Dumb mistakes Buy and hold Investors Make

Professional long-term investors do tend to make the occasional mistake, but there are some errors that are bigger than others, and you should learn from your mistakes. You may have never made mistakes so far, but here are the three dumbest mistakes you can make as a buy and hold investor.

First, you’ve got overpaying, which is essentially a big emphasis on this. You flip or wholesale, or are successful, you’ll want to get great deals that make a lot of profit.

But, even if you’re a long term investor, you shouldn’t pay more than you should, since it means paying high mortgage rates, and it can cause serious danger to the cash flow. Do take the time to learn the best ways to buy low, and get the best deals, and by imitating the clever tactics, you’ll find yourself creating some equity on the investment.

Next, one of the biggest mistakes to make is purchasing a rental property with minimal or negative cash flow based on their hopes that the property will appreciate. This is a very risky move, since the market tends to fluctuate quickly, and it’s impossible to predict, so you shouldn’t purchase a property without any profit to it.  You should get something below market value to add to the value, and you should get a property that has a positive cash flow since it allows you to improve and bring in income since you can see it grow as well. You should make sure that if you are investing for cash flow you don’t worry about the value of the home, but instead, you should look at the cash flow and see whether the property is selling or not. Real estate investing happens over a long period of time, so you shouldn’t immediately take losses if you notice them.

The final, and biggest one is not treating landlording as a business.

This may seem like a surprise to some, but it is a business, and in order to keep your assets performing at the highest level, you need to maintain the upkeep of the property, the tenant relations, and the finances, so while a majority think that it is totally passive, it’s not.  You may think that it’s just handshakes, emotion choices, and loose regulations, you need to remember that this is indeed a business, and you should treat it as such if you want to get some great results from this.

So what this means for you, is that if you don’t want to make mistakes, keep all of these in mind. Now, you’ve got to remember that nobody is perfect. Not a single soul can sit here and say that they are perfect in this, but the thing is, you’re not going to really get anywhere with this if you’re just treating it passive, and instead, you need to be smart with your decisions and make fitting ones that you can utilize and create for a brighter, better future.

How to Prepare for Rental Property closings

Real estate investors don’t talk enough about what you need to do in order to be prepared for closings on rentals. Some go smoothly, others awfully. There are a few things that you’ll want to be prepared for, and here, we’ll discuss that.

First, you should have the titles and legal instances of this all put together. If you know that there is a lien that hasn’t been touched on or talked about, this can be a huge issue for you. There are times when people don’t look at title companies, and instead, they just continue, find an old lien, and then they’re hit, and if you don’t have insurance, this is a problem. So get all of your legal eggs into a basket, and you’ll be much better off.

Then there are tenants.  Tenants are a big part of this, for they can make or break the situation. If you have good tenants, you should be fine, but if you have no tenants, you may end up bringing any old person, in, and in turn, that can end up creating a big issue for you in the future. If you’re looking to fix that mess, then you should definitely have it done before you close.

Know your loans. If you’re not ready for this, you’ll be in hot water. You should look at the mortgage payment, what it entails, and anything regarding that. Having an idea on your loans will allow for you to have a better, more rewarding instance.

Finally, look at your insurance.  Insurance is another big part, and if you don’t have insurance on the home, you don’t have renter’s insurance for tenants or the like, this is a huge issue.  You should have this all in place, because not having that there can mean curtains for your business. This is how people get into legal trouble when getting into closing, and it’s how you’ll end up having to pay a lot out of pocket.

So, if you’re someone who is trying their best to ensure that they get everything sorted out before you close, then it’s best that you sit down, and you make a checklist on this, especially before you buy your rentals. By doing this, you’ll be able to easily create a better atmosphere for renting out your properties, and in turn, you’ll be able to sort this out quite easily. it’s quite easy, and you’ll be much better off.

Working on this is integral, and you need to, with every step of the way, ensure that you have this in place. There are far too many times people have done this, and you’ll be able to, with this, create a better, more rewarding scenario for your business, and in turn, create a wonderful result from it as well. Do this, and you’ll be able to create a better and happier rental situation for yourself, and for others that you have as well for you too.

How to Reduce Your housing Expense

House hacking is a concept we try to go for, but it can help you buy a single family home with a low downpayment, live, and then rent out the rest of it. The goal is to reduce or eliminate the housing cost, and by doing this, you can increase the money you’re saving, creating a solid financial foundation to tackle new investment chances. So, now that you have an idea of it, there are three levels. Level 1 entails having the tenants cover the portion of your rent, having it cover all of your monthly, and then the third generating cash flow.

So how can you achieve the first? Well, a mortgage payment is kind of a way of life, since many stay in a house for a short period of time.  Every month you’re writing checks period. But, if you were shelling out half of what you normally would, you can reduce your housing expense a lot.  Sometimes, moving some weights and such out of your guest room can bring another in, and then from there, you’re essentially a house hacker. Even if it’s only a little bit of money, it pays off.

Then there is level 2, which involves more planning and intent, and really this can be bringing in a home that has an extra bedroom, and you can, for example, rent out a couple of extra bedrooms. Having a finished basement that you rent out can completely cover your housing costs. Adding the third period to the unfinished basement, along with renting out the extra bedroom, you can completely cover the costs of housing payment.  You can theoretically do this anywhere, you’re just going to have to make a few sacrifices here and there.

Finally, there is generating cash flow on top of it, paying for your payment and that.  It is possible.  You can use low downpayment conventional loans for a duplex, triplex, or quadplex, and from there, you live in one unit, rent out the rest, and from there, you can cover the entirety of your mortgage.  You can literally cover everything, and have a few hundred dollars every single month.

You can do that with roommates, and then renting out houses and rent out a part of the rooms that are in this.

Now reaching level 3 is quite hard. it’s not for everyone either. If you’re cool with roommates, then this might work, but if you like your privacy, this may not be idea. It does create a different life, and you will need to sacrifice a few things. House hacking is powerful, and everyone should try it since it can ultimately impact the financial situation that you have, even if you didn’t even realize that you can do this.

House hacking is pretty important for the success and ability of your business, and for those who are looking to truly master this, it does take some time and effort, but you’ll be able to easily.

Why Rentals are the Best Investment Properties.

Flipping used to be super popular, but rentals are the way to go. You actually can get a lot more from this than other properties, and there is a reason why.

Rentals are great because you can borrow money to increase the return, which is known as leverage. You don’t need to have a total property’s purchase to get it. Rentals allow you to get large properties for far less than you may need for something else, including stocks.

It also allows for better returns. You can also leverage your time and the abilities to make magic happen, something that is difficult. You can hustle if you want, and if you want to do the rehab for the property, you can do that, but if you want to leverage your skills and get money, you can also do that. If you want to leverage and find better deals and more return, with this, you can do that. Rental property investing allows for a better hustle for the future.

You can also manage the investment directly, so if you’re a bit of a control freak, this is good. you’re directly responsible for the outcome of this, so you should always analyze before you buy, ensure it’s in a good condition for renting, and also if it’s at the peak performance. You don’t have to depend on some directors for the direction of it to go, but instead, you manage directly, and personally as well.

Plus, people always need places to live. The real estate market will have its ups and downs, but the demand never ends for rentals period. People need places to live, so unlike a started, or a tech trend, real estate investment is something that will last. Because increasing loans are making qualifying for mortgage harder and it the culture prefers mobility, the demand for rentals will only grow with time.

Then there is the fact that millions have done this before. There are so many successful inventors, and since the beginning of human civilization, landlords have created wealth by owning and leasing our property. One of eight Americans consider themselves investors or have investment rentals, so it’s a working investment.

It also is very stable and predictable. While the market collapses do happen, rentals often have long-term investing and don’t suffer in comparison to others that do other actions. The crash was predictable if you did pay attention since it did have the boom and bust cycle that doesn’t go away. As an investor, if you learn of this cycle, know to buy low and sell high, you’ll be able to achieve so much more.

Rentals are the future of investment, and you’ll be able to, with this alone, create a better, more rewarding atmosphere that will allow for you to truly benefit from this, and in turn, you’ll be able to buy more properties, and create a much more worthwhile situation. So yes, consider rentals today, for they work.

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.

4 Absolute Rules for Setting Appropriate Rent Prices

You will have to come up with many thoughts when you start considering to acquire a multifamily property. The first, and likely the most important question which comes across in your mind is, what will the rent be?
This conversation can take a long time to cover all aspects, but I tried here in this article to cover more and more. The conversation about rent can give you a headache. But if you read this article you will get to know all the answers and can get rid of this headache. I try to shed light on all the question, you will have in your mind. Here are absolute rules for setting appropriate rent prices.

  • Rent should cover all your expenses
    Every landlord thinks rent should be high enough to cover all his expenses. Rent is the fixed income you will earn every month. So, it should be enough to afford all your expenses and something should be left over as cash flow.
    Well, I do not like any hard and fast rule, but the purpose of this conversation is, what should be a minimum rent requirement. For instance, a 50% expense ratio, which covers both the economic losses and the operating expense. So, in the case of a $600 rental, a 50% expense ratio would leave us with $300 to cover 3 very important characteristics which are:
  • Debt service
  • Capital reserve
  • Cash flow
    If you think practically, the $300 is simply not enough to cover all three above things. And since debt service is a prime factor, the choice we face is between our profit and Capital reserve. What we usually see is in the landlord’s pocket, the money left over after debt service, and then go to do some other work for some cash flow. This goes for years and years, and then their house gets destroyed.They find themselves needing to repair and renovate their houses like to replace the flooring, new painting, the water heater, and a stove. This is a sad experience for them because they have to do all these repairs from their cash flow. So, the situation can get worse for them. So, in order to get rid of this situation, always try to fix the rent that will cover your 80% expense. It is good if you can cover your 100% expense from the rent, but the minimum requirement should be 80%.
  • Protect and grow your investment
    Every landlord has two main objectives. To protect his investment, and to grow his investment. Protecting your investment is a function of operating at a price point which is attractive to an economically stable tenant base.But,it should not get so high that it limits our audience. In other words, until and unless you are in a very selective boutique market or asset class, you should not want your rent to be in the 90 percentiles. Many people cannot afford that rate.
  • Market range
    This conversation is specific about the market. I am talking about owning rentals that are within the 55th to 70th percentiles, within the range of, availability in the market place. So, if in your market rents range from $500 to $1,200 for class A, you probably want to be in the $725 to $1050 range. This will be attractive to tenants who are stable enough to protect your investment.Remember, it would not be so high that only high class of the marketplace can take on. Always set both minimum and maximum rent requirements for your tenants.
  • Rent of the property should be per square foot
    You have to price your apartments on a per-square-foot basis. Do some research online and then make rents for your property as per square foot not as per rooms.

5 Items to Replace when you Upgrade Rental Properties

Whenever you’re renovating a property, there are some items that you can delay in fixing, but there are other items that you should always replace whenever you’re renovating a property, and you should never ignore them but just so it. Here are five items that you should consider when upgrading, regardless of condition.


The first is the toilet. If it’s leaking, it can create a huge water bill, almost 10x what you will pay for the bill. They run all day, and if they’re leaking, it is continuous and a huge money guzzler.it’s also like super easy to fix, and you don’t even need to replace the whole toilet, just the “guts” of it, and takes only a couple of hours, and 20 bucks.

Then there are locks. You don’t know who all had the keys before. Instead of giving justifications, just change them. If you’ve got multiple properties, you can recycle locks as well, and that way you’re saving money when there is a turnover.

Then there are lightbulbs. Using energy-saving and long-lasting ones will reduce the bills, and they can reduce the number of phone calls to change the light. You can do this in common areas, or even in the places the person is living too. Once you do change the bulbs, it’ll be a long time before you change them again. You can get energy-saving bulbs that last 9 years, and they’re super affordable too, which is great.

GFCI outlets are electric outlets that are shut off when electricity goes through unintended paths. They are more expensive, and they’re perfect for safety reasons. Some places, they may be required by law, especially in areas where water is. You should definitely consider these if you have the budget for the renovations.

Finally, replace smoke alarms and fire extinguishers, for obvious safety reasons. Having these replaced, you won’t have to worry about them needed to be replaced for years. If you do use battery-operated ones, you’ll need to change these batteries a few times a year. You should try to have these replaced when you inspect the property every single month or every few months. You should consider getting the dual-sensor ones where there are ionization and photoelectric sensors, since these can help with detecting the fires that are slow and smothering, along with the fast-spreading fires in a simple, yet effective manner. It’s a great addition to have in the home and a must for replacement.

When it comes to fixing up which items you need to fix, you can do so with these five items. They’re simple, yet effective, and you’d be amazed at the difference that this makes in the home. They’re so simple, and if you want to save money on renovations of rentals, you’ll be able to do this in an effective manner, and you can ensure that your property has the safety precautions put in to help with this as well for you.

 

Avoiding Risks in Real Estate

To get into the real estate business real fast and efficient, people might use several financial instruments or even try to borrow investment from others. Mortgage is the easiest example when it comes to leverages in real estate. With a twenty percent or more down payment the property is handed over and the rest of the payment is done on monthly or yearly basis. In real estate joint ventures, the partners in the contract put all or some of the money in the dealing of the property. When using these leverages the investor should try to avoid the following things.


High level of appreciation
Every deal in the real estate investment is a new experience so one should not keep thinking that the next deal in a process will the same as earlier. The value of a property can increase and decrease at any time so expecting the same appreciation from properties at different times is not wise. Calculating the same rate when using leverages in real estate should not be done. If this is done the investor may have to face a loss or even a worse situation. When using leverages, all three scenarios should be imagines i.e. best case, worst case, and the most likely case. If the market remains calm and unfluctuating we can expect the best case to happen and a lot of profit is generated using the leverages. The real estate market can get effected by a number of factors such as the political situation and change in the map etc. If this happens the property may lose its value rapidly. When the value of the property is lost all the anticipated profit becomes a burden and the borrowed money has to be returned without any profit. This can be quite a situation for an average investor.
Having a too high payment in the end
Higher payments only come with leverages. In the case of mortgage, the buyer will have to go for monthly payments. The more the investor borrows, the higher will be the monthly payments. If the market fluctuates and one may face credit losses, the mortgage payment may not seem easier as it appeared in the beginning.  Not being able to pay the monthly payments can endanger the whole investment. The borrowed money has to returned in a specific time period and if the property has failed to prove enough benefitting at the end, the payment becomes a headache and may turn into a lawsuit sooner.

Good financing but bad purchase
Overpaying during investment when using leverages is a common thing among investors. At that time everything seems to be perfect and no issues are anticipated. Everything seems perfect as the investor is getting the property at a very less initial payment. There are several factors to consider. If the property is priced higher than it should be it can prove to a bad purchase sooner or later. It may lead to a significant loss in the end. Sometimes the deal seems to be so attractive that its overpricing does not seem to be a problem and is not given much importance but this can be a problem when the property does not gain enough value or looses the value it already has.

Importance of cash flow
If the rental property is generating enough cash that pays the mortgage and the expenses of the property, then the fact the property is gaining value slowly does not count much. But if it is not generating enough cash and also not gaining value, this is worrisome. As long as we are gaining from the property, everything is well and good.