Category Archives: How to be a landlord

Landlord training

How to screen your tenants!

Screening tenants is ultra important for being a successful land lord!  The questions you need to answer include:

1.  What kind of tenant are you looking for

2.  What kind of credit do you want?

3.  What about criminal background checks?

4.  How do you check former landlord references?

5.  How much income do your tenants need?

tenants

Check out this short video where I talk about how to screen your tenants and leave me your comments, questions and be sure to share with your social media contacts!

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10 Costly Mistakes Landlords Make

By Jim Ingersoll

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Below are the top 10 threats to you thriving profit margin.

A landlord’s profit margin struggles every day to survive, grow and flourish in a sea of predators, competitors and government regulators.

1.  Poor Tenant Screening

The costliest mistake is accepting a new tenant without properly screening. An undesirable tenant will often have a poor credit, rental and financial histories. Landlords should review previous landlord relations, credit reports, courthouse records and income. It is probable that if they have not met their obligations with previous landlords, then chances are that they will repeat their behavior with new landlords. Many landlords have faced horrific situations where tenants have stopped paying rent while employing legal maneuvering to avoid eviction. Others have faced tenants who moved in and initiated criminal activity, which adversely affected other tenants and neighbors. Either of these scenarios translates into expensive ordeals where the measures of rectifying the situation can threaten the financial stability of the landlord.

A thorough screening also involves verifying that the person who is applying is the same person that submits credit/criminal info for screening. A picture I.D. should be cross-referenced with the application. Landlords must make sure that there are no omissions, inaccuracies or inconsistency in the actual application. Due diligence will certainly save landlords much money and stress.

2.  Lease Preparation

Having a poorly prepared lease is very costly because it is the document that legally binds the landlord to the tenant. It is the rules of the relationship that dictate conflict resolution, financial responsibility and terms of execution. With out a professionally prepared lease the landlord stands to forfeit many of the rights afforded to the owners of the property. Landlords need to employ leases that are designed to protect them and their property and not the other way around. Many generic leases do not take into account the values of the landlord.

3-Rent Collections

Landlords must always enforce the terms of rent payment as it is written in the lease including late payments and fees. If not enforced, the landlord runs the risk of creating a dangerous precedent that will certainly cost the landlord dearly. Be sure to take action early in the month.  Plan to issue a pay or quit on the 5th and unlawful detainer by the 10th.

If a tenant has had a poor history of paying rent on time, a landlord should consider not renewing the lease. Being late consistently is a sign of financial trouble and future uncertainty for the landlord.

4-Law and Regulation Ignorance

Many landlords get into rental business with out learning the rules of the game. To get a perspective of the folly of not knowing the rule, Imagine trying to play basketball with out knowledge of the rules. You would become paralyzed from the constant rule infractions. It would be impossible to win. Translated to the rental business: Knowledge of the Laws and regulations can make the difference between a profitable venture and a loser.

Landlords must familiarize themselves with the states’ Landlord/Tenant Act. Every state has different laws, therefore due diligence must be taken by landlords to educate themselves. Landlords must also take the initiative to draw upon with the experiences of other landlords. Many landlord advocacy groups exist in most communities and the Internet.

Finally, it encouraged for landlords to develop a relationship with a real estate attorney that specializes in the rental industry. Having a knowledgeable supporter on your side can relieve a lot of uncertainty. A landlord must never wait to the last minute to develop a relationship with an attorney because the requirement of immediate response will prove to be costly.

5-Poor Response to Service Requests

The number one reason that tenants do not renew their leases is poor response and execution for service requests from the landlord. Tenants expect a constant inspection, repair, and preservation of the general conditions of their rental home. This also includes a timely repair or replacement of parts for appliances. Everything has to be in working order and problems must be addressed quickly and courteously. Everything has to be in working order and problems must be addressed quickly and courteously. To facilitate an efficient delivery of maintenance requests, the property manager’s best method of receiving these requests is actually answering the telephone. When the manager is too busy to actually answer the phone or the request comes at an odd hour, many properties utilize apartment call centers. This resource allows properties to always have a human responding to the needs of their tenants. The apartment call centers are industry specific and have a direct, open communication with the maintenance and property management. Maintenance requests should be supported by a shared calendar that documents the request cycle: creation, delivery, execution, completion and follow-up. Maintenance requests, if implemented properly, should be a team effort that will lessen and distribute workload through the property staff.

6-Not Employing Good Customer Service

Running a rental business is just like any other business in the sense with respect to employing good customer service. Many landlords forget that they would not be in business if it weren’t for the customer. Practicing good customer service not only reduces tenant turnover, it also is one of the primary forms of marketing. Word of mouth advertising is the time tested, most effective way to promote any business. In the long run, a positive approach to communicating with your tenants will reflect in the profitability and value of a property. On the other hand, poor customer service will take a toll on the general conditions of the property. Tenants will not respect the property by not cleaning up after themselves or not following the property’s rules and regulations. Therefore, poor customer service may result in high turnover, high vacancies, higher operational costs and lower profits.

7-Not paying taxes

Many landlords do not have their rental income as their primary source of income and neglect to report their income to the government. Others fail to pay property taxes because they don’t reside in the property. Failing to declare income and ignoring property taxes can cause very expensive recovery efforts. The government will assess taxes, add fees, add penalties and assign interest. Other costs will come from attorney fees, added accountant charges and personal time. In extreme cases, landlords may get their property confiscated.

8-Not waiting for the funds to clear

In a rush to fill the occupancy, many landlords make the mistake of allowing the tenants to move in before the funds are cleared. The scenario of tenants moving into a property too soon has caused numerous headaches for landlords having to initiate eviction procedures without ever collecting any rent or deposit. Always ask for money orders and certified checks or simply wait for the funds to clear the bank.

9-Not conducting a move-in inspection

Neglecting to have the tenants complete a move-in inspection can result in damages to a property that cannot be documented by the landlord. Payment for rent must not be accepted until this inspection is completed.

10-Not keeping a professional landlord/tenant relationship

Landlords must always uphold a professional relationship with tenants to avoid the pitfalls of not employing the codes of conduct that are based on the stipulations outlined in the lease. The professional relationship is based on the landlord realizing profits from the rental business. Changing the nature of the business relationship threatens the ability for the landlord to coll

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3 Property Management Tips For Real Estate Investors

By Jim Ingersoll

3 Property Management Tips For Real Estate Investors
They get it! Our Mastermind Team has learned to buy and hold rental properties without banks and it is exciting to interact on topics of debt financing, equity financing, catalyst and private lenders…

Now what? Once you own rental property you have to learn to deal with tenants and manage it effectively.

Here are 3 property management tips for real estate investors.

1. Screen your tenants

When I bought my first duplex back in the 1990’s I had zero training and my management systems were that I would rent to the very person who had a pulse and the rent to move in. My tenant screening was invisible because it did not exist…

I quickly learned the dangers in this approach to property management and it led to hassles, no rent and many headaches as I went through the school of hard knocks property management.

The first tip to make management easy is to carefully screen your tenants.

The screening process starts with having a great rental application and expecting the application to be completely filled out.  Once you have a completed rental application and everything looks good be sure to diligently call all the references on the application and ask questions to verify employment, rental history, etc.  The two most important items on references are the employment and rental history.  When calling current and past landlord I like to ask “would you rent to this person again.”  There is value in verifying all the information on the rental application.  Some tenants are very good at trying to deceive the new potential landlords with false information and when screening tenants diligently confirm all information.  Once you have gone through the references, be sure to pull credit and criminal background.  The credit check and criminal background checks will shed a huge light onto potential tenants and give you an idea on how important it is for them to pay their bills, check for past evictions and if they had a stint as a “jail-bird.”

2.  Lease

So many people use other people’s leases without ever reading them to see what they define.  The lease is a contractual agreement that calls for the lesee (tenant) to pay the lessor (landlord) for use of a real estate asset.  There are many elements of leases and they contractually obligate both parties to the terms of the lease including length, rental amount, late fee’s and a huge host of other terms from move in to move-out.  Be sure that you read your lease and are 100% comfortable with all the terms of your lease so that you can properly explain it to your tenant when they sign it.  It sets all the expectations for rent payments, taking care of your assets and what happens when tenants do not perform to the terms of your lease.

3.  Firm but Fair

What do you do when your tenant does not pay rent on-time?  What happens if your tenant does not have all the rent, but has a partial?  Being a firm, but fair property manager is a good method for handling most situations.  Never tell the tenant that you own the property they live in and that you always have to get approval from your boss before making a final decision.  Last spring I was at dinner with John Groom and he told me a story where a tenant asked him for a specific improvement to the house he was living in.  I asked John what he did which was tell the tenant he had to check with his boss (who is actually John’s wife in this case).  You see the point that if tenants know you “own” their property they are more likely to ask you to have “sympathy” on them for being late on rent, or asking you to fix something that they broke, etc.  If you are simply an employee at your own property management company, you can tell them you are bound to the company policies and can manage more effectively at an arms length away.  Do not become personally attached to your tenants, do not become their best buddy, do not become personally involved with their families, struggles, etc.  Manage your properties as if you are an employee and stay firm but fair and you will be able to manage through most situations.

Want more?  Check out my two books!  Here is the link to my first book, Investing Now by Jim Ingersoll and my second book Cash Flow Now by Jim Ingersoll

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How to evict a tenant

We rely on our tenants to pay rent on time so we can continue to work towards paying off the houses they live in.  Our goal is to get these houses free and clear by working with great tenant who pay rent on time, leave us alone and take good care of our assets.

The first step of eviction should start on or before the 5th of each month.

For most people rent is due on the very last day or the very first day of the month.  If you have not received a full rent payment by the 5th of the month, it is time to start the eviction process.  Do yourself a favor and do not ask the tenant why they are late on their rent because you will likely hear this:

Excuses tenants make:

1.  My grandmother died – Again?  Really, I think that is the 3rd time your grandmother died!

2.  Things are just tight this month –  This happens in September due to back to school supplies, in December for Christmas, in January for the holidays, in February it changes to “Don’t worry I will catch up with my tax return”

3.  Rent is late due to the huge electric bill I had to pay –  They usually blame this one on weather stripping, bad windows or broken heat/air…  if only they would pay their bill every month it would not become such a GIANT bill to begin with.

4.  “I aint got it and your keepin callin me for it doesnt help anythin”

5.  “My wife just started a new job and doesn’t get paid for two more weeks,” Husbands blame their wife all the time sometimes they say “I know my wife sent it, no idea why you dont have it yet” —  Throwing your wife under the bus is not a Good thing!

What excuses do you hear for not paying rent?  Leave them for me in the comments section below to continue this discussion!

 

Regardless of the “WHY” they did not pay rent, what do you do?  Do you tell them to make a partial payment, call you when they have the money, do you sympathize with them (hope not)?

I tell our tenants that IF you are going to be LATE on rent, I need to know before the 1st of the month.  Do not call me after the 1st of the month.  Regardless if they call or not, have excuses or not the we mail out the pay or quit notices on the 5th of every month to every tenant who is late.

The pay or quit must clearly state that the tenant is delinquent in his/her rent payment, show the total amount due including late fee’s and the date they became delinquent.  In Virginia we are allowed to simply mail the form to the tenant.  In some states they may require personal delivery, I am not certain of the tenant/landlord laws in all states.  Besides stating the amount owed, the day it was due and late fee’s, the following statement is also made on the pay or quit:

Pay or Quit

“I hereby require and demand possession of the aforesaid premises or the payment of said rent plus late charges within five (5) days after service of this notice, and, continuing in default, I shall proceed by due process of the law to recover possession of said premises.

I certify that I personally mailed this notice on ____________________”

That is how simple it is to send out a pay or quit notice.  The pay or quit is the very first step in the eviction process.  Repeat after me:

“I will send a pay or quit to every tenant who owes rent, every month, regardless of the excuse”

Now, don’t you feel better?  The pay or quit starts the eviction timeline by giving your tenant 3 or 5 days to pay your rent.  IF they miss this deadline and do not pay you in the time allotted, the next step is to go the the courthouse and file the unlawful detainer so you have a date in the courtroom.  Keep in mind that I am not attempting to practice law by giving this advice, but simply stating the process on how it works.  You may want to hire a great attorney to represent you, handle your pay or quit and the entire eviction process.

 

Remember, if you do not have your rent on-time that you have a responsibility to follow your systems and procedures including starting the eviction process on tenants who are late in paying your rent!

What are your thoughts and experiences?  Share this article, leave some feedback in the comments section….

 

 

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Getting the right assets to get you the right cash flow

 

 

 

 

 

 

 

 

 

 

 

 

Sometimes it is hard to know how to spend your money. Should you buy a liability (car, boat, r.v.) or should you take some of your money and buy some investment real estate? It can be so much fun to go out and get a new car or a new “toy” to give you the fun that you so deserve.  But, what if you could invest your time and resources into assets that could provide you with income streams to help you meet your financial goals?  What if you get rental property at todays reduced prices and you didn’t need to use a bank to get that financing?

This photo above was sent to me from a reader, Bruce Brown, and it tells the perfect story about the difference between assets, liabilities and cash flow.  I appreciate Bruce sharing this illustration and this is how he further describes it:

“The price of the house and the rehab was $300 less than the price of the 2012 Galant. The cashflow that the rental produces will make the car payment. Four years later the car is paid off and the cashflow from the house continues… Cha ching!!”… Bruce Brown

Bruce has figured out how to invest in today’s real estate market.  Purchase income producing assets without using your own money and without needing a bank and begin to enjoy the many benefits of positive cash flow.   Cars and other liabilities will be depreciating and creating negative cash flow for you, however, if you can focus your energy on positive cash flow and building assets you can strike it rich in today’s real estate market.

How many houses would you need to purchase to set you financially free?  How much positive rental income would be required so you could quit your job?  We are experiencing the greatest transfer of real estate wealth of our generation.  Now is the perfect time to establish a real plan to allow you to experience the financial freedom you deserve.  Think about what your life would look like if you were no longer a slave to your daily living expenses or the day you no longer needed a job. Visualize it in your mind and focus on finding a real estate plan to set you FREE.  Put that plan together and begin to make it happen NOW!

Please leave me your thoughts and comments and consider sharing this post to your social media connections!

Thanks!


 

 

 

 

 

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