If you are selling good advice, and your customers listen carefully and implement it - they will be more successful and thus will value you that much more. It is a cycle that spirals upward: The more you charge, more people follow your suggestions, more profitable they become, more valuable you are to them. This is a vicious circle that you definitely want to be part of.

SERVICE

The third component of your offering is service. In today's world, service is ultimate differentiator and separates successful companies from mediocre companies. People will pay a premium for excellent service, and want to do business with companies who provide it. They want to build up personal relationships, know that their needs are understood, and do business with people who demonstrate integrity and value long term associations.

Successful businesses are in relationship building game, and everything they do is aimed at strengthening connections and affiliations with potential and existing clients. This is where each of us can be different. No one can imitate our personal style and success at building and maintaining relationships.

In long run, excellent service providers will prevail over mediocre "competitors."

Getting Away from Hourly Rate Mentality

Before you do business with a new customer, you hold all leverage in relationship. After services have been performed, customer possesses leverage. The lesson is that you want to set all of your prices when you possess leverage - that is, before engagement begins. This requires quoting fixed prices and removing yourself from Almighty Hour mentality.

The minute you quote an hourly rate, you put a fixed limit on your earning potential. It’s hard to increase an hourly rate once it has been set. The most successful service providers charge for job as a whole, and don’t reveal how many hours it will take to complete job.

One of my clients - a management consultant – bemoaned fact that he always underestimated hours required to complete a job, even when he added in extra time. When all extra hours were added in, his hourly rate worked out to less than $50 per hour. At my suggestion, he began quoting prices by job. After three months he conceded that on average, he was able to charge more for whole job than when he quoted by hour. His customers – it seems – perceived greater value when he outlined what job consisted of, than when he simply quoted an hourly rate for his time.

Price Resistance

If you are in business, at some stage you will encounter resistance to price you are charging. Your best option here is to help customer understand full value of your service, and value or benefit they will get by implementing it. If you cannot conquer price resistance through educating customer, then I would seriously suggest you not take engagement.

Never decrease your price to get business from a customer suffering from price resistance. That cheats your best customers - those who value what you provide - and subsidizes your worst customers - those drawn to you by price considerations alone. Those will be first customers to defect once they find - and they will - a service provider willing to do work for less. You do not want to work for people who do not understand, or refuse to pay for, value you provide. Stay true and stick to your guns.

In today’s world it is no longer relevant to talk in terms of hourly rates when positioning price of your services. It’s all about value you provide, and perception of value in your customers’ mind.

While helping restring some crawl space electrical wire-later found strung in closet for hangers-Josh found a rusted out .32 caliber handgun. Somehow tenants had managed to pry bricks out of chimney, which Ben needed to replace in order to meet code. Apparently someone had driven an M1A1 Abrams up driveway; there was no other way to explain huge cracks in a driveway that had remained perfect for 20 years.

What can we learn from this horrific, yet unfortunately true story?

Rule #1

Location, Location, Location. Ok, so this might seem a little cliché, but it's a fact that location of your investment property will determine kinds of tenants you will attract, and how much rent you can fairly charge. Remember, at some point in time in future it may become necessary for you and your family to live there; what kind of neighborhood do you want to be in?

Rule #2

Don't go overboard when you're fixing up an investment property. You ought to expect reasonable wear and tear. Keep in mind that 'reasonable wear and tear' means something entirely different to a person whose renting than it does to an owner. And for goodness sake forget the, "We are Family" hand towels!

Rule #3

Know how to make basic repairs. Luckily for Ben and sons they had quite a bit of experience in various construction trades. Otherwise they may have lost even more money than they did through hiring out help. Knowing how to fix electrical wiring, repair drains, and replace windows will save you quite a bit of money down road.

Rule #4

Screen your tenants as if they were moving in to live with you. This may be most important step to avoid becoming a slumlord. Ask for and check references. Call previous landlords and ask questions like, "Did they pay rent on time? How was condition of house/apartment when they left? Did they ever disturb neighbors with loud music or yelling matches? How often would you have to make special trips for untimely repairs?" Being as informed as possible about who you rent to will make a huge difference in profitability of your investment property.

Rule #5

Know your rights as a landlord. Be familiar with eviction process in order to avoid long, drawn out disputes with tenants. Most states and counties provide online information about tenant and landlord rights.

Don't repeat mistakes made by Ben and his sons. Granted, getting into investment property business takes hard work and you'll have to put up with things you normally wouldn't put up with. At same time there are steps you can take to limit your liability while preventing yourself from becoming a 'slumlord'.

In next portion of this two-part article we will be discussing some of financial aspects you should be familiar with in order to find best deal possible on your first investment property.