American Apartment Owners Association

Five Steps To Avoid Illegally Evicting Your Tenants

Mon, 07/30/2018 - 9:16am
One of the biggest risks related to owning investment properties is dealing with an eviction. If a tenant doesn’t pay rent, the simple answer is to evict him.

To a seasoned investor, however, it’s never that simple. Actually evicting a tenant is an extremely complicated and expensive process, and one that should always be avoided.

An eviction is an official legal proceeding, complete with a formal process that needs to be followed exactly in order to have your tenant move out and relinquish the property back to you. Failure to follow your state’s laws on a legal eviction can result in delaying the eviction date, losing a court hearing or owing the tenant money.

Rental property owners will benefit from understanding the legal eviction process in order to protect themselves from breaking the law should they ever go through the process. I also hope to instill the idea that addressing an issue with a bad tenant takes a lot more energy than simply evicting him. I want all investors to understand  and sticking to the lease terms, so you can minimize the risk of dealing with an eviction.

Let’s first take a look at the difference between an illegal and a legal eviction.

An illegal eviction involves:

• Changing the locks.

• Putting your renter’s belongings on the curb or in the garbage.

• Threatening the tenant with an eviction or increased fines.

• Turning off utilities or other services.

A legal eviction includes:

• A court order.

• Official notices.

• Appropriate communication.

• Adherence to state laws.

• Patience.

What Is An Eviction?

An eviction is a lawsuit, sometimes known as an unlawful detainer lawsuit, that a property owner files against a tenant in order to regain possession of a property. Once an eviction lawsuit is filed with the court and a judge rules in favor of the eviction, the property owner can work with law enforcement to remove the tenant by an agreed-upon date per the eviction ruling.

In order for a property owner to win an eviction ruling, the property owner must prove that the tenant violated a lease term, that he gave proper notices to the tenant to fix the violation and that the proper eviction process was followed.

Reasons To Evict A Tenant

A tenant can lawfully be evicted for:

• Failure to pay rent.

• A lease violation (like illegal use, subleasing, unauthorized pet, etc.).

• Damaging the property.

• Threatening the safety of other tenants, neighbors, the property or community.

• Breaking other local housing laws, as outlined in the lease agreement.

A property owner cannot evict a tenant because of personality clashes, minor disagreements or annoying behaviors. If you establish a reasonable need to evict a tenant, you should act immediately and follow your state’s guidelines for a legal eviction.

The Eviction Process

Here is a general overview of the standard eviction process:

1. Establish a legal need to evict a tenant:

Tenant violates a lease term, like failing to pay rent.

2. Notify the tenant:

Landlord provides an official notice to Cure or Quit to the tenant. A Cure Or Quit Notice notifies the tenant of the violation and tells the tenant to either fix the violation within a certain amount of time (cure) or move (quit). This notice should be taped to the door and mailed via certified, first-class mail. You will need to prove in court that you did your best to notify the tenant of the potential eviction proceedings.

In some cases, a property owner or manager can file an eviction with the courts without giving the tenant time to remedy the problem. Such is the case if the property or other people are in immediate danger.

3. File with the court:

If the tenant does not fix the violation outlined in the notice and does not voluntarily move out, the landlord can proceed with filing an eviction lawsuit.

After filing an unlawful detainer lawsuit with the local courthouse, you will receive a date for your eviction hearing and the court will notify the tenant of the summons. Depending on which state you live in and how busy your local courthouse is, this hearing can be anywhere from one week to a few months from your filing date. If it takes a few months for your eviction date, you have to let your tenant continue to live at the property until a judge rules otherwise. Often, a tenant will not pay rent during this time. If this is the case, let’s hope you have a good lost rent policy with your .

4. Court hearing:

At the court hearing, you will need to provide proof of the reason for eviction, and that you gave the tenant an official notice to cure or quit. It is also a good idea to bring copies of the lease, rent payment records and records of all communication you have had with the tenant.

If the judge rules in your favor, you will be able to move forward with an eviction by contacting your local law enforcement to escort the tenant out on an agreed-upon date, if needed.

5. Regaining possession of the property:

On the date determined by your eviction hearing, you will officially regain possession of the property. You are allowed to change the locks and proceed with managing any abandoned tenant property per your state’s laws at this time.

As you can see, moving forward with a legal eviction involves a lot of time spent dealing with your local courts. You have to be patient with the court’s timelines and rulings. You also must keep all your communication with your tenant professional during this time, which can be challenging if you are frustrated with your tenant’s behavior.

Evictions are risky because of the unknown timeline from the filing date to the date a tenant will actually be required to leave the property per the court order. The time and money associated with moving forward with an eviction demonstrate the need for approving only the most qualified tenants for your property, minimizing the risk of eviction.


The post Five Steps To Avoid Illegally Evicting Your Tenants appeared first on AAOA.

Categories: RSS

The Pros & Cons of Owning a Rental Property

Mon, 07/30/2018 - 9:09am

Being a land baron — it’s an appealing idea, isn’t it? Real estate is a notoriously stable long-term investment, but it’s not for everyone. There are both advantages and disadvantages to owning a rental property – here are a few to consider when considering owning a rental property.

Pro: You Get Multiple Sources of Revenue

Even a single rental property will increase your net worth in several different ways. You’ll get income from your tenants and your property will appreciate in value over time. Any improvements you make to the property yourself will further increase the value of the asset.

When you have multiple properties, the income potential is even more considerable. You will be able to diversify your assets in terms of properties and tenants. The more properties you’re able to purchase, the more consistent your revenue will be.

Con: You Also Have Multiple Sources of Expenses

If your rental property needs a new HVAC system, you’ll need to find a way to pay for it. Rental properties require a lot in upkeep and maintenance. You need to keep them clean and habitable and may need to renovate them occasionally to ensure that they are still marketable.

Other expenses can include legal expenses, as it’s possible that tenants may need to be evicted. Tenants can also cause expensive damages.

Pro: You Can Sell Your Property for Profit

If you want to sell your property later, you can. In nearly any market, property values are going to rise steadily. Once you no longer want steady revenue from your rental property, you can choose to cash out. This could be used to invest in a business or retire. You can also leverage your properties to buy additional properties.

Real estate does give you some flexibility, as you can borrow against the equity that you have at any time.

Con: Your Money is Tied Up in an Asset

Becoming a landlord does mean that your money will be tied up in real estate, which could ultimately lead to a lack of diversification if you don’t have enough invested in other areas. If you want to start a business or are interested in other aspects of investing, you might be looking for a less expensive investment. It is possible to invest in real estate through other means, such as REITs or investing in stocks for real estate focused companies.

Get Started Today

Whether a rental property is right for you depends on your own financial goals. Rental properties make you money, but they also take some work — unless you engage with a property management company. You can get started by investigating the real estate available in your area.




The post The Pros & Cons of Owning a Rental Property appeared first on AAOA.

Categories: RSS

Future Renters and Apartment Demand Factors

Mon, 07/30/2018 - 9:02am

As the apartment industry runs through its cycles, changes in apartment demand and demographics are fostered by economic fluctuation. And with the expectation that the economy is on the cusp of a new direction, multifamily strategies are likely to shift.

Various factors dictate apartment demand and how future renters look. In the current cycle, the industry adjusted to historic household changes and embraced young, single renters and empty nesters looking to downsize. But as younger renters finally start to marry, settle down and have kids and the working-age population growth slows, the nation’s apartment makeup is bound to look different over the next few years.

The strength of the economy is sure to be a factor on just how multifamily is reshaped. It’s likely going to be sooner than later that the already softening industry shifts focus with maturation of some demographics and depletion of others.

Economists predict the economy will recede by 2020

Economists say conditions for a recession are edging closer and that markets will start feeling the squeeze in earnest by 2020.

A signal, notes RealPage Chief Economist Greg Willett, is that the gap between interest for long-term and short-term treasury notes is tightening. Typically, long-term rates are higher than short-term but when the two intersect conditions have historically been ripe for a recession.

The gap has steadily closed since the fall of 2013, according to the Federal Reserve Bank of St. Louis, and dipped to its tightest in July. This fall, when the Federal Reserve is expected to boost interest rates by 25 basis points, it could get even tighter.

“In the best case, that’s going to put us at even at that point,” Willett said at RealWorld. “For the last seven times you’ve had this inflection between these two measures, we’ve had a recession within 18 months.”

Willett said it’s not a guarantee but multifamily investors and operators should nonetheless be prepared that one of the longest, most fruitful cycles the apartment industry has enjoyed is approaching the finish line.

“You can make arguments why it doesn’t matter to the degree this has occurred in the past, but I think if you’re planning for business strategies, given indicators out there at this point, it’s irresponsible to assume everything is still hunky dory two years from now.”

For the short term, indicators point to healthy apartment market

Willett said indicators continue to point to a healthy apartment market at least for the short term. A large block of additional apartment deliveries lies ahead and apartment demand appears favorable to cover the new inventory.

New supply volumes are likely to continue at an annual pace above 300,000-320,000 units through mid-2019, levels last seen in the 1980s, according to RealPage Analytics. RealPage analysts expect that plateau to remain for the foreseeable future.

Helping to fuel demand is that employment growth is pointing to new household formation. U.S. monthly job production, is healthy and on pace with 2016-17 levels despite tapering from its peak in 2014 when 2.5 million jobs were added.

Willett notes that the return of manufacturing growth is a key storyline in the recent overall employment picture but another is that increased investment by smaller businesses points to significant confidences in the economy’s direction.

A National Federation of Independent Business survey that measures small business expansion and investment posted its highest readings beginning in the fall and they’ve carried into 2018.

“Jobs being created now are actually coming in small businesses rather than corporate employment,” Willett said. “Small business owners tend to like some of the policies we’re seeing now and expanding.”

Also, solid consumer confidence is helping to spur retail spending, a key component of economic expansion.

Demographics and misaligned employer needs could signal change

But the demographics and misalignment of employer needs could make it tough to maintain today’s economic expansion pace in the next couple of years.

AARP and the Census Bureau report that 10,000 Baby Boomers are turning 65 each day, which means growth in the working-age population is slowing meaningfully. Also, today’s 6.7 million job openings slightly exceeds the number of unemployed people who are looking for work.

In addition, wage growth at 2.7 percent, as reported by the Bureau of Labor Statistics, is topping rent growth.

Willett reminds that a growing segment in rental housing is single-family homes. Build-to-rent space could play a meaningful role in inventory growth for the nation’s institutional capital firms, according to Rick Palacios, Jr., Director of Research at John Burns Real Estate Consulting, in a recent podcast on the rise of the single-family home rental industry.

The impact of prevailing conditions means total housing demand should remain robust for the next couple of years, although some expected cooling in the pace of job production points to demand off a bit from recent highs, Willett said.

“The apartment sector’s share of total housing demand should be solid, although some headwinds not seen earlier are now developing,” he said. “We think demand will slow down from where it has been, but still will be pretty substantial. And that begs the question, who will the renters actually be.”

Analysis reveals interesting trends in future renter makeup

RealPage applied data science and clustering analysis among more than five million apartment lease transactions across the country to get a picture of future renter makeup. A portion of the analysis looked at individual households and characteristics like age, income, pets and children in 25 major markets and 25 smaller markets.

Willett anticipated the individual makeup of the markets would compare to the current U.S. renter household segmentation, which is based on eight demographics. The top four are renters just starting out (29 percent), followed by young adult roommates (21 percent), “Perma Renters” (16 percent) and middle-income Baby Boomers (11 percent).

Of the major markets studied, Minneapolis looked most like the U.S. average in household makeup, and segmentation in Philadelphia and Charlotte was similar. But in most places across the 50 metros examined, the story wasn’t the same.

“The big takeaway is that in almost every other metro there was something different about one or two segments relative to what you saw in the U.S. average,” Willett said. “And there wasn’t an especially pronounced pattern in how they were different. You really have to deal with each one as a separate entity.”

Couples and renters moving up in the world fueling new product demand

Young adults are key components of the renter audience but in some markets they are an out-sized portion of the total. In Indianapolis housing is so affordable that older dwellers are purchasing homes, leaving a plethora of young renters. Similarly, Salt Lake City, San Jose and San Diego have high concentrations of younger renters.

Also, the data shows that roommate households have a large share in expensive metros but San Jose was well above the norm. There, 41 percent of households living in roommate arrangements are roughly double the U.S. norm.

Willett said the real fuel for new, luxury apartments comes from the “Moving on Up” and “Young Couple” segments. Groups consist of fairly affluent singles in their early 30s and couples in the mid- to late-30s that live close to jobs in the urban core and suburbs. Most are living in the fast-growing metros that have high home prices.

The biggest concentration of these demographics are out west, primarily in San Francisco, Los Angeles, Denver and Seattle.

“These are the people who have the incomes to really fuel that demand for the new product that we’re building,” he said. “It’s a stretch for these folks to actually get out there in the marketplace to buy some homes.”

Small metros with affordable single-family product had very few households for these groups, likely a byproduct of positive economic growth.

“They are not great choices for new apartment development,” Willett said.

‘Perma Renters’ an attractive segment for the future

Willett noted that one of the industry’s more interesting and under-appreciated segments of the renter population is the “Perma Renters,” households o

f one person at a median age of 42. They have a median income over $50,000 and rent-to-income ratio of 22 percent. Typically, “Perma Renters” live in Class B apartments in the suburbs and tend to renew a lease at least once. As Millennials get older, this segment is sure to grow, Willett said.

“To me, if I’m an owner and operator, this is a really easy segment of people to keep happy,” Willett said. “That makes them attractive.”

They’re also in pretty appealing markets like Washington, D.C., Atlanta, Dallas, Houston and Las Vegas.

Willett also noted that middle-income Baby Boomers − older singles with moderate incomes − only exist in limited numbers. Also, renters with kids tend to prefer single-family homes.

An interesting stat from the analysis is that although people with pets isn’t a huge demographic in the overall U.S. renter household segmentation, Denver is going to the dogs. More than 8 percent of households have multiple pets, compared to the U.S. norm of 3.5 percent.

“Denver looks nothing like the U.S. average at all,” Willett said. “It’s probably the most different from the U.S. norm. It’s an interesting economy and population in Denver. Look for that to be an outlier compared to the rest of your portfolio.”

Younger renters will continue to maintain grip on households

Willett said younger renters will continue to maintain a hold on the U.S. household renter segmentation for the future. While they don’t have high credit card debt, younger renters could be slowed in home-buying pursuits by high student debt. But how that plays out is an unknown.

“It’s hard to get a handle on that,” he said. “Are students paying off the debt or is mom and dad? While student debt is much bigger than it used to be, credit card debt among those households is much smaller. If I’m qualifying for a home loan, I’m looking at all debt. We’ll see how that comes together.”


The post Future Renters and Apartment Demand Factors appeared first on AAOA.

Categories: RSS

Apartments offer too much of what renters don’t necessarily want

Thu, 07/26/2018 - 11:50am

While it may seem that every new apartment building tries to stand out by offering more and better amenities than competitors, renters often find a mismatch between their priorities and the features on offer.

The prime example: An estimated 53 percent of renters want an in-unit washing machine but only 13 percent of units have one.

In 59 out of 70 metro areas that Apartment List analyzed, renters are likely to have difficulty finding the amenities they want or they are paying extra for amenities they don’t want. In some cases, renters do both.

While plenty of renters make finding a pet-friendly building a priority, this is one area where the mismatch means that more apartments offer the amenity than it is requested. For example, 52 percent of buildings allow cats but only 12 percent of renters search for a cat-friendly building. Similarly, 48 percent of apartments allow dogs but only 27 percent of renters want a dog-friendly building.

Renters in more affordable markets typically have higher expectations for amenities, while renters in more expensive areas are willing to settle for less. Topping the list of markets with demanding renters is San Antonio, where the median rent for a two-bedroom apartment is $1,050. Renters in New York City, where the median rent for a two-bedroom apartment is $2,470, are the least demanding and probably just grateful to have found shelter.

To see the full analysis of the misalignment between desired and available amenities, click here.


The post Apartments offer too much of what renters don’t necessarily want appeared first on AAOA.

Categories: RSS

7 Real Estate Investing Mistakes That Kill Profits

Thu, 07/26/2018 - 10:07am

Investors are flooded with advice about how to invest in real estate. The vast amount of that advice is about what you should be doing. Very little is about what not to do. A good businessperson understands both the good and the bad in their marketplace. New investors need to understand both the upside and the potential downside of their investment opportunities.

You don’t need to reinvent the wheel. You will make mistakes. And you can work your way through those mistakes. But make them your own unique mistakes. Real estate investing is among the oldest professions. You can and should learn from those that came before you.

1. Not thinking outside your home market. It’s easy to become enamored with your home market because you are so familiar with it. And it’s critically important that you fully understand the market you are investing in. But it’s also important that you not be narrow sighted. Research and explore other possible markets. That doesn’t mean jumping into the most promising market before you understand it. However, it does broaden your vision to identify possibly bigger gold nuggets that you can learn the details about.

2. Not having an exit strategy. A deal that appears to be a bargain at first blush isn’t worth a dime if you don’t know how you are going to make your profit. Remember that it’s a bargain for a reason. Investors are always looking for distressed properties but buying for dimes on the dollar will leave you with only dimes if you don’t have a solid plan to make the dollars.

3. Avoid too risky of financing. There’s a lot of money out there to finance your investments. There are high interest loans and low interest loans. There personal recourse loans and non-recourse loans. There are balloon payments and 30-year loans. Each comes with tradeoffs that lenders use to manage their risk. You need to carefully select your financing source to manage your own risk and to match your investing objective.

4. Underestimating cost and over estimating profits. Beginning investors are typically zealous about the profit potential. This can lead to underestimating costs and overestimating profits. A good rule of thumb is to diligently include every possible cost. Then increase your cost estimate by 15% to 20%. Do the opposite with the profit calculation. Determine what you realistically think you can make. Then decrease that by 15% to 20%. If you still see a profit, you have a relatively low risk investment opportunity. The lowball estimate doesn’t need to be very high. The purpose is minimizing the chance you will lose money.

5. Not managing cash flow. This is part of both your financing and managing the property after the investment. Some loans come with milestones. Partial funds are only released as defined goals are completed. You need a backup plan if one part of a project runs over budget. This is why some lenders require you to have reserve funds that are separate from the primary loan. Another potential problem is not reserving cash for maintenance and repairs. After renovating a property, you may not plan to invest any more money for three years or more. But you need to have a maintenance and repair fund just the same. Another potential pitfall is not having cash for holding costs if the ready-to-occupy property sits vacant for 90 or 120 days.

6. Not keeping an eye on the property. A fellow investor once found his rental house destroyed after the renter moved 3 of her friends and 7 kids into an 800 square foot house. The rent check was coming in every month and no one was complaining of repairs needing to be made. He thought everything was good and just sat back collecting the rent. Unfortunately, when she moved out two years later he thought a bomb had gone off in the house.

You need to visit your tenants occasionally. Do it frequently when they first move in. Just knock on the front door and ask them how everything is going. If they complain about something being broken, you can go inside to see what the problem is. You will save yourself a lot of trouble just by checking up once in a while.

7. Manage your property. Many beginners treat investment properties as a hobby. This is not a hobby, it’s a business. Before you buy, you need to know the numbers. Know what your return on investment will be. Keep good accounting books so that you can write off expenses on your taxes. Keep good repair records. Over the years, you’ll buy new appliances and other features for the house. You’ll have a record of your actual costs. Someday you’ll want to sell the house and being able to show repairs, maintenance, and improvement records brings you a higher selling price.

By no means is this a complete list of mistakes that beginning and experienced investors need to anticipate. These are only some of the most common. What’s important is that in your enthusiasm you fully understand both the opportunities and possible consequences before investing your time and money.

What potential mistakes do you think investors should be watching for? Please comment below.




The post 7 Real Estate Investing Mistakes That Kill Profits appeared first on AAOA.

Categories: RSS

When Is It The Right Time To Sell Your Rental Property?

Thu, 07/26/2018 - 10:05am

One of the smartest things you can do as a real estate investor is to get into the habit of periodically evaluating your options: buy, hold or sell. This is especially true if you’re building your real estate portfolio as a primary investment vehicle that you’re hoping will fuel your children’s education or your retirement.

There’s rarely a clear “right” answer when it comes to managing an investment, which is why it’s important to consider what makes the most sense for you and your financial goals on an ongoing basis. Here are some questions to consider.

Could the money you’ve invested in your rental property be earning higher returns elsewhere?

While you’d need a crystal ball to answer this one with 100% accuracy, you should be able to make an educated guess. For example, if you own a property in a town whose biggest industry is dying or in a place where a major employer has announced plans to relocate its headquarters, there’s a good chance your ability to earn money from that property will diminish in the coming years.

In that scenario, it may make sense to sell the property and reinvest the proceeds elsewhere.

On the flip side, if you bought a property years ago in an area that’s now gaining popularity, you’re likely well suited to hold the property and enjoy higher rent prices.

Do you need money right now (or will you soon)?

Whether you need a cash infusion to pay for a child’s tuition or a major medical procedure, it may make sense to sell a property rather than take on debt. Real estate is one of the most illiquid investments out there, so if you know you’ll need actual cash in the near future, selling the property and stashing the cash in an easy-to-access investment fund or savings account could prove beneficial for your long-term finances.

Could you realize a significant tax benefit from selling (or buying) a property?

This is especially important to consider in the wake of the tax law that passed last year. It’s also pretty complicated. Briefly, you should be aware of a few items in the tax code that could make it more (or less) beneficial to buy, sell or hold a property:

• Depreciation: The IRS gives you the option of claiming depreciation benefits of your rental property as a way of reducing your tax burden. If claiming depreciation benefits can lower your effective tax rate, it may make sense to hold.

• Section 1031: This section of the tax code, also called a “,” lets you avoid paying capital gains taxes on income from selling a rental property, as long as you buy another property within 180 days. Note that taking advantage of this benefit requires you to follow a lot of detailed rules. If you’re interested in learning more, get on the phone with your CPA.

• Reduced benefits for homeowners: The new tax code offers fewer tax incentives to own a home, which means people on the fence about buying may choose to rent for longer. This could make it a great time to buy additional rental properties if you’re in a position to do so. Keep in mind, though, that the rental market varies around the country, so the changes may have more impact on renter behavior in some places than others.

Is maintaining the property becoming a drain on your lifestyle?

Whether you’ve retired to travel the world or you just don’t feel like managing your properties anymore, it’s possible to outgrow real estate investing. But before you sell because you’ve had enough of the backend work, consider lightening your load by automating as much as possible with software that handles a lot of the paperwork you’d otherwise have to do.

Unless you really don’t need the income your rental property provides (and you can’t imagine that any of your descendants will, either), it may make be worthwhile to adjust your management style and continue bringing in the monthly rent.

Should Sell Versus Need To Sell

One final thought: In some situations, you need to sell an investment property. These situations are usually not predictable — maybe you lose your day job and you can’t keep up with the mortgage anymore. Not selling the property would create an acute financial lack that would significantly impact your life.

In other situations, you probably should sell the property. Maybe it’s in a town with a dwindling population where property values aren’t rising. In these situations, you won’t notice any day-to-day urgency around whether you hold or sell the property, even though you could be earning greater returns on your money elsewhere. When you absolutely need to sell, you won’t have to go through a list of questions to make your decisions; the decision will be made for you. Being alert to when you should sell, though, can help ensure that you’re making the most of the funds you’ve earmarked for investment.



The post When Is It The Right Time To Sell Your Rental Property? appeared first on AAOA.

Categories: RSS

Sneaky Rental Property Expenses

Wed, 07/25/2018 - 5:19pm

Rental property expenses are irritating to most investors.

Ideally, our income exceeds our expenses.

Sometimes, expenses can sneak up on us though.

Most rental property expenses are fixed expenses. Property Management, taxes, insurance, etc. are all expenses that are locked into our businesses. Wouldn’t it be great if you could cut your expenses down each year or at least, be prepared for them?

The good news is that you can do that. Every year you have the opportunity to cut your expenses in many ways. If you do not try to reduce your expenses, you are leaving money on the table.

Money that should be in your pocket.

Always be on the look out for lower prices and fees for everything.

So, what are some of those expenses and how should we handle them?

Rental Collection Software and Credit Card Processing

As a landlord, you may choose to manage your properties yourself.

I personally use property managers for most of my properties but I do have some I manage myself.

When you manage properties yourself, it is a must to have an online company handle the managing of the properties. There are many great things that these online companies do:

  • Online payments
  • Automatic reoccurring monthly payments
  • Online maintenance requests for tenants
  • Manage the property expenses and income
  • Track leases
  • Track tenants
  • Property reporting
  • and much more

There are many companies out there that charge a fee for this. Some charge monthly fees for their service that you will have to eat the cost.

How You Can Save Money

But there are some companies like that do not charge anything at all for their service.

I have personally used Rentigo and recommend you to use them for your properties. The system is very easy to use and you don’t even pay for any of it!

How they get paid is on the rent payment transaction.

FREE: ACH transaction for your tenant
1% Charge: Debit card transaction
2.5% charge: Credit card transaction

With no added expense to you, you have a full management software at your fingertips.

Book Keeper (& Software) Expense Can Be Eliminated

Do you have a book keeper? One that tracks all income and expenses every month? While these are very helpful and fulfill a vital part of your business, you possibly could do without one.

Every month, you should receive a statement from your property manager. This statement should itemize everything for each property.

If you manage the property yourself, you should keep track of EVERY expense you incur for each property and the income.

I personally suggest that you document the income or expense as they occur. Don’t put it off for another day. Do it right then and there. It will only take 1 minute to get it done and save you lots of head ache in the long run. Waiting for the end of the month to do all your income and expense documentation is problematic as well as a pain.

Some people pay for an actual bookkeeper who does the books for them. Others even have software they pay for that manages their books. If you don’t have any employees for your business, I suggest doing it yourself.

Book Keepers are not that expensive but do cost money every month.

Why not try to do it yourself?

Book Keeping Software

There are many book keeping software companies out there that want your money. Their products are nice and do a lot fancy things that your business may not really even need.

This can potentially be another hidden expenses that you may not need to pay. For all of my properties, I have found that you can do most of what the book keeping companies offer with Google Drive or Microsoft One Drive.

Both of these offer free storage and a free version of Excel.

How You Can Save Money

Make yourself a spread sheet that includes income and expenses. For your accountant doing your taxes, be sure to break down your income and expenses so he can account for them in your tax return.

On the left side, have a list of your properties.

Along the top, have a list of the income and expenses.

At minimum, you should have these separated into different columns:

  • Income should be: Rents, Security Deposit, Other Income.
  • Expenses should include: Repairs, Supplies, Maintenance, Management Fees, and Legal Fees.

Here is an example of what I use:

Having a spreadsheet like this can really help you to cut costs and keep track of your business.

Capital Reserve Expense

It is easy to overlook a crucial expense that most people do not account for. Capital Reserves must be an expenses you put into your expenses ever month. This can be as much or as little as you would like it to be. I recommend to all my rental property students to set aside 5%-10% of each months rent as capital reserves for future expenses.

A furnace may go out in the middle of winter or the water heater could spring a leak at a moments notice. You need to have money saved up for these future expenses.

A tip would be to keep that money in an interest baring money market account you can have quick access to.

I use Capital One 360. They give up to 1.60% monthly return on your money stored there. If you sign up with them, they are currently giving a $100 bonus if you get referred. Here is a link I used for the $100 bonus. Property Insurance

From the first day you own the property, you should have homeowners insurance on all the real estate you own. Hopefully when you bought each rental property you found the best and least expensive insurance out there.


Insurance rates change.
Insurance companies change.
Insurance salesmen change.

It may not be every year that you should shop for new insurance for your rental properties but it should be at least, every other year.

When it is time to renew your property insurance, go get at least two more quotes for insurance with other companies. Look to change up the coverage too. Changing the deductible can lower your cost.

A tip is that, depending on the property, you could lower your insurance by getting 60% replacement value coverage instead of 100%. The reason to do this would be because the property may only be worth $30,000 and the replacement value could be $150,000.

If the entire property burnt down you would get $90,000 back (theoretically, so talk to your insurance broker).

Take that $90,000 and buy three others just like it.

Remember, things change and you may lower your expenses by $100 or more just by shopping around.

Real Property Taxes

There are two things in life that are certain: Death and Taxes

Every year, you should appeal the taxes on your real estate rental properties. Taxes always seem to go up but this is one way you can get your taxes to come down.

I personally got back almost $1500 from my taxes with only 5 min of work.

Every year, I go through all my property tax statements and appeal the assessment values of each property that has a high property value. It is super easy to do and all the forms are usually online.

Go to your county Assessor, Tax Collector, or Treasurer to get their Property Value Appeal form. Fill it out and mail it off. I usually save thousands of dollars each year by lowering my taxes.

Some of the links in this article are affiliate links. I do get a commission for the referral at no cost to you. Also, I wouldn’t recommend them if I didn’t believe in the product.


The post Sneaky Rental Property Expenses appeared first on AAOA.

Categories: RSS

How to Find Properties Using Zillow and the Rental Property Calculator

Wed, 07/25/2018 - 5:19pm

Have you ever had a hard time finding and evaluating potential rentals to invest in? We all have. This video explains Zillow rentals and how to find new areas to invest. By using both Zillow and my Rental Investment Property Calculator you will be able to quickly:

  • Analyze cash flow, return on investment and much more
  • Adjust your numbers on the fly to find your best offer price
  • Create a printable PDF report summary to show potential lenders, partners or others

Zillow Rentals

The Investment Property Calculator will help you quickly analyze your investment property potential using this comprehensive rentals investment calculator. With Zillow, rental properties are much easier to find.

It must be said that Zillow is only a tool. Don’t rely solely on Zillow rentals for your business. Zillow rentals is just a tool to find your next property. As you go through this process, you will find that there are many areas where you can invest.

Start investing in yourself be learning the tools of the trade with your rental business. Along with zillow rentals, there are many other tools you can use to get your business started. Just check my resources page for more ways you can help your rental business succeed.

Let me know how you use rentals for your real estate business.

Please leave a comment below.


The post How to Find Properties Using Zillow and the Rental Property Calculator appeared first on AAOA.

Categories: RSS

Learn How To Negotiate Everything In Your Business

Wed, 07/25/2018 - 5:07pm

The art of negotiation can help you build your business dramatically. You can save yourself hundreds, if not thousands of dollars by negotiating every thing you do as you build your passive income business.

Negotiating anything can be both an art and a science.

Just about anything in life can be negotiated. It all depends on the parties involved and how hard you are willing to push for the negotiation.

The main goal of a negotiation should be a win-win for all parties involved. Obviously you would like to have the terms work out in your favor and there are ways to actually get that done. There are four key principles to negotiating which will help you to understand ninja hacks and how to implement them.

Four Key Principles to any Negotiation1. Never Pay Asking Price 2. Seek to create a win-win scenario for all parties (As best you can) 3. Negotiating is all about give-and-take 4. Never give in without getting something in return

These four keys are self-explanatory and you need to have these in mind as you are going through the hacks and implemented them into your next negotiation.

There many people who are nervous, shy, or even repelled by the thought of negotiating anything. Being an investor, you need to work your way through that and make yourself negotiate everything in your business.

You need to negotiate the price and terms of products, services, contracts, etc.. If you don’t negotiate, you’re actually leaving money on the table that should be in your pocket. You can even negotiate with your boss a higher salary or hourly wage to increase your income and then save it to by more investments through negotiation.

My most recent property that I purchased, I got the seller to lower the purchase price down almost 10% off their asking price. I have even negotiated with my renters to get them into longer lease terms and rent amount.

Here are the ninja hacks to negotiating anything.1. Know What You Want

Before you enter negotiations with another party, know exactly what you want in a best case scenario. Your ultimate goal is for you to benefit from the negotiation. In order to do that, you need to start with the end in mind. If, for example, you are looking to buy a property, then you must know the highest price you would be willing to pay in advance.

That is your maximum set point.

Plan out the highest price (maximum set point) you want to pay for the property and do not go any higher. You need to start at a much lower position than your maximum set point in order to be successful in the negotiation process.

Let’s say the seller of a property is asking $200,000.  You need to know the highest price you can pay while still make money which would be $175,000. Because negotiating is about give-and-take, you need to be able to have room to work towards the seller from your starting position. If I know that I want to spend $175,000 the property, I would offer $140,000 to start so I can work my way up as the seller comes down from their price.

As the seller counters with a lower price, you counter with a higher price. They lower their asking price to $190,000, you increase your offer price to $155,000. Then as the seller counters again, you counter again until you come to a mutual price that’s beneficial to both parties.

They say that “knowledge is power”, but it really should say “applied knowledge is power”. The reason why is that you need to know, as best you can, all parties of the negotiating table with their interests, desires, needs, and wants. With this in hand, you can map out beforehand the process you would like to take in the negotiating process.

Having as much information as possible about the other parties involved will help you to know how to implement the other hacks of negotiating.  You will be able to use this to your advantage in the negotiation process.

3. Know Who Has the Upper Hand

Before you enter into a negotiation, you need to know who has the upper hand. That means you need to know who has the most incentive to give up ground in the negotiating process. It could be where you have the upper hand because the seller is in dire need to sell a property.

The seller may need the money from the sale of the house and be willing to take a much lower price for it.

It could also be that the other party has the upper hand because you desire what they are selling more than they desire to sell it.  If you see beforehand that you do not have the upper hand, refer to negotiating hack 7 and 8.

4. Don’t Be Afraid Ask

There are two things you need to remember: “You have not, because you ask not” and “a closed mouth never gets fed”.

If you don’t ask because you are afraid of being rejected and imagine the seller saying no, you are effectively putting words in their mouth. If you don’t ask, you have already assumed they will say no.  You have your answer already.

The answer you have right now is NO because you not asked.

Here’s a quick tip for you to help the negotiation process started in a nonthreatening way. Ask this question: “Are you flexible on the price?” More often than not, this one question will start the negotiation process for you. Just by asking this question, sellers have dropped their asking price by 5% without me saying another word.

5. Shut Up!This is probably one of the more important hacks you can employ when negotiating.

Nobody likes and uncomfortable silence in a conversation. You need to learn to love those uncomfortable silences in the negotiating process. Each and every time you make a request in the negotiation process, make the request and then shut up. It will be that uncomfortable silence that helps the other side want to give in because they feel they need to respond and remove the uncomfortable silence from the conversation.  The first person to give in, looses.

Here’s an example:

You: “How much are you asking for the property?”

Seller: “$200,000”

You: “Are you flexible on the price?”

Now don’t say another word!

It is said that the first person who talks after the proposition is presented, loses. So present your offer/counter offer and then DO NOT SAY ANOTHER WORD until they talk.

You can use this ninja hack EVERY time you make a request in the negotiation process.6. Never Stop Negotiating until the Deals Done

Just like how you should not be afraid to ask in the beginning of the negotiation process, don’t be afraid to continually ask for more “ground”. Again you have not because you asked not and unless you ask and they actually say no to you, you already have a “No” without even asking.

One time I actually got the seller of a property to come down in price four different times. Each time I asked for more of a discount, the seller dropped the asking price and said they could not come down any lower.

7. Be willing to walk away at any time (and show it!)

You need to be able to walk away from the deal at any given point. This does not necessarily need to be done from a position of strength. You need to know the maximum amount of ground you are willing to give beforehand so that you do not go above and beyond that set point and make a mistake.

That is why ninja hack number one is at the top of the list. The negotiation process can be used for or against you. The whole process of negotiation creates buy-in from both parties. Each has put in their time, effort, thoughts, emotion, and heart into the deal. That is a lot invested into the negotiation process, and people do not want to feel like they’ve wasted all of that effort to have the deal go away.

This can be used for or against you. If you are not willing to walk away once you’ve reached your maximum amount, you need to be ready to walk away if the process goes above that. If you get emotionally charged and go above your maximum, you have given up the upper hand.

Even if you’re not ready, or willing, to walk away you need to show that you can walk away at any time. This forces the other party to reconsider the offer because they don’t want to lose all they have invested into the negotiation process.

8. Think of Yourself As a Negotiator for Somebody Else

The goal in the negotiation process is to not get emotional or too wrapped up in the negotiation that you give too much away and go above your maximum set point.

Imagine that you are a paid negotiator for another company in your next deal. You are getting paid to do the negotiation whether it happens or not. You want your client to be happy, but you have your guidelines (maximum set point) from your employer and you stick to it.

This attitude will show that you’re serious about the negotiation and at the same time willing to walk away from the process if you don’t get what your client wants. This will help you to remove all the emotion out of the negotiation process and allow you to think more clearly.

You need to care about the deal, but not that much.

9. Be Patient

Again, think of yourself as a hourly employee negotiating something for your employer. It doesn’t matter how long the process takes you because you get paid either way. This takes even more of your emotions out of the deal.

Just like how you need to shut up after you present your offer, you need to be patient to let the other person talk first. Negotiations can be long or short in duration and you need to be ready for both. The party in the negotiation process who is the most patient during this process will usually come out on top with the most gained from the negotiation.

10. Request a Last-Minute Discount/Price Drop

At the last minute, before you close the deal in the negotiation process, ask for one last change in the deal. It could be something as subtle as saying “in order to get this deal done I really need you to come down $1000.”

It could also be very straightforward saying “the deal is off unless you lower the price $1000.” In both scenarios, you’re asking for more of a discount but it is a difference in tone and directness.

Again, “You have not, because you ask not.”Conclusion

By using these negotiation hacks, you can dramatically increase the profitability of your business. Remember the four key principles as well as the hacks for negotiating and you will be able to save and make lots of money that would normally be left on the table.

As for me, I personally negotiate everything.  It could be just by asking the simple question: “Are you flexible on the price?”

If you employ these ninja negotiating hacks into your next deal, you will fully succeed in getting the price lower and/or other perks in the deal.

Let me know how you do in your next negotiation. Leave me a comment below, I’d love to hear it!


The post Learn How To Negotiate Everything In Your Business appeared first on AAOA.

Categories: RSS