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”

   Check out almost every publication that deals with creative real estate and you'll see myriad approaches to acquisition of properties using both conventional and private financing. Erudite newsletters for many years have dealt with sophisticated strategies for slicing and dicing mortgage instruments and notes to create amazing rates of return. Investors have become fairly sophisticated when it comes to mortgages. Most have a working knowledge of hand-held calculators that can calculate precise rates of return on their investments. But these same people are lost when asked to explain about Leases, or how they can be created and employed to build cash flow and profits. This month, we'll see if we can remedy this.

Continue reading “Lease are Creative Real Estate’s Orphan Child”

  Just as Note terms can be indexed, so can Lease terms. With a Note, the interest rate can be pegged to the prime rate or to one of several major bank interest rates. I often index loan rates on my installment contracts to the HUD rate for FHA loans. Hence, when inflation drives up interest rates, it also drives up my cash flow, enabling me to keep pace with the rising cost of living. The indexing terms can be built into the language of the debt instrument, or the term can be shortened so that the Note has to be either paid off or refinanced at the prevailing interest rates every few years.

Continue reading “Indexing Hedges Against Inflation”

  Leasehold Estates extend to Land Leases under the terms of which a fee simple land title holder agrees to let another person erect or buy the improvements in whole or in part situated on his land without paying for the land itself. They then sign a long term lease spelling out the rental scheme for the duration of the leasehold estate's term. Land Leases can be created either by a Lease or by a Deed in combination with a Lease. Here's how:

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Continue reading “High Yield Low Management Rentals”

Admittedly, lenders are casting a jaundiced eye on marginal borrowers and those who flip houses for a lving, but this doesn’t necessarily apply to stable owner occupants with high FICO scores. To build up its cash flow, an enterprising Brokerage corporation in New England has offered a reverse rental to provide the down payment for any of its tenants who buy one of its houses, or any other house in its State. In the slow sale market being experienced, this is one way to create new buyers from among qualified tenants who don’t have the down payment funds with which to buy a house or condominium. Offering a rental credit to those who otherwise might never be able to own their own home might enable the landlord or any other affected seller to receive full value for his house rather than having to reduce the price. It’s easy to see why a landlord might want to sell out in this market, take the money, and sit on the sidelines until the market makes up its mind as to what it is going to do. That’s what I’ve been advising for a couple of years.

Continue reading “Giving Reverse Rental Credits”