Aug. 17, 2015
We interview Chris Clothier from Memphis Invest to explain real estate investments without the mess. Collect the rent check while someone else does the dirty work!
If you’ve listened to LMM for any length of time, you know how much we emphasize the importance of passive income. One of the keys to building wealth and achieving financial independence is to have more than one source of income and because there are only so many hours in a day, some of that income should be passive.
Passive income is income generated with minimal effort on your part. Good sources of passive income can include your investments and retirement accounts, making money from things you already do like driving, shopping, or going out to dinner and our favorite, rental property income.
Becoming a landlord can generate significant passive income. But how can owning rental property be considered passive income if you’re searching for homes to buy, tenets to live in them, and handling any repairs that have to be done and the whole list of other things a landlord has to do?
The secret to making rental property a source of truly passive income is hiring a management company
to deal with the day to day hassles of being a landlord.
Turn key rental property means that the home is ready to be rented out as is. Any needed repairs or upgrades have been completed and it’s ready for occupancy. This is the best kind of property to buy if you’re going to be an out of state landlord. It’s hard enough to deal with renovations when you’re local, almost impossible if you’re trying to do everything from a distance.
There are turnkey management companies too. The right turnkey management company can do nearly everything for you from finding the property and renovating it, to putting a tenant in place and dealing with any repairs and maintenance that might need to be done.
They collect the rent and send you a check. They also handle the sometimes protracted process involved when a tenant has to be evicted. You pay a management fee which is typically 8-12% of the monthly rent, some charge additional fees to cover expenses, and some charge a flat monthly fee.
You can’t just blindly turn such a big investment over to anyone. You need to do your research when looking for a management company. Are there any real estate centered Meet Ups you could attend either in your local area or the area you want to buy in?
It might be worth a trip to talk to some local investors and get recommendations for a management company. If you can’t travel, the internet has plenty of reviews for management companies so you at least have a starting point.
Once you have a few recommendations you can start interviewing companies. The preliminary round can be over the phone but once you have your list further narrowed down, you probably want to make a trip down in person.
Some key questions are:
* How long has the company been in business in the local area?
* What services do you offer?
* How many properties do you manage?
* Can the renter and I reach someone 24 hours a day?
* What are the fees?
* Under what circumstances can I cancel my contract?
* Do the fees change when there is no tenet in the property?
* How do you screen tenets?
Learn more about your ad choices. Visit megaphone.fm/adchoices