The Simple Reason Why Real Estate Explodes Your Net Worth

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.

Self-Screening Rental Applications

As a property owner, you may receive hundreds of rental applications a month, especially if you own a large apartment complex or something similar. You may already have some systems in place for quickly weeding out those not-so-great applicants, but there are some additional self-screening techniques you can utilize to further eliminate potential tenants who are less than ideal. With these processes, you'll save yourself time, money, and the headache of renting to someone who won't be a good tenant. You can do these screening and wedding methods yourself, or you can have a property manager, leasing consultant, or other staff member go through individual applications to look for some red flags. Here are four things to focus on as you self-screen rental applications.

Employment History

Red flags here include multiple jobs over a short period of time or large gaps in employment. People who switch jobs frequently are not generally as reliable as those with longer stints at the same job. They also tend to make less money since they are essentially starting over with each new position.

Income Level

You likely already have a minimum income limit in place, such as three times the monthly rent. But it is important to compare the applicant's income to their time at their current job, and also look at other lifestyle information that may lead to higher monthly expenses, which could impact their ability to pay rent. They might check all the boxes with income level, but taking a look at these other things could give you more information about how likely they are to be a great tenant versus an okay tenant.

Financial Information

Depending on how much financial information you ask for, you may need to run a tenant background check before you can dive into this information. No matter how you get these details, however, you should look at debt to income ratios, credit scores, length of credit, total balances, and other monthly expenses. Having this overview of financials can help you determine how likely it is for a tenant to be able to consistently pay rent on time.

Previous Residences

Look at how many residences a tenant has had in the past few years and if there are any gaps in their rental history. Compare the cost of each rental to what they are currently planning to pay as your tenant, and compare income from the past to their current income as well. You should also contact any previous landlords and inquire about their payment history, what type of tenant they were, and why they left the property. This can give you additional insight into how they would be as a renter at your property and maybe help you make an easy decision regarding their application. If you've gone through these items and feel relatively confident in a tenant, the next step is to complete a background check on the individuals who will be renting your property. With tenant background screening, you'll get a large amount of information about your applicants that will give you a better picture of how they will be as a tenant so you can make the best decision for your rental property.

Five Ways to Attract (and Keep) Quality Tenants

When you're a landlord, you know that there are those dream tenants that treat the space with respect, pay on time, and don't break the lease, and you want more people like this renting from you. However, finding them can be easier said than done. Luckily, there are a few ways that you can attract quality tenants and keep your apartments and homes filled with them. Here are a few tips that you can start applying today!

#1: Thorough and Quick Tenant Screenings

While some landlords will want to conduct interviews, you may not get all of the information you need from these. Be quick and thorough when it comes to tenant screenings so that you don't waste any time because this will show that you have ethical and professional systems in place. If you want to meet the potential tenants before you sign the papers, then have everyone that is interested in renting come by at the same time to view the space. This will give you a chance to meet everyone, as well as provide a sense of urgency that comes with a little competition.

#2: Be Straightforward with Expectations

One thing that quality tenants love is when you explain everything with clarity because no one likes a gray area when renting. Remember, you're not the only one with a checklist of expectations! The best renters will know what they want and will ask about the rules that apply to them. If you don't have on-site laundry or your pool can't be used for private birthday parties, don't try to sugar coat it. Be straightforward and you'll find that you and your tenant will get off on the right foot.

#3: Set the Rent at a Reasonable Rate

You don't want to go too low with rates and attract people that only want a short term-solution for their renting needs. However, you also don't want to be at such a high rental rate that you turn responsible people away because they know that they can get a better deal in the same location. Set the rate at a fair price that makes sense for the amount of space that you're offering, and factor in the location and amenities that can cause that number to be raised or lowered.

#4: Make Yourself Easy to Find

If you aren't advertising, on social media, have a website, and are just tough for quality renters to find, then it's time to put yourself out there. Trust that you want to be control of your online presence so that people find you, and not a review from a disgruntled tenant of the past.

#5: Show Your Appreciation

Whether you pair up with another business like a local pizza place and give away a super deal to new tenants or you have fun events for people to participate in, show renters that you appreciate them. A few simple gestures will go a long way when it comes to referrals and keeping everyone happy so you have a low turnover rate.

Four Steps to Take When a Tenant Won’t Pay Rent - Tenant Screening Blog

Even if you're making a concerted effort to engage in tenant screening, all landlords, at some point in their careers, will likely face tenants who avoid paying rent. While there are many reasons this can occur (some legit and others not so much), when you know the proper steps to take, you'll be able to get the situation resolved in a prompt and efficient manner so you can put it behind you. Here are five steps to take when a tenant is refusing to pay rent.

Step 1: Talk to the tenant about the issue.

The first step when a tenant isn't willing to pay rent is to speak to them about the reasons. While some will have financial issues, others may be withholding rent for reasons such as their roof is leaking or their toilet needs to be fixed. There may also be a problem with a roommate moving out, so the renter can only make a partial payment.

Whatever the reason you're given, it's up to you as to what actions you want to take next. If someone doesn't wish to pay because they want something fixed first, you can let them know the repair date and show them it's on the calendar.

Step 2: Find out your state laws.

Each state is different in how they handle tenants who don't pay their rent. The more knowledge you have about landlord rights in your state, the more prepared you'll be when you approach a tenant who isn't paying. You'll also be better equipped to handle any legal threats they make towards you because you'll already be aware of your rights.

Step 3: Decide if legal action is required.

If a resolution isn't happening between you and the tenant, the next step is to decide if it's time to bring in your lawyer. He or she will be able to offer guidance, as well as a solution for closure in this situation.

Step 4: Protect yourself with a plan.

Even though you try to weed out these individuals in your tenant screening process, people still exist who try to get out of paying the bill. The best action you can take as a landlord is to have a proactive plan in place, ideally before you're even faced with this situation. While each tenant is unique and can be dealt with on a case-by-case basis, it's still going to be crucial that you know exactly what steps to take when faced with an unpaid bill. Knowing the laws of your state and involving your lawyer at the right time will help prevent past due months, as well as give you peace of mind that you'll be ready when it does happen.

No matter how the tenant acts, be sure that you remain calm and professional throughout the entire process. It's important that you keep a cool head, so you can make smart decisions during this time. In some cases, your tenant will react in a positive way to your professionalism, and you'll be able to resolve the issues in a single conversation because they were treated with respect.

Thankfully, these issues are becoming more and more rare thanks to the tenant screening solutions that Tenant Background Search offers, starting at just $19.95

Investing in Student Housing

Are you considering purchasing a property near a college or university with the intention of marketing your property as student housing? This can be a great investment and there are benefits of owning a property near a campus, but it is accompanied with some factors that are different from that of a regular rental property. Before you invest in a property for student housing, be sure you have educated yourself on the unique factors of owning a property that is to be occupied by college students, and make sure it is an investment you are ready to make.

Marketing Your Property
Among the best factors of owning a rental used for student housing is that there is little to no marketing involved in finding a tenant. When you own a property near a campus, potential tenants will come in crowds. If you post an ad announcing you have a rental space available, you are guaranteed to have applicants lining up to try to occupy your vacant rental.

Finding Applicants
By owning a property near a campus, you will always have a high supply of future tenants. With this being the case, you have the control of being pickier about who you choose to occupy your space. You don't have the pressure of choosing the first candidate that shows interest in your property since there will be many potential tenants enquiring. This also allows you some peace of mind knowing if one tenant breaks a lease, you can quickly have a new tenant in place.

Protecting Your Investment
College students often get a reputation for destroying homes, but a college student can in fact be just as responsible as any adult or family occupying your home. Many college students are enrolled in school solely for the education and hold jobs in addition to attending school in order to make an income. Housing college students is not necessarily a risk in and of itself, but you should make sure you are prepared for any incidents that could occur while students are living on your property. Your rental agreements should be written to protect you from any damages should an incident occur. You should also consider a larger security deposit than you would typically collect to be confident that you have a deposit that will supplement any potential damages. You will also want to do some tenant screening to ensure they are being totally honest with you.

Selecting a Lease Term
Typically a lease agreement lasts for a year. Unfortunately, when renting to students, a one-year lease is not always going to meet the needs of the market you are reaching. You will need to adjust your lease period to match the school year being followed by the nearby college.

Summer Vacancies
Your tenant's lease term is likely to end at the beginning of summer when college students return to their hometowns. This could mean that your property will sit vacant throughout the summer months. Take the possibility of summer vacancies into account when you are setting your monthly rental rate to ensure that you are making a profit off of your property all year round. You should also consider renting to those enrolled in summer school. If you choose to market to summer students, make sure you have a written rental agreement specific to summer tenants.

Owning a student housing property is unique and should be treated so. If you are unwilling to waver from the typical rental lease agreements, then student housing may not be an investment you should make. On the other hand, if you are able to be flexible with your rental agreements, you may experience great success investing in a student housing property!

Top Three Reasons to Perform Tenant Screening

Do you have a room for rent? Have you chosen to lease out an investment property? Are you in search of another person to split an apartment lease with? If so, it is critical to ensure that the person you will be allowing to reside in your home is responsible and stable. You will want to know if there are underlying issues with these people to not only ensure your safety, but the safety of your property, the safety of your neighborhood, and/ or the safety of your investment. Even tenants who are referred by family or friends can be a risk if you don't look into their history.

Tenant screening is the only way to protect yourself and do your best to ensure that you are choosing a tenant who is going to be financially reliable and safe in your home. When screening a tenant, you may choose to pull credit reports, criminal background checks, eviction reports and more. Here are the top three reasons why you should have your tenants pre-screened before you sign papers and hand over the keys.

1. Make (and save) money. If you are sharing an apartment, you need to know the person you choose to share this space with is going to follow through with their half of the pay. If you are renting out your house, you are doing so in order to make money off the investment that you have already made. If you unknowingly choose a tenant with a history of late or missed payments which results in poor credit, you have set yourself up to lose the money. By running a tenant screening report, you are protecting your investment and income by knowing your tenant's ability to pay.

2. There is no way to be able to look at someone and know who they really are. The most polite, nicest, and charismatic person could have a list of criminal activity a mile long. By performing tenant screening, you are able to see what your prospective tenant has done and is potentially capable of doing in the future. If you want to ensure the safety of your high-cost real estate property, your belongings, and the safety of your neighborhood, it is crucial to know the people attempting to reside inside. The background check performed during the tenant screening will give you helpful information to make a decision.

3. The eviction process can be a taxing and time consuming course of action. If the tenant that you deemed kind and responsible turned out to be a dreadful tenant and you have to go through the eviction process, you're in for a long ride. The best way to avoid having to deal with the stress of the eviction process is to skip the assumptions and educate yourself on your prospective tenant's eviction history. By performing a thorough tenant screening, you will be able to see the errors that your prospective tenant may repeat in the future.

Tenant screening will provide information as to how responsible a tenant is likely to be based off of their past history. No amount of screening can guarantee zero problem tenants; however, if you opt not to screen you open the door to many unpredictable outcomes. Tilt the odds of getting a responsible tenant in your favor by performing tenant screening before you sign the lease agreement and hand over the keys.

To Accept or Not Accept Pets—That Is the Question

As a landlord, you do everything you can to encourage people to become new tenants. You entice would-be tenants with move-in specials, temporary reduction in rent prices, and other promotions in the hopes of adding to your second family. Then, one day, you get a visit from a potential new resident. You're encouraged as he tells you that he's moving his entire family with him as he starts a new job in the area. Then he says, "By the way, we also have two dogs. Do you accept pets here?" This query could put a smile or a frown on your face. Indeed, it's the one question that every landlord has to address at some point – will you accept pets on your property or not?

This question creates an interesting internal debate because you fully understand both the pros and cons of allowing four-legged and other creatures on your property. But you can also understand the renter's viewpoint as well. For pet owners, furry friends are not simply extensions of their family – they are family. Additional stress and headaches occur for them with each property that tells them that their pets aren't allowed. There are so many factors to consider when answering this seemingly simple, yet significant, question.

Here are some of the benefits of allowing pets on your property:

1) Larger tenant pool: With so many pet owners looking to rent these days, you get a bigger pool of would-be tenants to choose from if you allow pets, which can help you pick the right tenant more easily. When you have more options in terms of tenant screening, the odds that you can find a renter that you feel very confident will pay on time every month increases. 2) Higher rent: You can usually charge higher rents to pet owners because you know that these tenants will have fewer options for where they can live. In most cases, this could mean a few additional hundred dollars. 3) Longer tenancy: Residents with pets tend to stay longer in one place because they understand their choices are limited as far as pet-friendly properties. Also, they tend to be happier because they don't have to worry about whether their pets will be safely sheltered. There are so many fees associated with getting a new renter in place: there are often realtor fees, home improvement fees, tenant screening fees, etc. It's incredibly beneficial when your tenant stick for the long run.

Here are some of the downsides of allowing pets on your property:

1) Property damage: Pets can cause a wide array of damage to your property, including chewed up carpets or stained floors, scratched furniture, and strong pet odors. In many cases, you won't even be aware of these damages until a resident moves out.

2) Liability: You need to be prepared for the possibility of another tenant complaining that someone else's pet attacked them. Many people need hospitalization from dog bites every year.

3) Community disruption: Neighbors may find that someone else's pets are disturbing their peace. If not dealt with, some people may simply move out rather than continue dealing with a constantly noisy animal.

So the questions remains--should you allow pets or not? You need to weigh the previous considerations carefully before making a final decision. Also check your insurance coverage to see if you're covered for pet liability. It's also a good idea to include a specific pet policy addendum in your lease for each tenant. Remember, every family is different. You may find that you're willing to add not just two-legged, but also four-legged, members to your second family.

What Rental Strategy Should You Use To Maximize Revenue (Short Term Rentals Vs Year Long Lease)?

When you have a vacant property, it can be difficult to know what the best course of action is. Every situation is unique, so it's important to understand what your needs and goals are. There are at least two common options that you can consider to maximize the amount of revenue that you will generate from your rental property. The first option is to rent out the room at a year-long lease to maximize and secure income for the entire year. The next option is to rent out your space to vacation rental websites that specialize in providing short-term rooms to individuals or groups on vacation (such as VRBO or Airbnb). Consider some of the benefits and pitfalls for each below.

Tenants with a Year Long Lease

The first option, renting out your rooms to a tenant for a year-long lease, will help secure income over a long period of time. It can also reduce the amount of stress of needing to find a new tenant between months if a pre-existing tenant does not decide to renew their lease or rental agreement. Even if the market begins to shift, you will have the tenant's monthly rate locked in. Overall, this will be a secure option for you to consider if you prefer a more stable income.

However, if the market shifts in favor of raising prices, you will have a harder time trying to raise prices. Typically, you are only able to raise the monthly rate in between rental agreements by 10% with 30 days of notice or 60% with 60 days of notice.

When opting for a yearlong lease, you will want to verify that the tenants moving in are safe and reliable individuals that won't bring you stress or cause harm to other tenants in the building. Order a tenant screening report today to have a background check done on any tenant.

Renting Out on Vacation Rental Sites

If the location of your rental properties is near an ideal destination for travelers and vacationers, then choosing a short term and variable option may be your best bet. You might be able to charge daily rates of anywhere between $250 to $800 (or more) per night... rates that you would never attain for a long term rental. VRBO and AirBnB are two of the most popular vacation rental sites. These website have been built around the ability to provide short term rentals to people that need a place to stay for a brief period of time.

One downside is that you can run the risk of having more variability in income. Some busier months may be booked completely while others may leave you renting only a few times for the entire month. However, the upside is that you will have much more control over the rent that you're charging. If you expect a busier month, bustling with tourists, you can jump the rates up to accommodate and capitalize on the opportunity.

The other risk is that you could rent to a group of partiers who could damage your property. Unfortunately, on VRBO there is no way for you view the ratings of potential tenants (it would be great to see if other landlords had complaints about this individual in the past or if they had stayed at a bunch of other properties with no issues). VRBO also doesn't provide any protection/ reimbursement if a tenant damages your property; it's completely up to you to collect an adequate deposit. Airbnb offers a bit more protection... but there's still risk involved.

To protect against this, we highly recommend running tenant backgound check. You can assure these possible tenants that running their background check is only a "soft pull," so it won't affect their credit scores in any way.

Which Option Is Best?

As with most rent-related situations, you need to understand the situation that you're in. You will have different results based on the location of your property, the amount of other rental properties on the market and the time of year. With any kind of rental, make sure that the tenant you're bringing in is a safe candidate. Whether it's long term or short term, you can use our background check service at Tenant Background Search. Also be assured that any applicants that get screened through us won't have their score negatively impacted.

Rental Staging Can Increase Landlord Profits and Reduce Vacancies

When the real estate market crashed and the economic slowdown hit about five years ago, realtors began scrambling for ways to get their listings sold. Face it--it was a buyers' market with so many foreclosures available at the same time. So, realtors came up with a concept called home staging which had an impressive impact on sales. It can have an impact for landlords, too.

Home staging is the act and art of presenting your property in its best light, with the mind's eye of the buyer/renter as the driving factor. This doesn't sound like something new. It used to be called "curb appeal." However, home staging is more intrusive than just a new coat of paint, hiding personal belongings in the closet, and adding a shrub to the front yard.

It entails presenting the property in such a way as to be almost a model home, or at minimum, in a way that de-emphasizes the current residents to allow potential buyers to be able to envision the home as theirs. How is this done? Well, there are many steps, depending on the current condition of the property. Here are just a few.

Cleaning is essential. There should be no greasy appliances, no scuffed walls, no dust bunnies or spider webs. Uncluttering is a must, even if it means the people currently living there must pack up some of their items and put them somewhere other than on the property. Painting is appropriate, and in fact, color is one of the prime ingredients of home staging. (There are home staging certified professionals that advise on these steps for a living.) If the property is furnished, the furniture may be re-arranged to produce intimate or cozy groupings, or it may be moved to follow a natural traffic flow dictated by the layout. Lighting is another key ingredient to make the home bright and comfortable. Front yard appeal is still much a part of the process, so cleaning, raking, removing dead shrubs, etc., is a must. According to one realtor who staged 35 homes in a little over a year, the average time the staged homes were on the market was 26 days, and they sold for 98% to 99% of the asking price. Staggering results.

With this in mind, landlords can borrow the concept, with the differing emphasis on attracting tenants rather than buyers. It will take some investment in the property for improvements to achieve the desired look or to pay for a certified home stager to get the look you want. However, if your investment results in reputable tenants and low to no vacancies, the money will be well-spent.

Protect Your Real Estate Investment

It may be difficult for investors to find a good, safe investment in the current economy. There is uncertainty because of economic issues in Europe and the national debt. The stock market is a huge gamble. Gold has a high price and doesn't produce any sort of dividend. Bonds have a low yield due to low interest rates. There is, however, one good area to invest in the current economic climate. Rental real estate can offer both short and long term returns. A rental property can increase in value while offering a recurring revenue stream. There are plenty of distressed properties out there and plenty of opportunity to buy low. Demand for rental housing is also higher because people feel less secure about committing to a long term mortgage (and many don't qualify). An investor can immediately enjoy a positive cash flow while building equity, which eventually can be converted to cash by selling the property.

Unfortunately, even a local market with high prices to rent and low prices to buy can still carry risks. One of the biggest threats to the value of the investment is a bad tenant. A bad tenant might not pay the rent. A tenant that doesn't pay rent or damages the property will cost you lots of money. Your investment can easily turn into a burden and an expense, rather than an income generating asset.

In order to protect against nonpayment, vandalism, eviction proceedings, unsavory characters and other issues, landlords should run a tenant background check on applicants. It is important to do a quick background and credit check on all tenants. You don't want stolen merchandise found in your house or drugs being dealt out of your house! You do not want your investment property to become a crime scene! Protect yourself with a thorough background check.

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