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Showing posts with label tenants. Show all posts
Showing posts with label tenants. Show all posts

April 15, 2011

The Big List of Do's and Dont's for Real Estate Investing

Happy Friday !
   We have made it through another week.

   Well...it's here ! "The Big List of Do's and Dont's for Real Estate Investing". Shall we proceed?

   The biggest caveat we have heard from almost everyone that we have been speaking with is to not let your emotions get in the way of investing. "I would say the number one don't would be to not let your emotions get involved with a property. It's not like a car, you don't have to drive it on a daily basis, it's an investment.", says Jamie McKeehan, a Professional Mortgage Planner, who provides the following example; "Just because it's a lake front property with a super cool dock that reminds you of your grandfathers lake house when you were a kid...doesn't make it an investment." Ankit Duggal, Founder and Investment Director of RER, LLC, a real estate investment firm that specializes in the acquisition, renovation, and sale of distressed assets agrees, and says that some investors tend to, "get attached to a property" and are therefore, "not able to see past a bad transaction."

   A variation on this, per Duggal, is that others just become, "emotionally fixated on "winning," and become so intent on acquiring the property that they lose focus on the numbers." Oscar Zamudio, a Commercial Executive with Coldwell Banker Commercial NRT, says that some investors are, "willing to add their money to the monthly mortgage simply because they fell in love with the property." Duggal adds the following tip: "Don't personalize an investment home. Keep the rehab neutral so you leave room for the personal taste of all buyers."

   "Don't be attached to investing in your local market.", says Brian Sparr of Sparr Properties, who adds that, "If you feel the need to be able to drive past your investment property at any given time, you are very likely stunting your investment growth.". Sparr advises that you should be, "open to taking advantage of the opportunities other markets are currently providing (even when you factor in the added expense for hiring a property manager to oversee the unit)."

   Obviously, a huge factor in Real Estate Investing is funding. Zamudio speaks about a "basic rule" in investing; "If you can borrow money at a low cost why not maximize it by buying the most amount of money that the investment can cover through its income." Sparr suggests that you have a "long-term plan that you can execute against", and that, "Simply owning a rental property doesn't make you an investor. The purchase or sale of a property needs to clearly fit into your overall plan and help you get closer to realizing your ultimate goals.

   David M. Rice of New Home Star Corp, says that there is, "one overriding piece of advice that I would give to anyone I advised today", which is, "The investment has to make sense.", and continues to say that you need to, "Forget buying it because it is "so much lower priced than it was before" or because "this area is sure to boom"." Rice says that successful real estate investing, "in my opinion, should be based on making investments that make financial sense. One shouldn't count on appreciation, even if it seems "certain". Of course, if the purchase can be appraised a higher number than the purchase price, that's substantiated (relatively) equity. If the property needs work and you do comparisons to find out what the property would be worth when the work is completed, that too is a different story. Look at real estate investments at this point in time. Consider all of the known factors and make a decision that makes sense.

   The Big "Do's" here, are, "Identify what your goals are; Cashflow? Rate of return? Percentage of return overtime? Tax strategy? Appreciation only?", per Glenn Bill of The Glenn Bill Group, and ultimately, per Duggal, "find your buyers needs and fill it. You'll be successful if you can provide what others demand."

   Barb Getty, a Real Estate Investor, Landlord, and an Author, provides some operational tips, for example, to, "Protect yourself by operating under an LLC or other corp., and if you do your own management, tell your tenants you’re the property manager – not the owner. This makes them feel you’re in their corner, a go-between, and when things get rough you can say, “Let me talk to the owner and I’ll get back with you.”. Getty also says that you need to have an, "airtight lease", and "do enforce it", because, "The best lease in the world is worthless if you can’t, or won’t, enforce it's terms. Landlords quit this business because they’re frustrated, overwhelmed and burned out. The reason? Tenant management issues. If you have a great lease and follow it, burnout won’t be an issue."

   "Don't rely solely on the information you find on the Internet.", says Sparr, who adds that, "there is no substitute for the facts obtained by getting your hands dirty in the local market." Bill suggests that you, "hire an agent to help you. An agent who has owned rental property in the past. Preferably an agent who has lost investing money in the past." McKeehan takes this further, and says that, "A must do, is to speak with multiple Realtors about the property, even if you are loyal to one. It never hurts to hear multiple opinions from professionals, this will save loads of cash.

   OK, so once you have your goals, funding, structure, and your team in place, where to invest? "Location, Location, Location", say Dina Goldentayer of the DS Team in Florida, ..."When buying for investment, the future upside of a neighborhood is the most important factor. What makes people want to live there? Good schools, new restaurants, proximity to highways. These are all factors that will attract a renter and a future buyer when it's re-sale time."

   Christine Michaels, an investor of condos in one of the hottest markets in Florida, suggests that you check the crime grid for the neighborhood. Additionally, Michaels says that if you're building condo high-rises, you need to, "Find out if empty lots are zoned for high-rise". If you are investing in a condo, She also suggests that you, "attend a homeowner's meeting", and also, ask if there is upcoming special maintenance", which is, "critical as it will affect your budget."

   Once you find a property that meets your investing criteria, says Bill, "Inspect the property". Michaels suggests that you, "Kick the Tires", some of which she has done, such as, "talked to residents, flushed the toilets, observe the management office". Duggal adds that you need to, "Do your homework: Perform the market research and the neighborhood comparables, and inquire upon multiple contractors, electricians, plumbers, and other people who will be doing work on the house for you. This way you know that you're well informed, well prepared, and that you're getting the best deal possible.

   When it comes to tenants, Bill recommends that you, "Don't purchase unless you have a tenant history, verify taxes and financial viability of the seller. i.e: check the title close(ly) with a title company". Bill advises that you do not, "get involved with a tenant with out a lease and proper disclosures being signed, especially for lead based paint and mold", and also suggests that you should not, "agree to pay for tenant's utilities this can cost you big time". Getty says that you should not be, "overly trusting !", and, "When your tenant is behind in the rent payment and promises it will be there next week, make them put it in writing, signed by both of you, with the threat of an eviction being filed if the rent isn’t paid by then. I learned – the hard way – that “next week” never comes. Choose to think the best, but by all means, have a backup plan!"

   Some additional tips, says Goldentayer, are to, "Read the Fine Print. It is crucial, especially in a condominium, to evaluate the building's rules on leasing, pets, and re-sales. As an investor who is unlikely to occupy the property, it's vital to make sure it can be easily rented to produce steady income." She also says that, "The Numbers Must Work. For an investment property, buyers are much more focused on the balance sheet versus how pretty the kitchen cabinetry is. So, run the numbers carefully and always assume a worst case scenario, such as a period of vacancy and deferred maintenance issues."

   Sparr advises that you should, "have a sizable amount of money set aside as an emergency reserve.", and says that, "The unexpected is going to happen - appliances going out, the roof needing a repair, missed payments from a tenant - but by setting aside enough money to cover many of these types of issues, you will protect your interest in the property and allow yourself to sleep soundly each night".

   For rehabs, Getty suggests that you, "Don’t overdo it on the rehab.", and says, "...That middle income home is only going to bring middle income rent, like the other homes around it. Make the rental attractive in less expensive ways – nice landscaping (good curb appeal), pleasing paint/carpet colors, nice window coverings, faux countertops that imitate the expensive stuff."

   In closing, Bill says that you should not be, "hurried or pushed into making a decision without understanding all the risks.", "Don't think you will get rich quick. The only people getting rich quick are people selling get rich quick schemes!", and finally, "Have the guts to go ahead with the purchase once it all makes sense."

   Hopefully, these Do's and Dont's can be incorporated into your Real Estate Investing endeavors. If you have anything to add, there are a lot of people reading this post, and would love to read your helpful comments.

Have a Great Weekend, and Happy Rent-to-Owning !
Rob Eisenstein
HomeRun Homes Blog http://blogging.lease2buy.com
HomeRun Homes Website http://www.lease2buy.com

TAGS: #realestateinvesting #realestateagent #rental

November 5, 2010

Best Markets For Commercial Real Estate Investing

Commercial Real Estate Investing
Hi Folks,

   Hope everyone made it through this week a few steps ahead of where you were on Monday.

   Since we always look at Real Estate and Rent to Own from the Residential angle, today we're going to take a look at Commercial Real Estate Investing, along with some information and some forecasts that could prove quite valuable for you.

   We spoke with two individuals that are quite well-versed in the Commercial Real Estate market, and we asked them about which markets are the best right now, and what the outlook is going forward.

   Our first comments come from Shari Olefson, a Real Estate Lawyer, Author, and an expert panelist who frequently appears on CNBC, MSNBC, FOX, CNN, and CSPAN. Olefson says that the best Commercial Real Estate (CRE) markets, "mirror the best - or least worst - residential markets.", and that, "Folks perceive home wealth gains or losses as more permanent than stock markets gains or losses". Olefson says that home equity gains/losses are spread across all socio-economic groups, while only the top 1/3 of Americans hold most of the stock. "Why does this matter?"; Olefson said that, "since CRE values (occupancy and rates) depends on tenants or occupants generating income which oftentimes comes (from)  folks in or near that geographic location.", and that, "When those folks feel poor they don't spend"

   Olefson offers some tips for Investors with strong staying power, in that, "they may find the best deal in longer terms non cashing flowing asset purchases from lenders. For example defunct residential projects in Florida. And particularly where FDIC loss share agreements are involved.". She also says that, "For now acquiring banks are not selling notes on these deals as the guidelines for pricing notes from the FDIC are not clear.", and , "As a result these assets are having to go thru the entire foreclosure process. But once this kink is resolved those CRE note purchases may be good values. Knowing the terms of a banks loss share agreement is helpful as during the time immediately before those expire banks will be especially eager to try to deal."

   We also spoke with Denise Beeson, a Commercial loan officer with Bay Sierra Financial, Inc., who states that, "If you are a professional i.e. MD, dentist, podiatrist, or small business owner, etc. this is the ideal time to buy your building under the SBA 504 program (10%) down, or through a commercial loan (25-35% ) down with interest rates this low.". The reason, she says, is that, "Owner occupied buildings are very appealing to the professional or business owners who have paid rent/leased and the building owners are interested in selling."

   Beeson believes that the market will continue to be, "rather 'soft' in the next 2-3 years as buyers recoup from financial problems i.e. stock market decreases, vacancies, depressed real estate prices.", and that the economy has to stabilize before you will see any active purchasing.". Beeson does go on to say that, "the private money market is prospering since commercial investors always need money to buy or refi outside of the traditional banking avenues."

   Overall, it does truly seem a mirror image of the Residential situation, but usually lags behind the events in the Residential spectrum. If you have anything to add to this, such as promising CRE markets, or anything additional, please comment below.

Have a Great Weekend, and Happy Rent-to-Owning !
HomeRun Homes Blog http://blogging.lease2buy.com
HomeRun Homes Website http://www.lease2buy.com