Kids tend to have nightmares they can’t control. Parents often have kids they can’t control. Some investors have expenses they can’t control – or they won’t even acknowledge the problem. Thus, rental real estate becomes less of the fulfillment of a dream, but more like a Nightmare onElm Street. How about you? Are expenses making you crazy? Expenses drive many investors out of real estate and some investors to financial ruin.
I have found no other subject in rental house investing that is so invisible, that is not often written or taught, than expenses. I have researched the most popular real estate investing newsletters – and I’ve found nothing. Websites – nothing. The bestselling books – nothing. The guru/experts speaking agendas – nothing. Yes, it may be mentioned in passing to, “control expenses”, “cut expenses”, but there are no numbers, no ratios, and no strategies, such as my almost-famous “The Eliminators”.
Why? Perhaps it’s better to push the nightmare into the corner, hide it in the unconscious. Better not bring to light the ugly and noxious truth even as it bulldozes your hopes to a pile of moaning rubble on a foreclosed empty lot.
In direct contrast, public companies’ quarterly and annual reports are filled with expense totals, percentages against budget, and gross margins. These numbers are openly reported and enthusiastically followed by investors and Wall Street. Ignoring expenses is not the norm in business; it is the exception–and it is deadly and dumb.
Dealing with Expenses
I actively manage 70 houses and 26 garages. I deal daily with the nonstop tide of expenses. I study (not just look at) my profit-and-loss monthly statement against my budget, and I consistently attempt to monitor and make adjustments to overruns. I don’t do this naturally or particularly well – I force myself to do it.
For instance, I have a 3′ x 4′ poster board on my office door with monthly totals for Rent – PITI (Principal, Interest, Taxes, Insurance) = Gross Margin – Expenses (nine categories) = Net for each month and quarter – totals vs. budget. The poster board on my office door forces me to look at my expense numbers several times a day.
If an investor is not calculating and monitoring the monthly numbers, he is not an investor; he is a speculator/mystic who leaves the making of profit to chance. Do you hope and pray for profit from the tooth fairy so you can gamble another day?
I have asked individual investors if they have a budget and track expenses.
“I’m too busy.”
“I don’t know how.”
“What do you mean?”
“My CPA does it at year end.”
Don’t let yourself be one of the former. There’s so much more to share on this subject, but for now let me suggest that beginning in 2014, at a minimum you track your expenses on a monthly basis and compare this to your budget, or develop one.
Did You Get My Text?
Surviving in landlording, like any business, often means being able to adapt to changes in the times and embrace new methods of communication. Texting is one type of communication where some landlords have adapted and embraced the idea whereas others have not as much. Whatever your personal preference regarding using texting, there could be advantages to using texting in your business. The key with texting, as with other communication tools that will come along, is to remain open to the idea of discovering what ways (even if in minor ways) texting can possibly add to your effectiveness in business.
For example one landlord shared how she likes and utilizes texting in her landlording business: “Texting saves me hours of time. I have to laugh because I remember when faxes weren’t acceptable. Then voicemail. Then it was email. Now it’s texting.
Here’s just one tiny example of why I love texting – two days ago I got a text from a resident. The fridge was warm. I texted my repair guy and in turn he texted the resident. He went over, fixed the fridge, and texted me when it was done. Done and done. Now had those been phone calls – first of all, trying to get people to answer the phone during a work day is hard. But they read their texts! Second, in order to be polite, when you DO get someone on the phone, you don’t say, ‘The fridge is broken. Can you check it out?’ You might say, ‘Hi how are you; how’s your day going or how’s the kids, etc.’ It just always takes longer.”
Please understand, this is not a commentary to persuade you whether texting is something you should or should not do. It is simply an encouragement to be OPEN to the idea, that there may be some ways that you can utilize texting in your business to your advantage. If the truth be told, I’m pretty “old-school” in many of my ways, so I’m writing this note as much to myself as to anyone, because I’ve learned that if I let my personal preferences totally limit my thinking, I may also be limiting the success of different aspects of my business.
SCREENING TIP OF THE WEEK
You can do phone number searches on Facebook and find people — even if their phone is private on Facebook itself. If they have just used the mobile version of Facebook at some point, and if you do a phone number search, Facebook will usually find them. Again, this is true even if their number is otherwise private. That is how I find most of my applicants that I’m researching -by putting in their cell phone number in the Facebook search engine.
The above tips are shared by regular contributors to the popular www.MrLandlord.com Q&A forum, and by real estate authors. To receive a free sample of Mr. Landlord newsletter, call 1-800-950-2250 or visit their informative Q&A Forum at www.LandlordingAdvice.com, where you can ask landlording questions and seek the advice of other rental owners 24 hours a day.