It’s pretty ironic about how I wrote about the important rule for getting into real estate the other day. I just experienced my first issue with my rental property. My tenant emailed me and asked me if he could get out of the unit early. He found a new job in a different part of town. The commute is too far and he spends too much of his time on the streetcar.

We’ve never had any problems. He kindly emailed me to let me know that he really wants to get out a little bit early. Now I have an important decision to make.

What do you do when your tenant wants to leave early? What are your options?

Let them leave.

Do you really want to force someone to stay when they don’t want to? The obvious choice is to let them leave. The benefit of doing this is that you maintain a strong relationship with this person and you get to find someone else that wants to live in the unit. I can let the tenant leave early.

Force them to stick with the contract.

You can force the tenant to stick with the contract. You signed a rental agreement for a reason. If you really don’t want to look for a new tenant, you can force this person to stay and continue paying rent until the lease expires. This will likely cause some tension and not a lot us can deal with this.

Immediately start looking for a new tenant.

Instead of waiting around and making excuses, you can start looking for a new tenant right away. This is what I started to do. For me I see it as a learning experience. I get to work on creating another ad, screening tenants, and choosing the ideal tenant for the second time around. I want practise at this because I plan on purchasing more properties in the future. This is also why I opted to not hire a property management firm. I want to get to know the ins and outs of real estate.

Live in the unit for a bit.

You can always live in the unit for a little bit of time. This is a rare option but it’s definitely viable. As you live in the unit, you can work on upgrading it and fixing it up. You can also get to rediscover the community all over again. When you rediscover the community you can become better at selling the rental unit when the time comes for it. I’ve been strongly debating the idea of living in this unit for a month while I figure out what to do next.

That’s what you can do when your tenant wants to leave. You’re going to have to learn to deal with issues if you want to become a landlord to build your passive income. There’s no guarantee that you’re going to have a long-term tenant. This is why you need to get into the habit of looking for tenants and screening tenants.

Do you want to build passive income with real estate? Are you looking to purchase a rental property?

If you enjoyed my piece last week on why young professionals should get into real estate, I wanted to quickly followup today. I wanted to look over an important rule that you need to keep in mind as you consider investing your hard earned money into real estate.

One of my main sources of passive income is a rental property. I recently purchased a second rental property. I plan on owning a bunch of properties before I hit the 30 milestone (if the world doesn’t end this year).

What’s the one important rule for getting into real estate as passive income in your 20s?

If you want to get into real estate you must be able to deal with problems.

Do you have high anxiety? Do you get stressed out easily? Can you handle problems? Can you handle pressure?

There are going to be problems in real estate. There’s no way around this. There’s always going to be something that pops up. Some real estate issues will be minor. Other problems with your rental property will seem catastrophic at first.

What are some common issues that can occur with a rental property?

The minor issues include:

• Tenant doesn’t know how to use something.
• The lights don’t work.
• Tenant is unfamiliar with something.
• You need to find the tenant a parking spot.

The major issues with a rental property are:

• Tenant stops paying rent.
• You need to evict the tenant.
• Tenant runs away from the property.
• Something breaks down, the furnace or some other major item.
• A huge house fire.
• A break in.

Think about all of those potential issues. If you’re impatient (me at times), then you could really lose your mind at one point. I remember my friend got a call from a tenant one time because this person didn’t know how to turn on a light switch. He drove their in the middle of the night to show them how to use a switch. Imagine that for a second.

If you can’t deal with problems, you really shouldn’t get involved in real estate. You’ll simply lose your mind or get far too stressed out. You might end up hiring a property management firm because you can’t handle the hassle of being a landlord. I’m not trying to scare you. I just want to prepare you for what can potentially happen if you decide to use a rental property as a source of passive income in the future.

I’m lucky so far. My problems have been minor. However, I’m bracing myself for huge problems in the future because that’s just how life works usually. I follow this simple strategy: plan for the worst case scenario and hope for the best.

Can you deal with problems? Are you ready to become a landlord?

We’ve discussed various sources of passive income around here. One of the topics that has been discussed plenty already is the idea of using real estate for your passive income. As you may know by now, my first real source of passive income was my rental property that I purchased (a new condo). It has been an interesting experience and I enjoy sharing it with friends and readers. Today I wanted to suggested why you should consider real estate as an investment.

If you’re finally making money for the first time in your life, saving a good chunk of change, and seeing real progress for once, you’re likely thinking about what to do next. You don’t have to move out and get your own place just yet, you can purchase a rental property that you’ll rent out while you save up for your own place.

Long story short, young professionals can really benefit from getting into real estate.

Why should young professionals get into real estate?

Low interest rates.

The interest rates are pretty low right now. I’m not sure how much lower they can get. The benefit here is that you’ll spend less money on interest than previous generations have. It might be tougher to get a mortgage, but if/when you get one, you can reap the benefits of lower interest rates.

A property is a tangible asset.

When you buy a rental property, you have four walls. You can always rent out the whole place or a piece of it. You now own something that is all your own. Depending on the area that you live in, your property can also greatly increase in value over the years. You can also lose value. The good news is that you can rent your place out at any time and earn yourself passive income through your rent checks.

Motivation for more.

Are you lacking motivation? Perhaps you need something to push you in the right direction. When I purchased my condo it wasn’t even built yet. I knew that I had two years to save up X amount of money. I also knew that I didn’t have this money yet. That meant that I had to go into full hustle mode. From 2008 until 2010 I worked my butt off, while I still studied full-time. It wasn’t easy, but my condo was the motivation that I needed to save more money and get myself into the zone when it came to working.

I’ve also seen this happen with my friends. They buy a place and they become motivated for more. They want a better car, for disposable income, and more money to enjoy life. Will a rental property give you the motivation that you so badly need? It’s not guaranteed, but it’s worth a shot.

That’s why I believe that a 20-something should consider buying a place in their 20s. You don’t have to use this as your primary residence. You can rent the place out, save up money, learn about real estate, and prepare yourself for the future. What will you do?

I often toot the idea of a rental property around here. I personally invested into a rental property and it now generates passive income for me. However, those are just my experiences. You can totally go wrong with investing your money into a rental property.

Recently a reader, Sean, left an interesting comment on rental properties compared to stocks:

Having a rental property comes with the fun of maintenance, emergency calls, and potential vacancies. Not to mention praying to God you find a responsible and clean renter. The leg work of finding a reliable blue chip stock may take some time, but I don’t see that being much different than researching a potential rental property or screening renters. Once you find a good stock you believe in, it can become a form of passive income. I also prefer how liquid stocks are compared to real estate. The real estate market may not be in a very good state when you need your money.

Does a rental property always make sense? Nope. You can crash and lose your money with a rental property. I wanted to look at what can go wrong with a rental property.

You find a horrible tenant.

Screening tenants is the same as screening applicants for a new job. Sure, everyone is great during the interview process. You just never know what can happen once the tenant is living in the property. My friend has a tenant that calls him for every single small thing.

Then there’s the other side of the horrible tenant– what if they stop paying? What if they just leave on you? These are all issues that you have to deal with as a landlord. Everything is in your hands.

Maintenance issues.

A lot can go wrong with a property. If your hand, it will be an inconvenience. If you have no hand-man skills, then you’re going to have to pay the big bucks to get these issues resolved and dealt with.

A few other common maintenance issues that could arise:

• Furnace breaks down.
• The plumbing doesn’t work.
• Electricity goes out.

Expensive upgrades.

I purchased a brand new condo so that I wouldn’t have to worry about upgrades. Many new investors will want to purchase an older place to fix up or a property that they want to renovate. The only problem is that these costs of upgrades can add up real quick. The next thing you know is that you’re spending far more than you expected to upgrade your rental property. You could make your money back in the future through rental income and appreciation, but it can be a setback at first.

As always, I’m open minding to both sides. As you can tell from earlier writing, I’m personally a fan of rental properties as a source of passive income. With that being said, I can definitely see the negatives of investing your hard earned money into a property. Anything could happen. You just need to know what you’re getting yourself into when you purchase your first rental property.

Real estate agents are faced with many obstacles, including the tough housing market, lower prices, and a lot of competition. Sure, you may have properties you’re selling, but are people buying them? One reason your properties may be sitting on the market is because they’re not getting the proper marketing. Holding open houses every weekend can be hit or miss. Listing your properties on third party real estate sites can only give your potential clients so much information. It’s time to take matters into your own hands and create your own website.

1. Buy your domain name: First things first, you need a domain name. Maybe you want to buy your first and last name, which is a good idea either way. If you’re an independent agent, you may want to purchase your business’ name. If the .com name isn’t available, try .net, .org, .biz, or .info. You can purchase the domain name from places like GoDaddy or NameCheap. Buying a domain name is more affordable than you may have thought.
2. Find a hosting site: Hosting is the service that houses your website. It’s not over once you buy the domain name. Hosting is affordable as well. I host my websites with Think Taylor for $10/month and it’s been great! If you have bigger needs, they also have a $25/month package for businesses as well. Hosts can provide you the space for your website, e-mail addresses to match your website, and the proper security to protect you from hackers.
3. Choose a content management system: A content management system, or CMS, is where and how you will build your website. There’s several different content management systems to choose from, but you simply can’t go wrong with WordPress. WordPress is the CMS of choice for millions of webmasters for a variety of different businesses and blogs. There are multiple plugins available, you can find thousands of free themes or layouts, and once you get the hang of it, it’s really easy to use. If you need help choosing, your hosting provider can steer you in the right direction, and may have a tech who can assist you in setting you up.
4. Design your website: Now here’s the fun part: the web design. If you’re not good at it or don’t know where to begin, you have 2 options: hiring a professional or finding a theme to implement online. If you chose WordPress, there are several different themes that will go great for a real estate agent. One is provided by Elegant Themes and it is titled Elegant Estate. Another is brought to you by WooThemes entitled Estate. Both of these themes offer multiple color options, a search function, and allows you to showcase your properties and include their features, making it easy for buyers to sift through your inventory.
5. Take pictures of your properties: The main reason you’re setting up a website as a real estate agent is so people can find your properties. I highly suggest that you take pictures of all of your properties, inside and out. On third party listing sites, the most popular properties are the ones that have multiple pictures. As a buyer, if your search begins online, you want to rule out houses you can’t see yourself in right away. The only way people can tell is if they see the inside, since you can’t judge a book by its cover. Grab a digital camera, or hire a photographer, and photograph every room. Post the pictures on your website and let the photos do the talking.
6. Write a great description of the house: Sell that house by using your gift of gab. Tell your customers what’s great about the house, what neighborhood it’s in, the conveniences nearby. Inform them why they’d be lucky to buy it. Add tags for your customers to find websites in their personal search, including the price, how many bedrooms and bathrooms, if there’s a garage, if there’s a guest house, etc. Don’t forget to include a map integration so they can see where the house is located.
7. Include your contact information: If people like what they see, they’re going to want to talk to you about either buying a house you listed or selling their house. Become available by offering your e-mail address, business phone number, and possibly even social media websites like LinkedIn, Facebook, and Twitter. Include your photograph and a brief bio to make the experience more personal. People may be searching online, but they’d still like human interaction.

By setting up your website, you will definitely see your leads increase. It’s very easy to do, so start today!

We’ve talked about how renting properties is a method of passive income, although it certainly takes some time. Even with a down economy, you can still be profitable by becoming a landlord to reliable tenants. However, the point of passive income is that you put in little to no work, yet still earn money. As a landlord, you’re responsible for handling repairs, safety concerns, and collecting rent. This can be a part time to full time job depending on how many units you own and the type of tenants you rent to. So how can you streamline the process and make your rental property truly passive income? You hire a property management company.

What is Property Management?

Property management is just what it sounds like: they manage your property on your behalf. A property management company acts as the liaison between yourself as the landlord and the renter. They do the work for you, including screening applicants by running background and credit checks, handling the legal documents including leasing agreements and rental insurance, and handling maintenance and upkeep of the property.

Property Management Companies vs. Property Management Software

Obviously, hiring a property manager is not going to be cheap, so it may dock some of your passive income if you hire a company to handle your rental properties for you. If you own a complex with several units, it makes sense to hire a company to handle the ins and outs for you, since there will be multiple tenants. It may also make sense if you have multiple commercial properties. However, if it’s not in your budget to hire a company with managers, sales associates, and other staff members, you may want to look into property management software.

Property management software still keeps things in your control, but puts everything on your computer. There’s different programs for sale or available to download that will allow you to control your leases, bill your tenants, track your expenses, set your budget, and even manage your properties on the go. You can allow your tenants to pay you online as opposed to writing you a check, a convenience for both you and your renters. The programs can even help you stay organized come tax time.

What to Look for in a Property Management Company

If you’re still interested in hiring a firm to handle your property management, there’s a few different things to look for:

• Costs: How much will it cost to have the company manage for you? What are the monthly fees?
• Reputation: Property management companies get a bad reputation sometimes. You want your tenants to feel absolutely comfortable living on your property. Does the company have a good track record?
• Experience: Whether you’re choosing an individual or a company, how much experience do they have? More than likely you’re choosing a property management company because of your lack of experience or lack of time. How long have they done this? Do they know what they’re doing?

Before Choosing an Online Program

Before you go the online route, you should check out reviews, see if they have a free trial, and decide if you would rather have a desktop based or online/cloud based program. Give several softwares a try before deciding on one right away. This will probably be the most cost efficient option for you, and can still yield you passive income while remaining in control.

Many people rent apartments, condos, and townhouses before they decide to purchase their first home. You may not be ready for the commitment of home ownership, either because you haven’t found an area you want to live long term, you plan on switching locations often, or because you don’t have your finances prepared for a huge purchase like a house. Whatever the case may be, millions of people are renting. While some consider it “throwing your money away”, as long as you’re paying for a roof over your head, it’s not. So how do you find an apartment in your community?

• Look around: You can usually find a place for rent just by looking around an area. Landlords and property management companies are constantly advertising rental properties with signs detailing the types of properties available. Look for signs that say “for rent”, “apartment available”, and “looking for roommates”.
• Ask around: Chances are, you know someone who knows of a housing community with units for rent, or someone who is renting out their property. My husband and I found our current townhouse rental through a coworker who was moving. In many cases when you personally know someone renting a place out, you can work out a discount for your rent. At our previous apartment, if we referred others to the complex and they signed a lease, we would receive a referral bonus which discounted our rent.
• Look through apartment books: There are hundreds of apartment complexes that advertise their vacancies in free booklets like Apartment Finder. I grabbed a copy from our local juice bar, and found a lot of different communities that I may have otherwise overlooked. I was able to find out their amenities as well as where their prices begin.
• Check online: The first apartment I ever moved in, I found online. You can usually type in rentals in your area in your search engine and find a lot of places of interest. What I like about searching online is that you can do an advance search with your criteria. You can narrow down the search results by choosing your maximum desired rent, number of bedrooms and bathrooms, whether you need a pet friendly property and more. You can even find floor plans, pictures, and virtual tours for many of the properties.
• Classifieds: There are still plenty of rental listings in classifieds. For college students, your school newspaper or magazine usually has a classifieds section that advertises places for rent that you may not find in any other place because they’re looking for a specific type of person, such as a student or a roommate instead of a sole renter. Websites such as Craigslist will also have a section for rentals, but always beware of scams.

Looking for an apartment or other rental in your community is fairly simple. Once you find a place that you like, prepare by asking questions like how long is a lease term, how many visitors are allowed, when rent is due, and what are the community rules. Don’t forget to bring money for an application fee as well as a security deposit, and be ready for a credit check as well. Happy hunting!

You may have heard that the housing bubble has burst and there is little to no hope for investors, but that’s not true. If it’s a buyer’s market, it can easily be an investor’s market. What better way to start securing your financial future than to start investing young? The odds are in your favor more than you think. The banks have so much inventory, they’re almost willing to let foreclosures and short sales go without much of a fight. Home prices and interest rates are at historic lows. Young investors should take advantage of this opportunity and buy their first investment property. So what are the steps?

Find Your Investment Style

Real estate investors usually have a style that they prefer. You can be a landlord and have rental properties where your tenant pays the rent and you profit from that. There are investors who like to flip houses, meaning you buy a property, fix it up a bit, and sell it for a profit. You can specialize in apartment buildings, duplexes triplexes and fourplexes. Maybe you prefer commercial real estate, where businesses can open. Decide what you prefer, and go for it!

Find Your Partner

Since you’ll be a young investor, you’ll want to partner with someone who knows the market and can help you get started. Find a real estate agent or broker who is familiar with the area you’re interested in, and will want to work with you in the future. There are some investors who work with the same agent time and time again. You don’t have to, but it can be profitable for both of you. The agent or broker will help you find properties, and will give you the details and information you need for purchasing them.

Location, Location, Location

You wouldn’t buy a home in just any neighborhood if you were going to live there, right? The same goes for an investment property. Location is very important, so you should do your research ahead of time. This will match up with your style as well. If you’re going to be a landlord, you’ll want to find a property near places people will want to rent, maybe near colleges, a thriving business area, or entertainment. If you’re looking into commercial property, you don’t want to have a restaurant in a location no one is going to want to eat, or a business front all by itself. You can research online as well as going out and seeing for yourself.

Get Your Finances Together

Investing is still going to cause you to come out of pocket, even though it will be a method of passive income. You can’t buy a property without the necessary capital. You may want to meet up with a Certified Financial Planner before seeing a lender to make sure you’re ready to handle the ups and downs that come with being an investor. As a real estate investor, you’ll certainly experience your share of lows, including vacancies on your rental property, your property staying on the market longer than you’d like, and tenants no longer being able to pay the rent. Prepare for the worst situation. Also, ask about the different options for financing the property, including conforming mortgages.

Do Your Research

When you’re searching for your perfect investment property, you’ll want to know what other properties are going for in the area. You don’t want to pay a price that’s much higher than a similar building is going for. You can do this research on your own online at websites like Zillow and Redfin, or you can ask your experience realtor partner what they think. You’ll also want to know the history of the property, including what to expect in case of construction.

Don’t Fall in Love With the First Property

It’s going to take a lot of time and patience before you find the best investment property, so don’t fall in love with the first one. You’ll want to look at a variety of properties in different areas and different price ranges. The cheapest property is not always the best, and neither is the most expensive. Don’t make your decision in haste; take your time to weigh your options. An investment is a big deal and should not be taken lightly.

So are you ready to buy your first investment property? Find a CFP, a lender, and a broker, then you’ll be on your way to becoming a young real estate investor.

Home ownership is one of the biggest parts of the American dream. Sure, today it’s a buyer’s market, but that doesn’t mean you should rush to the bank to get your pre-approval and go house shopping this weekend. You may have heard renting is throwing your money away, but that isn’t true at all. You’re still paying for a roof over your head, and you get the benefits of maintenance, and even some utilities free of charge. There’s a lot of time, work, and money that goes into being a homeowner. The entire process can be exhausting and is a lot more complicated than it’s made out to be. Even if you’re mature and have enough money for a down payment and closing cost, it’s still wise for you to wait until you’re ready to settle down before taking that plunge. But why?

• Your future spouse will want a say: When you buy a house before you get married, you’re going to mainly go off of things that you like. It’ll be your inputs and your requirements and your taste. If you buy a house and then get married, your significant other may feel as if they didn’t have a say in the home that the two of you will be living in. Sure, you can always allow them to decorate how they like, but what if you didn’t need a backyard and your husband brings a dog? What if a downstairs laundry was fine for you but an upstairs laundry was something your wife always wanted? Housing prices may be at historic lows, but they’re not cheap enough to where you just buy a new one if someone doesn’t like something in it.
• You may soon outgrow your living area: I see it all the time on House Hunters. There’s a family that started off in a 2 bedroom house, then they find their family balloons to more kids than there are rooms. I don’t suggest buying a home until you know how large you would like your family to be. Children are a blessing, but parents need their own space and kids need their own space too. Rent a one bedroom while you’re single, then seek out a family home when you begin to build one.
• Give yourself more time to save: There seems to be such a rush and pressure to buy a home, but the days of 0% down payment is long gone. Saving up 10% of your purchase price can be really tough on one income, especially if you have other things to pay for. If you wait until you have someone to share your life with, you’ll also have someone to save your down payment with. A combined effort can help you reach your goal faster.
• You may change your mind about what you want in a neighborhood: What you look for in a neighborhood when you’re single will more than likely change when you settle down. When you’re single, you’ll probably look for somewhere close to work, a thriving nightlife, and maybe in the city. When you settle down and prepare for a family, you may choose suburbs over the city, and you’ll want to be close to good schools instead of fancy restaurants.

You may have the house buying itch, but you should slow down and take your time. When you’re ready to settle down, then you’ll be ready to take the next step and buy a house. Even then, you don’t have to become a first time home buyer right away.

Although the housing market is a lot different than it was a few years ago, flipping properties is still a great way for passive income. You can do maybe 1 flip per month or even less, depending on your goals. While some people want to put minimum work and money into a flipped home, your best bet is to get a rehab property. That’s where the gold is! A run down house is going to be full of opportunity and be the property you’re most proud of flipping, and here’s why:

• You can negotiate the price: There’s a reason that torn down home has been sitting on the market forever: no one wants it. But you should! Houses that are in desperate need of rehab are also in desperate need of a buyer, so banks will be willing to let them go for less, just to get them off their hands. You can haggle down the price, and get a bargain or steal, compared to a home that has a few interested buyers.
• Big lots, small properties: Some of these homes are on a big lot but the square footage doesn’t fit with the home. If needed, you have the chance and the room to expand. Add on extra bedrooms or common spaces, and you’ll get more people interested in a home that can accommodate their entire family.
• Old houses have character: While a lot of people are choosing newer homes with open concepts, older houses have character that isn’t found in newly built houses. Take advantage of the character of these older homes, and bring in some new concepts to make it a unique property that your buyers won’t be able to forget.
• Rehab properties have primarily cosmetic issues: Rehab properties sit on the market because of their appearance. A lot of the issues are purely cosmetic, and can be fixed with simple solutions like a fresh coat of paint, a bit of landscaping, new flooring and some fixture changes. You’d be surprised what lighting and some decorations will bring out of a home. When you hold your open house, other investors and agents will be wondering why they didn’t see all that the house had in store.
• You can inspire change: Run down properties are often in run down areas. If you start to remodel a home you’re about to flip, you can inspire neighbors to change their houses too. And of course you can always install peace of mind like an ADT Safe From The Start security system that can be used to provide 24/7 home protection against burglary and theft too. The problem is people hate change, but they also hate being shown up. If they see the property you bought is looking better than theirs, you may light the fire under them to cut the grass, finally renovate their kitchen, or do some work in their backyard to make it more comfortable for their family. You’ll essentially bring up the value of the neighborhood one flip at a time.
• Appeal to all buyers: Everyone has their preference in a home, but it’ll be hard to find someone who wouldn’t appreciate a home that has been completely updated throughout. Use that as a selling point, and it will not be ignored. If you include before and after pictures, people will really be able to see why your property is an awesome buy. From first time home buyers, to seniors who may be moving elsewhere, your rehabbed property can appeal to all buyers.

So what are you still waiting on? You know you have a property in mind that just needs a bit of TLC. Why haven’t you bought it yet? Get out there and make it into a dream home.