For me, Q4 is always a time of reflection, adjustment and preparation. Iāve spent a significant amount of time looking back on numbers for 2023 and the 1st half of 2024, trying to glean insight into what is working, what has stopped working and where my energy should be spent headed into next year.
In doing this, it occurred to me that Iām nearing the 7 year mark since I bought my first rental property in Parma, OH (I still own it today!). Between land flips in my business, funding land deals for other people, new builds and rental properties, I have done somewhere between 250 – 300 deals all over the country, the majority of which have been in the last 4 years.
Iāve dealt with all kinds of esoteric title issues, bizarre family (seller) drama, strange local norms, sudden regulatory changes freezing entire markets (and Iām not talking about the pandemic), crazy economic cycles and endless passive aggression from disgruntled escrow company employees.
Consequently, as we head toward the holidays I wanted to write this article as a way to both share my experiences and lessons learned while also helping clarify/articulate my own thoughts so I can effectively move forward into 2025 and the next 7+ years and beyond.
Iām also aware of the fact that 7 years isnāt that long of a time. Iād say the volume of deals Iāve done lends far more credibility to anything I have to say than the length of time Iāve been doing this. Nonetheless, I find putting my thoughts āon paperā to be useful so hopefully you all can find value in it as well. Iād also like to think in another 7 years Iāll be able to look back on this, and with more time/iteration, think I was naive and inexperienced.
All that to say, the following are lessons, concepts and tactics Iāve learned through several hundred real estate transactions. Really, itās a list I wish I could share with myself before I started.
Since I canāt do that, Iām sharing it with you all.
Timing the Market
I was worried when I was buying that duplex in Parma in 2018 because of how many people I heard say āweāre at the top of the market!ā and a ācrash was imminentā (pretty funny to think about now). When talking about where the market is headed, my favorite analogy would be to the ā3 Body Problemā in physics (Google it if you donāt know). You can have a general idea of where things are headed but you certainly cannot predict with specificity. Itās been shown over and over and over again that pundits trying to predict the future are no better than monkeys throwing darts. You have to make some assumptions about the future in order to make decisions but those are more general and long term. For example, Iām continuing to buy/hold real estate along the Front Range in CO because the government is pouring billions of dollars into the Space Force, there are huge defense contractors doing the same and there is a significant amount of manufacturing moving there. Additionally, there are huge restrictions on supply and thereās already a housing shortage. Consequently, I believe that in the coming decades real estate values and rents will do well BUT in any given month or year I canāt tell you what will happen.
All that to say, I ignore people who think they know the future and simply look at where people and businesses (i.e. money) are going and focus my efforts there.
As a corollary to the above, Iāve heard many people say they want to āwait for the crashā to buy. The funny thing about that is when thereās an opportunity, everyone is scared! Itās āIāll wait for things to settle downā or āI donāt want to try and catch a falling knifeā. Then those same people miss the opportunities because theyāre too busy waiting.
As an example, I bought 2 fourplexes this year off market at $575k each amidst the frozen multi family market. In hindsight, they probably wouldnāt have sold too much higher on the MLS. One was financed at a rate of 7.375 and the other at 7.625, each on 30 year conventional notes. Weāve turned half of the units while the other half were already filled and both buildings are stabilized with a decent margin each month. I keep the ācash flowā in the respective accounts for future repairs.
With a number of tenants from the prior landlord still in place, rents are still a bit below market. We should be at $1,400 per unit ($5,600 per building) with the units in their current condition and $1,500 per unit ($6,000 per building) if we bring them up to date. One mortgage is around $3,600/month and the other is $3,500/month.
Weāll slowly bring rents up to their full potential and I would bet money (I quite literally have) that weāll be able to refinance the rate into the 5ish percent range at some point in the next 2-5 years. At that point, there will be a pretty substantial margin each month and these will be solid deals. However, if I had waited until I could buy them at a lower rate and rents were rising again, do you think Iād be able to buy them at $575k? I doubt it. You tend to get deals when thereās some sort of turmoil in the market and it feels like itās a bad decision.
When COVID first hit and there was a massive drop in the stock market, how many people bought in then? Very few. Most people were afraid because they thought the world was ending, and thatās the point! When there are substantially discounted assets available, thereās some sort of calamity going on and it feels like a terrible decision to buy. For this reason, most people trying to time the market fail to buy when the opportunity does present itself.
Incentives
It doesnāt matter whether youāre dealing with contractors, business partners, lenders, etc. If people are involved (they always are), you HAVE to make sure their incentives are aligned with yours. It doesnāt matter how ethical they might be, if theyāre your brother or your best friend, humans are motivated by simple incentives and if theyāre not aligned with what youāre trying to accomplish youāll experience constant friction.
It may be subtle and is likely subconscious, but nonetheless, it will influence their behavior. This seems obvious, but I see partnerships and agreements that clearly havenāt considered the incentive structure enough. Think of ācost plusā agreements with contractors as an easy example. The more expensive the project is, the more they make. This is a recipe for conflict, yet people structure their projects this way all of the time.
Another context where this is not fully appreciated is in hiring. If you want to get an employee on board 100% where they treat your business like their own you must give them a commission, an equity stake or some sort of profit share. I wouldnāt say this is necessary for clerical employees but for sales people and your C-suite team this is absolutely essential.
One more example where incentives are often mismatched is in property management. Often times, PMs take the entirety of the first monthās rent as a fee for placing new tenants. Once in place, the PM only gets 8-10% of monthly rents as their fee. This means they make 10 months worth of fees each time they place a tenant. Do you think they want you to keep tenants for the long term, or would they prefer yearly turnover?
Incentives drive behavior, thatās it.
Competition Increases
When I first started in the land space 6 years ago it was incredibly easy to get deals. There was far less competition and land wasnāt on anyoneās mind. Today, I hear many people asking āIs land getting too saturated?ā. The funny thing is I have heard people say this every single year Iāve been in business.
Iāve also heard this nonstop about buying residential rental properties, starting house flipping businesses and investing in commercial multifamily. Yet every day, people continue to start successful businesses around these strategies, in spite of the increased competition.
In general, competition always increases and the standard goes up and up. Sure, there are aberrations (2008 for example) but those come with separate challenges and the long term curve still goes up.
This concept tends to be true in all pursuits. As a kid in the early 2000s, I was a huge baseball fan! I remember how rare it was for pitchers to be able to throw over 100mph or even in the upper 90s. I happened to catch a few games this summer and couldnāt believe how commonplace that has become! The standard has gotten higher.
I noticed the same thing while watching NBA games today. I grew up watching Lebron (Iām from near Cleveland) and if the Cavs or their opponents scored over 100 points it was rare! Today, it happens all of the time.
The same thing has happened (and will continue to happen) in business. Land investing was easier in 2019 than it is today and I would bet that Iāll look back on today in 10 years and think āwow, it was so easy back then!ā. The technology we use to pull data, market to sellers and dispo deals will get better and so will the average skill of operators. It always gets more competitive over time.
Nonetheless, people start new ventures in competitive markets every day and still find success. The future will be no different.
Difficult, Frustrating and Boring
I had a closing set for 09-18. Today itās 10-01 and it still hasnāt closed. The seller sent in all their docs on time and we sent in the money weeks ago, yet the transaction hasnāt been executed and we canāt get a response from the attorney handling escrow. Sounds pretty frustrating, right? Welcome to owning a business. We all hear about the challenges around closing deals, managing contractors/tenants, hiring/firing, obtaining financing and marketing, but the endless clerical problems that lead to enormous amounts of wasted time/energy are inevitable in any business. The bar is so low for attorneys handling escrow in the Carolinas, Iām amazed if they manage to close a transaction on time. Issues with escrow companies are a big one in real estate but every business has its own version of this. Understanding there are going to be nonstop problems/frustrations, and setting expectations accordingly with yourself and employees, is essential to staying in business without losing your mind.
Along the same train of thought, expect that you will get bored! It might be a few months in or a few years in but it will happen. Youāll see other businesses that look exciting and āmuch easier and more profitableā but thatās very likely because youāre unaware of the challenges that come with operating them.
Iāve met countless people over the years who are succeeding in one business but get distracted and stop doing what has worked! They start something new, start back at square one and then get distracted again. I hear home flippers/wholesalers say they envy people in the land space since itās (ostensibly) simpler/easier. Yet, Iām over here dealing with endangered turtles, wetlands, lots that fail perc tests even though theyāre between two homes, etcā¦..
One of my friends owns a bunch of commercial buildings on triple net leases. I told him how Iād like to graduate from the residential buildings I own and move into the NNN space. He proceeded to go on a long rant about all the frustration and challenges that come with it and finished with āIād rather buy more apartmentsā…………
Every business has its challenges. Picking one and getting really good at solving those problems consistently over the long term will put you far ahead of most.
Calmer Heads Prevail
One thing that never seems to change is human nature. We all tend to overreact to any sort of change or disruption in our routine, and this is as true in business as in any other aspect of life. For this section, Iām focusing more on the overreaction (and corresponding poor decisions) to changes in markets, policy and technology. I have seen countless examples of something new on the horizon causing fear/worry/frenzy amongst investors, only to be forgotten about a short time after itās implemented (and becomes normal).
For example, the hype around this summerās NAR settlement was MASSIVE. There was endless speculation as to how it would play out and much of the conjecture was extremely negative. Many people went as far as leaving the real estate industry to find work elsewhere. Yet, here we are several months into the rule changes and competent realtors who continue to service their clients are still earning commissions as always. Not much has changed for those who didnāt overreact.
Thereās a new law requiring certain disclaimers to be put on direct-to-seller marketing pieces to buy real estate in Georgia. I was on a call with a bunch of land investors recently where they were very upset about this. Many were saying they just wouldnāt market to GA anymore, as if the (fairly innocuous) disclaimers were making their marketing pieces obsolete. I brought up the point that disclaimers of all kinds are required in many industries and businesses still have success marketing to customers. I went on to emphasize that the rule is applicable to everyone in the business so itās fairly null, since everyone has to follow it. Even more, thereās opportunity in the short term since many land investors are choosing to stop all marketing to any GA addresses! Other peoplesā overreaction to the regulation creates reduced competition (temporarily) for those willing to adapt.
Itās the same story with technological innovation. Being a Millennial, Iām old enough to remember dial up internet, landlines and CD players. As technology has progressed, there has been tremendous amounts of fear each step of the way about peoplesā jobs becoming obsolete. To be fair, many positions have faded into obsolescence but many new jobs have been created as well. Today, I hear the same worries about AI putting everyone out of work. While Iām sure there are many jobs that wonāt be around in 10 years, Iām also sure there will be new jobs created by AI, people will adapt, and life will go on.
Iāll finish this section with a more dramatic story from my own business that really illustrates the point. It was January 2022, business was great! I had about a dozen lots in Pueblo West that I owned, with the intent to build on a few of them while I was reselling the others. I was flying home from a trip to Florida and I had a layover in DC. As soon as we landed and I had service again, my phone started blowing up! Something was clearly wrongā¦.
Turns out, The Pueblo West Metro District put a moratorium on all new water taps with no warning. The lots in Pueblo West are not large enough for wells so without water taps, the parcels were essentially worthless. This was not a fun dayā¦..! I called everyone that I knew in town and nobody had any answers (government employees included). Were taps going to open back up? If so, when? And at what price? I was legitimately concerned that all of my cash was gone and the primary market I knew how to do business in was dead! All the properties I had under contract to sell immediately fell out of escrow, and I was certain it was the end.
My older buddy (who also owned A LOT of land in Pueblo West) didnāt seem especially concerned. He was pretty calm and said something along the lines of āwater taps will open back up at some point at a higher price. Theyāll have to buy more water shares which are very expensive so theyāll need to get the money from somewhereā.
I was too worried at the time to wait calmly and consider what he was telling me. I rushed to get some of the cash back and managed to get a builder I knew to buy several of them at my cost (50%ish of market value) just to recoup some of the cash. This was totally irrational for multiple reasons. First and foremost, I was fine! I had plenty of cash reserves and low living expenses so if all of the money I had put into the land was gone, Iād be alright (albeit, frustrated). Secondly, I didnāt listen to my friend, who had been in the land business significantly longer than Iād been alive! He had experienced similar regulatory hurdles and knew what he was talking about.
What do you know, several months down the road they let us know theyād be opening water taps back up at a higher price and put a cap on how many were to be issued each year. The land market opened back up and parcels started trading again at about 10% – 15% lower prices with the increase in tap fees. I sold the other lots and still made a profit (and immediately expanded into FL). I cost myself a significant amount of equity by selling those lots to a builder at my basis when I couldāve profited on them if I simply waited a month or two. I panicked and made a poor decision.
Itās been almost 3 years since this happened and lots have continued to trade, there is a solid store of water taps left and builders are still building. Not much changed.
Are They Real?
Whether youāre looking to invest with someone, hire a consultant, start a new venture with a partner, decide on which realtor to use, or even interview someone on your podcast, you want to be sure theyāre legitimate and have the experience they claim. You often have to make these judgments quickly and you can get into hot water if you make the wrong call. Short of asking for their financials, there are a few things that I have found quickly tell whether someone is experienced or not.
Is everything rosy? Anyone who has been in business for a significant amount of time will have plenty of horror stories. From bailing my contractor out of jail, to the aforementioned water tap story, to having the police called to one of my rental homes due to one of the tenants having a psychotic break, to a tenant Facetiming me to show water pouring through the ceiling, to all the appliances being stolen out of one of my new builds, to endangered turtles infesting a lot I boughtā¦ā¦ā¦ā¦. I can go on and on and on.
If somebody is legitimately in business, they will have stories like these. New people tend to be overly optimistic, excited and unable to see what can go wrong.
Mason and I were interviewing a COO on our podcast this week who oversees several subsidiaries of an umbrella company. There was a point on the show where he was talking about āprioritizing which fires to put outā each day and I paused to emphasize what he was saying. There are constant problems, all the time, every single day. That is the reality of running a large business.
Do they go out of their way to tell you how much money theyāre making? Iāll expand on this with a quick anecdote from a recent encounter thatās very illustrative. I met a guy at a real estate group here in San Diego who seemed like he had quite the operation. I thought there might be some synergies so I asked him to lunch. Whenever I meet new people, I like to be quiet and ask them questions to get a feel for what theyāre like. This was pretty easy to do with this guy as I donāt think he paused to take a breath for the entire hour. He went on and on about how much money heās making, all the deals heās doing and gave me lots of advice. He even told me about a ādealā he bought where the mortgage is $1,200 and the rent is $2,000 so heās ācash flowing $800/monthā. Needless to say, after that lunch he has discredited himself in my mind.
As Iām writing this, Iām reminded of someone I hadnāt thought of in a few years that further illustrates this point. He has a pretty large following on social media and a lot of people pay him for coaching. His posts are very ostentatious and āloudā (to put it lightly). I know him because he reached out to me years ago asking for help (before the current social media presence) and I got on a few calls with him to assist. He was much humbler then, eager and seemed to listen. A year or two went by and he was posting about how well he was doing so I reached out to see how things were going. We got to talking and he showed me a number of ādealsā he had in a market that I knew very well. Simply put, he had a bunch of properties under contract at 95% of market value and he was trying to assign them for $1k. I told him those arenāt deals and showed him what I was buying lots for in that market at which point he stopped responding.
His social posts about how successful he was continued, despite him not actually making money in land, and he started coaching people. We exchanged a few messages about a year ago and he told me heād moved to being a full time coach! Apparently, it was more lucrative than his $1k assignments ādealsā.
Sure, there are legitimately successful people who make flashy posts and tell everyone about it, but Iāve found that behavior to be a strong indicator that something is off. Both of these encounters are excellent examples of that.
Are they excessively self certain? As a corollary to the last point, when I meet people who are absolutely sure that they have it all figured out and that their business model is 100% bulletproof, thatās a huge red flag. All of the very wealthy, self-made (in the sense that their parents didnāt give it to them) business people I know are very curious, open to new ideas and have enough experience to know their business model could be crushed overnight. Only the naive and inexperienced are foolish enough to think they know everything.
Iāll end this point with a brief anecdote pertaining to self certainty and life experience. Years ago, I was working out at the gym and there were several older guys (likely in their 70s) taking turns on the machine next to me. I overheard their conversation and one of them told a story about something foolish heād done that got him into trouble when he was in his early 20s. They all laughed and then he paused, seemingly lost in thought, until he said in a gentle tone āI knew a lot more then than I do now!ā and they all nodded in agreement.
Partnerships
Effective partnerships can accelerate your business exponentially. Partnering with the wrong person can lead to total and complete failure. Here are my key takeaways from having done it both ways. (Iām talking about long term partnerships where you both own equity in the asset and make decisions together, not partnerships on individual shorter-term deals).
Always do a few small one-off deals with new people before starting any sort of long-term partnership. This is a precaution that has huge potential benefit with little-to-no downside. You donāt want to get attached at the hip with shared entities/assets until you have some experience working together. After a few transactions, you might find the person doesnāt perform as expected, you donāt get along, your values arenāt aligned, etc. Getting out quickly is MUCH easier if you havenāt created a long term partnership whereas, if it goes well and you do want to move forward with a shared entity, you can at any time.
Everything needs to be in writing! No handshake agreements. Even if itās someone youāre close with, put all terms of the agreement and expectations in writing as if you were creating an agreement with a stranger. Donāt bend this rule.
Clear expectations are vital. Outline all roles and responsibilities and talk through all of your assumptions that you think theyāre already aware of. Donāt forget to consider the unwanted outcomes as well. Who is expected to put capital in if additional funds are needed? What happens if the market turns and youāre losing money for a period of time? What if you have to work weekends to stay afloat when that happens? At what point would it be time to throw in the towel? The other side of that same coin is, what if things go extremely well and one of you wants to sell/retire at a certain point and the other wants to keep building the business? Itās much easier to talk through these scenarios ahead of time so be thorough here!
Lastly, I would only partner with people who are stable across all aspects of their life. Financial stability is the obvious one, but if their home life is a mess, they have bad habits, addictions, etc Iām not going to get attached at the hip with them. These problems will spill over into their business life at some point and cause trouble for you too.
Why am I doing this? Avoiding Arbitrary Metrics
The easiest example of this is the question, āHow many doors do you own?ā. I guess this is a proxy in peoplesā minds for measuring someoneās wealth via real estate investments but itās a pretty absurd one. If I have 10 doors in the Midwest they could very likely be worth 1 nice house in many of the coastal markets. The metric tells you absolutely nothing and drives people towards arbitrary goals.
Another potential example of this is too heavily focusing on GROSS revenue simply because the number is much larger than the net and sounds exciting.
When youāre looking for metrics that matter, work backwards from your end goal. Maybe itās a net worth goal that you think will allow you to retire or a specific amount of free and clear real estate.
Whatever it might be, donāt get caught up in mindless vanity metrics! Make sure youāre clear on what youāre trying to accomplish with your business, align your metrics with those goals and ignore the rest.
Make Money, THEN invest
I listened to BiggerPockets quite a bit when I first learned about real estate investing. I havenāt listened to their show in years, but at the time they talked a lot about buying rental properties as the āend all be allā. They had endless episodes about buying real estate with ālow to no money downā which were very misleading as the guests had active businesses along with their buy/hold rental properties which helped them through the ups/downs of ācash flowā.
The reality is, rental real estate is something you should buy once youāre making a substantial income. Sure, a house hack or two early on can be a great way to lower your expenses and start to build equity but the reality is, your time is MUCH better spent figuring out how to scale your income. Once youāre making money, buying rentals helps to reduce your tax burden and allows you to hedge against inflation which helps to accelerate your wealth building.
It comes down to leverage on your time and effort. Spending all your energy trying to find deals on rental properties does not provide nearly the leverage that most active businesses offer. Itās far more feasible to scale your income by orders of magnitude with an active business, especially with todayās technology, than it is to do with fixer-uppers. Consequently, I now think about using rental real estate for tax savings in the short term and an inflation hedge in the long term while Iām scaling my business.
Do you Want to be Right or do you Want to Make Money?
This is a difficult but necessary pill to swallow, that I learned about pretty early on in business. Iāll use the earlier example of the deal that was supposed to close on 09-18 but still hadnāt by the 1st of Oct (I wrote that section earlier, the deal is now closed). After continued follow up by both myself and our realtor, the attorney finally called me late one afternoon. He was rude, made no mention of being 2 weeks late and asked ME to have the seller sign the closing statement (this is indisputably his responsibility).
Naturally, I wanted to tell him āno, thatās your jobā and ask him why he hasnāt been responding, why he didnāt close the contract on time and tell him itās probably time to hang up his license since he doesnāt seem to know how to do his job. Instead, I was very polite, friendly and said weād get the seller to sign the settlement statement. This guy was blatantly in the wrong, but who cares? Do I want to āput him in his placeā or do I want to close the transaction and never deal with him again? As frustrating as it is, handling his job of getting the final HUD signed gets the transaction done (which is the goal!) so I can move forward. So I handled it, the deal closed and Iāll never have to deal with him/his firm again.
These sorts of scenarios happen constantly! Someone messed something up, refuses to acknowledge or take accountability for it and YOU have to fix it to get the deal done. If I had spoken my mind to that attorney it might have felt good for a moment but very likely wouldāve caused the deal to get delayed further which would have been counterproductive. To be clear, if this is happening with someone you do business with consistently, then it needs to be addressed and corrected but there are constant one-off encounters where itās just not worth it.
You just have to swallow your pride, handle it and move on.
Cash Flow
I made a post on social media a few months ago about a 4 plex I bought this year. Someone commented āwhat does it cash flowā to which I responded āIām not sure, ask me in 10 yearsā
This question is a bit ridiculous when talking about small, residential buildings that arenāt new construction. You can make guesses using averages but they do not manifest in reality (i.e. theyāre pretty useless). I have furnaces still running that are older than me that I expected to die a long time ago. At the same time, I had a water heater go out last week from 2016 in the nicest house I own!
I remember listening to BiggerPockets when I bought the duplex I referenced earlier in OH. They said to budget 10% a month for capital expenditures and 10% for small repairs and maintenance. So of course I did just that!
In hindsight, I was naive and had a terrible realtor who brought her terrible inspector when I was doing my due diligence. I ended up having to replace the roof on the building and garage within the first year which cost just shy of $10,000. This was a substantial amount of money for me at the time and taught me a lesson early on about averages. Perhaps after several decades, if I add up all of the rental income and multiply it by 10% I might get a number thatās approximately equal to the cap ex or maintenance that Iāve done on the building, but thatās not useful.
This concept can be summed up with one of my favorite aphorisms from Howard Marks. āRemember the story of the 6 foot man who drowned crossing the river that was 5 feet deep on averageā. You donāt get a regression to the mean without significant volume. If youāre buying a stabilized, 100 unit apartment building or a brand new duplex, you can likely get pretty reliable monthly averages. Whereas if youāre buying a small residential building thatās decades old, you better have substantial liquidity AND significant upside in equity because your ācash flowā will likely be wiped out with a major repair or two.
Time Heals All Wounds
The duplex I keep referencing has still turned out to be a great investment because I kept it. Itās now worth somewhere in the mid $200s (I bought it at $134,500) and that irritating roof replacement is fairly null.
I stayed in an Airbnb in La Jolla recently where the owner of the property did not have the finances to buy in such an expensive area but had bought the property in the 90s and kept it and now is one of those people that makes you think āHow does he own that!?ā He told me how happy he is now that he didnāt sell it during the hard times that followed 08ā.
This point is repeated ad nauseam so Iāll keep it brief, but I wanted to at least touch on it because itās true!
The simple fact is, in a country where weāre rapidly growing the national debt (increasing the money supply), the government tries to make that sustainable by slowly debasing our currency, lessening the true value of the debt/future payments on the debt (The Feds target of 2% inflation). Over the long term, this will tend to drive up asset values.
Buy Nice Real Estate, Screen your Tenants & Treat them like Customers!
From squatters to hoarders, tenant horror stories are commonplace amongst investors. However, I havenāt had much issue with this for three reasons.
- I buy nice real estate (or make it nice) in nice areas
- I screen tenants thoroughly
- I take care of themĀ
These are the rules and processes I follow to avoid much of the headaches that come with rental properties (this is focusing on tenant quality and experience, not investment trends).
Building Location:
- Somewhere Iād feel comfortable living
- An area where itās feasible to get tenants with 650+ credit scores
- Somewhere thatās supply restricted
- The building is younger than I am (or close)
Building Condition
- Everything is fully functional & clean. Do not leave anything broken, even little things
- At MINIMUM, in line with the average standard. If everyone has AC, make sure your unit does too, etc.Ā
- Ideally, your units are nicer than the average available in the market
Screening
- Background check for everyone over 18. No felonies.
- Call their boss both to verify employment and to verify reliability, punctuality, etc
- Call their last two landlords (watch out for current landlords that really want them gone lying to you!) and ask the same sort of questions you asked the boss
- Income at least 2.5 times rent
- 650+ credit score. Weāve capitulated a little here a number of times when their income was 3x rent and they had stellar reviews from their boss and two landlords and itās always worked out.Ā
- Do they do what they say theyāll do when they say theyāll do it? If theyāre late to see the unit, donāt fill out the application by when they say they will, etc, I wouldnāt lease to them.Ā
- Set very clear expectations around taking care of the unit, how to leave the unit, etc
Customer Service
- Donāt forget to hold up your end of the bargain! These people are your customers and need to be treated accordingly
- Make sure everything is fixed immediately and theyāre responded to quickly
- Do not be overly cheap and make them feel like you donāt care about them and their family
These are the steps Iāve taken to avoid having major tenant issues. We had to file an eviction this year (first time ever) and it was entirely because we didnāt follow the screening process I listed above! If you do this right, rental property investing can be fairly passive.
In Summary
Thereās a lot more I thought about writing on but I wanted this to be digestible. Much of it comes down to continuing to do what works (even when it gets boring), not getting distracted, taking care of people you do business with and keeping a long term time horizon in your planning and investments. More and more Iāve come to learn that success in most aspects of life is simple. Weāre the ones that make it complicated because we donāt want to sit still and consistently focus on one thing for 10+ years.
-Dan
