Three Easy Ways To Increase Your Home Value

increase your home value

Here are three very easy ways to increase your home value and get buyers to pay more for it.   After all, like the saying goes, why spend (a lot) of money when you don’t have to?

Best Way To Increase Your Home Value

Real estate is all about location, location, location.  But real estate is also about appearance, appearance, appearance.

Improving the curb appeal of your home and its appearance is easy and relatively inexpensive.  Things you can do to improve the appearance of your home and increase its value include routine landscaping, decluttering, and fresh paint in today’s designer colors both inside and out.

Updated Fixtures

New faucets, electrical outlets and switches, and door handles are pleasing to the eye of the new home buyer.  Replacing these items is also pretty inexpensive and can usually be done without using a high-priced handyman or contractor.

You can increase your home value by thinking of updating fixtures as improving the curb appeal of the inside of your house.

Energy Efficient Appliances

For home owners who have a little extra money in their budget,  upgrading to LEED certified, energy efficient appliances can pay off in both the short- and long-run.

Are you thinking about selling your home in the not too distance future?  First-time home buyers will appreciate – and pay extra for – the work you’ve put into updating the appliances in your home to today’s Energy Star standards.

If you’re more of a buy-and-hold home owner, then the money you save by having energy efficient appliances will quickly add up over a few years.

Highly-rated air conditioning units, heating furnaces, water heaters, and kitchen appliances can help save a surprising amount of money with today’s energy efficient standards.

 

 

Real Estate Time Management Tips

real estate time management tips

Here are two real estate time management tips to help take running your real estate business to the next level.

Emails Take A Lot Of Time

There are certain tasks in any business that are affectionately called ‘time sucks‘.

Time sucks are things that, well, take up a lot of time without giving you anything in return.  Like more income, for example.

Email can be a huge time suck in any business, but especially in real estate.  That’s because real estate agents only get paid when a deal is done . . . and not by the hour or on a salary.

Even for correspondence that is time sensitive, checking, sending & receiving emails should be limited to two or three times each day.  Many people schedule their email times for first thing in the morning.  Then again around lunchtime, and toward the end of the day.

Have A Routine & Stick To It

Another good real estate time management tip is to have a routine and stick to it.

Devote a certain amount of time each day – at the same time each day – to tasks such as real estate marketing & prospecting, or client outreach, and administrative work.

Remember, having a successful real estate business isn’t about how many hours you work each day.

It’s about how smart you work!

Are Traditional Real Estate Companies Bound To Fail?

traditional real estate companies

To answer this question allow us to change gears for a moment and consider what Steve Jobs had to say about Apple Computer back in 1995.

Specifically, he talked about how Apple will eventually fail.

Granted, this thought is near-blasphemy for a countless number of retail stock market investors, mutual funds, and investment gurus.

After all, the price of Apple stock recently hit an all-time high.  Warren Buffett owns nearly $45 billion of the company, and Apple accounted for an incredible 23% of the entire S&P 500’s gains in May.

How in the world could Apple possibly fail?

According to Steve Jobs, companies with a monopoly market share forget about what it means to build a great product.  There’s no difference between a good and a bad product, and no feeling in the hearts of the people who run the company about wanting to help their customers.

Other than perhaps the size of the display screen, what’s the big difference between the last several generations of iPhones . . . except for a rising price?

Eventually companies decline because of the lack of quality products and failure to adapt to the new realities of the marketplace.  Steve Job’s belief that companies must adapt or eventually die is also applicable to the real estate industry today.

Traditional real estate companies

Media as diverse as the Pew Research Center and USA Today claim that the decline in home ownership and the rise of the ‘renter class’ is due to rapidly growing home prices and an inventory shortage.  Would-be homeowners are forced to rent because they can’t find anything to buy.

But perhaps a more likely explanation for more people renting homes than buying is that consumer demand is simply changing.

As more Baby Boomers retire and sell their family homes, they are intentionally choosing to rent, or moving into assisted living or senior housing.

At the same time, the younger generation prefers to rent a home rather than own.  Factors such as the growing gig economy and 1099 employment, the lack of mobility that home ownership brings, and the rapidly growing ways to invest in real estate other than owning a home, all make home ownership much less attractive than it once was.

The traditional real estate industry still operates under a business model of new home construction and a resale market that focuses primarily on home buyers that are owner occupants.

This is in stark contrast to the changing wants and desires of the real estate consumer, and a perfect example of Steve Job’s warning to companies who focus on their own needs rather than wanting to help their customers.

Three First-Time Home Buying Tips

first time home buying tips

Here are three first-time home buying tips that will go a long way toward enjoying your new home.

These three first-time home buying tips all focus around saving money.  That’s because buying your first home will always, always, always, take more money that you might think!

Down Payment Assistance

Many first-time home buyers think that asking the seller for down payment assistance is an embarrassment.  But smart home buyers think of this as a way of using OPM or other peoples’ money.

This first-time home buying tip works especially well with sellers who have a lot of equity in their home, and with buyers who have few contingencies in their purchase contract.

Closing Cost Credits

This is similar to asking for assistance with the down payment.  It works well with sellers who don’t even have that much equity in their home.

The fees when buying a new home can really add up.  In addition to the normal buyer costs such as doing inspections, there will be fees from the home owner association, title and escrow company, attorneys, and lenders.

Individually these can be small dollar amounts compared to the purchase price of a new home.  Most sellers are quite willing to negotiate a closing cost credit with a qualified home buyer of the house for sale.

Home Updating Escrow Reserve

First-time home buyers can also ask the title company to hold money in reserve for needed repairs.

The funds come from the seller, but are held by an independent third-party – such as the escrow, title company, or an attorney – to directly pay contractor bills.

Any left over money gets returned to the seller.

Other First-Time Home Buying Tips

In addition to getting as much money back from the seller as possible – even in a seller’s market!  First-time home buyers should also:

  • Try not to underestimate the cost of repairing & rehabbing
  • Visit the neighborhood during different times of the day and week
  • Don’t be afraid to renegotiate the purchase contract if any red flags appear during the inspection period

Relationship Between REITs and Rising Interest Rates

reits and rising interest rates

In today’s rising interest rate environment, many real estate investors are wondering what the relationship is between REITs and rising interest rates.

Here are three factors to consider.

Asset Quality of the REIT

Experienced real estate investors understand that not all real estate assets are created equal.  That’s why a time-tested truism is that real estate is all about location, location, location.

But in a hot market with real estate prices rapidly rising year after year, it’s easy to forget about quality and focus solely on quantity.  Sometimes traditional real estate companies do this all too often.

As interest rates continue to rise, REIT managers may have a hard time refinancing if they made the mistake of buying a low-quality asset at too high of a price.

Property Loan Refinancing Timelines

Loans on commercial investment real estate and larger multi-family property are usually made for only a few years at a time.  That’s because lenders know that volatility in the real estate market can appear at any time.

Another reason for short-term real estate loans is that lenders what to ensure that the asset is being maintained and that the real estate property management is top notch.

It’s important for both residential and commercial REIT investors to understand when each individual loan becomes due and what the prospects are for refinancing.

Real Estate Assets of the REIT

Investors concerned about REITS and rising interest rates should also investigate the quality of each individual asset that the REIT owns.  This will help to identify potential problems when the time comes to refinance.

Some items to research include:

  • Uniqueness of property
  • Competitive environment
  • Occupancy and tenant types
  • Asset class – retail, office, industrial, multi-family residential
  • Economic drivers of the market area

REITs and Rising Interest Rate – The Crowdfunding Alternative

Investors who are worried about specific REITs and rising interest rates often find that crowdfunding can be a good alternative to buying a publicly-held REIT.

That’s because crowdfunding organizations such as RealtyMogul and Fundrise raise capital for one specific asset purchase at a time.  This makes it much easier for the individual real estate investors to determine whether the real estate investment makes sense for their portfolio.

 

How To Buy A Rental Property Investment

rental property investment

Owning a real estate rental property investment is one of the most time-tested ways to build wealth and generate income.

Here are three things to consider when buying a rental property investment.

A Rental Property Investment Isn’t Your Home

Many beginning real estate investors make the mistake of buying a rental property investment the same way they would buy a home to live in themselves.

They focus more on the amenities-  lush backyard, high-end fixtures & appliances, and a swimming pool – than looking at the property as a business.    True, items like these will attract tenants.  But they will also be more expensive to maintain, repair, and replace when damaged beyond repair.

Experienced rental property real estate investors prefer to buy a basic home with minimal upgrades and amenities.  Doing this allows for a quicker turn between tenants and less expensive repairs when needed.

Go Where The Renters Are

An easy way to determine where to buy a rental property investment is to buy in areas where there are already apartments or smaller multi family dwellings.

While doing this might sound like common sense, it’s surprising how many beginning investors in real estate don’t do this.

Apartment building developers & property managers have already done the heavy lifting.  They’ve figured out where the renters are and what the market rents are for the area.  Rather than reinventing the wheel, savvy smaller rental real estate investors simply adapt to what the big players have already done.

Treat Your Rental Property Investment Like A Business

As a small real estate investor it’s very easy to get caught up in tenant drama.

Remember, the tenant is your customer and not your friend.  You’re providing a nice place for them to live.  In exchange you expect the monthly rent to be paid in full and on time, each and every month, and the property to be well kept.

Experienced real estate investors know that once they allow a tenant to pay the rent late it will quickly become the norm and not the exception.

How To Buy A Multifamily Property

buy a multifamily property

Many real estate investors decide to buy a multifamily property after owning one or two single family rental houses.

While the asset classes are similar, there are some distinct differences between owning single family rentals and buying a multifamily property.

Before You Buy A Multifamily Property

Here are some general things to consider before you buy a multifamily property.

These are general comments.  They will vary depending on what market and what country your real estate investments are:

Exit StrategyBefore you buy, think about selling

When you invest in a single family home as a rental, selling it is easy.

That’s because you have a bigger buyer pool.  You can sell a rental house to another real estate investor, to the tenant, or to an owner-occupier who is buying the house to live in.

Selling a multifamily property is different.  Yes, you could ‘go condo’ by turning each rental unit into a property for sale.  But often times that’s easier said than done.

When the time comes to sell your multifamily real estate investment, your pool of prospective buyers is going to be other income property investors.

Unit TurnsHow quickly can a vacant unit be made rental ready?

We all know that time is money.  This is especially true when it comes to property managing and leasing multifamily property.

The term ‘unit turn’ refers to how quickly any needed repairs and updating can be done when an old tenant moves out and a new one moves in.

Some of the keys to turning a unit quickly include having the same fixtures, appliances, paint and flooring in each unit of your multifamily property.

Tenant TypesUnderstand who you are renting to and why

Knowing the type of tenant you will be renting to is key to successfully investing in multifamily property.

You will also want to have a firm understanding of the unique characteristics of your specific tenants.

For example, young professionals in an urban area will expect more amenities and stylish decor.  Other renters are just looking for a simple place to live.

Five Ways To Have A Work/Life Balance In Real Estate

work life balance real estate

Achieving a positive work/life balance in real estate is much easier said than done.

It’s true whether you’re a new real estate agent selling real estate full time, or an experienced broker or real estate investor.  It’s true whether you work in residential, commercial real estate, property management, or another real estate niche. Positive time management in real estate can be difficult to achieve.

Why Have A Work/Life Balance In Real Estate?

In the real estate business the more you work the more money you make.  If you work in various markets around the world, you can literally work 24/7, seven-days-a-week if you choose to do so.

This works well for a while, and a little bit longer than a while for real estate people who have no family to worry about.  And those that are able to focus 100% on their real estate business.

But after a while, no matter what you do, real estate burnout occurs.

You forget to return phone calls or emails.  You’re not able to hold an intelligent conversation with clients or friends about a topic that doesn’t involve work.  Or you make a mistake on a contract and end up getting sued.

Not good.

Five Ways To Achieve A Positive Work/Life Balance In Real Estate

Here are five tips to balancing your work and life when you work in the real estate business:

  • Email – limit reading, replying, and sending emails to one or two times per day
  • Phone calls – as with emails, limit the times when you will make and receive phone calls
  • Working hours – have set working hours and take at least one full day off each week
  • Choose clients carefully – many prospective real estate clients don’t value your time and actually have no intention of buying anything from you . . . learn to choose the ones the will make money for you and learn to say ‘No’
  • Pick a real estate niche – you can’t be an expert in every field of real estate, and you can’t be all things to all people . . . choose what you’re good at and stick to it

 

How To Calculate A CAP Rate

calculate a cap rate

There are two pieces of information that real estate investors need in order to calculate  a CAP rate or Capitalization Rate:

  1. NOI or net operating income of the asset
  2. Sales price or current market value of the asset

CAP rates are useful for comparing the performance of a real estate investment to similar properties in the market, to calculate what a sales price should be based on the property’s NOI, and determining what the net operating income should be based on the CAP rate of a property that’s for sale.

The CAP rate calculation can be used for residential and multifamily property, commercial investments, and even land.

Formula To Calculate A CAP Rate

The formula used in a CAP rate calculation is pretty straightforward:

CAP Rate = NOI / Sales Price

Let’s say we have a small multi family rental property investment that is generating $100,000 in net operating income each year.  The owner decides to sell and lists the apartment building for sale for $2 million.

The CAP rate is: $100,000 NOI / $2,000,000 Sales price = 5% CAP rate

Why Is A CAP Rate Used?

In addition to comparing alternative real estate investments in the same market, the CAP rate formula can also be used for calculating what a sales price should be and in determining what a property’s net operating income should be based on CAP rates for similar properties.

For example, if our apartment building above is listed for sale with an asking price of $2.5 million and market CAP rates for similar properties are 5%, then the property’s NOI should be:

$2.5 million x 5% = $125,000 per year

Based on the capitalization rate calculation the property is over priced compared to its peers.  Now, maybe there’s a good reason for this or maybe not.  That’s up to the buyer and seller to determine.

What Is A Good CAP Rate?

CAP rates for specific asset classes vary from market to market and sometimes even from neighborhood to neighborhood.

A good CAP rate for one investor will be a not so good CAP rate for another investor.  That’s one reason why it’s dangerous to call a CAP rate good or bad in and of itself.

But capitalization rates are useful for quickly comparing one real estate investment to another, and also return on investment for specific asset classes from one market to another.

How To Analyze The Cost Of A Condo

analyze the cost of a condo

Many first time buyers and even some real estate agents misunderstand how to analyze the cost of a condo.

Here are a few things to consider when analyzing the cost of buying a condominium.

Analyze The Cost Of A Condo – Balance Sheet Reserves

The financial strength of a condominium association or strata has a big impact on the actual cost of buying a rental property such as a condo.

Condo buyers make the mistake of looking only at the profit and loss statement of the association.  They almost never look at the balance sheet showing the reserve budget.

The profit and loss statement can show a positive cash flow.  But the condo association may have very little money in the bank for an unexpected common area repair.

Budget Reserves Are A Big Deal

When a condo association needs money and doesn’t have it, the condo owner gets billed for a special assessment.

While the phrase sounds innocent enough, what it really means is that the association didn’t plan properly by saving money for a rainy day.  And the owners are the ones who will have to pay.

That’s why looking at the amount of reserves are so important when a buyer wants to analyze the cost of a condo they’re thinking about purchasing.

Imagine if you’re the owner of a condo – especially if you’re a first-time home buyer – and all of a sudden you have to pay $1,000 extra per month for the next 12 months to cover your share of an un-budgeted expense.