The Landlord Suicide Squeeze

The suicide squeeze is one of the most exciting plays in baseball.

It happens when there’s a runner on third who takes off toward home when the pitcher starts his motion, expecting the batter to make some sort of contact with the ball and put it in play, thus scoring a run.

Except for trying to steal home outright it’s also the riskiest play in baseball.

I was with a couple of buddies this afternoon smoking cigars and talking shop. We got on the subject of rental houses, and since one of them is a lawyer, we talked at length about how many LLCs I use with my rentals and how I learned to use them properly.

He then told me about a couple of his colleagues that have free-and-clear rental houses. They’re building up portfolios, and his understanding is that neither of them use LLCs at all, as they were simply holding the properties in their own names.

That’s just about the riskiest play in landlording.

Which is why I call doing that it the Landlord Suicide Squeeze.

Why? Because when you do that you’re betting your entire personal balance sheet on black.

Every single day.

All it takes is one slip and fall or one “accident” at one of your properties and you could be committing personal financial Hara-Kiri.

Now I know the folks he was referring to, and they’re both really smart people. Which reinforces to me the fact that proper use of entities isn’t common knowledge.

So I want to use this space to review the reasons why using entities is important when you have rentals.

One caveat – my friend is a lawyer, I’m not. So I’m not giving you legal advice. If you have questions, talk to a local attorney with real estate entity experience.

Here are three items to keep in mind:

Beware of Professional Tenants!

DennisFassett.comI have to say that one of my biggest fears about being a rental property owner is running into a “Professional Tenant”.

A “Professional Tenant” is a someone who knows the rental laws cold, knows the system, and therefore knows how to work the system” by taking advantage of pieces of the law to live rent free. Sometimes indefinitely.

They can cost you several months of rent and thousands of dollars in legal fees before you win. And they’re generally not collectable so while you’ll eventually get your house back the judgment will be worthless.

I’ve mitigated that risk somewhat by buying and owning properties in the best school districts, so I generally have no less than ten good quality applicants to choose from when I have a vacancy. So I can reject an applicant that doesn’t look right on paper.

And to date I haven’t ever rented to one. But my fear is still there.

I bring this up because I just read a great piece on the topic and I wanted to share it with you.

It’s called ‘Professional Tenants’ and How Not to Fall Victim to Them, and it was written by Richard D. Vetstein, Esq.. A link to the article is below.

Landlord Friendly Financing? Seriously?

dennisfassett.comThis is pretty amazing.

I was looking around for some new ideas on how to finance additional rental properties, and I happened to find something that was pretty surprising…..

…… that a monster-sized hedge fund – BLACKSTONE no less – has started offering financing specifically focused on rental property owners.

Yeah. To say I was shocked was an understatement.

I mean, Blackstone has been the bad guy as they hoovered up all the good deals in many areas over the last several years.

But that has apparently changed.

I have never been very fond of conventional lenders. They don’t like rental properties, and back before and during the crash they kept making it more and more difficult to get their approval.

In fact, the process to get my 10th conforming mortgage took SIX MONTHS to accomplish. Partially due to the broker’s incompetence, but most of it was due to the lender changing he rules of the game as the game was being played.

So the fact that an organization is now landlord friendly is a great thing.

I’ve included the text from the press release below, and there’s a link to their lending site as well if you’d like to get more information.

Let me know how it goes if you decide to reach out to them.

Here’s the press release from Blackstone….

Bad Tenants Suck

dennisfassett.comThis is Captain Obvious reporting!

Seriously – I really like being a rental property owner. And I really like most of my tenants too.

But occasionally I get some clown who decides that they’re special and they don’t have to play by the rules anymore.

Like paying rent on time.

So I like to deal with these people quickly, because if I don’t they get worse.

So if you have been following me for any length of time you know that I’m being a fan of cleaning up my rent roll a regular basis.

I find the best time to do that is in the spring. And I consider June 1 to be “last call” for rent roll spring cleaning.

Why? Because the best renters wait until the summer to move, so they don’t have to deal with the kids being in school or changing school districts.

Newsflash – It Ain’t That Hard to Be a Set and Forget Landlord…

our__1_bossHere’s a news flash – being a landlord isn’t rocket science.

Seriously. It just ain’t all that hard to own rental properties and make money at it. With very little work on your part.

Actually – to be precise, it ain’t all that hard IF you do two simple and pretty obvious things.

And that’s to heed the Two Critical Success Factors for owning rental properties.

That’s all it takes. Seriously.

If you simply heed the two Critical Success Factors, you’ll eliminate about 90% of the headaches that can come with owning rental houses. And by headaches I primarily mean VACANCIES.

I know what you’re thinking – how do I know this?

Because when I started I was really thick headed and it took me a couple of years to figure it out. And after being beaten bloody by my initial experience I – magically – became willing to learn. (That’s sarcasm just in case you didn’t get it)

And my results bear this out.

I Have a Secret…

single family rentals 101Yep. I have a secret. Something that I’ve never told anyone.

But I have to come clean.

What’s the secret?

Well, I have a tenant in one of my houses. They moved in right after I bought it in the fall of 2006. They’ve been with me now for seven and a half years.

The secret is that I haven’t raised their rent one dime since they’ve been living there.

That’s right – they’re paying the exact same rent that they were in October of 2006.

Shocking, right? Perhaps. But I couldn’t be happier!

Now I know what you’re thinking – that I’ve been leaving money on the table all these years, and that I’m a really bad property manager for not raising the rent, and so on and so on and so on.

But am I a bad property manager?