5 Things You Should Do To Your Rental Property Every Year

To maximize rental cash flow you need to stay on top of your property year round. It is not enough to list your rental and wait for tenants to pour in. Even if the property doesn’t necessarily need updates it is always best to be a step ahead rather than a step behind. In competitive markets your property will be compared to every other one in the area. Often times it is the little touches that can make the biggest difference. You don’t need to give your rental a complete makeover every year but you should stay on top of it. Here are five things you should do to your property at the end of every lease.

Paint. It is important to look at your rental through the eyes of a prospective tenant. Even though the walls may not be in terrible shape they are probably more beat up than you think. If you are like most landlords you use lighter paint colors for the high traffic areas. White or eggshell colors retain every handprint and stain throughout the course of the lease. You need to hit the walls with a fresh coat of paint at the end of every lease. You don’t need to be a professional painter to paint a bedroom. For less than a hundred dollars you can buy everything you need to paint a room or two. This may take you a few hours but will make a tremendous impact on the appearance of the property. A prospective tenant can often tell how well the property is maintained strictly by how clean the walls are. Take a few days every year and keep the walls looking fresh.
Preventative Maintenance. Not everything you do to your rental is to attract tenants. A rental property should be treated like an investment. If you want your investment to hold its value you need to take care of it. There are several things you can do to keep the property as healthy as possible. Start with the major items like the furnace, water heater and oil tank. The furnace and oil tank should be serviced every year. You need to change the filters, run the lines and find any potential issues before they turn into larger ones. Not only will you keep these items running longer but they will also be more efficient. You should also take inventory of your appliances. The washer, dryer, dishwasher, refrigerator and stove won’t last forever. Even if you have great tenants they will not take care of these items the same way you do in your house. Take a look at if there are any lingering repairs that need to be made or if they are due to be replaced. If you put a band aid to get you through the year you should prepare yourself to purchase something new.
Floors. Tenant’s eyes go to the walls and floors upon entering a new property. If you are willing to paint the walls you need to do something with the floors. Instead of replacing the carpet every few years you should spend the money to have them professionally cleaned. A good steam clean can make them look brand new. The same is the case if you have hardwood floors. Instead of steaming there are plenty of inexpensive cleaning solutions that you can do yourself. Even if the floors are run down and scratched you can restore them and give them a good shine. The look of old, dirty hardwood floors compared to clean ones is night and day. This is the first impression that your tenant has. The rest of the house may look great but if the floors are run down your tenant may look elsewhere.
Landscape. The floors and walls are important once your tenant enters your rental but what about the exterior. It is entirely possible that your tenant may form a negative opinion before they step food in your property. The curb appeal is a much bigger factor than you may realize. You don’t necessarily need the outside to be pristine but it can’t look like a jungle either. Any bushes and shrubs should be trimmed and neat. If there are weeds in the driveway you need to pull them up. A fresh layer of mulch is a must in the spring. The property should be free of any leaves and long grass. The next time you pull up to your property make a note of how the exterior looks. Anything that catches your eye will probably catch a tenant’s eye as well.
Odds & Ends. You may be surprised at just how many little things impact a tenant’s decision. It is not an exaggeration to say that the little things can make all the difference. The little things can mean anything from replacing the shower curtain to cleaning out the garage. Something as seemingly small as a new welcome mat or updated switch plates can be what a new tenant remembers from the property. Many of these minor items are less than the price of lunch but will separate your property from everyone else. It is a good idea of have your spouse or someone you trust walk the property with you and tell you what stands out to them. If it stands out to them it will stand out to a tenant. Focus on these items before you start your new tenant search.
Even the best properties need a little work at the end of every lease. By spending a few hundred dollars you can attract better tenants and keep your property running as efficiently as possible.

“Winterizing” Your Rental Property

Even though fall is just a few months old it is never too early to think about winter. As a rental property owner you need to do everything you can to protect your investment.  There is no season that can produce greater wear and tear on your rental property than winter.  One frozen pipe will cause severe damage that will be costly and time consuming to fix.  Additionally there are several seemingly minor actions you can take that will save your tenants money and increase the useful life of your property.  Providing seasonal maintenance to a rental property is always important but no time more important than in the winter.  Here are a few things you need to do to your rental property before winter hits.

  • Furnace. No landlord wants to deal with tenant issues in the middle of winter. Season maintenance won’t provide all of the cures but it will certainly go a long way. Instead of trying to squeeze every possible hour from your furnace you should take a proactive approach. By getting the furnace updated every winter you can easily add years to its life. Cleaning the pipes and changing the filter may not seem like a big deal but they are. There are plenty of landlords who balk at paying a few hundred dollars every year for something that doesn’t produce a direct benefit. You can either spend a few hundred dollars in November or be stuck with a much bigger problem in the middle of winter. These problems can be compounded if you do not have anyone you can call in a pinch. Regardless of the types of tenants you have the furnace will be used almost every day from mid-November to mid-March. Before the furnace gets used the first time you need to get it serviced.
  • Check Out The Attic. One of the most under appreciated aspects of heating efficiency is insulation. If your tenants have complained about the house not being as warm as they like you should take a look at the attic. For starters you should check the insulation itself and make sure you have enough installed. While you are up there you should also check if there are any cracks or gaps that could be stealing heat. If you do not know what you are looking for there are several people who you can hire to take a look. While heat rises it can also be going right out of your attic if you are not careful.
  • Doors And Windows. Prior to any snow or extreme weather you should take a walk around your rental and check out all of the doors and windows. Many times something minor like the space under the front door can have a major impact on the room temperature. Take a look at any door entry ways in addition to the garage door. A space at the bottom of the garage door can have a bigger impact than you think. You also want to look for any cracks in the windows. Replacing a crack can be a relatively easy fix if you catch it in time.
  • Gutters. If you think that not cleaning out your gutters isn’t a big deal think again. All it takes is one season of leaves to turn a small issue into a bigger one. When your gutters get clogged the water has nowhere to go. This becomes an issue after a few significant snow storms and the temperature begins to drop. The gutters will eventually become packed with snow and eventually frozen. If the snow is significant enough the gutters will begin to sag and possible fall off the house. This can be a nightmare to fix with a foot of snow in the front yard. It can also lead to water buildup on the roof that could possible turn to a leak in your living room. If you don’t get your gutters cleaned you are asking for trouble.
  • Miscellaneous. After you get your furnace service you should make sure everything is running smoothly. Walk around to all of the air ducts and make sure that the heat is coming out. It is not uncommon for there to be minor blocks that disrupt the flow of heat. You also may want to check the insulation in the garage. Older garages with poor circulation can often lead to frozen pipes. A front pipe in the garage typically means no water in a bedroom or bathroom. If your property has central air it is a good idea to buy a cover and cover it up for the winter. It is little things like these that go a long way in heating efficiency.

Now is a good time to get on the same page with your tenant. Discuss your snow removal policy and make sure there are no questions at all.  If your tenant thinks the driveway will be plowed every inch of snow they may be in for a surprise.  You should also ask that they inform you if they plan on being away from the house for any extended period of time.  Just a few days of cold weather can cause the pipes to freeze.  If the house is heated by oil you need to remind them that if it gets too low the heat will not work.  It is their responsibility to stay on top of the oil level. It is always better to deal with potential weather issues now than when they actually happen.

By protecting your property in the winter months your tenants will be happy which leads to longer rents which makes your life as a landlord much easier. Now is the time to consider simple winter property maintenance.

 

5 Ways To Boost Your Credit Score

When is the last time you looked at your credit report? If you are even remotely involved in the real estate business the answer should be within the last thirty days.  If you are not on top of your credit report you run the risk of having to deal with unexpected issues when you least expect them.  Instead of utilizing lender financing when a new property hits the market you will be left scrambling for solutions.  At that point getting your score where it needs to be may not happen in the timeframe you desire.  Improving your score can take as little as 30 days if you know the right improvements to make.  If your scores are low and they need a boost there are a handful of moves you can make.  Here are five ways to quickly improve your credit score.

  • Periodic Credit Updates. You should constantly have an idea of where your credit scores are. In the past getting your scores meant going through a third party vendor who had access to Transunion, Equifax or Experian. Today it is easier than ever to know exactly where you stand. There are several companies who provide constant credit monitoring in addition to providing monthly credit score updates. You can even obtain a copy of your report through certain credit cards. Staying on top of your reports is an important part of avoiding fraud and erroneous accounts. The quicker you act when a fraud account is spotted the easier it is to deal with. The longer the account is on your report the more damage is done and more of a burden of proof you need to supply. Removing these items can become a time consuming nightmare that lowers your score every day. The first step in improving your score is finding a way to get your hands on a copy of your report every few weeks.
  • Get Current. Every day that you are actively late on an account has an impact on your credit score. This is the case whether you are talking about a small credit card or a large mortgage payment. Your score will not stabilize until the accounts become current. Current does not mean remaining 30 or 60 days late. It means paying off the account until you are not late. Once the account is caught up you will see an increase each subsequent month. Getting caught up could mean consolidating from one credit card to another or taking money out of savings in the short term. You credit is judged, in part, on the number of 30, 60, 90 and 120 day lates you accumulate. The quicker you can get out of any hole and get current the quicker you will see a spike in your scores.
  • Reduce Minimum Balances. It is understood that timely payments are a huge factor in determining your credit score. However most people aren’t aware that the balance in relation to the amount owed is a close second. You can pay everything on time but if your balances are too high your credit won’t be as strong as you expect. One way to quickly increase your scores are to pay down any high balances. Paying down a $900 balance on a $1000 credit card even just a few hundred dollars has a big impact. If your balances are high on multiple cards you should look into which balance transfer options are available. Paying down a few cards and shifting around some balances on a few others can increase your credit score by twenty points, or more.
  • Remove Erroneous Accounts. Every day that an erroneous account stays on your credit your score will drop. As we mentioned it is critical that you know what is on your credit report at all times. The minute you spot something that is not yours or has been paid off you need to take action. An old collection account or charge off that is not removed pulls your score down. If the account has been paid you need to send any supporting documentation over to the three credit bureaus and have it removed. There are also credit repair companies that can help expedite this process if you need a rush. Without supporting documentation your task is much more difficult. You may have to go back years and track down an old lienholder or credit card. As difficult as it may be it is an essential part of restoring your credit score.
  • Avoid Unnecessary Credit Pulls. A final factor in determining your credit score are the number of times your credit is pulled. A few credit pulls a month will not have any impact on your score. It is when you pull it a half dozen times or more in a 30 day span that your score will be impacted. Frequent credit pulls are seen as a sign that you are looking for credit and having a difficult time getting approved. If you do need a credit card it is best to go through one company that has multiple options instead of shopping around to ten individual companies. You may not think anything of it but you will see the impact the next time you pull your credit report.

You should never take your credit for granted. You truly never know when you will need to utilize credit.  If your scores are low the quicker you take action the sooner you can start on the path of recovery.

 

5 Things You Need To Know Before Making An Offer

make-an-offer-2-624x416-1Most new investors are in a rush to make an offer. They want to accelerate the process and get things started as quickly as possible.  As great as taking action is you also need to know everything about the deal and property you are making an offer on.  A lack of due diligence in just one of a few key areas can completely change the perception of the property.  Prior to looking at any new property you should have a due diligence checklist firmly in place.  This will help streamline the process and allow you to quickly react and avoid a major oversight.  Here are five things you need to know and have in place before making an offer.

  • Financing. The starting point for any purchase is financing. How you plan on financing the property impacts almost everything you do in the transaction. The terms and price on a property you are paying cash for is different than if one you would utilize lender financing. Either option you chose can work but you need to know which way you are going to go prior to making an offer. If you plan on paying cash you need to have your proof of funds letter updated with any amounts adjusted. If you are using lender financing your pre-qualification letter has to have the proposed purchase price in addition to as much specific information as possible. Your financing can, and probably will, change depending on the specific property. However you need to know which way you want to go prior to making an offer. The type of financing you choose will often influence the decision of the seller.
  • Understand Local Market. Getting an alert about a new listing at a reduced price may seem like a steal but it can end up being fool’s gold. If the property is in a declining market getting it for virtually nothing can still end up doing more harm than good. Prior to making any offer you need to know everything about the market the property is located in. It can be argued that the market is more important than the actual property. You need to understand both the micro and macro view of the property. The micro view looks at properties and trends as close to the subject property as possible. The macro view looks at the town as a whole and the big picture view of the area. It is important that you understand as many trends as you can find and have an idea of what influences them. The local market of the property will often directly influence the property value as well as what your future options are. It is not enough to simply acquire the property and figure things out as you go.
  • Know The Property. If you are going to make an offer on a property you had better know everything about it. Almost every seller will go to great lengths to make their property appear as appealing as possible. If the flaws are not obvious it can be difficult finding them. Prior to making any offer you need to go the extra mile to know exactly what you are buying. Track down the listing history and see if there was any work recently completed on the property. Walk the grounds with your contractor or an inspector to give you an additional perspective of the property condition. In your excitement to make an offer it is easy to gloss over some minor items that can actually have a significant impact. By having someone you trust provide an additional perspective on the property you reduce the risk of finding something unexpected after you take ownership. If you aren’t comfortable with your knowledge of the property you should consider passing until you are.
  • Walkaway Price. There is a lot of work that goes into researching a property and making an offer. There are times when you will do hours of due diligence on a property and not be rewarded with a deal. As difficult as this is it is part of the business. What you can’t do is let one deal influence your actions on the next one. It is important that you have a walkaway number in your head prior to making any offer. Without this number it is easy getting caught up in a bidding war and letting your emotions take over. Sometimes some of the best deals you make are the ones you walk away from. Stand firm with your number and know where to draw the line and walk away.
  • Research Exit Strategies. What do you plan on doing with the property if your offer is accepted? Do you have a backup plan or two in mind if things don’t go the way you anticipate? The longer you are in the real estate business the more you will accept that things won’t always go the way you plan. There will be plenty of times when you need to call an audible and change gears on the fly. If you are not ready to adjust you may find yourself in a situation with a property you desperately want to get out of. Prior to making an offer you need to have multiple exit strategies you can employ in a moment’s notice. The more options you have the more valuable the property is. Never put all your eggs in one basket and assume that everything will go the way you anticipate.

You always want to be confident you are making the right offer on the right property for you and your business. If this means taking a little more time on due diligence than that is what you need to do.  Always know and understand these five areas before making an offer.

 

Six Reasons You Should Consider Investing In Real Estate Today

beginner-investor-2-624x312Real estate investing is one of the best careers you can possibly have. Sure, this may be a little biased but it also happens to be true.  Investing in real estate gives you the ability to make your own schedule as well as the chance to generate unlimited income.  There is no boss telling you where you have to be and what you need to do.  You can invest as little or as much as you like and there are no licenses needed to get started.  The business is truly available to anyone who wants to be involved and the sky is the limit.  If you are on the fence as to whether or not a career in real estate may be for you here are six reasons why you should consider investing in real estate today.

  • Barriers Of Entry. As we mentioned one of the biggest reasons why new investors get started in real estate is because anyone can do it. If you wanted to practice law you couldn’t just go down to the local courthouse and work on the next case. You would need to go to school for several years than pass a grueling exam. In real estate you can make an offer on the next property that hits the market if you wanted to. There is no licensing requirement or continuing education you need to uphold. A brand new investor has the same opportunity for success as someone who has been in business for years. There is nothing holding you back from getting started or standing in your way from sustaining it.
  • Make Your Own Schedule. As a real estate investor you can concentrate on the business as much or as little as you want to. If you want to close just a few deals a year that option is on the table. If you want to quit your day job start a new career path that option is available as well. As a new investor you can dictate how you want your day to go. You no longer are forced to the same tired routine every day. You can get out of the office and come and go as you please. This doesn’t mean you won’t have to work hard but you will have greater flexibility to do some of the things you may have been missing out with your previous schedule.
  • No Office. Working for a big company and sitting at a cubicle all day has a few distinct advantages and disadvantages. On the positive side you can receive steady income and utilize any health insurance provided by the company. The negative is that you are forced to deal with office politics and usually do the same mundane tasks every day. In real estate there is something exciting and new each and every day. Instead of sitting at a cubicle you can get out and meet people and grow your business. You are the CEO, CFO and President of your own business. You can run in any way you like without someone looking over your shoulder.
  • Unlimited Income Potential. Wouldn’t it be great to have the ability to control your own income? In real estate that scenario exists. There are no caps on how much you can make. If you work hard, network and find deals you can close as many as you can handle. You don’t have to climb the corporate ladder and wait your turn to succeed. This doesn’t mean you will have instant success upon entering the business. The real estate investing business isn’t easy. However you are in control of your financial future more than any corporate job you can ever have.
  • Higher Average Returns. Any type of investing is about balancing risk and reward. You don’t need to be a finance major to know that parking your money in a savings account may not be the best investment vehicle. Sure, you will make a small yield every month but it won’t grow at a very fast pace. With real estate you can turn an average investment into a home run. Additionally you don’t necessarily need all of the funds to come from your account. It is quite possible that you leverage bank funds or even other people’s money to generate a return. Any way you slice it the potential in real estate is much greater than almost any other investment you will find.
  • Cash Flow Potential. When most people think of real estate investing they think of quick flips and rehabs. There are more rehabbing shows currently on TV than ever before. However, rehabbing isn’t the only way to invest in real estate. There are many real estate investors who focus solely on rental properties. A high performing rental property gives the owner a mix of monthly cash flow coupled with long term appreciation potential. With a strong management team in place they can receive all the perks of the property without having to deal with the day to day drama. The ability to open your mail box once a month and receive surplus cash flow is a wonderful part of the business.

There is truly no better time than right now to get started in real estate. Getting started in anything new is never easy but the perks of the business are too great to ignore.

 

6 Things You Should Review Before The New Year

new-year-investor-2-624x416We are officially under 40 days until we turn on page on another year. While that may seem hard to believe
it will be hear sooner than you realize.  If you are like most people you look at the New Year as a time to make tweaks or changes to your business and personal lives.  Instead of waiting for the end of the year you should take some time now to assess where your business is and what may need to be changed.  By doing this you can hit the New Year running and get your year off to a great start.  Here are six areas of your business you should review now prior to the end of the year.

  • Business Plan. Did you do everything you wanted in your business over the last year? If yes, what caused this to happen? If no, what prevented you from achieving it? In addition to reviewing your successes and failures you should look at your business plan as a hole. Does your plan still fit with what is going on in the market? Are your goals still in line with where you want your business to go? There is typically plenty of down time between now and the end of the year. Take some time and look at your business plan and more importantly how you can put any changes into action.
  • Marketing. In the world of real estate you are only as good as your marketing. You can do everything else right with your business but if your marketing is poor you won’t have the results you desire. There are more marketing options than ever before. It can be very tempting to dabble in all of the various marketing options that are on the table. It is always best to pick out just a few and make those your focus. With marketing you want to look at the return rather than the expense. Analyze what marketing gave you the biggest bang for your buck and what failed to hit the mark. Many times just a few subtle changes in marketing can have a huge difference.
  • Systems. Most human beings are creatures of habit. We often do the same things at pretty much the same time every day. With any business it is commonplace to continue doing things the way they have always been done. This isn’t always the best approach to take. You should constantly review if there is a better way of doing things. There are so many facets of the real estate business that can be improved simply by accepting change. There are systems for everything from lead generation to deal evaluation that change be altered. Look at every micro aspect of your business and see if there is a better way of doing things. As long as you accept that change is a part of business it is easier to make them.
  • Lease & Insurance. There are many hidden aspects of a good business. One of the things that make a good business is protecting yourself at all times. Items like leases and insurance are incredibly boring but are essential in the event of an emergency. When is the last time you look at either one of these items? If you are like most people you probably only glance at them when a lease is ending or when your policy is renewed. Looking at them after an incident is often too late. Reach out to your insurance agent to see if you have all of the coverage you need. Spending a few extra dollars a month is worth it to give you peace of mind. With your lease you need to be protected in the event of an eviction or unexpected issue with the property. Call your attorney and ask if they can give your lease a look to ensure you have everything you need.
  • Expenses. Do you have a firm grasp on every expense your business makes? It is not enough to have an idea or be able to take an educated guess. You need to sit down and take the time to go over each and every expense. This is another of those painstaking items that is necessary for business success. By pouring through your expenses not only can you save money but you may be able to find a better way of doing things. A few hundred dollars a month may not seem like a ton of money but added up over the year can equal thousands.
  • Financing Options. The final business item for review is your financing options. Even if you have a primary financing option you should always keep your options open. You never know when you will need a private money or hard money lender. If you use lender financing you should reach out to you lender or mortgage broker to see if there are any new programs available. There are always new mortgage programs hitting the market. There could be one with a reduced down payment or documentation option that fits with your lending profile. At any time you should have at least four different lending options you can utilize if a new deal presents itself.

Take advantage of any down time between now and the end of the year to set yourself up for next year. The better in touch you are with these six areas the better position you will be to have a great 2017.

 

Why November Is A Great Time to Buy

As we quickly approach Thanksgiving the end of the year is right around the corner. With this often comes holiday parties, excessive days off and a general lull in the real estate market. In real estate this can present a great opportunity to buy. With your competition mailing the rest of the year in you can take full advantage of it. Even though November is traditionally a slow sales month there are still good deals to be had. You just need to know where to look and how to approach them. By closing just one more deal before the end of the year it will set your business up for a great start next year. Here are five reasons why November can be a great time to buy.

Reduced Prices. Sellers know that the end of the year can be a difficult time to sell. With the change in weather mixed with the holidays there are many buyers who decide to postpone their home search until the New Year. Partially because of this sellers are inclined to reduce their asking price. Even if they don’t come right out and lower the price they may be inclined to accept a below asking price offer. If there are any properties you have had your eye on now is a good time to at least make an offer. You never know what a seller may be thinking and want to do with the property. They may be desperate to sell by the end of the year and willing to come off their list price. A good tip is to look at properties that have had a price reduction in the last 45 days. If they took one reduction there may be a chance they are open to accepting any reasonable offer that comes their way.

Motivated Sellers. As we mentioned there are many sellers who are desperate to sell before the end of the year. By finding motivated sellers you can stumble upon good deals. One group of motivated sellers at year end time are lenders. Banks are not in the business of being property owners. Although the number of short sales and foreclosures has declined there is still a good amount of inventory in many markets. Banks holding these properties would love nothing more than to clear their books of them by the end of the year. Ask your real estate agent for a list of all bank owned, short sale or foreclosed properties in your area. Go through them one by one and look for properties that have either been on the market for some time or require cash buyers. Don’t be afraid to make an offer you feel comfortable with as long as you can close before the end of the year.

Tax Break. There are a handful of tax incentives or breaks that expire at the end of the year. As a buyer you can write off several closing costs expenses and apply them to your 2016 tax return. This alone may not be a reason to buy but if you are on the fence it can be a deciding factor. There are also a handful of sellers who want to take advantage of these benefits on the other side of the transaction. If you can target a seller who has recently purchased a property you may be able to get a good deal. This is especially the case with fellow investors. Scour through as many real estate listings you can find online and target properties sold by investors. They may be highly motivated to sell by the end of the year and will often offer a steep discount to do so.

Quick Turnaround Time. Not every real estate purchase is done through a cash sale. If you purchase your properties with lender financing you may still have time to close by the end of the year. With decreased volume lenders have the ability to turn your loan around much quicker. Instead of waiting days to clear an underwriting issue it is possible get these taken care of the same day. The downside is that there are plenty of days off or half days towards thanksgiving but there is also more of employees looking for work to do. Ask your lender or mortgage broker what their current turnaround time is. If you have all of your loan items in place it is very possible that you can close your purchase well before 30 days.

Supply. The end of the year is usually filled with ample property supply. This gives buyers the ability to sift through inventory to find exactly what they are looking for. It is not uncommon to find the best deals of the year at the end of it. Sellers understand that after the calendar turns there is still three to four months before the spring selling season. This is four months of carrying costs or mortgage payments they would have to make. With increased supply you know exactly what you are buying with a seller who may be willing to turn the page and move on from the property.

With the weather turning and the days getting shorter there is a tendency to work less. However if you can finish up the year strong and keep your eyes open for deals you will be rewarded. November can be a great time to take advantage of the market.

How You Can Improve Your Credit Score

Improving a credit score does not happen overnight. Why? It’s because most creditors only report to the bureaus once a month. But there are a few steps you can take right now to start cleaning up your credit blemishes and here they are:

  • Always remember to pay your bills on time because late payments can have a serious impact on your score.
  • Do not apply for credit frequently because having a large number of inquiries on your credit report can worsen your score because it looks like you’re being turned down for credit and you’re just shopping around.
  • Reduce your credit balances. If you are “maxed” out on your credit cards, this will affect your credit score negatively.
  • If you do have any unpaid debt that you now have the ability to pay off, then either do so or try to set up a “payment plan” or settlement option with the debtor.
  • Obtain additional credit if you have limited credit. Not having sufficient credit can negatively impact your score. Because even if you don’t like charging purchases, obtain a low-limit credit card and use it every month and pay off the balance within thirty days.
  • When you do get your mortgage be sure to always pay it on time because late mortgage payments are one of the most significant blemishes that you can have on your report.

Are You Ready To Purchase A Rental Property?

It is no secret that owning a quality rental property can completely transform your portfolio. Not only does it give you the ability to generate monthly cash flow but you can also realize long term appreciation. As obvious as this may be not every investor is willing to pursue rental properties. They are influenced by negatives stories associated with rent collection, property damage and eviction. However if you understand that these are much more the exception rather than the norm you may be ready to dive right in. Before starting your rental property search there are a few things you need to get in order first. These will determine where, when, how and even if rental properties are a good fit for your business. If you are interested in rental properties here are five important things you need to consider.

Goals.
Does a rental property fit with what you want to do with your real estate business? If you have limited capital and are only interested in short term projects you may not want to have your money tied up in a long term rental property. Things can always change down the road but as of right now a rental property may not be for you. On the flip side if you aren’t interested in going from property to property a rental property may be ideal. With any rental property purchase you should be prepared to give it at least a few years. You are not buying for immediate appreciation and would be content to earn off the monthly cash flow provided. You should plan on having your money tied up for the foreseeable future in addition to having surplus capital available for the property. If you are on board with this long term view than you should start your rental property search.

Property Type
There are several different types of rental properties. Even though the most common type is the single family there are other options available. As you consider getting started you should think about which option is best for you. There are fairly distinct pros and cons associated with each individual property type. A single family property has less overhead and is easier to manage. The downside is that with only one tenant you are putting all your eggs in one basket. A two family property offers twice as many options to generate income but also has twice as many tenants to deal with. Once you cross over to four units you enter the world of commercial properties. This has a different set of financing guidelines as well as increased management challenges. There is no right or wrong type of rental property only what fits your budget and your business. Take some time to research all of these options and what is works best for your market.

Financing
There is a big difference in purchasing a property as an investment and one as a primary residence. With a primary residence you can take advantage of a number of minimal down payment programs. For an investment property you need anywhere between ten and twenty percent of the purchase price. Obviously this can be a significant chunk of change that does not include any closing costs or property taxes. While there have been some changes to other loan programs the investor programs have not changed too much in the past few years. You will not find a non-owner occupied program for less than ten percent down payment, with twenty percent a more likely scenario. These guidelines will change dramatically if you start looking at commercial and mixed use properties. The credit score requirements will be stronger and the down payment amounts slightly higher. Whatever type of properties you are interested in you need to have your financing in place first.

Management
How do you plan on managing the property? If you feel that management is something you can do you should know exactly what you are getting into. You will have to do everything from finding tenants to handling maintenance calls. You will chase rent checks every month and deal with every issue with the property. On the flip side if you simply want to purchase the property and collect rent checks you need to find a property manager. A property manager typically takes 10% of the monthly rent received. This has to be factored into your monthly cash flow calculations and projections. Whatever type of property you buy and whatever market it is in you need to have a management plan in place well before you make any offer.

Expenses/Reserves
You can figure out how much money you will need to purchase but once you take ownership you are not out of the woods. Even if the property is turnkey and you don’t need to make any major upgrades you still need reserves to run the property. Without reserves in place you will not be able to deal with property issues when they come your way. Instead of taking care of things the right way you will put a band aid on them and only make them worse. It is also important that you know all of the monthly expenses that are involved. Hidden expenses such as lawn care and snow removal have a huge impact on your cash flow.

Owning a rental property will impact your business today and well into the future. These five areas will give you a good idea of whether or not you are ready to take the step to rental property ownership.

What You Need To Consider If You Are Buying A Rental Property

There are many investors who are on the fence when it comes to buy and hold real estate. For every five investors who recognize the upside that rental property provides there are a few that focus on the negatives. Between dealing with tenants, handling maintenance issues and protecting your property being a landlord certainly has its share of potential problems. However on the flip side a good rental property in the right location can provide short term income as well as long term appreciation. Building a portfolio requires the assistance of a strong team around you. Additionally there are a few items you should have in place on your end before you start your rental property search. If you have thought about buying a rental property here are a few key items you need to have in place.

Financing. The first step in any purchase is finding financing. The financing for a rental property is different than an owner occupied property. For starters the down payment requirement is much greater. Depending on the number of units you will need anywhere between 20-30% down payment. The greater number of units the higher the down payment. There are also higher credit score requirements for investment properties. Typically the credit score needs to be at least over 700 with a 720 the minimum with some lenders. It is also not enough to have the funds available to close. They need to be in your bank account for at least 60 days. Any large deposits and withdrawals must be verified and accounted for. While long term interest rates are appealing the first step is securing financing.

Management. Before you make the commitment to buy a rental property you need to know how you plan on managing it. Regardless if you are looking at your first single family rental or have an existing portfolio property management is the key to success. With management there are a few ways to go about it. The first is to manage the property yourself. The positive is that you can save roughly 10% of the rental fee every month. This can add up to a large sum of money over the course of the year. The downside is that you need to be on call at all times. You will be the one that has to deal with maintenance issues, complaints and coordinating repairs. The alternative to self-managing is to hire a dedicated property manager. They will allow you to focus on other areas of the business. You will still have to pay for maintenance but they will make the phone calls and get the work done. There are pros and cons with both methods but you whatever you decide you need strong property management.

Attorney. You can do everything right on your transaction but if you don’t close it won’t make a difference. A good attorney can often times single handedly save your deal. They are the last line of defense between the seller and their attorney. They are the one that will smooth out any issues and protect you at all times. Your attorney is too important not to spend time finding the right one. You want to choose a good local attorney that practices real estate. They should also have a dedicated paralegal who is easy to reach and responds right away. Another key function your attorney serves is to prepare or review the lease. Your lease is the document that protects you and the property once you find a tenant. A poor lease with generic language opens the door to litigation and lawsuit. A good attorney will point out any holes your lease may have and offer ways to fix them.

Insurance Agent. Besides your lease the only other document you have to protect yourself is your homeowner’s policy. In the same way as your lease you should spend the extra time, and money, to get the coverage that serves the property best. You may be able to save some money on the premium or the coverage but this can end up backfiring. Pinching pennies monthly can cost you thousands if there is tenant injury or damage to the property. If you plan on buying multiple properties your insurance agent can find the best policy for the individual property. This can not only save you time but can give you the peace of mind in knowing that you are protected for whatever comes your way.

Maintenance. If you plan on doing any of the property management on your own you need to be proactive in finding help. Start by reaching out to a general handy-person. This should be someone that can handle the minor items from clogged toilets to changing the locks. You also need to find people that can handle the landscaping and snow removal. At almost every point in the year one or the other will need to get done. By waiting to the last minute to find a snow removal company you can end up costing yourself hundreds more over the course of the season. You should also find someone to remove the leaves in the gutter, perform checks on the furnace and update the HVAC. The better prepared you are the easier it is to own rental property.

The landlords that typically run into trouble are those that do not have a plan before they start. Get your team in place prior to starting your rental property search.