Welcome to our second ever case study! For those of you who don’t know, Gina and I recently started the “Ask Us Anything” segment were we take real questions submitted by readers and give them our best answer with a lot of backup. If you haven’t read our first case study then click here. If you want to submit a question to potentially be featured in a case study then tap the button below. 👇👇👇
Before we jump into the case, I must disclose that this answer is merely personal opinion and should not be taken as professional advice. I am not a Certified Financial Planner or a lawyer. Again, this is what we would do if we were in the reader’s shoes, so take this with a grain of salt because there are plenty of different paths for every situation. With that said, let’s dive in!
The Case
Readers Alias: Momma Jill
Age: 31
Momma Jill’s Location: Orlando, Florida
General Situation: Momma Jill is a new landlord of a 3-family home and she hopes to buy more property in the future. She has owned the property for less than 6 months and is expecting 2 of her units to be vacant in the next two months. Momma Jill is also a mom of 2 year old girl and has another on the way. On top of being a landlord and a mother, she also works full time as a RN (registered nurse). Momma Jill has a lot going on and feels like she has no time at all.
Goal: Momma Jill wants to learn how to properly screen tenants to make sure her next two are great, save for children’s college and improve time management skills.
Initial Thoughts:
Can we all agree that Momma Jill deserves a round of applause?! I mean she is kicking ass and taking names. I don’t think that I’d be alone in saying that you rock 🙂
You have a lot going on and that’s awesome but it’s time to prioritize your goals here. I’m assuming that this current property is a house hack and you are renting out 2 of the 3 units. That being said, getting new tenants ready to move into those units should be the primary goal, otherwise your overall expenses are going to skyrocket. With another kido on the way, financial stress is the last thing you want.
Based on Momma Jill’s goals let’s break this down into 3 pieces, real estate, college saving, and time management.
Real Estate
Renovations
When a unit becomes vacant it’s the perfect time to get going on renovations. Updating an apartment can be expensive however a newer/cleaner apartment will attract better tenants who will be willing to pay more in rent.
Not all renovations have to be expensive. There are plenty of ways to update an apartments overall appeal for cheap. An easy and fairly cheap renovation is fresh paint and better lighting. You’d seriously be amazed how much better your rental will look afterwards.
My advice to Momma Jill; when those units go vacant get in there access the situation and start renovating before another tenant moves in. This may allow you to charge more for rent and will increase the longevity of your property.
Screening tenants
Understanding how to screen for quality tenants legally according to the Fair Housing Act is crucial for being a successful landlord. Unfortunately for Momma Jill it’s time to learn quick.
The Fair Housing Act is a federal law that protects people from discrimination in housing. More specifically this law protects 7 classes that are often referred to as “protected classes”. These classes are race, religion, national origin, color, sex, family status, and disability.
After you’ve brushed up on the Fair Housing Act the first thing I’d advise you to do is make a tenant screening checklist for the entire process. You can use our tenant screening checklist by tapping the button below 👇👇👇
Before you start looking for tenants you should think about some qualities/characteristics that you are not okay with. For Gina and I we do not want smokers or sex offenders living in our apartments, so we make sure to do our diligence and make sure potential tenants do not fall in that category.
Brainstorming a list of all the things you don’t want in a tenant will help you form a picture of your ideal tenant. Again just be sure you are in accordance with the Fair Housing Act.
Now that you have an idea of your perfect tenant here are some things you’ll want to look into:
- Background checks
- Credit checks
- Find out if they have pets
- Find out their income and ask for proof of employment
- Ask for prior landlord references
The above questions will help screen out unqualified tenants and will hopefully leave you with a short list of qualified tenants. Unfortunately finding quality tenants is not always easy and can sometimes take longer than expected. The main takeaway here is to have a screening system in place that fits your needs.
For more information on tenant screening read: 5 Best Tips for New Landlords
New Property
Momma Jill you mentioned that you are also looking to purchase more investment properties, which is awesome. If you are not currently in a financial position for a traditional mortgage you may want to consider creative solutions such as seller financing.
Seller financing is when the owner of the property you are looking to buy carries the mortgage instead of a bank. Depending on the deal the owner may agree to a 0% down payment and only charge you the monthly mortgage fee.
Seller finance deals can be harder to find, however they are out there and can be an affordable way to invest in real estate.
Saving For College
Kudos to you Momma Jill for starting to save now for your kids college education. With the continuous rise of tution saving early for college is essential.
In Gina’s article, 9 Ways to Save for a Child’s College Education she shares these 9 strategies:
- College Savings Plan
- Prepaid Tuition Plan
- Coverdell
- UTMA/UGMA
- Roth IRA
- Brokerage Account
- Educational Bond Savings Program
- Savings Account
- Real Estate
While I think all of these strategies are awesome and should all be considered I believe #9 may be perfect for you. With the real estate strategy you purchase a multifamily home and put it in your child’s name the day they are born. You then set up the mortgage payments so that the property is paid off by the time they are 18.
Once s/he turns 18 they will own an investment property free and clear and be able to sell, refinance, or continue earning cash flow.
Based on your interest in real estate and ambition to acquire more properties you too may find this to be the perfect option to save for your children’s college. However, if you haven’t already be sure to read, 9 Ways to Save for a Child’s College Education. Gina provides extensive details of each option and you may find something that works better for you.
Time Management
Alright Momma Jill now that we got the real estate portion out of the way let’s get into time management. With soon to be two kids, an investment property, and a full time job it’s fair to say that you’ve got your hands full.
In my opinion becoming a strong personal time manager is gonna pay huge dividends for your level of success and happiness. Here are the steps that I would recommend to manager your time more efficiently:
- Track Your Time
- Stop Multitasking
- Take Breaks
#1 Tracking your time for a day or a week will allow you to see areas of the day that you are efficient and not so efficient. Gina and I have used this method and found it to be extremely helpful. If you want to use our daily time tracker template hit the button below 👇👇👇
#2 Multitasking always seems to be the most efficient thing but it’s not so stop doing it. When we multitask our focus is split and therefore each task is not getting the full attention that it needs. This can lead to mistakes, accidents, and half ass work. In order to be efficient you need to be effective, so stop multitasking and focus on one thing at a time.
#3 Taking a break, Momma Jill I know you are gonna be running around and getting things done but please remember to take a break. No matter how busy you are you should incorporate time into your schedule for breaks. This break time will allow you to relax and recalibrate so that you don’t burn out.
For more information on time management be sure to read: The Best Time Management Hack
Closing Thoughts
As I said before Momma Jill you’re crushing it 😄 I hope my answer/opinion helps you out and we wish you the best of luck. Thank you again for submitting this question 😄
If you have a question that you would like us to answer and potentially be featured in a case study you can do so here.
