Rental Property Investing for Beginners: Smart Tips to Take Your First Financial Step Forward

house-moneyInvesting in rental properties is one of the best ways to begin accumulating wealth. You not only build equity in the properties you own as you pay them down, but if you work your numbers right, you should also be generating some positive cash flow each month. However, like any other type of investment, there are some things you need to know before diving into the deep end of the pool.

Here are some smart tips to get you started with rental properties:

Fix Your Financial Situation

Don’t do anything until you’re sure that your credit and finances are in good shape. If your credit history is questionable, you’re likely to have trouble acquiring financing. A high debt-to-income ratio is a red flag that will prompt most lenders to reject you right away. It would be best to take care of any outstanding debt before attempting to get financed for a house.

Educate Yourself

Before purchasing any properties, take a few months to familiarize yourself with the real estate business and learn what will be expected of you as a landlord. There are lots of books you can read and clubs you can join where you can meet other investors that can answer just about any question you may have. Social media sites are great places to meet investors, mortgage brokers and property managers. For all you know, the investor whose brain you decide to pick might end up partnering with you on a profitable deal sometime in the future.

Check Out Lots of Properties

As tempting as it may be to buy the first property you see that you think you can afford, it might not be a good idea. As a new investor, it’s going to take some time for you to learn how to spot a good deal and if you jump too soon, you may overlook something important and become discouraged when it doesn’t go as planned. Visit properties in different neighborhoods and ask to view units that are occupied (if it’s okay with the tenants). You’ll get a feel for what types of tenants you can expect to attract with each type of property in various neighborhoods and hopefully you’ll see what a well-managed rental looks like on the inside.

Prepare for Expenses

Although it does happen, it’s unlikely you’re going to slide right into a property that doesn’t need any repairs whatsoever. Even if nothing’s “broken,” it’s advisable to do at least some minor work to the property for the purpose of improving its appearance and curb appeal (think paint and landscaping). Furthermore, you’ll have to set some money aside for things like accounting, legal fees, garbage collection, pest control and vacancies. Remember that regardless of who your tenants are, they’ll probably stay for a few years and leave. At that point, the mortgage, taxes and other expenses on the property will have to continue getting paid, no matter how long it takes you to find new tenants.

Hire a Property Manager

Just because you’re investing in rental properties doesn’t mean you have to be the person answering the phone whenever something breaks in one of your units. Property managers make it their business to take care of these and other administrative tasks for you, so you can concentrate on other things, like looking for your next property. They can even find new tenants and screen them for you. Check out keyrenterchicagonorth.com for more information on property management services.

Think Realistically

There’s nothing wrong with being optimistic, but your expectations of this real estate investing endeavor should always be grounded in reality. You’re not going to become a millionaire overnight and some of the deals you get involved with may seem rather modest until you develop the ability to spot better ones. If you quit your job expecting to make a fortune, you could find yourself heavily in debt and in worse shape than when you got started. There’s lots of money to be made in this business, but you’ll have to look at lots of properties, learn various types of buying strategies and figure out cost-effective ways to handle property-related expenses.

Above all, learn to enjoy this new venture you’re undertaking. Get to know as many people in the business as you can and read every book on real estate or rental properties that you can get your hands on. The more you know about how things work and how to avoid the pitfalls, the sooner you’ll start making the kind of money that allows you to quit your day job and pursue this full-time.

Source: nuwireinvestor.com

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Relationship Break-up, Who Gets the Security Deposit?

ask-the-attorneyThe Landlord Protection Agency®presents John Reno, Esq., a highly experienced Landlord – Tenant attorney based on Long Island, NY.

Q:  Dear Mr. Reno:

Return of security. Leased unit for 1 yr held 2 mo security. Boyfriend and girlfriend signed. 2 mos into lease girlfriend moves out,domestic violence she says. Lease up,boyfriend moves. Girl wants me to mail her half and refuses to give me permission to make check in both names and send check to boyfriend .there is no way boyfriend would be able to get girls signature and boyfriend wants both months. What do I do? Connie, Connecticut

A: You can not interfere with “affairs of the heart.” You give her half- then he sues you because he paid it all. One check- both signatures, MAIL IT! Don’t dawdle. If they forge each other’s name (or tear the check in half fighting over it) that’s their problem.

Legal Disclaimer
The Landlord Protection Agency’s “Ask the Attorney” column is for informational purposes only. The questions answered by Mr. Reno on this site do not constitute an attorney – client relationship and are not to be considered legal advice. Not all questions will be answered and some may appear in the LPA Q&A Forum.
The Landlord Protection Agency recommends that you seek legal advice before using any of the material offered on this web site, and makes no guarantee on the effectiveness, compliance with local laws or success of any of the material offered on this web site. The Landlord Protection Agency is not engaged in rendering legal advice.

5 Landscaping Mistakes That Could Cost You Dearly

garden-gravel-no-buildingAwkward or neglected landscaping can hurt the value of your property and even make it difficult to sell your home. With a bit of planning, you can avoid these six landscaping mistakes and make sure your property looks its best. Here’s what to look out for:

1. Crowded clusters

Planting shrubs and perennials in clusters is more attractive than scattering single plants around your yard. But, it’s important to make sure your plants have ample room to grow. Before you plant, find out the height and width of the mature plant and check the spacing recommendations on the label. Your garden bed might look a bit sparse at first, but it will fill in over time.

2. Wild weeds

Weeds compete with your expensive greenery and creep into cracks in your patio and paved walkways. Stop weeds before they start with a pre-emergent weed killer. Spray the herbicide around weed hotspots several weeks before germination.

3. Critter problems

Rabbits and deer can turn your yard into an ugly mess of mangled plants and headless perennials. Use deer repellent and electric fencing to keep unwanted critters at bay. You may also want to research rabbit- and deer-resistant plant varieties that won’t attract quite as many visitors.

4. Forgetting fall and winter

Many homeowners choose landscaping that only looks good in the spring and summer. For year-round curb appeal, mix things up with a variety of plants that provide interest during different seasons. Balance your summer perennials with deciduous shrubs and evergreens for an intact winter garden.

5. Too much mulch

Mulching around a newly planted shrub or tree is a good way to protect the trunk and improve the surrounding soil. Some homeowners pile a small mountain of mulch around the tree trunk, creating a slope. Sloping mulch can actually cause moisture and rot issues that harm trees. A loosely packed layer of mulch is all you need.

Conclusion

Whether you hire professional landscapers or do the work yourself, avoiding these common mistakes will help ensure that your property is beautiful all year long.

Source: huffingtonpost.com

The War on Pests: How to Protect Properties from Insects

no-pestsExpect insect populations to boom after unusual fall and winter weather.

Milder fall and winter temperatures in many parts of the country are expected to drive an insect population boom in 2016. The absences of prolonged hard freezes and wetter weather are resulting in early arrivals of pests, some in greater numbers which are already affecting landscapes, and others that are sure to bring out fly swatters during the summer.

Aphids have been making the rounds in Texas and Nebraska, and cooperative extension officials as far as New Jersey are expecting higher populations because of above-normal temperatures in the Northeast. While some of the 4,400 known species target vegetable plants and crops, others are an annual nemesis to residential landscapes.

The small, sap-sucking insects can quickly destroy apartment landscape mainstays like ornamental plants and bushes. Aphids suck the juices out of the plant and leave a slick, shiny substance − honey dew – on the leaves that spreads fungi and damages plants. Symptoms include decreased and stunted growth and discoloration and wilting of leaves.

Tod Russell, an insect specialist at Earthworks, says he’s seen early signs of aphids, and that their appetites are shifting from Photinias and Crape Myrtles.

“The aphids seem to be out in full force,” he said. “I saw them on Indian Hawthorne bushes this spring, and I’ve never seen them on those before.”

Expect Aphids, Bermuda Mites and Spider Mites to be busy

Aphids’ early arrival is just one indication that insects survived a mild fall and winter across much of the country. Others are at work, too. Russell says that Bermuda Mites, which typically emerge during hot and dry temperatures, are already doing damage.

Bermuda Mites are microscopic but damage can be big if left undetected. With a life cycle of 4-7 days, the tiny critters can multiple in great numbers and destroy grass quickly. Typically, turf will turn brown and thin. A major sign is that stems will take the shape of a broom, with a lot of little blades of grass clumped together at one end and spaced out at the other.

“It can be difficult to control,” Russell said. “(Bermuda Mites) usually like hot and dry, and it’s kind of strange we’ve already seen it early this year. I’m guessing the winter probably didn’t affect Bermuda Mites that much. It’s usually not a huge problem.”

Spider Mites, which damage vegetable plants, are also expected to be out in numbers.

Other pests, including mosquitoes, are expected to be active

Landscapes likely aren’t the only targets of pests because of unseasonable fall and winter weather.

In March, the National Pest Management Association (NPMA) forecasted that ticks, mosquitoes, termites, ants and other pests could be especially active this spring and summer.

Mosquitoes are expected to thrive after a rainier and warmer winter in the Southeast, and termite swarms should be stronger as hotter weather approaches. In the Midwest, a record-breaking warm December along with wetter-than-average weather is expected to jump-start ant and tick activity. A cooler, rainier spring in the Southwest may drive up mosquito populations and lead ants indoors. Larger mosquito populations are expected in the Northwest and West after heavier rainfall and flooding during the winter.

“Knowing what to expect for the season is especially important as some springtime pests, such as ticks and mosquitoes can have a direct impact on our health, especially with the threat of Lyme disease and Zika virus becoming a heightened concern in recent months,” said Cindy Mannes, vice president of public affairs for the NPMA. “And other pests, including ants and termites can cause damage to our homes.”

A licensed pest control professional should be the best defense

It’s unlikely that pests that attack landscapes will manifest into epidemic scale, Russell says, but apartments shouldn’t let their guard down. While do-it-yourself chemical treatments are much safer than they were 25-30 years ago, he recommends consulting with a licensed pest control specialist at the first warning signs that shrubs, plants, trees and grass are damaged.

“There are quite a few different kinds of chemicals for control that are available on the market,” he said. “Apartments should be sure to hire someone who is licensed to apply chemicals. They should have the common knowledge to use what’s appropriate for the time of year.”

Just be ready to battle insects in larger numbers.

“I don’t think this year is going to be more difficult, other than there might be more insects with the mild winter,” Russell added. “The populations will probably be higher.”

Source: propertymanagementinsider.com

6 Important Things You Should Consider Before Buying An Income Property

70-rentWhether it’s due to all the HGTV binge watchers out there or because Americans seem to have mentally recovered from the 2008 housing-market crash, one thing seems to be clear: The real-estate itch is alive and well.

But we’re not just talking families looking for their next home. Over the past few years, an increasing number of buyers have become interested in purchasing real estate specifically as a way to help make money. Last year, investment-home sales reached an estimated 1.09 million, a 7% jump over 2014 figures, according to a survey from the National Association of Realtors. Overall, about one in five homes bought in 2015 was an investment property.

For Katherine Dayton, 42, of Bozeman, Montana, being a real estate investor has been a steady side gig since the age of 28.

After a few work colleagues gave her a primer on how mortgages work, Dayton realized that buying a home and taking in roommates would actually cost her less than renting a place by herself—plus, she’d be building equity. “I went into it with a financial approach of it being a good investment,” recalls Dayton.

But she didn’t stop there. After a few years, she sold her first property to buy and fix up another house closer to the center of town, eventually turning it “into a rental that more than covered the mortgage,” she says. This was followed by another rental home she invested in with a friend—and now, 14 years later, she owns several rental properties in the college town of Bozeman.

But Dayton is quick to point out that not all of her investments have been equally successful. For example, while smaller, more basic units fare well with the college crowd in her town, her investments in nicer, high-end buildings and vacation rentals haven’t done as well. “The few places that haven’t been so modest have been a little more of a test,” she says. “I know that other people have done better at those [markets] than I have, so it was just a lesson in sticking with what you know.”

Dayton’s experiences show that being a landlord can be a lot tougher than it sounds. Investing in real estate can be a risky and headache-inducing endeavor, especially if you aren’t mentally and financially prepared to play landlord and take on multiple mortgages. Below, we’ve lined up six things you need to think about before dipping your toes into real estate investing.

1. Your Financial House Should Be In Order First

First things first: Can your finances handle this type of commitment? In other words, do you have a steady income and a well-stocked emergency fund? Are your high-interest debts paid off? Are you on track to meet your retirement-savings goals? (And no, real estate investing isn’t a replacement for retirement savings, in case you were wondering.) If you have a financial planner, does he or she support a decision to put your hard-earned money into this type of investment?

“From an advisor standpoint, the client needs to evaluate if it makes sense to own rental property as part of their overall portfolio, given their current financial position,” says Tim Sullivan, a Certified Financial Planner™ (CFP®) and founder of Clarity Financial in Columbia, Missouri. “‘Does the purchase make sense financially?’ is certainly one question, but ‘Does owning rental property align with the goals the client has expressed?’ is also equally important.”

After careful consideration of your overall financial picture, you’ll want to map out the costs up front. “Not just any deal is going to make sense—it has to pencil out first,” says Brandon Turner, vice president of growth at the real estate investing social network BiggerPockets.com, and author of “The Book on Rental Property Investing.”

Yes, you’ll have to factor in the down payment and monthly mortgage bill, but that’s just the tip of the financial iceberg. “Learn how to calculate all of the expenses you might face, including the ones that are only once-in-a-decade, like new appliances, a new roof and new carpet and paint,” Turner says. You should also plan to set aside money for repairs and maintenance. The exact amount will vary by property, but Turner recommends budgeting $100 to $200 per month for a single-family home or 10% to 15% of the rent for a multifamily property.

And here’s one more public service announcement: If you’re thinking of tapping your 401(k) to help cover some of these costs, consider rethinking that option. By doing that, you miss out on the benefits of compound growth and you are potentially sacrificing your future retirement fund.

RELATED: Ask a CFP: ‘Is It Ever a Good Idea to Borrow From a 401(k) for a Home Down Payment?’

2. Real Estate Isn’t Without Risk, So Calculate Your ROI Before You Buy

Just the way you likely wouldn’t put money into a mutual fund or ETF without first checking its performance, neither should you jump on an investment property without checking what your potential return might be.

“Rental property is not a low-risk investment, so investors should look for something with returns much higher than what a diversified portfolio would return,” Sullivan suggests. That’s why he personally recommends looking for properties with a potential return on investment of at least 14% to start.

To get an estimate of your first year ROI, subtract the annual principle and interest you’d pay from your total estimated net income from the property (which includes potential rental income, estimated tax savings, projected property appreciation and any estimated additional equity from renovations). Then, divide that number by your down payment, assuming that closing costs and taxes are already rolled into your mortgage, and rehab costs.

It’s important to remember that truly understanding your ROI can be extremely complex, and you’ll likely have to tailor any estimates to your individual situation. That’s why James Wachob, head of investor relations at Memphis Investment Properties, suggests buyers speak with a trusted commercial real estate adviser to help them better determine what their calculation could be.

Keep in mind when estimating any potential loan amounts that the rules for investment property financing may not be the same as for primary homes. For example, many of us are familiar with the rule that recommends putting down at least 20% on a home to avoid paying private mortgage insurance (PMI). However, some homeowners still opt to put down less and pay the PMI. But with an investment-property mortgage, you may have a harder time finding a lender willing to consider you if you can’t put down 20%—or more.

“Educate yourself about lending for investors, because it changes daily,” Wachob says. “It’s not something you learn [once] and you’re done.”

In an ideal situation, your tenants would help cover the full amount of your loan and then some, while your property continues to grow in value. However, the key word here is “ideal”—keep reading below to continue weighing the pros and cons.

3. Finding the Right Real Estate Agent Is Key

Many agents may view you simply as potential commission, so it helps to find someone who’ll be on your side: a real estate agent who’s interested in establishing a relationship, owns rental property themselves and specializes in investment properties, suggests Wachob. “Make sure you’re aligned with afiduciary who has your best interests in mind,” he adds.

Finding that person becomes exponentially more important if you’re considering a neighborhood you’re not very familiar with. “[You need] somebody in town who lives and breathes investment real estate with their boots on the ground,” Wachob says. In many cities, safety and desirability can vary not just by ZIP code but from block to block. An experienced agent will be well-versed in the area and will know when a property is too good to be true.

4. Your Investment Property Doesn’t Have to Be Your Dream Home

Does your list of must-haves generally include hardwood floors, a two-car garage and double-sink bathrooms? Maybe those were right for your personal abode, but they may not be necessary in an investment property. Many people bring their own emotion into the process and wait for the perfect place—only to see an opportunity pass them by, Dayton says.

Generally speaking, one of the biggest factors you should be focused on is the cliché-sounding location, location, location. “Look for property in a location that you feel comfortable spending time in and will attract high-quality tenants,” Turner advises. Beyond that, think about what would appeal to the demographic of the renter you’re trying to attract: What may appeal to grad school students in a college town, for instance, may not be suitable for a young family starting out.

5. Expect Your Taxes to Get More Complicated

The minute the keys are handed over to you, plan to hire a CPA or Enrolled Agent, a federally authorized tax practitioner, to help you with your taxes, Sullivan suggests. In the brave new world of landlordship, you’ll need to track expenses associated with the property, understand the difference between a repair and an improvement, and report rental income and losses with an IRS form Schedule E.

Plus, your tax preparer could help you unearth all the tax benefits you could potentially be eligible for. “When you own real estate, the U.S. government is very friendly to you in terms of your taxes owed,” Turner says. You may be able to take deductions, for instance, on the property taxes you pay or what you shell out for repairs.

6. Know That Finding—and Keeping—Good Tenants Will Require Some TLC

Homing in on the right property is only step one. Then comes filling it with people who will treat it properly and pay their rent on time.

“I tell people that you aren’t getting into the property-management business so much as the tenant-screening business,” Sullivan says. “First, ask yourself if you would mind getting a phone call from a tenant on a Sunday afternoon—just as you sit down to watch some football—letting you know that their toilet is broken. If something like that ruins your day, then you better think twice about having rental property.”

The closer you live to your investment, the less likely these calls should come as a surprise. “It’s helpful to be a landlord who lives at the property because you can keep an eye out; you know what’s going on at all times,” says Jeff Lanci, 39, who renovated a property in Queens, New York, and lives on the main level while renting out an upstairs apartment.

To find high-quality tenants, don’t be shy about conducting background checks and requiring deposits. Lanci also contacts two prior landlords from each prospective tenant. “They had no qualms telling me if [the tenants] were late in rent or throw loud parties,” he says. “I found that information to be invaluable.”

The extra work upfront can be worth it in the end. “If you take the time and energy to find good tenants and treat them nicely, they will stay longer and life will be much easier,” Sullivan says.

Source: forbes.com

Not hiring a Property Manager to protect your LARGEST investment is like not buying insurance to protect your Lamborghini.

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Not hiring a #PropertyManager to #protect your LARGEST #investment is like not buying insurance to protect your Lamborghini. #FoodForThought #LandlordTip

Why Your Property Isn’t Renting

exterior-houseSo you’ve taken the step to invest in rental properties. Of course, we think you’ve made the right choice. From building wealth to tax advantages, there are many good reasons to own rental properties. But you may be wondering why your properties aren’t renting. After all, why own rentals if you don’t have renters?

There are many things you may be doing to limit your rental’s potential. Here are the most common mistakes we see when it comes to properties not renting:

  1. Poor external curb appeal. It is easy for property owners to neglect the curb appeal of their rental properties, dismissing it as not important. But the truth is that the curb appeal of your rental property matters a lot.I encourage you to read my article on landscaping for rental properties to understand the impact this has.
  2. A weak first impression. “You never get a second chance to make a first impression.” This applies not only to future in-laws but also to your rental property. Your property may be great, but if you aren’t preparing it well and doing what you can to increase that first impression to potential renters, you are hurting yourself more than you know.I’ve provided seven steps you can take action on today to make sure your property impresses renters immediatelyand encourages them to come back.
  3. The wrong price. You must understand what comparable rental properties are renting for and honestly assess your listing against them. Of course, your price should cover your expenses to maintain the property. But if your price is too high, then your rental property will not be attractive to renters. If they can find a residence just as beautiful yet for significantly less, you will lose every time. You must also know if renters are interested in paying more for your location or not. Price is one of the top filters tenants use in their search and it matters a lot to all parties involved. We recommend talking to a third-party management company with significant experience in the relevant region to get the price point just perfect.
  4. The wrong marketing. You may be spending hours and dollars on paper fliers, but if the audience you are trying to reach never sees your fliers, then you are wasting a lot of time. The majority of potential tenants start their search online, so you must be sure that you are maximizing your rental property’s exposure on the Internet. If you aren’t marketing your property in the right way not only are you losing potential tenants, you are losing a lot of your time and money. Consult a rental professional to either advertise or screen for you, or to do what they do best – manage your property from A to Z.
  5. Poor reputation online. Again, since most tenants start their search online, you need to make sure your property looks good online. To fully understand what your online reputation means, I suggest reading my article on how to manage your property’s online reputation. While it can seem overwhelming, it is actually quite important and simple process: Can tenants find your property online and, when they do, do they like what they see?

The good news is that you can fix all of these to get your property rented. Especially with the help of a third-party management system, such as Sweyer Property Management, all of these can be rectified. Contact us today to get started and we’ll help you get your property rented as soon as possible.

Source: wilmingtonbiz.com