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

Security Deposit

I am returning a partial security deposit back to my previous tenant. If they cash the check with a final settlement security deposit refund, can they still sue me for the remainder?

Who's liable Unit owner or Condo Association

The exterior siding was redone about a year ago and it seems now that a portion of it is loose. The vapor barrier is not there and water got onto the wood. The mice took advantage of the soft wood and made themselves cozy in the wall. The condo association is supposed to do monthly exterior inspections and this problem apparently has been missed. They say I'm responsible for the mice in the wall. I believe that it's an issue that happened due to lack of craftsmanship by the siding company in which they hired. Of course I'm taking care of the mice because I don't want them there nor do I want to lose a good tenant. I might lose tenant at the end of lease because of it. Tenant is very OCD and is freaked that there is urine and feces in the wall no matter how much bleach the exterminator used. I am going to contact condo association so that they can proceed with fixing the exterior now the the softball size hole is plugged. If they come back with anything else that they want me to pay for, I may want get a lawyer. I may still want to go to small claims court for the extermination. I know it's not much but it is to me.

So what do you think?

What % of Late Rent Fees are the Property Managers

When late fees are collected by the property manager for rents that are late, does all the money go to the landowner or does the property manager take a percentage, none of it, or all of it?

Surveillance cameras in shared area?

I have a townhouse with front and back entrance doors connected to living room and Id like to monitor who entered the house(therefore living room). If I put a camera in living room then it will see both doors and living room space. Does anyone know whether it is legal to put cameras in living room for theft detection purposes? Thank you in advance for your help! Tom

What to do if not sure which tenant causes damage?

For house in California: I have lease with each tenant(each tenant rents one room) in a multi-rooms house. In case there is damage in shared areas such as living room and nobody comes forth to admit that he/she caused the damage, does anyone know how to handle this? Or how to write a lease so that LL will be able to have all tenants to be responsible for the cost of the repair of this type of damage? Thank you in advance for your help! Lu

Do I need to give notice when lease is expiring?

I am a new LL in California. I rented a few rooms to tenants in my single family house. My lease with one tenant is six months lease from Aug 2018 to Feb 2019. The lease box is checked (as opposed to month-to-month rental agreement) and specifically states verbatim: "Tenant shall vacate the premises upon termination of this agreement unless: (i) Landlord and tenant have extended this agreement in writing or signed a new agreement (We have NOT done this); (ii) as mandated by local rent control law (do not believe this applies as this one of owner of the house live with tenants who rented remaining rooms); (iii) Landlord accepts rent from Tenant (other than past due rent) in which case a month-to-month tenancy shall be created...."
The lease expires on Feb 12 2019 and I want one of the tenant out for sure when lease ends. Do I still need to give this tenant 30 day notice to vacate? If I only need to give courtesy notice, then do I need to serve the notice like the law requires(using registered mail, deliver in person, etc) in case this tenant does not vacate at the end of lease and then I have to start eviction process? Your pointers are greatly appreciated! Lu

No Kids Allowed

I have not ran into this problem yet. But I was in a meet up group and was told by a management company agent that if the you as the owner living on site, in the same building, you may say "no kids allowed." Does anyone know for sure if this is legal?

Bad behaving tenant

Hi, We have a tenant, call him Jim, that had an aggressive dog breed but had filled out a pet deposit on a docile breed, we made him either move or give the dog away, he gave the dog away. Now Jim is making life difficult with a non tenant neighbor, call him Bob, who was the one who reported Jim's aggressive dog who had gone after Bob's dogs. Jim now does stare downs most mornings to Bob and the latest was to throw fire crackers at Bob's little dogs. We like Bob and his family a lot and don't want him to have to endure this.

What can we do as landlords to stop this bad behavior of Jim? We don't want to make things worse for Bob.

Thank you,
-Tom

Tenant damage to stove/oven range

I have an older stove (10 yr old maytag gemini) in my rental unit and tenants that destroy everything within their possession. Never had a problem with previous tenants and stove/oven works great ..problem is, these particular tenants are, for lack of better word, filthy. I have never seen an appliance be treated like such garbage: both handles torn off, front glass door on oven missing, and just generally disgusting with grime everywhere. The other side of this problem is that these tenants love to break everything in general, they are extremely hard on the house to the point where literally everything will need to be touched upon their move out. This is a lower income area and high demand for rentals. My plan is to remedy this latest problem and send them their notice to vacate. But until that glorious day, my question is this..

How do I go about charging them for this?
I had an appliance repair guy come out and said it would cost more to fix the cosmetic parts of the stove than to just get the cheapest new one I could find. I agree but now not sure how to approach my tenants about this..they are very combative too, oh joy.

This is my best solution so far:
Let them know the unit is still working, but due to their damage and age of the unit it is not cosmetically repairable. I can not just let it be because with the glass door missing someone could burn themselves if it is touched so a solution needs to be found. I have found a cheaper new unit for $500 of which I would request they pay at least half and they cant take it with them.

Is this reasonable? What am I missing? How does depreciation tie into all this? Please help fellow landlords!

CA: Emotional support service animals

Tenants are moving into no=pet homes, then suddenly needing a service animal for their mental health. I think they've found a loophole to bring a pet in, so what can I request as proof of their need for an emotional support animal? Doctor's prescription? Pet certification? Other questions I can ask? I understand I cannot ask for a pet deposit. Thanks for sharing your experience and for any input/insight you have to offer.

CBD