Category: Landlording and Rental Properties
How and where can real estate investors network to find private capital?
Private capital continues to be a crucial part of real estate and investing today. Private money can be far more desirable than conventional bank financing in many ways, and sometimes easier to obtain if you can make the right connections. So, where can you meet and network with potential private investors?
Networking with those that have the capital to invest, doesn’t have to be limited to stuffy organized networking arenas. It’s really about getting out and putting yourself in the right place, at the right time. So, where might these individuals hang out near you? The golf club? Charity fundraisers? Antique and luxury car shows? Get out there, mingle, and have fun at the same time.
Meetup.com has become an incredible hub for connecting with targeted groups of people. You can attend local meetups on just about any subject. Or host your own, and cultivate a group of private investors yourself.
Local Real Estate Investor Association (REIA)
Local real estate investment associations and clubs are an easy way to get right to meeting active investors. No matter where you are in the country you are bound to have a few of these types of networking gatherings each month. You can also expand to Realtor, mortgage broker, and Chamber of Commerce networking nights.
Live Industry Events
Live events can put you right in the middle of hundreds or thousands of potential private money lenders. Your city or region probably has regular mortgage and real estate industry tradeshows and home related expos. Then there are investor pitch nights and seminars. Or check out national events which focus on bringing together financiers, private investors, and entrepreneurs like the Midwest Multifamily Conference. Investors from across the nation will be in attendance at that event.
Joining groups online can connect you with active investors across the country too. This might include BiggerPockets, Angel List, and the Angel Capital Association. Or you can hone in right to platforms where investors are taking action, and invest alongside them, like you’ll find at Holdfolio.
Private capital is very valuable and needed today to fund deals. It is also plentiful. Fortunately, it doesn’t have to be that difficult to connect with investors and potential capital partners. No matter where you are, and whether you like meeting people in person, online, at professional networking events, or more casual affairs, you have a whole menu of choices. Always remember, it is wise to make sure and not lose your money partners capital or it will be difficult to obtain it a second time around. If you make people money they will invest and reinvest.
How can you find real estate comps in your area to determine the potential appraised value of a property?
Knowing your property value is essential to making smart and profitable investment choices. Investors can get a better handle on this by knowing their ‘comps’. Those are comparable property sales. So, where do you find them?
3rd Party Online estimators
Zillow is one of the most commonly used online home value tools. It is fast and easy to use. It is also one of the most flawed. In fact, Zillow has finally been hit with a major class action lawsuit over its faulty Zestimate tool. Online home value estimators can help to give a fast, rough estimate of value, but are frequently wrong. Zillow or other sourcing websites can be a good first step in qualifying a potential property, but should not be relied on when actually putting your money on the line.
Real estate agents can be a great source of comparable information. They can save investors a lot of time, by pulling quality comps. Some brokers will provide ‘BPOs’ (Broker Price Opinion) for a few hundred dollars, or less. Agents will typically help by providing free CMAs (Comparative Market Analysis). Just note that they do this often in hopes of winning your business, and aren’t going to work for free forever. Their findings can also be biased.
Another option is to go right to the Realtors’ MLS (Multiple Listing Service) yourself. This can provide a lot of data on listed, sold, expired, and pending real estate comps. If you don’t have a real estate license and MLS membership, you can also use consumer-facing versions like Realtor.com.
One of the most important things to remember in finding comps is that asking prices are almost irrelevant. Sellers and agents aggressively overprice properties for sale every day. What you want are actual sold comps. County public records can provide this data, and often online. Title companies will also have details on comps that have actually sold, and what concessions or special terms may be artificially influencing prices. They also know what transactions are in the pipeline to close soon.
Professional real estate appraisers are go-to if you really want a solid figure you can bank on. You won’t typically want to splurge on the cost of a full appraisal for a property unless you are 100% sure you are buying it. However, appraisers and other data providers can also provide drive-by appraisals or an Automated Valuation Model (AVM). AVM’s usually include tax assessor's, sales history of a property and how other properties in the area are stacking up.
Whenever you can, you want to drive through the neighborhood for yourself. See what properties are for sale, and especially FSBOs (For Sale By Owner) which may not be on the MLS. This will also help in assessing rent comps as you can see how many properties are up for rent, and call on signs.
Remember it is best not to rely on just one source for figuring comparables. Pooling many of these sources together can assist you in coming up with the best comps for your properties.
Check out these six ways to increase the cash flow and returns from your rental property…
To make more money you either have to increase your income, or decrease your expenses. Thankfully, there are a variety of ways to drive down costs. This can include renegotiating contracts with service providers like landscapers. It could be challenging your property tax bill, or separating services like internet. Utilities are one of the biggest areas of waste for landlords too. Can you pass those on and have tenants pay directly, install energy saving appliances and windows, or even convert to more energy efficient options like solar panels?
Mortgage interest rates are still low, and debt service is one of the biggest drains on cash flow. This could be time to refinance or structure financing. Drive down those costs with a better loan, or bring in equity partners, which can provide an even more secure position at the same time.
Increase Longevity of Tenants
Vacancy and tenant turnover costs are two of the costs often overlooked by landlords. Seek long term tenants and work to retain them. That will eliminate losing money from vacancies, and avoid the cash out of pocket needed to cleanup and market for new tenants.
Raise the Rents
Landlords should be routinely raising the rents. There can be sizable opportunities to raise rent on the takeover of a new building. Tenants should expect annual increases as well. While there may be times to offer move-in specials, keeping the rent up can also help raise your asset’s value.
Income doesn’t just have to come from the rent. Rental property owners can offer additional services that can generate income as well. This may include cable and internet service, laundry facilities or washer and dryer leasing and even parking spaces.
Reduce Vacancy & Turn Times
When you have tenants who are exiting, the shorter the time your rental property is empty, the higher your overall cash flow and returns. So, keep tuned into tenants’ plans when renewals are coming up, create systems for fast turnover of units. Consistently build and maintain a waiting list of qualified renters, so that you can have cash coming back in within hours of a tenant leaving.
Cash flow is so important to landlords. Your properties need to provide you income and not be a drain. Fortunately, there are many ways to increase income, and drive down expenses, to increase cash flow spreads, and elevate total returns. Use this as a checklist the next time you acquire a property, or need to improve your numbers.
How can you make your rental properties stand out on real estate listing sites?
Check out these tips and tricks on how to stand out among the sea of homes for rent today.
90% of the battle to rent a home is all about price. If a property is priced right, it will rent, regardless of market conditions. What many property management companies don’t realize is this isn’t just about being realistic or offering a good deal. Pricing has to be strategic and technically accurate too. If you are off by just $100, then the right prospective renters might not even see your home come up in their search. Then it may as well not be listed at all. It’s essentially invisible. Knowing the comparables in the area and what the local market will support is very important.
People are so busy and accustomed to immediate information, that pictures are an absolute must. Now some sites allow prospects to search by only listings that have images, or by those that have the most images. Make sure you rank high here. The more you can do to build trust, and give them a real picture of the property, the more qualified renters you will get looking. You’ll also waste less time on prospects who may not be a fit. If you really want to impress and stand out, provide a video or virtual tour as an option.
Amenities & Lifestyle
Although the number of bedrooms and bathrooms count, amenities and lifestyle features can be even more important than just the basics. Expect renters to know what those stats are or they will move on to another listing that has this information. If they have to do a lot of research they will probably lose your listing and stumble on competing properties. So, if a listing site provides these features automatically, make sure your address and the map is right. If they don’t, include as much detail as you can that will appeal most to your likely clients. That may include local gyms, stores, schools, coffee shops, and distances to major transportation.
People want to feel smart when they invest in things. They want to get deals that they can brag about at dinner with their friends, and which make them feel good about justifying the decision to spend. Few people really know the market and what a good deal is. Sometimes you have to help them. You might do that by showing the comparison in value to other properties, provide a limited time discount if they can sign a lease by a certain date, or include incentives with the lease. If you are willing to hold seller applications, or contribute towards their move-in costs, work with low credit score tenants or be flexible on deposits, make sure you mention that too.
Clear Contact Info
Make sure that your contact information is clear, accurate, and easy to find. Include as many ways to contact you as possible so that they can reach out in their preferred medium. Too often sites make it hard to contact the real landlord. If they try to go through someone else you are at the mercy of them doing a good job at following up, or not showing them competing properties.
There are millions of rental property listings out there on the web. Consumers are busier than ever. In order to get your home listing noticed, and to get people to follow through to contact you, you’ve got to stand out and be different.
Spring is a time of new beginnings. Flowers are blooming, lawns are returning back to their lush green color, and the overall hustle and bustle of spring is upon us. Spring is a great time to give your rental property a check-up. After a winter of extreme temperatures, especially if you live in the midwest, it is important to find out how the interior and exterior of your property weathered.
While the interior of your property didn’t take the damage that the exterior did, there are still some important aspects to check out. First, make sure you check your smoke detectors. Replacing the batteries in all of your smoke detectors now reassures you that they are functioning properly if an incident was to occur.
Replace your furnace filter to prevent any extra wear and tear on your furnace. A dirty filter can make it harder to heat and cool your home. The furnace compensates by running longer and harder, which can lead to higher bills. A $15-$30 filter can end up saving you hundreds of dollars in utility bills. Plus, it can increase the life expectancy of your furnace. This goes straight to your bottom line as an investor because you won’t have to replace the furnace as often.
Spring is a great time to have your heating, ventilation, and air conditioning (HVAC) system checked by a technician. The humidity that the spring brings will attract dust and other debris to your system. A technician will check aspects that the average person can't. Making sure your registers open and close in each room and changing your furnace filter are simple checks that don't require a technician.
The winter snow and ice can cause a number of problems on the exterior of your property that you have to deal with in the spring. Clearing your gutters can save you a lot of potential headaches. Built up debris in the gutters can cause them to overflow and possibly leak into the foundation of your house, or into the basement.
The cold air in winter can cause the caulk around your windows to contract and crack. Replacing the caulking around your windows eliminates those pesky drafts and can also keep the bugs out of your property.
Let’s not forget about lawn maintenance when spring time rolls around. Make sure to trim any bushes that may be around your a/c unit or pushing up against any screens. Bushes and trees that are in contact with the house act as a highway for bugs. Spraying for weeds will keep them at bay so they aren’t a constant chore during the season.
Taking care of these aspects inside and out can lead to your rental home being in optimal condition for the rest of the year.
When you own rental properties it is important to keep a few basic things in mind to ensure not only the safety and security of the property but also to minimize safety risks for your tenants.
#1 First and foremost protect your own investment by having the proper insurance coverage and liability insurance that protects your asset and protects you as the owner.
#2 Check your city and state ordinances to make sure that you are following minimum requirements for safety and security of your property.
#3 Provide good outdoor lighting sources. Having exterior lighting that is strategically placed can deter any unwanted prowlers around the home.
#4 Install heavy duty, durable doors with deadbolts. Providing a steel door with a good deadbolt system can prevent break-ins from happening.
#5 Make sure all the windows are able to be locked and have proper screens or storm windows.
#6 Have a routine maintenance schedule that checks the furnace, water heater, wiring to make sure that these things are all working and non hazardous.
#7 If your rental property has a fireplace it is essential to have it cleaned out or inspected frequently. This can prevent a tragic fire or smoke damage in the home.
#8 Remind your tenants of the importance of smoke and CO2 Detector battery checks on a regular basis.
#9 If your property is in questionable area then consider installing amonitored alarm system.
Keeping aware of these items can make the difference for both you and your tenants in how safe your properties are and show the level of care that you provide in your properties AND your tenant safety.
For the buy & hold investor and or Fix & Flipper, there is the allure of taking a distressed property and making it bright, shiny and livable to generate a good cash flow income. There are many “distressed” properties tucked away in neighborhoods all over the country. Some are so distressed that the capital expenditure needed to renovate them outweighs the cash flow benefit and yet others are shiny diamonds under the surface just waiting for the right buyer to come in and polish them. How do you tell the difference? What do you look for in assessing these properties?
Having the Vision
To the every day buyer this house looks like a complete disaster. What the savvy real estate investor sees are these things:
Looking beyond the trash, the garish poor paint job and the flea infested carpet there are hidden gems. The walls are straight and plumb, showing no foundation settling or cracks. Paint can be covered up with fresh paint. The windows are relatively new and not broken so there is not a window replacement cost. The trash can easily be removed and discarded. Under the carpet happen to be lovely hardwood floors that just need a light refinish job so there is no cost to be incurred on flooring replacement. The other benefit is that the heating and cooling system up to date as well as current wiring, and electric box. These can all be big-ticket items that can run the budget up quickly. Many of the things in this house are simply cosmetic that can also make for a quick turn around in completion and getting it to market.
When looking at this kitchen there aren’t too many redeeming qualities at first glance. However, when looking closer we can see the positives. The layout of the kitchen in relationship to the rest of the house is good and the plumbing will not have to be moved or replaced. A new countertop and base cabinet with an L-shaped peninsula, new backsplash and new upper cabinet doors with new hardware along with new flooring and this kitchen won’t even look the same. This can all be accomplished without a complete tear out. Adding an upgraded fixture to the existing stainless sink and modern appliances also will make the kitchen seem like a real upgrade.
Renovation doesn’t have to “scare” you. With a vision, some attention to detail and knowing what to look for it can be a win win for you the investor AND the neighborhood will appreciate the appreciation!
Rental property investment is a powerful way to enhance your finances. It can also be a major disappointment if you aren’t prepared. What are some of the costs which commonly catch landlords short, and threaten to turn their passive income dreams into money pit nightmares?
Unexpected Rental Property Repairs
For the savviest and most experienced investors there are few unexpected items. Yet, newer landlords almost invariably under budget for routine maintenance and emergency repairs. If you aren’t on your game this can cost you a lot more than just losing a single property. Frequent surprises can include needing to change the locks, busted plumbing, broken washers and dryers, AC units, roof leaks, and kitchen appliance malfunctions. Some of these are affordable, others can mean having to come up with thousands of dollars overnight, and potentially even housing your tenants somewhere else while the issue is remedied. Every part of a home has a limited lifespan, and often parts never survive that long either.
Even the most perfect tenants on paper can default for a whole array of reasons. Divorce, job losses, illness, injury, family emergencies, and even just deciding they are going to go buy a home instead of continuing to rent. This may simply mean cash coming in slower than expected. Or it could mean going months without income, while covering the holding costs, and forking out money to an attorney for an eviction.
In most cases you just can’t expect to put a new tenant into a property the day the old one leaves. For one you may not know when they are leaving. Secondly, there will virtually always be a need to make repairs and spruce the place up. This could be a pro cleaning job, or it could be replacing appliances, flooring, and bathroom fixtures. Again, these are days with holding costs, but no income coming in. If you are not a full time investor then you’ll also probably have to deal with marketing. That means having ads created and paying for them. This is why experienced firms are constantly working on maintaining a tenant waiting list.
Not only does this mean failing to bring in rents, cash flow, and positive returns, it also bring more risk. There is risk to the sustainability of your entire finances. How many empty properties can you keep covering the holding costs on with your paycheck from your day job? Then there is increased risk of squatters and vandalism to vacant properties.
We should all be aware of property taxes which generally seem to go up every year. Then there are income taxes and capital gains taxes. These can cause investors massive problems if not prepared for. The most notorious characters of our country’s history seem to have been able to get away with everything and anything, except tax evasion. You can actually pay a lot less on money from real estate investment than a regular job; if you plan well. Or you could get hit with a tax bill for tens of thousands of dollars that you don’t have the free cash for. Self-directed IRAs, 1031 exchanges, and having a great accountant and tax strategy can help.
There are a lot of unexpected costs of being a landlord. Some ways to be better prepared and minimize these expenses include setting aside capital reserves, hiring a professional property manager, choosing turnkey property, engaging in real estate crowdfunding, and getting insurances and home warranties.
Finding the right property to invest in requires years of experience. It goes beyond just the location of the property, and it takes a trained eye to seek out the best investments.
If you are thinking about investing in a property, we want to offer some great tips on finding the best rental possible. Here are three characteristics we use at Holdfolio to determine if we want to invest in a rental property.
3 Things to Look for in a Rental Property and What to Avoid
1. A Substantial Amount of Cash Gain from Day One!
Robert Kyosaki, a well-known American investor and entrepreneur, once said it is imperative to make money when you buy a property. This way from the start there is no need to play a game of catch-up. You can lose a lot of money if there is the need to invest in improvements immediately upon buying a property.
What to Avoid: Properties that have a negative cash flow from the start when there is a mortgage involved.
2. In-Depth Look at Location
Thanks to the internet, it is easier than ever before to research every aspect of the location of your property. You can use websites like City Data or Zillow to do in-depth research on everything from the crime to the walkability of a neighborhood.
What to Avoid: Even if you find a property that is in a good area, it is important to check out the schools. No one wants to bus their kids to a school with a bad reputation if they can avoid it.
3. Condition of the Property
The structural soundness of the property is very important to check out. Take a look at the roof, foundation, walls, chimneys, etc. If you do not know what to look for during a home inspection, bring in a trusted inspector to check out the property with you.
What to Avoid: Properties with long-term repairs that send your cash flow in the negative due to ongoing maintenance.
Still Not Sure?
Investing in a rental property is no easy task. Make sure not to settle on the first reasonable prospect, but the property that is right for you. With enough patience and know-how you’ll be seeing a ROI before you know it.