I hope you enjoyed us going over the scenarios for Your Third Nomad Property. To review, up to this point, we covered two scenarios if you decided to not do your third Nomad property and just stick with two Nomad properties (one rental and one that you live in).
- One scenario where you acquire 2 Nomad properties and start with $40,000 but do not receive inflation based raises and don’t save money from your paycheck
- One scenario where you acquire 2 Nomad properties and start with just $10,000 but you do get inflation based raises and save money from each paycheck
Then, we looked at two more scenarios where you did just one more Nomad property to get a total of three Nomad properties (two rentals and one that you live in). These are similar to the scenarios where you just did two Nomad properties except you’re doing three Nomad properties.
- One scenario where you acquire 3 Nomad properties and start with $40,000 but do not receive inflation based raises and don’t save money from your paycheck
- One scenario where you acquire 3 Nomad properties and start with just $10,000 but you do get inflation based raises and save money from each paycheck
Then, I called back to the days when you first learned about the Nomad model and how you dreamed of doing the full Nomad investing strategy to acquire 10 rental properties and living in a world of luxurious passive cash flow that covered all your expenses and more. I reminded you what the numbers look like for doing the full Nomad model and how it compares to just doing two Nomad properties and also how it compares to doing three Nomad properties.
Resources From Previous Books
Now, I’d like to take some time to remind of you of some of the resources that you have available to you that you will likely need when buying your third Nomad property.
In my book Your First Nomad Property, I shared with you the resources for buying your first Nomad property since that is what you need when considering buying your first Nomad property. You don’t need resources on how to find and screen tenants. When you’re buying your first property, you need the resources for the buying process, how to analyze deals as a Nomad and how to finance Nomad properties. You will still need those same resources when you go to buy your third Nomad property, but I won’t repeat myself here with those same resources. Instead I will remind you to look at my book Your First Nomad Property for those.
In my book Your Second Nomad Property, I shared with you the resources for renting your first Nomad property since that is what you need when preparing for buying your second Nomad property and converting the first one to your very first rental. In that book I share with you the resources on how to find tenants, how to screen tenants, the lease and how to explain it to your tenants, tenant move-in, and property management. As you prepare your second Nomad property as a rental, you will want to reference my book Your Second Nomad Property again to review those resources since I won’t repeat myself here again with those.
However, as you approach buying your third Nomad property, you need new resources. These are resources we have not discussed before. Resources for tenants moving out of your properties and turning over the property to a new tenant. We call this tenant turn-over. Plus, you will need some resources in case something should happen to you so your loved ones know how to step in and manage your growing real estate rental empire with minimal hassle.
Preparing For Tenant Turn-Over
It is a best practice in most situations to maintain your property in great condition while your current tenant is living in the property. This minimizes the time required to prepare the property for your next tenant when the current tenant moves out.
For example, having maintenance done on your air conditioner and furnace can and should be done regularly and not specifically when the tenant is turning over. However, if you’ve been a neglectful landlord and have not been properly maintaining your air conditioner and furnace while the current tenant is living in the property… first, shame on you for not maintaining your several hundred thousand dollar asset… and secondly, you should definitely do it when you have tenant turn-over.
Now, that is not to say that you need to wait for your current tenant to move out to have this maintenance done. In fact, we strongly encourage Nomad landlords to minimize vacancy by doing as much maintenance on the property while the property is tenant occupied. Things like having the air conditioning and furnace serviced are definitely things that can be done while the current tenant is in the property. Or, you could do it as soon as the new tenant moves in. Either way, the point is that you don’t need to do these things in a vacant property that is not collecting rent.
When we analyze properties we typically use 3% vacancy on properties that we are renting out with year long leases. The reason I feel comfortable using 3% vacancy is because we are starting at least 60 days in advance of a tenant moving out (and in most cases 90 days in advance) to start marketing for the next tenant. We can start rent a little higher than we think we can get and slowly drop rent a little bit each week until find a tenant. You should find a tenant before the house is actually vacant… so adjust rent down to keep your properties occupied.
For example, if you’re thinking a property might rent for about $1,850 per month, you might start marketing it for rent 90 days in advance of your current tenant moving out. You know they’re moving out because your lease tells them they need to sign a lease renewal and tell you of their intent to vacate 90 days prior to their current lease expiration. Back to the rent amount. If you think your property might rent for $1,850 per month, you might start rent at $1,995 90 days in advance. Rent is rarely an exact number. You might find someone who wants the property at $1,995. More likely, you will need to drop the rent to get it rented.
So, you advertise for rent for a week at $1,995. If you get no calls or very few calls, you might drop it to $1,950 after a week of advertising it. For lower rent amounts, you might not drop $45; instead you might drop it $10 per month. If you are getting a good number of calls on the property, maybe you don’t drop the rent at all and advertise it for another week to see if you can get $1,995 per month. What is a good number of calls? You will need to know what is normal for your market, but in many cases, I would consider getting half a dozen calls inquiring about it as good enough for me to keep it at that rent for another week.
Each week, as you’re getting closer to the property being vacant and not collecting rent, you can continue to lower your rent until you are getting decent call volume. As call volume on your marketing to find a tenant picks up, you can either not lower rent at all or lower it by smaller amounts.
Tenant Turn-Over Checklists
We have two tenant turn-over related checklists: one to prepare for the turn-over and the other for actually turning the property over. Both are comprehensive checklists for Nomads on the LearnToBeRich.com website.
The checklist for Tenant Turn-Over Preparation is located:
The following is an abridged version of that checklist, but I’d strongly encourage you to check out the web version.
Mark complete when done.
They have limited lifespans and it is probably cheaper to just buy new ones than to have them serviced.
Mark this task as complete when done.
The checklist for Tenant Turn-Over is located:
As you might have expected, here is an abridged version of that checklist. I still recommend that you check out the web version though.
Mark this task as complete once you've watched it.
Classes About Tenant Turn-Over
We do have several classes that deal with topics related to tenant turn-over as well. Here are a few of them:
Property Management Mastery
Once you’ve placed a tenant in your property, you must remain diligent and manage the property. In this class we walk you through the process to prepare your property for a tenant moving in. We also cover the best practices for move-in and move-out with the tenant or tenant buyer. Plus, we cover what happens the first week and first month after the tenant moves in. We discuss how frequently and what to do during property inspections while the tenant is living there. Then, we cover what happens the last 90 days of a tenant’s lease including preparing to rent the property to another tenant, damage deposits and much more.
Solving Tenant Challenges
Despite our best laid plans and best efforts, not every renter will be the perfect tenant we hope and screen for. Challenges with rental properties happen. This class covers checklists and processes for dealing with tenant challenges like late rent, evictions, lease term violations, and much more.
I also have additional classes I’ve taught for our local real estate brokerage on these topics that you may also want to review:
Next, we will discuss tenant turn-over and share resources available for that.
- Your Third Nomad Property
- Just Keeping Two Nomad Properties
- Just Two Nomad Properties with Inflation Adjusted Wages and Expenses
- Buying a Third Nomad Property
- Buying Three Nomad Properties with Inflation Adjusted Wages and Expenses
- Full Nomad Instead of Just 3 Nomad Properties
- Preparing For Emergencies
- Conclusion for Your Third Nomad Property