The Educated Landlord

Making Landlording Easier

You are here: Home / Articles

Why You Need To Talk To Your Tenants About Renter’s Insurance

By

Renter’s Insurance – Why It’s Important

why tenants need renter's insuranceIronically it’s not just tenants that don’t understand renter’s insurance but it’s also landlords as well. Here’s why it’s important and here’s also what you need to know as a landlord.

Your insurance covers your property.

Or at least it should if you’re properly insured!

Depending on the type or amount of insurance this covers damage to the property through issues such as fire, flooding, sewer backups, rental income loss and more.

This helps you repair or rebuild your property if one of these issues does occur or provides you potential settlements if you prefer not to move forward with the work or if you wish to do it yourself.

Again the important point of this is it depends on the type of coverages you have. If you aren’t specifically covered for flooding for instance the insurance companies won’t cover you if there is flood damage.

If you don’t have coverage for loss of rental income, you won’t be covered for those losses, so it’s very important to ensure you’re properly insured to protect YOURSELF!

And that’s the important point, your insurance covers you, it doesn’t cover the tenants property and it also doesn’t cover the tenant if they are negligent and were the ones that potentially started a fire.

That is why it’s important the tenant themselves have renter’s insurance so they can cover the potential loss of their personal possessions.

Addressing Renter’s Insurance with Tenants

Now many landlords ask me “When or how do I talk to tenants about their insurance?”

Ideally this is done when you’re going through your lease with the tenant, but it can also be done as a courtesy during showings.

Many landlords make having renter’s insurance a term of the lease. This can be a great way to ensure they are adequately protected (as well as yourself) in case they do cause a problem such as a fire or significant damage due to negligence.

The challenge is depending on your local laws  you may not be able to enforce this, so as always learn your local laws and regulations!

I typically walk tenants through renter’s insurance during the lease signing by explaining to them how insurance works and the conversation typically goes like this.

” I just want to talk about insurance with you before we go any further. I have insurance on my property, but my insurance only covers my property. That includes the building itself, the appliances and everything attached or part of the property like doors, cupboards sheds and garages.”

“It doesn’t cover your belongings, your expensive stereo or TV, your computer, your clothes or any of your other possessions. That’s why you need your own renter’s insurance!”

It will cover any losses you might incur, it could cover any costs you might run into if you have to stay somewhere else if there was a fire or flooding and often it will even replace any goods or clothing you’ve lost.”

“And most important, it’s usually quite inexpensive for tenants as it doesn’t cover the building! Because of this I’d recommend acquiring your own insurance a priority right away.”

By this point the tenants usually understand how important it is, but it may still require following up once they have settled in. Just to make sure they actually do follow up!

What Tenants May Need From You To Get Renter’s Insurance

Depending on who the insurer is, often your tenant will now need you to answer some additional questions as well.

This can include the size of the space they are renting, the type of construction of the property, the type of heating, whether there are other attached units (ie up down suites, or whether it’s a condo/duplex) and possibly additional details.

To make providing this easier, you may want to include this information with any tenant packages you provide, and/or you may want to keep the information handy in your property files just for this type of occasion.

You’ve likely already been required to provide this to your own insurance company so it shouldn’t be hard to pull together.

Having an insurance conversation with your tenants can go a long ways towards avoiding a particularly unpleasant conversation if you ever do have major issues as well as pointing tenants towards a bit more peace of mind in their lives.

If you have some thoughts about tenant insurance and how you deal with it, leave me a comment below!

 

What’s The Best Way To Screen Tenants?

By

Is There A Best Way To Screen Tenants?

Best way to screen tenantsMany first time visitors here are looking for the best way to screen tenants. The problem is, there is no single best way.

It really requires a multitude of strategies to ensure you’re screening as well as possible.

There is no single question you can ask, a certain number they need to have for a credit score or a the ultimate reference. It’s a combination of all of these plus a bit of your gut.

The real challenge that comes with this is that it’s also a matter of consistency.

If you have a multitude of requirements and a broad range of questions, hoops and steps that take you from a vacant property to a fully rented property it becomes incredibly important to create a process.

A process you can repeat to ensure you’re using the best way to screen tenants possible rather than a haphazard approach where you could miss steps.

How I Can Help You Screen Tenants

Fortunately I can help a little in that department, or a lot depending on your needs.

best ways to screen tenantsAt the very least I’d suggest you grab my list of 7 interview questions you need to ask prospective tenants. That will help you a little by providing several basic questions that you can consistently ask tenants during the phone interview stage of your vacancy.

By asking these questions before you even show your vacant unit you’ll save yourself an excessive amount of potentially wasted time by weeding out tenants who will never qualify for your property. Or who are simply testing the waters and aren’t even serious.

On top of that by creating a systematic process that you repeat over and over as a best way to screen tenants for your landlord business, you’ll be able to protect yourself from potential discrimination complaints.

Would You Like A System For Screening Tenants?

Of course the 7 Questions are just the beginning. They make up just one of the 7 steps required to properly screen a tenant.

These steps include

  1. screening with a good rental advertisement
  2. screening with an initial phone interview (using the 7 questions)
  3. screening with an in person interview at the property
  4. using a solid application form
  5. calling of work references
  6. calling of landlord references
  7. and finally a credit/criminal check

Then capping all of this off with how you feel about the tenant. After all if you’re in the business of creating good solid homes for tenants long term you do want to rent to someone you like don’t you?

I feel using these steps are the best way to screen tenants and to screen them consistently so that you get the best possible people for your property.

You’re more than welcome to build your own system using this set of steps and off of my original 7 questions.

What If I Built You The System?

Now many astute landlords will look at that information and realize it could take many many hours to create their own system. And it would be a lot of work.

Wouldn’t it be far easier to have it already done for me? In a format where I could download the steps, maybe learn the best way to write my ads so they can do soem screening for me?

Maybe even providing additional best practices and questions to ask references and former landlords?

How about if it also showed you where and how to get credit checks and criminal checks and then even told you how to read them?

How much time would that save you and how much easier would it make your life?

Well tada, I’ve done this for you!

It’s part of my How To Screen Tenants Like An Educated Landlord Course and I feel the information it contains should be mandatory for landlords to know.

It’s based on the actual systems and processes I’ve used over my career as a successful landlord and includes the best way to screen tenants that I know of.

The art of screening tenants is one of the important skills a landlord can possibly have. Choosing the wrong tenant can range from being a minor headache to costing you months of lost rent and excessive legal fees in order to evict a bad tenant.

With the average eviction costing a landlord over $3,000 in lost rent, lost time and vacancies this $47 investment saves you money the first time you use it.

How To Purchase The Educated Landlord Screening Course

If you’re interested in the course so you too can avoid choosing the wrong tenants or simply tenants who will be a poor fit for your property you can purchase this online training through the following link.

How To Screen Tenants Like an Educated Landlord

If you’re still not convinced you need this course, let me ask you a few questions.

What would learning how to write an ad that fills your property faster saving you extended vacancies be worth to you? With average rents around $1,000 one month of additional vacancy costs you at least $1,000 not including any utilities you cover out of pocket along with other costs. That’s why I include ad writing as part 1 of the course.

How much does your time cost if you go to show your vacant unit to someone who will never take it? With an average showing taking 30 minutes to show the property plus driving time every “wasted showing” costs you an hour of time. What’s your hour worth? What if this happens three or four times or even more? That’s why lesson two goes into detail about the 7 Questions and how you can use them to avoid showing the property to time wasters saving you multiple hours of your precious time.

Do you know the most common scam tenants use to get good references handed out? I do, which is why in lesson four I explain what to do to avoid those scams, how to verify their information and why their current landlord may be the worst reference possible! Knowing this can help you avoid soem of the worst possible tenants, the professional tenants who use their knowledge of the systems and laws to get into your property for months at a time without having to pay any rent.

What do you do if you can’t find a qualified tenant? The wrong answer is to settle and the second wrong answer is to tell the applicants who didn’t qualify that they aren’t qualified! In section five I break down what to do if you don’t find qualified tenants and how to let the unsuccessful applicants down easy and so they don’t come after you for discrimination charges which is extremely important!

Finally, do you know where to get credit or criminal checks done and how to read them? Many landlords don’t know where to start with this and then even if they do they have no idea how to read or understand the reports once they get them. I explain a couple places to get credit checks done along with explaining what to look for and how to read them.

The best way to screen tenants - the Educated Landlord Screening Course

If you’d like to learn all the right steps to screen tenants along with what to watch out for to avoid the wrong tenants you’ll want to sign up today and get educated.

Again here’s that link, How To Screen Tenants Like an Educated Landlord

Remember, it’s all online with multiple downloads you even if you’re fully rented right now you can sign up, take the course at your own pace and be ready and primed for your next vacancy. You’ll even have all the skills to pre-write your ad for your next vacancy!

 

Know other landlords who have recently had problem tenants? Forward this article to them so they can avoid future problems!

Landlord Lessons

What A Rooming House Landlord Need To Know Before They Start

By

Being A Rooming House Landlord Can Be A Tough Job

Being a Rooming House landlordMost of the time a rooming house landlord makes it tough on themselves because they are missing some important information when they start, or they simply don’t change with the times and either of these can make their job tougher and definitely less worthwhile.

I just finished reading another article chronicling how many rooming house landlords are getting out of the business. They’re seeing less money being made, tougher regulations being put in place and less support from local governments.

The prevailing problem (or at least the problem I picked up on) was that almost all of these landlords catered to the bottom tier tenants.

Tenants that survived off of social assistance, government subsidies and basically had no other options but to live in low cost rooming house properties.

If that’s your target market, I can almost guarantee you  a) won’t last b) will become burnt out very quickly and c) will quickly get disillusioned with the business model of own rooming houses.

What A Rooming House Landlord Needs To Know To Thrive

When I started I bought into the low end rooming house market strategy with my first rooming property. I hated it…

I kicked my first drug user within a few weeks and lost a TV he pawned as well.

Shortly after that I realized low end properties were not what I wanted to do and low end tenants with tons of problems were not who I wanted to rent to. Sounds discriminatory doesn’t it. And if I screened only on that aspect it would be, so I don’t.

Instead I just raised the bar of entry.

Here’s the take away.

If you target low end tenants who can pay low end rent for your low end property you will end being a former rooming house landlord relatively quickly.

Yes I understand there is a need for spaces like that, but the challenges, the headaches and the disillusion that can accompany it aren’t worth it for a small time landlord.

Perhaps that needs some clarification.

If you plan on operating one or two properties, maybe 5-20 rooms, it’s not worth it.

If you have a larger portfolio, maybe buildings with 20 plus rooms you rent out, then perhaps you can make it work. It’s economy of scale.

On a smaller scale if you have low rents your cash flow at the end of the month won’t be high enough to offset potential losses. If you work on a bigger scale with more rooms, one or two losses won’t affect you to the same degree as you have more incoming to offset the shortages.

Changing The Rooming House Model

Rooming houses don’t have to cater to low end tenants, thats’ old school thinking. Instead, your rooming house should cater to the gaps in the market.

When I started, the gap in my area was safe, affordable, clean properties where tenants weren’t locked into long term commitments. I changed the model and was rewarded quite well for it.

rooming house landlord - higher end rentalsDid I still have headaches? Yes, but the number went down substantially.

Did I still lose money on occasion? Yes, but by charging higher rates and catering to higher end tenants I also made more money and reduced turnover, even without locking anyone into leases.

What you need to know, before you jump into the rooming house business, is that the more you break the traditional low end rooming house model and convert it into a profitable business the longer you’ll survive, the more people you’ll be able to help out and the less problems you’ll face doing it.

Want To Start Your Own Rooming House?

Rooming houses can be a profitable business, if you do it right. That’s why I put together the Basics of Rooming Houses.

It’s a beginners course to rooming houses perfect for someone interested in the business model and who wants to avoid soem costly mistakes learning on their own.

I walk you through the basics of finding out the local demand for rooming houses so you understand whether it’s a market you should pursue (imagine buying a property before you even know if it will, this helps you avoid that).

I show you how to learn the local rules so you don’t find yourself in trouble or worse shut down.

And I show you how you can start creating streams of steady clients who become a referral source for you making it easier than ever to keep vacancies low and profits high.

If you want to get off on the right foot, this investment in your rooming house education will get you started the right way.

Just click the following link to get started with this online course today,

Basics of Rooming Houses Online Course

 

Why Real Estate Isn’t For Everyone

By

Why Real Estate investing?People I bump into often say “why Real Estate”? Why not stocks or bitcoin, or precious metals or some other hot investment sector?

Well, because Real Estate requires a different mindset is what it really comes down to.

People who get excited about stocks, or bitcoin or gold futures or other shorter term investments are often looking for quick gratification. Note the qualifier there, often.

Sure there are many people using stocks and mutual funds for long term retirement, but they rarely are the ones getting all excited about the next big thing.

These long term visionaries are much closer to being Real Estate investors than they realize.

Why Real Estate?

The simple answer is that it’s one of the simplest most consistent ways to grow your money over the long term.

It actually acts as a hedge against inflation due to property values being driven up by inflation.

You might think of property as a boat at sea and inflation as the ocean. As inflation rises, or the ocean in my example, property values get raised up as well much like the boat on the ocean.

A properly chosen property creates cash flow that can assist you moving forward whether it’s to retirement or as an income supplement.

Perhaps the best part is your tenants are paying down your mortgage every month helping you create more equity and putting you in a more secure position the longer you own it.

Are there challenges associated with Real Estate? Obviously, it’s why many of you are here reading this.

Why Real Estate Isn’t For Everyone

It’s often these challenges that become excellent excuses for people to not invest in Real Estate. After all, isn’t it far easier to simply trust the bank with your retirement funds?

And that’s the crux of the problem. People choose easy rather than smart options. They don’t do their own homework, their own research and they simply hand their dreams and hopes off to someone “more experienced” with investments.

So Real Estate isn’t for everyone, it’s for people who are in it for the long haul. People who are willing to put in some work to manage and maintain their properties. People who are a lot like you who come tot this site to get some insights, learn a few tips and maybe pick up some new ideas to help you become even more educated about your landlord business.

So thank you for not being everyone, but rather for being eager to learn and interested in being educated about what you’re doing.

Caveats When Buying A Turnkey Rental Property

By

Does a turnkey rental property work?It seems perfect. The nice little turnkey rental property that the current landlord is selling comes complete with tenants. A puzzle perfectly coming together

You’ll buy the property, you won’t have the headaches of doing your own searching for and then screening of tenants. You’ll be ahead of the game from the start and you’ll be making money from day one! What could go wrong?

Well, let me count the ways…

Why Landlords Sell A Tenanted Turnkey Rental Property

There are usually only a few reasons someone sells a turnkey rental property that is ready to go and comes complete with tenants in place.

Some are good, some not so good, and in a few cases downright bad, so let’s run through them.

Reason 1 To Sell A Tenanted Property

Sometimes they’ve reached their goals, they’re ready to retire or move on from being a property investor and now is the time for them to sell. They’ve had great tenants in place and want to make sure they aren’t disrupted and forced to move on.

If that’s the case great this may be a fantastic opportunity. Of course you’ll still need to run all your numbers, base your purchase on it being a smart business decision and not the fact that it’s turnkey.

Remember, just because it’s being sold as a turnkey rental property doesn’t mean it’s actually a turnkey business decision.

It may work for the current owners due to their purchasing it many years prior and buying it at a much lower price point which means lower carrying costs. It may have worked for them as they put down a much larger deposit so the property would cash flow better or they may have even inherited the property and have no mortgage expense.

You don’t always know the entire story and even if you do, you still need to do your diligence to ensure it works for you. With current prices and bigger mortgages the value proposition may have faded turning this perfect property into a potential moneypit.

Reason 2 To Sell A Tenanted Property

With reason 2 we’re starting to get to the potential landmines, so pay close attention.

Often landlords sell their properties complete with tenants because they’re losing money or the property simply isn’t working. These properties may either be a nightmare, or a huge opportunity for an educated landlord!

Many landlords, especially those who jumped into the game without enough knowledge or education, simply don’t understand the business.

They may have underpriced their units, under renovated them so they weren’t getting good rents or they possibly didn’t do the “real math” that experienced Real Estate investors complete to evaluate a property.

Years ago I wrote an article that explained “actual cashflow” versus what rookie landlords often see as cashflow. If you’re not familiar with it you can find it here, Do You Really Understand Cashflow?

The monthly cash flow and returns they anticipated simply evaporate as their inexperience with screening and managing tenants and their ongoing maintenance costs eat all their expected cash flow up.

These types of properties can provide a great opportunity for the smart investor willing to sink a bit of additional time and money to turn a property around. So you can’t count them out entirely.

Of course these also end up being not quite as turnkey as advertised so you need to balance that out as well!

Reason 3 To Sell a Tenanted Property

Now we’re moving to the danger zone. Sometimes a landlord ends up selling a tenanted “turnkey rental property” because the tenant (or the property) is a nightmare and the turnkey opportunity isn’t quite as advertised.

They’re just trying to get out and pass the problem on to someone else.  Don’t let it be you!

Some of the warning signs with this could be simple items like paperwork that can’t be tracked down (like missing or non-existent leases or lack of validated expenses ), not being able to talk to the current tenants (owner doesn’t want you to hear the real story) or a list of excuses about the condition of the property (lack of funds for repairs due to lack of payment?).

As in reason 2, there may still be an opportunity to turn this property around and turn it into a profitable solid long term rental property investment. It will simply require more diligence and/or immediate gains.

For a quick gain, you’d simply want to be compensated in some manner in order to assume or negate the previous landlords problems. This could be a better price, rephrased terms where you get the property vacant or other options.

For your diligence you’ll want all the possible paperwork and in the case of any suited properties all documentation verifying the legality of the unit.

There’s nothing more exciting for a landlord than assuming the property is legally suited to find out the reason the landlord is selling is due to the city inspecting the property and shutting down the second rental unit you were counting on.

Maybe exciting is the wrong word, frustrating perhaps?

It’s Not All Bad

Now, it may appear I’m saying never buy a turnkey rental property, but that’s not exactly true.

What I’m trying to point out is it’s important to get all the details, not just what the current property owner tells you.

It’s important to get all the documentation available, like leases, tenant walk throughs, amendments to the leases or special exceptions (allowed to sublet, pets, agreements for late rent payments or other allowances outside the actual lease).  You’ll also want copies of receipts of any security deposits.

You’ll want to meet with the tenants to make sure thee aren’t any problems or issues and obviously you’ll want a thorough property inspection. You just can’t leave anything to chance!

So, should you buy a property that comes with tenants? Well that comes down to what you find out with all your diligence!

What are your thoughts?
Have you bought a turnkey rental property? And did it work for you? Leave me a comment below and let me know.

Your First Rental Property

By

It’s not uncommon that your first rental property is your worst rental property.Lessons learned from your first rental property

After all, it’s where you cut your teeth and learned from your mistakes.

Sometimes you learned you picked the wrong area, or perhaps the wrong type of property, or maybe it was where you evicted your first tenant out of.

Whatever you learned, that first rental property is what can make or break you.

You see often the first one is what discourages investors and landlords from carrying on. they learned that “all tenants are bad”, “you can’t make money in Real Estate” or simply that “landlording is too hard”.

On the other hand for many rental property investors, that first rental property is a stepping stone to a second, third and even more properties.

So what’s the difference?

How You Deal With The Experiences Learned In Your First Rental Property Is Key

It’s simply how you deal with it. At your first sign of problems is it fight or flight? Is it learn to do it right or get out while the going’s good?

How you react from the challenges you run into, what you take away from those challenges and how you correct them can make all the difference in succeeding or quitting before the race has really begun.

Like anything, being a landlord comes with a learning curve, you can’t be expected to now it all your first day. You need to go in eyes wide open, learn from any problems that come up and adapt so you avoid similar problems in the future.

Think of it as perspective.

With the right perspective you understand it may not necessarily be easy at first, but it does get easier. And hopefully with the resources on this site or that I share on our Facebook page (if you haven’t liked us yet on FaceBook, what’s holding you back? find me here, https://www.facebook.com/TheEducatedLandlord/ ) you’ll be learning even faster what it takes to be an Educated Landlord!

I see many landlords who simply give up when they face the adversity of a bad tenant or a rental property challenge, don’t be that landlord. Be the successful one who fights through the adversity.

7 Lessons From Selling 9 Rental Properties in 18 Months

By

It’s amazing what you can learn from selling nine of your rental properties in a fairly quick time frame.

selling rental properties lessons

But before I get into those lessons, some background on why I sold so many properties.

Dealing with a ton of rental properties can be overwhelming at times and when many of them are rooming houses with individual rooms rented on a weekly basis you can find your schedule no longer belongs to you.

That’s part of the reason my wife and I decided it was time to divest a bunch of properties. We also had a plan to potentially sell everything and move to a tropical Central American country, but kids hoping to finish high school, other projects that weren’t going to get finalized anytime soon and aging parents has put that on hold.

Yet we still needed to free up that time and we had a few items all coming together. We had several partners that wanted out, the market was reasonably stable (at least when we started selling, it started to drop shortly after we put plans in motion which was another reason to hang onto the remaining properties) and frankly the rooming houses were burning me out.

With over 30 weekly rental units at the time and a string of stressful problems all at once ( a fire, two evictions, a criminal and several deadbeats) my time was never my own and my mood would bounce all over the place depending on which problem or challenge I was dealing with.

In the grand scheme of things, I still love rooming houses. They are a fantastic way to amp up your monthly cash flow, you’re able to help a ton of people who may not necessarily have other options and it’s an empowering experience to be able to help so many people.

But as I also say, try to limit your operations to five to seven years to preserve your sanity, I was at 13, almost double what I warned others about!!

So the decision was made to cull the wheat from the chaff (we decided to sell the worst first…or at least the ones with mortgages coming due, the ones that caused too many headaches or had partners who needed out).

If you’re contemplating selling any rental properties yourself you might want to also check out this article to help you make an informed decision, How to Decide When to Sell an Investment Property.

There’s the background, now for the lessons!

Lesson One

Time your sales around mortgage due dates.

mortgage renewal dates and rental propertiesNow depending on where you live there may not be penalties for breaking mortgages early, but in most places if you break that mortgage contract you could be on the hook for a few months interest payments or the entire potential interest rate differential the lender is losing out on which can be significant if it’s early in a mortgage.

I’ve previously paid as much as $17,000 in penalties for a $500,000 mortgage with over a year remaining and trust me, it’s painful!

Again, know what penalties you may be stuck with for your particular financing before you move forward with starting to sell, it may mean the difference between profiting or losing money.

Or if you’re aware you’ll be selling in a year or two, either time your renewal to coincide with that timeline by shortening the term (one, two or three year term) or utilizing a mortgage with a lower or zero penalty (variable or adjustable rate mortgage often have smaller penalties or open mortgages have no penalties but trade that privilege for higher interest rates).

Lesson Two

Get your rental property into top notch shape before you sell it.

Painting Tools for LandlordsThis is basically the same advice you would follow before you fill a vacant property. You want to get it painted, patched and cleaned so it shows well and it sells faster.

If you’re emptying the property of tenants the longer it sits empty the more money comes directly out of your pocket, so why not put that money right into the property to sell it faster, and typically for more.

People don’t want to buy someone else’s problems, unless they can get a significant discount, so leaving marks on the wall or having a dirty home will only cost you money. Lot’s of money!!

If there are obvious deficiencies get them fixed and use it as a selling point. Hopefully you’ve made money over the time you’ve owned the property and hopefully you’ve set a portion of that aside for just this day. Especially if you’ve been planning on selling it in advance!

We’ve replaced decks, replaced roofs, redone bathrooms and kitchen counters to update properties. We also repainted almost every property we sold (more on the ones we didn’t in Lesson Four) to make them brighter and shinier!

We’ve replaced screens, hand rails, kitchen handles, we’ve brought in lawn maintenance to upkeep the property and to eradicate weeds and we’ve hired cleaners to get the properties spic and span. While hard to measure the direct impact we’re positive it is why  almost all of our properties we sold were gone within 45 days of listing them (one took 70 days as the initial purchasers had their financing fall through and we had to re-list and our most expensive property took longer due to the market conditions).

The impact became most obvious when we watched similar nearby properties languish on the market well past our close date even though they were listed well before ours!

Lesson Three

Do your own pricing homework!

selling rental property do your pricing homeworkIf you know you’re selling shortly start watching the market, especially for similar properties in the same area.

It’s very easy to have your Realtor set up an automated update system for you where you get notified of all the listings and sales for equivalent properties around you. I even have my Realtor automatically send me listings for similar properties to my personal residence and remaining rental properties so I can understand what’s happening with prices for those properties.

When it comes time to list you should know exactly what you should be able to sell the property for rather than depending on a Realtor to inform you of it’s value. If you’re really investing in Real Estate you should have a good idea anyway and this just helps you avoid getting led down the garden path by someone telling you about unrealistic selling prices just to get a listing.

Now I’m not saying all Realtors will inflate the potential selling price to get the listing, but it’s a common tactic of some just so they can get that prized listing. You simply need to be smart and not get caught in that trap.

If the Realtor has to lower the price a couple months later it only affects their commission by a few hundred dollars but it’s cost you multiple thousands in carrying costs. You have the most skin in the game when it comes to selling this property so make sure you know your numbers.

Some additional caveats that you also need to be aware of is to check your emotions at the door.

This is more typical of people selling their personal homes, but even investors can get emotional about their rental properties and this can cause them to artificially inflate the asking price above what it should be. And this can work both ways as you may see it as “just a rental”.

If your Realtor comes back with a price much lower or much higher than what you came up with, be sure to get all the facts from them as to why they believe this and balance it against your homework. Maybe you’re missing something important because you’re simply to close to the property.

Lesson Four

Let everyone know you’re selling your rental property!

It's important to tell people when selling rental propertiesWhy would you keep it a secret? Tell other investors, tell your friends, tell everyone!

Who knows which of your contacts, or even contacts of theirs, might be looking at rental properties or that possibly have a friend looking for a home in that area?

In lesson two I talked about updating and renovating your rental properties and I mentioned I didn’t do that with some. That’s because I sold them directly to other investors as turnkey properties.

They were looking for rentals and mine fit their needs so voila. I may have taken a slightly lower price as there wasn’t Realtors involved, but it went quick and easy and provided a great solution for both parties! So word of mouth does work!

At a recent seminar I attended the presenter asked us if we knew what people who invest in Real Estate secretly are. His answer was broke and it was because they miss out on the best deals as no one tells them!

The message from that was don’t keep it a secret and let everyone know.

Lesson Five

Leverage your strengths.

StrengthsThis one can be tricky, as everyone’s strengths are different, but in my case one of my strengths is marketing. So I wrote all the ads for the properties listed on the MLS.

If you’ve owned your property for any length of time and have been writing your own successful ads to fill vacancies you should be able to provide input that can help position your property to it’s best.

If your tenants all rave about the beautiful views from the deck or the nearby schools or the proximity to amenities the sales copy you or your Realtor provide should include that as well.

Simply leverage the positives and the benefits of your property to the best possible results in order to help sell that property for you as quickly as possible.

And it doesn’t end with marketing (well that depends on who you talk to as many people will tell you everything revolves on who you market). If you and your wife love gardening leverage your abilities to beautify the curb appeal.

If you have an eye for design (my wife’s an interior designer by training) leverage those abilities and skills.

Simply use your talents to benefit yourself and to help expedite the sale of your property.

Lesson Six

Ditch the emotions.

I touched on this in lesson three when referring to pricing your property, but you also have to take this into account when negotiating.

Someone will try to low ball you at some time. Don’t take it personally. Either move on or counter with something more reasonable and with a response that you won’t continue to negotiate unless they move up substantially.

Many investors often start with a lowball offer in order to negotiate down halfway between the listing price and their low offer, don’t get caught in that negotiating trap. If you’ve done your homework properly, understand your market, fixed up your property and are basing everything off business decisions versus emotional decisions someone will likely appear willing to offer you a fair price versus a discount price.

It can help to establish ahead of time what your lowest possible price will be and any timelines you have to work within. Perhaps you’ll take a slightly lower price if they close in 30 days, but if it looks like 90 days you’ll be stuck with several extra payments so you need a higher price.

If you know these numbers ahead of time you’ll be able to position yourself for a win during negotiations versus a disappointment.

Lesson Seven

Have a plan.

selling rental properties by planning aheadOnce you start down the course of planning on selling your investment property, what’s your plan? Are you putting the money in a new investment? Will the loss of cash flow affect you going forward and/or will you be able to replace it or survive without it?

In our situation we used the profits to get rid of a bunch of debt. We paid down some other mortgages, paid out some second mortgages, bought partners out and repositioned ourselves to be in a better equity position going forward. Plus I freed up a ton of time allowing me to focus more on articles like these and other ventures!

Depending on your unique situation will the sale trigger tax implications? If so, what are your options?

If you’re in the US if you reinvest back into more rental properties you can defer any tax (please confirm this with your accountant as your specific situation could differ from my experience), if you’re elsewhere do you have deductions to offset the taxes?

Sure it’s great walking away with a $200,000 check from closing, but if you have to give $100,000 back to the government for taxes it takes a lot of the thrill out of it. If you’re not sure how it will affect your tax situation talk to a tax accountant to make sure you take the necessary steps to pay the least amount of tax you’re legally responsible for.

Bonus Lesson

Empty your property of tenants.

Should you get rid of tenants when selling a rental property?But I’ll be losing out on rent each month and I’ll have to pay the expenses out of my pocket while it’s vacant!!! That’s the typical response I get from people when I tell them to vacate the property and it’s true.

The problem is if the tenant isn’t too excited about the opportunity to move once the property is sold or they want to sabotage the sale they have numerous different ways to turn your cost saving strategy into a nightmare.

This could range from little measures like leaving the place a mess which can reduce the dollar amount of any offers. They can make it difficult to show the property by blocking or denying showings for various reasons.

But those aren’t the worst. Perhaps the most devious tactic is stalling their move out and blackmailing the landlord in order to move out on time. If the buyers are expecting vacant possession and the tenant is still there you could be in brach of the sales contract at worst or you could end up with a delayed closing costing you more money.

It’s simply better to take this type of situation out of the equation. Especially if you’re not selling the property as an investment property and it’s likely the new owners will be living there.

Much like timing your mortgage coming due if this is your plan you’ll want to make sure your leases line up for this strategy as well. It may also help if you understand the local rules for terminating leases and what reasons you can use to terminate such a the sale of a property.

If it is being sold as an investment you may be able to keep the tenants in place, but you’ll want to be upfront with them and make them aware you’re hoping to keep them in the property in order for an easy transition and if they help with showings it will go a long way to letting them stay.

Of course if I was buying someone else’s rental properties I’d be wondering why they were getting rid of them. So you better have a valid reason, you’ll want to have all the necessary documentation like rental agreements, walk throughs and even tenant files that you can provide to pacify potential investors.

As a side note, just because it’s vacant doesn’t mean you shouldn’t do some minor staging. A few hand towels in the bathroom along with hand soap, vases, knick knacks and ornamental items on the kitchen counters and even some small furniture pieces can all help fill empty space in a property and make it more appealing. 

Selling Your Rental Properties Fast Is Key

We should all be aware extended vacancies are the fastest way to fail as a landlord, the same can be said about extended listing periods.

You’re stuck with all the expenses and none of the benefits once they’re vacant so why would you want to drag it out? Selling your listed rental properties as quickly as possible can solve that problem, but as I’ve gone over in the above lessons, there is work involved on your behalf.

The best and the most successful Real Estate investors with the best rental properties are also the most prepared so use my lessons to help prepare your self and make the future sale of any of your rental properties an easier proposition!

To wrap it up, what are your thoughts? Do you agree with this, disagree or better yet have something to add that I may have missed.

Take a minute and share your thoughts by leaving a comment below to help out the landlord community and if you found it helpful be sure to share it on Facebook, Twitter LinkedIn and more using the handy social media sharing buttons below.