Three Easy Ways To Increase Your Home Value

increase your home value

Here are three very easy ways to increase your home value.   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 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!

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

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 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.

When Does Seller Financing Make Sense?

seller financing

It’s certainly true that cash can be king.  But there are also instances when seller financing can be a better option for real estate sales.

Seller financing is a good option in a down market, or in a real estate market where home prices keep rising.

Seller Financing Can Make Sense

Seller financing – also known as a seller carryback or a deed of trust note – offers advantages to both buyers and sellers of any type of real estate.

#1 Easy Sale In A Tough Market

In a down real estate market there are more sellers than buyers of real estate.  Offering seller financing can help entice a buyer to purchase your property instead of the competition’s.

#2 Reduce Capital Gains

If the seller owns the real estate free and clear, or has a substantial amount of equity built up, seller financing can help reduce the upfront tax on capital gains.

That’s because rather than getting all of the profit at one time, seller financing allows the seller to spread out the profit over a longer period of time.   The monthly payment received from the borrower will be part principle payment and part interest income to the note holder.

#3 Seller Can Sell The Note

Seasoned deed of trust notes are easy to sell on the secondary market.

Seasoning is a term used in mortgage finance that simply means the debtor or the borrower has made its payments in full and on time.  Usually after 12 months of consistent payments a deed of trust note is considered to be seasoned.

Many times sellers agree to seller finance in order to defer capital gains tax and earn interest income.  But then their situation changes.

Sometimes they want to raise cash for another real estate deal for example.  To do this they simply sell the seasoned deed of trust note to another investor and invest their cash in something else.

A lease purchase of real estate is similar to seller financing and has pros and cons for both the buyer and seller.

How To Spot A Problem Property Owner

problem property owner

If there’s one thing that real estate property managers try to avoid at all costs it is a problem property owner.

A problem real estate property owner is one who says one thing but does another.  They’re the type of owner where nothing is every their fault.

Real estate property managers can only do so much.  That’s why it’s always a good idea to avoid problem property owners right from the start.

Here are three ways to spot problem real estate property owners:

Contract Cancellation Clause

Make sure that your property management agreement has a cancellation clause that either party may use for any reason.

Good property managers will never have a property owner terminate their agreement.  But good property managers should always reserve the right to get rid of a problem property owner unilaterally.

Cash Poor Property Owners

One of the biggest red flags to look for is a property owner’s unwillingness to provide working capital, or to maintain a minimum reserve in a trust account.

Sometimes property owners are actually cash poor.  Other time they simply think that the cash flow from their property should cover any needed improvements or repairs.  The end result is that they don’t increase their home value or the worth of their real estate investment.

Unbelievably, many problem property owners think this even though their rental property has a high vacancy level due to the poor condition of their property.

Signs Of A Problem Property Owner

Real estate property managers can usually discover a problem property owner before the property management agreement is ever signed.

Red flags include:

  • Vacant units that are not move-in ready
  • Obvious deferred maintenance items such as painting, parking, and landscaping
  • Blaming the previous property management company for the condition of the property and the low occupancy level

Why Home Prices Keep Rising & More People Keep Renting

home prices keep rising

One reason that home prices keep rising can be found in a recent report by the Pew Research Center.  The report notes that more households are renting than anytime over the past 50 years.

Over the last 12 years the number of people who own a home has remained basically the same, while the number of people who rent where they live increased by over 25%.

Everybody Is Renting

This rise in renters is across all demographic groups:

  • All age groups have seen an increase in rental households, with 65% of people younger than 35 renting where they live
  • White, black, and Hispanic ethnic groups have all seen a rise in renters over the last 10 years
  • People of all education levels are renting more, with households holding a bachelor’s degree or higher having the largest increase in renters

The rise in home renters is a pattern that is going to continue for quite some time.  It is also a reason why the costs of condos and single family home prices keep rising.

Why Do Home Prices Keep Rising?

Since 2012 private equity has moved into the home rental market in force.  Large REITs and smaller crowdfunding groups now buy homes in quantity and rent to the people that were foreclosed on and forced into bankruptcy during the last housing crisis.  These mega-home rental organizations continue to buy both new and existing home inventory.

The shortage of skilled labor and zoning laws that constrain the supply of new construction are another reason why home prices will continue to rise.

In 2011 only 13% of the members of the National Association of Home Builders cited labor costs as a concern.  Now 82% of home builders say rising labor costs are their biggest concern.  Both immigration policy and the increase in natural disasters such as Hurricane Harvey in Houston cause labor shortages in the construction sector.

Lumber futures have increased by more than 57% since President Trump imposed tariffs on Canadian lumber.  While that’s good for people in the lumber business, it is a disaster for single- and multi-family home builders who use lumber for framing.

In Summary

An increasing amount of new home construction and existing inventory is being purchased in bulk and turned into rental property.

At the same time the supply of new housing is limited by rising labor and materials costs and well-intentioned NIMBY governmental zoning policies that cause a shortage of buildable land.

How To Buy Your First Rental Property

how to buy your first rental property

I was recently quoted in a Fit Small Business article about how to buy your first rental property.

You can click on the above link to read the complete article.  But, here are two time-tested tips on buying a rental property along with some extra commentary.

When You Buy Your First Rental Property, Basic Is Better

Basic is always better when buying a rental property, and it also makes the real estate financing easier.

That’s because the more variables there are, the more things you have that can go wrong.

For example, a ‘plain vanilla’ house with very simple landscaping and inexpensive fixtures & appliances presents less of a risk to a real estate investor than does a luxury home with everything high-end, including a pool and a spa.

(Buying a condo to rent out is also a good option, but there are certain items to be aware of with this type of investment.)

While it’s true that a luxury rental will command a higher rent, there are also more things that can go wrong and more expensive repairs.

Often times, the bottom line or net income is exactly the same with a basic rental than with a luxury rental house.

Buy Where Renters Are

This is a common-sense item that new landlords and buyers often overlook.  They get so caught up in the house itself but they forget that they’re buying the house to rent out, not to live in themselves.

An easy way to know where the home renters are is to look in an area where there are a lot of apartment buildings.

Apartment developers and managers have already done all of the market research, so that you don’t have to.

Plus, when you have a rental house in an area where there are a lot of apartments, you’ll be able to rent to people who want to ‘move up’ from apartment living.

Even if you already own a rental house or commercial property, it’s always good to go back to the basics every now and then!

Sample Real Estate Profile For LinkedIn

real estate profile for linkedin

Here’s an example of a real estate profile for LinkedIn . . . or for any other social media platform that you’re using to building your online real estate presence.

It can be used whether you work in residential or commercial real estate.  This sample real estate profile for LinkedIn is also good for both companies and individual real estate agents as a lead-in for your professional bio.

Real Estate Profile For LinkedIn

[Your company name] is a full-service brokerage serving the Greater [Your city] area.

Our brokers specialize in all asset classes of real estate including: single family, multifamily, mixed-use, retail, office, industrial, special use, property valuations, property management, fix-n-flips, JV equity sourcing, and note sales.

[Company] works with real estate investors of all sizes – from experienced private investors to beginning real estate investors.

We know from our years of experience in the business and successfully closing hundreds of transactions that maximizing the return on your real estate investment in [City or Market]’s competitive real estate market takes more than just one person.

That’s why [Company] utilizes a unique, integrated team approach when buying or selling real estate on behalf of our clients.

While other real estate brokerages in [City or Market] limit the opportunities that their clients see, [Company] thinks outside of the box. We understand the power of team work and cross-marketing.

Our proprietary global network of over 150,000 active investors allows us to reach as many qualified buyers and sellers as possible, as quickly as possible.

[Company] combines today’s high-technology with an old school, hands-on approach.

We’ve built our solid reputation in the [City or Market] real estate market the old fashioned way . . . one client at a time.

[Broker-specific copy goes here]