Podcast Summary
Colorado Floods, New Segment, and Guest Interview: Listen to episode 36 for tips on buying rental properties, dealing with tenants, and property management from long-time landlord Kevin Perk. Don't forget to share your favorite quotes using #biggerpockets for a chance to win free books.
The BiggerPockets podcast, episode 36, features Josh Dorkin and Brandon Turner discussing various topics related to real estate investing. They started by addressing the ongoing chaos and flooding in Colorado, encouraging listeners to donate to the Red Cross. They also introduced a new segment where listeners can share their favorite quotes using the hashtag #biggerpockets to win free books. The guest for this episode is Kevin Perk, a long-time landlord and contributor to the BiggerPockets blog from Memphis, Tennessee. He shared valuable tips on buying rental properties, dealing with tenants, and property management. Listeners were encouraged to leave comments and questions in the show notes at biggerpockets.com/show36. Additionally, DealMachine was mentioned as a tool for accessing high-quality, reliable contact information for off-market deals.
Invest in real estate with no money down using Rent to Retirement: Start earning cash flow and building equity in real estate with minimal upfront investment through Rent to Retirement's discounted properties and investor loans.
It's possible to invest in real estate with no money down through programs like Rent to Retirement. Rent to Retirement offers new construction turnkey rental properties at discounted prices and investor loans with low interest rates and minimal down payment requirements. This means investors can start earning cash flow and building equity without having to come up with a large upfront investment. Additionally, working with a lender like Host Financial can make the loan process easier and more efficient, allowing investors to grow their portfolio faster. Kevin, a successful buy-and-hold investor, shares his story of how he got started in real estate after being inspired by Robert Kiyosaki's books and deciding to leave his career as a city planner behind. The early days of investing involved a lot of learning and networking, but eventually led to the purchase of a duplex and the start of a successful real estate career.
Combining strategies for successful real estate investing: Start early, network with agents, use various financing methods, and build strong relationships with banks for larger loans.
Successful real estate investing often involves a combination of strategies, including buying properties through MLS listings, networking with agents, and utilizing various financing methods such as commercial loans and private lenders. Starting early and building a solid portfolio before regulations like the 4 rule were implemented can also make a significant difference in expanding your investment capabilities. While it may be challenging for some individuals to secure large lines of credit, it's essential to remember that building a strong relationship with local banks or credit unions and presenting a solid business case can increase the chances of approval.
Securing a Real Estate Loan: Prove Yourself as a Good Risk: To secure a real estate loan, present a solid business model, prove strong cash flow, know banking jargon, shop around for best terms, consider private lenders, and have an alternative exit strategy.
Securing a loan for real estate investments involves presenting yourself as a good risk to banks or private lenders. This means having a solid business model, proving strong cash flow, and knowing the banking jargon. It's essential to shop around for the best terms and consider private lenders who may offer shorter-term loans with balloon payments. Private lenders are often interested in buy-and-hold type properties, and the rates can be anywhere between 8-10%. Typically, investors hold the properties for 5 years before refinancing or selling. If you cannot refinance at the end of the term, you may need an alternative exit strategy. Most investors buy distressed properties at a discount, often vacant and in need of repairs. The discount depends on the realtor and the listing price. Networking and getting introductions can also help in securing loans. It's important to remember that the process may not be easy, but with a solid business plan and strong cash flow, securing a loan is achievable.
Educating investors and building a network: Working with investors in real estate requires educating them on pricing and maintaining industry contacts. Agents may need to make multiple offers and revisit properties to find the right fit, with a 10:1 offer to acquisition ratio common for new investors.
Working with investors in real estate requires education and patience. Real estate agents often need to be educated on how investment properties are priced based on potential income. The process can take time, and agents may need to make multiple offers on properties before finding a good fit. The ratio of offers made to properties acquired can be around 10:1, especially for new investors. Properties that don't sell may be revisited after a significant period, as sellers may come to realize the true market value. Agents should maintain a network of industry contacts and stay informed about market trends to increase their chances of success. Despite the challenges, working with investors can lead to a stronger business and better deals for all parties involved.
Buying Properties in Desirable Neighborhoods: Stay informed, act quickly in trendy areas, find good amenities, high demand, secure financing, and have a real estate brokerage for quick offers.
Successful real estate investing involves staying informed and acting quickly in desirable neighborhoods. The speaker focuses on buying properties in trendy areas, specifically Midtown Memphis, where young urban professionals want to live. They look for neighborhoods with good amenities and high demand. The price range for properties in these areas can vary greatly, from as low as $30,000 to over $1,500,000. However, the higher-end properties offer less cash flow due to their higher values and increased competition among investors. To secure a good deal, it's essential to have financing and a real estate brokerage in place, allowing for quick offers when opportunities arise. The speaker's wife, who is a real estate broker, provides them with access to the Multiple Listing Service (MLS) and commission from their purchases. Obtaining a brokerage license can offer higher commissions and more flexibility compared to being just an agent, as agents must hang their license with a broker and follow their rules. Disclosure rules apply when the broker is involved in the transaction, but not initially when making an offer.
Considerations for Becoming a Real Estate Broker vs. Slumlord: Becoming a real estate broker involves careful planning and management, while slumlording can lead to neglected properties and unhappy tenants.
Becoming a real estate broker involves considering various factors such as business structure, liabilities, and costs. It may be a good idea for those who prefer keeping things in-house and managing their business closely. On the other hand, slumlords are landlords who neglect their properties and tenants, often due to financial struggles or lack of knowledge. Most slumlords are not intentional about it but rather find themselves in over their heads. Landlording is a complex task, and it's essential to understand the responsibilities and challenges before entering the market. Additionally, managing properties from a distance can be more difficult than it seems.
Effective advertising and education for real estate investors: Focus on building a strong community of investors, shift from outdated marketing tactics to Internet-based advertising, and change the perception of real estate investors in the community.
Changing the perception of real estate investors and improving the community starts with education and effective advertising. The speaker emphasized the importance of moving away from outdated marketing tactics, such as bandit signs and get-rich-quick guru mentality, and instead focusing on building a strong community of investors. They also discussed the effectiveness of Internet-based advertising for finding tenants, particularly in urban areas where young professionals are more likely to search online. While signs may still be effective in certain markets, the speaker's experience shows that Craigslist has become a dominant force in their market for finding tenants. Ultimately, the goal is to change the way investors view themselves and their role in their communities, and to work together to create a more positive image for real estate investing.
Schools' Impact on Housing Market: Schools significantly influence housing market decisions for families, with parents prioritizing specific districts. Zillow's new feature mapping school districts will benefit renters and buyers. Landlords consider applicant income, credit, honesty, and other factors for tenant screening.
Schools play a significant role in the housing market, particularly for families with children. This was emphasized in the discussion, with signs in higher income areas still being effective due to parents' desire to live in specific school districts. Additionally, Zillow's new feature mapping school districts on their site is expected to be valuable for renters and buyers alike. Regarding tenant screening, the landlord shared that applicants must fill out an application, pay an application fee, have sufficient income, good credit, and no evictions or past due bills. They also value honesty, neatness, and good manners. It's important to note that landlords can discriminate against non-protected classes, such as dirty pigs or slobs. Other common screens include no smokers, no motorcycles, and no landscapers. Serious criminal convictions or drug-related issues are also grounds for denial.
Effective tenant screening and maintaining standards: Thoroughly screen tenants, maintain standards, use technology for rent collection and property management, and avoid setting lease terms during slower rental periods to minimize vacancies.
Effective tenant screening is crucial for any landlord, and understanding the context behind potential red flags, such as a DUI, is important. Lowering rent prices to attract tenants during slower rental seasons can be tempting, but maintaining standards is essential to ensure long-term profitability. Utilizing online rent payment platforms and property management software can streamline the rental process and make collecting rent easier. When setting lease terms, consider avoiding end dates during slower rental periods to minimize vacancies. Overall, thorough tenant screening, maintaining standards, and utilizing technology can help landlords navigate the rental market successfully.
Managing Real Estate Investments with Technology: Online rent collection, specialized insurance, and data providers streamline real estate investment management, increasing efficiency and profitability. Aim for a consistent $150 monthly cash flow per unit.
Technology and specialized services are making it easier for real estate investors to manage their properties and secure insurance, leading to increased efficiency and profitability. For rent collection, online payment options and services like NREIG are popular among tenants and simplify the process for landlords. Insurance companies like Steadily offer fast and affordable options specifically for landlords, saving time and money. Additionally, finding motivated sellers and off-market deals is now possible through data providers like PropStream, making it easier to expand a rental portfolio. Aiming for a consistent cash flow of $150 per month per unit is a common goal for investors, which covers all expenses and allows for savings and repairs. Management fees can also be factored into the cash flow calculation.
Costs of being a landlord go beyond mortgage payments: Budget 10-15% of gross income for taxes, insurance, repairs, and unexpected emergencies. Have an emergency fund and minimize turnover costs through proper tenant screening.
Becoming a landlord involves more expenses than just covering the mortgage. New landlords often underestimate the costs of taxes, insurance, repairs, and unexpected emergencies. A common recommendation is to budget 10-15% of your gross income for these expenses. Additionally, having an emergency fund is crucial, with a suggested minimum of several thousand dollars depending on the property size. Long-term tenants and proper tenant screening can help minimize turnover costs. When tenants move out, clearly communicating the expectations for returning the property in good condition through a detailed list of required tasks and fees can encourage them to leave the unit in better shape. Remember, the costs of being a landlord extend beyond the mortgage payment.
Being a Landlord: More Than Just Collecting Rent: Landlords invest most of their rental income back into property maintenance, taxes, and obligations, working long hours and managing all aspects of property management.
Being a successful landlord involves more responsibilities and expenses than just collecting rent. While the cash flow from renting properties can provide a significant source of income, a large portion of it goes back into maintaining and improving the properties, paying taxes, and meeting financial obligations. The misconception that landlords live off large piles of cash is not accurate, as they often work long hours and invest their earnings back into their business. The flexibility of being a landlord comes with the responsibility of handling all aspects of property management, which can be time-consuming and challenging. Overall, being a landlord requires dedication, hard work, and a solid business strategy to turn a profit.
Learn from experienced investors through REIAs: Joining a REIA offers access to a community of investors, education, and guidance to help new investors succeed in real estate.
Networking with other real estate investors through organizations like Real Estate Investment Associations (REIAs) can provide valuable insights, learning opportunities, and a sense of community. These groups can help new investors avoid costly mistakes and provide access to experienced investors who can offer guidance. However, it's important to be cautious and do your due diligence when selecting a REIA to join, as some may be more focused on sales pitches than education and support. By attending meetings, engaging with members, and seeking out mentors, investors can build a strong foundation for their real estate investing journey.
Maximizing Real Estate Events and Building a Successful Portfolio: Attend events with business cards, stay cautious, adjust rent based on market trends, DIY clean or hire pros, know state laws, consider cash for keys, communicate with tenants, network, stay informed, and clear communication are crucial.
Attending real estate events can offer a mix of learning opportunities, networking with investors, and potential sales pitches. To make the most of it, bring business cards, keep your guard up initially, and trust your instincts. When it comes to rental decisions, stay informed about market trends and adjust rent accordingly. DIY cleaning is a good starting point, but consider hiring professionals as your portfolio grows. Know your state laws regarding abandoned properties and evictions. Cash for keys can be a cheaper alternative to evictions. Late rent payments should prompt communication from tenants. Overall, networking, staying informed, and clear communication are key to success in real estate investing.
Focusing on cash flow vs appreciation for financial stability: Successful landlords prioritize cash flow and proper analysis for long-term financial stability in real estate investing.
Successful landlords focus on cash flow as opposed to speculating on appreciation. This ensures financial stability and the ability to weather market fluctuations. An FED warrant is an eviction warrant used in Tennessee, and it can be a more aggressive approach to handling non-responsive tenants. Other than managing properties and reading, Josh enjoys teaching and staying active through running and racquetball. The difference between successful and unsuccessful landlords lies in their approach to real estate investing. Those who prioritize cash flow and proper analysis are more likely to thrive in the long run. Memphis, Tennessee, is a hotbed for investor activity, and the market has seen both appreciation and challenges. Regarding favorite books, Josh recommends "Rich Dad Poor Dad" for new investors and "The E-Myth Revisited" for experienced investors, as they offer valuable insights into cash flow and business systems.
Memphis: A Strong Real Estate Investment Market for Cash Flow: Proper preparation and knowledge are essential for success in Memphis real estate investment, including managing properties, finding tenants, and understanding cash flow. Connect with the local REIA group and engage with the BiggerPockets community for additional resources.
Memphis, Tennessee is an excellent place for real estate investment due to its strong cash flow potential. However, it's crucial for investors, especially those from abroad, to thoroughly research and understand the local market before making a purchase. Kevin Perk, a Memphis landlord and blogger, emphasized the importance of managing properties, finding tenants, and understanding cash flow. He also encouraged investors to connect with the local REIA group and engage with the BiggerPockets community. Overall, Memphis offers great opportunities for investors, but proper preparation and knowledge are key to success.
Invest wisely with caution and knowledge: Always prioritize caution and knowledge when considering an investment opportunity, only risk capital you can afford to lose, and seek professional advice when necessary.
Investing comes with risks and it's essential to use your best judgment and consult with qualified advisers before making any investment decisions. Remember, only risk capital that you can afford to lose. BiggerPockets LLC disclaims all liability for any damages arising from reliance upon information presented in this podcast. In essence, always prioritize caution and knowledge when considering an investment opportunity. Don't let the potential rewards blind you to the potential risks. Protect your financial well-being by making informed decisions and seeking professional advice when necessary.