Most people avoid rental real estate because they think it is a lot of work. It definitely is more work than mutual fund investing but you have more control and much better returns (in most cases). Like anything real estate is about systems and once you have those systems in place your business can be run from anywhere and EASILY!
The Systems I Use to Run My Business:
Let's Start at the beginning so you just bought your first property and need to rent it out now what? You need to find a tenant how do you do that? You can use a Realtor aka me or you can do it yourself.
When I Rent My Property Out Here's What I Do:
Put it on Zillow Rental Manager (this is a free service) it will populate it out to Trulia and Hotpads. I also have a lot of luck on Craigslist and Facebook Marketplace. You can join community groups ie: Philadelphia Housing, Manayunk rentals, insert your area....
So now you have 20 leads great do you do 20 separate showings? NO. Hold the house open for an hour or two and let all of them come through at one time. This does two things. It saves your time from running around and creates a vibe that there is a ton of interest in the property and they should get their paper work in to beat out the others.
What is your application process? Where do you start and how do you make sure you are getting a great tenant?
This is a two step process:
Get a standard paper application that states their job, income history, and past landlords (2 back or more).
For screening my potential tenants I use a site called Cozy.com. They make it super easy to screen tenants. You set up a listing in Cozy for free and request credit and background checks for that listing. You put in the clients first/last name and email then it sends them a link to apply. It is a $40.00 fee to the applicant which is pretty standard everywhere. This is also great because you do not see the clients personal info like SSN so it removes some liability off your shoulders.
You Have Got A Tenant!
You have to have a lease for them to sign, pet addendum if they need it, other docs.. Where do you get these docs, do you have them sign them in person, where do you store these documents?
I bought this package from BiggerPockets.com (click bigger pockets for the package). The package was $100.00 included :
So now you have your lease you are ready to sign! What I do is Electronically sign all of my documents this way I don't have to chase down the tenant again to sign in person. Any friction that you have in your business gives your potential tenant time to think about backing out. Everything should be immediately done if possible.
Esign Softwares I Use:
Free Service: dochub.com the free service allows you up to 5 signatures a month I believe.
Docusign: I use this one now because I am a Realtor and have to pay for it. I actually prefer using Docusign it's a lot easier than Dochub. For a decent Docusign package you are probably going to pay $25 a month. So I would start with Dochub and if you grow to a lot of units use Docusign.
Where to store your documents:
You can create a folder on your computer or you can use Google Drive. It is a free service and is super easy to use.
Do you pick up cash, do you get sent a check in the mail, carrier pigeon? Like I said before any friction in your business is a chance for things to go wrong. IE: You are not getting rent checks and your tenant tells you it was sent but "must have got lost in the mail". Now you have to conduct an investigation. Avoid the hassle and set up electronic payments. I use Venmo and when someone signs the lease it states that "Rent will be paid via Venmo". It is not an option. I have some landlords I work with who use Google Pay or Cashapp. I just use Venmo because I know it and it is a free service. I have never had a problem with this service.
This is crucial I truly believe if you are running any business you should have a book keeping service and an accountant. For my book keeping I use Quickbooks. I recommend the starter one it's 25$ per month. Which may seem like a lot but if your hourly rate is $25/hr and you waste an hr tracking expenses in excel or looking for receipts than you already paid for it.
How it Works:
-Have a bank account just for your rental
-Get a debit card
-Link the bank account to your Quickbooks
-Anytime your write a check or swipe your debit card it will populate in Quickbooks ie: "$20.00 spent at Home Depot on this date" then you just mark it as job supplies.
Your accountant can login at the end of the year and do all the accounting work for you! Also they can write off your depreciation for you which is a large write off!
Maintenance and Repairs:
Things break and go wrong in houses all the time. The first year I owned a rental it was very emotional everything that went wrong was a big deal and I tried to fix it all myself to save money. I would spend money, buy the wrong supplies, and then call someone anyway (and I am very handy). I now have a list of contractors I call when anything goes wrong. If your tenants call you and say "hey the washer broke" you should respond: "ok here is my maintenance persons number set up the appointment and I'll pay the bill". This just took you out of the equation between mediating when someone will be home and your contractors availability.
Get an electronic lock:
I heard a horror story my one friend drove two hrs away for vacation and got a call from the downstairs tenant: "Water is leaking through the ceiling into my unit". The property was built below the road and it was sewage back flow. The upstairs tenant was on vacation so he had to come all the way back to unlock the door for the maintenance person. If he had an electronic keypad he could have given the code to the maintenance person and let him in.
Also I would find an emergency service that operates all hrs in addition to your maintenance person. Most of them are really expensive but if you are on vacation and you get that call at 11pm your maintenance guy isn't getting there until tomorrow. Have these systems in place before they happen!
Last Two Tips:
-Automate your bill pay
-Decide on a Standard rent increase every year and have it in the lease at signing. IE: Hey John so your lease is a year long and if you want to review in a year there will be a 3% increase. This incentivizes long leases and is not a surprise if you raise the rent at the end of the year.
If you have any other tricks you like to use please comment below! The more systems you have in place the easier your life is. Which is what financial freedom is about FREEDOM getting your life back from your job! Don't take on another job automate your business!
There are a lot of reasons we tell ourselves or others tell us of why we shouldn't start our own business or invest in ourselves. Family, friends, colleagues even while they may have your best intentions at heart, a lot of times discourage us from breaking away from the norm. It's ok to take out hundreds of thousands of dollars in student loans (with interest) is "good". Investing in yourself outside of standard educating is "bad, risky, costly, etc..." I have been lucky to always have supportive family encouraging me, but I have still heard the common criticisms from others.
One of my favorite phrases is: "Free advice can be the worst advice". This doesn't mean if you are networking with individuals in your field and not paying a fee for it the advice is bad. This means, when you mention your idea at a party and your friend/relative/colleague with no experience says that's a bad idea because .....
So this post is about the 4 biggest lies we tell ourselves or others tell us of why not to get started in business.
1. I Don't Know How to Get Started!
We all know this lie/reason to get started. I still tell it to myself today when I do something new. What would you tell someone if they didn't know how to do something? GOOGLE/YOUTUBE IT (LOUDER FOR THE PEOPLE IN THE BACK). We have been doing this for 20 years and still when we want to start something we let ourselves get stuck and say (I don't know how to do this).
Now in business the waters are a lot murkier depending on what you're trying to do. If Google fails you then you have to seek advice. You need to have a network. I have joined paid real estate groups which just because you pay for them doesn't make them better. I've messaged dozens of people on instagram who I see doing something I want to do and ask them how. Reading books on the subject and podcasts are a great way also to get advice!
If the task feels big break it down into small chunks and tackle it a task at a time! Don't look at the wall of Getting Started look at the small tasks.
When you tell yourself I don't know how to get started replace it with I don't feel like getting started!
2. It Didn't Work for Me So You Shouldn't Do It
This was one I heard from someone at a gathering. I was telling him I was interested in pursuing rental real estate. He told me how he invested in this neighborhood (cheap rentals and high crime) and the vast amount of problems he had. His advice "I wish you luck but it was a pain for me". To someone starting out if that was the only opinion you had you would run for the hills. Luckily I had been listening to podcasts and networking so I had a lot of great stories I knew of.
No matter what the business path is you want to take if you have the ambition I believe you can make it work (if there is a need for your business/product). Which brings me to my next lie/reason we never get started.
3. The Market is Oversaturated, There is No Need for My Service/Product!
This is the lie I told myself when I started my landscaping company with my business partner. I was in a town where all you saw were landscaping trucks, it honestly felt like hundreds a day.
In my head: (there are so many landscaping companies who needs another one? Why would I be different?)
We quickly found ways to separate ourselves. I was good at creating websites and you know what most companies didn't have? A website! I did a ton of research on YouTube/google on marketing (when I say a ton maybe 5 hrs). I would always get the same response when I answered the phone: "Wow we haven't actually had anyone pickup/return our call". I grew my business by being responsive to clients and getting quotes out quickly. We eventually became the top 3 recommended companies on Next-door which was huge.
So the point is there is always going to be a ton of competition in any industry. Most of that competition doesn't pick up their phone, they don't get back to clients within 1hr or even 1 day. If you have ambition and care about your clients you can be the best in your industry. But if you are overselling your clients stuff they do not need and not valuing their time, it's going to comeback and you will be sorted out.
Be ambitious, be honest, value your clients time and you will succeed!
4. It's Too Hard
I have also been told this when starting out in business by others:
"Hey well it is great you have that passion but you know I have heard that (Insert your idea) is really hard to be in".
Usually this person means well but has no experience in this industry. Or we tell ourselves "I want to get started pursuing this idea but it sounds too hard".
I have heard both and I still tell myself this sometimes when I go to pursue a new idea. You have to switch it to "what are the challenging parts of the process?" Get educated around those parts and they will become less scary. You know what else is hard waking up at 5/6am going to an office for 8-10 hrs a day and doing something because it pays the bills. If you pursue your business idea it may take 12-16 hr days but if it's something you love it will not feel like work and the hours will go down .... eventually. Being in business for yourself is hard and challenging but so is going to work for someone else.
If you are having trouble getting started with your idea reach out I'm always happy to help where I can! Pursuing your own business is hard but it is so rewarding and all the milestones small and big are things you will never forget!
Matt Tallent is a Realtor with The How Group. His passions include rental property investing and helping others achieve their real estate goals.
Real Estate Investing
Buy and Hold