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Freeing money from your investment property

Freeing money from your investment property:

In 2008, when the real estate market experienced a fall out, a lot of people ran from investing in real estate. As is the case in any market turn around, there are those who seem to benefit from the event at the expense of those who don’t. You may be one of the smart investors who bought at the bottom of the market and are still sitting on those investments. If you are, then this may very well be an article for you.

By now, you are probably comfortable with the concept of equity. Equity is simply the difference between fair market value of a property and the amount of money owed on that property. So if your property has a fair market value of $1M and you owe $500K, then you have $500K equity.

While this sounds great – having your money tied up in one property may not be the most effective use for that equity. One way to “unlock” some of that equity could be through a refinance option. This would be done by taking out a new loan, for more that you currently owe, paying off your existing mortgage and then investing the balance of the cash into another investment property. This is called leverage – effectively where you use less of your money to acquire more properties, by borrowing more against (leveraging) the properties.

The upside is that you would be able to own more properties – this creates the possibility for you to experience and benefit from market appreciation. The down side is that your properties would be encumbered for longer periods of time, your payments would increase, and you might become more sensitive to the effects of any vacancy. Again, this decision should be made in accordance with your personal risk profile – you need to understand and be comfortable with the possible outcomes of any investment decision.

Watch this space for more value add articles from RESE Property Management LLC, if you have any questions or would like to have a chat about anything relating to real estate, please feel free to call the writer.
  Call Tony du Preez @ 801-360-6424 or email tony@resepm.com

Choosing the Right Investment Property

Choosing the right investment property:

The more I am involved in the management of investment real estate, the more I am convinced that making the right initial decision is critical to the success of the investment, on a number of levels. Here are 3 levels to consider when choosing the right investment property.

1) Financial

When choosing the right investment property I don’t think that considering the financial implications of an investment decision is a new concept to most investors – however, it is always useful to be reminded of some important factors. Return on Investment (ROI), Risk and Hidden Costs. Firstly, return on investment (we will be digging into this concept at a later date) is the return that you are going to get from the investment you have made. Secondly, the risk associated with that return – what are the chances of you actually seeing that return and how regular will it be and Thirdly, are there any hidden (or less obvious) financial considerations, for example the quality of the tenant that the property will attract, deferred maintenance etc.

After weighing these considerations against your personal risk profile, you will be able to make a confident decision, knowing what to expect from your investment property.

2) Personal

This is a slightly less obvious consideration, but one which will also have an impact on the outcome of your decision. If you are someone who loves to be involved in the detail of things, then you may end up managing your own property and, although it may save you some money, in the long run your investment properties can end up controlling your life. The more you are involved, the more you will be “needed” and the less freedom you will experience. In addition, there are the attempts by wily tenants to manipulate you so they can get what they want. Dealing with the inevitable confrontation is also something that a lot of investors underestimate. Bottom line, is that you need to decide whether you want to be a landlord or a real estate investor. Once you have made that decision and feel confident you understand the extent to which it will influence your life, it will become simple for you in choosing the right investment property

3) Emotional

Another less than obvious consideration – and yes, it may be very closely related to the personal effect, but I wanted to address this separately. Once you have decided that you want to be a landlord, then you need to be prepared for dealing with the type of people your investment property will attract – that will create some emotional challenges. For example, you are probably a good person and it may become a dilemma for you to hold someone accountable when they have a sad story or some convincing reason for doing what they have done. To maximize your return on investment, you will need to make the hard decision and even though it may be justified, a lot of owners end up feeling bad about making the right business decision – hence the emotional impact on you and your life. Too much of any of this, can lead to a negative impact on your returns and your life.

Watch this space for more value add articles from RESE Property Management LLC, if you have any questions or would like to have a chat about anything relating to real estate, please feel free to call the writer.

Call Tony du Preez @ 801-360-6424 or email tony@resepm.com

Toxic Investment Property

Can Your Toxic Investment Property Be Saved?

In an ideal world, you buy an investment property and immediately begin renting it out to model tenants, who pay on time and care for your property as if it was their own. However, the reality of owning a rental can be drastically different for most of us; while investment property obviously pays off in a variety of ways, some properties or units turn into money pits that drain cash from your account each month. As a last resort, you can try to sell the unit, but first make an effort to figure out why you are losing money and what, if anything, you can do to stop the bleeding to help turn things around. If a tenant has simply stopped paying, has turned your nice and orderly home into a meth lab, or is hoarding cats in the basement, your property is losing money for a reason. If your home is in poor repair, features 1970s shag carpeting (and appliances to match) and has an overgrown jungle for a yard, you simply won’t be able to charge enough rent to make things work. “Assuming your price-to-rent ratio is intact, the next fastest way to lose money on a rental property is with bad tenants. Worse than ending up with bad tenants one time is ending up with bad tenants consistently.” — Bigger Pockets Blog If the area your home is in has experienced a significant decline, and even upgrading your property won’t help, then you might need to consider getting out. Take a look at how your home stacks up against other properties in the area. Also consider the people you are choosing or maybe being forced to rent to. Both of these factors can help you decide if you are losing money because of outside factors which are beyond your control, or if you can make some changes and rehab your investment property.

Can You Improve the Property to Make It Profitable?

While you can’t change the location of your rental home or unit, you can take steps to make it function more efficiently and to increase its profitability. If you have tenants in place, but they are regularly damaging the property, failing to maintain the interior or exterior, or simply not paying regularly and on time, you’re losing money each month. Upgrading your tenants, either by legally evicting them if the circumstances call for it, or waiting out the lease and then investing the time and money it takes to find a better class of tenant, can help. “A landlord can evict a tenant for the nonpayment of rent, for the failure to vacate the premises after a lease agreement has expired, for a violation of a provision in the rental contract, or if the tenant causes damage to the property and it results in a substantial decrease in the value of the property.” — Findlaw.com Once the offending tenants are gone, taking the time to rehab the property and make it appeal to a better class of tenant can help you climb out of the money pit and begin making a profit on your property.

Beyond Dollars and Cents

While watching a steady stream of cash flow out your door each month is no fun, you also need to consider the emotional toll that dealing with your property causes you each month. If you are constantly worrying over getting paid each month, getting called at all hours by troublesome tenants, or are struggling to make timely repairs and improvements to your home, you’re living in a constant state of stress. You could get rid of the property (which could cost you even more money), but partnering with a professional property management company can help improve your bottom line and eliminate the hassle of dealing with your investment property.

Is It Time to Hire a Property Management Company?

A professional property management company can use several ways to help turn around a struggling investment and eliminate the time-suck that a bad property can become:

Better-Quality Tenants

As a property owner, you search for tenants once a year, but professional management companies do it all the time. They have the tools necessary to determine suitability and ensure that a tenant is able to pay — and likely to continue to be able pay the rent each month. In addition to the expertise that comes with meeting with hundreds or even thousands of prospective tenants each year, a proven system of background checks, and tenant suitability rules, a good property manager can smell a bad tenant a mile away. Familiarity with some of the red flags that signify a bad tenant can protect you and ensure that your property is safe from harm. Some tenants make a business out of appearing as if they are steady, reliable individuals — until they move in. Once in place, these tenants wreak havoc on your property and your profits. A savvy property manager can help you avoid trouble from the start and will have a system in place for dealing with good tenants turned bad.

Improved Maintenance Options

When you need to hire a subcontractor for one unit, you won’t get much of a deal; a property management company who either employs professional contractors and subs or handles multiple units can ensure that your unit gets the maintenance it needs while employing economies of scale on your behalf. The same benefit holds true for urgent and emergency maintenance needs — plumbing, HVAC and other big ticket repairs never seem to happen on Monday mornings; that 3 a.m. phone call from a frantic tenant will get answered by someone else when you use a decent property management company.

Regular and Ongoing Inspections

Are you losing money because it seems as if you have to repair something or attend to a new tenant concern each month — or because you have to overhaul the entire unit every time a tenant leaves? A specialized property management team will perform regular, well documented, site visits and inspections and ensure that your unit is being cared for correctly. Spotting a plumbing problem or insect infestation before it has a chance to damage your property can save you thousands in repair costs each year. Determining the reason you’re losing money and fully examining your options can help you determine if a property is truly toxic, or if it simply needs a different approach when it comes to management and maintenance. If you are worried about an existing property, are losing money each month or every time you need to find a new tenant, we can help. Contact us to learn more about the benefits of working with a professional property manager and for some specific help and advice about dealing with your toxic investment property.
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Don’t Get Burned: What to Look for in a Decent Property Management Company

Whether you’ve chosen to invest in real estate for profit or you’ve become an unintentional landlord, using a professional property management company can help you maximize your ROI and minimize your hassle. You do have to choose the best property management team for the job, though, to truly get all of the benefits associated with using a professional manager.

4 Symptoms of a Toxic Investment Property

The number of housing units occupied by renters in the United States has been steadily increasing since 1975, but there has been a sharp upturn in the past few years. In 2015, there were 43.58 million renters occupied housing units; this is up from 38.02 million in 2010. As housing demand rises, more rental properties are becoming available which means more investment opportunities. The question is, how do you know what is a healthy property that gives you a good return, and what is a toxic one that will rob you of all profits? Toxic property management is a soul-sucking, profit-draining venture, but there are ways to spot a toxic property before you get sucked in. Look for these four symptoms of a toxic property investment: