Question (CA): I live in Los Angeles, California, and am looking to purchase rental property in Baja, California, and North Carolina. Both properties would be managed by a management company.
- How do I choose a good management company?
- When interviewing potential companies, what questions should I ask and how do I check them out?
Answer: We assume you are purchasing residential properties as opposed to commercial properties. Whether the subject properties are located in Baja, California, or in North Carolina, you want a property manager or management firm that has successfully managed income-producing properties before. Such a firm can supply you with a list of clients for whom it has successfully provided the desired services.
Of course, if goes without saying, that the property manager must provide evidence of having the required state licenses to perform those management services. The services it provides usually depend upon what property management functions you are willing to relinquish as opposed to those you are not. However, most property management firms prefer to handle all the management functions subject to your contractual approval, and to supply you with typical management reports such as Balance Sheet, Income Statements (or "Profit & Loss" Statements), Accounts Receivable (if any) and Accounts Payable subsidiary ledgers. The frequency of those reports can be monthly or quarterly.
It is also important to match management philosophies. Some managers are very strict enforcers, while others are more congenial with their tenants. We recommend interviewing a minimum of three firms in each market and more if you have difficulty obtaining satisfactory answers from the firms interviewed.
Question (GA): I took out an interest only loan in 2004. The rate is fixed at 6.25. I have a 10 year fixed interest rate, after which time I will begin paying on my principal. How much additional money should I pay monthly to avoid having to pay an astronomical mortgage when the principal payments start? My current monthly payment is $800. Should I look at refinancing now or stay in the interest only loan?
Answer: Look at the Note (Promissory Note) you signed when you took out the interest-only loan. It should address whether or not there are any prepayment penalties assessed for making additional payments. If there are, you can take the amount you would have made in additional payments (those are payments that would be applied to principal if you could have made them) and place them in a savings account or a series of CD's.
As for whether you should refinance at this time, and how much your loan payments would be if you did refinance, access a lender's website and play around with the numbers as to current interest rates, term and points, then select the self-amortization schedule. It should detail your monthly payment and annually how much of the monthly payment is attributed to principal and how much to interest. In a self-amortizing loan (usual type of loan) the amount of principal in the early years of a loan is relatively small, but increases during the latter years.
Question (TX): Can you tell me where I can find the Texas law dealing with Real Estate Lease Options and Options?
Answer: There are scads of State Bar papers on this issue, plus a number of form books with basic legal coverage. You may want to just contact the State Bar of Texas (Toll Free: 800-204-2222, Local: 512-463-1463) to buy updated course materials for one of its many real estate law papers on the subject.
Question (UT): In Utah any real estate purchase contract, that doesn't specifically preclude assignment, is assignable, without putting "and assigns" after the buyer's name. Is the same true in Texas?
Answer: Yes. Texas subscribes to the general rule that all contracts are assignable unless the assignment is specifically prohibited. The only exceptions are contracts for personal services and those relying on personal obligations (extension of credit based on credit score).
