How to profit from every property

Profit from Property

To enable you to profit from property investment you must adopt 2 key strategies. When you invest in a property, always aim to secure a 2 way exit strategy. Your investment must be flexible and allow you to either sell or rent at any given time.

Key strategy 1:
Planning for a realistic rate of return when you sell Any property purchase or investment must have at all times enough profit in it, so should you decide to sell, you will achieve a 15-20% return on your investment.

Key strategy 2:
Planning for a positive cash flow when you let If you decide to let your property, you must always ensure a healthy and positive cash flow from the agreed rent.

Understanding market values

 

Sell at 15-20%
Over Market Value

Buy at 15-20%
Below Market Value
-Ideally your ceiling price!

 

 

The Different Approaches To Realty Management

Realty Management

Frequently during property management training the topic comes up about whether single family or multi family properties make the better investment.

Much of the answer to this is really a question of realty management, your specific real estate investment objectives, and whether or not the individual tasked with managing your rentals has the necessary property management training.

Single and Multi Tenant Properties Realty Management Review

Some of the common discussion about realty management cover these points:

Consider whether or not the market has really bottomed out. Are there too many properties on the market for the available buyers, or are unsophisticated investors bidding up property values while the smart money stays on the sidelines?

Think through the exit strategies available with each investment.

With single family properties you can:

• Sell to your tenant
• Sell to an owner-user who is not your tenant
• Sell your portfolio to another single family investor, although this is the toughest of the three to do and often times easier said than done

With multi tenant properties the exit strategy is more limited, but also more clear cut:

• Sell to another multi tenant investor
• Go condo, split up your multi tenant property into individual units for sale, and sell to either the current tenant, another owner-occupant, or a beginning residential investor

Realty Management Differences

There are big differences in the type of realty management required for each of these product types.

Here's what I see the top three being in each:

Single Family Realty Management

The realty management of a group of single family homes becomes much more difficult if they aren't close to each other.

On the other hand, the amount of ongoing repairs required is probably going to be less, since tenants in single family homes tend to have more of a "pride of ownership" in their property, even though they're renting.

But when repairs are needed, they are probably going to run on the high side, in particular when the property needs to be turned over to another renter. There's simply more of everything that needs to be spruced up or replaced, compared to a small sized multi tenant rental.

Multi Family Realty Management

The realty management of multiple units is almost always easier, since each grouping of units is right next to each other. Even if you have a real estate investment portfolio that's spread across town you've still got multiple units right next to each other.

You may have a higher level of on-going repairs, since tenants in multi family property may take a lower "pride of ownership" view than those in single family properties.

When repairs are needed, the costs are probably going to be lower due to the smaller sized units, when compared to a single family home.

The Impact Of Appreciation

I've seen a lot of real estate investors purchase property with the idea of building a legacy that they can pass onto their kids. Their intent is to never sell.

Sometimes this happens, sometimes it doesn't happen, for various reasons.

My point is that buyers of investment real estate should always think through the potential selling exit strategies of each and every investment they buy, in addition to the ease of realty management.

Here's where to start when you think about selling before buying.

Multi Tenant Investors

With multi tenant properties, you'll most likely be selling to another investor who is driven by financial performance, CAP rates, or cash-on-cash return. There won't be a lot of emotion involved with this type of sale.

So, your type of realty management should be developed with this in mind.

Single Family Buyers

Here you're most likely selling to an owner-occupant, either the existing tenant who wants to own, or an end-user who wants to buy.

With single family, other than the ability to finance the property, emotion is probably the number one driver for most buyers. The color of paint, carpet or flooring, the type of appliances, and much more all come into play.

Your realty management of the property should be done with this emotional twist in mind.

Making Money On a Vacation Home

Making Money On a Vacation Home

I'll just buy a condo on the beach, and rent it out for $700 a week, and then I will be rolling in the money." WRONG! Although you can make some rental income on a property, seldom will you make a huge profit, or any profit at all. There are many factors to consider.

Make sure you can afford the payments, utilities, insurance, and upkeep when it is not rented.

In the southeast U.S. there are many attractive places to have a condo, or home on the beach. However, that beach property is only in season as a rental certain times of the year. The rest of the time you just pay.

-There are monthly condo fees, that go on whether it is being used or not.

-Mortgage payments continue on.

-Utilities to some degree continue.

-Rental agency fees are deducted from rental income.

-Cleaning fees.

-Repair and upkeep costs.

-"Mother Nature" blowing plans to rent for that period.

-Insurance fees

The last one is a big one. After every major storm, insurance fees triple, or even higher for the beach areas. Your profit disappears.
If you are in the mind set of purchasing a place because you will be retiring there some day, and you just want to rent it out to help a little with the payments until then, it may be a good idea. Just be cautioned of the business expenses that will be involved. Do not cut yourself too short, in order to allow for the expenses, and non - rental times.

Carpet Maintenance in the Snowy Winter

There are four forms of carpet maintenance. They are preventative cleaning, interim cleaning, restorative cleaning and spot removal.

The most overlooked part of carpet cleaning is called preventative cleaning.

What this revolves around is the ability of the home or facility to keep the soil outside the building or at least at the entry doorways.

If the soil gets past the front doors then it becomes difficult to keep the place clean. In the winter this may often revolve around the dreaded slush or even worse yet - salt! - on the carpets.

It is extremely difficult to remove salt with any true green method of carpet cleaning method except for rinsing with straight water. This method can take dozens of attempts and still may not be successful.

Here are a handful of steps that are vital in maintaining a good appearance to your carpets at the buildings entryways during the winter:

Step 1 - Keep the salt swept away from the doorways when there is no ice or snow.

Step 2 - Keep sand, soil and settlement off of tires in parking areas swept up daily.

Step 3 - Have large capture mats at all entries.

Step 4 - Keep these capture mats clean. If they get slushy vacuum up the slush immediately with a wet-dry vacuum. If it's a bad winter you may have to do this several times a day.

Step 5 - Clean visibly soiled area frequently. This may mean that the carpet has to be cleaned daily at high traffic entrances.

Step 6 - Vacuum carpets in all directions. The dry particulate matter comes out much easier when its dry. Vacuuming in strokes north-south, east-west, south-north and then west to east will make a huge difference in the amount of soil removed from the carpet.

Step 7 - Speed dry carpet matting. A huge percentage of installed carpet matting is made of olefin. This olefin fiber wicks soils quickly. Speed drying will allow for salty moisture to dry and be either vacuumed out or padded out with an acid rinse.

The fundamental element of winter carpet maintenance is preventative cleaning. A thoroughly thought out carpet maintenance plan requires constant inspection. This may require looking at the carpet before and after the cleaning. You may need to vary the amounts of water employed and the chemistries used in cleaning. Never forget that salty slush is much easier to remove with a wet/dry vac than after it has hardened.

Rental Property Maintenance List

Property Management

Like any other real property, rental homes require routine maintenance to keep them optimally functional and structurally sound. Diligent upkeep of the items on this list are necessary in order to ensure your invest will continue to perform over the long-term. This checklist of maintenance items (to repair, replace, or simply inspect) are things you'll need to check/perform least once each year.

The items are broken out into two categories. "Things to Do" and "Things to Inspect". Naturally you should take note of any items that need additional repair, and make that extra trip back to the hardware store to rectify any noted issues.

Things to Do - Inside

Replace Smoke detector batteries.
Clean/Seal Tile flooring and grout.
Replace Air filter.
Replace Furnace filter.

Things to Inspect - Inside

Faucet, drain, and garbage disposal.
Kitchen cabinetry for anything loose (hinges or mounts).
Door hardware functionality.
Doorframe Squareness.
Furnace ducts.
Electrical panel for any rust or water signs.
Fire extinguisher.
Ceilings and Walls for any signs of moisture.
Fireplace (if applicable).
Attic - Signs of water damage, mildew and rot.
Any signs of pest infestation.
Bathroom faucets, drain, and drain plug.
Toilet - fill valve, flapper, seat, and floor. 

Things to Do - Outside

Clean gutters and downspouts from any leaves or debris.
AC Unit - Clean and remove any debris.
Check Dryer vent for any debris.
(If applicable) Pressure Wash wood siding in order to prevent mold.
Trim any overgrown trees or bushes.

Things to Inspect - Outside

Exterior Paint.
Exterior Caulking.
Windows and Door sills for any leaks (caulk).
The Foundation.
Sprinkler system.
Decks, railings, and stairs for any looseness.
Fences, gates, and associated hardware.
Inspect the roof to confirm soundness.
Window screens.
Garage and Garage Door.
Septic system.
Storm windows and all hardware.
Grading of the house to ensure proper water drainage.
Exterior walls for signs of pests or damaged wood (i.e. termites).

While many of these items will incur some cost, it will be a nominal amount compared to the cost of replacing the aforementioned items. If you are the one personally attending to you own rental property, it's easy to ensure that everything is done correctly. If a property management company is maintaining the home on your behalf, it becomes a necessary to make sure they are properly caring for your investment. Ask to see receipts and/or labor statements that can satisfy that everything has been properly maintained.

With routine maintenance and proper inspection, your rental property will provide years of quite enjoyment and profitable use.

Multifamily Residential Property Management Best Practices

Properly implemented, tracked and monitored property management processes and procedures are integral to the establishment of successful multifamily residential real estate. These types of property management best practices include effective standard operating procedures, installing well-run maintenance programs, obtaining package discounts on insurance and other items, monitoring unit inspections, and developing resident retention programs. These all serve to increase NOI (net operating income) while preserving, protecting, and enhancing the property's physical assets and resident welfare.

Property Management

Beyond establishment of effective protocol, extensive involvement with governmental agencies like HUD (Housing and Urban Development), the USDA agency for Rural Development, and the California Housing Finance Agency (CHFA) is crucial to developing a successful place of business that is also a happy place for people to live. HUD alone has eight major operating branches, several of which interact with multifamily housing developments. These include Fair Housing and Equal Opportunity, Healthy Homes and Lead Hazard Control, and the Housing Office (responsible for the Federal Housing Administration). Each branch has separate concerns regarding the proper operating standards of multifamily property management.
Local housing authorities and community development agencies that serve various types of residences are also integral to successful multifamily property management. In addition to extensive involvement and frequent contact with such agencies and organizations, regulatory compliance is clearly critical. This includes regulations from HUD, Low Income Housing Tax Credit (LIHTC), and other related agencies, and necessitates an experienced compliance coordinator to monitor and assist with these issues. Development of residences qualifying for the Low Income Housing Tax Credit can bolster a community and yield substantial tax deductions, but only if the guidelines of section 42 of the Internal Revenue Code are met. Failure to comply with HUD, LIHTC, or a number of other regulatory bodies can result in fines, reducing or eliminating profits and jeopardizing the ongoing successful operation of the property.
Historically, investment in real estate has proven a generally sound strategy for increasing capital when held for adequate periods of time. Implementing multifamily residential properly management best practices is a key component in enhancing capital growth, as the decisions pertaining to property positioning, maintenance practices, and long-term strategy will greatly impact the value of the asset at time of disposition. This includes everything from structural soundness to grounds keeping to reputation. Only through a comprehensive approach can stable, long-term growth be achieved. Focusing on properly implemented, tracking and monitoring property management processes and procedures, including the creation of a best practices protocol will help ensure optimum value for multifamily property holdings.

Ms. Burger serves as Senior Vice President of Eugene Burger Management Corporation (EBMC) and has managed a full-spectrum of real estate including common interest developments, multifamily residential including both conventional and subsidized housing, commercial, medical, single-family home and mini-storage. One of Ms. Burger's greatest attributes is holding the fundamental knowledge of the management practices in all real estate management disciplines.

Learning Real Estate Consulting

 

Learning Real Estate Consulting

 

With the guidance of real estate consulting, you'll learn how to maximize your profits by investing in foreclosures and short sales. Most individuals look at the current state of the real estate market and see nothing but a black hole. But, you'll learn that investing in these properties not only earns you a significant profit, but it also helps revitalize neighborhoods that are slowly going downhill by getting families into the homes that you invest in.

Why Invest in Foreclosures?

Lenders foreclose on a property when the borrower has defaulted on their payments for 90-days or more. In an effort to recoup some of their loss, the bank typically lists the property for sale for the balance that the borrower owes on the property rather than the actual property value. Therefore, you can often find properties listed for $100,000 that are in actuality valued at $250,000 or more. By purchasing the home, you've instantly gained $150,000 in equity.

However, the largest profit can be had when investing in luxury foreclosures. This allows you to receive up to 50% to 70% off. Therefore, if the home is valued at $600,000, you may be able to swoop in and purchase it for as little as $180,000. If the home is in a distressed condition, simply upgrade the necessities to bring the home back to par and sell the home close to full value to the right buyer. If you purchase the home for $180,000, invest an extra $30,000 into the property and accept an offer for $550,000, your profit is $340,000 on just one home. It would take the average person over six years to earn $340,000 in their day job. As a real estate investor, it can only take a few months.

Investing in Short Sales

You may be asking yourself, "Why should I invest in a short sale when I can purchase a foreclosure for less money?" Well, short sales are sometimes a better deal than a foreclosure as you're dealing with the current homeowner, rather than just the bank. It is in the best interest of a homeowner to sell the property. Therefore, you are far less likely to find that a short sale is in distressed condition.

When you're considering buying a home that is in good condition and can be had at a bargain-basement price, it's an ideal scenario. Because the home isn't distressed your expenses involved with bringing the property back to an acceptable standard of living are going to be less. Therefore, your profit margin is higher. Just like foreclosures, short sales are listed for the amount that is owed by the borrower rather than the market value. Therefore, you're often able to purchase a quality property at a steal.

Investing in foreclosures and short sales holds the keys to transforming your financial life. Making the right investment decisions requires a hard work, skilled eye, negotiation skills and the ability to spot the right property at the right price. Real estate consulting can help you make the profitable investment choices for you.