Tag Archives: new landlord

It Doesn’t Have To Be A Real Estate Empire

New landlord,my rental property coachA lot of new landlords getting into buy and hold real estate try to acquire as many properties as they possibly can. They realize that real estate can be a lucrative business – especially over the long term and they want to capitalize on it as much as possible. More so once they’ve overcome their fears, gotten their feet wet by buying a rental property or two and feel more confident about what they’re doing.

A lot of “would be” landlords think they have to follow this philosophy too. Once they’ve decided that this is where they are going to invest some or all of their savings, they feel like they will need to acquire as many “doors” as possible to make it a worthwhile venture.

Let’s face it, this can be daunting to someone just starting out in real estate investing. Not only fear of taking the plunge and buying their first property but fear of then having to build a real estate empire.

Most people are also thinking, “I’m already so busy, how will I manage this all?” With kids, a job and a million activities, it’s hard to become a property manager as well. And unless you start off with a lot of positive cash flow (difficult), you will need to keep a day job and manage the property or properties yourself.

The point of all of this is – you don’t need an empire or the stress of thinking you need an empire. Even one rental property puts you way ahead of the game and on the road to financial freedom. Then you can decide if you want another or if you want to put other investment money elsewhere.

Managing 1 or 2 properties yourself is completely doable, even with a whole other life. I’m married with 2 very busy kids, a guinea pig and I work a lot. But I manage 2 residential properties and 1 commercial property with minimal stress and few issues. I started with one, figured everything out and then bought another one a couple of years later. A year after that I was approached about buying a commercial warehouse and I knew I could take that on as well. And to be honest, that’s good for me. I like having time to spend with my family and working on my other ventures and I feel GREAT having these 3 appreciating assets being paid off for me while I do that. You will too – so take the plunge and stay calm…it will all go great!

Save For a Rainy Day

Rental properties come with expenses. Some are big, some are small, some are expected Save-for-a-Rainy-Dayand some come as a big surprise but there is always something that comes up so landlords need to be prepared.

Here are some of the more common expenses that a landlord can expect with their rental properties:

  • appliance repair or replacement
  • carpets, painting and floors
  • extra mortgage payments if there are no tenants in the property for a month or two
  • tenant gifts, tenant baskets
  • yard maintenance
  • major repairs like the roof or foundation
  • garage doors
  • furnace or air conditioning

So, why is it so important to repair and maintain your properties? First, your tenants are paying off your investment so they deserve to live in a property that is safe, secure and has everything in good working order. Second, a good landlord that responds promptly to requests for maintenance will be much more successful in building long term tenant relationships which are the cornerstone of a good rental property business. Third, looking after your properties will also add value to your investment as your property values continue to rise with these improvements, repairs and maintenance.

If you’re like most people, you likely don’t have a lot of extra cash on hand every month but that should never stop you from looking after your investment. Ignoring problems can and will lead to run down properties and a lower grade of tenant.

There are two key ways to overcome the problem of unexpected expenses. The first is to try and build a reserve fund from your monthly rents. If you have any surplus after your bills are paid each month, put this aside to cover these expenses. The second is to have access to credit. Putting a line of credit in place for these expenses will give you piece of mind that you can handle the unexpected and with interest rates so low, you can pay it back quite easily in small increments.

For new landlords, there are always fears and uncertainties when buying that first property. Anything that can be put in place to ease those fears is a good thing and will be so helpful in moving the dream into a reality. To your success!

Tenant Screening is Everything

ScreeningNew landlords often feel overwhelmed when they get into the rental property business. Buying your first property might seem like a challenge at the time but it’s a cake walk when you start to delve in to what it takes to manage that property. From preparing your property, getting your forms together, doing market comparables to set the rent, advertising, putting your filing system together, setting up your accounting and just generally reading up on all there is to know – it’s a lot of information! Ultimately though, the most important part of property management is finding the right tenants. If you are successful in this step, the rest of your journey will fall into place.

Tenants mean the difference between a positive, profitable experience and a negative, costly experience. Having a system in place to do proper tenant screening will help you find those gems that will pay their rent on time and take great care of your property. Here are some tips to help you become a better screener in order to attract a better grade of tenant:

Write a great, detailed ad. It all starts here as this is the first thing a prospective tenant will see when looking for a property. For example, if you don’t want pets or smokers, this is a great starting place to weed them out. You can also paint a good description of the type of tenants you are looking for by the types of amenities you describe. If you want a family you can talk about buses, schools and parks. If you want older tenants with no kids you can describe a more senior living area. The more descriptive you are, the easier it is to hone in on your ideal tenants.

Have a list of screening questions. After people have read your ad and decided they fit the bill and are interested, have a list of screening questions ready when they call. For example, how long have they been at their current place? Why do they want to move? Have they given notice? How many people will be living with them? These are just a start and there are plenty more you can ask but these questions will arm you with more information and make your decisions easier as you set up viewings to see your property.

Use customized forms. During the tenant screening process, the most important form in your repertoire is the Application Form. Don’t use generic forms that you find online, use a custom form that asks about employment history, rental history, and allows you to perform criminal and credit checks. If you have a prospective tenant that you want to consider renting to, get them to fill out this form in it’s entirety.

Do your checks! Sure they’ve filled out the Application form for you but the next step is the most important. Call their old landlords, verify that they have a job, do a credit check and do a criminal record check. Do these checks EVERY TIME on EVERY PERSON that you want to rent to. Looks and first impressions can be deceiving so stick to your system and you will greatly increase your chances of finding a good, honest tenant.

Thorough tenant screening isn’t always foolproof but it greatly increases your chances of finding stellar tenants. Experience helps this process as well and the more tenants you meet and interview, the easier it becomes and the stronger your radar is. Remember – stick to your system and don’t skip any steps. To your success!

Top Ten Best Tips For New Landlords

20130123-10-landlord-tips-corrected2-151x300So, you want to become a new landlord? Haven’t you heard the horror stories? 3:00 a.m. calls for a plugged toilet, tenants that don’t pay their rent, nasty evictions…it’s a minefield out there. But maybe you’ve heard the upside too. That owning a rental property substantially increases your wealth because you have a solid asset that someone else is paying off for you.

So how can you, a would-be new landlord, avoid the pitfalls and reap the rewards? How can you dodge the disasters and turn this into a profitable, hassle-free venture? The key is to start out on the right foot. Putting everything in place and being prepared will ensure that your experience as a new landlord is a positive one. Sure, there might be bumps along the way, but if you’re prepared, you’ll meet these challenges head on and overcome them.

The best way to prepare is to learn from experienced landlords that have come before you. Al Williamson and I met on the Bigger Pockets Real Estate blog and decided to share our own experiences by putting together an infographic called “The Top Ten Best Tips For New Landlords”. We think these tips will be very helpful to someone that is just starting out in the rental property business and I’ll break them down here for you in more detail.

  1. Follow Your Entire Screening Process. We didn’t put the tips in any particular order because we think they are all crucial steps for a new landlord to take – but if pressed, this is #1. Our best advice is don’t EVER take what a prospective tenant tells you at face value and hand them the keys. Be rigorous. Do all of your employment, reference and credit checks EVERY time on EVERY tenant.
  2. Establish Great Tenant Relationships. This is a very important step for new landlords because new tenants = a successful rental property business. Having good tenants, after all, prevents the aforementioned “horror stories”. Establishing these relationships starts before you even meet your prospective tenants through advertising and screening and then carries on through the duration of their tenancy.
  3. Run it Like a Business. Owning a rental property is a business and an organized landlord with systems and processes in place is much more likely to succeed than someone who is just “winging it”. Some examples of these systems would include your forms, your ads, your property information binders as well as filing and accounting systems.
  4. Use Customized Forms. When you’re just getting started with a rental property, it’s important to have your forms ready to go. These would include things like an inspection report, lease agreement and rental application. Many new landlords use generic forms that they find online thinking that one form is as good as the next and often times they don’t even understand everything that is written there. These are huge mistakes which will come to light when a lease needs to be enforced. Use customized forms to lay down your rules and regulations from the outset.
  5. Make Security a Priority. Most new landlords think that the cost of rent is the most important factor for tenants when they are looking for a rental. In actual fact it is security for themselves and their families that is a top priority. Many tenants are actually willing to pay a little more if there is great security in place when they rent and they know it will be ongoing.
  6. Make It Easy For Your Tenants. When it comes to “who should do what” between tenants and landlords, conflict often arises unless it is clear from the start. The easier you make it for your tenants, the easier it will be for both of you in the long run. Putting a reference binder in each property, installing a keybox and making the yard low maintenance are just a few ideas to keep things running smoothly and hassle free.
  7. Use Your Head Not Your Heart. I would venture to say that this might be the hardest obstacle for anyone getting started with a rental property. As a new landlord, you’ll eventually hear a story or promise from your tenants, especially when it comes to late rent payments. Unfortunately, you’ll also figure out that most stories and promises aren’t true. To keep more money in your own pocket, it’s important to separate emotion from business and know your local eviction processes before you have to implement them.
  8. Prepare For Bumps In The Road. Let’s face it, it won’t ALWAYS be smooth sailing, even if you do follow all of our tips. Even with all of your systems in place, challenges will still come along. It’s how you handle these challenges that will determine your success.
  9. Save For A Rainy Day. Rental properties cost money for repairs, maintenance and vacancies. If you don’t have a way to cover these expenses as they arise, your properties will deteriorate and so will your grade of tenant. It’s a slippery slope so it’s always best to expect expenses and plan for them ahead of time.
  10. Keep On Learning. You’re doing a great job of investigating before you become a new landlord. It’s how you ended up here! As your rental property business continues to grow and evolve, so should your education. Keep informed through blogs and online forums for landlords. They are a valuable resource and you will eventually have a lot to contribute as well. Soon YOU will be teaching new landlords how to begin!

Becoming a new landlord might seem like a huge learning curve and in the beginning it really is. Use our inforgraphic “The Top Ten Best Tips For New Landlords” to help you keep all of these points in mind as you start out. Al and I sincerely hope you find it helpful and we wish you all the best with your rental property empire!

Steps To Success For The Novice Landlord

When you finally have a little money saved and you’re thinking about investing it for your future, the road to prosperity can take you in many different directions. There are so many different ways to make money and so many ways to invest it for the future. Whether you’re just considering purchasing your first rental property, starting a business or looking at other types of investments to build your wealth, it’s a great idea to start with some personal finance building blocks. In this “Steps to Success” blog series I’ll offer you some of these different ideas to get you started. In each post I’ll give you two new ideas to try to help you enrich your life. Yes, most of it is about personal finance but you’ll soon see that many principles can apply to any part of your life. The REAL secret to success is balance after all.

In this first post, I want to focus on making a plan for what you want in life. Once you have a vision of what you’d like to accomplish and have, we can look more at the specifics of how to get there. Here are two ideas to get you started.

 

goals-destinationGOALS

When you’re planning your financial future, you hear about setting goals all the time. The reason is, it’s hard to get there if you don’t know exactly where you’re going. I think one of the reasons that people don’t take this step is that there’s too much information about the best way to set goals. When I type “setting goals” into a Google search, there are 179,000,000 results and everyone has a different opinion. “Write them down, make them S.M.A.R.T., dream big, start small, be specific.” Suddenly just setting a goal seems like a big deal.

The truth is though, if you want to get ahead and be successful, you have to set goals. When you set a goal it gives you a vision and it also gives you the motivation to achieve it. There is also a great boost of self confidence when you accomplish your goal and that in turn keeps moving you in the right direction, towards the success and wealth that you desire.

The best tip that I ever learned was from Jeffrey Gitomer who is a leader in the Sales industry. He recommended using sticky notes, writing down a goal and posting it to your bathroom mirror. Small goals, big goals, short term or long term, any kind of goals. Personal goals, financial goals…they don’t have to be written a certain way or in a certain format. The point is you see them every day and they take root in your mind. As you accomplish your goal, you move it from your bathroom mirror to your bedroom mirror and take great pride as you watch that bedroom mirror fill up.

I have followed this advice for a couple of years now and it’s worked very well. I’ve accomplished many of my goals and it DOES feel great to see that bedroom mirror fill up. It also feels great on the inside to know that I am steadily moving forward in the direction of my dreams.

Give it a try! And by all means, tell me what you think.

DREAM BOARDS

I am a big believer in the dream board and I recommend it to everyone I know. Dream boards are a collection of images that help you visualize the life of your dreams. It might contain images like your lakeside mansion, your ideal fit body, your dream vacations and your perfect job. There’s no limit to what you can put on a dream board. They’re your dreams…go wild!

dreamboard-300x192Dream boards are different than goals as you don’t really need to have any idea how you’re going to achieve it. Just looking at it every day and imagining yourself living that ideal life puts the universe in motion to bring it to you.

Dream boards are fun to put together. I use a plain cork board from Walmart and look through images on Google. When I find one I love, I cut it out and add it to the board. Once you start you’ll come up with all kinds of ideas and big dreams. I keep my board in my home office so I see it every day.

Once you have your board, all you have to do is put your imagination to use and imagine yourself living that life right now. Add a little unwavering faith that it’s all coming to you and feel happy about your present life every day.

It’s just that easy…try it!

I really hope you’ve enjoyed the first blog in this series. It’s a little different than just talking about rental properties but there’s a method to my madness. I think beginner investors and beginner landlords are often overwhelmed and become paralyzed by a lack of confidence in themselves and their abilities. Starting off with some ideas that help your mind, your attitude and your outlook will make those big challenges seem more achievable. I often think, “there’s more to investing than just money and know-how”. There are other things you can learn about yourself, how you think and how you handle what life throws at you that can really make a difference in your life. To your success!

The Easy Way To Get Your First Rental Property

My Rental Property Coach - The Easy WayIf you live in a city with high real estate prices like I do, it can be very difficult to find and buy a good rental property. If you can’t charge enough rent to cover all of your expenses, the property soon becomes a drain on your bank account. One of the easiest ways I’ve found to acquire your first property is to move and rent out the house you’re in. Here are the benefits:

  • Banks generally want to see a 25% down payment to purchase a rental property. Since you are now buying your principal residence, the down payment can be significantly less (generally 5%-10%).
  • You know exactly what the mortgage payments will be on the rental and they will likely be very manageable if you’ve been in the house a while.
  • You’ll know exactly what you need to charge in rent every month to cover expenses.
  • No need for a house inspection as you already know everything about the place. You now just need to clean and get ready for tenants.
  • You probably have a nice place so you’ll be able to charge higher rent and attract better tenants.

This plan worked well for us to get started in our rental property business but it might not appeal to everyone. Here are some disadvantages that might have come to mind (followed by my good reasons to just do it anyways):

  • You have to move! Yes, this is the big one – to leave your house and move to another. This might be bothersome for many reasons…you love your house and are too nostalgic to leave…it would take you completely out of your comfort zone to do something so drastic…it’s a very big job and more than you’d like to take on etc. etc. (Yes, all true but in the end it just depends what you really want. If your goal is to substantially increase your net worth with a rental property and financially it looks like the better alternative to buying a property to rent out – just keep the idea in your mind for a while. It may start to take root:))
  • Moving is expensive. (True but also a relatively minor expense in the grand scheme of things.)
  • If you’re putting 5% down on your next place, you will need to take out mortgage insurance which is costly. (I list this as a disadvantage but it is the reality for most people and really the reason for this whole plan. You can usually add the insurance on to your mortgage and it still makes a huge difference when compared with making a 25% down payment.)

We stayed in our next house for 2 years and then followed this plan again to get our second rental property. If you’re just starting out in the rental property business, I hope this plan will work well for you too.

How to Attract and Keep Good Tenants

Attract-Good-TenantsTalk to any landlord and they’ll have a tenant horror story to tell – myself included! When you get into the rental property business as a new landlord, tenants are one of the most important factors to consider. Not only will they be looking after your property for you, they will also be paying it off and ultimately building your wealth in real estate. Your ability to attract and keep good tenants will determine whether your rental property business will be a success or a failure so it’s important to know the basics.

ADVERTISING

Writing a detailed advertisement has two purposes. It allows you to describe all of the benefits of your property and is also the first step in describing the type of tenant you are looking for. You can be clear about whether you allow smoking, whether you allow pets, the amount of rent and damage deposit expected and the length of lease term you are looking for. With all of this information available in the ad, you have already narrowed the field to prospective tenants that potentially fit your profile.

SCREENING

Screening is your second line of defense and the most important step in weeding out bad tenants. When a prospective tenant calls me, I have a list of questions that I ask immediately. If their answers to these questions are favorable, I set up a viewing time to see the property. If they are interested in renting from me, I take things to the second and most important step; filling out the Application Form. This signed form is invaluable as it covers their personal information, their employment history, their financial status and their rental history. The form also allows you to call previous landlords, call credit references, call personal references, conduct a credit check and a criminal record check. If a prospective tenant is not willing to sign the Application Form and provide me with access to this information, I do not rent to them.

Screening is an important first step for landlords and it also sets the tone for tenants as well. It portrays you as someone who is organized, diligent and someone who takes their business seriously.

RELATIONSHIP

When you have completed your initial screening and decided which tenants will be moving in to your property, the rest of the relationship is up to you. You may have found the best tenants in the world but they won’t stay with you if you don’t live up to being a good landlord. A good landlord/tenant relationship involves many aspects but here are the most important things to remember.

When tenants are moving in, have a landlord checklist ready so that you don’t miss anything. Some examples are signing the Lease, getting the locks changed, going through the Accommodation Inspection Report, getting post dated checks, preparing a Tenant Binder and putting together a Tenant Basket to welcome them to your property.

Throughout the tenancy it is important that you are always available when contacted. If a tenant calls with a request or repair that needs attention, always respond in a timely manner. Keeping your property in good repair let’s the tenant know that you expect the same from them and also gives them a sense of security about where they live. Stopping in at prearranged times gives you peace of mind that the property is being looked after. Giving small gifts at holiday times and lease renewals also goes a long way to making the tenant feel appreciated.

The law of attraction is always at work in every aspect of your life and the landlord/tenant relationship is no different. Be a great landlord and you will attract and keep good tenants!

Essential Rental Property Forms

In this day and age, there is a form to cover every possibility in the rental property Forms2business. From pet leases to utility sharing agreements, everyone will agree “it’s best to always get it in writing”. Making sure that all of the rules are clear before a tenant moves in leads to fewer disagreements and a cooperative landlord/tenant relationship. These signed documents can also protect the landlord if a substandard tenant should slip under their radar and take up residence.

If you are just starting out with one rental property, there are 5 essential rental property forms that you should have on hand before you start to look for a tenant.

RENTAL APPLICATION This is the first form that a prospective tenant will fill out for you during the first meeting if they are interested in renting from you. It covers the personal information of all the people that will be living there including their employment history, credit information and rental history. The best part of the application form is that it allows you to do a credit and criminal background check of a prospective tenant.

INSPECTION REPORT This is filled out before the tenant moves anything into your dwelling and again when they are ready to move out before you return their security deposit. There is a checklist for each room and describes the condition of each item on the list. I always back this form up with dated photos of the property and have the tenant sign both.

LEASE AGREEMENT This is the meat and potatoes of all rental property forms. It outlines the rent, security deposit, length of stay and also lays out all the rules and regulations of living in your property. You can start out with a generic form which can be changed and revised to suit your specific needs or you can use one from an experienced landlord. I like this option because it will already be much more specific based on the landlord’s previous experiences and you can still modify it as required.

DEPOSIT AGAINST RENT Once you have done all of your investigating and decided on a great tenant, it’s time to get a deposit to hold the place until move in day. This form is simply a receipt for that amount and also sets out what is still required as far as security deposit and rent before they take possession.

LANDLORD CHECKLIST Owning rental properties is a business and in order to run a successful business, you need to keep yourself organized. I created a landlord checklist that I use for each new tenant moving in to my properties. It reminds me of all the things I need to do including property fix ups, tenant checks and everything from moving in to moving out. I find this tool invaluable as I never miss a thing and it starts my relationship with my tenant out on the right foot.

These forms will get you started in your rental property business and should be considered your “core package” that you use for everyone. Depending on your needs or as your business continues to grow, you can introduce more forms to your repertoire. These might include utility agreements, garage leases, notices to enter the premises or eviction notices.