Categories
Flipping

How an S Corp Election Can Help Flippers

While house-flipping is potentially very profitable, there’s an expensive catch.

You might have to pay a self-employment tax, which is a whopping 15.3% of your profit. That’s a significant amount of money that can go to your next vacation or property you want to flip!

Nevertheless, there is a way to set up your business in such a way that you’re not required to pay the tax. Let’s take a look at how an S Corp election can help you pocket more of your flipping profits.

Why House Flipping is Subject to Self-Employment Tax

While the usual real estate investments such as buy-and-hold are considered a passive activity, flipping homes conducted in a limited liability company (LLC) are active transactions—required to pay self-employment tax on top of the income tax.

Let’s define these two things that come with flip-and-fix projects.

Active Income. Active income applies to anybody who runs a business where one earns ordinary income from performing a service or selling a product. Business owners must pay the 15.3% self-employment tax up to a net profit of $128,400. (Beyond this threshold, you’ll only pay 2.9% as the Social Security portion of the self-employment tax is removed.)

Self-employment Tax. In essence, self-employment tax is similar to payroll taxes withheld from an employee’s wages. For self-employed individuals like house flippers, however, they must cover both the employer and employee portion of the tax. In addition, members of an LLC taxed as a partnership are considered self-employed individuals—which means their earnings will be subject to self-employment tax if they participate in the partnership’s trade.

The 15.3% self-employment tax of your gross salary does chip away at every dollar you earn. Moreover, 15.3% comes in before including the marginal tax rate from the federal and state perspectives. For example:

So, naturally, we want to find a way to save on taxes. One way is to run your flip-and-fix business out of an S Corp instead of an LLC or C Corp. Let’s talk about how you can do this.

How an S Corp Election Can Save on Taxes

First, set up an LLC or C Corp, then elect to have it taxed as an S Corp. Said structure is a tax entity or federal tax election—not a legal one. It’s not for asset protection but for reducing your exposure to tax.

By conducting your business this way, self-employment taxes only apply to a “reasonable salary,” and you’ll pay the remainder of your income as a dividend—not subjected to self-employment taxes. 

Here’s how it’ll go: Set up the S Corp, set up payroll, and begin paying yourself a W2 wage. The self-employment tax will only apply to the W2 wage, and the rest of the income will be considered a cash distribution or cash dividend. Of course, you can only do this with an S Corp route.

Take a look at how the situation now changes and how much you can save:

If you earn $100k with no S Corp (either as a Sole Proprietorship or an LLC), you’ll report your income as Schedule C. You’re going to pay $15,300 on self-employment taxes even before the marginal tax rate or state taxes come into play.

However, if you’re taxed as an S Corp, you can pay $50k to yourself as a W2 wage and have the other half as a cash dividend. With the $100k split up, half of it won’t be subject to the 15.3% tax—and you can pocket $7,650 just like that.

Just remember to never pay yourself the entire profit in W2 Wages. The whole point of setting up an S Corp is to help you reduce taxable income!

Conclusion

There are so many other factors that will come into play, so make sure that you talk to your accountant before considering this tax election for your flipping business. You may be able to amend your LLC to take advantage of this technique or establish a new LLC to start conducting your business as S Corp from the get-go.

Either way, it’s a good strategy to save on taxes legally!

Image courtesy of Jopwell

What do you think of this technique? Any additional tips on how to save on taxes?

Categories
Flipping

How to Find the Ideal General Contractor to Flip Houses

Finding a general contractor (GC) for your house flip can be challenging.

You want someone who knows what they’re doing, is trustworthy, has affordable prices, and has good reviews. This means you need to do proper research before hiring a general contractor—don’t hire the first one you find!

As a flipper, your main goal is to earn a high flipping profit in return for your investment. To do that, you need to renovate the house within a specific budget and timeframe, which means using contractors who stick to deadlines and understand the importance of flippers’ margins.

While simple repairs are easy to budget for and can be done within a month, more complex renovations can easily incur budget overruns and take more than a couple of months to complete. In these cases, it’s best that you hire a general contractor to handle the project for you, or assemble a team of go-to contractors that you work with regularly on your flipping projects. Which you go for will depend on your needs, but this article focuses only on general contractors.

Let’s go through some best practices for finding the ideal general contractor for your flip projects.

Independent Contractor vs. General Contractor

Before we go any further, it’s important to make a distinction between independent and general contractors:

  • Independent Contractors: These are contractors that you directly contract to perform tasks on a contractual basis. They complete the project themselves, without the help of subcontractors.
  • General Contractors: These are also directly contracted; however, tasks are subsequently contracted to subcontractors to complete. They complete the project along with their subcontractors instead of completing the project by themselves. They also handle all the administrative tasks needed (e.g., paying subcontractors, securing building permits, getting insurance for all workers, etc.).

General contractors will coordinate with necessary subcontractors on your behalf and oversee the project for timely and on-budget completion. They are ideal for major renovations and flips, because you can get all aspects of the renovation handled by a single entity.

What to Look for in a General Contractor

Here are the key things to look for in a general contractor:

  • A Good Reputation: The best way to find a general contractor is by asking for recommendations. Contractors work largely based on referrals. Ask your friends and the real estate community if they can vouch for somebody reliable, communicative, and punctual.

Once you have a list of options, go the extra mile to read online review websites and visit the Better Business Bureau to check their reputation and ask about the projects they’ve worked on before. 

  • A Good Contract: Hiring a GC on a handshake is not a good idea. You’ll want a contract that spells out what they will do and what you will do, with deadlines. The more thorough the better! Otherwise, there’ll be no accountability and your project can go sideways quickly.
  • Appropriate Payment Practices: A good general contractor will accept payments in the form of checks and wire transfers. They would also agree to sign a lien release before payment and negotiate with you on the payment schedule.

Stay away from contractors who want you to pay in cash or a lot upfront. Cash payments are not illegal; however, contractors who ask for them might be avoiding paying income taxes. This is a practice done by less-than-reputable contractors. Moreover, a down payment of 30% of estimated costs is typical to cover an initial retainer and materials, but an established contractor won’t need your full payment to start the job.

  • Local Coverage: Hiring a general contractor who lives and operates within the area of your flip is your best option. They will know the local building codes, city inspectors, have a network of subcontractors ready to help them, and you can easily contact them in the event of an emergency.
  • Proper Licensing: General contractors need to be licensed to pull the necessary permits for your property. Without these, your property won’t abide by the local building codes or pass inspection. You’ll end up financially responsible for bringing up the property to the required standards.

Instead, verify their license by asking for the license number. Check it with your state’s licensing board. For licensure information in Michigan, visit the state’s Department of Licensing and Regulatory Affairs website for details on the Bureau of Professional Licensing’s requirements.

  • Proper Insurance: General contractors should be insured for General Liability Insurance and Workers’ Compensation. You can ask to see a copy of their policy and call up the insurance company to verify the information. The insurance should be current and have clear policy limits for you to check. You should also be added as an “additionally insured” on their policy, until your project is complete.
  • Warranty in Writing: General contractors should provide warranties that cover the work they’ve done in your property. A warranty assures them that they won’t be coming back for multiple repairs over an extended period of time (warranties typically last one year only) while guaranteeing you a good renovation result.

This list isn’t exhaustive, but it’ll put you on the right track in finding your ideal general contractor.

Questions to Ask During the Interview

As part of the process, you should also have an interview with the general contractor. Here is a list of questions you can ask to help you identify those who’ll fit your criteria:

  • How many people work for you? How long has your crew been working together?

You want to work with an established company that has a large team of managers and assistants.

  • Where are you operating, and what is your service coverage?

You want to work with a local company that knows its way around renovations in the area.

  • What similar past projects have you completed?

You want to see their experience concerning the project you’re giving them. If they’ve never done what you need them to do, ask them how they will approach the project.

  • How do you communicate with your clients?

They should give you daily or weekly progress reports with photos and send itemized, detailed quotes and invoices.

  • For this project, will you be using subcontractors or just your own team?

If they are using subcontractors, make sure that all workers are trained, licensed (if applicable), and insured.

  • Are you licensed and insured?

Licenses should be updated and registered in the state where your property is situated. Insurance should include General Liability Insurance and Workers’ Compensation.

  • What would our contract look like?

Not all general contractors will have contracts. If they don’t, you can draft one up. Regardless, have your lawyer review it before everybody signs.

  • Will you provide warranties?

Make sure the warranty is written down and will conform to the requirements of the contract.

  • How will the payment schedule and plan work? Will you agree to sign lien releases?

Agree and sign the payment schedule before the job begins. They should agree to sign lien releases before payment.

  • Have you ever had to deal with lawsuits?

If they’ve been sued, ask what happened and how they handled it. If they’ve sued a client, ask for further information and check public records. If they’ve had serious accidents before, ask how they dealt with the situation and what they’ve improved to make sure it doesn’t happen again.

Conclusion

We hope this article is enlightening and helpful in your search for a general contractor. It might take a lot of effort, but having a reliable and skilled general contractor will protect your budget and timeline for a successful and profitable house flipping project.

The better your general contractor, the more houses you can flip fast, at the highest quality, and for the most competitive price.

Any additional tips for finding the ideal general contractor as a flipper?

Image courtesy of Andrea Piacquadio

Categories
Landlords

How Landlords can Easily Raise Rents

Many landlords dread raising rents on their tenants for fear of the tenants moving, or the landlord just finds the whole process unpleasant. So, it’s not uncommon to find landlords that haven’t raised rents in 2, 3, or more years. 

Raising rent is actually a regular (albeit not the most fun) part of being a landlord. A landlord should raise rents as the market dictates, because: 

  • Keep up with inflation
  • Be able to afford rising maintenance costs
  • Accommodate property tax & insurance increases
  • When you’ve renovated a property to a higher standard

When that time inevitably comes, you need to know the right way of increasing your rent. Doing it the wrong way might cost you, tenants, leading to longer vacancy periods and costlier turnovers. Plus, no landlord wants to feel like the bad guy, so it’s important to show you’re being fair by handling rent increases diplomatically.

This article will teach how you can raise rent amounts and generate more income while communicating the situation professionally to your tenants. We’ve even included a sample rent increase notice that you can use for informing your tenants as amicably as possible. 

How should you approach a rent increase?

Depending on local and state laws, the required notice period for rent increases can range from 30 to 120 days. In Michigan, you have to give 30 days’ notice, but if you’re raising rent by 10% or more, you have to inform the tenant 60 days ahead of time.

Most people draft a letter informing tenants of the increase (like the one we’ve included below) and send it out to them, but there’s another way to approach this: 

  1. Go on Zillow, the MLS, or Rent-o-Meter to find what the market rent for this property is.
  2. Compare that to what the tenant is paying.
  3. Submit that information to the tenant and ask them what seems fair in terms of an increase

Note: At this point, you haven’t told them the rent was going up, but you’ve implied it. You’ve also involved them in the decision, so they’re more willing to accept it, making this a more subtle, non-aggressive approach to raising rent.

  1. The tenant’s response will typically be to offer 50% of the full increase, although some will say they don’t want to pay any increased rent at all. A good way to address either of these scenarios is to ask: “Why do you think that low of an amount is fair?” Make them defend it. 
  2. Then they’ll explain why they shouldn’t pay an increase (personal emergencies, poor maintenance on your part, etc.). Then you can ask: “Are you sure that’s your best offer?” 

The best part about this is that it lets you raise rents without TELLING the tenant there will be an increase, but rather including them in the process.

Tenants may even surprise you by offering more than what you expected! 

How much can you increase?

Ideally, you’ll want to keep the raise to less than 5% per year. Any higher, and your tenants will most likely move away—even if the rate is similar to your competitors in the market.

Why?

Think of the other rule of thumb that’s often used in screening tenants: rent amounts should only be a third of the tenant’s monthly income. This means most people can’t afford to spend an additional hundred dollars a month on rent payments – unless the tenant base in your area is on the up and up, like because of new employment opportunities or developments nearby.

Jacking up the amount too high without good reason will therefore jeopardize your rental income, as tenants will struggle to pay fully and on time. 

Plus, once a tenant has been there a while, they feel entitled to zero rent increases forever. If you raise it from $800 to $900 overnight, they’ll freak out. Even if the rent in the area is $1,100, they can’t afford it. So you’re better off with consistent smaller rent increases, like $25 a year, rather than waiting 3 years and increasing your rent all at once to reflect current market value.

On top of this, some cities have rent control laws in place. These maximum rent caps on what landlords can charge and are implemented by the government. Be aware of your local regulations before implementing any rent changes (just FYI, rent control isn’t allowed in the state of Michigan, but it is common in markets in New York and California).

Sample rent increase notice

When you’re ready to implement the raise, here’s a sample rent increase notice that Colleen F. shared in the BiggerPockets Forums. This letter is great because it helps tenants understand the landlord’s own financial obligations and view an increase in rent as a necessary business decision, rather than thinking you’re just being greedy.

Feel free to use it as a basis for crafting your own notice:

Dear John Tenant,

Thank you for being a tenant here at 123 Main St, Apt 1. Our goal is always to provide a nice place to live, at a fair price. Whenever the prospect of raising rent comes up at any property, we take a good hard look at it to make sure it’s necessary.

In that light, we have decided it is necessary to raise the monthly rent on your unit, effective September 1, 2020, to $1,050 from $1,000. This is partly to offset the increasing cost of property taxes, insurance, high heating expenses, maintenance costs, and upgrades since our purchase of the building in 2010.

Even after this increase, we believe we are still at or below the average market rent for a unit of this type. Rather than pay an increase, you may choose other housing. Should you intend to vacate at the termination of your lease, the original lease agreement states that you have to provide 30 days written notice of your intent to move. If you choose, signing this form checking off that you will not renew and returning the form to us 30 days in advance of your expected renewal will be considered your written notice.

Sincerely,

Management

Conclusion

There’s no guarantee that your tenants won’t complain about an increase in rent. However, if you increase your rent fairly and strategically, you can manage their expectations and prepare them ahead of time to budget appropriately. 

When they’re prepared and you communicate openly with them about the situation, your tenants won’t see you as the bad guy for increasing their rent. 

Any other concerns related to increasing rent amounts? Leave a comment below!

Categories
Wholesaling

5 Wholesaling Myths —Debunked!

Real estate wholesaling often gets a bad rap, but is it fair to call this an illegal or shady form of real estate investing? How did it get this reputation in the first place?

The problem is, wholesaling is usually chosen by first-time investors as a way of getting into the industry with little or no upfront capital required – which is great. But it also means that newbie investors get into this field and make a lot of mistakes, and that has led to some serious misconceptions about wholesaling over the years.

If you’re an investor who’s excited to get started as a wholesaler but is hesitant because of things you might have heard about it, this article will pull back the curtain on five of the most pervasive wholesaling myths. 

Wholesaling real estate is not outright illegal, but it’s governed by specific laws that require you to have certain contracts and documents before you can proceed. Wholesaling gets its bad rap largely due to the illegal practice of unlicensed brokering, which isn’t the same as wholesaling.

1. “It’s illegal to wholesale real estate.”

To ensure full compliance with local real estate law, here are some steps to take when wholesaling properties:

  • Have a bilateral contract with the seller that stipulates your acquisition of the equitable interest.
  • Have a proof of funds letter to prove your intent to purchase.
  • Wait until the house is under contract with the original seller before finding new buyers.

In the event of needing to defend your wholesaling activities in real estate commission hearings, having everything documented is essential for proving you’ve acted within the law.

2. “Wholesaling is only for beginner investors.”

Just because it takes minimal capital to get started with wholesaling, doesn’t mean it’s easy. For example, since you’re the middleman in deals, a buyer or seller can easily get rid of you to avoid paying an additional wholesaler’s fee—effectively taking you out of the equation altogether.

Secondly, while there is a low barrier to entry, wholesaling has a high barrier to sustainability. People tend to think that wholesaling fulfills a need in the market, where investors are looking for people to help them find their next deal. In reality, the investors themselves are already good at finding deals themselves. This makes finding good deals extremely hard. Plus, investors don’t want to subcontract finding deals to wholesalers, and those who do certainly don’t want to pay top dollar. 

Wholesaling can be a stepping stone for beginners to get into real estate investing, but that doesn’t discount the fact that it’s highly lucrative for experienced wholesalers. Mastering the skills and acquiring the connections for a steady flow of good deals enables you to earn as much as other investment strategies.

3. “Wholesaling is inferior to house flipping.”

Let’s put the two investment strategies side-by-side for an accurate comparison:

Depending on your reason and goals for investing in real estate, you might choose one over the other. Either way, based on these key differences, wholesaling isn’t inferior to house flipping at all, it’s just a very different approach with a lot less maintenance required.

4. “Focus on buyers who’ve already bought from you.”

Often called the “easy button buyer” mistake, this refers to the tendency for beginners to send future deals only to the buyers that were willing to close on earlier deals. This is a common myth that wholesalers believe to be effective, but in reality, limits your potential returns.

Think of it this way: businesses thrive on supply and demand. After closing a couple of deals, you now know the area, the numbers, and what features attract more particular buyers. In other words, you have the supply to meet the demand in more than a couple of markets.

Position yourself as an opportunity to as many potential buyers as possible, and you’ll ensure you have a scalable wholesaling business for years to come.

5. “A buyer’s list is necessary to be successful.”

Many investors will say that you need a buyer’s list to be successful in wholesaling, but this is not exactly true. 

The typical buyer’s lists are full of investors who do a lot of deals on a regular basis, meaning they’re serious buyers who can close with cash in 10 days. This is exactly what you want as a wholesaler, but you don’t need to have a buyer’s list to do this.

Instead, new wholesalers should focus on finding quality deals, rather than quality buyers. If you can find a great property, serious buyers will follow.

We’ve written elsewhere on how to find buyers for your wholesale deals, should you need further tips.

Conclusion

All these myths surrounding wholesaling real estate may give some the impression that this investment strategy is shady and unsustainable. However, with these common myths easily debunked, you can see there are actually many solid reasons that prove why wholesaling is an excellent way to invest in real estate. 

If you want to learn more about wholesaling in the current market, we’ve also written an article that explains the top five insights you need to successfully wholesale real estate after a year of COVID-19.

Image courtesy of Monstera

Categories
Landlords

How to Market your Rentals Online: Screen Appeal and Listing on Digital Platforms

From digital walk-throughs to Zoom tenant interviews, real estate marketing has officially transitioned to digital in light of the COVID-19 pandemic.

Virtual showing techniques aren’t new, but COVID-19 has certainly pushed the industry to adapt as a necessity. Landlords that didn’t have videos of their properties pre-COVID are now rushing to create virtual tours and trying virtual staging methods.

At this pace, digital marketing will fast become an integral and permanent part of real estate marketing before we realize it!

What does this mean for landlords? 

Prospective renters are now viewing and shortlisting properties from their screens, making “screen appeal” a crucial factor to promote your rental property. You want your offer to stand out where the prospective tenants are: online.

In this article, we’ll go through the ways to increase your property’s screen appeal, write an effective ad online, and list your properties where tenants are most likely to find them.

Increase screen appeal with noticeable features

First, you need to make your rental look impressive in photos. To do this, invest in features that will stand out in photos—even if the prospect browses on their tiny phone screens. 

These are the things that will make a huge difference in digital listings:

  1. Sparkling kitchens with shiny appliances, glossy countertops, and newly-painted walls and cupboards
  2. Spotless bathrooms with new showerheads, clean mirrors, and re-grouted tiles
  3. Fresh blinds and curtains without any mold or grime that are updated to fit the aesthetic of the property
  4. Blemish-free walls freshly painted with a color that makes the room look bigger, brighter, and homier
  5. Brand-new fixtures everywhere—from light switches to faucets to doorknobs and fly screens
  6. Clean carpets that even look like they smell great
  7. Bright lights in every room to make the rental property feel new, and more importantly, show that you’re confident enough to put everything in the spotlight

Make sure that you use a camera that does your rental justice! None of the spectacular features you updated and cleaned will be seen if you use the front camera of your beat-up phone. If you need to hire a photographer for decent equipment, it’s worth the one-time payment to get a lifetime of great photos for your listing. 

Write an effective ad that highlights relevant details

Once you’ve updated your rentals with photogenic features, you need to post them on digital platforms. But what do you say? How do you write an effective ad that attracts your tenant pool? 

Here are the important factors to focus on:

  1. Write a great headline. Rentalutions’ formula suggests including the key information tenants look for (e.g., number of rooms or location) plus one feature that makes your rental unique.
  2. Use professional word choices that add value to your listing, as long as they’re an accurate description of your property. You want to avoid generic words such as “great” and “nice”, instead, choose words like: upgraded, spacious, tasteful, landscaped, modern, luxurious, and charming.
  3. Add more information on the key features. Knowing what tenants want (as you should), make sure to highlight these features in your ad. Are you expecting to attract tenants who put importance on parking spaces, walkability, nearby supermarkets, or proximity to a great school? Your copy should indicate that.
  4. Add detailed property descriptions. Similarly, also indicate what the tenants will want from the property itself. How many rooms, floors, and bathrooms? Will they be attracted to a lush backyard or extra storage areas? Flesh out all of the important details to attract tenants.

Lastly, prove what you said with great photos! When you use great photos to compliment everything that you verbally promoted on your listing, your screen appeal will skyrocket. This is where the prospective tenants should go “Wow! They weren’t kidding!”

List your rental on industry-popular websites

Armed with your impressive photos and well-written ad content, it’s time to post your listing where it matters. Most people are baffled by how many options there are to list online, especially since there isn’t a one-stop-shop solution that posts to all the rental listing sites. 

Zillow—the favorite of most landlords—allows you to create detailed listings that they’ll syndicate out to 26 partner sites (including Trulia, Hotpads, and MSN Real Estate), but it still doesn’t cover all of the sites available.

To get started, check these sites that are known to be effective and user-friendly:

  1. Zillow
  2. Trulia
  3. Hotpads
  4. Craigslist
  5. Facebook

Apart from those, you can also consider these lesser-known platforms:

  1. Apartments.com
  2. Apartment Finder
  3. Apartment Guide
  4. Apartment Home Living
  5. Apartment List
  6. Backpage
  7. Byowner.com
  8. Cozy
  9. Doorsteps
  10. Move
  11. My New Place
  12. Nextdoor.com
  13. Oodle
  14. Realrentals.com
  15. Realtor.com
  16. Rent.com
  17. Rentals.com
  18. Rentdigs.com
  19. Rentlinx
  20. Saletraderent.com
  21. Sublet.com
  22. Walk Score
  23. Zumper

All of these websites allow you to post for free. You just need to do some research and decide which platform enables you to attract the tenants that you want. For more details on the sites we mentioned above, check Smart Move and Landlordology.

Conclusion

Technological development waits for no one. In order to keep up and remain competitive in the rental property business, it’s time to level up with online marketing!

The steps are easy enough—simply increase your property’s screen appeal, write an effective ad describing the best parts of your property, and list them on websites where tenants are likely to browse for new homes.

Any other tips on how to market rentals online? Where are your rentals listed so far?

Image courtesy of Joshua Miranda

Categories
Wholesaling

5 High-Volume Influential Real Estate Investors to Learn From

There is no better way to become a successful real estate investor than by learning from those who’ve already done it. One of the greatest investors in this world, Warren Buffett, gave the same piece of advice when he said, “In the business world, the rearview mirror is always clearer than the windshield!”

Luckily, many real estate investors are more than willing to share their rearview mirrors with you.

Here are five of the most influential, high-volume real estate investors in the industry today. These real estate icons generously share their thoughts and experiences on social media, making it easy for you to follow and learn from them on a daily basis.

Max Maxwell

At the ripe age of 21, Max acquired his real estate broker’s license and began selling properties. He experienced the 2008 bubble burst and continued on this journey through real estate wholesaling. Years later, Max set up his first real estate investment company, Cash Homes Triad. He set a personal goal to earn six figures—which he did by December of 2017. 

In two years, he generated over $2 million in wholesaling fees alone.

Today, Max Maxwell is known as one of the top real estate investors in the country. He hosts annual Wholesaling Elite Live events—where one of them garnered over 1,200 attendees—dubbed the biggest wholesaling event in history.

Quoting from his website, “It is my strong desire to help others achieve financial freedom. By using my social media presence and hosting meetups and events, I hope to directly impact the lives of millions. Remember, you’re only one deal away!”

Here are the links for you to follow Max Maxwell online:

Max Maxwell constantly posts entrepreneurial tips on his Instagram and in-depth real estate advice on his YouTube channel. 

Raul Bolufe

Raul Bolufe is a CEO, investor, and coach in the real estate community. By his 23rd birthday, he famously flipped a total value of $15 million and made $355k off the Multiple Listing Service (MLS). 

Today, he is the president of the growing company Capital Rise Investments LLC and has done over 200 wholesale deals since his first one in 2014. He is passionate about sharing entrepreneurial advice and wholesaling-specific tips for real estate beginners looking to scale their businesses.

Raul Bolufe hosts the Flipping Miami podcast, where he talks about the following topics:

  • His average and highest monthly profit
  • His experience with real estate investing
  • His unique technique that grew his business
  • His tips on Section 8 and why it matters in investing
  • His best tips on how to search and land the best deals on MLS

Here are some of his other profiles online that you can follow:

Raul Bolufe posts generic advice for all entrepreneurs on his Instagram account and shares real estate wholesaling how-to videos on YouTube.

Tom Cafarella

Tom Cafarella is a real estate investor and broker-owner. He is considered to be one of the most successful real estate investors in Boston, Massachusetts. He lives by the motto “If you’re not happy with the work that you do, you’re never going to be great at it” and encourages all aspiring real estate investors to chase their dreams—just like he did. 

Today, Tom Cafarella is an expert at building and scaling real estate businesses. He has acquired the company Ocean City Development LLC. In addition, he passionately teaches other people how to increase deals, scale their return on investment (ROI), and how to gear their mindset towards investment success.

Follow and learn from his story and company here:

Tom Cafarella regularly shares valuable and practical tips across multiple channels—YouTube, Facebook, Twitter, and his podcast “Massachusetts Real Estate Careers with Tom Cafarella.”

Joe McCall

Joe McCall is the host of Real Estate Investing Mastery Podcast (ranked 4.8 out of 5.0 by 559 reviews on Apple Podcasts), where he shares the secrets of wholesaling and lease options to earn full-income figures. He helps people “escape the 9-5” by holding valuable conversations with successful real estate investors, discovering new strategies to implement in your real estate investment and business.

He is also the author of four real estate investing books, including one about wholesaling lease options (a fast and easy way to make money from real estate) and another about how to make extra money flipping houses while on vacation.

Here are some of his social media profiles that you can visit and follow:

Joe McCall posts practical how-to content on both YouTube and Twitter.

Additionally, he also speaks at conferences and workshops nationwide. His talks give all investors the necessary information on marketing, automation, and delegation in the real estate industry. 

He’s the guy Raul Bolufe learned his business growth hacks from!

Graham Stephan

If you’ve been watching real estate videos on YouTube, you’ve come across Graham Stephan.

Graham Stephan is a real estate agent that has gained a significant following online due to his real estate accomplishments and valuable lessons for investors. His content centers around financial independence and the importance of investing correctly. 

Graham Stephan is his own testimony, as he famously skipped college to jump into the real estate scene immediately. He got his real estate license at the age of 18 and earned $500 on his first commission. By the time he was 27, he had sold a total of $120 million worth of real estate and has earned up to $1.6 million a year—being praised by Kevin O’Leary for his impressive accomplishment.

Now that he’s 30 years old, he has reached a staggering net worth of around $6.5 million. He has served celebrity clients such as Orlando Bloom, Chloe Grace Moretz, and Wale. In addition, he works as a realtor associate for the luxury property brokerage, The Oppenheim Group. 

Follow Graham Stephan via these links:

Since 2017, Graham Stephan has decided to pursue YouTube as a full-time job. All his videos are for teaching real estate investors just like him.

Conclusion: You Can Be Next

It’s never been easier to learn from other investors today. With the rise of the internet and the generosity of successful real estate investors, the world of information and inspiration is literally at our fingertips!

Follow Max Maxwell, Raul Bolufe, Tom Cafarella, Joe McCall, and Graham Stephan for daily lessons and tips on becoming successful in the real estate scene. Their experience defines our future success.

Who knows… You just might be featured in an article like these in the future!

There are way too many influential people in the real estate industry we can all learn from. Anybody else you’d like to add to our list?

Disclaimer: We are not endorsing any of these investors or their advice. Always exercise caution when taking investment advice from people on the internet! 

Image courtesy of Rodnae Production

Categories
Landlords

How to Find Good Contractors for Your Rental Property

There are many shady contractors out there! Finding a trustworthy contractor to work on your rental property can be tough. You want to make sure that you find one who will do good quality work, is licensed, and won’t rip you off.

To ensure you get the best contractor for the job, here are 5 steps you should follow.

1. Gather Your Options

There are several places you can go to look for contractors that can serve your area:

  • Ask for referrals: Ask your friends, family, and colleagues who have had the same kind of work done for any recommendations. Many contractors rely on word-of-mouth advertising to build their client base and reputation, which makes it easy for landlords to ask around.
  • Read neighborhood review websites: Popular sites like Nextdoor give you several leads, all with contact information and recommendations for your area. You can also check Angie’s List (now Angi) or Yelp for more client reviews.
  • Post on social media or advertising sites: Posting on your social media platform may get you connections and recommendations from people outside your circles.
  • Ask hardware and supply centers: Your local hardware store or building supply center will likely have a list of plumbers, carpenters, electricians, and more. You can ask the customer service representative for their details. 

Our pro tip? Seek out the hustlers. Visit Home Depot at 6 AM on Saturday to find hard-working contractors. 

While others are sleeping in on the weekend, these hustlers will be wide awake and ready to work. You want contractors like this, who work beyond the usual 9-5 on weekdays, as your tenants are usually available for repairs only when they’re not at work themselves. You don’t want to pay contractors “overtime pay” for coming in on weekends! A good contractor will be greedy—grabbing opportunities to work even on odd hours, and some of them won’t even charge more for doing it. 

2. Research Them Online

If you’ve done your research, you’ll likely end up with a long list of contractors. Shorten your list by doing an initial sweep online—conduct your own background research for any shady activity or active disputes by certain contractors. 

Pull up Google and type in their name, their company’s name, and your city. Add keywords such as “scam,” “complaints,” or “court” to reveal negative information against the contractor.

3. Initial Interview

After the initial screening, choose the ones you’re comfortable with and schedule an interview. You’d want to ask questions about their services, such as:

  • How long have you been a contractor?
  • How long has the company been in business?
  • Is the team familiar with this kind of work before? How often?
  • Does the team have references that I could see?

Narrow it down to a handful of contractors. The next step will determine who’ll make the cut.

4. Verify with References

By this point, you’ve talked to the contractors themselves. This is the time to talk to the client references to verify service quality and performance.

Call former clients and ask the following:

  • Was the work done in a complete and timely manner?
  • Was the work done according to the agreement?
  • Was the contractor well-organized and professional?
  • Did the contractor charge fairly? Were there additional costs?

After this, you should have a shortlist of contractors that you want to proceed with. 

5. Screen Them Thoroughly

Schedule a meeting with each contractor to discuss the work in more detail. See how they feel about the proposal, and get a sense of their work ethic as well.

It’s important that they are experienced, knowledgeable, and officially licensed to carry out the work. Clearly outline your expectations, as you’ll be relying on them for both basic and emergency property maintenance.

The key questions you need to ask are:

  • When are you available and what locations do you serve?
  • What type of work would you say your team is most capable and skilled at doing?
  • Can you walk us through a typical job and the communication you provide?
  • How often do you send pictures and videos of the work? Are they clear and detailed?
  • What are your licenses and insurance to complete this particular project?
  • Can you pull permits, or would I have to?
  • How are your estimates and invoices created and delivered?
  • What is your preferred payment schedule?

Then, get into the details of how you want them to serve you by asking the following:

  • Will you add us as “Additionally insured”?
  • Will you agree to estimating and quoting by the job instead of hourly?
  • Will you allow payment within seven days to allow time for inspection?
  • Will you sign waivers for all payments?
  • Will you agree to a background check?
  • Will you sign a W-9?

Once you’re confident with a contractor, draw up the contract and close the deal. The document should include all the important information, including the start and end dates, payment schedule, materials required, description of the work, and specific instructions on how to handle any changes to the project plan.

Conclusion

With a good selection process, you’ll have a whole roster of trustworthy contractors in your arsenal, ready to meet the quality you expect from the best of contractors.

Gradually build your list of contractors you’re happy with, and keep their details easily accessible. You’ll never know when you’ll need to call them!

Image courtesy Tima Miroshnichenko

Categories
Landlords

Eco-Friendly Tips to Maintain Lawn and Garden

As a landlord, there are several reasons you need to take care of your lawn and garden:

  • Good landscaping is a great way to increase your property’s curb appeal.
  • Allowing weeds to thrive or leaving soil exposed might lead to flooding and pipe damage.
  • Large weeds can even destroy foundations, fences, and outbuildings.

For all these reasons, it’s actually more cost-effective to do preventative outdoor maintenance (and make sure your tenants do, too).

One of the ways to make the task easier, cheaper, and healthier is by using sustainable, eco-friendly methods. Taking care of plants and greeneries without harmful pesticides isn’t as hard as many would think! And, depending on the type of tenants you’re aiming to attract, your eco-friendly garden could be a major selling feature.

Even if you don’t have a green thumb, these quick and easy tips will help you maintain a healthy lawn and garden while being environmentally friendly! 

Leave grass cuttings on the lawn.

Grass cuttings act as natural fertilizers, providing essential nutrients to the lawn and garden. They decompose quickly into the soil, adding nitrogen and acting as a moisture barrier. They also eliminate the need for commercial chemicals that pollute the atmosphere, taint the groundwater, and add unnecessary maintenance costs to your property.

After mowing the grass, skip the rakes and leaf blowers! Just leave the cuttings on the ground—you’ll save time and money, without compromising your garden’s lushness. 

Use yard waste and kitchen compost as fertilizers.

Composting is a great way to reuse resources and create high-quality fertilizer that’s completely free. It’s achievable even in apartment buildings that don’t have garden space—you can use countertop compost containers or a technique called Bokashi composting.

In most cases, you can simply have a compost bin where tenants can throw in their food scraps, then add them to an outdoor compost pile. If they’re not interested in doing so, you can also maintain your own compost and bring it to the rental property during the turnover period to fertilize the lawn and garden.

Avoid gas-powered equipment.

Using electric or battery-powered lawn care equipment will cut down your fossil fuel consumption and emissions—especially if you use manual push mowers (which are also free to run). The US Environmental Protection Agency (EPA) reports that a gas-powered lawn mower produces as much air pollutants as 11 cars, and that’s if the equipment is brand new!

If the old-school push mower isn’t quite your style, you can take advantage of electric technology with the many options available in the market. A corded electric mower will also cost you less than a gas-powered one, running anywhere from $150 to $250 on average.

Water deeply, but less frequently.

Your lawn and garden obviously need water, but not all methods will contribute to healthy growth. Here are a couple of techniques to water them properly:

  • Water the area three times a week instead of every day.
  • Program your sprinkler system to go off at midnight for minimal water evaporation.
  • Keep the sprinkler system on for an extra 10 minutes to have the roots absorb enough water.
  • Use smart watering systems to operate them remotely.
  • Devote a few sprinklers to drip systems for water efficiency.

Additionally, consider turning the system off when rain is forecasted. Not only do you get free water, but you also avoid over-watering the lawn and garden.

Create a buffer zone between lawn and waterways.

This last tip is simple yet crucial, especially for homes in locations that are prone to natural disasters.

If your property is near a lake, river, or stream, try to leave a 10-foot buffer zone between the waterway and your lawn or garden. Allow the zone to thrive naturally with vegetation and plants, binding the soil underneath into a strong barrier. 

The area will serve as a physical barrier to prevent fertilizers from entering the body of water, protecting your area from erosion and keeping your property safe during storms, floods, and more.

Conclusion

There are many ways to implement eco-friendly maintenance of your lawn and garden. Most of them are completely free and only require a bit more effort in setting up. 

Pass these tips along to your tenants if you want them to maintain your garden perfectly during their tenancy, and you can hopefully prevent your outdoor areas from getting overgrown while the property is rented out.

By simply leaving grass cuttings, maintaining a compost pile, using electric equipment, controlling the water system, and having a buffer zone for waterways, your rental investment will have a thriving, beautiful lawn and garden designed to last for a long time. Plus, prospective tenants might love the idea of living in an eco-friendly property.

Any other tips that we’ve missed? How are you currently maintaining your lawn and garden?

Image courtesy of Pixabay

Categories
DIY

6 Fixes Novice Flippers Should Avoid DIY-ing

When it comes to DIY, “Why pay someone to do it when you can do it yourself?” is what most new flippers would say… at least until they realize how underprepared and underskilled they are for extensive repairs!

Some renovation projects are tough to do as well as a professional would, even with the best of YouTube tutorials. If you’re not qualified to replace roofs, repair electrical systems, fix the plumbing situation, or install new gutters, doing them yourself could lead to costly and dangerous consequences. 

Faulty work leads to spending more time and money trying to fix your mistakes, if you don’t know what you’re doing. Lots of seasoned flippers can do nearly any project themselves, but many more newcomers to the industry try their hand at things above their pay grade and end up regretting it later on.

So if you’re new to the world of DIY, here are six fixes that should be left to the professionals—even if you think you can do it yourself.

Roof Replacement

The fact that we refer to homes as a “roof over our heads” shows how important good roofing is for a home. Nobody wants to buy or live in a house with a damaged roof!

The roof is such a vital part of the infrastructure—you will want to make sure that it’s installed right to not cause any problems in the future. And while many people may think replacing a roof is easy, it really isn’t.

Here are just a few of the complexities you can encounter:

  • The height & pitch of the roof can require special safety equipment.
  • The underlayment is critical, but often done incorrectly.
  • Do you know what drip edge is for?
  • How do you prevent ice dams from causing roof leaks?
  • Unless installed by a licensed professional, most shingle warranties are voided.

Instead, you should hire a professional whose whole job is to replace roofing. Not only will they assess the roof before replacement, but they will also have all the suitable materials and tools for the job, as well as the much-needed experience in construction-related safety issues. A professional roofing company would also have warranties that can save you money in case something goes wrong.

Electrical Repairs

Repairing the electrical system of a home is another dangerous task to DIY.

In your house flipping journey, you might run into older homes with outdated or broken electrical systems. When that happens, you’ll want to spend extra on hiring a professional who has the training and experience to work with electrical currents—especially because they can be deadly when mishandled.

Feel free to install new light bulbs in the home, or to change light fixtures, plugs and switches if you’re a handy person, but anything more complicated than that should be handled by a licensed electrician. Here are the common issues often found in older homes that signal it’s time to call an electrician:

  • Replace electrical panels
  • Replace an exterior riser or the main feed from meter to panel
  • Messing with meters
  • Run underground electrical lines
  • Install a new circuit to an electrical panel

Plumbing Fixes

While improperly installed plumbing fixes aren’t as dangerous as electrical systems, they can seriously set your budget back and eat into your flipping profit. DIY-ing a simple leak might save you a couple of bucks, but if it escalates into a flood, that’s thousands of dollars instantly added to your expenditures. 

Beyond fixing a slightly clogged drain or replacing a new faucet, extensive plumbing repairs and maintenance are best left to the professionals. Here are some plumbing fixes that a professional plumber should do:

  • Replacing underground sewer or water lines
  • Replacing corroded stack or main supply lines
  • Replacing or repairing water heaters, sump pumps, and worn down or burst pipes
  • Running new drain lines, unless you know the exact pitch required by code

Drywall Mudding 

Drywall mudding is more artistic than people think, so it’s tough for non-professionals to do well. You can hang drywall yourself, because unless you totally butcher it it’s fairly uncomplicated to hang, but doing the taping and mudding takes an artistic touch.

Plus, even if you do manage to do your own mudding, it definitely will not be as seamless or aesthetically pleasing as work by a professional company. Ugly drywall is a serious eyesore which could turn buyers off from an otherwise beautiful house, so leave it to the pros.

Structural Repairs

We’ve all seen that part on the DIY home improvement show when the clueless flipper bashes through a load-bearing wall and almost caves the whole house in. 

Don’t be that guy. Structural repairs are one of those things which even pro flippers hire contractors for, because the cost of making a mistake is so high. Stay away from all structural work as a new flipper, including:

  • Bowing walls
  • Cracked floor joists
  • Bowed roof or ceiling
  • Removing walls for an open floor plan (are they load-bearing?)

Fixing or Replacing Heating Systems

Installing the wrong efficiency furnace or replacing with one that’s mismatched with the exhaust system could be fatal, literally.  For an 80% efficiency furnace, you use a particular exhaust, but if it’s 90%+, it’s a totally different exhaust system, which is not compatible with 80%-efficient systems. If someone gets poisoned with carbon monoxide in a home where you worked on the furnace, you’re liable.

The same applies with duct work. There are equations which experts use to calculate the type of ducting required, based on the size of the house, furnace type, distance from furnace, etc. Get it wrong and this could lead to a house that’s not heated well and puts more strain on the furnace, so it wears out faster.

Conclusion

Know your limitations, and you will save thousands of dollars – not to mention headaches! Even if you’re a crafty person who loves to learn new things, there are certain cost-cutting measures you want to avoid when it comes to flipping a home.

So, the next time you want to replace the roof, repair the electric system, fix the plumbing, or install new gutters in the home you’re flipping—grab your phone instead to protect your flipping profit as much as possible.

Image Courtesy of Suntorn Somtong

Categories
Shortterm Rentals

Cleaning Checklist for Every Short-Term Rental Landlord

Image Courtesy of Tirachard Kumtanom

End of stay cleaning can be frustrating for short term rental owners, especially those who manage their properties themselves. It turns out that “clean” is very subjective—what’s clean for one guest is a pigsty for another. And if they’re unhappy with the cleanliness of your property, chances are they’ll be vocal about it in the review they leave you on Airbnb.

To avoid wondering whether the property is clean enough to satisfy even the most particular guests, it’s crucial for landlords to have a cleaning checklist. A cleaning checklist doesn’t only help make sure your property is well-maintained and sparkling clean for the next guest – it also helps you stay on top of any issues or damages that outgoing guests may have caused.

Plus, if you’re hiring professional cleaners, the checklist can serve as a guideline for them to use when cleaning your properties, making sure they’re cleaned to the same high standard for every turnover.

Not sure how to start your checklist?

We’ve put together a general cleaning step-by-step guide that you can alter to fit your needs.

Bathrooms

  1. Clean:
    • Mirrors 
    • Windows
    • Floors and tile walls
    • Wastebaskets (don’t forget to put extra trash bags inside)
  2. Clean and sanitize:
    • Toilet
  3. Clean, sanitize, and scrub:
    • Showers
    • Bathtubs
    • Vanity sinks
    • Backsplashes 
  4. Refill toiletries:
    • Handsoap
    • 2 rolls of toilet paper
    • Makeup wipes or tissue wipes
  5. Replace with clean items:
    • 1 hand towel
    • 1 washcloth
    • 1 bath towel per guest
    • 1 shower mat per bathroom
    • Shower curtain liners (optional)
  6. Check if sinks, tubs, toilets, and faucets are running properly.

Pro tip: We recommend that you tackle one room at a time so you won’t miss out on any of these tasks.

Bedrooms

  1. Change sheets, blankets, and pillowcases.
  2. Vacuum floors, including under the beds.
  3. Check drawers, tables, and closets for personal belongings.
  4. Clean the mirror and windows and dust the furniture.
  5. Check for stains and wear and tear on the sheets and pillowcases.

Pro tip: One cleaning trick is to close the door of the room that you’ve just finished cleaning–this way, you’ll know which rooms still need cleaning and which you’ve already done. Plus, it will stop any wandering pets or people from going inside and messing up the beautiful work you’ve just finished.

Living Room

  1. Clean, dust, and vacuum the entire area.
  2. Dust:
    1. Furniture
    2. Picture frames
    3. Decorations on display
    4. Lamps
  3. Vacuum carpets or wash the floors with specialty cleaners.
  4. Place 2 standard pillows and 1 clean blanket for the sofa bed.
  5. Place the remotes, welcome packet, and other welcome items for the new guest in an easy-to-locate spot (like the center of the coffee table).

Pro tip: When wiping and dusting, the dirt will naturally fall to the lower furniture and the floor. Thus, it’s best to start cleaning from the top and work your way down to the floor.

Kitchen

  1. Clean:
    1. Counters and countertops
    2. Chairs and tables
    3. Sinks and backsplashes
    4. Glass doors and windows (if any)
    5. Appliance exteriors, including the coffee maker and toaster crumb tray (also check if they still work or are malfunctioning in any way)
    6. Inside and outside the refrigerator (and throw away any leftover food)
  2. Empty:
    1. Dishwasher and replace items in the cupboard
    2. Ice tray
  3. Sweep and mop the floor.
  4. Supply:
    1. 2 clean dish towels
    2. New dishrag, sponge, and soap
    3. 2 trash bags
    4. 1 roll of paper towels
    5. 2 dishwashing pods

Pro tip: Start cleaning at the area furthest from the door, and then work your way towards the doorway—this way, you avoid stepping on wet floors and dirtying them again on your way out of the kitchen.

Before Locking Up

  1. Turn off all lights and unplug appliances (except for the refrigerator, aircon, and TV).
  2. Set the thermostat to a temperature that doesn’t keep the unit running.
  3. Place patio sets and other outdoor items inside or in a covered storage area.
  4. Place trash bins by the road.
  5. Ensure that all doors are locked to prevent break-ins.
  6. Make sure cleaning supplies are well stocked.

Deep cleaning

  1. Clean:
    1. Exterior and interior of cabinets
    2. Lamp, lampshades, chrome fixtures, and display items
    3. Stovetop and range hood (and replace filters if necessary)
    4. Dishwasher
    5. Behind and under appliances and furniture
    6. Walls, baseboards, moldings, and tiles (and remove markings, if any)
    7. Door frames, switchplates, and other woodwork (remove any fingerprints or other marks)
    8. Windowsills, ledges, blinds, ceiling and electric fans
  2. Vacuum cushions and upholstered furniture.
  3. Deep sanitize sinks, countertops, and appliances (including oven and microwave).
  4. Wash windows and glass doors.
  5. Change air filters.
  6. Descale faucets and showerheads.
  7. Disinfect all surfaces and contact points.

Pro tip: Aside from the regular cleaning you do on your property between guests, you will also need to do deep cleaning once in a while. Deep cleaning ensures that your entire home is free from dust and dirt, which helps maintain your appliances at maximum efficiency (e.g. air conditioning units).

Conclusion

End of stay cleaning may be complicated and frustrating. But with a checklist that’s customized to your property and needs, it doesn’t have to be!

Checklists instruct professional cleaners how to make your property perfectly presentable for your next guest, and they can also help you make sure you haven’t missed a spot when doing DIY maintenance for your short-term rental. 

Going through after each turnover to make sure every box has been ticked on this list is your best bet at ensuring a 5-star cleanliness rating from every guest you host – and that’s a highly valuable thing to have when it comes to attracting new customers to your STR business.

How do you clean your property between guests? Are there other items that we should include in the checklist?