Epic Real Estate Investing - The Dream Begins! How Freedom Happens | Episode 97

Episode Date: April 14, 2014

You now own the property and have the tenant. When does the dream begin? How does freedom happen?Those questions and more answered on today's episode. ------------------------- Download Matt's free real estate investing course "How to Do Deals | No Money Required" at FreeRealEstateInvestingCourse.com or text FreeCourse to 55678 "Click" what interests you most:  Education Properties Income Coaching Learn more about your ad choices. Visit megaphone.fm/adchoices

Broadcasting from Terrio Studios in Glendale, California, it's time for Epic Real Estate Investing with Matt Terrio. Yes, it is. It's another great day here at Epic Real Estate. Hello and welcome to another episode of Epic Real Estate investing. If this is your first time listening to the show, really happy that you're here. If it's not, welcome back. Glad that you're here as well. This is the place where I show people how to escape the rat race by investing.

in real estate. And if I were to do it all over again, I do it exactly the same way. I do it exactly the same way whether I had money and credit to work with or not. And the reason being is because I had neither one of those when I got started. And so I was forced to think. I was forced to get creative. And by doing that, I was forced to come up with ways to actually make it work. And I stumbled upon, you know, 12 different strategies. Some were taught to me. And some I kind of, you know, maneuvered and kind of came up with on my own. and hybrids of both.

And, you know, I learned how to do this with little to no money at all. In fact, to this day, with the money that I do have, I still use my own money very rarely. And I think the reason why is because by getting for or being forced to start that way, it just made me a better investor. It made me more creative. It caused me to use my brain more than it caused me to use my wallet. And I want to make you a better investor as well. So what I did is I took two strategies, two specific strategies, two of which I

believe are the easiest and fastest strategies to a paycheck, and I've put them into a free course just for you. And you can access that free course at free real estate investing course.com. Very simple. Free real estate investing course.com. Or, you know, if you're listening on your smartphone and you can't wait to get back to your computer, or maybe you don't have a computer, I don't know. And I've got something for you too, though.

You can download the course right there on your phone by texting free course to 55678. And you'll get the course right there on your phone, the two. easiest and fastest strategies to a paycheck in real estate. All righty. So if you haven't registered for the many online coaching sessions that I have scheduled for the next several weeks, you're going to want to. And the good news is it's not too late. You still can.

And you can do that at epicprowebinar's.com. Epicprowebinar's.com. And if you're listening to this episode right now on the day of its release, the first session, this first free session, is tomorrow night, of which I'll be covering how to create a marketing plan that works, one that works with regard to, one, generating leads, but also one that works for you and your specific situation. And here's what I mean by that. That's why this is important. Just in case, you know, that doesn't sound like something you might be interested in, like creating a marketing plan. I get it. It doesn't sound real exciting on the

surface. But it's really important. It's important because although most of the strategies I teach here on the show, you know, and what I teach in the free course and what I teach inside of the Epic Pro Academy, most of those strategies don't require a whole lot or any money at all. The myth around doing deals with no money or no money down investing, I think that myth when people say it's a myth, I think that accusation is a really undeserved one. Because doing the deal with no money is actually the easy part. There's not much mystery around that. Once you know how to do it, you can do it.

It's not a big deal. Where the myth is or what isn't disclosed very often, is you're going to need some money to market or advertise for those leads that you can do without money. Got it? I mean, that's where the distinction really lies and that's where it's rarely discussed. It doesn't take money for the real estate. It takes money for the marketing of the leads to that real estate.

Now, having said that, you still can do this whole business without a big budget. But understand that your lead generation would be limited to, you know, networking, knocking on doors and cold calling. Okay, because those activities, those activities are indeed free. And if you want to do that, but you can. Okay, so that's how you do it for free totally. But if you don't want to, and most people don't, I mean, it takes a certain type of personality that can take on those practices for the long term and create a real strong and thriving

business out of it. So most people opt to market for their leads to put out a message out there or multiple messages that cause the leads to call them as opposed to them calling the leads, as opposed to them going out and networking, as opposed to them going out and knocking on the doors or them picking up the phone and cold calling. They get those calls to come to them. That's what marketing and advertising does. So that's the distinction. And I know for those that eventually understand this dynamic, the next big question is, how much money do I need to market for my first deal? How much money do I got to put into the marketing before I get that first deal? And should I deploy the use of that money

in one day or should I spread it out over time? And if I do have to spread it over time, how should I distribute it over time? And for how long until I get my first deal? I mean, those are the questions that will come to me once people understand that, oh, I'm going to need a little bit money for postage and for letters and printing and postcards and all this kind of stuff.

Those are the questions that come to me. And those are the questions that I will be answering on tomorrow night's training session as well for all in attendance. everybody that attends, they will receive a copy of a special spreadsheet calculator that I designed just for this purpose to help you figure out your own marketing plan, your own marketing budget. So, you know, just to make the math easy. And it's actually the same calculator that I use right here in the office for my team. It's the same calculator I'm using with Lisa.

And that's going to be available. You can have a copy of that if you're in attendance. And the reason there's that little caveat there is that these live trainings, they are free. They're free for all to come and enjoy. All of them are free. However, the recordings of the trainings are available inside of the Epic Pro Academy to its members only. Okay? So that's the distinction.

Come one, come all. You're all welcome to go to EpicproWebinar's.com, register those trainings and sit in and get that free training. You'll get the free calculator. And every training, I'll be handing out something. So you'll get access to all of that. So that's all there for free. But the recordings are available to the members only. And I say that because I just don't send me any sob story on how you couldn't make it

and beg for a recording. I've been rather soft in the past. I've been rather lenient, and I've acquiesced to those requests. But this time I can't. I can't, because I'm putting a whole lot into the Epic Pro Academy,

and it just wouldn't be fair to those that decided to become members. And speaking of which, I have the official announcement of when version 2.0 will be open. So May 1st, the unveiling of version 2.0 of the Epic Pro Academy,

that's when that's going to happen. May 1st, the Academy will open on that day, and I'll be offering on that day a one-time-only discounted rate on the 1st through the 4th, May 1st through the 4th, at a rate, out of which a rate I will never offer again, never. And that's not a marketing ploy. If you've been here long enough, you know that I don't do that. I mean, every time I've made an announcement like that, and I said, hey, this is the last time or this is the only time,

it's always been the last time, it's always been the only time. I've held true to it, whatever I've said. there. And it'll be the same here too. So between here on the podcast and if you've opted into access the free real estate investing course, I'll keep you informed on how to access this one-time discount. Okay. Enough of that. Let's get on with our Living the Dream series. Last episode, we left off with how to find a good tenant and how to find the best tenant that will pay the most rent for your property. And if you missed that, you can get yourself up to speed by listening to episode 96. We're on episode 97, so that was just last episode. Okay, so acquiring your first rental

property, that's a huge milestone on your journey to financial freedom. Congratulations. But, no, it's not the end of the road, as you could imagine. You know, it's really just the beginning. You know, once you have at least one tenant, you will soon to begin. I mean, you'll, you'll start to feel it. You'll start to generate the cash flow and you'll want another property because it's really rare for someone to be able to retire on the cash flow of just one property. So you're going to need multiple. For some of you might be five, some of you might be 10. You know, I'm up to 200 and I'm still going.

And it could be anywhere in between. It just depends on what type of life you want to live and where you want to live. So you'll need to replicate the process with new strategies and tactics that you're going to learn through experience and you're going to learn it through study. You know, just like any skill, real estate investing to your maximum potential will require experience and a never-ending learning process. So to continue this process. of acquiring cash flow properties while keeping your current ones performing. That's very important because I've made that mistake before where I've been so focused on acquiring new properties.

I kind of lost focus on the ones I already owned. And they suffer. And so it's kind of like spinning plates a little bit. I had to go back and spin that one plate a little bit more so I could go out and spend the next ones. So you're going to do that, though, you're going to need to know how to manage your finances, manage maintenance and repairs, and manage the tenants themselves to keep this all going. So let's start it with managing finances. You know, any business owner needs to develop

skills of financial management. And your team and other professionals in your network that can handle, you know, certain aspects of financial management for you. But really, the most successful business owners tend to be pretty knowledgeable on this subject. You need at least need to understand it and be able to grasp it. You know, if nothing else, a solid financial education in your field will help you to choose which professionals to hire. Because it's kind of like how I would kind of recommended you manage to say that first property on your own. Because once you do make that leap, if you do, to hire a property manager, you know how to manage that property manager because you already know how to manage the property. Okay.

So, you know, you're going to be looking for people who have experience and expertise who also identify with your goals and really speak your language. In other words, financial professionals that invest in real estate also. Those are your best choices. And as you focus on managing your finances for the business, you'll need a business. I'm sorry, got a fly here buzzing around the ding microphone. Move, go. So where was I? Yeah, as you focus on managing your finances for the business, you'll need a business checking account for a monthly.

expenses and another account for your net operating income. You can make the second one an interest-bearing account that'll help maximize your profits. I don't know how much these days, but it'll help maximize your profits, and I'll explain why in a sec. You'll be able to get a small business bank account package set up through a local bank that will customize your accounts for you. That's what I've done. That's what I recommend. And your accountant will probably have valuable tips for you to stay organize and efficient. You don't want to do all this your own. Okay, I learned this really the hard way. And I made a total mess of my business and it cost a lot of money to get it all straightened out. And you can also find software packages specifically for property management, which I recommend if you're going to do it yourself.

Or you can create or customize your own system based on spreadsheets or other standard organizing systems. There's all of those options out there and there's successful investors that do all of that stuff in all of those different ways. I really recommend just hire professionals and let them do it for you. That's what I recommend. But it's a good idea for you to have a general understanding of how it all works. So you know what you're looking at and you know if your professionals are doing their job or not. And then so you want to keep your accounts receivable. You want to keep accounts payable and then a miscellaneous accounts.

You want to keep that all separate and organized. So let's talk about accounts payable. Okay. So that basically means that the money that you have to pay to keep your business going, accounts payable. The money you have to pay to keep the business going. And you can look at your situation, decide. if, you know, you'll need to pay bills weekly every two weeks, monthly, quarterly maybe. And then you can set up a regular bill paying routine.

And once you get into a routine, it'll really be easy to pay track and record your accounts payable. And, you know, I've got my accounts payable as well as all my money partners and all of my private lenders. I have all of them on regular payments. I have all that set up. It's not a routine for me. I have actually set up on auto pay.

and they'll just you can set that up in most bank accounts now they give you online access and you can set all that up and those payments that they just happen automatically every single month and the reason I do that first of all is this so I never forget anybody and everything continues to operate but what more importantly I have it that way because it allows me to focus solely on the next account and that's the accounts receivable in this category as you may have guessed covers is the money that you bring in the money that you receive. So your excess money from rental payments after monthly expenses, your net operating income, that will probably make the bulk of this, make up the bulk of your account. However, the account may also include money from insurance and reimbursements and late fees,

escrow excess, refunds, other payments, maybe you've got laundry facilities or you've rented out your roof to a cellular tower or something like that. Any type of that income that comes that you receive from your properties would go into that account. And it makes sense to keep this money and an interest-bearing account. You know, although the, I just kind of saying the interest ain't much these days. I don't know how much that's going to impact your bottom line. But you know what? Those interest rates aren't going to be that way forever.

So it would be a good idea just to get started and do it that way now. And then you've got the miscellaneous accounts. In addition to keeping track of accounts payable and accounts receivable, you'll need to keep track of some other things also. For instance, you may need to deal with insufficient funds coming through on rental payments. You know, in these cases, you can charge a fee. You can contact the tenant and ask for a cashier's check, give the tenant a five-day notice or all of the above. Whatever you choose to do, put it in writing and stick to your guns, be consistent.

And one of the big choices you'll need to make is that of whether or not to set up a corporation. Might be another account. There are many things to consider, though. And everyone's situation is slightly different. The tax benefits and legal protections afforded by a corporation vary. and they can be very attractive as well. So I'm trying to keep a nice middle ground there because I'm not a legal professional and I'm not a financial professional. So I can't give you that advice.

I really want you to go out and consult with your attorney and your CPA to help you make the decision of what type of structure you should set up for your life. What type of legal entity if you should. Maybe it's a trust. Maybe it's an LLC. Maybe it's an S corp. There's all different ways to do it. So just, yeah, consult a professional to see what's best for you, weigh the pros and cons and make that decision. And, you know, just kind of make a regular schedule to review your finances and make sure everything is in order.

Okay. So the steps here in the accounting process, go out and find a CPA with experience and a good reputation. Of course, you should find one who is an expert in accounting for investment properties. that all CPAs are not created equal, I promise you. Okay? The CPA that I use at $400 an hour is very different than H&R Block that will prepare your taxes for $99. Okay, and there's everything in between.

But a good CPA, you know, they're going to be worth their weight in gold because, you know, if you're not careful and you get good at this and you start making a lot of money, you want to keep as much of that money as you possibly can. And that's what a good CPA is really going to do for you. So talk to your team, including your CPA, about the possibility of creating a corporate entity for your real estate investment business.

Under the right circumstances, the creation of a corporate entity can be one of the, really the smartest moves that you can make. As far as, you know, if you want to know how the rich avoid paying taxes or avoid paying a lot of their taxes,

it all kind of comes through corporate structure. And what's kind of sad about that, it's not just the rich. It's not only just available to the rich. It's available to everybody. the tax code it applies universally okay so this could be like your first step into playing that game where you can make money and you can contribute to society and in return for contributing to society the corporate awards you with tax breaks that's really kind of what how it works

you know it's got this where society's kind of got this negative evil undertone if you don't pay taxes and that's unfair but it's totally fair and it's totally fair for every You just have to know the tax code. I don't expect you to know the tax code back and forth, but I do expect your CPA to know the tax code or the tax code. And they're going to advise you on what to do to make them best or the most of your own financial situation. Okay. And, you know, you can also make a separate account just for your security deposits. You know, you might as well make it an interest bearing account also.

You know, some states are actually required you to pay interest on the deposit to your tenants. But you might be able to, you know, keep the interest if there is no rule against it. so that kind of works. In fact, you know, sometimes the combined interest from all of your tenants may still add up to enough for you to clear a profit, even if you are required to pay the tenant's interest. Now, whatever you end up doing, though,

it's a good idea to set up accounting software for paying and documenting these expenses at the very, very least. Okay? So there's managing your finances, just hire professionals, but get a good grasp on what they're doing, have them explain things to you, so you know what's going on

and get multiple sources of your information, and I know one thing that I do is when I hear something, some sort of financial information, some sort of tax information or legal structure information, I hear it from another source, maybe a seminar or a mastermind group, or I read it in a book, or I just, I don't know, maybe I caught it on Twitter.

I take that information. I learn everything I can from that source, and then I take it to my professionals and say, hey, prove to me that we can do this or prove to me that we can't do this. I do that all the time. I bring this information back to them and I make them set things up for me

or I make them prove to me why they can't. Okay? So always be, you know, you're always in that learning process. Now, managing maintenance and repairs on your properties. You know, after you get your legal and financial affairs taken care of, you may want to shift your focus to repairing and maintaining your rental property. Not to sound negative, but this is one of those cases where it's a good idea to prepare for every problem that you can think of.

you know, the saying about an ounce of prevention being worth a pound of cure that really applies here. I mean, modern homes are absolute marvels of modern technology these days. And the downside is that there is plenty that can go wrong with the electricity, the plumbing, the ventilation, the furnace, the air conditioning, all the other systems involved in the property. And I mean, and even if you are skilled with these types of repairs, you may find that you don't have the time to take care of them yourself, especially as you accumulate more properties. So it's a good idea to have, you know, a file of trustworthy, affordable, experienced professionals who you can call when you need help.

And if you have a plan ready to go for fixing and funding any problems that may arise, it will be easy to keep happy tenants and your cash flow positive. Okay. So that's important, keeping the tenants happy and keeping the cash flow positive. and one of the best ways to protect your investment and stay in compliance with the law is to try to stay on top of preventative maintenance, addressing potential issues before they really become problems. His problems inside of holding on to large number of properties, those problems can snowball rather quickly if you don't keep your eye on it. Now, choosing repair and maintenance professionals.

This is a biggie. It's kind of like we talked about, I don't know, several episodes. I've sent it several times on the show. where real estate investors, most real estate investors lose their money. Anyone that's lost a significant amount of money in real estate, they've lost it in one of two places. They've lost it with bad property management or they've lost it with bad rehabbers. Now, when it comes down to choosing repair and maintenance professionals, there's some

overlapping gray area in there. So you want to make sure you get good ones. You know, most communities, they have many different repair and maintenance professionals who actually compete for business. And it sometimes, you know, it takes. a while to find these types of people that you're really comfortable with. And sometimes you have to work with some bad ones before you find the good ones. But patience, it pays off.

And when you find good ones, I've said this before, treat them well, pay them well, and keep them happy and they're going to treat you right. You know, no one, and when you're trying to keep them happy, I mean, understand that no one likes to get an emergency repair call, but it does happen for even the highest quality property. So if you're prepared for it and you've got the right people on the job, you won't, you know, you won't have to do much more than make a quick phone call to to one of your top repair, your repair professionals.

I mean, hopefully you already have them on speed out. Ultimately, that's what you'd want to do. And you can talk to your network for referrals and put together, you know, a solid list of service providers. Maybe within your regroups, you can exchange service providers. You know, make sure you include a handyman who can take care of many of the common issues that come up as well. Those handymen, they're worth their weight in gold when you find good ones.

and then as you're ranking your list of vendors, keep affordability in mind, okay? You always want the ones that are going to, you know, you want to be conscious of your bottom line still, but don't use that as your exclusive criteria. Also consider response time, consider the quality of the work, consider the flexibility,

and any other factors that may seem relevant for you in your situation, okay? So maintenance. Maintenance, it's a term that covers the, you know, the ongoing upkeep of the property, and that includes stuff like lawn care, periodic repainting, roofing repairs, or maybe even replacement, changing the furnace filters or the smoke detectors or even replacing, you know, external light bulbs. You know, some of these tasks are reasonable to ask of the tenants, like, you know, like mowing or snow removal. And you can even make a deal for the tenants to do some extra work around the property in exchange for a rent discount.

Just be certain to include all of those details in the lease. all of these things, you want to really define what you're responsible for as the landlord and what your tenants are responsible as the tenant. You want that all to be defined and clearly stated inside of the lease. Now, fortunately, many of the jobs that are bigger and require specialists have fairly predictable cycles that you can look up. And if you can time the repairs between tenants, you know, it tends to make things go much more smoothly. While you want a good deal, it doesn't pay to cut corners here. I've learned this so many times and I'm, you know, after the first fifth or six time. I was like, when am I actually going to learn this and apply it?

So it doesn't always pay to cut corners. It just don't use prices. Your sole, your sole criteria. It's generally better to pay once for good work than to pay twice for bad work and then a repair. Not generally. It's pretty much always. So that's maintenance. Repairs. You know, it's, it is the landlord's responsibility to take care of any repairs of the property. And that's something else that can kind of be outlined or detailed inside of the lease agreement. But for most, in most instances, you will need to take care of repairs right away. You want to do that, but there are some cases where, you know, maybe the damage is the tenant's responsibility due to negligence or reckless behavior. And, you know, if the damage really is the fault of the tenant,

you can bill that person for the cost of repairs. And when a repair is needed, you need to take down the tenant's name, contact information, schedule, and details about the need of repair. check out the possibility that the repair may be covered under some kind of warranty before you move forward with the call to the repair professional unless it's an emergency of course. And if a warranty is in effect, contact the company directly to follow the procedures. Then you can contact your vendor and pass on the tenant's contact information and just have it handled and let the tenant and repair vendor hash out the details about the repair visit.

Okay, so let's repairs. Basically repairs, you want to respond to those calls right away. responding to repairs is one thing, a very simple thing that you can do that keeps your tenants happy. And happy tenants are good tenants because those good tenants are ultimately result in cash flowing tenants. Okay, so let's talk about the tenants now. We're going to talk about managing the tenants. So for all, you know, all intents and purposes, every business is a people business. And we've talked about that very much here.

Real estate is a people business. And one of the more valuable skills, if not the most valuable skill that you can acquire, is the skill of, you know, interacting with people. And managing tenants, well, requires, it requires some pretty good people skills. And the good news is that if you don't like dealing with people, you can always find someone who does, okay? I really don't.

I'm not good at it. I have a little bit too soft of a heart for it. So I'm not a good person to interact and deal with my tenants. I'll believe a story because everything kind of makes sense to me. I've been through so many things in my life when a tenant gives me a sob story. He's like, I remember when that happened to me or something like that happened to me. I can associate with so many of my tenants because I've just been through so much. So I don't make a good person for that.

I don't like to deal with them. So I have someone that does. And I've already talked a little bit about the pros and cons of using a management company to manage your properties and the tenants. And I'm going to discuss a little bit more in a minute. But you can save a good deal of cash if you are willing and able to take matters. into your own hands and work directly with the tenants. Tenants, they tend to prefer landlords and property managers who are present only when they

are called. Keep that in mind, showing up when they are needed and leaving the tenants alone. You want to leave them alone most of the time. You got to keep in mind, this is their house, right? This is where they live. And once you have good tenants in your properties, you want to keep them happy. Be attentive, but also be respectful of their privacy. return phone calls and emails promptly,

take care of repairs, like I was saying, and communicate effectively to avoid misunderstandings. And again, if this isn't your strong suit, hire someone of which it is. Your property has just become someone else's home. So try to make that home a happy one, okay? Lease renewal. When at that time when the lease is up,

you know, you got the good renters into the property in the first place, but that was just the beginning. You want them to stay and keep paying rent for years to come. And lease renewals, that's, it's always, you know, it's always one of the main goal that you want to renew those leases. And there are various ways to increase the likelihood that occupants will renew the lease. You know, part of the trick there is to just simply keep your tenants happy as much as possible.

I've said that. And I just, I can't, you know, say it. I'll probably say it again. But when the lease comes to an end, you can decide if you would like to offer a renewal. and if you would like to change any of the terms of the lease, okay, you can put all of that in there. And if you would rather have new tenants, you can send a certified letter 30 days before the end of the lease

telling them that when it's time for them to go, when they got to move out. And I think 30 days, I think that's pretty much universal, but check for your state. And then if you would like them to stay, then you would send a renewal offer, I would say give them 45 days before the lease ends

to let them know that you're open to them staying. You know, and of course, the tenant also has a say in whether or not to continue the lease and whether or not to agree to any addenda that you attach to the lease agreement. And if the tenant is not going to stay in the property, you will both sign forms to the effect and schedule an inspection of the property to assess the security deposit return. Okay. And as soon as the tenant has moved out and the property is made ready for occupation, you'll begin the advertising process and you'll work on getting a new tenant. So that's if that's kind of how that plays out. It's kind of a very general

overview. So promoting the property. If they are indeed moving out, you don't have to wait until a tenant leaves to start promoting the property. You can begin getting the word out as soon as you know the date that that property is going to be available. And you know, even if you have the greatest rental property in the world available at a great rental rate, it's not going to, it's not going to do anyone in good if they don't know about it. So just as you would promote any other business like a restaurant, a bookstore, advertising company or any other company, you'll need to promote your real estate business. And we talked about that last episode and putting tenants in there. And at the very least, you can put a sign at the property with contact details for more information, even if the

place is not yet available. And we went over several ways on how to find tenants and what the strategy is to finding tenants in last episode. So if you miss that, go back to that. I don't want to cover it all over again, even though I feel like I should right now. just because it's in context. But I won't because we've got a little bit more here to go through. So the walk-through inspection, you know, when it's established that a tenant will not be renewing the lease, you know, for whatever reason, you'll need to send a certified receipt-requested document to the tenant and be upfront about what you will be looking for in the walk-through

inspection. You know, after you have the documentation, keep a file of any related letters, notices, or other correspondence. You'll also have to contact the utility companies to keep the utilities on, under your account. And when you do the property inspection, use an inspection form to make sure you don't miss any important details. You can find those readily available on Google.

You know, Google inspection form, property management inspection form. And I want you to go room by room through the form and see if there's any damage caused by the tenant and make a note of any and all instance of damage on the form so that you can calculate repair costs to get the place ready for the next tenant. And after you've, you know,

you've walked the property and test the, all of the appliances, the plumbing, the lights, all the stuff, you should have a good idea of what you are dealing with. And then you want to collect the keys before you do the inspection. The tenant, you know, is still considered a resident while in possession of the keys. And if the tenant wants to be present for the inspection, then you just collect the keys then. That's fine too. And the inspection should be a very transparent process with no debate over responsibility for repairs. All of that should have been outlined in the lease agreement right up front.

Okay. So it's really important to be very clear with your communication and put everything in writing you possibly can. Keep impeccable records. Okay. You want to keep all of that because if anything goes wrong and sometimes it can, surprise, surprise, sometimes it can. You want to cover yourself.

Okay. So ordering the repairs and the maintenance. You know, don't wait to work on getting the property tenant ready. Don't wait at all. Start cleaning and doing repairs and upgrades as soon as a tenant moves out. and then compare your final inspection to your initial inspection to make sure, you know, you are only charging the previous tenant for damage that is his or her responsibility. And you can decide whether to bring in, you know, outside help to or take care of the cleaning,

repairs and maintenance yourself. Okay. As far as the security deposit goes, make sure that you are following the law when you take care of the tenant security deposit refund, backing up any deductions with specific calculations from your inspection worksheet, keep your, keep all of your receipts, keep, keep, keep everything. Take photographs if you can. We just, we just fired a property manager because they couldn't provide receipts for what, for what they were charging us for. So we fired them and found a new one. So that can go both ways, though. It can go, if you're a property manager, you might get

fired by me, the landlord, or you might have some issues with the tenant in when it's time for them to get their security deposit back. So whether you have someone else doing it, managing the property for you, or if you're managing the property, make sure you keep receipts for everything. And it's smart to send the refund via return receipt mail and keep documentation of that as well. Okay. Let's see. Dealing with conflicts because we'd all prefer that everything goes smoothly and it does most of the time. However, you know, conflicts and complications, they do arise once in a while. No matter how thoroughly you review your tenants, there is still a possibility that you will have to deal with delinquent payments or noncompliance. That possibility is all.

always there. And if you do it long enough, you'll eventually well. And in these unfortunate cases, you will need to send delinquent notices or noncompliance notices, perhaps even an eviction notice. So let's talk about what those are. Notices of delinquent rent. So when a tenant has not paid rent within the time stated in the lease agreement, it's time to issue that notice, that notice of delinquent rent. And that gives them a specific amount of time to make up the late rent. five days. And this is often done through return receipt mail to make sure the tenant receives it. Okay. And we've also, we also have a practice of where we'll post or tape the notice to the front door as well. And then we also send it via mail. And in this case, the repayment period would

begin when the letter is received as per the return receipt. Okay, that's very important to understand when that happens, especially if it gets ugly and it goes deeper. You want to know when that time actually started. Now, if the tenant gets the money to you within the time period specified, then you can bill him or her for the late fees and just go back to business as usual. But if the tenant still does not pay you the back rent and may be time to start processing an eviction notice. Okay, so notice of delinquent rent, that's one notice you may have to post or issue. The second notice is notice of noncompliance. Now, this is very similar to the delinquency, but it doesn't apply directly to the rent payment.

The general type of notice, this notice of noncompliance, it can be used to address, you know, any kind of action that is not in compliance with the lease agreement, including, say, illegal activities or unauthorized occupants or parking violations, anything like that that's in violation of the lease that doesn't have to do with the rent, the actual money. And in most cases, you know, a quick phone call will be enough to bring the tenant back into compliance. I haven't, I don't know if I've even had to ever issue one of these. You know, sometimes people just forget the details of the lease or they have a temporary lack of judgment, or they just forgot or just didn't know. That happens as well. So be courteous in your

reminder, keeping all that stuff in mind. Be courteous. But do keep a full record. Always keep a full record of all landlord-tenant correspondence just in case it comes up again. Because it can and, you know, sometimes it does. This is why I don't make a good property manager because like, oh, yeah, I forgot to take out my own trash last week. I forgot to mow my own lawn. So I can understand how you didn't also. But that's your life and that's and their life is theirs. In this relationship, you are the landlord.

They're the tenant. You want to make sure you run this like a business still. So if the problem persists, you know, you may have to send an official notice of noncompliance through you guessed it, certified, return, receipt, posted. You want records of all of this. So keep a file of this notice and then check in to see if the corrections were made. if the tenant does not make the required adjustments in the stated amount of time, then, hey, the eviction process would probably be the next step. Now, of course, we all want our tenants to be cooperative and reliable.

However, things don't always work out exactly the way we want them to. And once in a while, if a tenant breaks the contract, you may have to deal with an eviction situation. I've had to deal with a few of these this year, and a few more of those that last year were getting better at our screening our tenants, but as good as job as you do up front, sometimes you still have to deal with this. And an eviction, it's not good for anyone.

But sometimes you just don't have much choice. And when this unpleasant situation arises, you need to know how to proceed. So do some research to develop a thorough understanding of the eviction laws of your state because they do vary. And you want to understand those laws so that you can be sure to be in compliance with the law. And it can get very unpleasant if you're in. if you're not following the rules, you can actually, even if you're in the right, you can, if you don't follow the rules, because you don't know the rules, you can end up in the wrong,

which can mean, you know, court cases or a loss of rental income for several weeks. So try to look at eviction as a last resort and try to talk to the tenants before taking legal action. Like I said, it's not good for anyone involved, but sometimes it's unavoidable. And you may be able to salvage the rental relationship if you can sort things out. And a lot of times you can. But just, you know, always remember that's your intention is to sort this out. Okay. So sometimes we can get trapped on trying to be right and trying so hard to be right.

You lose sight of the big picture. And the big picture is to have good tenants in your property that pay you rent on a consistent basis. But if you just want to be right that, you can cost yourself that. So being right can be very expensive for sure. So if they refuse, you know, but if the tenant isn't complying and then they refuse. to return your calls or your emails or they refuse to meet with you, you do have the right to lock them out of their property, okay?

Or it's your property. You have the right to lock them out. And if you lock them out, though, you have to have a key available for them within two hours or so so that you can let them in to access their possessions. So check with your local laws just to make sure that's the case. I don't want to, you guys end up in court and say, that guy Matt, the guy on the podcast said so, but that's what I know to be true.

I don't invest in every single state in every single area, so I don't know if that's 100% universal, but it is in all of my markets. You know, locking tenants out of their property, though, that's pretty extreme. I've never had to do that. And most landlords use this tactic only as a way to getting a meeting lined up

so that you can resolve the actual issue. So it's just kind of getting their attention. So, but still, always keep detailed records of communications with your client, especially any communications that have to deal with, you know, breaches of the contract. So if you can't manage, after all of that, you can't manage to get the problem ironed out, you will need to go ahead and process the eviction notice. And this is a legal process.

So you will need to consult an attorney to make sure everything is in order. Put together all of the necessary documentation that you've been keeping good records of, including the lease, and all of the correspondence related to the problem, everything that has to do with anything. And your attorney, they can help you nail down a court date and officially notify all concerned parties. And during their hearing, the judge will assign the judgment. They'll assign the dollar amount, owed for rent, damages, fees, costs, any expenses

associated with the filing. And in most states, it will take, I don't know, about 20 days for the eviction process to be completed. The eviction process, okay? But there's lots of other things that vary significantly from state to state. that could make that a 30-day process or a six-month process. I know in California it's really a pain in the butt. But once the eviction process begins,

you might decide to work things out with the tenant and continue the lease once they have made amends. If the tenant pays the amount decided by the judge and moves out, then you can prepare the place for a new tenant and start advertising again. Start the process all over and hopefully find a better tenant this time. If the tenant fails to pay the required amount, you can ask your attorney to turn the matter over to a collection agency, and the tenant would obviously

then forfeit all deposits, of course. And if the tenant refuses to vacate the property by the arranged date, your attorney can file a writ with the court and the constable's office or the sheriff's department to enforce the eviction. Okay. So that's a lot to remember. And it may sound overwhelming if that's the first time you've ever, you know, you've been walked through the process and looked at all of those different scenarios. And actually all that might have caused you to think twice about whether you want to buy and hold or not. I get it.

You know, there can be an unpleasant side to managing properties. But if you do your work up front, the unpleasant experiences can be significantly reduced. Okay, significantly. You know, and here's what I mean. If you're having second thoughts or like, I don't know if I want to be a landlord, I've had some very successful real estate investors call me. They're very successful wholesaler.

very successful fix and flippers, they have called me and asked me if, because they know how many properties that I hold, and they ask me if it's worth it. And, you know, let's look at this way. Okay, so last week, maybe two weeks ago, I had posted a video. Okay. Well, actually, I posted it here too. It was the, it was a Financial Freedom Friday video episode right here on the podcast. And it was about how to use other people's money to pay down your debt. And I kind of went through that whole scenario and I explained how to do it. You buy rental property. You set up auto payment, the auto payment pays the debt and blah, blah, blah. And on Facebook, I promoted that video. And if you're not familiar, you can actually boost one of your posts to it, so it reaches

a, it reaches more people. But you can also narrow in and target which people you want to reach. So it's just, it's, it's, it's, it's, it's, it's very specific targeted advertising. And I wasn't selling anything in the video. I just wanted to expose the video. I just wanted to share it with people. And so I decided to reach a certain demographic. I went down the simple. I went through Robert Kiyosaki, anyone that has that has that in their profile, anyone that has read the book, Rich Dad, Poor Dad. But then I decided to go, well, those people are probably already believers. Let me go out and try and touch the people that don't know and might believe something to the contrary. So, of course, I reached out to anyone that was a Susie Orman fan, anyone that was

a Dave Ramsey fan, as the video offers an alternative to what they preach with regard to paying down debt. And I probably should have been expecting this. I was hoping I was going to get some people, wow, man, that was great. I never thought of it this way. Dave Ramsey never explained it this way. But, you know, I actually got some really evil and emotional comments on that video. And I could only assume they were from Susie and Dave's fans of which I took with a grain of salt. You know, as they're drinking the Kool-Aid over there and they'd listen to the show regularly. So it's probably just part of their belief system. They've been indoctrinated to that. And probably not just by them, but by the way that they were raised because they're kind of pretty

the traditional values and the traditional means of, you know, creating security in your life. But there was one comment from a guy in particular, and he wrote something to the effect of, I'm paraphrasing here, I'll just make it real short. He said, no thanks. Why would I want to base my entire life off of finding good tenants? I'll stick to Dave's plan. So that was one of the more friendly responses that I got on that video. So initially, this doesn't sound that bad, right?

You know, it wasn't evil or he didn't call me any names like some of the other people did. And it wasn't anything like that, nothing like the other comments. But he wrote, why would I want to base my entire life off of finding good tenants? And he's very much right because your property, the cash flow that your property spits out is going to be very dependent on you finding good tenants. So I see where he's coming from. and then he says, I'm going to stick to Dave's plan. And if you look at Dave's plan, he suggests, you know, spending your entire life, working for someone else and living below your means so you'll have enough to retire on

when you hit 62 some odd years old. Really? So is that really a decision? I mean, you just got to really look at it this way. Like, this guy was responding, like, no way. going to spend my entire life finding good tenants, but I will spend my entire life working for someone else. I mean, would you rather manage tenants that pay you their most important bill every month?

I mean, even if your tenants are having some troubles financially, what's the first bill that they're trying to pay their rent? They want to keep the roof over their head. So even if some of their other bills are going to suffer, they're trying to pay yours first. Okay? So there's, would you rather manage tenants? Would you rather get up every day for the rest of your life to report to a boss?

And live below your means so that you can finally enjoy your life at age 65. After the best and most active years of your life are behind you. That's not even a decision in my world. It's a no-brainer. And it's a shame that when, you know, mountains of logic and evidence are placed before people and not just logic and not just evidence, but flat out math equations that prove pursuing cash flow as opposed to saving cash will get you to financial freedom anywhere from four to ten times faster.

And despite simple, indisputable math, this person, as well as the majority of the people in the world, I didn't meet this person, but I know this is the thought problem. out there because you can just look at the people's results. The majority of the world would still rather opt in for living a life of mediocrity working 40 to 60 hours a week for someone else than investing a little time and learning how to find good tenants and maintain them. They'd rather spend 40 to 60 hours a week working for someone else rather than, you know, four to six hours a month managing tenants and having the rest of that time to do with

what you choose. And so it was just, it was an eye-opening experience to realize that my work is not done here. But I know I'm preaching to the choir because you're here listening to me. You're looking for something new. You're looking for something better or you're trying to better the situation that you already, the good situation that you already have. So I'm preaching to the choir. But I mean, but when I say that, I mean, it's so sad and I'm not saying that I live in this perfect world, not by any means. My real estate empire does not run smoothly all the time.

In fact, it can be rough. And if you're doing this, you already know that too. There are certainly nights when I can't sleep because I'm stressing out over something within my business. And sometimes it just flat out sucks. It flat out sucks. But you know what doesn't suck? Here's what doesn't suck.

Sleeping in on a Tuesday, just because I can. Taking a day off any time I want to spend with my son, just because I can. Eating at any restaurant that I want and ordering anything that I want with the majority of all of that money that I just spent with the majority of it being a tax write-off. Traveling to my markets. People go, I don't want to go to Memphis.

I don't want to go to Cleveland. And those are some awesome parts of the country. There are so many awesome things to do there. And we live in a really great country and they've got a lot of great, exciting and fun things. to do, fun things to see, fun places to visit with your significant others. And when I go to my markets, I travel first class, I stay in four and five-star hotels. You know why?

Because it's all 100% tax right off anyway. So I can fly coach, I can stay in a motel six, and give the rest of that money that I didn't spend to Uncle Sam, or I can fly first class, stay in four or five-star hotels, and enjoy myself while I'm doing my business. And also what else doesn't suck? Is driving down the street in the middle of the day on a Thursday with my girlfriend and my son and at a whim we'd just say,

Huh, let's go to Disneyland. We make a U-turn head to Disneyland and don't come home for three days later. Just totally spontaneous. That doesn't suck. Or taking my girlfriend to New York for her birthday for four days. And we just left.

We traveled with no luggage. And we bought everything that we needed when we got there. We went on the most amazing shopping spree and had a blast. That didn't suck. Or just play golf. Pick up and play golf any day, anywhere that I want.

Decide to ditch the office midday and just drive to Malibu and cruise through a few different wineries and enjoy the blue sky and ocean air. All the while that that guy that made the comment on my post is sitting in an office somewhere, likely dreaming about doing what I'm doing. All because he doesn't want to learn how to find

and maintain good tenants. You see how ridiculous that that comment was? I mean, when it comes from my world, from my perspective, reading it, from his perspective, hey, he's right on the money. I get where he, how he came up with his decision. I get that. He's probably got a friend or two that had a bad tenant. And so now he's made up his mind.

Well, now you know somebody who's had a bunch of good tenants. So do you take the one or two bad horror stories or you take the guy with 220 units that's got, still got a few horror stories in there? but out of 220 units, I've got 204, good ones, and I'm out there enjoying my life right now. And he's in there dreaming about what he's going to do when he hits retirement because he's following the Dave Ramsey plan, because Dave Ramsey told him to max out his 401K

and not to take on any new debt and to eliminate all debt and not even take on his mortgage. He wants to pay off his mortgage as soon as possible, and he wants to live below his means and save 10% so that he can do all the things I'm doing at 4,000. so he can hopefully do them at 64. Now, I'm not bragging. I'm not trying to show off.

Not at all. I'm not even trying to sell anything right now. I'm not even rich enough to brag about. I don't have a ton of money. I don't consider myself rich. I'm not rich enough to brag about. But I am free enough. I am free enough to share with you

what knowing how to find and manage tenants provides for me. I am free. And that poor gentleman on Facebook, that poor Dave Ramsey fan, and he represents all of them, is not. He might even have more money

and me in the bank. I wouldn't be surprised. That's not saying a whole lot, by the way. But he might have more money in the bank than me. But you know what? He's not free. That's what cash flow provides.

That's what knowing how to find good tenants and manage them provides. That's what knows how to find good deals and acquire those good deals with little to no money and never having to contact the bank provides. That's what cash flow provides. And at some point, you know,

you won't even want to find and maintain the tenants. You want to hire someone to do it for you. Of which, you know what that does? Now instead of working those four, six, eight hours a month managing your tenants, now you're working two, three hours a month just managing your property manager. You're going to want to hire someone to do it for you.

In fact, you'll soon acquire enough properties where, one, you won't be able to manage them all on your own, or two, you won't want to manage them all on your own. At what point you make that decision, that's entirely up to you. I made that decision rather soon in my investing career, and I haven't regretted it at once. Like I said before, it hasn't been smooth sailing, and sometimes I could even say it's very uncomfortable and sometimes real estate does suck, but I'm free. That's the real decision. Do you want to be secure by holding a job or free by learning how to maintain your cash flow?

You know, the pros and cons of property management. You know, some people are great investors, but they don't necessarily make great property managers, and that would be me. I mean, if you really dislike the idea of having to deal with the less, pleasant aspects of property management like those previously discussed, you can always hire someone else to take care of all the potential conflicts for you. There are many reasons why you may not want to manage your own properties. You know, maybe it's long-distance managing.

That's certainly one reason that people choose to hire property management companies. I mean, if you own a rental property or rental properties in a location that is inaccessible or a few states over, you may need to bring in some help. In fact, I recommend it. You know, it can be very wise to purchase properties in areas far away from your primary residence if you can find good locations, motivated sellers, and great deals, great deals that produce good cash flow, that produce good ROI. I mean, it would sometimes be a shame to pass up an excellent deal because of distance alone.

And we've talked about that before. No one has ever lost money on a rental property just because of its proximity to their primary residence. It's a huge real estate myth. People say it all the time. You'll hear it all the time. From seasoned investors, they'll say, don't ever invest in. a property that you can't drive to.

That's the worst advice possible. There might be other aspects that cause that long-distance property to do not perform, but it has nothing to do with the distance or the proximity to your primary residence. It's a big myth. The other reason you might want one is just limited time. That's another reason you might want a property manager. You know, it's time. It's our most precious commodity.

Depending on your schedule and responsibilities, you may not have the time to personally manage all of your properties. If you can find a good one, reliable management companies, they can free up your time for your other priorities. Like playing golf, your family, spending the Disneyland, you know, whatever it may be, wine tasting, that's my favorite one. And doing it in Malibu, and doing it with blue skies and out in the countries, and doing it whenever you want to do it.

Another reason you might want to hire a property manager. You know, if you have the extra income to easily afford the fees of good property management business, It may be worth it to let them handle the aspects of your real estate business that you don't want to deal with. After working hard and working smart and developing your financial resources, you deserve to make your own choices about how and when to focus your energy. Personally, I wouldn't do what my property manager does for the amount of money that they do it for. I am worth more. I am worth so much more than what my property manager makes.

And so are you. You know, managing your properties, it's not the best use of your time. I'll never fault you for managing your properties on your own. No, a lot of investors do and a lot of investors do with great success. I will never fault you for that. But I will tell you each and every time that you ask me, where's your time best spent? It's best spent generating leads and negotiating contracts. That's where you get the most bang for your buck.

That's where you get paid the most. That's where you end up making $100, $500, $1,000 an hour. Depending on your market, maybe even more than that. And you compare that to the $10 or $12 an hour work that your property manager earns? Not even a decision. I mean, if you do the work that a property manager could do, just know that while doing that work, you are earning somewhere in the realm of $10 an hour. When you could be earning a minimum of $100 an hour doing the work of a real estate investor,

generating leads and negotiating contracts. Another reason you might hire a property manager is you've got your portfolio is too big. you've got multiple properties. You know, along the lines of time constraints, people who own multiple investment properties often bring in professional help to lighten their loads. Okay, so there's all kinds of reasons that you'd want to hire a property manager.

The only reason I think you would not want to hire a property manager is you have this, what they call it, obsessive-compulsive, OCD, you have this OCD thing about being in control and that's going to actually, you know, rattle your emotional stability. Maybe that's why you don't want to hire property manager or why you would want to manage your properties on your own. But the other reason, I think, which is a good reason,

it's a valid reason. You should probably go through the experience a couple of times on your own. Because if you can at least get the fundamentals of managing a property on your own, you're going to make a great manager of property managers. You're going to know when they're doing their work, and you're going to know when they're not. You're going to know when they're lying to you.

You're going to know when they're not. you know, doing their job right. You're going to know when they're overcharging you. You're going to know when they're undercharging you. So that is a good reason to manage your own properties. But I would say, you know, once you get past one or two or three, boom, it's time to delegate. It's time to hire that out and invest your time where you get paid the most for your time. That's generating leads and negotiating contracts.

Got it? Cool. All right, that's a bunch for today. Hopefully some perspective was shared there. And one thing I would like to point out that there's no right or wrong here. I just want to share with you the realities so you can make your decision on what to do with your time yourself. I mean, you know your situation much better than I. I just want to give you the realities and give you enough information so you can make those decisions for yourself.

You know, so to eventually live the dream, you'll have to continue this process over and over and over. Your first property is not the end. It's just the beginning unless it's a really big property. and you don't need a lot of cash flow, but likely you're going to need more than one. And to continue acquiring cash flow properties and keep the ones you do acquire, you want to keep those performing,

you'll need to know how to manage your finances, maintenance and repairs, and the tenants themselves. And you can do all of that work yourself or you can hire others to do the work for you. Both will probably get you to the life of living the dream. I don't think one, there's a right or wrong way to do it. But I will tell you,

one of those paths will certainly get get you there much faster than the other. All right, that's it for today. I'm Matt Terrio, living the dream. Fast on a rough road, twisting, turning further from my heart in wonder. But tell a... The podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.