What is Leverage

Leverage is a really cool concept to use with your investments, and it’s an important concept that can be used to help change your business. Understanding where your cash flow comes in is quite important, so understanding this is definitely a big part of leverage.

There are three key pieces of data to consider here. First, you’ve got the cap rate of investment, which is 10% generally.  Then, you want to look at the loan constant, which is the ratio in finance to signify the relationship between the loan and loan payments. Before calculators and computers, this was a constant that was used to determine the monthly payments for loadns.it was used to take the total loan payments and dividing it by the principal balance on there.  You should from here use this to determine leverage.

Leverage is used to indicate the return that you’re getting or losing out on on the capital that you’re borrowing for the loan. Leverage is defined as your cap rate minus the loan constant.

With this, you can essentially determine the cash flow of any situation, and if you need this for learning about any property or loan, this is something that you should consider learning.

So let’s take for example that you want to get a property with no loan, and you can use the cap rate to determine the NOI, which is the same as the cash flow if there is no loan. Which is essentially the price times the cap rate.so, if you’re getting a property for say 900,000 dollars, and the cap rate is 10$, then the NOI is going to be 90 grand essentially.

But what if you don’t realize that the cap rate applies to any cash you contribute, even if it’s not the full, the same rules apply.  Essentially, what this means is that if you put down say 500 grand on a property, not the full 900, and you then use the cap rate, then you’ll get the 50,000 on that as the cash flow.

Leverage also applies to borrowed funds, and they are either working for you or against you. When borrowed, it’s called positive leverage if it generates extra cash. With positive, borrowing money increases returns, whereas when it doesn’t create cash flow, it’s negative leverage, and decreases returns. So how do you know? Well, you can calculate the leverage value at this point. =if the value is positive, you’ll get positive leverage, if it’s negative, you’ve got leverage.

The cap rate tells you how much it’s earning, the loan constant tells you how much borrowed funds are, and how much it’s generating for the lender.  If the cap rate is higher than the loan constant, the lender isn’t taking all the returns, and essentially, the extra is what you get from this.  you’ll notice this, so you want to make sure that you look at the leverage of this before you begin. it’s important and can determine a lot of loan values.

How to Low-Stress as a Landlord

If you want a job that’s stress-free, sometimes a landlord isn’t the case. But, you can actually mitigate a lot of the tasks to make it much less stressful, and here, we’re going to tell you just how you can manage that.

The biggest sources of stress is usually poor cash flow to keep the property above water, late payments or irregular payments, legal issues if you make mistakes, and bad tenants that cause trouble and destroy the properties that are there. This is a hot button, abut if you can pinpoint it helps. Plus, there are some different ways to mitigate stress too.

First, hire yourself a property manager. This is good when it comes to separating the emotions and getting the pitfalls done with. The relationship between a tenant and a landlord is a prime example of this. A property manager can save your bacon, so it will help.

Next, screen your tenants and get all of the information provided, and any outside information that might be there. You can get a reasonable estimate of the quality of the tenant from this, and you can get tenants that can afford the rent, want to pay it on time, have a stable job, are good with cleaning and housekeeping, don’t do drugs or criminal activities, and also have a lot less stress than others.

Next, automate rent collection. Manually doing it takes forever. It’s slow, cumbersome, and not efficient. If you want to limit the effort that it takes, automating it through an online platform, or even direct deposit can help you set up a proper and better way to really improve your means to create a better and more efficient rent collection process.

Finally, if you want to prevent money stress and ease your cash flow, using an emergency fund for each rental property should be done. The fund should be a dedicated cash savings that has enough money to bankroll the property for at least 3-6 months. This gives you something to use in the event of a bad scenario, or if you have to deal with getting rid of cruddy tenants.

The biggest thing that you should take from this, is that you should always work to utilize a stress-reduced atmosphere. The role of a landlord does tend to be daunting, but if you do it right, it’s quite exciting. In order to enjoy these job perks though, you need to look at the pain points that are often frustrating for those who do this. By implementing the strategies that are there, you’ll have more freedom and enjoyment during your tenure as the landlord of the place, and you’ll be able to that, with this, create a much more rewarding and a helpful enviornment that was only going to get better for you from there. It is scary, but the big thing to take from this is to always enjoy what you do, and create a good atmosphere for yourself too.

The Top Rule to Closing a Real Estate Deal

Many investors that have multiple properti3es that understand that real estate is hard actually may not know the one secret rule that will close any real estate deal.  you’ve probably seen investors who have needed help with closing, or maybe you’re the one struggling.  But there is one rule you need to realize: you have to have a title company!

Why is that? Well, enlisting in a title company allows you to have an account representative that will look after your best interests since they’re interested, but they act as the mediator, who do the searches for liens and taxes, and the ones who will prorate the rent and deposits if the property doesn’t have tenants.  They also will help you with the whole process, making it so much easier for you, and they’ll show you transactions by each item, and if you have questions, simply call and they’ll help you.

Title companies help you avoid giving money directly to the seller, which is something you shouldn’t be doing.  You should make sure that you work with this so that you actually do get the property.  There are times where the title company may not have seen some things when looking for liens, and the liens might be existing. You know who has to pay for that if you aren’t protected? You do! The title insurance does protect, but that’s extra money.  But you can prevent mistakes from happening by working with a reputable title company or go talk to another investor or company in town that’s investor-friendly and ask.

It might seem weird if you’re new to this game. I get that, but this is actually a big thing that many tend to screw up on if they’re not careful.

A title company might seem like extra money. After all, you might wonder why you should pay for the people to search for information on the property. But that’s the thing, title companies do a lot of the dirty work for you. Their job is to pore over the contents of this, and in turn, they’ll tell you whether there are extant deeds, liens, and the like that are on this.  If you’re someone who wants to have the extra success of a property sale, and in turn, you want to create a better, more rewarding experience, you’ll be able to do so with the help of a title company.

A title company can make or break a sale, and you’ll be able to take full care and responsibility of this if you do the right thing and look into getting a title company to work with you. you’ll be able to, with this, create a better and safer sale, so that you know exactly what you’re getting into when you use this properly, and you should do this before you begin with any sale, or even before the process o the sale as well, which will protect you too.

How to Screen Vendors as a Landlord

Screening vendors for property management take a bit of time but finding the right one will save you a ton of money and avoid a lot of dangers. Property managers along with landlords will use a vendor at some point for services, whether it be repairs due to maintenance, or even turnovers and inspections. Every vendor should be vetted before service, but maintenance vendors are especially important since the interactions could be a liability for your business. Every vendor is a representative of your business, so you should make sure that you select those that will work with you.  You should look to see what you need as well and choose vendors in that way so that once you do have it all established, you can research, and you’ll be able to find the ones that you want to contract out.

The first thing to do is look at the approachability of the vendor closest to rental properties, including how easy they are to contact and if they return correspondence in a timely manner, or if they have 24/7 emergency services.

You should look at the people that you employ on your property, no matter who they are since they can become irresponsible or dangerous to the property, tenant, or themselves.

Also, look at the experience that the vendor has, or how long they’ve been in the business,s and what types of projects they’ve got under their belt, along with testimonials and references they can use. 

Look at the insurance overage that they have as well, including any damages, injuries, or liability claims as needed.

Finally, make sure that they have a business license and a professional license that’s valid and up to date. Any vendors that aren’t licensed should be avoided like the plague. If you can’t find this information readily, always ask.

it’s important that, when you are screening vendors, if they’re willing to give you this information, that’s a good sign, and if they are hesitant, or refuse, it’s a huge red flag. If you’re finding it difficult to research on this, you should use vendor screening services so that you can look into the criminal and financial backgrounds of each vendor, and the business that they have.

If needed, you should consider taking it a step further by creating a list of rules and policies that your company takes when it comes to vendors. Demonstrating that you’ve done your part when it comes to diligence is important if thee are issues. This is a formal compliance policy that you can put together that allows you to tell the timeline to look at issues, contact information, documentation, and consequences of not following this, and any anti-discrimination policies.

Finding the right vendor can save you a boatload of time, money, and stress when choosing someone to help you with your rentals. Choose people that best fit your company, and in turn, create a better, more rewarding situation for yourself as a landlord.

Top House-Hunting Mistakes

Buying a new house is a very memorable and emotional transaction. Do not let the emotions come into your way while buying a home otherwise you can take a bad decision.In that manner you can make some mistakes while hunting a new house for you. But, you have to avoid such mistakes that are mentioned below.


Falling for a House You Can’t Afford

Never fall in love with a house. Once you have fallen in love, it would be difficult for you to go back.Do not make clouds or bubbles in your mind. If you do this, you may buy an expensive house or you may crack a bad deal.Do not make a fascinating world.  Specially, if you cannot afford that house that would give a bad impact on your emotions. The best decision is always looking for a home which is in your price range. Do not visit any house which is out of your budget. If you avoid this mistake, you will be able to buy a wonderful house.

Assuming this House is the Last Option

When you are in the process of house hunting, visit multiple houses. If you find a home, you like, but the price of the house is out of your range, do not stick with that house. You can find some other identical houses, which would be in your price range. So not assume this is the last option for you. I know house hunting is a hectic process, but a little pain will benefit you later. If you will make a spontaneous decision, this will be regretful later.

Getting Desperate

When you are in the process of house hunting and you do not find any appropriate house, it is an obvious thing that you will get desperate. Getting desperate can lead you to a big mistake. To avoid such mistakes in house hunting you have to keep your passions level high. Or even you like a house and you show your desperation to buy that house can be a big mistake. You can take many wrong decisions in your desperation zone.

Try to Avoid some Flaws

The other mistake that can be done by you in house hunting would be overlooking all the flaws in the house. Nothing is perfect in this world. There would be some flaws in the house. So, try to avoid some small or less important flaws. Do not seek for perfection. If you want to buy a flawless or perfect home, this would be expensive or impossible challenge for you.

Do Not Get Hurry in Making an Offer

When you hunt houses, you may get tired.Then, you find a house you like and want to buy it.So, you quickly make an offer. This would be your one mistake in buying houses. Do not hurry in making an offer for the house you like. In a hurry, you can neglect some important steps like you can make an expensive deal, you can choose a bad neighborhood or a bad decision with location.So, first think and then take a decision.

Careless Decision
As I mentioned above, house hunting is a hectic process. So, you get tired by visiting houses on a daily basis. But it does not mean you will take a careless decision. It is a long-life decision so, you have to pay keen attention. Keep in mind every prospective of the house. Your careless decision will throw you in a worst situation. Take your time before making a deal. But keep in mind, do not take too long to make it. It will require your energy and time. But, a careful decision will give you the best and economical results.

What to Do When Your Tenant Gives You Notice to Vacate

The tenant will give you written notice if he wants to vacate.  When you receive the notice the first thing you have to do is withdraw the lease. Review the contract keenly. There will be some important points you need to keenly observe when you receive the notice from tenant to vacate.

Time Duration of Written Notice.

The time duration of the notice may vary in every state. In some states common requirement of the time duration is 20 to 30 days prior notice before ending up the rental agreement or vacating the apartment. Before getting into rental contract you need to check up what rules applies in your state regarding prior notice of vacating the apartment. The notice period is to be mentioned in rental contract. If we talk about the State of Washington 20 days prior notice before ending up the rental contract is required to be given by tenant to landlord.

The 20 days prior written notice should be given at the start of the month in which the contract likely to be end.So, if your tenant gives you written notice at the 2nd of the month in which the contract is going to be end that is the best thing. But in case he gives you written notice at 24th of the month and he plan to move 31st of the following month then the tenant is responsible for paying rent through the fulfillment of the lease.


In this case when the tenant does not give you a sufficient notice of vacating the apartment. Two options for them are:

  1. You can stay here for one more month.
  2. They have to pay obligations and they can move according to their plan.

By choosing option 2 they have to pay rent but in case we find new tenant then they will receive a prorated refund on rent from the day the new tenant moves in.

Expiry of lease.

Find out the expiry date of lease. It is very important in order to check whether they are breaking the lease or not. Means they are moving in the middle of the lease or not. If yes, they are breaking the lease then let them know what the obligations they have to pay for it.

There is a one exception of the notice is: if the tenant is military person then he is allowed to break the rental lease. Just because they may get any reassignment or deployment order any time. It is a tiny price for us to pay for those serving in our Military.

Their Deposit Money.

It is important to know how much your vacating tenant’s deposit is. So, you can be prepared to personally cover any overages. Of course, your tenant is still responsible for all charges associated with returning their apartment to rent-ready condition. Let me be honest, it will be a while before that your tenant pays for any overages above and beyond their deposit money.

Utilizing the Deposit as Final Month’s Rent.

Many of the tenants want their deposit should be used as last and final month’s rent. Do not let it happen. It is totally understandable that they want to use their deposit money as last month’s rent as saving up for their new place. But this is not good for you. Make sure your lease agreement should have the clause that clearly mention that the deposit amount could not be use as last month’s rent.

The deposit amount that held by landlord is to encourage positive behavior of the tenant. In case they want to move out without leaving your home in its original condition then you can utilize the deposit amount for paying off the cleaning bills, for fixing the damages, or may be something worst then this. Even if they do not pay the last month rent then you can use that deposit amount. So, always remember do not use deposit amount at any time as rent.

 

 

Some Pros and Cons of Buying Property Next to a School

The biggest challenge can be finding the best place to live.  Some people are specified about neighborhood, looks around and the new area. If you are that type of a person who has some specified criteria about surrounding than I have a solution for you to find place for your living. Living next to a school would be the best choice. Specially if you have kids. You may find some best possibilities finding property next to school, if your kids are school going, college students, and deal breakers. Let me show you some pros and cons of buying property next to a school.


First have a look on some pros:

Affordable.
You may find affordable living places near school and colleges. You might think why the places near to school, colleges and universities are low in cost. I can answer your question, it is just because near to places like school and college students used to live. They want some affordable places which must be low in cost. You can easily find place to live nearby schools and colleges at very low cost. If you want to cut down your expenses and planning to save some money for future this is the best decision you can take on for living and cutting down.It might be more affordable as compare to finding home somewhere else.

Close to playground.
The incredible thing you can have when you choose your home near by school is playground. Choosing home near to school will amaze you with some enjoyable things, one can be a playground. You can go out with your kids in every evening or whenever you urge for a trip. This would be very convenient and trouble-free for you as you do not need to pack your bags and make a drive for some wanderlust. You may enjoy there in every evening and your all stress and tension can vanish away. The other ease would be you might be able to send your kids alone to play. At the same time, you can keep a safeguard eye on your kids. Even you can go on morning walk every day and do exercise. You can enjoy good health and nature at the same time.

Increased the value of property.
Buyers have some eager interest in buying homes near to schools and colleges. The reason is they can easily rent out these homes and can enjoy some plentiful profit. The other point is they can easily resale it at good amount. Eventually for these reasons your property’s value get increases day by day.

Now it is time to have a look on some cons.

Traffic noise.
You would have been bothered by traffic noise.The two timings of school that is morning and closing time school can make a lot of noise and disturbance. You may run into jampacked roads which can bother you. The inflow of the traffic may be very high depending upon the size of the school. But the tension is for only morning and closing time. Else time would be easy and peaceful.

Noisy neighbor.

I can say it is good but not so good. I am talking about the noise of kids. The area surrounded by kids cause a lot of noise that may bother you. The chirping of kids may sound sweet and cherish able but at the same time cause noise and disturbance. This place is not for you if you are suffering some kind of illness honestly.

Time for decision making.

You are your own boss in taking decisions. It is an entire your decision what you want to choose. All these pros and cons may help you in making decision whether tobuy or rent out the home or not near to a school.

The Three Major Benefits of a Highly Organized Land Lording Business

The major question is why organization plays a vital role in real estate business.
Here are the three major reasons to clarify:

Freedom and peace like a Calm Lake.
Everyone wants his mind should relax like a clam lake. No one wants to get into any dilemma at work. Relaxation at work is one of the biggest tool your mind wants to grab. No one wants to come across any tension.Yes, its freedom at work you want to avail. You want freedom at your work place. You want peace of mind like a calm lake. Being organized is a key to avail peace of mind like a calm lake. It is not just about rules and regulations it is something beyond it that is none other, but peace of mind and freedom at work place. When you are having a still mind like a calm lake you are able to enjoy your work. Eventually the key is being organized for having enjoyable work and peace like a calm lake. Planning and placing is behind minimizing your stress level and being organized.


When you organized and plan your work you can easily manage:
Have the bill payed yet?
How much money is bringing in by rental?
Did I need to call my tenant back ever?
You would not need to take any tension about such type of questions.

Simply being organized is the incredible thing that can vanished away all your worries. It can bring peace of mind and you can enjoy peacefulness like a calm lake. The purpose of this blog is to emphasize on being organized which is getting things done. Here I want to you that your goal must be to organize your property management system. You must use computerize system for filing properly, use software and spreadsheet for your property. Only in that manner you can organize your work properly and enjoy ample of peace and your mind would be like a calm lake.

Legalize.

The other significant point is to legalize your organization. It will help you out in minimizing your stress level and maintaining your peace of mind. The internal revenue service requires some important and accurate information. The compulsory thing is to report accurate facts and figures regarding expenses and income that is occurring during a period.This is the most vital point that you have keep into your head to record each and every expense and income. You may think these things are insignificant but to legalize and record everything will blow away your stress. I must tell you that to record accurate reports on your property and to manage it internal revenue service is very important. Legalizing is simple to record every fact and figure about each and every expense and income.

Profit.

Profit is a word everyone knows and want to grab. Ultimately, organizing is all about profit. Being planned and organized can make your organization able to earn more profit. When you organize your property expenses and incomes you can able to understand from where all the incomes are coming in and where all the expensesare going out. You can able to take accurate actions for lowering down your expenses and able to get significant points that would be, what should have done next to earn more profit. The whole picture of your business is now transparent to you which is very important.

Keep in mind the three points when you embark to set up your business. Are you close to your goals by the actions you are taking in your business? Are you able to improve them? Can you able to differentiate your hobby and your goal? Always try to improve and being organized will help you out regarding this. When you set up the perfect system by organizing you can then enjoy your work and profit.

Why You Don’t Want to Be a Landlord

Some people think being a landlord is a great way to save money, but when it comes to multiple properties, it’s not fun, and it’s much less profitable than those who are in real estate make it out to be. While there are benefits to owning and investing in property, but self-managing can be a nightmare. Here are a few reasons why you shouldn’t be a landlord, especially if you value your time and your sanity.


First, as stated initially, if you’re going to self-manage, you can go ahead and kiss your free time goodbye. You can forget taking a vacation, weekends off, booking dates, and getting sleep. that’s because, tenant and renter inquiries will essentially come at all hours, and it’s quite a mess to deal with, that’s for sure.

It is also a huge job, and it’s essentially a full-time job. Despite it being mostly customer-service based, it actually involves marketing, leasing and screening, bookkeeping, doing some of the repairs and handy work, and even property management and inspection. Do you want six full-time jobs? Well, if you love yourself and your sanity, you don’t properly manage on your own.

Then, let’s talk about the mental draining, shall we? Being busy is one thing, though, in the job that you’re in, you’re going to deal with tons of stress. It doesn’t matter how good or how perfect the properties are, or even how good of a landlord you are, you’re going to get tenants that are demanding, and those with drama. There are a million reasons why some people can’t pay their rent, and it can be awful to deal with, and a total mental drain for yourself.

You also can’t be objective. When you’re that close to investment selection, supervising the rehabs and improvements, and accepting tenants and managing the properties, you’ll start to realize that emotions are there, and they come into play, and when you allow emotions to influence financial decisions, this does lead to a lot of risk in many cases, and it is a very risky thing. It’s better to just stick to looking at the numbers rather than looking at the property. One thing to always work to avoid is falling in solve with any property because this is how judgment gets clouded.

Finally, it’s super risky. that’s because of the fact that you’re going to be dealing with not just the physical aspects of job sites, but also dealing with tenants and collecting rents and dealing with tenants who are angry, and who might have dogs that are angry too. It’s something that really isn’t financially liable for those, and being a DIY landlord is super risky. If you want to put your life and limb in danger because of this, you should definitely consider it, and you should definitely put yourself there. But, if you love yourself and you don’t want to be a DIY landlord, you should definitely consider some alternatives.

Now, there are some great ways to get the benefits of real estate investment without having to be the landlord for the property. You can invest in funds, those the turnkey rental property investments, private lending, outsourcing the management, or partnering up with others who do the work. In reality, this can cost you some money, but if you learn how to become better at watching for this, and by smartly choosing who you’re going to let do the dirty work, it can make a world of a difference, and help you immensely.

When it comes to real estate investments and the like, you should make sure not to personally manage your properties. If you value your time, money, and personal sanity, you don’t do this, because let’s face it, dealing with the general populace is a nightmare. If you want it to be truly passive, you get out of this, and if you don’t want to have to put money into a potentially dangerous job, then you should make sure that you take the time that is necessary to prevent this from happening, and in turn, you should make sure that you’re smart about how you handle your properties.