MAREI's April 2022 Newsletter

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MAREI

MID-AMERICA ASSOCIATION OF REAL ESTATE INVESTORS

Can you Buy & Hold Your Way to Wealth . . . even in 2022 Find out with Andrew Syrios on April 12th at MAREI

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CRIME FREE TOPICS Introduction (Police) Screening Renters (Attorney) Leases (Attorney) Evictions (Attorney) Drug Identification (Police) Crime Prevention (Police) Role of Police on your Property

Dates May 18th September 14th November 16th

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Mid-America Crime Free Inc. is a 501c3 charitable organization that provides free seminars to owners of rental properties on a regular basis to reduce crime and develop safer neighborhoods. Training police officers and property owners.

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what's coming up 12

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April 12th MAREI Meeting, Evening, Live & In-Person in Overland Park Andrew Syrios has been BRRRRing since before it had a name. It's a sure-fire way to wealth and he will be explaining how it's worked for him in the past, how its working currently, and what he sees coming in the future. Doors open at 6:00 for Networking, Presentations Start at 7:00 April 19th MAREI Virtual Meeting Virtually on Zoom - 7:00 to 8:30 Pm Our special guest, Attorney Julie Anderson will be joining us to give us an update on the eviction front.

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May 10th MAREI Meeting, Evening, Live & In-Person in Overland Park Anthony Chara is back for a 2nd Visit to share how to grow your wealth exponentially with Apartments & Commercial Buildings. Doors open at 6:00 for Networking, Presentations Start at 7:00

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May 21st One Day Workshop Wealthy people turn to Apartments to build wealth and many find them an easier investment than wholesaling or flipping. Come learn why, the lingo, and how to find and fund a good deal. Special early bird pricing till April 30th, must register by May 10th to get the bonuses. All Day Live in Overland Park.

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July 12th MAREI All-Star Night Join us to Network, Build Your Team, ask questions, and raise money for Harvesters. Sponsorships Available, Alice Lund with Leader One is our Event Committee Chair.

See MAREI.org/Calendar for these and other member sponsored events.


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From Andrew Syrios Local Real Estate Investor & Housing Provider who along with his brother Phillip, owns 600 plus doors in the Kansas City Metro Area. Look for and Follow The Syrios Brothers on YouTube. Subscribe to Andrew's Blog at AndrewSyrios.Substack.com

ARE WE HEADED FOR A REAL ESTATE CRASH? The real estate market is obviously very hot. In the last year, prices went up a full 14 percent and 45 percent of all listed houses were under contract within the first two weeks of being on

the market. This is all but unheard of. Between 2000 and 2020, home prices have more than doubled. And that’s with a massive real estate-driven financial crisis in the middle of those two decades. As of March 2022, the median price of a home is $408,100. Indeed, since the 2008 financial crisis, the big line has been going up at a pretty consistent pace. In Jackson County, MO where I work (basically Kansas City), there was only 0.7 months of inventory on the market in February 2022! That means for every 10 houses sold in February, only seven were still available at the end of the month. For reference sake, a “balanced” market that favors neither buyers nor sellers is considered to be one with six months of inventory.


So, the market is hot. But why? My brother Phillip and I tackled this issue on our YouTube Channel "The Syrios Brothers."

In other words, people mistakenly thought that inflation was low until recently. It wasn’t. Inflation has been going on for a while now, but it has mostly been in assets and particularly in housing.

There are several major reasons the market is hot. The first is simply inflation. As of March, 2022, the inflation rate was at 7.5 percent, the highest it has been since the early 80s. This shouldn’t be surprising at all as the money printers have been going brrr like there’s no tomorrow. Here’s the Fed’s chart for the M3 Money Supply to the right: Since Covid came around at the beginning of 2020, something absurd, like 80 percent of all the money in circulation has been printed. Quite obviously, this much additional money is going to lead to inflation. So it makes perfect sense that housing would go up in price as with everything else. But it’s even more acute with housing as new money is typically created as debt. When the Fed engages in “quantitative easing” it is simply buying assets (usually bonds) with newly created money. And as it lowers interest rates or reserve requirements, banks will lend more. Each time a bank lends money it is engaged in fractional reserve banking (lending out more than its current cash reserves; usually at a ratio of about 10 to 1) and thereby pushing new money into the economy.

The Supply Crisis Inflation and Cantillon Effects don’t explain it all, however. There’s also a major housing shortage in the United States that also traces itself back to the Great Recession of 2008. Namely, they just didn’t build enough.

This creates something called a “Cantillon Effect.” Namely, those who get that money first buy at lower prices before the additional money has an inflationary effect. Because most new money is created through credit and most credit is used to buy assets (especially real estate) asset prices will go up before and more so than commodities and other such things. Thus, the incredibly low-interest rates of the last 15 years and endless quantitative easing have lit a fire under real estate prices since the Great Recession ended. Indeed, what we have seen should more accurately be called “housing inflation” than appreciation. But since housing prices are conveniently not a part of the consumer price index, they have had no effect on official inflation numbers.

This chart that’s been making the rounds on social media should drive the point home.


After 2008, everyone was shell shocked. Banks didn’t want to lend on new construction because they took such big losses in that sector. The government wanted to regulate lending on new construction to death. Investors didn’t want to touch it. Many developers were bankrupt. Basically, no one wanted to build anything.

Economics 101: When demand exceeds supply, prices go up. And then on top of that, when you throw in all the various supply shocks, particularly in lumber, and the labor shortage, it’s just going to make things all the worse as these added costs will get passed on to consumers.

And, more or less, they didn’t. Between 2000 and 2007, there were over one million housing starts each year with over two million between 2005 and 2007. After the financial crisis, housing starts fell below 500,000. They didn’t get back to over a million until 2020 and then Covid hit and the lockdowns shut down and delayed construction for months on end.

What Does the Future Hold? I can’t say for certain, of course. Economic predictions have an almost farcically poor track record. But rising interest rates and general affordability issues will likely cool the housing market. That being said, it will take years to rectify this supply crisis and supply and demand remain undefeated. It’s almost impossible to see housing prices collapsing when demand outpaces supply as much as it does now. Inflation is also likely to be with us for the foreseeable future, even with a few rate increases by the Fed. Housing should go up in price, at least nominally, for that reason alone. (Housing prices basically kept pace with inflation in the highinflation decade of the 1970s.)

All the while, the US population kept growing. More people and less new housing equal a housing crisis. Right now, Freddie Mac estimates there is a 3.8 million unit housing shortage, the largest ever recorded.

In addition, most of the NINJA loans and teaser rates from the 2000s that helped create the 2008 Financial Crisis are now, thankfully gone. So while the real estate market might cool or even be pulled down with the rest of the economy if a general recession comes about, it’s highly unlikely the housing market will collapse. Indeed, it’s likely to continue rising, albeit at a slower pace.

Follow in Andrew's Footsteps

Want to buy and hold your way to wealth? Need a bit of guidance to get started? You can follow Andrew & his brother on YouTube, on Andrew's SubStack, plus they are featured on MAREI's Introductory Guide to Rental Property Investing, which is a collection of recordings of classes they have taught over the years.


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ADVANTAGES OF INVESTING IN APARTMENTS Anthony Chara Apartment Investor and Syndicator of over 2000 apartment units in the US since 2004

Why is the Real Estate Market so HOT!! Will Rising Interest Rates Cause it to Crash? Here's what Andrew has to say:

Have you ever played the game Cash Flow 101 by Robert Kiyosaki? If not, I highly recommend it. In the course of a few hours, you can learn some valuable lessons about how to analyze properties quickly and whether or not you should buy them for cash or get a loan and leverage the investment. You start the game in ‘The Rate Race’ which is in the shape of a hamster wheel. You go round and round in your JOB until you do what needs to be done to get out of the Rat Race. What is that? You need to generate enough passive income to surpass your monthly expenses so you can, in essence, quit your JOB and move onto The Fast Track where you can do larger and more lucrative transactions.

Buying apartments is one of the investment vehicles you can use to get out of the Rat Race very quickly. Why? Instead of buying 1 single-family home here and there, why not take that same time, effort, and money, and buy a 10 unit or 20 unit, or 50 unit property? Your returns and Net Worth can be amplified exponentially if you buy the right property in the right market at the right time. You learned how to exponentially increase the value of the property in the lesson on Cap Rate a few weeks ago. How do you know you’re buying the right property in the right market at the right time? You’ll learn that over the next few months by reading these lessons. Another advantage to buying apartments is due to the lower purchase price MAREI Member Serena per unit. Think of it this way; if you go to a store and buy a can of soda, how Bales hosts a cash flow much would that one can cost? Maybe a $1? But what if you bought a game night on Thursdays. 12-pack? Last time I checked, 12-packs of soda ranged in price from $2.50 to $4 depending on the store and soda type. So you now have a choice. Buy Look for KC Cashflow 4 cans of soda for $1 each or get a whole 12-pack for $4. Hum? What Game Night on Facebook would you do? It’s similar with apartments when compared to SFH’s. If you buy in bulk you expect a discount. Even though you may buy at a discount, the biggest advantage to buying apartments over other types of RE is the fact that your expenses are so much lower than SFH expenses because you can average out those expenses over more units. This is where the real value in apartments comes into play. It’s not by increasing rents perse. It’s more about controlling the expenses.


The vacancy is relatively lower with apartments too. Think of it this way, if you spent the same money in the form of a down-payment on an SFH compared to a 10 unit apartment building and either your SFH was vacant or 1 of your units was vacant, which one would have a lower vacancy rate? The apartment building, of course. When your SFH becomes vacant, you have 100% vacancy, but if only one of your apartments is vacant, your vacancy is only 10%. With the SFH, if it’s vacant, who’s paying the mortgage? You are. If you have one vacant unit in your apartment, who’s paying the mortgage? The other 9 tenants, that’s who!!! I love apartments! Management Costs: When I do presentations and classes around the country I ask the attendees what they are typically paying property managers. Generally, the response I hear is 8%-10%. Meaning; 8%-10% of the collected rent comes right off the top to pay the property manager to manage a single SFH. With apartments, because you have more than one unit grouped together, the costs associated with managing this type of property should be less, because the manager only has to go to one location to collect rent, perform repairs, check in on the tenants, or, if need be, to evict the tenants. Due to this time savings, you should also be paying less to your property manager. How much less will depend on the area of the country where the properties are located, the style of the complex, and the number of units. Typically, you should be able to reduce your management fees to somewhere between 4%-7% or even lower as you increase your total number of units within a given market. Another advantage to having more units is the Economy of Scale. Think about it this way; if you have a SFH and you need to replace the roof, how many units do you have to divide that cost across? Only 1. But, if you have a 12 unit building and you need to replace the roof, you can now divide that cost across 12 units. It’s the same thing when you have to paint the building or take care of the landscaping. Sure, the cost will most likely be slightly higher for the roof, painting and landscaping for a 12 unit complex, but it certainly won’t be 12 times higher than a SFH! This is where wealth is created with apartments. It’s in the value of controlling the expenses due to the economy of scale more so than trying to increase rents. Many times when I give teach, people will ask me how they can find and buy, and then manage an apartment complex if they still have a full-time JOB and aren’t out of the Rat Race just yet. Let me answer the second half of that question first. If you have ever played Cash Flow 101, you know the object of the game is to create Passive Income. If you’re managing the property by showing the units, taking and processing applications, and performing repairs, is that passive? Of course not. Why would you want to manage the property anyway? Time is more valuable than money so pay someone else to manage the property for you. If you’re analyzing and buying the property the right way, then there should be adequate cash flow available to hire a property manager and still leave ample money in your pocket. If there isn’t adequate cash flow to hire a property manager, go find another property!!! The second part of the question about how to find and buy deals if you have a full-time job, is also an easy answer, but not something a lot of people will do which is why you’re successful and they are not. First off, if you want to do apartment investing all on your own, then you’ll have to find the time to find the deals, analyze them, then put together the financing in order to close. This means you may have to spend time late in the evening, early in the morning or on weekends doing the research to find the right opportunities. My partner George started this way. After he came home from his JOB, he’d have dinner with his family, help his kids with homework, tuck them into bed and then hop on the computer. Occasionally, he would find deals at 1 or 2 in the morning. He’d put together an offer in the form of an LOI (Letter Of Intent) and fax it to the seller or listing agent in the wee hours of the morning. On his way to work the next day, he’d call the agent to confirm they received the fax and would ask them to share it with the seller. I didn’t say this was easy, but you can be successful doing what others won’t do, which is taking the time necessary to get deals done. Would you like to know an easier way to be successful? I can sum it up in one word, ‘Partner’! Yes, it is that easy. Partner with another person or people that have the time you don’t to find deals. Partner with


people who are better at analyzing the deal. Partner with people that have more experience than you do. Partner with people that have better credit or more cash than you do. Partner, partner, partner. At least until you get started and are successful. After that, you can choose to continue to partner with others or, to quote a ‘fleeting’ poet, “you can go your own way!” There really isn’t that much competition when it comes to buying apartments. In my presentations toReal Estate Associations I ask the audience, “How many of you own at least one SFH?” Generally, about 90% of the attendees raise their hand. Then, I’ll ask, “How many of you own an apartment building?” (FYI, buildings that have 5 or more units are classified as apartments or ‘commercial residential properties’ by lenders.) Most of the time, only 2%-8% of the attendees raise their hand to that question. Then, I’ll ask, “Why do you think so many fewer people own apartments?” The typical replies I’ll hear are; “It takes too much money”, “I don’t understand how to manage apartments”, “Having that many units scares me”, “There are more headaches with the tenants in apartments than SFH’s”, and my favorite, “I don’t understand the numbers”. My reply to all of these ‘excuses’ is that every single one of them can be overcome by applying 1 word; Education. All of the ‘reasons’ people create allow them to validate, in their own minds, that their fears are real and these fears keep them from taking action. The fact is, these fears are usually unfounded once you know how to find, analyze, purchase and manage your apartment assets correctly. Therefore, people that overcome their fears by educating themselves are far more successful. Thus, there is less competition with apartments, because only a handful of people have educated themselves accordingly when it comes to apartment investing. Think back to when you bought your first SFH. Did you know everything you needed to know to get from point ‘A’, finding it, to point ‘Z’, closing the transaction? Probably not, but yet you did it. How was that possible if you didn’t have all the answers before you started looking for the property? You were successful because you saw everyone else doing it and were probably told at a very young age that the American Dream was to own your own home. Even though there was some fear surrounding this new adventure, you were comforted by knowing that everyone else was doing it and it was accepted practice. It’s the same with apartments. You just need to get the proper education. Once you purchase one or two complexes your fears will subside. So where do you get the education? Join me at the two different training events at MAREI in May and look for my 4-day training event in Kansas City in July. Find all of these events on the calendar at MAREI.org. And I will see you in May!

INVESTING IN APARTMENTS Anthony Chara is the guest speaker at the May 10th MAREI meeting and teaching a 1 Day Apartment Investing Workshop on Saturday, May 21st. Register MAREI.org




THE GOOD, THE BAD, & THE UGLY OF INTEREST RATES Chris Kuehl Premier economist worldwide who happens to call the Kansas City Metro Home.

To control the economy, the Federal Reserve raises or lowers interest rates to encourage an expected outcome. To control inflation, they are raising interest rates.

There is an old Scottish proverb that holds that it is “an ill wind that blows nobody good.” It seems that with most things there will be winners and losers and that is certainly the case with interest rates. In the last several months the most pressing economic issue has been inflation. The real rate is now above 7.0% and the core rate stands at 5.5%. The hike in the inflation rate for energy has been staggering at 29.3%. The preferred rate from the perspective of the Federal Reserv e is around 3.5% for real inflation and 2.0% for the core.

The difference between the two is that core doesn’t take into consideration the prices in energy and food as these are highly volatile categories and that complicates year over year or month over month comparisons. When rates reach this point the Fed is expected to take action to bring them down and the major tool at their disposal is the Fed Funds Rate. The statements from the Fed thus far indicate a commitment to hiking rates three times this year, likely by a quarter-point each time and starting in March. If the stated goals remain intact the interest rates will be at .75% by year’s end as compared to the current rate between 0.0% and .25%. If the Fed decides on half-point hikes the rates might be at 1.5%. These will still be very low as compared to past years but these rock bottom rates have been in place since the recession of 2008 and many have become accustomed to them at this low level. The argument for higher rates generally centers on inflation control. The logic is that inflation is fueled to a degree by too much money in the economy overheating the system. The money supply issue was a bigger factor last year when the US was sitting on almost $3 trillion in excess savings due to the stimulus spend. There are other reasons to want interest rates higher and this point has been made by the “hawks” at the Fed. The first is that low rates punish traditional savers. There is no interest made available to people who want to put money in a savings account or want to buy a CD or any other instrument based on interest rates. A second concern is that very cheap money has encouraged investors to borrow huge sums which they put in the stock market. They assume they will get a nice return and that will allow them to pay that loan back. The worry is that these borrowers (and their banks) will be exposed when there is a correction in the market. Higher rates will benefit the traditional saver and it reduces some of that risky investor behavior.


There is generally a negative attitude towards higher rates and an assumption that hiking them will be bad for business. There is a silver lining, however. When rates are as low as they have been for the past decade the banks have very little margin to work with and become very cautious regarding loans. The interest rate hike will allow banks to do deals they might not otherwise consider. The bottom line is that hiking rates a little makes sense in the current inflationary environment and the hikes may also provide stability in the market as well as the opportunity for businesses and consumers in search of bank financing. The real estate market watches the interest rate conversation very closely and for the most obvious of reasons. For the last several years there have been contradictory trends in real estate – commercial or residential. On the one hand, the mortgage rates have been extraordinarily low and that has been the same situation when it comes to commercial property (although there has been considerably more variation depending on the project). At the same time, there have been much higher prices. The fact is that many buyers (residential and commercial) pay more attention to the monthly payments than to the size of the loan and as long as the rates stayed low, they were able to justify and handle the higher prices. Now that situation seems slated to alter as mortgage rates rise at the same time that prices continue to increase. The complicating factor as far as commercial development is concerned is there are significant differences between sectors. At the moment there is intense interest in anything related to warehousing and logistics but relatively little interest in developing office space. Retail has also suffered as has lodging and entertainment. As usual the location of a project matters with some states recovering old patterns faster than others. As interest rates rise some of these projects will yield inadequate returns but by the same token the higher rates make banks slightly less risk-averse. Over the last several weeks there has been more and more speculation regarding the potential for a housing bubble burst. This discussion intensifies as mortgage rates climb as there is an assumption that demand will suddenly dry up and those homes that have been selling at record high prices will lose the market demand that has driven these prices so high. It is certainly possible that some markets will experience that bubble burst as they have been red hot for years but three things have to happen for these bursts to become a nationwide issue. The first is that demand really has to erode and quickly. The motivation for the demand that has allowed prices to spike is not entirely down to low mortgage rates and low-interest rates in general. There are other factors that have not altered much. There are still many millennial buyers coming into the market and still many people looking for homes away from congestion. Remote work allows people to live where they want to as opposed to where they have to. Most cities in the US are still seeing housing shortages. A second criterion is an interest rate hike sufficient to trigger a retreat from buying. The Fed’s proposed rate hike policy only pushes the rate to between .75% and 1.5% and that remains at a very low point. It will price some first-time buyers out but most of the market will not react. The third criterion is a belief that home prices are truly excessive and buyers will never be able to recoup their investment. In some markets that may already be true but it remains a seller’s market and that trend continues unless there is an unexpected tightening of credit or a dramatic rise in unemployment. The rate of joblessness is expected to be at record lows in 2022 – around 3.5%. That means that people have the income to buy a house – even an overpriced one. Chris Kuehl, PhD., is an economist and Managing Director of Armada Corporate Intelligence. Visit www.armadaintel.com for more information.




KEY TRIGGER WORDS WHEN RENTING PROPERTY David Picron Housing Provider, Private Investigator, and Founder of Rent Perfect

When you are talking with a potential renter, you need to listen closely for some key questions that could indicate a problem renter in the making.

You can hardly turn on a TV or read a newsfeed where you don’t encounter the term “trigger words.”While there are some universally accepted trigger words, like racial or ethnic slurs, most people or groups have their own unique lexicon of words that send them immediately into orbit. Our industry is no different and over the years the way we identify the players in our game have even fallen victim. In many circles, “landlords” are now more generically referred to as “housing providers,” while tenants are now more often called “residents.”

As a landlord (I can call myself that because I am one) for over 20 years, I have encountered thousands of applicants who are looking to rent my property. In looking at them as potential “business partners,” I engage several of my senses to get a read on what kind of potential partners they might be. More important than anything, I listen closely to the questions they ask as we tour the property. The following is a list of the top trigger words or phrases that every landlord, old and new, should listen intently for to ensure they are getting the best possible read on a person for their property and partnership. 1. Are you going to perform a background check on me? Has an innocent person with nothing to hide ever asked this question? The likely answer is no. Why would they? If I have no criminal background history, then I have nothing to fear; run all the background checks you want. As an applicant, if I have something in my past that I am trying to keep from you as my potential landlord, I’d rather know upfront, so I don’t waste time or money on trying to qualify for your property. If this question ever comes up, now is the perfect time to introduce your rental criteria. Let the applicant know that you have standard criteria and that these rules are applied evenly and fairly to all applicants. It’s easier to let the criteria work for you in showing exactly where the standard is for qualifying for your property. Make sure the criteria are clear in defining exactly what you are looking for when it comes to disqualifying criminal history. And if you don’t have criteria, consult with your attorney or local experts to ensure what you are doing in regard to background checks is legal. We have great detailed sample criteria we would love to send to you. Just email info@rentperfect.com.

Disclaimer: Being presented these questions doesn’t always mean the applicant is a definite no-go, but it should put you on notice. Always make decisions off your detailed criteria.

2. Do you require a deposit upfront? I can’t tell you how many times I’ve heard this question, or one similar to it. I’ve been asked to spread out their deposit over a


few months or even the entire term of the lease. Whatever form it comes in, it puts me on alert. Why? Because it usually indicates that money is tight and that I may not be a priority when finances are stretched thin. When a medical bill or car repair charge hits a tenant hard, you may be the last person to get paid, if you get paid at all. Now is the time when you really have to stick to your guns and require that deposit as it may be the only protection you have moving forward. 3. Can I move in immediately? I’ve shown properties where the individuals have arrived at the showing with the moving van packed and ready to unload. This concerns me as I have to ask them why they are needing to move so quickly. Did they just get evicted? Did they leave their last residence in the middle of the night to avoid being seen by their landlord? Granted, there are times when an applicant just suffered a devastating loss by flood or fire and needs immediate housing. Asking follow-up questions on why they need to move so quickly will help you analyze the situation and make the best decision for you and your property. 4. How many people can stay here? While it might seem harmless, this question could lead to more people living in your property than it can accommodate. When an applicant sees your listing as a 3 bedroom, 2 bath, it’s pretty safe to expect it can accommodate up to 6 people. Establishing the maximum occupancy in an applicant’s mind lets them know what you expect and consider as “too many” people in the home. This question is often accompanied by “how long can someone stay and still be considered a guest?” Both of these together or individually are cause for you to ask a lot of follow-up questions to determine exactly how your property will be used. Again, clear criteria can protect you in this area. 5. How many pets can I have in the property? Pets are just part of the business and having a firm policy regarding number or type is a great way of protecting your investment. While you don’t want a zoo moving in, having a no pet or one-pet policy is pretty standard. Make sure to require an additional deposit (see point#2) and collect all of it before move-in. It’s beneficial to define what is considered a pet and to clearly communicate what animals are and are not allowed in or on the property. I’ve seen tenants who tried raising chickens in the backyard using the excuse that, a) they aren’t pets and b) they never go inside the residence. Along with violating our lease, they also violated the CCR’S of the Homeowners Association and made me subject to a pretty hefty fine with the city. Clarity, especially when it comes to pets, will save you a lot of headaches. 6. My current landlord is a jerk. This trigger lets me know that I just might be the next “Jerk”. Most landlords I meet just want to maintain their property value and make money and keeping tenants happy is an integral part of that game. No one wants to throw a good, paying tenant who is taking care of the property out. Ask your applicant why they feel that way. Often, I hear the current landlord will not return their calls. I see a frustrated landlord when this action starts and, in my mind, it always takes two to tango. There are countless other things to listen for as you meet with a rental applicant; you likely have stories to tell that top my experiences. Listen intently, ask as many follow-up questions as you need, and communicate your criteria and policies clearly. After all, when you are getting ready to turn your keys over to a sizable asset, knowing who you are renting to is critical to your success in this business.

David Pickron is President of Rent Perfect, a private investigator, and fellow landlord who manages several shortand long-term rentals. Subscribe to his weekly Rent Perfect Podcast (available on YouTube, Spotify, and Apple Podcasts) to stay up to date on the latest industry news and for expert tips on how to manage your properties. Members of National REIA & MAREI can take advantage of special pricing from RentPerfect; the solution for rental property owners and managers for screening & managing tenants. Learn more by visiting www.rentperfect.com or calling 1-877-922-2547.



BOOKKEEPING

Common Mistakes Investors Make by Gita Faust

Real estate professionals usually turn into jacks of all trades; after all, when you decide to run your own business, you usually don’t hire other people for all the other jobs right off the bat. Of course, you want to work in real estate, so you probably want to focus on the frontlines: negotiating deals, fixing up properties, meeting with potential clients, and so on. However, that does not mean you can forget about the back end—more specifically, you cannot forego bookkeeping in any company (If you do, you’ll be in hot water with the IRS, and nobody wants that!).

Bookkeeping is a big deal. If you never took a business class in school, you might not have the slightest idea of how to manage your accounting; they don’t really teach you that in high school, unfortunately, and if you did go to college, you probably didn’t take accounting if you were an English or bio major! Still, there are no excuses; the bookkeeping needs to be done.

The scariest part of it all is there is plenty of room for error when it comes to keeping your books organized, especially if you choose to handle the bookkeeping yourself. While it might not be your top priority, you still need to pay it plenty of attention, and here are the top five mistakes you should watch out for:

RECORDS. Improper records is probably the most common mistake made by real estate professionals. You probably know how to keep proper records and file things accordingly (and if you don’t, you might want to hire someone to help you!). The issue with managing the bookkeeping files is that you likely just do not have enough time to carefully organize everything the way you should.

Failing to organize your records can have greater consequences than taking a bit longer to find something. You may not be able to find that something at all! If the IRS comes in for an audit, a messy back office just spells out disaster. Your records should be accurate, organized, and easy to navigate so you are always prepared for any surprises.

1.

CLASSIFICATION.

When you’re running a real estate

business, chances are you have multiple properties and entities. Along with that you might have multiple bank accounts and credit cards. You might have loans to acquire the properties or construction loans to develop the property. You have to make a note of the property name on each transaction and classify it accordingly.


Why is this important? Well, categorizing your expenses matters for two primary reasons: first, you paint a better picture of your business. You can identify where you are spending too much, not spending enough, and spending just the right amount. Secondly, you can get tax deductions on

HammerZen App imports your Home Depot Receipts into Quickbooks. Intuit Quickbooks Solution Provider Discounts on Quickbooks Implementation of Quickbooks for Real Estate Investors Quickbooks training

certain expenses. Yearly deductions add up fast, so it would be extremely beneficial to your business if categorized all of your expenses properly.

NO BACKUP PLAN.

Imagine you don’t make any of these

other mistakes. Your bookkeeping records are spotless. You feel like you could go head-to-head with an IRS audit and come out the victor. All of a sudden, though, something happens. You spill coffee all over your computer. Your building floods. Your system glitches. Something happens, all of your data disappears, and… you have no backup.

Doesn’t that sound crazy?! Why wouldn’t you have a backup of your accounting file? Well, more real estate pros than you think have had to learn the importance of a backup the hard way. Do yourself a favor and save your file to multiple locations so you never lose your data.

These mistakes might seem easy to avoid, but in all the chaos of running a business, it is easy to let one or two of them slip through the gates. That is why you should pay special attention to these areas of real estate accounting—and if

HammerZen.com/NREIA

you can’t, you might want to consider outsourcing your bookkeeping to somebody who is educated, qualified, and has knowledge of accounting and the real estate industry.

If you have questions about real estate bookkeeping and accounting, reach out to us and learn how to get more time to increase your wealth. Depending on what you do either rent or flip you would require different tax structures, so it is important that you create a game plan and classify them in your books. If you fail to do so, you might end up underpaying or overpaying on taxes, both of which are pretty terrible for your business.

ACCOUNTS .

Gita Faust is the founder & CEO of HammerZen, which helps businesses save time & money by keeping track of The Home Depot purchases and efficiently importing receipts and

One of the worst accounting offenses you can

commit is mingling your expenses in one bank account, yet so many real estate professionals make this mistake. Trust me, paying for both your personal and business expenses from one account might seem like it makes life easier, but when tax time rolls around and you have no idea which expense is for what, you are going to wish you had segregated your accounts.

Take my word for it and open two separate accounts—one for personal expenses and one for business expenses. It will make managing the books much easier, and tax time will be a breeze for you, your accountant, and anyone else who has to take a peek at your records.

CATEGORIZATION .

You should always, always, always

review and categorize your expenses. If you do not get a grip on how to do this properly, you will likely end up lumping things together that don’t belong together.

statements into QuickBooks. National REIA members receive discounts on QuickBooks services and software. Learn more by visiting www.hammerzen.com/nreia.



Investor Tools

REVIEW A review of the websites & services provided by carrot

a review

from Kim Tucker cofounder of MAREI and local KC Area Real Estate Investor & Real Estate Agent

CARROT WEBSITES INVESTORS & AGENTS for

When it comes to marketing your business in 2022, you simply must have a website. A website offers a wide variety of benefits for a small business: 1. It makes you look professional, especially if you write a blog post every few weeks to share your knowledge and expertise. 2. It can attract new customers through search engine optimization – so if you have pages or blog articles that impress Google or other search engines, they will share your page. 3. You can showcase your products and services: Houses for sale, before and after on rehabs, lists of what you do for service providers, the options are limitless. 4. You can share reviews and testimonials from past customers with future customers.

7. Your website establishes your place in your industry, and with 81% of customers researching things online before they buy, if you are not there, they can’t find you. So as a real estate investor who buys or sells houses, you need at least one website to showcase what you have to offer, although you might want two: One specifically targeting sellers and one specifically targeting buyers. Real Estate Agents will want one that will showcase the homes they offer for sale as well as their services as a buyer's agent. If you are an agent from a bigger brokerage, you probably have the option of a free or low-cost website offered by your broker’s franchise. But if you work for a smaller brokerage, are your own broker, or you are a real estate investor, you are on your own at finding and building a website.

5. You can encourage customers to contact you through short forms asking for name and email, to more detailed landing pages, and contact forms.

As an investor here in Kansas City, I have used a wide range of resources as my website over the years. As an early adopter of a website, I used to get seller leads through my website with very little effort because there was virtually no competition. It was easy:

6. You can link your website to Google Maps so you can get found, even if you don’t have a physical location for customers to visit.

But that was 2004.


Now everyone has a website and if you don't, you might get left behind. I’ve built my own websites using WordPress and still use this today for MAREI as I love all the tools I can get for free or low cost through WordPress. But you have to teach yourself something about building websites or pay a lot of money for someone else to build them (look on Fivvr or Upwork). And you have to find someone to create content for you on a regular basis, as those blog posts don’t write themselves. I’ve also used several different real estate investor website providers over the years: One company so long ago that I don’t even remember who or what it was. Next up was Realeflow which while I loved the contact management connected to it, I didn’t like the lack of ability to design 100% what I wanted and it had no blog post feature, so no way to build my credibility and develop my search engine optimization. Then in about 2014, after seeing all these investor websites with this little carrot logo at the bottom, I decided to see what this carrot thing was all about. Back then it was called Investor Carrot and they did one thing – build websites for real estate investors that work. They had three basic templates: ·One for real estate investors in general. ·One for investors targeting motivated sellers. ·One for investors targeting cash buyers. They offer the ability to buy just one website or I could buy a package that offered up 3 different websites and with 3 websites, they would prewrite basic blog post content for me. In theory, you could sign up with them, turn on your first website, and with a little bit of work following their implementation checklist, have a functioning website up and running in about 24 to 48 hours. I turned mine on and saw an immediate increase in seller leads as that was my focus. This was super easy for me as I had built several websites already, but for the person who was brand new to websites, it was still fairly easy, so what took me about 12 hours, I would say the brand new person would take a couple of days. Or hire one of their implementation team to do it all for you for a fairly reasonable rate. And the implementation checklist came complete with step-bystep instructions to make it really easy. Now, I can tell you with very little effort, everything works. If you are a WordPress junkie, it works for the most part like WordPress but without the ability to just load up a plug-in to do something else. And if you can't quite figure out how to do something, or there is a glitch the chat feature is great to ask a question. It does a good job of finding the right answer to basic questions

good job of finding the right answer to basic questions that actually match what you asked and if it can't it connects you to a human that might not be available right that second, but who will follow up with you and get your question answered in a timely manner. Better than any other help chatbot I have utilized. After setting up the basic website, we then spent some time going through all the free training that Carrot offered so we could better generate seller leads with our website. They actually show you how to use your new website and the new features as they roll them out. They had several getting started with Carrot Trainings and they had weekly CarrotCasts where we learned about writing the best content, collecting testimonials, video blogging, pay per click, and just about any other way you could use to generate buyer or seller leads. And if you have an investor or a realtor website I would highly recommend following their CarrotCast as you will learn things to implement on whatever platform you are using. They also offered several other classes that cost about $99 on average: a class about using Facebook to generate leads, a class about using Craigslist to generate leads, a class about pay per click AKA Google Ads. They also offer a 30-day Authority Building Challenge that starts on the first Monday of every month that comes with a discounted subscription to their website. Then over the next 30 days, shows you how to set up and optimize your website and your marketing to generate leads. If you like what you have set up, the website package that comes with 3 websites and pre-written blog posts will be billed at $199 a month or you can cancel at any time. I’ve gone through this challenge (go to MAREI.org/CarrotChallenge to learn more) So, if you can’t tell, I am a big fan of Investor Carrot . . . or Carrot as they are now called. I am also a user of REIBlackbook which also offers websites. But Carrot's specialty is websites and REIBlackbook's specialty is tracking and following up with the leads I generate. So for now I use both. I have not yet tested out the websites that Carrot offers for Real Estate Agents, but they do offer templates for Realtors that come with customizable content, prewritten blog posts, and an IDX Solution. To see it in action so to speak for yourself, check out the demo that we offer at www.MAREI.org/carrot Should you decide to utilize Carrot for your provider, MAREI does have an affiliate relationship with them and we do earn an affiliate referral fee when you sign up for a website or other paid training.



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