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April – May 2015 Rental Cash Flow

packs-163497_1280-PDThe rental cash flow was a solid as ever.  All of the 25 rents were all collected and deposited mostly by the third of the month, again.  It is a rather boring record, but if you have ever been a landlord, you know this is a great achievement.  I did have one rent that arrived on the 5th due to a bill-pay error?, and a $225 partial rent paid for the remaining sum owed on the 8th.  The bill-pay error was more due to forgetfulness, than an error.  These are solid tenants that are moving out to buy a home, so they have plenty of money.

So here are some of the cash flow highlights of the past several weeks…

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Maximizing Revenue from Your Rental Property

Saving-MoneyAre you maximizing revenue from your real estate investments? If you have rental property, there are literally hundreds of ways to make extra money. I often thought if I had 20 properties to take care of that it would be a full-time job for someone, possibly me. In addition to the rental income, at a time I was running a small lawn care company, trying to generate enough money to live on. That mowing, plowing and miscellaneous maintenance also generated capital to kick-start my seed money for real estate investing.  Never underestimate the power of saving money, or the ability of a side gig to create a lot of extra capital.  Every hour you spend making money for yourself, is an hour less you have to work for someone else.

Now that I have my rentals, I always look to save money or generate new revenue streams from my tenants. I am not looking to gouge them, but for ways to leverage my skills and their money.

Here are a few tips that  I have either done, or have thought about doing.  Actually I have implemented all but one of them, although not every one on every tenant.  Most are common and not rocket science, some are not.

If you have ever wanted to quit your full-time job, and wondered how it would be possible with only a few rentals, this could be a way to help with your ticket out of the drudgery of working for a boss.

Read More Here

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Tenant Deposits, How to Reduce Risk

hand-holding-a-grenade-1411373825Xtf-PDTenant deposits are one of your keys to risk mitigation.

If you are like most landlords, you think that the largest risk to being a landlord is getting your rent.  You know that deposits will protect you, and if you are calculating your numbers correctly, you will make a big profit.

Make no mistake, if you think all you need is a deposit to protect you, you will be headed for disaster.

The number one way to protect your income stream from tenant defaults is to get great tenants to begin with. Good tenants will bring in a solid income of at least 3.5x the rent in income. Preferably much more. With the average family income over $50K annually, just getting an average income will probably be well over 3.5x the rent in income.

Income will tell you the tenant’s ability to pay rent.

The second piece of the puzzle is credit score. With a C-grade credit score north of 620, and the average tenant’s credit score being north of 650, it is easy to weed out lower scoring tenants to reduce risk.

Why take the bottom of the barrel tenants in terms of credit score, and increase your risk? These people may be great people, and some will definitely pay rent, but it is a higher risk potential. Mitigate your risk by selecting a tenant who has proven their ability to stand behind their financial commitments.

Read more here

Do you have any interesting tenant deposit stories? What is your policy on deposits, or what have you experienced as a tenant?

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Financial Independence With Rental Real Estate

beach-641548_1280-PDFinancial Independence with Rental Real Estate.  I often get asked by my co-workers at my ‘regular’ job, the ones who know I am a landlord, why I keep going in. Why not just retire now?  Why do I put up with the mega-corp meetings, frustrations and red tape just to bring in a few dollars.

I put in a lot of hours, and a lot of investment capital to get this far, what does it takes to be financially independent?

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Apartment Turnover and Other Maintenance

Apartment TurnMy final apartment turnover for March is complete.  I am all set until the end of April now.  I had the new tenant sign a lease and pay the rent for the remaining March rent, and all of April, on 3/24.  I prorated the rent for March, and she also paid all of April.

These tenants have a solid credit score, and solid income, so they should be a great tenants.  It is only one person for now, and another that moves in in August.  Both have been screened and accepted.

That is the way to do it, declare and screen everyone who will be moving into the apartment right up front.  No one wants to be told their significant other can’t move in a month down the road.

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Hidden Rental Expenses That Might Cause Problems

enter-the-catacombs-PDIf you are like most investors in real estate, you want to make money.  Unfortunately, Murphy has a way to continually take away your profits at the earliest moment.  Even though you have accounted for all of the known events, and even all of the unseen events, the ‘other’ events happen.  These hidden rental expenses are real, and they add up.

Some expenses are a part of running a business, and really have no bearing on the rental property you are purchasing.  But you would not have the expense if you did not have the rental.  So it impacts your cash flow and profitability.  Some expenses are very small, but they indeed add up.

Some expenses are obvious, but who would ever think to include that in the cash flow analysis of a rental property.

Were you aware that driving to and from the rental will cost you something?  Of course, did you account for it in your analysis?  It could add up to be several hundred dollars a year.

Were you aware that sending letter(s) to a tenant would cost you something?  Did you account for it?  It may only be a couple of dollars, but it adds up.

You may want to get a business business liability policy.  How does that affect the cash flow of the rental?

Tenant gifts?  Even $50 adds up fast.  Bad tenants?  Those are the worst.  Evictions?  Bed Bugs?  rental licenses?  Rental inspections?  Tax preparers?  Incorporating?  Time and effort?  YIKES!!

Read more here

What expenses in your own life have popped up, some that may have been expected but were unplanned?  Or even totally unexpected?

 

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The Tale of a Problem Tenant?

criminal-portrait-PDNo matter how good of a landlord you are, or how great your system is, you will sometimes have issues with a problem tenant.  It is up to you to mitigate the issues and make for the best.  You must have the ability to recognize the problem, have a solid way to handle it, and have a back up plan it that first plan fails.  And you have to be ready, able and willing to execute the plan.

I came across a potential problem on my recent tenant.  Here is the scenario.

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January – February 2015 Rental Cash Flow

packs-163497_1280-PD24 of 25 rents were all collected and deposited in the bank by 2/3/2015.  Since I am now 100% full, it was a great month for deposits and rental cash flow.  My one late tenant is the same one as I have every month, and she paid on 2/6/2015.  It was late, and many landlords would be happy to get their rents by the end of the month, let alone the first Friday of the month.

My typical month goes just like that.  If you look at my previous rent collections, you will see that I rarely get any late fees, and I rarely go beyond the second business day of the month to deposit my rents.

How do I do it?  I get great tenants to start with.

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Landlord Work

plumber-35611_1280-PDIt has been a bit busy here.  There has been a lot of landlord work on the rental front that has been taking a bit of time.  I updated the landlord maintenance log, and added times to the chart.

 All My Rentals are Full (for now…)

I was able to take in a pretty decent renter in my vacant apartment in my duplex.  Now that the winter is over, the calls on the rental seem to be exponentially more in volume.  The tenant had lived at her old place for about 10 years, and was ready to move out of the apartment scene.  She was slightly more risk that my original plan, so I went with a month-to-month lease.  Overall, probably less risk than 90% of tenants, but I saw a few things that I would have preferred to have been different.  The fast move in was one red flag, although that was due to procrastination on her part.

So, February and March 2015 will be a 100% full months, that is the first time since July 2014.

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How to Be a Landlord’s Ideal Tenant — and Get into Any Rental You Choose

wonder-woman-533663_1280-PDIf you are a renter, you have many obstacles ahead of you. Landlords are full of horror stories, and you are just another potential horror story. Based on statistical evidence, you are not an ideal tenant.  You want and need to be the best renter the new landlord has ever seen.

No landlord really wants you, but they need you. They need you to help them pay their rental mortgage; they need you to help them pay their personal mortgage, they need you to help them retire early. But they do not need you to come around and damage the premise or cause them a lot of extra work. Here is how to be the best renter you can possibly be.

My rentals are multifamily, but much of this advice translates to all rentals. Much of it I have seen firsthand.

How to Be a Landlord’s Ideal Tenant — and Get into Any Rental You Choose

Prepare for the Apartment Viewing Process

When you set up a showing for a rental property, it is really an interview. You are interviewing the landlord or property management company, and they are interviewing you. Make a critical mistake in this process, and you will have to move on to the next property. You do not have to be dressed for church, but do not come looking like you are homeless.

Read more here

Have you ever been turned down for a rental?  If so, what was the landlord’s reason?  If you are a landlord, what do you find to be the most detrimental things a tenant does to get rejected.