Welcome to another episode of Passive Real Estate Investing. I’m your host Marco Santarelli. And I am glad to have you back today. We’re going to talk a little bit about the pros and the cons of self-managing your rental properties. Some people do it. Some people love it. Other people hate it, and they just want professional management. I actually know real estate investors who invest from thousands of miles away. Do it well, do it successfully, but it’s their thing. And it’s not for everybody. Maybe you have to have thick skin for it, but it’s really not that bad. I’ve actually, self-managed a few properties I prefer not to. I would much rather spend my time elsewhere and do other things like find more deals and negotiate more deals, work on my business and do whatever else I enjoy doing. So we’re going to talk a little bit about that today with my guest, Steve White, it’ll be an interesting conversation.
We went for about 30 minutes talking about the ins and outs of managing your property. Now there’s a lot of information out there and there’s a great book we’re going to mention during today’s interview. So stay tuned for that. And I actually suggest listening to it right through to the end. It’s not a long episode before we jump into that. Let me just quickly give a thank you for all the reviews that we receive. We receive actually a lot of compliments and reviews, both on the podcast, which is well past a thousand five-star reviews on iTunes. And that’s just the United States. There are every country has its own set of ratings and reviews that you can’t see unless you’re in that country or you’re actually signed into an iTunes account based out of that country. So whatever you see on iTunes is always local to the country, but thank you for all of those and as well, a lot of reviews online, which I greatly appreciate it.
Those are not so much about the podcast. Those are actually about my team at Norada Real Estate Investments and what we are doing to help other real estate investors invest successfully in passive real estate investments in the different markets that we have around the country. So something we’ve been doing for over 17 years now, we were arguably the first nationwide turnkey rental property provider in the country. There was only one other, but they’re really not around anymore. They’ve kind of morphed into other things, but again, thanks for all the reviews and the ratings that you guys have shared greatly appreciate it. So love to hear the success stories and speaking about success in case you didn’t notice the quote, we put a quote in our weekly newsletter, and if you haven’t subscribed to that weekly newsletter, I suggest you do. I just go to our website and fill out any form on the website, whether it’s the membership form or download of the report, you’ll be added to that weekly distribution list.
And we put a quote in each and every newsletter, and they’re usually really good. This week’s was from Howard Schultz and it was a very simple, short one. It’s “Success is best when it’s shared.” And I truly believe that I think anybody who success should pass it along, share that knowledge with other people sometimes pay it forward. You know, this podcast, there’s no cost for it. It’s free and look a lot of the content. Well, pretty much all the content we put out is also free. So sharing in that knowledge and that success with you and other people that we talk to and work with is really the best way to give back and share. So success is best when it’s shared. And I love that quote by Howard Schultz. Aside from that last quick mention here is that we have officially launched, even though I started it last year, but officially launched Norada Real Estate Funding.
It’s really the funding arm of our existing business for all loans that are non-conventional loans. So when you’ve tapped out your conventional loans or you’re having trouble qualifying for conventional financing, we may have an option for you with a theoretical unlimited number of loans. The LTVs are similar. The terms are similar. You have more options. It’s not just a 30 year fixed. The rates are a little higher, but the good news is you can quite inexpensively buy down that rate that they call points by down that rate, by paying some points and you can get a rate that’s comparable, if not the same as conventional financing. So it is really a good option when you’ve tapped out the cheapest money available, which is the government-sponsored entities of Fannie Mae, Freddie Mac giving you virtually free money to buy and invest in real estate.
So that is it for now. Let us get to our interview with Steve white. And like I said, stick around till the end of the episode, because I think there’s some good stuff in here.
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It’s my pleasure to welcome Steve white to the show. Steve is the founder and CEO of RentPrep, the leading tenant screening solution for busy landlords. And I love that because our show is for busy entrepreneurs and busy investors. Steve brings 20 years of experience in the credit industry and entrepreneurship to his role in leading a growing team of executives, determined to make renting easier for everybody before founding RentPrep, Steve honed and tested his leadership skills while serving as a non-commissioned officer in the United States Marine Corps. And he’s received two certificates of commendation for exceptional demonstration of duty. Steve is also a sought after expert prolific author and a frequent keynote speaker and presenter at industry events around the country with that. Steve, welcome to the show.
Thank you, Marco. I just want to say that that was clearly written by my marketing team and I think it might be hearing it for the first time. It’s very flattering. I appreciate it. But yeah, that’s funny
That you’ve never heard that before, but yes, your assistant gave me that as your a bio and I didn’t want to change it. So I took it as is
It’s accurate. Like I said, it’s a, you know, it’s a little, I wouldn’t have written it myself. It’s a little flattering, which is why you have the professionals write those things.
There you go. Well, we had a conversation here before we started recording and we were talking about self-management and a few other things, and it was actually pretty enlightening to learn about what you’ve done and how you’ve got here. Tell us how you started RentPrep. And maybe why, because I’ve got some pretty specific questions that I think my audience are going to be very interested in. Most of them are, you know, indoctrinated, if you will, into using professional property management, there’s nothing wrong with self-managing. It’s just the right thing for the right person. But we’ll talk about that. But first maybe talk about RentPrep and how you started the company.
We started the company back in 2007 and we were servicing large property management companies. And we consider more of like a enterprise level client base. So, you know, thousands of units, thousands of doors that they’re managing. And I would do a lot of speaking engagements at landlord associations, real estate investor associations. And we’d always have a line of people that wanted to use our service after I gave a presentation on how to find the best tenants and how to do proper tenant screening. And we didn’t have a solution for them until about 2012, 2013, we launched RentPrep specifically to cater to small landlords, smaller property managers, property management companies that wanted the best tenant screening that typically only the really large enterprise solutions were getting at that time. Especially what year was that? About 2013? I would say, I think we launched RentPrep.
The original launch of RentPrep was a failure. So if you want to talk entrepreneurship, I’ll I’ll peel back the curtain a little bit. We launched it originally in 2012, got about $50 in sales in 90 days and we were marketing to tenants. So the original concept for RentPrep was tenants would prepare to rent by running their own background checks and presenting it to the landlord. It was a phenomenal idea. So it was 10 years ahead of its time. Cause that’s just something that’s now starting to come around because of crowded housing market and people wanting to avoid application fees. So you get screened once and you can apply to 10 or more places, but yeah, 10 years ago that fell flat on its face. And so we, you know, like any good entrepreneur, you know, scrapped the vehicle, pulled out the parts that were salvageable and, and and rebuilt it for specifically marketing towards landlord.
Well, I know it’s grown a lot, so congratulations on that. It sounds like you have a big thriving business, so I’m happy for you. So let’s jump into this. So, you know, let’s start off with the argument to self-manage. I know that there are many investors out there that have a small to medium sized portfolio. They self-manage often from a long distance and they do it successfully. I know people like that personally, that’s not necessarily my cup of tea. I, you know, I want to spend my time doing other things, but there are people who are probably wondering about this at different times for different reasons. So what would you say is the argument to self-manage your property? And we can get into the pros and cons, you know, as we go
So full disclosure, I had no longer self-managed. I use a professional property manager. So our podcast hosts, Andrew Schultz is my property manager. And for me it’s the same reason that I don’t cut my own grass. I work a ton of hours. I’ve got a young son that I, a lot of time with, especially on the weekends, he plays sports and I’m doing stuff all the time. And you know, I’m a healthy, capable guy. I can get out there and cut my own lawn for me. It’s more about managing my time and doing what I want or what I can do. And so the, the work that I put in all week affords me the luxury of not having to mow my lawn. For me, it works for some people, they’re the type that would never dream of letting someone else touch their lawn. They’re very do it yourself, very handy.
My dad was that kind of guy. I never saw a service guy, a service repair person, or a handyman or anything like that until I owned my own home, you know, growing up, my dad did everything. So I think that’s really the, you know, it’s in your DNA. I think, you know, we work with 150,000 plus landlords around the country, and I’ve been doing this long enough that, you know, in a short conversation, I can usually tell who’s going to make it as a, as a self-managed landlord and who might not have the stomach for it. And I’d say a lot of times it comes down to that, your tolerance to to pain at times, you know, and dealing with things.
Is it really about having a thick skin? Cause I actually am curious to know, you know, who should, and shouldn’t be self managing, cause I know some people are just not cut out for it.
Yeah. I’ll say thick skin is a huge piece of it. You know, landlords in general for years have had a real negative stereotype and it’s well earned. Unfortunately I say all the time, landlords create their own problems most of the time. And you know, we see it a lot in a lot of times it’s because they don’t have great people skills, soft skills. They don’t know how to respond to somebody who’s maybe coming at them aggressively. Maybe they don’t have thick skin and know how to, you know, let something roll off your back versus a retaliated. So when it comes to managing tenants, you know, aside from all the handy stuff, whether you’re a handy person or not, you know, when it comes to managing tenants, it does take a, a certain demeanor and a certain skill set that not everybody has. So that is a big part of it.
I would imagine that the main reason to engage with professional property management is to have more time, time to do the things that you know, are better suited to you. I’m guessing that’s the number one reason, at least that is for me.
Yeah. I feel like I’m the perfect case study there. The deal with my wife was I can get one more at the time it was, can I get one more rental property? And she said, not if you’re managing it, I can’t do the phone calls in the middle of the night for toilet leaks and, and you know, the dishwasher broke. And so for me, you know, my self-management career didn’t last very long, but it was long enough to realize that I prefer the services of a professional property manager for my, my lifestyle. Okay.
I think the other reasons there for a lot of people have to do with the separation of work and their personal life. They just want to, again, stay focused on whatever they’re doing in terms of their work, their career and their personal life. So there’s time. And then the separation of work. And of course, some people really just don’t want to bother with that. They just feel that it would be easier to fill vacancies when they do occur, if they’re using professional management. So, I mean, you’re really more in the business of people who are self managing, what are the main reasons people do that, you know, what does it come down to? Is it all about control or why are people do it.
Managing or costs too? You know, landlords for sure tend to be frugal by nature. You know, they’re very cost minded. And so when you think about most professional property management services are going to cost you about 10% of your collected rent and typically cost you your first month rent as a placement fee, just to find in place a tenant. So, you know, on a balance sheet, that’s a lot of red. So I there’s a lot of people out there that just think of it purely from a cost perspective. And they’re very, hands-on do it yourself type of people. So I think that definitely drives a lot of it. And again, some people love it. I don’t want to always paint it out. Like it’s true. Yeah. You know that it’s not a great situation for me personally. It’s not, but you know, we, we obviously work with a lot of landlords that they love what they do and they’re great at it.
So you know, I think it’s a matter of, does it work and does it fit or does it not? I would say where I see landlords get into trouble is sort of this burnout that we see is when they don’t recognize soon enough that they’re not a very good landlord and it’s time to use a professional service in place of what you’re doing. And and they’ll hold on a little too tight, like a lot of entrepreneurs do, you know? It’s like you got to know no one to let it go. And and to have some self-awareness and say, you know what, I might not be the right fit for this, or this might not be in my wheelhouse. And so they hang on a little bit longer than they should. And that’s where we start to see usually that they’re getting into some trouble.
Yeah. That’s a great, great point because I think some people don’t realize that they’re getting into deep and then they end up realizing that after it’s too late, now they need to go out and get help anyway. So, and they’re having to dig themselves out of a little bit of a hole, but yeah, I would think financial savings are probably for most people, the number one reason why they want to self manage. If I had to guess a number two reasons, it would probably be control freaks who want greater control over their portfolio. And they don’t want to let go and hand it over to a property manager thinking that they can do it better themselves. Those are probably the biggest two reasons from my perspective, but I’ve also heard the argument that some landlords want closer relationships to their tenants, for whatever reason, maybe that, you know, they can groom them better, keep them longer, whatever it may be.
And then of course, then there’s always the argument of gaining the experience, just saying, Hey, I’m going to self-manage myself just for a year or two or for however long, just to gain the experience and then hand it off. So now I’m a better-educated landlord or they might be thinking, and this might be a big one. I don’t know what you think about this. Maybe in the beginning, when you have one or two or three properties, it’s not overwhelming and it’s to self-manage, but as you grow your portfolio, you get to a point where your time becomes more valuable than the amount of time you’re spending self-managing. And now it makes more sense financially to hand it off to a property manager, because your time is worth more than the amount of time you’re putting into self-manage.
Correct. Yeah. It’s a, there is for sure a scaling effect that goes on there where eventually, you know, you don’t have enough time and you can’t stretch yourself that thin. And so you either need to start adding to your team or reach out for professional services. So there’s definitely that the one thing that I’ll comment on that you mentioned was having a closer relationship with their tenants. So, and I don’t disagree with you. And I would say it’s, I hope that it’s less about having a closer relationship and more about feeling like they want that control, which I feel like comes down to having and trusting a good property manager, right? Like there’s plenty of bad property managers out there too. I hear horror stories all the time. So you definitely don’t want a good tenant being spoiled by bad property management services. And then you feel like, you know, you’ve created this mess that may have been potentially avoided if you just manage it yourself.
I think a lot of landlords have that fear, but you know, having a close relationship with a tenant is a double-edged sword too. And a lot of landlords get themselves into trouble that way, where, you know, they become too close, too friendly that conversation about, Hey, I can’t make this month’s rent mind if I pay late mind, if I pay next month, that conversation becomes much easier for the tenant. A professional relationship is always the best approach for a landlord to handle it like a business so that when you have to make a tough decision or have a difficult conversation, it’s far less personal and less emotional for you because there’s going to come a point in, you know, in your career as a landlord that you’re going to have to make a decision. That’s not going to be the popular decision, but it’s the right business decision. And so a lot of people struggle with that for sure.
Yeah. One thing I’ve said for many, many years is that property management is a thankless job and a thankless business. And that is why probably the second reason why I don’t want to be involved in doing it. Not that it’s bad or you shouldn’t, like I said, it’s, it’s right. For many people who have the, you know, the tolerance and the thick skin for it. But I don’t look at it from a financial perspective. I look at it from a time perspective. And I think a lot of people listening to this are probably in that same boat. They’re saying, okay, what else can I be doing? And what other high value tasks and functions can I be doing versus managing my property, which is whatever, you know, 30, 50, a hundred dollar a month task. How many hours am I putting into that? Right. He’s got to start doing the math and divide that up. But yeah, I’ve always said it’s kind of a thankless business, but I don’t want to knock it. It’s great for a lot of people and some people want that experience. Yeah. Yeah. So I think you need to build a team, obviously if you’re going to be self managing. So who should be part of that team? I don’t know if you ever talk about this on your website or in your blog articles, but like what does your team look like if you’re self managing.
Good question. I don’t think it gets talked about enough, honestly. So first thing I’ll say is you need to be screening, right? Not only your tenants, but your team that you’re building as well, and even your property management company that you’re considering. And you’ve got to make sure they’re really vetted, because again, that’s another thing that maybe doesn’t get talked about as much as maybe having to deal with a bad tenant, right? That’s every landlord’s nightmare, but I promise you that dealing with a bad contractor is just as frustrating and just as much of a nightmare as dealing with a bad tenant sometimes. So, you know, you want to make sure that you’re straddling that line between cost-effective and quality when you’re choosing the right plumber, the right contractor, people who are going to go in and do the things that you’re letting go of.
So that’s a big piece of it is making sure that you’re surrounding yourself with good quality people. I would say if it’s not a general sort of contractor or a property management service, and you’re vetting individually like plumbers and electricians, make sure that you’re vetting them well, but then also let them know that this is a rental and what’s their process for dealing with rental calls. So a lot of plumbing, professional plumbers will have you in their system as a rental property. And so when they get a call in the middle of the night, they’ll go out there. They’ll know what their spend limit is. So they don’t have to call you at two in the morning and say, Hey, we’ve got a problem here. Are you okay with us putting a $400 toilet in? So as a landlord, that’s sort of managing that on his own. Those are all sort of controls that you can set in place ahead of time. Usually, no matter what the contractor that you know, or the subcontractor that you’re using. So that’s a big part of it, but I would say, yeah, think about the professional service side stuff that you don’t want to do. And that really needs to be your team that you’re assembling.
How far does RentPrep get involved in references or referrals to professional service providers? Is that something that you guys are involved in it.
Or no, we, so, yeah, I would say, and I’ve, and it’s funny, I’ve seen a bunch of startups, especially lately try to solve this issue and it’s a difficult, it’s a difficult issue to solve. It really is. Number one, you don’t want to necessarily reinvent the wheel and just build another Angie’s list. Right. Right. But also, you know, there’s nuance to it because you’re dealing with rentals. And so if you’re find a service out there, just remember, it’s only as good as the participation. So if they don’t participate with a good number or a large number of plumbers, let’s use that since we get, I keep going back to them as an example. But you know, you want to make sure that again, you’re getting the best choice, not the least worst. So those surfaces are tough that try to connect that I’ve explored it, but ultimately we’re the resource that says, here’s how you screen your contractors. Not necessarily, here’s a number to call for a contractor in your area. I think landlords are still better off doing that on their own and doing that homework on their own and researching on their own.
One of the big questions out there all the time when it comes to contractors, whether it be a plumber, electrician, handyman, et cetera, is where do I look? Is it as simple as going to Google and type in Kansas city plumber? Or, you know, is there another source or, you know, where do you go for that type of referral?
First thing to remember, first and foremost, not this should come as a shock to you or anybody else, whatever you read on the internet may not be true. So yeah, I know. It’s crazy. Yeah. So you gotta be careful, you know, call them yourselves, ask the questions. What do you do for rental properties? What would you do if you got a call in the middle of the night that I think is the important step that you really can’t skip. You got to talk to these people and especially general contractors that ask them what their capacity is, what their workload is. Cause that’s probably the number one problem that I hear is a job that gets started and usually a pretty large deposit put down on it. And then it stretches out because of course the contractor gets busy and sorry, I can’t finish up this work. So I think that can’t be left to anyone else. And it certainly cannot be left to trusting online reviews or a very well-written marketing page. Just like my bio there that was written by the marketers. You want the real thing, you want to talk to somebody and say, what do you do? How do you handle this? How long you’ve been doing it, but how many rentals do you help landlords manager or work with property managers to manage? So I think those are the important things.
Yeah. I will quickly say that it is not hard to find reviews, both positive and negative online. And if you find, I usually kick out, you know, the worst ones and the best ones, and then look at everything else. But if you can find reviews on people, regardless of what it is, that’s a good starting point. Then you can interview them, you know, don’t make it a call that, you know, it’s a sales call. They’re trying to sell you think of it as an interview that you are interviewing them. If you want to bring them on your team, if you take that position, that stance, I think the conversation is a little bit different, so, and helpful.
I agree. Yeah. Online reviews are useful for that too. And you know, if it’s a negative review, I’m sure you do the same thing that I do on Amazon or anywhere else. I’m reading reviews. And it has to put it through that filter of, is this person just being crazy or they have a genuine problem.
Yeah. Some people just want to complain, you know, and they need a forum to vent and the, and they go online and that’s what they do. They just vent. So that’s why you gotta be careful when you read the ones in the five-star reviews, but, you know, take it all in and then find the common ground. So, okay. Back to the tenant for a real quick second here, how do tenants typically feel about self-managed properties like rent by owners versus property managers? Because I would imagine that the way they see their situation is a little bit differently. And I don’t know if they’re looking at it as, oh, I can take advantage of this person or I can push them a little further, but how to tenants feel about that?
I would say my general rule of thumb is the best tenants want the best landlords or property management. I’ll add to that. So that’s something that we cover a lot on RentPrep and on our podcast and things like that is, you know, how landlords can improve their tenancy just by being aware of the things that they’re doing. Right. If you show up late to an appointment, if you’re not putting your best foot forward, when you meet someone to do a showing, if you’re just an unresponsive landlord, the best tenants don’t want those types of landlords. So the best tenants are really doing as much screening on landlords and how the property is managed, at least as much as landlords are doing on them. So I would say, I don’t think that there’s an issue between who’s managing the issue is how it’s managed.
And if it’s a professional property manager, I would say more often than not, they’ve been there and done that. And so there’s not a whole lot that they’re going to fumble the ball on. Whereas, you know, if I’m a professional landlord in managed self-managing and I’m in Boston for the weekend for a hockey tournament with my son and a tenant calls me and says, the toilet just broke and started overflowing. There’s not a whole lot I can do about that. And I’m going to be scrambling. And if I didn’t prepare ahead of time to have a plumber on hand and to have those relationships built. So, you know, I feel like from the tenants perspective, I don’t think they care who they’re writing the checks to or whose name is on the lease. They care about how the property is being managed and to what degree of professionalism that’s being managed.
Yeah. I think that’s a great point. And really that summarizes, it doesn’t matter. Who’s managing it as long as it’s professionally managed and the tenant is being taken care of. I’ve always said that tenants should be looked at as your customers because you’re providing space, you’re providing a living space for them at your property and they’re paying you. And so you’re providing a service they’re customer, they’re paying you for that. So you want to treat them like a customer, not just, you know, another person that you don’t know, a faceless individual, right? So I think that’s the best attitude to have as a real estate investor, regardless of whether you self-manage or not.
And I would say, if you can’t at least hold that position, you have to at least appreciate that by law, they are occupants in your property. And although it may be your property, they are occupants with rights. And some of those rights are inalienable that, you know, you have to address things. You can’t let a hole in the roof stay there and not address it or fix it, or, you know, you have to provide a habitable dwelling for them. And so, you know, a lot of landlords, I think I’ll say the bad ones. I’m not going to say a lot of them. Of course, you know, it’s always the few bad apples will ruin the bunch. And so I’ve seen plenty of landlords that take on the attitude of it’s my property. You know, I’m going to do with it, what I want manage it, how I want. So it’s a dangerous attitude to have, but like I said, if you can’t at least hold the position that you set up, like these are your customers, and this is business, you at least have to acknowledge and accept the fact that there are some laws that that may compel you to manage properly at times too.
Yeah. I learned a long time ago, probably in 2004, something I live by, it’s kind of my rule of thumb and you should provide safe, clean and functional housing, as long as it’s safe, clean and functional, you know, you’ve more or less got it covered. Yeah. I think that’s just a good way to go about it. So, you know, that begs the question now. So what happens when you have a difficult tenant? Do you have any advice on how to deal with a difficult tenant?
So first and foremost, document everything and I mean, everything landlords again, create a lot of their own problems when it comes to this because they’re not documenting, they go into court. And the first thing that any judge or even a mediator is going to want to see is show me the documentation and they want to see everything. So, you know, I made a call at this time and day left a message. I made another follow-up call got ahold of them. Here’s how that conversation went. So not only phone calls, but every interaction that you’re having. Take a quick note document really, really well. And especially when you’re dealing with a difficult tenant, that’s likely going to press you or push you to make things more difficult. And it may end up in court or something like that, where you’re going to need to have a record showing that you tried doing the right thing to have a thick skin.
That’d be my other piece of advice. Don’t give into the temptation or urge to retaliate or fight back at somebody. Sometimes that’s being done purposely to provoke. And so landlords, I see fall into those traps as well. And I would say, don’t be above the concept of cash for keys. If you’re dealing with a really bad tenant, are you familiar with this idea of Marco? Yes. Yep. A lot of landlords hate this. Anytime that we do any type of content on it, we get it split down the middle. Some landlords say, I love it. It works. Other landlords say I hate it. And it’s a principle based issue. And so the concept of cash for keys is I’ve got a really bad tenant. They’re a nightmare. I’m going to pay them to leave. And in some cases that could be really useful. It’s a business decision at that point.
You know, if you’re worried that they’re going to do damage, maybe you have an arrangement with them where you say, listen, if you’re out by the first, I’ll give you 500 bucks. If you don’t flush your socks down the toilet and kick holes on the way out and you leave the, you know, sweep the place or at least leave it clean for me, man, that’s worth 500 bucks to me to get rid of somebody and do a little bit of insurance that they’re not gonna do more damage, but a lot of landlords get hung up on the idea, which is principle-based that why would they pay somebody who’s in the wrong? Or why would they pay somebody to leave when it’s their property? And they have the right and you know, principle is expensive. And if it’s a business decision, I want the easiest solution to solve my problem. And a lot of times that actually works.
Yeah, that’s actually a great strategy cash for keys. The thing is, is that’s what kind of a worst-case scenario. If you’re dealing with someone who’s lost their mental marbles, then you know, that four or 500 bucks for them to leave will probably be a lot cheaper than them leaving angry and kicking holes in the wall and creating other problems or damaged or leaving trash behind. Because the cost of curing that is going to be more than the $500. It’s better to just pay them and let them be happy to leave and leave the property for you to turn over easily and quickly. So you can get another tenant in there right away. Yep. What’s interesting about this conversation. This comes up often when questions like this come up, you know, with investors or even just in interviews, is that the answer to the question always defaults to the worst case scenario, you know, that bad apple tenant that you have once every five or 10 years, that is a worst case scenario. The reality is, especially if you’re not investing in war zones or like low end C and D class neighborhoods, odds are, you’re probably never, or rarely going to deal with a person like that. If you’re in good areas, good neighborhoods like B quality B areas, A-class neighborhoods because your tenant demographic is not like that generally speaking.
I couldn’t agree more. And I would even say a step further is now again, I, my situation might be a bit different in my reasons might be a bit different. You know, I figured, okay, I own a screening company. If I place a bad tenant, this is not going to be a great look for me. So, so my last vacancy, I let sit vacant from September to March because I was very picky about getting the right person. And I only own properties in, I would say, not C and D. Probably not a, so I’ll say class B at least. Yeah. But you want to make sure you’re being picky because you know, an ounce of prevention is worth a pound of cure. If you can solve an issue before, it’s an issue, you ought to take that extra time to do that. Screening’s a huge piece of it and not being afraid to let it sit vacant if needed. Because the last thing you want to do is make a desperate decision or skip steps on the screening. And now you get somebody in there they’re way harder to get out. And the frustration and cost of an eviction, I don’t think is equivalent to the vacancy time. I would rather pay that vacancy and not cashflow for those months to get it right. And place the proper person. And I agree. So, yeah, I think patients and, you know, again, operating like a business, if it’s not the right person, don’t do it. Yeah. Yeah. I agree.
Well, let’s start to wind things down. Maybe two more questions here that I have for you. When is a good time to raise the rent. Maybe I should ask this a little differently. How do you decide when to raise the rent on your tenant? Like, is there a kind of a best practices or rule of thumb way to know when you should bump it up? So that way you they’re still happy. They stay, they don’t move, et cetera.
Yeah. So I tell you, I see a lot of landlords wrestle with this too. The easiest thing to do is build it into your lease, which is super common. And so if you enter into that, lease on, let’s say a thousand dollars a month, and then you build it into your lease that says, upon the end of this term, your lease is going to roll over month to month. And your rent rate is going to increase by 3% per year. My only caution is for landlords, be aware of what state you’re in. I think New York, New Jersey they’re at two and a half percent, I think is the most that you can raise your rent annually
By contract. You mean by contract, meaning raising the rent as having it outlined in a contract. Because I don’t think that law applies if the lease expires and you re negotiate a new lease. Right?
Correct. Yeah. So this would be, well, no, if that lease expires and you’re renegotiating a new lease, you cannot renegotiate higher than that rate. You can give them the option to basically we’re not going to renew your lease. And again, you might get a little pushback, but if it’s for good reason and you’re saying, Hey, listen, you know, we’re trying to collect what the market rate is, or we’re doing some upgrades and we want to have the place vacant while we do that. But no, if they’re renewing a term, you cannot raise it more than those caps, which are set by state limits. So not every state does it, but quite a few of them do.
Well. There’s another argument towards investing in markets and states that are landlord friendly, as opposed to ones that have a lot of tenant landlord controls in place that favor the tenant, not you as a business owner and landlord. So yeah, that’s, you know, I don’t need to go any further to explain which states those are. I’m sure most people can figure that out.
Right. Yeah. They’re on the opposite ends of the country right. The two key ones there. You and I are both. Yeah. We’re in one of each. Yeah, exactly.
Sometimes they’re colored blue, but I’m just saying, right.
Yeah. You’re not wrong at all there. Especially if you’re going to be investing out of state, which is tricky enough, I know that your service helps people find properties and coach them through that process. And I think that’s huge because, you know, they could be kicking a beehive if they’re going into an area where they don’t know that this is not very landlord friendly and, and things can get very difficult quickly for them. Right.
So, Steve, my last question might actually segue into your company and whatnot, but it’s a valid question and something, I think people are thinking about, where’s the best place to learn about what to do, what not to do when it comes to self management. I know you write a lot and you have a lot of content. I’m not trying to tee you up with this question, but it’s a valid question about, okay, how does someone learn how to self manage if they’re truly interested in it?
You pitched it right down the middle for me. And actually I feel like a, you know, give me a softball though. I would say for sure, there’s websites, blogs, make sure that it’s well-written, you can get a sense of for something is not well-written and it’s only written for the sake of keyword generated content. That’s one thing, you know, make sure you’re getting it from a good source, but I really think the best place for landlords to learn and get educated is inside of landlord communities, whether that’s an online community, Facebook community, local landlord association, a real estate investor association, a local that you can join. You know, we see this sort of magic interaction happen all the time in our Facebook community, where, you know, for a landlord, who’s dealing with something that’s terrifying and they’ve never dealt with before, like a house fire in their rental property.
I don’t know if there’s a worse feeling than that, that moment when you are panicked and this is an awful situation, you don’t know what to do. And there’s also no better feeling than having four or five landlords come up and say, Hey, I’ve been through this. It’s okay. Here’s what’s going to happen next. And that, to me, that’s the best education peer-to-peer learn from the people who have done that, who have paid for mistakes that you shouldn’t have to pay for. If you’re listening close enough. And what else I found is landlord, investor, community. I can say the exact same thing. It’s an incredible community. That’s filled with people that want to help others out and want to help people avoid mistakes and want to see people succeed. Maybe they don’t want to see them succeed in that they’re winning bids on houses that they’re trying to compete for, but it is very much a community and their colleagues. And they see each other as that. You know, I see that in our community all the time and I think that’s the best place to learn. Yeah. Cool.
And of course, I mean, it goes without saying that there’s different books on Amazon about property management, self management, whatnot. I can’t say all of them are great, but there are good books out there too. So, you know, that’s also a plus.
Yeah. I’ll say the one book that I would plug is Brandon Turner’s book on Managing Rental Properties. It’s a great book. We actually, when we hire new screeners here, part of their onboarding is they have to read that. Right. Well, yeah,
Actually that is one of my top 18 books. That is a top article on the blog. It’s a sticky article. It’s there all the time and I broken it down into different categories, but that’s actually one of the books that I suggest people read just for their own self-knowledge. Yeah.
And I can tell you, it was written by a guy who did it, does it lives. Can’t, you know, he Brandon, Turner’s a long time run prep client. And I mentioned this a few times in the book. We don’t get anything for it. I never wanted anything for it, but he’s a guy who knows what he’s doing and I could vouch for that because I’ve seen him grow and scale from throughout many years of work. Yeah.
Awesome. Yeah. He’s a good guy. I’ve gotten to know him a little bit over the years. Well, Steve, let’s wrap it up here. Tell our listeners how they can find you get more information, your website, whatever you want to share here today. Yeah.
rentprep.com. So we do tenant screening and education for landlords. So you can find anything on there, you know, from how to screen and find the best tenants to what the average tenants credit score is to who’s responsible for shoveling the snow in the winter time, our private Facebook community is rev prep for landlords. We’re very picky. I was telling you before we recorded, we’re very picky about who we let in there because we’re a screening company. And so we make sure that we keep the streets clean, which is great for landlords because they want to have unfiltered uninterrupted conversation without worrying that the tenants knocking or you’ve got somebody in there trying to pitch them a course or something like that. So it’s a clean community where landlords are learning from each other. And I would say either one, those places are a great place to connect with RentPrep or myself and the podcast that says the last thing, RentPrep for Landlords Podcast.
Great! Okay, good resources. We’ll put them all in the show notes and on the website. So that way it’s available and easy to find. So Steve, thank you for taking the time today. I appreciate you coming on the show. We’ll certainly circle back with you again here in the near future and thanks for your time.
Thanks Marco. I appreciate it. Thank you.
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