Hey, gang. Kris Krohn here with Limitless wealth TV. Today, I'm going to be answering
the question on how to be a landlord and make sure you hang out for the end of
the video because I'm going to actually do a little litmus test on whether you
should or shouldn't be a landlord and no worries, if it's right up your alley
you're set but if it's not, I'm going to give you two alternatives one of them
being my ultimate favorite.
Alright, so today we're going to be jumping into this conversation of how to
be a landlord and before I jump into this, I just want to invite you to start
thinking now, should I be a landlord? Because I'm going to share with you two
different alternatives if landlording is not for you so here's just a couple of
the rules. If you're insisting or thinking I am going to be a landlord, here's
a couple of things that you need to know right out of the gate. Rule number one,
you have to put the right tenant in the home now you might be thinking well how
do you do that and how do you know who the right tenant is Ultimately, it's
going to come down to the fact that if you've done a background check and if
the people can put up their first and last month's deposit or whatever their
lease option down payment is, they need to be able to comfortably afford the
place that they're renting and so you might get someone for example, let's say
you're renting out a place its 1,200 a month and the previous place they were
renting was 700 a month and you call that previous landlord and the
landlord's like, "Oh yeah, they struggled to pay their rent they were
late every other month." Guess what's going to happen when they have a $500
increase with your rent? Even if they got a job and there's a reason why they
think they can make it on time, people are usually creatures of habit, it's not
necessarily a creature of finance, some people pay the rent first and some
people that's the last bill that they pay which is why they're sometimes
perpetually late so I think the first thing for you to do is just recognize
that rule number one is put the right person in and the best way to know that
is number one to look at the debt to income ratio, look at how much they make
versus what the rent is and then just use some common sense, right. If it looks
like they're making plenty of money then that's one way of knowing they should be
able to pay their rent but then number two, call some references. Now I tend to
be personally a little bit lazy and not like to jump through all those hoops
that's why I have property managers and people that will do some of those things
for me but one way or the other, it's really important that they do get done
so remember if you want to be a landlord, number one, put the right people in the
house. Okay, rule number two, how lenient of a landlord are you, okay?
Because when you're brand new to the business, there are some people that are
like built for landlording, they tend to be bulldogs, they tend to be by-the-book
and keeping the rules and justice but if you're one of those really tender heart
softened individuals that likes to hear the story of how they lost their job or
their paycheck got lost or you know they went to their grandma's
funeral and that's why they're late for their rent and if you just have that
heart-wrenching disposition then lording is very likely not for you because
you're the problem, you're actually going to help perpetuate the fact that they're
like oh yeah so-and-so is a pushover so I'm going to pay them after we pay these
less important bills, right. And so you've got to, you've got to have a strong
stomach and you've got to be willing to meet her out the contract and the
information the way that it is ultimately set up and designed. The
moment you start creating a room for any kind of leniency, I promise you, in 99% of
situations, they're going to come back and they're going to start taking advantage of
that, they're going to start leveraging that against their own game because when
you're tied on money and by the way, understand that most people are so what
that means at the end of the day is they're trying to figure out who can I
push. They know what their cell phone, if they're late and they don't
pay it, guess what happens. Their cell phone gets turned off. Guess what happens
if they don't pay their electricity bill, it gets shut off but guess what happens
when they're late on their rent? No big deal, they're going to give me five extra
days, they're not even going to impose the late fees. Listen, this is a business and
if you don't treat it like one, I'm just telling you, there's people out there
they're going to mess with you and it's not even because they're trying to, it's not
because they're bad natured, it's just that when things are tight they want to
know when push comes to shove who's firm and who's soft. Rule number two, do not
be a soft property manager, it will establish a habit and I promise you in
most cases you're going to start seeing a repeat problem show up and I want you to
understand in that situation, if you're watching this in you're a landlord, you're
like, I'm kind of guilty of that, you are the problem in this, it's not the
fact that they're asking for leniency, it's that you're dishing it out, okay.
Those are the two rules. First of all, that you want to be aware of when it
comes to landlord. The next thing that I want to share with you is that there's a
professional approach to landlording, you need to be familiar with the local state
laws that you have because some states are super friendly towards landlords and
some states are super friendly towards tenants, like there are some parts of the
country that if you're late on your rent, you have these massive amounts of
redemption periods to kind of get caught up and you can basically squat in the
house for quite a buried a period of time without actually you know paying
your rent, there are other areas where you're late, I can give you
three day notice and you have to vacate so be familiar with your laws and making
sure that you're enforcing things legally, making sure that you're using
the proper paperwork, if it does come unfortunately to something like an
eviction and so you need to have that Oracle mind set up that says I'm going to
follow the laws of how this works, like rent's due on this day and if I don't
collect it by this day then they get this paperwork and if they don't get it
by here than I do this and the landlording business even though often
if you put the right person in the home, it's going to take so
little of your time you're going to hardly be aware that it exists but if you have
the wrong person or someone that's come under kind of hardship or dress or
something's happen in their life then all of a sudden that can start feeling
like a job, you've got to make some phone calls, you've got to start showing up on
premise, you've got to do some different things and a lot of the new investors
that go out there and they make the mistake for believing that they're going
to be a really good landlord or that they take that part for granted like
that part's easy or it's not worth paying a management company 10%
of gross funds to do that for me, in this energy of trying to save, if you're not
going to do it the right way then you really shouldn't consider that and then
you probably shouldn't be doing it because ultimately, it's going to hurt you
more than anybody else so those are the three different considerations that I
would share with you and now's a little bit of a bonus I want to share really
the other side of this which is, hey if you don't want to be a landlord, you need
to consider two different replacement options. The first one is just higher
property management, that one I think is, that one makes sense, right? It's not my
favorite of the two options but yeah, if you have a property manager step in,
they're generally going to charge you 10% of gross rents so if the place
is collecting 800 a month, they're going to want 80 of it and if it's 1,200 a month,
they're going to want 120. So 10% of whatever the gross collection is and you
know they'll be the professionals that divvy out the paperwork, they'll send by the
the line up the repair people, they'll do whatever it takes to get that
taken care of and some investors don't want to do that because that cuts in if
you have a $300 cash flow and that eats up a hundred and fifty of it you know
then there's less. The other thing that you do need to be aware of with property
managers is because it's not their property, they don't care as much about
the rates that they can make on having things repaired always which means if
there's a repair you might want to go in and take care of it but if they send
their person in, it might cost double or triple and so you just want to be aware
that there's a maintenance issue or if
there's a repair issue, who are their people, you never really know whether
there's kickbacks involved but they're not going to penny pinch on
the repairs the way you might and so if you are going to hire someone, be aware of
that and then here's the second option which ultimately really is my favorite
option which is, alright, what about a lease option?
It's my compassionate financing system, you can go to my website and actually
download the book for free and my team and I can actually teach and show you
how to do that, we can give you the contracts, we can set that all up for you
but what I love about a lease option is I typically make on average, for a home
priced underneath the median, meaning a house under two hundred and twenty
thousand dollars, on average I make forty thousand more dollars on it than I would
doing a rental and the people manage it and the people take care of it and they
give you a down payment so they're showing a far higher
degree of responsibility and skin in the game to take care of the property and
treat it like it's their own versus just a place that they're
temporarily renting. You check out one of the other videos on the way out so you
can actually learn more about this lease option system, I'll give you the details
on exactly how to do it in these other videos and that would be a great way for
you to have an alternative if landlording is not for you. Hey, I sure
hope you enjoyed that video and I really hope that it was useful for you. If
there's something that I missed on landlording that you have questions
about, drop them in the comments below. So make sure you check out my website or
the link in the description below this video and what I'll do is, I'll share
with you really a lot more of the details of how Lease Option works, why
it's such a fantastic system or you can even check out this video right here
where I walk you through it.