Category: Owner & Investor

10 Great Reasons to Have A Property Manager

10 Great Reasons to Have A Property Manager

Rental Management One

When you hire a professional property management company, you save time, money, and lots of hassles. They can handle all aspects of your properties daily operations, legal aspects, and transactions, ensuring efficient management. There are many things you should know about such a service.

1. They screen the tenants
Every property owner wants to ensure that they have the best-possible tenants who pay their rent on time. Timely rent is the key to generating regular income. You want to find the kind of tenants who are careful about how they use the place and not cause any damages. Thus, you will not have a tenant who doesn’t pay on time or causes damage to your property.

2. They manage all the repairs & maintenance

Another good thing about a good property management company is that they manage all the repairs and maintenance for your property. Whether it’s the plumbing, electrical systems, equipments or building, the manager will arrange for the job work. They will also monitor the work to ensure quality compliance.

3. They Fill Up Vacancies & Ensure Optimal Retention

This is something that you cannot do on your own like a professional. No one wants properties to remain vacant. You will not have to spend all your time marketing your property. An experienced manager will shorten vacancy time by getting the right tenants. Besides, they will also work to ensure longer average retention.

4. They Deal with Legal Issues

An experienced property management service can handle one of the biggest challenges as an owner – legal issues. They know about the latest tenancy laws and can take the right action to prevent or alleviate legal tussles.

5. They handle all Documentation

Property management is not just about handling the day to day operations, it also involves a lot of essential paperwork. When you hire a professional service, you will not have to spend all your time dealing with potential-tenants’ credit reports, drawing the lease agreements, doing background checks, and dealing with the billing, and notices.

6. They already have Lists of Contractors

When you hire a property management service, they already have lists of contractors in the area. Whether it is fixing the plumbing, cleaning, or removing the snow, they will already know the right people to call for the job. They can also help you save more by getting special rates due to their well-established relationships.

A property manager will ensure that everything keeps running smoothly and efficiently. They will negotiate and secure contracts for clean-up, landscaping, trash removal, mowing, and other services.

7. They Deal with the Tenants

Your property manager acts as the contact with the tenants. A property manager will address all problems at all hours so that you will not have to drive over to the place. This means a lot of convenience and a hassle-free owner experience.

8. They Ensure Timely Payments

Another good thing about hiring the services of property management companies is that they take care of rental collection and bill payments. They will also enforce the lease policies if your tenants fail consistently to pay rents.

9. Get Tax Deduction

Property owners can also claim a tax deduction for the professional services of a property management company. Thus, hiring a property management service can help save money in several ways.

10. They Keep Everything Well Organized

One of the best things about hiring a property management service is that they keep everything organized for the owners. It can be almost impossible for you to keep track of all the details on your own.

Call Rental Management One for your free property evaluation and management quote today!

Tax Deductions Available for Rental Property Owners

Tax Deductions Available for Rental Property Owners

Rental Management One

Owning property is a huge part of the American dream, and at times it seems the IRS is trying to reward such behavior. In this article, I review the best federal tax deductions available to rental property owners in the United States.

What Qualifies as an Expense?

There are two types of expenses: Current Expenses and Capital Expenses.

Current Expenses

These are generally one-off items that help keep the property in good working condition and habitable, or help you operate your rental business.

The entire expense can be deducted from your taxes in the same year that it was incurred – hence “current” expenses. Repairs are generally expected to restore an item to its previous working condition.

To qualify as a current expense, it must be considered:

  1. Ordinary and Necessary
     Ordinary expenses are those that are common and generally accepted in the business. Necessary expenses are those that are deemed appropriate, such as interest, taxes, advertising, maintenance, utilities and insurance.
  2. Current
     Must have more short-term value than long-term value. Fixing a hot water heater has short-term value. Replacing the appliance has long-term value.
  3. Directly Related to your Rental Activity
     The expense must be business related.
  4. Reasonable in Amount
     If you claim to have paid $500 for a toilet seat, you will get audited.

Capital Expenses

Anything that increases the value of the property or extends its life is categorized as a “capital expense” or “improvement” and must be capitalized and depreciated over multiple years.

My general rule of thumb is any item that costs hundreds of dollars (or more) to replace should probably be deducted as a capital expense.

For a more detailed explanation and specific examples of each, read the article: Repairs vs. Improvements – What Can I Deduct from my Taxes?

Top 12 Tax Deductions for Landlords

Before claiming any of these deductions, be sure to have detailed and thorough records to back them up. Rental Management One provides all these records and documents for you to supply to the IRS. The IRS scrutinizes these deductions (some more than others), and you need to be prepared should you get audited. If you fail to have proper receipts and cannot validate the business necessity of each expense, you will have to pay the amount due, with interest, if you get audited.

1. Loan Interest/Points

If there is a mortgage on the property, the loan interest will probably be your single largest deductible expense.

In 2013, I paid $19,000 in interest on one of my mortgages. Further, if you paid buy-down points on the property purchase or mortgage refinance, you’ll be able to deduct those as well.

  • Mortgage Interest (primary & secondary)
  • HELOC Interest for loans used to repair or improve the property
  • Credit card interest on items used for the property
  • Mortgage Points to purchase or refinance a rental property

Keep in mind, you can only deduct interest on money that was actually spent on your rental business. Therefore, you wouldn’t be able to deduct the interest of a withdrawn line of credit that is sitting in your bank account.

2. Depreciation of Assets

There are, in general, three types of costs you need to capitalize and depreciate:

  • The value of the structure, not the land
  • The value of improvements – such as appliances, carpet, windows, countertops, etc.
  • Equipment/Computers/Laptops

These expenses cannot be deducted in a single year, but rather must be spread out (depreciated) over multiple years.

Otherwise, people would abuse the system by claiming $100K in repairs in a single year to remove all tax liability, and then sell the property the next year to recoup their renovation ROI.

3. Taxes

Often the real estate taxes are paid through the mortgage company, and therefore show up on the Form 1098 that is sent from the bank.

If the property is free and clear of any mortgage, CONGRATULATIONS!, but you’ll have to look up your tax records online if you didn’t keep receipts of those payments. Other business-related wage taxes, permit fees, or personal property taxes are considered allowable deductions as well:

  • State, County and City Taxes
  • Social Security Taxes for Employees
  • Medicare and Unemployment Taxes for Employees
  • Personal Property Tax/Vehicle Tax
  • Permit Fees/Inspection Fees

4. Repairs

Repairs are defined as any effort to maintain the current condition of a property or asset.

  • Painting/Spot Patching
  • Plumbing Repairs
  • Air Conditioning Repair
  • Fixture Repairs
  • Labor Costs/Contractors
  • Incidentals related to a repair
  • Rental Fees for Tools/Equipment

5. Maintenance

Maintenance costs are often confused with repairs, however with maintenance, you’re not necessarily fixing anything. For example, the lawn will always need to be cut but it is never really “broken.”

You can also hire a pest company to treat the property every few months to prevent further infestations, even if the original pests are long gone.

  • Landscaping and Tree Trimming
  • Homeowner Association Fees
  • Pool Cleaning, Chemicals and Maintenance
  • Pest Control and Treatment
  • Tune-ups on Lawn Mowers, Chain Saws, Leaf Blowers, etc.
  • Light Bulbs
  • Smoke Detector Batteries
  • HVAC Filters
  • Janitorial Items

6. Insurance Premiums

All business-related insurance premiums are tax-deductible. When trying decide if the insurance is business related, I ask myself, “Would I buy this insurance if I didn’t own a rental?”

I have an Umbrella Policy which covers my personal assets and legal liability above and beyond the coverage on my rental properties. Because of the added risk involved with one of my less-polished properties, I decided to purchase this additional coverage.

I would not have purchased this policy otherwise, and therefore I can classify it, in good conscience, as a business expense.

  • Homeowners Insurance
  • Mortgage Insurance Premiums
  • Fire/Damage/Liability Insurance
  • Flood Insurance Riders
  • Theft Insurance
  • Workers’ Compensation Insurance
  • General Liability Insurance
  • Personal Umbrella Insurance

7. Utilities

You can deduct the cost of any rental property utilities that you pay for. You are still allowed to claim utility expenses even if the tenants reimburse you later, but you also have to claim that reimbursement as income.

  • Electricity
  • Gas
  • Heating Oil
  • Water & Sewer
  • Trash & Recycling

8. Travel Expenses

50% of American Landlords do not live near their properties. Any long distance travel to visit your assets or to conduct rental business can be tax-deductible as a business expense.

  • Airline Fares
  • Car Rentals and Taxis
  • Hotels
  • 50 percent of meal expenses during long-distance travel

9. Vehicles

When expensing business vehicles, the actual asset must be depreciated over multiple years, however the upkeep can be deducted in the year the expense was incurred.

You have the option of deducting actual expenses, or utilizing a standard mileage rate of 56.5 cents per business mile driven (as of 2013).

  • Business Vehicles (depreciable)
  • Mileage or Gas/Maintenance/Usage of Business or Personal Vehicles

10. Management Fees

Even the best landlords need help, if you’ve hired a property manager, like Rental Management One, you are allowed to deduct that expense.

  • Property Management Companies
  • Individual Property Managers
  • On-site Manager
  • Condominium Association Fees
  • Special Assessments

11. Legal and Professional Fees

If you need to hire a pro, be it a lawyer, accountant or tax professional, you can expense the cost. If you ever have to evict a tenant, you can expense all reasonable court and filing fees.

  • Accounting Advice
  • Professional Tax Preparation
  • Tax Preparation Software (like TurboTax)
  • Structural Engineering and Consulting
  • Legal Fees
  • Lease Review and Editing
  • Court Filing Fees

12. Commissions

Occasionally, I will offer a $50 incentive to my current tenants if they find a replacement tenant upon their departure.

  • Commissions to Managers and Salespeople
  • Commissions for Tenant Referrals

A $25K Limit on Losses

According to the IRS, if you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income.

For Example: Lets pretend, you had $60,000 in depreciation and expenses for a given property in a single year, however that property only generated $20,000 in rental income.

This leaves you with a $40,000 loss (ouch!).

You can claim $25,000 of losses that year, but then you are allowed to “recapture” the other $15,000 in losses against your income the next year. If you continue to have losses beyond $25,000 year after year, you can recapture the sum of the unused losses against the gains when you sell the property.

Source: IRS Publication 925: Passive Activity and At-Risk Rules (pdf)
Article written by
Edits in red by Rental Management One
Original Article available here: https://www.landlordology.com/tax-deductions-for-landlords/
Thinking About Becoming a Landlord? Avoid These 6 Rookie Mistakes

Thinking About Becoming a Landlord? Avoid These 6 Rookie Mistakes

Rental Management One

Putting your property up for rent can be tricky. Here’s how to sidestep six of the most common blunders.
Ever considered becoming a landlord? There are plenty of reasons you might. For some, it’s the temptation to scoop up a cheap property before the last of the deals vanish. Or maybe you’re like the 39% of homebuyers who told real estate firm Redfin that they’re interested in renting out their old place. Then there’s the lure of steadily escalating rents. The cost of renting the typical single-family home or apartment rose 4.5% in the past year, and spiked by more than 10% in the hottest areas, according to Trulia.
Becoming a landlord can be a profitable move, but learning the ropes requires some effort; it’s easy to take a misstep and end up in the red. “It’s not a passive investment, like putting your money in a mutual fund,” says Robert Cain, founder of landlord resource site Rental Property Reporter. Below, six slip-ups frequently made by newbie landlords, and strategies that will help you avoid making the same mistakes.

No. 1: Underestimating costs

You’ll most likely account for your insurance, taxes, and if you have one, mortgage. But you might miss expenses such as water, garbage, gardening, and regular repair and upkeep tasks. Even riskier, you may fail to put aside a large enough pot for unexpected expenses and big-ticket items. “Mom-and-pop investors tend to skimp on reserve and emergency funds,” says John Yoegel, author of Perfect Phrases for Landlords and Property Managers.
For a realistic estimate, plan for annual costs (not including your mortgage) to run at least 35% to ­ 45% of your yearly rental income, says Leonard Baron, who runs the real estate investor website ­ProfessorBaron.com. When calculating future income, it’s a good rule of thumb to include only 10 or 11 months of payments per year. After all, whenever a tenant moves out, you’ll still be stuck with expenses.

No. 2: Breaking the law

Tenant and landlord laws vary from state to state and even city to city. For example, in some areas, you can require a month-to-month tenant to move out within 15 days, while in others you must give him 60 days’ notice. Yet when real estate site Zillow quizzed landlords on basic rental laws, the average respondent missed at least half the questions. One easy way to avoid getting into legal hot water: Never buy generic lease or other tenant forms, which don’t account for local laws, from a general real estate site or a big-box store, says Cain. To get the skinny on what’s permitted in your town, talk to your local or state landlord or apartment owners association. These groups usually cost at least $50 to join.

You know that federal law prohibits you from denying a rental to someone based on race, religion, or gender. Keep in mind that it also means that you can’t advertise a place as perfect for female roommates or specify no kids. You may, however, include a cap on the total number of occupants or ban pets.

No. 3: Skimping on vetting prospective tenants

When you’re looking for a good renter, it’s not enough to trust your instincts, or even to go on a referral from a friend. “Landlords get in trouble when they are in a hurry to find tenants and when they feel sorry for someone,” says Cain.

Never rent your property without checking the prospective tenant’s credit, confirming the source and amount of income, and checking in with the current and previous landlords, he says. Look for income to run at least 2½ times annual rent. Sites such as E-Renter.com and MySmartMove.com provide credit and background details for around $25.

No. 4: Ignoring renters insurance policies

Landlord policies cover the structure of the home, your appliances, and liability in case of injuries or property damage. Not on this list? The tenant’s stuff. You may think that’s not your problem, but Michael Corbett of Trulia warns that renting to one of the 65% of tenants who lack a policy can cause problems if something goes wrong. “Tenants lash out when they realize they aren’t being compensated,” he says.

In places where it’s legal, such as California, he recommends requiring that renters purchase a policy (go to your local landlord association to check the law in your state). This may shrink your pool of potential tenants, but is likely to increase the odds that you end up with someone responsible. If that’s not an option, be sure to explain to your tenant that you are not covering his things, and suggest he buy his own insurance.

No. 5: Failing to check out the property regularly

Don’t count on your renter to tell you about problems. “A tenant will complain about an inconvenience, such as plumbing issues, but not necessarily something like broken rain gutters that can produce major problems down the road,” says Yoegel. What begins as a dripping pipe or watermark on the ceiling can quickly swell into a multi-­thousand-dollar repair if left unaddressed. “Water damage is a big one,” says Corbett. “It can be outrageously expensive to fix.”
While you must respect your tenant’s privacy and cannot legally enter the residence without advance notice, you should find a way to take a regular look at the property. One solution: Add a clause to the lease specifying that you or your property manager will inspect the home at least every six months. It’s also a good idea to drive by the place once a week or so to look for exterior trouble spots. Finally, swing by anytime work is being done; you can verify that the job goes as you see fit and take a quick glance around for other potential issues.

No. 6: Going DIY at tax time

The tax treatment of rental properties is nothing like that of your home, and keeping it all straight is nearly impossible for novice landlords. The rules of depreciation are a prime example. The IRS requires that you take a deduction for wear and tear on the property each year. However, “the rules say depreciation is ‘allowed’ or ‘allowable,’ so people assume it’s optional,” says Cindy Hockenberry of the National Association of Tax Professionals. If you don’t claim the deduction for depreciation, you’ll miss a yearly tax break. Then, when you sell, the IRS requires you to retroactively depreciate the home, and that’s likely to leave you with a larger-than- expected tax bill. Not tricky enough? Starting this year the government “complicated” the regulations about what types of repairs you can deduct annually, says Hockenberry.

The bottom line? Get a professional’s help—at least for the first year or two until you fully understand the rules. And don’t forget to keep receipts for everything: You can deduct all the costs involved in managing your property, including the mileage for all those drop-bys.
If you are seeking a professional property management company in Michigan to assist you with your rental or investment properties – call Rental Management One today. (248) 208-3882. 

Article written by: http://time.com/author/amanda-gengler-2/
See original article here: http://time.com/money/2800666/thinking-about-becoming-a-landlord-avoid-these-6-rookie-mistakes/

HUD ISSUES NEW GUIDANCE ON FAIR HOUSING PROTECTIONS FOR PEOPLE WITH LIMITED ENGLISH PROFICIENCY

HUD ISSUES NEW GUIDANCE ON FAIR HOUSING PROTECTIONS FOR PEOPLE WITH LIMITED ENGLISH PROFICIENCY

Rental Management One

WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) today issued “Limited English Proficiency” (LEP) guidance that addresses how the Fair Housing Act would apply to claims of housing discrimination brought by people because they do not speak, read, or write English proficiently. More than 25 million people in the United States do not communicate proficiently in English. Read the new limited English proficiency guidance here.

The Fair Housing Act prohibits both intentional housing discrimination and housing practices that have an unjustified discriminatory effect. People with limited English proficiency are not a protected class under the Fair Housing Act. However, the Fair Housing Act prohibits discrimination on seven protected bases, including national origin, which is closely linked to the ability to communicate proficiently in English. 
Housing providers are therefore prohibited from using limited English proficiency selectively or as an excuse for intentional housing discrimination. The law also prohibits landlords from using limited English proficiency in a way that causes an unjustified discriminatory effect.

“Having a limited ability to speak English should never be a reason to be denied a home,” said Gustavo Velasquez, HUD Assistant Secretary for Fair Housing and Equal Opportunity. “Every family that calls this nation home has the same rights when it comes to renting or buying a home, regardless of where they come from or language they speak.”

Nearly 9 percent of the U.S. population is limited in English proficiency. Approximately 16,350,000 (or 65 percent) of these individuals speak Spanish, while 1,660,000 (7 percent) speak Chinese, 850,000 (3 percent) speak Vietnamese, 620,000 (2 percent) speak Korean and 530,000 (2 percent) speak Tagalog. Housing decisions that are based on limited English proficiency may have a greater impact on these and other groups because of their nationality.
The guidance addresses how various legal approaches, such as discriminatory effects and disparate treatment, apply in Fair Housing Act cases in which a housing-related decision – such as a landlord’s refusal to rent or renew a lease – involves a person’s limited ability to speak, read, write, or understand English.

Discriminatory practices, for example, could include applying a language-related requirement to people of certain races or nationalities; posting advertisements that contain blanket statements, such as “all tenants must speak English;” or immediately turning away applicants who are not fluent in English. Targeting racial or national origin groups for scams related to housing also constitutes intentional discrimination.

A housing provider also violates the Fair Housing Act when the provider’s policies or practices have an unjustified discriminatory effect, even when the provider had not intended to discriminate. Determining whether a practice has a discriminatory effect involves a three-step legal evaluation of the statistical evidence of a discriminatory effect; whether the housing provider’s policy or practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest; and, if so, whether there is a less discriminatory alternative policy or practice.

In addition to the new LEP guidance, which is limited to the Fair Housing Act, HUD published a “Notice of Guidance to Federal Financial Assistance Recipients Regarding Title VI Prohibition Against National Origin Discrimination Affecting Limited English Proficient Persons” in 2007.

Single Family Rentals: What Does the Future Look Like?

Single Family Rentals: What Does the Future Look Like?

Rental Management One

In June, the NRHC and Green Street Advisors’ Advisory and Consulting Group together published an in-depth research paper packed with stats that illuminate the current market for home rentals and projections for the coming years. Their findings should be of interest (and quite encouraging) to people in the business of renting single family properties.
In short, a number of factors point to a bullish market for single family home rentals over the next five years, including the modest growth in supply of homes; strong demand due to demographics and the growing attractiveness of homes relative to apartments; and a greatly tightened lending environment that has made buying homes (vs. renting) more difficult for many.

Today, according to the report, around 13% of all occupied single family homes are rentals, constituting about 37% of the total residential rental market. That’s more than most people would guess, and testament to the strong role single family homes now play in housing renters. In fact, the ownership of rental homes could even become an asset class for institutional investors betting on large portfolios of homes – though today their portfolios still represent only around 1% of the total single family rental market, with the other 99% being owned by “Moms and Pops.”

Single family homes are still 11% below their peak values in 2006, while apartments are now priced 38% above the peak they reached in 2007. The report suggests that this leaves lots of room for a rise in home values vs. apartments, so the good news isn’t only about the strength of the rental market – it’s also about the potential value of the underlying assets, the homes themselves.

Growing Demand

The report posits household formation as the chief driver of housing demand, and goes on to estimate that 6.6 million households will be created over the next five years. Over half these households will rent, a percentage exceeding the historical norm; of these, around 1.5 million will choose single family homes – an increase of around 9% over the next five years.

Job creation is another demand driver for rental housing, and a post-recessionary job market that continues to improve should add around 156,000 jobs per year over the next five years if the report’s projections are correct.

Demographics figure into demand as well. People under 35 represent the most important renter base, and this base is expected to grow faster than the population as a whole over the next five years. These days, carrying lots of debt and finding it hard to come up with down payments, they’re likely to delay buying homes until later in life than ever. Until that time, they’ll remain in the renter pool.

Then too, there’s the fact that every demographic group has seen an increase in desire for homes over apartments, particularly those needing three or more rooms – a feature homes are much more likely to provide than apartments or townhomes. The large millennial generation will soon be creating families that need more room than many apartments can offer them.
Limited Supply

The economy has for over seven years now been absorbing the many foreclosed houses that came on the market as a result of the Great Recession. Where once they might have been rented at bargain prices, many have now been purchased out of the rental market, and the others are more highly valued than they were when empty houses were abundant.

At the same time, the building of single family homes has lagged far behind the development of new apartments, and virtually nobody today builds homes from scratch specifically as rentals.

The changing ratio of supply and demand has led to a favorable situation for owners of rental homes, leaving plenty of room for rent growth. The occupancy rate has been climbing since 2009, and is expected to rise even more quickly over the next five years, while apartment occupancy is already at historic highs and doesn’t leave as much room for growth.

The upshot of this eye-opening report is that it’s a good time to own single family rental properties, and it’s likely to get better – perhaps a lot better. Keep an eye on our blog to pick up tips on how to squeeze the most from your investments!
Source: “Single-Family Rental Primer,” June 6, 2016, Green Street Advisors in partnership with National Rental Home Council.

http://www.propertyware.com/blog/single-family-home-rentals-what-does-the-future-look-like/?utm_source=twitter&utm_medium=social&utm_campaign=blog&hootPostID=d1a89f336bc38ee9c2b9c45924586e09

 

Recent Analysis Shows Many Big-City Renters that Earn Enough to Buy, Prefer Convenience of Renting

Recent Analysis Shows Many Big-City Renters that Earn Enough to Buy, Prefer Convenience of Renting

Rental Management One
SEATTLE, WA – Across the country’s largest rental markets, almost 14 percent of on-market renters have strong credit scores, relatively high incomes and could afford to buy the median home in their market.

As the homeownership rate has declined over the past decade, a broader socio-economic swath of Americans are renting than at any time in recent history. That means people who could afford to buy are renting instead, increasing competition for limited available homes for rent, according to an analysis of financial qualifications reported via the Zillow Renter Profile feature.

San Jose, San Diego, and San Francisco have the largest segments of on-market renters who have the credit score and income necessary to purchase a home, making those metros highly competitive for renters. Los Angeles, New York and Seattle also made the list of metros with large segments of current renters who are financially qualified to buy a home.

To determine which markets have the highest number of financially stable and thus most competitive renters vying for the attention of landlords and property managers, Zillow examined the self-reported credit scores and incomes of renters who were on the market during the first half of 2016. Zillow also looked at regional median rental and home values and competition to determine the markets with the highest share of renters who reported a monthly income equal to or greater than necessary to afford the typical rental and median home in the metro area.

There are also long-term demographic trends impacting renter qualifications and competition: young adults, both the affluent and otherwise, are renting longer than ever before as they delay many of the hallmarks of adulthood that typically lead to homeownership, such as finishing their education and starting families.

In general, markets with lower homeownership rates have higher proportions of on-market renters with both strong credit and high incomes. That said, even when controlling for the homeownership rate, booming markets closely associated with the tech industry – such as San Jose and San Francisco – tend to have exceptionally high proportions of highly qualified, on-market renters.

At the other extreme, markets that tend to have higher homeownership rates, such as Houston, and metros that were particularly hard hit during the housing bust and foreclosure crisis, including Cleveland and Detroit, have lower shares of renters who report both strong credit and high incomes.

“When faced with hurdles of high prices and low inventory, first-time homebuyers are renting longer than ever before even if they are qualified to buy,” said Zillow Chief Economist Dr. Svenja Gudell. “San Jose, San Diego and Seattle are among the most competitive places for buyers, and the going isn’t any easier for renters – as they are competing against throngs of financially sound applicants with strong credit and high incomes. This is a conundrum for many young people who move to those cities because of their strong job markets, only to find tight inventory and steep competition standing between them and their dream home.”

Courtesy of: http://www.multifamilybiz.com/News/7107/Recent_Analysis_Shows_Many_BigCity_Renters_that_Ea…
Skills All Property Managers Need

Skills All Property Managers Need

Rental Management One

The best property managers know how to apply a broad skillset to the unique situations they encounter. They move with ease into situations that require strong communication, negotiation, customer service, and organizational skills. Property managers also have the ability to manage more tangible property-related concerns, such as maintenance and repair issues.
Here are five essential property manager skills that all property managers must develop in order to excel in the field:

1. A Property Management Company Needs Strong Communication

According to Entrepreneur Magazine, “learning how to effectively communicate with others while choosing the right words can literally make or break your growth in the marketplace.” While your properties are an important part of your rental property management company’s portfolio, it’s the way in which you interact that will seal the deal for tenants. If you treat prospective tenants with respect during the screening and move-in, move-out process, they will know that they can trust you and your business.

Respect means that you communicate clearly, you’re easy to access, and when you’re not available, you have processes in place that allow tenants to connect with your company. A tenant portal that allows tenants to ask questions, find information, and pay bills online at a time that is convenient for them is a communication investment that will pay off. Keeping the lines of communication open is a great way to build and maintain good relationships with your tenants.
Property managers need to have strong customer service skills backed up by effective property management systems.

2. Property Managers Must Exemplify Responsive Customer Service

For tenants, excellent customer service and exceptional communication skills go hand in hand. When tenants communicate a question, they want an answer as soon as possible. You must have a way of tracking tenant queries and concerns. A tenant portal makes these questions and concerns visible to tenants. Then, you must act. For example, if a tenant is concerned about a possible leak in the roof, you need to treat this issue as the emergency it is and respond quickly. To do this, you need a list of pre-approved contractors at the ready and a schedule that shows when your employees and those contractors are available to manage the customer’s problem.

3. Managers Need to be Exceptionally Organized

Property management requires a high level of organization. For example, that leaky roof might have been avoided if your company conducted an annual evaluation of large maintenance concerns, such as the integrity of the roof and the safety of stairs and railings. According to Inc.com, exceptional leaders look for patterns to improve the company’s processes: “they are constantly scanning themselves, other people, and processes to identify patterns and changes in the patterns.” To avoid the leaky roof, you could identify the need for a stronger ongoing maintenance schedule that involves not only yard maintenance but checking appliances, plumbing, and other common problem areas in the home. Help your managers put these systems in place with rental management software that can be used in the development of a maintenance schedule and ongoing tracking of maintenance and repairs.

4. Managers Need to Know the Basics of Marketing

Most property managers are skilled in property maintenance and related tasks, but not everyone has extensive marketing experience. Do you find it challenging to write about your properties, add that information to listing services and your website, and develop the site itself so that the listings speak to certain desired groups of tenants? Writing a great property description requires knowledge about the amenities of the property and surrounding area, as well as an understanding of how those amenities will attract a specific group of tenants. Digital property marketing assistance can help you develop a website and list your properties even if you don’t have a lot of experience with web listings.

5. A Property Management Company Needs to Have Hands-On Skills

Property managers need to have a diverse range of skills, and they must understand properties as well as people. Some property managers come from a background in customer service, while others come from a background in building maintenance. Each manager should have an understanding of how buildings work so thorough and well-documented inspections can be conducted. Managers also need to understand the typical problems of rental properties so that they can respond appropriately and rank maintenance issues according to their urgency.
Written & Published by Propertyware June 2016

Detroit Landlords Get A Firm Warning

Detroit Landlords Get A Firm Warning

Rental Management One

The city on Friday put out a call to Detroit landlords to register their rental properties ahead of stepped-up enforcement next year.

Mayor Mike Duggan warned the city is gearing up for “a serious enforcement period” in January for rental owners who fail to register and undergo required city inspections.

“We have an ordinance that requires you to register your properties — nobody has enforced that in years. We are going to get back to that,” Duggan told a crowd of more than 100 current and prospective landlords at City Hall.

“What we’re trying to figure out how to do is take the strong landlords and help them grow and succeed and thrive, and take those who are abusing the system and not make it attractive for you to stay in the city. We are giving you notice now.”

The Friday seminar is believed to be the first of its kind for Detroit as officials ramp up efforts to get owners of rental homes or apartments to gain compliance with the regulations.

David Bell, director of the city’s Buildings Safety Engineering & Environmental Department, said officials want landlords with vacant rentals to get them registered within 30 days. For occupied properties, they want them to begin the process immediately.

Landlords are required to register with the building department and get annual certificates of compliance showing they are safe and inhabitable.

The majority of rentals, though, aren’t registered. The city has about 2,500 rental addresses registered, while U.S. Census data estimate there are more than 136,000 rental housing units in the city.

Failure to register or get a certificate of compliance are both punishable by $250 fines, officials said.

Duggan on Friday said he plans to ask Detroit’s City Council to sign off on an ordinance amendment that would require rental owners be current on property taxes to obtain a certificate of compliance for their properties in 2017.

The city is also slated to go live with an online database that will show all of Detroit’s rental properties with the proper certificates and approvals, he said.

“I envision a city in 2017 where every single tenant in this city can go online and in a minute find out whether their rental property is legally authorized and operating in the city,” Duggan said. “But we’re saying here today: Get a head start on this before the rush is coming.”

Rich Salem and Peter Sirr own about a dozen single-family rentals in the city and their Royal Oak-based management company oversees another 150 to 175 homes, primarily in Detroit.

The pair said they’ve already been working to register the homes with the city and came out Friday to learn more.

“Personally, I look at this and think it’s a great thing. You can eliminate all the slum landlords,” said Sirr, of Preferred Homes Michigan. “If you do everything the right way it’s going to cost you a few extra bucks, but it’s not a big deal.”

Duggan noted the city’s land bank owns about 30,000 vacant houses. About 5,000 of the properties could be rehabbed and another 5,000 are occupied with squatters, former homeowners or renters with landlords who failed to pay taxes.

“People who are tenants who were paying rent to a landlord every month had no idea the landlord wasn’t paying taxes,” he said. “…we can’t let this continue to happen.”

The Friday presentation gave attendees tips on crime prevention, squatters, fire and lead safety. Officials also distributed registration steps and requirements and inspections information.

The city launched pilot programs in East English Village and the Bagley neighborhoods to boost registration and inspections.

To help identify landlords, Bell has said the city is using records from the Detroit Water and Sewerage Department.

“We are here to partner with you to increase the quality of life in Detroit,” Bell said. “For too long its been an adversarial relationship and it doesn’t have to be that way. We can’t bring this city back without you.”

Detroit resident and landlord James Lovejoy said he’s worried about the financial impact the changes will have on property owners and tenants.

“I’ve got a property and I’m already charging a set amount of rent, and now the city comes and hands me a bill for inspections,” said Lovejoy, who has three occupied rentals. “I’ll get it all up to code but now the taxes are raised up and I’m going to have to raise my rent on the tenants. People are already struggling to pay rent.”

To register properties online, visit the city’s website.

Written by: Christine Ferretti. http://www.detroitnews.com/staff/27525/christine-ferretti. Staff writer Christine MacDonald contributed.
20 Real Estate Experts Reveal Top Mistakes Made By First-Time Investors

20 Real Estate Experts Reveal Top Mistakes Made By First-Time Investors

Rental Management One

For many first-time real estate investors, taking the leap and buying an investment property is one of the scariest things they’ll ever do. After all, there is a lot at risk if things go south.
I asked real estate experts and successful investors a simple question:

If you could list 3 common mistakes made by first-time real estate investors, which 3 would you list?

I wanted to know plain and simple which three mistakes most often derailed first-time real estate investors when getting started in their investment careers.

Read on to discover the three most common mistakes made by first-time investors, as listed by 20 of the industry’s top real estate experts and investors.

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Bill Gassett, Top 5 Real Estate Agent in Southborough Massachusetts 

As far as mistakes go from real estate investors, I have seen some of the same things repeated more than once.
The most common issue I see is when an investor buys a rehab and underestimate the costs involved in bringing the property into what would be considered appropriate for the market and neighborhood. I have seen numerous cases where the investor actually loses money because they have either overpaid or not done enough home work on what it will actually take to renovate the property correctly.

The second mistake is buying a home that would be considered at the top of the market for a particular town and/or neighborhood. You never want to be the “cream of the crop” property when you are an investor. Middle of the market to the lower end is always a better place to be as the properties that are above you bring up your value.

The third mistake I have seen but not quite as often is an investor buying a property that has some form of functional obsolescence that makes it difficult to sell. Usually these are structural issues that cannot really be changed. For example having to walk through a formal dining room to get to a bedroom in an older home. These are all things that can squash an investors plan of making the money they thought they would!

Marco Santarelli, Investor, Author, Founder of Norada Real Estate

Here are three common mistakes that I would put at the top of your page:

Investing in your local market only. Although your local market might offer you the best opportunities, the reality is that more often than not the best deals are found in other markets, often out-of-state.

Speculating on appreciation. Appreciation is nice but if your property doesn’t make sense the day you buy it then you are probably speculating.

Buying with financing (all cash). Leverage is one of the greatest benefits of investment real estate. It increases you cash-on-cash returns and allows you to buy more property.

Brandon Turner, Investor, VP Marketing at BiggerPockets

The biggest mistakes I see new investors make are:

Not Doing the Math. They simple rely on “gut feeling” when making a decision, which tends to lead to problems and bad investments. The math is not tough, and doesn’t take a lot of time, but can mean the difference between success and failure.

“Shiny Object Syndrome” – where the new investor bounces back and forth between new ideas constantly, never focusing. I believe you can succeed in any niche of real estate, so it’s important to pick something and stick with it.

Not Asking for Help – People think they need to do everything on their own, or that there is some kind of competition that stops them from asking others for advice. People would find greater success (and avoid mistakes) if they only asked for more help!

Maya Paveza, Real Estate Coach, Investor and Strategist 

Great question.

My first instinct answer is the following, there are SO many more mistakes.

1. Rookie Mistake: Pick a REALTOR you are related to, or know, but might only work part-time or has never worked with investors. Do your due diligence in finding the right REALTOR to work with. Ask for references, check references and schedule a consultation with them prior to beginning your working relationship. Make sure they have experience in the investment process. A rookie mistake can cost you a LOT. When I train agents to work with investors I make sure the agents know about “due diligence” inspections and options for special insurance to cover lost rental income, and even system failures. It’s not an everyday real estate transaction, it’s a long term relationship. Take your time, if you are not sure then sign a short term Exclusive Buyer Agency Agreement. But committ to a single agent so you don’t waste your time, and their time. Show dedication to them and amazing things might happen, Agents who are active enough in that area may have notice before a new property hits the market, and if you are committed to your agent you will be top of mind when they get that call. They will also have leases they can share with you, and references to others you might need in the process of purchasing and owning investment properties.

2. Rookies Mistake: Purchasing an investment property with a regular mortgage product. Oops! You can buy a few this way, but at some point you need a commercial loan or a line of credit. It’s much easier to draw upon and a faster way to go when you have to act quickly, especially if in a competitive situation perhaps with a cash buyer. After acquiring a few properties use the equity (which you should have if you are investing properly) to secure a commercial line of credit which can act as cash when need be.

Have your finances ready. Better to have a commercial loan ready to go, and a company set up to protect your personal assets from your investments. There are a lot of risks for investors who own properties, especially those that are rental units. Lost rental income insurance coverage is available, and a home warranty is a great option. Have a GREAT accountant who is familiar with real estate investments and the timeline, you want to avoid showing too much gain and need to know when to turn a property over and acquire a new one.
3. Rookie Mistake: No hiring a property manager or management firm because of the bottom line effect.

You are running a business when you own investment properties, you aren’t playing guys this is the fastest way to build wealth. Cheaping out in this aspect will be the difference between true success and an expensive hobby. Consider it an additional stream of revenue while values increase. Your time is worth money, you need to really value it properly and not become your own handy man or bill collector.

Be sure to read, research and learn about the rental process in your ara, what you should be looking for, what rents are in your area, as your REALTOR ot introduce you to a reputable, and proven, property manager, it’s well worth the expense to have someone else handle the potential issues, maintenance and even licensing required in some area. A client once had a call on Christmas Eve that there had been a fire at one of his properties, he was a few hours away but because he had secured a relationship with a reputable property manager they were notified by the fire department and handled all the arrangements to secure the property, meet the insurance adjuster and act on behalf of the owner without their needing to leave their family gathering. I got the call after it all had occurred, and my client was extremely grateful I had introduced him to his property manager.

Learn the market, trust your REALTOR. They do this everyday, and if you chose the right one you won’t have to worry about the potential ROI of the property you purchase because your agent should be able to easily demonstrate that information via market analysis and statistics.

Ben Leybovich, Real Estate Investor, Entrepreneur and Speaker

Assuming you need money to invest in RE.
Assuming the bricks and mortar are the only value centers in a transaction – there are many others.

Confusing knowledge with wisdom – they are not one and the same, and we need both!

Joshua Dorkin, Founder and CEO at BiggerPockets

Overpay b/c of lack of understanding of how to evaluate deals

paralysis analysis

financially unprepared to support REI

Michael Blank, Expert Apartment Building Investor

I’ll answer the question for apartment building investing:

Mistake # 1: Not having enough cash: either to complete due diligence and get to closing, and running out of cash while owning the building. You need a reserve in case something happens. Sometimes you get into a deal and discover that half the tenants aren’t actually paying rent, or your boiler blows up etc. Once you have a handle on it and it’s stable, you can pull out some of the reserve fund and substitute that with funding the reserve out of cash flow (the rule of thumb is $250 per door per year).
Mistake # 2: Not verifying the actual rents collected. In fact, I just wrote a BiggerPockets article on this here.
Mistake # 3: Not being clear or not sticking to your underwriting guidelines. Before starting to make offers, know exactly what returns you’re looking for. In other words, how will you recognize a good investment when you see it? How do you know it’s good? I look at the IRR (the returns) for the investors – everything else is secondary. So # 1, what are your investment return requirements. Then # 2, make sure you’re underwriting the deal conservatively. Use a 10% vacancy factor, take into account bad debt (i.e uncollected rent) if your property is affected by this. Use a rule of thumb for expenses of 50% of income, and if landlord is paying utilities, increase that to 55% or even 60%.

Seth Williams, Founder of REtipster.com

Don’t pay for improvements and services that don’t add value.

There will always be opportunities to pay for improvements for your properties or added services in your business. These things can certainly help your operation run smoother and allow your properties to generate more revenue with shorter turnaround (both of which will be very important to the long term help of your investment portfolio).

On the same coin, we all have to sift through MANY temptations that entice us to spend our hard earned cash on things that look flashy and appealing, but just don’t add much to the bottom line. Use great discernment when it comes to the things you spend money on (especially in the beginning, when money isn’t “growing on trees” just yet). Choose your battles wisely and only invest your cash in the things that will effectively bring your business to the next level.

Don’t buy properties that cost more than they make.
Let’s face it – in order for a property to be an actual “investment”, it needs to generate a profit.
In other words, after all of your expenses are paid – how much money will you actually be able to KEEP at the end of each year? It comes as a surprise to many new investors that t’s harder than it looks to pull this off. There are an endless number of things that can (and will) eat away at your revenue and become obstacles to you making (and keeping) money. If you want to avoid the trap of owning a property that costs more than it makes – be sure to do through due diligence before you buy it and leave no stone unturned in the process. It may be tedious work that requires great patience, but you’ll thank yourself for a lifetime as a result of laying the groundwork properly.

Don’t hesitate to pay for the right expertise.

It’s the same reason I take my car to a mechanic when it needs fixing, the same reason I go to a doctor when I’m sick, and the same reason I don’t dare to pick up a hammer to fix my own properties… because I don’t have the right set of skills to do it myself.

Mark Ferguson, Realtor, Investor and Author

Buying a rental property for appreciation and ignoring negative cash flow.
Buying a fix and flip and not calculating all the costs or trying to save money by doing all the work themselves.

Spending $20,000 on a real estate guru to teach them how to invest.

There are many programs out there that use low priced or free seminars to get investors in the door and then up charge them for more and more services until they finally bring out the big guns with a30k or 20k program that walks them through how to invest with financing. In the end they are mostly worthless and you could have bought a house with that money.

Joe Manausa, Real Estate Blogger, Broker and Investor

From the hip…

No clearly defined goal – If you are going to invest in real estate, you should have an ROI/IRR goal. Your money will have to be removed from its existing use and put into real estate, so what is your minimum required return on investment?

Not understanding active vs. passive – buy and flip is a job, not an investment. You have to take an active role in this type of “investment” so yo should not compare it with other passive investments.

Looking at properties vs. looking at numbers – investing in real estate requires you to find a property that will meet your financial needs. Too often, new investors go and look at properties that they have yet to financially qualify as feasible investments. Do the numbers first.

Tracy Royce, Short Sale Realtor, Investor and Foreclosure Expert

3 common mistakes made by first time real estate investors is not sticking with it, chasing rabbits, and getting emotional over a deal. I tell anyone who starts, you’re probably going to get a paycheck 6 months from the day you start working diligently on lead generation. So many people drop off after a few weeks/months, and lose hope.
Secondly, when they start getting calls/lead flow, they chase “rabbits” that aren’t ever going to be an actual deal for one reason or another. If someone’s motivated, you’ll know. Don’t waste your time on the majority of leads that aren’t ever going to convert.
Lastly, don’t over improve a house, or buy based on emotion. Let the numbers talk and show you if there’s a deal. You can buy a lot of houses, overpay, overimprove and lose your ass pretty quickly, so your emotions need to take a back seat. It’s not worth buying a bunch of property just so you can brag to your friends you’re in real estate investing. It’s a business; think like an owner from day 1 and you’ll already be ahead of the crowd.”
Don Campbell, Best Selling Real Estate Author, Investor and Senior Market Analyst

The three most common mistakes of real estate investors:
Not understanding the economic fundamentals of their target market. What is driving the market, (speculation or long term economics), is it sustainable and is it attracting the type of tenants I want for instance those with increasing income and strong job prospects.
Buying a property because it is ‘cheap.’ Too many investors buy property without understanding value. Price is not value. Just because it is cheaper than it used to be, or it is cheaper than in other cities doesn’t mean it is a good deal. What matters is Yield – what long-term income stream are you buying when you close on the property. Is it higher than you can get in other areas or investments? Is this yield sustainable or is it just a short term shortage blip.

Not planning a ‘sustainability fund’ when they purchase properties. We often call this the sleep at night fund. It is made up of 3 months of mortgage payment equivalent in readily available cash reserve, for EACH property. This money becomes the buffer for unforeseen repairs, vacancies and other issues. Without this sitting on the sidelines, the investor is simply adding too much unnecessary financial risk to their portfolio. With it, they can go on vacation, sleep at night or just get on with their life with fewer “What if” worries. Treat investing in real estate like the business that it is.

Lynn Pineda, Expert Realtor

Investing in Real Estate for the first time is a very exciting adventure for first time Investors with the hopes for great returns on their investments. Proper planning and preparation is key in anything we do and the same holds true for investing in Real Estate. Likely the most common mistakes made by first time Investors are the following:

Not completing your local Real Estate market research

This is a big deal if you haven’t done your research when deciding on a Real Estate property to purchase. You want to make sure you’re buying in an area where you can anticipate price appreciations and/or steady demands for rentals, if you’re renting opposed to fixing and selling a property. Making the wrong investment due to lack of research is a hard lesson to learn when you end up losing money.

Not budgeting properly for owning Real Estate

It’s so easy to get all wrapped up in the excitement of a first time property purchase that you fail to consider the expenses that go along with property ownership. You need to budget for utilities, repairs and down times, if renting. Will you have the money to fix the A/C when it breaks? What about the month or two you miss out on with no Tenant, when the prior Tenant moved out and you couldn’t immediately find a new Tenant?

Taking shortcuts on any needed repairs or remodeling
Shoddy repairs and/or remodeling will not benefit an Investor. Have you quality contractors in place before you purchase an investment property. Taking short cuts to save a buck will not bring Buyers wanting to buy your property when you’re ready to sell or you won’t have Tenants interested in paying you top dollar for a rental unit. Quality will always pay.

Raphael St. James, Expert Realtor

Not sticking to a plan or the numbers to fulfill your goal (Paying too much, not having enough capital for unexpected repairs, etc.)
Being too short-sighted on immediate returns and not the long-term end goal.

Buying off of impulse or emotion instead of the parameters of the property (cap rate, etc.)

Ilyce Glink, Award-winning real estate & personal finance expert

Timing Issues. Too many people sign a year-long rental agreement and then decide to buy.

Not understanding where you are in the cycle of life. Don’t buy a 1b/1ba and then find a long-term partner or get married and have a baby. You’ll be squished.

Not educating yourself. Read up on the process. (Buy my books, 100 Questions Every First-time Home Buyer Should Ask and Buy Close Move In!) Get educated. It’s the single biggest purchase you’ll ever make. Don’t wing it and don’t rely on people who have never been through the process.

Andrew Fortune, Expert Realtor

1.) Not being realistic about the learning curve. – First time investors are usually pumped full of info from blogs, seminars, and books. Most of the info that they receive will convince them that anyone can be successful investing in real estate. In reality, the chances of a first time investor doing well on their first few deals are slim to none. There will always be an unexpected expense and/or problems that will eat into profits. If you are prepared to make a few mistakes, you will learn from them and adapt with each deal. If you are not prepared to make mistakes, these unforeseen problems will crush your motivation to try it again.

2.) Remodeling for Personal Taste and Not What’s Currently Selling – First time investors have something to prove when they enter the business. One of the ways they express their abilities is through the design choices that they make throughout the remodel process. Unless the investor is looking at homes on a regular basis and noticing what materials are currently selling homes, chances are high that they will over spend on materials, or pick materials that are not desirable to the masses. Tip: Hang out with local home builders who build plenty of homes and use the materials that they use. These builders have years worth of experience dealing with choosing materials that sell homes fast for minimal cost.

3.) Getting Caught Up in the Small Stuff – As an investor, your first home remodel is exciting. It becomes personal. Once emotions and personal feelings get involved, the chances are high that small details will become more noticeable and important. Small cosmetic flaws will start to pop out everywhere you look the longer you are in the property working on it. It takes experience to know what to spend time on and what to avoid. First time investors are known for overdoing their first few rehabs because they get caught up on the small cosmetic issues that home buyers usually never notice when they look at a home. Some examples might be painting inside closets, remodeling under bathroom cabinets, or changing out light fixtures in the garage. Just stick to the main selling points and get the job done on time with minimal cost.
Debbie Drummond, Expert Realtor

#1. The most common issue we see is first time investors who buy with emotion. We’ve seen in-experienced investors who pass up great opportunities because something about the home doesn’t “Wow” them. It may be an investment but they are drawn to homes they could picture themselves living in.
An experienced investor will look at how quick homes in the neighborhood rent and how much rental income it will produce. They’ll leave the “Wow” factor for their own home and focus on the numbers for the investment property. Experienced investors are more likely to buy site unseen based on the numbers and thorough inspections.
#2. Many first time investors see the world thru rose colored glasses. They expect to get the property rented right away, rent checks to arrive on time and not have major issues.
They don’t allow for management fees, occasional repairs and the cost of having a property sit vacant. The expenses involved in evicting a tenant who doesn’t pay can add up. It’s always a good idea to have additional funds out away to cover the unexpected.
#3. First time investors sometimes neglect making little improvements which will help the property rent quick. Most of our investors will spend $5-$10K, depending on size and condition of the property. The extra investment adds updated light fixtures, new flooring, paint and desertscaped back yards, etc. Many of our investors buy used appliances from a local store.
Tenants see stainless appliances, nice flooring and the property rents quick for a good price. The first time investor lists the home for rent with minimal improvement and it sits on the market until they lower the price to get a tenant.
Kyle Hiscock, Real Estate Expert

I’d be happy to give the top 3 mistakes made by real estate investors.
Misjudging cash flow – An investor who purchases an investment expecting to have a positive cash flow of $10,000 after all expenses only to find out after owning for a year the cash flow is $5,000.
Thinking they will get rich fast – Investors purchasing one investment home believing they will get rich quick. Building an investment portfolio takes years and years to do. It doesn’t happen after just one property!

Overpaying for properties – This is a huge no-no. In experienced investors sometimes will stretch when buying an investment because they have the “itch.” This often leads to a poor cash flow and poor investment. It’s important for investors to stick to the numbers and not overpay for properties if the numbers don’t work!

Karen Highland, Real Estate Expert

When considering an investment property purchase, the investor must know going into the project, whether they are going to buy, rehab and flip, or whether they are going to keep the home and rent it out. There are two different approaches, depending on each of these plans. Sometimes first-time investors are not clear on their goals and may change their minds when they get into the renovations on a home. The problem is, then they may have already over-invested, or underinvested.

For example, if the investor plans to renovate and flip the home, then they need to do their research and learn what buyers in that price range and in that neighborhood expect in a home. If the comparable homes are fitted with granite counters and upgraded appliance packages, hardwoods and upgraded bathroom features, then they need to have that cost figured in to the project. If they get into the renovation and find that they are short on finances, then skimping on these features will make the home less desirable to buyers in that market.

If the investor plans to own the home and rent it out for a while, then fitting the home with upgraded features is an expense that they may regret. Renters tend to be hard on a home, no matter if the finishes are less expensive, or more expensive. The wear and tear on expensive upgrades will be more costly to fix and replace down the road, compared to less expensive finishes.
Knowing whether the final product will sell for a profit depends on knowing the comps. Knowing whether it will rent well, depends on the same knowledge, but switching from one plan to the other can end in a disaster. If they find that the home doesn’t sell, or that it doesn’t rent for the money that will cover the cost that they put into it, then they have an entirely new set of problems to deal with.

Richard Silver, Real Estate Expert

My thoughts….

Think long term…
Decide whether income will trump capital appreciation… Or vice versa…what are your goals…

What value can you add with minimal cost??

All of this goes with knowing the market and rules affecting landlords and tenants…
Written By: Jacob Grant Property Management | August 19, 2014 | link to fill article here.