Should I Consider Renting to Section 8 Tenants?


What is Section 8

The PA Section 8 program, also known as the Housing Choice Voucher Program, provides rental assistance to low income families in the private rental sector. Funded by HUD (The United State Department of Housing and Urban Development) the Section 8 housing goals are to provide improved conditions for families while assisting them in obtaining low income housing, maintaining rental payments, and promoting a greater freedom of choice in housing conditions. This Federal program provides incentives to the owners of apartment complexes and private homes to ensure the continued availability of government subsidized homes. Locally, the Pennsylvania public housing authority (PHA) is responsible for qualifying applicants and disbursing the vouchers to eligible families.

Low income house rentals are listed by the PHA in each of the 67 counties in Pennsylvania, though each complex and home is privately managed. So, each county, Montgomery County, Chester County, even Philadelphia County manage their own Section 8 programs. Even within some counties there are individual towns that have Section 8 offices. For example, Chester, PA has its own Section 8 office.

Philadelphia County is a busy office and very difficult to work with. To be frank it is a struggle for Del Val and others to work with them. They are trying to improve their systems but are very bureaucratic. It is very difficult to reach them on the phone to get simple questions answered. The counties outside of Philadelphia are much easier to communicate with.

But it is a partnership between three people: the owner/landlord, the tenant and the Section 8 office. Traditionally there is a lease between a tenant and an owner/landlord. That is the contract that lays out how the lease is going to work. But with a Section 8 tenant there is a second contract, which is a payment contract that describes the payment amounts and when they will be made. That contract is signed by the Section 8 office, by the tenant and by the owner/landlord. So, this is an additional contract and in an exchange for them offering to pay the rent, the owner/landlord must agree to comply with their rules and regulations. One of those rules is that the owner/landlord will maintain the house in good shape and Section 8 inspections will occur on a regular basis to make sure that you’re doing just that.

What are some of the Pros of Section 8

One of the pros obviously is its federally funded guaranteed rent from HUD, so there is no credit risk involved. Traditionally, Section 8 will pay probably 90-100% of the rent. The tenant may pay a small portion from time to time but 90-100% of the rent typically is going to get paid by the Section 8 office. You will get a one year contract, sometimes a two year contract. The county of Philadelphia offers a two year contract. So obviously once you put that tenant in there for the next two years you know your property will be rented and you’ll be getting your rent.

Now, the question comes up about rent; Is my rent going to be higher or lower than it would be otherwise? In some cases, it’s going to be a little bit higher but I typically tell owners that it will be within 10% + or – than other rents. Again, it depends on the county, it depends on the city and the area so everything’s a little bit different in each case. Typically, five to 10 years ago the Section 8 rent would be probably 15% below a non-Section 8 person. But I think that gap has come down recently to no more than 10% that you will receive. In some cases, you might actually get more for Section 8 than you would get for a non-Section 8.

What are some of the Cons of Section 8

One of the negatives is they will perform regular inspections. So initially before the tenant moves in they do an inspection and you must comply with what they’re asking you to do. They’re not going to ask for you to do anything out of the ordinary. So you’re going to have to make sure that your outlets work, your smoke detectors work, you have fire extinguishers, stairwell banisters are tight and secure and outside that your walkways and things are all safe and secure with no tripping hazards.

Another of the cons is the fact that the tenant may call Section 8 from time to time and say something’s not working. And if Section 8 comes out and determines that is correct, it’s not working, then they could stop paying your rent for a period of time. That is called an “abatement of the rent”, meaning for that period you won’t get any rent.

Why should you consider Section 8 tenants?

In some areas, Section 8 may be your only choice. There are certain areas where Section 8 is very prevalent and because of that there’s not a lot of options and you may have to go with Section 8. There are certain areas of Philadelphia, Norristown, Pottstown, and Reading that have high concentrations of Section 8. So, it may be your only option in those areas.

Tenants tend to stay longer. If a tenant has a Section 8 certificate and they like your house, you’re keeping it up and repairs are being made, for the most part they’re not going to want to leave. For one reason, because there’s not a lot of other Section 8 housing out there. Also, it is very difficult to move and there’s a lot of paperwork involved and a lot of risk on their part. If they notify you they’re going to move out and they can’t find another house within a 60 or 90-day period, they are potentially going to lose their Section 8 certificate. Second, moving from one county to another county is very difficult. So, if they want to move from Philadelphia to Montgomery County there’s a lot of paperwork involved, and the red tape is not easy. So, for the most part Section 8 tenants do stay a long time.

Section 8 requires you to keep your house in good shape, they inspect it and that’s a good thing ultimately for you as the owner of the property. You want to keep your property in good shape.

There is also lots of demand for Section 8 tenants. When we put “Section 8 Welcome” in our ads they get a lot of attention and so that’s obviously a great reason to use Section 8.

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Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 12 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More……



U.S. Real Estate Predictions for 2018


Without elaboration, the year 2017 was tumultuous on the real estate and political front. How often can one say that the forces of market dynamics are shaped by the very few, for the very many. Not often, really. And keeping consistent with last year’s predictions, the following will be referred to as “Sidney’s Pix Six”. So notwithstanding that diversion, let’s keep focused on the positive developments yet to come in 2018.

The Tortoise and the Hare paradigm 
The good news for 2017 is that there was overall appreciation, the bad news of that development is that 2018 is posed to be slower given the lack of inventory. The popular website Zillow noted that housing stock fell 10.5% in the year ending November 2017. Zillow economist Rhonda Olsen stated that the low inventory “drove all the dynamics that we saw, from bidding war in the hottest U.S. housing markets, to the incredibly fast home value appreciation” across the country, but with 653,347 homes for sale ending November 2016, and in November 2017 there was 967,604, this portends a slowdown in home sales in 2018.

Independently Millennial 
In my predictions last year I made a special notation of Millennials. This year is no different. It is anticipated that single Millennials will be more likely than not to own a home, versus previous generations of singles before them.

Patience is a virtue 
According to David Blitzer, head of the Index Committee at S&P, “Underlying the rising prices for both new and existing homes are low interest rates, low unemployment and continuing economic growth. Some of these favorable factors may shift in 2018,” However, Blitzer cautions that optimism that prices will in fact increase in 2018, but that the rate of increase will be notably slower.

It pays to rent 
The age old maxim has usually been that it’s better to buy a home then to rent. However, for all of those naysayers out there who have pestered others to own a home instead of buying, it appears that they actually may be wrong, at least for some real estate markets. “Since home prices are rising faster than wages, salaries, and inflation, some areas could see potential home buyers compelled to look at renting” particularly in expensive West Coast cities, noted Blitzer, from S&P.

Four is the Lucky number for interest rates 
By all accounts and based on a wide sampling of real estate economists, mortgage interest rates on the 30-year mortgage, should hover around 4.0% to 4.5% for 2018. However, don’t get too excited, since according to my numerology friends, Number 4 is actually considered inauspicious in traditional Chinese feng shui. This is so since it sounds like “death” in Cantonese.

Affordability and race 
The color line in real estate home ownership is well documented. Which is to say, that home ownership will not likely increase for the black and brown in this country. With a new HUD director put in place last year, the agenda for increasing those numbers appears only to be lip service. As it stands, the high watermark for black and brown families plateaued in 2007 with the housing bust. They have not regained thus far. According to many economists, those numbers could change direction if new programs were rolled out by the government to encourage home ownership. Growth could be accelerated if new zoning regulations made it easier for developers to offer subsided housing via co-ops, condos and high density locations for example, where the black and brown are most densely populated.
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Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 12 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More……


Turnkey Investing – A Great Wealth Building Strategy With Excellent Cashflow Returns


When it comes to real estate investing, there are really two categories – investing for capital gains and investing for cashflow. Capital gains investing includes strategies where properties are bought and subsequently sold for a capital gain. Cashflow investing on the other hand involves purchasing properties and holding them to collect the cashflow they create.

Each strategy offers benefits but if you are trying to build wealth, then investing for cashflow is the strategy you must choose. The reason for this is because cashflow investing offers five different ways to profit from the investment.

1. Cashflow

As the term implies, cashflow investing creates a monthly passive income from the rent that is collected on the property. There are expenses like taxes, insurance and property management, but if purchased right, the rental income from the property should pay these expenses and also provide a monthly cashflow.

2. Appreciation

Many investors do not think of appreciation when they invest in rental properties. However, over time as a property appreciates it creates equity that the property owner can borrow against.

3. Depreciation

Depreciation is an expense the government allows you to take which covers the loss in value to the property due to wear and tear. The great thing about depreciation is that it is what is called a paper loss, meaning you do not actually pay for this expense. You are allowed to claim the expense though, and thus your taxes are lowered. At the time of writing, the US Government allows rental property to be depreciated over 27.5 years. For example, if you purchase a property for $27,500 you would be able to claim a $1000 depreciation deduction against the property every year for 27.5 years.

4. Interest Deduction

If you mortgage the property you are purchasing, the interest paid on this mortgage is deductible thus reducing your taxes.

5. Principle Reduction

If you mortgage the property, the rental income the property generates will pay your mortgage payment. Your tenant is effectively paying for the property on your behalf.

Because of these profit centers, cashflow investing is a great way invest in real estate, and if you purchase multiple properties it can be a great way to build wealth. However, setting up rental properties is not necessarily a straightforward thing to do. To be successful, an investor must have the knowledge on all of the following:

  • Where properties should be purchased
  • How to renovate the property to demand the highest rent
  • How to screen tenants properly
  • How to properly manage the property

Fortunately there are companies out there like Michigan Turnkey that offer real estate investors the opportunity to purchase “Turnkey” rental properties in great markets like Michigan. As the name implies, a turnkey property requires nothing more than the investor to purchase the property and start collecting rent checks. Finding the property, renovating, tenant placement and installation of the property management company are all taken care of by Michigan Turnkey. The only job the investor has once they purchase the property will be to cash the monthly rent checks.

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Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 12 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More……


For Turnkey Property Investment Memphis Is Hot


In The Market For Turnkey Property Investment Memphis Is Really Blowing Up

If you’re ready to make money through turnkey property investment Memphis is one of the cities you should be looking at.

By concentrating on turnkey investment, you can spread your holding out over a great distance, and the Memphis area is one place where you definitely want to get a foot in the water sooner rather than later.

Turnkey Investing Defined

“Turnkey” is a term that shows up in a lot of different industries. It started in construction, describing a house built “on spec” instead of customized for an owner.

Ironically, by the time it came back to the world of real estate, “turnkey” had picked up a new meaning. A turnkey investment property is one that’s rented to tenants.

It’s not just ready for tenants to move in, either; turnkey properties are transferred from one owner to another while they’re occupied. This is an attractive prospect for buyers because you get a piece of rental property that comes with an stream of income that’s active from the moment you close the deal.

The Benefits Of Turnkey Properties

Most properties sold as turnkey investments also feature a solid property management plan already in place.

(In fact, many investors consider pre-arranged property management a prerequisite for turnkey deals!)

That means that a professional is already taking care of maintenance, repairs, and tenant issues.

Buying turnkey properties is extremely straightforward when compared to other forms of real estate investment.

Many brokers and Realtors specialize in facilitating turnkey sales, with different firms operating either nationwide or locally.

Finally, if you’re looking to build a diverse investment portfolio including properties in many different regions, turnkey investment is ideal.

It relieves you of the burden of property management and provides steady income.

What Makes Memphis Particularly Attractive

Among the different areas suitable for turnkey property investment Memphis is exceptionally hot right now.

The city features considerable growth at the moment. The financial upheavals of the last few years led to a huge number of foreclosures, sales, and renovations in the Memphis real estate market.

The city’s intrinsic appeal and strong job market were unaffected, though, so demand for quality homes has remained high.

Rentals are surging ahead of home purchases, making Memphis an ideal environment for turnkey investment.

And thanks to the relatively modest average price of Memphis homes, (currently at about $122,000) you can pick up a fine turnkey property without committing too many of your financial resources.

Points To Prepare Yourself For

If you’re going to get the most out of a piece of turnkey real estate in Memphis, you have to do your homework.

Although one of the great appeals of this form of investment is the ease with which you can find properties, you still have an obligation to pick the ones that offer the greatest money-making potential.

You’ll want to thoroughly research the neighborhood trends of a home you’re going to buy.

You also want to investigate the manager handling the property; as your direct representative you need this person or company to be reliable, trustworthy, and competent.

You should also make sure you’re clear about the responsibilities to your new renters you’re taking on. In many turnkey deals, you’ll have to honor the terms of any leases or other agreements the previous owner made.

If you’re ready to make turnkey properties a part of your real estate investment portfolio, the market in Memphis is definitely worth your attention.

The long-term profit potential is excellent, yet the costs of getting into the market right now are low.

There’s never been a better time to pick up a great rental property or two in Memphis.

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Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 12 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More……

11 Things to Consider When Setting Your Goals


To prepare for the most success in the next 12 months:

1. Decide – what you want to accomplish. Then break it down into manageable steps. In our business, we speak with 20 sellers to set up 8 appointments to buy 1 house. If we want to buy 12 houses next year, we need to speak with 240 sellers. How can we best make that happen? If we want to buy 1 house per month, how do we find 20 sellers each month to speak with?

2. Set financial goals – and hold yourself accountable. Your net worth won’t grow unless you plan for it. How much more money do you “plan” to have saved at the end of the next 12 months? Break that down – how much will you put aside monthly? Warren Buffet famously said, “Do not save what is left after spending, but spend what is left after saving.”

3. Focus on net worth, forget about income – like the wealthy do. How much do you make every year? Is “annual income” even important? Depends. If you make $225,000 per year but you spend $250,000, your income sucks. The wealthy focus on and grow how much they have left at the end of every year – their net worth. Do you know your net worth? Focus there.

4. Pay attention to what you’re making hourly. Seems like a contradiction to item # 3? It’s not. A millionaire makes $500 per hour. If you want to be one, start thinking and acting like one. If you can hire a job out at less than $500 per hour, do it so you have time to do the $500 per hour stuff. Which leads me to my next point:

5. Figure out the $500 per hour stuff. See item #4. What in your life and your business creates the highest financial rewards? I’m in the real estate investing business. For me, I make the most money buying and selling houses which means I should spend the most time talking to sellers and buyers. I do not make money when I am painting walls or mowing yards, so I don’t. I focus on finding and speaking with the people who create success for my business.

6. Think long term. What can you give up today for financial security in the future? When your goals are exciting enough and you have manageable steps to get there, sacrifices today become easier and more than worthwhile because you’re focused on the eventual pay off. Think long term and give yourself enough lead time for the payoff you desire.

7. Live below your means – which sort of goes with #6. If you live better every time you earn more, that won’t leave money for saving and growing your net worth. Don’t increase your lifestyle every time you get a raise.

8. Schedule – whatever you need to make your plans happen. Do you need to set up marketing? Do you need to schedule interviews with banks and hard money lenders to establish funding options? Get out a calendar and schedule the things you need to do to make your goals happen.

9. Focus – Notice how I use this word a lot? Your actions can get sidelined not only by distractions like TV and Facebook, but by what’s happening in your daily life. So much of our life is not planned, but don’t get taken off track for longer than necessary. Identify one goal and work hard to achieve it. Don’t get distracted – don’t make excuses – don’t waste time.

10. Hang out with the right people – not to be snobby, but to accomplish more. Peers greatly influence your behavior so find people successfully doing what you want to do and hang around them. It’s been said that we’re the average of the 5 people we spend the most time with, so changing friends as your lifestyle changes (or even before) will happen. Doing what you’ve done in the past won’t take you where you want to go in the future, neither will hanging out with the same people. It’s a fact, most people hang out with others who make within 10 percent of what they make annually – higher or lower. As your income increases, your friends will change and that’s OK.

11. Keep going. Be OK with failures and set backs. To accomplish a lot, you have to do a lot. When you do a lot, you will make mistakes. The most successful people have made the most mistakes, they just refused to get stopped by them. Don’t get stopped.

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Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 12 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More……

What you should know about the New Tax Law


The changes to tax law that are currently making their way through the House and Senate have been all over the news lately, but there is still a lot of confusion over what exactly is being proposed and how it might impact the average American taxpayer. Frankly, keeping track of the news about all the different proposals and their potential repercussions has reminded me of that EDS Super Bowl ad about herding cats!

The debate in Congress is still ongoing so there’s more to iron out, but here are some of the current proposals, as well as a few tax strategies that could benefit you – depending on your financial situation – for your 2017 taxes.

(Also, I want to clearly state that I am not a tax attorney or accountant.  The goal is to make you aware of the changes and possible actions you might want to consider taking, but it should not be considered as professional tax advice. For that, you should consult your tax advisor.)

Future tax returns may include simplified filing for some

Many taxpayers who currently itemize deductions may find it more beneficial to switch to just claiming the standard deduction on their 2018 return, assuming that the currently proposed increases to the standard deductions are part of the final bill.

New standard deductions

The current bill proposes upping standard deductions to nearly double their current levels. The new standard deduction would be $12,000 for single taxpayers and $24,000 for married couples filing a joint return.

Fewer people will itemize

Assuming that the law passes with the currently proposed deduction levels, itemized deductions may no longer add up to more than the standard deduction. That means that some taxpayers who currently itemize will have no reason to file a return with itemized deductions after this tax year. This is more likely to be the case if you live somewhere with high property taxes or high state and local taxes (SALT). That’s because the proposed tax reforms would only allow you to deduct one of those types of taxes and would limit the deduction to $10,000. With these limitations, the new standard deduction may be more than your itemized deductions.

In fact, that’s my personal situation if the tax reform passes as proposed. My itemized deductions have exceeded the standard deduction threshold every year since I bought my home. But the combination of a new, higher standard deduction and being able to itemize only my state income tax or my property tax would mean that the standard deduction will be larger than my total itemized deductions. So starting with the 2018 tax year, I will probably just file a 1040EZ tax return like I did in the days before I was a homeowner. The good news for me is that filing my taxes will be quick and easy. The bad news is that I will no longer be able to claim deductions for my state income taxes or charitable contributions.

Should you consider prepaying deductible expenses now?

If you’re in the same boat as me and the larger standard deduction means you probably won’t itemize deductions starting with your 2018 tax return, there are a couple of actions you may want to consider taking right now.

Whether these actions will benefit you depends on a lot of factors. For example, if you have a high income, taking extra deductions this year could cause you to fall under the Alternative Minimum Tax (AMT), negating any tax savings you’d realize absent the AMT, so you definitely need to crunch the numbers and talk to your tax advisor before you decide on any course of action.

Mortgage interest prepayments

Because the mortgage payment you normally make in January is for your December mortgage “bill,” paying your January 2018 payment in 2017 means you can deduct it on your 2017 tax return. But keep this in mind: Claiming 13 months of payments on your 2017 taxes means that if you do ultimately itemize in 2018, you’ll only have 11 months of payments to itemize then (unless you prepay your January 2019 payment in December of next year).

Property tax prepayments

Property taxes are deductible in the year they are paid, so if your locality lets you prepay – some do and some don’t – you may be able to deduct those prepaid taxes on your 2017 tax return. However, with this one, there are a couple of huge caveats. If you pay your taxes into an escrow account, you can only deduct the actual amount paid in taxes, which can differ from the amount you pay into escrow. Also, state and local taxes are not deductible under the AMT, so if you fall under the AMT in 2017, there is no benefit in prepaying your property taxes.
Pro tip: The current tax reform proposal limits the property/state/local tax deduction to $10,000, so if your property taxes are higher than that threshold and you continue to itemize your deductions, you could prepay part of your property taxes now to optimize your deductions. For example, if your property taxes are $15,000 a year, you could prepay $5,000 this year and pay the remaining $10,000 next year. But again, the caveats about the AMT and the intricacies of your unique situation apply, so consult your tax advisor before prepaying.

Charitable contributions

If you normally donate $2,000 to your church or $500 to the American Cancer Society annually, you may want to consider donating extra this year so you can claim a higher deduction on your 2017 tax return. By effectively “prepaying” part or all of your 2018 contribution in December of this year, you’ll be able to increase your 2017 deductions without affecting those for 2018 (because your 2018 1040EZ won’t have itemized deductions, including those for charitable donations).

Keep in mind before you pull the trigger on this action that if the tax reform proposal changes in ways that make it better for you to continue to itemize in 2018, you’ll have effectively reduced your 2018 itemized deductions by prepaying your charitable contribution. Basically, taking this action is likely to be beneficial tax-wise only if you’re switching from itemized deductions (charitable contributions are deducted) to a standard deduction (no charitable contribution deduction) starting with your 2018 return.

Other tax changes

As of the publication of this article on December 15, 2017, the list below represents a summary of the proposed changes we think will impact a lot of our members. If you want to take a more detailed look at what is proposed, check out the House and Senate Conference Committee Policy Highlights, which summarizes the current proposed bill. Just keep in mind that the entire tax reform package could get voted down altogether or further negotiations may change it significantly from its current state.

Mortgage interest deduction. Currently, homeowners can deduct the interest paid on mortgages up to $1,000,000. The new proposal will cut the mortgage threshold to $750,000 for new mortgages, but if you already have a mortgage on your home, you’ll be grandfathered in at the current million-dollar level.

Children. The Child Tax Credit will go up to $2,000 with refundability of 70% ($1,400), and the income phaseout threshold will be increased to $400,000. Also, you’ll be required to have a Social Security number for any child for whom you claim the credit, so if you don’t have an SSN for all your kids, you should get one.

Educational savings. The amount of your 529 account that can be distributed each year would bump up to $10,000 and these funds would be eligible for rollover into ABLE accounts for disabled dependents. Additionally, some home-schooling expenses will become 529-eligible.

Alimony. Alimony will no longer be a deductible expense for the ex-spouse paying it, and will no longer be taxable income for the ex-spouse receiving it. This proposed change will only be effective for divorces or separations that happen beginning in 2019.

Sports booster donations. If you make a big donation to your college in order to have rights for season tickets or preferred seating for games, you’ll only be able to claim a charitable deduction for 80% of the amount you donate.

Work-related moves. Currently, if you have to relocate for a job and you pay the moving expenses yourself, you can likely deduct them. The new law ends that deduction for everyone except military families. If your company pays for your relocation, the amount of that employee benefit will count as taxable income for you.

Estate taxes. Both the House and Senate want to double the amount of an estate that is not taxable under the estate tax.

The final vote on the tax reform proposals has happened. If any of the above changes might affect your tax situation, you should pay close attention to what the tax reform looks like so you can make smart-money decisions about any action. Please consult your tax adviser if you have questions on the pending tax reform.

Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 12 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More……


4 Easy Ways to Increase Profits and Your Rentals


Cha-Ching! It’s the first week of the month and time to cash these checks. It is not always easy, but I love owning rentals; especially now when rents are through the roof. The challenge now is finding property to buy. If you were lucky enough to pick up a few properties the last few years you are likely doing very well, but maybe you could be doing even better! Here are four ways to do even better on your rental portfolio.

Consider renting extra space separately. There is a tremendous amount of upside in this. Garages immediately come to mind, but I have also rented storage sheds separately and have heard of people renting sections of the lot for horse boarding or additional storage.

I have a property now that I rent the garage out separately. It is a two car garage that I rent for $200 a month. This one strategy increases my revenue by 10% and there is little to no expenses with the garage lease, so it actually increases profits by more than that!

Rent extra items. I have heard of rental property owners renting out items such as TVs, computers, or furniture to increase revenue. I have not done that, but I have rented washer/dryers separately. Washers and dryers tend to break down so I will never include them with my rental units. If I buy a property with a washer/dryer or I get one from a tenant that has moved out, I will typically either offer it to the tenant for free or rent it to them. Obviously, renting the washer and dryer will increase the monthly cash flow, but you will be responsible if something goes wrong. It could increase your headache, but it will also increase your profits. If the tenant does not want to rent them from you, you can offer it to them for free or you will want to remove them. The last thing you want is the responsibility of insuring the washer and dryer works without any income for the additional hassle.

Bill tenants for utilities. For some reason this was a hard one for me to do. I was taught early on that I, as the landlord, should pay for the water. The argument is that water is the one utility provider that can lien your property for nonpayment. Although that is true, it still makes since to have the tenant pay water. The worst case is the tenant does not pay and you have to.

In my market, it is becoming more acceptable to ask the tenant to pay all utilities, so why not give them what they expect? The two benefits are increase in cash flow for you and they will use less. I just spoke to Travis in my office about this. He has a tri-plex that had extremely high water bills. He was having trouble figuring it out and was paying that bill each month as the landlord. This was cutting into his profits by more than $300 a month!! The solution for him was to pay a company $2,500 to put in a system to individually meter each of the 3 units. Within one month, he discovered that one unit was responsible for most of the water usage and discovered that they were growing marijuana. Those tenants were asked to leave and were replaced with a much better tenant saving Travis over $150 a month. His next step will be to start sending invoices to each tenant for their water usage, which will increase his revenue by another $150.

Reduce turnovers. This one might sound obvious but is often overlooked. Turnovers can be very expensive. In fact, it is not uncommon for one turnover to ruin your profits on a unit for two or more years. The cause includes loss rent, marketing for a new tenant, repairs, and more. Reducing turnover can be complicated. Here are just a few ideas to help.

Screen tenants – This is the single best way to keep your turnovers low. It is extremely important to get quality tenants, and the only way to do that is to screen them properly. Obviously credit and criminal checks are essential, but it is also a good idea to interview your prospect about why they are moving and why they want to rent from you, call references, insure they can afford the rent and utility payments, have a stable drama free lifestyle, take care of their stuff (look in their car when you meet them), and have an emergency contact that will help them if they get into financial trouble.

Smaller rent increases – In a hot rental market like we are in, it is challenging to keep up with the pace in which rents are rising. Often times rent in the area is going up faster than I can raise the rent, which is a very positive thing. The reason this occurs for me is that I do not want to increase rent more than a tenant can afford. My experience is that if the tenant cannot afford the rent increase, they will not tell you. They will attempt to make it work and will eventually fall behind, creating a costly turnover. It is much better, in my opinion, to work with your tenant with reasonable increases and keep them happy and paying their rent each month.

Maintenance – I just had my maintenance team go out to a rental to unclog a shower drain. I got a bill for the service for $125. On the invoice it mentioned that he found hair in the drain. Why is it my responsibility to clear a drain that the tenant clogged? Well the answer is… it’s not. My lease states that I am not responsible for any clogged drain, so when I got the invoice I created an invoice that I sent to the tenant with a copy of the lease and a copy of the invoice I received for the maintenance call. I just got the $125 check in the mail today. Now the tenant is conditioned to take better care of the unit because I am not paying for issues they create.

The other thing about maintenance that has worked really well for me is to take care of items that I am responsible for right away. I do not delay at all. When I get a maintenance call, I will get my team on it right away. The tenant will normally hear from the person scheduled to fix the issue the same day. This has really helped me keep tenants. I have had tenants tell me several times how much they appreciate that. It is not uncommon for a tenant to ask me to rent them another place when they decide to move, and it is also not uncommon for me to hear that a tenant stayed longer than they wanted simply because I took care of them.

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Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 12 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More……