By David Pickron
Think of your rental criteria as frequently asked questions for those applying to rent your property and are they written down?
Early on in my investing career I flew by the seat of my pants. I had no real policies or guidelines; I relied on gut reactions to situations as they surfaced. As I travel and meet with different real estate groups across the country, I always ask this critically important question; who here uses a detailed criteria? Rarely do I get many hands raised.
In fact, you may be asking right now, what is criteria and more importantly, how do I make one?
Like any business, your rental criteria can function as your rental policy, lining out your rules and regulations. It covers questions like:
- Can I smoke on the property?
- Do you rent to people with criminal history? If yes, what kind of history would disqualify me?
- How high does my credit need to be in order to qualify?
Think of your criteria as an FAQ for those applying for your property. I love the fact that I have all my requirements written down for the world to see. No surprises! And best of all this helps me treat everyone the same and avoid even a hint of a fair housing violation.
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One other important note is I always have a unique criteria for each property in my portfolio. Factors like location, square footage, and age or condition of the home all go into the creation of the criteria. I may require a lower credit score, less down payment, the inclusion of pets, or other things that are unique to that property. With that being said, I give every person that views that property the same criteria for that unique property.
While having your criteria is crucial, sharing it is even more important. I like to share with my potential tenants throughout our interactions in the following three ways.
- Share your criteria on your listing. Isn’t it a waste of everyone’s time to look at the listing, consider, schedule, and show a property when the applicant doesn’t even meet the criteria? Though I would encourage you to let everyone apply, giving them your criteria in advance allows them to read it before they reach out or see the property. If an individual reviewing your listing has three dogs and is able to see that this property doesn’t accept pets, chances are they will move on to the next listing. This saves you time from responding to someone who will never qualify under that properties criteria.
- Provide and review a copy of the criteria at the time of showing the property. Once again, if you do not allow smoking on that property, your applicant will have heard and acknowledged that, so even if you forget to mention that in the walk through, you’re still covered. A detailed criteria lets them know you are a professional and those trying to get away with something will move on. On the other hand, if they still apply and you have to deny them for something on the criteria, you know they took the chance, hoping you would not find out or they flat out lied to you. Either way, this is not an individual you want to enter into business with anyway.
- Before you invite them to apply, the Rent Perfect system I use will attach the specific criteria for that property to the link I send them. It’s just one more chance for them to see the rules of that specific property in advance. Simply put, if they cannot pass my rules, they will be declined, and I’ll move to the next applicant.
As a landlord, I give them three separate times to acknowledge and understand my rules before they pay the application fee.
I would rather have the tough conversations before they apply and become my tenant.
Catching a renter smoking after the fact while they are living on the property is a much more difficult (and far more expensive) situation. By being open and sharing your criteria, you can treat everyone the same with a well-documented process if there is ever a fair housing complaint against you. Remember, you are hoping to make this individual your business partner for the next few years. Taking this small but critical step is just one way to help you get the right tenant the first time.
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By Bradley Barth
Estate planning is a crucial aspect of managing your assets, especially if you’re heavily invested in real estate. As a real estate investor, you’ve likely put significant time, effort, and money into building your portfolio. Ensuring that your investments are protected and managed according to your wishes beyond your lifetime is essential. In this article, we’ll delve into some essential estate planning tools that every real estate investor should have in place.
WILL
A will is the cornerstone of any estate plan. It outlines how you want your assets, including real estate properties, to be distributed after your passing. Without a will, state laws will determine how your assets are divided, which may not align with your wishes. When drafting your will, be specific about which properties you want to leave to whom and consider contingencies for any unforeseen circumstances.
TRUSTS
Trusts offer more flexibility and control over the distribution of your assets compared to wills. For real estate investors, a revocable living trust is particularly valuable. By transferring ownership of your properties to the trust, you retain control during your lifetime while
ensuring a smooth transition of ownership upon your death or incapacitation. Additionally, trusts can help avoid probate, which can be time-consuming and costly.
DURABLE POWER OF ATTORNEY
A durable power of attorney allows you to appoint someone to make financial and legal decisions on your behalf if you become incapacitated. This is crucial for real estate investors, as it ensures that someone can manage your properties and investments if you’re unable to do so yourself. Make sure to choose a trustworthy individual who understands your investment strategy and preferences.
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HEALTHCARE PROXY
In addition to financial matters, it’s essential to plan for healthcare decisions in the event of incapacity. A healthcare proxy, also known as a medical power of attorney, designates someone to make medical decisions on your behalf if you’re unable to do so. This includes
decisions about medical treatment, long-term care, and end-of-life care.
BENEFICIARY DESIGNATIONS
Many real estate investors overlook the importance of beneficiary designations on assets such as retirement accounts, life insurance policies, and even certain types of real estate holdings. By designating beneficiaries, you can ensure that these assets pass directly to your chosen
recipients without going through probate. Regularly review and update your beneficiary designations to reflect any changes in your personal or financial circumstances.
LETTER OF INTENT
While not a legally binding document, a letter of intent can provide guidance to your loved ones and beneficiaries regarding your wishes for your real estate investments.
This document can include instructions on property management, maintenance, and any specific goals or objectives you have for your properties. While it may not have the same legal weight as a will or trust, a letter of intent can offer clarity and peace of mind to your heirs.
Estate planning is a vital aspect of managing your real estate investments and ensuring that your assets are preserved and distributed according to your wishes. By implementing these essential estate planning tools, you can protect your properties, minimize taxes and probate costs, and provide for your loved ones in the future.
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Provided by Bigger Pockets
Selecting, validating, renovating, and managing a successful rental property requires specific skills, local knowledge, processes, and resources. The only source for what you need is a local investment team. Without it, you are merely guessing.
The Most Important Team Member Is the Investment Agent
Investment agents are entirely different from regular residential agents. Here’s how.
Residential agents
Residential agents help clients buy or sell homes. The process is simple: Clients scan real estate sites or drip feeds and choose the properties they want to see. The agent provides access to these properties.
If the buyer wishes to submit an offer, the agent facilitates the offer. If the offer is accepted, the agent facilitates closing.
Except for adding the buyer to a drip feed, providing access to the properties, and handling paperwork, residential agents provide little value to an investor.
Investment agents
Investment agents assist clients in purchasing income streams, not homes. They need to understand finance, market trends, ROI, and tenant demographics, and they are always part of a team.
The process is entirely different. Here’s a high-level overview of our process:
- Define the client’s financial goals.
- Develop a property profile that supports the client’s goals.
- Find conforming properties and generate analytics.
- Perform an on-site evaluation for properties of interest, including sending annotated walk-through videos to the client and property manager.
- Obtain the property manager’s evaluation of the property based on the video, including estimated rent, time to rent, and recommended renovation items.
- Estimate the renovation cost based on the property manager’s recommendation.
- Recommend offer price and terms.
- Manage due diligence, including inspections and in-person walk-throughs for property managers.
- Obtain quotes for all renovation items.
- Overwatch renovation after the close of escrow.
- Facilitate property manager take-over and rental listing.
The takeaway
Investment agents and their team members provide a wide range of services, including property selection, property analytics (not MLS data sheets), validation, renovation management, and more. These are highly valuable services for investors.
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Qualifying an Investment Agent
Finding a (good) investment agent can be challenging. The problem is that while there may be thousands of residential agents, there may be only one or two investment agents in a market.
Some residential agents will occasionally sell real estate that becomes rental properties. However, the client selects the properties and provides all the investment skills. The residential agent usually provides no services beyond those needed for homebuyers.
Interview questions
How can you tell an investment agent from others? By asking the right interview questions.
Before interviewing candidates, compose a list of 10 or fewer questions; you will not have time for more. Ask each candidate the same questions, and note each response for later comparison.
Here are sample questions, along with acceptable responses. Will you find a candidate with the “right” answer to every question? Probably not, but make sure they provide reasonable answers.
- Tell me about your investment team: You’re looking for a response like, “I’ve worked with X property manager for years. We’ve completed X properties,” or “I work with several renovation companies…” They have no value to you if they are not part of an investment team. Move on to the next candidate.
- Do you own investment properties? I would reject the candidate if they have not personally owned investment properties.
- How many investment properties did you close in the last 12 months? Some agents only sell two or three properties per year. Even if all were investment properties, there is insufficient repetition for the needed processes, experience, and resources. A minimum of 12 investment properties per year is necessary to be proficient.
- Did you or your client select the properties? This is an important question. Residential and investment-friendly agents do not pick properties. They send MLS data sheets for the properties the client requests. The client evaluates the properties and selects one or more to make an offer. The agent adds almost no value if you do all the work. Investment agents select potential properties and provide analytics. Reject the candidate if the client selected the property.
- What were your primary selection criteria? It could be the initial return, appreciation, tenant pool, or something else. You’re looking for a plausible answer based on analytics, not opinion or “feelings.”
- Tell me about the tenant pool segment you target: Understanding the existence of tenant pool segments and their characteristics is not common knowledge. It requires a person with investment experience. If they do not have a plausible answer or do not understand the question, go to the next candidate.
- How did you estimate rent and time to rent? They should be able to describe a process like, “I look at recently rented comparable rentals.” Another good answer is that they work with a property manager who supplies this information. If they answer that they use Zillow, Redfin, Rentometer, etc., they do not know how to evaluate investment properties. No real estate sites I’ve seen provide usable estimates of rent or time to rent for specific properties. This is critical information when you are evaluating investment properties.
- Tell me about your renovation process: You are looking for an answer like, “I work with the property manager to determine a list of renovation items. Next, I work with XXX company to get a quote. Once escrow closes, the renovation company does the work, and the property manager does final acceptance.” Renovation is a critical success factor.
- What else should I have asked you? This is an absolute golden question. I’ve learned a lot by asking this question at the end of interviews.
For example, I was checking out a neighborhood I did not know. Nothing looked unusual or concerning. While walking around, I saw a woman sitting on her front porch. I talked to her about the neighborhood for a while. I was about to leave when I asked her, “Is there anything else I should have asked you?” Her response blew me away.
She told me that when two drug dealers lived on the street, and they would occasionally shoot at each other. One was sent to prison about a year ago, and the remaining drug dealer keeps things quiet. I saw nothing to indicate the presence of drug dealing, and would not have known if I did not ask the “what else?” question.
If the candidate answered all questions satisfactorily, you are reasonably assured they know what they are doing.
Final Thoughts
Ask the right interview questions to determine whether an agent has the skills you need. Once you find and vet an investor agent, that person will bring the team of people and resources you need.
However, much like in any company, the investment team will only function as well as the leader, which is you. You are still responsible for directing the team and making all major decisions.
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