Advice for Tenants
A tenant asked me today why I didn’t have any advice for tenants at my blog. That kind of stumped me, because this blog is for landlords.
But I actually do have some very important advice for tenants: Buy a home. Do it now. Don’t wait.
Interest rates are going up, and you’ll be able to buy less and less home in the future because of the higher cost of money.
You’re welcome.
What is Possible in 2015?
One of the main things that sets you aside as a landlord, real estate investor and entrepreneur, is that you have vision. You create new futures, new goals, new, renewed and improved properties, beautiful environments and other happy living circumstances. You are a leader.
Most people only see what’s in front of them. Most people find it difficult to envision a future that is not already there.
Entrepreneurs see things that are not there yet and then make them come into being.
Here’s a couple of examples from my own family:
My Dad was always considered a “wild man” because (among other things) he believed in his visions of the future and took big risks to make them happen.
Dad never waited for permission, agreement or approval.
He used to drive through Kanab, Utah on his way to boat at Lake Powell or vacation in Phoenix. Dad just loved the Kanab town and red sand.
So he bought 500+ acres of it.
Our family all thought he was out of his mind. My Mom actually went on strike for a couple of years.
The people in Kanab thought that the sage brush and red sand was only good for grazing cattle.
But Dad envisioned a bridge across the river, a beautiful subdivision of acre-plus ranchettes and his very own “No Bull Ranch” with three canyons backed up to BLM land that goes forever.
And that’s what exists there now.
Before that, Dad had a landscaping business and a nursery on a few acres in West Valley City, Utah. So naturally, he decided to bulldoze it and build 90 apartment units.
One day Dad was out on his tractor grading the land in preparation for building, when a black limo pulled up out front and a man inside asked one of Dad’s workmen where the owner was. The workman pointed to Dad on the tractor, and the man from Aetna said “give him the loan.” (This actually happened in the real world!)
Entrepreneurs have vision, and the leadership to make that vision come into existence.
My inspiration for this New Year 2015 post was a podcast I just listened to by Eben Pagan. Eben says:
“As an entrepreneurial leader you are the keeper of a very special flame — the vision of a better future…. As the leader, your ability to envision a better future and then translate that vision to others is priceless.”
Eben also points out that it’s key to keep believing in yourself and the future you envision:
“Even. When. Other. People. Don’t.”
[By the way, if you haven’t subscribed to Eben’s podcasts you are missing out on some wonderful entrepreneurial leadership that will inspire you to grow your business to the next level in 2015. I highly recommend it.]
Remember this quote from Steve Jobs?
“A lot of times, people don’t know what they want until you show it to them.”
Could there be any better example of leadership and entrepreneurial vision than Steve Jobs?
So let’s make this personal. What can we envision in 2015:
- That would enhance the lives of our tenants?
- That would enlarge our cash flows?
- That would improve the value of our property?
- That would contribute positively to the neighborhood?
- That would build our business and our estate?
- That would “put a dent in the universe?” (Steve Jobs)
I don’t know about you, but I have a lot of work to do!
So here’s to you and me having some wonderful visions of a better future in 2015. Let’s get out there and bring them into existence.
How to be Smart in a World of Dumb Landlords
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
How to Become a Weekend Millionaire
Twelve years ago I had virtually no assets. Zip, zero, butkis. To balance that out, I had big law school student loans (which I’m still paying), and a new law practice. Retirement funds? No way.
What I did have is a strong work ethic, a great education, an enormous ability to work hard and produce, and I’m honest. That made me a good prospect as a partner.
My son/investment partner Josh, was busy building his loan business. He has a fantastic business sense, a strong work ethic, an enormous ability to work hard and produce, and he’s honest. That made him a good prospect as a partner.
So we were off to the races.
When I look back now, I have no idea how we pulled off most of what we pulled off. It was sheer intention.
I was getting older (just between you and me) and needed to get serious about putting together a retirement. Josh was young and needed an investment plan so he didn’t party away his income.
As a loan broker, Josh has seen thousands of credit applications, and he says that almost everybody lives beyond their means, no matter how much money they make. Very few people have income producing assets.
Think about that.
In about the last 12 years, I have bridged from earned income (the dreaded billable hour) to passive income. I have an income for life and assets with equity that I can pass on to my loved ones. I have a tremendous sense of peace and well being from that accomplishment.
That’s self made wealth.
I still work hard every day. I never have to show up for work and wait for someone to tell me what to do. I get to select my goals and choose my projects.
The only purpose for this little exercise in rear view mirroring is to say to you….if I can do it, anyone can do it.
There’s a book I wish I would have written that I want to recommend: “The Weekend Millionaire’s Secrets to Investing in Real Estate: How to Become Wealthy in Your Spare Time,” by Mike Summey. Mike retired at age 50 with a 7-figure annual income from his rental properties. He started investing at age 34 while working at a demanding job. Over time he purchased hundreds of rental properties in his spare time. Mike has already walked the path. You don’t have to invent it. Get his book and start by following his program.
It’s doubtful that we will ever see real estate loans again at interest rates where they are now.
I hope every person who reads this blog will take the next step to becoming a weekend millionaire by adding at least one rental property in 2014. Then follow Mike Summey’s program and keep going until you reach your own wonderful retirement, with cash flow.
Positive cash flow, equity build-up, depreciation…
How many reasons do you need to invest in income property?
Old Kitchen
Positive cash flow, equity build-up, depreciation, tax write-offs, leverage, the thrill of making things beautiful, building passive income for retirement, building an estate that can be passed on to your heirs. There’s a few reasons off the top of my head.
Here’s another reason: it’s so much fun!
New Kitchen
Josh and I bought a little 7-plex at the end of October, 2012.
Six months later it has a new roof, new parking lot, new landscaping, gorgeously renovated units, and a lovely new tenant clientelle.
We have increased the annual rental income by $23,000.00. (!!!!)
Old Front Room (East View)
All of you number crunchers know that we have thereby increased our equity in the project by some fairly impressive number in the six figures.
That was the fun part.
But there was also a scary part when we had big renovations sums flowing out of our bank account with little rent flowing in. Gulp.
Six of the units are probably still $50.00 per month under market, but I started marketing in the middle of winter when no one wanted to move so I got scared for a minute and dropped the rents to get them renting.
New Front Room & Diningroom
This was a perfect small project to use as a case study, so I’m writing an e-book which will walk budding investors through the process from beginning to end. I’ll let you know when it’s ready for public consumption 🙂
In the mean time, I can’t remember a better time to buy rental property. I hope you are paying attention.
2013 started with a new 7-plex
Our goal for 2012 was to increase cash flows and add cash flows. Happily, we did that. We now own and self-manage 100 lovely houses and apartments.
We closed on a great 7-plex at the end of October. Over the following 3 weeks we installed a new parking lot, a new roof, new landscaping, and gave notices to all the smokers. Bye-bye.
Tomorrow, the first gorgeous, fully renovated, 3BR townhome goes on the market. I expect to be able to increase the rent on that first unit by $300/mo. over the former rents. That’s my sick and twisted definition of fun.
So in 2013 I want to really “put a dent in the universe.” (Steve Jobs)
We have a tried and true formula at this point, and I’m going to spill the beans this year on what we do and how we do it. Stay tuned!
In 2013 we plan on adding and beautifying more units, adding cash flows, doing some writing, and taking some time off.
I better get back to work 🙂
This is a great retirement gig!
Smokers suck!
I don’t know why a landlord would put up with smokers.
Smokers cause huge damage to property and they stink the place up and scare away nice tenants.
I just got an apartment back that reeked. It took a full paint job and a ton of chemicals to finally make the apartment livable. We lost a couple weeks rent because we had to shut the apartment up and bomb it with anti-smoke concoctions, clean every square inch, and then air it out.
By the way, the lady that lived in that apartment, who repeatedly lied when we tried to find out who the smoker was after numerous complaints and notices, wanted her deposit back!
Luckily, we were able to save the carpet.
We have a little complex in escrow at the time of this writing, that is full of smokers. It’s nasty. We have a big job ahead of us. But we’ll be able to raise rents significantly just by getting rid of the smokers and the stench.
That’s what real estate agents call upside potential!
Professionalism
I ran into an old friend a few nights ago. His name is David Read and he’s the real estate broker that sold my son, Josh his first home. It was a view condo. Josh was 20 years old and I was a single mom going to school.
Dave treated us like we were special.
Josh made a bundle of money off of that first home. He lived in it for a couple of years, then he rented it out for a couple of years, then he renovated it and moved back in, then he sold it for a $65,000.00 profit.
It’s doubtful that Josh could have “saved” $65,000.00 in the same time period. Plus when you factor in the tax benefits and the benefits of having his tenants pay his mortgage down, Josh figures that he pretty much lived in the condo for free for the years that he lived there.
The experience also made Josh a believer, so I was able to recruit him as my real estate investment partner and that has worked out pretty good too!
Dave got Josh off to a great start in life, by helping him buy that first home. And it wasn’t easy, because Josh was a 20 year old punk kid :), he was a commissioned salesman at Lifestyles 2000 Fitness at the time, and Dave had to work hard to find Josh that first loan.
Here’s what I learned from Dave’s professionalism and kindness:
1. Show up at the close (or go over the HUDs in detail beforehand so your clients know what to expect when they sit down to sign hundreds of pages).
2. Make your clients feel special.
3. Solve problems.
Not necessarily in that order.
How to Add an Extra $1 Million to Your Retirement Plan
If you would like to add an extra $1 Million to your retirement plan, start today. Buy one investment property: a house, a duplex, a 4-plex, etc. Just start. Start with one. Next year add another one. Add another one on year three.
If you’re crazy like me, keep adding.
(I acquired 92 units because I have the greatest ever handymen, and I didn’t want them to find a new client. I wanted to keep them busy. They just kept renovating themselves out of a job as we added each new property…until we had/have almost no service requests. True story. My Mom finally asked me, “How many units are enough?” I told her I never thought of it like that, I was just trying to keep Allen and Andy busy!)
The more units you acquire, the easier it gets. You develop an “economy of scale” and your great helpers (handymen, landscapers, janitorial crew, bookkeeper, etc.) start to run like a watch. I know you don’t believe me about this, yet. But eventually you will. (You can always hire the management out if you don’t find the game as exciting as I do.)
Interest rates are at an all time low. Get out there, take a risk and add just one unit to your assets this year. Then rinse and repeat next year.
Read the full CNN Money article here.
Happy investing, and happy retirement!