These are low quality tenants for many reasons. Most of the problems stem from the fact that they barely qualified for low-income jobs. They lack a decent education and are forced to accept minimum wage jobs. As a result, they spend much more of their income on housing than the middle class does.

They have more family members sharing the living space to reduce the cost per person. More people mean more wear and tear on your rental units. Less income on their part makes it more difficult to pay the rent each month. Obviously, that leads to more evictions, which results in more tenant turnover. More turnover means more wear and tear on your rental units.

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Exploiting the Poor

Low-income jobs also tend to be high turnover jobs. The already tight budget gets even tighter from layoffs and little work. Again, it means more tenant turnover and more wear and tear. Of course, you can try ignoring the wear and tear, the broken windows, the furnace that no longer works, and everything else that is broken. That’s definitely a primary strategy for slumlords. To maximize cash flow while minimizing maintenance expenses. However, most municipalities have code enforcement officers that will soon be citing you and fining you for these violations.

Then there are problems with vandalism, graffiti, and crime. As a slumlord, you’ll have the police wanting to talk to you about criminal tenants on a regular basis. You’ll be financially responsible for repairing vandalism and cleaning up graffiti. Almost certainly, your property insurance will be much higher than in a low crime area.

A slumlord is someone taking advantage of tenants’ difficulties in life to maximize his or her profits. It’s about exploiting tenants that can’t afford a more expensive place and someone that typically has no other option than to accept that no maintenance will be done to a property that will continue to deteriorate until it is condemned. Sure, they could move to another place but that takes money that they don’t have and these people have trouble qualifying with a better landlord. At best, another place would be marginally a step up from where they currently live.

A Better Investment

If you want to rehab an apartment building or other rental, you’ll be much better off investing in an older worn down property in a better part of town. It’s almost always better to invest in a low cost property in a good part of town than to look for the cheapest property in a bad part of town.

As always, before making an investment, perform a thorough due diligence. If you’re honest about the costs of being a slumlord, you’ll quickly see why it’s better to invest a little more on the right side of the tracks.

Please leave a comment if this article was helpful or if you have a question.

Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

What’s happening today is much bigger than a few rule changes. With crowd funding, the entire game is being changed. Crowd funding enables small investors to get in on deals with a small investment that were previously only available to big investors. For instance, if you want to get in on the big deals that hedge funds invest in, as an investor you’re required to meet minimum capitalization levels, called accredited investors (have an income of $200,000 or a $1 million net worth). These regulations come from the SEC with some more ridged standards established at the state level. Additionally, the hedge funds have policies requiring a minimum $1 million investment that often goes as high as a $10 million to get into that game. Even then, the investor is at the mercy of the hedge fund manager deciding what to invest in. Clearly, all of these rules keep small investors on the sidelines when it comes to major real estate investments.

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How Crowd Funding Changes the Game

Crowd funding is about very focused investments. Instead of dropping $1 million into a general investment fund that spreads the money around, you invest maybe $5,000 into a specific and well-defined single project. Crowd funding opens up investment opportunities to small investors in expensive commercial properties such as shopping malls, mobile-home parks, and apartment buildings.

As a small investor, you can get in on the ground floor by working directly with a developer. When working with a developer to build new construction, you’ll have to wait until the construction is complete and tenants are in place before you’ll receive a return on your investment. You can also work with an experienced lead investor to buy into a property that is already providing income. In either case, crowd funding investors are entitled to a portion of the cash flow as well as the profit when the property is sold. There is no guarantee of earnings but early investors report that 6% to 8% is common and a few say they are earning upwards of 15%.

Crowd Funding Does Have Risk

Not all crowd funding opportunities are open to small investors. Crowd funds requiring higher minimum investment amounts are still governed by the SEC accredited investor regulations. However, the SEC says it’s working to remove these hurdles. Still, there are crowd funds out there accepting investments as low as $100 with the intent of enabling everyone to get into this new game.

Do your homework before investing in a crowd fund. This is a new game and the rules aren’t set in stone yet. Before investing, be sure to read and understand all of the disclosures and look for opportunities with crowd funds that have demonstrated prior success.

Please leave a comment if this article was helpful or if you have a question.

Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

Having a strong buyers’ list saves you both time and money and of course, time is money. If you’re in a particularly strong market (which are abundant today), it’s possible you could be wholesaling 7 to 10 houses a month. With a strong buyers’ list of knowledgeable investors, you could save tens of thousands of dollars in commissions. At an average commission of $6,000 on a $100,000 sale, with 7 sales per month, that amounts to a $42,000 in savings.

Who Belongs on Your Buyers’ List

The short answer is that anyone with an interest in investing in real estate belongs on your buyers’ list. The more realistic question is how do you build your buyers’ list? It’s as simple as joining real estate investing groups, placing craigslist ads, and networking through MeetUp or other professional groups of people with money to invest.

A big key to wholesaling multiple properties each month is taking the time to find out what people on your buyer’s list are looking to invest in. That means asking questions and taking notes. On craigslist, it means posting adverts reading, “I birddog houses for investors, what are you looking to invest in?” At networking opportunities, you ask the same question but go into questions that are more detailed once you have a conversation started. Then you go out hunting for the houses that your buyers have shown an interest in.

Building Relationships

Over time, you’ll discover who, on your buyer’s list, are more serious and repeat buyers. For wholesalers, these will tend to be both rehabbers and landlords. You’ll save time, effort, and make more money as you determine and focus on your key and repeat buyers are. You’ll be able to focus your efforts on these particular investors and make more profit by delivering up the exact properties these investors are looking for.

Beyond networking and craigslist, look for professionals that know people with investment dollars. Typically, these include accountants, lawyers, and doctors. Particularly accountants and lawyers. These professionals are constantly in contact, with not only potential investors, but also people who fall on hard times and have an immediate need to sell investment properties to raise quick cash (distressed sellers). Nevertheless, don’t ignore the doctors, even if the ones you know aren’t looking to invest, their well-healed friends might be looking for investment opportunities. The bottom line is you need to be networking and building relationships with the people that have money.

A few last words of advice about contacting your buyers. Don’t mass email descriptions of the properties that you have for sale. At a minimum, use an autoresponder that sends an individual email to everyone on your list with only the individual’s name at the top of the email. Better yet, send customized emails describing why the property meets the person’s investment criteria. Also, keep in mind that when wholesaling properties, you don’t always have to own them. Sandwich lease options can put you in control of a property with little or none of your own money directly in the deal. Private lenders and hard moneylenders are also friends to wholesalers.

Please leave a comment if this article was helpful or if you have a question.

Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

A key factor is how far you are from the property. If you have a rental house in your own neighborhood, it’s going to be much easier for you to keep and eye on it and to pop in to take care of any emergency repair that comes up. However, if it’s a 30-minute drive, you’re going to find it annoying and time consuming to actively manage the property.

Services a Property Manager Brings

When you have a responsible tenant in the property, being a landlord is a breeze. Especially if the property is in good shape and doesn’t need constant repairs. However, every landlord has an occasional “problem” tenant. This can be someone that doesn’t pay the rent on time or someone that complains about every little thing or someone that is busting the place up. A professional management company can pressure this type of tenant to move on and replace them with a better tenant. Property management companies also screen tenants carefully to reduce the chances of a problem tenant in the first place.

Property management companies bring an expertise that you may not have. Two important areas they know well are complying with the strict Fair Housing laws and getting top rent for your property. A good company can cover their own fee by getting more rent than you might be able to. Another expertise is structuring leases to best protect you as the property owner.

Finally, they have systems in place to keep the paperwork and financial records in order. Whether it’s refunding a security deposit or having the information at your fingertips when tax time comes around, a good property management company will have you covered.

What to Look for in a Property Manager

Besides experience and good references, you want to know how many units a manager is responsible for. Generally, a good property manager can handle between 30 and 40 units. With the automated software available today, a property manager might be able to take on a few more units but not much.

Typically, property managers charge between 7% and 10% of the rents. This motivates them to maximize the amount of rent being charged. However, some managers expect to be paid based on all potential rents rather than only collected rents. Never get into an arrangement where you are paying their fee for vacant units or units where the tenant isn’t paying the rent. It’s their job to make those things happen.

Regarding maintenance, you want to have a cap that they are allowed to spend without your direct permission with anything above that amount requiring your written permission. Generally, that cap should be somewhere around $250.

Finally, you should expect reports on all of your properties by the 6th of the month. That is the same date that the property manager should send your portion of the rents.

Certainly, there are other important issues to be aware of related to property managers but we’ll save those for another article.

Please leave a comment if this article was helpful or if you have a question.

Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

Rules can be separate from the lease. Rules are things like no loud music after 10 p.m. or that vehicles can’t be dismantled on the property. The lease tells them when the rent is due and includes a clause saying there is a $35 late charge if the rent is late. Be sure you personally go through the lease with new tenants. That way you know they read it. Use a yellow highlighter to point out important clauses like when the rent is due and that 30 days notice is required before vacating.

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Provide a Home in Good Repair and Keep it in Good Repair

You don’t want to invade their personal space but you do want to make sure they are taking care of your property. You want to become known as the landlord that takes care of your tenants. Make sure the home is in good repair and clean before you do the walk-through and hand over the keys. Tenants that can be proud of where they live are more likely to keep it in good shape. Also, have a reason to come back to the place in about a month to see how they are treating it. Replacing the furnace filter can be that reason. While you are there, ask them if there are any problems that need attention. Keeping your renters satisfied the first few months of the lease goes a long way in turning them into long term tenants.

One nice gesture is having the grass mowed right before they move in if there is a yard. Moving is a lot of work. Not having to do that chore for a while is a help to them and of course makes the place show better.

If they do call with a problem that needs attention, make sure it’s taken care of quickly. Quality tenants expect the house they are paying for to be kept in good repair. Also, put a reward program in place. Something like a carpet cleaning when they renew the lease is a nice touch. And a $25 gift card if they recommend a quality tenant for one of your other properties.

Collect Your Rent on Time, Every Time

Letting them know it’s important to pay the rent on time is as easy as sending a late notice immediately the first and every time they are late. Never wave the late fee. Without a late fee, they have no incentive to make sure the rent is paid on time.

A few well thought out policies and rules make it easy for your tenants to know what to expect of you and what you expect of them.

As a landlord, you have the responsibility of setting the expectations of your tenants and living up to the expectations your tenants rightfully have of you. By establishing this from the beginning sets the tone of the relationship you’ll have your tenants. Even if you only have a couple of rentals, managing them professionally makes the difference between a profitable business or an expensive hobby.

Please leave a comment if this article was helpful or if you have a question.

Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

Hard money lending is one of the more popular ways of making passive income from real estate investing. Of course, every private contract is written for the mutual benefit of both the borrower and the lender but there are general rules that drive the hard money market. One is that these are short term loans averaging between six months and two years. Because hard money loans earn more interest than longer term loans, these can be very profitable.

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Why short term loans appeal to lenders is because these loans generate the maximum interest (profit) and are repaid in full long before the principal is reduced to lower the amount of interest being generated. What appeals to borrowers is these loans are granted within a couple of days, making all cash offers for properties possible. All cash offers are critical to almost all distressed sellers, which becomes the benefit to the seller. Although sometimes appearing ugly on the surface, these are actually win-win-win scenarios to all involved.

Another common denominator is that hard money lenders mostly don’t care about the credit rating of the borrower. Lenders are only interested in the value of the property securing the loan. In today’s market, most hard moneylenders won’t lend more than 70 percent of the appraised value of the property. This creates a 30 percent buffer to secure the loan.

As a hard moneylender, you can expect to earn at least ten to twelve percent above the prime interest rate. That means twelve to fourteen percent interest on a short term loan. One thing that hard money borrowers expect is a fast closing. Because there is no credit check, closing typically occurs in three to seven business days after the appraisal is completed. With an established relationship with a hard moneylender, the borrower can even close in less than three days. This can be very appealing to a distressed seller that has less than a week before being foreclosed on or having another immediate need for fast cash.

Foreclosures aren’t the only reason a seller needs fast cash. Another example is a father that has fallen tens of thousands of dollars behind in child support payments and is within days of being put in jail because of it. He might have recently inherited a house that he has no significant interest in owning. Selling to an all cash buyer that can close in a couple of days keeps him out of jail and obviously creates a very profitable investment for the investor that searches out this deal.

If you are interested in real estate investing as a hard moneylender, you might want to consider your retirement account as a source of funds to make loans. You can do this by setting up a self-direct 401K or self-directed IRA account. It can be funded from an existing retirement account. A self-directed IRA can make hard money loans with the earnings going back into your retirement account tax deferred until you begin making withdrawals.

Of course, retirement accounts aren’t the only source of funds for hard money loans. Any source of funds can be used for both hard money loans and long term loans that will generate passive income that is secured by real property rather than the meaningless promises of Wall Street executives.

Please leave a comment if this article was helpful or if you have a question.

Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

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Direct MLS Access

Direct access to the full MLS is the single biggest benefit to obtaining an agent’s license. Without direct access, investors rely on sites like Trulia, Redfin, Zillow, and LoopNet. While these are valuable sites for gathering information, the gold standard for finding accurate and up to date information remains the MLS.

The MLS is where the properties are first listed. It can take days and even a week before the secondary sites pull the data onto their websites. When you’re in a competitive market, you want to see new listings the instant they come on the market. With direct access to the MLS, you can set alters that match your investing criteria to you notify you the instant a new property comes on the market.

Having More Control of Your Deals

With a realtor’s license you have full control of your purchase offers. You can directly negotiate with the listing agent without having a buyer’s agent filtering the information that you receive. You can also speed up the entire purchase process by working directly with lenders, appraisers, inspectors, closing attorneys, and anyone else involved in the closing of your transactions. If you’re flipping properties, you can do the same thing as the selling agent and fully control your marketing.

Building Relationships with Other Agents

Being your own agent encourages building relationships with selling agents. By making their job as easy as possible during each transaction, you build a reputation as someone they want to work with. There is a high probability you’ll start being told about attractive listings before they are even entered into the MLS. Also, if your investing criteria only covers certain neighborhoods, other agents can bring your attention to attractive investment opportunities in neighborhoods you might have otherwise over looked.

Collecting the Commission

This is more of a fringe benefit than a main benefit. Typically, you’ll earn a 3% commission on each property that you buy or sell and then split that with your broker unless you become your own broker. As an investor, your serious money is earned either as a landlord or on the flip. I wouldn’t make the commission a major reason to get an agent’s license but a little extra money never hurts.

Reasons for Not Getting Your License

There are certainly reasons for not getting your license. Depending on your state, it will cost you several hundred dollars in fees and probably a hundred hours taking required courses and exams. There are also ongoing costs like the fee for MLS access and requirements for continuing education. Finally, you’ll be doing more paperwork. You’ll be doing the paperwork that your agent currently does on your behalf. It is a personal decision with pros and cons.

Please leave a comment if this article was helpful or if you have a question.

Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

This strategy works well for partnering with people that want to invest in real estate but either don’t have the time or don’t have the skills needed to succeed. In those scenarios, they bring the money or credit to the table and you bring the time and know-how.

Just like a formal partnership, you need to be sure a JV partner is compatible to your investing strategy. Before drawing up a JV agreement, you need to establish both your purchasing criteria and your exit strategy. Once that is in place, you find a property meeting the criteria and draw up a JV agreement specific to the investment criteria.

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Issues to Consider in a JV

Issues you want to evaluate about a potential JV partner ahead of time include, business acumen, expected return on investment, their ability to make logical business decisions, and their reaction to business set backs. The list is longer than this but answering these questions is a good start.

When you think you have found the right investment property, JV partner, and have an exit strategy, you still need a JV agreement. It doesn’t need to be recorded with the state the way formal partnerships are in most states. However, it does need to be legally binding in court.

There are important issues to address in the JV agreement. One is how profits will be divided in the end. Will they be divided 50%-50% with your work being given equal equity in the property as your JV partner’s financing? Or will you be compensated for your work and receive less of the profit?

What if the investment results in a loss? Will you be expected to repay part of the money or is the risk fully assumed by the investor? What happens if there is a fallout of the meeting of the minds? How will it be resolved? In a court of law or by a third party arbitrator? How is the arbitrator selected? These and other issues must be included in the JV agreement to protect both you and your partner.

Keep Your JV Above Board

If they aren’t, the old axiom “he who has the most gold wins” is likely to apply. That makes the agreement a necessity to protect your interests. Don’t go into a joint venture when the money partner says to skip the legal agreement to save costs. When they have the money, they are taking away your legal right to the profits.

Finally, although it happens all of the time, it’s never a good idea to partner with family members. Too frequently, this is done without a formal agreement making it even worst than having a fallout with nonfamily partners. When there is a fallout with a nonfamily member, your can pick yourself up, dust yourself off, and move on. When it involves a family member, you may not have anywhere to spend the holidays for years to come. It’s not worth it.

Much of this may sound too negative to make a JV worthwhile. Try not to look at it that way. Joint ventures are used all of the time and are a great way to raise money for highly profitable real estate investments. Most of them go exactly according to plan. The agreement just makes sure everyone is on the same page from the beginning.

Please leave a comment if this article was helpful or if you have a question.

Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

Just because the real estate market as a whole has turned in favor of buyers the last six months doesn’t mean every house is going to have multiple offers. In San Francisco, every house will have several buyers at least taking a close look at every house. But in Detroit, most houses will never be considered by even one buyer. Location is still very important regardless of the overall real estate market.

What Else Counts

Price is the next consideration that buyers look at after the location. If you price the house 10% above market values in anticipation of receiving multiple offers, you’ll price yourself out of the market. Buyers are still very price sensitive. You won’t know the true market value of your house until you start receiving offers but you need to price it realistic to other houses in the neighborhood even to catch the attention of potential buyers. In fact, if you want to catch the attention of the most buyers, you need to price your property at the lower end of the range. Especially, if the house has location or presentation issues.

After location and price, your next consideration is how the house views or the presentation appeal. In this age of internet selling, the house needs to photograph well. The location of your house is permanent and prices will fluctuate based on a number of factors outside of your control but how well your house is presented is the one thing you have full control over. If you can afford it, make some cosmetic upgrades to the house. Some painting and new carpet can make your house look up to date and attractive.

Although the landscaping isn’t a major selling point with most houses, it is the curb appeal. You need an exterior photo of the house to post on the internet. Obviously, you want the best angle you can find and a few minutes trimming shrubs and cutting the grass makes a big improvement. If the neighborhood is attractive, take photos up and down the street to enhance the location appeal.

Buyers Want an Emotional Connection

Buyers looking for their new home want to make an emotional connection with the house. Your jacket, purse, and muddy shoes do not make that emotional connection in photos or when the house is being walked through. Before photographing the interior of the house, remove personal belongings. Also, unclutter the rooms to make them appear as large as possible. Always remember that the internet photos are the first place buyers look when considering if they want to go inside a home to take a close up and personal look.

It’s great news to sellers that some markets are seeing multiple offers on homes shortly after going on the market. However, you still need to take appropriate action to make sure yours is one of the houses that attracts multiple buyers.

Please leave a comment if this article was helpful or if you have a question.

Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

There is a low level of competition in the trailer park industry because most communities either ban additional trailer parks or heavily discourage them. The reason being is that they are perceived to attract drug addicts, criminals, and the poor that consume resources without adequately adding to the tax base. Billionaire, Sam Zell, recently told an investment conference “We like the oligopoly nature of our business”. An oligopoly is much like a monopoly. However, instead of only one company controlling the industry, two or a small number of competitors control it.

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Mobile Homes Can Be a Rough Industry

Dan Weissman previously worked at Goldman Sachs and for a hedge fund says that, he didn’t used to have to worry about meth addicts chasing his employees with a metal pipe or having a SWAT team barge into a manager’s office looking for an arsonist but in the trailer park business these become realities.

Still, there are safe havens in the trailer park business. In years gone by, buying a mobile home was an economic step up for most people when they were finally able to own at least the mobile home even if they still had to rent the dirt it stood on. Today, although new trailer parks are discouraged, the demand has never been higher. New people moving in aren’t moving up economically. These are people that never recovered from the recession and are being forced to move down the economic ladder. Because of high demand and low supply, by doing background checks and checking references it’s possible to keep stable and non-criminal clients in your trailer park.

Senior Parks

Another strategy for a trouble free trailer park is investing in a 55 and older park. Many of these parks have other rules such as requiring dogs to be under 20 pounds. Another common requirement is that owners be present when guest are staying at the home and limiting the number of days a guest can stay. People willing to comply with a few sensible rules typically aren’t going to be people that cause trouble and attract the police.

The past three years have seen trailer lot spaces increase rents an average of 30%. In parks where the trailers are mostly owned by the tenants, these tenants are willing to endure annual rent increases rather than try to come up with the $3,000 it costs to move the mobile home to another park. Another tactic that big time investors are employing is offering park managers a monthly bonus for collecting 100% of the rents on time. There is a substantial amount of money to be made in the mobile home business. That’s probably why Warren Buffet bought Clayton Homes Inc., the largest manufacturer of mobile homes, more than a decade ago.

Please leave a comment if this article was helpful or if you have a question.

Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.