When does it make sense to pull the trigger and refinance a property? For the most part, it’s actually pretty simple. There are three major reasons to refinance a property:

  1. As part of a strategy
  2. To improve rates/terms
  3. To pull out equity

We’ll address each separately.

1. As Part of a Strategy

Refinancing is a key part of the BRRRR strategy. In fact, you’ll notice it’s the third R (buy, rehab, rent, refinance, repeat) in the acronym. This is our go-to strategy, and we usually get a private loan up front to pay for the purchase and rehab (or at least for most of it). But you can also purchase the property for cash and then refinance later.

Once you have rehabbed and rented the property and it has “seasoned” (the amount of time a bank requires before they will lend on the appraised value instead of your cost into the property), it’s time to refinance—either to replace your high-interest private loan with a long-term loan or pull out the cash you put in the property to begin with.

Refinancing may also be a component of a different strategy as well. And if it’s part of the strategy you are utilizing, you should obviously refinance when that strategy calls for it. Sometimes, this may be forced upon you. Say a partner demands it or the loan is nearing it’s balloon and is about to be called due. Almost every loan will have a term, usually five years. Most banks will renew the loan at that time, but sometimes they will not. And national lenders that specialize in investment properties, such as A10 Capital, usually have a hard balloon date when you have to pay the loan off. In these times, unless you intend to sell, you would need to refinance.


Related: The Essential 11-Step Guide to Refinancing Investment Properties (For BRRRR Strategy Followers!)

2. To Improve Rates/Terms

The rates and terms banks offer change over time. If you have a bad loan, particularly if it’s fixed at a higher rate, it’s something you should definitely considering refinancing out of. My dad, for example, recently refinanced an apartment he owns that had a 5.94 percent loan on it and replaced it with one that was 4.25 percent.

The rule of thumb I’ve generally heard is that it makes sense to refinance if you can lower your rate by one full percentage point. That being said, Investopedia states that experts vary on their advice between one and two percent. The longer you plan to hold the property, the more it makes sense to accept a smaller reduction in the rate. So if you only think you’re going to hold the property for another year or two, I don’t think it’s enough to refinance for a one percent gain. On the other hand, if you plan to hold it for five plus years, in my judgement, it usually would make sense.

You can also run the numbers by hand. As The Balance explains:

“This process allows you to figure out how long it will take to recuperate the closing costs you’ll have to pay to refinance. For example, assume you’ll pay $2,000 to refinance and your payment will be reduced by $100 per month. In this scenario, you’ll start saving money after 20 months (the $2,000 expense divided by $100 of monthly savings equals 20 months).”

Or let’s put some harder numbers to it. Say you have a $200,000 loan at 5 percent interest (amortized over 30 years) costs $1,074/month. At 4 percent, it costs $955. So each month you would save $119. Let’s say your expenses look like this:

  • Appraisal: $450
  • Recording and Title Fees: $500
  • Loan Fees: $2,000

In this case, the closing costs of the loan would be $2,950. With $119 a month in savings, it would take 25 months to break even. That being said, it’s not worth the time and effort to refinance a property if you’re only going to break even. In the above example, I would want to plan on holding for at least four more years before pulling the trigger on a refinance.

Related: Should You Refinance Your Mortgage? Consider This.

It’s also important to remember that interest rates aren’t the only thing. There are many other terms to think about with a loan, including:

  • Fixed rate or adjustable (it may be better to refinance an adjustable loan into a fixed one to reduce risk)
  • Amortization (even at the same interest rate, a 15-year amortization will require substantially higher payments than a 30-year amortization)
  • Term (as noted above, you may have to refinance to avoid a balloon payment)
  • Loan fees (if too high, the fees could make even an attractive interest rate unaffordable)

3. Pulling Out Equity

One of the most important ways that real estate creates wealth is as properties appreciate and you pay down principal, your equity starts to grow exponentially. That being said, you can’t buy much with equity. To spend equity, you need to pull it out first. And so one great way to grow your real estate portfolio is to refinance properties you already own and use the equity you pull out as capital to purchase new assets with.

The question you have to ask yourself is, “Will I make a good enough return investing this money to make up for the increased mortgage payments of a higher loan?” This is something that you would need to run some numbers on. (For a how-to on that, see here.)

Another important reason to refinance out the equity in your property is debt consolidation. Mortgages are much cheaper than credit cards and many other types of debt. If you have such high-interest debts, it makes a lot more sense to pay them off with a lower interest mortgage.

That being said, I’m very much against refinancing your properties just to buy stuff or consumer goods. This type of borrowing gets a lot of people into a lot of trouble. Stuff, in the end, is just stuff. You really don’t need that much of it.

But real estate investors do need refinancing. And if you know when to use it, it can help you grow your real estate investment portfolio immensely.

Are there any other reasons you’d add to this list?

Comment below!

Source link

Homebuilder Lennar announced it has agreed to sell its Rialto Investment and Asset Management business to Stone Point Capital in a deal worth $340 million. The news of the sale shouldn’t come as too much of a surprise. Rumors about Lennar offloading Rialto to Stone Point surfaced in early October.

Source link

Every penny that you spend renovating an investment property has to be justified by ROI.

For rental properties, how much extra rent can you expect to command for this upgrade? For flips, how much extra value will that renovation add?

If an improvement will cost $1,000 but will only add $700 in value for a flip, then it’s not an improvement worth making.

Rentals are slightly more complicated. If an improvement to your rental property will cost $1,000 and will raise asking rents by $40, is it worth making?

One way to think about rental improvements is time-to-recovery. In the example above, it would take slightly over two years (25 months) to recover the up-front cost. Then you have to factor in the expected lifespan for the improvement.

For instance, that improvement is worth making if it will last you 15 years, but if it will only last through end of this tenancy? Maybe not.

If you’re buying a property that needs work, your first priority is obviously repairing or replacing anything that’s damaged or hideously ugly. But if we’re talking about an average, somewhat dated, ho-hum residential property, and your renovation budget is $5,000, what do you prioritize?

Here are seven ideas to help you spend your $5,000 renovation budget for maximum ROI.

7 Ways to Spend a $5,000 Renovation Budget for Max ROI

1. Appliance Hookups ($500+)

You don’t have to include appliances in your flip or rental property. But most buyers and renters nowadays expect to at least be able to plug in their own appliances.

The cost for adding appliance hookups will vary based on the layout of your property. As always, get at least three quotes from contractors.

If you’re a landlord, having appliance hookups (or better yet, appliances) will definitely help you secure a higher class of applicant. And better applicants mean better tenants, which in turn mean better returns.

2. Invincible Flooring ($2,000+)

This is less crucial to flippers, but landlords should install flooring that could withstand bombardment from the British navy.

I recommend to my students that they avoid carpets and hardwood floors in their rentals. They’re simply too easily damaged.

Instead, consider bamboo flooring, high-end faux hardwood, or luxury vinyl tile (LVT). The latter can even come in waterproof options.

While flooring is the most expensive item on this list, it’s also one of the most critical to landlords’ long-term returns and success. It will be hard to turn a profit as a landlord if you have to replace the carpet every two years as your units turn over.

3. Kitchens: Cover the Ugly ($250+)

Everyone loves to talk about kitchens and bathrooms in real estate—usually right before they try to sell you something for them.

You don’t need to spend an arm and a leg on kitchen renovations for an average property. If your renovation budget is tight, try simply putting a better face on the existing bone structure of your kitchen.

First, consider painting the cabinets. White or black are the classic options, but they’re not your only options, of course.

Second, look to the counters. Assuming they look like pickled death, how might you replace or cover them without going out and spending thousands on white marble?

Related: 3 Renovation Tips to Make Property Management Easier [Video!]

One idea is to replace them with butcher’s block. You can have it cut to your countertop’s dimensions and properly install it, or if the property is a lower-end rental, you could simply place an appropriately-sized piece of butcher’s block over the existing counters.

Another idea is to paint the counters a glossy black, then coat them with shellac or some other shiny surfacing agent. It’s easy, cheap, and contrasts well with white painted cabinets.

If your property is a rental, you can always cover ugly kitchen flooring with a giant throw rug, too.

Here are a few more cheap DIY kitchen hacks, if you’re looking for a new look on a tight budget.

4. Bathrooms: Pull Attention to the New ($100+)

Bathrooms are another area where property owners blow thousands of dollars.

Just like kitchens, how can you cover the ugliest, most outdated parts of a bathroom?

The giant rug trick works here too, if the tile floor is old, cracked, or downright ugly. Just make sure the rug you use is brand new and spotlessly clean.

Speaking of clean, the entire bathroom should sparkle with cleanliness, no matter how old the fixtures are. Use whatever cleaning agents it takes to get the tub, toilet, sink, and walls perfectly clean.

Then, direct prospects’ attention to a few new features in the room. A new upscale faucet, for example, makes the entire sink look newer and sharper. New stylish cabinet hardware, when combined with a fresh paintjob, can make old cabinets look new and chic.

Assuming your shower tiles have also seen better days, scrub them clean, then distract viewers with a bright, en-vogue shower curtain—left in the closed position, of course.

An upscale shower curtain, especially when it’s the brightest object in the bathroom, shifts the entire feel of the room for casual observers.

5. Low-Cost Landscaping ($100+)

Curb appeal matters more than most people give it credit. Human beings, by our very nature, make quick, subconscious decisions based on emotion, then gradually our conscious mind catches up, using logic to justify a decision already made by our lizard brain.

Curb appeal calls out to that lizard brain and helps make up prospects’ minds before they even know it.

The front lawn should be kept immaculately mowed, with front-facing bushes and shrubs trimmed perfectly. Edge the sidewalks—it takes a half hour but makes a huge difference in how crisp and neat the front walkway looks.

The rear landscaping is also important, but less so than the front. When time and budgets are constraints, focus on the front first.

I like potted plants as a cheap way to make the front entrance or walkway look more welcoming. This particular trick works particularly well for urban properties, which may not have a front lawn, or any green for blocks in any direction, for that matter.


6. Paint! ($250+)

When your budget is tight, you can do your own painting and save money.

The trick to painting is preparation, not the actual strokes. Meticulous taping and draping will make your amateur paint job look professional.

The interior of your property should be freshly painted before showing it to prospects. Period.

As for the exterior, that gets more difficult and more expensive. If the exterior is only dirty, try power washing it. But if the paint is flaking, you’ll need to scrape and repaint it.

7. Add a Few Pieces of Flare ($300+)

In my property management course, I teach my students to find a couple “hooks” to make their property more marketable.

What could you do to make your property stand out from all the other listings in your neighborhood?

One idea I like is to market your property as a “smart home.” The entire house doesn’t need to look like the Jetsons; you just need two or three smart home features. A smart thermostat is a no-brainer— it costs $180-250 and you can show off statistics about how much cheaper the utility bills will be.

Here are a few more ideas for smart home upgrades to boost your property’s marketability.

If the target demographic for your neighborhood is eco-conscious, how about marketing your property as a “green home”? You’re already on your way, with that smart thermostat; you just need one or two more eco-friendly features.

Have a dingy unfinished cellar? Add a big wine rack against a wall or two and call it a wine cellar!

Find a couple hooks that will make your listing stand out from the rest. They don’t need to be expensive; they just need to create an upscale vibe.

Related: 3 Easy Multifamily Renovations That Give the Best Bang for Your Buck

The Cure for Average

You can do a lot with $5,000, if you’re willing to do some of the work (e.g. painting) yourself. It’s amazing what a fresh paint job and spick-and-span cleanliness will do to make a property feel newer.

When you have a lavish budget and you can completely renovate the kitchen and bathrooms or completely re-shingle or reside the exterior of a property, it’s easy to make your property stand out and not feel so average. So mediocre. So boring.

But when you’re on a tight budget, you need to use creativity instead of cash to make your property feel fresh and new.

The cure for average is to find a few focal points to pull attention. We touched on this in the bathroom section above; when you can’t rip out the entire bathroom, you can still pull prospects’ attention to a few salient, new features.

The same applies to the entire house. Can’t afford to repaint the entire exterior? Repaint the front door a bright, attention-grabbing color. If prospects’ eyes are drawn to the brilliant red front door, it’s hard for them to conclude that the house is drab, even if the rest of it is coated in an old, dull gray.

Use your creativity, and it will only take those few attention-grabbing features to distract from the fact that kitchen flooring is ugly, or the shower tiles are dated.

We’re republishing this article to help out our newer readers.

What are your tips for doing a renovation on a tight budget?

Share your secrets and hacks below!

Source link

My husband and I are self proclaimed self-managing landlords. We’ve owned seven houses in three different states and self manage all of the homes ourselves. I have answered calls in Bahrain, signed a renewal on a 40-year-old ferry with ancient internet in the Baltic Sea between Finland and Russia and placed a tenant while in Abu Dabi.

While four years later this is where we are, it certainly wasn’t where we started or even our plan in the first place. When we got started four years ago, I had every intention of hiring a property manager. We both worked full time and honestly had no time or energy to manage a property six hours away that I had no ties to, and my husband’s college ties were fading fast. After that failed disastrously (let’s just say I wasn’t a fan of their contact!), I decided I was going to be the best property manager and have my tenant who liked me.

That too saw disastrous results. Once I learned that no one cared more about my house than myself and that someone else’s financial challenges couldn’t jeopardize my livelihood, suddenly things got a lot better. People realized that I would hold their feet to the fire.

The same pertains to a property manager. No one cares about your home more than you care about your home. No investment is truly passive, as no one cares about your financial net worth and therefore about your property like you do. It is very important when you are hiring a property manager that you put the time and energy into finding the right one. You need to take the time to interview them and make sure they are the right fit. You also need to continue to manage them and hold them to your expectation.

Over the years I have learned from watching others and through my own challenges that there are 80 things you should think about before picking your next property manager.

80 Questions to Ask BEFORE Hiring Your Next Property Management Company

1. Will I have one specific property manager? Who will be my property manager?

You want to know who will be your specific property manager and know their name. I am all about accountability, and you want to know and meet with your property manager, not just the marketing director or whoever is in charge of new business.

2. Who is the head of the office?

You want to know the broker in case something goes wrong. Brokers have PMs who work under their license, so ultimately it is the head broker who runs the show.

3. How long have you been a property manager?

The length of time is important to know. That being said, a hungry newbie who wants to learn, in my experience, is often times better than the most advanced person, because they care.

4. How many units do you manage?

For me this is more so food for thought because large and small management companies both have their pros and cons. There are benefits to a large office and also to a small office; the key is to know which one you are getting and to make sure you are comfortable with the pros and cons.


5. What is the average length that clients stay with you?

You want a property manager who is in it for the long haul. While this might not be a truthful answer or able to be substantiated, it is still good to ask.

6. Do you just manage or do you sell, too?

Most places do both. That being said, it is good to know to assess people’s motivations and goals. You want a company that still prioritizes property management even if it doesn’t make as much income doing so as selling.

7. What do you offer that sets you apart from other companies?

You want them to sell themselves, to tell you what they do differently from other companies. Remember, this is an interview for both parties.

8. What do you expect from me as the owner?

What is their expectation about your involvement? Some people want to be very micromanaged, and others do not. It is important to know the exact expectations that the property manager will have of you.

9. How often do you communicate with the home owners?

This is very important, since communication is key. It is really important to know over what issues, with which methods, and how quickly you will be notified.

Related: 7 Surefire Signs You Need to Enlist the Help of a Property Manager

10. Do you provide the owner’s information to the tenant?

Some people hire property managers so they do not have to give their information to tenants. So this is important.

11. Do you have a policy about landlords contacting the tenants?

Some management companies will not allow the landlords to contact the tenants in the house.

12. Do you have a requirement for your property management clients to use you? Do you charge if the tenant decides to buy the house?

Many property contracts require the landlord to pay fees if the tenant decides to buy or they sell. Make sure you check this clause closely.

13. How often do you reach out to the owners? Can you give me examples of how and when you would communicate various problems?

Communication is a very big concern and a common complaint regarding property management companies. The last thing you want is to be learning everything on your monthly statement. The best way to have clear expectations is to understand when they will notify you and when they will not.

14. What is your turnaround time on phone calls and emails from owners?

Some of the biggest complaints I hear are people not hearing back or receiving return phone calls quickly enough. This is why you want to know what to expect and how long it takes to hear back from your property manager.

15. What is your monthly charge?

Every management company calculates their fees differently. Some charge 10%, and that includes everything. Others do 6% and charge extras everywhere, so make sure you are looking at everything.

16. Who is the lease between?

In some places the owner is on the lease. In other places it is the management company on the lease.

17. Do you provide a copy of the lease to the owner, and if so, when?

One of the biggest issues I see is the owners not receiving a copy of the lease, so they are not able to verify when questions and issues arise with their property manager.

18. What lengths of lease do you offer?

Some property managers only do a month-to-month lease, others do a one-year, some do multiple. Personally, I do a month-to-month lease.

19. Do you charge extra for month-to-month leases?

I charge $300 more per month for my month-to-month lease. It is important to know what their policy is and who gets the fees.

20. Do you do a break-out clause?

I have a lot of tenants who try to break their lease. For me, this clause has been a lifesaver.

21. Do you offer a reverse military clause?

As an empire builder who buys homes that her family will live in too, it is important to me that we can always move back into our home. Therefore, we will always have a reverse military clause in our lease. The last I heard, if you did not have a clause, you couldn’t use it. Some companies will not allow this in their policy, so it is important to know your company’s policy.

22. Do you have a rental deductible?

I am a huge believer in tenants having skin in the game and therefore not calling over senseless items and repairs that cost money and cause headaches. Repairs can eat you alive and do some serious damage to your bottom line.

23. Do you have lease language that requires the tenant to pay for any damage they cause that is not wear and tear?

I am a huge believer of “you break it, you buy it.” So I charge my tenants for anything they break. I would ask my management company if they do the same thing.

24. Do you troubleshoot with your tenants when they call for repairs?

One of the things I have done to help reduce service calls is to troubleshoot with my tenants. I ask them if they tried the breaker, put a new light bulb in the socket, etc. So I would want to know if the property management will try to troubleshoot, or if it ends up being something silly if the tenants are required to pay the service call.

25. Do you do “sight unseen” leases? If yes, do you have a special addendum?

I know some places won’t rent sight unseen, which is a huge disadvantage in military areas. This has caused problems for me and others in the past, so I have fixed this issue by having a provision in the lease.


26. Who pays for pest control?

I don’t include pest control. Make sure to go over who is responsible.

27. Do you do “as is” appliances?

I put any appliances I don’t want to replace as “as is” in the lease.

28. How much move-out notice do you require?

I require my tenants to provide 60 days’ notice, but other companies and areas have different rules.

29. Is the lease automatically renewable?

I personally don’t like automatically renewable leases since if you forget, you could be in trouble. That being said, I know some places do it. So make sure you follow up on this to see if you property management company offers this service.

30. What is your renewal policy?

You want to know if they renew everyone or if people with specific dings against them are not renewed.

31. Do you charge for renewals?

Some companies charge a renewal fee to the owners if the tenant stays.

32. Do you perform a market evaluation for every renewal?

I am a huge believer in raising the rent every time a renewal comes up. So I would want a market evaluation and recommendation to raise rates if needed.

33. How do you determine to raise the rent or keep it the same?

Will they raise rates on good tenants? Is there a reason they wouldn’t raise the rent even if the market called for it? This is important since some people do not believe in raising the rates.

34. What does the monthly fee include?

Make sure you know exactly what you are paying for. Some places are more full service than others. Every agency has different standards and goals. I know some agencies who do professional photos and others who charge for it. So get them to go through what it includes.

35. Do you have any additional charges or fees (pet, placement, maintenance, etc)? What does my monthly charge not cover?

You want to look at the contract closely and ask specifically. At some places the monthly price is higher and that’s it. At other places the price is lower, but they nickel and dime you on ALL the fees.

36. Who keeps the fees that the tenants pay?

You want to know who keeps the late fees, pet fees, etc. This can cause a LOT of issues, so review the answer to this question closely. If your tenant pays you late and the management company retains the fees and you were expecting to be compensated, this can cause a lot of financial frustration.

37. How is the money dispersed?

Many property management firms only send checks, so this is a very important question.

38. When is the money dispersed?

Most people’s mortgages are due the 15th. This is a very important thing to know, so you make sure you receive your checks in time to pay your mortgage.

39. What is your advertising strategy?

Every company has a different marketing plan. Some companies take professional photos and others do not. You’ll want to know whether they take professional photos, where they advertise, etc.

40. What rental price do you recommend?

You want to know what they think it will rent for and why. Some places will overprice the rent (higher monthly fee since it’s a percentage), while others will underprice the rental (quicker to rent). The best way is to make sure it is priced right.

41. Do you recommend any work be done to get top dollar?

You want to know if they have any recommendations to get the best rental price from the unit.

42. How long do you think it will take to rent out?

Vacancy is lost revenue. Often times it’s better to go cheaper than vacant.

43. How quickly do you schedule showing/return calls?

One of the things I’ve found is important is to get people into the home as quickly as possible. For property managers who are not quick, this can be as much the issue as the price.


44. How quickly does it take you to approve tenants and have a lease signed?

I have found that this is also very important because I have had many people find other units when I have not been quick enough to get them approved and qualified.

45. What is your schedule for payments when installing a tenant?

I personally do not accept a signed lease until I have all of the deposits. Then first month’s rent is due with keys. It is important to know the process so there are no surprises.

Related: The Not-So-Obvious Reason Your Property Management Company is Failing You

46. Do you have a termination clause if it is not rented after so many months?

A lot of questions I see are regarding how to terminate an agreement after a house sits empty. So this is an important question to ask.

47. Do you have a trial period?

It is important to know if you are unhappy with the company if there is any way to get out early. If yes, what are the rules to retain the company if you are happy?

48. Do I pay any fees when the place is empty?

It is important to know if a company is going to charge you while your unit is empty. Some areas charge seasonal fees (opening/closing pools, winterizing homes) even if the home is not occupied.

49. What is your termination policy?

While you might have no desire to self-manage or to have a different company in mind, know that things can change. You want to make sure you are covered and have a very clear out.

50. What is your late policy?

The key to keeping tenants on time with the rent is to have consequences. Therefore, it is very important to enforce the late policy. You want to know their exact process.

51. What is your late fee amount?

I personally charge a 10% late fee, but based on the state and the company, this can change. Since a late fee is one of the biggest incentives for the tenant to pay on time, this is very important.

52. Who keeps the late fees?

Many property management companies will keep the late fees themselves.

53. If fees are not collected from the tenant, will you still charge the owner for them?

I have seen a few comments where owners were upset that they were charged for fees (late, etc.) because the tenants didn’t pay it. This is crazy, I know, but it has happened.

54. How many “late” payments does it take to have a fee assessed?

I give my tenants one late payment, and then after that, I ALWAYS assess the fee. You want to have their policy so you are not surprised when the first one is waived, but can be upset when the fifth one has been.

55. How many evictions did you perform last month?

I would want to know the number of evictions, as it’s great food for thought.

56. How do you handle the eviction process?

You want to know when the company will start the eviction process. Do they do it in house or hire someone? What is their procedure and how do they proceed?

57. Is the eviction part of the cost or is it an additional cost?

When we were first looking, they charged beyond their monthly fee at $20/hour. This can really hurt when you are evicting for nonpayment of rent and therefore not receiving income.

58. What is your application and screening process?

I run a credit and background check.

59. What are your screening requirements?

Do they accept foreclosures, short sales, 400 credit scores, evictions, etc.? Remember, you are picking someone that you can trust so you can be hands off. This is why it is very important that you agree with who they are picking.

60. Do you run it by me before you approve them?

Some companies just place the tenant, and others get final approval.

61. What do you charge for your application process?

Some companies charge a high amount to applicants, others charge the owners, etc.

62. What form do you use for the move in/move out inspection?

Personally, I would want to see the forms, as this is a very important part. This is what you will use to prove the tenant did damage.

63. Do you take video or pictures? What is your criteria for what you put down on the forms?

The more detailed you are, the easier it will be if you go to court, so this is very important.

64. How often do you do inspections during a tenant’s term?

Many property management companies do yearly or quarterly inspections.

65. How do you document the inspection, and do you send it to the landlords?

If they are supposed to do inspections, you want to make sure you receive a copy. You also want to make sure the inspections are documented.

66. How do you handle the security deposit?

You want to know where the security deposit will go and who holds on to it (them or you).


67. How do you charge for tenant’s damage during their lease term?

You do not want everything to wait until the end of the term. You want it to be taken out as the damage is done because the security deposit is their skin in the game and incentivizes them to not have an issue.

68. If there are damages upon move out, who does the accounting (you or the owner)?

If the tenant does a ton of damage, you want a property manager who is going to pursue the tenant for you–first by taking it out of the deposit and then by sending them a bill for the rest.

69. If the tenant has damages that exceed the security deposit, do you come up with the documents and pursue the tenant?

This is important because every company is different. So it is important to know who is responsible for what.

70. When do you return the security deposit? Do you get approval from the landlord first?

There have been a lot of issues with property managers returning the money too soon and missing deductions for tenant damage. Personally I use almost the entire time provided by law so I can make sure there is nothing missing before I return the deposit. I do not return the deposit at the move out or even the first week.

71. Do you do a pre-inspection prior to the tenant move out?

I only do one in California as required by law, but this is an important question.

72. What is your maintenance minimum/policy?

A lot of companies have a number, say $200, where any repair under that they will approve. It is important to take note of this as these can really eat your profit.

73. Do you charge for an additional fee for maintenance?

Some companies charge 2% or more on the repair cost. So this is very important to know.

74. Do you get multiple bids? If so at what amount?

I personally like multiple bids.

75. Is your maintenance in-house or a vendor?

This is good to know and more for food for thought.

76. How do you handle off-hour emergencies?

You want to know if they receive the calls or if it goes to an answering service.

77. What do you consider emergencies?

What is their definition of an emergency? (Heater out, etc.)

78. Do you ask permission or just fix and bill?

This is very important, as some emergency repairs can cost a small fortune.

79. How much time between tenants do you leave?

I try to schedule things as quickly as possible so my down time and therefore vacancy is as close to zero as possible. The key to this is being on top of things. Some people schedule weeks in between tenants so this is an important question.

Related: Managing Your Property Manager: How to Track Crucial Monthly Metrics

80. Do you show the house while the current tenant is in the home?

One of my ways to keep costs down is to show the house while the tenant is still in the unit.


The point of these 80 things is not to sit down and ask all 80 of these question in an interview format. I know if someone did that to me, I would probably run away. The point of these questions is to start you thinking about what you want. Do you want a large or small property management service? Did you read the entire lease and not only understand it but agree with it?

As someone who went through school to be a financial analyst and focuses on real estate. I find myself subconsciously analyzing every “horror” story I hear and identifying the problem. The biggest theme I have noticed with the horror stories or complaints about property management usually come from a lack of realistic expectations or from lack of interviewing and finding the right person.

Here are 4 take aways to think about, now that I have overwhelmed you with my list of 80 questions.

  1. Read these 80 questions. Think about these questions and your expectations from a property manager.
  2. Interview the property managers thoroughly. Spend the time to REALLY get to know them, their values, their styles, etc. Make sure you tell them everything you expect. Think of this like hiring a contractor, only you will have a contract and be “stuck” with them.
  3. Read the ENTIRE contract and lease. Make sure you are 100% comfortable and okay with everything they require.
  4. Think twice before hiring someone you gut is warning you against.

And lastly, remember that eventually you’ll just have to jump in. You will make mistakes, you will have regrets. If you don’t try, you won’t be successful. Before you know it, you will be me, dispensing thoughts, experience and other wisdoms (no legal advice!) to fellow landlords.

We’re republishing this article to help out our newer readers.

Did I miss anything? What questions do you ask? Is there something else I should add that you learned the hard way?

Let’s talk in the comments section!

Source link

Pending home sales increased 0.5% in September, but have still fallen on an annual basis for nine consecutive months in September, according to the latest report from the National Association of Realtors. NAR Chief Economist Lawrence Yun said that even though we are still seeing year-over-year declines, the latest monthly increase is a good, stabilizing trend.

Source link

Cresset Capital Management and Diversified Real Estate Capital are partnering to launch an investment fund for Opportunity Zones.The Cresset-Diversified fund will be used for real estate development and redevelopment in Opportunity Zones across the nation.

Source link

If you look hard enough, you can find real estate to buy in just about any market in the world. Still, there are warning signs that exist in each market that might indicate it’s just not a good idea to invest there.

6 Deal-Breakers that Disqualify a Market for Real Estate Investment

1. Declining Property Values

Unless you are a wholesaler who can get in and out faster than the market is declining or you can buy at an incredible discount and hold out for cash flow indefinitely, it doesn’t make a whole lot of sense to buy a rapidly depreciating asset. If neighborhood property values have recently dropped by 10% to 30% and that activity is just getting started, it’s no different than buying a new car, knowing it will be worth half as much once you drive off the lot.

4 Tax Tips for Rental Property Owners

Related: How to Invest in the Hottest Real Estate Markets and Still Cash Flow

2. Super High Vacancy Rates

Investors always need to expect some vacancy. It should be a part of your projections, even if occupancy is at 100% upon acquisition. Vacancies unique to one building may not be a bad thing. They may be an opportunity to renovate or bring in better management to increase value. Still, if one market is suffering an average of 30% or greater vacancy rates, when the national or city average is 5%, there could be a bigger problem. It is definitely a red flag to watch.

3. Declining Population

If people are moving away instead of towards a given market, there is going to be a drop in demand and buying transactions. Vacancies can get a lot higher, and values will stagnate. This can happen in even very wealthy and established markets where taxes are high and the population is aging. If all of the younger generations, talent, and workers are moving away and are staying away, local real estate can become less profitable. A quick Google search can reveal which cities have consistent population growth over the last couple hundred years—and which are declining or may be boom-and-bust markets.

4. Disrupted Jobs Market

Some markets can survive with very little local employment. The Florida Keys and other markets that are driven almost 100% by vacation owners and retirees are examples of these exceptions. Still, they can be heavily impacted by disruptions in travel and vacation patterns, security crises, and weather. Look at Detroit and what happened when the automakers went bust. It made a huge impact. Things are moving in the right direction now, 10 years later, but it can be a big risk to invest where a city is reliant on one major employer or sector.

5. Too Rural

You can find super cheap deals if you go far enough away from the city. That’s largely because most investors stay away from those sub-markets and most lenders won’t loan in them. Demand is too low. The potential buyer and renter pool is too low. Comps can be scarce. Reliance on annual crop production and profitability can be too volatile. This can also apply to distant suburbs, which experience huge boom-and-bust activity when the market changes. When the economy is strong, people go there for cheaper properties and can quickly flip houses and make some good profit. When the economy contracts, those areas can become the wild west again.


Related: An Analysis of Rental Market Trends: Here’s How Typical BiggerPockets Investors May Be Impacted in a Recession

6. Unreliable Government

You can find unbelievable promises of real estate investment returns in all types of exotic locations around the world. But one of the main reasons global investors prefer America is for its safety and legal system. In many other countries, police and governments can effectively take control over your property and give it to someone with less money. There’s nothing you can do about it. While this is mostly overseas, some U.S. markets can be more prone to this type of activity than others. Look out for high levels of government interference with landlords, especially when the city or county is grabbing profitable rentals from individual landlords to turn them over to larger developers.

What are some of the red flags and issues you’ve run into out there?

Comment below!

Source link

There is an ongoing debate here on BiggerPockets and in real estate investing circles about which investment is better—single family or multifamily. It is a very interesting (and even fun!) debate, and both can be great investments if you are prepared and execute an effective strategy and plan.

Today, I am joined by fellow BiggerPockets contributor Chad Gallagher from Slatehouse Management Group. We go into a ton of detail as we debate back and forth on this topic. Chad presents an argument for why the single family home strategy is better, and I’ll be debating why multifamily is better.

Related: How to Transition From Single-Family to Multifamily Investing

Multifamily vs. Single-Family Real Estate: Which is the Superior Investment?

I hope you enjoy this in-depth debate. Let’s continue the discussion and debate.

What investment class do you invest in? Why is it a better investment?

Thanks as always for watching my videos!

Source link

The links to third-party products and services on this page are affiliate links, meaning that BiggerPockets may earn a commission (at no additional cost to you) if you click through and make a purchase.


Real estate investment is a business of referrals. Just as in any industry, a few bad apples can ruin the image of the entire industry, so it can be difficult to get attention if you aren’t recommended first.

Believe it or not, there is a simple solution to this issue: Develop a great reputation.

When you do business well, you will create a portfolio of referrals that will do the talking for you. But in real estate, doing business well can be easier said than done.

As an investor, you are looking to get the biggest return with the least amount of work and as quickly as possible, but this must be balanced with the client’s need to feel taken care of.

When people feel that they are being taken care of, they will be more likely to refer you to their friends and family. So how can you create the best experience for your clients as possible? 

Be Honest

Don’t try to hide the fact that they may have options. Of course, they may be in a situation where putting the home on the market is not feasible, but this will not be the case for all your clients. Instead of avoiding the option of listing the home, make your option better.

Tell them about the short closing time, show them the laundry list of items that a home inspector goes through in a traditional sale, or maybe provide a list of rentals in their area to help with the transition.

Let them know that if they choose not to sell to you, they still have other ways of relieving their financial burden. Get to know the ins and outs of refinancing so that you can be a resource for some of the people that you may encounter.

In cases like these, you may not close that particular sale, but you may have opened the door for a few referrals. If you are honest, open, courteous, and respectful, you might even get referrals from someone who decided to refinance instead of sell.

Related: 6 Ways to Impress Clients With a Highly Personal Business Experience

Be Mindful

If you feel as though a client is not feeling cared for, talk to them. Give them a space to air their grievances. Maybe they have other people whispering in their ears about other options, or perhaps they are confused about the process and are feeling a bit uneasy.

Listening to your clients and answering their questions can ease their worries and bring a realm of comfort that will encourage a smooth sale.

You’ve been through this process before, but for many of your clients, this will be the first time they are involved in a transaction such as this.


There are many nationwide tools like Cole Realty Resource—or local solutions like Real Estate IQ in Texas—where you can research before you even meet your clients. You go in knowing how long they’ve owned the residence, whether they’re facing a lien, and what their income is, which can inform how you approach the sale. A family selling a cherished home will present different challenges than a rental owner who is just trying to unload a property. Using these tools not only offers a means to contact home owners, but also paints a picture of that owner, which can be used to provide a more efficient negotiation.

If you are mindful of the climate of the situation and keep the lines of communication open, you can check in with your clients and make sure that they feel like they have a voice that is being heard. 

Be Intentional

When you feel like a transaction is going particularly well, document it. Keep track of timelines and money earned by your client. Ask your clients if you can share a statement with future clients to accompany these numbers.

Send a thank you to your clients. Take the time to get to know them so you can send them a personalized closing gift. Does your client like to cook? How about an initialed cutting board? Do they play golf? What about a pack of nice golf balls or club mitts?

When your clients remember you fondly, they might be more likely to send your name down the line with the time presents itself.

Ask to take pictures of your happy customers. Real estate agents often take a picture of their buyers in front of their new home and post them on Facebook. Why not take a picture with your clients holding the envelope to their closing check?

Related: Yes, Customer Service DOES Matter in Real Estate: Here’s How to Make Yours Top-Notch

Send out a quick blurb (through email, mailers, or even a Facebook status) that reminds your past clients that referrals are the name of the game.

Through all your transactions be honest, be mindful, and be intentional. This perspective will help keep you on track to potentially being the name that people think of when their friends ask for real estate or investor referrals.

And those referrals could be what helps you grow your business and set you apart from your competitors.

Cole Realty Resource has a 70-year history of providing contact information (including cell phones and emails) for a specific property or entire neighborhood, which means more meaningful conversations about buying and selling real estate. Because of your relationship with BiggerPockets, you can now get access to unlimited home phones, cell phones and emails—all tied to a specific address and all at a discounted rate. To start getting contact info within minutes, click here.

How do you work on being honest, mindful, and intentional with your clients?

Comment below!

Source link

Real estate myths are abundant on the internet. It’s important to discern the facts from clickbait and content written by people trying to establish themselves as experts in an area they’re unfamiliar with. Some articles legitimately debunk real estate myths. The biggest obstacle is misleading titles that claim to debunk myths, but actually perpetuate them.

Incorrect information usually comes from one-sided reporting by people sharing a personal experience with a given situation. Unfortunately, following bad advice can plunge you into a downward spiral, depleting every ounce of financial security you have. One major financial mistake can drain your savings, force you to live on credit cards, and cause debt which will affect your ability to continue investing.

Hopefully, you’ve got a bigger savings account than the 69% of Americans who have a stash of under $1,000—or the 34% who don’t have any savings at all. If you don’t have enough savings to cover a large loss, it’s especially important to discern fact from myth and learn from experienced investors.

Relying on the following myths as absolutes can quickly turn your profits into loss.

3 Real Estate Myths That Can Turn Potential Profits Into Huge Loss

Myth #1: Listing above market value will always give you more profit.

At first glance, it seems like good advice to list above market value. Real estate agents know prices are negotiable, and it seems advantageous to negotiate from a higher starting point. Every investor wants their property to be one that sells above asking price, and starting higher seems like a good strategy to make that happen.

For instance, an inexperienced investor might list and sell a property for $200k above market value, and write an advice piece urging other investors to list above market price. An experienced investor knows listing above market value is a strategy to be used in specific circumstances only. A new investor doesn’t have enough buying and selling experience to differentiate what those circumstances are.

Listing above market value can work in cities like Seattle, San Francisco and the Silicon Valley area where homes routinely sell for more than asking price. In 2013, 67% of homes in San Francisco sold for $41,000 above the listed price. In 2017, a quarter of all U.S. homes sold for 3.1% above listing price.

In 2014, two Palo Alto homes sold for over a million dollars despite being in total disrepair. Despite one of those Palo Alto homes being steps away from noisy Caltrain tracks, it’s a few blocks from a lively downtown area. Also, when parking is scarce, homes with garages sell for more. It’s all about location, and apparently parking.

Attempting to list above market value outside of high-demand cities (or circumstances) can get your listing ignored. You can reduce the price when you don’t get any bites, but according to Nela Richardson, Chief Economist for the brokerage Redfin, if your home stays on the market for more than a few weeks, buyers will become suspicious.

Myth #2: You’ll get a better deal as a buyer without a real estate agent.

When a house is listed with a real estate agent, the entire sales commission is included in the price. When a buyer doesn’t have an agent, the seller’s agent receives the entire commission. In other words, a percentage of the sale price is designated as a sales commission. You don’t get a discount when you buy without an agent.

Myth #3: A small profit on a bad deal isn’t a big problem.

A small profit can become a big loss when you were counting on the deal going through for much more. It takes time, effort, and money to salvage a deal gone wrong. This is a lesson Dave Scherer knows well. As the Principal and Co-Founder at a top-ranked commercial real estate investment firm, Scherer knows his game. Like anyone, though, he isn’t immune to a bad deal. His firm entered into a JV deal that looked great on paper, but turned out to be the company’s smallest profit in 11 years.

Scherer’s firm bought a student housing complex for $14.4 million, but their partner failed to reveal that leasing was down, and he hired his own companies to work on the property without telling anyone.

After investing time and money into maintenance, capital improvements, marketing, and leasing out extra space, they eventually sold the property after owning it a little over a year. Their efforts to revive the situation strained their resources, and their JV partner became a hindrance to their attempts to revive the situation.

Scrutinize All Advice

Take all advice with a grain of salt. Look for the context people may not be sharing. Know the circumstances that make your situation similar or different from the success stories you read about. Property investment advice rarely applies to every situation all the time.

What would you add to this list?

Comment below!

Source link