question. Can I raise rent on a lease option or is it set the entire term? Any thoughts on that?
I agree with Colin on the tax issue , personally I would just eat an amount that small , it`s the cost of doing business.
In my lease contracts I have a sentence at the end of the paragragh that talks about the rents and the amounts etc , that goes something like this , "There shall be a standard monthly rent increase of ______% for each consecutive year" , you can do between 5 to 15 % annual increase this way , even tho I seldom use this if I have positive cash flow.
Good Luck
Norman
My first thought is...when is the tax bill due? Usually these have some time before they are really due. Do your tenants pay taxes as part of the rent and do they know they are paying the taxes? My reason for asking is that if they are then you might just let them know you got this bill, but it isn't due for another 3 months or so (tell them you will add this amount split up to their rent over the next so many moneths to get it paid for IF they are responsible for this specific cost). MAKE SURE YOU GET THAT PAID OR ELSE YOU WILL LOSE THE HOUSE TO ONE OF THE OTHER INVESTORS ON HERE!! DO NOT LEAVE THAT RESPONSIBILITY TO THEM!
You cannot raise the rent during the term of their lease unless they have breached the agreement which could cause you to draw up new terms. Even if you did a 2 year deal...you cannot raise rent. One leveraging tool is if they have breached your contract...I could see renogiating rent with them and let them know you will not kick them out and take their option money (there is a prettier way to say that I'm sure). -Jess
Basically it comes down to your contract; does it say she pays the taxes on the house or you? Colin did a great job explaining it!
Hi Crystal,
A few things I'd like to make a note on from your blog. First, for all our lease/option tenants, WE pay for all the PITI, mortgage payment, taxes, insurance, everything. I was actually under the impression that unless you lease speciafically says that they are to pay the taxes and insurance than that's the job of the owner not the person leasing the property. If your lease does say that they are to pay all the taxes and insurance than it's their responsibility but if it doesn't than in my opinion, it's your bill.
The way we structure our lease options is this way:
3 year lease with the option to purchase after one year. Two separate documents and we make the option only good after one year to offset short term capital gains. We pay for all the PITI but make them pay for all the repairs. We get a $5000 catatrophe insurance policy and tell them they are responsible for the first $5,000 in repairs. We also "bump" them every year $50 or $100 bucks a month for rent, but they know this at the beginning so we ask them to plan for it.
In my opinion, it's not really fair or good business to have tenants to pay for insurance or taxes because unless your docs say this, they are paying for the insurance, but if the house burns down, are they collecting the proceeds? I doubt it. Also, it's hard to give them a firm idea of what their payment is if the city raises the taxes or reassess the value of YOUR property.
Remember, a tenant is always a tenant regardless of what kind of option agreements they have signed. Until they exercise their option to purchase and close, it's your house and the responsibilities of ownership should fall on you as well during that time.
Let me know if this helps and I commend you for learning the lease option part of buy and hold. Once you perfect it, you'll never go back to regular leasing.
Have a great one!
Colin