As the owner of Wesley Chapel property management company, I meet a lot of owners over the years who believe paying down a mortgage early is a great investment strategy. What could be better than a free and clear rental property?
Paying off a rental property mortgage early can be quite sound if you are near or in the retirement age range. The goal at this point is not to increase your retirement capital but to preserve it. Free and clear rentals are a very stable and conservative asset.
As I was brainstorming what to talk about this month in my Riverview Property Management newsletter, I decided to explain a couple of techniques I use to improve my real estate investing. First off, I highly recommend you obtain a real estate license in the state you wish to invest in over the years.
I know the expense and effort puts people off. Granted, if you aren't interested in owning five or more rental properties across your career, it is probably not worth it, but let me explain why it has been a huge benefit to me as a Riverview Property Manager.
"The trick in investing is just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot.If people are yelling, 'Swing, you bum,' ignore them."Warren Buffett
As an active real estate investor and owner of a Tampa property management company, the above Warren Buffett quote always fascinated me. There is real genius in this idea, but it is super easy to miss and much harder to implement than one might think.
As an owner of a Tampa property management company, I speak with all sorts of different owners looking to rent out their properties. Inevitably, I'll hear from half the owners how the neighbor across the street is renting their home at a very high rental rate. This rate then becomes the standard of how they judge my services. If I promise to rent the property for that rate, I've got a good chance of getting the management contract. If I submit a lower rental quote, I'm toast. The dilemma is, how do you convince the property owner that the neighbor's rent is unrealistic and way over market rent?
As the owner of a Wesley Chapel Property Management company, I personally approve and deny all rental applications. I do this for one simple reason: to avoid nightmare tenants. This type of tenant doesn't pay the rent on time or at all, trashes the home, is a constant, demanding person who doesn't abide by the terms of the lease, and more often then not ends up owing you a lot of money and possibly gets evicted.
Nightmare tenants are (in my estimation) 3% of the population, and since 36.6% of the people rent in the US, that is about 10% of all potential tenants. The key to avoiding them as a Wesley Chapel property manager is to screen properly. To learn more details of how to do this, please see my other articles or videos.
We manage about 146 Section 8 rentals as a Tampa property management company. I've learned as over the years a few tricks that have a dramatic impact on the quality of tenants selected. A big key to success is just avoiding the poorly behaved and disgusting housekeepers on the Section 8 program. They do the most significant amount of damage because they have no respect for any cleanliness standard. How do we identify these people and weed them out? Glad you asked.
I know the title of this articles goes against commonly held wisdom when it comes to qualifying tenants, but as the owner of a Tampa Property Management company, I've learned the hard way this is not always true. Of course, having a high credit score is an excellent sign of a responsible tenant, but there is more to the story.
If you are a Tampa property manager or anywhere in the US, you should take a closer look at the credit report.It takes some time to get familiar with exactly what I mean, but it is worth the effort. I've noticed about 5-10% of rental applications that come across my desk with low or no credit scores paint a very positive story about the tenant if you know how to interpret the credit report.
As a Tampa property management company, I recently signed a new owner who had me start managing a lovely townhome that had been sitting vacate for a long time. They were trying to manage the property on their own but had family health issues, so it was taking a backseat to other responsibilities. We checked the home out and started marketing it in a couple of days, no sweat.
Well, a week later I hear from the owner about a mold problem they are having at another rental property they own in Tampa. As a Tampa property manager, this kind of call sets off all sorts of alarms in my head. Though, we happen to be state licensed mold remediators and have done tons of mold jobs both big and small. Mold is a very a touchy subject; it can lead to an expensive lawsuit, for the owner and my company.
As an owner of a Tampa property management company, I encountered a lot of owners in unfortunate circumstances.I just spoke with a potential client who lives in Orlando.She had just finished spending over $26,000 renovating a very nice townhome in Tampa.She had picked the wrong tenant thinking she was doing the right thing.
The sad thing is the owner was just acting as any normal, decent human being would.The problem is owner encountered one of the 2% of our population that are considered compulsive liars. As a Tampa property manager, I see this all the time.
I call these people "Nightmare Tenants" because they will lie so convincingly that he or she could win an Academy award for acting.These people are so good at lying because it is their basic default setting.They lie all the time in every aspect of their life.They've become so skilled at it, that it's almost impossible to detect it.
The basic ploy is the person builds a ton of rapport with you.He or she is very friendly, conversational, and probably a very good listener.However, the "tell" is when they start giving you a story about how all bad thing(s) you are going to find on their credit report is not their fault.Their last landlord was the "Devil", or their ex-husband or ex-wife caused all this terrible stuff.
Now there are bad landlords and horrible ex-spouses but, if you look at the background reports: credit, criminal, rental history, and job verification, you'll see a pattern.People who have been victimized by a spouse will show excellent credit before the divorce, good job history and landlord references.If they don't, they are 95% going to be a Nightmare Tenant.
There are a ton of tricks these people will use besides telling you a heart wrenching story.They will have their friends pretend to be their landlord and employment references. They will delay even submitting a rental application until the last possible minute.They will try to give you cash to let them move-in right away.They will switch from such nice people to guilt tripping you about how they need a chance.
This particular tenant had a PHD in education and had a great job.She had very bad credit but claimed it was her spouse's fault.But she really got the owner with the "story" of how she just needed a chance to get back on her feet.
Always keep in mind, tenants are not family.You are under no obligation to listen to their stories much less give allowances for their circumstances.I don't even recommend talking much to a tenant until they submit a rental application with the application fee.This will weed out a lot of unsavory types.
Also, if they ask a ton of questions regarding your qualifying criteria and you hear a lot of "What about X…" that is a huge red flag.
In short, as a landlord you've got to prepare yourself to handle these people.There's about 2% of the population but they prey on private landlord and can be 20% of the calls you get.You are in charge and in control of screening process.Don't be cajoled or pressured in any way.If prospective tenants start doing this, 95 times out of 100 you should not even run their application and just refund their application fee, if they even submit one. These people destroy more new landlords than any other issue in landlording.
Obviously, if you are reading this you are our client.However, I have a number of clients who have rental properties in other states so I figured you might find this helpful or at least interesting. 😊xt here ...
As an owner of a Riverview Property Management company, I've noticed the tendency of rental property owners to sell in 10 years or less.There can be a lot of valid reasons to do this such as the property has appreciated enough to sell for a good profit, you have need for the profits you would receive, or you don't want to lose out on the profits already earned by hitting a severe recession.