image of for rent sign

How to Get the Most Out of Rental Income

Real estate investing has rapidly grown over the years with more people choosing to buy real estate to either flip for a profit or rent out for a passive income. However, many people who are new to this type of investing may not be fully aware of how to make the most of their purchases. If you want to maximize your profits from real estate investments, the following ideas can help you think more creatively.

Allow Pets

Many landlords miss out on tenants because they’re more concerned about the damages pets can do and take the easy way out of dealing with it by not allowing pets. If you want to attract a larger pool of potential tenants, allowing pets, even with some reasonable limitations, can do that for you. Be sure to collect a pet security deposit to cover any damages that may occur. This type of deposit is often nonrefundable, but tenants are more than happy to pay if they can get a nice living environment for themselves and their fur babies. This is typically around $250. It’s also possible to charge an extra $25-50 per month for pet rent if you’re still concerned.

Rent for Shorter Terms

Not everyone is looking for a long-term rental to spend a year or more. Some people travel for work, while others may just want a place to rent for a long getaway. Offering short-term contracts can open up your tenant pool significantly. Some renters prefer shorter six-month leases, while others would rather rent month to month so they can move quickly if needed. Think about the needs of your target audience and decide whether these shorter-term rentals are a better option for your rental property.

Furnish the Property

This is especially beneficial if you are considering short-term leasing, such as for business people who may be staying for a contract period. Some businesses will even rent properties with furnishings and move various business people in and out as their contracts dictate. If your property is located close to a college, providing furnishings can make your rentals more appealing to students who may be looking for alternatives to on-campus housing. There are many reasons individuals may be looking for furnished rentals that provide most of what they need. All they need to do is bring themselves, their clothes, and personal effects. Before you furnish any apartments, though, take a look at other local furnished apartments so you can remain competitive. While furnishing your properties is costly at first, it can pay off in the long run.

Add Extra Amenities

People are always looking for things that make a rental property stand out. Consider adding some extra amenities to make your rentals more attractive than the alternatives. Alarm systems, for instance, are an excellent addition, especially in more urban properties, to not only give your tenants greater peace of mind but to show them you are putting in the extra effort to make their stay in your property more enjoyable.

When investing in rental properties, it’s crucial to find the best ways to ensure a steady flow of income. Thinking outside the box is essential to your success. When you consider these ideas and come up with a few of your own, you can make your rental property truly stand out.

image of home and money held in hands

How Hard Money Lending Can Benefit You

Gone are the days when the thought of hard money lenders evoked images of shady lenders doing deals in dark alleys. Hard money lending has evolved into a reputable financing source for many people. There’s a lot of things that hard money lenders can do for you.

The Benefits of Hard Money Lending

Fast Process

Traditional lenders engage in a slow process, even if you have a good income and a good credit score. Hard money lenders take a different approach. Hard money lenders lend based on the collateral securing the loan. With this approach, they are not concerned about how you can pay the loan back. A hard money lender will just take the collateral and sell it in order to get repaid. That being said, your collateral’s value takes precedence over your financial position. Because hard money lenders are focused on collateral, the loan can be closed much more quickly than a traditional one. Hard money lenders do linger going through your loan application with a fine-tooth comb. They don’t spend time reviewing your income or verifying your current income. As a result, the loan process moves more quickly than a traditional loan. You can close a deal quickly with a hard money lender. And that’s very important in a hot market. You’ve got to be able to move fast.

Flexibility

With a hard money lender, you get some flexibility when compared to a traditional loan. Each deal is evaluated individually, instead of utilizing a standardized underwriting process. In addition, a hard money lender is much more willing to talk with you. It may be possible for you to tweak some things, such as repayment schedules. Instead of dealing with a bank with strict policies, the policies of a hard money lender are flexible.

Approval

Since the most important criteria for a hard money lender is collateral, approval is much more likely. A hard money lender will lend only as much as the property’s worth. If you need to borrow against a different property, that’s the value of that property will be what the hard money lender is interested in. Negative items on your credit report or previous foreclosures are much less important to a hard money lender than a traditional lender. Keep in mind that many hard money lenders maintain loan-to-value ratios (LTV). Their maximum LTV ratio may be from 50 percent to 70 percent. That’s a low ratio and hard money lenders know that they can sell the property quickly to get their money back. So, you’ll need some assets to qualify for a hard money loan. The bottom line is that your approval is much greater with a hard money lender.

Keep in mind that hard money loans make good sense for short term loans. That’s why so many fix-and-flip investors use hard money loans. Investors own the property just long enough to increase the value of the property. Then, they sell the property and repay the loan. This is often done within a year. If an investor plans for a longer time, he usually refinances for a better loan.

All around, the benefits of hard money lending are good when you know what you’re doing.

 

image of couple fixing and flipping a house

4 Things to Avoid When Fixing and Flipping a Property

Diving into the real estate investment world can be very exciting—and there’s certainly a lot of money to be made. If you don’t have much experience or haven’t done your research, though, your first fix-and-flip could end up being a disaster. By being aware of some of the most common mistakes investors make with fix-and-flip properties and how to avoid them, you can come out on top.

Paying Too Much for the Property

Start with knowing how to determine a fair asking price for the property in question. Many factors need to be taken into consideration when deciding how much to pay for an investment property, including:

  • the location
  • square footage
  • number of bedrooms/bathrooms
  • overall condition

And of course, you’ll also need to consider how much you’ll be able to realistically sell the property for once you’ve made the improvements. Make sure an investment property is going to be worth your time and will actually pay off in the long-run. Otherwise, you’re setting yourself up for failure right from the beginning.

Doing Too Much (Or Too Little)

Deciding on how to spend your renovation budget on a fix-and-flip property is a very precise science. You’ll need to have a solid understanding of which improvements and repairs will ultimately yield you the best return on your investment. From there, you can make smart choices moving forward.

For example, did you know that adding a wooden deck or patio on an investment property can bring in as much as a 90% return on your investment? Other projects to consider that can really pay off include bathroom/kitchen upgrades and landscaping improvements.

Choosing the Wrong Professionals

Even if you consider yourself a DIY expert, you won’t want to take on an entire fix-and-flip yourself. Instead, your time and resources will be better spent making big-picture decisions and overseeing a team of experienced and licensed professionals.

The contractors you choose to trust with your property’s repairs and improvements can have a huge impact on the results—and on your bottom line. Take the time to screen and interview potential contractors, and always make sure they’re properly licensed, bonded, and insured.

Making Polarizing Design Choices

Ultimately, your goal with an investment property should be to appeal to as large of an audience of potential buyers as possible. This means that you’ll want to avoid making polarizing design choices and keep things neutral instead. As much as you might love the idea of installing a bright and bold backsplash tile in the kitchen, you’ll probably get better feedback from potential buyers if you stick with something neutral and in-demand, like a white subway tile backsplash.

As you can see, there’s a lot to keep in mind when it comes to taking on a fix-and-flip property. By starting with the right purchase price and choosing a team of reputable contractors to carry out your projects, you’ll be well on your way to making some money with your first real estate investment!

Image of Commercial Real Estate Buildings in Arizona

As Arizona Begins To Re-Open, What Should We Expect From the Commercial Real Estate Industry?

The ongoing coronavirus pandemic has fundamentally changed the world as we know it. As countries around the planet began to shut down, states within the U.S.A.. followed suit. While each state followed its own set of guidelines, the country as a whole experienced a cumulative economic downturn. Now, months later, the state of Arizona is beginning to re-open as life returns to some semblance of normalcy. Unfortunately, life will be anything but normal for the commercial real estate market in the weeks, months, and potentially even years following COVID-19.

Understanding the Impact of COVID-19

While much has been made regarding the discussion of COVID-19s true impact on the country, it is hard to ignore the economic fallout that has taken hold in Arizona’s commercial real estate market. According to a vacancy report detailing post-COVID office vacancies, Arizona’s business sector is sporting Great Recession-levels of vacancy rates within traditional office buildings. A report compiled by the team at Costar projected that vacancy rates in commercial offices will remain between 11% and 15%. Seeing these numbers and understanding their impact are two different things. While only a sliver of the picture, this vacancy number gives us plenty to digest.

Let us briefly chart a few primary ways that the commercial real estate industry in Arizona will shift for the foreseeable future. As the state of Arizona continues to re-open, these expectations should be held for the commercial real estate industry:

  1. Space Requirement Changes – Living in a post-COVID world means acclimating to the new normal. Social distancing, sanitation, and large open spaces will dominate commercial property in the coming months and years. As OSHA and HR reps around the state adjust to these new regulations, expect businesses to need larger spaces for the same amount of work.
  2. Equalizing Rental Rates – As individuals struggle to make ends meet, there is an expectation that rental rates will reach an equalization factor. Landlords who are not beholden to debt or lenders that are offering amenable rates will do what is possible to keep their buildings fully staffed. As landlords compete to retain the best tenants, there is an expectation that flexibility in lending and renting can be met.
  3. Changing Operational Expectations – Industries that rely on call centers will also experience rather large changes in the way that they perform in the post-COVID world. Call centers will be expected to split shifts to reduce the footprint of their employees. Buildings will be reorganized and adjusted for CDC and OSHA regulations which could include the installation of filter systems, sneeze shields, and other sanitary safety measures.

While there is no telling exactly where Arizona will be on the other side of the COVID-19 re-opening, it does appear that the state is primed for a healthy launch. Arizona sports a warm and dry heat thanks to its geographical location. With plenty of room for potential land development and a healthy infrastructure for commercial construction, Arizona is in a primed position to succeed.

Home made of investment money

5 Reasons to Invest in Real Estate instead of Stocks

A good portfolio should be diversified. There’s stocks, bonds… but also real estate. In fact, most investors would be better off investing in real estate rather than other types of investment — for a number of reasons. If the volatility of the market has you hesitating to invest, consider a few of the reasons why real estate might be better.

1. Real estate is a more versatile investment.

You can make money through real estate in a few ways. First, there’s equity: It accrues value over time. Second, you can rent it out. Third, if you don’t want to rent, you can always just flip. Real estate gives you a lot of different opportunities to make money, so even if the market is changing, you’ll still find a way to profit.

2. Real estate fluctuates far less.

Real estate always goes up in value over time, compared to the stock market which frequently goes up and down. If you want an investment that’s never going to give you a heart attack, you want real estate. Even when real estate boomed-and-busted, it was over a comparatively short period of time, and it did rebound.

3. Real estate is something everyone knows a little about.

Most people have bought or sold a home whereas most people have not bought and sold a company. The fundamentals of a business can be very confusing, but most people know a little about what real estate would be considered valuable.

4. Real estate is both physical and finite.

Real estate is valuable for the same reason gold is: There’s a limited amount of it. There will always be a finite amount of real estate, which is why it’s always going to be more valuable than other types of investment.

5. Real estate gives you control over your investment.

You have direct control over real estate. If you want to make it into a business, you can. Your own effort in flipping a house or renting matters. But if you’re just investing in stocks and bonds, there’s very little you can do to influence the ultimate outcome of the investment. You’re at the mercy of the market forces.

That’s not to say you shouldn’t be invested in stocks and bonds, too. But in times of high volatility, it can be better to purchase something a little more secure. Real estate has long been a good investment during tumultuous times for all these reasons.

image of figurines of commercial real estate agents social distancing

Social Distancing Requirements Impacting Commercial Real Estate

When the first case of COVID-19 was diagnosed in the United States in January, it’s fair to say that the vast majority of people never thought it would lead to the nation being effectively shut down for the foreseeable future. Now over halfway through the year and restrictions still in place throughout most of the country, all kinds of businesses are being forced to adapt or go under. The commercial real estate industry is no exception, and it is important for all investors, property managers and building owners to know exactly what they’re dealing with.

It’s worth noting that, depending on the specific business operating out of a commercial space, there will be a variety of unique individual issues that need to be handled. In general, however, these are the social distancing requirements that need to be addressed in order for the space to be open and operational:

Ventilation is a Priority

All commercial spaces must have proper ventilation in order to help prevent Coronavirus spread. This means windows should be able to be opened, and ventilation systems may be in need of an upgrade. Many commercial spaces are also adding in fans and vents where none existed before.

Office Layouts Must Allow for Desk Spacing Requirements

Yes, a lot of offices are still sitting empty, with employees telecommuting from home as they wait out the pandemic. However, many others are going back to work in their office settings in order to increase productivity and communication. In order to do so, they generally must meet social distancing requirements by spacing desks out and seating employees so they face away from each other. Furthermore, cubicles are poised to make a comeback in lieu of the open offices that have become prevalent in recent years. Having divisions between work spaces is important in order to slow the spread of germs

On this note, many companies that are opening back up are even looking to relocate to larger spaces that allow for them to spread out. Conference rooms and walkways must also be expanded, allowing for coworkers to safely pass one another without coming into close personal contact.

Store Space Needs Are Changing

Most retail businesses now must operate at limited capacity and/or provide clear directional walkways for customers. Rather than sacrifice inventory and displays, a lot of retailers are therefore looking to expand their spaces when their leases are up.

On the flip side, other retailers that have been heavily hit by the pandemic are looking to downsize. They are looking for spaces where they can still effectively run their businesses with social distancing requirements in places, but within a smaller setup.

Cleanliness is a Must

All commercial spaces need to be cleaned more frequently now, meaning there must be easy access to cleaning supplies. Sinks are considered a plus, as are bathrooms that can be both easily cleaned and give customers and tenants more space.

Automated Features are a Welcome Bonus

Before 2020, the world was already making a gradual shift toward automation. From lighting to doors opening to even elevators knowing when to stop by themselves, automation has made great strides. Now with the ongoing pandemic, the fewer buttons and surfaces that need to be touched, the better. Automation helps promote as little personal contact and germ-sharing as possible, so it is likely that commercial properties with automated features will become even hotter commodities in the near future.

image of scale for flipping houses and money

4 House Flipping Myths That Could Cost You

Even with all the ups and downs of the real estate market, house flipping remains a lucrative endeavor. That said, anyone who’s been at it for a while will tell you that there are a lot of misunderstandings that could cost newcomers big-time. And the last thing you want is to purchase a house (even at low cost) and then go way outside your budget fixing it up, or worse, not be able to move it come sell-time. If you’re willing to put in a little work and flip houses the right way, here are 4 house flipping myths that must be avoided:

1. It’s a ‘Get Rich Quick’ Process

House flipping is nowhere near as easy as it sounds. The whole reason many houses are able to be purchased for lower costs is because they need quite a bit of work done before they become attractive to the market. It’s important to do your research on each house before buying and evaluating whether or not you are able to devote the time and money needed to fix it up.

2. A Coat of Paint Will Do the Trick

Going along with the above, it’s crucial to take a look at the actual structure and any hidden damage. Simply covering it all up with a fresh coat of paint and some other strictly cosmetic fixes can result in even costlier fixes down the line, or even a lawsuit if you portray the house to be something that it’s not. House flipping really is about fixing existing problems. There may be electrical, plumbing, insulation or other issues that need to be addressed before you can sell.

3. A Foreclosed House is a Great Flipping Option

At a glance, a foreclosed house may seem ideal because it can be purchased for cheap. However, it’s important to do your research first and have an in-depth inspection done. Houses are foreclosed because the people who lived there could not meet their mortgage payments or ran into other financial difficulties. This means they also likely let expensive fixes with the home slide and may have neglected its upkeep. There may even be some hidden issues neither you or an inspector will see right away.

4. You Absolutely Must Sell the Home

Did you know it’s actually just a myth that you need to sell the home at all? It’s important to take a serious look at the local market and gauge what your selling prospects are like. In many cases, it can actually be more lucrative to fix up the house and then rent it out to tenants. While you may not make a profit upfront, renting out the house long-term is means of bringing in steady income and can even result in bigger profits eventually.

The Bottom Line

House flipping is not for everyone, and it is not a project meant to be taken lightly. Many people work in house flipping as a full-time job, while others view it as a part-time job or serious hobby worthy of their time and efforts. If you’re willing to do the same and understand the myths, you can also reap the financial rewards that come down the line. If not, it may be wise to look into other endeavors.

5 Tips for Managing Out of State Rehabs

When you rehab a house in a state you reside in, it is convenient to do it because you live close to it. But how about when you rehab a home where you live far away from it? You will not be able to physically look at the work in progress and even walk through the property whenever you want to monitor that the work is being done as required.

How to Successfully Rehab Property Out of State

Two of the best scenarios you can use to rehab your property out of state is to:

  • Hire a contractor or property manager to rehab your home
  • You manage all the subcontractors, laborers, etc.

You can have a property manager handle all the repairs and rehab for you, or you can manage all the contractors, subcontractors, and laborers yourself.

The following are five tips to follow to ensure you successfully manage out of state rehabs.

1. Trust but Verify Everything

The key to rehab out of state is to trust but verify everything. Talk to your contractors, inspectors, and yard workers of the local area to verify that all the other workers work. You should also verify it with other people. Have before and after pictures of everything in the works send to you. Have your property manager check all the work being done on the property.

People on the ground should know you are checking on them and that you have eyes and ears on the ground for everything going on.

2. Don’t Pay Full Upfront For Work Done by Contractors

You may have heard of stories that a contractor is paid full upfront and he goes away with all the money. To prevent this from happening to you, you should follow a schedule of payment below:

  • Pay 10% of the price upfront for a contractor to get started
  • Paid 1/3 of the balance once a 1/3 of the work is completed
  • Pay another 1/3 of the balance once 2/3 of the work is completed
  • Make the final payment when the whole work is completed and verified

3. Manage Your Property Manager

For out of state rehab, you should have a property manager (PM). Look for the best one you can find, and have alternatives — in case you fire someone along the way.

Have your property manager handle all the repairs. There should never be a lack of communication between you and your property manager. Talk to your PM whenever you feel like to stay on top of your property rehab.

4. Manage Property Yourself

You can find, manage, pay, and verify all the sub-contractors yourself, although it can be hands-on and time-consuming. You can ask for referrals to find good subcontractors or search on the internet. Read reviews to help you decide if you should choose a particular subcontractor.

Call daily a subcontractor to stay on top of each job and get progress reports.

5. Have Proper Documentations for the State

Prepare the paperwork, schedule a meeting, and walkthrough with all parties to have proper documentations signed for the state. This also gives peace of mind that everyone involved is on the same page especially with regards to project details, time frames, and the budget.

To get started, carefully put across your goals and identify which rehab best aligns with your situation. Don’t be afraid to start small. Learn the process before taking on your first project.

5 Ways to Market Your Home Flip

When you buy a house and then sell it for a profit — that is a home flip. For a house to be considered a flip, it must be bought to quickly resell it. You will need a solid real estate marketing plan to attract potential buyers to your home. You can sell the house yourself or through a listing agent, but you have a common goal — to sell the house in the shortest time possible for the highest possible price.

To reach your goal, you need to attract the largest number of potential buyers. This requires you have a market strategy. To come up with a market strategy you will need to answer the following two questions:

  • Where are you likely to find buyers interested to buy your home?
  • Where do buyers look to find homes for sale?

Potential profit only becomes a reality when the rehab is done, the home is resold, and you have the cash in hand. Use the following smart rules they will help you convert opportunities efficiently and consistently.

1. Find a Knowledgeable Real Estate Agent

A good agent will provide the best possible deal for your home, and in the most convenient manner possible. You should look for a real estate agent who has lots of experience, both in the industry and in your local area in particular. A knowledgeable agent will lead you through everything to successfully get a buyer and will answer any questions you have and protect you against any hindrances that may arise.

You can ask around from friends and family for referrals or search through the internet for local agents in your area.

2. Timing Is Key

Spring and summer are often the busiest time for home sales, but that doesn’t mean you should list your house only at those times. Even though winter may have fewer buyers, a couple of factors will motivate them to buy, for example, when they need to move for a job and need to find a new home as soon as possible.

Market conditions are local, so if you invest in an area that has a strong seasonal element, for example, a beach town, consider that into your consideration as well.

3. Spread the Word

Even though your real estate agent will do a great deal to market your home, you can still chip in to help spread the word further. Talk to your friends, family, and colleagues about your home flip. Post pictures of your home on social media, including Instagram, Facebook, and Twitter.

4. Price Wisely

Your real estate agent will advise you on the best price to put on the home sale that will entice buyers, and give you a good return on your investment.   But also look at similar properties in your area to see what price they offer. This will give you a clue — homes that have been on the market for many weeks may be an indication they are priced too high.

5. Negotiations are Key

Agents, mentors, and mastermind groups will help you when it comes to counter, help you to know when to hold firm, and when to accept the buyer’s offer. Listen to their recommendations as they’ve seen it all before.

Make yourself scarce when it is time to show your home, whether by appointment or an open house. Your anxious presence or added comments will add an element of pressure and awkwardness that could discourage buyers. Let your agent handle the case for you.