Landlord Tenant Screening

It's common knowledge that many people get wealthy through real estate.

The real question to ask is why?

There is one simple reason.

Let's say that you have $100,000 to invest. You have two choices: invest it in the stock market or put it into a rental property.

Assume 10% annual return in the stock market. That might be generous considering wars, pandemics, inflation reports, etc. that have been dragging the market down but let's be optimistic in this scenario.

After ten years your investment will be worth $259,374.

Now let's consider a rental property. You would put $100,000 down and purchase a property worth $400,000. You do your homework and figure that rent will cover your mortgage payment, property taxes, insurance and other expenses. Assume 7.5% annual appreciation.

After ten years your investment will be worth $824,412! $565,038 more than if you had gone with the stock market!

Why is your net worth so much higher? Because you are gaining the appreciation on $400,000 worth of assets vs $100,000.

I'm still invested in stocks (especially high dividend ETF's) and 5% interest checking accounts because they are much lower maintenance than real estate and I find that they're often more consistent in terms of cash flow; however, if your goal is to increase your net worth, there's really no comparison to real estate.

This entry was posted on May 14, 2024 at 4:22 PM and has received 3509 views. There are currently 0 comments. Print this entry. Download attachment.

My property was trashed. Everything would need to be replaced... new floors, new paint, major repairs everywhere you look. Even random illogical things like wires in the garage were cut for some mysterious reason.

In the backyard was this bearded dragon. This lizard is native to Australia... far, far from where the property was located (Texas). It was extremely weak, hungry and dehydrated. Its jaw was extremely crooked. I don't know if a cat or dog attacked it or if it's some kind of symptom that arose from severe neglect/ malnutrition.

All would be super expensive to fix and get the property back into good shape to be rented out to future tenants.

The tenants (who I later found out were drug dealers) had bailed on the lease and stuck me with $30,000 in damages.

What's worse... this is the third time in a row that a tenant had bailed on the lease early. And I had used a property management company all three times that was supposed to screen out these people! One would think I would have learned from the previous two times but this was literally probably about priority number 1000 on my list. It was supposed to be passive income.

What can we learn from my mistakes?

Sadly just hiring a hiring a property management company that has good reviews isn't enough. You need to micromanage them to some extent.

Make sure that the management company pulls all three of these reports: (1) credit history (2) criminal record and (3) eviction. Many property management companies just take the first person that can come up with the deposit. That's far from enough screening. Ask to see the report. Don't just take their word for it. It could end up costing you five figures.

As for the bearded dragon? We named her Loretta. We nursed her back to health and found her a good home.

This entry was posted on May 14, 2024 at 4:07 PM and has received 7071 views. There are currently 0 comments. Print this entry. Download attachment.