When there are more houses for rent than there are qualified tenants, the tenant can command a premium for his tenancy. As a practical matter, this is often the case anytime that mortgage credit is plentiful and interest rates are low. This situation provides good tenants the opportunity to stop renting and to start buying their own homes with low down payments and mortgage payments that are as low, or lower, than prevailing rents.

Continue reading “Getting Tenants to Pay Higher Rents”

A truly significant trends has been the merging of two households into a single rental. In some areas owners are making minor modifications to their houses to enable two rent payers to occupy a single family house. Let's take a three bedroom, 2 bath house which rents for $400 per month. It might be suitable for 2 childless couples who'd share kitchen accomodations and living/family room areas for a rental of $250 each. Ergo, their rent expense goes down while the owner's income goes up by $100. Naturally, this carries some risks, but profits are high. If you consider that the same house might require $375 in operating expenses and payments, what was formerly a $25 per month cash flow has increased to $125 or 500% PER MONTH!

Continue reading “Creative Management Techniques Continue to Generate Cashflow”

     For a high bracket investor, buying expensive houses as investments is a perfectly rational approach, but there's a fly in the ointment. First of all, our well heeled friend probably isn't aware of these possibilities. And he doesn't like the idea of managing real estate. But he hates taxes. That's where you come in.

Continue reading “Good Managers Can Carve Out Their Own Opportunities”

     There's a cycle in the landlord business that makes my life easier than for many of those who own rental income property. First of all, unlike my tax year, my tenant year doesn't start in January, it starts on the first day of February. In Florida, February brings a flood of additional people into my market. Regular winter visitors ('snowbirds') soak up rental housing along with students entering colleges. The extra demand triggers a 'landlord's market' that justifies higher prices for rents, and reduces tenants' bargaining power. As a result, each year at about this time of the year, my new rents start flowing in to begin my new year.

Continue reading “I Just Gave Myself A Raise”

Which race-horse owner makes the most money? The one with a stable full of mediocre horses contentedly munching hay by the bale while losing races? Or the owner with just one horse that wins over and over again? If your objective is to generate income rather than to have the bragging rights to ownership of a lot of unprofitable rental properties (and wide experience in the martial arts), doesn't it make sense to focus on fewer, better properties than more, worse properties?

Continue reading “Houses Are A Lot Like Race Horses”

     What do we mean by 'leadership'? Military manuals describe it as 'the art of influencing others to willingly accept and achieve defined objectives'. There are some special words there. The first one is art. Art usually refers to one's ability to do things rather than to know things. You can study management books until the cows come home and still be a poor manager unless you're able to do what the books say. That requires lots of practice putting into effect what you learn. When we talk about learning, it's the process of changing behavior patterns to incorporate new information. In short, find out how a good manager does business, then start using successful practices in your everyday property management.

Continue reading “Good Management is 90% Leadership and 10% Supervision”

     Having to manage rental houses can be pretty confining unless you learn the fundamentals and implement an automatic management system. At first, my wife and I did everything ourselves - both management and maintenance. After placing an 'open house' ad in the paper, we'd load up the car with our 'chemical warfare kit' of cleaning supplies, paint, tools and materials. Many times we traded off rental deposits in return for the new tenants completing the clean-up and painting.

Continue reading “Mastering Rental Management Can Set You Free”

     Management difficulties begin when a buyer selects the wrong property. What's the wrong property? It's one that won't attract decent people because it is either located in an unattractive neighborhood or because it doesn't appeal to them as their home. Sometimes it's hard to remember that the owner is offering a 'rental'. The tenants are choosing their 'home'. Every day, 24 hours per day, the tenant is going to be involved with the property. It will be where a family invites its friends for a social evening. It will be a safe place where the kids can easily walk or catch the bus for school. Convenient to neighborhood amenities, major access routes to jobs and recreation. When the tenants can't take pride in where they live, those tenants whom you want won't want you - and vice versa.

Continue reading “Poor Properties and Poor Financing Beget Poor Tenants”

     The IRS loves leases. First of all, when a person makes a 'spread' by sub-leasing a property, the landlord continues to 'write off' his expenses such as depreciation, non-capitalized expenses, insurance, taxes, etc. So would we. If we had to suffer a month's vacancy without any income, or pay for any repairs under $100, or pay for an eviction, we'd deduct these expenses from rents. At the end of the year, all our net rental profits would flow through Schedule E under the passive income rules. Thus, there would be no payroll taxes to pay. If we suffered net losses, we'd get to deduct $25,000 from all other sources of income. But wait, it gets even better.

Continue reading “Leasing is One of the Most Tax Advantaged Sources of Income”

 
    It's commonplace for real estate brokers to win awards for earning the greatest commissions for sales. Imagine the chagrin of a lot of the real estate board members a few years ago who discovered that the top producer was a fellow who'd signed up a commercial tenant to a 50 year Lease on a major building calling for $2,000,000 a year in rents. His Lease commission was 6%. His annual $120,000 income will extend for 50 years from his residual commission income from just this one deal alone. Management fees over the years will be in addition to this.

Continue reading “Leases Can Be Bought or Sold to Create Income”