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How to Build Passive Income

My son, Josh Mettle, just interviewed me for his Physician Financial Success Podcast on iTunes.  I hope you give it a listen while you’re walking your dog, hiking or traveling up the coast 🙂  You will learn (among other things):

  • The kind of stuff they never teach you in real estate school.
  • What I learned from Donald Trump about picking up great properties.
  • How to bootstrap your way into income property investment.
  • How to weather the storm when markets move from good to bad to good again.
  • How to retire with cash flow.
  • How to start!

If you have a secret desire to bridge from the billable hour to passive income for life, this may help you get started.  Enjoy!

 

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How to be Smart in a World of Dumb Landlords

light bulbs

Last week I told a tenant: “I am not your mother, father, bishop, priest, pastor, social worker or shrink.”

The tenant was shocked.  But that stopped the gossip right there in its tracks.

She and her husband had been my great tenants for six years.  They always paid their rent on time and were lovely people.  Now they were splitting up, and both wanted to hurt the other by telling their landlord bad things.

I said “you guys need to knock it off.  I want to remember the good things about you so I can give you a great reference when you need it in the future.”  Uh, they hadn’t thought about that.

Can I be painfully honest with you for a moment?

Not the “you have spinach in your teeth” type of honesty, but the brutal, painful, your business will never improve until you get this, kind of honesty.

So here it is.

You have to run your rental property like a business.  If you already run your units like a professional, you can be excused from this “Come to Jesus” meeting.  The rest of you, please listen up.

In the old Wild West, every railroad worker wore a different uniform and a different hat: Conductors, Engineers, Firemen, Brakemen, Flagmen, Porters, etc.  This made it easy to identify their different jobs.

Borrowing from that tradition, consider each different job you have as a different “hat.”  You are probably a mother, father, daughter, son, volunteer, cook, cleaner, chauffeur, coach, possibly a professional, and if you’re reading this blog post you’re probably also a landlord.

Whatever job you’re doing, consider the “hat” you’re wearing at that instant.  If you confuse your hats, you can get in trouble.  And some tenants will try to suck you into their drama to throw you off and get you to wear the wrong hat.

One of the best examples of this is a prospective tenant who doesn’t qualify to rent your unit.  This person knows that they will be homeless or living in a relative’s basement unless they can find a landlord who will buy their “story” instead of actual qualifications.  This unqualified tenant will want you to wear something like a social worker hat instead of a landlord hat when you are deciding whether they qualify for your units.  Guaranteed, they have a hard luck story to beat all hard luck stories.  And if you succumb, you will get the unqualified tenant (and the legal fees, rent loss and other expenses that come with unqualified tenants.)

When I was practicing law for landlord clients, I once evicted “Utah’s Most Wanted” criminal.  Scary.  But how did that man become a tenant of that property?  The landlord was not running his property like a business, because the tenant obviously didn’t begin to qualify.  That landlord was not wearing his “landlord hat.”

Likewise, if you accept a “story” instead of on-time rent payments, you are not running your rental property like a business.  I have often been shocked at how long a landlord will allow a non-paying tenant to go on story-telling instead of serving a polite, professional, pay or quit notice with a smile.  Put on that “landlord hat.”

And by the way, I can tell you this from long experience as both an attorney and a landlord, that the longer you allow a non-paying tenant to keep possession of your unit, the harder they will fight to stay there, and the higher your legal fees will eventually be.

Just saying.

Look, here’s the truth: landlords that run their rental property like a business are just plain smarter.  And they make a lot more money.

The good news is that it’s relatively easy to gain the same kind of smarts as the landlords with fat pockets.  So here’s some tips:

  • Every landlord in the known universe should go to their local Apartment Association and take the Good Landlord classes and the Landlord 101 class.  Don’t argue with me about  this, just drag yourself down there and do it right away.
  • Join the Apartment Association, and get access to their forms, their advice, and their service providers.  This will save you over and over, especially in a weak moment.
  • Read and read some more.  If you’re relying on old knowledge, you’ll be obsolete in no time.  Keep up.
  • Hang out with interesting, smart landlords who are socking away for their retirement and let them rub off on you.  (You can find them at the Good Landlord classes 🙂

You’ll still be you.  But you’ll be a better, smarter, version of you — with a great rental property business and lovely tenants.

Now go forth, get smart, and make a profit!

Photo credit: electricnerve via photopin cc

Articles

My Tenants Have Piercings, Tattoos, Blue Hair & Great Credit!

cute tenant with blue hair(I also rent to some really hot bachelors – in case some of you ladies want to get on my waiting list!) 😉

Some landlords shoot themselves in the foot by trying to prejudge which prospective tenants will be good, based on physical characteristics. This will get you into discrimination trouble, and it’s unproductive.

I remember many years ago, when my Mom managed a 90-unit complex that my Dad built. There was a club-house with an office. I think the statute of limitations has run out now so I can tell you that once my Mom locked the door and hid under her desk when a “skuzmobile” full of smokers pulled into the parking lot. This is not advised!!! (But it is a pretty funny family story.)

I have a system (for apartments) where I don’t even meet my prospective tenants until I’m there to sign the lease. So I have various funny stories about that.

One day, a few years ago, I arrived to sign a lease. There was a girl with blue hair and her hippy boyfriend waiting at the door. I said, “Wow! You have blue hair……but I could care less because I’ve seen your awesome credit reports so you can have any color hair you want.” They were my great tenants for about 3.5 years.

(I asked her what was up with the blue hair, and she said she was just trying to freak out her parents. She also worked in the prop department at the University Theater so it was part of her shtick. The hippy boyfriend was a registered nurse.)

I fell in love with them on paper (good credit, good rental history, good employment, no criminals or sex offenders). We don’t have a hair color requirement!  More…

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Pimp Your Ads with “Postlets”

You no longer need a big budget to create snazzy-looking ads like the professional management firms do, and attract quality tenants!

Go to The Savvy Landlord website and watch the 5-minute video created by two savvy landlords, which will show you how to sign up for Postlets for FREE (my favorite price).

I just signed up and created my first Postlets ad after watching their video.  It only took a few minutes and it looks great.  Postlets publishes your ad on a bunch of websites, and the video will show you how to easily post it on Craigslist.

Images

Is “Trashed” a 4-Letter Word?