The Science of Flipping - How To Be A Happy Landlord

Episode Date: January 11, 2021

How To Be A Happy Landlord

What is up? What is up, everybody? Welcome back to the Science Flipping Academy podcast. I am your host, Justin Colby. And if this happens to be the first time that you have reached this podcast, then make sure to pay attention. This is all things real estate investing, the best systems, tools, processes, how to implement, how to build a lot of cash, but also build wealth at the same time. This is a great episode. I wanted to jump in here on how to be a happy landlord. I know that this is a big topic right now and the best people to market to would be landlords, but let's talk about how you can be a happy landlord and how you can actually create a massive amount of wealth without actually dealing with the headaches

of being a landlord. Now, again, if this is your first time here, welcome. You can also jump over to the science of flipping.com. If you're interested in speaking with me or any of my team members about how to level your game up and, you know, become reaching the goals that you want to just head over to the scienceofflipping.com. Now, as I mentioned briefly here to start this, you know, a lot of the marketing that is being talked about for 2021 is directed to the landlords for obvious reasons, right? I mean, essentially, people can't be evicted as a moment in time. People are fed up with this and there's more motivation being a landlord. But I want to flip that on its head. And if you don't have rental properties, it still pertains to you. So

stick around. But if you do have rental properties, let me offer up a quick solution. Now, one of the main reasons besides as a moment in time, people not paying their rents, but one of the main reasons why landlords do get fed up is all of the home ownership stuff, right? Where the toilet leaking or whatever, right? Like the simple stuff that you just got to go fix, you know, the AC going out, et cetera, et cetera, et cetera. And so a lot of people, you know, find that being a landlord can be very frustrating, irritating, you name it. Well, what if you were able to get all the benefits of being a landlord, like tax write-offs and deductions on taxes, which would be depreciation on the home? What if you were able to still make a monthly check every single month,

but you actually didn't have to fix all the other stuff. And so one way that I believe will be kind of the wave of the future for this and should be, and this is not that creative, so bear with me here, but is why wouldn't you start looking at selling your home, your rental home off under a seller financing lease option. Okay. So essentially home ownership goes over in the responsibility of home ownership goes over to the option buyer. You are creating a lease that is equivalent to a mortgage. You can create a mortgage for a certain length of years. Nothing has to be, uh, you know, there's no, I guess what I'm trying to say is that length of years can be predicated on what they're able to pay monthly. That would actually be, um, enough money to cover whatever note you might have and still put money in your pocket. So the option might be a 10 year option, but you might have a mortgage on there for a 30 year mortgage.

Well, because they have an option at the 10th year, they're going to pay off the remainder of the loan. Now, why I love this and why this is so great is let's just use the example that, you know, your mortgage is a thousand dollars and they're paying 1200. You are still collecting that $200 as rental income, let's call it. But even if you bought this home this year, you're going to be able to have true ownership in the sense of you are still going to be able to take all the write-offs and depreciation for the 30 years depreciation in year one because they're not executing the option. It really is a beautiful plan. Okay. So if I have somewhat confused some people, if you bought a rental property today and you went out

and rehabbed it to a good, you know, need some work. So you put some money into it. So that's a good livable home. And you then would sell it with seller financing to someone who would come in and do a lease option to buy with you. Now, what that means is technically you are still on the deed, but the option to buy when written correctly will enforce that they have home ownership of the home and will need to take care of all maintenance regarding that home. You also can put in terms and terminology about that they have the authorization to make improvements to the home. All of that can be written out specific to your option. But if they don't execute the option or if they break the lease, you absolutely can. The word wouldn't be foreclosed, but the option is void and they have to continue to pay out their lease. There's a lot of outs there.

But essentially what you're trying to do is you're trying to continue to have the rental income every single month. You are also taking the massive write-off of the depreciating asset. And you then actually, because you are doing a seller financing, a lot of times you're able to charge a premium. You have a down payment of the option. Let's just call it 10% down payment of the option. So you will get a paycheck when you sell it that is non-refundable. It does go to the purchase price, but that is non-refundable. It does go to the purchase price,

but it is non-refundable. If you structure it right and they break the lease, they stop paying the lease, then the option is also void. You really get all of the great qualities of being a landlord without actually having the headaches of being a landlord. They actually will have all coverage of any maintenance on the home is how you write that out. And essentially, and again, as I said, you can even allow them to improve the home as part of the terms of the option is they have the ability, authorization, however you want to say it, to actually improve the home. And you don't necessarily mind because in hopes that those improvements actually are increasing the value. So this is how to be a happy landlord.

If you currently have rentals, I'd really encourage you to actually look at this right now. Because guess who continues to pay their lease? The people who want to own the home. Okay. Those are the people that want to pay the lease, they're not going to necessarily not pay their lease, because then it voids the option to buy in it voids out that option payment that they gave you, it really just blows it all up where, you know, if they're not an option to buy and they are just simply leasing, maybe they do have a little like, ah, who cares attitude towards it? Because really what's going to hurt them? And, you know, essentially they're just risking eviction.

So this is how several of my friends have maneuvered their rental portfolio. I've thought it was brilliant. That's why I bring it here on this episode. If you do have a current rental portfolio, a handful of homes, this really is a brilliant move. If you wanted to just go in and restructure this, you could even work with the tenants you already have in there. If you are looking to buy rentals like I am, I'm gonna absolutely be structuring my purchase and sale in this manner for the right homes. That way that I can take all the benefits

of buying rental properties from depreciation, which is a tax write-off to the monthly income. And I will absolutely not have the headaches, which would be maintenance and upkeep of the home, as well as a risk of a tenant not paying my lease. Because if they are looking to buy the home, they sure as heck are going to continue to pay the lease. So hopefully this was a good episode for you.

Hopefully it made you think a little bit. And maybe you start maneuvering your rental portfolio into this model, which really is a beautiful, beautiful model. Again, if you, if I can help you at all, if you have any further questions, head over to the science of flipping. Also check out my daily YouTube videos, make sure to go to YouTube forward slash Justin Colby. I drop a video each and every day about business, real estate, and entrepreneurship. I hope you guys are doing well and I will see you or I'll talk to you on the next episode. Peace.