Hassle-Free Property w. David Tilney

By Christina Suter on Aug 31, 2019 at 12:00 PM in Real Estate Issues
Hassle-Free Property w. David Tilney

Real estate investor, and creator of Master Leasing, David Tilney has owned and operated single-family investment properties for over 38 years. David believes his tenants are his greatest assets and views them as his on-site resident managers who are compensated with good, long-term housing. In 1984 Tilney became a tenant and rented a house for 35 years, which he then subleased for a profit. By 1996 he'd leased and subleased over 100 homes. "Owe nothing but control everything." -John D. Rockefeller

Recently, in my interview with him on the Ask Christina First Radio Show, Tilney shared that he was able to glean a lot of great advice from his wonderful mentors over the years and he reassembled that information into a new package that is Master Leasing. Tilney found that properties management companies he'd hired didn't pay attention to detail and he was therefore pushed, pulled, and dragged into property management. He says property management is the key to long-term success in the field. "You can flip, you can do all these other things, but if you don't want to work the income doesn't come in. Or if you can't work, the income doesn't come in. Whereas management, long-term ownership, free and clear properties over time will produce an income whether you are in the country, out of the country, asleep, or whatever it is you want to do with your free time. So I spent quite a bit of time building up a house portfolio... and it was like rolling a boulder up a hill... there wasn't much income... but finally you got to the top and there was a plateau and things got a little easier until you got to the other side and it started rolling down the hill and the income picked up steam." David says effective house management is key and one thing he does that is uniquely different is he is in it for the long-term. Tilney's longest tenant was with him for 24 years and his only eviction was in 1981. David receives all his rent before the first of the month almost every month and he goes from tenant to tenant with no downtime. "An empty house eats you, it does not pay you."

Years ago David wrote an article about a friend of his who owns a local bank. In that article he said that his friend's bank wasn't his asset, it was his employees, who'd been with the company for 30 years. Every night his employees went home and his friend's job was to motivate them enough to come back to work the next day. Having those loyal employees is what kept his friend's customer base and he says it's the same thing with tenants.

Tenants make all the difference in the world and the key to retaining good tenants is first screening for the right people.

David says the first steps to screening include complying with all the federal fair housing laws and coming up with a way that has tenants vet themselves. Tenants will self-weed, so David puts as many applicants in for a home at once and those who make it through the process are the best of the best. He also says he doesn't want tenants who have a victim or entitled mentality, but he wants tenants who will take his house and make it their home by enjoying and improving it, not just camping out in the place. On his end, he promises to treat tenants with respect and to be available during the day if they have a problem and they are welcome to offer support when needed. 

David's application process is one that has its standards clearly written first and is then followed by a three-page application. That helps him to weed out the people who aren't going to be good tenants. David invests little time on the showing of houses or the moving in of tenants, he even has his rent through ACH debit where he can subtract his rent directly from his tenants' bank accounts in minutes. 

Master Leasing

At my FIBI meeting, David talked about Master Leasing. A master lease means you lease a property from a person who owns it, you have all the details in the lease and you turn around and rent the property to someone who will be there for 10 years or longer under your style of management. You keep the monetary difference between what you're leasing it for and what you're renting it out for.

If you're working as a manager for someone, your fiduciary responsibility is to your principal. In essence, you put on the glasses of the owner/investor and do everything for their benefit. In master leasing you aren't an agent for anyone else, you lease a property to me only if it's in your best interest to do so and I will lease it from you only if it's in my best interest to do so. So there's no problem of where my fiduciary responsibility lies.

There are many benefits of master leasing over management, one being that it's not one size fits all, it's more what does the owner need. Do you need rent guaranteed? Do you need a performance basis where you may net more, etc? There's no title company and you get to create the documents. If you lease a property for 30 years or more, the IRS says you own it, so you can write that lease off. 

David is leading a 3-day seminar in Costa Mesa, CA Sep 27-29, 2019 on hassle-free property management and master leasing. For more information on the course at https://www.davidtilney.com.

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