In the fixer upper and rental house business there are many perfectly legal ways to maximize your rental profits, which don’t require drawing a gun or subtly displaying the threatening DVD cover of The Clan of the Cave Bear.
Keeping tenants satisfied = more $ for your
Putting the comfort of your tenants first can result in you making more money. Three things happen when you increase the value (or usefulness) of a property:
1.) You attract more and better tenants;
2.) Tenants stay longer; and,
3.) You make more money.
Things to do make a property more valuable
Catzilla makes tenants complete
1.) Provide a clothes washer and dryer;
2.) Have a refrigerator;
3.) Add a carport to protect tenant cars from the sun;
4.) Install security doors;
5.) Put a storage shed in the back yard;
6.) Allow pets. Many people consider their pet a member of their family, and in some cases, make their decision on which home to rent based on the likely comfort of their pet.
Maybe pet owners cross the line when they refer to themselves as “mommy” and “daddy,” and maybe pets cross the line when they start marking their territory before you even get a chance to go through the checklist.
But in general, allowing pets is a win-win situation.
These types of things increase the value of a property for tenants, and may set our property apart from other rental properties. They also allow us to charge a higher monthly rent.
The more satisfied a tenant is, the more they are willing to pay a little extra rent.
The Arizona Network of Real Estate invited me to give a presentation to their group about my book “Fix em Up Rent em Out.”
I thought the video might be available to the general public but it looks as though that’s not going to happen.
However, so that no one feels left out, I am going to provide a summary of the key points that I hit during the presentation. As someone who was regularly picked last for teams in gym class, I’m sensitive to people feeling left out. Casting modesty to the wind, I am also including exclusive photos of the event.
So here are:
The 5 Rules on How to Lose Money and Get Your Rental Property Trashed by Tenants (based on an article by Andrew Stefanczyk)
1. Choose the Worst Possible Area
Location will determine the kinds of tenants you will attract, and how much rent you can fairly charge.
Do you want these bearded wonders as tenants?
The best approach is to identify target areas in your city where you would like to focus your purchases. I like to focus on “transition zones” (where there is a mixture of housing types) which are good for investors because we can purchase properties at lower prices, and there is high demand to live in these areas.
2. Put in the very best of things when fixing up an investment property
Use new and expensive sinks, doors, refrigerators, light fixtures, etc. Never shop at stores that recycle construction supplies. Spare no expense.
Of course, the problem is that tenants will not take care of our properties as well as we would,
Habitat Store
so we end up with many broken or worn out items. The better alternative is to shop at used building supply stores, and to purchase good, inexpensive, supplies for our rental houses. One such store is the Habitat for Humanity store.
3. Make sure you have absolutely no experience in make basic repairs
Not knowing how to change electrical outlets, unclog drains & toilets, and replace broken windows will cost quite a bit down the road.
Being as uninformed as possible about who you rent to may be the best way to lose money as a landlord. Do not ask for or check references. Do not call previous landlords and ask questions like, did they pay rent on time? How was the condition of the house or apartment when they left? Did they ever disturb neighbors with loud music or shouting matches? How often would you have to make special trips for repairs? Being as uninformed as possible about whom you rent to will make a huge difference and will increase the chances that you will get tenants that will trash your property and refuse to pay rent.
However, the better way is to:
A. Use a checklist for tenants. Decide what kind of tenant that you want ahead of time.
C. Check county records to see what illegal activities they’ve been up to.
D. Know the Fair Housing Act. Never select tenants based strictly on “race, color, national origin, religion, sex, familial status or handicap (disability).”
E. To find new tenants, use Craiglist, put up arrow signs, and host an “open house.”
5. Make sure you have not learned about your rights as a landlord
Be completely unfamiliar with the eviction process to guarantee long, drawn out disputes with tenants. Don’t keep up to date financial records or copies of correspondence with tenants. Most states provide online information about tenant and landlord rights so avoid reading these.
With the annual approach of summer rains, now is almost the last chance to make rental house roofs water proof before the watery onslaught. As someone who has a sworn aversion for arriving too early to parties, I subscribe to the time-tested philosophy of “better late than never.”
This morning I applied some black roofing cement on some areas on one of my townhouse roofs. I had located some cracks upon my inspection of it about 2 weeks ago.
The first photo shows the area in question, where I had previously applied a small amount of plastic roofing cement, but today I was going to put on some more and cover a broader area.
The second photo shows the application of the plastic roofing cement. We apply one layer of cement, then put a white membrane on top of that, followed by a second layer of cement. The membrane allows for more cement to be applied.
Below is the “after” photo. You can see that in addition to the corner, we hit a few other cracks with our roofing cement on the sides of theroof. Later, we’ll come back with white roofing paint to cover the black cement.
A good rental house
My wife and I purchased this 2 bed 2 bath townhouse in 1993 and lived in it for 10 years before moving on to a bigger house (to accomodate our growing family), and turning this property into a rental house in 2003.
Its been one of our best rental houses because it is in a “transition” zone (aka “opportunity zones”) where there is heavy demand for housing, and it is easy to care for because it is compact (1100 sq ft with small front and back yards). The townhouse perfect for single people or small families.
If your circumstances are such that it is impossible for you to start investing in real estate today, you can start by just meandering in that direction. You can program your mind to pay attention to anything related to real estate. Cut articles out of the newspaper, buy books at book sales, ask friends and co-workers how they purchased their house, watch for free classes or seminars.
You can be constantly learning and preparing for the day you will purchase your first fix-up property. Virtually anything you need to know is available to you through books, audio recordings, workshops, seminars, public education programs, consultants and training programs.
I meandered for approximately 11 years before purchasing my first investment property. Now I wish I had started sooner, but you can’t begin until you have the desire and the knowledge. Sometimes, desire and knowledge can be acquired simply by observing someone else operating a successful business.
Reason to Not Invest and Reasons to Invest
There are always reasons not to invest in real estate. The most common reason used to be that people thought house prices were too high. Now, the situation has reversed itself and housing prices are at historic lows.
The time is ripe to start meandering in the direction of Fixer Upper Houses.
See What’s Happening in Your Neighborhood
You might want to check out how low houses are selling for in your neighborhood. You might be surprised.
Remember your tenants during the holidays with a gift card. This shows them that you are in it for more than the money.
When I was a Peace Corps Volunteer in Honduras, the people I worked with went out of their way to make me feel I welcome and cared for. I try to do the same with my tenants.
Be kind to your tenants and treat them the way you would like to be treated and they will return the favor by taking care of your property, and by providing you with financial security for years to come.
Naturally, people are nervous about making financial changes during a recession. But, refinancing your existing house to take down payment money out of your equity and buy a rental house is one of the safest ways to start investing in real estate. It’s the most common way that real estate investors use to purchase investment properties.
If you have a steady job and a good credit rating, now is a rare opportunity to get a loan in the 4% interest range. And, houses are selling at fire sale prices!
It’s a good idea to refinance a house that you have owned for a few years before reinancing to take some equity out of it.
Refinancing an existing property for downpayment money is a lot better than waiting until you have enough cash to purchase a rental house withouta loan. Having a loan gives you leverage, because you don’t have to use all of your own money, which could take 20 years or more, to save.
The great benefit is, after you have purchased your rental house, is that you have a stream of income that is in addition to your regular 8:00 to 5:00 job.
You can be laid off, or fired from your regular job, but you can never lose your rental property job!
Before the show I heard Ron going through the news and he said that ratings were so bad at CBS that Katie Couric was showing up to work in sweat pants, a tank top and a ball cap too.
So, during the interview, I mentioned that one of the advantages of working with rental properties was, like Katie Couric, I can show up to work in sweat pants and a ball cap.
Owning rental houses far exceeds the benefit of the pension that you may receive from your job. I worked for the state of Arizona for 13 years, and I will one day receive a pension of around $1,000 a month.
But, does that really provide security?
Each year the value of my pension will go down because it is not tied to inflation. So, after 10 years I’ll still receive $1,000 a month but because of inflation, it may be actually only worth $100 dollars a month because the cost of my groceries, my clothes, health care, and other costs have all gone up each year.
Rental houses provide a better pension. If I get $1,000 a month in rent profits, it not only keeps up with inflation, but it exceeds inflation.
Which pension program would your rather have? One that increases in value with the passing years, or one that decreases in value?
1. Place several small For Rent signs on all nearby streets, especially the major intersections. If you get a sign with an arrow on it, you can point the arrow in the direction of your house. I buy the signs at Home Depot or Lowe’s.
2. Hold an “open house” on Saturday and Sunday. People driving by can come in and look around.
3. Contact companies that help people find rental properties. Some will list your property for free. These companies usually contact me.
4. Run an ad on craigslist.org. You can upload photos and describe the qualities of your rental property. The ads are free & I usually get a great response.
I hope you find a tenant soon.
Let me know if you come up with a good technique that I haven’t thought of.
Good luck!
Best regards,
Terry Sprouse
Location, Location, …
One thing I didn’t mention in the letter, but which is perhaps the most important consideration of all in attracting good tenants, is the location of your property. Properties located where people really like to rent are called “opportunity zones” (or “transition zones”). Just as Baskin-Robbins must offer the flavors of ice cream that the public likes, so you must offer rental properties in the areas of town where people want to live.
If your property is located in an area where people don’t like to rent, you will always have trouble finding tenants. For more information about my philosophy on where to invest, check out my EzineArticles.com article The Secret to Increasing Cash Flow – Invest in Opportunity Zones .
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FIX EM UP RENT EM OUT
Purchase FIX EM UP RENT EM OUT (paperback)Award-Winning Finalist in the Real Estate category of the National Best Books Awards, sponsored by USA Book NewsGreat information for anyone starting out in the fixer-upper business. The author has served his apprenticeship in the trenches.
-- Fixer Jay P. DeCima, Investor and AuthorTerry Sprouse has created a profitable rental business in his spare time. What sets him apart is he took action.-- Bob Zachmeier, Investor, Educator, Author With the wit of Will Rogers, this book provides simple guidelines for restoring homes, and sanity to our crazy lives. --M.D. Matlock, Ph.D., P.E., C.S.E.