BiggerPockets Real Estate Podcast - 36: How to Be an Awesome and Profitable Landlord with Kevin Perk

Episode Date: September 19, 2013

On today’s episode of the BiggerPockets Podcast, we look at the topic of landlording and get some great advice from long-time landlord Kevin Perk. Kevin is a very successful investor from the Memphis area and has a real good grasp on finding and dealing with tenants as well as some unique methods of financing his properties, getting rid of bad tenants, and building wealth. There is a lot of really great tips and advice for anyone looking to grow their buy and hold real estate business. Read the transcript to episode 36 with Kevin Perk here. In This Show, We Cover: How Kevin finances dozens of properties with creative financing Private lending and methods to use commercial financing to invest Making offers that get accepted The three things that turn a landlord into a slumlord – and how to avoid them Online technology to help attract and manage tenants Signs of future bad tenants How to fill vacancies during the holiday season The best and worst parts of being a landlord Real estate clubs: determining the good, the bad, and the ugly Links Mentioned in the Show: The Real Estate Agent’s Ultimate Guide to Dealing with Investors Tenant Screening: The Definitive Step by Step Guide How to Rent Your House: The Ultimate Step by Step Guide AppFolio.com Top Online Property Management Software list from BiggerPockets Books Mentioned in the Show: Rich Dad Poor Dad by Robert Kiyosaki Cash Flow Quadrant by Robert Kiyosaki The E-Myth Revisited by Michael Gerber The Book on Flipping Houses by J Scott The Book on Estimating Rehab Costs by J Scott Tweetable Topics: Don’t drop your standards just to quickly fill a vacancy. (Tweet This!) When investing in real estate, have some cash reserves. (Tweet This!) If you bet on appreciation – you are going to lose. Real estate doesn’t always go up. (Tweet This!) Connect with Kevin: Kevin’s BiggerPockets Profile Kevin’s Blog: SmarterLandlording.com Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast, show 36. Can I start? Can we start? Do it. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online.

What's going on, everybody? This is Josh Dork and host of the Bigger Pockets podcast here with my co-host, Brandon Turner. Hey, Bernie. Hey, hey, Josh. How's it going? Going okay. How you doing? I'm good. I'm doing something different on this podcast that I've never done before. Yeah, I know. You're sitting your lazy backside on a couch. Yeah, I got my microphone hooked up to my, like, couch with this big stand, and I'm, I'm, like, relaxing on my couch while recording this. Yeah, he's literally, like, laying out on its couch. It's ridiculous. If there's any, like, chiropractors listening to the show, they would hate me right now for the way I'm laying, but that's all right. Yeah. Nice. Nice. Yeah. Yeah, I'll live. That's awesome.

Cool. All right. Well, yeah, good show today coming up. I'm excited. Yeah, yeah, but you didn't ask me how I'm doing. So, you know, whatever. I said, hey, what's up? I think. I don't actually remember. Well, I am doing well. However, I do want to make a note here. As anyone who's listening may know the great. state of Colorado has been undergoing some serious chaos. The flooding here has been really pretty awful. I mean, me personally, we were spared, but lots of folks have dealt with some serious, serious damage. I mean, tons of homeless people. Lots of people have lost a lot of their possessions, including John Holdman, our lead moderator on Bigger Pockets. He had a ton of damage to his house.

lot of other people I know did as well. So you guys, if you're listening and you want to help out, I know the Red Cross is doing collections. So, you know, please do give and donate to the Red Cross. It's a good cause. There's some real bad stuff happening here. So that's it. Just wanted to, yeah, get that out there.

Nice. Very noble. I'm a noble guy. It's not true what they say about me. It's not true what they say about you. Yes, yes. Well, listen. So last week, we started this new segment where we asked listeners to share their favorite quote via Twitter, Facebook, or Gplus using hashtag bigger pockets.

And last week's winner was Greg Jackson, who tweeted, life is too precious to spend doing something you hate, which is, as we like to say, awesome. So Greg's going to win a free digital copy. of the book on flipping houses and the book on estimating rehab cost by Jay Scott. So big congratulations. Go out to Greg and thank you very much for tweeting that and getting the word spread about bigger pockets. We love it.

We love it. Cool. And of course, everyone else who did not win, I want to encourage you to jump on this week and share your favorite quote from today's episode on your social media. So next week you can win a digital copy of the book on flipping houses and the book on estimating rehab costs as well.

use hashtag bigger pockets on Gplus, Facebook, or Twitter, and that will be awesome. And of course, if you missed last show, you'll know that our quick tip is no more. No more. No, no, no, no, no more. But anyway, so thanks a lot to Greg and to those people who tweet out this week's quote.

Yeah. Yeah, yeah. So why don't we move on to the meat of the show here? today's guest is a long-time landlord and weekly contributor to the Bigger Pockets blog, Kevin Perk. Kevin is based out of Memphis, Tennessee, and he's a real hands-on landlord. So he's going to share a ton of tips today on buying rental property, dealing with tenants, property management, and a whole lot more. So get your pens out and ready. As always, however, remember to jump onto the show notes at biggerpockets.com slash

Show 36. That's right. Show 36. If you find links to everything we talked about today, and also to take a minute to leave a comment or ask Kevin any questions you have. It's a great way to interact with our guests. So leave your feedback in the show notes at BiggerPockets.com slash show 36. There's always a ton of great conversations happening there,

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Without further delay, why don't we bring this guy on? What do you think? Sounds good to me. All right, Kevin, what's up, man? good to have you. Thanks, man. I really appreciate being here. Yeah, we appreciate having you. Let's jump into it. Yeah, absolutely. All right. So what do you do? I mean, what's your story? Well, my wife, Taryn and I are buy and hold investors. Basically, we are landlords. We've been doing that for about 10 years now here in good old Midtown, Memphis, Tennessee.

I buy smaller apartment buildings, duplexes, triplexes, things like that, even houses, all buy and hold. That's what we do. That is what you do. That is awesome. So you are actual real estate investors. Yes, sir. Yes. Not flippers. We are not flippers. We invest. Right. Yeah, I'm just trying to start a debate here. That's all. Come on. Take my bait. Take my bait. Do not bet on appreciation. Nice. Nice. Nice. Nice. Nice. All right, man. So you guys are buying hold investors. How did that come about? How'd you decide to get involved in the industry? Well, you know, it's kind of funny how that started. My previous life, before I got into this full time, I was a city planner. I was actually a planning director of one of the counties here around the Memphis. And I really couldn't see myself sitting at that desk for 30 more years.

So my wife and I were kind of, but what do you do? I mean, you just, you don't know, you don't have the knowledge yet. And I was sitting on my porch reading one night, and my wife kind of emphatically called to me, hey, come here and watch this guy on TV. You know, I was like, well, what she, you know, she's really being emphatic. I need to go see who this guy is. Well, it was Robert Kiyosaki. And he was doing a PBS, you know, telethon thing, you know, where they have the fundraising.

And he was doing his cash flow quadrants. and so we sat and watched and it was like well you know this guy's making a little bit of sense and i read his book and then i it went from there it mushroomed from there uh the real estate part of his book really made a lot of sense to me about uh getting uh income properties and people paying you and that's really how it took off nice nice so so what what what did the the early days look like you know you guys saw this video you bought the book and and you know how did you go from there to now we own our first property? It was a lot of learning, you know, a long learning curve, a lot of reading, a lot of interacting,

networking with other investors. We found a local RIA group and went there and talked to them. And our first property was a duplex. We kind of used Kiyosaki's thing, had, you know, get somebody paying you. So we bought a duplex, lived in one side, rented out the other. And they paid the mortgage a note. And it was kind of like, wow, this works. and we just kept buying more and more and more. That's awesome. Yeah, I always recommend people to do that. The duplex live in one half and rent the other is such a good idea.

It was. It was. It worked out well. Yeah. And you don't still live in that duplex, do you? No, no, no. I've since bought a foreclosure and fixed it up. Nice.

But we still own the duplex. It's still there. Nice. That's exactly what I did. I lived in a duplex, lived in one half, and then I bought a foreclosure and live in that now. You guys are like buddies. I know. We're like.

I know. Batman and Robin here. Kevin, he's definitely your Robin, Kevin. Okay, okay. I'll be Robin. All right, anyway. So how do you normally, I mean, you've been buying more and more now for the last 10 years, I'm assuming?

So how are you finding them? Well, I've found properties in all sorts of ways. You know, I've driven by and seen the tall grass and sent a letter and that's worked sometimes, you know, all sorts of things. but honestly these days it's MLS listings. I mean, that's the honest answer. And kind of once you get up into the position, you know, you've been an investor for a while.

Once realtors see that you can close on an eight-unit apartment building, the deals are going to find you. You know, they're going to kind of bring them to you a little bit. But that's the honest answer. You know, the foreclosures, you kind of got to wait until the realtor gets them and lists them and that sort of thing. and 90% of it is MLS these days. Got it, got it.

So you're not doing any kind of marketing at this point or anything like that to find properties. You're just waiting for them to come your way from your selected group of one or more agents. Yes, yes. And I really don't even have a selected group of agents, so to speak. You know, there are just certain agents that deal with those type of multifamily properties. And, you know, there's a select group of buyers, I guess you could say. And so, you know, I'm just on that list. They call me.

Do you buy any single family or is it just multi now? No, I buy single families as well. You know, I just look at the MLS every day. I have a search set up. It pings me if certain words are in the realtors' comments like foreclosure or fix-up or estate, things like that. And, you know, it prompts me to take a closer look at a particular property. All right. So when you buy a property, a lot of people have the trouble is once they get a

four of them, they can no longer buy anymore. And I'm assuming you have more than, I mean, you obviously have more than four. I do. How do you, what do you do? Like, what's your solution for financing these things? Well, we have been lucky in that, you know, we started out before the four rule was in place. So you could get 10, which was before, when it was that, 2007, when everything went to hell and the real estate crash. Seven eight. Seven, eight, somewhere in there. So we were able to use that. for quite a while. And of course, by networking and talking to other investors, we learned that you can put one in your name and then one in your wife's name and you don't have to put them

both on. So you're able to get a few more. But we've also always had a line of credit and commercial financing with local banks. And I've also had private lenders finance properties for me or help finance properties for me. So today, since I can't get the four Fannie Mae, Freddie May, backed loans anymore. It's all commercial loans and private lenders. Okay. So is that even on like a single family house, you might get a commercial loan? Yes. And a commercial loan? Basically you would go in and talk to a local bank and you don't want to go to Bank of America to find these. You got to go to the local little bank or your credit union and you'll talk to

the VP of new accounts or commercial financing there. And basically they'll review your portfolio and your business structure. And they'll hopefully give you a line of credit. I mean, it could be $100,000, could be $500,000, could be a million. And they'll let you, you know, whatever you want to buy with that, go get it, as long as it appraises and works out and all that sort of thing. Right. So this is something that's really fascinating to me because, you know, I am like you,

I want to buy property and I use private lender sometimes, but I do not have a giant line of credit that I can play with. But I would love a giant line of credit that I can play with. So I'm wondering, like, I mean, if I go into the bank and tell them, you know, hey, look at my portfolio I've got so far. I mean, I guess I just have a hard time believing that a bank's just going to say, yeah, you know, this 28-year-old kid, we're going to give them a line of credit based on, you know what I mean? Like I have so many properties that it's not like I could ever pay them anyway with my salary from job or whatever. They very well might. You know, it's part of us, it's a sales job for you a little bit to go in and show

the banker that you're a good risk, that you're building a company and building an investment portfolio and that you have every intention to pay these things back because they're going to have awesome cash flow because of how you buy them, because of all that sort of stuff. And you have to know the banker speak debt service coverage ratios and things like that to talk to them a little bit. But yeah, you might. Now, you're going to have to shop around these days.

I'm not saying this is going to be easy. In 2007, they'd give anybody who is breathing alone, which is kind of how we got into this mess. But now, if you have a good business model and you can prove good cash flow and things like that, and if you can get an introduction from another investor, which gets back to networking, if they can give you an end, hey, Mr. Banker, you really should talk to Josh or Brandon because they're smart. if they know what they're doing. Chances are pretty good that they might give you a little feeder and test the waters with you. That's awesome.

Yeah. And stop complaining about your salary on the radio show. Seriously. Really? I'm just saying, I'm not going to go to the bank. I mean, if I try to qualify for traditional financing now, they just look at how much debt I have compared to income. Oh, I can't. Yeah, and they just laugh at me.

It's impossible. I've got one of my old loans with, you know, a big bank. won't mention them. And I was just trying to refinance it because the rates are so much lower. And the guy literally said to me, I can't put all your information in the computer because I just don't have that many slots to put it in. And so therefore, I'm shut out. I was like, I already have the loan with you. I've been paying you for X years. Why can't you just refine? I just don't have all the slots in my computer and it just shut down right there. That was it. I have too many properties, too many properties. Yeah, yeah, small banks, portfolio lenders, that stuff. That's

some great advice. Well, you had mentioned private lenders. So why would a private lender go ahead and lend on a buy and a whole type of property? How does that work? Are you getting a 30-year loan from a private lender or how are you doing it? No. Generally, our private lenders, they'll, have to give me five years. And then there's a balloon in there, you know, at the end of five years. So it becomes due at the end of five years. And at that time, they can choose to either come back with us and roll the thing over again, or we can try and cash them out. That's just one of my criteria that I have to have for me to buy properties with the lenders. And if that doesn't work with a particular person, that's fine. You know, I understand. Go on. We'll move on, do something else.

But there are certain folks who are happy, yeah, with the interest rate you're paying, and it's better than what I can get putting it in a CD right now, which is what, 0.5 percent. You know, they're happy to do that. So what kind of rates are you getting from private lenders? Somewhere between 8 and 10. Okay. It depends. And how long are you typically actually holding before you do a refi?

Five years. So you are actually holding for five years. Okay. So what do you do at the end there if you can't refinance out because the bank's not going to give you a loan, let's say. Like you're going to have another exit strategy? Is that when you sell? Well, I've always been able to find somebody to refinance. or there's always been a bank

or somebody's willing to step in and do it. So I really haven't hit that problem because the properties are nice and they cash flow well. And I've never missed a payment. I've never not paid a lender. They're happy with us. They want to keep it going.

The cash is coming in. I like the cash coming in from rents. They like the cash coming in from, you know, they're basically the bank. They like being the bank. Yeah, yeah. Okay, so you've got these properties and obviously you're buying them at hopefully at a pretty decent discount.

And you had already said that you're buying them from the MLS. Are, you know, what kind of discount are you getting off-list priced on your typical property? What kind of discount are you paying from their, yeah, do these need repair, I guess, or are they ready to go? I tend to buy distressed properties. And distressed, you know, means they're either in a short sale or they've been for foreclosed on. And so usually, yes, they've been beaten up. The previous landlord didn't manage it well, lost it, obviously. And so all kinds of things happen there. They might be vacant now. If they've been foreclosed, they usually are vacant. How much of a discount? Well, it depends on the realtor and how much they list it for. Honestly, sometimes these things have to sit on the market for a while for the bank or the seller or the realtor to come to reality as to what they're. actual price is going to be. Their investment properties, and so you base the sales price on the amount of income that

can be generated, you know, and that's where it starts off. And a lot of realtors have to be educated as to how that works, and that just takes some time, sometimes to do. So I really can't give you a hard and fast number. How much of a discount do I get? But there is always a discount. And, you know, I've passed on tons of properties because they won't come down. I'll let somebody else buy it.

Yeah, no, right on. Yeah, you know, we put together this guide. It's, what is it, the ultimate agent's guide to working with investors. And, you know, we wrote that, and we'll link to it in the show notes at, what is it, BiggerPockets.com slash show 36. The guide is designed to help educate agents for this exact purpose. Right. Because, you know, it's really amazing that agents don't get that training as a

requirement. I mean, they really need to be better educated, particularly in working with investors, because for them it's great. You know, you can build a better, stronger business if you know how to do this stuff. And obviously, you know, stop wasting your time and energy and money, you know, listing properties at really bad prices when they're not worth what you're listing them for. Right. Right. And I've actually, I've talked to, you know, given some talks to groups of realtors about working with investors and that sort of thing. So yeah, it's all about educating them because they don't learn it through the realtor process. I always like to say, you know, I don't know what it's like in your state, but here in Tennessee, to get a license to cut hair, you have to take

more hours than to get a license to sell real estate. So, you know. Yeah, that's crazy. Say, I'm curious, you said, you know, you offer on, you know, a lot of properties and you might not get a lot of them. Do you have like a ratio that you tend to get? You know, I hear some investors say, look at 100, you know, offer on 10 and you actually get one. Do you find that? ratio about right or do you only off-arm ones you're pretty sure you can get? I'd say at the beginning it was kind of that way. Yeah, make a lot of offers. You have to, some of the folks that we network with and even myself will say, you know, you need to go look at 100 properties before you find one that you want to use if you're new. I mean, that's just,

you've got to get used to the market to what's out there to what's going on. Yeah, if you make 10 offers, you probably will get one. That's probably about the way it works. These days, I'm kind of, I kind of know if it's going to work or not. And so, you know, I'll make offers where I think it's going to work. If I think it's probably not, I might wait a little bit and see how it sits on the market for a while or, you know, somebody from will come and pick it up and pay too much and I'll pick it up three years later when it's close. Yeah, exactly. Exactly. No, that's great. Well, what about those properties that you make the offer on and then it goes back on the market? well, it stays on the market, obviously, and nobody bites.

At what point in time do you go back and hit up that agent again and put a secondary offer in? I've waited over a year to go back. I've made an initial offer. Didn't get accepted. The owners, for whatever reason, didn't accept it. It sat on the market for over a year from that point. And I came back and said, you know, here's my business.

my offer again still stands and was able to pick up the properties at that point. So it took time. So they had to be educated as to what the price really was. Right on, right on. Was that the only time that you had come back on an offer on a property that sat or has that? No, no, I went on another one. A bank had foreclosed on a property. And I went out and talked to the bank and said, look, you know, I'll give you X dollars

for this particular property. And they decided they wanted to list it on the market that they spent. eight months listing, sitting this thing on the market, I eventually picked it up from them for less than what I had initially offered them. Nice. Nice. Yeah. And, you know, so, you know, they had to learn the hard way. And that bank's not even around anymore.

That bank actually got foreclosed on. Nice. So, you know, they made some pretty bad deals in there and obviously didn't learn from their mistakes. So do you have a database? Do you track those properties that you're interested in and just kind of watch them to see when they go or is it kind of if it kind of comes back somehow

you run across it again then it's at the front of your mind? I don't really have a database. I kind of just have a folder where I'll put the maybe a printout from an MLS listing in and every once in a while I'll just flip through it and see or a lot of times

the realtors will play their little games where they'll drop the price $100 or put it back on the market and so it'll pop back up and I'll see it again and it'll be like oh, well, this thing's still in the market. Let me go go check it out. Or driving around, I'll see the sign still in the yard, you know, that sort of thing.

And it'll pop in my mind that I need to check that out again. Right on, right on. And so what neighborhoods are you buying in? Are you buying in, you know, middle class, upper middle, you know, what are you looking at? We generally are going to buy in better neighborhoods. I'm generally staying in Midtown Memphis, and I know you guys don't know where that is, but it's a kind of a, it's a trendy area. A lot of folks want to live there.

I like to buy neighborhoods where people want to live, not where they have to live. And so my tenant, my typical tenant is a young urban professional tenant. Okay. And that's who I'm going to get. They care about their credit, and they want their security deposit back. And so, you know, that's going to be my typical tenant. I invest in areas where the trendy restaurants are, where the trendy shops are, you know, that sort of thing. Gotcha.

Gotcha. Okay. So, you know, Midtown Memphis is a little different than like Midtown Montesan. There's more than one traffic light there, right? Yes, yes. There are dozens. Oh, okay. Lots of them.

What kind of price range are these houses in? Midtown Memphis has got houses. all the way from, you know, you can buy a beat-up $30,000 house to, you know, some of the houses in Midtown are $1.5 million. You know, obviously $1.5 million house, you're not going to get that cash flow. But the $30,000 one with a little bit of fix-up, yeah, you might be able to get that. It's harder to find properties in those types of areas because the values tend to be higher. And there tends to be more investors chasing them a little bit. You're talking to lower area.

Higher end areas. Okay. Okay. Yeah. You know, the values are just higher. And so it's harder to make those cash flow because the values are higher. Yeah. That can make it a little tougher to find the deal.

And so you really have to stay on top of it. When something comes on the market and it's a deal, man, you've got to jump on it quick because somebody else is going to get it to. You know, everybody else is out there looking for that too. So if you've got your money, your commercial. financing and all that stuff in place, you've got to have that stuff ready to go. So you can make that offer maybe within 24 hours to go. I can remember a couple years ago, I went to look at a property at 10 o'clock in the morning. By noon, I told my wife, you know, she's the realtor, said, you know,

hey, let's make an offer on that. We called the realtor. She said, oh, it's already under contract. And it had just popped up at 8 o'clock the night before. So, I mean, you know, it was gone. If it's priced right, it's going to go. Gotcha. You said your wife's a realtor? Yes, she's actually real estate broker. She's a broker. Okay.

So how does, obviously, I'm assuming there's some serious benefit to having the license under your purview between you and your wife. Yeah. Yeah. And, you know, everything's in-house. We don't have other realtors working for us. We don't manage other folks' properties. The real estate brokerage is basically allows us to access. to the MLS. We can see it on all our own time. We don't have to have another realtor involved.

And obviously, whenever we purchase something, the seller plays commission here in Tennessee. So, you know, she gets some commission from when we buy a property. Gotcha. And why would somebody go and get a brokerage license versus just your agent license? More commission, obviously, is one reason. Yeah, more commission. And if you're, just an agent, then you have to hang your broker, you have to hang your license with a broker somewhere.

And depending on the broker, I mean, they're going to make the rules. Has to, well, do you have to attend sales meetings? Do you have to attend this? You know, I need you to have so much in sales, etc., etc., etc. It's just there are brokers out there who will work with investors, but sometimes they can be few and far between and hard to find.

But they're out there. When you offer on a property then, do you have to disclose that your wife is an agent or broker, you know, like there's some disclosure rules, but how does that work for a married couple? If I'm just making the offer, initially, we don't, I don't have to disclose. I'll just hand, I have a one-page contract that I use and I'll just give that out. Eventually, yes, you know,

she's representing me. So yes, all the disclosures will come. But initially, right off the top, no. And was that, was that, at some point, obviously, your wife went and picked up, picked up the license. So, you know, previous to that, you know, I guess what kind of advice would you have for folks listening in terms of, you know, when's maybe a good time to think about getting that license? And, you know, is it, you know, at what point is it a good time to go from being an agent hanging your shingle with somebody else to hanging your own shingle? It's hard to say. Yeah, it is hard to say. I guess it's going to depend on the investor and what they want to do and just how, you know, do they want to keep things in house or do they mind hanging up their license with somebody else?

You do take on a little more liability, of course, being a broker. I mean, it all is going to fall on you, whereas if you're hanging with another broker, it's going to fall on the other broker. And there's a few more costs, more liability insurance, more classes you have to take, et cetera, et cetera, et cetera, to keep that thing up. it's just going to depend on how you want to structure your business or how you want to run things. It's worked out for us very well because we just like to keep things in-house and close to what we're doing. Right on. That makes sense to y'all. Oh, yeah, definitely.

Definitely, definitely. All right. So let's move to a little controversy, so to speak. A little controversy here. Slumlords. Yeah, slumlords. Yeah, slum lords. They're out there.

there's plenty of them. Hopefully you are not one. I'm assuming you are not. I hope not. No, no. I'd like to talk about what makes somebody a slum lord? Well, you know, you kind of have to think what's typically a slum lord? You know, it's someone I think who is not fixing up their properties or lets them go into disrepair or just kind of neglects their tenants, I think. why do they do that? Well, who knows? It could be many things.

I mean, I think there are, yes, a couple folks out there who the general public might think a slum lord sitting back smoking their cigars on piles of money and just counting their change. But I think mostly it's most folks who would get accused of being slum lords and you guys may agree or not here. I think it's folks who get in trouble somehow. And eventually their properties end up being distressed and folks like me pick them up. They haven't learned how to manage tenants. They haven't learned how to screen tenants.

They haven't had enough cash flow. Something happens and they get in trouble. In other words, they haven't spent enough time on bigger pockets. Yes, they haven't learned enough. And the cash flow starts to crunch. Suddenly, they can't make the repairs. And that's just a pyramid. That will just start to build.

If you let a few repairs go and then it will just get worse and worse and worse. And then your good tenants will leave. you'll try to do anything to fill them, you'll start filling them with bad tenants, and it just leads down a spiral. And I think, honestly, that's a lot of folks what happens is why they would get called a slumlord. They get in over their heads. And then thirdly, I think people just get tired of it and say, you know, I'm just tired of dealing with this. I don't want to, don't call me ever again. You know, just pay your rent's cheap.

Don't call me. I'm not fixing it. I'm just tired of dealing with it. and if I can ever sell these, I would. Yeah. Yeah. I think there's a lot of that. I also think, you know, there certainly are those people who say, well, you know what, I'm going to buy a property and, you know, that doesn't need paint. Who cares?

Yeah, who cares? You know, I think a lot of that is an attitude. You know, who knows what the percentages are. But I think the guy who just says, screw it, you know, they don't have respect for their tenants and they could care less. And so they're low. lives or whatever, you know, they got a roof on their head, they should be happy. You know, those, I mean, those are the really bad ones. I think the folks who kind of find

themselves in trouble, you know, obviously they're hopefully doing it unintentionally and if they have the ability to, would do better by their tenants. But, you know, in the end, everybody kind of, they all give a bad name to those people who are not slumlords, right? They do. I think people don't realize just, you know, landlording is not the easiest thing in the world to do. I mean, it's, it's, a lot of these so-called gurus out there will tell folks, hey, it's easy, you know, you can do it from Hawaii sitting on the beach, and it's, you know, it's not that easy. I see a lot of out-of-state investors here coming in from Seattle, Australia, wherever, and I'm just like wondering, how the heck are you guys going to manage this

from, you know, the other hemisphere? And I honestly pick up a lot of properties from folks from California, Seattle, whatnot, who have bought here, who are trying to manage it from the West Coast and you know it's a lot harder than it than you think it is. Yeah I remember you wrote a post a couple months ago called like so you're a slumlord how to respond and the whole idea is yeah every time because I I have the same thing that you do is whenever somebody asks me what I do I say well I'm an investor they always make that joke every time oh you're they do they do it's it's just associated with landlords unfortunately and and I don't know how we got such a bad name but we did And, you know, I try really hard not to do it, you know, to try to keep things up nice and, you know, respond to tenant issues.

Yeah. And I think that's, you know, that's really the goal of what I've been working on for for almost nine years now with bigger pockets is, you know, can we, you know, can we do something? Can we work as a community together to change not only the way that investors learn, you know, kind of getting rid of the old, you know, get rich quick. guru mentality and moving towards more of a community base, working with local mentors and people, but also to, you know, trying to change the perception of real estate investors and, you know, change the way that they think about themselves as well. Because I think, you know, take like bandit signs, for example. It's a tactic that, you know, the gurus push on everybody and that are, it's really popular. And frankly, it's kind of effective. But, you know, the end, I'll argue every day of the week that it's really bad for you personally as a brand and it's really bad for investors as a group.

These things are bad for our neighborhoods. They don't look good. They may work, but there's other ways to do it. I think if we kind of all work together in terms of how can we better this set of people that we're a part of, I think that's how it's going to change. It's just going to take time. It's education like we were talking. talking about with the realtors earlier.

And it's just showing folks that, you know, hey, we're not all bad. Yeah, definitely. All right. I want to move on to another topic. You know, I know a lot of people that listen to the show are either not investors yet but want to be or maybe they own one property or two properties. You know, there's small time do-it-yourself landlords. I want to get in kind of some how-to questions, I guess, on how you actually manage

properties. So why don't we, I guess, when we start out at the very beginning, how do you find good tenants? Like, how do you advertise? How do you, you know, get the right tenant in there? Mm-hmm. All of our advertisements are done through our websites and web-based media. You know, I've got my own website, and that puts it up there. We have a property management software that we have purchased and used, which kind of automatically generates the ads. and it puts it automatically on Craigslist and several others out there. That is how we get and find tenants. We do not even put signs in the yards anymore.

It's all internet-based. As I said, we tenderly have a young urban professional tenant. They're going to be online. They're going to be with their smartphones. That's how they're finding their information. And so that's how we're trying to connect with them. Now, in other types of markets, you're definitely going to have to put signs in yards. So I'm not saying signs are bad.

you know, for rent signs. It just depends on your market. But that's how we find them. Everything's internet-based for us. Yeah. I find that Craigslist nowadays, like, just in the last two years or so of my market, Craigslist has completely overtaken any other form of advertising that we're doing. Oh, it's phenomenal. It is. And it's awesome because it's free. Like our local newspaper is a hundred and, I think it's fairly cheap for a newspaper, but it's $140 a month or something. Our newspaper is outrageously expensive. Nobody reads it. What's the newspaper?

It's a commercial appeal. To put an ad in that thing is really expensive. I don't remember what it is because we haven't done it in nine years. We do use, since you brought up print media, we do use, there's a local free paper here that certain cities have. They put them around everywhere. We do use that because a lot of the, you know, that paper gets picked up and read by our tenant base quite a bit. And so we will put an ad in there, which also goes on to Backpage. There's a Memphis Backpage. It also goes up there. And that site brings us some good traffic as well. Yeah. Yeah,

I found Backpage just wasn't very effective, but Craigslist certainly is a great resource for finding tenants. It's just going to depend on the market and where you are and what folks do. And you're going to have to try several different things to find what works for you. Yeah. And I think, you know, lower-end tenants, lower-income properties, typically the signs are going to be your best bet. Yes, they will. And as you rise up amongst the income class, you're going to find that online media certainly is probably your best bet.

Right. But even in the higher income areas, you know, folks are going to be driving around looking because they might want a particular school. And so they're going to be looking, driving around in that school district. And that's going to be the driver for them, is finding something in that particular school district.

So signs still in the higher neighborhoods work. I tell you, Zillow actually just came out. I haven't even tested it yet, but they just announced that they have mapping of school districts now on their site, which, you know, that's phenomenal. I think that's going to be really valuable for folks looking to rent in different districts and for people buying as well. So, you know, there's a great quick tip for you. I snuck it in there. It's a big driver for people with families, with kids, schools. I mean, my tenants generally don't have kids, so that's not a big issue.

But for those families that are moving into an area and, you know, with kids, schools are going to drive it. And that's what they're going to look for. Cool. And so what's your screening process? Well, I'm going to look for generally about four things. everybody has to fill out an application everybody has to pay the application fee hands down there's no getting around that

and that's online right not a paper app it's we could do either but most of it's online it comes goes through our website but for those who for whatever reason can't get online we can give them a pay for one no big deal but you know basically we're looking for income to pay rent I want to see that you've got enough income coming in to pay rent and cover your bills

and have food and all that sort of stuff I don't want any evictions, no evictions, period. I want fairly decent credit. That's fairly decent? 600's and up. That's what we're generally looking at here. We can go a little lower depending, depending on your situation. We just really want to see that you're going to pay your bills and that you have paid

your bills, especially things like utility bills. If you're not paying those and they're coming after you, you're not going to pay me either. So, you know, that's what we're looking for. I always look to the car loan. If people don't pay their car loan. Yeah. There's,

because that's like the last thing somebody wants to get rid of is their car, because that's like their life. Right. Or the cable bill, you know. I mean, if cable's gone, then, you know, it's bad. But other things, you know, that you may not think about, but neatness counts, manners count, and not lying to me is big thing.

If you lie to me on an application, I find it, you're done. You know, you're just out the door right there. We ask, have you been in bankruptcy? And tell me the truth. I've worked with people who've been in bankruptcy. Hey, one of my best tenants was a guy who went bankrupt because cancer bankrupted him. And he was great.

So, yeah, I can work with you as long as you're honest with me up front and you're not a jerk. I mean, if you come off being a jerk, I'm not going to let you in my property because guess what you're going to be once I let you in. Even a bigger jerk. So, you know, manners, neatness, you know, if your car is full of trash and all that,

you know, it's, it, it, it, it, it, it, it, it,

it, it, it, uh, most people are aware of, of, of the, uh, the,

the, uh, the protected classes, you know, oh, yes, race, age, gender, that kind of stuff.

But, you know, as, as a landlord, you can discriminate against, you know, dirty pigs, slops.

Yeah, you know, dirty is not a protected class. Yeah. It is not a dirty is not a protected class. Smokers, You don't have to let smokers in. We've talked about that on the blog before.

I know a landlord who doesn't allow folks with motorcycles. He says, the motorcycle is going to end up on my living room dripping carpet in January. Or dripping oil on the carpet in January. You know, that's – and so no motorcycles. I just don't allow tenants that have them. No landscapers because they're just dirty. I mean, they're just going to be filled with money. I've had a couple of roofers, and every roofer is extremely dirty on the walls because they're with –

their hands are all covered in roofing material. Yeah. And they cover the walls and dirt. It happens. I've had like three of them just like that. Yeah. I shouldn't make all the rovers in the world, they're going to hate us now. Yeah.

Well, I was thinking, I should make that a requirement. Yeah. It wasn't me that bans them. It was other folks. Well, what other, I mean, what other non-protected things have you, have you screened out? you know obviously drugs are one i mean if you if you've got oh come on kevin you know it depends no no no no you know if we see uh you know serious convictions in the past uh you know criminals i mean crime that's one you know i mean criminals are not a protected class uh you know obviously a traffic

ticket or something minor and a long time ago we can work with you but i mean i just don't want to see i just don't want all those problems that are going to come with that especially if you've been dealing. I mean, you know, that's, that's just one. It'll drive your other tenants away. What about like DWIs or DUIs? You know, that's going to kind of look at, you'll be able to see if they make poor decisions when you pull their credit. You know, was the DUI a poor decision along with a bunch of other things? Like they don't pay their bills and they're just doing other dumb things. Or was the DUI a one-time thing? The guy made a mistake and he really kind of needs a chance.

You can kind of see it when you get the whole picture and you're screening everybody out that way. Okay. So you've been doing this a while. You're obviously very skilled at it. You know, I think one of the big problems that newer landlords face, particularly as we approach the time of year that we're approaching now in most of the country at least is, you know, November, October, December, January, February, it gets harder to rent. your apartment. It gets harder to rent your house out. People aren't looking as much. And I think oftentimes there's that level of compromise that happens. Well, you know, if I can't get them in now, you know, I'm going to have to wait until February. What, you know, what can you tell the listeners

to maybe help alleviate that? Do you have any advice for what they can do? And I would say, just drop the rent and find, you know, find a better class of customer. But what would you say? That's the main thing. If a property's not renting, a lot of times it's because of the price. And you need to come down a little bit on the price and see if you start to get some more hits. I know it's painful to have it sitting there vacant, but don't drop your standards just to get somebody in there. You're not going to make any money. On the back end up paying a lot more than what you're going to collect in rent. I mean, we've tried and learned the hard way of going down that road. Oh, yeah, me too. Yeah.

Really bad. Folks, just stick it out a little bit. If you can get past Christmas, people will start looking. There are people. People are moving to towns, changing jobs. There's all kinds of things. Yeah, there's not as many as May and June, but they're out there. And if you have a nice place in a decent area at a good price, it's going to rent eventually.

So just stick to your guns. Yeah, that's great. And I know a lot of landlords advocate. You know, when you actually sign a lease with a tenant, structure that lease so it doesn't end in December, January, or November, December, January. You know, if that means offering an eight-month lease instead of a 12-month because you don't want it to end at the wrong time.

And I know, like, for me, I always go into, like, blitz mode in October, November. And I, like, I ramp up my marketing, like, crazy to make sure everything's full by November 1st. Because, yeah, nothing will rent from November 1st to January 31st in my area. Just nothing. It's difficult. I can't say nothing will rent here. Obviously, we're in a slightly different market because it will rent, but it is certainly more difficult. And yes, we have used, that's one trick.

You know, maybe do a six-month lease so that it ends in June, you know, or if you can negotiate a 14-month or a 15-month or whatever, you know, if the tenant's willing to do that, then, yeah, try to extend them out so that your vacancy comes up when the market is high. Yeah. Nice. How do you collect rent? Do you collect rent online through one of these online rent payment companies or what do you use? Our property management software has a portal where folks can pay their rent online and about 70% of them do that. What do you use? What software? We use App folio. App folio, okay. I also, I just started using it on my website and it's really, really cool.

Yes, it is, especially talking about the ads on Craigslist that we did before. It generates those. It makes them pretty. It's nice. It's really, I'll give them a little plug. It's a nice thing. You knew folks out there are not going to need that right away, but as you build your business, that's something you're going to want to think about.

And we have a list, and we'll point to it in the show notes as well at biggerpockets.com slash show 36 of, it's a whole list of a handful of different online rent. online property management software platforms like AppFOLio. So make sure to check that out on the show notes at biggerpockets.com slash show 36. And you can do your own research on that. But obviously you just got two plugs to AppFolio. Yeah, and shop around.

We shopped around all of them or a lot of them, but we found that that was the one that worked the best for us. And you're just going to have to see what works for you. Before that, we use the service called Clear Now. If you're not that big, you can use them. Obviously, they take a little cut out of your rent, but it's so worth it because it deposits that it's right in your checking account. You don't have to go to the mailbox. You don't have to go banging on doors or anything like that.

Boom, it's right there. And, of course, my tenant base is going to like that. They're used to paying things online. They're used to paying with debit cards and things like that. They don't have checkbooks anymore. They don't have stamps. You know, what's a stamp? We don't know what that is.

And so everything's done online. The more we can get to that, the better for us. But we still, like I said, it's about 70% that pay online. The rest is check. They mail them to us. I don't go banging on doors looking for rent. Yeah, yeah, right on. What if your CRM actually did the hard work for you?

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If getting rentals organized and filled fast is on the list this year, start with Avail. Sign up for free at Avail.co.com slash Bigger Pockets. That's A-V-A-I-L-C-O-Bigger pockets. What about cash flow? So, you know, I'm a guy of the mindset that cash flow means you're making a profit every single month, you know, barring the cap-x that you actually plan for ahead of time. And so when you're plotting ahead for, you know, a purchase, you're obviously keeping in mind all the expenses that come with a rental property, not the ones that, you know, sorry to rip on

agents here, but the vast majority of agents will tell investors it's your rent minus your mortgage. Right, right. That is not cash flow. So, you know, what's your theory on cash flow? Will you buy a property that's, quote, break-even, or do you only aim for a specific amount per door?

How do you work it? No, I will not buy a property that's break-even because I can tell you it won't be break-even for long. Something's going to break. something's going to happen that it will not be break-even. My standard is I look for about $150 positive cash flow per month per unit. So if it's a duplex, that's $300 positive cash flow per month. And that's on top of everything.

That's your principal interest, taxes, insurance, about 10% vacancy credit thrown in there, 10 to 12% repairs and then trying to put a little bit of reserve fund away for future. You know, you've got to repair the roof at some point. Your condenser is going to go, all those sort of things. So you've got to put a little bit of a reserve away as well.

What about property management since you guys are managing? Are you assuming the management fee of, say, 10% a month on top of that? Because you've got to pay yourself. Yeah, yeah. We kind of throw that in there a little bit as well. not as much when we first started out, but now as we've gotten a little wiser and structured things a little differently,

yeah, we try to plug that in there because as you get larger, you can't do it all yourself, and we've had to hire a couple of folks as well to help us out. And so they've got to get paid somehow. Well, it comes out of that cash flow. What's the best way for newer folks

to plan for the expenses? Again, I think that's probably one of the biggest errors that we see people making is they have the wrong assumptions about what it actually costs to be a landlord, and that's where they screw up. And, you know, it happens when they buy. They overpay because they don't know what they think the rent is going to be covered by the mortgage. And that's it. That's the end of the story. Yeah, you know, they get bad advice. People, they're told, well, you know, you need to just cover your mortgage.

But there's also taxes, there's insurance, and the repairs. The average that everybody likes to use is 10% of your gross income. So if your rent is $600, you can expect to pay $60 a month in repairs. Now, you may not do it every month, but say in May, you know, something's going to break, and you're going to have to use those five accumulated months, that $300 to fix something. trust me it's going to come and and I would even probably I've lately been going up to 12 15% trying to budget that in because you know stuff breaks a lot yeah and and not every tenant is going to take as good care of stuff as it is like you would if it was your own I mean you know

things break and and you've just got to be ready for that you've also got to have reserves too that's that's key as well have some cash in the bank what does that look at like. How many, you know, I mean, and I'm guessing that that'll depend on the size of the property, the purchase price, but, you know, what would you recommend in terms of reserves for folks? You know, it's just going to depend on how big the property is and, but you should, you know, you should at least have an emergency fund of several thousand dollars, at least. If you've got one property, you know, put five to ten thousand dollars aside. Because if something happens, you know, If there's a storm and it blows your roof off, well, I mean, you're going to have a huge deductible to put it back on.

And stuff happens. I mean, trees fall on properties. You know, you just never know. You're taking a gamble if you don't have some funds put aside. I have a triplex that we saved up like $9,000 for like the emergency fund and we wiped the entire thing out in one month. I mean, 100% of it in one month just could be had two vacancies and eviction and two remodels because the units were destroyed. Yeah. And that's the other thing people don't realize is the turnover kills you, especially if they tear up the unit.

So, I mean, the key is to, A, get long-term tenants if you can. B, get your, if you can't, get your properties back in almost as good condition as what they went out. Because the turnover, if you have to constantly rehab these things every year, fresh paint, redo the floors, yada, yada, yada, the whole thing. Your cash flow is going to get killed. How do you do that? How do I do, make sure I get them back? How does somebody, yeah, how does somebody get a property back in as good or close to as good a condition as possible? Don't rent to landscapers, I know.

Right. It goes back to the tenant screening we talked about and getting a tenant that cares about their credit and not getting that dinged and getting somebody who actually wants their security deposit back. And somebody who's neat and has manners and all that sort of thing is probably going to take care of your property fairly well. And that just shows why. We manage it. When they tell us they're going to move out, boom, we send them a form. Here's all the things you've got to do.

The fridge has got to be cleaned. The stove has got to be cleaned with prices next to them that says if we have to clean the fridge, it's $50. You know, if I have to take a fork out of the drawer, it's $10. You know, if I have to put a light bulb in, it's $10. So we send them that list and, you know, this is what, if you. You want to get your security deposit back. This is what you got to do.

And a lot of times we get it back in pretty dang good condition. We just did. We just started that. We got that form that, you know, that says the price for everything. And it's hard to tell, you know, how much it's improving. But the last two people that moved out with that form cleaned spotless. Because I think there's something about that. When they see the number that it's $10 to replace a light bulb, yeah, all of a sudden,

then they start to, you know, think, oh, that's coming out of my wallet. Yeah. And, you know, you'll never get them back. Perfect. There's always normal wear and tear. You're going to have to touch up a little paint and whatnot. But, you know, it's not hundreds or thousands of dollars worth of repairs that you have to go in and fix. You can almost rent them instantly, which is what you want. Yeah, yeah, for sure. All right, well, let's kind of move on to the next section here. And we're going to try and speed it up a little bit because this is looking like this is going to be a pretty long show here, which is great because there's a ton of, a ton of great stuff here. For you, at least, I guess what's the point of the cash flow? Is this live off the cash flow, say for future purchases, or is it you using it to pay down loans? What are you doing?

You know, it's living and building reserves and everything else. I mean, the cash flow is our salary pretty much. I mean, that's how we put food on our table, put gas on the car, buy an occasional luxury, pay our mortgage payment on my house, and that sort of thing. It's what we live on. And it's what we use to invest further in the business to make improvements, to put a little bit down perhaps on buying another property. Well, let me ask you this. So you're what we would call a pretty successful landlord. And so, you know, I think I really want to harp on this because, you know, you're successful.

You're living off your business. You've created this business that you and your family. survives off of and does, you know, hopefully fairly well with. But, you know, you're not spending, you know, six months out of the year in Tahiti and buying, you know, 10 Mercedes and blinging it up. I mean, you're, you know, the perception of this, you know, landlord is as rich man. What's your theory on that? You know, it kind of gets back to that slumlord discussion we had. You know, they all perceive us as we go home, light up a cigar, and then sit on my piles of cash, like Scrooge McDuck or something.

I don't know. I love that guy. Uh-huh. You know, and I don't know where that perception came from, but yeah, you're paying me $600 a month in rent. But, you know, a lot of that's going back out. I've got to pay the bank. I've got to pay the bank on the first. There's no calling the bank and going, oh, well, I'm a little late, you know, my cat died or whatever.

You know, I have got to pay them on. the first where they are going to take the property for me. I've got to pay the city taxes and the county taxes. There's no stopping that insurance. And, you know, when you call me about your toilet leaking or this is broke or that's broke, that's where the money comes from. I got to cut the grass. I got to keep the, you know, the place painted and looking good. I got to pay somebody to pick up the trash. All of these things add up to where I'm really not bringing home $800 a month. that you're paying me. The majority of that is going back out

to keep a roof every head that's nice and habitable in some place you want to live in. I get a little bit extra. I can eat a pizza every once in a while or drink a good beer every once in a while, maybe take a vacation every once in a while, but I'm certainly not sitting in Hawaii six months out of the year. As much as I'd like to be.

Maybe that's the goal at some point. But right now, we're still building our business. Our goal eventually would be to replace us more and more as more and more cash flow comes in, replace us with managers, and then maybe we can go and sit in Hawaii at some point. And I wanted to raise that just because, again, I think there's a lot of people out there that are selling that dream. Oh, yeah. And I really, you know, if anything, if we can do anything with what bigger pockets is and does,

and the show is, I want it to be about reality, and that's cold reality right there. I mean, you know, if you want to get rich, you can get rich with real estate. It takes time. It takes time. It's a lot of work. The best thing you get from being on your own and getting into real estate is flexibility. You get your time and you get a flexible schedule. You can work at 2 in the morning if you want to or 10 in the morning or whenever.

But the bad part is it's all on you. I mean, it's all falling on you, especially in the beginning. You know, when you don't have any help, somebody calls, hey, my toilet's leaking, you got to go over there and fix it. Or, you know, you got to cut the grass. You've got to do all of these things to keep that up. And it's hard. It's time consuming. And it takes a lot of, it takes a lot of funds sometimes.

Yeah. So what would you say then as like the worst part about being a landlord? The fact that it's all on you, it all comes back to you. I mean, if you're going to sink or swim, it's all on you and how you've done your business. That's, I think, the hardest part of it. Sometimes you can feel rather alone out there working on these things, keeping it up. And, you know, that's why it's nice to network with other folks, other landlords on bigger pockets or whatever, because you don't feel so alone.

somebody else is having the same problems you are. Yeah. It's a thousand percent true. I talked to somebody yesterday and they said every time they talk to somebody about real estate in their life, they just kind of look at them like they're greedy. And I feel the same way sometimes. Like I talk to my family and friends about it. And they just kind of, you know, their eyes gloss over and they just think,

oh, there's Brandon being. People don't get it. Stop bragging you guys. Come on. Yeah, that's exactly what people think. People don't get it. And, you know, one of the things a lot of folks say about, you know, if you want to get into real estate is go talk to other folks who are into real estate.

Don't talk to, you know, Uncle John who, you know, works for the government or something, because they're going to tell you real estate's bad, you know, that's not true. You need to find somebody who's actually in real estate and we'll give you the straight dope on what's going on. Yeah, yeah. And it's funny. People always say to me over the years, they're like, well, how's bigger buckets, how's your business? You know, the market's real crappy. You know, what's going to?

said, listen, no matter what, there are people who are buying properties. If the market's great, people, everybody's jumping in thinking, hey, I want to be a landlord. When the market turns, most of those people get out of the business and sell their properties to real investors, guys like you guys, who have a background, who work their butts off to do it, and aren't they're trying to gamble and bet on appreciation of other things. So, you know, yeah, absolutely, absolutely. Hey, so you mentioned networking. Yeah. I believe, tell me if I'm wrong here, you're the VP of a local real estate club. How did you get into that? Why did you get into that? And let's really quickly try and fly through this whole RIA thing and the value of it. So tell us a little bit about that really quick. Well, yeah, I was a past president and vice president of our local RIA, which is the Memphis Investors Group. And I've been involved with them for 10 years. How did I get into them? I just was looking for

help, looking for other folks to talk about on real estate and you start Googling things, you start looking around and you find these clubs. And so I went and kept going and signed up and became a member and I've been going ever since. It's been great. The biggest thing about going, at least to my club, was learning, learning from other investors out there who had done it. And so I didn't make the same mistakes that they had made. I've got a good friend here who says, you know, if you know, if you're not.

If you don't do it, you're going to have a bunch of seminars. He specifically says seminar. And we all know what a seminar is. You go to these gurus, you pay thousands of dollars to take their seminar. Well, even if you don't do that, you're still going to pay thousands of dollars for seminars because you're going to let in a bad tenant. You're going to buy a property wrong. And you're going to end up paying thousands of dollars to learn that lesson the hard way.

Instead of going to a local RIA group and hearing another more experienced investor tell you, here's how you screen tenants. Here's how you buy properties right or whatever it happens to be. And so that's kind of how I got into it. And now I like to give back. And that's why I stay with it. I like to teach and give back to the new folks coming in. So there's obviously good clubs and there's certainly quite a few bad ones out there.

How can somebody avoid the bad ones? I guess you just kind of got to go and see if. it's just a big fat pitch fest. Yeah, they're not going to have up a sign that says, you know, we're a bad club. You know, be careful. And they're not going to have the red flags out. But there certainly are, I think, things you can look for.

And it's just going to take a little bit of time on your part to go and feel them out. I think if you go and it's always a sales pitch, somebody's always trying to sell you something or somebody's always trying to sell you in particular, their particular properties. red flag red flag you know be careful you know not saying that it's a bad club it could be very good you know there are there are

lots of privately owned rea's out there that are fine I've been to several and they're good clubs ours is a non-profit so you know maybe that'll make a difference to you non-profit versus a private one but don't say if it's private that it's automatically bad it could be good I would say that if they're always trying to sell you

something if they're trying to sell you a specific product or a specific set of properties, then your spidey sense should go up and say, well, maybe something's not quite right here. Yeah. That's great advice. Yeah, be careful. Yeah, right on.

But on the other hand, if it's, you know, yeah, they're trying to sell you something sometimes, but then it's networking and it's also classes and it's also panel discussions and other things where real local investors are talking to you, then you've probably found the right place. Yeah. Just leave your wallet home. Bring your cards and, you know, go have fun. Yeah, when you're going out there at first, you probably do want to keep your cards close to the chest, feel it out, see what's going on.

You know, trust your instincts. If it feels bad, it may be. But if people are being open, yeah, it's good. Cool. All right, well, we are, you know, we're at like almost an hour now, so we better slowly start to wrap this up to one of my new favorite parts of the show, which is the fire round. Yes, the fire round. You like that? Sounds great.

All right. So the fire round is questions from the Bigger Pockets forums. Most of these come directly from there and there are questions that actual people have asked. And I want to get your advice on it. So very first one, how do you decide on rent, on the rental amount for renewals when somebody's renewal comes up? How do you know to raise a rent or keep it the same? You've got to stay abreast of your market. You've got to see what other investors are doing and what other properties are renting for.

And again, it gets back, that's part of networking. So you're with other investors and seeing what's going on. It's going to be based on your market. If the market's going up and you can raise the rent, then certainly do so. But if not, and you want to keep a good, steady-paying tenant, you know, then don't raise the rent. But obviously, if the market's hot and has been raising or going up, then, yeah, you can raise it a little bit. Sure. Right on.

Right on. Okay. During turnover, do you? rent your own DIY rug doctor, Home Depot, steam cleaner, or do you go get professionally cleaned your carpets? At first, I did it myself, but now I hire all that stuff out. And to a new person, I would say, do it yourself first so you learn the cost, the expense and how to do it. And as you grow and get bigger, then you hire that stuff out. Cool. Speaking of that, then, best flooring for a rental. I like hardwood floors and ceramic tile

ceramic tile in the kitchen and bath hardwood floors everywhere else with tons of clear gloss polyurethane nice nice nice keep it shiny keep it shiny shiny and hard and indestructible nice pretty much or close to it excellent excellent okay my tenant moved out without any warning what do I do

it depends on your state and what the law say here I have got to here I've got to actually send a notice and then I have to actually store their stuff for 30 days if they're just abandoned and then after that I can

pretty much declare it abandoned I can take their stuff out, sell it, try to recoup any costs and then clean and re-rent the unit. But they haven't given you notice that they have left and so technically possession is still theirs under the law. So if

you have to be very careful. If you go in and start moving stuff and then they show up if they just went to hawaii for 30 days and didn't tell you then they come back well you know i have three thousand dollars hidden under the mattress where is it grandma's gold ring is gone etc etc etc you can set yourself up to be burned quickly very very know your state statutes and what you have to do in that situation that's great and we have written a couple good articles on that and and we'll see if we can scrap them up and put them in the show notes as well. Cool. All right, cash for keys. Do you pay tenants to leave that you don't, you know, that instead of an eviction? I would prefer to sometimes, yes. It's cheaper generally than

going through the eviction. An eviction is expensive and it's adversarial and I just don't like going down to the courthouse. It's generally cheaper for me to pay cash for keys and I can tell the folks, look, get your stuff out, clean it up, broom sweep it, make it clean, and I will, here's some cash to go. And that's usually, you know, I get my property, sign the possession form back to me. I got my property back. It's just easier. Yeah, it's cheaper and easier.

I hate to do it. I hate to pay somebody. I hate it. It hurts. And, you know, and yeah, I'd love to have my day in court and all of that. But, you know, just pay them to get out. It's just going to be easier on everybody. Yeah.

Breathe. You're okay? Take a breath. seemed a little a little frustrated, a little angry. I get it. On the flip side,

though, I've only done, in 10 years, I've only done three evictions. You know, I just, you know, I try to avoid that

as much as I can. Yeah. And that's probably a testament to your screening process. Yes, yes, yes. Right on. All right.

So how do you deal with tenants who pay rent late and don't call? Just rent shows up on the eighth and they don't say anything or the 12th or? And they haven't. talk to me at all? Nope. Wow. They better start talking to me soon. You know, I don't know. That's

really never happened. We talk to them and, you know, with texting now and all of that, I mean, they'll get in touch with us somehow. They're going to get a note on their door or something. Now, if they just don't talk to me at all, I mean, I'm eventually going to get an FED warrant, and that'll get their attention. At that point, if they pay lay again and keep doing it and not talking to me, they're going to go. At the end of their lease, they're going to go. What's an FED warrant for those people who have? I have no idea.

I've never heard of it. Entry and Detainer. It is the eviction warrant in Tennessee. Okay. Okay. Gotcha. And so you Sounds a lot more hardcore. Yeah. FD.WR. Forcible entry and detainer. Yep. That's the

eviction here in Tennessee. And that is what will be tacked on their door. Usually just the service that's tacked on their door will get get somebody calling you real quick. And that's when you can talk to them. Don't ever do that again. Nice.

All right. Final section of the podcast today is our famous for. That was very good. I don't even know what you said. I don't think. All right. This is famous four. We asked these questions to every single person.

And here we go with you. Number one. What is your favorite real estate book? My favorite real estate book. I don't know if I could narrow it down to one. I'm going to give you two if that's okay. I liked Kiyosaki's Rich Dad, Poor Dad for Newbies, because it gets your mind thinking differently about cash and money.

And I also like the e-myth for more experienced folks for building systems for businesses. I mean, that's just key when you get into this is having systems in place to keep your sanity and to keep your business growing. So I would say those too. You know, if there's anybody listening to this podcast right now that hasn't read both those yet, I mean, almost every guest says one or the other or both. It just depends on where you are in life for each one of those. If you're new, Kiyosaki.

If you've been in it for a while, e-mith. So would that e-myth then be your favorite non-real estate business book? Yeah, they're both kind of non-real estate. Actually, they're more business books. But they apply to real estate very well. Indeed. Indeed, absolutely. What about hobbies?

Do you do anything for fun other than kicking those three tenants out of your properties? That wasn't fun, believe me. Yeah, I like to read. I read quite a bit. I like to teach. I still use those college degrees. I teach college-level geography. I do that for fun.

Oh, nice. I for fun am an astronaut. Oh, cool. Yeah, I just use my astrophysics degree for fun on the side. That's a complete lie, everyone. Josh's line. He wouldn't lie to us, would he? No, never.

No, never. Other than that, I like to, I run for exercise. I just ran a four-mileer in 26 minutes on Friday. Nice. And I play racquetball. Oh, I love racquetball. Do you? I also, I'll play.

I like it too, but I'd be afraid to play with the giant Sasquatch that is Brandon. It's like eight feet tall. I'm actually terrible at it, but it's fun. Which is scarier. I just run into people and throw them into the walls. Yeah, pretty much. Rar. Full contact, Rocky Ball.

Good idea. All right. By the way, that is fascinating, the whole geography thing. I'm a huge fan of geography, and I think it's awesome. Well, and I enjoy teaching, which is part of the reason I like writing for you guys on bigger pockets, and I like going back to my Rhea and things like that. I just enjoy giving back and teaching and trying to get folks to do it right. Yeah, sure.

Well, we definitely appreciate it. Final question. What do you believe sets apart the successful landlords from the non-successful ones, the ones that give up and fail or lose their properties or whatever? I think it's that they bet on something other than cash flow or didn't analyze the cash flow properly. If you bet on appreciation, you're going to lose. you're speculating. Because, you know, real estate does not always go up as we've so hard learned.

But if you bet on cash flow, if you always have positive cash flow, who cares what your property's worth? You're still got proper cash flow coming in. You're going to be able to eat. You're going to be able to buy gas, all those other things. You're going to be able to ride over the rough waves that we've just gone through. Hey, any, all the folks who are still standing today in my Ria club, etc., bet on cash flow.

Those are the ones that are still above water today. Nice. That's great. The folks who are flipping and trying to, they're gone. They are gone. Now, flipping's good. You can do it. I'm not saying that's bad. But the ones who were just doing that and we're betting on appreciation, most of those guys

are gone now. Interesting. Well, I tell you, your area is kind of a hotbed of investor activity. There's certainly a lot of stuff happening. Memphis is. Memphis is hot. It is. Memphis is one of the few cities around where you can actually buy a property that will cash flow very well.

And we have folks coming here from, like I mentioned, Australia, New Zealand. At our RIA group, I meet folks from all over the world coming here and wanting to buy properties in Memphis. So, you know, everybody else stay away. We've got to leave us some of these deals. But no, Memphis is good. but don't let that be your only criteria. You know, come here, see it, make sure you understand everything going in,

has to, you know, managing the property, finding tenants, understanding cash flow, all that. It's so important, especially if you're in Australia trying to manage this thing. Yeah, yeah, for sure, for sure. Well, listen, Kevin, that really, really great advice, lots of good tips here.

And we definitely want to thank you for taking the time to be on the show. and of course also for being a contributor to bigger pockets. We really do appreciate it. Well, thank you. I really appreciate being here. Like I said, I kind of have the heart of a teacher. I enjoy giving back, so I'm glad to do it anytime.

And your website is, what is it again? My website, yes, I blog as well, smarterlandlording.com. Thank you, Kevin. All right, guys, that was our show with Kevin Perk. Be sure to connect with Kevin on Bigger Pockets. and we'll have a link to his profile in the show notes. Also, also make sure you're connecting with Kevin over on his blog at smarterlandlording.com. That's smarterlandlopolding.com.

Kevin is definitely a savvy landlord. What do you think, Brandon? I agree. I learned a lot in this episode. So, yeah, good stuff. I'm not sure how you learn anything lounging on your couch here. Your energy's down. You're just kind of, I don't know.

Today is good. Today is good. Today is I'm learning and I'm relaxing and my feet are up. This is awesome. Awesome. And I'm not playing the drinking game. Although somebody is. Apparently we just got a tweet at the time of us recording this from Luke Ward,

which is who's at OK investors. And Luke said, I will be definitely doing the BP podcast, Adult Beverage game this week. Ha ha, not just not full shots. Awesome. So if you two want to partake in the Bigger Pockets Adult Drinking game, you'll take a shot of anything you want whenever we say. Awesome. Okay.

All right, moving on. Don't forget everybody, we're doing this hashtag thing to give away free copies of our Bigger Pockets book on flipping houses and estimating rehab costs. If you want a chance of winning a free copy of the e-books, just share your favorite quotes from today's episode, Facebook, Twitter, or Gplus with the hashtag at pound bigger pockets. And we'll be looking out and awarding our next winner at the next show.

Otherwise, of course, make sure you're following us on Facebook, Twitter, Gplus, and so on. And the fast and easiest way to do that is just go to Bigger Pockets slash Facebook, bigger pocket, slash GPLUS, bigger pocket slash LinkedIn, so on and so forth, and you will find all our profiles. Otherwise, again,

jump on the show notes, ask Kevin any questions you've got for them, especially if they're pretending to rental properties or working with networking at Rias and things like that. He's definitely a pro with that stuff. And connect with us on bigger pockets. If you have not set up an account yet, what on earth are you waiting for?

You will meet people like Kevin every single day all day long. We have hundreds and hundreds and hundreds of new posts every single day, new discussions happening every day on bigger pockets. There's absolutely no reason you shouldn't be on there engaging, connecting with your peers. And so do it if you just set up a profile, get out and connect, introduce yourself, ask questions, answer questions. The more you do that, the more you're going to meet other people, build your business. So do it, do it, do it. That's it. This is me.

I'm Josh. I am signing off. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hike, you're in the right place. You're to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform.

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