4 Advantages Of Multi Family Investing

There is more than one way to invest in real estate. One of the most intimidating hurdles in the real estate world is taking the leap to multifamily investing.  The common thought is that with increased units comes increased risk.  The reality is that the opposite is often the case.  Sure, multifamily properties can be more difficult to obtain but are often far less risky than single family properties.  In fact the rewards often outweigh the risk. There is nothing wrong with single family investing but multifamily properties should not be blindly ignored.  If you are on the fence as to whether or not multi’s are for you here are four advantages of multifamily investing.

  • Cash Flow. On a single family property you have one rent coming in. With multifamily properties there is almost no limit as to the number of units you can have. When most people think of multifamily investing they usually think of a two or three unit house. Multifamily investing also includes commercial, mixed use and apartment rentals. On a large apartment complex you can have 100 units or more. This increase in units directly increases your cash flow. This doesn’t necessarily improve your net income but your cash flow amount is much greater. Increased cash flow reduces risk. With a single family property if your tenant stops paying you have no cash coming in. On a ten unit property if one tenant doesn’t pay that is only 10% of your total units. While this scenario isn’t ideal it is much easier than dealing with an eviction and trying to offset the entire monthly payment. This alone makes it much more of an attractive investment in relation to a single family property. A single family property may be easier to sell but a multiunit property is less risky partially due to the increased cash flow.
  • Competition. If you have avoided multifamily properties for years you are not alone. In fact you are much more the norm than the exception. Once the extra unit or units are added to the mix many investors run for the hills. This greatly decreases the competition for these properties. Like anything else in the real estate world the less competition the easier the property is to acquire. Instead of competing with a dozen other investors for a property there may only be one or two interested people. On large apartment and commercial complexes there is often little to no competition at all. There are other hurdles to acquire these properties which are largely financial but reduced competition allows you to streamline the process. Instead of wasting time on single family properties that you may not end up getting your due diligence can be rewarded. Anytime competition is reduced it greatly increases the chances you can get a property you really want.
  • Management. One of the most common reasons that investors shy away from extra units is the perception of increased work. As crazy as it may seem you may actually end up working more on a single family property than you would on a ten unit. There are many single family owners whose cash flow is paper thin. Instead of spending money on property management they are forced to do everything themselves. Every time the phone rings or something needs to be fixed they are the ones handling it. Over time this becomes too much to bear and they look to simply get out of the property. With multifamily properties the increased units give you increased cash flow. This gives you the option of hiring a property management company to take care of the property. You will still get the occasional phone call but you don’t need to hop in your car every time the toilet clogs. Your property will pretty much run on autopilot while you focus on other areas of your business.
  • Appreciation Potential. One of the golden rules of real estate investing is never count on appreciation. This is true regardless of the number of units. While your focus with multifamily properties isn’t necessarily on appreciation there is greater upward potential. With a single family property you are at the mercy of the local market. You may have made great improvements and have strong cash flow but it doesn’t necessarily translate to increased value. With most multifamily properties comparable listings and sales are far less important. Buyers look at certain rental formulas and calculations to determine value. If the property is running at maximum cash flow and the local area is on the rise your property will appreciate. In most cases the appreciation levels are much greater with the more units you have. Some of the wealthiest in the world have accumulated their wealth with multifamily properties. Increased appreciation is never a guarantee but the potential is much higher with increased units.

While there are some differences in single and multifamily investing the process is essentially the same. You are still looking to generate rental income which relates to value.  Like anything else you do in real estate you need to be comfortable with how you invest.  If a multifamily opportunity presents itself don’t dismiss it solely based on the additional units.  Once you close your first multifamily deal you will discover that it was often much easier than you anticipated.

 

7 Inexpensive Ways To Find Sellers

The best real estate investors understand the importance of a keeping a full pipeline. Closing a deal today is great only if you can find ways to build on that momentum.  In almost any market there are motivated sellers.  The key is to constantly strive for ways to find them.  One of the misconceptions in the real estate business is that you need to spend thousands of dollars on marketing.  Pricey direct mail campaigns can be effective but there are other less expensive alternatives available.  Given these price points you can afford to try a combination of some or even all of them.  Here are seven inexpensive ways to find sellers.

  • Expired MLS Listings. One of the best ways to build your business is with a real estate agent. A quality real estate agent has multiple outlets for finding sellers. Most investors use their realtor to help with foreclosure and REO listings. These deals can be profitable but they are also very popular. An alternative to this is expired MLS listings. There are listings that have been on the market typically for several months. After anywhere from 90 to 120 days the listing will expire and either need to be renewed or is taken off the market. These sellers may have mispriced their property or were simply looking to gauge interest. Either way they may be frustrated and looking for any offer to get the ball rolling. You never know what you will get when reaching out to expired MLS listings.
  • Classified Newspaper Ads. There is a large segment of people who grew up relying on newspapers as their prime source of information. While newspaper popularity is down they still reach thousands of eyeballs every day. The classified section in your local newspaper has multiple options for finding sellers. The first is to reach out to all rental listings. Focus on ones with out of market area codes. An out of state landlords may be frustrated with the process and interested in selling. The classified section also has homeowners or investors who are looking to sell. You may talk to a few disgruntled owners but all it takes is one who is willing to make a deal.
  • Email Contact Lists. Every email you receive from a business card or personal contact should be put in a separate file. It is important to stay updated and relevant with these contacts. Every few weeks or so you should send out an email just to keep in touch. This email could include a newsletter or something else of relevance but the point is to keep you on their mind. You never know when one of your contacts may know someone who is interested in selling. The chance of closing a referral lead is much greater than any other type of lead you will generate. Every week you should look to add someone else to your file. The more people you can reach the greater the odds of finding a deal.
  • Mortgage Brokers. Mortgage brokers are a great source for motivated sellers. The average mortgage broker comes in contact with dozens of applications every week looking to either refinance or purchase. Some of these borrowers may not fit lender guidelines and selling is their best option. Since they know that their options are limited they are more likely to sell at a discounted number. On the flip side you can share any homeowner information on properties that you are selling. Every investor should have at least one solid mortgage broker as a contact.
  • Bandit Signs. Bandit signs are the small signs you see on various front yards. This being an election year they are especially prevalent. Instead of promoting your favorite politician you can market your business. Your bandit sign and read anything from “we buy houses” to “quick, cash closings.” Whatever slogan you want to use can be placed on these signs. You can typically purchase hundreds of these signs for less than the cost of a good dinner. These can be placed on any properties you current own or in select locations with town approval.
  • FSBOs. FSBO is the acronym for “for sale by owner”. As the name indicates these are owners who are selling their property without the assistance of a real estate agent. They may be looking to save money on real estate commission or simply feel they can do as good a job. Many FSBO properties try testing the market at an inflated market price only to come down after several months. With the inactivity they often entertain almost any offer that comes in. Working with fsbos often takes several months but the payoff could be receiving a great deal.
  • Driving For Dollars. Finding deals is often as easy as driving for dollars. You can spend a few hours every day driving an area of the market. Make note of any distressed looking properties you see. You can often find the owner through a tax search at town hall. From there reach out to them explaining that you buy investment properties in the area. They may have thought about selling but aren’t sure the easiest way to go about it. Driving for dollars just a few hours a day will often yield a handful of live leads.

Marketing and lead generation is a numbers game. The more leads you have the better chance you have of closing deals.  If you are looking to build your pipeline start by focusing on these seven inexpensive ways to find sellers.

 

7 Steps To Keep Your Rental Property Occupied

It takes great management to run a successful rental property. One of the most important aspects of rental property management is avoiding vacancies.  Every month that rental income is not coming in directly costs you money.  In most cases these vacancies can be avoided with proper marketing.  There are several little things that you can do that will generate interest to your property.  If you wait until the last minute to find tenants you are playing with fire.  Here are seven simple steps you can take to keep your property occupied.

  • Start marketing early.   It is never too early to find your next tenant. You should always keep your ears open for who may be looking for a rental down the road. Stay in contact with local real estate agents and mortgage brokers. Don’t be afraid to ask them if they may have someone looking for a rental. In addition you should give yourself plenty of time to find someone. Once you are under two months you should start making posts on social media and placing bandit signs in your yard. You can also focus on Craigslist, Zillow and any other website that has worked in the past. The longer you wait to get started the more likely you will be forced to pick the best available tenant.
  • Price right. Regardless of your property or the location price is important. It is often the first item that potential tenants look at. Even if you made improvements you need to look at other rentals on the market. A new dishwasher may look great but it probably won’t add the value you are looking for. You need to price your rent according to how it compares to what else is on the market. If the amenities are close tenants will usually opt for the rental that is less expensive. Do some homework on your market and price your rental accordingly.
  • Highlight positives. With whatever kind of marketing you do you control the narrative. A prospective tenant doesn’t know anything about your property other than what you choose to present. It is up to you to put the property in the best possible light. Start by highlighting all of the positives. If you are one of the few rentals in your market with a third or fourth bedroom make that easily known. The same should be done with any amenities. Focus on items that you think a tenant would find appealing. A deck, garage, driveway, fireplace or new appliances should all be highlighted. Think about what makes your property stand out and drive that home throughout your marketing.
  • Pictures/video. Positive features may generate interest but you need to support those with pictures or videos. We live in a visual day and age. It is not enough to simply say something we need to support it with images. You need to do more than just snap off a couple of pictures and put them on a website. The quality of the pictures is important. Start with a picture of the front of your property. This is the first impression they will have. From there you need to include pictures of all the rooms in the house. The angle of which you take these pictures can make the room like big or small. If you don’t have experience with these or don’t have the right camera it is important enough to consider hiring someone that does. If the pictures are poor the response will be equally as bad.
  • Bonus features. Are there any features that make your property stand out? Do you include heat and hot water with the rental? Is snow removal and lawn maintenance included? Are there a washer & dryer on site? These are the seemingly small items that can be put your property to the top of the list. These may not seem like a big deal to you but they need to be mentioned. Something as simple as basement storage can be a big factor. Anything that you can think of that may be considered a bonus should be included.
  • Create action. The closer you are to the end of your current lease the less leverage you have. If you are in this situation you need to create action. One way you can do this is by offering something of value if they act within a certain timeframe. Free cable for a month can be a good way to get your phone to ring. Even if you don’t want to give up anything of value you need to create a sense of urgency. Phrases like “property won’t last long” or “act now” may give you the little push that you need.
  • Contact info. Dealing with tenant phone calls constantly can get annoying at times. This is nothing compared to dealing with a vacancy. On every ad you place either in print or on a website you need to include multiple contact options. Leaving an email address is not enough. You need to include your name and phone number as well. People are more likely to call if they are interested than send an email. When you get incoming calls you need to answer them. You never know who will be the call that turns into a tenant. You can’t wait for a tenant to leave a message and call back when you feel like it. By the time you call they may have already spoken with three other landlords.

Finding a tenant usually does not happen on its own. You need to put some work in to keep your property occupied.  Following these seven steps will greatly improve your chances of never having to face a vacancy again.

 

The Perfect Lease From Beginning To End

As a rental property owner you are only as good as your tenants. You can do everything right with the property but if your tenants are poor it won’t make a difference.  Dealing with tenants is more than just handing them a key and waiting for checks every month.  They should fully understand expectations and guidelines but are given enough space to enjoy the property.  At the end of the lease they should either want to renew or give a glowing review of you and the property.  To achieve this there are a few simple steps you need to consider during the course of the lease.  Here are some things every landlord should do as they strive for the perfect lease.

  • Lease/Walk Through. The relationship with your tenant starts with the initial conversation. Every applicant that reaches out to you is a prospective tenant. You should treat everyone that calls as if they are going to be living in your property for the next nine months. After you receive their application and commit to renting you need to review the lease. This should be sent through email and reviewed at the property. It is very important that you take time and go through your lease line by line. This can be tedious but will cut off any potential questions before they happen. Also when you are at the property you should walk the grounds and take pictures to note the condition before they move in. This may come in handy at the end of the lease.
  • Set Firm Guidelines. As you review the lease you need to make note of any items that are of particular importance to you. If you are adamant about keeping the property pet or smoke free you need to reiterate this. You may also have concerns about parking or the number of tenants allowed in the property. Whatever is important you need to make this crystal clear. You also need to attach a punishment for breaking these rules. These could range from a small penalty for a late payment to eviction. Let these guidelines and penalties be known up front so there is no misunderstanding down the road.
  • Scheduled Periodic Checkups. Most leases contain language that allows the owner to enter the property at any time. Just because it is allowed doesn’t mean you should do it. In every lease you should schedule a walk through every five months or so. Give your tenant at least two weeks’ notice. The point of this isn’t to check on your tenants but to make sure that everything in your property is running properly. Your tenant may not tell you that the downstairs toilet runs from time to time or back door doesn’t close all the way. These are the little things that if caught early enough could save you hundreds of dollars. If you explain it to your tenant this way they won’t think you are checking up on them.
  • 60 Day End Of Lease Notice. At your lease hits the home stretch you need to think about the end. Start by giving your tenant at least 60 days’ notice. As obvious as it may seem to you your tenant may not know when the end of their lease is. Giving 60 days’ notice serves a few purposes. The first thing is that it gives your tenant a chance to renew their current lease. If you have a good tenant there is no reason to look anywhere else. Ask them if they have any interest in staying for an additional term. If not a 60 day notice gives them a heads up to begin preparing themselves, and the property, for move out day.
  • 30 Day Notice. If a 60 day notice is a wakeup call a 30 day notice is an alarm. With your 30 day notice you should supply a detailed list of items and expectations needed for move out day. These should be on the lease but need to be reiterated again. As simple as it sounds you want the property in the same condition as they found it. There will always be normal wear and tear that is expected but you don’t to pay to have the property restored. By giving a detailed list, along with photos, of the expected condition you leave no doubt as to what you want done.
  • Walk Through/Key Exchange. On the lease move out day you will walk the property with your tenant and exchange keys. Your tenant will probably ask for their security deposit on the spot. It is important that you tell your tenant if they want to be with you at the property that you are going to be a few hours. This is your chance to try all appliances and examine the property. Once you give back the security it is too late if you find something after the fact. You shouldn’t nickel and dime your tenant but you don’t want to have to pay to repair an item either. If you are satisfied with condition you can cut a check on the spot but you have up to 30 days after the lease to do so. Keep in mind that positive word of mouth is important and you never know who your tenant may know.

The key to a successful lease is to respond as quickly as possible to whatever comes your way. By staying on top of these six areas alone you greatly increase your chances.