Real estate niche analysis

real estate niche

If you’re a new agent or investor, focusing on a single real estate niche will help jump start your business. Or maybe you’ve been in the business for a while but feel like your real estate business plan needs a reboot.

Concentrating your efforts on a single real estate niche will help separate the good clients from the bad ones, and help choose the real estate investments that are right for you.

A real estate niche can be an asset class

One way of thinking about real estate niches is to look at the different types of real estate available. Real estate asset classes can be divided into four categories:

  • Residential
  • Commercial
  • Land
  • Special use

There are a lot of different types of real estate that go into each of these four asset classes. To fine-tune your real estate business plan and avoid real estate burnout, you’ll want to break down these big real estate niche asset classes into something smaller.

Small real estate niches make up bigger asset classes

The next steps is to break down the four big asset classes above into sub-classes or smaller real estate niches. Let’s use the commercial real estate asset class avoid as an example.

Some of the types of real estate and activities that fall into the commercial category are:

  • Retail
  • Office
  • Warehouse
  • Industrial
  • Single tenant or NNN
  • Apartment buildings
  • Leasing
  • Buying
  • Selling
  • Property management

You can probably think of more, but you get the idea. Now, let’s take the office real estate niche and break it down a little more.

Office real estate niches

The office real estate niche can be divided up a number of different ways:

  • Size of property – single or two levels, midsize, or high rise office building
  • By class of property – typical office building classes are A+, A, B, and C
  • By how the office building is used – medical, professional services, consumer-related services (such as banking, collections agencies, or telemarketing), and general office use
  • Location of property – central business district, suburban office markets, or mixed-use office/residential

Choosing the real estate niche that’s right for you

The types of tenants and the types of owners for each of these office niches are different.

For example, a Class A office building in a central business district will likely be owned by an institutional investor. The types of tenants in this type of building will be white collar and professional service businesses.

The demands and expectations of these property owners and tenants will be much different from the mom-and-pop bookkeeping firm renting space in a smaller office building in the suburbs.

Successfully choosing the real estate niche that’s right for you means understanding your own preferences, strengths, and weaknesses and selecting the best match that will lead to your real estate success.

Three Things To Know Before Signing A Commercial Lease

commercial lease

Negotiating and signing a commercial lease is much more complicated than a residential lease.

Here are three things to think about before signing a commercial lease.

Three Types Of A Commercial Lease

Every commercial lease is different, but they do fall into three general categories:

  1. Gross Leases – everything such as utilities, common area maintenance, and janitorial is included in the monthly rent
  2. Triple Net Lease – nothing extra is included in the rent
  3. Modified Gross Lease – some things are included in the monthly rent and some things are not

Landlord Expense Pass Throughs

The things that aren’t included in the base rent are items that can really add up.  Known as expense pass throughs, these charges can also surprise a lot of tenants.

CAM fees – or common area maintenance fees – are the tenant’s proportional share of the landlord expenses to maintain the common areas of a property.   CAM items can include routine charges for services such as:

  • Landscaping
  • Utilities
  • General repairs
  • Janitorial
  • Parking lot sweeping

Personal Liability

Landlords and real estate property managers always try to make a commercial lease as strong as possible.  If a tenant goes bad and stops paying the rent, the landlord will look for as many ways as possible to collect.

Unlike residential leases that are usually only one year in length, commercial real estate leases often have terms of between five and ten years.  While that can be good for a business initially, it can be a big problem for the owners if the business shuts down.

Until a replacement tenant can be found, the business owners can be held personally liable for the total amount of unpaid rent agreed to in the commercial lease contract.

 

Five Real Estate Rental Property Expenses Not To Forget

real estate rental property expenses

Here’s a list of five real estate rental property expenses not to forget about when calculating your ROI. They apply to whatever real estate niche you’re working in.

As a good real estate accountant or bookkeeper will say, ‘Report all of your income and expense as much as you can’.

Tenant Credit Reports

Checking the credit and background of prospective tenants is a must-do and one of the most important tips for a real estate landlord or property manager.

While the cost of running an individual report is small, the annual real estate expense for credit reports can really add up.  Especially if you have a large multi family property or several single family rental homes.

Leasing Fees

Surprisingly, many beginning real estate investors overlook expensing out the finder’s fee paid for leasing the rental property.

One reason this happens is that the leasing agent will collect the upfront monies from the tenant – such as the first month’s rent and security deposit – then remit to the owner this money less the leasing fee paid out of those upfront monies.

The landlord mistakenly only accounts for the money he or she actually receives instead of the gross income from the tenant.

Back Office Property Management Time

The time spent on little tasks like answering incoming phone calls, balancing the bank statement, and endorsing rental checks can really add up over the course of a year.

One way to account for this time spent managing your real estate investment is to use a stop watch or timer on your computer.  Then, log the minutes on a spreadsheet along with the date and a brief description of the task.

Onsite Property Management

Just as with the back office time, onsite property management time can add up as well.  It’s also one of the most overlooked real estate rental property expenses.

This category includes tasks such as driving by or walking the property, meeting a vendor onsite, and checking out the competition.

Market Research

Speaking of the competition, don’t forget to expense the time spent researching your market.

This can include things such as dues and subscriptions, property drive-bys, shopping the competition, and online research.

Common Real Estate Rental Property Expenses

Some of the most common expenses with a real estate investment property include:

How To Buy A Home In A Safe Area

buy a home in a safe area

Buyers are often surprised to find that if they want to buy a home in a safe area, they oftentimes need to do their own research.

That’s because many laws – especially in the U.S. – prohibit real estate agents from telling buyers about the safety of an area.

Here are three easy things that can help you to buy a home in a safe area.

Buy A Home In A Safe Area With Multiple Visits

Many home buyers make the mistake of only visiting the home they are buying once or twice.  And that’s usually at the same time on the same day of the week.

To make sure that you’re buying a home in a safe area it’s important to make multiple visits are different times.

Going by the house at midnight on a Saturday is a great way to find out if there are a lot of noisy parties.

Visiting in the early evening or weekday mornings is a good way to see what the neighborhood is like when people are home.  It’s also a good way to meet your potential new neighbors.

Talk To The Neighbors

Speaking of which, there’s nothing wrong with introducing yourself to your next door potential new neighbor.

In addition to making new friends, it’s also a good way to gather intelligence about the home you’re thinking about buying.

Online Research

There’s so much information on the internet today that can help you to buy a home in a safe area.

Things like crime statistics and locations of sex offenders are important.  Aerial views of the neighborhood, and the locations of schools, churches, and shopping centers are also just a few key strokes away.

 

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 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. Doing so will make running a real estate business that much easier, and profitable.

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

Two Tips For New Landlords

tips for new landlords

Good tips for landlords are hard to come by, especially if you are new to the business of real estate property management.

Here are two more tips for new landlords that can save a lot of time, money and trouble.

Pictures Don’t Lie

Experienced real estate property managers and landlords leave as little as possible to the tenant’s imagination.

That’s why it’s a good idea to take photos of the appliances.  This includes the model label on the back of the machine.  Then, include this detailed information as part of the written real estate lease contract.

That way if an appliance happens to be missing during the move-out walk through it will be much easier to determine the replacement cost that the tenant is liable for.

Utilities Should Be Turned On

The rental lease that the tenant signs should specify that the utilities will be on when the move-out walk through is done.

Most leases actually call for this, but frequently the tenant doesn’t keep the electric, water, and gas turned on.

The reason for having the utilities on during the walk through is so the landlord or property manager can check for active water leaks and other damage that may have been caused due to tenant neglect.

Other Tips For New Landlords

New landlords are always anxious to get their first rental property rented.

But getting the wrong tenant will be much more expensive than taking the time to find and keep a great tenant.

A few other tips for new landlords include:

  • Don’t negotiate on the rent amount or down payment
  • Always run a tenant income and credit report and background check
  • Put everything in a written contract
  • Be aware of the landlord tenant laws in the market where your rental property is located

Remember, it’s always more expensive to get rid of a bad tenant – and to fix any damage caused by them – than it is to take the time and find and keep a great tenant to rent your property.

 

 

 

Is Hosting On Airbnb A Good Idea?

hosting on airbnb

A good way that first-time home buyers can save money on their new home is by hosting on Airbnb.

Airbnb hosting is also a good niche for vacation rental property managers to focus on.

Here are four things to consider about hosting on Airbnb.

Hosting On Airbnb Is Easy

The process for becoming a host on Airbnb is pretty easy.

But as Airbnb grows in popularity, there are more places listed for rent.

Because of that professional real estate copywriting and marketing are becoming more and more important.  It’s also a good idea to have professional pictures of your property taken before you offer your place for rent on Airbnb.

Airbnb hostings can be very competitive.  Making a good first impression makes a big, big difference between getting bookings on Airbnb and not getting them.

Airbnb Hostings Mean Extra Money

Some people make money on Airbnb by renting out an extra bedroom or listing their place on Airbnb when they go on vacation.

Then there are Airbnb hosts who pretty much rent their place out full time while they travel around the country or even around the world.

People who freelance and are able to work remotely – and those who have virtual businesses – love hosting on Airbnb.

Challenges With Hosting On Airbnb

Each time a guest leaves – and before new ones arrive – Airbnb hosts will need to make sure their place is thoroughly cleaned and ready to go.  Having a reliable cleaning company is critical and important to avoid getting bad reviews from guests on Airbnb.

Hosting on Airbnb also means having a kitchen that is completely supplied with cooking supplies, dishes, glasses, pots & pans.

Many 5-star Airbnb hosts also find that guests appreciate welcome gifts such as a bottle of wine, along with some cheese and crackers.  Remember, it’s always that extra little touch that people remember the most!

How To Make Your Real Estate Business Plan Better

real estate business plan

Having a real estate business plan – or a property management business plan  is crucial if you want to succeed in the business of real estate.

That’s because real estate is about much more than just buying & selling, leasing & managing.

Here are the top two ways to make your real estate business plan better.

Rainmakers Should Make Rain Not Train

Some real estate brokers are rainmakers.  They’re the ones who bring in the majority of the business and are great in dealing with clients.

If that’s the case, bring in a partner or key employee to recruit, train and manage the newly-hired real estate agents.

New agents will be attracted by the broker-rainmaker’s outstanding success stories.  But new real estate agents usually lack experience, skill or motivation.

They won’t be able to perform  and produce without having a lot of hands-on guidance – at least to begin with.  The broker-rainmaker won’t be able to give new agents the attention they deserve because they’re out there making rain and bringing in new business.

A Great Real Estate Business Plan Is Niche Specific

Focusing on a specific asset class for your real estate business is much easier than trying to be all things to all people.

A real estate asset class isn’t just commercial or residential real estate.  A asset class is a specific category – or niche – within those sectors.

If you have a residential real estate brokerage, concentrating on specific zip codes or neighborhoods is one example of a niche.  Another is focusing on a certain product type such as small multifamily or fix-n-flips.

Commercial real estate brokers could identify high-tech industrial property, medical office buildings, or STEM tenants as their niche.  Or they could concentrate on finding replacement property for 1031 tax deferred exchanges.

Property Management Business Plan Tips

property management business plan tips

Here are three property management business plan tips to think about before expanding your real estate business.

Focus On A Single Asset Class

One of the most important things to do when developing a property management business plan or a comprehensive real estate business plan is to focus on a specific real estate asset class, and then ‘drill down’ to a specific sub-class.

An example of this on the residential side would be single- or multi-family homes.  Then then focus on a specific price range, area of town, or number of units in the property.

An example of this on the commercial side would be multi-tenant retail or office.  After selecting the type of commercial property you will property manage, determine the class of property (A, B or C) and the property size in terms of square footage.

Developing A Solid Property Management Business Plan

It might seem counter-intuitive by narrowing the type of property you will manage.  But narrowing your focus is great for your real estate business for three reasons.

First, tenant personalities and issues will be more similar.  Their wants and needs will be as well.

The things that a medical tenant requires are much different from what a mom-and-pop small retail business will need.

Second, owner personalities will be more alike as well.  Real estate investors who buy office property are much different from those who invest in small multi family buildings.  Plus you’ll learn how to avoid a problem property owner.

Third, you’ll develop a skill set much quicker when you manage only certain type of real estate asset classes.

This will let you grow your property management business faster.  You’ll be able to transfer the skills you’ve learned in working with similar tenants and owners to other like-kind real estate.  You’ll also be able to target your property management marketing to the audience most likely to respond.