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What You Need To Know Before You Own Your First Rental Property!

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Advice For New Landlords

Pieces of the puzzle with your first rental propertyI’ve been helping landlords for years now and as I look through the masses of info = I have shared, one gap I find is what a new investors needs to know before they own their first rental property.

The trigger for this was just a quick comment a subscriber named Matt left me the other day.

You see Matt’s been reading my articles and watching some of my videos preparing for his first rental property which he closes on at the end of the month.

He’s being pro-active, he’s getting prepared and educated and he’s being very smart about getting started!

I love it.

To hopefully get him off to an even better start I replied back to his comment with some additional tips and suggestions, but  I realized that unless someone is reading that specific article they will miss that specific information!

So I realized maybe I need some information all in one place to help others just like Matt! So here’s what I have.

Getting Started With Rental Property

Some of the information I’m going to talk about here you’ll find in other articles on the site or videos here and on YouTube I’ve done and I’ll include some references to these at the bottom of the article.

In my experience I’ve found that I read one article and don’t quite get a concept, but when it’s explained slightly different or from a unique perspective suddenly it becomes crystal clear.

I’ll also include a subscription form at the bottom where you can get my guide “The Secrets of Successful Rental Properties” where I also talk about some of these tips that apply to your first rental property and to your fortieth rental property, or at least in different ways.

So rather than babbling too much more, let’s get started!

Leases – They Are Not All Created Equal!

leases for your first rental propertyIf you’re not familiar with my background, my online start was with a site that helped landlords evict tenants in the province I’m located in, Alberta Canada.

Sure I had my own sites for my Real Estate biz that I’d created in the past or paid someone to build, but AlbertaEviction.com was all my own.

This site came about because of my own personal experience with so many evictions over the years. Now I hope it’s not a shock that a guy who educates landlords has had to evict a ton of tenants.

It should be more of a reality check.

Because just about every landlord I know has had to evict a tenant at some point in their career. Time and circumstances change situations and a perfect couple one year may be divorcing or laid off the next causing you the landlord problems as their problems trickle down.

It’s not uncommon for me to get emails from landlords telling me how they’ve had great tenants since they bought their first rental property five or even ten years previously, but suddenly they’re stuck evicting someone.

It can be a bit of a numbers game and the longer you own a property and the more tenants you have the better (or should I say worse) chance you have of getting a bad tenant.

In my case, I’ve just dealt with so many more tenants than the typical landlord that I’m that much more experienced with the negative aspect of the business.

Which bring me full circle back to my point about leases. One of the biggest problem so many landlords I helped through my eviction site had, was they used the wrong or if not wrong, a poor lease. Leases are not all created equal and the rules in various states, provinces and countries also vary making it important that your lease applies where your rental property is located.

An example of this is in my local area is that I recommend to landlords to only use “Fixed Term Leases” rather than “Month to Month Leases”. The reason being (at least in Alberta Canada) a landlord doesn’t need to renew a fixed term lease (find out local rules that apply in your area!).

“Fixed Term leases refer to leases with a start and end date, they can be as short as a one month term or as long as several years, but they have a defined end date.”

In English, that means that if I have a tenant who is constantly late with rent, doesn’t maintain the yard or I’m just not getting along with, once the lease term ends, I’m not obligated to renew it, they have to leave.

If instead I used a month to month leases that just rolls over with no fixed ending date, I require a valid reason to evict the tenant, so unless he is doing something in serious breach of my lease, I’m stuck!

The lesson from this is, understand your local tenancy laws and make sure your lease fits what’s best for you! You may not have the same rule about fixed versus month to month, but you need to understand what does apply and make sure your lease includes what benefits you the landlord the most.

Next step is to ensure you have a very specific lease for your region.

If you’re buying a generic lease from an Office supply chain, a corner store or downloading it off of the internet, it better apply specifically to your region.

Now just about any generic lease will work everywhere, but the problem is they are generic and they don’t contain the specifics you need to enforce them for your benefit.

If you can make your properties non-smoking, your lease needs to contain that information. If you don’t allow pets, your specific lease should state that. If you don’t want tenants to sublet rooms or the basement or a garage, your lease requires a clause stating the restriction.

I could go on and on, and I already have I believe, but I need to because it’s that important. Generic leases get you started, much like generic house plans are the building blocks for your dream home.

You need to fine-tune that lease much like you choose colors and materials if you are building a home, so it suits your needs and protects your interests.

It may require buying a lease from a local landlord association, it may require getting a custom lease created by a Real Estate specializing lawyer in the area or it could be somewhere in between. Just make sure it’s not generic!

For a reality check it should also not be a single page! My standard lease I’ve modified and edited over the years as rules change, is four pages long and uses a small font in order to contain all my clauses and information.

It’s that long because I try to cover everything!! And your lease should too!

Now onto the next priority.

Tenants – They Too Are Not All Created Equal

Tenant problemsMore reality checks for you, not all tenants are equal or will look after your property the same way.

That nice looking couple who seem so pleasant may be professional tenants who bilk landlords out of months worth of rent and understand how to live rent free for months or even years at a time by being smarter than their new landlord.

There are so many districts throughout the world that have set up very tenant friendly legislation that makes it virtually impossible to evict tenants in a timely fashion.

They’re set up to allow tenants to appeal or delay hearings month after month and even then they are awarded extra time to vacate. Professional tenants understand these rules and once they are in, they can cause havoc.

All while not paying, or while damaging your property or worse building drug labs or grow ops which you get stuck fixing later.

The lesson from this?

Screen your tenants diligently and rigorously. Create systems and processes where you check and double check the information applicants provide you.

This includes calling and verifying all references, previous landlords and contacts. I even go so far as to check online profiles for their Facebook, Twitter, Instagram and more to see who these people really are.

If you put in the effort up front to do all this fact checking, research and verification, you’ll find you can save yourself a ton of headaches going forward.

As my friend Julie The Street Smart Diva and I often talk about with students who have gone through our coaching programs, it’s far easier to let the wrong person in than it is to get that same person out.

Your job as a successful and educated landlord is to make sure you never let that wrong person in and makes sure they end up somewhere else while you reserve your property for the fantastic tenants you deserve!

The Final Lesson For Your First Rental Property

Processes, systems and checklists for landlordsCreate Systems! I just referenced this when talking about screening tenants!!

As new landlords and investors you have a ton to learn as you get started with your first rental property. From the incredibly important skill set of screening tenants to property maintenance and much more.

Some you may do yourself, some you may hand off to others to do, but long term, many of these processes need to be repeated over time. Often over and over as you own a property for years or expand your portfolio.

The challenge being, if it’s been a years since you last screened a tenant, can you remember all the steps?

If you happen to own several properties already and you’re ready to do your annual or semi annual inspections, do you know what furnace filter sizes to bring to replace at a specific property?

Do you know how many smoke detectors are in the property that take batteries and which kind of battery so you have them with you?

Or if you are adding a second or third property to your portfolio, what did you forget to do or ask the first time that you need to know for the next time?

Did you talk to your insurance people in advance to get the proper rental insurance in place?
Did you have a list of home inspectors you know and trust at the ready?
Did you have a list of requirements for your Realtor of what your next property needs to have?

These are just a few examples of the hundreds of questions that need to be answered as you maintain and expand your portfolio.

And yes it is a lot of work, initially at least. But that extra work at the beginning as you take notes gives you references and the start of check lists and the systems you need to streamline your landlord business going forward.

Once you get the basics of these processes down and in some semblance of order you’ll find it a helpful resource that you can go back to for years and years and that will make your land lording experience simpler, less stressful and ultimately more profitable!

Now just to tie all this together and to help make this easier to remember, I want to share with you what I call,

The Educated Landlord’s Mantra

  1. Remember how hard it is to get them out (bad tenants)
  2. Do your due diligence (on new properties & new tenants)
  3. Trust your gut, but have processes (so you don’t forget steps or get caught in emotional decisions versus rational decisions)

If you can remember these three steps as you get started as a landlord, it will carry you forward many years!

Landlord Lessons
Wrapping Up

So, those were my thoughts and words of advice about your first rental property, what would you add to this? I’d love to get some feedback from you, maybe share your advice or some lessons you’ve learned as you started in your Real Estate investing journey!

Just leave me a comment below and share any stories you could add and any feedback you might have! I look forward to your thoughts and will reply back to everyone!

Also, if you didn’t grab my guide The 7 Secrets of Successful Rental Properties yet, simply fill out the form below and you’ll get it emailed to you!

And finally, if you belong to a Real Estate group, know other landlords who this could help or could simply share this with people on your Facebook, LinkedIn or Twitter feed, I’d really appreciate it!

There are handy share buttons right at the bottom of the article and the more people we can share this with, the more successful and educated landlords we’ll have out there!






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Understanding The Basics of Leverage and Return On Investment

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Leverage in rental investmentsIf you’re buying your first or your fiftieth property one challenge that almost every Real Estate investor runs into is financing their properties.

In a perfect world we’re all sitting on a huge trunks of money and can simply purchase a property all cash. No financing required, no banks or brokers required and it all gets incredibly easy.

Yet, if it was easy, everyone would do it…

And if everyone had trunks full of money, sites like mine wouldn’t be necessary as money is supposed to fix all problem.

So let’s get back to reality and talk about a couple of areas involving financing. These are the benefits of leverage that financing gives you and I’m going to introduce some of you to the concept of Return on Investment or ROI.

Leverage is one of the most exciting aspects of Real Estate and it’s also why so many people get involved as it allows you to get involved without completely paying for a property.

I’ll break out other exciting tidbits a bit further, but for now let’s dig into the power of leverage.

The Power of Leverage

The Basics of Leverage in Real EstateIf you’re just getting started with owning rental property hopefully this little walk through can help you understand how leverage can benefit you as a Real Estate investor.

To help get the point across I have some examples that hopefully make it much clearer than just rambling on.

It’s also where you get to learn the basics of Return on Investment (which I’ll refer to as ROI going forward through this article). Anyone excited yet?

For ease of understanding I’m keeping this to the very basics very basics. I’m simplifying this by not taking into account any additional costs and expenses. These would typically include legal costs, taxes, financing setup costs, cash flow, mortgage pay down and many more annoying yet vital details.

Why skip these important aspects you might be thinking?

Because I’m only making a point about leverage, I’ll have a separate post about annoying yet vital details later to keep all the detail folks happy 8’].

So let’s go look at some examples!

Example 1

An investor purchases a property for $100,000 all cash and over the next five years the value of the property has increased by 10% making it now worth $110,000.

His $100,000 investment has grown by $10,000 and his ROI is 10%. That’s determined by dividing the growth amount or return, $10,000 in this case, by the original investment and multiplying by 100 to turn it into a percent.

ROI is typically referred to as a percent so it’s easier to compare across properties, industries or sectors.

The formula being

(Growth/Original Investment) x 100.

In our example the numbers look like this,

(10,000/100,000) x 100 = 10% return.

On a yearly basis the it works out to be 2% or the total percentage divided by the number of years. 10%/5 = 2% per year.

With inflation normally between 2-3% per year, this is a break even situation at best, but likely a net loss.

Example 2

In this example, lets say you still have the $100,000, but decide to now put only 50% towards the purchase price ($50,000). Then you use traditional financing for the remaining 50%.

Again, the value of the property has risen 10% over five years but the important difference is the return on the investors investment.

Using the same formula, but with a much lower investment, we get some much better returns.

Here’s this example,

(10,000/50,000) x 100 = 20%

Suddenly that return has doubled. Even on a yearly basis (20%/5 years) it’s double at 4%, so now you’re potentially slightly ahead of inflation!

But the aha moment is you still have $50,000 and could repeat the process on a similar property. By duplicating this and purchasing two properties your gross return would be $20,000 (2 x $10,000 in growth).

Your individual (and your overall) return on both of these properties would still be 20%, so that doesn’t change, just the amount of money you at the end does which is the important factor.

Example 3

This is where it gets exciting. We’re now going to look at only putting 20% or $20,000 down to purchase the original $100,000 property.

With everything staying the same except the amount put down, 10% increase in value over 5 years, lets look at the Return on Investment calculation now.

(10,000/20,000) x 100 = 50%

Anyone else excited? Same property, but now buying it with way less money and you’ve created a much larger return.

Breaking it down to a yearly basis, you’re seeing a 10% per year return on your $20,000 investment.

Let’s rethink our aha moment and now consider buying 5 $100,000 properties with our original $100,000 by putting only $20,000 on each.

With a $10,000 increase on each property that $100,000 dollars that only increased to $10,000 in the first example now becomes $50,000. Same original amount, just leveraged to allow additional properties and resulting in a 50% return on investment.

Which my friends, is the power of leverage!

And The Lesson Learned Is…

It’s also why you don’t want to typically buy a property all cash when financing is available. Is it always the case, no, but it is in my simple examples!

The issues do get more complex as you add in mortgage paydown, cash flow from having tenants in place and other external factors, but the one point I needed to convey with this article was the power of leverage.

Hopefully it made sense and it provided some clarity for you. To further help, I’ve created a Simple ROI Calculator for you to use. Just click the link below to download and once you’ve downloaded you should be able to open it in your spreadsheet program of choice!

Simple ROI Calculator

It just covers the basics, but it might be fun to play with when looking at a current property you own or even to project a return by estimating growth. Hopefully you find it helpful.

If you have a chance to play with it, I’d love to hear about your ROI, so leave me a comment. If you already understand ROI, let me know if I explained it clearly by leaving a comment, and if you think this will help others please share it with them!

Traditional Retirement Planning, Or Real Estate Investing…

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Or Why My Financial Advisor Didn’t Like Me

Investing in Mutual Funds versus Real Estate investing

You need to understand, I’m a Real Estate guy and this site talks about landlording, Real Estate and Real Estate investing . That’s why my retirement planning is based around property, not mutual funds or stocks.

Due to that, due to some of my experiences and due to some knowledge picked up along the way, I may have a slightly biased view towards financial planners, but it wasn’t always like this.

When I was much much younger I really bought into the mantra of setting aside money each month to put into mutual funds. I even modelled what successful people do (or at least what I thought successful people did) and found a financial manager to help me along the path.

To make sure I was doing it right I set up automatic withdrawals each month so funds were withdrawn from my savings account and transferred over to buy more mutual funds. Here I was just like one of the grownups!

I was ecstatic that the power of dollar cost averaging along with along term plan securely set up the future was bright…

Does this sound familiar to anyone?

You know, invest in your retirement now, start early, dollar cost averaging, plan your financial future and more? All the hugely successful investment firm and big banks were all talking the same game, so it had to be right, right?

Well, unfortunately it seemed the more I read about all these great mutual funds and the more I chased the mythical returns they made in previous years the more disappointed I became. For some reason these funds that made 10% one year, suddenly only made 3% when I bought in…

What was going on? Or more importantly, what was I doing wrong?

Over time my visions of yearly 10% returns the books talked about started to fade. Doubts started to creep up, was I doing it wrong? Did I need to set more money aside? Maybe I needed a longer time frame and things would balance out, or maybe, just maybe there was something else going on?

Could it be possible that this promised land of steady returns wasn’t actually true?

I was starting to suspect that perhaps the rules weren’t quite what they seemed and maybe much like Las Vegas, the odds were not in my favor, but rather they were stacked in the favor of the house.

To make sure I understood everything clearly, I did more digging and found out some interesting facts.

The Rules Are In Favor Of The Fund Managers

stocks versus Real Estate investingIf you’re not already familiar with how mutual funds work, here’s a quick recap, or at least the part we hear about. (This is the simplified and slightly sarcastic viewpoint btw).

Some brilliant financial guy analyzes the various financial markets finds solid stocks and investment vehicles that he believes show great opportunity to grow and become more valuable over time. Then through marketing and sales they get investment capital to finance these purchases so everyone can grow their investments.

In my case, this investment capital was in the form of my automatic withdrawals, but it’s also through large institutions like pension funds who buy into these funds and many other individuals and groups buying into the game of investing.

The idea being as the fund grows in value from the carefully analyzed data the value of each fund grows, or in some cases a dividend may be paid out which the investor typically uses it to reinvest back into the fund.

As more and more money is poured into this fund it grows and gives the brilliant financial guy even more of other people’s money to play with. All with the intent to provide everyone with a nice return.

Now, here’s the part they don’t talk about.

As for the funds themselves you need to realize their goal is to make money for the institution, not just to help investors in the funds retire…

To make that money, it used to be very common to have what were called front end loaded funds where you paid a percentage up front to get into the fund. This put you behind right away, but made sure the fund itself made money right away.

To counter the paying to play setup of front loaded funds there were also back end loaded funds where you had to keep your money in for a set period and if you took it out early you were penalized on a sliding scale.

This worked out slightly better for investors, unless you were in a losing fund or needed to get the money out early. In the case of a losing fund you then got dinged twice.

Once by the loss of the funds value and then by paying a percentage of your original investment for having them lose your money.

Of course there are also no-load funds, but they have a different set of rules which I talk about further on.

The problem is, all the rules are designed by the funds for the funds to make sure they make money and not necessarily for the fund investors. Basically they are playing a stacked deck where they are guaranteed to win and if you win, well that’s just a bonus.

Best of all though, at least for the investment companies behind the funds, whether they make or lose money, you’re still paying them for the privilege of having your money in their hands.

Which is one part of the other two problems with mutual funds, including no-load funds.

The Two Problems With Mutual Funds

Mutual Funds versus Real Estate investmentsProblem one, even if the fund loses money, the fund itself still gets paid a management fee. This management fee is often 2% or more and often up to 3% and guess where that gets paid from?

If you guessed your money you’re absolutely correct.

Think about that.

If you invested $1,000, the fund went down by 2% your $1,000 has become $980 plus you get hit with another 2% management fee for managing your losses. Now you’re down 4% or more depending on how they calculate their fees (is it based on the original investment or the amount after losses, you might need to read the fine print to be sure).

Or say you win and it went up 4%. suddenly your $1,000 is now $1,040 yay. Oh wait a minute, you still have to pay 2% for their management!

They win either way! With your money. With you taking all the risk, how awesome is that? At least for them…

But I haven’t talked about problem two yet….

Problem two is the majority of fund managers under perform the market. I’ll give that a minute to sink in…

Let me know when you’re ready…

Is that enough time for you to digest that the majority of funds or institutions that you’re paying 2% or possibly higher fees too, is unable to outperform the average growth of the market?

You’d be better off investing yourself in something like the S&P 500 which is an index of the top 500 stocks in the US markets rather than paying your fund manager to manage your money.

Here are some of the numbers to back that up.

Over a 20 year window from December 31, 1993 to December 31st 2013 the S&P 500 returned an annual return of 9.28%. Yet the average investor made just 2.54% according to Dalbar, one of the leading industry research firms.

According to financial industry expert Robert Arnott, the founder of Research Affiliates, from 1984 to 1998 (a 15 year span), 192 out of the 200 top active fund managers did worse than the Vanguard 500 index (an index fund similar to the S&P 500).

Anyone feeling confident about their mutual funds yet?

But Wait, The NaySayers Are coming!

By now the naysayers reading this will be getting ramped up with their counter arguments.

“There are lots of funds with lower management fees!”
“You’re forgetting about compound interest and long term growth.”
“My Financial Advisor is different….”

I’m sure all of this is true, as are my numbers and info.

Many of these lower management charging funds are not actively managed and hence have a lower management fee, but they are also lower risk and also come with lower returns.

Compound interest is incredibly important, but 2.54% average growth over 20 years even compounded is still crap.

And it’s very likely your financial advisor is not different. Unless of course you’re already a multimillionaire and then I question why you’re even here reading this.

That leads me to problem three, which is an industry problem and an internal bias your advisor may have and not even realize.

What’s Best For Your Financial Advisor,
Isn’t Always Best For You

biases in Real Estate investing versus stocksThere’s a built in bias to the entire system and to be fair I’ll admit, it’s not just restricted to the financial industry.

Whether it’s a Realtor directing clients to a property he gets paid more for (properties listed through full brokerages versus discount brokerages), a mortgage broker pushing you to a lender he gets paid a higher commission through or a Financial Advisor pushing you to trade your mutual funds to get into a new, higher paying fund.

I understand I’m painting with a broad brush here, but it’s a brush that deserves to be painted broadly.

When I updated my Financial Advisor about our plans to buy and invest in multiple properties I was warned vehemently about how risky Real Estate was.

He was extremely anti-Real Estate due to the risk involved, or that’s how it was framed anyway. Never mind this was only recently removed from the days of Enron, the dot-com crash and multiple high flying stocks that were heavily bought into that virtually disappeared over night leaving investors with nothing.

Now you can call me biased, but perhaps the aspect of losing out on future capital that he could invest for me was the real risk? Or was he sincerely concerned about my long term financial wealth? I’m not sold on number two in this case.

Over the years I’ve learned even more about the financial systems through various books and articles and it’s becoming an even harder sell to trust an industry that has become “to big to fail”.

Circling back to Real Estate, the same individuals behind the mutual fund and investment world were also involved in the financial crisis of the late 2000’s.

And it seems like far more of the little people who lost their homes or their finances ended up hurt than any of the big players who received bailouts and huge bonus’s for their spectacular work…

Now all of this seems to be strange for a land lording guy to be talking about, but learning more about the financial world is what made Real Estate that much more attractive to me.

Real Estate Gave ME Some Form of Control

So here we are, full circle back to Real Estate. When I invest in stocks or mutual funds I’m often affected by decisions about austerity made by politicians in Greece, about oil price decisions made by ministers in OPEC and by real or perceived threats of invasion or retaliation by hostile countries. All factors that affect potential values for stocks and funds and all beyond my control.

Even more frightening is the potential for a stock to devaluate from x price to not being worth the virtual paper it’s printed on simply because of the previous factors.

With Real Estate investing I still have a certain lack of control, not all banks will deal with me, I can’t have all the properties I want, zoning rules can be problems and landlord tenant laws also factor me. Overall though, I do get to choose where I want to buy, who I want for tenants and I have a steady long term plan to carry me through.

Perhaps most importantly though, I’ve also never seen property devalue from x price all the way to zero. Even if it’s destroyed and you had no insurance (don’t tell me you’re not properly insured!) you still have the value of the land!

Ultimately I simply felt I had more control and there are still ups and downs, but that’s why we also had a long term view.

Long Term Financial Planning With
Real Estate Investing

Planning your future with Real Estate investingWith traditional investment planning once you reach retirement age you have to covert your IRA’s or RRSP’s or other retirement vehicles (USA, versus Canada versus other places) into investment vehicles where you withdraw money until it’s all gone or you die.

It’s a race to the finish with no real winner.

If there’s too much left, the government takes a chunk of it as part of the two inevitabilities of life, death and taxes. If there’s not enough left, well that’s not a pretty picture either.

With Real Estate, what if you have three or four or maybe ten properties that you held not just up to retirement, but well past that point?

If you generate around $1,000 per month cash flow after all your expenses, that gives you $3,000 per month of income with three properties, $4,000 with four and $10,000 per month with ten properties.

What if you generated $2,000 per month per property after expenses?

Remember in 25 years your mortgage is done, so all you’re paying is taxes, insurance, maybe a property manager and setting some aside for maintenance and vacancy funds, so it’s not that unreasonable if you buy smart!

Tell Me Your Thoughts!

Does Real Estate investing as a long term plan start to look even better? Why don’t you tell me your thoughts by leaving a comment below!

If you’re a Real Estate person, tell me if you’re like minded, if you’re a stock person (and I know they’re out there) tell me why I’m crazy! And if you’re a Real Estate person with stock minded friends, share this with them 8’]






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What Are Boarding Houses?

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And Is a Boarding House For You?

What are Boarding Houses and Rooming HousesI have a lot of people stop by looking for information about boarding houses, room rentals and rooming houses. It seems people are interested in short term rental properties as a way to earn extra income or to turn an under performing property into an asset that cash flows.

The extra income was the original ticket for me.

I bought my first rooming house with three rooms in 2004, hated it and wanted to shut it down within the first few months. That wasn’t an option, so I modified the original premise to what I can only say was an even better model.

Then within three years I ended up owning nine more rooming properties with 53 rooms that each rented in a range of $150-190 per week.

If you can quickly do the math on that you might understand why I grew it so quick!

Anyway, I’m wondering off the main point of this article, so let’s get back on track  by explaining more about boarding house properties and how they fit in the market.

Boarding Houses

Room and Board Properties - Boarding houses date back hundreds of years and come in a variety of different types and options. Predominately the idea of a boarding house is a property that it includes a room and board . With board being meals and often including services like laundry and cleaning.

My first experience with this was actually with my grandmother. She was a widow and rented out two rooms in her three bedroom home to local workers and provided them evening meals and laundry service.

These two sources of income helped her make ends meet and helped keep her busy as she loved taking care of people. It was a perfect fit for her!

Over the years you’ve probably seen other examples in movies and books without even being aware of what you were looking at.

Boarding Houses – The Original AirBnB

From Sherlock Holmes 221B address being a boarding house to George Bailey’s mothers boarding house seen in it’s a Wonderful Life to more recently in the film Brooklyn where Eilis lives in a boarding house.

Of course all these examples tend to be from previous eras where this was much more common. People tended to be more transient years ago and often followed work and needed cost effective places to stay. Even though things have changed and boarding houses aren’t quite as common, they do still exist and may be a perfect fit for some people.

If you don’t mind sharing your home, enjoy cooking meals and possibly providing cleaning or laundry services (which can be an additional charge). Operating a boarding house style property may be the perfect method to help you make ends meet and put some bonus cash in your pocket.

It just requires a spare bedroom (or two), enjoying having people around and most importantly ensuring you have a solid set of rules in place.

Variations of boarding houses include Bed and Breakfast setups, hosting foreign students and even AirBNB properties and even combinations of these options.

Just in my little circle of friends and relatives I see examples of this every day. My sister-in-law runs a successful Bed & Breakfast, a friend of mine rents out two rooms in her home, one to a foreign student and the other on six months terms. My cousin rents out a room in his home and we have friends who bring in foreign students for eight months at a time.

I even have an acquaintance who helps people convert their vacant rentals into AirBNB spaces.

The important part of any of these though is understanding any local regulations, laws and possibly even zoning that could come into play.

With a single room rented out to help make ends meet, it might be just fine, it might fly under the radar of any by-laws or zoning and be ideal for you.

Once you expand to a full fledged B&B though, or rent out multiple rooms as a full fledged business it can expand into a litany of paperwork and processes to legally operate.

Renting Out Rooms

Room Rentals for ProfitThe majority of my experience with these types of properties involves renting out furnished rooms in a home where the tenants are responsible for cooking their own meals, their own laundry and even their own cleaning (or at least most of the time).

From higher end properties targeting business people, tourists and more upscale clients to mid to lower end properties targeting trades people, individuals caught between places and even simply folks down on their luck, rooms were great for me.

They became a bit of a cash cow for me and helped create significant monthly income for us, but I’ve already written about that previously. If you’d like to find out more, check out this article,

Profiting from Renting Out Rooms and Boarding Houses

Or, if you would like handy tips on how to run your own rooming house, be sure to check this out,

Get My 5 Best Rooming House Tips via email

Or, if you’d like to learn about the Ultimate Mortgage helper,

Renting Out Rooms In Your Home

Here’s are my thoughts on what every rooming house owner should know,

What A Rooming House Owner Needs To Know

And finally, if you’d like to learn more about how, where and the basics of locations for setting up your own rooming house,

The Basics of Starting Your Own Rooming House

What are your thoughts on rooming houses, or did you even know they existed? Leave a comment below!

Did Your Goal Planning Work Out?

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Did You Even Goal Plan?

Goal Planning Your Real EstateOr did you even do any goal planning? Without goals, you simply end up coasting through life and as the last several years of my life have shown me, you need to know when to coast and when to push.

When I look back at my most successful years, it all started with goals, plans and a destination. When I look back at my least successful years they all involved no goals, haphazard plans and zero destinations. Think it’s a coincidence?

I don’t.

I’m getting up there (in my mind anyway). I’m not as energetic as I used to be, I’m not as athletic as I used to be, I’m not as aggressive as I used to be and the list of not’s can now go on far longer than I’d like. But one thing I’m not is dumber.

That’s why I want to do what’s worked for me before and why I’m going to make it work again.

The Problem(s) With Goal Planning

The problems that pop up when people start goal planning could end up being a list as long as my arm, but I’ve taken so many seminars, courses and read so many books that talk about goal planning I’ve got some helpful tactics I want to share with you.

The big problems I see people running into with goal planning are making their goals realistic, making them achievable and staying on track with them.

So let’s talk about those.

Realistic Goals

I want make a billion dollars! Realistic, or just wishful thinking?

For the majority of us not just unrealistic, but also not very specific which can be another problem. By making goals specific they also become easier to accomplish, so a better example would be as follows.

I will increase my monthly income by $2,500 by December 31st, 2020.

Now it’s become not only realistic, but specific as I’ve listed an amount and a timeline to achieve it.

Keeping Goals On Track

Tracking Your GoalsSo now that it’s realistic, I need to keep it on track, so as a Real Estate investor, how would you be able to achieve this goal?

First thing that pops into my mind would be to increase my portfolio, but then what?

Well, I see several options now. If I plan on increasing income by $2,500 per month that means I need at least one, but realistically several more properties to achieve this.

If I have determined that I make $1,250 cash flow from a single rental property I own I would need to replicate it twice to achieve over the next 12 months to achieve that goal. If I only make $500, I would have to do it five times to achieve my goal.

If you’re like me though, it suddenly creates new problems. I don’t have enough money lying around to buy five more properties, so if that is the situation I’m in, maybe that goal wasn’t realistic and it needs to be redefined, or I have to get more specific!

Specific Goals

With Real Estate there are so many ways to skin the proverbial cat we could easily create a new list as long as my arm of how to make money in Real Estate.

Maybe that original realistic goal morphs into the following.

I will increase my monthly income by $2,500 by December 31st, 2020 by partnering with two or more investors who will help with financing.

Or,

I will increase my monthly income by $2,500 by December 31st, 2020 by increasing the income from my current properties by $500 each and adding another property that generates $1,500 income per month.

Or maybe,

I will increase my monthly income by $2,500 by December 31st, 2020 by learning
how lease to own properties work and adding two properties that
generate $1,250 each to my portfolio

Notice how each iteration becomes it’s own specific goal? A goal that could be achievable by just about anyone reading this article? the sky is the limit when it comes to setting goals, as long as you also include some specifics and a plan as to how to get there.

But that plan also needs to be trackable and accountable!

Tracking Your Goals

The tracking part is where goals often fall apart and they are also what separate the people who achieve them from the ones who let them fall to the wayside.

With goals like our $2,500 increase we’ve already set the deadline to achieve it of December 31st, 2020, but our next step would be to set timelines as well.

Looking at the first goal which involves adding two or more money partners, you need to donate time to find them before you can even start. Suddenly your goal morphs even more and might look like this.

I will increase my monthly income by $2,500 by December 31st, 2020 by partnering with two or more investors who will help with financing. I will acquire the first investor by March 1st, 2020 and the second by July 1st, 2016 with two additional properties purchased by September 1st, 2020.

Using the second goal and morphing it, you may find something like this.

I will increase my monthly income by $2,500 by December 31st, 2020 by increasing the rents on my current properties by $500 each by June 1st, 2016 and adding another property that generates $1,500 income per month by September 1st, 2020.

And since we’re morphing, let’s look at the third goal.

I will increase my monthly income by $2,500 by December 31st, 2020 by studying lease to own properties for the next three months and adding my first lease to own by June 1st and my second by September 1st
adding $1,250 each to my portfolio.

Now these are all achievable, trackable and you should be accountable to at least yourself to reach these goals. Of course, these are all generic goals and I’m not saying any of you should specifically use them, they are just examples. Yet they are examples I hope you can learn from.

My Wife’s Take On Goals

Everyone should have their own little tactics and strategies for achieving their goals, but my wife has put together a pretty helpful walk through for folks and she’s been kind enough to let me borrow it and post it here.

As an entrepreneur herself she has had to coach people along the way and created  steps on goal planning that she shared with her fellow artists and entrepreneurs, so here you go. It was from January a couple of years ago, but since this is coming out in December, that means maybe you can start early!

I hope between the two of us you’ll get something out of this and it helps to make 2016 your best year yet!

The Great thing about goal planning is that you get to start fresh….a time to re-evaluate what worked for you last year and what didn’t.  This time is a chance to tweak things, or just to start fresh.  Any successful business person must be able to plan for their business.  I want you to really focus on your business in regards to this goal setting.  Yes, you can apply it to your personal life, and that’s a good thing to do, but for today’s benefit it’s all about your Business.

Now, we’re going into this year with January almost over, but that’s okay.  Any time is a good time to start your goals.  My husband and I have created an annual event on New Years Eve where we sit down with a nice glass of wine and talk about the past year, and set our goals for the new year.  We’ve done this for many years, and now our girls join us.

1.  Take a look at last year.  Take a sheet of paper and divide it in half.  On one side write down what worked the prior year.  What got you excited, what your customers liked, what were your successes.  What made you the most money.  And what do you enjoy doing the most.

On the other side write down what didn’t work, things that didn’t make you money, wasted      your time, or you just plain didn’t like.  Think about what you need to stop doing…..perhaps it’s  saying yes to everything that bogs down your life.

2.  Start planning your goals.  First think about the things that were a success, they are already working, what can you do to improve them or stream-line them?  Do this before you start adding new Goals to your list.

The thing about goals is that they should be reasonable, and measurable.  Sure I would like to earn $10,000 a month….but is that reasonable based on how much work I’m prepared to do.   Whether you intend to go hard with your business or not, being clear on your intention and what you can achieve is really important.

3.  Setting goals can also create a great mountain that seems impossible to conquer.  So you need to make sure that your goals are broken down into mini-goals.  When you are able to check off little tasks that will eventually take you to your goal, you will be motivated to continue, and feeling good about your progress.  If you feel good about what you are accomplishing you will continue forward with a positive frame of mind.

Pat Flynn from  SmartPassiveIncome.com  has a great phrase.

Write it down…get your goals out of your head where all the other stuff is rattling around and write it on paper, or a white board.  Once you do this, then the goal is real, and not just a thought.

Break it down…Task it out into little mini-goals.  The only way to get the big goals completed is by giving yourself achievement along the way.

Take it down… this is where you start chipping away at those little tasks, checking them off to   get you closer to your goal.

4.  Review your goals!  This is so important for you to succeed.  Putting all those mini-goals into months so that you can focus on them individually.  If you try to focus on all the mini-goals, you will not be giving the appropriate attention that you need to get that goal completed.  The reason I want you to review your goals monthly is to help you keep on track.  If you fall off, it’s only a month that you need to make up for.  If you review quarterly, you will either forget it’s the quarter, or if you missed the goal, you are now three months behind.

If you are a goal planner, I’d love to hear from you! Maybe leave a comment here and share how it’s helped you. If you don’t goal plan, maybe this was the incentive for you and next year you can come back and tell us how it worked!

Either way happy 2020 to you!

Why Listening To The Media Will Mess With Your Mind

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Housing Market Set For Biggest Downturn Since 2007

Houses OverPriced By 20-40%

Real Estate headlines shock landlordsHave you seen any Real Estate headlines like this lately? Depressing isn’t it, well don’t worry if you either check the next days paper or find another one you’ll find headlines like this.

Housing Market Booming

New Home Construction Set For Record Growth

I’ve even run into similar headlines to this on the same page, one calling for a downturn, the other calling for a boom and that’s the problem with much of the media these days. They have an agenda.

While they may have different underlying agendas, their main one is to sell papers and headlines that scare people or pump them up sell papers, magazines and TV news which is why you have to take them with a grain of salt.

How many economists, politicians, billionaires and people in general nailed the financial crisis back in 2007? Just a handful.

How many of those had accurate forecasts before that? Just a handful again.

And how many have been 100% right all the time,  if you guessed zero you’re right.

Many of them have just picked a stance and stood fast on it until they were right. In the early 2000’s there were many vocal critics of the housing booms forecasting an imminent crash and for five years plus they held to that and sure enough they were completely correct. Eventually.

Meanwhile the landlords and homeowners who bought at the beginning of the growth were still far ahead. Yet, if they followed some of the headlines and listened to these media experts, they would have missed out.

surprisedsmallNow I’m not saying you can’t listen to what’s out there, but you can’t take the headlines verbatim. You need to get more of the facts and look further into the details. There are so many variables that affect housing, the world economy and even the cost of groceries that it’s almost impossible to predict with complete accuracy anything these days.

An unexpected frost can cause orange juice prices to skyrocket, a dock strike can leave fruit hanging in the orchards causing shortages two months down the line, a country dealing with debt can change the confidence of a whole continent and these affects trickle down throughout our very interconnected world.

So you need to stay informed, but try not to let the media headlines cause a panic in your life. The panic of the up and down swings will give you an ulcer or worse a heart attack and it’s just not worth it.

As I told another Real Estate investor a day ago, you have to look long term. The panic headlines today are laughable ten years down the road when you look back at all the cash flow you’ve generated, the amount of your mortgage that was paid down by your tenants and the current value of your investment.

As we’ve talked about before, Real Estate is a long term plan and a long term solution. If you have planned for the long term the day to day and year to year hiccups all even out over time. Having said that though, if you’re getting to a point in time where you  are selling everything off to simply enjoy retirement it may be more important to pay attention to the current market.

Just remember not to get caught up in the headlines and look at the actual details usually buried in the article!

Systems Check – Check

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Thank You Mr. Pilot

Airplane pilots and checklists

If you’ve ever taken a flight anywhere you’ve probably been more than content to sit back, watch a movie, read a book or even sleep while the pilot dealt with the business of flying the aircraft.

Maybe you’ve had some nervous moments and you’re not entirely sure how or what keeps this incredibly heavy piece of metal up in the air and prevents it crashing down to the ground. Or if you’re like me, you just sit down, buckle up and leave the flying to the professionals.

Wherever you fit, the important thing to remember is those pilots you’re flying with are professionals.

They’ve logged countless hours of flight time, simulator time and classroom time to hone their skills and they have dozens of checklists with myriads of steps that they go through to ensure their flight and your safety are a top priority.

Now I’m not sure how many steps are in a checklist for a big passenger jet, but I did go online to search for a simple checklist for a smaller Cessna and found it had almost 100 steps in the checklist before the pilot was off the ground. It doesn’t have quite as many dials, knobs, levers and controls as you see in the picture above…

If there are any pilots out there reading this (and I believe we have one out there!), how many steps were there for your plane before you took off?

But What About The Flight Plan?

Plan Where You Are GoingAgain, I’m not a pilot, but I know a pilot’s job typically doesn’t end with just a beginning checklist. there’s flight plans to file, constant adjustments to make during the flight and even more checklists to prepare before descending.

Now many of these pilots have completed hundreds if not thousands of flights, but they consistently need to check these checklists, make sure their flight plan is accurate and they constantly make adjustments as they go. All so they can get whee they are going safely.

Are you starting to see a parallel yet with being a landlord?

Are All Systems Go?

All systems goObviously taking the lives of a couple hundred people into a pilots hands by flying them across the country can’t compare to you renting out a single property. But owning an investment property and making mistakes along the way can take the life of your financial future away, and that can have a huge affect on you and your entire family!

The worst part, many of those mistakes are avoidable. Which is where checklists come into play.

There can be so many moving parts when it comes to purchasing and owning a rental property that we tend to forget bits and pieces along the way.

When it comes to buying an investment property, many folks only do it once, or once every several years. When it comes to finding tenants again it may only occur once every several years.  This leaves plenty of time for you to forget the steps along the way.

That’s why following the model of airplane pilots and creating your own checklists for various processes in your landlord business can help streamline recurring events and help you avoid costly mistakes.

And it doesn’t end with a checklist, you still also need your flight plan. After all, if you don’t know where you are going, how will you know when you’re off course? Part of your system as an educated landlord is to not just take advantage of checklists to make your systems well, systematic, but to also have a longer term plan of where you are going.

Understanding you have a ten year plan, a twenty five year plan or simply a plan to never end being a landlord makes you stay on course, makes those hiccups or diversions along the way become a little less taxing. I’ve previously referred to making sure you have a plan (You Need Your Own Real Estate Plan and What’s Your Real Estate Plan?), so if you missed those articles, be sure to check them out for reference.

My Flight Plan AKA My Checklists

2015 is going to be a big year for me. It’s the year I am hoping to spend more time focusing on getting some more educational courses and packages put together on this site to help those of you without processes and checklists in place.

Whether you’re new, experienced or somewhere in the middle I’m hoping everyone will find as much value in them as they did in my Tenant Screening Course.

This course is one of my most popular paid courses as it’s full of helpful information, processes and checklists to point a landlord in the rigth direction.

So the lesson to take away from this right now is, if you don’t have a checklist already don’t wait.

While I may have something down the road, the next time you purchase a property, break down the steps. From must have conditions in your offers to specifications of properties you buy a checklist can keep you on track.

The same goes with your next tenant screening. If you’ve taken my course, you should already have some screening steps to follow, turn that into a checklist you can use and keep, rather than try to remember again in another 12-24 months.

Make sure all your systems are GO!!

And hey if you already use checklists, can you take a moment and share with everyone how they’ve worked for you?