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Passive Real Estate Income – Step # 1

YOUR CREDIT & WHY IT MATTERS

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Take Control: Your credit, a Simple Approach to fixing it.

This book helps you take a major step toward improving your credit. Inside, you will do more than learn how important your credit history is, you will also find out how to clear up old or incorrect entries on your credit report, how to challenge the reporting agency, and how to make sure you credit report gives an overall picture of your real financial situation.

credit score is a numerical expression based on a level analysis of a person’s credit files, to represent the creditworthiness of an individual.

Lenders, such as banks, rental communities, auto dealers, apparel stores, and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers (you) and to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. Lenders also use credit scores to determine which customers are likely to bring in the most revenue. The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system.

For a score with a range between 300-850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most credit scores fall between 600 and 750. Higher scores represent better credit decisions and can make creditors more confident that you will repay your future debts as agreed.

Why Credit Scores Matter
Credit scores are decision-making tools that lenders use to help them anticipate how likely you are to repay your loan on time. Credit scores are also sometimes called risk scores because they help lenders assess the risk that you won’t be able to repay the debt as agreed.

Having good credit is important because it determines whether you’ll qualify for a loan. And, depending on the interest rate of the loan you qualify for, it could mean the difference between hundreds and even thousands of dollars in savings. A good credit score could also mean that you are able to rent the apartment you want, or even get cell phone service that you need.

Passive Real Estate Income – Step # 2

YOUR NEW BUSINESS

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LegalZoom.com

LegalZoom’s goal is to make legal help accessible to average Americans. A great resource for starting, running and maintaining your new business.  LegalZoom can assist with Business Formation, Wills & Trusts, Intellectual Property and best of it all Legal Advice.

Once again, I don’t live, teach, or believe in get-rich-quick schemes. It takes hard work, dedication and commitment. But you can do it too.

Creating passive real estate income, is a business.  If you are not treating it as such, you leaving money on the table.

So planning ahead and knowing the proper business entity to create, is key to maximize your cash-flow.

In the spirit of full transparency, I am not an accountant,  and I advise you to seek legal advise from an attorney.

Limited Liability Company
The Limited Liability Company (known as LLC) is the best entity for most real estate investors who “buy and hold” their investments. When you buy and hold real estate it is considered a capital asset. The primary goal for “buy and hold” investors is to achieve passive cash-flow income and long term capital appreciation.

S Corporation for Short Term Investors
Some times it is best to just resale or “flipped” the property. This means the investors “buy and sell” real estate with the goal of turning a quick profit. When real estate is flipped it is considered inventory and the investor is considered a “dealer.” A real estate dealer cannot take advantage of the following tax benefits that are available to buy and hold real estate investors:

  • Capital gain tax rate
  • Depreciation deductions
  • Installment sales method for recognizing gain
  • Tax free like-kind exchange under Code Section 1031

Real estate investors who flip real estate should form an S corporation (or LLC taxable as an S corporation). This allows the dealer to avoid self-employment/social security tax on a portion of the profit earned from flipping real estate.

Passive Real Estate Income – Step # 3

FINANCING YOUR FIRST DEAL

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Streamline Capital LLC

Helping Borrowers turn Projects into Profits

Whether it’s funding for the rehab of distressed homes, or cash-out refinance existing properties, we’re committed to helping you achieve your real estate investment objectives in the fastest, most cost-effective manner, while minimizing risk.

Hard Money Loan

A hard money loan is a specific type of asset-based loan financing through which a borrower receives funds secured by real property. Hard money loans are typically issued by private investors or companies. Interest rates are typically higher than conventional commercial or residential property loans, because of the higher risk and shorter duration of the loan.

Most hard money loans are used for projects lasting from a few months to a few years.

Commercial Real Estate Loan

A commercial real estate loan is a mortgage loan secured by a lien on commercial, rather than residential, property. Commercial real estate (CRE) refers to any income-producing real estate that is used solely for business purposes. Typically, an investor (often a business entity) purchases commercial property, leases out space, and collects rent from the businesses that operate within the property. Financing, including the acquisition, development and construction of these properties, is typically accomplished through commercial real estate loans. Commercial real estate loans are typically made to business entities formed for the specific purpose of owning commercial real estate.

Peer-to-peer lending

Peer-to-peer lending is anew method of debt financing that allows people to borrow and lend money without a financial institution.  Harnessing technology and big data, P2P platforms connect borrowers to investors faster and cheaper than any bank.

P2P lending has grown rapidly in recent years and is a new source of fixed income for investors.

Passive Real Estate Income – Step # 4

FINDING THE HIDDEN GEMS

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FirmRE.biz

FirmRE.biz is the online Platform as a Service (PaaS) for Fimr Real Estate Group, LLC.  A full service real estate brokerage in the state of FL, focus on online real estate transactions and member of the National Association of Realtors.  Assisting buyers, sellers and Realtors through referral services.

Up to this point, we have focused on the preparation needed before investing.  Let’s look at, what we need to look for in a real estate investment.

As the popular real estate quote states, you “make your profit when you buy.” In most cases, you will not start your investing career by landing a big fat check; these checks come after you successfully implement your investment strategies. The profits you make, however, can be made or destroyed at the time of purchase . . . So what does it mean to “profit when you buy?”

To make your profit when you buy, you must purchase a property at a price that ensures you make your desired profits based upon your ability to execute your exit strategy. In other words, you need to buy smart. If you vastly overpay for a property, no amount of wishing, hoping, or improvement is going to make your investment great.

While you can’t predict with 100% accuracy where the market is going to go, you can know where it’s at today.

This brings us to the 70% rule.  The 70% rule is used by investors to quickly determine the maximum price one should pay for a property based on the after repair value (ARV). Though most often used by house flippers, the 70% rule can actually be used for any strategy when you want to find a good deal. The 70% rule says that you should only pay 70% of what the after repair value is, less the repair costs.

For example:  A property which, after being fixed is valued at $100,000, which needs $20,000 worth of work and materials.  Using the 70% rule, multiply $100,000 by 70% to get $70,000.  To the $70,000 subtract the repair cost of $20,000, leaving you a purchase price of $50,000.

The information above is only a rule of thumb.  You should always, once again always due your diligence and inspection before the purchase.  Never us a rule of thumb to decide on a purchase.  Always do your homework, and if a property passes the above rule of thumb of 70%, then it may be an opportunity worth a more detailed analysis.

Passive Real Estate Income – Step # 5

GETTING THE PROPERTY READY

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FirmPM.com

FirmPM.com is the online PaaS for Firm Property Management, LLC.  A full service property management company in the state of FL, focus in turn key real estate and property management services.

Getting Ready

Before putting your property on the market or listing it for rent, lets make sure you have a few items ready:

  1. What monthly rent are you going to charge?

  2. What is your application fee?

  3. What is your security deposit amount?

  4. Are you going to collect advanced rents?

  5. What is your credit score limit?

  6. What type of credit & criminal history would you accept?

  7. Are going to allow pets? If so, what is the fee for a pet deposit?

  8. Who will pay utilities? Taxes?

While you sit and think about the questions above.  Keep in mind the expenses your property will carry, and make sure the amount you charge covers all of your rental property expenses:

  1. Mortgage payments

  2. Taxes

  3. Insurance

  4. Interest Payments

  5. Estimated Vacancy Loss

  6. Utilities

  7. Collection expenses

  8. Legal & accounting fees

  9. Advertisement

Talking to Prospects

When you receive your first initial call from a prospective tenant, make sure you are always ready and with your rental property information handy or memorized.  This will make it easy to jump right into pre-qualification mode during your initial call.  Use this time to explaining all rental prices, application fees, and deposits… other useful information to keep available:

  1. Address of the property

  2. General area of town property is in and nearby attractions, hospitals, shopping, etc…

  3. Type of property

  4. Square footage

  5. Number of bedroom and bathrooms

  6. If any immensities are included

  7. Are pets allowed

  8. When is property ready to move in

  9. Rental rate

  10. How much for deposits

A quick and easy way to have this information always available is through flyers.  It is a simple and economical way to advertise and inform the public of your new rental.

When you answer a call from a prospective tenant, be ready and focus on the task at hand, rent your property!  Make sure you are ready to answer the questions you are about to be asked.  Use a flyer to remember key information about the property and a notepad, your phone or tablet to gather prospective tenants information.

Listen to the prospective tenant, understand their needs and adjust your conversation around their needs.  If their not clear, then ask questions to fully understand their needs.   Do not over kill the first call either.  Try and get only the information you need right then and there.  You can get all other details and specification later in the process.  The goal is to get the prospective tenant to commit to an appointment.

Be clear the prospective tenant knows where the property is located.  Always be ready to provide clear directions.  Also explain the importance of setting an appointment to view the property.

If at the end of the conversation, prospective tenant is interested in viewing the property, schedule a time to meet and show the property.  Make sure the scheduled meeting is during the day so property can clearly be shown.

Always follow up! if after a showing you do not hear from the prospective tenant, you call them.  Majority of times a little demonstration of interest in your part, is all they need to bring them to the table and sign a lease.

Qualifying Prospects

Qualify the prospects before showing the property.  Determine your criteria for approval.  Here are some key items that you should checked during the screening of prospective tenant:

  1. At least two pieces of identification, including one government issued ID

  2. A complete rental application

  3. Verification of employment

  4. Verification of at least one reference.

Before showing the property make sure:

  1. Complete rental application

  2. Collect application fee

  3. Screen tenant through a credit report and background check service

  4. Determine if approved or decline.

If Approved:

  1. Collect security deposit

  2. Review move-in cost sheet

  3. Schedule move-in meeting

If Approved but raising the lease amount due to risk then:

  1. Have tenant sign letter of acknowledgement and explaining the reason for higher rent amount.

If Declined:

  1. Send or give tenant rejection letter.

Make sure you comply with Fair Housing Laws
Whatever screening procedures you implement for your property.  Be sure to use them the same way for each prospective tenant to avoid any charges of discrimination. Use a fair process and apply it consistently and equally to all prospects.

Readying Property for Showing

Have good curb appeal.  Most prospects make their decision within the first few minutes of seeing the property.  Make sure:

  1. All exterior walk ways leading to the house are clean, bright and well maintain

  2. Clear away any trash

  3. Make sure grass is cut

  4. Make sure their is no junk or old items left in the yard, walk ways or entry of the property

  5. Make sure the property is well painted

  6. Make sure the windows look good and clean

  7. Have landscaping

During the initial entry and inside the property, make sure:

  1. Light fragrance candles

  2. Have light refreshments, battled water, sodas, snacks

  3. Play soothing music like jazz, classical or nature sounds

  4. Have bright lighting

Every time you show the property, make sure to:

  1. Vacuum away footsteps, dust or dirt caused by the previous showing

Always make sure to have the following information about the property handy:

  1. Floor plans

  2. Community or property information

  3. Photographs

  4. Maps of the City or Town the property is located

  5. Rental application

  6. Guest cards

  7. Qualifying Criteria

  8. Move-in Cost Sheet

  9. Lease

  10. Pen

  11. Paper

Passive Real Estate Income – Step # 6

GETTING PAID!

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FirmPM.com

FirmPM.com is the online PaaS for Firm Property Management, LLC.  A full service property management company in the state of FL, focus in turn key real estate and property management services.

Lease Agreement

Most of us know what a lease is.  It is a contract between the landlord and the tenant that spells out terms and conditions of the tenancy.  The survivor-ship of a landlord depends on it.    A lease is one of the most important lines of defense rental property has.

The lease should:

  1. Recognize all parties involved

  2. Use the correct legal names

  3. All occupants must sign the lease

  4. State the duration of lease term, beginning date, lease date, and expiration date

  5. State method of payment, due dates and penalties for late payments

  6. State rental amount

  7. State complete property address

  8. State causes for legal action

  9. Proper use of the property

  10. Contain abandonment information and pelnalties

These are just a few items to include or make sure your lease agreement has.  Seek professional legal help from an attorney if you would like to have your own lease created.

Hopefully you now have a basic understanding of what a lease is and what should include.  If you have a rental property and do not have a lease in place.  I urge you to put one in place ASAP.

Move-In Meeting

When meeting with the tenant at the property for the initial move-in meeting, if they have not already singed the lease, review the lease with them and get it signed.

Make sure to review any special addendum’s already discussed and agreed on.  Also make sure to review and tenants is aware of the rules and regulations.

Proceed to collect funds as agreed.  Majority of the time, your First and Last advanced rents and Security Deposit.  You should open two separate bank accounts for depositing your security deposit and advanced rents.  Remember the Security Deposit is not your money.  You cannot spend it.

Walk through the property with a notepad, phone or tablet, make sure to take details notes while the tenant inspects the property.  Make any necessary notes to repairs, damages or items to keep notice.  This will help to ensure there is no confusion during the ending of the lease and move-out stage.  It is always a great idea to keep pictures with this notes or report.

Once complete, proceed to give your tenant a set of keys to the property and any other keys required, such as pools, mail boxes, gate, etc….

After Move-In

Once your tenant has moved in, you have collected all funds and organized all documents, make sure:

  1. Create a tenant file, and put all documents in it.

  2. Add any notes to this file regarding any discussed terms, discounts or repairs.

It is good practice, that after a week or two of move-in you check with your tenant to make sure they are enjoying their new home.  Ask them if they have any questions.  This simple but effective follow up will help build a strong relationship with your tenant.  Opening the door to a smooth and open dialogue with your tenant.  Helping your tenants feel comfortable to communicate with you, it will ensure a smooth and efficient way to resolve any potential of issues or repairs in the future.

Get Started the Smart Way

YOUR FREE, EXCLUSIVE  ONE ON ONE CONSULTATION

Before you get going full steam with your real estate investing, I’d love to share with you some insights and guidance that I’ve learned about getting started in real estate investing the smart way.

The information you will get with your free exclusive consultation. You won’t find it anywhere else. I do that because I believe it’s important to start out with a focused, nurturing experience that rewards commitment.

Get immediate access now by clicking the button below. I cannot wait to help you get started.

I Appreciate You!

THANK YOU FOR BEING HERE

I’m here for you as both a guide and as a friend.

I want to hear your stories. I want to know how else I can help you.  I want this experience to be our experience, together. That’s how we all learn and grow together, including me.

I do my best to respond to emails. I treat everyone equally.  I am normal person who enjoys working hard and working smart.  Everything I do, is truly to make your real estate experience, a great experience.

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