Have you ever wanted to get started in Real Estate Investing?

 

 

     There are so many ways an aspiring investor can get started in Real Estate. Tucson is an excellent location to invest in. Property values in Tucson and the surrounding areas are comparatively less than other markets, which can promote cash flow. Tucson and the surrounding area is comprised of many cities. Some of the surrounding cities are: Picture Rocks, Three Points, Marana, Avra Valley, Oro Valley, Red Rock, Sahuarita, Green Valley, and Vail. Each city has it's own individual pros and cons for investment purposes.

 

     How much do you know about investing in Real Estate locally in Hampton Roads? Do you currently own rental property? Are you looking for a short term investment or a long term investment?

Do you know any active investors or any real estate professional to help you get started? Do you currently own a home that you are living in that has available equity? Do you have good or bad credit? These are basic questions that you should be asking yourself when you think of Real Estate as an investment.

 

There are four most common ways to invest in Real Estate. There are many variances and differences in each of these ways, but for the most part each is done the same.

 

Rental Property:

 

     Rental property is the foundation to every serious long term investor. Acquiring and building a diverse portfolio of rental property is paramount in order to achieve financial wealth and investment leverage. The key thing you must look for when purchasing a rental property is how much cash flow will it yield? What is the standard appreciation in that given area? What are rental rates verse what my mortgage is? Are there any owner paid utilities? What is the risk associated with the investment?

     Once you begin to purchase cash flow properties, you begin to build monthly cash flow. The more properties you own, the more monthly cash you will have, therefore, the more investing leverage you have to buy more properties and to use to invest in other areas such as Rehabs. In essence, this cash flow is Residual Income, money that will come to you each month for the rest of your life as long as you own the property. For Example: You own 5 properties each bringing $300.00/mo after all fees and mortgage. That's $1500.00 a month that you can use to reinvest back into your properties or to use to buy more cash flow properties. Just think, that's $6000.00 every four months you own the houses.

     On top of the monthly cash flow you will receive, your properties will continue to appreciate or go up in value constantly, depending on the current real estate market. Which the difference between market value and loan amount is equity, money that you have sitting in your house that you can leverage to purchase more cash flow properties.

     Thirdly, each year that you rent these properties, the tenants will be paying down the amount owed, increasing equity build-up as well. On top of that, each year rental rates will almost always raise, so each year you own the rental property, the investment will just get better and better.

 As you can see, rental property will be the backbone for your investment endeavors and will create long term wealth as well as residual income. The more rental property you own, the more cash flow you will have to purchase rentals on a consistent basis.

 

Rehab Projects:

 

     Rehabs are a lot more complex than rentals. You must be very good with number crunching and have some great contractors, or you'll have problems. Rehab investing can be very risky, and timing is everything. Rehabs are short term investments. The faster the better, the longer you hold on to these properties, the less profit you will make.

     You must have substantial capital in order to rehab properties efficiently. The first thing you must do when you find a fixer upper is know what the property is selling for verses what you can get for it completely renovated. This is your gross profit margin. For Example: A house is selling for $50,000 and has a market resale value rehabbed at $150,000. You have a $100K margin to figure in all the expenses involved.

     What kind of expenses are involved with Rehabs? To begin with, you must have a down payment and closing costs to purchase the property. In most cases, 20% down and 5% closing costs determined upon contract price. On a $50k house, that's $12,500. Next you must figure in rehab expenses after taking bids from multiple contractors and negotiating the price as low as possible. Let's say rehab expenses for this property is $40K, to completely renovate and sell this property in a timely fashion. Now you have $47,500 invested. Next you must figure in your selling expenses. which include commission fees and closing costs. Commission fees are around 6% of resale value, and closing costs are normally very inexpensive depending on sales price, day in month you close, etc....in most cases no more than 1% of sales price. In our case, that would be $10,500 for commission and closing costs  based upon a sales price of $150k. Total capital invested into the project is $62k. Amount owed on property is $40k, after putting the initial down payment of 20%. Add capital invested to loan balance to figure total investment. Subtract sales price of  $150k from total investment of $102 which is the net profit earned of $48K. Which should take no longer than 60 days to renovate and resale once owned, determined upon project size. Any longer than 60 days, you must start deducting net profit for holding costs.

     Always remember that you must figure into your budget, Capital Gains tax will apply on profit made of 15%. Always consult your tax adviser for a more in depth overview. This will apply to all investment properties acquired and sold if you have not physically lived in the property two out of the last five years. In that case however, no capital gains tax would apply.

 

Flipping Property:

 

    The meaning of flipping property is to acquire a property and flip it to someone else, sometimes without ever owning it. You normally don't make large amounts of money on a standard flip. You must be very networked, especially with investors. Your job is to find under valued property and essentially flip it to a buyer or an investor. You must always have a buyer on the sideline to buy this property or you can get stuck with it. Which will usually mean to a loss, since there isn't really much of a profit margin to begin with. The best and most efficient way to invest in this nature is to work with several full time investors such as rehabbers or landlords that are consistently purchasing investment property and scout out great deals to sell to them at a slightly higher price to make a profit. Normally you will only make a couple of thousand dollars, but the more under value the property is, the better your profit. You must keep in mind that most investors that work full time are very market savvy and won't pay a dime more than what market value is, and even that is a challenge in itself. The best thing to do, is sell it slightly below market value if there is room, that way it's a win-win and you will more likely strike a deal. Most of the time flipping is done by being able to assign the contract to someone else. However, you must get the seller's consent in order to do this, which isn't always easy. There are many variations to flipping property, but for the most part, this is how it's done.

 

Foreclosures:

 

     Foreclosures are the most risky investment. They can also yield the highest return. Foreclosures can be acquired in three different ways. The first way is when the notice of auction is put into the newspaper in the legal section or when an investor receives a lead from a generated list of upcoming foreclosures. The investor will attempt to make contact with the owners to ask if they would be interested in selling their property at a below market value in order to help them avoid foreclosure and bad credit. The more equity the owner has in the house the better, but the best way to approach these disgruntled owners is with a win-win situation.

     The second way to approach foreclosures is at the courthouse steps on auction day. You must make sure that you have done due diligence with this property and possibly have viewed the interior in order to know what your buying. Many times you will buy a foreclosure and it is infested with termites or has any number of unknowns wrong that may take away from your profit margin. Always know what market values in the area are going for and what you can flip or rehab it for when completed.

     Lastly, if the property is not purchased at the auction, it becomes Real Estate Owned, Or REO. An REO is a bank owned property. Normally they are fixer uppers and great for rehabbers. Hud and VA also have REO property that is listed. Normally these properties are sold below market due to condition and can be great investments, however, there is a lot of red tape in order to purchase these properties. With the Hud properties, you must bid for them, and the first two weeks of being listed is generally a owner occupant bid only time. Meaning, investors get second dibs of the properties after the owner occupants.

     Foreclosure investing is very complex and can be handled many different ways. It can almost become a full time job if done thoroughly and efficient. You must have substantial capital with foreclosures, because many times you must purchase these properties in cash due to the amount of time it will take to qualify and close a loan to purchase.

 

     These are the four most common ways to invest. If done correctly, you will build wealth and financial independence with no limits. It's a fact that 96% of all millionaires in this country credit real estate for creating some amount of their net wealth. That's an amazing percentage! All these methods point back at the foundation of your portfolio. You must own rental property in order to leverage the money you will need in order to Rehab or purchase forclosures. The equity you will build in your rentals along with your monthly cash flow will help you continue investing.

 

 

Landlording

First Time Eviction

Hello everyone. This is the first time that I have ever had to evict someone from one of my apartments, and I want to make sure that cross all of my "t's" and dot all of my "i's".

From what I have gathered, I basically have to write a letter to the tenant with the title as PENNSYLVANIA NOTICE TO QUIT, and post it on each entrance to the apartment. Here is what I have so far, let me know if I am missing anything:

PENNSYLVANIA NOTICE TO QUIT

[landlord name, address and contact info]

[date that this notice begins]

To [tenant/tenants]:

And all individuals (tenants, occupants and subtenants) in possession of the Premises

The Premises herein referred to in this official notice to quit is located at [apartment address of tenant] with a lease agreement commending on [beginning start date of lease] between [tenant/tenants] and [landlord]. This notice to quit has been sent by the Landlord to the Tenant(s) due to the non-payment of rent.

In accordance to the laws in the State of Pennsylvania WITHIN TEN (10) DAYS after service on you on this notice to quit, you are hereby required to pay via money order or certified check to the undersigned Landlord or the Authorized Agent and back-rent including any late penalties or other fees accumulated of which you now hold possession amount to the sum of [total amount due to date]. If payment is not made you will be required to quit and deliver up the possession of the premises at the end of the ten (10) day period.

YOU ARE FURTHER NOTIFIED THAT the Landlord does hereby elect to declare that forfeiture of your lease agreement under which you hold possession, to the above-described premises,if you fail to perform or otherwise comply with institute legal proceedings to recover rent and possession of said premises which would result in a judgment against you including costs and necessary disbursements together with possible statutory damages allow by law for such unlawful possession of the premises.


Landlord/Agent Signature ______________________________________

[landlord's name]

*** Am I missing anything? I know this procedure varies state-to-state. ***

AB 1482 Bill Passed (CA)

The laws for California landlords are changing.

https://www.ocregister.com/2019/09/11/california-rent-cap-bill-ab-1482-passes-state-legislature/

Sitting tenant home being sold

Hi,

I am in a quandary. I am a sitting tenant in a home thats about to be put on the market. I am fine with my 60 notice to vacate and complying 100%. I completely understand the reasons for the home sale and wish them success .
My main problem/concern....
I was out of town when given notice to vacate. Unfortunately I still am. After my 3 week job out of town I had to hustle out to another town to care for my ailing Dad and am here for the next 10 days.Following Dad care I have more out of town jobs in the works.
As a tenant in the process of moving I will have few days at home to start the moving process. I was home one day this month and had a friend help sort with packing, etc..My move is a WIP. Piece meal moving with limited number of days to do do so. Chaotic at best! I paid rent this month and am hiring packers while I am gone . I intend on fulfilling my obligation to be out by Oct 15, and leave the home in perfectly clean condition by end of my tenancy.
The kicker is!
Apparently they are hiring stagers to come in soon and stage the home while I am out of town. During this crucial moment of my piece meal move out agenda. Seems ludicrous to me. My stuff as of now is barely contained. Much of it half pulled out, personal items and papers with sensitive info out in the open. Stuff haphazardly spilling out of boxes shoved along walls, etc...Given my situation I have no other option than to start my move now. I feel in no way obligated to work with stagers at this point. In fact I wrote a nice letter to the home owner a few weeks ago suggesting they wait till I am fully out and then stage. The house would be beautiful and they can come and go to their hearts content. The response back was " The agent advises against it "
I hope someone has some suggestions! When I get the 24 hr notice stagers are coming in what should I do? Again, my stuff is all over the place and I am currently out of town. I absolutely do not give them permission to touch or even move my stuff. Thats where my anxiety hits the roof! They plan on staging with:
A sitting tenant who is moving out, chaos and boxes abound.
Packers who will be in the home , packing and moving my things around stagers belongings.
Stagers have movers that can come in and potentially damage/break my things.
My shackles are spiking!
I will be there some days/nights and living among stagers things, trying to pack my own belongings.
Who is liable? Should staging items be broken during my move by my helpers or myself who is responsible?
Why on earth would they want to stage in such a scenario??!
Can any landlord help me with this bizarre situation?

Stressed to the max....




Screening questions

Hello:
Can you provide me some pre-screening questions for the potential tenants? Also, I would like to know if I can ask the question Have you ever owned a home? I dont know if it is a discrimination question. In addition, can I ask the income of the potential tenants in the pre-screening step? How much income the potential tenants should have as compared with the rent (2, 3 or 4 times..).

Thank you so much,

Hao Hao

Someone wants to rent my house to run AirBnB

Someone wants to rent my house to run Airbnb business. He wants to rent for 3 years plus 3 years renewable, total 6 years. I am new to this business model. What are the catches? I suppose he would have to get licenses or permits if required by local city or state. He would also have to purchase commercial insurance for short-term rental homes. What else should I pay attention to? I just do not want to fall into a pitfall.

Thermostats

Thermostats used to be easy. Now with so much being super programmable and WIFI telephone controls, I have lost any ability I had to install home thermometers, program them, and instruct a tenant. The NEST thermostat --which they are installing now--we have it in our home and oh, boy...
Are you folks installing fancy thermostats? Preferences.

Smart locks - do you use them?

We have two sets of apts in NM and FL, the cost to rekey is getting to us- cost and hassle factor. Do any of you smart locks and if so which brands are the best for you as to reliability and ease of setting code? We have helpers at both places but want to make sure the codes are easy to set for each new tenant? Thanks! -Tom

Almost tenant is threatening to sue.

I'm relatively new to being a landlord. I had one of my units become available after a tenant moved out and left the place a mess. somebody I knew from barber school was looking for a place and I offered it to him. Big mistake. He paid first month and security deposit cash and signed the lease a week before the lease start date. He asked when he could start moving stuff in and I said the u it wasn't ready yet but in a gesture to build good will I told him he could pit some stuff in the back bedroom but no furniture yet. He took full advantage of this and came every night sending me a message asking when I would be home because he was coming to drop some stuff off. I quickly grew tired of this but shrugged it off because I knew he was excited to get his own first place. so I gave him a key to the side door of the duplex and took the door off of his actual unit. I live in the other unit btw. The very next day he shows up at 10 pm being super loud blasting music and smoking weed. He also brought furniture in and set all of the stuff up in every room of the house except the kitchen and bathroom. when doing so he scratched the floor up and put deep gouges in it. I had spike to him previously about not putting furniture in and when it is time to do so he would need felt pads on the furniture or he would ruin the floor. I stressed this several times. I also told him he was only able to put stuff in the back room only right now. when I confronted him about this he became very defensive and never once apologized or offered to fix the floors. I told him this wasn't going to work out and he instantly became apologetic and even begged. I told him it's better f we both cut our losses and move on. He started the tough guy attitude again and I pointed out this is why it wouldn't work. He said it's not about to happen like this and I explained to him that I have all the leverage and if he moved in he would be in default of the lease right away in many ways. one being that he didn't have renters insurance . I didn't tell him tgat because I didn't want him to get some.. after some back and forth he called me and said he was going to come tomorrow (the day the lease started) to get his stuff and his money. He came and got his things without incident and I made him sign a handwritten mutual lease termination stating he would receive his money and agrees to remove his property by end of day and that any liabilities expressed or implied by both parties will be absolved and released. I have him his rent and security deposit back and he left. I saw on fb him saying he would sue me and I asked him about it. He told me be prepared for a phone call fro. his lawyer and that he will be suing. I feel like I have protected mymyself legally but would like any input.

Background Check ... last?

We just had a tenant apply for a property, he seemed amazing! Great job, decent credit, passed his pre screening phone interview, references all checked out, we showed the trailer, told him everything looked great so far.. He was the NICEST person. Kind, quiet, curteous.. we even passed him on our way home pulled over on the side of the road, my wife called him to make sure he was okay and he said "yes, I just had to make a phone call and I don't feel comfortable driving while I'm on the phone" .. Wow, right? (most people don't do this these days, even though its the law)... One of the very last things we did was check his criminal background (as per the tenant screening flow chart), and wow what a surprise. He murdered his newborn baby, went to prison for 15 years.. Then a couple years ago he went threatened to kill his girlfriend and himself, went on a high speed car chase, then threw an illegally obtained firearm out the window into a random front yard containing kids.

My question is this: Why isn't the criminal background check done earlier? Is it because a prospective tenant needs to see the property before filling out an application, hence the need to show the property first? My thought was if you had great pictures showing the property, do the phone screening, then have them fill out an application and do the background then?

Thinking about it now, I guess its all done about the same time anyway - you get the application and then check pretty much everything out. I guess I'm still in shock over what we found. We didn't have any questions on the application specifically asking about criminal activity / if they are a felon / etc. Lesson learned! Biggest lesson I learned here though was to just be aware. If something seems too good to be true, it probably is. And be sure to thoroughly screen.

Selling multi-family by owner

Hello all,

I'm in the early stages of listing my multi-family. I want to try to sell "by owner".

My question is, how to you vet a potential buyer? Getting many people who want to see the property, but it is fully occupied and I'd rather not have people who can't afford it, or who just want to compare to other properties, walking through my tenants' units on a whim.

Thanks for any advice.