Why You Should Consider Flat Fee Listings

One of the things we do in our business is when we rehab and sell a property – instead of listing it with a Realtor – we use a flat fee listing service instead. If you are not aware of flat fee listing services, there are flat fee services in almost every real estate market.

Why I like ‘em…

A flat fee listing service is one where a broker will take a flat fee for simply taking the listing and putting your property on the MLS.

The service we use, which only operates in the Southern states, charges a $175 flat fee. But you should be able to find another service local to you.

Since it is a “Fat Fee,” there is no “percentage commission” to pay to a listing agent. In other words, you are not paying out 3% to a listing agent. You are only paying $175. This can save you thousands of dollars depending on the price of the house you are selling.

Buy & Hold 101: How We Screen Our Tenants

parkingWelcome back to another segment of Buy and Hold 101. In the last session, we talked about where you can go to find your tenants. My advice is always: Never go the easy route of finding people who will live in your properties.

For example, if someone says their cousin’s mother-in-law’s uncle needs a place to rent, refrain from snapping at that bait. It could spell doom for your rental business. Use good business practices at all times – such as those we talked about in the previous post.

Now on to the next step – finding tenants is only half the battle. Once you have a prospective tenant, you must walk them through a predefined screening process. Again, I have to emphasize – don’t try to shortcut this process. You will do so at your peril.

A Simple Process

If screening is so important, why do so many landlords (especially new landlords) skip this step?

Usually, it’s because of a lack of knowledge. Most don’t know how to go about it, and it just seems like too much trouble. The truth is, screening tenants can be a simple process.

There are many online companies that you can use to run a background check and they're not that expensive. Here are a few sites you can check out:

www.e-renter.com

www.tenantverification.com

www.ucheckcredit.com

www.tenantcheck.com

The main goal here is to do a criminal background check and a credit check, on every potential tenant.

Check the Facts

This doesn't mean that you’ll be using the information against them or that you’re not ever going to rent to that person, but you're going to check the facts in order to protect yourself and your business.

My policy is to build the cost of a background check right into the application process, which typically is less than $50. So if they want to rent the property, they have to show up with a check for the cost of the background check.

superThis is a non-refundable fee because immediately you’ll spend it on the background check. Show them the receipt to let them know that you’re good to your word. If you’re interviewing two or three and choose only one, now you’re not stuck with the fees for all three background checks.

“I’ve got the Money!”

Here’s an added tip that I’ve learned over the years. Be wary of people who call up wanting to look at the property and after they learn the rent amount they say something like:

"Hey, I've got the money, I can pay it today ..."

Don’t let the cash divert your attention. Remember what I said – don’t take shortcuts here. If they're talking money before they see the property, there's a reason. Consider it to be at least a yellow flag, if not a red one.

They’re trying to make the money the main focus rather than who they are or what their background looks like.

Scary Consequences

Here’s what happens – the newer investor, who is managing their own properties and dealing with their own tenants, may think like this:

Hey, I've got this potential tenant who has the cash to pay for the first and last month’s rent; they’ve got the cash for the security deposit; it's been vacant now for 35 days and I’m SO ready to get this thing rented… I’m just gonna skip the background check this time.

Three months later, that over-eager landlord is walking through the long, drawn out process of eviction. Talk about expensive – an eviction is expensive both in time and money.

The tenant had the cash for the rent and deposit, but that was it. They have no ongoing source of income; they stop paying and it takes another month or two to get them out of that property. Meanwhile, they’ve had just enough time to trash the place.

Don’t Judge the Book by its Cover

Another tip: Don’t judge people by how they look.

It takes all kinds, as the saying goes, right?

I’ve had people who were dressed nicely, drove a nice car and then turned out to be the slowest paying tenants. I’ve often joked that sometimes educated, intelligent people simply have more educated and intelligent excuses for not paying on time.

I’ve learned to be very direct. When a prospective tenant hands me the application, and before I run their criminal or credit background check, I this question:

Hey look, I'm going to do a full check on you. I'm going to pull up everything I can about you, anywhere from a criminal background, credit, financial, everything. Is there anything that I'm going to find that's going to scare me? And if there is, if there's something you think I might find, would you go ahead and be honest with me now? That way we can deal with it and get it out of the way.

nackgroundSome will say, “No problem – I’m good to go,” and lo and behold you discover felony drug arrests. Now you have an issue.

Then you might have the guy who lets you know he’s a recovering drug addict who just moved out of a halfway house. He’s starting a new life with a new job and has his employer’s reference.

Which one’s the greater risk?

I’ve learned to lean on the side of up-front honesty.

Interestingly enough, some of my best tenants have been people who had issues in the past and are now moving forward, but they were completely honest and transparent with me up front. Their honesty speaks volumes to me about the type of tenant they’re going to be.

Little Rover?

There’re a number of important decisions you’ll have to make when dealing with tenants. One biggie is pets – will you allow pets or not? And what will be your boundaries regarding those pets?

It’s never a cut-and-dried issue.

Personally, I’ve never had a problem allowing pets, but no matter how large or small, they leave a smell. That's just the way it is. You have to assume you're going to pay for either a thorough carpet cleaning or all new carpets.

You must insist on a non-refundable pet deposit – this means non-refundable no matter how clean the place is when they leave. They know right up front that that money is not coming back to them. That’s part of the rental agreement.

It will be your judgment on the deposit amount. It should at least be enough to cover the cost of cleaning, if not the total replacement, of the carpet.

Having a strict no-pet policy might save money in the short run, but it will greatly limit your tenant base in the long run. Most families love their pets.

Restriction Clause

Another tip when it comes to pets, you may want to add a clause (depending on your level of comfort) that restricts certain types of pets. A pit bull for instance. You don’t need the added liability of an animal that has a reputation for being considered dangerous.

I’m sure there are well-trained pit bulls that are not dangerous and that’s fine. But they don’t need to be on your property. Again, use wise business policies. (How do you feel about boa constrictors?)

My Amazing Pet Story

Before we close this out and get off the subject of pets, I have to tell this story of one of my rent-to-own tenants.

petI had fully remodeled this house when I bought it, and this tenant had paid a hefty deposit to move in. I hadn’t visited the property for almost two years because they paid right on time every single month. All of a sudden, one month – nothing.

I called his cell and it was disconnected. I called his wife and got no answer back. Finally, I decided to stop by the house. The house looked great – probably the best looking house on the street.

I knocked on the door and it sounded like a freight train coming to the door. It was dogs. Like a herd of dogs. The commotion was horrific. But no one answered my knock, so I left a note on the door giving a 5-day notice.

Then I got a call from the tenant. He said his cell had been inadvertently disconnected, and that he’d pay the rent immediately.

Now I had to ask: “Tell me, how many dogs do you have?

He said, "Well, we got a couple."

Can you say understatement?

I said, "But in the lease agreement, it says no dogs. How many dogs do you have?"

"I have 15 dogs."

I nearly panicked. "You have 15 dogs in a house that I'm renting to you? I don't even know if I have insurance that covers if one of your dogs should attack a neighbor kid.”

His reply was, "I'm headed to the bank; I'm going to send you a $2,000 non-refundable deposit. And by the way, the day we got our first dog, I took up all new carpet, rolled it up, slid it into a sleeve and it's in the garage."

Wasn’t that so thoughtful of him?

Fifteen dogs. I was in shock. Needless to say, I demanded they get rid of most of them, but it was a huge uphill battle. They finally got the number down to 4 or 5.

From this I learned 1) to go check on my properties more often, and 2) to make sure it’s crystal clear in the lease agreement whether or not pets are allowed, and if so how many will be allowed.

Every landlord has a list of almost unbelievable stories like my 15-dog story. But by and large, if you follow the tips given in this segment of Buy and Hold 101, you’ll be protected against most of the hazards that could come your way.

Coming Up Next

In our next session, you’ll learn how to protect your assets. What good is it to build up a nice inventory of rental properties if one frivolous lawsuit could send you packing? Don’t miss this crucial information.

Meanwhile, keep it classy!

signatureChime In

I’m interested in hearing your experience with screening tenants. What’s worked for you? And what met with disaster? The things you have learned will help others – so don’t hesitate to share.

Winner, Winner Chicken Dinner

winHi guys, Franklin Cruz, REI Drill Sergeant here…

I want to tell you about something awesome here at Clever Investor… The Clever Labs.

The Clever Labs is absolutely the most exciting event in the real estate industry today. Attending the Clever Labs in June was exhilarating to say the least. I’ve been to plenty of real estate events and this is the first one I’ve attended that not only kept my interest throughout, but also left the attendees smiling as they left for home.

After an extremely close battle over the two-day event, Dinesh Nagabhushan’s team emerged victorious. The winning team of the Clever Labs is determined by the number of calls made to sellers, the number of lead intake forms filled out, the number of contracts sent to sellers and the number of contracts returned. The excited and well-deserving winning team is pictured here – Clever Labs #008 – Official Winners!

You Decide: Corporate Conveyor Belt or Real Estate Investing?

2015-7-6-260Hi guys, Franklin Cruz here – REI Drill Sergeant and Mentor …

American jobs are getting more and more SCARCE these days, that’s no secret to anyone. But is taking the exciting yet terrifying leap of faith into the unknown chasm of entrepreneurship really worth the headaches and confusion?

In a word (or two): OH. YES.

Like with removing yourself from any “comfy” situation, leaving a cushy corporate job for one of self-reliance can be daunting. But in the end, it’s almost ALWAYS one of the most rewarding things my students have ever accomplished.

What’s Your Eye Q?

eyeFrom Dave Ludena, Real Estate Rockstar…

I was recently talking to a mentor of mine (yes, a mentor has a mentor. Guess what? That mentor has a mentor, too. I’m willing to bet THAT mentor has a mentor) and we were discussing vision.

He said that as humans, we hunger for vision. If we are unable to create a compelling vision for ourselves, we will latch on to someone else’s vision. With no vision for our future, ours or someone else’s, we extinguish our powerful internal fire.  

That’s some heavy stuff if you think about it.

And in some cases, very sad because so many go without. The good news is that we can ignite it at any time. That is our choice. Today I want to discuss creating a compelling vision and how this will serve you in every aspect of your life, including your real estate investing business.

Challenge Yourself and Give Back To The Community

Hey guys, it’s Torsten Coulson again, taking a quick break from our 10 Critical Steps to Fix and Flip Success series for something I think is really important…

Today, I wanna talk about challenging ourselves and giving back to the community.

A few weeks ago in my real estate investing company, our team talked about ways to challenge ourselves. We talked about this so that we can become better than we were yesterday and to help us stay focused. We came up with ways to challenge ourselves in business, our personal lives and talked about ways to give back to the community.

The 5-Year Foreclosure Clock Is About To Expire

From Tom Nardone, Millionaire Mailman …

Do you know any borrowers in judicial foreclosure states who got stuck in their houses when the market crashed 5 years ago?

The hardest hit areas of the country are rebounding fast with value, but that does not change the fact that the major lenders have lots of mortgages and notes out there that are still not getting paid on… and now many of those old foreclosure cases are hitting the 5-year statute of limitations for being able to foreclose against a non-performing note.

Florida, where I live, is just one of those states, and the 5-year statute is now in Florida Supreme Court waiting for a decision.

Buy & Hold 101: How We Find Good, Quality Tenants

You know all about property managers, don’t you?

In fact, I’ll bet you’ve become a true virtuoso, a mastermind at finding good property managers.

How do I know this? Not because of my crystal ball (but man do I wish I had one). I know this because when we last met, I shared with you some awesome tips on how to find, interview, and communicate with good, quality property managers, and I know that you’ve since applied what you learned and put the lessons I shared to practical use in your own businesses.

The Most POWERFUL and UNKNOWN Real Estate Investing Event

Hi guys, Franklin Cruz here – REI Drill Sergeant here…

I want to talk to you today about something awesome – that you might be missing out on – The Clever Labs.

The Clever Labs is an effective real estate investing event held by Clever Investor. And, as you probably know, Clever Investor provides marketing for their students and holds a groundbreaking conference where mentors walk their students through live deals!

Finding Bodies in Your Neighborhood

2015-6.30-260From Dave Ludena, Real Estate Rockstar…

I remember reading an article where someone fell and drowned in a river. In order to retrieve the body, the police dragged the riverbed to try to pull it up. You can imagine in doing so they pulled up all manner of goodies: shopping carts, shoes and probably several bodies… depending on where you live. (Dexter fan, anyone?)

It’s likely you have heard of finding properties by “Driving for Dollars,” where you look for vacant/distressed properties. But, that is only one of the bodies we want to drag from the riverbed of our target neighborhood. Why? Because that’s how the mere average investor does it.  

Today, I’m going to show you how the Clever Investor (yeah, you) does it and leaves no bodies behind. Heck, if you are out there anyway, let’s make it really worth your time.  

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