Resources on the Topic:
Rich Dad Poor Dad by Robert Kiyosaki
Landlording: A Handymanual for Scrupulous Landlords and ....by Leigh Robinson
Every Landlord's Tax Deduction Guide by Stephen Fishman
SmartMoney.com's "So You Want To Be a Landlord"
Landlording: A Handymanual for Scrupulous Landlords and ....by Leigh Robinson
Every Landlord's Tax Deduction Guide by Stephen Fishman
SmartMoney.com's "So You Want To Be a Landlord"
For those of you who missed it, make sure you start with the first post on this topic: Slumlord Millionaire: Part 1.
For the rest of you, let's get right into the details of managing your real estate rentals for cash. We are going to move through 3 main topics, tax benefits, managing your rental, and when to sell. Do it all right, and you'll earn the title of Slumlord, which puts you in some pretty great company!
Let's start with taxes because they ARE the primary reason that real estate success is a near guarantee of long term wealth. There are 3 main tax deductions that owning rental properties will open up for you:
1) Mortgage Interest and Real Estate Taxes: Just like a primary residence, you can deduct all interest and taxes on your rental properties.
2) Operating Expenses: Includes utilities, maintenance, condo fees, yard care and any other fees that you spend maintaining your property.
3) Depreciation: This is the true jackpot! Even though real estate tends to appreciate in value, the government allows you to deduct the "estimated" depreciation of your residential building over a 27.5 year period. For example, on a $100,000 property, you can deduct $3,636 per year, which allows you to collect a decent amount of rent without paying any taxes.
Just add all that up. If done right, your total tax deductions on a $100,000 rental could easily top $10,000. Amazing huh? You can quickly see how people who acquire 5-6 rental units never pay a penny in taxes. That's why we call them SLUMLORDS......
Now that you're a tax master, let's move on to managing your rental. For starters, you will need an air tight rental contract. You can start with a standard contract online. If you simply google "rental contract" you will get plenty of results. These can act as starting points, but I strongly advise paying a real estate lawyer to look over the contract, especially if you plan on having multiple units. It is worth the money.........
Next comes finding tenants for your rental. With the explosion of the internet, their are a ton of free sites such as Craigslist to find your tenants. In today's market, this process should be a breeze. People are struggling to get financed for homes, so they are entering the rental market. I don't believe in paying to find tenants. Use all the free resources available to you first, and only then can you move onto the pay sites.
Don't hesitate to be selective. While the fair housing act prevents you from discriminating against tenants, this is YOUR property, so don't just open the doors to anyone. If Homer Simpson or Cosmo Kramer came marching up to my property, I would turn them away in a heartbeat (And then take them out for a beer of course!).
Once the tenants are in, your life should get a lot easier. You will certainly have some maintenance issues to handle, and personally I believe in paying someone else to do the job professionally. Not only does it look good to your tenants, but it will simplify your life and let you focus on finding your next rental.
Finally, we must discuss the sale of your property. When should you sell???
NEVER!
As a real estate mogul, your goal should always be growing your portfolio of properties. If you have too many to manage, hire help. My personal belief is that you should only sell in case of emergency or to help fund a better retirement. Beyond that, those properties should be yours for life!
So now that you know the basics, get out there and start looking for that first property!
Good Luck!
Keys To Success:
Educate Yourself. Managing real estate for a career is complex, but fortunately there are a ton of great resources on the topic. Start with the books above and never stop learning!
Be Frugal. If you can knock out simple jobs on your own, do it. When renovating, look to garage sales and clearance warehouses. You will find a lot of the things you need.
Be Patient! I know this is a theme on every topic, but especially here. Don't over-leverage yourself, and don't rush into the wrong properties.
For the rest of you, let's get right into the details of managing your real estate rentals for cash. We are going to move through 3 main topics, tax benefits, managing your rental, and when to sell. Do it all right, and you'll earn the title of Slumlord, which puts you in some pretty great company!
Let's start with taxes because they ARE the primary reason that real estate success is a near guarantee of long term wealth. There are 3 main tax deductions that owning rental properties will open up for you:
1) Mortgage Interest and Real Estate Taxes: Just like a primary residence, you can deduct all interest and taxes on your rental properties.
2) Operating Expenses: Includes utilities, maintenance, condo fees, yard care and any other fees that you spend maintaining your property.
3) Depreciation: This is the true jackpot! Even though real estate tends to appreciate in value, the government allows you to deduct the "estimated" depreciation of your residential building over a 27.5 year period. For example, on a $100,000 property, you can deduct $3,636 per year, which allows you to collect a decent amount of rent without paying any taxes.
Just add all that up. If done right, your total tax deductions on a $100,000 rental could easily top $10,000. Amazing huh? You can quickly see how people who acquire 5-6 rental units never pay a penny in taxes. That's why we call them SLUMLORDS......
Now that you're a tax master, let's move on to managing your rental. For starters, you will need an air tight rental contract. You can start with a standard contract online. If you simply google "rental contract" you will get plenty of results. These can act as starting points, but I strongly advise paying a real estate lawyer to look over the contract, especially if you plan on having multiple units. It is worth the money.........
Next comes finding tenants for your rental. With the explosion of the internet, their are a ton of free sites such as Craigslist to find your tenants. In today's market, this process should be a breeze. People are struggling to get financed for homes, so they are entering the rental market. I don't believe in paying to find tenants. Use all the free resources available to you first, and only then can you move onto the pay sites.
Don't hesitate to be selective. While the fair housing act prevents you from discriminating against tenants, this is YOUR property, so don't just open the doors to anyone. If Homer Simpson or Cosmo Kramer came marching up to my property, I would turn them away in a heartbeat (And then take them out for a beer of course!).
Once the tenants are in, your life should get a lot easier. You will certainly have some maintenance issues to handle, and personally I believe in paying someone else to do the job professionally. Not only does it look good to your tenants, but it will simplify your life and let you focus on finding your next rental.
Finally, we must discuss the sale of your property. When should you sell???
NEVER!
As a real estate mogul, your goal should always be growing your portfolio of properties. If you have too many to manage, hire help. My personal belief is that you should only sell in case of emergency or to help fund a better retirement. Beyond that, those properties should be yours for life!
So now that you know the basics, get out there and start looking for that first property!
Good Luck!
Keys To Success:
Educate Yourself. Managing real estate for a career is complex, but fortunately there are a ton of great resources on the topic. Start with the books above and never stop learning!
Be Frugal. If you can knock out simple jobs on your own, do it. When renovating, look to garage sales and clearance warehouses. You will find a lot of the things you need.
Be Patient! I know this is a theme on every topic, but especially here. Don't over-leverage yourself, and don't rush into the wrong properties.
Related Articles
Good Luck!
Michael A. Schrader
www.upwardlifestyle.com
