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Investment Property Part I: How Not to Become a Slumlord

by: Cameron Brown

Welcome to the first part of a two part series about getting into the investment property business.

After riding the ups and downs of the stock roller coaster for a while, an increasing number of investors are looking into property investment as a more stable alternative. With hot markets in many parts of the United States, the time may be ripe for you to get into this potentially lucrative trade. I would suggest, however, that you keep reading before you jump on the first property you find. You just might find something in this article that will keep you from breaking the bank and your back.

The hope of any investor is to build long-term wealth; this is a fairly straightforward principle and probably the reason you�re reading this article. There are however, some rules to play by in the property investment game if you don�t want to end up taking a shotgun with you every time rent needs to be collected. I�m talking about how to avoid becoming a �slumlord�.

In order to best relate the rules of being a successful landlord, let me share a story experienced by some extended family members. It�s a great example of what NOT to do if you want to get the most out of your investment property. After the story we�ll see what rules and lessons we can learn. Names have been changed to protect the identity of the innocent.

Ben bought a beater single-family investment property in a very bad area and he his two sons, Josh and Nathan, all got busy. They put in hardwood floors-don't want to have to replace carpet every time you have turn over, right? And then they thought they'd use really good paint-don't want have to repaint every time, right? And then they decided to splurge on good cabinetry and bathroom fixtures-a happy renter is a good renter, right? And to top it off, they put in nice towels on nice racks that said, "We are Family." Renters would appreciate that, right?

Right.

The first family to move in removed the bedroom and cupboard doors for firewood, tore out the nice bathroom fixtures and sold them at the swap meet, and fired small caliber rounds through the new hardwood floors. Ben discovered this when he received a call that the roof was leaking and he should, "Get your *** down here and fix it!" He patiently tried to explain that roofs do that when you pull shingles for kindling. Other wonderful visits ensued, prompted by similar calls.

It only took eight months to get them out of the house; turns out that tenant rights as outlined by the county enumerate more rights than the rest of us enjoy collectively. As the family moved out he noticed that mom and the two older boys all sported matching shirts stitched with "We are Family." The rest carried various pieces of the house.

Ben, Josh, and Nathan began to rebuild the house, finding all sorts of interesting changes to its structure. Nothing really serious other than a supporting beam was chain-sawed out (apparently more firewood), tile pried up in one bathroom-no clear reason why, gang signs scratched into all the glass and mirrors that weren't broken and other little surprises. While crawling under the house to repair bullet holes in a leaking plastic sewer pipe, Nathan found a bong and a bag a weed. I guess if you're stoned you tend to misplace things.

While helping restring some crawl space electrical wire-later found strung in the closet for hangers-Josh found a rusted out .32 caliber handgun. Somehow the tenants had managed to pry bricks out of the chimney, which Ben needed to replace in order to meet code. Apparently someone had driven an M1A1 Abrams up the driveway; there was no other way to explain the huge cracks in a driveway that had remained perfect for 20 years.

What can we learn from this horrific, yet unfortunately true story?

Rule 1
Location, Location, Location. Ok, so this might seem a little clich�, but it�s a fact that the location of your investment property will determine the kinds of tenants you will attract, and how much rent you can fairly charge. Remember, at some point in time in the future it may become necessary for you and your family to live there; what kind of neighborhood do you want to be in?

Rule 2
Don�t go overboard when you�re fixing up an investment property. You ought to expect reasonable wear and tear. Keep in mind that �reasonable wear and tear� means something entirely different to a person whose renting than it does to an owner. And for goodness sake forget the, �We are Family� hand towels!

Rule 3
Know how to make basic repairs. Luckily for Ben and sons they had quite a bit of experience in various construction trades. Otherwise they may have lost even more money than they did through hiring out help. Knowing how to fix electrical wiring, repair drains, and replace windows will save you quite a bit of money down the road.

Rule 4
Screen your tenants as if they were moving in to live with you. This may be the most important step to avoid becoming a slumlord. Ask for and check references. Call previous landlords and ask questions like, �Did they pay rent on time? How was the condition of the house/apartment when they left? Did they ever disturb neighbors with loud music or yelling matches? How often would you have to make special trips for untimely repairs?� Being as informed as possible about who you rent to will make a huge difference in the profitability of your investment property.

Rule 5
Know your rights as a landlord. Be familiar with the eviction process in order to avoid long, drawn out disputes with tenants. Most states and counties provide online information about tenant and landlord rights.

Don�t repeat the mistakes made by Ben and his sons. Granted, getting into the investment property business takes hard work and you�ll have to put up with things you normally wouldn�t put up with. At the same time there are steps you can take to limit your liability while preventing yourself from becoming a �slumlord�.

In the next portion of this two-part article we will be discussing some of the financial aspects you should be familiar with in order to find the best deal possible on your first investment property.

About the author:

About the Author
Cameron Brown is a client account specialist with � More Visitors. More Buyers. More Revenue. For information on apartment financing, visit

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How Investment Plans Work
by: John Mussi

More people are choosing investment plans than ever before. With the rising cost of living and the growing insecurity about the availability of many retirement funds, many individuals are looking to investment plans to begin a nest egg or to make some additional money via investment without having to spend a lot of time purchasing stocks and bonds.

Investment plans allow individuals to simply purchase a specific amount of stocks, bonds, or indices on a regular repeating basis, cutting out a large part of the hassle while allowing for some of the main advantages of investment.

If you've been considering an investment plan but aren't completely sure what they might entail, the following information might help you to decide whether or not an investment plan is the right investment option for you.

The Mechanics of an Investment Plan

Basically, an investment plan is a method of making multiple investments over time at regular set intervals. The funds for the investment are taken from a cheque, savings, or money market account automatically, and are used to purchase stocks or bonds that you have decided upon beforehand. In most cases you can change the amount, frequency, or purchased stocks or bonds of the automatic investments at any time, though depending upon the broker through whom you're doing the investments you may be subject to fees or penalties especially if changing details relatively close to the next investment date. Most online investment firms offer investment plans that you can change at any time free of charge.

Deciding How Much to Invest

When deciding how much to invest each cycle with an investment plan, you should take care not to overextend your funds and bring yourself up short. Make sure that the amount that you choose is available and that you'll have it to spare each time your investment comes up� it can be difficult to plan for events in the future, and just because you have a surplus now doesn't mean that you won't find money running tight a few investment cycles from now.

If you feel that you're reaching a point where you won't be able to afford your regular investment, go ahead and reduce the investment amount or put a hold on the next scheduled investment� better to put less in than short yourself afterwards.

Choosing What to Invest In

Making the decision of which stocks and bonds to invest in can take some time, but it's worth it� this is your money that you're dealing with, and you shouldn't invest it without putting some thought and research into your decisions. Find stocks or bonds that have performed well over time, and that are likely to continue doing so� they may be expensive at times, but you aren't making your total investment all at once so it doesn't matter as much.

Don't be afraid to add new stocks or bonds to your plan later, either� this can help to diversify your portfolio.

Deciding On an Investment Interval

You also need to decide how often you wish to make your investments� this will largely depend upon the cycle of your paycheques and your monthly bills and expenses. You may decide to invest once per month, after everything has been paid, or you might want to invest a little from every paycheque.

The more often you invest, the lower the amount of each investment can be� after all, two or four small investments per month might end up purchasing more than one larger one.

Decide on what works best for your lifestyle, and modify it as needed later if it doesn't seem to work out for you.

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