I can’t believe that I’ve owned rental property for 10 years now!
Overall, I love rental property because its great for long-term wealth.
But if I had to start my rental property business all over again, I would have done things differently. Why? Because I’ve learned a lot over the years.
Sadly, I don’t have a time machine, so I can’t go back in time and avoid the major mistakes I’ve made… but I can share my lessons with you so you can learn from them.
Here are 100 lessons learned from rental property for 10 years…
1. Tenants have to have a reference from a previous landlord and a job. No exceptions
2. Keep the application short, not for the tenant but for you.
3. Don’t assume you know what the tenant wants
4. Screen them out online before you even show them the property. This will save you a ton of time.
5. Use GoogleDoc forms for a free form application or cozy.co – a free software screening tenants
6. Be proactive in asking for any concerns they have in the screening process
7. Don’t try to bait people to see the property or fill-out an application. This will only result in a ton of time wasted.
8. Always charge a late fee – no exceptions.
9. Never waive the deposit requirement…even on a temporary basis. This is a huge red flag if they don’t have first months rent and a deposit before signing the lease.
10. No family and friends. When I bought my first multifamily I was going to lease a unit to a friend very cheap as a favor to them since they were down on their luck. They had the audacity to snarl their nose at a place I was going to let them live in for free!
Don’t be the “owner” – when you are dealing with tenant they need to treat you like the manager. Owners are worth a lot of money and can make the final decision. You need to abrogate this to the owner. When you deal with a tenant you need to be the manager.
11. Your tenants are your employees. “Instead of the typical landord/tenant relationship, let’s make a relationship change to employer and employee. This is a BIG tip I got from Mike Butler, author of Landlording on Autopilot.
12. Create a policy and stick to it. This also let’s you have an out from hearing tenant sob-stories. “I’m sorry Ashely, our policy doesn’t allow that” I know this is common sense – but I got it from Brandon Turner over at BiggerPockets.
14. Hud.Gov is a great resource for researching housing laws
15. Have all applicable real estate forms in Evernote for easy access.
16. Charge $25/per month extra for each pet. They will pay it.
17. Additionally, charge a non-refundable pet deposit. Again…they will pay it.
18. Other items to think about up-charging for: light bulbs, air filters, missed work order appointments, smoke alarms and batteries, door locks, key, and application fees.
19. As soon as a tenant notifies they are going to leave start marketing the property.
20. Your best referral source will be current tenants.
22. Contact local mission organizations and large companies about potentially renting one of your properties.
23. If one of your properties don’t rent fast enough, consider using airbnb for short-term rentals. I have rented out an empty house for a weekend and made $400!
24. Don’t accept multiple checks from a single rental unit. Make the tenants combine their money with one check.
25. Get a rock-solid lease and go over this very carefully with your tenants to set the right expectations.
26. Have a tenant on-boarding package ready, so when you need one you aren’t scrambling to print one off or find anything.
27. Get a master-key so you don’t have to worry about keeping up with different key systems.
28. Get a google voice number. Regardless of if you manage properties yourself or you outsource this. Your real estate business should have its own number.
29. Set office hours. For emergencies have another number for an outside maintenance company or your cell number.
30. Be a realist. A couple of years ago I had a problem that was out of my control and I didn’t have the resources to fix it myself. I eventually fixed the problem, but promised myself I was handing over property management responsibilities to another company afterward.
31. Referrals. You need /at least two referrals from people you know to handle your properties.
32. Rates. There should be absolutely no surprises with a property managers fee schedule. The hourly rate they charge for maintenance, lease fee, on-going management fees, etc..
34. Technology. Know what kind of technology you are going to use to manage your properties or what kind of software your property management company uses. I manage my real estate business using Evernote.
35. Have a list of contractors you use and trust for each specialty. Ideally, you want 2 of everyone (ex: two plumbing companies). Have tenants call them directly when an emergency happens.
36. Review vendor bills methodically. Contractors are notorious for adding in miscellaneous cost.
37. Review and reprice your insurance every year. You can save thousands of dollars every year with less than an hour of work.
38. Have a zero-tolerance possibility for contractors that don’t show-up and don’t call you. Only tolerate 1 violation of contractors who are late. 39. I have found the best contractors at Home Depot at 6:00 a.m.
40 . When working on a large construction project ask: “How can we make this cheaper?” Also ask: “How can we get this project completed faster?” Ideally, you would get all your contractors from referrals from other rental property owners in your area.
41. Your local REIA is a great resource.
43. Always remember the saying: [Tweet “”Work on your business, not in your business””]
44. Create your punch-list in Evernote and share it with your contractors. Your contractors should adapt to your workflow, not the other way around.
45. Be extremely judicious when choosing business partners. 46. Your business partner(s) should not share any expertise, but rather compliment each others expertise. 47. If all the business partners are bringing to the table is money, do not give them equity on an on-going basis. 48. If you are going to be true business partners there should not be any secrets. 49. Financial information inside and outside of the company should be transparent.
50. Get a reference for lenders that lend on non-owner occupied rental property. This will save you a ton of time! Ask what areas and/or types of properties the lender avoids. Remember, you are the prize as the customer! Treat this like you are interviewing the lender.
51. Utilize hard-money loans ONLY when the potential profit margin is 30% or higher. 52. Diversify your capital sources between banks, private lenders and your own cash. This will not only build security in your business, but also enable you to act fast if you have an opportunity you need to act fast on.
53. You can get my private lending presentation here.
54. Remember what Warren Buffett says: “Price is what you pay, value is what you get” Sometime lower rates, are not worth the slow turnaround time.
55. Never forget that the seller of a property could potentially be your easiest lender to work with if they are motivated sellers. Don’t forget about utilizing a self-directed IRA to purchase rental property.
56. Compute your own personal Debt Service Coverage and your business debt service coverage. Knowing how to calculate DSC will help you when negotiating with lenders.
57. The largest expense of any property management company is gasoline. Try to keep your properties within close proximity to one another.
58. Know what kind of investor you want to be: single-family residential, triple-net single tenant commercial, apartments. Defining your niche will save you a significant amount of time and build a competitive advantage for yourself.
59. For me, I try to stick to small, residential multifamily. This provides the right risk/reward relationship for me and provides cash-flow.
60. Mobile homes and mobile home parks can be an exceptional moneymaker if you focus exclusively on this type of property. If you don’t focus on this type of property it can be an exceptional way to lose money.
61. As a rule of thumb, cap-rates are completely inverse to the desirability of the neighborhood.
62. Avoid trying to rent a property during November and December.
63. Conversely, try and buy properties during December, January and February. The reason: nobody else is buying properties during this time.
64. Don’t be afraid to make embarrassing offers as they say:[Tweet ” If you aren’t embarrassed by your first offer, it’s too high”]
65. Consider using airbnb for your own house. I have used this recently and received more rent than my own house. My wife and kids just go on vacation when we rent our own house out. The rent we receive covers the vacation and then some.
66. Do not allow cats. I had a bad experience. Don’t ask.
67. Window units can be a big advantage when it comes to keeping maintenance cost down.
68. If you only have the budget to do one thing, change the floors.
69. If you have the budget to do two things, paint.
70. This is a real estate business, not a hobby. Treat it as such.
71. Your friends and family are way more important than any kind of problem you are having with your real estate business.
72. I try to include my family in the parts of my real estate business they like. My wife likes to give her ideas on how to reposition newly acquired properties. My son likes to be a part of renovations. My daughter likes to go with me to hunt for deals.
73. Stay motivated! If you are having trouble, check out these real estate motivation quotes.
74. Get involved in your local REIA. Incredible networking that can get you deals and save you a ton of time.
75. Get involved with BiggerPockets. This is the worlds largest online real estate community. Everyone there is very helpful.
78. Start with the end in mind. This might be a rehash of the first post in the Relationships category. However, I’ve seen too many people sacrifice friends and family to build a real estate business only to end-up divorced and without friends after achieving their real estate goals.
79. For me, my real estate business is for net-worth and passive income purposes. 80. For real estate to be full-time, I would have to be an employee of my business. 81. I’m always surprised at the tax advantages of owning renal property.
82. Do not do cash-out refinances. This forces you to grow equity in your business, albeit at a slower pace.
83. My best friend gave me the following quote and I have to repeat it to myself every year: [Tweet “”A good deal at a bad time, is a bad deal””]
84. Systematizing your business will not only save you time and headaches, but will also increase your revenue and profit.
85. Store your financial information in Evernote.
86. Whenever a lender or agent needs information just share the Evernote folder. This completely eliminates email and gets you out of email hell.
87. Equity is ALWAYS the most expensive type of capital.
88. Cash is reality.
89. Your net worth is irrelevant if you don’t have liquidity to whether the storm.
90. Complete a personal financial statement every year and compare it to the previous years.
91. Compare your current tax return with the previous years, to look at changes and trends.
92. Do not do your own taxes. If you have a good CPA they will pay for themselves.
93. Know the difference between expensing a costs and capitalizing a cost. If you don’t know what I’m talking about you definitely should not be doing your own taxes. 94. Do not intermingle your personal checking accounts with your business accounts. This will help when it comes to year-end accounting.
95. If you have absolutely no money but want to get into real estate, consider doing manual labor and another job.
96. You can never underestimate maintenance cost.
97. Cash is King
98. Just do it!
99. A property is a home for someone, don’t ever forget that.
100. Have Fun!
I’ve learned a lot about real estate investing over the last 10 years. I’ve enjoyed my journey, and I will continue to learn more as I invest over the next 10 years.
I hope you can gain some insights from my experiences and grow your real estate business at a much quicker pace than I have been able to do.
If you still have questions about investing in real estate and growing your real estate company fill out the form below.