All About Evictions

Unfortunately, eviction is an inevitable part of being a real estate investor. Especially as you grow your portfolio, it’s important to know what to expect should you ever need to evict a tenant from one of your rental properties.

As a landlord, you should know your rights amidst an eviction. Although eviction laws vary from state to state, there are a few typical terms of the eviction process you should expect regardless of your location.

You can’t begin the eviction process until you’ve notified your tenant that you’re ending their tenancy. You must give them proper notice. Then, you can file the legal paperwork to initiate the eviction process. Typically, it costs around $150 to file the lawsuit, depending on the city you live in.

There are three reasons why you can file an eviction:

1) Pay Rent or Quit Notice. This notice gives a tenant who is behind on rent two options: pay up or get out!

2) Cure or Quit Notice. This is when the tenant has acted in violation of the rental agreement. This notice gives them the option to either fix their wrongdoing, or leave the premises. An example would be acting out the terms of the lease such as having a pet that you are not aware of or making excessive noise.

3) Unconditional Quit Notice. This orders the tenant to move out when they have repeatedly violated the lease agreement. This typically applies when you’ve discussed a matter with the tenant multiple times, but is still an issue. This can be for noise, damage, or other offenses.

And remember, it’s important to be knowledgeable about the state you’re investing in. Certain states are more protective of landlords in their legislation. Check out my list of the 5 most landlord friendly states!

If you’re working with a great property management team, which you should be, they will handle the eviction process on your behalf. Sometimes people ask if you need a lawyer for this process, but my property management teams have always handled evictions beautifully. 

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3 Biggest Expenses Most Real Estate Investors Overlook

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Every single expense you encounter as a real estate investor ultimately comes out of your ROI. That’s why it’s so important to be prepared for any costs and expenses you might encounter. I often find that there are three big expenses that many investors overlook.

If you skip the important step of figuring expenses into your ROI formula, you’ll be disappointed! Factor in these things ahead of time, so you aren’t surprised if and when they occur.

Vacancy expenses. Every real estate investor WILL have a vacancy at one time or another. People move, things happen, it’s just part of the business. And when your tenant moves out, you’ll have to conduct a tenant turnover. Depending on the amount of work that needs to be done, and how long it takes to find the right tenant, it could be a few months. I always account for 5% vacancies in my ROI formula.

Property management expenses. Having a property management team on your side is an absolute must! Hand over these duties to a professional who understands what they’re doing, and be prepared to pay for their expertise! The industry standard is around 10% of your monthly rental income.

Maintenance expenses. If you own your home, you know that things break from time to time. A rental property is no different. It’s wishful thinking to assume you won’t have expenses. I like to set aside at least one month’s rent to cover any expenses. Because we do extensive rehabs, I typically don’t have any huge expenses, but little things do come up occasionally, and you want to be prepared just in case!

If you want to be as prepared as possible, take these expenses into account. Figure them into your ROI formula, conservatively.

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Is Turnkey Real Estate Right for You?

Is turnkey real estate right for you? This is an important question to ask yourself, because let’s be honest: it’s not for everyone. As always, I suggest real estate investors try to reverse engineer their lives.

Think about your end goal; imagine what you want your life to look like down the road once you’ve achieved your Freedom Number. What do you envision your future to look like? Will you be spending your free time renovating properties? Or do you plan to collect rent checks passively, while you spend your time with your family doing the things you love?

Turnkey real estate is not for someone who is Type A and needs to be hands-on. If that sounds like you, we have a DIY playlist on YouTube that you might find helpful.

Here’s are a few key indicators that you and turnkey are a match:  

  • You don’t know the first thing about finding a great investment in the right market.
  • You don't have the time to commit to everything investing entails.
  • You don’t want to get your hands dirty doing a rehab.
  • You don’t want to worry about hiring contractors.
  • You don’t care to pick out paint, or find the right materials.
  • You don’t want to interview property management teams to find the right fit.
  • You want a totally passive experience and high ROI.

It’s a fantastic solution for those investors who want the benefits of high ROI and monthly cash flow, but don’t want to put in the work. Turnkey is totally hands-off, you juts sit back and collect rent checks.

The entire system is rock solid. You don’t have to worry about paying contractors crazy rates, and your property management team is ready to go! Everything runs incredibly efficiently, which makes your business scalable.

If you’re ready to pick up your first turnkey property, let’s talk! Book a free call with our team to talk about making your real estate goals happen.

Is turnkey real estate investing right for you?

Is It Safe to Invest Out of State?

Is it safe to purchase real estate investments out of state? Should you be worried about what could go wrong? What should you consider before purchasing a property so far away?

Many investors are initially fearful about purchasing a property outside of their home state, but as long as you've got a few things covered, your business will run seamlessly! 

I find that whether or not an investor wants to purchase out-of-state is a personal preference. In my business, I knew it wasn’t profitable to purchase buy and hold properties in my home state of New Jersey.

Properties in my area are simply bad investments. The cost to acquire is too high, and the taxes are outrageous. In my research, I’ve found that the ROI in New Jersey isn’t lucrative. If I want to build legacy wealth, I have to acquire properties with a high ROI.

Therefore, I always purchase my properties outside of New Jersey, and in my experience, it’s perfectly safe. I find that it’s just as safe, if not safer than purchasing properties close to home.

Worrying about safety is a mental barrier. Anything that happens to a property out of state could also occur nearby. In order to feel comfortable, I ensure that I have a professional, trustworthy property management team in place. I work with a team that has an A+ rating with the Better Business Bureau. They’re always nearby, and proactive about tackling and issues that may arise.

Get outside of your state, get outside of your comfort zone, and get a high return on investment!

Is it safe to purchase real estate investments out of state? Some things to consider when buying out of state rental property.

5 Cities with the Highest Vacancy Rates

One big factor to consider when choosing a rental market is vacancy rate. If your main goal is earn cash flow, you’ll want to invest in markets where properties are quickly and consistently rented. A high vacancy can be incredibly problematic for investors, and these are five cities you'll want to avoid: 

5) Winston-Salem North Carolina. This city is known as the Camel City because of its role in the tobacco industry. Due to the decline of tobacco consumption, the city has experienced an enormous decline in employment opportunities. Without jobs, renters stay away. The city’s vacancy rate is one of the highest in the country.

4) Mobile, Alabama. Although Mobile is a beautiful port city, it has not been able to capitalize like similar cities in Georgia and Florida. Mobile has a lack of economic growth, and high taxes that discourage renters from living in the area.

3) Jackson, Mississippi. I’ve actually invested in this area before, but I certainly won’t again unless something drastic happens. The properties in Jacksonville are cheap, but this area experiences a high volume of crime. This area is full of D and F neighborhoods that are unattractive to renters.

2) Little Rock, Arkansas. You might be surprised to hear that a capital city has one of the highest vacancy rates in the country. Little Rock doesn’t experience high crime rates or dire economic circumstances, but an issue of too many properties. Homes and apartments were overbuilt in this area, and there simply aren’t enough renters to fill those spots.

1) Memphis, Tennessee. Recently, the FBI released crime statistics, and Memphis held the title of the second highest criminal activity in the United States. Not to mention, Memphis was hit hard in the recession. The combination of high crime and no jobs gives Memphis the highest vacancy rate in the country.

For more on rental markets, check out our list of the 5 most landlord friendly states, and how to assess a rental market! 

One big factor to consider when choosing a rental market is vacancy rate. If your main goal is earn cash flow, you’ll want to invest in markets where properties are quickly and consistently rented.

Why Do Tenants Rent Instead of Buy?

Why would someone rent a relatively cheap home—why wouldn’t they just buy it? Wouldn’t a mortgage on a low cost home be cheaper per month than renting? These are questions we get from time to time. Some people doubt the economics of a market where people are unable to purchase a low cost home in the $40-50k range.

However, more and more people are deciding to rent. I’ve found that there are three major reasons why some people choose to rent, instead of becoming homeowners.

1) Mindset. As a real estate investor, it seems like the obvious answer to simply purchase a home. But here’s the thing: not everyone thinks like you and I. Not everyone wants to own a home. They might have a different perspective. Perhaps they want the flexibility and impermanence of renting. Maybe they don’t want the headaches and hassles of fixing things around the home; they can just call the property manager if something goes wrong. Maybe they didn’t grow up in a home that their parents owned, so that’s the norm for them. Not everyone has the same views about real estate and home ownership that you and I do, and that's okay.

2) Money. Most banks require a 20% down payment for a mortgage. On a $40,000 home, the down payment would be around $8,000. Maybe that doesn’t sound like a lot of money to you, but it might be for someone else. Plenty of people across the country do not have an extra $8,000 sitting in a bank account. For those people, renting makes more sense.

3) Banks. Many banks won’t put a mortgage on a low cost home because it doesn’t make them much money. Additionally, banks have an exhaustive vetting process. If you’re someone who has a low credit score or job instability, chances are you won’t qualify for a loan.

In the end, it comes down to individual situations, but there are many reasons why tenants rent. We as investors should be glad they do, and continue to provide sold homes for our tenants. 

More and more people are deciding to rent. I’ve found that there are three major reasons why some people choose to rent, instead of becoming homeowners.

The Real Estate Investor's Guide to: Rich Dad Poor Dad by Robert Kiyosaki

Many successful investors who I’ve interviewed for the Investing in Real Estate Podcast have something in common—they struck inspiration after reading Rich Dad Poor Dad by Robert T. Kiyosaki. If you’ve read the book, this should come as no surprise. In fact, it’s touted as the #1 personal finance book of all time.

As a quick overview, Kiyosaki was raised by two different dads—one rich, and one poor. Therefore he grew up seeing differing viewpoints about money and wealth building. This situation gave him insight into investing, having your money work for you, and the importance of gaining control of your finances. There are six major principles in the book, all of which apply to real estate investing.

The rich don’t work for money. Truly successful people understand how to make their money work for them. Read: passive income. This is why I’m so passionate about rental real estate! Owning investment properties brings in rent checks every single month.

Why teach financial literacy? Many of us are not taught about how to make and manage money. We don’t learn financial skills in school, and many parents pass down their own limiting beliefs and fear-based ideals about money. Just today on the podcast, Natali and I discussed how we intend to teach our small children about money. We don’t just want them to think of money as something that mommy and daddy have, but rather something that they have the ability to create.

Mind your own business. In this section of the book, Kiyosaki writes about the importance of building your assets, and that we should all own our own businesses. That’s exactly what we do with rental real estate; it’s our business that allows us to build our net worth.

 The history of taxes and the power of corporations. The majority of people hate taxes but this is only because they don’t understand how the tax law works, or how to make it work in their favor. Truly successful people take the time to gain an understanding of the tax law, and then reap the benefits. The US Tax Code favors entrepreneurs and real estate investors. There are incredible tax implications for owning rental real estate. I had the pleasure of having Kiyosaki’s personal tax advisor on the podcast to talk about this exact topic.

The rich invent money. Most people are of the mindset that they should work harder at their paycheck-based job, and try to save a little bit every month. The problem with this is that it takes forever, and the return on investment is low. But rich people build their financial intelligence, and gain a deep understanding of investments in order to create more money. That’s why at Morris Invest we’re all about ROI!

 Work to learn—don’t work for money. For most people, job security is everything. But when you own cash-flowing rental real estate properties, your job is no longer all about the money. That’s true freedom.

Looking for more books? Check out my list, 5 Must-Read Books for Real Estate Investors.

The real estate investor's guide to Rich Dad Poor Dad by Robert Kiyosaki.