We only rent homes on the days that end in “Y”: Monday, Tuesday, Wednesday, Thursday, Friday, Saturday and Sunday.
#AvailableAroundTheClock #TwentyFourHourCustomerService #WakeCounty #Apex #Cary #Raleigh #TriangleArea
We only rent homes on the days that end in “Y”: Monday, Tuesday, Wednesday, Thursday, Friday, Saturday and Sunday.
#AvailableAroundTheClock #TwentyFourHourCustomerService #WakeCounty #Apex #Cary #Raleigh #TriangleArea
When investing in rental properties, there are a lot of tasks that need to be done on a regular basis if you want to find success.
From placing ads to taking phone calls to showing properties and more, a landlord has a full list of responsibilities to handle if they want the process to return a great profit long-term. However, all that work doesn’t need to be done by you. Professional property management companies can take care of most of the above list and more, but management companies are not a perfect solution either.
So should you manage yourself or hire someone else? Although there is no “one size fits all” solution, there are several key issues that a real estate investor should consider before making the decision.
How Much Does Property Management Cost?
Property management fees vary by location, but typically for a single family house or small multifamily property, you’ll be looking at 8–12% of the rent in a monthly fee and a large, one-time fee each time the unit is rented. This placement fee is often 50% of the 1st month’s rent all the way up to the entire 1st month’s rent. Some managers also charge a “renewal fee” each year, as well as “marking up” the maintenance costs.
For a property owner who doesn’t have a lot of cash now, property management can quickly turn a decent investment into a negative cash-flowing investment.
Of course, the other side of the coin is that by allowing a manager to look after a property, it frees up the investor’s time to do “higher value” tasks, like finding more rental properties. If a management company costs $2,000 per year, but the time saved helps an investor buy one more property per year that nets him or her $5,000 in cashflow, then the savings might be worth it.
Are You Willing to Learn How to Become a Landlord?
People are not born with natural landlording skills. So perhaps one of the biggest questions to ask yourself when deciding whether to manage yourself or hire an outside company is this: will you invest the time needed to learn how to become a great landlord?
But maybe you are simply not interested in learning how to become a good landlord and you are more interested in “just owning.” Nothing wrong with that – and, in this case, it would be better to pay the several thousand dollars per year to avoid losing tens of thousands on your investment.
And yes – if you manage ineffectively, you can definitely lose tens of thousands of dollars.
Property Management Doesn’t Mean The Investment is 100% Passive
Keep in mind that hiring property management is not going to make your investment totally hands-off.
The painful truth is, a lot of property management companies are terrible. Becoming a property manager is not a difficult task, so the market is saturated with managers who have no idea what they are doing.At best, these managers are terrible at getting units rented, horrible at communication with the owner, slow at getting repairs completed, and allow the tenant to let the property fall into disrepair. At worst, they could steal, lie, and cheat their way into the owner’s pocketbook and completely destroy an investment.
Even if you hire a great manager, your job as the owner is not completely work-free. You must continue to manage the property manager and ensure they are doing their job correctly. One of the biggest complaint from owners about property management companies is “they just don’t care about my property.” And with hundreds or even thousands of properties under management, it’s probably the truth. Your property does not stand out to them from the others. When they have 50 vacancies at one time, yours included, they are trying to fill all of them at once.
They don’t have an incentive to get just yours rented, which could cause the property to sit vacant longer. On the other hand, professional property management companies have a much wider reach for finding tenants due to the marketing they run. While you might put up a Craigslist ad or sign in the yard, they may have hundreds of signs and ads all over town, with dozens or hundreds of potential tenants calling every week. They also may negotiate “bulk rates” on their services, which could bring down the cost of some maintenance.
If You Decide to Hire Property Management – Do This
If you do decide to hire a property manager to run your rentals, do your due diligence and find the best manager in your town.
Ask other local landlords for referrals, interview dozens of companies if you have to, ask the hard questions, talk with their current clients, and don’t be afraid to fire a bad manager.
My wife and I have managed our own properties since day one. On the couple of occasions we have attempted to hire a property manager, we leave quickly with the realization that we do things ten times better! We don’t say this to brag; we say this to inspire! You can manage your properties, and you can maximize your returns. It all comes down to knowing that nobody cares about your property or about your investment as much as you do.
Anyone can manage, but managing effectively is a skill that must be learned and perfected.
They say there’s no secret to success in real estate investing. They’re wrong. Sort of.
You see, there isn’t just one secret but many secrets or more accurately many repeatable processes all intertwined with hard work, proper planning, and a dash of long term goals that lead to success.
The problem is so many people are looking for the magic bullet or the shortcut to success that that will make them wealthy and successful.
Surprise, it doesn’t exist.
If that’s what you’re looking for, you’re setting yourself up for failure rather than success and if you’re hoping that’s what you’ll find here, you will be disappointed.
You see, the majority of people who build wealth, retirement nest eggs, and successful rental portfolios haven’t discovered new and better wheels.
They didn’t take shortcuts to get where they are and they aren’t rocket scientists with elaborate computer models and formulas to beat the market.
They’re just normal people doing the same smart easily repeatable things over and over and I’m going to share one of them right here (plus give you the opportunity to find out about the other six).
So going forward, rather than calling these secrets, let’s just call them strategies!
Ultimately, the reason so many people become landlords is by growing their wealth through the following areas.
While the first one, cash flow, should start almost immediately both equity and appreciation occur through the repeatable strategy of time.
I know, time, how exciting and obviously not much of a secret as everyone’s hard of time!
Yet time is one of the most important strategies in real estate; the longer you hold onto a good property the more value it gains and the more it rewards you.
First, over 25 or 30 years worth of time mortgages get paid off (if money isn’t drawn out via refinancing that is) giving you a nice little equity nest egg.
The big bonus once you get to this point in time is almost all of the cash flow now goes directly to you, instead of going to cover the mortgage. Imagine that $1,000 monthly payment (or an even larger payment quite often) you used to make to the lender, now coming directly to you.
It brings a smile to my face thinking about it.
Second, the property will also appreciate over time, especially over extended periods of 10, 20 and even 30 years, simply due to inflationary pressures.
Inflation is the increase of prices due to the value of money decreasing. The cost of labor, the cost of lumber, and other supplies to build a new property rise and this all contributes to the rise of home values over time.
It’s part of what’s driven the value of cars up from an average of $3,450 in 1970 to over $33,000 currently and a loaf of bread up from $.25 in 1970 to $2, $3 or even $4 a loaf now depending where you are located.
So repeatable strategy #1 is simply time. If you set yourself up with a good property plan on giving yourself a long window of time, real estate investing can make you wealthy without doing much else.
Unfortunately, this strategy of letting time increase your wealth does go against the get rich quick scheme so many people are after. But as I said, there isn’t a magic bullet to real estate wealth; it’s many repeatable, yet simple, strategies and pieces.
So there’s one piece of the puzzle, but I haven’t provided the entire picture, yet. Would you like to find out some of the other secrets?
If you’ve answered yes, you’re in luck.
What I’ve done is put all 7 Secrets/Strategies in an easy to read guide that you can read through and then start implementing portions of nearly immediately.
Some might require some extra work (which again surprises folks who just want shortcuts), but that work will come back multiple times over in rewards. So who’s ready to start some extra work?
To grab your free copy, come visit me at the following special link for American Apartment Owners Association readers,
And one more thing, I’d love to hear your feedback once you’ve read it, so either leave a comment here, or go back to the link above and give me some feedback.
Happy real estate investing and happy land lording!
Bill Biko – “The Educated Landlord” has been an active landlord for well over a decade and during that time has packed more enough experience in for dozens of regular landlords. From rooming houses, to rent to owns, furnished rentals and“regular”rentals, Bill has had around 1,500 tenants which has made him a master of systems and a master of evictions. To find out more about Bill or to get access to additional tips, articles and Bill’s “7 Questions Landlords Must Ask” visit www.TheEducatedLandlord.com
Question: I have been renting an apartment, and my lease will expire at the end of November. I have taken a job out of this area, and expect to begin my new position on November 1 of this year. My landlord has a security deposit which is equivalent to one month’s rent. Should I pay for November since I will not be living in the apartment? The landlord will not be hurt, since she can use my security deposit for the November rent. Should I discuss the situation with my landlord?
Answer: The landlord-tenant relationship should not be antagonistic. There is no reason for a landlord and a tenant to get into constant fights and arguments over every conceivable issue affecting the rental property.
However, unfortunately, this is the situation in too many cases. The landlord often presents unreasonable demands, and the tenant counters with his/her own unreasonable requests.
We have to start any landlord discussion with a review of the lease. In every landlord-tenant arrangement, there should be a written document, which is called a “lease.” Once it is signed by the landlord (or the agent) and the tenant, this becomes a legally binding document on all parties who signed it.
Thus, it is important for tenants to thoroughly read (and understand) the lease before signing. Typically, however, it is my experience that most tenants do not bother to review the lease before it is signed. It is only when a problem arises does the lease begin to be scrutinized, and often that is too late.
The security deposit is an amount of money — generally one month’s rent — which a tenant gives the landlord upon signing of the lease. This deposit — which in some jurisdictions must be kept by the landlord in an interest-bearing account — is not to be used for the last month’s rent. It is used to pay any damages which the tenant may have caused to the property during the tenancy.
Landlord-tenant laws differ all over this country; some are stronger than others. In fact, the landlord-tenant laws in the District of Columbia are considered perhaps the most tenant-friendly in the United States. It is to be noted that this article is addressing residential tenancies; there are different procedures (and laws) impacting commercial leases.
You have suggested you want your landlord to use your security deposit for the last month’s rent. I cannot recommend this under any circumstances.
What will happen if the landlord finds damages in your apartment, which were caused by you — i.e., your movers put a hole in a wall or your dog ripped a screen door? Your monthly rent is $1650 and your security deposit is in the same amount. If it costs the landlord $500 to make the repairs, this leaves the landlord only $1150 to be applied to your November rent.
Thus, your actions may cost the landlord to lose money. Contrary to what a lot of people believe, many landlords are not wealthy individuals, and any monetary loss they incur is significant.
You probably believe your landlord will not spend the time — or the money — filing a lawsuit against you for this small amount of money. This may be true. However, the landlord has this right, and one day you may find there is a judgement against you because you failed to appear in court.
More significantly, your landlord can create credit problems for you — which problems can continue to haunt you for a number of years. The landlord can report your delinquency to credit reporting companies, and any lawsuit which is filed may also be picked up by these credit bureaus.
It is not a pleasant experience to explain to a banker or a department store — several years after the incident — why you failed to pay your legal rental obligations.
I cannot recommend you skip your last month’s payment; it is just not worth the subsequent problems — and hassles — you may encounter. Also, assuming you have a conscience, you should recognize that you may have financially hurt another human being.
However, I strongly recommend you discuss the situation immediately with your landlord. He/she may be understanding, and may even be willing to give back your security deposit if the property can be rented out immediately.
The landlord-tenant relationship should be amicable. Communication between the parties is a crucial factor in determining whether the arrangement will be friendly or hostile.
#PropertyManager, because #MiracleWorker isn’t an official job title.
Investors in real estate are not quite the same as landlords. Investors take more business risks and often times get better results and profits. It’s the big leagues of property investments.
The good news is that anybody can join the big leagues. Real estate investment entails more risks than merely leasing and overseeing a house in the case of landlord ownership. But the risks are worth taking as the result of good investment far outweighs any risks.
A landlord is anyone who owns land – a house, apartment or what we generally call real estate. He or she generally rents those houses and apartments to tenants. Meanwhile, a real estate investor is much more – clearly you still own houses — but you don’t have to wear all the hats that come with being a landlord.
I have highlighted six different reasons why it is wise and expedient to metamorphose from being just a landlord to a real estate investor.
Marketing the property, vacancy showings, tenant screenings, lease negotiations, rent collection, tenant communication, repairs and emergencies, bookkeeping, coordinating insurance policies and more – these are the hats on a landlord’s head.
Investors exempt themselves from the daily grind and responsibilities and focus more on the business and profit making part. No need worrying how to make a plumber show up on Sunday afternoon. An investor would focus on constant research and smart decision-making.
To do this requires hiring a property management company (PMC) to advertise, negotiate with clients, maintain and generally oversee property and assets on her behalf. This in the short-term might seem like great expenses, but if only to rest from the hat wearing it is worth it, plus a few more advantages as you will see.
Imagine having all the responsibilities above and doing it long-term — which is what many landlords do. It could get really exhausting, to avoid using a stronger word. Investors focus on one thing, and this increases their profit in the long-term and also in the short-term, depending on how quickly they can make a property more profitable.
Almost every landlord has to face this at some point, especially in economies that are dwindling. Let’s face it, so many people all over the world are living below the poverty line. Most of these people find it extremely difficult to pay their rent when it is due. And many times these tenants would not vacate the premise, which means you can’t get a new tenant. This usually leads to the issuance of quit notice, or even as far as using a court injunction, to get them to leave.
An investor can’t be bothered by such challenges. The firm manages all of that and reports to her. And in the event that a property is not profitable, she can sell it, and move on to better investments.
Good investors acquire properties that have flexibility. This includes the cost of hiring a management firm in their cashflow assumptions so they can vet out any financial deal breakers.
Because of this early planning and wise decision making they can have more time to themselves. They can enjoy vacations and travel, and it won’t affect their jobs, because they limit themselves to about 20 percent of what they would have done as landlords.
Landlords might even be so restricted that they have to live in the same property with the tenants to keep an eye out. Investors on the other hand, keep charge of their time versus money balance.
The valuation of property tends to increase over the years as the net operating income of the same property augments as a result of increase in rent and reduction in the maintenance cost. The latter is assured through effective property management work. Investors need only to find the best management firm they can.
Aren’t we all? Landlords and investors alike invest in property to make profit, but investment is a less tedious way of making money.
To be a real estate investor, you only need to have business at the forefront of your mind. You buy an asset with the intention to offload such property for good profit as soon as it is profitable. This canning ability is called flipping, and it is achieved by smart real estate investors by buying undervalued assets ,or those that are not in huge demand marketwise.
Investors have no sentimental attachments to properties — as selling it doesn’t mean losing their home — as is the case of many landlords.
If you want to hate on the housing market recovery, there are certainly plenty of items to dwell on.
Ads for house-flipping seminars have returned to AM radio and late-night cable TV in many markets — and so have Better Business Bureau complaints. So-called “liar loans” or “Alt-A mortgages” that played a big role in the housing crash are increasing in popularity. And, of course, there are the fears that a low-interest-rate environment has already prompted everyone to refinance and has artificially created demand for housing thanks to cheap access to mortgages.
But while plenty of pundits are sounding the alarm bells — including MarketWatch contributor Michael Brush a few months back — I think the hysteria over another housing crisis is a lot of hogwash.
Particularly if you’re an investor, there has never been a better time in history to get into real estate.
The scars from the Great Recession are real, and many can’t shake the fear and financial pain caused by the housing crisis. I get that. But recency bias also causedmany small-time investors to dump stocks at the very bottom of the market, and caused many to miss out on the 200% gains in the recovery.
If you think we are in the middle of another housing bubble and that real-estate investing is only a sucker’s game, you may simply be letting the past color your perceptions despite continued signs of strength.
And considering the investment potential — particularly in the rental market — you may want to take another look.
For starters, let’s talk about the real estate environment. Generally, it’s quite good.
By any measure prices continue to rise. Median home prices shot past pre-recession levels to new all-time highs. National home prices were up 5.7% in June, according to CoreLogic — an even faster rate of appreciation than the 5.3% rate in May and the 5.4% rate in April. New home sales have powered to a seven-year high on strong demand.
Critics will warn that rising prices and rising demand can indicate a bubble the same way they did in 2005. But when you dig deeper, the housing market is much healthier than during the previous run-up. In fact, Realtor.com has created a “bubble index” to show how different conditions are from 10 years ago, using metrics like the prevalence of house-flipping, price-to-income ratios and the share of buyers using mortgage financing. Even in high-growth markets like San Francisco, we aren’t seeing behavior that mirrors the frenzy of the mid-aughts.
Housing starts mirror that change in behavior, with recent “highs” north of 1.2 million still roughly half the bubble-era peak of nearly 2.3 million monthly starts. If this was a bubble, we would see a supply glut instead of a lack of inventory actually acting as a headwind to sales.
Another important data point: Foreclosures are at the lowest level since at least 2000, so it’s not like people are burying themselves in big debts they can’t pay just to buy a home.
Lastly, consider how many markets like Las Vegas or major Florida metros like Miami, Tampa and Orlando have real estate values that still are below pre-crash levels despite the broad improvement nationwide. This proves that areas that were ground zero for irrational exuberance have not gone back to their old ways, but have in fact been right-sized … and are staying there.
Whether it’s stricter lending standards, a shift in attitudes among borrowers or simply the nation getting wiser about the risks of real estate, we’re hardly seeing irresponsible buying in 2016.
What we are seeing is a healthy housing market that continues to steadily and organically appreciate.
The interesting thing is that while there doesn’t appear to be speculation in the current marketplace, it probably is easier than ever before to speculate on real estate if you’re a small-time investor.
I recently talked at length with Dennis Cisterna, chief revenue officer at Investability Real Estate Inc. Investability is an online real-estate marketplace that helps knock down barriers of researching and investing in real estate with tools like cash flow calculators that allow you to input estimated vacancy rates and rental incomes from potential properties.
“In the past, you might buy a local property and own it forever and pass it on to your kid as a kind of annuity investment. Even though (the real-estate market) is highly fragmented … you’ve seen a number of platforms stand up and become a marketplace for properties,” Cisterna said.
“Historically people invest within a 10-mile radius around their own home,” he said. “But in 2016, people want to invest in markets outside their own neighborhood. Because if you want to buy a rental property and live in Southern California right now you’re going to spend over $400,000 and possibly not even have any positive cash flow in year one.”
Investability isn’t alone, either, with other tech companies and websites includingFundrise and RealtyShares going one step further to allow people with less money to ride this trend. RealtyShares has a $5,000 minimum investment, while those with as little as $1,000 can join Fundrise.
You’ll be charged a fee, of course. Fundrise’s fine print notes that a rash of fees will likely add up to more than 4% annually. These fees make this kind of real estate crowdfunding less interesting to me than direct plays on properties without the middleman. But anyone who has watched financial innovation from discount brokerages to exchange-traded funds knows that we are living in an age when investment fees only go down over time, so these companies certainly are worth watching.
Another less sexy innovation in real-estate investing is the simple evolution of lending.
“The financing options available to investors have expanded dramatically,” Cisterna said. “Instead of an investor being totally tied to their personal income … (lenders) underwrite the loan based on the income of the property based on a traditional commercial real-estate loan.”
Some people will always see all leverage as risky, and point to easier lending as the cause of the previous housing crash. But financial innovation so mom-and-pop investors don’t have to take a typical mortgage out from Fannie and Freddie to buy a rental is simply reducing friction in the market by properly assessing risk — not lowering lending standards the way so-called liar loans did.
Throw in the ease of researching properties around the U.S. thanks to digital MLS listings, cheap online background checks online for prospective tenants and the ability to get rent checks direct-deposited electronically, and there are far fewer headaches to landlords than in years past.
If you think all this analysis of the market and praise for innovation adds up to a shaky investment thesis, then it’s worth considering the alternatives out there.
You think there’s no risk in stocks? Or satisfying returns in bonds?
As I wrote a few weeks ago, investors need to lower their expectations for returns from both developed equity and the bond markets. Yes, a rental property isn’t exactly a conventional income investment … but 10-year Treasurys yield less than 1.6% annually and investment-grade corporates aren’t much better. And sure, house flipping is risky and isn’t for everyone, but the same is true for small-cap biotech stocks and emerging-market equities.
Nobody should put all their savings into one or two properties, but in a diversified portfolio, there is a very good argument for real-estate investments in 2016. And based on recent data, the “smart money” and institutional investors certainly seem to be buying that argument.
A recent report by risk management firm Willis Towers Watson PLC WLTW, +0.67% found that total global alternative assets under management has hit $6.2 trillion — led, unsurprisingly, by real estate, which makes up about a third of that total.
“The shift away from equities and bonds into alternatives has gained momentum, among most institutional investors around the world, as these strategies have helped to manage risk through diversity,” said Luba Nikulina, global head of manager research at Willis Towers Watson. This interest is particularly strong among those with “secure income strategies where investors are searching for both yield and diversity as an alternative to traditional hedging with government debt securities.”
I am agnostic about all asset classes, and think everything from gold to small-cap biotechs to TIPS can play a role in your portfolio when used properly and with an eye toward diversification.
And given that so many traditional asset classes are facing headwinds, it’s worth taking a serious look at real estate both as a way to find new opportunities and to hedge your bets in a challenging market.