The Book on Rental Property Investing: How to Create Wealth and Passive Income Through Intelligent Buy & Hold Real Estate Investing!

340 Pages·2016·2.07 MB·English

by  Brandon R

The Book on Rental Property Investing

Copyright © 2015 by BiggerPockets Inc. All Rights Reserved.

Written by Brandon Turner

Published by BiggerPockets Publishing LLC, Denver, CO

This publication is protected under the U.S. Copyright Act of 1976 and all other applicable international,
federal, state, and local laws, and all rights are reserved, including resale rights: you are not allowed to
reproduce, transmit, or sell this book in part or in full without the written permission of the publisher.

Limit of Liability: Please note that much of this publication is based on personal experience and anecdotal
evidence. Although the author and publisher have made every reasonable attempt to achieve complete
accuracy of the content in this book, they make no representations or warranties with respect to the
accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of
merchantability or fitness for a particular purpose. Your particular circumstances may not be suited to the
examples illustrated in this book; in fact, they likely will not be. You should use the information in this
book at your own risk.

Any trademarks, service marks, product names, and named features are assumed to be the property of their
respective owners and are used only for reference. No endorsement is implied when we use one of these
terms.

Finally, use your head. Nothing in this book is intended to replace common sense or legal, accounting, or
professional advice and is meant only to inform.

ISBN: 978-0-9907117-9-7

First Edition

Acknowledgments

“Feeling gratitude and not expressing it is like wrapping a present and not giving it.”

- William Arthur Ward

Writing a book is hard, but certain key people have made it much easier.

I want to thank Josh Dorkin, CEO of BiggerPockets Publishing for his encouragement and guidance in

putting this book together, as well as the rest of the BiggerPockets Team who have been amazing to work

with on this project.

Thanks to Seamane Flanagan, my fantastic editor who cleans up my messy words and makes me look less

stupid, to Jordan Thibodeau who read the first draft of this book and offered incredible (and humorous)

insight, and to all those who helped record video interviews for this book launch – you guys rock!

And of course, to my amazing, thoughtful, intelligent, spunky wife Heather who, without her assistance,

this book never would have been completed.

Thanks to the hundreds of real estate investors whose words, actions, and encouragement made their way

into my head over the past decade and, thus, into the pages of this book.

Finally, everything I have, everything I am, everything I will ever be I owe entirely to the grace of God.

Dedication

This book is dedicated to my many mentors who have brought me from where I
was to where I am today. No words could do justice the appreciation I have for

you.

Table of Contents

PROLOGUE

WHAT DO YOU WANT?

ABOUT ME

ABOUT THIS BOOK

CHAPTER 1 - WHY I LOVE RENTAL PROPERTIES

WHY DO I LOVE RENTAL PROPERTIES SO MUCH?

THE FOUR WEALTH GENERATORS

HOW MUCH MONEY DOES ONE NEED TO INVEST IN RENTAL PROPERTIES?

TOP FIVE DIFFICULTIES OF RENTAL PROPERTY INVESTING

BUT I DON’T WANT TO FIX TOILETS AT 2:00AM!

WHY DO SO MANY RENTAL PROPERTY OWNERS FAIL?

QUITTING (OR NOT QUITTING) YOUR JOB THROUGH RENTAL PROPERTIES

WHAT NEXT?

CHAPTER 2 - THE FIVE KEYS TO RENTAL PROPERTY SUCCESS

1. THINK THE RIGHT THOUGHTS

2. STUDY THE RIGHT SOURCE

3. PICKING THE RIGHT PLAN

4. ACQUIRE THE RIGHT ASSET

5. MANAGE THE RIGHT METRICS

CONCLUSION

CHAPTER 3 - FOUR SAMPLE PLANS

PLAN 1: HOW TO MAKE $1,000,000 THROUGH RENTAL PROPERTIES

PLAN 2: BUILDING WEALTH THROUGH SINGLE-FAMILY HOMES

HOUSE HACKING

HOW TO MAKE $100,000 PER YEAR USING THE BRRRR STRATEGY

CONCLUSION

CHAPTER 4 - THE TEN MEMBERS OF YOUR REAL ESTATE TEAM

1. SPOUSE

2. MENTOR/ACCOUNTABILITY PARTNER

3. REAL ESTATE AGENT

4. LENDER(S)

5. CONTRACTORS AND HANDYMEN

6. BOOKKEEPER

7. CPA

8. LAWYER

9. INSURANCE AGENT

10. PROPERTY MANAGER

CHAPTER 5 - ANALYZING A RENTAL PROPERTY

HOW TO ANALYZE A RENTAL PROPERTY

WHAT IS CASH FLOW?

123 MAIN STREET ANALYSIS

PUTTING IT ALL TOGETHER

CHAPTER 6 - INVESTING WHILE LIVING IN AN EXPENSIVE AREA

ARE YOU LOOKING FOR HOMES ON SALE?

IS THE PRICE RELATIVE?

WHAT IS WORKING IN YOUR AREA?

HAVE YOU CHECKED THE OUTSKIRTS?

INVESTING IN AN EXPENSIVE AREA: WRAPPING IT UP

CHAPTER 7 - TYPES OF RENTAL PROPERTIES

SINGLE-FAMILY HOMES

MULTIFAMILY REAL ESTATE

CONDOS

TOWNHOMES

REOS/FORECLOSURES

FIXER UPPERS

FIVE QUESTIONS TO ASK BEFORE INVESTING IN A FIXER UPPER

COMMERCIAL REAL ESTATE

WRAPPING IT UP

CHAPTER 8 - LOCATION, LOCATION, LOCATION!

NEIGHBORHOOD CLASSES

CRIME

DRUGS

SCHOOLS

JOBS VERSUS UNEMPLOYMENT

POPULATION GROWTH

HOUSING STARTS AND BUILDING PERMITS

TRANSPORTATION

PROXIMITY TO LOCAL BUSINESSES

PRICE-TO-RENT RATIO

VACANCY RATE

PROPERTY TAX AND INSURANCE RATES

MOVING ON

CHAPTER 9 - HOW TO FIND RENTAL PROPERTIES

1. THE MLS

2. DIRECT MAIL MARKETING FOR DEALS

3. DRIVING FOR DOLLARS

4. EVICTION RECORDS

5. BIGGERPOCKETS MARKETPLACE

6. CRAIGSLIST

7. WHOLESALERS

8. PASSION

CONCLUSION

CHAPTER 10 - WHICH PROPERTIES MAKE THE BEST RENTALS?

EIGHT PROBLEMS I LOOK FOR WHEN SHOPPING FOR RENTAL PROPERTIES

3 PROBLEMS I AVOID WHEN SHOPPING FOR A RENTAL PROPERTY

WRAPPING IT UP

CHAPTER 11 - SUBMITTING YOUR OFFER

HOW TO MAKE AN OFFER

THE EARNEST MONEY DEPOSIT

WHAT SHOULD THE OFFER INCLUDE?

HOW MUCH SHOULD YOU OFFER?

16 TIPS FOR GETTING YOUR OFFER ACCEPTED

WRAPPING IT UP

CHAPTER 12 - REAL ESTATE NEGOTIATION

THE NEGOTIATION PROCESS

WHEN TO NEGOTIATE

13 TIPS FOR SUCCESSFUL NEGOTIATION

CONCLUSION

CHAPTER 13 - FINANCING YOUR RENTAL PROPERTY

ALL CASH

CONVENTIONAL LOANS

PORTFOLIO LENDERS

OTHER CREATIVE METHODS

CONCLUSION

CHAPTER 14 - HOW TO GET A LOAN APPROVED, GUARANTEED

UNDERSTANDING HOW A LOAN WORKS

THE 12-DIGIT CODE YOU NEED TO GET YOUR LOAN APPROVED

MAKE YOUR LENDER’S JOB EASIER TO GET YOUR LOAN APPROVED

MOVING ON

CHAPTER 15 - THE DUE DILIGENCE PROCESS

WHAT IS DUE DILIGENCE?

CONCLUSION

CHAPTER 16 - GETTING READY TO CLOSE

ORDER INSURANCE

DO I NEED AN LLC?

FINAL WALK-THROUGH OF THE PROPERTY

PLAN THE REHAB

SIGN THE DOCS

WRAPPING IT UP

CHAPTER 17 - MANAGING YOUR RENTALS (PART I)

SELF-MANAGEMENT VERSUS PROPERTY MANAGEMENT

BUSINESS OR HOBBY: GETTING IN THE RIGHT MINDSET

GETTING A PROPERTY READY TO RENT

FIVE WAYS TO FIND GREAT TENANTS

ACCEPTING PHONE CALLS

SHOWING THE PROPERTY TO TENANTS

THE APPLICATION PROCESS

WRAPPING IT UP

CHAPTER 18 - MANAGING YOUR RENTALS (PART II)

MAINTENANCE AND REPAIRS

LANDLORD VERSUS TENANT RESPONSIBILITIES

ANNUAL PREVENTATIVE MAINTENANCE

DEALING WITH DIFFICULT TENANTS

TRAINING YOUR TENANTS

1. LATE RENT

2. NEIGHBOR CONFLICTS

3. MOVING IN UNAPPROVED PETS OR PEOPLE

4. BREAKING A LEASE

5. DRUGS

IF YOU ARE UNHAPPY, YOUR SYSTEM IS BROKEN

CHAPTER 19 - EXIT STRATEGIES AND 1031 EXCHANGES

HOLD FOREVER

SELLER FINANCING

CASH OUT

THE 1031 EXCHANGE

WRAPPING IT UP

CHAPTER 20 - FINAL THOUGHTS

THE FIVE SUCCESS PRINCIPLES OF RENTAL OWNERSHIP

WILL YOU TAKE ACTION?

ABOUT THE AUTHOR

MORE FROM BIGGERPOCKETS

IMPORTANT: FREE AUDIOBOOK

If you are reading this book, I’m going to make two assumptions about you:

1.) You are interested in gaining Financial Freedom through real estate
investing
2.) You don’t have a ton of spare time.

So to help with both these things, I want to give you some free gifts to say
THANK YOU for buying this Kindle book, including the audio version (Mp3)
of this book (a $29 value.) No strings attached. Listen and learn in your car,
while walking your dog, at the gym, or wherever.

To get the audiobook, just go to https://www.biggerpockets.com/bookbonus or
text just the word “BOOKBONUS” (no spaces) to the number 33444 on your
phone.

Simple, right? Then don’t wait – do it now. This link won’t be up forever.

In addition to the audiobook, you’ll also get:

- Over 30 rental property owner forms (lease, application, etc)
- A printable poster on the step-by-step path to rent out a house
- The complete, official Audiobook of “The Book on Rental Property Investing”
read by… me (the author.)

I hope you enjoy and love this book! Hopefully these bonuses will make you
love it even more and will help you on your journey toward financial freedom

through rental properties!

Your friend and mentor for the next 400 pages,

Brandon Turner
Author and Real Estate Investor

PROLOGUE

What if I told you that you could make millions of dollars in real estate, doing
nothing but sitting on a beach?
Piña coladas, little white umbrellas, endless sand—sounds pretty great, right?

Well, that is not going to happen, at least not anytime soon. If you were looking
for an easy path to riches, rental properties are probably not the right avenue for
you. I know I’ve probably just lost half of those who picked up this book, and
that’s okay. I know that millions more are willing to do what is necessary to find
success, even if that path is more difficult than the late night television
infomercials would have you believe.

Obviously, people flock to real estate for a reason. In my opinion, real estate can
provide the best, safest, fastest path to financial freedom compared with any
other method used to build wealth. I’ve seen it in my own life, which I’ll explain
in a moment. But first, let’s talk about what this book will not teach you.

If you were looking for a book written by the latest guru, you are going to be
disappointed. You are not going to learn some secret strategy that I discovered
and that no one else knows. After all, I’m not anything special. In fact, I’m just

like you. I may be further along on my real estate journey than you are, or I may
be years behind you—in which case, I hope to learn from you as well. The truth
is that we’re on the same journey together, playing the greatest game ever
invented. In writing this book, I hope to share with you the lessons I’ve learned
so far, both the successes and the mistakes. I believe these lessons will help you
achieve a greater life than you have ever imagined.
Moreover, you should never learn from just one person, I believe, and anyone
who says otherwise is probably trying to sell you something. The best education
comes from experience, and by learning from the collective experiences of
others, you can supercharge your real estate ambitions to find greater success,
faster and with less drama.

Therefore, in the pages of this book I’ve incorporated the lessons and stories of
real estate investors from the BiggerPockets community in an effort to help you
gain the greatest perspective. Together, as a community, let’s help each other
find financial freedom through real estate investing.
What Do You Want?

Let me ask you a very basic question: what do you want?

Go ahead, say it out loud. Money? A new house? To fire your boss, quit your
job, and work for yourself? How about a better retirement? More wealth for your
kids? A summer in Europe? Longer sleep? Whatever it is, yell it out! (Unless
you are sitting in a Starbucks right now, in which case, you probably shouldn’t
yell. But I’d like a tall extra-hot peppermint hot chocolate, please!) Let me share
with you one of my all-time favorite quotes. Michael Jordan (yes, that Michael
Jordan) once said, “Some people want it to happen. Some wish it would happen.
Others make it happen.”
Which kind of person are you?

Now, there is nothing wrong with wanting things in life. Don’t feel silly about
identifying material things you want when you answer that question. Having
goals is great—but it’s not enough! You need action, too! You will need to get
off your butt and change your world yourself, because no one else will do it for
you. My goal in writing this book is to not only give you theory and hope but to
also give you the tools and knowledge you need to reach your goals. You
already know that real estate can change your life. Now it’s time to learn how to
make that happen. It’s time to take action.

Are you committed to taking action?

Are you committed to dedicating your spare time?
Are you committed to replacing daydreams with strategies?
Are you committed to investing your money?

I hope you answered “yes” to all of these questions. And don’t worry if you
don’t actually have the money, the spare time, or the knowledge just yet. If you
are committed to giving this a try, I’ll help you get there. Remember, you are not
doing this for me; you are doing it for you.

As you work through this book, I encourage you to not only read but also
internalize every concept. Don’t simply pass your eyes over the words without
understanding the concepts being explained. Reread sections if you need to. Ask
other experienced investors about the topics. Share the lessons you’re learning
with your significant other as you digest them. Question everything I say, and do
whatever is necessary to have it make sense in your own mind. Take your time.
About Me

“If you do this, Brandon, you’re going to go broke, be homeless, and ruin your
life. Please reconsider. ”

This was not the response I was hoping for when I finally told my parents I
wasn’t going to go to law school, despite months of studying and a strong score
on the law school entrance exam. Instead, I had set my sights on becoming a real
estate investor.

I had been raised in a “go to school, get a great job with a great company, and be
responsible” household. I can’t fault my parents for this mentality — after all,
this was how they themselves had been raised. My parents are incredible people
who simply wanted the best for me, but I needed to do things differently.The
path I had in mind was neither better nor worse — just different.
My entrepreneurial itch led me to the fascinating world of real estate investing,
and specifically to rental properties. The idea of using my creativity in place of
cash to build passive income exhilarated me. However, my ambitions hit an
almost immediate roadblock with my parents’ warning of catastrophic failure.
My tenants wouldn’t pay, they feared. I would have to deal with evictions. I
would lose all my money, lose my properties, end up on the street, start dealing
meth, and for good measure, probably end up killing someone in a bar fight.

All because I wanted to be a real estate investor.
At that point, I was forced to face my future head on. Do I abandon my newly
discovered dreams and come back to earth? Should I suck it up, stop

complaining, and go to law school? After all, my parents had a point. A good
law education pretty much guaranteed a good job. A good job meant stability.
Real estate, on the other hand, didn’t seem very stable. What if my tenants
wouldn’t pay? What if I had to deal with evictions? How could I survive?

Before giving up and accepting what seemed to be my fate, I turned to the only
source I knew at the time to ask: Google which brought me to this brand new
website called BiggerPockets. Suddenly, a switch flipped in my brain. There on
the screen were other aspiring (and practicing) investors with the same questions
and concerns.

More importantly, there were answers.

My entrepreneurial ambitions didn’t necessarily mean I would end up a meth
dealer wanted for murder. My quest for knowledge brought me to
BiggerPockets.com, for which I now blog, design, write, teach, network, and
help out however I can. But that’s a story for another day…

In short, I had discovered that all my questions had answers. There was hope.
“Financial freedom” was not just a buzzword late-night charlatans used to sell
their programs. Financial freedom was a real thing, enjoyed by millions of
people around the world. And I wanted it with every ounce of my being!

So I confronted my parents’ concerns, quit my job, walked away from my law
school applications, and jumped into full-time real estate investing, acquiring
dozens of rental units over the next decade. I just turned 30 years old this year.
I’m not a multimillionaire, I don’t drive a Tesla (yet), and I definitely don’t
spend my life on the beach, though I enjoy an occasional nice vacation.

What I do have, however, is financial freedom. Because of my real estate
investments, I’m able to live the kind of life I choose, not one given to me. As I
continue to earn more money, I can pour that extra income into additional
investments. My current investments are allowing me to buy more investments,
a concept known as “exponential growth”—and it’s freaking awesome! Thanks
to my rental properties, I am creating an awesome future for myself, my wife,
and our future children.
Most real estate authors and gurus tend to be reluctant about sharing information
about their personal investments, but I say, screw that! As of today, I have 44
units, spread out over a dozen or so properties (both single family and
multifamily). In the beginning, I worked hard to acquire them, and now I try to
pick up a few new ones each year. My wife and I manage the properties
ourselves, splitting the duties and sharing the rewards.

To help us keep our life sane and manageable, we collaborate with some great
individuals, including an incredible part-time office manager, numerous
contractors, and other valuable professionals. We travel a lot, but in a modest
way. We buy nice stuff, but we don’t overdo it. We hang out with our friends
and family every chance we can. And we absolutely enjoy life to the fullest. Real
estate has been a major contributor to our lifestyle design. Furthermore, I am not
done with my journey. I am not writing this book from the position of “back in
the day, this is how it was done.” I am writing it in real time, as I live the very
life I’m describing. As I said before, this is a journey you and I are on together,
and I still have more to learn. I’ll make mistakes, screw up, get frustrated, and
feel discouraged. I don’t yet have it all together.
I hope that this book will be different because of this.

I can’t tell you how many books I’ve read by has-been investors who no longer
invest and are teaching tactics that no longer work because the game has
changed. I’m happy for them that they achieved financial freedom and were able
to retire, but that’s not me.

I only want to teach what I actually do.