27-Year-Old Landlord: How I Prevent Getting SCREWED by Tenants

here are pictures of over 2.7 million dollars worth of properties that i own and each of these properties i just recently rented out within three days of putting them up for rent to high quality tenants without a property manager and since tenants and toilets are the most common reason people give for not wanting to build wealth through real estate in this video i'm going to walk you through step by step the proper way to find high quality tenants so that you no longer have that objection let's get into it 99 of the work that it takes to get these properties rented within three days to high quality tenants is done right here it's not done at the property showing the tenants the property and showing them upgrades it's finding tenant leverage and following these steps to make sure you never get screwed but first consider this according to the new york times the average net worth of a homeowner is 195 thousand 000 the average net worth of a tenant is just 5 400 dollars we'll now imagine the potential net worth that you could have as a rental property owner every time they pay rent my net worth goes up and i barely have to do anything and i'm not somebody special i didn't inherit these properties i worked for these properties and you can make this happen as well rule number one of property management always have the property rent ready before you try to start showing your property to potential tenants here's why tenants usually don't have very good imagination if they had good imagination they would be buying properties that need work and not renting them once they're done even if you got lucky and showed a property to a tenant that had the imagination based on what you said you were working on the odds are they're going to over imagine it and you're going to get screwed as a landlord by over-promising and under-delivering rule number two never rent a property as is sometimes people are tempted to buy a property and then just throw a tenant in and if issues come up they'll deal with it i don't do that see i like to buy properties that need work which is great because then i can buy them for a cheaper price and build my net worth pretty fast that's what we call wedge deals however i never rent them out as is because i want a rental grade property so that i can attract the highest quality tenant and high quality tenants are not going to be accepting of an as-is property that still has dated elements to it it must be modern and move-in ready and if you have the same standard for all of your rental investments you'll realize that rental grade is a pretty easy threshold to get to that doesn't cost you a lot of money think of it as paint flooring and finishes now sometimes people confuse a rental grade for cheap and low quality but rental grade is actually quality work that's not over improved over improved is where people start spending money on stuff that doesn't actually get them more money in rent now another reason you don't want to rent properties as is is because when it comes time to re-rent them it's really difficult to show a property a tenant is living in to the next prospective tenant if somebody's living in it and it's an as-is property bad idea rule number three and this should go without saying but i'm going to say it anyway professional photos and ideally a 3d scan of a property are the best way to rent a property to a high quality prospect crooked photos unedited photos cell phone photos are not going to be what attract high quality tenants because it's a sign of a lack of professional management and high quality tenants don't want to rent from clueless landlords who can't even get good photos up rule number four when you go to list your property for rent on a website like zillow's rent manager or on the mls make sure that not only do you put those awesome photos up but make sure you put a nice description and include what your requirements are to make your life a little easier what i like to include are things like must have a 700 plus credit score no cats because lauren's allergic to them we'll take a 20 pound dog with pet rent and security deposit tenant pays all utilities and renters insurance and i'll even include smaller things just to make sure the tenant's expectations are straight before they even call me like tenant is responsible for all pest maintenance and putting salt in the softener keep in mind when it comes to rental real estate whether they're apartment buildings or single family houses you're only in control before the tenant takes possession once the tenant takes possession they have a lot more power over you so set the expectations straight up front rule number five go for quality not high rent look i know it's really exciting to be able to go to a cocktail party and tell everybody about how much you rented a property out for and how fast you rented it and guess what i could rent any of these properties within a day for 500 over market value to some loser that probably won't end up paying me rent and the fact that i was able to place high quality tenants into every single one of these properties within three days is what you want to learn from so as part of this rule i like to say i'd rather see you slightly under price your rental then slightly overprice it this is very important because when you're thinking about buying real estate you're wanting to get into your first rental property and you look at rental comps don't assume that you're going to get that rental comp value if you want a really high quality tenant i'd rather see you take a little bit off those comps knowing that most managers will make a lot of exceptions for tenants i don't i'd rather have a little bit less rent but guarantee high quality tenant and i personally just build that into the negotiations when i'm looking for good deals to buy i already know what i'm going to be renting out the property for rule number six the phone call pre-screen this is why i say 99 of the work is done right here the phone call pre-screen is what prevents me from wasting my time driving on around to go show rental property 99 of the work is done on the phone because i'm hunting for something i call tenant leverage there are two forms of tenant leverage you have the first one is the better attendance credit score the more tenant leverage you have think about it this way somebody with a 775 credit score didn't luck into that they got a 775 credit score by paying their bills timely not over extending themselves with too much debt and not missing payments or having collections that's not to say people with bad credit aren't good people or are not responsible but you have less leverage with somebody who has less of a credit score why because somebody with a 775 or higher or even a 720 or 730 or higher has pride in their credit score and they don't want to mess it up see if attendance screws me and i take them to court that judgment is probably going to tank their credit score and the tenants know that now i never want to end up in court but by having tenant leverage i'm more likely to have tenants that don't want to even risk their credit getting screwed up and they're gonna behave just think of the power credit has the better your credit is the better loans you get the better job you might be able to get and sometimes you even get people that date each other and then they get financially naked and they check each other's credit just to make sure the other person isn't loaded up with a bunch of collections or has a really bad credit history which isn't necessarily the best sign for a strong stable financial future here's the problem though pretty much every person that calls me that has a credit score under 700 has a reason or an excuse why their score is under 700 and they've got great stories to go along with it about how they're on a better path and they're working on it whatever the problem is somebody that's already got a score under 700 is not going to care as much about ruining their credit as somebody with an 800 that's why credit tenant leverage is so freaking powerful tenant leverage number two is more of a coincidence than something you really want to mandate and if a tenant happens to own a real estate or a local business that gives you extreme tenant leverage because if you ever get screwed by that tenant it's pretty easy to get a judgment secured against other real estate or a business it's not disappearing to another county now usually i think this is a little bit of a double edged sword because if a tenant owns real estate the odds are they're probably going to leave me soon when they go buy real estate again so you have a little bit of a balance but if i had two tenants with a 750 credit score i'd rather pick the tenant that owns real estate because again double leverage and just a heads up everybody that you pre-screen that you start indicating you're probably going to deny because they have bad credit is going to get aggressive with you impatient with you they're going to yell at you they're going to tell you you're discriminating against them because of their credit and you know what you are but guess what three of these properties were rented to military tenants with 775 credit scores or greater the fourth one also had great credit but wasn't in the military so it's possible look sometimes people say our standards are extreme but see that house right there that's a 775 000 house i'm not putting somebody in there that doesn't have some tenant leverage you get it rule number seven you have to be fast speed is very important high quality tenants have choices you're usually not the only game in town but if you're fast it signals to a high quality tenant that you respect that they are a high quality tenant and that you're a professional and not stringing them along now two of these properties behind me we just bought remodeled so they were vacant when it was time to show them but the other two were occupied by the previous tenants they gave us notice we started showing the property and because they were high quality tenants that we rented to in the first place it was actually easy to show the properties because the tenants had a nice place they kept a nice house and we had already remodeled the properties so showing the tenant occupied properties was very easy because again high quality tenants look at the place they go here's a high quality tenant at least they live like a high quality manner this is easy i'll rent it so that's how i get properties rented before they ever actually go vacant now the biggest motivation for you should be every single day that you hold real estate empty it costs you big money probably somewhere around 100 to 200 a day so you really want to minimize the days that properties are empty and speed is huge number eight trust but verify everything i run credit through experian which you could do as well by going to experian.com connect landlord you can also run through transunion which i also recommend as it runs credit criminal and eviction background checks that's at mysmartmove.com then i verify two forms of id and i compare the social security number card that they have to what they put on their application and what showed up on their credit report rule number nine and this is the last time you're going to be in control when it comes time to sign your lease make sure you take your time on the lease agenda that is sit there and literally think about every minute detail you want the tenant to know it could be things like tenants responsible for replacing the air filter tenant to add salt to the softener trash compactor is included without warranty tenant maintains all utilities all of that is extremely important now but once you're in contract the tenant has a lot more control over you rule number 10 never ever tell a tenant that you're the owner you're just the manager and if a tenant worst case somehow figures out that your name is on title yep i'm one of the owners but there are other owners as well look it's happened tenants will come up to me and go i know you're the owner we really want these palm trees trimmed make sure you trim those palm trees and you go oh you know what i'll i'll check i'll check with the other owners hey lauren uh you know the contract says the tenants have to maintain all the palm trees and everything but the tenants want us to do it do we want to do it lauren goes i'm so sorry the owner said no now there's obviously so much more we can talk about in regards to rental real estate but there's only so much we can talk about on youtube so if you'd like to learn more make sure to check out the link below for the real estate investing course you can currently get 20 off with coupon code wedge 100 and inside you'll get my brain on a platter when it comes to real estate investing and access to me in private live streams twice a week look forward to seeing you there also if you're interested in coming to a real estate crash course consider the events we have coming up seattle austin miami and san francisco and as a bonus note to everybody who stayed to the end of the video why is it that people who own commercial real estate like apartment buildings always talk about vacancy factor and including that in your expense ratios it's usually because they're trying to impress their investors with higher rents if they just had slightly lower rents they'd probably have way less of a vacancy factor i usually run my properties at a vacancy factor of around one percent where apartment buildings will oftentimes run them between five to ten percent which remember vacancy factor isn't just about the property being vacant every time a property turns over you usually have to do some repairs that you can't always get from a tenant's security deposit so in other words vacancy and a higher vacancy factor oftentimes also leads to a higher miscellaneous and repair expense factor as well but if you follow these property management rules you'll dramatically decrease the odds of you ever getting screwed by a tenant thanks for watching and we'll see you next time [Music] you

Channel: Meet Kevin

Views: 104,959

Rating: 4.5771766 out of 5

Keywords: landlord, tenants, real estate, investing, property management, tenant screening, how to property management, real estate investing

Id: 99Q5iV2j1So

Length: 14min 12sec (852 seconds)

Published: Sun Jul 28 2019

Reddit Comments

[u/thelogicproblem]

Thanks, I want to die now.

[u/gliese570]

wow, after just the first 75 seconds i already want to disconnect my internet.

[u/meinchemicalbromance]

I like some of the comments lol.

[u/sonicsilver427]

Jesus, he's got a smug face you could break.

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"Every time they pay rent my net worth goes up" -- Guillotine time increasing

[u/syber0001]

27 going on 40