Investing in real estate is a numbers game. The profitability of any given investment often comes down to a very simple equation. Though you can analyze the numbers in different ways, such as the profitability index ( Profitability Index = Present Value of Future Cash Flows ÷ Initial Investment ) and ROI ( ROI = Net Return on Investment ÷ Cost of Investment x 100% ), the point is that it all comes down to numbers.
3 min read
4 min read
We often talk about maximizing your income potential in an investment property. But what does that really look like? Is it all making expensive renovations and upgrades? Is it the opposite and spending as little as possible (as some landlords will tell you...I know, I agree that is crazy!!!)?
Spending time and effort on the right renovations is certainly part of the equation, and they can certainly level your properties up to a higher price point. However, part of increasing your income is reducing your costs—and this can have a huge impact on your profit! Why? Because unlike spending moneys on renovations, which are a lot like "investing" in the property itself and making it more desirable to residents, reducing your costs and finding hidden savings puts dollars directly onto your bottom line!
5 min read
There are three primary points to consider before changing things up:
As an investor, ensuring excellent customer service for your tenants is key to growing a positive reputation. You will never make 100% of the tenants or even applicants happy 100% of the time. However, put the effort in to hit that mark. It will make it a lot easier to ignore the few who decide a nasty online post is their best route....whether it is truthful or not!
Many renters live paycheck-to-paycheck and value flexibility in paying rent. This is a new reality and landlords as well as property management companies need to creatively figure out flexible payments.
Grace periods, though helpful to tenants, can promote bad habits. Bad habits are the last thing you want to promote in a tenant!
With these in mind, consider: how can you innovate in how tenants pay their rent and improve customer service without extending too-lenient grace periods?
1 min read
So you all know that we are constantly working to improve our operations and educating ourselves when it comes to investing in real estate and we urge you all to do so as well. Last week we spent 4 days at the Fortune Builders Rehab Bootcamp in sunny San Diego, CA learning new processes and touring the properties that Fortune Builders are currently rehabbing. Ryan, who heads the rehab department at Memphis Invest, joined us in continuing his education. This is by far one of the best educational opportunities of the year and we are happy that Ryan could join us.
Kent, Jr., Brett and I had the opportunity to speak to the 300+ attendees in regards to systems implementation, business building and stayed over to give a special presentation to a select group of attendees on the inner workings of the Memphis investment property bus tours that we host. See below for pictures from last week's workshops.
Be sure to check out the Fortune Builders' home page for future events and make plans to join us for one of the upcoming educational boot camps. Even the experts still attend workshop weekends to continue to grow and learn as business owners.
See you on the road soon...
3 min read
What are the laws in your state or municipality
There are different laws around the country for both landlords and renters and you absolutely must know the laws that pertain to your area. That being said, here is the easiest way to learn those laws. First, contact local property management companies and ask for their guidance with local land lording laws. It may take more than one call, but be proactive and ask for their assistance. Most will be more than happy to answer a few of your top questions. Second, contact local landlords that advertise properties for rent in the local papers. Many times, with an offer to buy them lunch or dinner, a local landlord will spend time telling you how they operate and what they know about local laws. Finally, when you have a better idea of your market place and the local laws, you turn to a local attorney who specializes in representing landlords. They can assist you with the ins and outs of how to operate as a landlord to give yourself the best opportunity for success.
Developing a great lease
Once you have established a better understanding of your local land lording laws, you can also develop your lease. Chances are, if you will ask, other landlords will share their lease with you. Another possibility is that your attorney will already have a lease that they can give you to use. Using a proper lease is the best way to protect yourself when it comes time to collect late rents or possibly move towards dealing with a problem tenant in the legal process. Being clear and precise in your lease is the best way to protect yourself when it comes time to involve the local courts and laws as a landlord. Once you have a great lease, make sure you have a great closing process. Make sure that your tenant not only signs every page of your lease, but it is a good idea to have them sign key parts of the lease where the legal process is laid out. Cover yourself and your tenant to ensure your success.
Create your process
Problems will absolutely occur when you are a landlord. From late rents, evictions, maintenance calls and even maintenance issues that have to be charged back to the tenant. All of these situations will occur to you as a landlord and you must be prepared form the beginning on how you are going to handle each of those situations and be consistent. I suggest you put it in writing and have that process filed with your attorney. Once you have committed it to writing and filed it with your attorney, you have no choice! You must follow that policy. That policy will spell out when a tenant is late, what the repercussions are going to be, when that process moves to the stage of eviction, when the tenant will be notified and again, what the repercussions are going to be. If you will follow the process you lay out, you will be moving in the right direction and the legal process will be easy.
Dealing with evictions
Evictions are one of the few absolutes in the property investment business. If you are going to manage your own properties, then getting over the fact that you will have evictions to deal with is a must. Renters will pay late, they will push the envelope and some know every step to take to play the game of staying in a property for the maximum number of days for the minimum number of dollars. If you have created your lease based on what you learned form other landlords, management companies and your lawyer and created your process for dealing with tenants (and followed that process) then you will have a very good chance of winning the eviction as quick as possible and for the least amount of work and cost.
Moving forward as a landlord
Investing in real estate and choosing to operate as your own landlord both can be very profitable and rewarding. Simply making that decision will not be enough. You must take the time to get educated and prepared to be a good landlord and out your contracts and systems in place. These simple steps will absolutely help you to become a better investor and a better landlord.
2 min read
While none of us expects changes in the national housing market over the next few years in terms of major appreciation, there will be some localized, smaller market cities that fare better than others. National and international Real estate investors are lining up to see what the numbers have in store for real estate investor friendly markets like Memphis, TN.