American Apartment Owners Association

The hottest new condo trend is reusing old buildings

Mon, 11/13/2017 - 10:04am

Everything old is new again. Well, mostly new, anyway.

Look across New York City and you’ll find all manner of structures — stables, churches, factories, warehouses — being converted to residential use. With a building stock dating back centuries and high demand for developable land, the city and surrounding region is a natural spot for these sorts of conversions.

And in a market where it sometimes seems the sole imperative is to cram as much apartment into as little space as possible, adaptive reuse can allow (or force) developers to add some idiosyncratic touches to their buildings.

Take, for instance, Six Cortlandt Alley ($6 million to $9 million), a five-unit condo conversion of a former corset factory and furniture showroom from Megalith Capital Management and Imperial Development Group. In the course of work on the project, the developers uncovered original details like granite archways, and stone walls and timber that they’ve incorporated into the new building.

“We actually have several locations within the building where you can see the original fabric of the property,” says Ryan Kaplan, a partner at Imperial. “We wanted to remind people from the moment they step into the building and up until they get to their apartment that there is a history here that can’t be replicated in a new building.”

Likewise with developments such as Alchemy Properties’ Woolworth Tower Residences, where Frank Woolworth’s original private lap pool is being repurposed as part of the 33-unit condo development’s ($4.6 million to $110 million) amenities package. At 51 Jay St. ($2.4 million to $5.2 million) in Dumbo, developers Slate Property Group and Adam America Real Estate preserved the century-old industrial building’s original facade while incorporating its roof skylight into the glassed-in penthouse.

Frank Woolworth’s original lap pool is being elegantly repurposed as part of the amenities package at downtown’s Woolworth Tower Residences.The Woolworth Tower Residences; Williams New York/Evan Joseph

At West Village building the Shephard ($1.4 million to $29.5 million), Naftali Group maintained original features like barrel-vault ceilings, and brick-and-granite detailing when it carved 38 condos out of the 19th-century industrial building.

Those details, Naftali EVP Matt Van Damm says, are the sorts of things no developer would take the trouble and expense to re-create from scratch.

“Even if we could, it would be cost prohibitive to rebuild it exactly as it was,” he says.

Uptown, at 140-142 W. 81st St., CMC Development Group and Epstein Development Group are converting the 19th-century Mount Pleasant Baptist Church into a five-unit condo where apartments will feature grace notes from the building’s past like its stained-glass rose window and gabled roofs.

The Upper West Side’s Mount Pleasant Baptist Church is now being converted from a house of worship to swanky condos.DXA Studio

“It’s something you would never see on a new building,” says architect Jordan Rogove, partner with DXA studio, which is handling the conversion. “But it creates a very special and interesting space.”

Decisions forced on builders of the past can prove a boon for developers today, says David Robinson, an architect with Newark-based Studio for Urban Architecture & Design, which is working on several projects in that city’s Ironbound district.

One is a conversion of the former Murphy Varnish Works factory to a mixed-use development featuring 46 rental units. Robinson noted that the lack of artificial lighting required that the original structure, which dates to the mid-19th century, be built in a way that maximized natural light.

That makes it perfect for residential development today, he says. “Modern buildings are very deep, but old factory and mill buildings were made so they could get natural light into the space. So they are laid out perfectly for residences.”

Thicker floors and walls used in old construction can also make for quieter living, Van Damm says. “You try your best to address [noise issues] in new development, but you’re not going to pour a concrete slab two or three times thicker than you have to.”

Prime Manhattan Realty’s Robert Dankner represents Tribeca property 17 Leonard St., the onetime stables for the Knickerbocker Ice Company. The owner is in the midst of turning the 161-year-old building into an 11,500-square foot single-family home, repurposing the stables as the entrance to an underground three-car garage.

“It’s going to be a garage with a lift that will go down two levels where there will also be a wine cellar and cigar room,” Dankner says, adding that the design will preserve some of the original wood and steel beams.

Adaptive reuse can be a mixed bag, though, Rogove says, acknowledging that while such projects are catnip to architects, developers have cause to be more circumspect.

“It . . . leads to better design and more interesting spaces,” he says. But, “the fact that these spaces are different from everything else on the market — there’s arisk in that, too.”

There can also be an additional expense, Rogove adds. “When you talk to developers on these projects, maintaining a landmarked facade or other portion of the building can be an expensive proposition,” he says. “So I think that when these guys are doing their pro formas and trying to assess if they want to get involved in a project, it might price a number of them out. It’s not for everybody.”

“Conversions are tough,” says Megalith CEO Samvir Sidhu, noting that old buildings often come with unexpected surprises.

“You never have enough time or enough diligence to be able to truly uncover some of the unforeseen things [that will arise in a conversion],” he says.

Of course, sometimes, as at Six Cortlandt, the surprises can be happy ones.

“There are a lot of things we discovered that we had no idea were there, but became features of different amenity spaces or units,” Sidhu says.

A structure’s past can be felt in more fundamental ways, as well. Naftali’s Van Damm notes that unit layouts at the Shephard expanded to fill the building’s size.

 

“The building is a lot bigger than it would have been if we had built new construction on the same site,” he says. “We realized pretty quickly that we were going to have a lot of extra space, so our floorplans became a lot more generous, more similar to prewar.”

At Parkhill City, Chetrit Group’s 476-unit rental conversion of Mary Immaculate Hospital in Jamaica, architect David West had to shave parts off of the existing structure while adding to other sections to make for more conventional apartment sizes.

“We had to work with some areas where the building was shallow and some where it was much deeper than normal for a residential building,” West says. “Where that became extreme we actually sliced off pieces of the building and put them back where they would make a better dimension.”

While residents typically enjoy historic touches, developers shouldn’t go overboard, Dankner cautions. “I think it’s important not to go too far,” he says. “There are functional, modern elements that most people expect; you don’t want to fool with them to preserve the architecture.”

The ideal, he adds, is to achieve “the charm of what was there, but seen from ‘a distance.’”

 

Source: nypost.com

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Use Plants to Showcase a Healthier Home

Mon, 11/13/2017 - 10:00am

You can clean the air with plants. And in an age when “healthy home” is what so many buyers are saying they crave, you may find this a cheaper alternative to improving the air quality in a home by just being smarter about the plants you choose to stage with.

The Center for REALTOR(R) Technology has been studying how plants can improve indoor air quality, and has written a book on the topic, “A Pocket Guide to Cleaner Air.” The book focuses on which plants can improve air quality in commercial settings. Their findings can also apply to residential spaces too.

At the 2017 REALTOR(R) Conference & Expo this past weekend, CRT showcased an orb of clean-air plants on the show floor. We thought it looked like a chic space for an outdoor oasis of fresh air. But as the healthier-home trend catches on more, maybe we’ll even see this idea move indoors—like an indoor tropical paradise home office orb. After all, the cleaner air is supposed to make you more productive.

CRT’s clean-air orb display during the 2017 REALTOR(R) Conference & Expo

 

The average American spends about 90 percent of their time indoors. Yet, indoor air quality is about five to 10 times worse than outdoor air quality.

Certain plants, however, can actually improve the air quality of a space and even make people more productive and healthier, research shows. For example, dracaena warneckii is known for cleaning benzene and formaldehyde from the air—chemicals that are often linked to some furnishings. The “Money Plant,” or also known as Devil’s Ivy, is known as one of the hardiest houseplants to kill and also will rid these potentially harmful chemicals from the air. The Chinese evergreen is another plant that is known to clean indoor air, and as a bonus for when selling a home, it’s known to bring good luck to those who grow it.

Infuse more clean-air plants into your next listing. Maybe buyers will notice there’s something different in the air.

A sample taken from CRT’s book “A Pocket Guide to Cleaner Air”

Source: styledstagedsold.blogs.realtor.org

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Hurricanes could bring another disaster: Foreclosures

Mon, 11/13/2017 - 9:58am
As life slowly returns to normal in hurricane-ravaged parts of Texas, Florida and Puerto Rico, housing experts and consumer advocates worry another crisis is on the horizon: Foreclosures.

Already, legal aid groups are working with people who are struggling to make mortgage payments on homes made uninhabitable by the storms, while paying rent somewhere else.

Although most mortgage lenders are offering grace periods for homeowners in disaster zones, the real trouble begins when those grace periods run out.

“I’m anticipating a wave of problems coming in February,” said Amir Befroui, a foreclosure specialist for Lone Star Legal Aid based in Houston. “It’s going to get worse before it gets better. We’re in the calm before the storm.”

Roughly 4.8 million mortgaged properties were in the paths of Hurricanes Harvey, Irma, and Maria, representing nearly $746 billion in unpaid principal balances, according to financial data firm Black Knight. In September, the number of loans that were more than 30 days past due rose 48% in Irma-affected areas and 67% in Harvey-affected areas, Black Knight found. The firm has not run the numbers for Puerto Rico yet.

Consumer advocates and government agencies are now trying to prevent those delinquencies from turning into lost homes and broken neighborhoods.

Soon after the storms hit, government-backed mortgage giants Fannie Mae and Freddie Mac instituted a three-month suspension of foreclosure sales, late fees and credit score reporting, and allowed mortgage servicers to work out forbearance plans that could delay payments for up to a year.

Those measures help, but historically haven’t been enough to solve the problem.

After Hurricane Sandy hit New York and New Jersey, homeowners still had trouble resuming payments once their forbearance period ended, according to a 2013 report by Legal Services NYC.

For many, months of postponed payments were suddenly due all at once after that grace period ended, creating an insurmountable burden.

The other problem: Mortgage servicers tend not to release insurance payments until homeowners have a contractor lined up to make repairs. That’s a daunting task at a time when construction companies have months-long waiting lists due to a surge in demand, and homeowners need money immediately in order to clean out their homes and avoid further damage.

“You just have to go through this really bureaucratic process just to get some funds flowing,” said Joseph Sant, director of homeowner services for the non-profit Center for New York City Neighborhoods. “When there’s a disaster on a large scale, mortgage servicing companies are an integral part of the recovery process. After Sandy, they were just not ready to play that role.”

In New York, state regulators worked with Fannie and Freddie to avoid large payment spikes for homeowners. The state also worked with mortgage servicers to reduce some of the stringent requirements placed on insurance payouts, like getting detailed estimates from contractors and multiple inspections. But those actions came months after Sandy hit, and neither Texas nor Florida or Puerto Rico have taken similar measures yet.

For Anna Rosalez, a medical administrator in Houston whose home took on four feet of water, the process has been suffocating. She has flood insurance and found a contractor through a family contact. But the insurance company wants all the expenses itemized before it will release the funds to fix the house — which she says still won’t cover the full cost.

Meanwhile, Rosalez and her husband are living in a hotel, which the Federal Emergency Management Agency will stop paying for on Nov. 27. Her mortgage forbearance ends this month, too. So she’ll have to resume her monthly payments of $893, on top of everything else.

“We’ve had to spend money that we don’t have just to keep going every day,” says Rosalez, 60. “It’s very frustrating, very tiring.”

Last week, consumer advocacy groups sent a letter to Fannie, Freddie and other agencies in the mortgage business asking that particularly hard-hit homeowners be able to hit pause on their mortgage payments for up to two years. The groups also recommended that servicers immediately give homeowners $10,000 to fund urgent repairs.

The Federal Housing Finance Agency, which regulates Fannie and Freddie, responded by allowing affected homeowners to extend their loan terms and issuing guidance for servicers to release more insurance money upfront.

National Consumer Law Center attorney Alys Cohen says that’s progress, but it doesn’t free homeowners from the burden of finding a licensed contractor in order to get the insurance money they need before rebuilding.

In addition, the policy changes don’t cover the approximately 40% of mortgages that are owned by private investors and banks. In Puerto Rico, that percentage is even higher. The island was already in bad economic shape before the storm and had a mortgage delinquency rate three times the national average.

Nate Hendricks is a Florida-based law firm operations manager who started the Puerto Rico Legal Project this past summer to defend homeowners facing foreclosure. He said the fact that many mortgages are held by smaller, local banks makes it more likely that lenders will move to foreclose.

Banco Popular, for example, is one of the biggest banks on the island and is only offering a three-month forbearance. In its last earnings call, it reported a $70 million increase in its quarterly loan loss allowance on the island, driven largely by mortgages that are delinquent and expected to go into foreclosure.

“There needs to be a moratorium, and then they need to set up special courts to hear these properties,” Hendricks says. “Because there’s going to be a slew of them.”

 

Source: money.cnn.com

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3 Ways Real Estate Can Boost Your Retirement Income

Mon, 11/13/2017 - 9:21am

There’s big appeal in the idea of investing in real estate right now. And it’s not just because of all the attention these days on President Donald Trump, who made his fortune in the industry.

Many real estate-related investments have done quite well in the last decade or so. The median sales price of single-family homes hit $315,700 at the end of the third quarter, up 23 percent from the prior peak for values in 2007 before the financial crisis hit.

At the same time, a low-interest rate environment has depressed yields in typical safe-haven investments like bonds and certificates of deposit. That has made income-generating real estate assets even more attractive.

And, of course, there’s the basic value of real estate as part of any well-balanced investment portfolio.

“Without alternative assets, a portfolio is limited to stocks and bonds. That means the portfolio is not fully diversified,” says Craig Cecilio, founder and president of real estate investment firm DiversyFund. “The other big advantage of real estate investing is that your investment is backed by real assets.”

Yes, real estate values do fluctuate – and sometimes drop significantly. But since properties are physical assets, they will always be worth something whereas other investments can go all the way to zero.

So if you like the appeal of real estate, how should you start investing?

Buy rental homes. This is the most direct way to invest in real estate – however, this approach does comes with a few drawbacks.

The first is the initial investment that’s required, since buying a house can require a big one-time payment or taking on significant debt. Then, of course, there is the hassle of being a landlord to fix leaky faucets or dealing with tenants.

That said, in many markets where rental rates are higher than mortgage payments on a similar property, a shrewd landlord can easily wind up ahead at the end of every month – and more importantly, have a reliable income stream that is independent of any appreciation in the underlying real estate.

Of course, renting versus house flipping is very different, and this latter strategy can be fraught with risks, Cecilio says.

“Investors need to ask whether the incentives of the investment issuer are the same as their own incentives,” he says.

For instance, if a company benefits by selling you advice or issuing loans instead of sharing in the ups and downs of your investment portfolio, that’s a sign that they may not care much whether you ever make any money.

Buy into publicly traded REITs. A special class of companies known as real estate investment trusts, or REITs, are specifically designed to make public investment accessible for regular investors.

In fact, thanks to all the attention, the Standard & Poor’s 500 index added real estate as its 11th industry group in 2016 to show the importance of this segment on Wall Street.

The biggest appeal for income-oriented investors is that REITs are a special class of investment with the mandate for big dividends. These companies are granted special tax breaks to allow them to more easily invest in the capital-intensive real estate sector, but in exchange, they must deliver 90 percent of their taxable income directly back to shareholders.

As a result, the yield of many REITs is significantly higher than what you’ll find in other dividend stocks. Mall operator Simon Property Group (NYSE: SPG) yields about 4.8 percent. Residential housing developer AvalonBay Communities (AVB) yields about 3.1 percent.

And, of course, investors can purchase a diversified group of these stocks via an exchange-traded fund if they prefer. For example, the Vanguard REIT Index Fund (VNQ), yields about 3.9 percent at present and has a portfolio of 155 of the biggest real estate names on Wall Street. The VNQ has an expense ratio of 0.11 percent, or $11 per $10,000 invested.

Crowdfunding. A fast-growing form of real estate investment for the digital age is via “crowdfunded” properties. The concept involves pooling together the investments of individuals to purchase properties, and share in those properties’ successes.

DiversyFund is one provider of these crowdsourced investments, as is Fundrise, a Washington, D.C.-based firm that owns properties from South Carolina to Seattle.

“We allow investors to very simply invest in private real estate instead of public real estate, with much lower fees and greater transparency, through the internet,” says Fundrise co-founder and CEO Ben Miller.

Private real estate can offer much bigger yields than publicly traded REITs, Miller says, to the tune of 8 to 10 percent annually. But the challenge in the past was the burden of big upfront fees and a lack of liquidity or access to your initial investment after you buy in.

Miller says REITs offer low barriers to entry for investors and the ability to buy or sell stocks on a daily basis, but investors pay a steep “liquidity premium” for the ability to trade – and subsequently, suffer a lower return.

“That liquidity premium is theoretically a benefit, but it’s invisible to most people and it’s not free,” he says. “If you’re investing in the long-term for income, why would you pay that premium?”

Crowdfunding platforms like Fundrise, DiversyFund, Realty Shares and RealtyMogul all look to take the best of both private and public worlds. For instance, Fundrise has a minimum investment of just $500 in its “starter portfolio” and charges significantly lower fees thanks to the cost-saving benefits of technology and a lack of middlemen.

Top Real Estate Mutual Funds Rank Fund Name Minimum Investment 1 Year Return #1 TIAA-CREF Real Estate Securities Fund TIREX $2.0M 4.07% #2 DFA Real Estate Securities Portfolio DFREX N/A 0.24% #3 CGM Realty Fund CGMRX $2.5k 28.25% #3 Commonwealth Real Estate Securities Fund CNREX $200.0 10.17% #5 Fidelity® Real Estate Investment Port FRESX $2.5k 0.03% #6 Cohen & Steers Instl Realty Shares CSRIX $1.0M 0.63% #6 Cohen & Steers Realty Shares Fund CSRSX $10.0k 0.24% #8 Cohen & Steers Real Estate Securities Fd CSEIX N/A 1.60% #9 Manning & Napier Real Estate Ser MNREX $2.0k 3.41% #10 Principal Real Estate Securities Fd PRRAX $1.0k 1.14%

Fund information as of November 9th, 2017

Source: money.usnews.com

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Make sure you check the credentials of people giving you real estate investing advice

Mon, 11/13/2017 - 9:12am

Many a new real estate investor starts his or her career by seeking the guidance of a local real estate agent. The problem is most residential real estate agents know little about real estate investing. What’s worse is most agents think they’re investment experts and many a newbie investor’s career has come to an abrupt end after being led into a bad and stressful investment purchase.

I am a licensed real estate agent in Virginia. But I was first a real estate investor. I never intended to get my real estate license until I realized the difficulty of finding a good real estate agent, especially if you’re looking for assistance in purchasing investment properties.

Buying a property for investment purposes is not the same as buying your own home. Most agents know how to do the paperwork to facilitate a purchase, but few residential agents know the financial fundamentals of a good investment property.

I don’t recall receiving much training at all in my Realtor licensing courses concerning real estate investing, and there is almost none at all in my continuing education. This doesn’t stop agents from portraying themselves as investment experts.

I’m concerned about the fundamentals of the Washington real estate market, and I’m beginning to buy properties outside of our area. I’m familiar with several markets where I invest or have invested in the past. And I’ve identified several other markets where the average home is much more affordable and the local economy appears strong or poised to do well over the next few years.

I am moving some funds back into long-term buy and hold investments, and some of my investors are joining me. I’m a seasoned landlord and familiar with my markets, but doing business out of the area requires greater dependence on other people.

To that end, I have been contacting local investors, contractors and yes, real estate agents in these target markets. Once again, I’m running into agents who at first are excited to work with an investor. They think I’m going to run out and buy 10 homes off the open market. Then they hear my investment strategy and think I’m crazy. Their typical modus operandi is to convince you that you’re crazy. The new investor will often be unsure of themselves and they end up following the agents’ advice and paying too much for a property or buying a property that is otherwise a poor investment like the situation I wrote about in my last post.

Many investors pay thousands of dollars on education before they attempt to buy their first property.  Yet they still let that agent talk them out of sound investment strategies and into a purchase that leads to stress and financial loss.

Buying rental properties is about the safest real estate investment strategy as long as you acquire properties that are sustainable for the long run. I mean you need to buy properties at a low enough price or with a big enough down payment that the rental income will cover the expenses even if the overall value of the property decreases in the short term. Then you have to consider the return on your investment. You also need to make a return on your down payment that is greater than what you could expect from other more liquid and less stressful investment options.

Most real estate agents just want you to buy a home at market price. If you get a deal that they believe is 10 percent under market value then they are really proud of themselves. It doesn’t matter if the property loses money and raises your blood pressure every month. In their mind they did a great job.

In my forays into other real estate markets, I recently had an agent from out of town contact me and tell me he had deals in his local market. This agent had been spending time on a real estate investor networking site that I know well. During our first couple of exchanges he used some keywords that made me think maybe he knew the business. His market was not one I was immediately considering but I told him I would look at his deals.

I told him how to screen deals for me. I have two basic criteria. I need deals that have at least an 8 percent capitalization rate. This means that the property will produce an 8 percent return on the purchase price each year after all expenses, not including the mortgage. I also need my purchase price, closing costs and renovation expense not to exceed 80 percent of the homes after repair value.

“No problem,” he said. “I’m going to find you properties with at least a 10 cap.” And he went to work.

Within hours he was sending me deals. “Hey look, Justin, this property is listed at $1.5 million and the gross rents are $160,000 per year. That’s over a 10 percent return.”

Looking at the numbers, I saw the taxes on the property. I also noticed that the property had a past vacancy rate of nearly 15 percent average. It has a high legal expense, which probably means they’re doing lots of evictions.  I estimated the taxes, insurance, maintenance, vacancy, repairs and management to be around $72,000. Running the numbers, $160,000 gross income minus $72,000 in operating expenses equals $88,000 in net operating income. This gives us a 5.9 percent capitalization rate — not 10 percent.

This agent didn’t even know how to compute capitalization rates. He asked me: “You want your returns to be at least 8 percent after you subtract all the expenses?”

Yes, that’s what a return is. It doesn’t matter that you’re making a million dollars if the investment is costing you $1.1 million. He then tells me that those numbers are unrealistic.

I saw other problems with the property, such as the fact that there was a huge lawn but no lawn maintenance costs. I also noted that the past average vacancy rate was around 15 percent, but within the last few months it had dropped to under 5 percent. That worried me, making me think that they reduced their screening criteria to fill units to bolster the numbers. I worried that I’d have a lot of nonperforming tenants and a lot of legal expenses in the first year of ownership.

Time after time, I’ve had agents tell me I can’t buy properties for the price I need to make them cash flow. They believe the only way to value a property is based on comparable sales analysis, which is the primary method for valuing residential properties. Investment properties are primarily evaluated by the cash-flow method or the capitalization rate. If you can’t buy a property at a price that is low enough that the income will cover the expenses and provides a minimal profit then I highly recommend that you don’t buy at all. And don’t let an agent tell you that a property is a good deal because the purchase price is 10 percent below market value.

It’s great that you have 10 percent equity, but if you’re losing hundreds of dollars per month in the operation then that equity does you no good. Market value is at best a moving target and even if the agent is right it will probably cost you 8 percent of the property value in closing costs and commissions to sell the home. You may be stuck.

Agents, like many other professionals, feel like they control the information. They see themselves as experts. When they are dealing with investors they often begin to talk down to you and try to convince you that you’re naive or unrealistic.

Usually, in this case, it’s the agent who is uninformed. It’s perfectly reasonable to look for real estate bargains even in a hot market. A good real estate investor is not going to buy just any house listed on the market. A good real estate investment deal is much more elusive.

The real estate investor has to know his or her numbers and his or her market. They cannot rely completely on the advice of an agent and they need to know enough to realize when they are getting bad advice.

Real estate agents should also educate themselves about real estate investing and what makes a good investor. Having a couple investors in your back pocket can be a great resource when you find the right deal, but you really have to know how to use them. Dedicating your time to an investor may just end up with you writing a bunch of lowball offers with no payday.

The real estate investor cannot begin his career with a major information deficiency. You don’t need to be an expert on day one but you need to know and be comfortable in the fundamentals before you start.

Do your homework before you start and know that not buying a property at all is better than buying a bad property. Don’t get bullied or talked off your game but make sure you’re realistic in your expectations.

If you’re a new investor, ask your agent if he or she has worked with investors before. Get references.  Call them and see if they’ll share the numbers with you from their deals. If they’re happy with the experience, ask what their buying criteria was and compare it to your own. See if they’re still acquiring properties and if they’re using that agent to do so.

Being a real estate agent does not automatically make a person a real estate investment expert. If you cannot independently verify that your agent is an expert in real estate investing then don’t rely on their real estate investing advice.

If you’re an agent, make sure you know what you’re getting into when you start working with real estate investors. It’s not easy and it’s not the same as working with retail buyers. It can be a lucrative relationship but if you don’t know what you’re doing, you’re likely to end up wasting a lot of time and effort or ending up with an unhappy client stuck in a bad deal.

 

Souce: Washingtonpost.com

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How to Build the Largest Property Management Business in the Country

Fri, 11/10/2017 - 8:34am

Here Are Your Keys to the Rent Estate Revolution.

Kevin Ortner runs the largest property management company in the country.

He has some things to say about where the industry is going and how property managers can move it in the right direction while growing their own businesses and increasing their own potential. On the Property Management Show, he shared some insight and dropped some numbers that might surprise you.

About Kevin Ortner

Kevin was a pilot, and moved to Arizona for a new job opportunity, but lost that job because the company went under. He had some rental properties and became the first franchisee of the now-famous Renters Warehouse. Today, he runs the company.

Kevin is the author of Rent Estate, a book that discusses the movement of owning rental property as a way to earn income and financial independence. It talks about important market trends. People who aren’t property owners yet are capitalizing on it just as much as people who already own and operate rental homes.

Why Kevin Wrote Rent Estate and Why it Matters

Kevin wrote the book for marketing purposes. He wanted to use this content to start conversations about real estate investing as a tool for retirement and to attract new clients. It was a way to position Renters Warehouse as a thought leader in the property management space.

In addition to his marketing and content goals, Kevin is passionate about the fact that owning long term residential real estate will create wealth, security, and legacy. Retirement is different today than it was decades ago. No one is going to give you a pension and a gold watch. Your 401K was supposed to replace the security of a pension, but it’s not quite working out the way it was intended.

So, rental investing is a great tool. It’s not always exciting or sexy. It’s not as fast-paced as flipping homes. But it is consistent and reliable. You can count on it. That’s the message Rent Estate is sharing.

The Purpose of It All

Before Kevin’s book was published, the term “rent estate” was just something that Kevin and his team threw around internally. The term refers to buying and keeping property, differentiating this strategy of long term, reliable wealth building from the concept of “real estate” – which is buying and selling. They have now trademarked the term. Kevin’s book, of the same name, demonstrates the power of rent estate and what it can do for people.

Kevin’s purpose in writing Rent Estate is to help other people create wealth through real estate. The book provides the reader with both the educational background needed to begin this journey and actionable steps for making it happen. The first part is the macro view of what’s happening and why real estate is becoming that vehicle for wealth creation. Then, the second part is a micro approach to how it’s done.

22 Million Rentals and 70% of Them are Self-Managed. Why?

Kevin wrote the literal book on rent estate, so it is no surprise that he has done his research. Renters Warehouse was a sponsor of The Iceberg Report, an insightful study into single family homes and properties up to four units. According to that report, there are 22 million rentals in the U.S that fit that property category. Only around 30 percent of those are professionally managed. That means a staggering 14.5 million properties are currently being self-managed.

If you’re wondering what keeps landlords from turning their homes over to professional management companies, Kevin has 3 answers for you:

1. Generational Slant

A lot of landlords now are in their fifties or even older. This generation is so used to the concept of “DIY”. They are very happy to learn how to do things by themselves in order to save a few bucks. It’s no surprise why they prefer to manage their own rentals as well.

That’s a big contrast to the younger generation that is very comfortable with outsourcing things.

Kevin thinks that over the next 10 or 20 years, rental properties will change hands between one generation to another. This generational shift will eventually put more properties into the hands of professional managers.

2. Communicating Value

People don’t understand the value that property managers bring. They understand the dollars they’ll pay, but not the services they’ll receive.

This boils down to educating owners and helping them realize that the time savings and expertise they get from hiring property managers are worth the cost.

3. Industry Reputation

This is the biggest one of the three. The industry as a whole has a trust barrier to get over.

Property managers used to sit on the sidelines while real estate professionals took the stage. In the early days, the industry had too many fly-by-night operators who had no training, no resources, and no technology. This led to poor service and it bred distrust from customers.

No one took it seriously as a profession until the real estate sales market collapsed in 2007, and property managers were the only real estate professionals able to make money.

Since then, there has been a big improvement on education, resources, and technology for property managers. Despite this, it has been a slow crawl towards a better reputation for the industry.

As a property manager in this day and age, it is your responsibility to be trustworthy, transparent, and educated. Show property owners and landlords that there are professional players in this field who demand and deliver excellence. That’s the only way to bridge the trust gap.

Speaking of trust, you may have noticed a big change in this realm over the last five years. Online reviews are shaking up the service industry and giving consumers the power to ruin a brand with a few simple clicks. People will trust an online review more than they’ll trust a referral from a friend. People are doing their own research and looking at review sites.

Reputation is More Important than Image

It is difficult to maintain a good online reputation as a property manager. Homeowners want one thing and tenants want another. Don’t let that challenge scare you. Managing your reputation is an important way to grow a business. We talked about industry reputation – yours needs to be that company on the front lines communicating trust and professionalism to online prospects.

There are so many conversion metrics, and the biggest is reputation. Consumers will look you up, and if you aren’t getting enough praise online, it won’t matter how well-presented your landing page is. No one will care how appetizing your special offer is. Reputation is key.

So when the tide comes in and the next generation of owners brings a growing demand for qualified property managers with stellar reputation, you want to be in front of it.

Prediction: 5 Million More Rentals in the Hands of Professionals in 5 Years

Alex, The Property Management Show host, made a bold prediction:

Over the next 5 years, more than 5 million rentals will come into the hands of professional property managers.

So, he predicts that the market share for professionally managed properties will jump from 35 percent to 55 percent. The generational shift will work itself out and the changes in the economy will really begin to matter. People from the younger generation don’t want to buy homes; they want to rent and have the freedom of mobility. That overall growth will be worth about 11 billion dollars annually for the lucky management companies who can grab those new contracts.

Too bold?

Kevin wasn’t ready to make a specific prediction of his own, but he acknowledged the large movement towards professional management. New rental properties will constantly be available. The trends are turning in favor of property managers, and the potential for that kind of growth is definitely there.

Let’s Make This Interesting…

Alex, so confident in his prediction, promised to pay for Kevin’s dinner if he’s wrong. But if he’s right – Kevin agreed to pony up for a meal. And, Kevin says that’s one meal he won’t mind paying for. He’d love to see that kind of opportunity for property managers in five years. Everyone wins.

So if the property management industry is on an upward trend, what can property managers do to make sure they get a piece of the action?

Creative Marketing and Drive for Growth

A lot of resources went into Rent Estate as a marketing tool. But, Kevin didn’t stop there. He believes not enough property management companies are spending what they need to spend on marketing and advertising.

Referrals are great, but if you want to grow, you need to be prepared to pay for business.

Did you catch that?

Referrals are great, but if you want to grow, you need to be prepared to pay for business.

Kevin did everything from Pay-Per-Click to SEO. Lately, his team has really benefited from content marketing. They put up great, evergreen content that continues to build value and can be endlessly repurposed to serve their marketing needs many times over. This includes educational blog posts and videos that rank for long tail searches, alongside paid advertisements.

You have to invest if you want to grow. You have to be creative and stand out. Referrals and relationships are great and important. But they are not as efficient. They are not going to help you grow rapidly. A lot of property managers have trouble getting over their hurdles, whether it’s 500 doors or 1,000. Marketing investment is key.

A Shocking Statistic: Spend 25 Percent on Marketing

Renters Warehouse has an average lifetime customer value of five years, and Kevin uses this as a foundation for making key decisions. When it comes to marketing, he believes in spending big to win big.

If you want to grow your business and make more money, put 25 percent of your topline revenue into marketing.

If you want to maintain your current level of business, put 10 percent of your topline revenue into marketing.

That sounds aggressive, but Kevin doesn’t dial it down. Renters Warehouse used to spend 30 percent of their topline revenue to spur business growth. They don’t need to spend that much now, but they didn’t hesitate to invest that much in the beginning.

That’s how you become the largest property management company in the United States.

Growth through Acquisition

Renters Warehouse also buys companies. They look for smaller businesses that can introduce them into new markets. Revenue per door matters, and so does the quality of the portfolio. Many of the businesses don’t have a lot of cash flow when Renters Warehouse buys the contracts.

They pay top dollar for companies that have a fee structure already aligned with what Renters Warehouse does. Every company is a little different, but there are industry standards that need to be met. Tenant placement fees are usually more varied than the management fees.

Other criteria are reviewed, such as where the portfolios are located and the quality of the assets. The goal is to build a good book of business. Kevin wants to see a track record of keeping clients on board and a similar fee structure.

At Renters Warehouse, the management fees are lower than most but the tenant placement fee is a full month’s rent. Sometimes this causes friction, but not a lot of attrition. They honor contracts when they buy them, and slowly integrate their own pricing model.

The Beauty of a Simple Pricing Model

Most Renters Warehouse management fees are $89 or $99 per month, depending on location. The flat fee structure was a way to stand out and turn the industry upside down.

It’s getting better, but a decade ago, people would pay a management fee and then be nickeled and dimed to death. Renters Warehouse wanted to be simple, no-fuss, and transparent. The goal was to get big and grow volume. That helped them create efficiencies through technology and scale. They aren’t worried about leaving money on the table. The flat fee works for them, and they’re sticking with it.

Apart from their simple pricing model, Kevin also shared another key to their success — tenants.

Tenants Are Your Business Partners

Get to know your tenants. They are your business partners.

If this sounds crazy, Kevin wants to emphasize that to have a good business, you need to keep your clients around longer and have a property that’s easier to operate. So (and this shouldn’t be controversial), treat your tenants like people. Treating them like a transaction creates a negative experience. Reward your tenants for loyalty and on-time rental payments. Don’t make them a rental payment and nothing else.

Renters Warehouse is a big company that manages more than 20,000 homes across the country. But, they have a live leasing agent show every property. You won’t find any lockboxes on their homes. It’s part of getting to know the tenants. They live the methodology of Rent Estate. The human experience is a luxury, and if you’re going to charge a full month’s rent for tenant placement services, you need to be there to connect with the tenants.

Mistreating tenants can also hurt you when they become landlords. Tenants aren’t tenants forever. They will buy into the Rent Estate revolution, and when they do – you want them to hire you.

Marketing Tip of the Day:

Mine your tenant database and set up your business by getting tenants to love you and buy investment property with you.

Advice to Growing Property Management Entrepreneurs: Just Start

Everyone goes to the same seminars and learning events, but a lot of the people you see there have not closed a deal yet. If you want to know how to get started, it’s simple – just start. It won’t be perfect and it won’t go according to plan. But, you’ll learn along the way.

The nice thing about a decision is you can always change your mind.

Make it happen.

Focus on your people and your tenants. Everyone is watching investors and homeowners and that’s good. But, remember your tenants. They will help you grow and they will make you more successful.

Renters Warehouse will be at the PM Grow Summit, and hopefully you’ll be there, too. In the meantime, give Rent Estate a read. If you have any questions about Kevin and his work, please contact us at Fourandhalf. We’d be happy to tell you more about this interview and how to develop a marketing budget that’s designed for growth.

 

Source: fourandhalf.com

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San Francisco’s largest landlord signs on with Airbnb

Fri, 11/10/2017 - 8:30am

Residents who rent an apartment from San Francisco’s biggest landlord may soon be able to rent out their apartment through Airbnb, thanks to an agreement between Airbnb, Veritas Investments, and Pillow, a San Francisco-based startup that helps apartment owners turn units into short-term rentals.

Under the agreement, Pillow Residential will become the preferred partner for landlords enrolled in Airbnb’s Friendly Buildings Program, which allows landlords and tenants to share the revenue generated by home sharing.

According to the companies, Pillow Residential’s services have benefits for both landlords and tenants that make short-term renting into a mutually beneficial option.

For landlords, Pillow’s tools include onboarding tenants and providing them with information about home sharing, creating and executing lease addendums that support home sharing, and working with building management to incorporate building rules into listing templates.

Pillow also provides landlords with single dashboard with information about short-term rental hosting in their building, which enables them to know which units are being rented out at any given time.

For tenants, Pillow’s tools can help create Airbnb listings that automatically include information about their building’s shared amenities, plus mobile guides for guests with information like building access codes and emergency contact information.

Veritas Investments, San Francisco’s largest apartment building and urban retail owner, is the first landlord to sign on to allow its residents to take part in the program.

Veritas will pilot the program in five of its buildings in San Francisco.

“Together, Pillow and Airbnb can give landlords and tenants access to the best tools and make home sharing better and easier for everyone,” Jaja Jackson, director of global multi-family housing partnerships at Airbnb, said. “Veritas is a leader and innovator in the real estate community and they are one of the multi-family building owners who know Airbnb is a tremendous benefit for their properties and the residents who call their buildings home.”

Yat-Pang Au, CEO of Veritas Investments, said that the company surveyed its residents, who said they want to be able to take advantage of the “sharing economy” and potentially make money on their apartment.

“This well-supported home sharing program of Airbnb and Pillow can help our residents with economic empowerment and could further differentiate our properties,” Au said.

“Veritas strives to offer market-leading opportunities in some of the most character-rich, well-located apartments, which enhances our residents’ experience,” Au added. “This partnership also marks one of the more significant pursuits from our newly formed Veritas Innovations business unit that advises, invests in, and incubates synergistic real estate technology partners.”

 

Source: housingwire.com

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3 Affordable Ways to Add Value to Your Multifamily Property

Fri, 11/10/2017 - 8:27am

There are a bunch of ways to add value to your multifamily deal, such as upgrading kitchens and baths, which will yield a higher rent from prospective tenants. You can also separate utilities to pass expenses onto the tenants. We have done both, but investments like this can be costly, even if they do have a high return.

What about ways to add value that are on the more affordable side? Watch the video to see what we did specifically to add real value at little cost.

3 Affordable Ways to Add Value to Your Multifamily Property 1. Increase the profit of the property.

The first way to add real monetary value is to do something that increases the profit of the property. Increase rental revenue or decrease expenses—sounds like a simple way to add value, right? Well, it goes beyond that because although you are now enjoying more cash flow from your rental, you are also increasing its value through something called forced appreciation.

Here’s how it works: Multifamily properties are evaluated based on cap rates. A cap rate equals the net operating income (NOI) divided by the value of the property. If you increase rents or decrease expenses, even by a small margin, your net operating income will go up. If your property is evaluated at the same cap rate, the only thing that can happen is your value goes up. Let’s run through a quick example. Let’s say you add 4 storage units to your property and lease them for $30 each, or $120 per month, which is $1,440 per year. Storage units arguably don’t have any noticeable expenses, so that’s all profit. If your property is evaluated at a cap rate of 10%, your value goes up by $14,440! Not bad, and I can tell you that 4 storage units cost quite a bit less than that, so it’s a great investment.

2. Create a sense of security for your tenants.

The second way to add affordable value is to create a better sense of security for your tenants. If your tenants don’t feel safe where they live, they will move. It’s that simple. Creating a safe living environment can indirectly decrease your vacancy rate. If you make improvements to the property’s safety, make sure your tenants are aware of the upgrades. It will go a long way. Watch the video to see the affordable upgrade we implemented.

3. Add affordable amenities.

The last way you can add some value is by putting in affordable amenities to your multifamily. There are big, expensive amenities you can add that work on large apartment complexes, such as pools and workout rooms. But remember, the point of an amenity is to make life easier on your tenants. It doesn’t matter how much it costs; it just matters that they use and appreciate it. In today’s video, you will see how we added an amenity and also created an additional revenue stream.

Source: biggerpockets.com

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Bill would make Seattle landlords pay when tenants are priced out

Fri, 11/10/2017 - 8:23am

Last week, Crosscut reported that city councilor Kshama Sawant announced said she’d introduce legislation that would make landlords pay for tenants’ relocation when their rent gets too high.

Currently, the city only requires 30 days notice for a rent increase, or 60 days if the increase is more than 10 percent within a one-year period. With a statewide ban on rent control in Washington State, there’s no actual limit to how much a landlord can raise rent.

Under Sawant’s proposal, if the rent increases 10 percent or more within a one-year period and the tenant moves, the landlord would have to pay for three months of rent to help the tenant relocate. The ordinance would only apply to tenants making 80 percent of area median income or below, or about $50,000 a year.

A similar ordinance passed in Portland back in February, requiring landlords to pay an amount based on apartment size for both no-cause evictions and for moves prompted by rent increases.

Because rent control is also illegal in Oregon, the ordinance went to court, with landlords alleging that the ordinance is essentially rent control. While a judge ruled in the city’s favor—that the measure does not violate the state’s rent control ban—in July, landlords appealed the decision the next month.

The ordinance is also similar to Seattle’s existing Tenant Relocation Assistance Ordinance, which has a lower income threshold—around $30,000—and applies to remodels and demolitions.

The ordinance isn’t finished yet, so it’s unclear when it will be introduced to council.

 

Source: seattle.curbed.com

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New tech firm aims to protect real estate agents from opioid addicts

Fri, 11/10/2017 - 7:58am
  • Drug addicts are posing as potential homebuyers and book house tours in order to get access to medicine cabinets.
  • Of the 150,000 active real estate agents and brokers, close to 38 percent of them say they fear for their personal safety.
  • A new tech firm will mine data to flag the backgrounds of buyers.

Imagine if it was part of your job to make appointments with strangers and then go alone to meet them in empty houses.

Yet that is a daily routine for the more than 150,000 real estate agents and brokers. Close to 38 percent of them say they fear for their personal safety. Among female agents, the share is closer to half, according to a survey this year by the National Association of Realtors.

The most common fear-inducing situations are open houses, vacant or model home showings, properties that were unlocked or unsecured, and properties in remote areas. That concern is rising, as seven agents have been murdered between 2011 and 2015, the latest data from the U.S. Bureau of Labor Statistics.

Now there is a new danger: drug addicts.

The nation’s opioid crisis has put some real estate agents, especially those who represent higher-end properties, in the crosshairs. Addicts are posing as potential homebuyers and booking house tours in order to get access to medicine cabinets.

Forewarn, a subsidiary of Cogint, is a new company offering an app that will perform instant background checks on potential clients, akin to a police report.

“When you’re talking about potentially opening up access to a home, to an environment where prescription drugs may lie … with doing no vetting or checking of an individual, I think we’re feeding into that crisis.”-James Reilly, CEO, Forewarn

The company says it can instantly analyze billions of data points, using just a client’s name and/or phone number, and mines Cogint’s data, using proprietary algorithms. Cogint already provides similar information to law enforcement, government and insurance carriers.

“When you’re talking about potentially opening up access to a home, to an environment where prescription drugs may lie, a medicine cabinet of a house that is listed for sale, with doing no vetting or checking of an individual, I think we’re feeding into that crisis by creating these channels of easy access to drugs,” said James Reilly, CEO of Forewarn.

Forewarn’s parent “is able to leverage much deeper and much more accurate data … to get a better profile of an individual,” said Reilly. “That’s the same massive data repository that Forewarn leverages to get information to a real estate agent.”

Forewarn says it will only offer its service to licensed real estate agents and real estate companies. The information can be retrieved online or on an app with costs starting at $4 per month for larger companies and $20 per month for individual agents.

While just 5 percent of agents report having been attacked on the job, more than half regularly carry a weapon for self-defense, the most popular being pepper spray, firearms and tasers. Some of those are restricted or illegal in major metropolitan markets.

While protection is valuable, information is also key. A criminal history is obviously the biggest red flag, yet even just verifying the information a potential clients gives, like an address, vehicle ownership, mortgage and financial history can raise suspicions for an agent.

Attacked while showing a home

Janice Tisdale, a real estate agent with the Phyllis Browning Co. in San Antonio, was attacked while showing a $750,000 home in December 2010. She was 64 at the time. Tisdale was hit over the head and then held hostage by Emilio Maldonado, a supposed house hunter.

“He goes, ‘I need money from you right now.’ And I said, ‘well, I tell you, I have a closing on Monday and it’s a big one so if you can wait until Monday I can get you $4,000,’ and I have no idea why I said that to him, but I was saying anything to him to just go and leave and not kill me,” said Tisdale.

After 45 minutes, Tisdale convinced Maldonado to go to his car to get paper for a note. She had told him she’d write a note saying she hadn’t been held hostage. And then she fled and was rescued by a car of teenagers who stopped to help her.

Maldonado was arrested soon after and is currently serving 60 years in prison for aggravated robbery. He admitted to being on drugs at the time of the attack.

“I guess I always thought I was aware but you never think it’s going to happen to you and it does, it can, and it did,” said Tisdale.

Most real estate firms require their agents attend safety training, yet not all run background checks on potential clients.

Crye-Leike, a Memphis, Tennessee-based real estate firm with offices throughout the South, is being sued for negligence and wrongful death by the family of an Arkansas real estate broker, Beverly Carter. Carter was murdered in September 2014. Her assailant, who pleaded guilty, said he targeted her because she was rich and because he knew she would be alone. The family claims Crye-Leike did not provide Carter with enough safety training, especially on doing background checks and procedures for meetings with unknown clients.

Crye-Leike declined to comment on the suit in response to a request from CNBC and referred inquiries to its attorney.

Source: cnbc.com

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How does the Trump tax plan impact real estate investment?

Fri, 11/10/2017 - 7:55am

A cap of the mortgage deduction in the Republican-backed tax plan working through Congress has many sectors of the real estate industry crying foul. The National Association of Home Builders (NAHB) and National Association of Realtors (NAR) have both warned of declining home prices, particularly in high-priced coastal markets.

Furthermore, doubling the standard deduction could result in many homeowners forgoing the mortgage deduction altogether. The motivation for both of these groups is fairly transparent: higher home prices is good for their members. Outside the furor, the long-term impact of the tax plan is much grayer and has little impact on most Americans.

The Bay Area, Southern California and New York are the most often cited cities impacted by the mortgage-deduction cap. According to Zillow, eliminating the state and local tax deduction and doubling the standard minimum deduction would result in homes valued at more than $800,000 worth taking itemizing the mortgage deduction.

The impact of the cap on the mortgage deduction could further nullify the number of future homeowners impacted by tax reform. Existing owners are exempt and can continue under the old cap of $1 million. Zillow estimates that only 5% of homes would be valuable enough to take the mortgage deduction, and that’s before the newly announced cap.

Is the mortgage deduction cap a middle-class burden?

The question becomes, is this a tax on the middle class? Real estate lobbying groups believe it is. It’ll make it harder to buy a home and could lead to a “housing recession” in some of the most expensive markets according to NAHB’s CEO Jerry Howard. Zillow’s senior economist Aaron Terrazas stated the impact will be felt by retailers, not necessarily in home value declines.

Regardless of the actual implications, the tax plan really only impacts homebuyers in a few arguably overheated housing markets where a market correction is already overdue. The area’s median price for a single-family home in San Francisco is over $1 million, more than 10 times median household income. A disparity that wide on a metro level isn’t sustainable. A bear housing market in the Bay Area, Southern California and New York would certainly erase a significant amount of equity, but it would also bring more buyers into the mix. On average, bear markets tend to delete two-to-three years of housing appreciation.

With the prospect of a housing-market correction in high-priced metros, how should local residents in these areas engage the real estate market? One avenue is through arbitrage.

While continuing to rent in high-priced markets with better ROIs, investors can acquire rental homes or even apartments in lower-priced areas. Although mortgage interest isn’t a tax deduction on rental properties, investors are able to take advantage of many tax advantages that will remain in place under the new tax guidelines. Deprecation is one such advantage.

If tax reform passes, what’s next?

Overall, doubling the standard deduction is a tax benefit that will impact the more than 35% of renter households, not just homeowners. When the government utilizes homeownership as a political football, significant repercussions can result.

In the 1990s, the government pushed loosening lending standards to encourage homeownership. Combined with a series of other unchecked lending practices, housing prices soared and the deepest recession since the Great Depression gripped the nation. Millions of Americans lost their jobs and homes, and realtors and homebuilders, in particular, paid a heavy price.

Reducing the mortgage deduction and weakening its viability will enable normal market forces to impact the housing market, which is good for the industry. Furthermore, reduced taxes for middle-class renters will hasten their ability to save for a down payment and enjoy the benefits of homeownership if they choose.

Then, mortgage interest rate deduction benefits too few people in too few areas, and a broad-based decrease in taxes will ultimately benefit the housing market.

Source: housingwire.com

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Q&A: How Do I Protect Myself From Expensive Evictions?

Mon, 11/06/2017 - 10:11am

Question:

I’ve had the worst luck with tenants! I only own four rental properties, but I’ve gone through two evictions in three years! Altogether these evictions have cost me around $9,000 and that’s not to mention all the priceless time, energy, and stress it caused me.

In both cases, they stopped paying rent completely and wouldn’t move out. Even after the judge ruled in my favor, I still haven’t been paid the money I’m owed.

I’m a good landlord and I screen my tenants diligently… how can I keep this from happening again?

– Sherry C.

Answer:

Hi Sherry, unfortunately, you never know what type of tenant you might get even when they have a decent credit score and income. A person’s financial situation may change with little notice or they may have a history of leaving rentals owing rent or damages. Remember, landlords don’t always take tenants to court so there may no record of missed rental payments or damages. The best thing to do is continue to screen your tenants and check references, but get RentGuard to protect yourself against damages, legal fees, and unpaid rent. RentGuard can give you between $2,500 and $10,000 of protection annually. By making RentGuard part of your rental policy you’ll make sure you get paid the money owed by a tenant.

RentGuard starts at $299 for 12 months of $2,500 protection and it can be paid by either you or your tenant. Some landlords will request their tenants pay for RentGuard instead of a large security deposit or cosigner because RentGuard offers much more protection than a standard security deposit. Should you have to evict the tenant, you would get reimbursed for the full judgment, including legal fees and court costs. The point is to eliminate rental losses so you can have peace of mind no matter who moves into your rental.

If you have questions about using RentGuard please call the AAOA team at (866) 579-2262 or visit

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Q&A: My Applicant Has Terrible Credit and Wife Has An Average Score. Should I Rent to Them?

Fri, 11/03/2017 - 8:58am

Question:

I recently screened a husband and wife and was surprised that they had such different scores. They seem like a nice couple, but the husband has a lot of debt and multiple collections. Is this too risky?

Answer:

There are many variables you should consider before making a decision. For instance:

  • What is their combined income?
  • What are their monthly obligations to their total debt?
  • Is there a story behind his bad credit, possibly an ex-wife, identity fraud, unemployment, student loans, or medical illness?
  • Did they pay rent on time before?

Any way you look at it there is still a risk associated with renting to these tenants. Their employment may change or a collection agency may garnish the husband’s wages making it difficult for them to pay rent. if you’re still looking to rent to them here is the best way mitigate risk:

  • RentGuard: We recommend using RentGuard to protect yourself should they leave owing rent. RentGuard is offered in every AAOA tenant screening package. It starts at $299 annually and will cover you for 12 months up to $10,000 for lost rent, damages, or legal fees. That’s much more coverage than you’ll get from a security deposit alone.  Most landlords will use a portion of the security deposit to purchase RentGuard or ask their tenants with questionable credit to purchase it as a requirement of getting accepted for the rental. RentGuard covers all parties to the lease agreement, so if you get RentGuard for the wife the husband will automatically be covered as well as long as they are both listed on the lease agreement. Learn more.
  • Ask for proof of income: Collect paycheck stubs from both husband and wife to ensure they have a steady income. Compare this to their total debt or account balance found on their credit report.
  • Ask for bank account balance: A significant amount of savings means they are more likely to have a safety net should there be a change in their income, health, or another factor that affects their ability to pay rent.
  • Check references: What others say about your applicants can show if they are trustworthy and on time with rental payments. This is a must for any tenant screening process.

If you have questions about using RentGuard please call the AAOA team at (866) 579-2262 or visit 

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Most Popular Place for Movers: The South

Fri, 11/03/2017 - 8:13am

More Americans are flocking to southern states with Florida and Texas topping the list of where they’re most likely to move to, according to a new analysis by LendingTree. LendingTree looked at where residents in each state are looking to move by reviewing purchase mortgage loan requests for primary residents in all 50 states from October 2016 to October 2017.

Florida is the number-one destination of movers in 18 of the 50 states, according to the analysis. Of all purchase mortgage requests, 9.14 percent were for consumers who were planning to move to Florida.

Texas, meanwhile, had the highest percentage of residents looking to move within the state versus outside of the state. Nearly 93 percent of purchase mortgage requests from borrowers in Texas were for properties within the state. The second most popular location with the highest percentage of residents looking to move within the state was in Michigan, according to the study.

On the other hand, Vermont has the most residents who are looking at moving somewhere else.

Many people who are planning to move out of state don’t tend to go far, the analysis found. More than half of the most popular new designation states border the current state.

The top five destination states, according to LendingTree’s study, are:

1. Florida

2. Texas

3. California

4. Washington

5. Massachusetts, Minnesota, and North Carolina (tie)

In the chart below, each state is shown with its most popular destination state, based on purchase applications.

Source: realtormag.realtor.org

 

 

 

 

 

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4 Surprising Benefits of Smart Home Tech

Fri, 11/03/2017 - 8:11am

It’s 2017. Smart home technology isn’t exactly new at this point, but we’re still discovering new benefits beyond what the product packaging describes.

Despite Amazon having sold over 10 million of its Alexa-fueled Echoes to date, and in light of the myriad affordable smart devices on the market, over half of the US population has yet to purchase a single one. Automation and instant gratification are reasons enough to invest in a few smart home gadgets, but so far they haven’t been enough to spur a significant revolution.

These four unexpected benefits of smart home tech might be the trigger we’ve been waiting for:

Lower Home Insurance

Depending on the smart devices you own, your homeowner’s insurance company may cut you a break. For example, American Family Insurance states on their website that homeowners who install certain smart home products can save on their insurance.

Things like smart smoke alarms, security cameras, and smart locks may be enough to trim your expenses, which means your investment will pay for itself a little faster than you initially thought.

Higher Home Value

Not all devices are guaranteed to boost your home’s resale value, but the right ones can attract better buyers. One survey revealed that 90% of respondents emphasize safety and security as the top reason they’d buy a smart home. Security devices like smart locks and cameras add appeal to the home more so than, say, lighting or sprinklers.

In addition, 68% of respondents mentioned they like to see technology that’s energy efficient. Things like programmable thermostats and lighting schedules are known to help reduce energy bills, but it could be years before you see an ROI on these. However, the real ROI may come in the form of a higher sale price when you’re ready to move.

Better Health and Safety

Yes, a smart home could improve the health of its occupants. Using a hub like the Echo or Google Home, you can set reminders to keep much-needed maintenance from falling through the cracks, such as regular mold prevention or repairs to a loose gutter that could fall off and hit someone. Medication reminders for elderly residents mean they’ll never forget a dose. Detecting an oven that’s been left on reduces risk for a fire and associated injury.

There are countless potential health benefits when you consider what smart home tech is capable of. It simply takes a little creativity in finding them.

Peace of Mind

There’s nothing greater than knowing your home and its inhabitants are safe. We all worry about possible disaster: Did I turn the oven off? What if I forgot to lock the door? I hope nothing happens to the house while I’m on vacation. These little what if’s can stop us from enjoying the here and now, causing us to stress more than we should. Peace of mind is priceless, and the right smart home tech can deliver it affordably.

In Closing

Lower energy bills weren’t enough to spark an immediate reaction to smart home tech. Convenience didn’t do the trick, either. When consumers realize there’s more to smart devices than the obvious benefits, smart home tech may finally get the attention it deserved years ago.

 

Source: realtybiznews.com

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Airbnb Horror Stories (& How You Can Prevent Your Own)

Fri, 11/03/2017 - 8:06am

October is the perfect time for snack-size candy, questionable costumes, and entertaining your own worst fears. And for those of you (my mother) who love a good horror story, this month’s Airbnb news may definitely feed those fears (more on that later).

But for those of you who want to try Airbnbing—aren’t sure—but would like to hear about all the stuff that doesn’t make the news (but could potentially be a nightmare) we’ve listed our personal worst Airbnb stories below.

We’ve also included tips for how to avoid your very own house of horrors.

Things That Go Meow at Night

The listing said there would be a cat that needed to be fed. The listing did not say that there would be a cat that needed to be fed and medicated three times a day, was prone to meowing all night, preferred the bathtub to its litter box, and was owned by a very neurotic part-time actor whose claim to fame was minor roles in Bruce Willis movies and harassing Airbnb guests via text: HAVE YOU PET THE CAT TODAY? IF THE CAT MEOWS, SHE NEEDS LOVE. DO NOT USE THE CURTAINS.

Suffice to say, as guests, this has been our worst Airbnb experience to date, but there were warning signs.

First, he mentioned the cat and some cat maintenance. Second, his Airbnb description included some language that suggested he was a wee bit demanding and did not have the strongest grasp of customer service: Will TEXT YOU if time permits, otherwise, Google it. 

The take away on this one? Read between the lines and be clear on expectations. If there’s something about a place that seems or feels a little different (like paying to be a cat sitter), ask for more clarification on the issue, what’s expected, and what the scenario totally encompasses.

When Nature Calls

So, this one was 100% our fault. After checking a guest in on a Friday around 3 p.m., we left for a mountain getaway with spotty cell service. It wasn’t until 9 a.m. the next morning that we heard our guest’s multiple voicemails. Her messages had started around 6 p.m. and informed us that she had locked herself out on the balcony. Worse yet, by the third voicemail, she had needed to use the restroom. By the time we heard her messages, some good samaritan on the street had heard her pleas, notified the front desk, and helped her off the balcony and back into the studio (but not before she had to pee in a cup outside on our balcony).

We owe it to our guests to be reachable during their stays. They pay us. They depend on us. It’s about trust. It wasn’t cool that we weren’t able to help her. If you’re out of town or otherwise unavailable, make sure there is someone nearby whom you trust to take care of your guests—someone who can help them in emergencies (in many cities, including Denver, this is actually now required by law).

RIP

Actually, we used more colorful language than “rest in peace” for the $2,400 condominium garage door we had to replace, but the point is it died after our guest ran into it with his Jeep. We know our guest did this because our condo security cameras caught it and a month later informed us we had a $2400 bill to pay because buildings like working garage doors.

I won’t bore you with the details, but know that we did get the money back. The good news is Airbnb has all sorts of safeguards in place to help you in this kind of situation. First, they encourage (and we encourage) conducting correspondence through the Airbnb site so they can mediate. Second, you can give reviews and research people before they stay. Finally, there’s insurance. Airbnb offers host guarantees (which we don’t think is enough), and you can also get private short-term insurance which will cover you in such disasters.

Lastly, there’s been a lot of press recently about someone in Florida who used a modified smoke alarm to film their Airbnb guests in the bedroom. This is truly creepy and a legitimate horror story. While I feel terrible for everyone involved, Airbnb has had over 50 million users and relatively few horror stories (and we’ve had over 150 guests with minimal issues). The truth is the review system on the site helps keep (most) people honest, and it’s proven to be a fairly safe platform for almost everyone who has used it.

Try not to let the occasional nightmare spook you too much.

Have any horror stories of your own to share? Leave them in the comments below!

 

Source: biggerpockets.com

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5 Ways to Personalize Your Property for Students

Fri, 11/03/2017 - 8:00am

Student tenants are an important part of the renter community, especially in college towns and their surrounding areas. Due to the increase of people attending colleges and universities, landlords and property managers have been confronted with the opportunity to create property units that appeal to and attract students.

According to Jennifer Maughan of RentPrep, “student tenants generally range in age from 18 to 23, and sometimes even older for those attending graduate schools or specialty programs.”

Because of this increase and the difference in age groups, the standard and expectations of condominiums and apartments have slightly changed and adjusted to meet the wants and needs of this growing sect of renters. Being that student tenants are a large part of the renter community, it is important to keep track of the interests and demands of students so you can offer them the best experience at your property.

If you are a property manager or realtor looking to appeal to student renters and tenants now and of the future, check out my top five ways you can personalize your properties!

1. Study lounge/common area: When it comes to studying, college students not only love but appreciate to have public spaces to study like the library or a café. Working and studying in an apartment or dorm can sometimes become dreary and boring, which doesn’t help students get that A they are going after.

Distractions like TV, video games, or simply a bed to sleep on can hinder the studying and working experience for students. In order to further ensure student safety and appeal to students and parents, create a common area with tables and comfy chairs as well as open Wi-Fi for students to work and study. This will not only inspire other student tenants to move into your complex but also help keep your current student tenants safe as it gives them the incentive to stay inside instead of studying late at night in the library or elsewhere. Doing so will also highlight the greatness of your property, which will be recognized by the university in the area.

2. School spirit décor: One of the greatest elements I remember about my former apartment building was the school spirit decorations throughout the lobby and the building. Upon walking in, you were greeted with a fun banner with the school’s name on it, a football helmet, and artwork featuring buildings of the university and its surrounding area.

Though it is small, the use of decorative school merchandise in my apartment building helped to create a stronger sense of community among tenants. Due to the fact that apartment buildings for students aren’t directly on campus, some can feel a sense of detachment or isolation from the community aspect of being directly on campus. By doing this, landlords appeal to students by establishing a connection between there and the university.

3. Coffee stand/shop: Another great feature that influenced my decision to rent the apartment I did (though I may be slightly ashamed to admit it) was the presence of a coffee shop within the building. I know this is simple, but coffee is considered to be one of the most important things among college students!

I remember my mom and I visiting the building and being super excited to see that it featured a coffee shop with outdoor seating; I mean how often do you see this in a university apartment building? The coffee shop had a nice menu of hot/cold coffees and teas, smoothies, breakfast sandwiches, and pastries. Though it may be a pricey investment, students and parents will definitely be attracted to this feature, which can also help build the business of your property company!

4. Comfortable lobby: A nice welcoming lobby is a great feature of any apartment building. Comfortable love seats, a television, a table with the college newspaper and magazines can not only attract students and parents but also draw attention to your building in general which can help you gain recognition and recommendations from people in the area!

In my former building, our lobby had all the features I stated above and during Christmas time, it had a large Christmas tree decorated with my college’s ornaments as well as fun decorative presents. This made the building incredibly cozy and helped to create a home-like feeling for those who could not be home during the holiday, which was a really nice touch!

5. On-site laundry facilities: Though students may put off laundry and not do it nearly as frequently as they should (myself included), on-site laundry facilities are great for students in apartment buildings. By having washers and dryers in the building, whether it be on select floors or just on one, students have the convenience of doing laundry at their home rather than having to travel elsewhere to do so.

In my former building, there were washer and dryer units on my floor which could be paid for either with money or school-based “dollars” that you get as a student. Including the school-based payment can also help to build a greater relationship with the school through this collaboration.

Though some student tenants can be difficult to deal with, most just want to be able to have a place of their own and learn adult responsibilities. By establishing going out of your way to create a better atmosphere for students, you will be able to facilitate a better relationship with student tenants (as well as their parents) and make your job a little easier. After all, these few options and changes can make your property attractive in the future and help you gain even more tenants!

As always, good luck!

 

Source: rent.uloop.com

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Defending Against Applicant Identity Fraud with Identity Verification

Fri, 11/03/2017 - 7:57am

While it’s just a blip, apartment home and lease fraud is now being measured on the Federal Trade Commission’s identity theft and fraud radar. Three years ago, identity fraud or theft related to the lease housing industry first showed up on the agency’s annual Consumer Sentinel report. The number of complaints − albeit just a small percentage of those about people posing as someone else – has increased.

U.S. consumer grievances involving identity theft have risen sharply since 2012. Last year, identity theft ranked third highest with 399,255 complaints (13 percent) on the list of 30 types of consumer complaints FTC measures. It was the number one complaint (46 percent) by enlisted military personnel.

The cost of identity theft and fraud is significant, last year soaring to $16 billion, according to the 2017 Identity Fraud Survey conducted by Javelin Strategy & Research. JS&R noted that weak identity verification processes contributed to the rising cost of identity fraud.

Identifying imposters becoming more critical during online leasing process

Whether it’s the use of synthetic or real consumer data to create fraudulent identities, the multifamily industry is having a rough ride. This is an alarming crime that, in a lot of cases, is becoming easier for thieves via online access. An imposter who signs a lease and doesn’t pay can cost a property thousands in not only lost revenue but turn costs, even damage, in just a short time before being evicted.

As the industry’s online picture continues to evolve, identifying imposters becomes more critical for properties who may never make a personal connection during the lease process.

“There are instances where people apply online with a false identity, move in, damage the apartment, stop paying rent and it costs a community thousands of dollars before kicking them out,” said Mark Wilkinson of RealPage Screening. “Up to 80 percent of applicants apply online, and that makes it easier to pose as someone else. You can’t verify their identity. A lot of communities might not double check before they move in or can’t tell if it’s a fraudulent document versus a real document. It’s probably more prevalent in last couple of years.”

Authenticating an applicant’s identity in addition to criminal, financial checks

RealPage Screening recently rolled out its new Identity Verification enhancement, a new feature that authenticates an applicant’s identity, in addition to running the existing criminal and financial checks.

The software performs a device assessment (phone, tablet, laptop, etc.) and identity validation for each applicant applying online. The company says the product will successfully validate more than 90 percent of applicants and filter the remaining applicant population into risk categories during the online application process.

High-risk applicants are flagged using a predetermined index score, or specific identity triggers. For example, an applicant who inputs the identity or social security number of a deceased individual or someone using multiple social security numbers gets flagged. Applicants who are considered medium-risk will be sent a one-time verification code via SMS text, email or voice call as they apply online to authenticate the information, a two-factor authentication process.

The applicant won’t be allowed to go to the next screening step until they pass this vital identity verification process. The service is similar to verification processes enacted by financial institutions when users change passwords and get a text or email requiring verification, says Wilkinson.

“It’s all taking place within seconds and doesn’t interrupt the consumer experience,” he said. “If the applicant is considered medium-risk they will receive the verification code right then and can go through the verification code process two or three times. If the online applicant fails either the device assessment or the identity validation the will receive a message to contact the leasing office to gain or provide further information.”

Going the extra step to avoid costly business decisions

Wilkinson said the industry isn’t immune to this activity and more and more of the company’s customer base is experiencing fraudulent renters. While the topic isn’t taboo, it’s clear the issue is mounting. Losing thousands of dollars in rent and turn costs because of an imposter is something most won’t discuss even if the applicant passed criminal and financial background checks.

Going the extra step of verifying personal identity lessens the potential that a property will be left holding the bag. The key is first verifying the identity of the applicant.

“It’s taking the traditional two-step check and adding in a vital third check,” he said. “Properties need to act, put the necessary barriers in place to protect their properties, residents and staff from being the next victim.”

 

Source: propertymanagementinsider.com

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Sizing Up Your Applicants Through Debt to Income

Thu, 11/02/2017 - 4:57pm

As the U.S. economy generally continues an upward tick, household debt has eclipsed that of levels in 2008 leading into the Great Depression. Total household debt has increased by $149 billion to $12.73 trillion.

Depending on who you talk to, that should cause alarm. But economists argue that the economic condition is now much healthier than when it teetered nine years ago. They cite about a 10 percent gain in the gross domestic product in the last several years.

U.S. credit card debt at all-time high

The fact is, after a few tight years of borrowing, the reins are loosening. Credit card debt is now at a U.S. all-time high after steady growth in the few years as more lenders are issuing more rope. Also, Fannie Mae increased its debt-to-income ratio for home loans from 45 percent to 50 percent in July.

Household debt-to-income percentage is the amount of debt compared to gross income. For example, a household that has $3,000 in debts (personal loans, car notes, credit cards, etc.) and generates $5,000 in monthly income has a debt-to-income percentage of 60 percent. That would flunk even today’s more generous Fannie Mae loan application.

For apartment operators, analysis of rent to income has been a staple in assessing risk of an applicant during the screening process. But the rise of America’s debt suggests that more emphasis should be placed on how much the applicant owes – and what makes up that debt.

Debt competes with resident’s ability to pay a lease

Rich Hughes, RealPage’s chief of data science, says multifamily operators can minimize risk by getting a better picture of applicants and the financial burdens they may bring to the doorstep instead of only relying on rent-to-income ratios. The concept is no different than how mortgage lenders cross the t’s and dot the i’s in the loan approval process (only borrowers have to sign their lives away amid dozens of documents).

“Suppose a person is carrying a bunch of debt,” he says. “That debt is competing with the lease you sign. The question is are they more likely to pay their rent or more likely to pay their debt. It becomes a very important question, whether you should let somebody live with you.”

The type of debt should factor into the equation, says RealPage Data Scientist Pavithra Ramesh. Long-term, low-interest debt like a student loan or car payment is not the same as a revolving credit card debt or short-term loan at a much higher interest rate.

“An applicant just carrying debt by itself isn’t sufficient to make decisions,” she said. “You need to know what kinds of debt they are carrying and that will determine whether you want them as renters or not.”

Resident screening technology provides better insight in ability to pay

Resident screening products pour through a wealth of information, everything from criminal records to rental history, that applicants bring with them to sign a lease. The next wave of screening criteria to assess whether an applicant will pay rent on time – or at all – is how much money is going out for bills compared to paychecks coming in.

RealPage’s LeasingDesk has a proprietary credit-scoring model that, among other things, utilizes debt to income of applicants. The model goes beyond creditworthiness by looking at the ability of the applicant to pay rent on time and in getting the best residents into the properties, Hughes says.

Data scientists are discovering that greater analysis of debt type yields improved predictive analysis of an applicant’s ability to pay.

“We can model debt differently based on factors such as credit utilization and other debt,” Ramesh said. “Even among loans, the model differentiates between ‘malignant’ and ‘benign’ debt, since not all debt is bad or can be construed to lead to a bad lease outcome. By distinguishing the type of debt, we were able to achieve a lift in the predictive power of the component.”

No matter how much or how little Americans are borrowing, multifamily operators will have a better picture of who’s asking to rent their apartments.

 

Source: propertymanagementinsider.com

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Top Reasons Why Real Estate Investing Is So Popular

Thu, 11/02/2017 - 4:55pm

Real estate is secured by a physical asset and is an overwhelmingly stable investment. In the vast majority of cases, an investment property will retain its value and appreciate over time. If you make your monthly mortgage payments and have the correct insurance, it is very unlikely that you will experience a total loss on a real estate investment.

Robert Kiyosaki, the author of Rich Dad Poor Dad, claims that there is money to be made even when the market crashes:

“Real estate is a long-term hold. It’s not liquid. I don’t care if the market is up or down. What I’m looking for is a bargain. I make most of my money when the markets crash. I made most of my money in 2007. I made even more money in the subprime crash. I don’t care about the overall economy or the markets.”

Because people will always need a place to live, real estate can be a safe way to invest your hard-earned money in something that’s always in demand. It’s no surprise, then, that real estate is a popular investment today. Let’s look at some of the other reasons behind its popularity:

Investors make money immediately.

Depending on the type of real estate investment and the method with which it is acquired (i.e., with or without financing), real estate investors may begin earning cash flow immediately. For example, when you purchase a turnkey real estate investment, the property is completely renovated with a quality tenant in place. You receive your first rent check at the end of the first month.

Long-term appreciation and equity build over time. 

Long-term real estate investments not only produce positive cash flow each month, they also build equity. Every mortgage payment you make is done with the proceeds from your tenant’s rent. When you pay off a mortgage with the money furnished by your tenant, you are essentially having someone else pay for your investment.

Appreciation is the second benefit of a long-term real estate investment strategy. In most markets, real estate appreciates over time. According to Zillow, real estate in the U.S. has increased in value by 6.9% year-over-year since the time of this writing. So, the $150,000 home that you purchase today could be worth $292,000 in 10 years.

There’s a low barrier to entry.

Getting started as a real estate investor isn’t as difficult as it sounds. You don’t need to have hundreds of thousands of dollars on hand to make your first investment. There are many financing options available, and taking advantage of them is the secret to success for many real estate investors. To get started in real estate investing, you may only need to put 20% down on a property and finance the rest with a low-interest mortgage. If you can’t get a mortgage, there are other options such as non-recourse loans, hard money or even personal loans. Understanding financing options is critical to making the most of your real estate investments.

Investors can leverage their capital.

If an investor wants to buy $100,000 worth of stocks or mutual funds, they typically need $100,000 in cash to do so. With real estate, though, an investor can buy a piece of real estate valued at $100,000 for only $20,000 in cash and a loan for the remaining $80,000.

While not all properties meet the requirements for a conventional mortgage (think fix-and-flip investors), many real estate investors can secure multiple mortgages and grow their portfolios with only 20% down on each property. Real estate investors use conventional financing to leverage their cash on hand so they can purchase more properties and maximize their investment opportunities.

With an affordable entry point for investing, real estate offers good potential for growth and diversification in a portfolio. And leveraging assets like professional property management companies allows investors to buy properties almost anywhere. As a real estate investor, you aren’t just limited to your hometown.

Investors enjoy tax deductions.

Real estate investors enjoy tax deductions that other investors simply don’t have access to. Here are just a few of the deductions a real estate investor can claim:

• Interest paid on mortgage

• Depreciation

• Property taxes

• Insurance

• Repairs and maintenance

• Business-related travel costs

There are other ways to avoid losing money on a real estate investment, like leveraging a 1031 exchange to avoid capital gains taxes. Deductions can mean more positive cash flow for the investor and less money sent to the IRS.

The time commitment is flexible.

Fix-and-flip investors and investors who act as property managers make investing a full-time job, while turnkey investors simply use real estate investing as supplemental passive income. Depending on your investment style, different time commitments are required.

Arnold Schwarzenegger made his first million in real estate while building his film career. The perception that many people have of real estate investing is wrong — it is possible to successfully invest in real estate on the side.

Investors can manage their risk.

You’ve heard the phrase, “The greater the risk, the greater the reward!” This age-old saying holds true in the world of real estate investing. Lower class assets can produce higher yields (at least on paper), but they also bring more risk for loss. Higher class assets generally produce lower yields, but they are considered a safer investment. Just like in the stock market, investors can make real estate investments that fit their risk profile.

 Get into real estate investing today.

Real estate investing can fit into nearly every investor’s portfolio. There are so many options in real estate, all with different pros and cons, risks and returns. From the safe and reliable turnkey investment to the risky (but potential cash cow) fix and flip, there is something for everyone to achieve their financial goals. It’s no wonder so many people are investing in real estate.

 

Source: forbes.com

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