by Attorney William Bronchick

There are over 80 million lawsuits filed every year in the United States. Landlords and real estate investors are especially susceptible to liability. Are you a target? Are your assets easy to locate? Is your real estate titled in your name?

You wouldn’t walk around with a financial statement taped to your forehead would you? So why would you have your most valuable assets exposed to public scrutiny? Anyone can go down to the county courthouse or recorder’s office and look up the owner of any property. Real estate records are now computerized, so all of your real estate holdings can be located at the touch of a button!

Any mortgages on your property will be recorded as well. Most recorded mortgages will state the amount of the original principal balance and the date the mortgage payments began. All one has to do is figure out the balance of your mortgage and subtract that amount from the market value of your house. Bingo! Now they know how much equity you have and hence whether suing you is worthwhile.

If a tenant or creditor is contemplating suing you, he will make an appointment with a lawyer. Unless he can afford an attorney by the hour ($150 and up), he will likely seek a “contingency-fee” lawyer. A contingency-fee lawyer does not charge by the hour; he charges a percentage of whatever he collects. Most contingency-fee lawyers will not take a case unless there is something upon which to collect. If you have no real estate in your name, then finding out your ownership interest will not be easy for a typical lawyer. It’s not that lawyers are lazy. It’s simply a matter of allocation of resources; lawyers focus on cases they can win and collect. If they don’t find any assets in your name (and there is no other apparent “deep pocket”), they probably won’t take the case. As you can see, appearing “broke” is the best lawsuit-repellent money can buy!

There is another problem with owning real estate in your own name. If a judgment is obtained against you and filed in any county in which you own real estate, all real estate in that county will have a lien attached to it. You cannot sell or refinance any property in that county, since no title insurance company will guarantee a clean title. You’re stuck until you pay off the lien.

Some people use a corporation or limited liability company to hold title to their real estate. While these entities will protect you, they will not protect your property. If you own all of your properties in one corporation, a judgment against the corporation will create a lien on all property owned by the corporation. Furthermore, the directors and officers of a corporation are public record, so a corporation will not hide your ownership.

The solution for holding title to real estate is a land trust. A land trust is a revocable, living trust used to title ownership of real estate. Title to the property is held in the name of a trustee, who is forbidden to reveal the beneficial owner. The beneficial owner or “beneficiary” can be an individual, corporation or other entity for further protection.

Land trusts were first used in Illinois, hence the nickname, “Illinois Land Trust.” In nine states (AL, FL, GA, HI, IL, IN, ND and VA), land trusts are specifically recognized by statute. In most other states the validity of land trusts are supported by common law and general trust principles (land trusts are not recognized in TN & LA).

A land trust, if properly setup and implemented, will hide your name from the public records. No one will know who owns the property but you, your attorney and the trustee. If a judgment is entered against you, a lien will not automatically attach to the property, since title is not in your name.

A transfer of realty into a land trust virtually no income tax consequences. A land trust is considered a revocable “grantor” trust under the Internal Revenue Code, so it does not require a separate tax identification number or income tax return. Thus, you continue report the property for income tax purposes as though you still own it. Furthermore, a transfer of property into a land trust will not usually trigger the “due on sale” clause of your mortgage.

So What are your waiting for? Get that Property Out of Your Name! You can find information and forms for creating personal property trusts in William Bronchick’s Land Trust course.

Real estate investors looking to make that first real estate investment have undoubtedly become aware that finding a good income property can be daunting. Good real estate investment deals are either hard to find or they are already taken. This article will explain how to locate good investment opportunities that are hidden from plain view.

Develop a good working relationship with a real estate professional

A qualified real estate salesperson can be an excellent resource for you. You can build trust by exclusively working with one agent.

Look for builder-developers

Look for people who are in the business of selling their own real estate. Often you can find someone with a treasure trove of inventory that is motivated to sell some of it off.

Look for code violations

Local building codes sometimes change during the course of ownership and put a seller into a difficult spot, for example when the state passes a law to require buildings of a certain category to have fire sprinklers installed, or earthquake reinforcement. The required investment to do that work may be more than the owner has to spend, and in turn might motivate the owner to sell at a reduced price instead.

Look for foreclosure-REO

When lenders foreclose on a delinquent loan and buy the property themselves at a foreclosure sale, they end up with real estate owned property (REO property) which they generally prefer to sell rather than operate. REO properties can sometimes be a prime source for good deals.

Look for sale by owner

It’s common for owners to market their own properties to avoid paying a real estate commission. When properly handled, sale by owner (FSBOs) can be a good source for good deals.

Look for management problems

Properties in need of maintenance can be an indicator that the owner no longer has a heart (or the cash) to continue managing the property and might want to sell. A call to the owner expressing your interest in the property might be all it takes to negotiate a good deal for yourself.

Run your own numbers

Regardless what resource you pursue, always run the numbers yourself, and do not naively accept numbers for a rental income property given to you. Making a small investment into affordable real estate investment software will help protect your investment.

James R Kobzeff is a real estate professional and the developer of ProAPOD Real Estate Investment Software. Discover how you can create cash flow, rate of return, and profitability analysis presentations for rental properties in minutes. Go to => http://www.proapod.com

The purpose of your investment real estate is to produce positive monthly cash flow and sell for an increased value at some point in the future. The only way rental real estate will be successful is to have excellent hands-on partners in the venture, otherwise know as tenants. Great tenants are crucial to the financial success of your rental property. In fact it’s been said that the property isn’t an asset without great tenants in it. So where can you find the elusive great tenant? They’re only elusive if you don’t know how to attract them. By being open minded and pro-active, pumping up your ads and sweetening the deal you can attract great tenants like bees to honey.

Five years ago I tried to persuade my property manager to start placing rental ads on the Internet. She flat out refused. In her mind no one was ever going to look online for a property. The only place to advertise was the newspapers, granted it was more expensive but that was the way she had always done it. Now, I exclusively rent on line with great results.  Statistics show that people go to the Internet first to find place to live. In areas where migration is out of state, province or even the country your tenants aren’t going to pick up the local newspaper; their only resource is online. The point is you have to follow your tenants. Be ready to change and adapt to new markets or even set the next trend in rental ads. If times changed and skywriting became the new way to find tenants, you can bet I would do that too.

When I was a tenant I can’t tell you how many rental ads I combed over looking for the perfect mix of comfort and convenience that wouldn’t bust my budget. The sad part is most ads were written in a language I couldn’t understand. There were a lot of “bdrms” and “bas” and until I figured that lingo out I was lost in the world of Realtor speak. Most of the time I had no clear idea of what I would be looking at until I physically went to the property. Imagine if you wrote an ad that literally put a movie into your ideal tenant’s head.  As they read it they could see themselves living in your house, better yet they couldn’t wait to move in.  How do you do that? Use adjectives, the more the better, and tell your tenants what a great life they will have in your house. The additions of words like beautiful, stunning, gorgeous and stylish are proven to significantly improve the sale price of a house; don’t you think they will attract tenants as well? Turn  “new kitchen” into “the perfect place to start the day with your family” or “3brdm” into “more than enough private space for everyone in your family”. Now doesn’t that sound more appealing?

A vacant property is doing nothing but keeping you up at night. When you have empty investment properties you have a lot more bills to pay, another mortgage and the fear of squatters. If there was a way to keep your property tenanted for long periods you would do it — even if it cost you money. So how much are you willing to pay? Would a few hundred dollars be an extraordinary amount if it kept happy equity building tenants in your suites? Give back to your tenants. If you sweeten the rental pot you’re sure to get tenants who enjoy living in your property and won’t leave unless they are moving to their own home. All you have to do is think what extras people need when they move. Is it free cable? Free internet hookup for a year? Or could you offer one-month free rent if a one-year contract is signed and honored? How about gift coupons for dinner and a movie every 6 months? Little things build a long-term relationship with your tenants. Tenants will stay where they feel good, and remember in an area where vacancy rates are high it’s just as easy to move out of your place into another.

It’s not hard to find good quality, long-term tenants for your rental property. The best thing to do is to treat your renters like the valuable business partners they are. A little positive action goes a long way to making a win-win situation for everybody.

Glenn Simon Inc. delivers superior, revenue joint venture properties in the economic power house region of the Alberta Oil Sands, Canada. Our goal is to partner you with equity building Investment Real Estate, strong appreciation and consistently profitable, safe and secure Joint Venture Real Properties. Todd enjoys spending time with his family, traveling around the world and a variety of outdoor sports.

For every action there is a reaction. If things are bad for one, they have to be good for another, right? The same principal applies in the world of investment real estate. We have all read about the developers and owners of commercial real estate that are undergoing tremendous financial pressures with some being forced into bankruptcy. So what happens to their real estate? Well, the owner or lender puts it on the market at a discount to attract a solid, mortgage worthy buyer who can perform quickly and close a deal. Unfortunately, you as an individual investor or partnership will never see these deals because they typically involve several properties valued at several millions of dollars. And why would you want them? If the current owner can’t sustain them what magic can you perform?

Net Leased Real Estate

However, there is one asset class that is outperforming the market that should be at the top of your list. I am referring to net-leased properties such as drug stores, bank branches, auto parts stores and dollar stores. As many retailers are struggling to stay open these retailers are defying the trend and are some of the most solid performers today. And the prices for these assets are being lowered to attract investors. For example, asking capitalization rates for a fairly typical Walgreen’s Drug Store twelve months ago were in the very low sixes. Today, approaching the first of May of ‘09, the asking prices are pushing the 7.25 % cap rate range, with some higher. Translating that into a sale price, what was being sold a year ago for $6,100,000 can be purchased now for $5,285,000. Same tenant, same credit. The credit crunch has triggered widespread re-pricing in all sectors of the real estate industry. In general, the market has witnessed Class A property cap rates increase by 25 to 75 basis points while B and C property cap rates have climbed 50 to 150 basis points. For buyers of newly constructed net-leased properties with 10 plus year leases to credit tenants, well-capitalized buyers are finding that this is a great time to invest in net-leased properties. 

When considering the purchase of any commercial real estate investment property you must ask yourself one critical question -what are my management responsibilities in terms of time and physical effort? With a net-leased property the tenant pays all, if not most of the expenses making the properties next to management free. If you are a professional without the time or inclination to devote to your real estate investment but at the same time understand all the benefits of owning real estate, it should be pretty obvious that this property type suits your lifestyle.

Conclusion

Very simply stated, prices are coming down for even the best real estate, and net-leased real estate properties offer the investor a conservative investment strategy. These are properties with long term leases with credit tenants in good locations and no management headaches.

Ned is a Vice President, Investment Properties with the CB Richard Ellis Group of Companies. 419-794-3953 ned.coyle@cbre.com  or at http://www.netleasesuccess.com/

As home inventory begins to shrink and interest rates remain low, the better real estate investment bargains are getting multiple offers from interested buyers and investors are eagerly snapping up homes – often under the mistaken assumption that every short sale, foreclosed or REO (real estate owned) property is a highly profitable investment opportunity.

Unfortunately, according to HomeLovers, while a home may be a great bargain, it may not be suitable as a rental property. “We are still seeing way too many people apply the right timing and enthusiasm to the wrong property,” stated HomeLovers Co-founder David Zundel.”Investors are bringing their new steals to us to manage, only to find out that the home they bought has long-term challenges and attracts the wrong types of tenants or is prone to vacancies.”

“Over 80% of the homes brought to us for management are the types of homes that we would never have purchased or sold as investments,” added Michael Sargent, HomeLovers’ other co-founder. “Even the cheapest foreclosure can be a very expensive investment mistake.”

Before jumping into what seems like a great opportunity, how can you avoid common pitfalls as you select properties to invest in?

1. Do your homework before shopping for a home, so you have a thorough understanding of your long-term plans for the property and the type of tenant you want to attract. It is important to know what your ideal tenant is looking for and the type of property that is most likely to meet their needs. For example, a two-story home in Sun City, Ariz. might lend itself to vacancy issues simply because the senior demographics of the area are adverse to stairs, where a two-story home in Chandler, Ariz. near a park or school may be in high demand because of its younger demographics.
2. Spend time looking at the demographics of the prospective home’s neighborhood. Some neighborhoods are simply prone to attract the wrong types of tenants by nature of their affordability. If you are looking at homes renting for under $1,000, understand that you are looking at tenants that typically earn double or triple that – or $24,000 to $36,000 annually. Renters in this income level may struggle with bills and add an unwanted risk factor to your portfolio. The most common mistake, according to HomeLovers, is that investors are scrambling to buy the sub-$100,000 homes. While that might be a great price, there are many more issues that impact a property’s profitability, and the advice of a reputable portfolio planner is critical.
3. Don’t wait for the bottom of the market. By the time sources confirm the market has hit bottom, prices and interest rates are already on the upswing. Many people tend to sit back and watch before taking action, but if you watch too long, opportunities are  missed. The time to buy is now, but it should be done carefully. Investors need to purchase with the long-term returns in mind. With the right tools and/or the expert advice of an experienced property manager, it is easy to crunch the inventory of available properties down to a short list of homes that would make a truly great investment. Once you have a short list, you can shop for the best deal without compromising long-term investment ROI. This strategy will put you ahead of the masses that are getting a great “deal” on bad investments.
4. Consider homes in the $1,000 – $1,500 monthly rental range. This is the “sweet spot” of the market that attracts financially stable, reliable tenants. With all of the foreclosure activity, many people who are used to owning will not be able to buy for a long time. These people make fabulous tenants, and will make a strong pool of tenants for years to come. Until the foreclosed owners get their credit back and start buying homes, we will enjoy a larger group of mid- to high-end tenants. The nicer properties are getting rented faster than ever, and there is a huge demand for middle to upper income homes to rent. Savvy investors need to consider bargains in this area of this market, instead of chasing the homes under $100,000.
   

HomeLovers is one of Arizona’s most rapidly growing home rental and property management companies, founded on the premise of creating a drastically improved property management agency model, including full disclosure of fees and anticipated costs in a market that is prone to “junk fees,” unexpected costs and inexperienced agents that make it difficult to manage profitable real estate investment portfolios. Visit their investor blog at www.arizona-investment-properties.com or their website www.homelovers.com for more informatio

Bad tenants are a landlord’s worst nightmare. Between not paying their rent, trashing your rental property, allowing pest infestations, committing criminal acts in the property and a hundred other miserable acts, bad tenants can make a landlord’s life miserable. Fortunately, there are tactics you can employ to minimize the damage caused by bad tenants.

First Line of Defense: An Airtight Lease Agreement

Before you allow a tenant to move into your property, you can lay the groundwork for addressing future problems by using an airtight lease agreement. Every state has different landlord-tenant laws governing what your lease agreement can contain, so be sure to use a state-specific lease agreement. These can be sometimes be obtained through your state’s website, but more likely you’ll have to buy one online (EZ Landlord Forms offers a custom lease agreement for each state).

Among other provisions, a strong lease agreement states clearly the landlord’s policies on cleanliness, property maintenance, criminal activity, late rental payment penalties and all other common problems that can arise.

Second Line of Defense: Adhere to All Disclosure Laws

Bad tenants will often run crying to sleazebag attorneys or Legal Aid, claiming that the “Big Bad Landlord wants to evict me! I didn’t do anything wrong, oh protect me protect me!” And the first thing lawyers will do will check to make sure that your lease agreement is valid and that you complied with all applicable landlord-tenant laws, including delivering all of the necessary disclosures. You have several options for complying with these laws:

1. You read your state’s landlord-tenant code directly
2. You hire a real estate attorney to tell you what to do, or
3. You use an online landlord forms system that automatically fills in all of the required forms for your state. 

Third Line of Defense: Offer a Deal to the Tenant to Vacate

It always pays to offer a carrot before a stick, so when your tenants go bad, sit down with them, preferably in person and make them an offer. If they can be out of the property within the week, with all of their belongings, you won’t take them to court and get a judgment against them. If they want to fight and drag it out, then tell them that you’re going to file the eviction, which shows up on their credit report, and obtain a hefty judgment against them for back rent, court costs, legal fees and damages to the property.

Fourth Line of Defense: Comply with All Local Eviction Laws

Every state outlines different eviction procedures in their landlord-tenant laws, and all landlords need to comply closely with them if they want to clear the bad tenant out of their rental property this decade. As with every other step in this process, as a landlord you have several options:

1. You can hire a real estate attorney who specializes in evictions, which is effective but pricey;
2. You can hire an eviction specialist, which is less expensive and often effective; or
3. You can do it yourself, by mailing the appropriate notices to the tenant and filing an eviction form with the local landlord—tenant court (see the above landlord forms link for state-specific eviction instructions).

As a final note, it helps to have all of the tenants’ asset information on record, for collection purposes, and the cheapest and easiest way to learn this information is to simply have the tenant fill it in on their rental application.

Which brings us back to the initial point of prevention: Through being diligent from the beginning, when they first fill out the rental application and you first sign the lease agreement, you can lay the groundwork for dealing with future problems. Hopefully, you’ll never have to do any of these actions, and your tenants will all be clean, make their rental payments on time and take good care of the rental property—but don’t count on it.

Brian Davis is a landlord who has owned dozens of rental properties. He is currently traveling the country on a photography tour and hosting gallery exhibitions featuring his work.

1. Holding out for a “home run” deal

If your home is worth $1,295 in the current market, you can waste months chasing $1,395. How many mortgage payments are you willing to make trying to get a “home run”? Home runs can backfire on you too. Tenants have a knack for finding out they could have had the home next door $100 less every month. When your tenant knows they are in a great rental home at a fair price, it shows in the way they care for the home and how long they stay.

2. Waiting to get repairs done

“I will paint the house if it doesn’t rent in a couple of weeks”. Sound good? This is a really bad idea! You should always be thinking of the tenant your home will attract.  If your home isn’t in optimal shape to attract the very best tenants in your specific market area, you will only get tenants who don’t care what their home looks like. You may get the home rented without the cost of the repair, but it may not be the tenant you want in your home for the next 12 months. If you end up doing the work in a couple of weeks… all you did is extend your vacancy and waste more money!

3. Ineffective marketing

A simple line ad in the paper may be the quick end to your vacancy. Be careful though – most consumers depend on the internet and our best applicants now come through online ads. You have to track your efforts to see what media produces the best (not always the most) calls per dollar spent. A “free” ad can cost you days or months of vacancies if it keeps you from finding the best tenants.

Whether you choose paper or online ads, you must have a well-written ad to get the phone to ring. You also have to be priced right, and have the home available to rent. If you aren’t getting any calls, it is usually about price. If you are too high, most people won’t even take a look. If you are getting plenty of lookers but no takers, check the home out to figure out what is turning people away.

When you hire an experienced property manager, you are buying into their proven systems for marketing and leasing your home, which eliminates the guesswork. If you decide to “save money” and lease the home yourself, be ready to commit serious time to your education and expect the process to take longer.

4. Using an inexperienced agent

There are many reasons to use a leasing agent, but if your agent isn’t experienced, there isn’t much benefit at all. In any major markets, there are literally thousands of real estate agents who want a commission, but very few with enough property management and leasing experience to make them a good choice. Be prepared to do your own ads, applications, and tenant screening if you plan to lease your home yourself, or through the help of an inexperienced friend, neighbor or relative. More property management tips are available on our website articles page.

5. Poor (or no) tenant screening

Most evictions are the result of a poor screening process. By extension, that means most repairs, vacancies and legal expenses are also due to approving the wrong tenant. This is an area where you MUST do your homework and not rely on first impressions or instinct. Looks can definitely be deceiving. Unless you have money to burn, screen well and know when to say NO.

Take a close look at the entire family of your prospective tenant. If you screen the parents, you might not know that their teenage son has a history of violent crime – leaving yourself open to a high risk of potential liability.

Many people who try to manage their own homes are very trusting, sometimes even skipping the use of a basic application. If you want to learn how evictions work, just go with your ‘gut’ feeling on that prospective tenant and hope for the best. 

6. Using a substandard lease agreement

Most leases on the market are very generic and seem to be built to not scare off a prospective tenant, rather than protecting the landlord. Do some tenants refuse to sign our lease because we have a “crime free” clause? We sure hope so. Does our “no dangerous breeds” language discourage the owner of 6 Rottweiler’s? We want it to. If your lease protects the tenant more than the landlord, then you are headed for trouble unless you get lucky finding the perfect tenant.

7. Lost time

Losing time is the easiest and most common mistake that we see new landlords make. Calculate the rent value of each day on your home. If your home rents for $1,395/month, then each vacant day costs you almost $50!  We see people all the time who “can’t afford $75/month for a professional manager”, but lose a week getting their ad in the paper ($350)… or take a couple of weeks getting the house rent-ready ($700)… or feel bad for the tenant and delay the eviction for a month ($1,400).

If you aren’t prepared to be completely diligent and focused on the details, then you probably can’t afford NOT to use a professional manager. Sloppy practices with your rental property can kill what should be a very profitable and rewarding experience.

SUMMARY

Managing your home is more complicated than it looks. Do your homework and either become an expert, or hire one. Your rental property or portfolio of properties is business and should be treated like one. The problems outlined here are easy to avoid, but expensive to experience. Give your business the time and attention it needs and it will pay you back very well over time.

At age 40, Dave Zundel had accumulated an investment portfolio of 15 homes and retired as a successful CEO for a Phoenix company, where he drove aggressive growth from 300 homes under management to nearly 2000 homes. After nurturing an idea for a dramatically improved property management model, he co-launched HomeLovers, which is now one of the fastest growing real estate investment and property management companies in Arizona. He can be reached via his blog at www.arizona-investment-properties.com.

Tenants worldwide dream of becoming homeowners, and homeowners dream of becoming landlords — expanding their real estate ownership while someone else pays the bills. This dream is not hard to realize, but that doesn’t mean it is without pitfalls and easy-to-make mistakes. That said, with equal parts hard work (which you’ll have to do yourself) and knowledge/expertise (read on), being a landlord can be a fast track to passive income and wealth accrual.

Landlord Mistake 1: Over-Leveraging Your Rental Properties

It’s a classic error which is made by not only real estate investors, but also homeowners. Whatever the bank says they’re willing to lend, borrowers typically take their highest offer. While this mistake may not cripple you with your home mortgage, over-leveraging your rental properties is a drastically different story. With rental properties you have far less control over the associated expenses. For example, if you own five rental properties, and suddenly three of the tenants decide to move — or worse, just stop paying their rent — you will suddenly find yourself with not only your home mortgage, but three additional mortgages to pay. If that isn’t bad enough, you will also be faced with eviction costs, repair and maintenance costs, advertising costs, etc. As a general rule, you want your predictable monthly expenses (mortgage, taxes, insurance, legal entity fees, ground rents, etc) to be no more than 50% of your collectable rent.

Landlord Mistake 2: Signing a Generic Rental Agreement

The cheap and easy thing to do is to scrounge up a free generic rental agreement online, or buy a boilerplate lease for a few bucks at the office supply store. But guess what? The second your tenant decides they don’t feel like paying you anymore — and starts looking for ways around it — they can simply sue you for failing to include necessary addendums or disclosures (such as national, and state, mandated lead paint disclosures). They could also target your failure to use a state-specific rental agreement with state-required clauses, or maybe for writing in unlawful fees, security deposits, and so on for your state. There are two ways to get a lawful rental agreement for your state. Your should either hire a local real estate attorney who is well versed in landlord-tenant law, or use a quality online service that helps you through the process of creating a rental agreement for your specific state.

Landlord Mistake 3: Failing to Research Rental Applicants

Most landlords simply want the perfect tenants to show up, sign a rental agreement, then pay their rent on time all while keeping the rental property in pristine condition. Reality check: this is a fantasy. Most rental applicants aren’t going to follow this idealized pattern, but you can maximize your chances of finding the good ones by doing your homework. Start by verifying their income and employment (to see if they CAN pay), pull a credit report (to see if they WILL pay), and pull a background check that includes criminal and eviction records (to see if they’ll treat the rental property and neighbors well). Don’t make compromises — they will cost you far more than the extra few weeks of advertising and screening.

Landlord Mistake 4: De-Prioritizing Your Rental Properties

It’s easy to forget and procrastinate when it comes to your rental properties; you don’t see them often, and you probably have a separate full-time job, on top of family and social obligations. But the old cliché applies: an ounce of prevention is worth a pound of cure — as you can prevent most maintenance/repair and tenant disputes from ballooning into major problems, if you address them quickly and effectively. When tenants call you to voice a concern, listen to them, and then address their concerns immediately (even if that means telling them “no”). If they call to request a repair, send a contractor to the property to assess the cost and seriousness of the problem, and then call the tenants immediately to give them a definite answer on whether and when you will address the problem. Left unheeded, these small problems and disputes can become major damage to your rental property, or a lawsuit that wastes your time and money.

Landlord Mistake 5: Letting Rental Agreement Violations Go without Eviction

No landlord wants to file an eviction: it seems cruel, it’s expensive, it’s time-consuming and of course your tenants continually tell you they’ll cure the problem “in just a few more days.” But the fact remains that eviction — from serving the initial eviction notice through the eventual put-out date — usually takes months, so you need to get started the moment the tenant violates the rental agreement. It doesn’t matter whether they failed to pay rent on time or if it was some other violation. Additionally, it sends a loud and clear message to your tenants: you will not tolerate late rental payments or any other rental agreement violations. This will make your tenants think twice before violating the rental agreement again.

All five of the mistakes above are easily understood, and easily remedied, but they also require discipline on your part. You can learn these lessons the hard way, or you skip the aggravation and expense by reducing mortgage debt, using a state-specific rental agreement package, screening tenants effectively, responding immediately when issues arise and serving an eviction notice the moment your tenant crosses the line.

Brian Davis (AKA The Traveling Landlord) has achieved the dream: he travels the world with his girlfriend (a travel nurse) and enjoys income from his rental properties. He recommends EZ Landlord Forms for a state-specific rental agreement, his own Traveling Landlord blog for inspiration, and the Slumlord Real Estate Humor blog for real estate hilarity.

A soft market means it is a good time to buy and hold. But before writing any big checks there are a few things you should know to protect yourself from litigation and other legal issues related to being a landlord.

Obtain a legal entity to purchase property

Too many smart people make the mistake of buying rental property in their own name. This has some serious legal implications, as it will immediately show up as an asset if someone decides to sue you. Furthermore, if the tenant of that property sues you, they can legally go after all of your other assets.

Create a legal entity (like an LLC) to purchase property under, and make sure someone else—such as a spouse—owns it with you. This will make it harder, though not impossible, for someone to take your hard-earned assets from you in litigation. As a final note, restrict how many properties each of your LLCs owns, as anything owned by that LLC is vulnerable if the LLC is sued.

Use an airtight lease agreement

If anything goes wrong with the tenant or property, the first piece of paper produced in court is the lease agreement. What makes a good lease agreement? Well, that’s the subject of an entire article in itself, but first and foremost it must conform with state and local laws.

Issue proper real estate legal disclosures to your tenants

If you don’t issue the legally required real estate disclosures, your tenants can successfully sue you later. The most common example is lead-based paint disclosures, which you must give to tenants (typically along with a lead-based paint inspection certificate) when they sign the lease agreement. However, each state has different laws regarding what must be disclosed and when, so check local real estate and landlord laws, and if need be, contact a local real estate attorney specializing in landlord-tenant law.

Screening tenants and good property management

How to Screen Tenants is an art that needs more attention than I’ll give it here, so read the linked tutorial.

Property management is also a nuanced and tricky beast, but to be brief, an attentive landlord who responds to his tenants when they call will be drastically less likely to be sued. When your tenants call about a problem, call them back. When there’s a problem with your real estate investment property, fix it. Establish a personal, first-name relationship with your tenant. They’ll appreciate it, and be less likely to sue you for your legal assets if there’s a problem.

Brian Davis is a landlord and real estate investor based out of Baltimore, MD.

Visit ezlandlordforms.com for a good database of state-specific lease agreements, to contact a local real estate attorney, or to find some landlord- tenant legal disclosures.

by M. Anthony Carr

The market has cooled in various cities across the country and fair weather investors are starting to worry about how they’ll be able to make money now that their houses aren’t escalating at astronomical rates.

I just have to say to these folks — breathe. If all you want to do in real estate is make money on the basis of appreciation (asset growth), then you need a primer on how to make really good money in real estate.

The authors of Investing In Real Estate, Andrew McLean and Gary Eldred (2006, John Wiley & Sons Inc.), have provided that primer, listing eight ways to grow your wealth in investment real estate.

The key to building true wealth in real estate is through buying and holding. A good tenant can create wealth for you by paying for the mortgage, insurance, taxes and monthly fees through their rental payment to you. In addition, consider this: you have just taken over an asset leveraged by a fraction of the value. In other words, let’s say you purchased a condo at $150,000 for $15,000 down payment. If it grows at 5 percent per year ($7,500 first year, etc.) you’re making more than 50 percent on your money that you actually invested — can’t get that kind of power behind mutual funds.

Real estate investing allows investors several ways to make and/or save money that other investment tools will never allow or have the ability to provide. As Mr. McLean and Mr. Eldred point out, no one can predict short-term price increases — but that’s why the savvy investor doesn’t look to just appreciation to make money. Here’s how you can build wealth through your real estate investing:

 
1. Positive cash flow. This is simply what it sounds like — the rent covers the mortgage, taxes, insurance, fees, etc., and once all that’s paid, you have money left over at the end of the month. A wise investor will also have enough money in reserves to cover all these expenses for a few months in case the property goes vacant. 
2. Equity growth via amortization. As the mortgage shrinks from the mortgage payments, your equity grows (and so does your net worth). This is one of the most powerful means of wealth growth — using OPM (other people’s money) to build your net worth. The tenant is providing the investor with hundreds or thousands of dollars per month to pay off debt, which turns into equity for the landlord. 
3. Capital improvement. This is the fixer-upper that most people think about when investing in real estate. Purchase a property for $50,000, put in another $25,000, and voila, the house is now worth $125,000 ($50,000 more than the initial investment). 
4. Wholesale purchases. The most effective way to build net worth and equity is to buy a house for a bargain price. These properties would be the pre-foreclosure, foreclosure, tax sales, etc., where the investor buys the property well below market price. In essence, you make your money when you buy the house at such a low rate. 
5. Lowering tax bills. One of the greatest benefits about real estate investing is all the tax breaks allowed for these type investments. Uncle Sam allows many tax deductions, tax credits and other government-sponsored programs connected with real estate investing that cut the investor’s tax bill, thus, increasing the bottom line and equity growth. 
6. Smart asset management. Many novice or ignorant real estate investors lose money simply by not managing the asset wisely. For instance, painting properties before the wood is actually peeking through will keep the asset in good shape, seal the wood, and protect it from more expensive damage. Managing the asset is just as important as buying smart and cash flow. The real estate investment is a commodity, not a money machine, and must be managed and protected to maintain future wealth growing potential. 
7. Asset value growth. As your property increases in value, so does your wealth. This is the old fashioned principle of buy and wait. Buy at today’s prices and with time, your asset will grow in value because of local appreciation. In addition, your equity will grow along with the amortization principle mentioned above. 
8. Rent appreciation. As the cost of living increases, so, too, should your rent cash flow. Increasing your rental income per month by 5 percent could result in hundreds of dollars of cash flow per year — year after year.