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As a real estate investor and landlord, you’re always looking for ways to cut costs, improve the bottom line, and increase your ROI. 

As a parent, you’re always looking for ways to teach your children about financial discipline and responsibility so that they mature into wise adults.

What if you could combine these objectives and see benefits in both areas? Depending on the circumstances and ages of your children, you might be able to hire them to help you manage your Houston rental properties and enjoy some nice financial incentives as a result.

Why You Should Consider Hiring Your Children

There are a number of compelling reasons to hire your children to work for you, including:

• Tax benefits. The number one financial benefit of hiring your kids is that it allows you to reduce your taxes. Children under 18 who are employed in a family business are not subject to Medicare taxes or Social Security taxes (as long as the business structure is a sole proprietorship or a limited partnership where the parents of the child are the only partners). You’re able to deduct the salary you pay your child from the business income, which reduces your income taxes. The amount the child is taxed at is then reported at the child’s rate. And as long as you keep their income under the standard deduction amount, they won’t owe any taxes. This strategy not only provides significant tax benefits but also eliminates the need to withhold income tax or self-employment tax from your child’s earnings. Additionally, by paying your child and reporting it on their own tax return, you further reduce your business’s taxable income. (More on this later.)
• Wealth transfer. If you’re looking to transfer wealth to your children with limited tax repercussions, hiring a child gives you additional ways to put money into IRAs, 401ks, or college savings plans without incurring gift or estate taxes.
• Personal development. So far, we’ve just focused on the financial benefits. But there’s a very practical personal development piece to all of this. When you hire your children to help you with your properties, they develop real-world skills. This includes problem-solving, financial literacy, goal-setting, communication, etc. This helps tremendously as they mature. 
• Frees up your time. As your children get older, they become more capable of doing tasks well. Even if it’s just organizing files or doing some simple paperwork, it’s helpful. When a child is able to do 5-10 hours of work per week, that’s 5-10 fewer hours you have to work. That’s a win for the entire family!
• Succession planning. As your children enter their late teen years, you may begin thinking about succession planning for your real estate business and portfolio. By hiring them now, you can gauge their interest level and help them gain some experience. If they really enjoy the work and show some promise, you can get a jumpstart on your succession planning. 

How Much Should You Pay Your Children?

This is a question that gets asked a lot. While the IRS allows you to pay your children for legitimate work and lower your Federal income tax, there are some common sense rules and requirements to keep in mind.

First, your children need to be at least 7 years old to consider this strategy. And, the older they are, the less likely it is that the IRS will question what you’re doing. You also need to pay them a reasonable salary – meaning the same amount you would pay someone if they weren’t in your family.

For example, if you would hire a stranger for $15 per hour to answer emails for you, it’s not reasonable to assume you would pay your child $100 per hour. That’s going to raise some red flags. Always keep the salary in line with a normal expected pay range.

While there technically aren’t any rules to how much you can pay your children per year, there are some limits you’ll want to keep in mind. For one, the standard deduction amount for single individuals is $13,850. That means a child can make up to that amount and not owe any Federal income taxes.

However, you could also open up an IRA or 401k for your child and combine the annual contribution with the $13,850 to effectively increase how much you can pay per child without incurring any taxable income on their part.

All of this can get a little complicated, so you’ll want to consult with a CPA to learn more about how much you can/should pay to make sure you’re maximizing tax savings and playing within the rules.

Best Practices for Hiring Your Children

If you’re going to hire your children to help you manage your Houston rental properties, there are some best practices to keep in mind:

• Only hire your child for legitimate and age-appropriate work. For example, you can’t try to claim that your 7-year-old child writes marketing content for your website when he or she can’t even read very well. It needs to be work that they’re actually legitimately doing. 
• Always maintain proper documentation. This includes timesheets of when and how much they’ve worked. You should also make payments on a regular basis into a separate checking account that’s in the name of the child.
• If you’re going to hire your children and pay them for work, make sure you also take the time to teach them how to be financially responsible. Sit down with them and show them how to read their pay statement. Help them build out their own monthly budget with categories for saving, spending, investments, and generosity.

Very few parents are ever in a situation where they’re able to hire their children and teach them work ethics and financial responsibility. If you’re in a place to do this – and you also get to benefit from tax savings – it’s a no-brainer! Just make sure you consult with a CPA to figure out all of the nitty-gritty details.

Article Source: greenresidential

As a real estate investor, rental property owner, and landlord, your ability to grow your portfolio with high-ROI properties that generate substantial cash flow for you and your family is highly dependent on who you know. The more people of influence and power you know, the more opportunities you get to purchase properties that haven’t yet hit the market. That means much of your success is tied to your ability to network.

Your networking efforts act as a powerful tool to open doors to exclusive deals and opportunities. Maintaining relationships with these influential contacts is crucial, as they can provide ongoing insights and leads to help you expand your portfolio.

The Power of Networking

You’ve heard the saying that it’s not what you know but who you know. And while it’s become an overused cliche at this point, that doesn’t make it any less true. If you want to be successful in this industry and build a robust real estate portfolio, you can’t do it in a silo. You need to surround yourself with people – the right people. Start networking, it is how you build that circle of influence. 

The amazing thing about networking is that it puts you in proximity to people. And as the saying goes, proximity is power. When you network, you aren’t just meeting one person. Every time you meet someone, you’re also gaining access to their entire network of people.

For example, let’s say you meet a guy in town who owns an accounting firm. As you build your relationship with him, you learn that his clients are some of the top business owners in the area. Now, if you maintain this relationship, you have the possibility of getting introduced to those folks. 

Networking is an exponential activity that delivers an oversized return almost every time. And while you might not think it’s as important for a real estate investor as it is for, say a real estate agent or financial advisor, that’s simply not true. Embrace networking from the start and reap rewards for years to come.

One of the most important things to remember is that building relationships takes time, so don’t rush it. Focus on making connections both in real life and on social media by finding interesting ways to start a small talk and making eye contact when you meet people.

Creative Ways to Build Your Network

There are tons of generic ways to network. But if you want to expand your professional network and build powerful centers of influence that allow you to grow as a person, you’ll want to get creative. Here are a few ideas:

• Start a Podcast

While traditional methods play a crucial role in business networking and marketing, incorporating modern and creative strategies can set you apart from the competition. Podcasting is one of these networking hack that is easy to do. It not only elevates your landlord status, but it also helps you build valuable connections with your local community.

Start by creating a podcast that delves into various aspects of property management. Share your expertise on topics like property maintenance, tenant-landlord relationships, legal considerations, and market trends. This positions you as a knowledgeable authority in the local real estate scene.

Once you have a platform and an audience, it becomes easy to reach out and invite guests on your show. In fact, you’ll be able to have conversations with people that you otherwise never would have been able to confidently approach. You might even have successful people start coming to you asking to be interviewed. This will cause your network to explode.

• Create Your Own Newsletter

Maybe podcasting isn’t your thing. No big deal! Another option is to start an email newsletter. But here’s the key: Don’t make it a boring real estate newsletter. Make it a community newsletter that focuses on everything happening in your city. This includes events, stories, personal interest features, a calendar of events, and…yes…real estate news.

With a newsletter like this, you become known as an expert in the community. Naturally, this helps you build power partnerships, which can benefit you as you grow your real estate portfolio.

• Spend Time With Business Owners

Business owners are some of the most well-connected and well-off people in any community. So if you’re going to prioritize who to rub shoulders with, do it with other business owners. You can find them at various events, conferences, and groups around town. These are the folks who understand the movement within the real estate industry and know about big happenings before they hit the market.

• Join Local Investor Clubs

A lot of real estate investors and landlords make the mistake of going too narrow in their networking events. For example, they only attempt to network effectively with other real estate investors. However, there’s some power in broadening your horizons and interacting with successful people in general.

One of the best ways to meet successful people is to find local investor clubs with thriving membership bases. Inside the groups, you’ll find people who have wealth and understand investment strategies (both inside and outside of real estate). This gives you the opportunity to rub shoulders with people who have capital and/or know about properties and deals.

• Invest in Yourself

The best investment you can make is in yourself. The question is, are you doing it? Once you open your eyes to the power of self-investment, you start to see new opportunities. 

For example, let’s say you have $10,000 to invest. You find a property with a pretty solid cap rate that you could purchase with $10,000 down. However, you’ve also always wanted to write a book, and you know how powerful it would be for your personal brand – giving you a leg up in networking event situations. Hiring someone to help you write and publish that book will also cost $10,000.

Investing in yourself looks like taking that $10,000 and writing the book, which could allow you to buy not just one more property, but 10 more properties in the future (as a result of growing your personal brand and getting more opportunities for good deals in the future).

Article Source: greenresidential

Rehabbing a rental property – whether it’s one you’ve owned for years or one you’re about to purchase – can be a great way to improve the property, increase rent, and improve the long-term value. However, the process can be long and frustrating if you don’t have a plan for finding the right contractors and managing them well.

In this guide, we’re going to discuss some of our top suggestions for not only finding good contractors to rehab your rental property, but also for managing them well. The hope is that it will give you the confidence to make confident, proactive decisions.

Finding the Right Contractors

There are a lot of what we’ll kindly call “average contractors” in our industry. Most of them mean well, but they simply don’t meet the standards of the average real estate investor who has high expectations around craftsmanship, timeliness, and professionalism. But then there are those contractors who do check these boxes – and they’re worth pursuing.

As you look for contractors to help you with your rental property rehab and renovations, here are a few suggestions you’ll want to keep in the back of your mind:

Get Multiple Bids. Never settle on the first contractor you like. Get bids from at least three contractors to compare prices and timelines. However, remember that the cheapest option isn’t always the best. Balance cost with quality and the contractor’s ability to meet deadlines.

Start with Recommendations. The best contractors often come through word of mouth. Ask fellow investors, friends, or family who have had successful rehab projects for their recommendations. This way, you’re not starting from scratch – you’re working from a base of trusted opinions.

Check Credentials and Reviews. Once you have a few names, do your due diligence. Check their credentials, including licensing and insurance, to ensure they’re actually qualified to handle your project. Online reviews on platforms like Yelp, Google, and Angie’s List can be helpful, but always review your state’s official resources to look up license numbers to confirm that they’re valid.

Conduct Interviews. You wouldn’t hire an employee without an interview, and the same goes for contractors. Set up meetings to discuss your project and gauge their understanding of your vision. This is also your chance to see how well they communicate.

Managing Your Contractors

Hiring the right contractor is a huge step in the right direction, but you can’t let off the gas now. Once you have a team in place, you have to act as the project manager – making sure everything is tracking as it should be.

Here are some suggestions for managing your contractors:

1. Set Clear Expectations

Make sure your contractors know what you expect from the jump. This includes detailed discussions about timelines, budgets, and the scope of work. Always be specific about what you want and when you want it done – never leaving anything open for interpretation. This will reduce the risk of misunderstandings and ensure everyone is on the same page.

2. Establish a Timeline

Discuss and agree on a timeline that includes specific milestones and deadlines. This helps keep the project on track and allows you to monitor progress. Make sure there’s a bit of cushion in the timeline for unexpected issues, but always aim to keep things moving forward.

For example, let’s say it’s July 15 and you need the project completed by October 15. The smart thing to do would be to set milestone checkpoints at August 1, August 15, September 1, and September 15 – with the deadline being October 1. This gives you some checkpoints to gauge progress, while also providing an extra two weeks of cushion on the back end. (Never tell your contractor that your desired completion date is actually October 15. That’s your little secret. Instead, push them to be done by October 1.)

3. Communicate on a Daily Basis

Good communication is the key to any successful relationship, and your relationship with your contractor is no exception. Some real estate investors set up weekly check-ins, but it would benefit you to do daily check-ins. These don’t have to be hour-long conversations – a 10-minute phone call will do. The point of these check-ins is to hold your contractor accountable for the work that’s getting done on a daily basis. 

4. Insist on a Written Contract

A written contract is extremely important and vital to the integrity of the project. It should outline every aspect of the project, from payment schedules to the materials used and the scope of work. This document will be your go-to in case any disputes arise. (Make sure both you and the contractor understand and agree to all terms before the actual work begins.)

Speaking of legal and financial aspects of the project, never pay for the entire project upfront. A common practice is to pay in installments based on completed stages of the project. Each installment should only be paid after you’ve inspected and approved the work that corresponds to that payment.

5. Monitor the Work

Being an active participant in the rehab process can make a big difference in the timeliness, quality of work, and the ultimate outcome. 

We recommend regularly visiting the site to inspect what’s being done. This shows your contractors that you are involved and care about the quality of the work, while also allowing you to catch issues early on.

6. Be Prepared for Issues

Even with the best planning, issues can arise. Whether it’s a delay in materials or a sudden unavailability of a key contractor, be prepared to make adjustments. Having a contingency plan and budget can help you manage these challenges without derailing your entire project.

This is why we encourage you to give your contractor a deadline that’s several weeks ahead of your actual deadline. And from the financial side of things, you should always include an estimated 10 to 15 percent in the budget. That means if the estimated cost is $25,000, you should anticipate it being more like $28,750.

Mensayhub Professional Property Management

At mensayhub, we take great pride in helping our clients manage their rental properties in a stress-free, highly-profitable manner. This includes managing both the big picture and finer details of each property in your portfolio.

Want to learn more? Don’t hesitate to contact us today!

Article Source: greenresidential