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Ultimately whoever occupies your investment home is your decision. The choice of who will move-in, maintain and occupy your investment property should be carefully screened and cherry picked until you have the ?perfect? tenant or tenant-buyer. Let?s get real, ?In many areas of the country some landlords are fighting over the scarcity of renters in the market.?

After only a handful of year?s managing properties I have come to agree with the classic 80/20 rule. Eighty percent of the tenant problems that will arise are caused by only twenty percent of the residence. Therefore the worst part for me is knowing that most of these problems could have been avoided if I had spent five extra minutes qualifying each tenant before I allowed them access into my investment home.

So there is the dilemma; Do you rent/rent-to-own your home now to a less than qualified tenant with first and last months rent or do you wait (and continue paying holding costs) for Mr. & Mrs. Right?

Being a landlord isn’t always easy, you are responsible for making snap determinations for who can and cannot live in your home. Not only that but you have only a short period of time (days) and limited resources to qualify or disqualify these new applicants. Lets looks at the facts..

Screening Your Mobile Home Tenants

Verify Employment: Call the present and previous employers to see if the applicant still holds current employment, how secure his/her job is for future work, and if applicant has been reprimanded or suspended for any reason? If there is no response to your call, keep calling until you get through to a past employer. Employment shows the ability to pay your monthly rent or mortgage payment. A length of two or more years is nice to show stability.

Exception to Employment Length: Monthly income is necessary to insure your monthly bill is paid; however looking solely at the length of employment may not always be pertinent. Many hardworking employees have been downsized over the past 5 years due to no fault of their own, simply a negative economy.

Criminal history: DUIs, Armed Assaults, Robbery, Domestic Abuse, Misdemeanors vs. Felonies, Jaywalking, Parking violations, Etc. Whether renting mansions or mobile homes I am not comfortable with violent criminals or sexual offenders in my property. Make your own decision for this topic and stick to it!

Eviction History: You should not be surprised by a tenant leaving unexpectantly or not paying you on time if that tenant has had a track record of prior evictions. Typically recent past experiences will shed some light on how your newest tenant will behave towards you and the amount of respect they will show you and your property. If your tenant-applicant was evicted from his/her last place of residence or within the last 10 years than it should be no surprise when they stiff you for rent down the road.

Exception to Eviction History: The past is past. If a past eviction is over ten years old I will generally look the other way with no since rental blemishes. If a 30 something tenant-applicant just admits (before I run the background check) that in his late teenage years he was not as responsible as he could have been and got evicted I will generally overlook this blemish.

Sexual Predator: Check the nationwide database at http://www.nsopw.gov. This should have been disclosed by the applicant at the time of submitting the application. This may be a deal breaker for many of us!

Down Payment Ability: Let us be honest, price cures most past blemishes. If a tenant/tenant-buyer can put down a large down payment or deposit most of us have the tendency of looking some past credit or criminal hiccups. Ultimately if you are on the fence about letting your tenant-applicant live in your home simply increase the down payment or security deposit amount until you are happy to let the tenant rent your property

Honesty: I tell every applicant of mine, ?We grade on honesty in addition to what we will find on your credit and background checks. Is there anything else we will find when we pull your background report?? If an applicant has had a criminal mishap in the past and admits/explains the situation to me prior to me finding it on his/her background it helps show honesty and I’ll allow the small infraction. If the applicant lies or forgets about his/her 2 felony convictions than I will have no alternative but to think he/she is lying and therefore they will be denied. Never rent to liars!

Credit: Credit is important; don?t let anyone tell you it is not. Credit is the barometer that landlords can use for a quick evaluation to see if the subject applicants may be a potential risk for rent or rent-to own.

Exception to Credit: Millions of Americans lost their homes and jobs during the housing crash in the late 2000?s. Many of these individuals had to foreclose or claim bankruptcy in order to save what little their families had left. It is for this reason ?Credit? should be looked at as guideline, not a rule.

In the beginning of my real estate career I was told to write down everything I looked for when screening my rental/rent-to-own tenant applicants. Write down what criteria I would accept and would not accept in a potential tenant/tenant-buyer. i urge you to do the same and write this list down, keep it in a safe spot (say the back of your filing cabinet). If anyone claims you choose another applicant over them simply refer to your qualifications guidelines sheet.

Happy, Safe and Profitable Investing,
- John

This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.

Mobile Home Tenant Screening Guide

Retailers Post Stronger Than Expected Same-Store Sales In August

In results that came in stronger than many expected, same-store sales rose in August by more than 3 percent. The results are especially surprising since people just a few days ago were saying the back-to-school shopping season was turning into a big bust. However, it does appear that big discounts were part of what drove sales numbers, which means that retailer profits may not be as robust as you?d otherwise expect with the sales gains.

Heavy discounts during the back-to-school season, which were deeper than retailers had offered in years, drove healthy levels of traffic and sales. Tax-free holidays that were held in several states in August also provided an additional boost.

Major chain stores reported a 3.3% sales gain compared with a year earlier, according to Thomson Reuters’ tally of 27 retailers. Analysts had expected a more modest 2.5% rise. Sales rose in all categories including discounters, department stores and apparel chains. Two-thirds of retailers either beat or met expectations.

That was a relief after two years of sluggish back-to-school sales, but retail analysts and economists say retailers need to be prepared for what’s expected to be a highly competitive fall and another tough holiday season.

Retail Metrics said sales rose 3.5 percent while Kantar Retail recorded the gain as 3.4 percent and ICSC estimated that sales rose 3.2 percent.

ICSC’s tally shows that same-store sales rose 3.2 percent in August.

ICSC’s numbers are based on 31 retailers. In its monthly report, ICSC wrote:

The August results continued to reflect a bifurcated and uneven performance with a group of very strong performers and a group of weak ones within the same subsector. Some of the strong sales performance by retailers in August included Abercrombie & Fitch (+6.0%); Costco Wholesale Corp. (+7.0%); Macy’s Inc. (+4.3%); Nordstrom, Inc. (+6.3%), Limited (+10.0%); Stein Mart (+8.5%); and Zumiez (+9.1%).

By segment, the August results were relatively steady with July. Apparel specialty comp?store sales grew by 3.2% in August vs. +3.6% in July. Department store sales rose by 3.3% in August vs. 3.9% in the prior month. Discounter sales grew by 1.8% in August vs. 2.0% in July and wholesale club sales rose by 6.4% in August vs. 5.6% in July.

?

Among the retailers that choose to comment on back?to?school sales, they generally were encouraged by what they saw??aside from the weather impact. Target?s chairman, for example, observed that his company was ?pleased with [its] strong performance in back?to?school and back?to?college categories.? Ross? vice chair commented that he was ?pleased? with his company?s ability ?to offer terrific bargains on a wide array of product for back?to?school shoppers drove healthy traffic to [its] stores during the month.?

Here are ICSC’s monthly same-store sales year-over-year changes, not seasonally adjusted, going back to 1993.

Here is ICSC?s index of same-store sales, seasonally adjusted, going back to 1992.

According to Kantar Retail, sales-weighted same-store sales excluding Walmart increased 3.4 percent in March for the 30 retailers that reported numbers. (A pdf with each retailer’s results can be downloaded here.)

Frank Badillo, senior economist at Retail Forward, said in a statement, ?August sales held up relatively well because shoppers’ intention to curb their spending plans was outweighed by their back-to-school needs, especially when they scrimped on meeting those needs a year ago.?

Retail Metrics, meanwhile, reported that same-store sales increased 3.5 percent, beating its expectations by 70 basis points.

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Introduction to Internal Rate of Return (IRR)

Today?s Quiz:

What is my return on the following investment:

I bought my first investment property back in August 2008. I paid $63,500 for the house using my own cash. I spent the next two months rehabbing it with $34,000 of my own cash. It sat for about 5 months before I lease-optioned it for $1000/month in rent, starting May 2009. In August 2010, I refinanced and pulled out $66,320 in cash. It cost me about $2300 to do that refinance. I spent $1400 on property taxes in August 2009 and another $1200 in property taxes in August 2010. I?m expecting the tenants will be able to purchase the property for $120,000 in July 2011, and I?ll end up netting about $50,000 after all fees, commissions and loan payoff.

If you don?t know how to calculate the correct answer to that question ? and as a real estate investor you SHOULD know ? I highly recommend you keep reading?

Anyone who reads my BP blog posts or my blog probably knows that I?m a hard-core numbers guy. While I don?t discount ?gut feel? when it comes to investing, if the numbers don?t work, it doesn?t matter how excited my gut might be. I like to examine the financial aspects of a deal before I buy, while I?m holding and then after it?s done. That way, I can mitigate the risk of financial surprises as much as possible.

Seeing as how I?m such a numbers guy, I find it very surprising when I speak to investors who don?t seem to have clue how to analyze a deal or how to determine how profitable a deal was after it?s completed. It?s not that most investors are stupid (far from it!), but many investors have never spent any real time learning the basics of analyzing investment numbers.

I?ve spent many of previous BP blog posts discussing how to analyze a deal upfront to determine if ? in theory ? the deal is a good one; today I want to tackle the other end of the deal and discuss how to determine whether a specific deal was profitable after all is said and done.

First, let?s clear up some common misconceptions. I?m sure most investors have heard terms like ?cash-on-cash return,? ?total return,? ?return on investment,? etc. These are all terms that indicate in some way, shape or form how successful a particular deal is. The most common I hear people referring to is Return on Investment, or ROI. For many investors, this is the one number that summarizes the entire success or failure of a particular investment.

For those not familiar, ROI is calculated as follows:

ROI = (V1 – V0) / (V0), where V1 is the ending balance and V0 is the starting balance.

A simple scenario for using ROI to calculate an investment return would be as follows: On January 1, you put $1000 into a bank account. On the following January 1, you cash out the account for $1100. Your ROI on the investment is:

ROI = (1100 – 1000) / (1000) = .1 (or 10%)

You start with $1000 and end up with $1100 after a year for a return of 10%. Seems pretty straightforward and even the most non-mathematical among us should be able to do that type of calculation.

Now what if I give you the following scenario: On January 1, you put $1000 into a bank account. On February 1, you put another $500 in the same account. On September 1, you removed $250 from the account. And then on October 1, you removed another $250. On the following January 1, you cash out the account for $1100. Like the first example, you started with $1000 on the first day of the year, and you finished with $1100 on the first day of the following year.

So, is your return still 10%? At first glance, you might think so. In fact, using the ROI formula above, the ROI on this investment appears exactly the same as the previous investment. But, given that you had $1500 invested for several months of the investment period (from February through September), you?d think that a 10% return should have resulted in a higher ending balance. So, in actuality, your ROI is probably a good bit less.

As you can see, the ROI formula has two big limitations:

For any investments that involve sums of money going in and coming out through the life of the investment, ROI will pretty much ignore every in-come and out-flow other than the first and the last;
ROI doesn?t take into account the amount of time an investment was held. For example, let?s say in that first example, the $1100 was cashed out after 5 years instead of one ? according to the ROI formula, the return is still calculated at 10%.

This is where Internal Rate of Return (IRR) comes in. IRR is the much more powerful cousin to ROI, and while also more complicated than ROI, it?s an essential tool that all serious investors need to understand. I?m not going to go into the nitty-gritty of how IRR is used (and yes, there are some downsides to using IRR that I won?t go into here), but I do want to review the basics?

First, you may hear IRR referred to by different names ? on your mortgage truth-in-lending statements as annual percentage yield (APY), as the ?effective interest rate? of a loan, as the discounted cash flow rate of return (DCFROR), or sometimes even as the generic rate-of-return (ROR). All of these things essentially mean the same thing, and serve to underscore how important and versatile the concept of IRR is when it comes to investing and finance.

(For the other hard-core finance geeks out there, IRR is most specifically defined as the discount rate that makes an investment?s net present value (NPV) equal to 0.)

Second, and most importantly, I want to do a quick summary of how to calculate IRR for a given investment. Unlike ROI, you can?t calculate IRR in your head. In fact, even doing it with pencil and paper is practically impossible. But, calculating IRR using Microsoft Excel (or any other financial software) is a piece of cake.

In Excel, list the monthly (or annual) dates of your investments in sequential order in one column. Next to each date (month or year), list the aggregate in-come or out-flow for that time period (in-comes are positive and out-flows are negative). Then use the XIRR function in Excel to calculate your IRR. Using the example above where we deposited $1000 into a bank account on Jan 1, deposited another $500 on Feb 1, removed $250 on Sept 1, removed another $250 on Oct 1, and then removed the remaining $1100 on following Jan 1, our Excel calculation would look as follows:

IRR Calculation

As we suspected above, our return was a good bit less than 10% (almost 25% less!), despite our ROI calculation of 10% return. As you can see, doing a quick ROI calculation in your head would left you feeling a lot better about your investment than it probably should have.

If there is enough interest, I?m happy to go into more complex uses of IRR in future posts, and am also happy to discuss some IRR nuances that sometimes affect the ability to accurately determine returns of some types of investments. In the meantime, if you?re interested in learning more about IRR and how to calculate it using Excel, there are some good online tutorials.

This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.

Introduction to Internal Rate of Return (IRR)

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Burger King Puts Itself on the Block

Private equity deals appear to be coming back in vogue in the retail sector. Earlier today, The Street reported that Burger King has been discussing buyout possibilities with several private equity players. In the past two years, the chain has been trying out new strategies in an effort to catch up with its main rival, McDonald’s, and the desire to go private might be tied to the greater freedom afforded retailers who don’t have to report to Wall Street. Burger King has gone through a buyout and a subsequent IPO before: in 2002, it sold itself to the consortium of TPG Capital, Bain Capital and Goldman Sachs. The partners put Burger King back on the public market in 2006.

Right now may be a good time to market itself to prospective buyers, as private equity players are sitting on mountains of cash that need to be spent. But buyout specialists are no longer as indiscriminate as they once were. Before they spend their money, they want to make sure the retailer they pick up is not going to become a money loser. For example, Saks Fifth Avenue recently put itself on the block as well. But so far, it has failed to secure a buyer because private equity worries about the outlook on luxury goods in the current environment.

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And The Winners Are …

I’m pleased to announce here the winners of Retail Traffic’s 21st Annual Superior Achievement in Design & Imaging Awards.

The judging took place recently in Chicago. Overall, the jury tabbed seven projects–three as winners and four others as honorable mention recipients. In addition, we decided to recognize two other projects that fell just short in the judging with special Editor’s Choice merits.

The big winner this year was RTKL, which took home the Grand SADI for its Dolce Vita Tejo project in Lisbon, Portugal, which was the winner in the New Enclosed Center category. Judges were impressed not only with the aesthetics of the project, but also with the integration of sustainable technology into the design. The entire project is covered by one of the largest ethylene tetraflouroethylene roof structures in the world. The material allows sunlight to pass through while keeping heat out, enabling the center to make maximum use of natural lighting while keeping cooling costs low.

In addition, RTKL was also the winner in the Renovated or Expanded Enclosed Center category for its Chadstone Shopping Centre renovation in Melbourne, Australia.

GHA design studios was this year’s other winner taking home the top prize in the New Fast/Casual Dining category for its Carrefour Laval Food Court in Lava,l Canada.

The award winners and editor’s choice projects can be viewed below and a full write-up of the awards with project details will appear in the September/October issue of Retail Traffic.

New Enclosed Center
Winner
Grand SADI Winner

Dolce Vita Tejo
Lisbon, Portugal
RTKL

Dolce Vita Tejo

New Store — Less Than 5,000 Square Feet
Honorable Mention

The Shops at Fontainebleau
Miami, Fla.
H DeVinn Visual with Mancini?Duffy

The Shops at Fountainbleu

New Store — More Than 5,000 Square Feet
Honorable Mention

Stark & Whyte
Brossard, Quebec
Ruscio Studio Inc.

Stark & Whyte

Renovated or Expanded Enclosed Center
Winner

Chadstone Shopping Centre
Melbourne, Australia
RTKL

Before

Chadstone Shopping Center (Before)

After

Chadstone Shopping Centre

Renovated or Expanded Enclosed Center
Honorable Mention

Cherry Hill Mall
Cherry Hill, N.J.
JPRA Architects

Before

Cherry Hill Mall (Before)

After

Cherry Hill Mall (After)

New Community/Power Center
Honorable Mention

Countryside Marketplace
Menifee, Calif.
Perkowitz + Ruth Architects

Countryside Marketplace

New Fast/Casual Dining
Winner

Carrefour Laval Food Court
Laval, Canada
GHA design studios

Carrefour Laval

Renovated Store — More Than 5,000 Square Feet
Editor’s Choice

Saks Fifth Avenue (Third Floor)
New York, NY
Mancini?Duffy

Saks Fifth Avenue

New Mixed-Use or Multi-Use Development
Editor’s Choice

Annapolis Towne Center at Parole
Annapolis, Md.
The Martin Architectural Group PC
ka inc. architecture
Tim Haahs
Target Corp.
Mulvanny G2

Annapolis Towne Center at Parole

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Michael Simpson

Broker/Owner/Commercial

National Commercial Real Estate News

Screening Your Mobile Home Tenants

	Keller Williams Realty: DRE# 1443822
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