Archive | February, 2015

Don’t Confuse Real Estate Investors with Landlords

16 Feb

Be wary of the excuses people give themselves when dismissing rentals – the reality is not so black and white. Many of the perceived pain points (finding renters, late night phone calls, challenging tenants) are primarily landlord fears, and being a landlord is not the same as being a real estate investor.

Landlord vs Real Estate Investor

Investment properties pose unique challenges and they aren’t for everyone, but discouraging yourself and others from doing something you haven’t even tried because “it’s too much work” is a weak sauce argument. And not necessarily true.

Our Changing Priorities & Responsibilities
In 2011, we were excited to jump into this real estate experiment, prioritized cash flow over convenience, and wanted to keep close tabs on our investment.

Excited Boy with Toolbox

(photo by ocbeejay)

We started out as proper landlords managing everything ourselves:

After our 2nd duplex we were a little burned out, but we still believed in the long-term benefits of investing in real estate. Today we have 3 duplexes (6 units) in addition to our full-time day jobs.

Hire Property Management Company for Rentals

(photo by Nguyen Hung Vu)

It didn’t take long for us to hire a property management company, which delegated the vast majority of our day-to-day hassle. I no longer worry about how to get a plumber to show up on a Sunday or remembering when the next lease comes up for renewal.

Our workload today is about 20% of what it was:

  • Approve the occasional expense or request
  • Bookkeeping
  • Coordinating insurance policies
  • Make ready work

Delegating isn’t an all or nothing proposition either – the work we’ve chosen to do ourselves is generally more predictable and easier to fit into our schedules. Your time vs. money balance might be different than ours.

Golden Rule: Choose Properties with Flexibility
When buying a new property, we follow the 1% rule and then plug estimated costs into our balance sheet to vet out any financial deal breakers.

Even if you intend to manage the property yourself, I highly recommend including the cost of hiring a property management company into your cash flow assumptions.

changing priorities of being a real estate investor vs landlord

(photo by R/DV/RS)

Nothing wrong with being a landlord and pocketing the extra cash flow, but 30 years is a long time and priorities can change. You’d be doing yourself a favor to keep your options open by buying a property that can support the costs of hiring a property management company – just in case. This “flexibility insurance” will dramatically increase your odds of having a positive experience with rental properties long-term.

Play your cards right and you can still build substantial assets and realize early retirement without the day-to-day hassle of being a landlord. Rental properties require many hats – but you don’t have to wear them all yourself.

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Tenant Letter – Notice to Remove Holiday Decorations

2 Feb

Translation: “Come on tenants – those holiday lights. For realz.”

notice-to-remove-holiday-decorations

(photo by Zepfanman.com)

Dear Resident(s),

We appreciate the holiday spirit, but it is now time to take down those festive decorations.

Please be aware that a fine of [$x] will be charged for any decorations that continue to be displayed after [Day], January [x]th.

Thank you for your understanding, and we look forward to seeing them again next year!

Kind regards,
[Community]

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