Archive for For Up and Coming Landlords
Is it hard to be a Landlord?
If you’re wondering if it is challenging to become a landlord you need to first ask yourself if you’re a good problem solver or not. Don’t get bent out of shape and wrapped around the axle over the small details that come along with the job. You don’t need to concern yourself with all of the knowledge of ordinary handiwork around the property, like fixing toilets or changing locks. Knowing how to perform these routine tasks can save you some money upfront when you are just starting out but try not to let your ignorance of these routine tasks stop you from jumping into the business.
Eventually you want to work your way up to a spot in this industry where you no longer have to worry about repairing the properties yourself. That is what your property manager’s job responsibility will be. He will hire out the contractors needed to do repairs for you if he cannot repair the issue himself. In fact, I would even suggest to you that you try to find properties that cashflow well enough where you don’t even need to waste your own time in the first place when something tears up. Your number one focus in this business should be to find properties that cashflow well and to see to their occupancy after you’ve purchased them.
Everyone starts out small when they become a landlord (and perhaps the person never intended to become a landlord in the first place), but after they’ve had the opportunity to fully grasp the idea of earning money from other people’s efforts without putting forth much work (if any) to reap the benefits, they will eventually want to expand. I know I sure did. I purchased 1 single family home in late 2007, followed by 4 more places in 2008 and now heading into 2010, I currently own 38 rental properties (2009 has been an explosive year of growth for me). This was the year I finally started thinking clearly and decided to hire a property manager. It’s hard to imagine this but, I do less now that I have a property manager with 38 rental properties than when I only had one property back in 2007 that I managed myself.
I have more free time than ever to do the things I enjoy and to focus more on my “real” job. Yes, I still hold a full time job even with the rental property income, but it’s not because I have to, but because well…yes I think I sort of have to. I still have a few years on my military obligation lol. However, if my contract ended with the military today and I was forced into an unemployment situation, I would feel so relieved to know that my rental property income would supplement my family’s needs and we would do just fine.
So do I think it’s hard to become or actually be a landlord?
Definitely not. Other than speaking a couple of times each month with my property manager, Thomas, over the phone about different subjects pertaining to the industry, I must say this is probably one of the easiest jobs to be in. Now I might be singing a different tune if I was the “Do It All Myself” type of landlord. I shudder to think about managing these properties by myself and working full-time. I’m quite sure I wouldn’t have had much time for anything else. I wouldn’t have been able to purchase this many properties if it wasn’t for my property manager in the first place. At best, I probably could have managed 10-15 properties and worked full time like I’m doing now. But once my growth exceeded what I was capable of managing myself I would have been forced to stop buying new properties, and thus would actually be limited on my overall success.
I am almost at another crossroad where I must hire on a helper for my property manager since he is getting spread a little thin and I believe with any new additional house purchases that is just what I will do, but so far he has been managing just fine and I have recieved little complaints suggesting otherwise. Of course, some professional property management companies have a large staff and can meet you at whatever size your business is currently at or where it will be in the future. I am a strong believer in having a third party assist you in your landlording business and I believe if you try to do it all yourself, you will eventually find there are not enough hours in the day.
5 Reasons Why Rental Properties are the Best Form of Passive Income
I, like many people, own stocks, bonds, mutual funds, IRA accounts, foreign currencies and a couple forms of passive income. Wow that sentence had a lot of commas! However, if I was to draw you a pie chart depicting how much of my financial portfolio is divided up between all of the above mentioned assets and real estate, we would be looking at approximately 90% real estate holdings and the other 10% divided among everything else. Perhaps the only reason why I don’t have 100% of all my wealth in real estate is because I was “told” not to. I personally don’t see a problem with throwing all of your eggs in one basket so to speak, but with all the talk of “playing it safe” over the course of my financial education, I reluctantly decided to diversify. And thus I now own the typical mutual fund, a separate Roth IRA, a few hand picked stocks, 3 Million Iraqi dinars (which aren’t worth very much – I bought them while I was in Iraq, trying to speculate on a strong Iraqi economy rebound…maybe someday), and some loan notes I made to people in the past (which I now realize that I don’t care to be a lender anymore). There are several reasons why I love real estate over all the other assets.
1st Reason.
My money is (relatively) safe, tied up in the equity value of the home. I don’t live in a major city where home prices have dropped like a rock nor do I buy real estate that is priced for the upper middle to upper class citizens in my area. I tend to stick with properties in the lower middle to lower class areas of town. Does this make me a slumlord? No, I don’t think so. I believe a slumlord is someone who treats his tenants badly and neglects to do proper repairs on the home when needed. By owning the lower end to the bottom of the real estate market, there’s really nowhere else for the price of the property to go, but up. At least, as far as I have experienced. My home values have been generally stable over the last couple of years and I have had several offers to purchase them from other landlords in town.
2nd Reason.
My properties not only generate a stable source of monthly income through rent, but also might appreciate in value over the years. Several of my properties tax values have increased. That doesn’t mean they will sell for higher than I paid for them but obviously the county tax man believes they are worth more today than when I bought them. I view this as a double reason to love rental properties. You get the added benefit of watching your net worth rise, like owning an IRA, without having to make monthly contributions to it.
3rd Reason.
Someone else builds your equity in the property. If you did your math correctly (like i suggested in this article http://www.landlordsanonymous.com/2009/10/invest-in-the-right-rental-property/), then you should have someone paying the bank off for you and allowing enough for you to realize a nice little profit each month. Not only will the home’s net worth increase over time (hopefully), but your property equity will increase so when you go to sell the property one day, the banker won’t get to keep as much of the profit if you still owe a mortgage on home.
4th Reason.
Tax benefits! Holy cow. There are so many tax benefits when it comes to dealing with real estate. Gas for your own personal vehicle (as long as you use it for business purposes), repairs and improvements on the property (which increase value), and mortgage interest deductions to name a few. I will post another article on the many different tax benefits to owning rental properties.
5th Reason.
You have a real, solid, honest to God piece of property you can drive up to and place your hands on if you feel like it. I don’t know about you, but I feel sort of helpless owning a mutual fund. I have no say in anything except to buy, sell, or hold. In the field of rental properties, if I have a problem with a tenant who is not holding up to his end of the bargain, I can evict him/her and find a better one. If I want to inspect the property to see how it is being treated, I have the right to. Can you approach your mutual fund manager and ask to inspect what he’s been doing for the last year with your money? Sure you can view specialized reports, but can you get your specific questions answered and have your input taken seriously? I’m not a control freak, but I like knowing that I do have some sort of control being in the rental property business.
These are just 5 quick reasons why I love holding rental property to increase net worth. It’s definitely one of the best “vehicles” someone could use to get to where they want to be in life. Please leave a comment and let me know what you think!
The Importance of finding the Right Real Estate Agent
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If and when you decide that you are ready to jump into the Rental Property business you will need HELP! And lots of it! You must find a good loan officer, attorney, tax accountant (optional), property manager (also optional) and real estate agent. This post will discuss the importance of the Real Estate Agent and exactly what qualities you want to look for in finding a proper real estate agent that looks after YOUR best interest and not the seller’s.
So you’ve been doing the online shopping thing and cruising through the many local real estate agency websites scouring through tons of different properties and you’ve found a few gems that you are definitely interested in taking a closer look at eh? Well unfortunately we can’t just approach the seller at the home and ask to take a tour of his property or break into that lonesome vacant property that looks like such a steal on the market right now. In order to gain access to these properties you will need to find a real estate agent that will show you around (and preferably has a lot of patience.) However, there are a lot of good as well as bad agents out there and choosing the right one to represent you is not as easy as you might think. Choosing the best real estate agent for you should not be taken lightly.
It’s time to start interviewing! Have you ever interviewed someone for a job before? Well if not then guess what! You’re about to get a quick glimpse of what it’s like to be the boss. You need to come up with a list of qualifications, skills and traits that you are looking for in a real estate agent. Some freebies you might want to consider are: Is the agent a full time realtor? Is the agent popular in the community? Has he/she won any realtor of the year awards (basically are they battle proven)? How many current listings does the realtor have on the market already? What are the typical closing times on the Realtors properties?
You need to call up several Realtors and let them know you are interested in becoming a local Landlord/Land-owner and you would like to set up an appointment to speak with them to see if they could help you find the right properties to purchase. Most Realtors will go Coo Coo for Cocoa-Puffs at this point (they don’t really get these kind of calls too often!) and will chomp at the bits to see you right away unless for some reason they don’t take you seriously (their loss). The realtor will be thinking to him/herself that they could score a lifetime client by really WOWing you at the interview so don’t be surprised if they are overly eager to please you. Try to look past the charm and flattery of the real estate agent (they are trained to be that way) and focus on your list of criteria you are seeking in a great real estate agent. Interview many of them until you’ve found the right one.
Remember you want an agent that will work for you! Not the seller! You’re going to be the one making lots of offers for different pieces of real estate and it’s all about what YOU want. The agent is there for you as a key to get inside of the houses you want to see you will need a real bulldog in your corner when it comes time to negotiate an offer. Don’t settle for timidness. Find an agent that’s not scared to call in a low-ball offer and work hard to keep it as close to you’re offer during the negotiation process.
After the first purchase with your real estate agent the two of you will begin to understand one another. When the time comes, you will be able to call them to let them know you’re ready for your next property and he or she will already have a few properties in mind just for you because they will know what kind of properties you are in the market for based on your past history together. I have a lot more information to put out about the criteria for selecting the right agent and will go into more detail about that soon! Thanks for reading.
Invest in the Right Rental Property
Are you tired of working for the man? Are you ready to start creating passive income that pays you while you do what you WANT to do and not what you HAVE to do? Investing in rental properties is one of the best vehicles to set you on the road to financial freedom. This article is going to explain how to find that perfect rental property that will pay for itself each month and give you plenty left over to start your real estate empire!
First things first! Go Shopping! There are literally hundreds of properties on the market in your neck of the woods that would make suitable homes to live in but you have to learn how to speculate when looking for profitable rental properties. Find out how much you can afford to spend on an investment property by first speaking to a loan officer at a bank (usually this depends on your credit history and how much money you’re willing to put down for your down payment). Once you have this number in mind you need to narrow down your search by putting in your price range parameters. Looking for houses online is probably the fastest and easiest way to get an idea of which houses you want to take a closer look at. You need to pre-screen the houses that you see online. Try to realize just how much work (if any) you are willing to put into fixing up your rental property. You generally can get better deals this way than by purchasing a property that is immaculate. Remember you are not shopping for yourself.
Once you have narrowed down all the houses that are up for sale by your price budget and by pre-screening them online it’s time to contact a real estate agent and ask them to show you the houses on your list. Once you get inside the houses make notes about what needs to be repaired or upgraded and try to use that as bargaining power when you are starting to negotiate the price of the house. (I never pay the asking price of a house).
Once you have found the best house for your budget and feel like it’s better than all the others that you’ve pre-screened (by price, area of town, condition, crime rate), then you need to do the math. This is the most important part of the process. If you purchase a property that cannot support itself then you are making a terrible mistake. You need to figure out just how much you can expect to rent out this property. Ask around! Talk to real estate agents that deal with investment properties and speak to other landlords. A few seasoned landlords can tell you exactly how much you can expect to make in rent from your property. But don’t ask just one. After you get a general idea of how much you “think” the property will rent for go ahead and subtract 10% of the monthly rent just incase the property doesn’t rent for that amount each month.
Next, figure out how much the monthly mortgage will be on the property. Get your real estate agent to find out how much your annual taxes and insurance will be for this property and also what you’re looking at for utilities each month (water, electricity, gas). Add up all of the monthly expenses (even the utilities just incase you have a tenant that wants you to pay the bills each month) and write down this total. Now add 10% to it for safe measure.
Now it’s time to figure out if your property will cash flow or not. Take the total amount of monthly rent that you ended up with in step 3 and subtract the final monthly expenses that you came up with in step 4. This should paint you a close picture of how you’ll look each month if you decide to go through with your purchase. Now multiply this number by 12 to get the annual income (the Net – what’s left over). If you’re rental property is not AT LEAST $200 in profit after you do the math then move on to your second choice property. You will need this minimum $200 each month in the case of repairs & vacancies. Hopefully you will have a nice profit margin from what you bring in to what you pay back each month. You will need to set up your own “repair fund” that you deposit a portion of the rent to each month for problems down the road and also a “vacancy fund” incase you cannot get someone in the property right away or they break the lease early.