Six Benefits of Owning Rental Property

By Charrissa Cawley

During a real estate downturn it’s easy for someone to overlook the big picture and question why they should be interested in investing in the residential real estate market. It can be difficult not to listen to media reports and members of Congress talking about how hard it is to be alive. Don’t forget that before this real estate downturn, real estate was the hottest investment you could find. While it’s true that what goes up must come down, it’s also true that everything that falls eventually reaches the bottom, and bounces back up. Here are six reasons to invest now and be ready for the big bounce when it does come.

• Passive Monthly Income – By investing now and using your head by performing some simple calculations, you can ensure that you have more money left over at the end of the month than you need. This positive cash flow is like a gift that keeps on giving because it will show up in your mailbox every month whether you’re there to meet it or not. $200-$300 per month may not seem like a lot of money, but when you have 5, 10, or even 20 checks like that coming in that you don’t have to earn doing some repetitive or backbreaking job, a seemingly inconsequential amount of money can suddenly look pretty good.

• Security – A small child may rely on a blanket, a pacifier, or a thumb for a sense of security. Recent events have demonstrated that — while we may be older — we still like to feel confident that we have options during scary times. Owning real estate gives you that same feeling because you know that regardless of what happens you still have options.

• Depreciation – Thanks to the generosity of the U.S. Congress, real estate allows you to take an annual tax deduction for the loss in value of your real estate. Ironically, while you are busily taking a tax deduction for the lost value, the actual worth of your property is going up. Real estate has taken a temporary hit, but you get the depreciation credit even when real estate values increase (which is most of the time).

• Capital Gains Taxation – whenever you purchase something and its value rises while you own it, the federal tax code requires you to pay a special tax on that item when you sell it. Fortunately, no tax is due until you sell it. While there are a couple of steps involved, you can also extend the time you have to pay that tax in the event that you do sell it, which is a major benefit to all those who are able to capitalize on this little quirk of the tax code.

• Appreciation – Real estate appreciates – increases in value – far more frequently than it loses value, and with these increases come the opportunity for you to add to your net worth. You’ll still have the monthly income your positive cash flow provides so you have a second way to cash in on real estate – a third way if you bought it at a great price. You could look at the trickle of monthly income as a down payment on the flood of cash that will come your way through appreciation – value you can benefit from by selling or by pulling equity out to help fund future purchases or use for anything you like.

• Pride of Ownership – Do you remember how proud you felt when you got your first car? It may have been a beat up Volkswagon, but it was yours. Imagine how your chest will swell with pride when you drive down the street and look at your house, and you realize that you own another just like it across the street, and several others that are even nicer around the corner. There’s no better feeling in the world than knowing that you own something that so many others only dream about.

There are lots of great reasons why you should want to own real estate; these are just a few of them. I can appeal to your desire to build a portfolio of appreciating assets that will add to your net worth on a year to year basis. You can look at your net worth on paper and try to comprehend what all those zeroes mean, but the biggest prize will be the looks of adoration in the faces of your family when they realize that your time is their time, that they have your undivided attention, and you can go anywhere or do anything you want to because you had the good sense to start investing when a lady named Charrissa told you it was a great idea.

So invest now, and reap all of the rewards that are waiting to come your way.

How Much Should You Keep in
Rental Reserves?

by Attorney William Bronchick

“Cash is King”, so they say, and investor would be wise to keep an adequate cash reserve for things that can go wrong in real estate, particularly rentals.  It is easy to buy real estate with no money down, but it’s difficult to survive when you have no cash set aside for a rainy day.

There’s no magic formula you can use to determine how much you should keep in reserve in the real estate business. When I have rental properties, the four key factors I consider are strength of the local rental market, eviction time line and cost, the age of the property, and the type of neighborhood.

Strength of the Local Rental Market

The lower the vacancy rates in your area, the fewer reserves you’ll need for vacancies. Your local newspaper or your city’s housing department may have articles or statistics on vacancy rates. You should, at a minimum, have enough cash reserves to pay for one month of vacancy per unit, which is only an 8-percent vacancy rate.

Even in a good market, you’ll deal with problem tenants who may stop paying rent and require an eviction. Good tenant screening will help solve this problem. If you plan to rent properties, you should always,

without exception, do a rigorous background check on tenants. This includes reviewing credit reports, employment verification, references, and calling current and previous landlords.

Eviction Time Line and Cost

The length of time it takes to evict a tenant is relative to your cash reserves. In pro-tenant states like New York and Massachusetts, it could take months and thousands of dollars in legal fees to evict a tenant—all while you’re paying the mortgage. In addition, in our experience, collecting back rents or damages from tenants who’ve been evicted can be futile.

Age of the Property

With newer and recently renovated properties, you won’t need to anticipate many repairs in the first few years. As noted earlier, we recommend that you always hire a professional property inspector before you

buy. Inspectors will go through the property with a fine-tooth comb, which helps ensure you’ll have no surprises later on. Another thing to keep in mind is that many utility companies offer a fixed monthly payment option so you don’t experience payment swings each season if you’re paying for heating, water, or other utilities as the landlord.

Type of Neighborhood

If you’re renting properties in low-income neighborhoods, you can expect the turnover to be much higher than in high-income areas. In addition, multiunit buildings with small units and one-bedroom condos will attract more single people who tend to move more often than families.    

Cash flow management is the bedrock of survival in any business, with real estate being no exception. Investors must be careful not to run out of cash or they will be soon out of business.

Let’s say that you’re looking for a landlord lawyer—someone to represent you, give you advice, review forms, or any number of things you might need help with as a landlord.  How will you know what to ask in order to make sure you find the right one?

I promise you they will all seem confident and fully qualified.  But how well do they really understand real estate investors and your needs as a landlord?  To answer this, I’m listing 5 questions to be sure to ask whenever you’re interviewing a potential landlord lawyer.

Question #1:  How much of your practice is devoted to real estate law?

This will tell you how much they actually know about real estate law.  Note: Paying an attorney to spend time learning the law is not very fun!

Question #2: How many of your clients are landlords or investors?

The wants and needs of investors are very different than those of regular homebuyers and sellers.  They will need to be well-versed on landlord-tenant law in your state.

Question #3: Are you familiar with creative real estate strategies?

By this, I mean techniques like assigning contracts, buying subject-to, and lease/optioning properties.  If you don’t recognize these terms, I would earn them right away as they are all no-money-down strategies that really work.

Question #4: Do you personally own investment properties?

This isn’t essential, but it will mean they know what it’s like to be in your shoes and will probably have the solutions to common landlord challenges already figured out.

Question #5: How available are you for contact?

Nothing is worse than needing an important answer and not being able to get a hold of your attorney.  Make sure they can get back to you by phone or email in a day or so.

They don’t have to answer all of these with flying colors.  But ask them all anyway.  Maybe call three to five landlord lawyers and ask each of them the same questions, then compare results.  They have helped me build the right dream team and I hope they do the same for you.  Happy investing!

Click Here: http://stinkymarketreport.net — to receive a free copy of my interview with a $100,000,000 investor on making money in a slow real estate market — Dramatically increase your real estate investing profits by learning how market cycles REALLY work.  Or, for info on Alan Brymer, go to www.AlanBrymer.com

Multi-family dwellings provide a sounder basis for real estate investors

 The popular adage goes that when the going gets tough the tough get going but I much prefer a variation of it that goes when the going gets tough the tough get smart. Success in real estate investment as a career depends on your ability to work smarter rather than just harder and for that you need to have a clear focus on what you are doing and why.

Having spent the best part of a decade building a personal fortune that’s given me over a million dollars in the bank and more than 4,000 apartments spread across six states I have a predilection for clear focus and smart planning which I will explain now.

When you deal in real estate you essentially invest your time and effort (and I am not even going to talk about the money involved in this here) and you have a right to expect in return to make money from that. Each deal is there to provide you either with a profit from the sale (whether you renovate and upsell or simply flip a property for a quick profit is irrelevant here) or a parallel income stream which will become the basis of a growing income from your real estate investment activities.

Because the ‘investment’ you put in each real estate deal is roughly equal (particularly difficult and time-consuming projects either have a higher pay-off as compensation or are simply the result of error of judgement on your part) the smart element of planning goes into picking projects which will give you a maximum return for your investment.

In plain speak this means that if you focus on single-family dwellings you need to concentrate on the high-end of the market where the money is big or else you need to focus on multi-family dwellings as a way of setting up parallel income streams that will give you money and keep on giving you money month after month with minimum risks (because the risks usually associated with tenancy are spread amongst a large number of tenants as opposed to just one).

Multi-family dwellings also allow you to achieve savings in other ways. They create an economy of scale which works in your favour when it comes to finding a supply firm for materials necessary for repairs and upgrades. They create an economy of scale which allows you to negotiate good deals when it comes to finding a management company which will deal with your tenants for you so you never have to even see or talk to a single tenant in your life.

Multi-family dwellings allow you to create a sounder basis for your investments and because the effort involved in closing a deal is approximately the same as that involved in a single-family dwelling, they are a much better return for your time.

David Lindahl, also known as the “Apartment King” has been successfully investing in single-family homes and apartments for the last eight years. He is the author of four popular, money making home study courses “Apartment House Riches”, “How To Estimate And Renovate House For Huge Profits” “Managing For Maximum Profits” and “The Real Estate Investors Marketing Tool Kit”. He can be reached at dave@real-estate-fortune.com and www.rementor.com.

Larry has asked me to write a series of articles for this column on single tenant commercial NNN investment properties.  For those of you who do not know me, I am a commercial investment broker and work exclusively with investors.  Larry and I have worked together for some timenow and recently he and I wrote a book together.  I am also an investor and have doubled my own assets every year for the last six years.  I also get the same results for all of my clients.  I study different forms of investments and analyze their risks and returns and help investors grow their income, assets, and net worth by buying commercial investment properties that have very low risk but high returns.  The first tule in investing is — it is more important to minimize risk than to try to get higher returns, if you want your wealth to grow in the long run.

The one thing that all eal estate gurus agree on is if you want to attain financial security or retire, you need to have more passive residual income than your living expenses.  I would add that you not only want enough passive residual income to coer yoru living expenses, but you also want a little bit more so to keep up with inflation and any unexpected financial needs.

Passive residual income is income you get without doing anything in the future.  In other words, getting paid without havin ga JOB!  Examples of NON passive income include working for others or having others work for you.  It also includes flipping residential properties.  It takes work to buy them and work to sell them, not to mention all the work that you have to do in betwen those two pionts to maintain the property.  Examples of passive residual income include interst from money in a bank savings account, yield from stocks, etc.

Why single tenant commercial NNN investment properties?  Residential rental properties may give you cash flow but they an be a major headache.  With commercial properties, the tenant is a business and the business has an incentive to maintain the premises because otherwise their business suffers.  A triple net or NNN property is a property where the business tenant takes care of all the maintenance, taxes and insurance.  Now not only has the headach of maintaining the property moved to the tenant but even the risk of taces, insurance and maintenance increasing have passed to the tenant.

Furthermore the better the tenant’s credit, the better the property is because there is a lower risk of the tenant defaulting on the lease.  A single tenant property means there is no management.  With multiple tenants, you have different leases having different lengths and termination dates.  Furthermore you are going to have some vacancy and have to go through the hassle of finding a new tenant.  That costs time and money and is a headache.

If you buy a property with a single credit tenant, who also takes care of all the maintenance, taxes, and insurance, you get a predictable rent check every month.  You do what I do and set up to receibve the rent by automatic deposit and pay the mortage by automatic withdrawal.  I even have a portion going over to my personal checking account and then have all my bills paid by online banking.

Now my income and expenses are handled by autopilot and there is nothing I have to do.  It is easy to see why single tenant commercial NNN investment properties are such a good deal and low risk.

Next month we will cover why single tenant commercial NNN investment properties give such high returns.

Winston T Rego is a multi-millionaire commercial real estate investor.

How to make a million dollars investing in real estate

As a real estate investor with more than 4,000 properties to my name and a million dollars in the bank you could argue that I am a little more qualified than most to give advice on how to make it big in real estate.

When I was starting out in my career there were no courses, no help and no advice I could really tap into and, as a result, I ended up making almost every mistake in the book and learnt from each one and this is one of the reasons I decided to run courses and give workshops to real estate investors ready to take their career to a new level.

I know that in order to make a million dollars in real estate you have to be in for the long haul rather than a fast stake in and out kind of deal and this is exactly where the professionals from the amateurs really stand out.

In order to make that million dollars in real estate you need to get into it with a vision and a coherent strategy. I know that this is news to you because when I first got in I too was in there chasing almost every deal I could and the result was that I used to get fragmented ways of working and was finding it difficult to make much headway in anything.

I learnt the hard way by falling down and picking myself up that you need to have that focussed strategy so that when an unexpected deal does come along you are very clear in your head why you are taking it and where it is going to get you.

Most of those who come to my real estate investment workshops know that I favour multi-family dwellings as a means of creating robust, parallel income streams, minimising risks and achieving economies of scale which then make it easier for me to automate some of the processes such as the day-to-day running of more than 4,000 apartments which would otherwise be crippling.

This does not mean I do not deal in single-family properties however. Quite the contrary, but I do deal with them in a way that fits within my real estate investment strategy, takes my plans further and helps me to further my goals of building a robust real estate portfolio and continuing to be financially independent.

Making it big in real estate is not easy but it is achievable, as my case proves, and the only way to achieve your dreams and become successful is to make sure that, just as in life, you have clearly stated goals, a philosophy you can stick to and a strategy that fits in with the way you work and allows you to make the right decisions.

David Lindahl, also known as the “Apartment King” has been successfully investing in single-family homes and apartments for the last eight years. He is the author of four popular, money making home study courses “Apartment House Riches”, “How To Estimate And Renovate House For Huge Profits” “Managing For Maximum Profits” and “The Real Estate Investors Marketing Tool Kit”. He can be reached at dave@real-estate-fortune.com and www.rementor.com.

Real estate investments that give you constant returns

Here’s a pop-quiz question: when it comes to setting up a parallel income stream what do you look out for the most. Price or stability?

By this I mean that if you have decided to keep a property and make rental income from it do you look for one which is likely to give you the most stable returns and very few gaps in your income or do you go for price?

This is exactly the question which also determines your real estate investment strategy and whether in your real estate career you are going to focus on single-family dwellings or multi-family ones. This is not an exclusivity kind of decision. Real estate investors know that opportunity is opportunity and when it comes along and looks good it makes no sense to pass it up. But by having a strategy you can focus on the type of property you deal with and you can also have a logically set out means of assessing when it is wise to break your usual pattern and go after something else.

For example, I tend to work with multi-family dwellings , for reasons which I will explain in a moment, but I also buy and sell single-family dwellings. I have upgraded and sold some and flipped others for a quick profit which I have used to invest in more apartments so that my portfolio, which currently is 4,000 strong and growing, can continue to grow.

I tend to focus on multi-family dwellings because I discovered, the hardest way possible, that when it comes to real estate investment the most important element in all the decision making process is risk management. I needed and wanted to be able to minimise the risks involved, to not be hostage to a single tenant and the pressures he may face in his day-to-day life and to have the ability to negotiate from a position of strength.

Having a large number of apartments, for example, gives me the ability to achieve an economy of scale which is really difficult and much more expensive to achieve with single-family dwellings.

This way I can negotiate harder with companies that carry out maintenance, repairs and upgrades, I can set up management contracts which mean that I never get to see or deal with any tenant problems and I have developed an automated system which simply delivers money in the smoothest, most constant way possible.

I have a million dollars in the bank and a sterling name in the industry which corroborates all that and if I can do it anyone can. Real estate investment is, quite simply, the greatest job in the world.

David Lindahl, also known as the “Apartment King” has been successfully investing in single-family homes and apartments for the last eight years. He is the author of four popular, money making home study courses “Apartment House Riches”, “How To Estimate And Renovate House For Huge Profits” “Managing For Maximum Profits” and “The Real Estate Investors Marketing Tool Kit”. He can be reached at dave@real-estate-fortune.com and www.rementor.com.

Special Interest Considerations

Take the special interests of your customers into consideration.  You can do this as you set up the property.  Or, you can make plans to include your residents’ interests after your property has been in business for years.

Getting the younger crowd into apartments or condos can be a real challenge.  They have very distinct ideas of what they want.  Besides this, most of them are on a somewhat limited budget.

You can cater to this crowd by furnishing your model from a discount warehouse.  This could be Ikea or any other place where they can get cheap furniture and linens.  Somewhere that is popular with them is ideal, but you would have to find out what that is.

The idea is to get them to see that the apartment does not have to be done up with the finest furniture and lamps.  It can be a home that is more suited to them, and to their budget.  That is appealing to them on many levels.

The younger people also like to communicate in different ways than those of us who are older.  Their special interests in this area tend to center around their phones.  Many of them have had cell phones since they were in Jr. High.

It is so much a part of them that you can hardly separate them from their cell phones for a moment.  What they like to do is send pictures and text messages.  If your staff can find ways to communicate with them in these ways, they will excite the young people about the property and the staff.

On the other hand, you cannot overlook the limitations of the older crowd.  They may not be able to adjust to text messaging, either physically or emotionally.  Their special interests lie in more nostalgic areas.  They mostly like using their computers, but they may need a larger font.

Yet, this group of people, the group around fifty or so, do like to take care of themselves.  They like to go jogging and work out.  Your clubhouse can help out with this immensely.  You can have all the weight machines, exercise bikes and work out machines you want.  You might even go so far as to hire a personal trainer.

If they need a place to jog, you can set up jogging trails with mile markers.  You might even put in benches at different places along the trails for people who are just starting to get into shape.

Environmental issues are special interests with many people these days.  Both the young and the old are concerned about the planet.  Make any concession you can make to the ecology of the property and its grounds you can.  This will create good will among those who care about the earth.

Special interest considerations often have to do with age.  One generation has its toys and another generation is happy with something else.  Some issues are cross-generational.  No matter what the special interest is, if you find a way to feed it, you will make friends for life.

Overcoming How Do I Get Paid with Realtors When Doing a Lease Option or a Rent to Own

By Wendy Patton

The number 1 objection I hear from real estate agents when the subject of doing a lease option or rent-to-own is broached is “How do I get paid?” Sometimes the agent will be concerned about how they get paid but don’t want to flat out ask it. So instead they’ll say things like “Lease Options are too risky! You(home seller or home buyer) don’t want to do that.” This sounds a whole lot better than, “I don’t want to do a lease option sale because I’m not sure how I’ll get paid.” Now keep in mind that not all agents are like this, it’s just that the ones who do object usually object for this reason.

Times have changed now and many real estate agents are more open to the idea of lease options or rent to owns. That’s because the real estate market is down and more and more agents are willing to be creative to get things done. But there are definitely still some holdouts who only want to do conventional sales. The reality is that some of these agents will never change their mind but some will, especially if you are their client and you insist on it or suggest you’ll find someone who will. So bear in mind that the suggestions I’m going to offer will work with some agents (the ones who still want to make a living in this market) and won’t work with others (the ones who absolutely refuse to do anything besides conventional sales).

So, let’s look at how to tackle the “How do I get paid?” question.

With a lease option or rent to own a real estate agent will get paid PART of their commission (maybe 1% to 2% in this market) when a tenant-buyer signs contracts with a rent to own seller and pays an option fee. The real estate agent’s partial commission will come out of the option fee. The remainder of their commission will get paid when the lease option buyer actually buys the seller’s home. Obviously this is not as desirable as doing a conventional sale where they get paid their full commission right away.

BUT, conventional sales are a lot harder to come by now. The mortgage crisis is affecting everyone, even A+ credit buyers need to have larger down payments than before. This means that if a real estate agent is only doing conventional sales their income has dropped. Look, I’m not saying that rent to owns are the perfect solution for EVERY situation. They aren’t.

So how do you handle a real estate agent’s objection to rent-to-owns?

Let’s say you want to buy a home on a lease with an option to buy. You approach a real estate agent to be your buyer’s agent and tell them that you can’t qualify for a mortgage right now but you want to buy with a lease with an option to buy. The agent objects and says “You don’t want to do that it’s too risky!” You can tell the agent that you understand the risks, (read my book – Rent-to-Buy – and you will definitely understand the ins and outs of rent to own) and that you are interested in finding a rent to own home. If the agent still poses some objection explain to him that you are a real buyer, while they won’t get a full commission up front as they would with a conventional buyer, they will still get paid and isn’t that better than just turning you away? If the agent still objects after that, find another agent. By the way, once you find a real estate agent who is willing to represent you for rent to own make sure they read my book Rent-to-Buy to be sure they are giving you good representation.

Now if you are a home seller and you’ve decided that rent to own is right for you (again, read my book – Rent-to-Sell – and you will definitely know whether this is something you want to do) so you suggest it to your real estate agent. Your agent objects. Explain to your agent that your home has sat on the market for a while now and if you don’t find a buyer soon you would have to rent it out because you don’t want to keep paying that mortgage. If you just rent the home the agent is only going to get about 1/2 months rent for their commission, which is definitely less than they would get if you do a lease with an option to buy. Your other option is to find another agent in which case your current agent would get no commission at all. Now isn’t it better to consider rent to own instead of the alternatives? When you explain these things to your agent don’t be confrontational, do it in a way that makes it clear you want to work with them but that the current method of selling your home just isn’t working. Also, once they agree to do a rent to own with you make sure they read Rent-to-Sell!

If you are serious about making money through the inevitable “thick and thin” of real estate investing then you need to start to think about multiple income streams and a wider distribution of the potential risk factors which go with every investment.

The secrets of successful real estate investing were not taught to me by a guru and did not come to me in a moment of enlightenment. Instead I gleamed each one through trial and error and hard-earned experience gained through actually making mistakes and learning from them.

That’s right! In the path I took I had some luck along the way but most of the time I made mistakes and learnt from them and applied what I learnt to the way I was investing. In order to do that I left nothing to chance. I did an incredible amount of research and learning about how properties are rehabilitated, how repairs are costed, how property financing works and how deals are closed. Anything and everything that had to do with buying houses, selling houses, buying and renting apartments and developing an apartment portfolio.

The reason I put in so much hard work is because, all the while, I knew I was working towards very specific targets and very specific ideas and I was learning where the shortcuts were and what I should be looking out for each time I closed a deal.

What I realised, quite early on, is that if you handle them properly, are careful in what you invest in and know how to set up a remote management network so that you do not have to deal with a single tenant, ever, multi-family properties can fast-track you on your road to financial success.

The reason for this lies in what I like to call the income development curve. With any single-family dwelling that curve depends upon a number of variables that rely on the single family living there. The moment you consider multiple-family dwellings you begin to spread the risk of stagnating. I will give you an example: suppose you are letting out a single-family dwelling and the family moves or are suddenly unable to pay the rent? A couple of months’ inaction plus the cost of finding a new tenant are enough to wipe out your profit margin. Suppose, in a slightly different scenario, that you need to carry out repairs to the property and the tenant cannot afford to contribute their maintenance fee for that property? You are forced to either evict the tenant and risk losing more money or pay for the repairs yourself and try to work out an agreement to get your money back. All of this is a nightmare initiated by what I call a linear chain of action where you and the tenant are engaged in what might at times look like a tag of war between you and the tenant.

What experience has taught me is that when you are dealing with multi-family dwellings you no longer have to engage in this linear action. You have multiple interests, which represent the group of tenants, pooling their resources together to meet repairs, and maintenance. Add to this fact that when a tenant leaves the others are still paying their rent while you find a new one and you realise that in terms of making money multi-family dwellings maximise the opportunities and minimise the risks.

Of course the ‘formula’ as such is more complicated than that and I cover a lot of this in the real estate success workshops I offer. The million dollar question, always, is are you really ready to learn how to invest properly and are you determined enough not to give up at the first obstacle?

David Lindahl, also known as the “Apartment King” has been successfully investing in single-family homes and apartments for the last eight years. He is the author of four popular, money making home study courses “Apartment House Riches”, “How To Estimate And Renovate House For Huge Profits” “Managing For Maximum Profits” and “The Real Estate Investors Marketing Tool Kit”. He can be reached at dave@real-estate-fortune.com and www.rementor.com.