Archive for October, 2009
Should I use a Property Manager?
Are you trying to figure out if you’re going to be the “Do It All Landlord” or the “Sit back and Call the Shots Landlord?” The answer to this question directly depends on the thoughts, feelings and drives of the individual. There are many pro’s and con’s to each side of this coin for instance:
If you manage your own properties you:
- Save More Money
- Have first hand knowledge of each and every situation that might come up
- Get to know your tenants better
- Don’t have to worry about trust issues between yourself and your property manager
- Can keep a better eye on your properties and not rely on the word of your property manager about their condition
If you hire a property manager:
- You have more time freedom to do the things you want or need to do that managing properties normally takes up
- You have less headache and frustration from dealing directly with your tenants needs, wants & desires
- You don’t have to worry about making repairs yourself and rely on the property manager to worry about upkeep
- You don’t have to be the “Bad Guy” when it comes to evicting tenants anymore
There are a lot more reasons to hire or not to hire a Property Manager and there are extensive books written on the subject. I highly recommend reading the book “The ABC’s of Property Management” by the Robert Kiyosaki “Rich Dad” team. It’s a very insightful book that is definitely worth it’s weight in gold. I have read and recommended it to many others who have found it very helpful in the past when they too were contemplating the subject. Let me know what you think about it!
The Importance of finding the Right Real Estate Agent
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If and when you decide that you are ready to jump into the Rental Property business you will need HELP! And lots of it! You must find a good loan officer, attorney, tax accountant (optional), property manager (also optional) and real estate agent. This post will discuss the importance of the Real Estate Agent and exactly what qualities you want to look for in finding a proper real estate agent that looks after YOUR best interest and not the seller’s.
So you’ve been doing the online shopping thing and cruising through the many local real estate agency websites scouring through tons of different properties and you’ve found a few gems that you are definitely interested in taking a closer look at eh? Well unfortunately we can’t just approach the seller at the home and ask to take a tour of his property or break into that lonesome vacant property that looks like such a steal on the market right now. In order to gain access to these properties you will need to find a real estate agent that will show you around (and preferably has a lot of patience.) However, there are a lot of good as well as bad agents out there and choosing the right one to represent you is not as easy as you might think. Choosing the best real estate agent for you should not be taken lightly.
It’s time to start interviewing! Have you ever interviewed someone for a job before? Well if not then guess what! You’re about to get a quick glimpse of what it’s like to be the boss. You need to come up with a list of qualifications, skills and traits that you are looking for in a real estate agent. Some freebies you might want to consider are: Is the agent a full time realtor? Is the agent popular in the community? Has he/she won any realtor of the year awards (basically are they battle proven)? How many current listings does the realtor have on the market already? What are the typical closing times on the Realtors properties?
You need to call up several Realtors and let them know you are interested in becoming a local Landlord/Land-owner and you would like to set up an appointment to speak with them to see if they could help you find the right properties to purchase. Most Realtors will go Coo Coo for Cocoa-Puffs at this point (they don’t really get these kind of calls too often!) and will chomp at the bits to see you right away unless for some reason they don’t take you seriously (their loss). The realtor will be thinking to him/herself that they could score a lifetime client by really WOWing you at the interview so don’t be surprised if they are overly eager to please you. Try to look past the charm and flattery of the real estate agent (they are trained to be that way) and focus on your list of criteria you are seeking in a great real estate agent. Interview many of them until you’ve found the right one.
Remember you want an agent that will work for you! Not the seller! You’re going to be the one making lots of offers for different pieces of real estate and it’s all about what YOU want. The agent is there for you as a key to get inside of the houses you want to see you will need a real bulldog in your corner when it comes time to negotiate an offer. Don’t settle for timidness. Find an agent that’s not scared to call in a low-ball offer and work hard to keep it as close to you’re offer during the negotiation process.
After the first purchase with your real estate agent the two of you will begin to understand one another. When the time comes, you will be able to call them to let them know you’re ready for your next property and he or she will already have a few properties in mind just for you because they will know what kind of properties you are in the market for based on your past history together. I have a lot more information to put out about the criteria for selecting the right agent and will go into more detail about that soon! Thanks for reading.
Invest in the Right Rental Property
Are you tired of working for the man? Are you ready to start creating passive income that pays you while you do what you WANT to do and not what you HAVE to do? Investing in rental properties is one of the best vehicles to set you on the road to financial freedom. This article is going to explain how to find that perfect rental property that will pay for itself each month and give you plenty left over to start your real estate empire!
First things first! Go Shopping! There are literally hundreds of properties on the market in your neck of the woods that would make suitable homes to live in but you have to learn how to speculate when looking for profitable rental properties. Find out how much you can afford to spend on an investment property by first speaking to a loan officer at a bank (usually this depends on your credit history and how much money you’re willing to put down for your down payment). Once you have this number in mind you need to narrow down your search by putting in your price range parameters. Looking for houses online is probably the fastest and easiest way to get an idea of which houses you want to take a closer look at. You need to pre-screen the houses that you see online. Try to realize just how much work (if any) you are willing to put into fixing up your rental property. You generally can get better deals this way than by purchasing a property that is immaculate. Remember you are not shopping for yourself.
Once you have narrowed down all the houses that are up for sale by your price budget and by pre-screening them online it’s time to contact a real estate agent and ask them to show you the houses on your list. Once you get inside the houses make notes about what needs to be repaired or upgraded and try to use that as bargaining power when you are starting to negotiate the price of the house. (I never pay the asking price of a house).
Once you have found the best house for your budget and feel like it’s better than all the others that you’ve pre-screened (by price, area of town, condition, crime rate), then you need to do the math. This is the most important part of the process. If you purchase a property that cannot support itself then you are making a terrible mistake. You need to figure out just how much you can expect to rent out this property. Ask around! Talk to real estate agents that deal with investment properties and speak to other landlords. A few seasoned landlords can tell you exactly how much you can expect to make in rent from your property. But don’t ask just one. After you get a general idea of how much you “think” the property will rent for go ahead and subtract 10% of the monthly rent just incase the property doesn’t rent for that amount each month.
Next, figure out how much the monthly mortgage will be on the property. Get your real estate agent to find out how much your annual taxes and insurance will be for this property and also what you’re looking at for utilities each month (water, electricity, gas). Add up all of the monthly expenses (even the utilities just incase you have a tenant that wants you to pay the bills each month) and write down this total. Now add 10% to it for safe measure.
Now it’s time to figure out if your property will cash flow or not. Take the total amount of monthly rent that you ended up with in step 3 and subtract the final monthly expenses that you came up with in step 4. This should paint you a close picture of how you’ll look each month if you decide to go through with your purchase. Now multiply this number by 12 to get the annual income (the Net – what’s left over). If you’re rental property is not AT LEAST $200 in profit after you do the math then move on to your second choice property. You will need this minimum $200 each month in the case of repairs & vacancies. Hopefully you will have a nice profit margin from what you bring in to what you pay back each month. You will need to set up your own “repair fund” that you deposit a portion of the rent to each month for problems down the road and also a “vacancy fund” incase you cannot get someone in the property right away or they break the lease early.