Real Estate Investor without owning real estate

I have a friend in my old town who introduces himself as a real estate investor, he makes the bulk of his income from rental cash flow, yet he owns no real estate. If you look up my friends name at City Hall, you will find no property in his name.

How can he be a real estate investor and own no real estate, and how can my friend make the bulk of his income from rental payments, when he owns no units? My friend sublets real estate. He rents for X dollars and sublets for X plus 100-250 dollars. He had 34 units leased and sublet last time we spoke. He focuses on one niche, upper middle class income range condominiums. He finds the well manicured, high amenity laden, units in the nicest part of town, and he ties them up with longterm leases. He has special insight into the mind of a landlord, because he was once a landlord. So he designed his sublet business around addressing the greatest fears of the landlord, and some fears the landlord didn’t know they had.

First, as a landlord he had a few major fears, first of all getting paid. Most rental property owners own 1-2 units and have a mortgage payment looming over their head each month. My friends business addresses that. He pays one month ahead of time, so the landlord always has one mortgage payment in the bank, and 30 days of breathing room.

Second, rental unit owners fear a vacant unit. If the unit isn’t rented, no rent is coming in, so my friend addresses that fear. My friend signs longterm leases with a small discount to himself of 2.5, 5.0 and 10 percent for 18, 24 and 36 month leases. He also has 90 day lease renewal clauses, which automatically renew the leases for the units for an addition lease term, which always gets longer. The long lease terms make the unit owner happy and the discount makes my friend more profitable.

Third, no one wants their unit destroyed by a bad tenent, so it can’t be rented, so my friend addresses that fear. So my friend always has the tenet provide rental insurance, and the leases have an emergency repair clause, that allows my friend to ask the tenet to vacate the premises in 72 hours if damage occurs which could result in my friends lease being terminated and renter agrees to waive all renters rights if they are evicted under this clause. My friend also gets the renter to agree to quarterly inspections, so he can give the owner pictures and videos, so the renter anticipates the inspection and keeps the unit clean and in good repair. While the unit owner is delighted to see the unit is well cared for...

Fourth, no one wants to get calls in the middle of the night or weekend about plumbing or electrical problems. My friend addresses that too. My friend has a contract with a couple plumbers and electricians, with an agreement with the rental unit owner, so they take the after hours and weekend calls, determine if it’s electrical or plumbing, can it wait until morning or Monday, and then due the repairs at a previously agreed on discounted rate, in consultation with the rental unit owner. In this way the plumber or electrician gets a high volume of business, the rental unit owner gets peace of mind, yet stays in the loop and my friend stays out of it. It’s a real estate business without many of the hassles. It’s true he doesn’t get all the tax Deductions of owning a rental property, but he gladly trades that for cash flow.

You see he built a rental business, by seeing both sides. The affluent, upper middle class renter wants to live in an expensive looking building, with lots of amenities, close to work. The rental property owner wants to get paid on time, the owner wants the unit rented and wants to know his property isn’t getting destroyed and be able to both sleep at night and not be disturbed on the weekend. My friend built a business solving problems and the result is a successful business.

Stay thirsty for knowledge my friends!

✍️ written by Shortsegments

Shortsegments is a blogger or writer on the Steemit platform, where writers, photographers and video bloggers, along with other content producers get paid for posting their content.

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