Today, we’re going to talk about how you can become a master of the lease option syndicate. This type of syndicate is ideal for expert negotiators. Your basic job is to do one of two things – develop a network of lease options or specialize in flipping lease options.

In the first case, you’ll negotiate a master lease option with a property owner. Then, you’ll make some minor property improvements and rent the space out for above market value. Your investors will see a return on their capital as a monthly cash flow and you can collect a percentage of the rents as your fee.

At the end of the lease, you can either work with the seller to purchase the properties for your investors and sell for a profit. Or you can flip the lease option to another investor and collect an assignment fee.

You can also specialize in the latter – flipping lease options. Essentially, you’ll act as an agent for buyers looking to purchase lease options. You establish their investment criteria and negotiate the lease options based on these criteria. Once you’ve obtained the lease option, you then flip the contract to your investor and collect an assignment fee. You can structure the assignment fee any way you choose – as a flat fee or as a percentage of the contract price.

Some tips on getting started:

1. Get to know your investors first. You want to know their criteria before you start working on options.

2. Do your research. If you’re going to negotiate lease options, you have to know the market backwards and forward. You’ll be approaching property owners with offers that are lower than market. You need to be armed with the right information (area rents, vacancy rates, recent sales, etc.) to make informed decisions and negotiations on behalf of your buyers.

3. Network, network, network. The only way to be successful in this business is to have a buyers list. You need to continually work that list to close deals.

Want more tips and tricks on forming a lease option flip syndicate? Check out the Master Lease Option Method. In this course, I share my number one strategy for success as a real estate investor.

I don’t manage any of my own properties because I’m into having time for investing or sharing knowledge with you to grow your investment business. I’m not into dealing with clogged toilets and late rents.

That’s what a property manager is for, and today I’m giving you my top 10 list of things a property manager must do.

1. Develop the optimum pricing strategy for your rentals.
2. Screen and match tenants with vacancies as quickly as possible.
3. Collect rent from tenants in a timely fashion.
4. Handle the tenant drama and disputes with professionalism.
5. Inspect your properties for wear on a semi-annual basis.
6. Handle property insurance purchases.
7. Deal with maintenance issues in a cost-effective, efficient manner.
8. Market your rental properties effectively and efficiently.
9. Communicate effectively with you on how your properties are performing.
10. Supply monthly reports on cash flow and vacancies (and their plan to handle them).

These are just some of the things I expect from a professional property manager. Stay tuned to The Investor Insights this month for more on how to hire the right property management company.

However, we do have to find a good property management company. So, here are my seven signs of a good property management company.

1. Willing to negotiate. If you’re getting the slick marketing package and the blanket 10% management fee, you need to have a conversation about lowering that rate. Don’t let them tell it’s non-negotiable. Everything is negotiable. If they won’t budge, move on.
2. Marketing included. If a property manager doesn’t do this, I’d say walk the other way. They are there to keep rents coming in, the building(s) in shape and the tenants happy. Part of that rents coming in is keeping the space rented. Also, don’t let them charge you an occupancy fee. It’s your property.
3. Good communication. You’ll know whether a property manager is good from the first phone call or email response. A good property manager will give you information in a timely manner through multiple channels. I wouldn’t work with someone who doesn’t really do email. Next, please.
4. Reasonable, reliable maintenance. Maintenance can be a money pit. While you want your tenants happy and your properties to look nice, you’re in this to maximize cash flow. Your property manager should have an affordable crew or contractor to handle maintenance. You should also have an agreed upon (in the contract) amount of discretion for repairs. Over $150 is a good number to follow.
5. Experience with your niche property. You will most likely specialize in one or two types of properties. It’s a good idea to find a property management company with experience managing your specific properties. For instance, I’d steer clear of a property manager that has only handled single family homes when you’re looking for someone to manage an apartment complex.
6. Monthly statements. You don’t want to wait three months to find out your monthly cash flow took a big dip. Ask this question up front and move on if they won’t comply.
7. A range of services. The reason to pay for a property management company is so you don’t have to collect rent, chase tenants and change air filters. Your property management company should cater to you and offer you a wide range of services at a fair cost. If you don’t get that vibe, move on.

Stay tuned to the blog this month for more on property management. Don’t miss a post. Sign up for email updates.

One thing I’m not into is managing the property myself. I’m kind of lazy, so I like to get a professional management group in there to streamline expenses and to manage maintenance and tenants. Lowered expenses plus higher rents is the way to cash flow one of these properties.

How do you find a good property manager?

I like referrals from other apartment building owners and there are a couple of professional associations. I like the Apartment Owners Association and the Institute of Real Estate Management.

How do you get a good deal on property management rates?

It’s the same as negotiating the MLO. It’s called negotiations. You’ll get a blanket 10% rate from most property management firms, but this rate is always negotiable. I’ve seen rates as low as 5%, but the average is about 8%.

How do you move cash flow up beyond professional maintenance?

Raising rents and adding profit centers. Look at the leases of existing tenants. Rates can go up on anyone near the end of their term (to renew). You can also start charging fees for storage, parking and adding amenities such as beverage machines and coin-operated laundry facilities. This improves the desire for the property overnight – and adds cash flow.

This month is Property Management & Systems Month on The Investor Insights. Sign up for my email updates so you don’t miss a post. We’ll be talking about ways to improve your properties through management and the best systems to put in place.

Let’s look at the pros and cons of working with a broker.

Pros

1. Access to buyers.
2. Access to listing services such as LoopNet.
3. Staff dedicated to marketing your property.

Cons

1. You can do all of the above yourself.
2. You’re going to lose a lot of your profits to the broker.
3. You should have your own buyer’s list ready to sell your properties.

This is just a quick overview of the pros and cons of working with a broker. However, it’s clear that working with a broker is not a necessity if you are working to build a buyer’s list. I like making more money with my deals.

And, a buyer’s list has more opportunities long-term than working one-off deals through a broker.

Advantages of the Buyers List vs. Brokers

1. Lower cost marketing - You can use a buyer’s list to market your properties without the transfer of commission.
2. Multipurpose – Your buyer’s list has multiple purposes. You can flip and sell to this list. Your broker is going to bring you a buyer, so the sales process is going to take longer to close.
3. More than one deal - Your buyer’s list gives you the opportunity to forge business relationships. I think it’s pretty cool to have access to a list of investors that want to work with you to make money – potentially on multiple deals. It’s much more fun this way, and that’s part of the reason I’m in this business.

If you’d like to learn more about building relationships with buyers (how to create that list) and the top four ways to exit from commercial master lease options, check out my course, the Master Lease Option Method. I’ve got a free video on how one exit strategy netted me $2,500 in one day. Watch it here.