Jul 7, 2017
Jul 6, 2017
Which type of property is right for your first investment? One of the most common questions new investors ask is, “What types of homes should I look for as a beginning investor?” So, what’s the answer? What You Need to Know The first step to deciding on which type of homes you should be looking for is to know what you really want out of it. What are your financial goals? What real estate strategies are you planning to use? What resources do you have? What talents do you have? What types of properties do you understand? What’s Important as a New Investor As a new investor, the important factors you should probably be focusing on include: Affordability Simplicity Exit strategies Ease of property management Low maintenance costs Beginner investors should be looking to test the waters, and keep their risk low in their first investments. Err, on the side of this being a springboard investment to launch you forward as you learn and get results. The last thing you want is to bite off more than you can handle, and get stuck. The ‘Bread & Butter’ House For all of the reasons above, most investors trend towards the common ‘bread and butter’ house. That is your standard 3 bedroom, 2 bath, single family home. It’s what will typically be the easiest to finance, rent and resell, and where most of your money will come from. This is the standard, neighborhood home which appeals to the most people. There are exceptions, however. If you are in an area where there are mostly 2 bedroom, 1 bath homes, or almost all condos, then those may be your best choice vs. the 3 bed 2 bath home. It all comes down to what banks will be most comfortable financing, and which properties will fit the largest number of renters and end buyers. Your first property is about maintaining flexibility and keeping risk low. It is about going for the homes that are going to deliver real, consistent results. You may aspire to live in a mansion next to LeBron James’ home, but that doesn’t necessarily mean it is a profitable investment. Leave the quirky homes and ultra-high-end speculation to others. Then you’ll be the one with the best investments making the most consistent cash flow at the end of the day. Summary Beginner investors should start by getting clarity on what they have, and what they want. They should be ready to take bold action and get going. Yet, to start smart, with properties that are going to give them the lowest risk, most options, and best flexibility. Once you get a few under your belt you can always expand to taking on more adventurous projects.
Jun 27, 2017
What type of insurance coverage do you need for your rental properties? Rental property owners need insurance coverage. You may not love making premium payments, but you’ll be glad you’ve got it when something happens. If you plan to finance real estate investments you’ll often also find that insurance is mandatory. Here are five types of insurance coverage you need to know about… 1. Title Insurance Title insurance covers your rights to ownership and use of the property and helps cover legal defense if issues arise. You do not want to buy property without this. Every dollar of your investment and future income can be on the line. There is a lot of fraud out there today, and without title insurance, you are at risk. 2. Hazard Insurance This is your basic property insurance. It typically covers fires and other common forms of damage. This is usually based upon the amount of the loan you have on a property, or the cost to rebuild the property. Make sure you keep the amount of coverage updated as your property value increases. 3. Special Disaster Insurances Basic hazard insurance is very limited coverage. It typically does not cover a wide variety of other natural disasters which can destroy your property. If you are in a flood zone you will typically need special flood insurance. This is normally very inexpensive. Those in coastal zones may need windstorm or hurricane insurance which also can be very expensive. 4. Renters Insurance Hazard insurance doesn’t cover tenant belongings. You don’t want to be on the hook for your tenants’ furniture and personal items if there is a fire, flood, or break-in. Typically, landlords will require that renters obtain their own renter’s insurance, at their own expense. This should be laid out in your lease. 5. Umbrella Policy Insurance Coverage There is generally a discount when you group all of the properties together and this also provides ease of management. If you do enough deals, and own properties long enough you’ll run into something. Often loopholes in the above policies will mean you aren’t covered by them, or they may not provide enough coverage. An umbrella insurance policy can be used to cover you and act as a second layer of protection across all of your real estate business and assets. This can help cover issues like “dog bite” lawsuits. Keeping in mind the need for all types of insurance coverage and this will make your property management experience a smoother and less risky endeavor.
Jun 23, 2017
Who are the essential professionals you need in your camp before you start investing in real estate? It is important to keep up your momentum when getting started in real estate investing. Yet, you also want to make sure you are investing wisely and can enjoy a smooth process which delivers the best possible real estate success. Here are the first five professionals you need to connect with before you invest: CPA Your actual investment returns will depend a lot on taxes. There can easily be a double digit difference in what you get to keep, depending on how you set yourself up, and how you file taxes. A good tax professional can help you strategize and get it right before you wind up with a big income tax bill. Attorney Sooner or later you will want or need an attorney. It is just smart to have one already pre-screened and on call for when that time comes. You may want a specialist real estate attorney who can help negotiate contracts, and aid you in defending against lawsuits. It might also be helpful to have a family law or asset protection lawyer who can help you personally set up the right structures to grow and pass on your legacy. Insurance Agent Part of real estate success is the reduction of risk. Even if you don’t need direct property insurance to cover individual real estate assets, you will probably need an umbrella policy, life insurance, and other types of insurance to cover your assets in various areas. Capital Partners Even if you don’t plan on needing credit or extra cash to invest, it can be wise to have relationships with these sources in advance. It will help you avoid any cash crunches or missing out on any great opportunities. This may be private lenders, mortgage brokers, or angel investors. You will also want to build relationships with bankers to make your transactions go more smoothly. Experienced Mentor Having someone you can pick up the phone and call or shoot an email to for urgent help or an experienced second opinion can make all the difference in your business decision making. Find someone who is experienced in what you are doing and who shares your values. If you plan to be an active real estate investor, make this a full-time thing, or to start a real estate business, you will also want these five people in your camp before you get going. Contractor Having a trusted contractor on call can be invaluable for fast property inspections, repair estimates, timely turnovers and getting work done quickly. Real Estate Agent Whether or not you actually use a Realtor to help buy, sell, and rent real estate, investors can find them very useful for making sense of the market, and keeping on top of evolving trends. Marketing Expert You simply can’t do it all as an investor. Even if you have a strong marketing background, the most profitable use of your time is probably inking new deals. Still, with 90% of your success relying on your marketing to secure deals, fill them with renters, and resell them, make sure you have an expert on your team. Virtual Assistant An assistant can be used to protect and free up your time so that you are getting the best ROI on every hour of the day. A good assistant can handle a wide variety of time-consuming tasks, including finding the other people on this list. Project Manager As you grow your real estate business, taking on a big multifamily property, or are building new homes to rent out, a project manager can save you time, and help things go smoothly. This could be a true project manager for a specific mission, a property manager, or a general manager for your organization. Putting some thought into what and who you need to have in your camp to be savvy and efficient will help direct you towards the path of success!
Jun 14, 2017
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? Social Events 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. Meetups 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. Online Groups 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. Summary 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.
Jun 13, 2017
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? 1. Third-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. 2. Realtors Real estate agents can be a great source of comparable information. They can save investors a lot of time, by pulling quality real estate 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. 3. The MLS 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. 4. Title Companies One of the most important things to remember in finding comps is that asking prices are almost irrelevant. Sellers and agents aggressively overpriced properties for sale every day. What you want are actually 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. 5. Appraisers Professional real estate appraisers are the 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 assessors, sales history of a property, and how other properties in the area are stacking up. 6. Drive-By 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 real estate 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.
Jun 12, 2017
Check out these six ways to increase the cash flow and returns from your rental property… Decrease Expenses 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? Refinance 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. Upsells 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. Summary 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.
Jun 5, 2017
Real Estate Investment: What's The Right Niche For You? One of the key questions to ask yourself when it comes to a real estate investment is, which type of property is best for your individual portfolio growth? There are many to choose from. Some investors diversify themselves across multiple niches. Others are adamant fans of just one type of property and strategy. Here are some of the pros and cons of each, so you can decide for yourself… Single-Family Housing Single-family housing is one of the most popular ways to invest in real estate today. It is easier to acquire and sometimes it is easier to purchase without the need for financing. It used to be primarily the domain of small individual investors but has grown to be a top choice for some of the largest funds too. The Pros: Largest amount of inventory Largest number of resale buyers Easiest for individual investors to tackle by themselves Most understood type of property The Cons: Large amounts of competition Vacancy can hit hard if you only own a couple of units Property management High cost of improvements per unit Multifamily Housing Multifamily housing includes quads and any type of property that includes more than one unit. There can be a wide divide in size and cost. It can range from a small 15 unit single apartment building to a 1000 unit apartment complex and everything in between. The Pros: Large demand for rental housing Efficiency in property management Lower cost per unit Higher ROI on improvements made The Cons: Competition from capital-rich investors Requires daily property management May require more money or financing to buy and manage Smaller resale market than single-family homes Commercial Real Estate Commercial real estate encompasses a variety of sub-sectors and niches including; office, retail, medical, hospitality, industrial, and mixed-use. The Pros: Control over asset value through repositioning Ability to obtain non-recourse financing Prestige and pride of ownership Benefits for personal use for your own business The Cons: Limited resale market High level of professional management required Least understood by most investors Most likely to be impacted by economic changes and industry disruption When you stack up and compare real estate investment niches like this, each has its pros and cons. Each also has a variety of deeper niches possible. In single-family, you can focus on individual homes or condos, and in specific areas. Multifamily real estate can range from local rentals to specialized lofts or apartments for vacation rentals or hi-tech professionals. Commercial property could include warehouses, local strip malls, or boutique hotels. What is important is that investors understand the differences. By selecting the optimal type based on your current circumstances and goals, you have a greater opportunity for success. Later you can add in other niches and diversify. Finally, recognize that there are various strategies for engaging in each of these niches too. You could go it alone, find a partner, be a private lender, flip them, or hold them for long-term cash flow and capital gains. What will you invest in?
Jun 1, 2017