Being a professional landlord has to be one of the best career choices one can make. The benefit “package” is difficult to beat. As landlords we have it all: personal freedom, perpetual monthly income, asset values (and rents) riding on inflation, no “formal” office, outstanding tax treatment (no self-employment tax on rents, long-term capital gains), forced savings plan via property debt reduction, little need for actual employees (contractors instead), and on and on the list goes. Any single benefit mentioned above is reason enough for stating that professional landlording is one of the finest home-based business opportunities available today. Personally, I love the freedom and flexibility owning rental properties gives me (on average, only 2 hours of management per unit per month).
Since you already have the wisdom to own income-producing property, allow me to share a secret of many highly successful professional landlords. By the way, my definition of a professional landlord is someone who earns a large portion of their income or NET WORTH from income producing properties. For most, this threshold means only owning 4-5 properties, since it only takes a few hundred thousand dollars in controlled assets to account for the majority of a person's net worth (estate), which eventually will translate into cash flow. (Sidebar: I told one millionaire landlord – “You can't eat equity.” He retorted-“I am.”)
One big secret to successfully buying and holding long-term rental producing properties is this: Have alternate sources of cash flow working for you. It is no secret that rental properties can have their own ups and downs in income that come your way: unexpected vacancies, evictions, slow-pays, repairs and major mechanical failures (heaters, roofs, worn out rugs, long-term tenant moveouts needing substantial remodeling, etc). Because of the high cash demands of our business, I recommend investors have another cash-flow business that they operate in conjunction with their rental business. Not only will the cash flow business augment your existing rental income, but most importantly: The cash-flow business will fund future building acquisitions. Let me repeat that again because it is the critical part of the secret: Having a cash-flow service business will fund your future real estate down payments and purchases!
Real estate is an industry operated by independent contractors. For instance, virtually all builders are not really “builders” at all. They are managers and organizers that outsource virtually every aspect of the building construction to independent contractors who perform their specialty in putting the building together. The largest builder in my area doesn't build anything. As a company they simply bring all of the parties and contractors together. They are construction “managers”. There's a lesson somewhere here!
Where the opportunities lies for you is finding your own specialty niche somewhere in the real estate industry. (Sidebar: Your cash-flow service business does not have to be real estate related. The principal remains the same: Have some additional cash flow business operating synergistically with your rental properties.)
There are 2 major opportunities everyone thinks about when you talk about real estate businesses. Since these are reasonably obvious and well known, I will, for the sake of space and time, not cover them, although many folks make a fine living operating these as businesses. They are: buying and selling houses or being a licensed Realtor. I know successful several landlords who do one or even both of these businesses.
Being involved in several real estate businesses myself and knowing scores of active real estate entrepreneurs, allow me to throw some ideas and brainstorming at you to get you thinking about your own real estate service businesses you can start.
The first idea is to create a business where you acquire distressed income properties and create what I call Turnkey Investor Packages. I know several investors who purchase distressed multi-unit properties (usually vacant or nearly vacant) who then rehab the building and then rent out all of the units. They then “package” the building for sale completely “turnkey” to investors who don't have either the time or experience to do it themselves. Some of these turnkey packagers then provide after the sale on-going management for the new owners for a fee. The profit goal is usually $25,000-50,000 per deal. In most cases, no license is required, except possibly for the management services and there are ways around that if needed.
My second idea: If you are the mechanical, physical work type, consider starting and operating a service whereby you detail rental properties for landlords. Also known as Apartment Preparation Services. The typical fee to clean and “prep” a unit is around $500 per unit. Do 2 units per week and that's $1000 per week. Granted, this isn't for everyone, but it could bring in an extra $30,000-50,000 per year to supplement your rental income. This may sound mundane, but there are many creative variations of this service that can help you earn even more. How about detailing houses For-Sale? How about doing this for $1000 per house? REO cleanup/securing services are another idea? Or, perhaps an advanced service for property sellers, charging $2500, whereby you “guarantee” to increase appraisal by $10,000.
Let's suppose you are the super organized type-is it possible you could create a salable service where you help other landlords organize, systemize, computerize their home office and records? Perhaps for a fee-say $500, you would spend a long day in their office getting them professionally organized and systemized. You bet you could. You'd need to deliver some true value, but with some thought and creativity it could be very saleable. You wouldn't need a license for this either!
Here's a what-if idea. What if you became a rental cash-flow consultant. Suppose you were a master at operating a rental business and squeezing every dime out of properties. Do you think you could do a 2-day consultation for $1500-2500 if you guaranteed the client that your service would essentially be “free” from all of the newly found revenue in their business. You would have to be hot stuff for this to work, but if delivered and marketed correctly, I bet it would.
There are dozens of viable opportunities in real estate. As I mentioned earlier, real estate is a business dominated by independent contractors and specialists. You could be one of them: title searcher, real estate website publisher, storage garages, dealfinder/birddog/wholesaler, home inspector, broker, manager, marketing consultant, rehab/maintenance services, cash-flow consultant, tax appeal services, 1031 exchange services, eviction services, rent-to-own expert, mortgage broker, or any number of other creative variations or combinations. Don't limit your income. Some diversification is wise.