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Tag: Rental Property

  • 5 Tips for Evaluating Your Next Rental Property | Entrepreneur

    5 Tips for Evaluating Your Next Rental Property | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Are you looking to invest in a rental property but aren’t sure what the telltale signs of a good investment are? In this article, I’ll share five tips for how to evaluate whether a property is worth your time and money and what to look for in an investment property.

    From market research and risk analysis to comparing local rentals and calculating your Net Operating Income (NOI), this guide equips you with the knowledge to evaluate your next investment wisely.

    Related: 3 Things to Consider Before Buying an Investment Property

    1. Do thorough market research

    It’s vitally important that you conduct thorough research on your new property before taking action. Real estate investments can be lucrative, but they can also be a money pit without proper planning and preparation. That’s why the first step in how to evaluate an investment is to take the time to figure out exactly what goals and ideas you have for the property.

    You should have an idea as to whether you would like to rent the house out long-term or have a series of short-term renters. Long-term tenants serve as a consistent income stream, and you don’t have to dedicate as much time or effort into finding tenants to fill vacancies as often. However, short-term tenants allow you to raise rent prices between periodic leases, plus you have the opportunity to remove tenants who you’d rather not rent to again, even if you don’t have proper grounds (or funds) for eviction.

    You should also start investigating the market you’d like to invest in. There are many factors that influence how appealing a particular area will be to renters — for instance, an influx of new construction might lessen the demand for your rental, while attractive amenities, restaurants or school systems in the local area could increase the demand for and value of your property.

    It’s also important to realize the potential costs that come with a new rental. Do you want to offer a furnished unit? The cost of furniture and cleaning associated with a furnished unit can add up. You’ll want to consider these costs plus appraisal fees, inspections and other fees that can put a dent in your capital.

    2. Conduct a risk analysis

    Building on the last tip, conducting a risk analysis is a great way to plan for potential risks and be better prepared for hiccups when they happen. The real estate industry is known for being volatile, so to best protect your investment, expect changes in the following factors:

    • Essential service prices, like gas and electricity

    • Local employment rates

    • Property taxes

    • State and local laws

    • Quality of applicants

    • Government real estate policies

    A good way to quantify the level of risk for each factor is to assign each one a score of, for example, one to five — five being the highest level of risk. If a property has a higher risk factor score, be aware that it could potentially lead you to spending more money than you’re comfortable with.

    Related: How to Get the Most Out of Your Rental Property Investments

    3. Use comparable rentals in the area

    An important step in evaluating your new rental property is to see how it stacks up against the other properties in your local market. In doing so, you can keep your expectations on expected cash flow in check.

    Conduct a sales comparison by finding properties that are similar to yours and calculating the price per square foot that they sold for. Be sure to look at properties that have been sold within the last month so that your numbers are as accurate to the state of the current market as possible. When looking for comparable properties, try to find units that have approximately the same number of bedrooms and quality of amenities as yours.

    Additionally, consider whether the location that you’re researching is the right location for the type of renter you’re looking to attract. For instance, if you’re primarily targeting local families for your rental, you’ll want to evaluate whether the school system nearby is high quality. If you’re targeting young professionals, however, you might investigate whether the property is close to public transit. An excellent location can upgrade a mediocre property to an extremely desirable one, so don’t overlook this step when choosing where to invest.

    4. Calculate your NOI

    Your property’s NOI (Net Operating Income) is the total amount of income that it will generate, minus general operating expenses. It is calculated by taking your total rental revenue over a certain period of time and subtracting all regular operating expenses required to maintain the property over that period, such as the cost of repairs, property management fees, insurance, property taxes, etc.

    If you divide your NOI by the original price you paid for that rental property, you get the capitalization rate, which measures how long it will take for you to make back your initial investment. If you have a high cap rate, you have more revenue and a strong overall investment.

    However, it’s important to remember the few factors that could skew your cap rate calculation. When you use cap rate to evaluate a property prior to purchasing it, you’ll need to estimate the potential rental rate and total expected income. That means that you’ll have to find the cap rate after you research what similar properties are charging in your area. Also, if you intend to flip a low-value home, your cap rate will not include the cost of renovations or the fact that you will not be renting the space out and are selling it instead.

    Related: How to Start Investing in Rental Properties — Your Step-by-Step Guide

    5. Consult a professional

    As an investor, you need to understand how a property’s current state will influence what it could be valued at in the future and how much you can profit from it at the time of sale. One of the ways to do this is to hire experts who are experienced in this field to give you an estimate.

    A professional property valuation estimates how much capital you’ll need to maintain a property. Maintenance costs are a significant factor in determining your overall profit from a rental property. A property valuation will take stock of larger assets like the roof, insulation or HVAC system to see what condition they’re in and how much you may have to spend to keep them functioning. You can also request a formal appraisal to have a professional estimate of the true value of the property based on factors like location, demand and lot size.

    The key to a great investment is solid upfront research. Real estate is a great way to be your own boss and possibly achieve streams of passive income — but first, you must dedicate significant time and effort to ensure your venture is a good one. Hopefully, the investment property tips above help you find a quality investment.

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    Dave Spooner

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  • 5 Steps to Prepare to Sell Your Rental Property | Entrepreneur

    5 Steps to Prepare to Sell Your Rental Property | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Preparing a house to sell is quite the process. If you’re a real estate investor with current tenants, it can become even more complicated. However, whether you’re deciding to sell because of a shifting business plan, a big life change or interest in investing your money elsewhere, figuring out when the best time is to sell and how you plan on doing so should be top of mind.

    Here are five steps to take when preparing to sell your rental property.

    Related: 6 Tips for Successfully Selling Your House

    Step 1: Plan when to sell

    The first step in selling your rental property is to strategically plan when to put the property on the market. If you can figure out your area’s local market trends, you will more easily be able to see what times are most profitable to sell your rental property. Here are some indicators that it’s a good time to sell:

    Higher demand for housing:

    Is there a large influx of buyers, perhaps due to new jobs cropping up in your area? While demand is high, it’s a strong sign to start preparing to sell just in case this demand doesn’t last long.

    You have substantial equity:

    It’s possible that you bought your property for a reasonable price and have made good renovation decisions over the years and now have a good amount of equity from that property. You should consider whether your potential gains will outweigh how much you’ll make in cash flow if you were to keep the property: If not, it’s best to wait until you have a stronger reason to sell.

    Incoming drop in rental prices:

    There are a few signs that rent prices in your area are about to drop. Although these are not guarantees, an influx of new construction or lower interest rates could lower the demand for your rental. If you see these signs, it’s a good idea to get out ahead of the decrease and sell your rental property.

    Step 2: Communicate with your tenants

    Maintaining a friendly, professional relationship with your tenants should always be top of mind for you as a landlord. Undergoing the selling process will force your tenants to decide between three options: They can move out, wait for you to sell the property and then move out, or remain a tenant under the new owner. If they choose to stay, it’s in your best interest to stay on their good side and encourage their cooperation.

    Tenants are going to be inconvenienced during this process. They will have to deal with a new owner, potential showings and repairs, and they could have to renegotiate their rental agreement. While these inconveniences could prompt some tenants to be difficult, if you already have a strong relationship with them and offer incentives to make them feel appreciated, the selling process is much more likely to go smoothly.

    Some ideas for tenant appreciation are offering gift cards to those who stay throughout the selling process or setting up activities like food trucks to stop by your property. Showing that you care about the sacrifices they’re making with their time and privacy will go a long way.

    Related: 6 Strategies to Increase Your Real Estate Cash Flow

    Step 3: Repair and prepare

    Preparing your property for the market entails advertising, making necessary renovations or repairs, and creating a listing.

    The first obstacle in this step is evaluating the current state of your property. Are there any big repairs that need to be done? Do you need to replace the carpet or appliances? Perform a pre-listing inspection to identify any glaring opportunities for improvement.

    Then, arrange to fix anything you found in that inspection. Vacant units are the easiest to arrange service on because you don’t have to work around tenants’ schedules or inconvenience them by constantly being in their living space. Extensive projects sometimes require an empty unit, like installing new flooring or repainting.

    Step 4: Hire a real estate agent

    A real estate agent will help you navigate the advertising and showing process, along with any legal steps that may be included.

    Advertising is extremely important. A good real estate agent will guide you toward the best ways to advertise in your area based on population trends and the local market, and they may also give you recommendations on house showing etiquette. They may also have access to databases that make it easier for you to find a great buyer.

    Related: 5 Real Estate Mistakes That Could Make You Lose Money

    Step 5: Choose a buyer

    First of all, a great buyer must have the means to buy your property. This buyer could be a real estate investor like you or someone looking for their next home. It would be beneficial for you and your current tenants if you chose an investor who is willing and prepared to take on your active leases, so your tenants don’t have to move.

    Also, if you have kept detailed records that prove your current tenants’ reliable record of paying on time and in full, investors may be willing to pay more for the property. The new investor will have an almost guaranteed positive cash flow right after they purchase the property without having to put in extra work for advertising or dealing with and filling vacancies.

    However, this decision is ultimately up to you. A real estate showing agent will be able to provide experienced advice on what kind of buyer would be best for your business’s needs, so be sure to take the time and hire someone you trust.

    Selling your rental property is best done with maximum preparation. The more research and prep you do into the process, the easier it will be for you and for your tenants. Consult with professionals in the field if you’re unsure of how to proceed. Picking a plan and sticking to it will be the best course of action, and ensuring your tenants are fully in-the-know will ease your stress as well.

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    Dave Spooner

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  • What to Consider When Determining the Value of an Investment Property | Entrepreneur

    What to Consider When Determining the Value of an Investment Property | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    When searching for an investment property, what should you pay attention to the most? There are several factors involved in every real estate deal, and it’s not always clear which are the most important.

    Understanding these factors is the key to answering questions like, “Is buying rental property worth it?” or “Will my investment be profitable?”

    In this article, we discuss six of the top factors affecting property value and what to know when buying rental property based on these factors.

    Related: Considering Buying Your First Rental Property in 2023? Here’s What You Need to Know to Succeed.

    1. Location

    If you’re familiar with the real estate industry, you may have heard the mantra: “Location, location, location.” Location continuously proves to be the number one factor in determining a property’s success in the rental marketplace.

    Not only do renters want properties in certain cities, but they also seek out homes near:

    Neighborhood desirability plays a substantial role in overall property value. Attractive neighborhoods are walkable, include convenient amenities and foster a strong sense of safety and community. Of course, a renter with three young children might have different priorities and expectations for a neighborhood than a retired couple. It’s about finding a property with the best balance of what the local community has to offer and then ensuring that location will retain its value over time.

    2. Investment plan/purpose

    Not every investor buys a rental property with the same plan in mind or purpose for it. Your plan could be to:

    • House hack: Live in one unit and rent out the other(s).

    • Buy and hold: Buy a property to keep as a long-term asset to a stable portfolio.

    • Fix and flip: Buy a property and sell it after making capital improvements to increase its value.

    • BRRRR: Buy a property at below-market rates, rehab it, rent it out, refinance the mortgage and repeat the whole process with your next property.

    Not every market is suitable for every investment plan. For instance, the BRRRR strategy only works where there is an abundance of properties at below-market rates. The quality of the match between your intended investment plan and your chosen market is a key factor in your overall success.

    Related: How to Effectively Assess Property Value for Investment

    3. Expected cash flow

    Positive cash flow is a priority for all investors who are planning to rent out their properties. You need to know that the money coming in regularly from your tenants is enough to compensate for your monthly expenses, such as mortgage payments, repairs and insurance.

    Before purchasing a property, calculate its expected ROI, or return on investment. ROI for rental property is calculated by dividing your annual return by your initial investment or purchase cost. An expected ROI around or above 10% is a good indicator that you’ll have enough cash flow to not only break even with your property but also generate a profit.

    4. Appreciation

    Appreciation is a broad category that encompasses several individual factors. In general, appreciation is the increase in value of a property over time. Properties appreciate naturally the longer you hold them, but you can also “force” appreciation by improving the property via capital investments (e.g., adding a bathroom, renovating the kitchen, replacing the roof, etc.).

    A property that appreciates well not only gains equity and sells for a much bigger profit later, but it also impacts your cash flow now. A property with higher value can be rented at a higher rate, leading to more capital to work with and reinvest in the short term.

    5. Size and number of bedrooms/bathrooms

    A property with more livable space is almost always worth more than a home with less space in the same market. Livable space refers to space that is available for everyday use and is properly finished, heated and ventilated (for example, a closet is not livable space while a finished basement is).

    Additionally, the more of the following you have, the more your property can be worth:

    • Bedrooms

    • Bathrooms

    • Kitchens

    • Parking or garage spaces

    • Yard square footage

    6. Property age and condition

    Many people looking for a new home are on the hunt for a newer, modernized property in top condition so that frequent repairs are not a concern. This makes a home’s age and condition important factors that play into its value and overall success in the market.

    Renters and homebuyers want:

    • New, modern architecture (unless the home has historic value)

    • Modern plumbing, HVAC systems and roofing

    • Modern appliances

    • Curb appeal

    Related: How to Start Investing in Rental Properties — Your Step-by-Step Guide

    Many buyers are on the lookout for turnkey properties, or homes that are move-in ready without any major repairs or renovations necessary. While turnkey properties cost more upfront, they often pay back their higher investment with the higher rents you can charge. It may be helpful to write up a checklist for buying a rental property with the amenities and features you want in a property and the amount you’ll pay for them.

    Let’s return to our original question: Should you take the plunge and become an investor? It’s a question that massively depends on the specific property, market and real estate goals you’re dealing with. But no matter where and when you decide to invest, these six factors can guide your thinking and help you find a property that will add sustainable value to your portfolio.

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    Dave Spooner

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  • 6 Things Landlords Should Know About Automated Rent Payments | Entrepreneur

    6 Things Landlords Should Know About Automated Rent Payments | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    As a first-time real estate investor or new property manager, you are responsible for choosing which rent collection method(s) you’ll offer your tenants. Automatic rent collection is increasingly popular among landlords and tenants alike, but it often comes with questions and concerns from both parties.

    If you’re thinking of offering automatic payments to your tenants, there are a few things you need to know first. In this article, we’ll review the benefits of autopay for rent collection as well as six key points to know before getting started.

    Related: How Successful Landlords Approach Rent Collection

    Benefits of automated rent collection

    Automated rent collection, often facilitated by a bank or property management software platform, is a method of rent collection that automatically transfers funds from your tenant’s account to yours each month.

    Autopay differs slightly from online bill pay, which you may also be familiar with. The key difference with online bill pay is that a tenant gives permission for their bank to make recurring payments from their account to the landlords’. Autopay, on the other hand, is when the tenant permits the landlord to debit their account each month.

    Autopay is an excellent way to manage regular payments in the same amount each month, like rent. Other benefits of automated rent collection include:

    • Guaranteed on-time payments

    • Fewer late fees for tenants

    • Peace of mind if there is no rent grace period

    • Less stress on the first of the month for both parties

    What landlords need to know about automatic rent payments

    Before you get started with autopay, however, there are a few important things to know. Keep each of the following six tips in mind before implementing your automatic rent collection system:

    1. You should include an autopay clause in your lease agreements

    It’s important that you establish all your rental policies and expectations in the lease or rental agreement, including payment options and requirements. In every lease, explain in detail the options tenants have for rent payment, including autopay. Be sure to also include a description of how autopay works through your property management software or other platforms, as tenants will likely have varying levels of literacy with technology.

    Related: 5 Property Management Tasks to Automate in 2023

    2. Don’t require tenants to use autopay (or electronic payments)

    This is one of the primary causes of legal issues regarding rent payments for landlords. In certain states (such as California), it’s illegal to require tenants to pay rent electronically. In these states, you’ll need to provide at least one offline method for rent payments, such as cash or check. The same applies to autopay — whether or not you can require tenants to set up autopay depends on which state your property is located in. It’s important to know which state and local laws apply so that you can provide tenants with multiple options to pay rent when necessary.

    3. Be aware of fair housing regulations

    Even in states that don’t specifically forbid it, requiring tenants to set up and use autopay could be interpreted as a violation of fair housing laws. In some states where tenants are protected against discrimination based on age, a policy requiring tenants to pay via automatic payments may be seen as discriminatory against older renters, who are less likely to be digitally literate.

    If you have older tenants, an online-only policy could induce unnecessary stress or even motivate them to find a new rental. Use caution when developing your rental payment policy, and be cognizant of how your leases uphold fair housing laws.

    4. Be sure you can reject automated payments

    No matter which method of rent collection you use, you must have a way to reject payments. This is important because in some states, accepting full or partial payments during the eviction process could delay the legal action and require you to file an entirely new complaint. For this reason, it’s critical that you are able to reject an automatic rent payment and stop autopay altogether when necessary, such as when the lease ends.

    5. Learn about NACHA rules and regulations

    The National Automated Clearinghouse Association (NACHA) is responsible for regulating the ACH network and ensuring its security. For example, NACHA requires merchants (like landlords) to have a written security policy explaining how tenant information is stored. These rules ensure the integrity and confidentiality of sensitive information and are critical whenever you’re dealing with tenant data. Be sure your payment processor is NACHA-compliant before implementing your autopay policy.

    Related: ACH Payments: What Are They and How Do They Work?

    6. Watch out for cases of non-sufficient funds

    Just because a tenant has enabled autopay, this does not mean their payments are 100% guaranteed. If a tenant does not have enough funds in their account to cover the debit, the payment will bounce and you won’t receive the rental amount on time. In many states, landlords can charge a service fee when this happens, but be sure you know how much you can legally charge based on your state.

    Automated rental payments are a benefit to both landlords and tenants but are typically accompanied by a learning curve. Be sure you’re aware of these six points to prepare for a smooth integration of this rent collection method.

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  • How Online Rent Collection Can Boost Transparency in Your Rental Business | Entrepreneur

    How Online Rent Collection Can Boost Transparency in Your Rental Business | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Landlords experience a variety of benefits when switching to online rent collection: automation, convenience, accurate bookkeeping and the ability to meet tenant needs in the marketplace.

    Transparency is an often overlooked benefit. As consumers, we want and appreciate transparency throughout the transaction process. We want to be able to track our packages, payments and orders and know that everything is proceeding as it should. The same is true for the rental marketplace. The more you can clue your tenant in on the rent collection process, the more they’ll appreciate it.

    Here’s how you can use online rent collection to enhance transparency in your own business:

    Related: Landlords, Don’t Believe These 5 Myths About Online Rent Collection

    Track IP addresses and login credentials

    One common concern that tenants have about online payments is that they aren’t secure. In reality, online payments are often more secure than traditional cash and check payments. This is because online payments track IP addresses (physical locations) and login credentials for every person who signs onto the rent payment portal.

    These details help distinguish a device from thousands of other devices online in the area, and incorrect details can indicate when there has been a problem. Combined with timestamps, IP addresses can be used to verify the validity of a transaction, especially if you or a tenant notice something amiss in your records. The addition of these data points is a clear strength of the online approach, and it helps facilitate communication about potential security breaches and other concerns between landlords and tenants.

    Record dates and timestamps

    As mentioned, dates and timestamps are another important data point that is beneficial to collect. Online platforms record these details automatically, and they can hold both you and the tenant accountable. For instance, a tenant may be able to claim that they dropped a check in the drop box at 11:00 p.m. on the day rent was due, but how would you know for sure whether it wasn’t really the next morning? There’s no way to confirm exactly when your tenant paid (or, in the case of cash, even how much their payment was).

    To solve this problem, online rent payments automatically record the exact time a payment was made, providing you with a benchmark you can use to apply late fees and hold tenants accountable. Plus, if a tenant doesn’t remember having made a payment at a certain time, you can investigate potentially fraudulent transactions much sooner.

    Auto-generate invoices and receipts

    Part of transparency is making sure all parties understand what is expected of them. That’s where invoices and receipts come into play. By providing your tenants with an automatically generated rent payment invoice each month, you can gently remind your tenants of the rent due date and encourage them to make more payments before late fees are applied. Additionally, if changes are made to the agreement or special circumstances of any kind, you can make these changes on the backend and still ensure your tenant receives the correct invoice at the correct time. And after each payment they make, your tenants will receive a receipt verifying the amount, date and time of the payment. There’s no better way to stay transparent with your rent collection process than to inform your tenants that their payments have been received on time, in the correct amount, right after they make them.

    Know exactly when your funds come in

    Online rent collection can also offer you transparency benefits. On some property management software platforms, for instance, you can use rent payment tracking to find out exactly when your funds are expected to hit your account. If tenants are not paying rent on time, you’ll know that as well, and you can still track the progress of the transaction until it’s finalized and the funds are deposited into your bank account.

    Related: How Successful Landlords Approach Rent Collection

    Keep a history of rental payments

    Lastly, online rent collection creates transparency for both you and your tenants by keeping an accurate history of rental payments. For each tenant, your rent payment platform keeps a rent payment ledger — or a history of all the transactions between you and that tenant. This increases transparency because your tenant doesn’t have to take your word for it about whether a certain fee was charged months ago or how many times they’ve had late payments. Instead, both you and the tenant can see the details of every transaction at any time.

    There are so many reasons to adopt online rent collection that we didn’t cover here. But as transparency is the foundation of good communication and lasting relationships, it’s no wonder that incorporating it into the rent collection process leads to better landlord-tenant relations and longer tenancies. By switching to online payments, you can serve everyone’s interests while looking after your business, too.

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  • 5 Myths About Online Rent Collection Landlords Need to Know | Entrepreneur

    5 Myths About Online Rent Collection Landlords Need to Know | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    When customers are online, so are businesses. It’s no less true in the rental industry — with customers increasingly embracing online bill pay, online rent collection is only a logical next step for landlords.

    But online rent collection is often met with hesitancy. Some believe that online payments are less secure or reliable. Others fear the complexity of online rent collection for themselves and their tenants.

    However, most of these concerns are proven myths. The truth is that online rent payments are one of the safest, most efficient and overall best methods for rent collection. This article will discuss and refute five myths about online rent collection to ease your concerns about switching to this vastly superior method.

    Related: How Digital Payments Are Disrupting Our Entire Ecosystem

    1. Online rent collection isn’t secure

    You or your tenants may have concerns about the security of online payments. Surrendering your credit card number or account and routing numbers to an online platform without knowing who’s behind it may make it seem like anyone can steal your information. However, transaction fraud is very rare in actuality. This is because rent payment platforms are usually encrypted so that hackers can’t access the sensitive information you enter.

    There are a few steps you can take to decrease the risk of fraud further. When you switch to online payments, encourage your tenants to:

    • Always use a secure internet connection: Advise tenants to avoid using public WiFi when paying rent or to use a VPN (virtual private network) if they must make a payment while out and about.

    • Use a credit card instead of a debit card: Credit cards are generally more secure than debit cards, which deal with real funds from your tenants’ accounts. It’s much easier to recover lost funds with a credit card by disputing a fraudulent payment.

    • Keep track of all accounts: Even if your tenants use automatic payments, remind them to regularly check their cards and accounts to ensure that the right amounts are being taken at the right times. Any suspicious transactions should be reported immediately.

    2. Tenants won’t know how to use it

    Many landlords also worry that their tenants (especially older ones) won’t know how to use online rent collection and won’t bother learning. Many older renters are accustomed to writing paper checks, and the stress of learning a new platform or site might be too much to ask.

    Despite these qualms, you may be surprised to learn that online bill pay is more common than you think. Fifty-six percent of all bills were paid online in 2017, and this percentage is only increasing. Even older generations are likely to have at least purchased a plane ticket or paid off their credit card bill online.

    For those who do choose to pay rent online, the interface is usually quite intuitive and simple to learn. Even the least tech-savvy individuals will easily get the hang of paying rent online from a secure platform each month.

    3. Online payment platforms are too complex to learn

    On your end, you may worry that an online rent collection platform you choose won’t be easy to get the hang of. Getting a platform set up can feel overwhelming, especially since there are so many options, including online bill pay through your bank, peer-to-peer (P2P) platforms and property management software.

    However, by carefully researching these different options ahead of time, you can determine which platform will be the easiest and most straightforward for your rentals. Platforms that offer rent pay online are designed to have smooth interfaces, navigable menus and automation capabilities. Yes, you might have to invest a morning or afternoon exploring the platform or scheduling a walk-through with a customer service rep if you use property management software, but the payoff to this small investment is that rent collection can be largely hands-off from then onward.

    Related: How Successful Landlords Approach Rent Collection

    4. Online rent collection will deter renters who would rather pay via cash or check

    Some landlords fear that collecting rent online will play into the overall decline in cash and check payments and deter tenants who would rather pay the traditional way.

    While it’s true that online payments have become more popular over the last few years, there are still uses and purposes for paper payments. There’s no reason to eliminate paper options altogether. Instead, you can simply offer online rent payments as an option (and even encourage tenants to use it), but you can still allow offline methods of payment for those tenants who want them. In fact, it may even be against your state’s laws to require that tenants make payments electronically.

    If you do have tenants making payments in multiple ways, keep in mind that you’ll need to keep careful records of offline payments by entering them into your software and sending receipts manually.

    5. Online payments increase the risk of bounced eChecks or credit card chargebacks

    eChecks, also known as ACH payments, are just what they sound like — electronic checks that work by transferring money directly from your tenant’s bank account to yours. And just like paper checks, eChecks have a risk of bouncing. It’s possible that a tenant won’t have the funds in their account to fulfill an eCheck payment they submitted. It’s also possible that credit card chargebacks will occur if a tenant sees a payment on their statement that they don’t recognize.

    While both bounced eChecks and credit card chargebacks are possible with online rent payments, they are no more likely than with traditional checks and credit payments. There are also ways you can prevent both of these risks from occurring, including reminding your tenants to regularly check their accounts if using automatic payments and to write down the payment processor name they should expect to see on their credit card statements.

    If a tenant does end up making a claim for the rent payment on their account statement, the good news is you can usually easily dispute the claim with a little evidence. All you need is the original lease agreement stating the rental amount and due dates or an invoice showing that the charge was valid.

    It can be overwhelming to consider upending your rental business’s traditional payment model and switching to online methods instead. However, given the array of benefits online rent collection can offer you and your tenants, you shouldn’t hesitate to make the switch.

    Related: How Landlords Can Prevent Rent Payment Fraud

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  • How Landlords Can Prevent Rent Payment Fraud | Entrepreneur

    How Landlords Can Prevent Rent Payment Fraud | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Rent payment fraud is a common concern among new landlords — and not without good reason. No one wants to be taken advantage of, and being outsmarted by a fraudster can make you feel helpless toward any future issues you may encounter with rent collection.

    However, fraud is a problem every modern business must contend with, and it’s part of managing a successful rental business. By learning about the types of fraud you may encounter and how to fight them, you will feel prepared should any of these concerns plague you in the future.

    Here are the various types of rent fraud you may face and how to mitigate them.

    Related: Payment Challenges and Fixes for Today’s Entrepreneurs

    What is rent payment fraud?

    Rent payment fraud varies depending on the method of payment a tenant chooses to use. Here are some of the most common instances of fraud across the different payment types your tenants might choose:

    ACH hackers and scams:

    ACH payments are direct transfers from one bank account to another through the Automated Clearing House Network. If an employer has ever paid you via “direct deposit,” the ACH network is what they were using. ACH payments are popular among renters due to the speed and ease with which they transfer, and there’s often no transaction fee.

    Among the various rent payment methods, ACH payments might be one of the most secure. However, there are still some issues you may encounter: namely, hackers and scams. The ACH network works such that all someone needs to deposit or withdraw funds in another person’s account is their bank account number and routing number — that’s it. If a hacker were to get ahold of these two pieces of information, they would have access to all your funds.

    Although this is a frightening prospect, keep in mind that the application process is strict, and the ACH network also enforces transaction and volume limits. If there is a problem, understanding a few of the ACH return codes can help you address the issue as quickly as possible:

    • R01: Insufficient funds — This code means the tenant did not have enough money in their account for the transaction to complete. Only full rental amounts (not partial ones) can be deducted.

    • R02: Account closed — This means the tenant gave you the number of a closed account or closed it recently.

    • R03: No account — This means the tenant’s bank account never existed in the first place.

    • R08: Stop payment — This means the tenant placed a “stop” on their account to prevent transfers from their account to yours.

    Debit chargebacks:

    It’s also possible that a tenant could dispute an ACH debit on their account to get the transaction reversed. This strategy to recover money has a higher chance of working if the tenant does not normally pay via ACH transfer, as it will be seen as a suspicious transaction. However, by keeping accurate records of prior payments, it’s fairly easy to contest the chargeback and recover your funds.

    Credit card chargebacks:

    Similarly, credit card chargebacks occur when a tenant calls their credit card company to dispute a charge that has appeared on their statement. It may seem easy for a renter to become a scammer by intentionally disputing a rent charge. If the tenant has been reliably paying via credit card all year, this strategy isn’t likely to work — but once again, detailed and accurate records are likely to save you in this scenario.

    P2P fraud:

    Peer-to-peer (P2P) platforms (think Venmo, PayPal, Zelle, etc.) have some substantial limitations when it comes to security and rent collection. For one, these platforms are not designed for landlords and rent collection. You’ll need to set up a general business account, as using a personal account to collect rent violates their user agreements. P2P platforms also don’t allow you to set up and manage late fees or reject payments, which is especially important during an eviction. Overall, P2P platforms are highly risky for landlords.

    Bounced checks (non-sufficient funds)

    Bounced checks are a more common type of fraud you may encounter if you allow your renters to pay via paper check. If a tenant does not have enough funds in their account to fulfill the check that they wrote, the bank will reverse the deposit from your account — even if you’ve already spent the money.

    Cash fraud:

    A basic cash payment is also susceptible to fraud. If you allow tenants to mail cash or leave it at a drop-off location, it’s easy for them to seal only half the rental amount in an envelope, drop it off, and then later claim that the other half was stolen from the drop box.

    Related: Don’t Fall Victim to Fraud: 5 Tips to Protect Your Business When Dealing with Payments

    Tips for preventing online rent collection fraud

    Now that you know the possible types of fraud, here are the top three tips to prevent them from occurring in your rental business:

    1. Screen tenants thoroughly:

    Tenant screening is an understated defense against all types of fraud. Renters who have made reliable payments in the past and have enough income to meet your requirements should have no reason to commit fraud to avoid paying. Don’t accept any renter who hasn’t proven their reliability via a thorough credit check, criminal background check, eviction history and income verification.

    2. Collect rent online (but not through a P2P platform):

    There are many reasons to collect rent electronically, but among the most important is that digital rent collection offers more security than traditional cash or checks. Although fraud can certainly still happen with online payments, online options tend to offer you more of a chance to recover your lost funds with accurate data and record-keeping. Rent collection software is also encrypted, such that both you and your tenants’ funds are safe from outside hackers. It also speeds up the processing time of transactions, so you’ll know about any problems that do occur sooner rather than later. But if you can, do avoid P2P platforms for the reasons mentioned earlier.

    3. Keep immaculate records:

    Diligent and accurate record-keeping is your best defense in case of chargebacks and other types of rent payment fraud. If a bank or credit card company asks you to prove that a withdrawal from a tenant’s account was legitimate, your records will clearly show what the payment is and that the charge is rightful.

    It’s likely that you will run into some kind of fraud during your time managing properties and tenants. However, the good news is that with the right knowledge, tools and resources, most of these instances are easy to mitigate and won’t affect your business in the long term.

    Related: Think You Can’t Win Against Chargebacks? Think Again.

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    Dave Spooner

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  • 3 Things I Wish I Knew as a First-Time Airbnb Host | Entrepreneur

    3 Things I Wish I Knew as a First-Time Airbnb Host | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    In 2017, I purchased a single-family home and listed it on Airbnb as a short-term rental. Several years and additional units later, the venture grew into a full-time business that now gives me around $150,000 per month. I could say I had a good ride.

    But the journey to this success wasn’t smooth. There were many things that I wish I had done differently, especially when I was just starting. And while some might say they’re part of the whole experience, I still won’t recommend them to anybody.

    And that is why I want to share the things I wish I had done when I was new to the Airbnb industry. These lessons impacted how I did my business, and if you’re starting on your own, these will be helpful for you too. The following are the three things I wish I knew as a first-time Airbnb host:

    Related: 10 Pieces of Financial Advice I Wish I Knew in My 20s

    1. An “employee mindset” won’t get you far in the business

    Now, I don’t have anything against employees. They’re awesome because they are the foundation of our labor force. I started as an employee myself, and I have a staff who helps me with my business too.

    However, if you want to create a flourishing Airbnb business, you don’t need the kind of mindset that most employees have. Allow me to explain.

    When I started my Airbnb business in 2017, my wife and I operated our unit, and we had no trouble doing so. Our profits were more than enough to cover our mortgage for the first three years.

    However, the struggle started when we decided to do all the cleaning ourselves. At that time, we didn’t think it was necessary to hire help because we could always do the cleaning on our own. Plus, we thought it was better not to pay anyone and keep the profits to ourselves. But we couldn’t have been more wrong.

    As days and months went on, we realized that we should have done things differently. We spent so much time cleaning our Airbnb that it was draining. Sometimes we’d be tired from appointments, and we still couldn’t rest because we had to clean our unit.

    It was then that we knew the business became another 9-to-5 job for us, and we were operating with an employee mindset. We wanted the job done right and to make more money, so we thought we had to do everything ourselves.

    But this employee mindset didn’t get us far, and neither would it be for you. The Airbnb business requires effort, and if you’re not careful, it could drain your time away from the most important things you should be focusing on. Instead, I recommend you get people who can make the work easier for you.

    Don’t hesitate to use some of your profits to hire help because, in the long run, you’ll benefit more from it. It’ll free up your time, and when you have more time, you’ll get the chance to focus on growing the business. You can even launch a new Airbnb if you want to!

    Related: How to Start an Airbnb Business Without Owning Property

    2. Delegation is the key to time freedom

    This is in the same context as the first lesson I mentioned, but it’s so important that it bears repeating.

    You see, there are three primary operations in the Airbnb business: cleaning, maintenance and communication. Now for your business to thrive, you have to take care of these three areas equally. But this would be extremely difficult, especially if you have more than one unit and you’re doing all the operations alone.

    People will check in and out of your Airbnb, so cleaning and maintenance need to be taken care of regularly. The problem when you’re doing those things yourself is that you are trading time for money. This is why you need to delegate those tasks and automate them for your work to be easier.

    You can hire people to do the cleaning and maintenance for you, create an automated cleaning and maintenance calendar that they will follow, and you’re good to go. You can even get a virtual assistant to help you on the communications side.

    This is how million-dollar entrepreneurs operate their businesses: by building a team and a system, hiring, delegating, and automating all the operations. And I wish I had known this sooner.

    3. Collecting a 1099 Form will reduce your taxes

    The IRS 1099 Form is a collection of tax forms that you have your subcontractor sign so you can take what you pay them as a tax deduction. This applies to the people you hire to clean, do the maintenance, and do your communications. As long as you pay them $600 or more within the same calendar year, you must collect a 1099 Form from them.

    This is something that I wish I had known when I was getting started. I didn’t know that I needed to collect a 1099 Form, so I ended up paying for money I didn’t keep.

    Now to be fair, no one told me about it then, so I didn’t know. But now that you have an idea make sure to implement it to protect your profits so that you won’t lose out in the end.

    Related: 8 Ways to Save Money on Business Taxes

    Conclusion

    Making mistakes as an entrepreneur is perfectly normal, especially if you’re new. However, no rule says you must make blunders for the sake of experience.

    Instead, you can learn from those who have already been through the same struggles and learn from their backgrounds. After all, success leaves clues. By learning from the experience of others who have overcome similar struggles, you gain valuable insights and avoid unnecessary pitfalls.

    So take advantage of the wealth of knowledge available to you, and start building the business of your dreams today.

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    Jorge Contreras

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  • Is Buying Rental Property Worth It in 2023? | Entrepreneur

    Is Buying Rental Property Worth It in 2023? | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Picture this: It’s New Year’s Eve, 2022, and you’ve finally committed to a resolution you really want to keep. In the coming year, you want to buy your first rental property and start investing in real estate. But what will real estate look like in 2023? Will housing prices continue to drop? There seem to be more questions than answers.

    If this scenario sounds like you, you might feel intimidated by the uncertainties of the coming months. Deciding to buy your first rental property can feel like a scary or risky endeavor in any market climate, but doing so during a housing correction may seem even riskier. You might be questioning your decision and wondering, “Is buying rental property worth it?”

    Before you throw out your resolution, however, reconsider what you know about real estate and how to retain and increase its value. This article will hopefully give you some of the tools and resources to invest in any market and demonstrate that 2023 can still be a fruitful time to buy your first property.

    Related: How to Start Investing in Rental Properties — Your Step-by-Step Guide

    What is a housing correction?

    First things first: What is a housing correction?

    A housing correction is a period during which housing prices start to fall in some places after a rapid rise. This fall is usually only by 10% or less, according to U.S. News & World Report. It typically occurs because home prices were unsustainably high in recent years, and the market therefore “corrects” itself to more reasonable prices that match the current supply and demand. Corrections are more gradual than housing market crashes, but they can last anywhere from a few months to a few years.

    Housing corrections are caused by interactions between a variety of factors, including mortgage rates, supply, demand, affordability, inventory and stock market trends. Analysts track these factors over time to look for signs that prices will soon fall. These signs can include a decline in sales, homes selling more slowly and homes selling for significantly less than just a few months prior.

    Many people who own property during a housing correction may worry that their properties aren’t worth as much as they used to be. However, housing corrections aren’t inherently “bad,” nor do they spell the death of your rental business. In fact, they can make home-buying possible for first-time owners or those looking to start their investing journeys without competing with high-capital peers. Corrections are part of the real estate cycle, and knowing what to expect can help you navigate one with confidence.

    What’s happening in 2023?

    Analysts and economists are monitoring the housing market, and many have predicted that a housing market correction has already begun or soon will. Today, the national housing market is up by only about 6% compared to March 2022, which is a relative slowdown in comparison to 15% a few months prior. Experts predict that house prices will continue to fall through 2023, with the markets that grew the fastest in the past year likely to see the starkest decreases (even up to 30% in overpriced cities).

    Why is this happening? Experts cite a few factors. For one, there are fewer people looking to buy expensive homes than there were in previous years. Many Baby Boomers now have fixed incomes and aren’t as interested in buying expensive homes, which is a natural cause of corrections. Meanwhile, young families are looking for starter homes.

    Related: 5 Tips for New Investors Who Want to Make Money With Real Estate

    How and why you can still invest during a housing market correction

    Don’t let decreasing prices discourage you from investing in real estate. A good deal is a good deal, and if you do your research, you have a good chance of securing a lucrative one.

    The key is to stay informed on market trends and be patient. Housing corrections are temporary, and they help transition from a seller’s market to a buyer’s market, so you can actually benefit from this period of low prices. Plus, as experts at BiggerPockets remind us, housing prices do not equal profit. There are a variety of other ways to earn revenue in real estate besides appreciation. Cash flow, value add deals and tax benefits all make real estate worth it even in less-than-ideal markets. It makes sense to be cautious, but don’t let that prevent you from taking advantage of great opportunities when you find them.

    Buying a rental property

    So, you’ve decided to buy a property in 2023: What do you need to know?

    When considering what to know when buying a rental property, one of the most important steps is analyzing the local market. Local data is more useful than national averages any day, as it will provide the clearest insight into the rental marketplace in the specific area you’re targeting.

    Calculating ROI:

    When choosing a property, the best way to get a picture of local demand is to survey local rent rates of comparable properties nearby. For a given property in that area, you’ll be able to estimate approximately how productive that investment will be.

    To do this, you’ll want to calculate ROI, or return on investment. ROI for rental property is the ratio of income you’ll generate to your initial investment or purchase price of the home. To calculate it, divide your expected annual return by the purchase price. If the resulting percentage is 10% or more, it is typically considered a good investment.

    Remember that you can increase your ROI by adding value to your property, then increasing the rental rate. For instance, if you add another bedroom and bathroom to a single-family home, you now have a property worth far more than the one you started with. You may have bought the house at below-market value during a correction, but you’ll soon make up for it in revenue generation and appreciation as the market leaves the correction period.

    Related: 6 Effective Real Estate Investment Strategies

    Legal and administrative tasks:

    You’ll also have some legal and administrative tasks on your checklist for buying a rental property. Namely, you should hire a licensed property inspector to review the property before finalizing the deal. You don’t want to discover that the home has severe infrastructural problems or water damage after you’ve already locked yourself into a price.

    Other important tasks include reading over the property title documents to confirm the seller’s ownership, confirming property tax receipts and writing up a solid property purchase contract. You may have an agent assist with this process. The goal is to clearly define and explain the terms of the sale so that you know exactly what you’re paying for. Many of these steps are also required by lenders to secure a mortgage — your lender has an investment in the property, too, so they also want to ensure you’re making smart choices.

    Becoming a first-time landlord doesn’t come without its challenges. The first step is to find and analyze a great deal that will lead you toward financial freedom. By following these tips, you can be a successful real estate investor in any market season.

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    Dave Spooner

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  • The Pros and Cons of Hosting on Airbnb, VRBO and The Landing | Entrepreneur

    The Pros and Cons of Hosting on Airbnb, VRBO and The Landing | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Investing in real estate is a great way to create passive income, but it also comes with a number of challenges. One of the biggest challenges I have faced as a rental property owner is finding the right hosting platform for my Palms Springs rental property.

    There are many options available — from traditional leasing to Airbnb-style short-term rentals — and more have become increasingly popular among real estate investors, like VRBO and The Landing. Each of these options offers different benefits and drawbacks, so it’s important to carefully consider each one before making a decision. Let’s take a look at the pros and cons of these options.

    Related: Tips for Making Real Money on Airbnb

    Pros of hosting on Airbnb

    The most obvious pro of hosting a property on Airbnb is that it provides an opportunity to make money quickly and easily. Airbnb offers a variety of services, from basic rental units to more luxurious accommodations like resorts and private villas. Additionally, the platform provides a simple way for hosts to get their properties listed, and Airbnb even has an automated system for handling payments.

    By renting out your property using these short-term tenants, you can profit more from your rental property as you’re not tied down to long-term leases, which can often be difficult to fill.

    Cons of hosting on Airbnb

    The main downside of using Airbnb for short-term rentals is that the platform charges its hosts a commission for each booking. This can eat into your profits, depending on the length and scale of your rental offerings. Many hosts, including myself, have tried to counter the fees by charging more and adding higher fees for cleaning.

    Additionally, Airbnb is known to attract younger travelers who may not be as respectful of the property or its amenities as traditional tenants — hence the launch of Airbnb Cover.

    The lack of proper filtering and background checks can leave you vulnerable to seasoned scammers on the platform. I’ve personally experienced this and have had to complain and make a claim with Airbnb Cover. In the end, I was taken care of, learned a great lesson and was invited to the Airbnb community.

    In conclusion, while hosting through Airbnb has many advantages such as being able to make money and meeting new people from around the world, there are also some drawbacks such as high commissions and liability risks associated with damages caused by guests during their stay at your property.

    Related: 15 Property Management Tips for Entrepreneurs Seeking Passive Income From Real Estate

    Is VRBO the right choice for real estate investors?

    Vacation Rental By Owner (VRBO) is a popular way for real estate investors to generate income from their properties.

    One of the biggest advantages of hosting on VRBO like Airbnb is that it offers a lot of flexibility in terms of when and how often you rent your property. This means that you can take advantage of peak tourism seasons or special events like music festivals to maximize your earnings potential.

    Another benefit of hosting on VRBO is that it can be lucrative because many travelers prefer to use VRBO rather than traditional hotels. This provides an opportunity for savvy investors to capitalize on this trend.

    VRBO cons: Protection offer and fees

    While there are plenty of benefits associated with hosting on VRBO, there are some drawbacks as well. For one thing, since you have limited control over who rents your property and when they stay there, this can make it difficult to predict how much money you will make each month — which is a problem if you rely heavily on rental income to cover your mortgage payments or other expenses related to the property.

    Additionally, since renters only stay for short periods of time (usually 1-2 weeks), this means that turnover costs like cleaning fees can quickly add up if not managed properly.

    VRBO also has set fees, and there is also a fee for protection starting at $59. This is a separate charge that you can add to a guest booking. While the booking fees are typically less than those charged by Airbnb, you may find that they still take a significant chunk out of your earnings.

    While you can encounter scammers on any site, I personally noticed an increase in people wanting to speak outside of the site as well as inboxes filled with more inquiries than people ready to book. Most of my inbox has questions about the fees and how to get around them.

    Related: 10 Hosting Options Besides Airbnb #TravelHosting

    Pros of hosting on The Landing

    The main benefit of hosting on The Landing is its flexibility as well as being able to charge for utilities separately. Unlike traditional leases, guests can choose how long they want to stay with the option to extend their stay using The Landing APP. This makes it ideal for investors who want to test different rental strategies without being locked into a single approach. Additionally, The Landings offers access to an array of features such as automated payments and tenant screening services that make managing your property easier than ever before.

    Another advantage of hosting on The Landings is its convenience and attention to quality. They have a standard that must be met for each listing such as high-quality photos, designated work spaces, reliable appliances and other things like white linens. Their standards lean more towards corporate housing. They target digital nomads, travel nurses and young professionals.

    Cons of hosting on The Landing

    One potential downside of hosting on The Landing is its application process. Unlike the other platforms, you go through an approval process. The platform is also membership based and offers housing that could potentially compete with the individual investment property owner.

    As a current membership holder, I love the platform — but as a rental property owner, I would not rely on that site alone. I would suggest using all sites while being aware and prepared for issues that may arise mentioned in the cons for each platform.

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    Saba Tekle

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  • 5 Ways Self-Managing Rental Properties Can Save You Money | Entrepreneur

    5 Ways Self-Managing Rental Properties Can Save You Money | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Many small to mid-sized landlords want to self-manage their rental properties, and for good reason.

    Above all, self-managing your properties means more take-home revenue — you won’t have to say goodbye to a large portion of your rental income each month to pay a property manager or company.

    Another benefit is that you’ll be closer to your renters and rental operations. When you’re the one screening the tenants and hiring maintenance contractors, you always know exactly who is in and around your properties, and you’ll be the first to know of a problem.

    However, there are also some cons. You’ll need to invest considerable time, energy and effort into your properties, which not all landlords — especially those with other responsibilities like W-2 jobs or families — can do. You might also find yourself at a loss if you don’t have the knowledge required for a specific task. You’ll need to rely on yourself much more.

    With the right tools and technology, self-management is a profitable and very doable choice for many. In this article, we break down how you can limit expenses with five self-management tips.

    Related: How to Manage Your Real Estate Business Like a Pro

    Listing syndication

    Listing syndication is one of the best tools for landlords. Why? Using listing syndication can make rental advertising a one-man job.

    Listing syndication allows you to write one listing and post it to multiple popular listing sites in one click. Instead of spending time re-writing or typing your listings for sites across the internet, you can use a listing syndication service to post them simultaneously.

    Listing syndication makes self-management possible because it limits the amount of time you spend on listing and advertising tasks. Posting online in general is a good idea because it allows prospective renters to contact you more easily with questions or general interest. However, syndicating your online listings is the best choice — you can optimize your advertisements without having to pay a realtor to do this for you.

    Applicant pipeline

    Similarly, automating your applicant pipeline is another way to make self-management feasible.

    Setting up an applicant pipeline is relatively simple on a particular listing platform. For instance, if you post on sites like Zillow or Apartments.com, you can opt to send introductory emails to renters who “save” your properties or opt to receive more information. Additionally, if a renter doesn’t respond to your initial message, you can designate a follow-up email to be sent after a certain number of days.

    Ultimately, your goal is a signed lease, so you need to stay in contact with interested renters and keep communication regular. If you don’t have time to respond to a message for several days or even a week, it’s likely the renter has already moved on. That’s why it’s important to automate the process: You don’t have to respond to each renter personally in order to make sure they get a personal reply. And you can always choose to answer specific questions yourself or receive phone calls from renters who are serious about renting your properties.

    Related: 5 Property Management Tasks to Automate in 2023

    Property management software

    Perhaps the biggest way to limit expenses through self-management is to use software. Property manager fees can be steep — most charge a percentage of your monthly rent collection, meaning the more successful your business is, the more you’ll have to pay for management.

    This doesn’t have to be the case with property management software. Many software platforms offer cheap plans with all the basic management features you need. Others, like Innago, are entirely free to use. You’ll gain access to key features like online rent collection, tenant screening, rental advertising and maintenance management, and you can automate many of these tools as well.

    If you’re looking to cut management expenses, software is undoubtedly the best place to start.

    Online rent collection

    As mentioned, online rent collection is one tool you’ll find on property management software that can save you much time and money. Instead of collecting paper checks or cash every month and driving everything to the bank, your tenants can simply submit their payments online. You’ll get them much faster and won’t have to manually track down late payments yourself — your software will apply and enforce late fees automatically. With more time on your hands, you can focus on generating more revenue, not tracking down revenue you should already have.

    Related: 4 Smart Ways to Reduce Your Property Management Costs

    Seek guidance when necessary

    Although there are many ways to cut costs by doing tasks yourself, don’t let your desire to save money cloud your good judgment. If there’s a task that needs to be done and you don’t have the knowledge or experience to complete it, you shouldn’t attempt it yourself at the risk of causing further damage.

    For example, if there’s a serious plumbing problem that needs to be addressed immediately, you most likely won’t have time to watch a YouTube video and teach yourself the fix. Instead, you should call a trusted contractor to ensure no further damage is done to your properties.

    Likewise, if you’re facing what’s likely to be a complex eviction and you’ve never attended an eviction court hearing, you should not hesitate to call a lawyer. An experienced eviction lawyer can offer you expertise that is well worth your money when it comes to something as expensive and challenging as an eviction.

    Self-managing your properties is an ambitious, but plausible, goal for most small to mid-sized landlords. There are a variety of resources and tools available for exactly this purpose. Many are based on automation, which is absolutely critical if you plan to manage your properties on your own. It won’t always be easy, but there’s much you can do to become a successful manager of your own investments and save money while you’re at it.

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    Dave Spooner

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  • 5 Property Management Tasks You Should Automate Now | Entrepreneur

    5 Property Management Tasks You Should Automate Now | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    In our fast-developing digital world, there’s little we can’t automate with a few lines of code.

    The same is true in the property management industry. The property management software market will be worth $2.7 billion by 2023, according to Strategic Market Research. The reason for its growth is easily apparent — software makes it possible to automate many tasks that traditionally belong to property managers.

    As landlords race to implement affordable software tools in their rental businesses, automation is one feature you should be on the lookout for. The more tasks that can be automated, the fewer you must take on yourself, and the less money you’ll spend paying other people to do them.

    Here are five property management tasks to automate in 2023, if you haven’t done so already:

    Related: 11 Ways to Automate Your Business and Boost Efficiency

    1. Rent reminders

    Basic rent reminders are an essential part of your digital toolkit as a landlord.

    Even the least tech-savvy landlords can set up a recurring email to remind tenants about upcoming rent payments before the first of each month.

    However, there are much more sophisticated ways to automate rent reminders in 2023. On most property management software platforms that offer online rent collection, you can automate a monthly message that includes a link to the payment portal.

    Your software tool also knows which tenants have already paid and which haven’t, so it can target additional reminders to tenants who still have outstanding balances closer to the due date.

    Plus, for most tenants, a simple reminder is all they need to regularly pay on time. Rent reminders are the simplest kind of automated communication you can set up in your rentals with the highest rewards.

    2. Applicant pipeline

    Your rental applicant pipeline can also be largely automated. From responding to a listing to signing a lease, much of the process can proceed without your direct supervision.

    If you use a listing syndication service, you can often compose message templates to be emailed to a prospective renter at specific points in the pipeline — for example, immediately after they respond to a listing or even a few days after they might have forgotten about the listing to follow up.

    Automated messages can also include your current availability, so you don’t waste time communicating personally with tenants who ultimately won’t be interested in renting your properties.

    Lastly, tour scheduling can also be automated. By setting up a platform for prospective renters to schedule tours of your properties on their own, you minimize the time you both spend attempting to coordinate schedules. Your availability is already on the calendar, so the tenant simply needs to choose a time that works for them, too.

    3. Renewals

    The lease renewal process varies from state to state and property to property. Sometimes, leases automatically renew after the original lease term is up. In other states, the tenancy switches to month-to-month by default unless a new agreement is signed.

    To make the renewal process easier on your tenants (and yourself), you can automate renewals in your rental business. For instance, if tenants need to sign a new lease each year to continue living in the property, you can automate reminders with links to information about renewals or an offer to schedule a time to meet and negotiate any details.

    If the tenancy switches to month-to-month by default, you can automate a reminder message that this will happen if the tenant doesn’t respond by a certain date.

    Automating renewals can eliminate much stress at the end of the lease term.

    Related: How to Manage Your Real Estate Business Like a Pro

    4. Financial reports

    There are a variety of financial reporting tools available for landlords currently on the market. In addition to the reporting tools included in your property management software subscription or account, you can also opt to use a general business accounting tool like QuickBooks.

    A good financial reporting tool will allow you to automatically generate income statements, profit/loss (P/L) reports, year-end summaries and bank reconciliation. Many platforms also generate certain tax documents to help you prepare for tax season.

    While you can certainly (and often should) hire an accountant for this job, any person you hire will still appreciate tools that automate their work. Rental accounting is no different, and there is a myriad of ways available to do so.

    5. Late fees

    Late fee enforcement is one of the most practical ways to leverage automation in your rentals.

    With property management software, you can easily schedule late fee reminders and apply late fee charges to the accounts of tenants who haven’t paid by the due date (or after a designated grace period).

    This way, your tenants can’t claim that they “didn’t know” or “forgot” about the late fee — the charge automatically appears alongside all late rent payments.

    Automatic record generation is also useful should you ever need to evict a tenant. During an eviction hearing, you are required to provide proof that the tenant violated the lease agreement. With automated records, you won’t have to worry about whether you remembered to record that the tenant didn’t pay on time. You’ll already have dated and time-stamped records of all payments and late fee charges.

    Related: New Real Estate Technology: Disruptive Ideas Transforming the Industry

    There’s no shortage of responsibilities when you’re running a rental business, and everything that simplifies the process is an asset. Automating components of your property management is a massive step you can take to embrace the digitalization of the industry.

    Instead of juggling tedious, everyday rental tasks, leverage automation to pursue bigger and better goals.

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    Dave Spooner

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  • The Landlord’s Complete Guide to the Eviction Process | Entrepreneur

    The Landlord’s Complete Guide to the Eviction Process | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    If you’re like most landlords, evictions are a last resort. However, despite the cost and trouble, some evictions are inevitable.

    According to a recent White House Summit, the eviction rate in the U.S. was 14% in 2022. This means nearly three out of every 20 tenants were evicted in the past year. It’s safe to say that if you didn’t experience eviction this year, you will at some point in your landlord career.

    When you need to evict a tenant, it pays to be prepared. By understanding the eviction process and best practices, you can save yourself time, trouble and expense. Read on to learn everything you need about evictions, from the basics to a step-by-step guide and the cautions to heed during the process.

    Related: How to Manage Your Real Estate Business Like a Pro

    Eviction basics

    Eviction, or unlawful detainer, is the legal process of removing a tenant from a rental property. It involves not only physically expelling the tenant, but also the legal documentation, filing and court hearing for eviction.

    Evictions are both time-consuming and expensive. An average eviction costs around $3,500, but the entire process (including legal and court fees, lost rent, repairs and cleaning, tenant screening, etc.) can total up to $7,000. Evictions can also take around three weeks to a month or longer to complete.

    Due to their costs, you should avoid evictions when possible. Some strategies for preventing eviction include performing thorough tenant screening and automating rent collection.

    A caution: Even if it seems easier, never attempt a self-help eviction. You should never try to regain possession of your property without going through the proper legal steps. Instead, carefully educate yourself on the eviction process in your state. If it’s your first time evicting a tenant, or if the eviction gets complicated (e.g., your tenant filed for bankruptcy, hired a lawyer, etc.), it’s a good idea to have a lawyer walk you through the process.

    Reasons for eviction

    There are several reasons you might file for eviction. The most common is late rent. If a tenant does not pay on time, and you’ve waited for any grace periods required by law or included in your rental agreement, it’s time to initiate eviction.

    Here are the other acceptable reasons for eviction:

    • Lease violations — e.g., smoking, unapproved pets, subleasing, long-term guests, etc.

    • Property damage — e.g., graffitied walls, shattered windows, deliberately broken appliances, etc.

    • Illegal activity — e.g., manufacturing or selling drugs, theft, violence, etc.

    • Holding over — continuing to live in the unit after the lease has expired.

    Related: 4 Changes Every Landlord Should Consider

    Step 1: The eviction notice

    If you’ve decided an eviction is warranted, the next step is to deliver the eviction notice.

    There are three main types of eviction notices:

    1. Pay-or-quit notices are for when the tenant has not paid the rent. In general, these notices require you to give the tenant between three and seven days to pay rent before eviction proceedings officially begin. This notice may also be called a rent demand notice or notice for nonpayment.

    2. Cure-or-quit notices are for violations of the lease agreement. The tenant generally gets a certain number of days to correct or “cure” the violation before eviction proceedings begin. This notice may also be called a notice for lease violation.

    3. Unconditional quit notices are for severe breaches of the lease or the law (e.g., selling illegal drugs). The tenant does not get any opportunity to correct their violation and must quit the unit immediately or within a few days.

    The exact length of each notice varies by state, as does the terminology for eviction notices. In general, a plain “quit” notice does not allow the tenant to correct the violation, while a “pay-or-quit” or “cure-or-quit” notice requires you to wait the number of designated days before filing for eviction.

    Remember that quit notices differ from grace periods, which are mandatory in some states. For example, landlords in Tennessee must wait a 5-day grace period before applying late fees and an additional 14-day pay-or-quit period before they can file for eviction.

    Lastly, send the eviction notice by certified mail and also post it on your tenant’s front door. This way, you can request a receipt and get confirmation that they received it.

    Step 2: Filing for eviction

    In many cases, the threat of eviction is enough to resolve the issue. The tenant will often cure their breach or move out without going past the notice stage.

    However, if you’ve delivered the appropriate eviction notice, and your tenant still hasn’t cured their breach within the notice period, it’s time to officially file for forcible detainer.

    After you file a complaint at your local court, an eviction case will be created. The court will set a date for the hearing and send a summons to your tenant, informing them of the eviction case and their hearing date.

    Step 3: The hearing and judgment

    The next step is the hearing itself. Prepare for the hearing by gathering the necessary documentation:

    • The rental agreement

    • Proof of the lease violation or nonpayment, such as payment records, bounced checks, photographs or tenant communications

    • Copies of the eviction notice and USPS receipt

    In essence, bring any documentation that will help prove the tenant’s noncompliance and support your case for eviction.

    At the hearing, a judge will review the case, look over the materials you provide and issue a judgment for repossession of the property, assuming the court rules in your favor.

    Related: 5 Real Estate Mistakes That Could Make You Lose Money

    Step 4: Evicting the tenant and regaining possession

    After the hearing, a local sheriff will give your tenant notice to quit within a set number of days (typically several weeks). If the tenant does not move, the sheriff may physically remove them from the property.

    Only after the tenant has permanently left the premises can you remove the tenant’s belongings, change the locks and re-list the property.

    If the evicted tenant still has unpaid bills, you do have options for getting your past-due rent. Your landlord insurance may cover unpaid rent, or you can file a claim in small claims court to retrieve your funds. It’s also possible to take the judgment to your tenant’s employer to garnish their wages or use a private debt collector.

    Eviction mistakes

    Despite the carefully designed procedures for eviction, landlords can occasionally get ahead of themselves.

    Here are some things you should NEVER do during an eviction:

    • Attempt a self-help eviction: If you forgo the formal eviction process, you may be required to pay damages or return the entire security deposit.

    • Accept partial payments: This may delay the eviction process. Once you begin, do not accept any payments from the tenant.

    • Neglect proper notice: Always wait the appropriate number of days.

    • Remove tenant belongings before the judgment: Landlords may not infringe on tenant privacy or touch their belongings before the tenant is removed.

    • Shut off utilities or change locks: Do not turn off utilities or change the locks before the tenant has been removed. These constitute a self-help eviction and are illegal.

    • Harass the tenant: This is also illegal.

    Evictions can be difficult, especially if you know your tenants well. However, you must remember that evictions are not personal, but rather part of running a rental business. Following the steps outlined above will help make evictions as smooth and painless as possible.

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    Dave Spooner

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  • Entrepreneur | 10 Steps to Leasing a Commercial Space

    Entrepreneur | 10 Steps to Leasing a Commercial Space

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    Opinions expressed by Entrepreneur contributors are their own.

    If you are new to commercial leasing and will be leasing a commercial space for the first time, here’s an overview of the commercial leasing process.

    1. Find a location

    Determine the demographic you want to reach and find an area that caters to that demographic. You will then want to research the market by considering the competition in the area and how your business will differentiate itself.

    In analyzing your potential locations, you need to look at costs: I recommend creating a spreadsheet where you put all your costs associated with each place you are considering. You can now make a side-by-side comparison of different sites with a cost spreadsheet.

    Related: How Your Business Can Be Its Own Landlord

    2. Tour with your general commercial contractor

    Once you have visited all locations and analyzed the costs, you will tour the locations with your general commercial contractor. You will want your general contractor to assess the condition of the walls, floors, roof and foundation to ensure they are in good shape. In addition, check the availability and condition of electrical, plumbing and HVAC systems to ensure they are adequate for the intended use. Finally, if you need gas, you will want to ensure that gas is currently at the premises.

    Make sure you have your general contractor evaluate the accessibility of the space. Ask your general contractor whether the property meets American With Disabilities (ADA) requirements.

    After you tour with your general contractor, if you want to submit an offer, ask your general contractor to provide you with a quote. This quote will allow you to evaluate the cost of any necessary repairs or renovations.

    Related: How to Start an Airbnb Business Without Owning Property

    3. Draft and submit a lease offer

    If you are working with a real estate broker, they will be able to assist you in drafting your lease offer. You will want to ask your real estate broker for comps before you let them know the lease rate you want to offer. Remember, when reviewing comps, you need to know the big picture. Landlords often give tenants a cash allowance and free rent to get a higher rent.

    After reviewing comps, determine your budget. Decide how much you will pay for rent, security deposit and other fees. Also, decide on the length of the lease you are comfortable with. At this time, you or your real estate broker are in a better position to prepare a letter of intent, often referred to as a LOI. Your LOI should outline your proposed terms, including the length of the lease, rent amount, security deposit and other relevant details.

    4. Wait for a response

    This part is the hardest for many of my clients since once the ball is out of our court, it can be challenging to know when it will come back in. If you seem too anxious, it will affect your ability to negotiate.

    5. Review and negotiate

    Once you receive the response from the landlord, you will either continue your negotiations or move on to another property. Please note that it is scarce for a landlord to accept an original offer from a tenant. Therefore, if you continue the negotiation process, you will engage in further negotiations until you reach a mutually acceptable agreement. This process can be as quick as a few weeks, but complex deals can last over a year.

    Related: Cultivate Your Negotiation Skills For Entrepreneurial Success

    6. Lease draft

    If you agree with the landlord on the LOI, you will wait for the lease draft to review. I recommend you interview and decide on a commercial real estate attorney skilled in lease review and tenant representation during this time.

    7. Attorney lease review

    Once you receive the lease draft, send the lease along with the agreed-upon LOI for your attorney to review. Additionally, it is essential that you carefully read the lease agreement to ensure you understand the terms and conditions. You, along with your attorney, will want to verify the terms. Make sure that the lease agreement accurately reflects the terms that were negotiated.

    Related: 8 Essential Real Estate Questions To Ask Potential Franchisors

    8. Final inspection

    Before you sign the lease, I recommend you do a final inspection. Typically the general contractor will do an initial review at no cost before this point. To get an in-depth inspection, they will require a fee. Considering the financial costs involved in the lease, it is a good business practice to pay for this final inspection.

    9. Execute the lease

    After you are comfortable with the lease and the final inspection, you will then be executing the lease. It is important to note that typically your time will start ticking when the lease is mutually executed. This time is most importantly specific to the free rent period.

    Related: Why Real Estate Agents Should Take Advantage of BPOs Right Now

    10. Hire an architect, if applicable

    You may need to hire an architect to draw plans if you make significant modifications. If the landlord has existing plans, it will save you money and time. I recommend you ask for these plans during your LOI negotiations.

    If you need to have plans drawn, your architect will submit them to the city once they are complete. Each municipality has different speeds at they operate. You need to understand that you can only start your build-out once the plans are approved.

    The process of leasing commercial real estate can be complicated and time-consuming. Therefore, I recommend you work with a commercial real estate broker, a general commercial contractor and a commercial real estate attorney to assist you in your journey.

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    Roxanne Klein

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  • 6 Effective Real Estate Investment Strategies

    6 Effective Real Estate Investment Strategies

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    Opinions expressed by Entrepreneur contributors are their own.

    As a real estate investor, you might encounter varying advice about investing on the internet, social media and from other investors. Some of these sources may claim they know best, but there are many effective strategies for investing in real estate. There isn’t a single strategy that is the best approach for every landlord. In fact, your real estate investing strategy should reflect your personal long-term goals, available resources and current circumstances.

    Plus, your investing strategy can — and should — change as your needs change. The success of your rentals isn’t tied to one investing strategy, but rather the skills you’ve built, the tactics you’ve learned and your ability to shift between different strategies when needed.

    Below are six great real estate investing strategies you may use at various points in your investing career:

    Related: Master These 6 Skills to Succeed as a Real Estate Investor

    1. House hacking

    House hacking is a popular investing strategy wherein you buy a property, live in half and rent the other half out. The rental income you receive helps reduce your monthly mortgage payments on the property.

    This strategy works well with duplexes and other multiplexes because you can maintain a clear division between your and your tenant’s spaces. However, some investors also rent out a basement or bedroom from their single-family home (SFH).

    House hacking is a trendy and widely used investing strategy for several reasons. For one, it’s an excellent way to transition to real estate investing for new landlords. This is especially true if you learn to manage your rented unit or bedroom with property management software. Software helps you carefully track your income and expenses while you establish your business. Another benefit of house hacking is that it allows you to get a residential mortgage because you’ll be living on the property as well.

    In the long run, this strategy’s aim is to make it possible for you to move out and transition the property into a full-blown rental.

    2. BRRRR deal

    BRRRR investing is another effective strategy made popular by Brandon Turner on Bigger Pockets. BRRRR stands for buy, rehab, rent, refinance and repeat:

    • Buy: Buy a property at below-market value.

    • Rehab: Renovate and improve the property by adding value.

    • Rent: Rent out the property to cover the mortgage.

    • Refinance: Get the property reappraised, then use cash-out refinancing to secure an advantageous mortgage.

    • Repeat: Use the capital you recovered from the deal to invest in more properties.

    With BRRRR, the idea is to capitalize on a property others may have overlooked due to its low face value or apparent lack of potential.

    To use the BRRRR strategy, target properties that are sound investments despite needing some work. Focus on improvements that increase value: installing hardwood flooring, adding extra bedrooms or remodeling kitchens and bathrooms. The value added from these improvements will improve your property appraisal and help you secure more funds to invest elsewhere.

    Related: 5 Tips for New Investors Who Want to Make Money With Real Estate

    3. Wholesaling/driving for dollars

    Wholesaling is a strategy many investors use to capitalize on great deals. In this strategy, you find a property that will make a good deal, facilitate a sale between a buyer and seller, and then collect the difference between the seller’s price and the amount the buyer pays.

    To succeed with this strategy, you need to be informed about which properties are currently on the market. You can use popular listing sites, the Multiple Listing Service (MLS) or a strategy known as “driving for dollars.” This involves manually searching neighborhoods for properties that look promising.

    One downside of wholesaling is that you need strong marketing and sales skills. If you don’t have this skill set and don’t want to work to acquire it, wholesaling might not be for you.

    4. Flipping properties

    Flipping properties is like BRRRR in that you buy, renovate and improve a property. However, with house flipping, the end goal is to sell the property, not rent it out.

    House flipping works best when you renovate and flip as quickly as possible. The longer you wait to sell, the more mortgage payments you must make. Like BRRRR, house flipping works best with properties listed at below-market value or those that are easy to improve at low costs. This way, improvements can significantly increase the property’s value and lead to quick turnovers.

    One downside to this strategy is that you’ll have higher capital gains taxes because you sold the property so quickly. You’ll also need help to successfully pull off house flipping — specifically, you’ll need a team of builders and renovators and access to high-quality materials at a relatively low cost.

    5. Syndications

    Syndication is often considered a more passive real estate investing strategy. However, with careful decision-making and an active eye on the process, syndication can lead to great gains. The main idea with the syndication strategy is to pool your funds with other accredited investors to buy real estate.

    Here’s how it works: You pay syndicators to locate and manage most deals, then benefit from the profit. Syndication can be public or private. Public syndication is usually operationalized through a syndication marketplace, while private syndication is managed manually by investors.

    Crowdfunding is a specific type of syndication investing that involves accredited and non-accredited investors alike who contribute and profit from deals. If you choose the crowdfunding path, you’ll work with a broader range of investors. You also won’t be expected to contribute as much entry capital as you would with traditional syndication (typically only around $50-$1,000 is required).

    If you choose the syndication route, be picky about who you work with. You want to ensure your investments are in good hands, even if you didn’t contribute as much initially.

    Related: 7 Common Mistakes Made By New Real Estate Investors

    6. Live-in-then-rent

    The live-in-then-rent strategy is a modified house-flipping scenario. Essentially, your property is a SFH (usually) that you live in initially and then turn into a rental after you move out. The main difference between live-in-then-rent and house hacking is that you don’t live in the property and rent it at the same time. Instead, these are two separate phases.

    Live-in-then-rent is a great strategy for people who don’t want to live closely with their renters but still want to participate in real estate investing on their budget.

    With so many ways to invest in real estate, it may seem challenging to devise a strategy that meets all your needs. However, by catering your investing strategy to your particular goals, you can successfully cultivate your real estate business.

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    Dave Spooner

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  • Meet the teacher and real estate investor who has a net worth of more than $500,000

    Meet the teacher and real estate investor who has a net worth of more than $500,000

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    The Internet is flooded with stories of people using some type of so-called “passive income” scheme to get rich quick, whether they’re cashing in on easy YouTube ad dollars or investing in the latest meme stock. It’s hard not to get suckered into the promise of earning the big bucks without working a traditional day job.

    Many times, these strategies focus on real estate. But most real estate investors will tell you that you can’t make money just putting in minimal effort as the Internet would have you believe. Just ask Tiffanie Vendryes. 

    Courtesy of Tiffanie Vendryes

    Lured by the idea that she could generate income from buying up rental properties, in 2015, Vendryes, now 37, bought three units in Florida that housed up to seven tenants. 

    But Vendryes quickly learned the hard way that passive income isn’t all it’s cracked up to be sometimes. “I was blinded by how much income [I could earn], and I didn’t realize all of that would go into maintaining the property,” she says candidly. 

    Vendryes says she chose properties that were older, needed work, and were in low-income areas. Instead of sitting back and raking in the profits, she was overwhelmed dealing with late rent payments, evictions, and expensive repairs, including a leaky roof and replacing the hot water heater and air conditioning units. “I failed, and I lost money,” she admits. 

    But Vendryes says the experience, while harrowing, taught her important lessons that helped her build up her current net worth of approximately $565,000. Here’s how she bounced back. 

    Playing the real estate game in Florida

    After graduating from Stevens Institute of Technology in 2006, Vendryes had about $25,000 in student loan debt, largely thanks to grants and scholarships. She landed a high-paying job in tech sales—earning between $70,000 and $130,000 over three years—and lived frugally, at times having up to three roommates. Slowly Vendryes was able to start building her wealth, and by the time she turned 25, she says she saved up about $100,000.

    But then the 2008 financial crisis hit, and Vendryes was laid off, prompting her to move south and shake up her career. “I moved to Florida and got into education,” she says, adding the shift from tech sales to teaching meant taking a major pay cut from $100,000 to about $40,000. 

    Yet with her savings, Vendryes was able to buy a house in 2010 in Palm Beach county. Five years later, the value increased by more than 60%—jumping from $118,000 when Vendryes bought it to $190,000 when she sold it. 

    With part of the proceeds from her home sale, Vendryes got into the real estate game in a big way, buying three investment properties over the course of 2015 and into early 2016. But the luck didn’t hold. 

    The fixer-uppers were within her budget, but they came with a host of maintenance issues and quickly became money pits. Not to mention the people problems: Vendryes says she had tenants fighting with each other, calling the cops on each other, and calling her about their quarrels—and being a landlord became a massive time suck and an emotional drain. 

    “I decided that this probably wasn’t the best investment strategy for me,” Vendryes says. Within six months, she unloaded the properties, selling at least one at a loss.

    Creating diverse income streams 

    Although Vendryes struggled to get it right in rental real estate, she never quit her day job in teaching. And having a full-time job helped her stay afloat when this other income stream wasn’t functioning.

    That’s one of the biggest takeaways she says: have multiple gigs. Vendryes, now the mother of a two-year-old, got back into the rental property game in 2019, and she opened up her own real estate brokerage. But she also keeps her teaching job.

    It turns out that buying the rental properties sparked Vendryes’ interest in being more than an owner. “When I was buying those three properties, I would sometimes feel bad asking my realtor too much or going to see too many things,” Vendryes says, adding she got her own license in 2016. That way, she could go look at all the properties she wanted to before making an offer—guilt free. Not only that, it had the added benefit of saving her money as both a buyer and a seller. 

    After taking some time to regroup, Vendryes bought a 2-bedroom condo in 2018 situated in a nicer neighborhood with the idea that she’d eventually rent it out. A year later, it started generating income. This time, with stable tenants and minimal drama, she earns about $6,000 in annual rental income. Plus, Vendryes doesn’t touch the majority of the income. Instead, it goes into an account so if there’s some maintenance problem with the condo, the cost isn’t coming out of her everyday budget. She currently has one rental property and a townhouse that she owns and lives in. 

    Last year, Vendryes also opened her own real estate brokerage, Grace Realty Group. She has one agent working for her. So far this year, they’ve sold $2 million in real estate, which Vendryes says translates into roughly $38,000 in commissions for her. 

    And thanks to tenure and picking up extra responsibilities, Vendryes has boosted her teaching salary to approximately $79,000 a year as she works as an interim assistant principal and remote high school math teacher.

    The early setbacks aside, Vendryes says she really likes real estate and enjoys looking at homes and showing properties. “It’s important to do something that you like so that it doesn’t feel like you’re doing a lot of work,” she says, adding that while her teaching job is flexible, she still relies on her mom for babysitting in order to juggle the real estate business, her teaching, and the responsibilities of a landlord. 

    All said, Vendryes calculates she’s on track to make about $123,000 this year. With her current home value (she bought a townhouse in 2021 that’s valued at over $400,000), retirement savings, and investments, she’s looking at a net worth north of $500,000. And she doesn’t have any outstanding debt.

    But she’s the first to admit it’s been a lot of hard work. “My story has not been one of easy success. I got laid off from my first job. I went into education at less than 50% of what I was making before. I made poor choices in real estate,” she says, noting that through it all, she’s been able to accumulate wealth. “It’s through discipline and it’s hard work and it’s through learning from my mistakes.” 

    Perhaps the biggest lesson? It takes hustle. “It’s not really passive—everything takes work,” Vendryes says.

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    Megan Leonhardt

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  • Why Insurance Policies Are Critical to Your Rental Business

    Why Insurance Policies Are Critical to Your Rental Business

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    Opinions expressed by Entrepreneur contributors are their own.

    As an investor, taking calculated risks is part of your job. Not every investment is profitable, and you can’t always know the risks you’re taking when buying a property. Problems could arise many years down the line. For example, an apparently sound building could develop infrastructure problems after several years of ownership. Or an unpredictable squabble between tenants could turn into a liability issue you couldn’t have foreseen.

    For this reason, it’s essential to protect yourself from risk by purchasing insurance. Both you and your tenants should have coverage to protect you should something unpredictable occur. But how much will your coverage cost? Why do your renters need insurance, too?

    Let’s explore these questions and discover why insurance policies are critical to your rental business.

    Related: The Beginner’s Guide to Investing in Rental Properties

    Landlord insurance

    Like any insurance coverage, landlord insurance protects you and your rental business against potential losses and liabilities.

    Here’s how it works: When you buy a property, you work with an insurance provider to decide which dwelling policy (DP) you want. Dwelling policies are insurance plans for property owners with varying levels of coverage.

    For instance, the cheapest dwelling policy might only provide basic coverage for fires or storms. More substantial dwelling policies may add other types of natural damages, lost rent if those disasters make your units uninhabitable or liabilities.

    What does landlord insurance cover?

    A typical landlord insurance plan covers three types of losses:

    1. Property damage to your building or equipment, including that caused by natural disasters, fires, wind, lightning or criminal break-ins

    2. Lost rent from months wherein your properties are uninhabitable due to any of the above damages

    3. Liabilities, or legal claims (including medical bills, legal fees or court costs) made against you, usually resulting from an injury on the property.

    These three types of coverage are standard across many insurance plans. However, you also have the option to purchase additional coverage. These add-on policies may cover vandalism, construction damage, or upgrading to fulfill building or health code policy changes.

    Another thing to note is that flood and eviction insurance are not included in a typical landlord dwelling policy. Coverage for these losses must be purchased separately.

    When deciding on your coverage, think about where your properties are located. Is the geographical area vulnerable to flooding, wildfires or earthquakes? Is the crime rate in the neighborhood high? If so, you might consider purchasing more comprehensive insurance coverage.

    How much does landlord insurance cost?

    The average cost of landlord insurance is around $1,200-$1,300 a year, paid in monthly installments. This is approximately 25% more than a typical homeowners insurance policy with the same coverage — because renters tend to introduce more risk.

    However, the cost ultimately depends on several factors, including the building’s age, the materials used to construct it, the presence or absence of pets, the dwelling policy you choose and the location of your property.

    In general, dwelling policies that use replacement cost value (RCV) are valued higher than those that use actual cash value (ACV). RCV represents the cost of rebuilding your property at today’s construction rates, while ACV represents the current, actual value of your property. Coverage based on RCV will lead to higher premiums.

    Why buy landlord insurance?

    If you take care of your properties, do you really need to be insured? Landlord insurance is highly valuable and usually worth the monthly fee. Here are some of the top reasons to purchase landlord insurance:

    • Protect your investment: You can’t predict what might happen to your properties or your tenants. It’s best to be prepared.

    • Achieve better interest rates on your mortgage: Some lenders require landlord insurance.

    • Take advantage of tax deductions: Landlord insurance premiums are usually fully deductible as operating expenses that you can subtract from your taxable income.

    Related: Getting Your Feet Wet in the Rental Property Business

    Renters insurance

    If landlord insurance protects your properties, what does renters insurance cover? Your landlord coverage won’t cover every loss related to your rental properties. Your renters need insurance coverage for their losses as well.

    What does renters insurance cover?

    Like landlord insurance, renters insurance typically covers three types of losses:

    1. Personal property and tenant belongings, such as clothes, electronics or valuables

    2. Liabilities due to a tenant’s responsibility for an injury or property damage

    3. Living expenses in the case that a tenant’s unit becomes uninhabitable and they must find other accommodations until repairs are made

    You may decide to offer a standard renters insurance package to your tenants, but they might also wish to purchase their own coverage. For instance, if a tenant keeps particularly valuable items in their unit, they may wish to add on scheduled personal property or valuables coverage.

    Tenants may also purchase theft extension coverage to cover their cars, boats or trailers; credit card coverage for unauthorized transactions; or other add-on policies.

    How much does renters insurance cost?

    Renters insurance is relatively inexpensive for tenants. The average cost is around $15 per month. However, this cost varies depending on the coverage level.

    Ultimately, the benefits offered by renters insurance are well worth the monthly premium. Your tenants may not appreciate the extra fee up front, but they’ll be thankful they have coverage should something happen.

    Why require renters insurance?

    Many landlords make renters insurance a requirement to rent their units. This is generally a smart move, and here are our top reasons why:

    • Prevent resentment for damages: Your tenants are less likely to sue you or pursue litigation if their insurance policy covers the loss.

    • Be transparent: In the event of a natural disaster, for instance, your tenants may expect that your landlord insurance will cover their belongings. They’ll be surprised to learn that it doesn’t. It’s better to inform your tenants upfront.

    • Avoid unnecessary complications with your insurance: If an accident occurs on your properties, it’s likely that your tenants’ renters insurance will kick in first. This saves you the trouble of interacting with your insurance company until necessary.

    Related: 5 Real Estate Mistakes That Could Make You Lose Money

    Insurance tips and tricks

    If you’re ready to get started with landlord and renters insurance, here are a few tips and tricks:

    • If your property management software offers renters insurance as a secondary feature, use it: This saves your tenants the trouble of finding a policy themselves and allows you to determine which type of coverage you think your tenants need.

    • Track renters insurance policies: Remind tenants to renew their policies before their coverage expires.

    • Avoid making claims for minor damage: Conserve your coverage for more severe losses and prevent your rate from increasing.

    • Ask for a discount if you own multiple buildings: You never know which deals are available until you ask.

    Disasters and accidents can be entirely beyond your control. However, by preparing for them ahead of time, you’ll know you’re protected in case of a major loss or casualty in your rental business. Both you and your tenants will appreciate the peace of mind and protection offered by insurance.

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    Dave Spooner

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