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Show Summary
In this conversation, Ron Faraci shares his journey as a landlord and the lessons he’s learned over the years. He discusses the importance of rule enforcement, crafting a comprehensive lease, and the challenges landlords face in today’s market. Ron also highlights practical tips for managing rental properties and emphasizes the need for resilience and thick skin in the industry. He promotes his TikTok channel and his Bulletproof Lease, a resource for landlords looking to improve their leasing practices.
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Investor Fuel Show Transcript:
Ron Faraci (00:00)
The best way to describe that is, if you’ve ever seen that movie Jurassic Park, it’s a weird analogy, but bear with me here, that the velociraptor’s in a room and he’s kind of poking at the door handle and he figures out he can turn it. And then he’s like, ah. The same thing’s happening. One of you is getting trained, either the tenant is or you are. And what I find is just don’t let it get beyond that point. Don’t let it slide, you know jump on things right away.Kristen (01:59)
Welcome back to the Real Estate Pros Podcast. I’m Kristen and I’m here with Ron Faraci He is the creator of the copyrighted Bulletproof Lease and the author of Confessions of a Landlord. We’re going to get all into how to protect yourself as a landlord. He has a copyrighted lease that you can buy from him. I’m really excited to get into it. Thanks for being here, Ron. So let’s go into your background with low income housing. I know that you managed several hundred. How did you get to that point?Ron Faraci (02:19)
Thanks for having me, Kristen.⁓ I mean, if we’re going way back, I’ll give you the 32nd version. My story’s not that exciting. Years ago, I’m 58 years old. Decades ago, I lived in Los Angeles, my wife and I, and ⁓ we moved to the East Coast to buy rental properties. We didn’t own any, ⁓ but we just had the thought process that if we could buy enough rental properties and get enough people to go to work every day and give us a third of their paycheck on the first of the month, then we don’t have to go to work anymore.
⁓ And that was just the whole thought process. And we uprooted our lives, left Orange County, headed to Connecticut, because you could buy low income units that cash flowed, right? And make a couple hundred dollars a month per door. Then now I just didn’t know how many doors I need to fire my boss. ⁓ For us, retirement was always a mathematical formula and not an age. So fast forward, we go to Connecticut ⁓ and I’m working a job like everybody. I’m a high school educated.
you know, guy, don’t come from money, I wish I did. And so we just started buying low income properties. And of course, you know, start small, our first property was a two family ⁓ in central Connecticut, real small, didn’t know what we were doing. And then we just kept levering up, getting bigger and bigger, and then figured out how to buy these things without banks. And that’s when we really started to just kept going. And of course, your friends and family, they see what you’re buying and they’re like,
Why are you doing that? It’s dangerous. I don’t want to change toilets at 2.30 a.m. and all those things that they tell real estate investors, which I don’t know how to change a toilet, but it’s wildly profitable. I mean, can’t fix anything. ⁓ It’s just very profitable. And it’s just a segment of the market that everybody kind of glosses over that think, know, because everybody wants the big shiny, nice building. And sure, that’s great and all. You just won’t make any cash flow. What you’re doing in that there is you’re hoping it goes up in value and that’s
Kristen (03:57)
YouRon Faraci (04:18)
That’s great, but that’s not landlording. So we determined that low income ⁓ is where all the money is. And of course you get the headache too, right? And it comes with the territory. ⁓ But what we found was owning class C, a little bit of D, but mostly C properties ⁓ was no more real headache than class B, right? So our typical tenant.you know, just making this up. She works at Dunkin Donuts, he works at Walmart, right? And they’re good, hardworking people and they deserve a good, clean, safe, affordable apartment and I provide that. But that tenant is not pickier than a upper end tenant. So if you’re renting to you know a doctor and a lawyer, take the extreme example to the other side, well, you’re getting just as many calls renting to the doctor and lawyer as to my tenant. You’re just getting different calls.
Right? You know, so, so we found that that that tenant base was our people wildly profitable, but it’s it can be a headache if it gets away from you. So we just kept buying and buying. And over the years, we developed our our 31 page lease. you know, being a low income landlord in a blue state, you know, we deal with some of the toughest agencies, laws and tenants anywhere in America. And we’ve been doing that for almost 20 years.
And we, you know, we built it up to several hundred units owned and managed and we started selling them off five or six years ago. And during that time, we ⁓ also bought the local RIA in our state, the Real Estate Investors Association. It’s a bit of a mouthful. And we ran that for about, I just sold it about six months ago. So probably about six years or so I ran that. I loved it doing that. got to tell you, we were the fifth largest RIA in America.
And what was cool about that, which was just different for me, is being a low-income landlord, you make a lot of money, but you give up a little bit of your humanity to do it, let’s be honest. ⁓ And for the first time, I felt like I got to give something back by owning the RIA. So I got to interface with just thousands of investors. And what a cool experience that was to kind of move the needle a little bit on some people’s journey to financial freedom, because that’s really what I’m about.
And so then, sold that about six months ago, to kind of wrap up the story, and I thought, well, I’m retired in Florida, and I’ll kind of hang out on my beach and sip margaritas and wait for my final days to come eventually, many years from now. I just thought that was a retired guy’s life, and what I found was that’s just not true. So three or four months ago, I kind of missed real estate and being involved and all that. So a 58-year-old guy, I’m…
I started a TikTok channel, which is kind of a joke, right? I don’t know what I’m doing. I’m the first to admit that. But I just started doing tips and tricks from a slumlord. you know, hey, here’s a lease clause I do in my 31 page lease. And, you know, here’s a tip right here. And just really resonated. And, you know, I was able to, I don’t know how, but I got some videos have a half a million views. And, and so I said, I’ll sell my lease, my copyrighted lease, and that’s going well. And then people started.
messaging me, hey, can you teach me what you do? Is it hard? I’m like, it’s not hard at all. It’s actually quite easy what I do. But it takes a lot of hard work, if that makes any sense. And so I’ve been just started doing that and kind of mentoring others and you know, and then here I am on a podcast with you and it’s been a crazy journey. That’s the quick version by the way, quick version.
Kristen (08:37)
That’s amazing. yeah, that’s,mean, there’s so much there to dive into. think, you know, going into your experience as a landlord, I’m sure you had to build a good team around you. I would also, I would love for you to go into kind of, you know, typically your issues you ran into as a landlord. I know that they can sometimes be punching bags, kind of as you’ve developed this bulletproof lease, what were the things that you were kind of combating there?
Ron Faraci (09:05)
Well, you know, the regulatory environment in a blue state, in any state really, but it’s heavily emphasized in a blue state, know, landlords, especially low income landlords are the enemy. mean, even though we provide housing to people that really need it. And, you know, just to be clear, 99, 98, 99 % of my tenants are terrific people. We’re talking about that one or 2%. That’s why a 31 page lease exists. And so you got to stay on top of that becauseThe upside to our business is you only need a few deals and you never met a broke slumlord, right? You never do. Yeah. But they can be very miserable because they can get away from you real quick. So our unofficial motto is, if you want a friend, buy a puppy. I’m fair, but I’m tough. And so you have to have all those clauses in there and you have to enforce the rules. You can’t let them slide because you’re constantly being tested, right? ⁓
The best way to describe that is, if you’ve ever seen that movie Jurassic Park, it’s a weird analogy, but bear with me here, that the velociraptor’s in a room and he’s kind of poking at the door handle and he figures out he can turn it. And then he’s like, ah. The same thing’s happening. One of you is getting trained, either the tenant is or you are. And what I find is just don’t let it get beyond that point. Don’t let it slide, you know jump on things right away.
There’s a 31 page lease, we all sign and initial it 40 to 50 times by the way in our lease. And I expect that to be honored and I have to honor it. So yeah, rule enforcement is critical in my business for the tenant as well.
Kristen (11:20)
Absolutely, and you’ve spent a lot of time perfecting this lease with lawyers and with capital. I mean, it’s great that you can offer it to people. What are some of the sample clauses that you have in there?Ron Faraci (11:32)
gosh, I could spend all day on that. Let’s see ⁓ here. Here’s an easy one. ⁓ Electronic communication only. Then they sign an initial that. And the reason for that is that, you hey, Kristen, we agree that you have the capability, text, email, and we agree that all communication shall be legal, force, and effect, da da da. The reason I want only electronic communication is I don’t want you to show up in housing court going, I told him to fix those steps.You know, no you didn’t. I told them I smelled gas. No, we’re gonna communicate electronically, so I need to know who said what, when and where and why, you know. Satellite dish addendum, there’s one nobody thinks about. So in low income housing, a lot of people go with the satellite dish providers for their cable, because it’s a lot cheaper generally, it depends on the market of course. And what happens is you go into some of these neighborhoods and you see buildings with 28 satellite dishes on the roof.
Because when they move out, they don’t take their satellite dish with them. Right? And so a new guy moves in and he calls up Dish or whomever it is and they put in a new dish up top for that guy. Now there’s another satellite dish. Well, they’re drilling holes in your roof. Right? So if there’s a leak, who are they going to call? Ghostbusters. It ain’t going to be Dish they call. It’s going to be you. Now, can you call the satellite dish company and say, come fix the leak? They’re going to laugh at you. Right? Obviously. You know, I have a holdover fee. So
you know, the lease ends on a specific date at a specific time, right? So always having your leases, you know, not that the lease ends on the 31st of the month, not the 31st at noon, okay? And if you’re there at 1201, it’s $100, okay? Because what happens is by putting a time and a holdover fee penalty in there, in the $100 a day, let’s say, okay? You want to incentivize a tenant to leave when they’re supposed to leave. And how that typically goes is, let’s say that,
lease is terminated on the 31st of the month, but that falls on a Sunday. So you get a call from the tenant, know, hey Ron, this is Kristen. You know, yeah, I’ll be out. You know, know I’m supposed to be out on the 31st, but I didn’t realize that was a Sunday. My brother has to work on Sunday, so he can’t help me move. So I’m to get the U-Haul on a Monday and I’ll be out Tuesday. And you think, well, no big deal, it’s only a few days. Well, the guy might be moving in behind you. So now there’s a ripple effect. So now my phone’s blowing up, right? Now I got to deal with you, I got to deal with him.
you know, cause he needs in cause he gave up his apartment. And so, so if you need extra time, well then I’m going to charge you, uh, $175 fee. I charge for no lead in. Uh, what, what that means is, you know, Hey Ron, uh, I have a leak under my sink or whatever. Great guy. I’ll be there tomorrow at nine, whatever it is. And he shows up and
You know, and he knocks on your door and you’re like, today’s not a good day. My baby’s sick or my husband had to work nights. He’s sleeping. Can he come back tomorrow? No. You know, I complied with all legally required notices. I’m here. I can’t force my way in. I’m not going to kick the door in. you know, however, if you’re not going to let me in when I’ve given you the legally required notice, then it’s going ⁓ to be $175. You know, and I could go on all day about all those things. And what happens is
Kristen (14:40)
Yeah.Ron Faraci (14:43)
You learn that over time, right? So, you know, several hundred units, you learn those lessons over X amount of years. And so it goes into the lease and then goes to the lawyers and, you know, and so I sell it as a fully editable lease, right? Cause laws are different everywhere. So they’re able to edit it to their particular situation or laws. No parking included. I put, as matter of fact, in my lease, parking is specifically excluded from the lease.And you think, well, why would you not let them park there? I do let you park there. You know, it’s a courtesy only. Really important in a snow state. So what happens is if it’s going to snow overnight, you know, in New England, let’s say, or in your Minnesota, and it’s supposed to snow three feet, let’s use an extreme example. Well, it’s, doesn’t just snow three feet all at once, right? It takes 12 hours and just keeps snowing cumulant. So your plow guy comes at 4 a.m. and he’s
plowing everybody out, right? He makes a pass at 4 a.m. Well, they go to work at nine, from four to nine, it’s snowed another foot. And they call you up and they’re like, hey, when’s the plow guy coming? Well, he was there. He’s not standing there as every flake falls, you know? So I can do that if you want that kind of service, I just can’t do it for $1,200 a month, you know? So I put, it’s a courtesy only if you don’t like the way we plow, don’t park there, you know? And it’s really meant,
and we explain this in our lease up, that we’re not gonna stand there as every flake falls. So we are gonna get to it, but if you don’t like our speed or our service, that’s okay, you don’t need to park there, because it’s a courtesy only. Things of that nature, and you wanna set those examples in the beginning. just all the, again, I could spend all day doing that, all the tips, ⁓ the strangest ones I’ve learned over the years. If you got a multifamily building,
Go into the basement and it depends on where it is, what part of the country you’re in, but here’s a great tip for somebody. Go into the basement, find the main water shutoff valve. It exists somewhere, okay? In New England and the Midwest, it’s usually in the basement. there’s, find that magic handle, okay? And the basement’s fully handles, but you wanna find that one handle and you wanna paint it bright orange or bright fluorescent yellow, whatever, easily identifiable. Because what happens is,
Washer and dryer hose breaks on the second floor unit. So low income, if you have a washer and dryer in there, they usually do the laundry as they’re going to work, the washer, and then they’ll put it in the dryer when they get home from work. Put it in, the hose disconnects, floods. The downstairs unit, so you get a call from your tenant downstairs. Oh my God, water’s coming through the ceiling, what do I do? Knock on the door, they’re not home. Tell the tenant, go down into the basement or tell your contractor, down to the basement, turn the bright orange angle.
Because otherwise, how do you describe where that handle is in a room full of handles, right? ⁓ In low income areas, want to paint, if you have copper pipe in your basement, ⁓ spray paint it white. Just mark it up. And the reason you want to do that is because crack heads will go into the basement, they’ll steal the copper. But if it’s painted white, it’s considered dirty copper. It’s worthless. It’s worthless. They won’t even bother tearing it out. I go all day on this. Never any ceiling.
Never ceiling fans, no garbage disposals, no carpets, no spray nozzles, ⁓ know, garbage disposal all the time. If it doesn’t, if you can’t rent it for more money, they won’t rent it faster or they won’t stay longer, you simply don’t do it. A garbage disposal. The problem with the garbage disposal is, when do you pull a GI Joe out of there and it stops working and you’ll get a phone call, hey, my garbage disposal’s not working. What happened? I don’t know. It turns out there’s GI Joe, golf balls, whatever in there.
The with the garbage disposer ceiling fan is if you have a section eight inspection and it’s not working, you just failed. Even though on a ceiling fan, let’s say the light works fine, but the fan is broken, you failed. So I just don’t do them because I don’t get more money. I don’t rent it faster and they don’t stay longer. I simply don’t put them in. I take them out in fact, you know, and all those ⁓ nether low income tip. Again, I could do these all day. Flex seal, I should get paid a commission from flex seal. Flex seal makes a paint.
You’ve seen it on TV, it’s really cool. And it comes in a very, very thick paint and using about a quart. Take that and it’s like a rubberized paint and put it under all your bathroom and kitchen sinks. So paint it. So when they have a minor drip, it doesn’t rot the floorboard of below your sink, right? And drip through. So it’ll kind of catch it. So it creates almost like a little tub in your sink. Stuff like that will save you over time. I could go on for a million of those, by the way.
Kristen (20:11)
I mean, these are such great tips, like very practical things to follow and you’re right. I mean, this came from probably years of you figuring this out the hard way and you’re really helping people cut the fat and just get to what works. I would love for you to talk about, know as a landlord, you really need thick skin and you need to be able to hold strong on your leaves. Can you talk a little bit more about that?Ron Faraci (20:36)
Yeah, you know, and that applies to whatever facet of landlord and you’re in, you A, B, C or D. ⁓ You need to have thick skin. Landlords are the pariahs of society today, right? ⁓ You know, housing’s a right, which that’s fine if you believe that, but I just don’t want to pay for others’ housings, you know. ⁓ So I provide a service, but yeah, you need to understand that. ⁓you’re gonna get some hate, especially at my level. get called, and I play with the word slumlord a lot. I don’t consider myself a slumlord. ⁓ I’m a workforce housing provider who plays in the NFL, so to speak. I play tough, but I play fair. ⁓ Yeah, run your system, ⁓ but just know that the system is really geared against you. Most laws, and some laws against landlords are good thing. There should be a healthy dose of balance. The problem is,
that balance has gotten like this against the landlord over the years, especially the last five years. ⁓ So you wanna make sure that your systems are in place now, even if you’re just starting off, start building that scale muscle. So when you do get to the size that I was, that muscle has been developed over the years. So yeah, use your lease, whether it’s mine or your own. ⁓
and enforce it and that’s just really the key. As long as you enforce everything, you don’t wanna selectively enforce, she was late this month, but I’m gonna let it slide. No, don’t do that. You’ve already lost if you’ve done that. And by not enforcing the rules, if you think about it, you’re really doing your other tenants a disservice. So let me give you an example of that. So typically what happens when I have a problem,
Not all the time, of course, but what happens is this. rent to usually a young female. That’s usually how this works out, by the way, right? I rent to you, Kristen, you’re great, right? You meet all my requirements. There’s a connection where this is gonna work. We transact business, you move into the unit, you’re great. Well, couple months later, you’re at a club. You meet this guy, this loser, all right? He’s the new love of your life. So he moves in with you, even though I don’t know about it.
Right? So now he’s a tenant legally, even though I’ve never heard of the guy, but now he’s a legal tenant and he’s, he’s smoking dope at 3am, playing video games with all his buddies, taking up five parking spots, working on cars, playing music loud, but you’re paying your rent. Right? So, all right. Well, can I, can I get rid of you based on that? Typically not. If you have a one year lease, typically I can’t get rid of you, even though you’re causing all this problem for the other tenants in the building. I don’t live there. I don’t care.
You put my other tenants care and you’re disrupting their home. So I become the enforcer now and the protector of my other tenants. So I only do a month to month lease, that’s all I do. Okay, so I can fire you at any time. So I just terminate your lease in that situation. So the problem with a one year lease in my business is Kristen, and that scenario I just did, and don’t mean to make you look bad, but under that scenario, I really can’t get rid of you and all my other tenants are now stuck with you and your jerk.
boyfriend because you’re paying your rent. And you say, well, they’re violating your lease. You can just get rid of them under that. That’s what the law says, but that’s not reality. So month to month lease lets me kind of be in control of the situation so I can protect the other tenants. I am their protector in a weird kind of way. They look to me to enforce the lease. enforce the lease. That’s my advice.
Kristen (23:51)
youWow, mean, this is, you make my job very easy by the way. You’ve just given us so many tips, so many just things to follow. mean, people who have been in the game a long time are just starting out. These are such good tips. I think a lot of things that people don’t think about. ⁓ Please tell us where to find you, definitely on TikTok and how to find your Bulletproof Lease.
Ron Faraci (24:20)
ha ha haYeah, TikTok, I think it’s bulletproof lease, one word on TikTok. That seems to be where I am. ⁓ Again, I don’t filter or edit my videos, because I don’t know how. ⁓ I try to do a video, I try every day, it’s not always every day. ⁓ Or my website is bulletprooflease.com. Like I said, it’s a 31 page, fully editable lease, ⁓ built over years of lot of ugly crying, a lot of lessons, things didn’t always go well. ⁓
but over the years between all the lawyers and everything involved in it, I’ve probably at least spent $10,000 building that lease over the years. So yeah, that’s where people can find it and look on TikTok for a little tips and tricks I do. I am doing mentoring, but not much. I have my last mentoring class I decided to do on December 6th, and that’ll be the last class I do.
I’d just rather go one-on-one mentoring after that because I support my students for the life of their business. And it’s hard to do that if I do too many students. So I’m just going to do a one-on-one teach people how to do what I did without banks and grow to scale so they can fire their boss. That’s really what I do.
Kristen (25:46)
Yeah,amazing. Well, thank you so much for being here, Ron.
Ron Faraci (25:51)
Thank you for having me.Kristen (25:52)
And thank you everyone for listening. I hope you got a lot of great information from this. Definitely follow Ron. He’s very generous with the free information he gives out. So follow him on social, look at Bulletproof Lease. It’ll save you a lot of money on lawyers. And yeah, we’ll see you back next time.
