Top 5 Happy Landlord Tips

Top 5 Happy Landlord Tips

Landlords come from all walks of life, and they can be pros or reluctant landlords who couldn’t sell their home. Whether you’re considering rental property investment, can’t sell and need to rent out your home and move, or you’re already a landlord, these five tips can help you sleep at night and keep a smile on your face on your way to the bank.

#1: The Right Rent

Take the time to study your area’s market rents and property types. Compare apples to apples, not apartments to single family homes. Call and ask about rents and features. Check the rental ads for promotions like free rent. A lot of this type of marketing may signal high vacancy rates. Be objective about your property’s features and location, and set a competitive rent rate. Being just 5% over market rates may still get you a tenant, but if it causes too much turnover you’ll lose that and more in lost rent between tenants.

#2: Be Legal

We don’t live in a simple world anymore, and landlord-tenant laws can be pretty complicated in many states. Even if you must get some legal advice from a real estate attorney, be sure that you’re using legal application and lease forms. They should be legal, but there will be room to draft them to favor your interests and protect your investment.

Misunderstandings cause a great deal of landlord-tenant stress, and using clearly worded and comprehensive leases can go a long way toward eliminating problems. When rent is due, what constitutes poor tenant behavior, and explaining the difference between “wear and tear” and damages are all important for a good relationship. It’s every bit as important for you to abide by the rules as it is for the tenant. If you legally must give notice before entry into the unit, do it the right way and with the right timing. When you don’t follow the lease, tenants don’t feel obligated to do so either.

#3: Screen, Screen … and Interview

Once that lease is signed, if you let the wrong tenant into your property it can be an expensive and painful process to get them out. You want to check their credit history, rental history, job and landlord references, and even do a criminal background check in most cases. Letting a previously convicted drug dealer into your property can create some major problems for you if they lapse into old habits. There are services that pull together these background and reference tasks, and you can find them online with a search, or there may be local companies.

Think back to the previous tip and be legal. Don’t ask for information you aren’t legally allowed to gather, or don’t ask questions that cross the line when it comes to anti-discrimination laws. This is another area where you may want some legal advice and a script for your interviews so you stay on the right side of the law. That said, if your gut is telling you that there’s something not quite right about a prospective tenant, especially in the interview, then you should reject them for any legal reason.

#4: Maintain for Comfort and Safety

The best way to avoid late night “no heat” calls is to have regular maintenance performed on heating and cooling systems. Maintain all of the equipment in your rental and you’ll have a happier tenant and fewer emergency repair visits. For safety, do regular checks of smoke and carbon monoxide detectors, even changing the batteries at your expense. On a side note, this is a great way to get access every three to four months to inspect for damage or problems when you’re doing a courtesy safety battery change.

#5: Make it a Home

Be nice to your tenants. Send them surveys or call them now and then to see if they’re happy or experiencing even minor problems. Be proactive and address their concerns. Whenever you can add a feature or amenity at reasonable cost, do that. When the end of their lease rolls around, you have two possible situations:

1. They give notice and move on to another rental, or
2. They make a rent concession necessary to keep them, or
3. They’re happy, and want to stay, even if you must do a minor rent increase.

The first two cost you money in lost rent and possibly rehab between tenants. The last one takes almost none of your time and keeps the cash flowing.

There are a lot of details involved in these five tips, but keeping them top-of-mind in all of your landlord activities will keep you in a better mood and add to your bank balance.
Dean Graziosi


Renters: When They’ll Move and What They Want

Renters: When They’ll Move and What They Want

What a difference five years can make. Apartments.com surveyed 2,500 renters recently, and they found that renters want different things now than five years ago, and incentives landlords offer to get them to move may need to change as well.

There are solid reasons for differences, but the most influential is likely the far lower vacancy rates now than back in 2009 when vacancies hit a 23 year high. Landlords do not need to offer those big flat screen TVs, large rent discounts, or free rent months to maintain reasonable occupancy these days. The flight of first time buyers from the housing market hasn’t helped the renters in their quest for a deal either. Competition and rents for homes and apartments have steadily risen.

The majority, 56% of renters surveyed, say that they plan to move within the next year mostly for a change of scenery, rather than for economic or other reasons. They also were asked what would get them to move immediately, and they cited:

• Big rent discounts.
• More space.
• Free month’s rent.

These were reasons to act sooner than they planned, but they aren’t considered critical in rental unit decision-making. When asked about the relative importance of rental incentives, survey respondents said:

• Nice to have but not a deal breaker: 33%
• Incentives are one of a few key factors in their decision: 28%
• Didn’t see any incentive offers in their search: 20%
• Incentives are crucial, make-or-break in their decision: 14%
• Didn’t care at all about incentives: 5%

Landlords can’t get complacent, as only 6% of those surveyed said that they loved their rental so much they couldn’t be convinced to move. Questions about why they rent yielded interesting results. As you may expect, about half of the respondents say they rent for financial reasons. However, more than a third of them stated that maintenance-free living was their primary reason for renting. Though we’re a highly mobile society and workforce, only 13% rent because they need to be mobile.

Those are the reasons they rent and some of the factors that play into their decisions as to when to move. As far as what renters consider important in their choice of a rental unit or location, only 21% want to be in a “cool neighborhood or city.” Factors important in their decision as to unit and location ranked this way:

1. Affordability: 71%
2. Safe area/Low crime rate: 57%
3. Convenient utilities/Amenities: 50%
4. Large rental unit/home size: 48%
5. Location near work or school: 38%
6. Parking: 33%
7. Pets allowed: 26%
8. Rental incentives: 23%

Some of these responses should be considered as important by developers who are making development location decisions. Perhaps the recent trend toward developing in big cities and popular urban areas isn’t going to be as lucrative in the near to mid-term future; especially if the size of the apartment is on the skimpy side.

For investors buying single family rental homes, it’s important to note the affordability and safety concerns at the top of the list. With location near work or school number five and behind home size and amenities, this could open up some neighborhoods for consideration previously dismissed or placed lower on the priority scale.

Dean Graziosi


Foreclosure Hurting Your Neighborhood and Home’s Value? — Buy It!

Foreclosure Hurting Your Neighborhood and Home’s Value? — Buy It!

We’ve all heard many times the “making lemonade from lemons” quote. When life throws a negative at you, turn it around and make something good out of it. Of course, this isn’t possible in many cases, but it’s a nice thought and course of action if it works.

Recent news and data tells us that there are far fewer homes for sale in foreclosure than in recent months. In August 2014, foreclosure inventory plummeted 33 percent year over year. This marks the 34th consecutive month that this inventory has declined, and 19 straight months of 20 percent or greater declines. Home prices are improving, in part due to fewer price-depressing foreclosure sales.

All of this information is nice, unless you own a home in a neighborhood with a foreclosure in poor condition sitting there dragging down neighborhood home values. Actually, there is some lemonade to be made here. Of course, if there are a half-dozen of these foreclosures within a few blocks, this isn’t going to be a great opportunity. But, if there is one or maybe two, you can do your neighborhood a favor, help your home’s value, and generate some great cash flow in the process. You can help yourself and your neighbors as well, and make some money in the process.

Invest in Your Neighborhood for Profit

Why not buy that foreclosure and convert it to a rental? You’ll take it off the market as a deep discount property. You’ll improve the neighborhood when you fix it up. And, you can control not only its ownership but occupancy as well. After all, if an investor buys it, they may be less picky about renters, or discount the rent to keep it occupied. You, on the other hand, can control the rent, marketing for better quality tenants who can afford the home and will hopefully take better care of it.

Single family rental home investors will tell you that one of the things they must be disciplined about is checking their properties, at least with a drive-by, regularly. Making sure that your tenants aren’t violating exterior HOA rules and getting early warnings of problems are the goals. If the home is right there in your neighborhood, it’s almost a daily thing without any planning required. You may be driving by it every day to and from work.

There May be Help Out There

Some areas are aggressively working to avoid neighborhood blight by offering government-backed financing for distressed homes and/or repairs. Check your local tax assessor and city and county housing offices to see if there are programs to take foreclosures off the discount market and fill them with owners or tenants who will maintain the homes.

It’s a Great Investment

If you’re not upset with the tiny returns on your savings and certificate of deposit returns, that’s OK. But, with today’s miniscule savings rates and risky stock market investments, it’s nice to be able to generate double-digit ROI with special tax advantages as well. In most cases, you can deduct all expenses related to ownership of a rental property, as well as depreciation. You can wipe out a chunk of the tax liability, even while you’re enjoying depositing the rent income every month.

If your lemon these days is a foreclosure in the next block that’s vacant and losing ground on the curb appeal front, take action, squeeze that lemon, and sweeten the lemonade with some cash flow sugar.

Dean Graziosi


Attitudes Alone Can’t Buy Houses — But We Can Hope

Attitudes Alone Can’t Buy Houses — But We Can Hope
You can get opinions about Zillow.com ranging from extremely negative to rave reviews. The negative views are more weighted toward real estate professionals who view Zillow as a threat, while many consumers see a great online resource with lots of bells and whistles for real estate shoppers. It’s a little of both, and some of the data from Zillow can be off the mark when it comes to estimates of value.

One area in which Zillow seems to be gaining credibility is in surveys and housing study results. The Zillow Housing Confidence Index is an example. The index increased over the summer from 63.7 in January to 64.2 at the end of the summer. Housing confidence increased in 11 of the 20 metropolitan areas tracked. Anything over a 50 indicates positive sentiment. So, generally people are feeling better about housing overall.

Zillow’s data also indicates a cautious attitude about value appreciation moving forward. Zillow’s Home Value Forecast predicts only a 3.1 percent growth in value through next year, as compared to 6.6 percent over the previous year.

When 10,000 questionnaires were returned, there was a distinct differentiation of attitudes based on age group as to whether the respondents were confident they would be able to afford a home someday. The percentages were:
• 18 to 34 age group – 82% confident
• 35 to 49 age group – 64% confident
• 50 to 64 age group – 48% confident

It’s nice to see that the younger generation is generally positive about the economy and I suppose about their job prospects. It’s hard to see why, when the percentage of working age adults actually holding a job in this country has been steadily declining. Perhaps there is an enthusiasm in youth that looks forward to better times. Or, maybe there is just a burned-out attitude that accelerates with age, accounting for the dropping confidence.

The value appreciation question is of crucial importance. The chart below is from the St. Louis Federal Reserve Bank, and shows that price appreciation of existing homes may be peaking. A chart of median new home sales prices looks very similar, with multiple tops and a move downward in the latest data.


This is an important trend to watch, as many home buyers currently own a home and are unable to move or upsize unless they can see some more appreciation. They’re still either underwater on their mortgage or they don’t have enough equity to sell and take any cash away from the closing table to use for another home.

So, what does the future hold?

Renting is still the lifestyle of the younger generation, but they seem to believe they’ll move from tenant to owner status at some point. An interesting quote from Stan Humphries, Zillow’s Chief Economist:

“It’s heartening to see younger renters express so much confidence in their ability to buy a home in coming years, because today’s renters by necessity are tomorrow’s buyers. Cynics might argue that these results represent no more than youthful exuberance, or perhaps some naiveté, but that’s missing the point. We need this generation to be confident and wanting to buy, regardless of the difficulties they face.”

Actually, the same Zillow survey showed that fully a third of the youngest age group expected home prices to rise by 6 percent per year over the next decade. That’s a pretty upbeat attitude, but if they are trying to buy, they’re shooting at a moving target. And, if wages don’t begin to improve more or if inflation worsens, they’re fighting on two fronts. So being confident and wanting to buy is nice, but there still has to be a down payment, affordable mortgage payments, and a sustainable job to pay them.

We’ll just have to wait and see, but my thoughts are that renting is going to continue to dominate the younger generation’s lifestyle. For investors big and small, buying and properly managing rental properties is still a good strategy. After all, if the younger generations do begin to buy into the market, investors have an asset that’s grown in value and they can always take their profits with a sale.

Dean Graziosi

Self Defense for Your Next Home Purchase

Self Defense for Your Next Home Purchase
I’ll start by saying that the tactics I’m suggesting in this article are definitely not for every future home buyer. However, the few who use them properly will emerge with instant equity and solid protection against reasonable market fluctuations to the downside.

It’s now eight years after the housing and mortgage crash that began in 2006, and a lot of media attention is on increasing prices and even bidding wars for homes in many areas. However, there are also analysts who fear that this is a “mini-bubble” that can’t last. Much of the activity is still cash buying by small and institutional investors buying up foreclosures and distressed properties.

A couple of major problems are contributing to pessimism in the current market. First-time homebuyers are just no longer in the market much at all. Many are living at home with their parents, unable to qualify for a purchase, burdened with student debt, or short an acceptable down payment. Even if they can buy, the second reason we’re not really in a major recovery comes into play.

Not only first time homebuyers, but would-be buyers in general as well, are fearful of the stability of market improvements. The American Dream has been tarnished, and many people are afraid to commit and buy when they aren’t sure about future appreciation. They’re also concerned about an economy that’s not supporting new job creation or wage increases.

The techniques I’m going to suggest in this article, if you choose to use them, are based on solid strategies used by investors to “buy right,” locking in a profit at the closing table. They aren’t used by the normal retail consumer buyer because they aren’t easy, nor are any of the lenders or new home builders really terribly interested in bringing them to your attention. In fact, you aren’t going to be using them for any new home purchases. This is all about distressed existing homes.

Generally the retail buyer isn’t getting in on the down-and-dirty foreclosure buying action because the homes are not in livable/financeable condition when purchased, so lenders will not approve a mortgage. They want all repairs and renovation completed to secure the long-term mortgage.

First make a decision to buy at a deep discount to the ARV, After Repair Value, of the home in the current market. Get help to determine what the home you like would be worth if it was ready to live in. Then you go to a lender who will be happy to help you with a FHA 203k home loan. This is really a combination of two loans, one for the repairs. Then that loan is rolled into a long-term mortgage.

You get hard quotes from contractors to do all of the necessary work to make the home livable and make the lender happy. The 203k loan is structured in two parts, the first to get the repairs done. The lender controls release of the funds to the contractor(s) as the work is completed and approved. An appraiser has already given the lender the ARV of the home, so the goal is to get the combination of purchase price and repairs to a level below that value.

A recent real life example was a buyer who found a foreclosure with a negotiated purchase price of $ 125,000, then received contractor written bids of $ 42,000 for all repairs and renovation to make it a nice home again. The ARV of the home according to the appraiser would be $ 192,000. Since the total of the repairs and the purchase was $ 167,000, this buyer locked in equity and profit of approximately $ 25,000 at the closing table.

That’s a comfortable 13 percent equity from the first day of ownership. Sure, it took a bit longer to make this deal a completed reality, but it was well worth it in the end. And, there were no retail competitors bidding for this home. This buyer was able to locate a home in a neighborhood they liked, and they could visualize it in totally restored condition.

The key is to do the due diligence and get your own reliable estimates of the value of the home once it’s repaired. Then get some preliminary quotes from contractors for the obvious work. If you can pad that some and get the right purchase price to guarantee instant equity, you’re on the right track. This self-defense strategy for buying your next home will give you a nice cushion for market gyrations and a comfortable feeling of control of your financial future.

Dean Graziosi