How to Handle Tenant Requests in Your Rental Property

Without tenants, a rental real estate business cannot cash flow. In our real estate business, our philosophy is to treat our tenants well. We do this not only because we believe in treating people well in general, but also because we understand the importance of having tenants stay in order to produce monthly income.

Some landlords take a cavalier approach when it comes to their tenants. They know that their rental property is an asset that they own, and that their tenants simply rent from them. Personally, we believe that having a big ego like that is dangerous.

We like to remember that an important piece of our business structure is creating a great home for an individual of family to live in. We have to remember our main purpose: to provide a home for families. We want our tenants to feel at home in our properties. Because of that, our relationship with our tenants tends to be flexible—it’s a give and take. We certainly set boundaries, and we don’t want to be taken advantage of. 

As a landlord, you will get questions from your tenants. Some examples are, "can I have a dog?" or "can I trim back these bushes?" Sometimes, the property management company will discourage you from approving these requests. However, we tend to use one guiding principle to make these types of decisions: will fulfilling this request make our tenant feel more at home?

If a tenant feels at home, they are more likely to stay long-term. The longer the tenant stays, the longer we receive consistent rent from that rental property. It’s important to remember that a rental real estate business revolves around humans. 

How to Pay Off Your Mortgage with a HELOC

What would your life be like if you had no mortgage? Would you accelerate your investing strategy, pay off debt, or take more family vacations? A few years ago, Natali and I discovered an incredible means to pay off our primary residence. Now we utilize this strategy consistently in order to meet our ultimate goal: purchasing more buy and hold real estate.

Using a HELOC, or home equity line of credit, to pay off your mortgage is a way to create equity in your primary home. Doing so allows you to pay down your balance quickly. More importantly, it allows us to leverage our funds in order to purchase cash flowing real estate.

The reason this works is because the loan on your house is amortized, meaning the value of the home is gradually paid off. Typically on a mortgage, you’re paying off the interest for the first years of the loan. Principle is not paid off until later.

But if you’re able to put a large amount of funds from a HELOC toward your mortgage, you can designate that money to go specifically toward your principle balance. Then going forward, a larger percentage of your monthly payment can be applied toward principle, instead of primarily interest.

Traditionally, you would pay off your mortgage in 15-30 years, but with enough discipline, this system allows you to do so in 5 years or less. Natali and I have utilized this strategy, and it works! If you want a step-by-step guide on exactly how to employ this strategy, pick up our new book on Amazon! 

What would your life be like if you had no mortgage? Would you accelerate your investing strategy, pay off debt, or take more family vacations? A few years ago, Natali and I discovered an incredible means to pay off our primary residence.

Home Equity Loan or Home Equity Line of Credit?

One of the best ways to rapidly build your real estate portfolio is to use the power of leverage. And if you own your primary residence, taking a loan based off of the equity can be immensely useful. There are a few ways to utilize this strategy, and many of you have asked whether a home equity loan or a HELOC is a better strategy.

Home equity loans and home equity lines of credit are similar in that they both allow you to borrow against the amount of equity in your home. However, the two financial products have some main differences you’ll want to consider.

A home equity loan gives you access to one lump sum of money. This is a fairly traditional loan. The bank looks at the value of the home and gives you a loan in one amount.

A home equity line of credit, or HELOC, works a little differently. A HELOC is a revolving line of credit, meaning it works similarly to a credit card. A HELOC can typically be used for around ten years. It has a low introductory rate, and uses simple interest.

Personally, I like to employ the strategy of using a HELOC because it is repeatable and reusable! It can be used like a traditional checking account; you will even be issued a check card and a checkbook. You can learn more about using a HELOC as an investment tool here! 

One of the best ways to rapidly build your real estate portfolio is to use the power of leverage. And if you own your primary residence, taking a loan based off of the equity can be immensely useful. There are a few ways to utilize this strategy, and many of you have asked whether a home equity loan or a HELOC is a better strategy.

How to Determine Your Payoff Schedule for Real Estate Investments

Many investors have asked us about the most effective way to pay off rental properties quickly. However, I think that sometimes investors get ahead of themselves. Before you determine how to accelerate your loan payoff, you should decide if it’s the right option for you to do so.

In order to determine if you should accelerate your payoff date, there are four key areas you should consider. There is no one-size fits-all when it comes to finances, so you’ll need to survey the options, and how they will work for your individual situation.

  1. Do you have other investment opportunities? It’s fine to pay down your mortgage if you don’t have any opportunities available to you at the time. But if a great deal comes across your desk, you may want to take the cash flow from your tenant to purchase an additional rental property. 
  2. What is your tolerance for debt? If you’re in a Dave Ramsey mindset, you’ll probably be focused on paying off your debt as quickly as possible. On the other hand, if you’re interested in using leverage to grow your portfolio, paying off the loan can wait. 
  3. What is your time horizon? Your investment strategy will likely be different when you’re 30 versus when you’re 60 years old. However, it’s not all about age, it’s more so about mindset. It all depends on how quickly you want your properties to cash flow.
  4. What is your required monthly income? If you’re at a time in your life where you’re using your rental income just to make ends meet, you should probably keep your cash flow. If your rental income is just icing on the cake, you might be more inclined to put it toward paying off debt.
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In order to determine if you should accelerate your payoff date, there are four key areas you should consider. There is no one-size fits-all when it comes to finances, so you’ll need to survey the options, and how they will work for your individual situation.

How to Deal with Real Estate Naysayers

Have you ever encountered naysayers when you talk about your real estate goals? If so, you’re not alone. We hear from investors all the time who hear negative opinions, horror stories, and limiting beliefs—particularly from their own relatives!

Particularly if you’re just starting on your real estate journey, you won’t have all the answers, and that’s okay. But if you want to share the things you’re excited about with people in your life, you might encounter a “negative nelly” or two along the way.

Oftentimes, these naysayers have an anecdote to share. And typically, it has to do with terrible tenants. This is why we work with property management teams! They screen the tenants, and find a great, responsible person to live in your home. And if a problem does arise, you won’t be the one fielding the phone calls.

The first tactic we have to offer is to try spending some time educating that person. If you can explain to them the smart, slow, and steady approach to investing, they might be able to understand your situation. You can also point them to resources, such as our podcast or YouTube channel. 

An alternative approach is to ignore the naysayer altogether. Just go out there, and pursue your investing goals. Soon enough, you’ll be making passive income, and they’ll be left scratching their head. There is a lot of fear out their surrounding investing, particularly after the last crash. But if you follow the right approach, real estate investing can bring you financial freedom. 

Have you ever encountered naysayers when you talk about your real estate goals? If so, you’re not alone. We hear from investors all the time who hear negative opinions, horror stories, and limiting beliefs—particularly from their own relatives!

The Basic Foundation of a Real Estate Investing Business

If you take real estate investing seriously, you’ll want to conduct your venture as a business. Doing so makes your investing more profitable, more organized, and more successful! I recommend setting up a business in order to reap all the benefits of being a business owner.

In my experience, there are six specific steps you should take to set up the groundwork of your real estate business. When you operate as a business, you reap the tax benefits and overall income benefits of owning rental real estate!  

  1. Know what your goals are! If you don’t have a clear goal, you have no direction. If you haven’t yet set a goal, download our Freedom Cheat Sheet. It’s the perfect roadmap to financial freedom.
  2. Choose a legal entity. We use LLCs per the counsel of our accountants. Be sure to seek the advice of your own team. Operating as a business allows you to receive incredible tax benefits! Not to mention, you can offset your rental income by writing off business expenses.
  3. Implement the Profit First System. This system has overhauled my entire business. Profit First is a simple and effective formula designed to help businesses stake claim on their income by prioritizing profit above sales and expenses. You can hear my interview with Profit First author Mike Michalowicz here, and how Natali and I use Profit First in our personal business here.
  4. Organize yourself early in the game. This is something I wish I had done. I had a few properties under my belt before I decided to take organization seriously. The sooner you start organizing, the easier it will be. Check out episode 100 of Investing in Real Estate to hear about our real estate organization system.
  5. Never stop purchasing real estate investments! Why? You pay more at tax time on your rental income if you aren’t offsetting it by purchasing more real estate! Here’s more about the “buy until you die” strategy.
  6. Set a vision goal. Think about your future in real estate, and what you want it to look like. Setting goals can help you hire the right team and outsource your business. Doing so makes your experience passive! 
there are six specific steps you should take to set up the groundwork of your real estate business.

Calculating Your Net Worth for Real Estate Investing

Calculating your net worth is so important. We recommend doing so regularly in order to reach your financial goals. You might think that calculating your net worth seems daunting, but the process is quite simple.

Finding your exact net worth is as simple as addition and subtraction. To us, it’s motivating to track our net worth and determine if we are on track to reaching our financial goals. Here’s how you can calculate your net worth:

You’ll begin by making a list of everything you own that is of value. Include your real estate investments, cash accounts, stocks, and 401k. Other assets could be college savings accounts, vehicles you own, and art. Include anything that is cash, or could be sold for cash.

You should also assess all of your liabilities. This includes all of your debts. Include the remaining balance on your mortgage and car loans, any credit card debt, a HELOC, etc.

Then you subtract your liabilities from your assets to determine your total net worth. Another way to think of this is if you were to sell everything you own and pay off all of your debts, your net worth is what you would have left. If you want an exact template to use, there’s a freebie on Natali’s website.

How would your net worth change by purchasing one more rental property? Or two? It's fun to imagine. Remember Kiyosaki's advice: rich people buy assets! 

It’s motivating to track our net worth and determine if we are on track to reaching our financial goals. Here’s how you can calculate your net worth