Loading summary
Transcript23 lines
- [00:00]
A
You got a message from someone you've never met asking if you'd sell your house before, before it even hit the mls. Do you know how to evaluate that? Do you even know what your property is worth off market? And what questions should you be asking before you even sign anything?
- [00:17]
B
Today we're answering three questions straight from the BiggerPockets forums covering what to do when you inherit a tenant mid purchase, how to evaluate whether short term rental is worth it in a saturated market, and how to how to know when you're actually ready to scale from one door to.
- [00:36]
A
This is the Real Estate Rookie Podcast. I'm Ashley Kerr.
- [00:40]
B
And I'm Tony J. Robinson. And with that we're going to jump into our first question today, which comes from the Bigger Pockets forums. Now this question says I just closed on a single family rental. Congratulations by the way. And found out that the current tenant's lease isn't up for another seven months. The previous owner never mentioned this. This tenant has been there for three years, pays on time, but the rent is $300 per month below market value. I want to raise the rent when the lease expires, but I'm also scared of losing a reliable long term tenant. How do I approach the situation as a brand new landlord inheriting someone else's setup? Alright, I love this question because I get to use my favorite phrase which is an establishment estoppel agreement. So if you've been around for a while, you know that I learned how to both what that word is and how to spell it on the podcast. But Ash, for our listeners that maybe aren't familiar with that break down what an estoppel is and why it might be beneficial in situations like this.
- [01:37]
A
Yeah, so this is too late for this person asking this question, but before you actually close on the property you should ask the seller if you can give an estoppelo agreement to the tenants. And this is basically a form that the tenants are filling out with how much rent they're paying when their lease expires, when did they move in, do they have any pets, what appliances belong to them, what utilities they pay, which ones the landlord pays. And basically you're taking the information they are telling you and you're verifying it with the lease agreement or with what the landlord sets. And that way if there are any discrepancies you can figure it out before you actually close on the property. So you know, if a tenant fills out and says, hey, I, you know, I pay $300 a month but I own all the appliances, but the landlord is saying like, no, I own the appliances. You're buying them with the property. Like you can figure out that situation and how to handle it before you actually close on the property. Because if that tenant moves out and all of a sudden you have to buy all new appliances, like that could be a big chunk of money out of your cash flow that you need to cover to be able to rent it back out. So try and do that. Always when you purchase a property that is not vacant and has tenants in place, what you can do now is it really depends on your state laws. You could always offer a lease if they agree to the renegotiation of the lease and they sign the new lease without thinking they're getting kicked out and things like that, where they're signing it under false pre sentences. You could, and they agree to the increase. But most likely you cannot raise the rent until their lease has expired. And in some states there's even regulation as to how much you can actually raise the rent on them. So even if they're $300, you know, below market, it may be several years before you could actually even bring it up to market because of those regulations and those caps on raising rent. So the thing I would do is give them the most notice you can. So I would give them a lease renewal, not now, that starts in the seven months. So that way if they decide that they're not going to accept that lease agreement, you're also going to want them to sign a form saying that they're going to terminate their lease when it expires. And you can also give them the option to terminate it early if you wanted. I usually don't. I usually let it go the period. But if you wanted them out so you could get somebody else in there, you could do that too. But you give them those two options and it's their option if they decide decide to renew at the new price or if they are going to vacate the premises and are not going to accept the new lease agreement.
- [04:16]
B
Yeah, Ash, all, all great points. I think the only thing I want to add to that is just to also do the math, right? You said yourself this is a reliable tenant. They've been there for a long time. I guess we won't know just yet if they're the kind of tenant that causes a lot of headaches. But assume that they're just an all around solid tenant. There's also, I think, some peace of mind math that we can incorporate as well. At $300 per month below market value. I mean that is a significant amount. That's $3,600 per year in potential risk or missed rental income. But you also have to compare that against, okay, if I do let this tenant go, how long do I think I'll be vacant for this listing? And let's say that your rent is maybe 2,000 bucks per month and you're vacant for two months. Well, you've just eaten up, you know, for, for that entire year all of that potential extra profit you'll gain by getting to, to market value. But hey, if, if you know every rental unit is, is gone before it's even fully vacant, well, then maybe you've got a really good case there to, to relist this at the new price. But as you have that conversation, Dion McNeely, who we've had on the podcast a few times, you've spoken to bpcon. I love his his approach, which is called the Binder Method, which we won't go into it in detail here, but if you just search the real estate rookie YouTube channel for Binder Method, you should find our episode with Dion McNeely. And he walks through how he actually gets the tenants to agree to a rent increase and he's just presenting them with options. So it's a really, I think, unique way to be able to raise the rent while still keeping a really good relationship with your clients or with your tenants.
- [05:47]
A
Coming up. Short term rentals are everywhere right now, but is it actually the right move in a market that's already flooded with Airbnbs? We're going to tackle that question next, right after a word from our show sponsors.
- [05:59]
C
We all joke that rentals are passive, but if you're spending nights matching receipts or guessing what a property earned last month, that's not passive at all. Baselane fixes that part of landlording the financial chaos. Their banking and AI bookkeeping system automatically tags every transaction, updates cash flow insights in real time, and builds the reports you need for tax season. You can even automate transfers and move money around without paying wire fees. It's just cleaner. Sign up@baselane.com BP and get $100 bonus. Baselane is a financial technology company and not a bank. Banking services provided by Threadb FDIC for decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time consuming and expensive. But imagine if real estate investing was suddenly easy. All the benefits of owning real tangible assets without the complexity and expense, that's the power of the fundrise flagship fund. Now you can invest in a $1.1 billion portfolio of real estate starting with as little as 10 bucks. The portfolio features 4700 single family rental homes spread across the booming Sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities thanks to the E commerce wave. The Flagship Fund is one of the largest of its kind. It's well diversified and it's managed by a team of professionals and it's now available to you. Visit fundrise.com bpmarket to explore the fund's full portfolio. Check out historical returns and start investing in just minutes. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the Funds prospectus@fundrise.com Flagship this is a paid advertisement how do you decide which pets to allow in your rentals? Most hosts are guessing or worse, they're just saying no to avoid the risk altogether. However, not all pets are the same and treating them in the same way can result in lost bookings. Pet screening gives you a smarter way to evaluate every pet. You get insights into behavior, documentation and risk so you can make informed decisions without the guesswork. Even if your property is not pet friendly, you are still required to accommodate service animals and pet screening helps you stay compliant, protect your property and say yes when it actually makes sense. See how it works? Visit petscreening.com and schedule a demo okay, welcome back.
- [08:14]
A
So now that you know how to handle a tenant you didn't choose and how to increase their rent, let's talk about a strategy a lot of rookies have a quite questions with in our wrestling right now. Okay, so this question comes from the Bigger Pockets forums and it says I'm analyzing a property in a beach town that I think could do well on Airbnb, but when I search the area there are already hundreds of short term rental listings. The long term rental numbers don't work as well, but at least they're predictable. How do I decide if short term rental is still worth pursuing in a saturated market? And what data should I be looking at beyond just the number of listings? Well, good thing we have our in house analysis. Non paralysis. Tony J. Robinson here to break down analyzing a short term rental and first of all Tony, saturated markets. Yay or nay. This is rapid fire here. Yay or nay. Yeah, okay, and then we're going with software. Off the top of your head, what's the first tool, the first piece of software that you need to actually start analyzing this deal and get the numbers
- [09:25]
B
and the Data, Air, DNA. Easy.
- [09:27]
A
Okay. Okay. Now tell us more.
- [09:31]
B
I think the word saturated is a bit of a nuanced phrase. I think a lot of people throw that word around without understanding the different layers or things that go into saying whether or not a market is actually saturated. Just because there are a lot of listings doesn't mean that a market is saturated. Right. Like, there could be just a lot of demand in that market as well. So I'll break it down. The things that I look at to actually gauge whether or not a market is quote, unquote, saturated, or if there's maybe an imbalance between supply and demand, I do look at the number of listings, but not just the raw number of listings. I look at how those listings have changed over time. What is the percentage increase in a market over the last, call it three years of the number of listings in that market, and what rate is it increasing at? It's not bad to see listing growth in a market because it means that more people are coming in because maybe there's more opportunity. But then I compare that number to the actual demand in that market, and when you use a tool like Air DNA, you can actually see across an entire market how many nights were actually booked for. For that market. And if I go back again over the last three years and I see that supply has been growing at 4%, but demand has grown 10% over that same time frame. Well, that's actually a really good balance, right? Like, demand is actually outpacing supply in other markets. Maybe supply is flat. But if demand is decreasing 3% year over year, that's a bigger issue. Right? So I'm not just looking at listings in isolation or demand in isolation. We need to look at them together, understand the trends between both, and then understand what that balance actually looks like between the two of them. So supply, demand, and the other things I look at is, across the entire market, how is occupancy changing? How is the average daily rate changing? So if I can see a market where there's steady growth in supply, there's steady growth and demand, that's hopefully at or above supply. And I'm seeing healthy growth in occupancy and in average daily rates. To me, that is a market even if there are hundreds or thousands of listings in that market, that there's a good balance between supply and demand and therefore not quote, unquote, saturated. All right, guys, we're going to take a quick break before our last question, but while we're gone, be sure to subscribe to the Real Estate Rookie YouTube channel. You can find us at RealEstate Rookie and we'll be back with more right after this.
- [11:49]
C
For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time consuming and expensive. But imagine if real estate investing was suddenly easy. All the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise Flagship Fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as 10 bucks. The portfolio features 4,700 single family rental homes spread across the booming Sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities. Thanks to the E Commerce wave, the Flagship Fund is one of the largest of its kind. It's well diversified and it's managed by a team of professionals and it's now available to you. Visit fundrise.com bpmarket to explore the fund's full portfolio, check out historical returns and start investing in just minutes. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the fund prospectus@fundrise.com flagship this is a paid Advertisement There's a point where basically every investor realizes traditional financing stops scaling with you. At first, it works. You qualify with your income, your job, your tax returns. But as you grow, that model starts to break. Now it's not really about your personal income, it's about the income from your properties. That's where DSER lending comes in, and it's why a lot of investors end up working with lenders like Host Financial. Host Financial qualifies deals based on property income, not personal income. So you're not dealing with W2s or tax returns or DTI constraints. And with 80 to 85% LTV, you can stay more flexible as you scale. It's just a different framework, one that tends to align better with how investing actually works. If you're buying rentals, refinancing or growing your portfolio, go to host financial.com that's host financial.com and see what you qualify for.
- [13:46]
A
You just realized your business needed to hire someone yesterday. How can you find amazing candidates? Fast? Easy. Just use Indeed when it comes to hiring, indeed is all you need. That means you can stop struggling to get your job noticed on other job sites. Indeed, sponsored job posts help you stand out and hire the right people quickly. Your job post jumps straight to the top of the page where your ideal candidates are looking. And it works. Sponsored jobs on Indeed get 45% more applications than non sponsored posts. The best part? No monthly subscriptions or long term contracts. You only pay for results. And speaking of results in the minute, I've been talking to you. 23 people just got hired through Indeed Worldwide. There's no need to wait any longer. Speed up your hiring right now with Indeed and listeners of the show will get a $75 sponsored job credit. To get your jobs more visibility at indeed.com rookie just go to indeed.comslick/rokee right now and support our show by saying you heard about Indeed on this podcast. That's indeed.com rookie terms and conditions apply. Hiring Indeed is all you need.
- [14:54]
C
People love to call real estate passive income, which is interesting because most of the investors I know are very busy. Busy finding deals, busy managing teams, busy worrying they picked the wrong market. Rent to Retirement flips that model. They help investors buy turnkey new construction homes, often 10% below market value. And in top rental markets across the country, their local teams handle the build, the property management and the details so you don't have to. In some cases, Investors even receive 50 to 75% of their down payment back at closing. And there are interest rates as low as 3.75%. They've been trusted partners with Biggerpockets for over a decade. And if you want to learn more, visit biggerpockets.com retirement a lot of businesses
- [15:37]
A
do not start as businesses. They start as side hustles. Shopify helps you turn that into something real. Shopify powers millions of businesses and 10% of all E commerce in the US. You can build your store, reach customers through email and social campaigns, and manage everything in one place. If you get stuck, there's 247 support start hearing with Shopify. Sign up for your $1 per month trial today at shopify.com Rookie Go to shopify.com Rookie that is shopify.com Rookie all
- [16:11]
B
right, let's jump back in. Our final question is for anyone staring at their first deal, wondering if they're actually ready or maybe already trying to figure out when the second one should happen. So the question says, I bought my first rental property eight months ago and everything is going well. Tenant is solid, cash flow is positive, and I've got some reserves built up. I keep hearing that I should scale, but I don't know what that actually looks like or how to know when I'm ready. How many doors should I have before I try to grow? And what does scaling actually require that most rookies don't plan for this Is actually a good question, right? Like no one really talks about, like, I don't know if I'm, if I'm ready to scale. But first let me say the fact that you've got a solid, you know, we'll call it like you're on base, right? Maybe not a home run of a first deal, but you made the first base with your first deal. That is a great starting point. You said you've got reserves built up, cash flow positive. So you've learned a lot. I think when we talk about scaling, what it really comes down to me is more, so what are your goals as it relates to real estate investing? Is this something that you're doing maybe in the background to help supplement your retirement? Is this something you're doing to maybe build cash flow aggressively? Are you doing this because you want tax benefits? And depending on which one of those things is really motivating you to invest in real estate at all, I think will help you decide what type of scaling makes the most sense for you. Because I know some people who invest in real estate and they're high income earning W2 folks who enjoy what they do, they have no desire to leave and they plan to do this for the rest of their lives. For those people, scaling maybe looks like buying one property every one to two to three years and just letting it build cash flow or build appreciation and letting that cash flow stack. For other people, they want to move more quickly, right? They want to get into this full time. They want to make this an active business. Their approach is different. So for me, I think scaling, the first question you have to answer is what do I actually want out of this?
- [18:04]
A
I think the problem is in this question is that you're coming at as people are telling you. This is what you should do. You should scale. And that's the problem that I had as in I thought I should be doing this because people were telling me to do this or people were doing this and I saw them doing this on social media and I thought I need to get to that point. Like that's the next step. And just like Tony said, you really have to evaluate what your own progression and what your why is and what you want out of real estate. So you've already got one duplex. Like I think a really great next step would be just to buy another duplex. I think it is really important to build a solid foundation of what you know, what's working for you and what you can be successful at. So you've already got one deal that is working for you replicate that. And yes, it's the boring way. It's not flashy, it's not shiny, it's not the hottest new strategy of 2026, but that is going to help you down the road. If you do decide to take on a different strategy, to pivot or, you know, the market changes, you have to pivot. But if you have that strong foundation, it's really going to help you. And the biggest thing is don't forget about your lifestyle, don't forget about the things you want. If you start growing and scaling too fast, that's going to eat up more of your time, more of your energy, and focus now on building systems. So as you're buying this second property, literally document every single thing that you are doing so that when you go through it for a third time, you have your whole process to follow, that you're not forgetting things, you're not getting overwhelmed with stuff, and you have it all together. Like one thing that I didn't do for a really long time, and it's the number one thing that I do now is a utility sheet. So probably my first 10 properties, I didn't do this, but I am, as soon as I'm setting up utilities, you know, pretty close to closing, I have a sheet that, you know, what's the name of the company? What's the account number? How do I pay it? Is there a login? What's their website? What's their phone number? Where is the meter located on the property? What is the meter number? So it sounds like something so simple, but like all of these little simple processes and tasks that you can put together and document will make your life so much easier down the road. So I think that's something you should focus on now, is like building out those systems just for that first property. What are some things that you can do now and then slowly take your time into buying that second one?
- [20:46]
B
I think the last thing I'll add, Ash, is just from a timing perspective, you'll also know if you're ready, if you have enough cash to actually just buy that next deal. Right? And it sounds like you've got cash flow coming from this property that maybe you don't need because you've got a job that you're working. Let that cash flow continue to grow and then save whatever else you can continue to save from your day job. And if you look up in another 18 to 24 months, you've got another nice pile of cash, well, then there's your sign that I'm ready to buy that next deal. I think a lot of times we try and overcomplicate the idea of scaling, but sometimes it's just as simple as save money, save your cash flow, buy a property, now you've got more cash flow, save some more, buy another property. And it really starts to snowball because when you bought your first deal, you had zero properties helping you save for that first one. When you buy your first deal now you've got one property helping you when you buy your second deal. Now there are two properties helping, so each property helps fund the next one if you save all of that cash flow. So don't overcomplicate it, right? Just save, buy, repeat.
- [21:44]
A
Thank you guys so much for listening to this episode of Real Estate Rookie. I'm Ashley, he's Tony, and we'll see you guys on the next episode.
- [21:53]
B
Hey, rookies, if you're watching this, we want you to apply to be a guest on the Real Estate Rookie Podcast. That's right. Ashley and I are looking for amazing stories just like yours to be a part of our Real Estate Rookie Podcast. Now look, you don't need to be an expert. You don't need to have done thousands of deals. Even if you've done one deal, you. Your story could help inspire the next
- [22:11]
A
listener as a rookie investor, especially if you just got your first deal. It is all fresh in your minds and you are the best person to tell your story. Give your experience on how you got it done to help someone else get their first deal.
- [22:24]
B
So head over to biggerpockets.com guest if you want to be a part of our show again. That's biggerpockets.com guest and we'd love to have you on.