* Carpet: Carpet is something that always needs being cared for. Think about it. You need to get the carpets cleaned when someone moves out and moves in. The carpet might get stained or ruined as a result of use or overuse. Carpet may just be old and out of style. When carpet goes out of style it is something that can keep someone from renting the property. Many property owners simply put in high wear carpet that is neutral in color because it doesn’t wear out easily and it matches everything for a long time. Its the way to go if you ask me. Other people will allow renters to do what they want with the carpet. When I owned my properties I would do ‘lease to own’. When someone signs a lease to own it gives them the ability to do what they want to the property which gave me a chance to make a little extra money by getting specific carpet guys or paint guys into the property.

* Paint: Things happen. Unless you are doing a lease to own, never let a renter paint the property. People have unique ideas on color and it rarely turns out right. Also, when someone moves in and out they are inevitably going to do some damage to the walls. Once that happens you will have to paint. Keep gallons of generic paint colors around that you can touch up with that has already been matched to the existing colors. Use basic colors that don’t go out of style and blend easily. You want it to look nice but also you have to think about making money on the property. Money is made by not coming out of pocket for unnecessary things.

* Plumbing: One of the most important things to always check when buying a rental is to look at the plumbing. Look for signs of water damage on the walls and ceilings. Check to see how old the pipes are and if the water is soft water or not. All these things matter because the most expensive type of damage to a home is water damage. We’ve lived in several different places over the last few years. In one home we were using the shower and the water was draining to the garage. It sounded and looked like a rainstorm in there. Water damage almost always causes mold and that can cause health problems for everyone.

First, the interest rates have been low enough for so long that if people have money to put down they can get these low rates on properties. A man I work with in Las Vegas has been buying up plenty of 100k houses and getting them rented while having extremely low payments on those houses. Why is this a good idea? Plainly, even if the interest rates go up in the area he is in a spot where renters will always be able to afford his payment and if the area goes up in value with the economy then he is sure to really increase the equity in each property. It’s a win across the board for him now.

Second, interest rates have started to go back up. When interest rates go back up something interesting will happen that the country isn’t prepared for at the moment. The housing values will have to stay still or even drop. I say this because the average person owns a 3 bed/2 bath house in our country and if they can’t afford an average payment at a 6% interest rate or higher then the market will have to adjust so they can. By getting these homes now at low rates you are setting yourself up for the best long term success because you can afford the payment at the low rate and it isn’t going to adjust on you like it did during the serious downswing we had a couple years ago.

Real estate is a great way to make long term wealth. Each day I deal with great owners of homes or apartments and they really see things for how they are when it comes to our market. I get great advice from them daily and I love to pass it on to you.

Short Term Strategies: Assignment of Contract. Many people have limited options but still want to make money at real estate. One of the more common and easier strategies to employ is to use the assignment of contract. This is where a person gets a property under contract and then turns around and sells that contract to someone else at a profit. This isn’t where people make the most money but it works in situations where investors have little or no money to put down. Here’s an example: You see a home for sale in your area and know that the owner really needs to sell the house. In an Assignment of contract situation you will want to offer a bit lower on the property. If the house is listed at 300k and is worth 300k then you can offer 280 on the house. If you get the home under contract at 280 you are then able to turn around and sell that contract to someone else for a certain fee. For me I was able to make around a thousand dollars a couple times using this strategy.

Lets look at our own housing situation. How many months have you had nothing go wrong with your house? Just last month we had a broken door, broken door handle, broken garbage disposal and some plumbing problems as a result. Other months it is always something else and we are no different. When you buy a cash flow property you are buying the good and the bad so sure you will have some months when you make money, but you’ll also have months where you lose money. In the end you are banking on the appreciation of the home while having good renters or leasers who take care of the place. It just isn’t as easy as a half hour show makes it out to be.

http://www.youtube.com/watch?v=gMUPYDsM69A

Vadim and Veronique

This week I had some great conversations with many of you. A couple of issues were brought up that you should all know about.

Issue #1
The applicant doesn’t want me to run his credit because he doesn’t want his credit score affected. What should I do?

When you as a landlord check a person’s credit, it is called a soft hit on their credit. This means it will only stay on their credit report for 2 to 3 months. Their credit score will not be affected long term when you check their credit.

I have found often that a person who does not want you to check their credit has credit issues that they are hiding from. You need to establish your own rule that you check everyone’s credit.

Another thing to consider is if an applicant is trying to dictate how you run your business now, they will continue to cause you issues in the future.

Issue #2
My tenant wants to pay cash. What should I do?
Cash is king, but not in the landlord business. This is big red flag. Why? People often want to pay cash because they do not have a checking account and they have money gotten from illegal means. Drug dealers are some of the biggest offenders of this. Now this does not mean that everyone who wants to pay with cash is doing something illegal nor is a drug dealer. It is better to be safe that sorry.

Last week I received an email from a landlord who rented to a person who seemed to be a great applicant and wanted to only pay in cash. The tenant paid the deposit and first month’s rent in cash. That was all he ever paid. The landlord is now going through the eviction process.

In summary, screen your applicants and don’t take cash.

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