Creating Wealth Through Real Estate

Part III of my 3 part series on tenants.

Always inspect your properties regularly whether you own it, lease it, lease-option it, have a property manager managing it, etc.  Try to see your property as often as possible.  Just be sure your lease makes it clear that you will be coming in regularly with 24 hours notice during regular business hours or whatever is convenient for the tenant to inspect for repairs and maintenance.  While at the property check the air conditioner, change the air filter, check the smoke alarms, change batteries, etc.  Just be sure to always contact the tenant before entering.  It’s their home and you can’t just show up and expect to get in.

Until the tenant gives up 100% control of the home, it is still their home by law.  You can’t enter it unless you’ve given them written notice.  Some tenants won’t pay the rent and will just move out before you need to evict them.  If they’ve left things behind you may think that they’ve moved, remove those items, and get the property ready for the next tenant, only to find out that they say they didn’t actually move or give you permission to enter their home and discard their personal property.  This could leave you open for a big lawsuit.  If you find yourself in this situation be sure to contact your local attorney to see how to best handle things if it appears the tenant has moved out before you needed to evict them and things were left behind.  You don’t want to move other tenants in only to find out the original tenant shows up saying that they didn’t relinquish control.

Sometimes there is nothing you can do except wait out the eviction process but I believe that tenants need to be held responsible for their actions.  When they are finally out, if they’ve destroyed the property or haven’t paid the rent, when I get a judgment against them I will go after them.  I make sure that the money they owe me and the eviction shows up on their credit.  It may even cost me more money to do this but I think it is important that there is a record of how they have behaved so that others can steer clear of them.  Otherwise we could all be renting to tenants with very bad pasts and no record of it to help us keep them out of our properties.  I’ll also contact a good collection company or collection attorney to go after them.  They take a percentage of what they collect; nothing up front.  It may take some time but you very well may get paid what you are owed.  Your local apartment association or real estate investors association can usually refer you to some good collection attorneys.

As stated in the beginning, you can make great money in reale estate simply by buying and holding.  Think about what real estate cost 20 years ago and what it may cost in 20 years.  Purchase a number of homes, let your tenants pay your mortgage, and you’ll not only get the monthly cash flow, and annual tax benefits, but you’ll also get all that equity down the road when you either refinance or sell.  It’s a great way to make money, and the process will be much more enjoyable if you take the time to do your due diligence on every adult before allowing them in to your property. 

As a wise man once said, “don’t wait to buy real estate, buy real estate and wait!”

William Barnard is Managing Partner of Nationwide Property Investments, LLC and President of Barnard Enterprises, Inc. Will participates in millions of dollars in real estate transactions each year and has experience in nearly every aspect of real estate investing, including rehab flips. Join his FREE Membership at www.nationwidepropertyinvestments,com and start or continue on your journey to creating wealth through real estate!

Part II of III in choosing and managing tenants:

When tenants move into the properties, have them sign a damage disclaimer in addition to the lease.  The disclaimer says, “you and your guests are responsible for the damages you cause.”  Discuss this with a local attorney for help creating this simple document.

Advertise a program that rewards good tenants to attract them.  The program states that if they stay in your property two or three years, pay the rent on time, and don’t do any damage, you’ll give them an incentive like a cash bonus of say $200.  Or you might offer to do an improvement on the property like clean the carpets, add a new ceiling fan, etc.  Let the tenant pick form a list that you provide.

When tenants say they are moving ask them why?  Sometimes you may find that they’re unhappy with something about the house.  It may be an easy fix, so find out what it is and take care of it if it is resonable to do so.  The cost will more then likely be much lower then the cost of an empty unit while you make the property ready and market for the next tenant.  Maybe it’s a neighbor issue.  If so encourage them to solve it by contacting the neighbor or the local authority that can help resolve it.  Many times helping them solve their issue may keep them as tenants and save you money. 

Other then trying fix any problems that could be causing your tenant to move, also outline all the expenses and hassle they will incur in moving.  Costs include packing supplies, the hassle of packing, moving and unpacking, new utility deposits, new rental deposit, moving truck, loss of work, etc.  Add up the total potential cost and send it to them.  They may reconsider the move.

Usually the most serious complaint tenants have about landlords is that the landlord doesn’t make repairs, or if they do it’s not in a timely fashion.  To help get tenants and have an edge in the rental market, offer a 3 to 5 day repair guarantee.  Use this repair guarantee as part of your marketing.  When the tenant moves in, give them the written guarantee signed by you.  The guarantee says that if the tenant calls about a repair and we’re responsible for it, we’ll fix it within 3 to 5 days or we’ll give them their daily rent back in cash for every day it’s not fixed.

Stay tuned for part III of this topic on tenants.

William Barnard is Managing Partner of Nationwide Property Investments, LLC and President of Barnard Enterprises, Inc. Will participates in millions of dollars in real estate transactions each year and has experience in nearly every aspect of real estate investing, including rehab flips. Join his FREE Membership at www.nationwidepropertyinvestments,com and start or continue on your journey to creating wealth through real estate!

A lot of money can be made in real estate with the buy and hold strategy.  The downside is the fact that you have to deal with tenants.  Although this can be a hassle, the benefits of owning real estate far outway the problems associated with tenants, especially if you do it right.

To begin with, you must do your due diligence on all potential tenants.  If you have a property manager instruct them as to what you expect them to do when qualifying a tenant.  Then all documentation must come to you for your final approval. Remember, it is YOUR business and not the PM's so lay down the laws and make sure your PM enforces them.

Always do a credit and background check on each adult that will be living in the property.  Of course most tenants will have less then perfect credit so don’t expect it to be perfect.  Verify that there have been no evictions.  You’ll want to verify their income and expenses to be sure they’ll have enough money each month to pay the rent.  You’ll also want to call their last 2 to 3 landlords.  Many times their current landlord will tell you anything you want to hear just to get the tenant out of their property because they’re lousy tenants.  They’ll lie to you so that their tenant becomes your problem, and no longer theirs.  The landlords before their current landlord will be much more honest with you.

If I have a property manager I still usually like to talk to potential tenants.  I introduce myself and ask a few questions.  Of course never give them your full name or the state you live in.  You don’t want them contacting you directly.

·       Ask “why are you moving?” a few times.  Asking this question a number of times over the course of the interview will give you a better chance at the truth.

·       How long did you live in your last residence?  How long in the property before that?

·       Inform them that you will be doing a credit check and a background check.  Ask them “what will I find?”  See if they’re honest.

Rent is due on the first, late after the third; and eviction starts on the fifth.  Evict immediately.  It doesn’t matter what the excuse or situation is.  You are not a welfare source.  They either pay or they are out.  You must have a very strict policy or you will be taken advantage of.  Of all the tenants I’ve had over the years, to date I have not found one that has been honest with me.  Unfortunately, they’ve all turned out to be liars, and very convincing liars at that.  There are honest tenants out there, you just never know which ones are so keep the same policies with all.  Make policies and no matter what you are told stick to them.  Tenants, like children, will push the envelope to see what they can get away with.  When they see that they CAN’T get away with ANYTHING, they will be much better tenants.  Just remember, that if your tenant can’t pay one month’s rent, they probably won’t be able to pay two months’ rent.

More to follow in my next post on Tenants.

William Barnard is Managing Partner of Nationwide Property Investments, LLC and President of Barnard Enterprises, Inc. Will participates in millions of dollars in real estate transactions each year and has experience in nearly every aspect of real estate investing, including rehab flips. Join his FREE Membership at www.nationwidepropertyinvestments,com and start or continue on your journey to creating wealth through real estate!

Today was another very productive day at our Granada Hills, CA REO rehab project. The plumbers put in the new pipes and fittings for the bathrooms (shower, bath, and sinks) and got rid of some of the old piping that was no longer used and just in the way. The master bath shower is completely framed in and the hot mop guys came out and did their thing. (Dang does that stuff smell!) After they completed the work, the shower was filled with water and then it will be checked tomorrow to be sure there are no leaks.

I went to our tile suppliers today and picked up some great looking travertine tiles that are 18" squares. They will go into both the master and hall baths for the floors and shower and bath. I got a smoking deal on these and when the buyers walk through this home, they will be very impressed indeed!

The finishing crew has all the new door jams and doors hung and the door moldings have been installed. Some of the baseboards have also been installed and it all looks great. Most of the paint prep is complete and the walls are ready for painting but that can not start yet until some other items are completed, such as the tile installation in the bathrooms and some electrical work in the bedrooms (ceiling fans and wiring install) as well as some other minor items.

William Barnard is Managing Partner of Nationwide Property Investments, LLC and President of Barnard Enterprises, Inc. Will participates in millions of dollars in real estate transactions each year and has experience in nearly every aspect of real estate investing, including rehab flips. Join his FREE Membership at www.nationwidepropertyinvestments,com and start or continue on your journey to creating wealth through real estate!

Until next time, stay tuned. . .

William Barnard is Managing Partner of Nationwide Property Investments, LLC and President of Barnard Enterprises, Inc. Will participates in millions of dollars in real estate transactions each year and has experience in nearly every aspect of real estate investing, including rehab flips. Join his FREE Membership at www.nationwidepropertyinvestments,com and start or continue on your journey to creating wealth through real estate!

Part II of our video series is now released. Today at our rehab project in Southern CA, we had some surprises in the bathrooms, completed all the demo work, got a great start on the drywall and paint prep, and even had one of our students present on site! He was able to walk the entire project with us, asked many questions and went back home with a greater understanding of how this business works.

Watch our newest video right here on our BP blog as well as on our website at www.nationwidepropertyinvestments.com/videoseries