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Quick Advice on Becoming A Landlord

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Become A Successful Landlord By Looking Ahead

advice on becoming a landlordI constantly run into people looking for advice on becoming a landlord and the challenge is they want to be successful at it immediately.

But they can’t, because being a successful landlord requires a long term vision and a long term strategy where you’re planning today for tomorrow. And tomorrow is years down the road!

The majority of the time that property you bought last year really won’t start making money for you for five to seven years, so you need patience.

I’m sure many of the readers are a bit confused right now by the five to seven year comment so let me explain what I mean.

During the first several years you own a property, even with good cashflow, you’re really treading water. The problem is if  you needed to liquidate your property in those first five years, in most markets you’ll simply break even.

Even if the property has gone up a few percent in value after paying Realtor fees, legal fees, and penalties or additional costs associated with the mortgage you often only end up with a little bit of money left over. We’re talking less than $10,000 in normal markets.

Over five years that works out to only a couple grand a year and I’m sure the time and energy you put in over five years was worth more than $2,000 a year.

Long Term Success

Fortunately somewhere around that five year mark the pendulum starts to swing over to your favor. You’ve reached a break even point and now any appreciation starts working in your favor and doesn’t simply go to Realtors and fees.

Also your mortgage is moving to a point where less of the payment is going to interest and more of it is going to your principal.

Suddenly, or not so suddenly if you’re not planning long term, in that seven to ten year range many different factors start working towards your benefit.

Rents have started drifting higher over time, values may move up and down but over the long haul tend to migrate upwards and you’re making an even bigger dent in that mortgage.

Now your friends start telling you how lucky you were to invest in Real Estate and you’ve become an overnight success…

They seem to forget the years where you were breaking even and putting in your time to educate yourself, to get the right tenants in place and to make sure your property was well maintained.

You just smile and nod and go yep, lucky.

My Advice On Becoming A Landlord

So what’s my advice on becoming a landlord, or more importantly a successful landlord?

How about, don’t be in a hurry, just buckle in for the long term and continue to educate yourself along the way.

What are your thoughts? Do you agree, or disagree? Leave a comment, share with other landlords and let’s hear what people think.

 

Accidental Landlords Can Become Expert Landlords

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Important Lessons For Accidental Landlords

Accidental Landlords can become Expert LandlordsThe last couple of weeks have put me in direct contact with a couple of accidental landlords and it’s been both good, and bad. Which is actually good!

You see, many of these landlords have ended up with properties they never intended to manage. That they never intended to be landlords of and that they really had no skills for!

But they did a couple of very important things.

First they took action.

They put their heads down, they jumped in without full regards to how deep the water was and they started moving forward. Which is where some of the bad appears.

Obviously if you’re brand new you make mistakes, but if you don’t take action to make the mistakes you never learn to correct them.

In a perfect world we would never make mistakes but unfortunately we don’t live in that world so mistakes often teach us valuable lessons that turn us into experts.

We learn by doing and we improve by learning from the mistakes we make along the way,
think about that for a minute!

Second they looked for resources to help them.

Like this site (he smiles broadly as he types that!).

We often hear talk about self made millionaires or overnight successes, yet the reality is none of them were self made and very few were overnight.

They became who they were due to the experiences they had and the people around them. Their parents their friends, their spouses, (if you’re a landlord hopefully me) and more.

The more resources, the more help and the more support you get along the way the sooner those accidental landlords can move forward to become expert landlords!

If you’re hoping to improve as a landlord, as a person or in just about anything, surround yourself with others already doing it, others who can support you and others who believe in you.

Now quick discussion, if you’re a landlord who has ever made a mistake, leave a comment below and share that mistake. If you learned a lesson from that mistake could you share that as well to help support more of those accidental landlords and to help them avoid making the same mistake!

Another Landlord Down – When You’re Tired of Being A Landlord

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What Would Make You Quit Being A Landlord?

Would You Quit Being A LandlordAs you gain knowledge being a landlord you do it two main ways, through good experiences and through bad experiences. As a landlord bad experiences can be problems with tenants, lenders, insurance or even neighbours.

It’s one of those bad experiences that drove another landlord out of the business.

As many of you know, I help landlords in my area (Alberta) get through the process of evicting tenants. It’s knowledge I’ve gained through many bad experiences!!

One way I help is I’ve created an easy to follow step by step guide that walks landlords through not just the eviction process itself, but what to expect along the way. I really take the unknown out of the situation for landlords and give them confidence to get through an eviction.

Confidence they didn’t have before.

Now I’ve sold a lot of these guides over the years, we’re talking hundreds!! And I’ve only ever had to do a handful of refunds. So whenever someone asks for a refund I get curious.

Half of the time I know they’ve just taken advantage of my refund policy and the other few occurrences they’ve had very valid reasons. Well I had another refund request this week…

And the reason for the refund? Well the tenant left before the landlord could start the eviction. And he left a ton of damage behind. And he’s tired of being a landlord so he’s quitting…

Another landlord down.

Now it’s too late for this fellow, but the question comes up, could it have been avoided? And more importantly would it make YOU quit?

Be Prepared

You will have problems, challenges and bad experiences as a landlord. Solving them and getting through them will differentiate you from being a landlord who simply quits when the going gets tough or worse yet has to quit.

Now I’m not saying this particular individual gave up too early, I don’t have enough of the details I just know there is an important lesson here.

Unprepared landlords have fewer options to recover, fewer options to get them through tough situations and most often few or zero reserves to deal with a financial hit like lost rent or larger repairs.

If you want to survive the bad along with the good you need to be prepared.

This requires setting aside cash reserves to deal with bigger expenses, it involves understanding eviction rules so you can get tenants out quickly when necessary and it involves understanding potential financial, insurance and other pending challenges.

So really it involves being prepared and educated! And that’s the important lesson!

If you go blindly in thinking you will become wealthy by just buying and holding you may get a big surprise along the way. A surprise that can set you back significantly if you’re not careful.

Be prepared to not just survive when times are tough, but to thrive!

Today’s question, could you survive if you had a $2,000 hit against your rental property? A $5,000 hit? what about a $10,000 loss? Would you be forced to sell or could you make it work?

Leave me a comment below and share your strategy or plan during a bad experience with others. Also please share this with other friends and landlords you know so they can start thinking about being prepared!

Why You Need A Custom Rent Increase Letter For Your Tenant

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Rent increase letter for raising your rentIf you plan on sending a rent increase letter to a tenant you need to understand how this can play out.

If you have a standard form letter announcing a rent increase you may get your monthly bump in cash flow, but at the expense of creating a long term relationship.  And long term relationships are one of the secrets of stress free landlording!

Think about it, when you get a form letter in the mail does it bring a smile to your face, or is it so impersonal you simply ignore it or worse build up negative feelings. I’m guessing even if you do ignore it deep down your subconscious is still feeling like you’re just another number in the system.

What if instead of a form letter you instead received a personalized letter. One that addresses you, your potential concerns and perhaps doesn’t have your name in a different font! How would that make you feel?

Well that’s the reason for creating a customized rent increase letter for any tenants facing a potential rent increase. But it’s not just a matter of customizing it.

You also need to position it! Now I go much more in depth about positioning in a previous article about raising rents and you can go check it out here, Raising Your Rents Without Raising The Roof (I also provide a sample rent increase letter you can look at).

The quick lesson about positioning is you have to make sure your tenants know you value them and that you’re not just randomly raising rents, but rather that you have expenses to cover as well.

Expenses like ever increasing property taxes, skyrocketing insurance rates and bank fee after bank fee. While they’re not a huge deal if they trickle in, after a couple years they can put a significant dent in your cash flow, and you’re already taking the risk of being a landlord so these costs need to be passed onto the tenants.

Just to be clear, I’m not talking about doubling your rents either. There is a fair and positive way to increase your rents and you need to understand that it starts with your rent increase letter.

If you haven’t gone to take a look at that earlier article yet I’d suggest you go take a look and get started on your rent increase letter sooner rather than later.

One last thing, make sure you understand local rules about rent increases. This can include how much you may be allowed to raise rents, how often you can raise rents and how much notice is required for a rent increase.

If you have any questions or feedback, leave me a comment below!

 

Becoming A Landlord – Is It Worth It?

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Becoming a landlord seems to happen to many people by accident, yet for others it’s part of a their plan.

Or as it happened in my case, it was an accident that I became a landlord and then it became part of a greater plan!

Is becoming a landlord worth it?

The question of whether it’s worth it though can be a whole new can of worms.

It seems many of the accidental landlords don’t believe it’s worth becoming a landlord, but rather that it’s something that has been forced on them. Their mindset from the beginning is that it’s a short term situation, that they aren’t going to enjoy it and that it’s going to be a negative experience.

For them it’s not worth it, it’s just a means to an end.

They’re also the ones likely to tell people how Real Estate is a bad investment.

In other cases some accidental landlords may initially look at becoming a landlord as a short term solution, but after a bit of time (and with the right tenants!), their view of the situation changes. This describes me by the way 8′].

They see some positives to the situation, they enjoy providing homes for people and they start to see some long term possibilities.

This type of landlord describes many of the people I hear from on this site and in various other spaces. They are also my favourite types of landlords as they have the capability of looking at the situation and evolving as time goes on.

Becoming A Landlord Can Be Worth It

For them becoming a landlord is definitely worth it and typically rewarding.

Finally at the far end of the spectrum we have the dedicated investor.

The Real Estate investor who becomes a landlord as part of their long term plan. They understand Real Estate can be a great method of building wealth and steady income and they also understand that they need to become landlords to achieve their investment goals.

Now many of these folks eventually transition to moving out of managing the properties themselves and instead depend on property managers or staff to deal with it, but for them becoming a landlord and learning the ropes initially is definitely worth it.

So, Should YOU Become a Landlord?

So what are your thoughts, is it worth it?

I understand many of the responses I’ll get here will be biased towards the positive, but I’d love to hear from you with a comment below. Is being a landlord worth it to you? And maybe more telling was it always worth it, or did you evolve to that stage?

Thank You For Being such An Awesome Landlord!

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awesome landlords are created by an awesoem circleWhen was the last time you received an email, a text or even had a tenant say that to you?

For me it was last Monday.

So why did I get that text?

Before I jump to that let me first say, it’s important to have good people in your circle. Whether it’s tenants, friends, contractors or people you trust. I wouldn’t get messages like that without that circle.

Onward.

I received a text from the tenant Monday morning, her son was off school and trying to get laundry done for the next day and the washing machine quit draining. Like all well organized teenagers, he was completely out of clean clothes and now the ones he needed were sopping wet and obviously not clean.

I let her know I’d reach out to my appliance guy and since Monday was a local holiday in my area (Family Day) I said I wasn’t sure if he could get there until possibly Tuesday or Wednesday.

I sent Allen the text and didn’t expect to hear anything back until Tuesday some time, but a bit later he asked for the address and the tenants info so he could coordinate directly with her (why coordinate through me as it just delays things and adds steps).

I left it at that until I received a text just after dinner from Allen confirming which company the property was under ( I operate under two companies). curious I told him and inquired when he might be by and he replied, it’s done!

Just a few moments after that the message from the tenant came in! Washing machine was fixed, laundry was being dealt with and I not only, correction, my circle not only got her up and running but it was done two days faster than she thought and on a holiday.

Allen emailed me the invoice and asked if it was possible to get paid that night, since he was so quick I e-transferred money to him half an hour later rather than waiting until i was back at my desk the next morning.

So Many Lessons From This

Here’s your take aways. Let me know if any resonate with you!

Under promise and over deliver. I guessed Wednesday to allow time in case he was backed up and was hoping for Tuesday knowing if it did take until Wednesday everyone knew in advance.

My guy over delivered by doing the work right away.

Your circle. You need good people to help you succeed, you can’t do everything on your own.

Build up trusted people around you to create people you want to work with, people you trust to work with and people who help make you better.

And finally, the right people make you better.

I have a great tenant, I have systems in place and back to my circle being awesome. This allowed me to get everything done with a few texts, a few minutes sending an email and the rest of the time I got to take advantage of the holiday and watch some movies with my family while my great people made me look awesome.

What can you do to apply any of this to your landlording business?

Happy Landlording!

 

 

The Noble Profession

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Real Estate conversations can happen anywhere - The Noble ProfessionI had some minor hand surgery last week (I’ll spare the graphic pics and details) and as it was completed with a local anaesthetic I was awake the roughly 40 minutes it took.

The surgeon enjoyed chatting while he worked so like many of my conversations with people, it eventually turned to Real Estate (I tend to steer Real Estate into conversations, if they are interested we stay on topic, if not… next topic).

As I told him what I did he informed me he actually owned the small apartment/commercial building where his office was located and he basically said (and I’m paraphrasing a bit as I couldn’t take notes at the time) “What a noble profession landlording is.”

Some of you may be thinking what was he talking about, others will be going I get that. Depending on your stance or position on that comment it can make a huge difference as to what kind of landlord you are.

Here’s what else the respected surgeon had to say, again paraphrased. Sure it’s great being a doctor and helping people, but landlords give people homes.

It’s not just a rental property, it’s a home, let that sink in. That’s not a paraphrase, that’s me speaking.

Yes you have to be diligent, yes you need systems, yes you could be (and should be) creating a long term investment for yourself, but ultimately you’re creating homes for people who need them and that’s pretty darn noble.

That’s my Friday thought for you, I’d love to a) have you share your thoughts about this “noble profession” as a comment below and b) have you share this with other people to spread the word all landlords aren’t slumlords. Most of us are pretty damn good folks, at least in my opinion!

So share it on Facebook, LinkedIn or Twitter (or all of them) using the share buttons below, share it with other landlords and talk about it with your friends. Happy Friday.