You’re interested in real estate investing because you seek passive income and long-term wealth. And perhaps you’ve considered investing in multifamily properties but you haven’t pursued it because you didn’t know how to get started.

In this article, I want to show you the blueprint to getting to your first apartment building deal. I believe that once you see the roadmap to your first deal, you will begin to believe that you, too, can do it.

How to Land Your First Apartment Building Deal

Step #1: Don’t sound like a newbie.

You have to use the right language when you speak to other professionals. You only have one chance to make a first impression. So if you call a broker and sound like a newbie, it will be difficult for you to convince him otherwise later.

This means you’ll have to educate yourself. Read everything you can on BiggerPockets. Check out all of the free resources, like the forums, podcasts, and blog. Read books. Eventually, it might mean that you invest in your education by purchasing a course or attending a seminar.

Either way, do your homework first. Learn the lingo, use the right words, and understand basic financial concepts.

Step #2: Get good at analyzing deals.

Real estate is a numbers game—the more offers you make, the more deals you do. Unfortunately, analyzing apartment building deals is more complex than analyzing a house flip or single family house rental.

I remember clearly when I got into apartment buildings back in 2007—it took me four hours to analyze a deal. Four hours! It took so long and was so overwhelming that I almost quit.

And then I discovered a better way. I call it “The 10-Minute Offer,” and it will allow you to make an offer on a deal you get from a broker within 10 minutes of getting the marketing package. It’s that powerful, and it will accelerate the progress you’ll make towards your first deal.

Related: Your Complete Guide to Analyzing a Property in Just 10 Minutes

And once you get a counter offer, it’s time to sharpen your pencil. Now you need a financial model that lets you determine exactly how much you can offer, taking into account the income and expenses, your investors, and the terms of your mortgage. It’s got to be easy to use and accommodate investors, but it also needs to be able to model more complex situations, like value-add scenarios or a cash-out refinance.

For some recommendations on a multifamily deal analyzer spreadsheet, see this Bigger Pockets forum post.

Here’s a side effect of getting good at analyzing deals: Once you’ve analyzed about a dozen deals, you will find that your confidence level will sky rocket.

One of my students, Nick, told me that his potential investors always asked him about his experience, and he didn’t have a good answer for them. But after a few weeks of analyzing deals, he went to his local REIA meeting and spoke to three potential investors who never asked him how many units he already had. It never came up! Why? Because he was speaking so confidently that it never occurred to these investors to ask about his experience.

That’s the difference confidence makes, and you build confidence by getting good at analyzing deals.

Step #3: Create deal flow.

Once you can analyze deals quickly and accurately, it’s time to put as many deals through the pipeline as possible. You can do that in a variety of ways, but the No. 1 way is through brokers.

That’s because their job is it to find, network, and know apartment building owners. They send cards and letters, make phone calls, and try to meet with these owners. When an owner is ready to sell, they will likely call one of these brokers who has built a relationship with them over the years.

There are other techniques, like sending letters and cold-calling, but the No. 1 way is brokers.

Related: The #1 Way To Find Great Apartment Building Deals

Step #4: Learn the secret to raising money.

The chicken-and-egg problem with apartment building investing goes something like this: “I don’t have a deal under contract, so I can’t go out and talk to investors.” Or, “I have a deal under contract, and now I don’t have enough time to find investors so that I can close.”

This is a real problem that will stop you dead in your tracks. But it doesn’t have to be that way. You can get financial commitments from people LONG BEFORE you ever get a deal under contract. Once you have the majority of the money committed, you can make offers with confidence, and you have a very high chance of being able to close.

I’ve written extensively on BiggerPockets about raising money—if this is of interest to you, see these related articles:

 

apartment-investing-success

Step #5: Avoid costly mistakes.

You’re going to make mistakes no matter what you do. You just want to take steps to avoid the kind where you lose your shirt. Here are some of the most common (but avoidable) mistakes newbies make with apartment building investing:

  • Buying in the wrong area
  • Not correctly analyzing a deal and overpaying
  • Choosing a deal that doesn’t have enough cash flow
  • Not having enough cash reserves
  • Not starting the money-raising process soon enough
  • Spending money too soon in the due diligence process
  • Not knowing your lender’s underwriting requirements up front

The best way to avoid these mistakes is to educate yourself and to surround yourself with experienced investors and/or hire a coach.

Step #6: Consider partnering on or wholesaling your first deal.

Don’t think that you have to have all of the money raised to get into apartment building investing. Absolutely not. In fact, many new investors get started by referring or wholesaling a deal or by partnering with someone.

I had a student who brought me a deal in Columbus. He found it, analyzed it, and was getting close to a verbal agreement around a number that made sense. He then called me up, and we determined that the deal was in fact going to work. We agreed on a $45,000 referral fee payable at closing, and I would take over from there.

This would let him say that he did a deal AND got paid $45K. Experience + getting paid = very cool.

Listen, if you can find a deal, properly analyze it, and negotiate around a number that makes sense, THAT has value. That’s something you can get paid for.

Conclusion

Many newbie investors don’t pursue apartment building investing as a viable option to achieve financial independence because of these three limiting beliefs:

  • “I don’t have the cash or credit.”
  • “No one’s going to take me seriously without a track record.”
  • “I don’t know how to get started and what to do next.”

I hope that this article dispels some of these limiting beliefs and gives you a map to help you visualize the road to doing your first apartment building deal.

Have you considered getting into multifamily investing? What’s holding you back?

Let’s chat in the comment section below!

 





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Most of us are on autopilot with our money. It keeps us aloft, if only just off the ground.

What attention we pay to our finances is mostly just fruitless worrying, not constructive action. But overhauling your finances is downright daunting. Where do you even begin?

Glad you asked! Below is a simple one-week plan. If you spend 30 minutes a day on the following mini-projects for the next week, you will end up in much better financial shape than when you started.

No advance degree is required, just a half hour a day for seven days. Give it a try and see just how much headway you can make in a week!

Day 1: Give Your Credit a Checkup

When was the last time you pulled your own credit report? Probably too long ago.

Start by going to AnnualCreditReport.com or a similar site and pulling your free credit report. It won’t ding your score, don’t worry. Americans are guaranteed a free credit report every year by law.

Look over your report carefully. In particular, look for any late payments in your history. Are any of them in error? Contact the credit bureaus to dispute false data.

If you see late payments that are not errors, set up automatic payments to those accounts moving forward so it never happens again.

Lastly, if you want to keep a close eye on your credit moving forward, consider signing up for credit monitoring on a site like CreditKarma.

young couple looking over financials in kitchen on computer and printed papers with piggy bank and money in view

Related: The 3 Critical Elements of Human Happiness (& Why Unlimited Money Isn’t Enough)

Day 2: Audit Your Credit Cards

There’s a fun part of this—and a not-so-fun part. We’ll start with the not-so-fun part first (of course).

Do any of your credit cards have balances over 30 percent of the card limit? Using more than 30 percent of a credit card’s limit starts damaging your credit, and it gets worse the higher proportion that you use.

Create a plan for paying down your credit card debt (start with these four steps). You should ideally be paying off your credit card balances every month—credit card debt is extremely expensive. Sure, there are exceptions, such as if you use credit cards to buy real estate, but as a general rule, aim to pay off your credit card every month to avoid hefty finance charges.

Now for the fun part. Do you have any credit card rewards that you’ve earned but haven’t spent? How much? Where are they held? How can you spend them in a productive way?

That latter is trickier than it sounds. Don’t just go blow your rewards on a shopping spree. Look for items that you would otherwise have spent your own money on, and pay them with reward points instead.

Lastly, are you using high-cost, low-reward credit cards? Maybe it’s time to shift to a lower-cost, higher-reward card. NerdWallet periodically publishes good summaries on these. Check ‘em out. Don’t cancel your old cards; just pay them off and only use them occasionally. Leave them at home in your bedside drawer for an emergency.

Day 3: Switch to a Lower Cost Cell Phone Plan

According to MoneySavingPro.com, the average monthly cell phone bill for Americans is $80—or nearly a grand a year. If you use one of the four “big brand” cell phone carriers—Sprint, Verizon, AT&T, T-Mobile—you’re probably paying even more.

Here’s a not-so-private secret: the smaller-name carriers simply pay a usage fee to the big brand carriers to access their networks. They charge a quarter of the price for the same network service. Why? Because the big name companies spend massive amounts on advertising campaigns to build their brand name. Don’t fall for it.

Find a company that lets you swap out sim cards and use unlocked phones. Spend $35/month and use whatever phone you want, instead of way more on a phone artificially locked to one carrier.

Day 4: Ditch Your Subscriptions

Companies love the subscription sales model. They only have to convert customers once, and they keep making money from them every month!

Break the cycle. Look over your monthly spending and highlight all subscriptions in red. Which ones do you actually use every day? Every week? Every month?

Classic example: gym memberships. They cost from $40 to over $100/month, yet a study published by Statistic Brain showed a shocking 63 percent of members never even go to the gym.

Ready for an idea you won’t like? Cancel your cable subscription, and start actually using that gym subscription. But if that’s just not going to happen, then cancel the gym membership, too, so you’re not wasting money on a service you’re not using.

Keep your monthly statements handy—you’ll need them tomorrow.

Day 5: Review (or Create) Your Monthly Budget

Do you have a firm monthly budget? Most people have only the loosest of budgets. It’s why a third of Americans have no savings, and another third have less than $1,000.

If you want your budget to work, the first thing you need to do is make sure that saving is your first priority—the first “bill” paid on every payday. Most people make saving their last priority (whatever happens to be left at the end of the month).

Reverse that pecking order. Set up automatic transfers from your checking account to your savings account, to take place every time you get paid—on the same day you get paid.

While you’re at it, create an account on Mint.com or another financial aggregation service if you don’t have one. It makes a huge difference to be able to see all of your accounts, in one place, on one dashboard. Your net worth suddenly becomes a real, living, breathing entity, rather than an abstraction.

piggy bank with coins on a table

Related: 12 Sneaky Habits That Kill Your Budget in the Night

Day 6: Back Up Your Important Documents

First and foremost, pull out your wallet and your smartphone. Take everything out of your wallet and photograph it with your phone. Save those photos on your computer, in a safe place, because you never know when you and your wallet will be parted.

Speaking of your computer, is your most important data backed up? No, I’m not proposing you go out and buy another subscription service after all the haranguing about them above. Download Google Drive’s desktop app to your computer, and set it to sync your most important folders to Google Drive’s online cloud storage.

Wrap it up by buying a portable fireproof safe for your most important physical documents, such as the deeds to your home and any investment properties. The title to your car. Your Social Security card. Your passport. Anything else that is difficult or expensive to replace should go in the safe, and the safe needs to go somewhere equally, well, safe.

Day 7: Reevaluate Your Retirement (and Consider Adding Rentals)

At your current retirement savings rate, when could you retire?

OK, OK, that was a bit of a trick question—or at least a tricky question.

First, do you have a target for your nest egg? If not, set one. And remember, this is based on your spending, not on your current income (big difference—at least it should be).

Next, keep in mind that your nest egg is only part of the equation. Retirement is more about ongoing, reliable income than it is about a lump sum figure on a balance sheet. Rental properties can be an excellent source of income and can change the math dramatically for how much you need to retire. They are investments optimized for yield that can adjust for inflation, over which the investor has much greater control than they do over some distant corporation.

Retirees typically have to sell off parts of their stock portfolio each year, drawing down the total value. Rental properties only increase in value over time, even as the mortgages debt draws down toward zero.

Take your new-and-improved budget from a few days ago and consider making it even more aggressive. With lean spending and heaving savings and investments, you can turbocharge your retirement investments.

Feel better about your finances? Good. Now keep your momentum moving forward, and accelerate your investing!

What’s your plan for financial growth? What have you had success with? Have any quick exercises that were a big help to you, to add to this list?

We’d love to hear about them below!

 





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This particular method has really helped me over the years. I present it at speaking presentations, I believe I’ve written blog articles about it in the past, and today, I’m giving you a video post about this question that I ask everyone before we look at doing business together.

Why Is This Question So Important?

When I moved here from Australia, I found everyone in the United States to be very transactional, meaning they want to do business immediately; they don’t want to wait. I’m here to tell you guys that if you want to succeed in real estate, it is not going to happen overnight.

Real estate is a long-term play. And I like to joke around by saying it’s not a one-night stand; it’s a marriage. Every relationship that you are looking at getting into, real estate investment-wise, has to be considered a marriage.

The people who you are looking at working with must be willing to plant the seed now before the harvest later. It’s going to take you five, seven, 10-plus years to get you where you need to be to fully realize the potential of your hard work.

It doesn’t happen overnight. So I’m begging you guys to stop working with people who are very transactional. You really have to work with people who really care about you and your best interests, who are in it for the long haul.

Related: 4 Tell-Tale Signs of a Bad Partnership (From Personal Experience)

The Question That Magically Weeds Out Bad Business Partners

Now that I’ve gotten that out of the way, here is the magic question that I ask everyone: Are you willing to wait six, nine, or even 12 months in building a trusting relationship with me before we do any business together?

I know what you’re thinking. “Why the hell would I even ask that question? If the deal is so good, I want to buy it right then and there.”

I understand sometimes you have to pull the trigger quickly, and I have nothing against that! But still, pop the question. I really want you to weed out all the shady people out there.

Way too many shady people exist. And what you’re going to find is you’re exchanging emails with these folks, you’re on the phone and in meetings, and then you’re going to pop the question. And then you are going to find out if there are any true hidden agendas within these people.

Anyone who wants your money right now will not be willing to wait. They can’t wait. They’re greedy, and they want your money now. They’re going to try and influence you any way they know how to get to your money. These are the people who are not right for you. These are the people who you do not want to be doing business with. These aren’t the people who are going to help you get where you need to be five, seven, or 10 years from now.

Related: 4 Lessons I’ve Learned From My Made-in-Heaven Real Estate Partnership

Let me repeat that question for you: Are you willing to wait six, nine, or even 12 months of building a trusting relationship with me before we do any business together?

Guys, it’s a powerful question. It will eliminate 99.9 percent of the shady operators out there. The only ones who are going to be left are the good people and the people who understand what delayed gratification means. And those are the people who you want to brush shoulders with, you want to associate yourself with, and you want to help get where they need to be. And they will help you get to where you need to be.

So, as you can tell, this is a topic I’m very passionate about. I love this question. It has helped save me hundreds of thousands of dollars in the past.

What tactics do you use to weed out the good from the bad?

Leave your comments below!

 





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When the time comes to step outside your comfort zone for a deal, it’s still a gut call.

In their early days of making deals, I recommend new investors follow a script and make their deals contingent upon finding a buyer. In addition to experience, it helps to have numerous other sources of cash flow (my associates and I typically structure three paydays) coming in to be able to step outside the comfort zone and fund deals.

This is the story of one of my more experienced associates, Bill, who was comfortable enough with the seller and the property in a certain instance to go outside his usual terms.

Related: What to Do When a Deal Goes Sideways (Hint: Don’t Panic!)

Straying From the Norm

The property was an expired-listing townhouse in good condition and in a good neighborhood. The seller needed a firm commitment on a lease purchase commencement date from Bill in order to get financing for another home he was buying.

He accepted that, but with a very spacious six-month term to find a tenant-buyer. Bill agreed that if he couldn’t find a tenant in six months, he’d start paying the underlying mortgage.

The real estate agent had been unable to find a buyer on the market for $359,000, and Bill was able to tie it up for a lease purchase of $320,000. That was another reassurance; if he couldn’t find a tenant-buyer, he could sell it outright for at least that purchase price.

To come to a deal took three buyer-seller meetings at the house, but once Bill started marketing with our proven funnel, there was a flurry of inquiries.

Everyone asks us, “Well, if I get a property, how will I know I can sell it?”

The buyer end is not the challenge, as somewhere between 60 to 82 percent of the buyer pool (depending on your area) cannot get financing. This makes your rent-to-own option extremely attractive—you’ll have plenty of buyers.

Young business people shaking hands in the office. Finishing successful meeting. Three persons

Related: How Remaining Flexible Resulted in a $54,000 Profit

Coming to Terms

The tenant-buyer in this scenario had some financial issues. When he was pre-qualified, the mortgage-ready date suggested he would need 24 to 36 months, and the deal terms were right at 36 months on Bill’s buy side with the seller.

This was risky, but as long as nothing tripped up the tenant-buyer, the deal could be closed. (If not, there are other options, but those are for another article.)

To compensate for the risk, Bill insisted on a hefty down payment of roughly $40,000 with about $25,000 of that within the first few months and the other $15,000 over the next year.

In the end, the risk was worth the reward of a $78,000 profit all three paydays. Another reward was that the sellers were happy, and the buyers gave Bill a big hug for helping them finally attain home ownership.

Deal Structure Summary

  • Lease-Purchase: $320,000
  • Sale Price: $369,900
  • Term: 36 months
  • Principal Paydown:
    • Payday #1: $40K down payment ($25K early, $15K first year)
    • Payday #2: $9K ($250 x 36 spread)
    • Payday #3: $28K (principal paydown and remainder of markup, less deposit down)
  • Profit: $78,000 (just under Bill’s average of approximately $110,000 per deal all three paydays)

What’s your level of comfort when it comes to straying from the norm in business? 

Let’s talk in the comment section below!

 





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Disclaimer: This article does not constitute legal advice. We recommend you seek the counsel of an attorney familiar with your specific situation and market to ensure you make the best decisions within your real estate business.

If you’re an investor learning about asset protection, it’s easy to get mixed up or receive poor advice. It’s even easier to fall into the logical trap of believing there’s a generic “best course” for all people.

After all, more than a few companies are all-too-happy to take your cash for a generic LLC, imply it’s all you need, “forget” to mention their products don’t include essentials like operating agreements or state filing fees, and toss you into the deep end of figuring out how to use the darn thing on your lonesome. Because once you’ve hit “pay” and received your docs, their work is done. They’re not your lawyers.

I am, however, a lawyer who’d like to take some time to clear up the confusion for my fellow investors here on BiggerPockets. The first thing you need to know is simple. Unlike a fly winter scarf, asset protection is not one-size-fits-all—at least if you’re doing it right.

One of the very first things to consider when developing your asset protection plan is where you live and hold property. If the word “California” appears in your answers, listen up!

This is the most essential information you need to know about the ideal structure for California residents: the Delaware Statutory Trust.

Why an LLC Might Not Be the Best Choice

Wait—aren’t you the guy who recommends Series LLCs for asset protection?

Yeah, that’s me. The Series LLC is an awesome structure for most investors. (Notice I said “most.”)

A critical point to understand about asset protection is that there is no silver bullet that works for everyone. An adequate asset protection plan is tailored to the individual, like a fine suit. The more your lawyer knows about you, the more tailored your asset protection plan can be.

When you work with a real asset protection attorney, we’re essentially doing the legal variant of crafting you an Armani-quality suit that’ll hold up so nicely you can be buried in it looking brand new. This is the strategy that defends your wealth, after all. It needs to stand the test of time.

For the California investor, though, we do know the starting point is different. Rather than isolating assets into LLCs or series within a Series LLC, we tend to recommend the California investor use a Delaware Statutory Trust (DST) instead.

couple on laptop, on holding gavel, online auction concept

In fact, understanding the Series LLC is a great starting point for understanding DSTs. Both use a parent-child structure and have infinite scalability, offering creative solutions for investors.

California investors have special concerns because of the state’s laws and tax regulations. While a Series LLC presents an ideal solution for investors in every other state, it would incur an $800 franchise tax at the very least.

The Delaware Statutory Trust is a great alternative, because it offers a similar level of protection to the Series LLC while also avoiding this tax burden. The state views DSTs as estate planning tools, which do not have to meet the same requirements as corporations or LLCs. Any investor who is doing business in California may be subject to state taxes.

Related: Estate Planning for Investors: Insight From a Real Estate Attorney

How a DST Can Benefit Investors Who Don’t Live in California

Let’s say you invest in California, but don’t reside there. Can you use a DST?

Yep.

That’s right! You might have never set foot in California, but if you have property there—even with partners—you’re still going to have to play by California’s rules. Check with an attorney if you are in a partnership or have interest in an LLC operating in the state.

Business people shaking hands, finishing up meeting. Successful businessmen handshaking after good deal.

Related: 3 Benefits of Holding Your Properties in an LLC

What is a DST Anyway?

At its most basic, the DST is the intellectual grandfather of the Series LLC. It uses a parent-child structure. I highly suggest you check out this previous Series LLC article for a more elaborate breakdown of this structure type and its asset protection implications. The same information is true of the DST (and I’ll be here when you get back!).

The DST is a type of trust that was among the first business structures created for asset protection purposes. Unlike a company, you have a trustee managing investments and a beneficiary (you), who receives the profits of properties held in the trust.

Like the Series LLC, it uses a parent company and many Series as asset-holding companies, sharing the liability limitation benefits. It’s an attractive alternative for Californians, because you receive the same benefits of Series LLCs (anonymity, streamlined business, tax flexibility) while escaping the requirements other companies must meet.

DSTs were designed to be low maintenance. No meetings or minutes are required, and compliance is fairly straightforward.

The DST’s structure separates your assets from you and one another. This concept is called compartmentalization and has two key purposes: making your assets harder to pursue at all and controlling the damage if one is successfully threatened and seized.

What happens to one Series need not affect the other Series or the assets within them. Of course, the above assumes a properly-formed DST, created with the aid of an experienced attorney.

Lawsuits are no joke, and you want the structure that’s best for you. If you’re in California, there’s no question that you should look into the DST, particularly if you plan to own multiple properties.

Disclaimer: This article does not constitute legal advice. We recommend you seek the counsel of an attorney familiar with your specific situation and market to ensure you make the best decisions within your real estate business.

Any additional questions I can answer for your about DSTs or LLCs? 

Ask me in the comment section below!

 





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When it comes to starting a short-term rental business, conducting effective market research can be the difference between success and failure. Many people think that they can just find a cute home in their market, and it will be successful because it looks nice. This couldn’t be further from the truth.

Starting a business utilizing Airbnb or similar platforms is exactly like any other real estate investment, which means you’ve got to do the upfront work or you risk making a mistake. Market research is a big part of the upfront work. You need to know whether or not your market is going to be profitable before you ever acquire a property and list it online.

You will need to be able to answer questions like what are the most profitable zip codes in your city? How much is the average rent? What can I charge per night? How many days of the month will my property be booked?

What will my expenses be? Which seasons are most profitable? Which local attractions do people want to be around the most?

Using Airbnb for Market Research

If you want a quick estimate on the potential revenue you might earn with your property, you can use the Airbnb Calculator available on BiggerPockets. It will give you a basic idea of how your property might perform in your specific city.

If you decide to move forward, then you will need to collect additional data to make a better decision on what type of property you want and which area.

To determine these things, first you’re going to want to open up the Airbnb website and type in your city. Then click the option for “Homes.”

airbnb market research

Related: How to Triple Your Rental Profits with Airbnb

Next select the option for “Entire Home”; this will automatically filter out options for shared rooms or private rooms. This is important because you should ideally be looking to rent out the whole place, which will end up being more profitable and easier to manage.

From here, you can also filter out the number of rooms. Set a maximum of four guests for a one-bedroom house and six for a two-bedroom house.how to use airbnb for market research

At this point, you will have filtered the results down to a much smaller number of homes that you can begin to analyze. If you want to take it a step further and narrow down your results to the best possible listings, you can select “Super Host” and “Plus Verified.” Then start off by examining the listings with the highest reviews to see what’s working for them.

Look at how much they are charging per night and run the numbers to see your potential profitability. If the average price per night is $150, then you can reasonably assume that if you rent the place out for 80 percent of the month, then you will make around $3,500 in revenue.

If you know how much rent and expenses are in your sub-market, then you can calculate how much your net profit will be at different occupancy rates. My advice is to find a property that will cashflow even if it’s only at 50 percent occupancy for the month. That way you can cover expenses during the off-season.

Related: 6 Steps to Getting Started with Airbnb [Video!]

Learn Your Market

Once you know which general areas are experiencing success with short-term rentals, you can begin to learn about your local market and it’s various neighborhoods. You will want to find out which attractions people want to be around, such as parks, bars, shopping centers, and sports arenas.

Much of this you can find using Google and Yelp by simply searching for attractions in your market. Then cross-reference what you find with the top properties on Airbnb. Examine their headlines and descriptions to find out what they are marketing to their guests. It’s a good bet that they know what the people want based on their feedback from being in business.

A lot of the work has already been done for you, but knowing where to look is key. I hope you find this information useful on your journey to becoming an Airbnb entrepreneur!

Do you have any questions about researching your market? Or any questions about short-term rentals in general? 

Leave them below in the comment section. 

 





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Some Americans apparently love to fantasize about an extreme downsize that reduces their personal space to the bare minimum and slashes their cost of living to a fraction of what it once was. Hence, the rise of the tiny house trend. Now, Amazon is making this tiny trend possible for any home shopper, offering a number of prefabricated houses on its site – and some are selling like hotcakes.



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According to experts from Multifamily Executive, one of the challenges landlords will continue to face in 2019 is finding and retaining quality tenants. Tenant turnover is one of the biggest cash flow killers a landlord can encounter. When a tenant moves out of your rental property, not only do you miss out on the monthly rental income, but the out-of-pocket costs can also quickly add up—especially when you factor in cleaning, repairs, marketing, and the additional steps it will take to get your property rented again.

Although tenant turnover is unavoidable in the property management industry, there are a few things landlords can do to reduce the number of vacancies they experience. You probably can’t prevent your tenants from moving out of town for a new job or for personal reasons like being closer to family. However, preventing local moves is something you can influence.

Here are four ideas to help landlords attract long-term tenants and minimize tenant turnover.

woman using internet website for rental apartments, houses

How to Attract & Retain Long-Term Tenants

1. Start with finding (and then keeping) reliable tenants.

The first step to avoiding tenant turnover is finding tenants who you want to stick around for the long run. Tenants who cause extensive damage, disrupt other tenants on the property, or fail to report important maintenance issues will end up costing you more money if they continually renew their leases. The best way to find and keep quality tenants is by properly screening potential tenants and requiring a detailed rental application for your property.

Be sure to check rental applicants’ credit reports, criminal background, and past rental or eviction history to gather the most accurate information and make an informed decision about what kind of renter each applicant will be. It’s best practice to avoid any red flags and always follow all Federal Fair Housing laws.

Related: Tenant Screening Process—The Application

2. Build positive landlord-tenant relationships.

Having a positive relationship with a long-term tenant will not only encourage them to stick around but could also lead to word-of-mouth referrals to other dependable tenants. The better history you have with your tenants throughout their lease term, the more likely they will be to choose to renew when their lease is up.

Try to present yourself as an approachable, attentive, and reasonable person and not just a figure simply there to collect the rent check. To the best of your ability, keep the lines of communication open and honest and always respond to any requests or concerns in a timely manner.

There is a fine line to be considered here. You can be friendly, but keep it landlord-tenant relationships professional. This is your business. Be careful not to allow tenants to take advantage of your friendliness.

person holding house key with living room in background

3. Price your monthly rent in line with the market.

Increasing the monthly rent at your rental properties is something every landlord will inevitably experience. Like every industry, the rental market responds to the economy and provides opportunities for property owners to ask more or less for rental prices depending on their region. You may also need to increase rental prices to pay for property maintenance or improvements, accommodate tax increases, or to simply increase profits.

The key to raising rent prices when the time comes is to do so in a manner that will limit backlash and avoid turnover. If you do find yourself needing to increase prices at your rental properties, be sure to follow all state regulations regarding timing and providing official notice to your tenants, too.

Your rental prices should be on par with comparable rental properties in your neighborhood. In a competitive rental market, tenants will have the opportunity to choose from several different properties, so setting the rate appropriately will help keep your property occupied.

Related: 6 Insider Tips to Fill Rental Vacancies

4. Keep your property up-to-date (or even upgraded).

Be sure to keep up on maintenance at your rental properties, even if your tenants have been around for a while. Take maintenance requests seriously and respond to them quickly to prevent costly repairs down the road, or frustrated tenants will start to look elsewhere.

Schedule routine inspections to make sure you catch issues your tenants might not be aware of, and check in with your tenants regularly to make sure everything is in working order.

Simple upgrades to your property can help persuade tenants debating on whether or not to renew their lease. Consider adding property features like an upgraded kitchen, fresh paint, in-unit laundry, or new carpet to make sure your tenants don’t outgrow their space.

The Bottom Line

Tenant turnover is a routine part of the landlord experience, but with the right knowledge and some planning ahead you can do your best to limit turnover and increase tenant retention.

hard-money-lenders

Do you have any tenant retention methods that I left off this list? 

Add them in the comment section below!

 





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The SEC this week accused the owner of a real estate investment company of perpetrating a $20 million real estate fraud scheme by convincing more than 600 investors to give money under the auspices of flipping houses in the Chicago area. But instead of making money on real estate, George Slowinski allegedly took some of the investors’ money for himself and his associates, made bad investments, and eventually cost his investors $17 million.



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After helping build Invitation Homes into one of the nation’s largest single-family rental operators, Blackstone is now cashing out on part of its investment. Blackstone, which took Invitation Homes public in 2017, sold off more than $1 billion in shares of the company’s stock this week.



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