Here’s the top 3 real estate investing articles of all time here at MustKnowInvesting.com:

1. 59 “Must Know” Tips in Creative Real Estate Investing to Minimize Risk and Maximize Returns

This creative real estate investing article presents tips throughout the entirety of the investing process. Whether you are a beginner, an expert, a flipper, a wholesaler, however you relate to the real estate investing world, you will be provided with some insights into safely maximizing your returns.

There are a ton of links throughout this article to help guide you through the blog to find exactly what you are looking for.

click here to read the article

2. How to Turn a Good Deal into a Great Deal : Creative Real Estate Investing

You’ll learn 7 simple ways to turn a good deal into a great deal such as getting “the stuff,” negotiating seller financing, rezoning a property, and more.

Remember, you never want to make the mistake of “trying” to make a deal work. Either it’s a deal or it’s not! What we’re talking about here are some simple ways to pad the deal for a greater comfort level and profitability!

It doesn’t ever hurt to be on the conservative side of things . . . especially in today’s market!

click here to read the article

3. The Most Costly Mistake You’ll Ever Make as a Creative Real Estate Investor

Here’s a little excerpt:

Have you ever read or heard about a killer deal that a real estate investor did and thought to yourself, “Why in the world would the seller ever accept an offer like that?” or “I could never make that kind of an offer” or “How do you talk someone into that?”

If you answered “yes,” than you have most likely suffered from this common profit destroying tendency. At some time or another, ever creative real estate investor has made this mistake and must always be on guard against it . . .

click here to read the article

Enjoy!

Popularity: 38% [?]

It is amazing how quickly the tenant/landlord relationship can be defined and redefined.  You must lay the groundwork for how the relationship will work from the start.  If you lack an iron fist up front, it will be hard to enforce your rights later on.  When you try, your tenants will accuse you of “being a jerk all of a sudden.”  On the other hand, if you are tough up front and help them out later on if need be, your tenants will think (correctly) that you are being extremely fair. 

For example, I recently bought an investment property with tenants already in place.  The sellers had mailed the tenants a letter informing them there would be a change in ownership and management.  I did the same and also informed them of the new address to send the rent to, who to make the check payable to, and the contact phone number for any problems or questions.

The tenants were behind on their rent when I bought the property, and due to a family emergency I hadn’t followed up on the late rent.  By the time I was able to check again on the rent another due date had come and gone.  Up to this point, I had received no contact from the tenants. 

Hmmm . . . I am a new owner/manager.  I have tenants that are late on their rent.  And the tenants haven’t even bothered to call me about it.  This was bad, especially this early in the relationship.  I was training the tenants and teaching them how our relationship works. I had to nip this in the bud quickly.

I filled out and mailed a Pay or Quit Notice as well as a Statement of Account showing the tenants the amount they were behind, including late payments, late fees, and legal fees if I had to pursue that route. 

Now, normally at this stage, I also file an eviction on the tenants.  In this particular case, I didn’t because the previous owners had told me the tenants had been good in the past but had run into some life problems and were paying, but consistently paying late. 

This can actually be a benefit.  If properly handled, a consistently late paying tenant can add up to big profits for you, as long as you enforce your late fees. I was taught by my mentor to let the paperwork do the talking.  Therefore my leases define all the late fees plus a rental discount that is lost as soon as the rent is late.  I make at least $100 the first day the rent is late, plus $5 per day after that.  It’s a great profit center!

I had to travel to the area of town where my late paying tenants lived so I personally placed the “Notice to Pay or Quit” and the “Statement of Account” in their mailbox at around 4:30 that afternoon. This paperwork has very strong language about the implications of not paying.

At 6 pm that day, I received a phone call and an anxious sounding voicemail asking me to contact them as soon as possible to resolve this situation. I did not respond. The next morning at 8 am, I received a second call and another voicemail pleading with me to call them. I waited until about 10am to call back because I wanted to make a statement to the tenants. I don’t want them to think that I am at their beck and call. If they think that they can ignore me and their obligations and get me on the phone at any moment, their wrong. That’s not the kind of tenant/landlord relationship that I want to create.

We ended up negotiating a workable payment plan, and I wrote up a consent judgment for the tenants to sign.  If they don’t make the agreed upon payments on time, they have already consented to a judgment being filed against them (without the hassle or expense of me going to court) and agreed that a writ of possession would be issued giving them 24 hours to vacate the property.

How about that?

You are going to save untold hours of frustration and headaches wondering if and when you’ll get your late rent and fees by following this advice; plus you’ll have tenants who know you hold them accountable for their actions, but also know you are fair and willing to work with them when the situation warrants it.

Popularity: 48% [?]

As creative real estate investors, there are many strategies that we can implement in our businesses to minimize risk and therefore . . . Maximize Returns!

When I first wrote down the idea for this post, I had a few things in mind to list and then something happened. I started to realize how many of the things that I do regularly are done for a specific reason. And that reason is to Minimize Risk and Maximize Returns!

Many of the suggestions and tips that I’m about to share with you were learned due to hundreds of hours study, and years of experience investing full time in the field. So hold on tight because this is going to be hot!

59 “Must Know” Tips to Minimize Risk and Maximize Returns

1. Become a Wholesaler

Some wholesalers close on a property and then immediately turn around and sell it. Others never even close on it in the first place. If your goal is to minimize risk, this is the strategy for you. Find a motivated seller, contract the property, and assign it for a wholesale fee. You can easily make $5K to $10K if you’ve got a good deal and sometimes much more.

Check out these two posts to learn more about real estate wholesaling strategies:

How Flip a House for a $14K Wholesale Profit without Rehabbing It

How to Start Investing in Real Estate Without Spending Money on Marketing

2. Use OPM

If you’re not familiar with the term, get used to hearing it. I’m talking about Other People’s Money. Doesn’t matter whether it’s a hard money lender, Bank of America, or your Uncle Bob. Leverage is powerful! Learn how to use it!

Check out the Real Estate Investment Financing Strategies category.

3. Build a Guerilla Marketing Plan

A Guerilla marketing plan is a low-to-no cost real estate investing marketing plan. There are a bunch of ways to get motivated sellers on the phone that don’t cost an arm and a leg. There’s a book by Jay Abraham on the subject that’s pretty popular.

Also, there are several posts in the Marketing category that go over low-to-no cost marketing techniques. Check them out.

4. Join a Mastmind Group

Andrew Carnegie taught the power of a Mastermind Group to Napoleon Hill, and Hill penned it in the classic book, Think and Grow Rich. If you haven’t read it and care about your financial future, buy the book this week.

As far as a Mastermind Group goes, find like-minded individuals that you can bounce ideas off of. Meet regularly to discuss your experiences, hardships, and successes. This will provide valuable insight into both your business and yourself.

5. Log Your Tenant Communications

When you end up in front of a judge (notice I did not say if), the more organized you are, the better chance you have to come out on top. The judge can pretty much make decisions to suit their personal liking so it’s a great way to minimize risk by knowing exactly when, where, and how you ended up in court with this tenant. Some judges are more tenant friendly, some more landlord friendly.

6. Build a Good Contractor Team

I have heard about and personally experienced bad contractors. I’ve been given estimates for things that didn’t need repairing, had a contractor get paid and never be seen again, and had contractors that stole supplies right off the job site. As a matter of fact, I just filed a judgment against a contractor a couple weeks ago who owes me a few thousands of dollars.

OK, I’m done with my rant now. There are also many excellent contractors. You may have to look hard but we’ve built an excellent team of good quality trustworthy contractors over the years.

Check out a recent post from one of our contributors, Wil Christenson, How to Find Great Contractors for Your Real Estate Investing Renovations.

7. Order a Title Search

My mentor, Louis Brown, said to always buy title insurance. I am a proponent of doing what experienced successful investors say so this one’s coming from Lou.

8. Get Everything in Writing

With your contractors, investors, tenants, partners . . . everyone that you do business with. Write down the terms of your agreement! Determine what will be paid for any products or services rendered prior to them being provided.

You can infinitely improve your chance of building longterm professional relationships by adhering to this often ignored nugget of wisdom.

By foregoing this easy and intelligent tip, you’re putting much more at risk than you realize.

9. Learn How to Utilize Options

Options can be used as a great way to tie up property with minimal risk. Since an option is a unilateral agreement, you can choose whether or not to exercise your option and close on the property. The only thing typically at risk is the option consideration that you put down which doesn’t have to amount to much. That will be determined by your negotiation skills.

10. Buy it Cheap Enough where you Could Flip it and Come out on Top

Flipping property is the most expensive way to sell real estate. Between purchase costs, the renovation, holding and marketing costs, and the costs associated with selling any property, profit can disappear pretty quickly. And we haven’t even talked about the tax consequences!

If you analyze a property and you could flip it and come out on top, that’s a safe bet.

11. Hire a Good Accountant

Knowing the bottom line in every deal you do is vitally important. If you are set up properly, an accountant can provide you with a wealth of valuable information so that you know how to maximize the returns from your portfolio.

12. Buy Properties with More Than 1 Bathroom

One bathroom houses have always taken us longer to fill with a tenant than houses with more. If you are looking at buying a 1 bathroom house, look for a way to at least add a half bath. You’ll be kicking yourself when your 1 bath house is sitting vacant for months at a time if you don’t.

Two or more baths is ideal and makes for a much more marketable house.

13. Utilize Technology

The Internet and technology are changing the way business is done at a faster rate than at any other time in history. Staying current and knowledgeable on the applications of technology to real estate will put you ahead of the old timers that are stuck in their ways.

You will be minimizing your risk of getting left behind by utilizing technology in your business.

14. Get a Professional Opinion of Value

This could be from a real estate agent, an appraiser, or some other knowledgeable real estate pro.

Check out this post for some tips on valuing property.

15. Be Able to Survive the Worst Case Scenario

This could correlate to many different scenarios.

For Example: Let’s say you find out there’s $15K worth of water and structural damage on one of your rentals, the tenant stops paying you rent and you start the eviction process, and it takes you 6 months to get it fixed and rented out again . . .

Could you Survive?

16. Use a Good Closing Attorney or Title Company

A good attorney or title company could save you many thousands of dollars and headaches. If you are looking for someone that is creative real estate friendly, I would suggest asking people in your local real estate investing association. Referrals have always provided much more value to our company than pulling out the phone book.

17. You are NOT the Owner . . . You Work for the Owner

As soon as someone knows that you are the decision maker in relation to a property you own, you have given up a valuable position of leverage. Whether it’s with tenants, contractors, or buyers, you’re best off if you “have to consult with your partner” or “have to run it by the owners.”

18. Have Sellers/Tenants Sign a Lead Based Paint Disclosure

I’ve never had any problems in any of our properties with lead based paint but many people have. This is a standard form used for most real estate transactions.

19. Learn How to Evaluate Property on Your Own

Knowing how to evaluate a property on your own gives you an advantage. You do not have to rely on someone else’s opinion, and you’re not on their time. By doing your own evaluations, you will be able to know quickly if you’ve got a deal on your hands. And time is of the essence when working with motivated sellers.

Click on the link in #14 if you want further info on this one.

20. Don’t Quit Your Day Job . . . Yet

Relying on monetizing your real estate deals for your sole source of income can be quite challenging. If you have a good income and your doing deals to make extra money and build wealth, you will be in a great position to do so.

21. Learn Creative Deal Structuring Strategies

Creative deal structuring spans from doing subject to deals, to structuring owner financing notes payable over time, to using the little know concept of substitution of collateral, to bringing in private investors to fund your deals, and the list could go on and on. You can be as creative as you want in the contracting, financing, renovating, and selling phases.

Ask yourself continually, “What’s another way that we could structure this deal?”

22. Have Multiple Exit Strategies

DO NOT enter a deal if you only have one way out of it! Why do you think so many of the speculators that bought preconstruction deals when the market peaked are losing their investments to foreclosure. They banked on one thing and one thing only . . . Appreciation! So the market fell out and so did they.

Check out the post, Real Estate Investment Financing Strategies : What is Your Exit Strategy for more info.

23. Do What Experienced Investors Tell You to Do

Maybe it’s built into human nature to not want to listen to people and to forge our own path and make our own decisions. Well, if you’re just getting started, fight this tendency!

It is much cheaper to learn from the mistakes of others rather from the school of hard knocks! Do exactly what successful investors tell you to do.

24. Define Your Niche

This will skyrocket your chances of success as a creative real estate investor. You will make it much harder when starting out by buying a couple properties in the hood, a few nice houses in nice neighborhoods, multi-family property, a beach front condo, and a mobile home park. You get my drift anyway.

My company’s niche is single family homes in nice areas, in good condition, with an ARV between $150K-$175K. Depending on where you are located in the country that price range may sound like a war zone to you, but it all depends where you live. Here in Charleston, South Carolina, there are many areas within a 30 minute drive that fit into our niche.

25. Write Small Earnest Money Checks

Between $10 and $100 is customary for our company. Most real estate professionals (agents) typically do 1% of the purchase price. But we’re creative real estate investors so we do things a little different.

26. Use Sandwich Least Options

I first learned about this concept through Peter Conti and David Finkel’s book, Making Big Money in Real Estate without Tenants, Banks, or Rehab Projects.

This has never been my style since you don’t get the deed but there seems to be people doing it successfully. And this technique definitely limits risk.

27. Bring in a Financial Partner

My first year investing we found an excellent financial partner. An additional bonus was that he had been doing renovations himself for years. He would put up a loan for 80% of the ARV, and we partnered with him on the deal. He not only financed the deal for us but also managed the renovation. It was an excellent set up for us as beginning real estate investors, and it was also a great way for him to leverage his way into more deals. A true Win-Win relationship.

28. Hire Qualified Contractors

This can be challenging when just getting started but not impossible. Here’s three tips to help you out:

1. Don’t accept the cheapest bid.
2. Get referrals from other investors.
3. Don’t pay for work yet to be completed (a material draw is OK but you may want to buy and deliver yourself).

29. Process Tenants Credit Applications

You shouldn’t expect every tenant to have stellar credit because if you do, you will have a major vacancy problem. At least, that’s been my experience. For awhile, we qualified our potential lease option tenants strictly by down payment and didn’t even pull their credit, but we have changed that now.

A credit report can tell you a lot about someone if you know how to read it. And if you don’t, get a mortgage broker to show you how.

30. Use an Investor Friendly Purchase and Sale Agreement

As a creative real estate investor, you want to make sure that you are well protected. Make sure your purchase and sale is rock solid and very investor friendly.

The best contracts that I’ve ever come across are Louis Browns. And no, I’m not making any money if you click through and buy any of his stuff. I’m telling you it’s the best because it is.

31. Lease Option Your Property

There are some big differences between a standard tenant renting from you and having a tenant buyer in one of your properties. Lease options are our primary exit strategy with our properties for many reasons.

Check out 3 Reasons Why Lease Options are Our Primary Real Estate Investment Selling Strategy.

And for some marketing tips, 10 Great Ways to Find Lease Option Tenant Buyers.

32. Limit the Cash You Tie Up in Your Properties

Less Cash in Deal = Greater Return on Investment

More Cash in Deal = Greater Risk

33. Find a Great Property Manager

It can be a great experience to manage your first few properties on your own but property managers are worth their weight in gold. We manage all of our lease options and have a couple different property managers handle our rentals. Typically, you can expect to pay 10% of the gross rent to property managers. We pay one of ours 8% and the other 10%.

34. Secure Financing that Works with Your Exit Strategy

I’ve written an entire post on the subject here so no need to be redundant.

Check it out, Real Estate Investment Financing Strategies : What is Your Exit Strategy

35. Negotiate Seller Financing

First off, NEVER use the terms “seller financing” or “owner financing” when negotiating with homeowners.

Check this out, Real Estate Investment Financing Strategies : How to Get Seller Financing

This is just a small primer to the subject. My business partner, Dusty Keefe, is the man when it comes to negotiating seller financing. You may not have noticed it yet but we just added an “Ask the Expert” page on the site. If you’ve got any burning questions, let us know.

36. Stay Abreast of Real Estate Law

By networking with local investors you will most likely here about any new legislation that would affect your business model. You can also ask your accountant to update you when they hear about new laws.

37. Buy Property in a Modest Price Range

This may seem vague but I will use an extreme to illistrate.

For Example: If you get a good deal on a 1.5M luxury home and buy it for 1M, that’s great and all but be careful. Consider the worst possible scenario. When you are dealing with properties in higher price ranges, you have a much smaller pool of buyers and your equity spread can disappear in a hurry.

38. Learn as Much as You Can About the Things You Delegate

When you hire out work that you do not know how to perform yourself, you stand a chance to get taken advantage of especially when you are a beginner.

Writing this reminded me of the first 5 or 6 heating and air estimates that we got from various contractors our first year investing. Every house that we bought “needed” an whole new unit. Didn’t matter who we asked or what the unit looked like. We finally wised up and learned some things about heat and air units.

39. Have an Asset Protection Strategy

There are many different approaches advocated across the industry. We are partial to using land trusts to protect our assets.

If a tenant ever slips and falls at a property we own and goes to an attorney to seek out their options, they will reluctantly find out that the only thing the trust owns is that one house. Unless the tenant has a lot of money they want to blow, the attorney wouldn’t have any reason to take the case.

Read up on these two posts below for more info:

Utilizing Land Trusts for Asset Protection as a Real Estate Investor Part 1

Utilizing Land Trusts for Asset Protection as a Real Estate Investor Part 2

40. Bring in a Credit Partner

Don’t have good credit, just find someone who does. You can provide the expertise, time, labor and management in exchange for someone else’s good credit.

41. Find a Mortgage Broker You Can Trust

I hate when you barely get it out of your mouth to a mortgage broker about a potential loan, and they are already telling you that they can get it done. All that I want is someone who will honestly give me a breakdown of what the options are and the likelihood of each.

With the mortgage industry changing the way it has lately, I can sympathize with them a little bit, but this has been going on as long as I’ve been in the business. Find a mortgage broker that levels with you and doesn’t promise the world.

42. Stay on the Real Estate Investing Sidelines, Don’t Invest, and Cling to Social Security

Not something I suggest but it would reduce your risk as an creative real estate investor. Real estate investing is definitely not for everyone. This is evidenced by how many people get in and barely get back out.

It amazes me the number of individuals I’ve seen “give it a try” over the years. By not committing to their real estate success, they are committing to its failure.

43. Use a Rock Solid Lease Agreement

As a landlord, you deserve to be protected to the utmost and that’s what a rock solid lease will do. I already told you who I think has the best paperwork in the business so if you missed it, you’ll just have to read the post again.

44. Know How to Protect a Deal while it’s Under Contract

In a recent post I stated, “If you do not know the secret to protecting deals you’ve contracted, it is not a matter of whether or not you will lose a deal to another investor, it’s a matter of when.”

Check it out, How I’ve Made Hundreds of Thousands of Dollars with this Creative Real Estate Investing Secret.

45. Be Flexible and Open Minded

You will especially need to adhere to this tip if you didn’t follow #8. Soooo, prepare to be flexible. A close minded person will not see the abundance of opportunity throughout the market. By opening your mind to an infinite amount of possibilities, you stand to profit from an array of areas throughout your business.

Remember: It’s risky to be rigid to a specific plan or way to go about business. Couple that with close mindedness and you no longer have any options.

46. Buy Property Way Under Value

This may sound like common sense but don’t forget about how many speculators entered the market during its peak and based their decision solely on potential appreciation.

Check out Our Buying Criteria.

47. Have a Well Connected Attorney on the Team

We have been in court plenty of times for evictions but have fortunately steered clear of lawsuits. People are so quick to file suit for anything these days.

I remember reading about a survey that was done at the turn of the 19th century and again several years ago. They asked people the question, “If you were to get rich, how would you do so.” At the turn of the century, the number one response was to build a business. Recently, it was to sue someone.

In other words, get a good attorney!

48. Give Yourself an Out in Your Purchase and Sale

This is very simple. Write in the special stipulations, “Subject to partner’s approval.” No one ever said that your partner had to be a person. Maybe your partner is your dog and if you end up not feeling good the deal, neither does Fido.

49. Commit to Being a Lifelong Student of Creative Real Estate Investing.

In addition to books, seminars, and courses, there are a tremendous amount of resources on the web.

Here is a short list of a few websites that I check out regularly:

RealEstateInvestor.com

BiggerPockets

theREIbrain

TheCreativeInvestor

Bryan Ellis FreeRealEstateTraining

JP Moses Real Estate Investing Tips Blog

Scott Roemermann’s REI Blog

50. Get a Great Agent on the Team

A good real estate agent can bring a lot of value to the table. I have always been all about delegating everything that I possibly can to professionals. I consider myself to be a professional investor . . . not a professional real estate salesperson. I do not want to do what they do.

And like Robert Kiyosaki says, “Don’t be like most people who want to stiff people who offer their services to you in the asset column and overpay people that serve you in the expense column.“

You get what you pay for and that’s why you should pay the professionals that serve you well.

51. Call Tenants References on Their Application

Even though people typically put down friends and family as references, you would be surprised. Call their references and you’ll save yourself many headaches. It’s an easy thing to do so just do it.

52. Buy Property where the Rental Rates Support Your PITI Payment

Going back to that worst case scenario thing again, if you have to hold a problem property, at least the rental rates support your monthly payment.

53. Have the Property Inspected

This could mean getting it inspected by a general contractor, home inspector, pest control company, etc. There are plenty of real estate investors that buy property site unseen, but I don’t recommend this strategy if you want to minimize risk.

54. If you Plan to Flip a Property, Have the Ability to Hold it if Need Be

If you are financially able to hold any property you buy indefinitely, you’re in a great position. This may not always be possible but it will greatly minimize your risk.

55. Network with Local Investors

There is about a 90% chance that there is a local group of investors that meet on a regular basis in your hometown. Investors usually have one of two mindsets. There are those that think that every other investor is their competitor and then there are people like me, who think of every investor as a potential partner.

We have worked with most of the active investors in our community and get a ton out of it. We’ll pass a deal on to one of our investor friends for a wholesale fee, and then they’ll fill one of our properties with a tenant that doesn’t fit what they have available.

WIN-WIN!

56. Have Your Closing Attorney Hold the Earnest Money When Contracting Properties

Our contract specifies that earnest money can be paid by check or promissory note, both of which are held by the closing attorney of our choice. Remember, we are the ones putting everything on the line to help all of the motivated homeowners out there. Protect your interests first!

57. Buy Property That Has At Least 3 Bedrooms

2 bedroom houses have ALWAYS taken us longer to fill or sell than 3 bedrooms.

The majority of households cannot live in that small of a house. I like to always position myself so that the majority of the marketplace wants what I have, and the majority of the marketplace doesn’t want to live in a 2 bedroom house.

You can easily minimize your risk in creative real estate investing by taking this tip. If you come across a 2 bedroom that looks like a great deal, get creative and see if there is any way to add that coveted third bedroom.

58. Pay Sellers Their Equity Over Time

Does this remind you of another one of the tips that we’ve already gone over?

I hope that it does. If so, you’re on the fast track to building massive wealth through real estate.

59. Hire a Creative Real Estate Investing Coach or Mentor

I have been in several real estate investing mentoring programs since I got started and continue to educate myself on a daily basis. It’s a never ending process in my mind.

Having a mentor who has seen the ups and downs of the market and that has made the mistakes necessary to become successful is invaluable. In the real estate investing game, one mistake can mean losing tens of thousands of dollars or one tip could mean $30K in your pocket next month.

Check this out if you think that a coach could benefit you. There a many programs available on the market. Find the one that is right for you.

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Well, that’s it for the 59 “Must Know” Tips in Creative Real Estate Investing to Minimize Risk and Maximize Returns. If I missed anything, please add it to the comment section. Let’s see how many more you can come up with.

Popularity: 100% [?]

Got a call from one of our contractors yesterday who opened the conversation by saying, “You might want to sit down for this one.” Never what you want to hear especially when you’ve already spent a lot of money in a property, know you’re about to be spending more, and that the expenses aren’t your responsibility in the first place.

This is a property that we have on our lease option program. We bought it about a year and a half ago by taking over payments on the existing mortgage, put $12K into the renovation, and filled it with a tenant buyer. The tenant buyer put $6K down on a 2 year lease option agreement.

As they were moving out of their previous residence, it burned down. Most of their belongings had not been transfered to the new house either. So these good people started out with us on a tough footing. Ever since they moved in, they have struggled to keep up month after month. It’s really a sad situation but as a landlord, our motto is “You’ve Got To Pay To Stay!”

So anyway, we had sent our contractor up to the property because the tenants called about a water leak. We know that they barely keep their rent payments current and don’t have any spare money for repairs. Even though they are contractually responsible for repairs up to $500, we made the executive decision to get the problem fixed.

Now back to our contractor’s comment, “You might want to sit down for this one.” He had already spent a couple days replacing shower valves, some of the old beat up pipes in the upstairs bathroom, and stopping the flow of rain in their bedroom. And then he calls because the water heater is on the fritz, we’ve got a new growing puddle of water to worry about, and he found a mold problem. Our contractor knows that we do not want to spend any more money in the property but that at the same time, we want to take care of what needs attention so that major problems do not arise.

Last Friday another one of our house’s water heater burst and caused a lot more problems than this one. And we are in the eviction process with this tenant. My business partner just told me yesterday that he thinks she is asking for a notice to show cause hearing which means he is going to have to go to court with this eviction. The process will take longer, which in turn will cost us more money since we are not receiving rent, and she will surely bring the property’s “horrible” condition into play. Or at least that what it sounded like in a message my partner received.

I say all of this to tell you, “Always prepare for the worst with your real estate investing portfolio. Be prepared for a HVAC unit to go out, a roof to need replacing,  and tenant problems. Unfortunately, it’s part of the business.” But, as always, we are continuing to learn an extraordinary amount from every problem that we face and will continue to put these learnings into our business and be better off because of it.”

Popularity: 49% [?]

Anyone who has been in the rental business for more than three months knows the biggest problem…TENANTS, TENANTS, and of course TENANTS!!!  No question about it.

Who are these people who call you with all these lame excuses and situations that seem to unfold so effortlessly in their lives month after month?  Their consistent stream of BS is simply amazing! 

Here is the life changing kicker…you don’t have to put up with it! 

It all starts in the very beginning of your landlord-tenant relationship.  Define the rules and your expectations VERY CLEARLY and HOLD STRONG to them! 

The first time they call and tell you why the rent is going to be 5 days late, explain exactly what it’s going to cost them and why.  Do not come off of your late fees even a little bit, especially early in the agreement.  YOU MUST draw the line in the sand with them and stick to it, or they will walk all over you.  Once a tenant understands what paying late means, they will stop putting you behind other bills.  They will miraculously start figuring out a way to pay you on time.  They will continue to test you throughout the lease just like kids test their parents…don’t waiver!

This philosophy has drastically changed tenants’ mindsets about the way they pay us every month.  We have given too many tenants the benefit of the doubt over the years and have learned from our mistakes. 

Set the expectations early.  Hold your ground when they try to change the deal. Now you can sit back, relax, and enjoy the asset you’ve added to your portfolio.

Now, you’re managing the property instead of it managing you!

Popularity: 11% [?]

We recently had an interesting situation with a tenant and how they delivered payment to us. In the past, they rarely delivered it at all, or late at best. In talking to the tenant, we found out that he has no real job anymore (surprise!), and that the only way he could make payment was from a trust that his mother left him when she passed.

She set up this trust to pay his trustee, his aunt, a $1,000 per month on the 1st of every month to pay for his rent in the future because she knew he would eventually be homeless if she didn’t set it up this way (he has apparently been a winner for some time now!). The aunt had been just cutting him a check and trusting him to make his house payment every month.

Needless to say, life happened and he “needed” the money for something else that month and was unable to pay rent. I filed the eviction on him and received a wonderfully pleasant call from him when he got the note on his door from the magistrate. He informed me of how he received payment from his trustee and that this person wouldn’t return his calls because he was asking for more money than was scheduled for him to receive and their conversations were starting to get heated. NOT GOOD for us!

I offered to meet with the trustee and negotiate his situation for him. What we worked out is nothing short of beautiful! She cut me a check for the past month’s rent plus late fees and the next month’s rent. Not bad, right? And now for the real kicker…We set up our account to auto draft his trust account every single month on autopilot so the money is there every single month for years to come! He has enough money in the account to pay us rent for the next 15 years, and he said he is in that property to stay!

Can anybody say, “Free & Clear property?”

Popularity: 7% [?]

Last November, we had seven evictions in progress. This did not count several other late tenants that we were trying to work with and had yet to file evictions on them. With a little over 50 tenants, that means that around 20% of our tenants weren’t paying us. That just sucks!

To keep track of our income records, we had created a simple excel spreadsheet to log the incoming rents and the dates they were received. Check out an example of what we were using below.

Most of our tenants had not been trained very well and paid several days late consistently. This created a nightmare because each individual tenant file had to be referenced to find out detailed info about their lease and contact info. Because of everything else going on in the business, we were not diligent in collecting late fees. We had so many tenants that were in the process of being evicted, we did not pursue our late fees on the other tenants. I was thinking that if we did, it might alienate even more tenants.

I knew that something had to change. Once we put the intention out in the world, it did not take long for something to cross our path. One of our employees forwarded an email to me about some property management software called PropertyBoss. The clouds had parted and the lights shined down from the heavens! I downloaded the free trial and we were off to the races.

We ended up evicting 2 of the 7 tenants and today, we have ZERO evictions in progress. We have made far more in collecting late fees from our tenants than the cost of the software. We had more tenants pay early, on time, and online, than ever this month. We were in contact with all of the tenants more than ever over the past months because we had to get them all set up within the software. Every one of our tenants knows that if rent is not received by the 25th, late fees are do and will be collected. Each tenant can log into their account online and see when their next payment is due, what is currently owed, they can update their contact info, and submit a work order if need be.

And we have only scratched the surface in regards to the functionality of the software!

Over the years, one thing that I have learned is that property management must be handled with an iron fist from the get go. You train your tenants how to do business with you. If you give an inch, they’ll take a mile. Now that our property management software tracks everything for us, we can focus on enforcing what’s owed. All we have to do is log into PropertyBoss and see where everything is at. And it’s internet based so I can log on anywhere in the world.

Popularity: 10% [?]

We have a property that we recently got back after an eviction. We had to go in and do some cosmetic work, but it wasn’t too bad. The property has now been on the market for a little over a month and is still vacant.

We are marketing the property on a lease option and started off asking $1,975/mo and $6K down. We are now down to $1,675/mo and $3K down. We lowered our asking prices because vacancy is too expensive. Check out our website to see some of our listings. The subject property is 140 Ryton.

There is a woman that really wants the property but cannot afford what we are asking. She can put $6K down, which is good, but can only afford $1,200/mo. For each additional $1K that a tenant puts down, we lower the monthly payment by $25. So that would mean that her monthly payment would be $1,600 with $6K down, and she can only pay $1,200. Still pretty far off.

After discussing this with Dusty, here is what we may do. First and foremost, we will run her credit to see what kind of person we are dealing with. In the past, we have filled properties based on down payment and not credit. For example, $6K down…you’re approved!! On this one, we want a closer look. Also, instead of signing a year lease and option with her, we are only going to offer her a six month term. She can extend her agreement for an additional six months if she is willing to pay $1,600/mo from then on.

If her credit looks descent and she agrees to our terms, we get a good down payment, get rid of a vacancy, and ultimately, still get what we want.

Popularity: 13% [?]

Is it the price or the house? How to effectively destroy vacancy.

Listen to the Handling Vacancy Audio

Popularity: 11% [?]

Last night was the local investor’s association monthly meeting. Myself and Dusty were invited to be on the expert panel. There were a total of 7 us on the panel, and it turned out to be a pretty informative meeting. The couple that runs the investor group up in Columbia, SC came down and had an interesting experience with one of their lease options.

When they initially filled the property, they had done their typical lease option paperwork and had collected a down payment. Their tenant buyer stopped paying the rent so they filed an eviction. The tenant probably called for a notice to show cause hearing because they ended up in court together (a notice to show cause hearing gives a tenant that is being evicted a chance to plead their case to the judge). At the magistrate level, the judge can pretty much side with whoever they want regardless of the “law.” Usually, when a landlord shows up with his paperwork and records showing the tenant’s delinquency, the decision from the judge is rendered rather quickly. The tenant is told to be out of the property by a certain date regardless of whether they are renting or in a lease option.

Not the case here! The judge found out that the tenant was in a lease option agreement and sided with the tenant. The judge said that the down payment gives the tenant an equity position in the property and that the owner would have to foreclose on the property. That sucks!

We have been doing lease options ever since we got started and have fortunately not run into this problem yet. This is good information to have at this point though. One of the guys on the panel summed it up pretty well. He said that in real estate, things like that are just going to happen. You are going to end up in court. You are going to get sued. And that ultimately, it’s a cost of doing business.

Popularity: 13% [?]