<STEP 11 DEPOSITS>
YOU WILL ALWAYS, ALWAYS, ALWAYS. Get the 1st months rent and 1st deposit from anyone before you rent to them no exceptions. If they can't come up with that you are going to have problems later on.
If the person has less than perfect credit that is ok. HOWEVER you will want to charge them a second deposit and maybe a third depending how bad there credit is. In this area you can use your best judgment and be a little be a little more flexible. You can let them pay ½ of the second deposit along with the next months rent, and the next ½ with following months rent. Or you can prorate the deposit over three months. (Use your best judgment). AGAIN they MUST have the first month rent and the 1st deposit BEFORE you rent to them NO EXCEPTIONS.

<STEP 12 PAPER WORK - THE APPLICATION>
There is no paper work required to be a landlord. If you own a house you can make an oral contract to rent your house. BUT I wouldn't recommend it. If you are going to do a background check, you will need an application to be in writing and it will need to include a section that allow you to pull their credit. If you email at Bryan@BryanFagan.com and ask I would be more than happy to provide you with a lease application FREE OF CHARGE. If you want I can also provide you a blank lease agreement

<STEP 13 - THE LEASE AGREEMENT>
I also recommend using a written lease agreement people feel more obligated when they sign a lease agreement. Its also nice because it has everything spelled out. I have looked at different lease agreements and the one I prefer as a landlord is the one that is put out by the Texas Realtors. This is an agreement that is written by lawyers and it has been tried and tested in Texas Courts. If you use the most current form then you know that all the clauses follow the most recent Texas Law.
You don't have to be a Realtor to use this form to rent your own house. I believe the Texas Realtors website also has printed copies of these forms available for sale.


<STEP 14 to LLC or NOT>
DISCLAIMER - I am not a Lawyer I will tell you some of the lay and anecdotal going opinions in the real estate investment community but this does not constitute legal advice.
The preference seems to be if you are investing in residential property you do not need to incorporate. Insurance will basically accomplish the same thing. You get fire insurance which basically insures the property and none of the tenants possessions and then for extra 10-15 dollars you can have an umbrella liability policy which insures all your properties for an extra 1,000,000 in liability.

<EXCEPTION 1>
If you are independently wealthy and have a lot of assets you may want to consider an LLC this will provide you an extra shield against being personally sued. However, if this is not the case the opinion seems to be people who rent houses are less litigious than people who rent apartments and there are less things to worry about because residential properties don't have common areas like they do in apartments that cause a lot of the legal problems.
If you were looking to buy an apartment building the going opinion is going opinion is that YOU WILL place this property in an LLC.

<EXCEPTION 2>
If you have a partner the going opinion is that YOU USE an LLC this is not because you are more likely to be sued by the tenant. No this is to protect you from your partner and any legal problems or debts they may have. This will limit your liability to only what you have invested in the LLC. This says I am only a partner to what is in the LLC not in all aspects of my life. If you are going to have a partner you want Limited Liability Protection. If you don't incorporate you are deemed General Partners and this exposes you to unlimited Liability in all aspects of your life which is VERY VERY BAD.

<STEP 15 - GETTING A LOAN>

<BANKS>
As an investor Banks for the most part are not going to like you they think you are an investor and therefore will want to penalize you and charge you a higher interest rate. That said just accept it <NEVER TURN DOWN A PAY CHECK JUST BECAUSE YOUR ARE GOING TO HAVE TO PAY TAXES ON IT>. One way around this is if you are going to live in the house for a little while. You can get lower interest rate and any other perks they may be offering. This might be possible if the house is going to take you 2-3 months to renovate or fix up depending on the terms of the loan. In the past I have used Bank of America. At the timed they were offering s 5% down, no PMI, and they paid all my closing costs. (I don't know if they are offering this anymore). I was charged a slightly higher interests rate though for these privileges though.
Banks also usually charge an application fee which if you get the loan I believe is credited toward your closing costs

<Mortgage Brokers>
Mortgage Brokers don't usually charge an application fee but do charge you a commission and closing costs 1-3% . There are all kings of different loans out there and you will just have to shop around to find the one the best meets your needs.
There are loans out there for investors if you go through mortgage broker that if the property is a good enough deal and you have good credit I believe at least 680 they will loan you the money to buy the property and then fix up the property and it ultimately ends up being like 0 down. I believe the way it works is that you pay for the repairs out of your own pocket and then you send them the receipts for the repairs and they reimburse you for the costs. In order to get his loan I believe you have to show that you have 10k in the bank. I believe Texas Loan Star and Capital Concepts here in Houston do those type of loans.

Caveat - This loan often involves a double close so you are paying for 2 closings so instead of say 4k in closing costs this may be 8k. This is less money in your pocket but technically this is no money out of your pocket either because this ends up being 0 down mortgage ultimately.

Free information is available to you about investing, buying, or selling in Kingwood Texas real estate or humble texas real estate. For complete information about the Kingwood TX real estate market including current Kingwood homes for sale, property values and more please visit the most complete website online dedicated to everything Kingwood TX at http://www.BryanFagan.biz I am available to answer any of your real estate or mortgage related questions. Call me on my cell at 281-318-1455 or send me an email at Bryan@BryanFagan.com