Real Estate Property Management

How you manage your property will determine your overall performance as an investor and your ability to generate income or a positive return on your apartment deals. With the right property manager or company, you will immediately see the benefits from both a financial and operations perspective.

An Operational Role

Real estate property management requires a fundamental understanding of basic principles, including managing the facility and physical property, handling tenant requests, and budgeting and financials, in addition to general administrative tasks associated with running a property. For example, knowing how much you can afford to spend on the replacement of kitchen appliances is something that the property manager must be able to figure out. This is an operational role that requires a variety of skills and strategies in order to truly be effective.

Financial Implications

Rental property management companies and individual property managers must know how the operational expenses associated with a specific property will impact the amount of money you receive as an investor. For example, managing vacancy in the property, maximizing occupancy, and setting the right rental rate for your specific budget are all aspects associated with real estate property management.

Learn more about how you can successfully manage a rental property, main your investment, and improve your real estate business. To potentially work with me on one of my apartment syndications as a passive investor, simply complete this form.

How Apartment Owners Can Leverage Smart Technology

How Apartment Owners Can Leverage Smart Technology

You’ve probably heard this saying before: You have to spend money to make money. As Mike Rovito could tell you, that notion definitely applies to smart technology.

Mike is the CEO of Dwelo, a San Francisco-based company that’s been in business for more than four years. Dwelo specializes in making apartments smart, focusing on midsize to large multifamily complexes. Its devices include locks, light switches, and thermostats.

These technologies help property owners attract and retain renters. They also make daily life easier, and they reduce energy expenses to boot.

 

Smart Tech: A Smart Investment

It’s amazing how often apartment buildings use energy needlessly. Take vacant apartments as an example. Naturally, painters and other workers turn on the lights and air conditioning when entering them. But, when they leave, they often neglect to turn them off. And, in some cases, no one checks on those vacant apartments for days or weeks. In the meantime, plenty of electricity gets wasted.

Smart technologies can regulate the air conditioning and lights in vacant units, ensuring they’re not on when no one’s there.

In addition, with a smart lock, you can control who accesses your home and when. Smart locks make it easy, for instance, for someone to enter your apartment when you’re out of town. That person could water your plants, bring your mail inside, and so forth.

You could provide certain people with a temporary PIN to open your lock or allow them to open your door with their phones. Alternatively, you could use your phone to open your door while you’re miles away from your apartment.

Not to mention, at any time, you could lock your door remotely. You’d never again need to worry about whether you locked your door before leaving home.

Many people, especially younger people, seek out smart residences. Mike believes that popular voice controllers like Google Home have increased public interest in these technologies.

In fact, Dwelo has empirical evidence indicating that many people will pay more for a smart apartment. For some renters, a high-tech home is a point of pride. Such systems can make a community feel progressive and exciting.

Then there’s the fun quotient. No matter how many times you’ve done so, you might still get a kick out of turning your lights off with your voice. For his part, Mike still really enjoys this task.

 

The Professional Education of Mike Rovito

Mike started his career in the field of energy efficiency. Working at ERS, an energy consulting company, he collaborated with many New York real estate owners. He showed them ways their properties could reduce energy consumption.

Those techniques included code generation, storing batteries properly, utilizing smart thermostats, using energy-reducing lights, and streamlining industrial processes. And such methods could be customized according to clients’ needs.

However, as Mike delved deeper into property management, he became increasingly fascinated. He examined how owners plan their capital expenditures, manage operational expenses, and optimize net operating income.

Eventually, Mike realized that he could combine his newfound knowledge of real estate with his energy efficiency expertise. He would create a new business to do so. Dwelo was born.

 

The Dwelo Difference

Mike labels Dwelo a technology and service provider. In essence, it offers property owners an entire infrastructure for implementing and using smart technologies.

To begin with, Dwelo recommends the optimal smart devices for a given property. It then sells, delivers, and installs those items. And its employees can answer questions and explain best practices to owners and managers.

The result is a property that’s completely connected and fully automated, able to conserve energy to the greatest possible degree.

Once Dwelo installs smart technologies in apartment complexes, it gives the property managers a special app that serves as a switchboard. With that tool, they can control the energy consumption in vacant units and other parts of the building. They can also lock and unlock all of the doors except the tenants’ doors.

When residents move into a smart apartment, all of the devices have already been set up and integrated. It’s a seamless technological experience. The manager simply emails them a link to an account that will let them control that tech. About 30 seconds after clicking that link, they can access every smart device in their new home.

To make matters even easier, if property owners prefer certain types of hardware or software, Dwelo can comply. The company sells Amazon and Google gadgets, for example, and it offers integrations with RealPage and Yardi software.

In fact, Dwelo doesn’t make any of its own hardware. And, while the company produces an app, customers don’t have to use it if they don’t want to.

Dwelo’s offerings are affordable as well, generally averaging in the $500 to $700 range per residential unit.

For sure, some property owners approach smart tech with skepticism. They might believe that it’s not necessary or that it can wait. They may fear it won’t really work or will lead to extra maintenance problems. They might doubt they’ll see any benefits from it at all.

However, the Dwelo team, which has already worked on tens of thousands of units, can make a persuasive case for smart technology in multifamily homes. With hard data, they can demonstrate that it leads to rent premiums of 1 to 3 percent. They have documentation to prove its energy savings, too.

As Mike Rovito notes, though, the strongest argument for smart technology comes when a nearby, competing apartment complex installs it. Building owners can then see how appealing that property becomes to renters.

 

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How to Use KPIs to Optimize Leasing and Retention Rates

How to Use KPIs to Optimize Leasing and Retention Rates

To ensure that a business is performing satisfactorily, keeping track of key performance indicators (KPIs) such as leasing and retention strategy is essential. If a comparison of this key metric vis-à-vis the competition shows that you are lagging, then it is time to fine-tune the strategy. A good management team will pay close attention to such metrics and take corrective action as soon as it becomes apparent that you are not a market leader, striving to be the trendsetters rather than followers.

KPIs give a quantifiable metric to measure if the set business objectives of a multifamily unit are being achieved. By paying close attention to KPI, a management team can take corrective action, if needed, to see that the multifamily property gets a stream of steady leads and to ensure that residents are satisfied with the various amenities available.

Every business has a set of variables unique to it. Therefore, blindly follow the industry KPIs may not work and at the end of the day, you will wonder what you did wrong. To ensure the KPI of each multifamily unit works as intended, the management team must assess the various relevant factors in the property and set its own KPIs. There are a few performance indicators that are common to all multifamily units and serve as the basic building blocks of a good KPI strategy.

 

Occupancy and Vacancy Inputs

One of the key performance indicators a management team must track is the rate of occupancy and vacancy in the property. The higher the occupancy, the better the bottom line will be. Due to the downturn in the economy, many property managers are grappling with the problem of apartments remaining empty for longer than average.

Due to this, it is paramount that every lead is turned into a lease. One strategy to keep track is to use an analytics dashboard, which will let the manager track vacancies in real-time and ensure that the business strategy is fine-tuned to increase the average occupancy rate.

 

Average Number of Days to Lease Empty Apartments

The length of time an apartment remains vacant before being leased again is a key performance indicator in the multifamily industry. By keeping track of the length of time the apartment is empty, the management team can calculate the cost of the vacancy. No management team wants a lot of empty apartments as a part of its track record. The moment they find out the number of vacancies is greater than the long-term average, they can take corrective action in their leasing strategy. For example, they can come up with added incentives for signing a lease or renewing it. There are a number of ways the management team can sweeten the deal to entice leads to sign on the dotted line.

 

Minimizing Resident Turnover

It is a fact in every industry that retaining an old customer is far less costly than signing a new one. Even if a single apartment is vacant, the marketing cost, preparing an apartment for lease, etc., will cost thousands of dollars per month. If this is multiplied over many empty apartments, the cost can be considerable indeed.

Resident turnover is a KPI a management team can use to measure and minimize the cost of keeping empty apartments in the complex. Using this metric, they can analyze whether it is a long-term resident who is vacating the place, or if is it a short-term resident who is not renewing their lease. Once this information is with the management team, they can figure out the reasons for such lessees leaving and can take countermeasures to plug the leak. It is a very important performance indicator.

 

Final Thoughts

By keeping a constant tab on KPIs, property managers can get an idea as to what has to be done to improve any problematic performance indicator. In the short term, the implementation of KPIs may add to a management team’s workload, but if attention is paid to KPIs diligently, they are a valuable tool to have at their fingertips. KPIs can help them improve the performance of the property in terms of amenities and improvements, as well as in improving the bottom line of the balance sheet.

 

About the Author:

Veena Jetti is the founding partner of Vive Funds, a unique commercial real estate firm that specializes in curating conservative opportunities for investors.

 

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Top 5 Tips for Multifamily Property Management

Top 5 Tips for Multifamily Property Management

Though many real estate investors start by looking for single-family real estate, it’s not the only investment type for industry beginners. Even if you don’t represent a real estate investment trust (REIT), you can still find ways to invest in multifamily homes. Whether you’re a newer real estate investor or you’re looking to make the switch from more commercial real estate opportunities, it’s important to know exactly what you’re signing up for. While real estate investing is a great way to build your portfolio, you also need to understand multifamily investment property management.

When you invest in multifamily properties, you’re also investing in a few key property management responsibilities. After all, when you own a rental property, you not only have to keep the home in good condition, but you have to ensure you’re making enough rental income and that you’re also keeping your tenants happy. To learn more about managing a multifamily investment property, here are a few tips you need to know.

 

1. Start small and scale appropriately.

Real estate investing often requires precise planning, especially for multifamily properties. If you’ve successfully managed a single-family home or you have experience in commercial real estate, it may be easier for you to pick up the skills required by a multifamily property landlord. However, if you’re not as experienced working with tenants, or you’ve never managed a property, hired a landlord, or invested in the real estate market, you’re going to want to start small when you’re working with a residential property. Even if you want to start generating larger amounts of rental income, you shouldn’t overextend yourself, as this can impact your cash flow and dividends.

Unlike regularly maintaining a vacation rental or hiring a cleaning crew for a commercial property, this type of property requires long-term care, especially if you want tenants to renew their leases to keep your property at capacity. The best way to do this is with a reasonable focus. If you’re a single investor or you’re part of a smaller group, there are drawbacks when you overextend your property management capabilities. Start with a single multifamily property and choose good investments as an opportunity to expand your portfolio once you’ve mastered fundamentals.

 

2. Add perks to encourage full capacity.

Even as you’re managing a multifamily property, you still need to make passive income from your real estate. The best way to do this is to ensure that you’re regularly at full renter capacity. So, how do you encourage renters these days, especially in the wake of the COVID-19 recession and a busy real-estate market? Since multifamily properties and apartment buildings are long-term investments, your best options are often working on your tenant perks, amenities, and quality-of-life improvements.

When you spend on amenities and perks, it’s good to make quick pros and cons lists to help you calculate your total return. Especially if you need additional funds for any down payment amounts or real estate developer fees, it’s a good idea to verify that you’re investing in upgrades that help you generate capital gains and real wealth. While your first multifamily property might not make you a millionaire, a successful individual investor will still work to add benefits and perks to this type of real estate to encourage renters to sign on for the long haul.

 

3. Screen your tenants.

When you’re working with U.S. residential real estate, the good news is that there are always people looking for homes. Whether you’re investing in house flip opportunities, or you want to make real investments into long-term real estate properties, you must find the right tenants. After all, your renters are kind of like “everyday investors” for your property. They help you pay the monthly mortgage, provide you with gains, and sometimes help increase your tangible assets’ capital value. If you have lower mortgage interest rates, this can be incredibly beneficial and help you generate more taxable income.

When you’re looking at lessees, take their entire financial history into account. In some cases, you want to consider multiple asset classes, different types of taxable income, and other payment sources to ensure that a renter can pay their lease each month. A quick background check can also help you determine someone’s rental history and whether or not they’ll require a credit sponsor or co-signer.

 

4. Maintain the property.

Some real estate owners and investors seem to think that all they have to do is broker leases, trim the hedge bushes once a year, and respond to renter complaints as they arise. While that’s certainly part of the job, you’ll have difficulty increasing your net worth if you’re not maintaining your property. Once you cover the monthly mortgage payments or fees, how much more do you invest in the multifamily home? If you’re not finding ways to invest in regular property maintenance, inspections, and even exterior cleaning or landscaping services, it’s harder to increase the home’s value and makes the property less appealing for a future house flip.

 

5. Know how to market yourself.

Any rental property, vacation rental, or Airbnb listing needs to market itself to attract renters and stay at capacity. When you look at the difference between industry pros and new rental property owners, the differences are distinct. Many vacation rental and real estate pros know how to effectively leverage marketing, advertising, and content creation to attract renters to their properties. This helps ensure that you’re generating consistent income. It also enables you to focus on portfolio diversification, whether you find other investments within the real estate industry or you’re looking for supplemental mutual fund opportunities. When you market yourself correctly, you can automate some mundane lead generation tactics and focus on qualified applicants to grow your real estate portfolio.

 

About the Author:

Annie Dickerson and her partner Julie Lam are founders of Goodegg Investments — an award-winning real estate private equity firm — and creators of the Real Estate Accelerator Mentorship Program. They are authors of the book Investing For Good and hosts of the popular Life & Money Show podcast: https://goodegginvestments.com/

 

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Eviction Moratorium Developments & What Real Estate Investors Need to Know

Eviction Moratorium Developments & What Real Estate Investors Need to Know

The CDC Moratorium expired on July 31, 2021. Landlords breathed a sigh of relief — for a few days. On August 3, 2021, the CDC issued an extension of its eviction moratorium until October 3, 2021. Landlords and real estate investors threw up their arms in frustration everywhere, except in Tennessee, Kentucky, Ohio, and Michigan. These states comprise the Sixth Circuit. The Sixth Circuit is a federal circuit of states whose federal courts appeal their cases when there is an appeal from their district federal courts.

This court ruled that the CDC has no authority to pause evictions and this moratorium has no effect in the Sixth Circuit. Thus, evictions can proceed. That is good news for investors in those states, but where does that leave the rest of the country? Unfortunately, by the time the issue is argued in another federal court in a different circuit, the moratorium may have expired, and it would not be ripe for decision.

However, there is a lawsuit being litigated in federal court in Washington, D.C., led by the Alabama Association of Realtors. They have sued the Biden administration for violating the Supreme Court’s opinion that held the CDC does not have the authority to issue or extend the eviction moratorium.

The Emergency Motion to Enforce the Supreme Court’s Ruling and to Vacate the Stay Pending Appeal was filed on August 4, 2021, a day after the CDC extended the moratorium. However, this does not mean that Congress cannot act to provide the CDC with this authority. Better political watchers than me can read those tea leaves, so I will not hazard a guess as to what will happen. I will add that the Supreme Court has the ultimate authority.

While there is much to be unpacked from these legal developments, those discussions will not help real estate investors. Here is what will help: 

 

U.S. Department of Urban Housing and Development’s COVID-19 Resources for Renters

This is a site landlords can send their tenants to for rent assistance. It is governed by the Housing and Urban Development Office and provides salient answers to the questions everyone is asking. To wit, should you still pay rent during COVID-19? YES!

This site also has links to emergency rental assistance, provides guidance on scams that are being perpetrated against tenants, and links to the Consumer Financial Protection Bureau.                                                                                     

 

National Low Income Housing Coalition’s Treasury Emergency Rental Assistance (ERA) Dashboard

This is the National Low Income Housing Coalition link to the Treasury Emergency Rental Assistance Dashboard. All states and their respective programs are listed for tenants to seek help through. There are 492 programs. Encourage your tenants to seek rental assistance. Help them help you. 

 

Looking Ahead

Landlords need to reach out to these entities to seek rental assistance and help their tenants. The funds are out there — take advantage. Unless the D.C. Federal Court strikes down the most recent moratorium extension, landlords are going to continue to suffer. As a lawyer, I can attest that the legal system can move very slowly. Take care and good luck.

 

About the Author:

Brian T. Boyd, JD, LLM, www.BoydLegal.co

 

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A woman holds a silver smartphone, speaking into it using voice technology.

The Advantages of Voice Technology in the Multifamily Industry

Not only has the next generation arrived — they have arrived with a loud bang. Businesses have been forced to listen to their voices and needs like never before. Over generations, different aspects of our social lives have been affected by new innovations and have been incorporated as daily necessities. Electricity, machines, automobiles, etc., played a part in revolutionizing society and the way business is conducted. Today, it is voice technology’s turn.

How the voice technology revolution is changing business

No longer do you have to physically input commands into a device. Now almost everything can be voice-activated. Using a simple command, you can switch on your TV, lights, fans, or air conditioner, and the limit is almost endless. How did this voice revolution come about? Other than the obvious reason that it makes life simpler, the subtext lies in the much wider availability of smart devices.

No manufacturer would be stupid enough to market a smart device without voice command capability. Even the employees would not buy such a product. Alexa, Siri, etc., have become ubiquitous at homes and workplaces, so much so that we take them and their capabilities for granted. More than 70% of owners of smart devices say that they use voice commands routinely to activate or deactivate their voice-powered devices.

By incorporating voice technology into all available digital assets, voice searches will become easy and routine. Even though today traditional text search is still popular, it is slowly giving way to voice search as a means to find information on the internet. About half the routine searches conducted on the internet are voice commands, and it is an even larger figure when searching for local businesses. This underscores the importance of voice search features, not only for businesses but also for multifamily units.

 

Some advantages of voice technology in the multifamily industry

The multifamily industry has been quick to realize the advantages of incorporating voice technology into the development of multifamily units. This technology can be leveraged as a selling point since it adds more facilities and other convenient features to be offered to investors and/or renters. The multifamily industry will be positively impacted in many ways on a day-to-day level as well as in the long term.

 

  • Voice technology can be integrated to make marketing the lease easier.
  • Renters’ FAQs can be handled by chatbots, especially during after-office hours.
  • Installing chatbots and using natural language processing will help reduce labor costs while ensuring queries get answered.
  • Apartment residents will benefit from voice-tech-activated smart appliances such as thermostats, lighting, etc.
  • When this technology is incorporated, even mundane things like heating up dinner become simple and convenient.
  • The on-site property manager can utilize voice tech to ensure prompt rent payment, stay on top of maintenance issues in real-time, and more.

 

Incorporating voice technology into your multifamily properties

 

Speak the users’ language.

Developers of multifamily units have been strategizing the needs of the end-user. Voice commands during internet searches tend to be longer than text searches. End-users generally build up a rapport with their smart devices and talk to them like a family member or friend. When introducing voice tech, it is better to incorporate various forms of speech that tend to reflect the type of interaction between friends. It will be informal commands to a large degree and the incorporated voice technology should be able to accept this in stride.

 

Create a more inclusive environment.

Voice tech, being inclusive in nature, will make for an easier and more accessible leasing process. It helps those with impaired vision and motor skills, which is an important advantage. Due to its usefulness, voice tech has become routine and a necessity for most consumers. Such technology, incorporated within the multifamily unit, contributes greatly to ease of living.

 

Optimize your website for voice search technology.

Voice searches in multifamily units also tend to be almost totally local. To ensure the search throws up relevant material, the community details should be accurately and consistently displayed on your website. Since such local searches tend to be reflected in social media platforms, ensure your pages are in total sync with such platforms. Update your profile with relevant and important details, which will ensure that search engines give prominence to your listing. It will score a big plus with consumers.

 

Voice tech is here to stay, and multifamily developers have a very valuable tool in their hands to positively impact their bottom line.

 

 

About the Author:

Veena Jetti is the founding partner of Vive Funds, a unique commercial real estate firm that specializes in curating conservative opportunities for investors.

 

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Scaling a Commercial Real Estate Company with Other People’s Money

What does it take to become a successful investor? Do you need years of study and decades of practice? Does it require special connections? Well, the story of Collin Schwartz proves you don’t need any of those things.

Collin is a devoted husband, a father of two, an avid reader, and a podcast devotee. And, in the spring of 2017, he launched his career as an active investor in the commercial real estate market. Today, just a few years later, he owns 245 rental units, and he’s already signed contracts to buy 70 more.

How has Collin made such an impact in real estate in so short a period of time? His fascinating journey offers lessons for potential investors everywhere.

A Bit of Collin’s Background

When he was a child, Collin’s family frequently moved. In fact, it wasn’t until he started his MBA program in 2007 that he finally put down roots. He moved to Nebraska, and he’s been based in Omaha ever since.

After college, Collin got married and worked jobs in insurance, marketing, and information technology. However, while those positions supported him, they didn’t fulfill him.

Then, on New Year’s Day 2017, Collin read “Rich Dad, Poor Dad,” the groundbreaking 1997 book about personal finance by Robert Kiyosaki. A mental light bulb went on and he just knew he had to get into the investment game.

Right away, Collin started consuming investment-related books and podcasts — as many as he could. He networked with investors. He joined the educational website Bigger Pockets. On April 24 — not even four months after reading “Rich Dad, Poor Dad” — he closed his first deal.

On that day, Collin and a partner bought a triplex. It was a pocket listing, which means it was sold through the owner’s personal contacts instead of a public listing.

After the purchase, Collin got to work refurbishing the building. He knew that, given the property’s solid location, it could fetch healthy rents after some sprucing up.

In short, Collin was well on his way. Obviously, though, he was still very green and he would learn some important lessons over the next few years.

 

1. Cast a Wide Net

In mid-2017, Collin was still working his regular office job. He figured that, in his spare time, he would contact brokers, collect commercial real estate prospects, and bid on the leads that seemed promising.

This plan soon hit a snag, however. Collin discovered that most brokers aren’t interested in giving leads to newcomers. He had trouble finding new properties.

Fortunately, Collin had no intention of giving up. Instead, he created an account on ListSource, an invaluable website that provides homeowner leads and lists.

With the information on that site, Collin compiled a long list of people who’d owned a multifamily residence for more than five years. Then he went old school. He mailed each person on his list a handwritten letter to introduce himself. Approximately 191 letters went out.

Collin didn’t get many responses, but this project definitely paid off. He was able to buy six properties from those contacts.

On top of that, those six homeowners recommended other commercial properties to Collin, all of which were located nearby. Even better, after he closed those six deals, the sellers talked to the other properties’ owners and endorsed Collin. Thanks to their assistance, he was able to buy even more units.

 

2. Keep Learning, Keep Growing

As time goes by, Collin continues to improve his skills and build his base of knowledge. That growth has taken different forms.

For one thing, Collin always makes time to study. During his first year of investing, he kept practicing his negotiating method. Even today, with all of his success, he still devours books and podcasts about real estate, eager to acquire new techniques and gain new competitive edges. As he once tweeted, “If you’re not constantly learning, you’ll soften a little bit.”

He keeps growing his professional network as well. For example, a few months before the pandemic, he formed a meetup group. Today, it has 500 members, and about 100 people attend each monthly meeting.

 

3. Partner Up

In any field, an experienced partner can be a great help, especially for a newcomer. Indeed, that person can assist in numerous ways, a fact that Collin can attest to.

One of Collin’s crucial early collaborators was a local real estate investor named Steven Sykes. In 2017, he met Steven in a circuitous way. The fiance of Collin’s wife’s cousin was an attorney who knew a good deal about real estate. He told Collin about a real estate agent he knew, and that agent recommended a different agent. Finally, that third person gave him Steve’s contact information.

Collin and Steve hit it off right away, and they had long conversations about their investing goals. When they met, Steve owned and managed about 50 rental units. Collin showed him the triplex opportunity, and they became active investing partners.

Given Steve’s expertise, he was able to explain every aspect of the deal to Collin. And they each contributed half of the money for the purchase.

Steve also provided Collin with a sense of security, promising him that he’d buy out the entire complex in a few months if Collin didn’t like real estate management.

In short, having a seasoned partner like Steve can often mean the difference between success and failure — and between enjoying a project and not enjoying it.

Since that time, Collin has had no problem attracting business partners when he wants to. Part of the reason he’s so appealing to potential allies is his penchant for self-management. Indeed, he describes himself as a “control freak,” and he runs his properties whenever he can.

As such, Collin meets with contractors and personally fills tenant vacancies. Thus, he’s able to handle problems faster and keep his rates of occupancy high. And he has an outstanding reputation within the industry to show for this hard work.

 

4. Get Outside Financing

Collin relied on his own money for the first 18 residential units that he purchased. As he scaled up from 18 to 245 units, however, he had to depend on financing from others. He couldn’t have scaled up without it.

For one thing, Collin found many deals through his own personal leads and not through public listings. Thus, whenever he brought a financing partner on board, he could charge that person an acquisition fee. Those fees definitely added up.

Flipping buildings has been another source of funding for Collin. To date, he’s completed about 12 flips.

In addition, he’s received a number of second-position loans.

One of Collin’s largest sources of funding is the BRRRR strategy. “BRRRR” stands for “buy, rehab, rent, refinance, repeat.” This technique is fairly simple:

  • The active investor purchases a distressed property.
  • He or she beautifies it and, if necessary, brings it up to code.
  • The units are rented out.
  • The investor refinances, typically by receiving cash for equity by way of a larger mortgage.
  • With that infusion of cash, he or she can then look for another distressed property to buy, starting the process all over again.

In a similar vein, Collin has, at times, gone to hard money lenders for cash. Then, after completing a deal, he was able to refinance, pay back the money, and attain ownership of the property.

 

Creative Financing

If you look at the largest of Collin’s commercial properties, a residential complex that has 87 units, you can see how intricate his financing strategies can be. Collin and a partner serve as this property’s managing members, and the two of them brought equity to the deal. Two other partners have contributed funding. Collin also earned an acquisition fee for this complex, and he gets an asset management fee as well. On top of all that, the group received a fixed loan from the lending company Freddie Mac to complete this purchase, one that’s amortized over 30 years.

This property wasn’t a candidate for the BRRRR method because it wasn’t distressed; it was in great shape at the time of sale. Even so, Collin estimates that his group can raise the rents by 25 percent or more. And they’re giving the units a makeover, one that includes new flooring, new colors, and other improvements. Moreover, Collin is planning to refinance in about 18 months, after which his group can take out their cash.

As a final note, Collin keeps the cash reserves from his investments in the bank. He doesn’t try to live off of his cashflows. As a result, he’s well prepared in case of a sharp downturn in the economy, an event he has yet to live through.

 

Scaling a Commercial Real Estate Company with Other People’s Money

In the end, Collin’s example demonstrates that active investing opportunities are out there waiting for you, no matter your age, occupation, or level of experience. If you love learning new things, finding and working with partners, developing creative financing plans, and taking a hands-on approach to asset management, you may enjoy a level of investing success you never realized was possible.

 

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Top 10 Ways to Add Value to Apartment Communities

If you are on this blog then it is fair to say you are interested in multifamily or apartments for your portfolio. This particular type of real estate investing is a great choice because it allows you to have greater control over your portfolio’s profitability by adding value to the property. How so?

When you purchase multifamily properties, an efficient way to increase your property’s value is to take action on multiple fronts. Below is a list of the value-add opportunities that will show better returns in months:

 

1. Property Updates

Surprisingly, a fresh coat of paint, landscaping, light fixtures, door handles, and drawer pulls will spark life into a property that would otherwise be humming along. A simple trip to the hardware store may be all you need to put a new perspective on a property that is currently performing fine. It would also be a way to show that you are in control of your property, it has your attention, and to show the tenants you take pride in ownership of the property. It is also a subtle way to telegraph that you may be trying to keep up with the market.

 

2. Repairs

Repairing that running toilet, door hinge, dishwasher, etc. goes far in keeping your properties in good shape and again, signals to your tenants that the property is an asset you care about. Simple everyday fixes go a long way to maintaining value and keeping your property market-ready.

 

3. Management

Having centralized management who is responsive to tenants goes farther than anyone in the real estate game really gives it credit for. With multifamily units, the management is the face of the owner. Thus, when a smiling and responsive manager or management team answers that service call, responds to a question, or just pops by the unit to ask if everything is going well, that leads to tenant satisfaction, which leads to tenants staying longer and your door turnover going down.

 

4. Technology

It’s 2021 and everyone has a smartphone in their pocket, hand, or purse. Installing software to allow tenant interaction for service calls, rent payments, and communication with the property management lends itself to making the rental process more effortless for the tenants and the management. Here is a blog post with more ideas on how to use technology to improve your multifamily investments.

 

5. Parking

Sometimes parking can be a hit or miss endeavor for the tenants and their guests. If there is no space that is another issue, but if you have the space, these simple steps will make everyone’s life easier and lead to better tenant retention.

  • Keep the lot(s) smooth and clean;
  • Keep the striping clear and bright;
  • Have lights for accident prevention and the safety of your tenants;
  • Make sure there is access for the elderly, and those with additional needs; and
  • Provide shade to keep cars cool and safe.

 

6. Laundry

Installing pay-per-use laundry equipment is a hidden gem in the multifamily space. Laundry equipment now can be purchased to accept coins, credit cards, debit cards, or even laundry-specific money cards that can be loaded with cash on-site. Not only does this generate more money for the property, but it also engenders loyalty to the property and the management who are taking care of the needs of the tenants. The washing and drying units are right there, with detergent and fabric softener that can be purchased by the box.

 

7. Pets

I have dogs. I love my dogs. I spend money on my dogs just like the rest of us. I expect to pay pet rent if I am renting. Charging a pet deposit and adding $25 a month is more than acceptable to any pet owner. Also, a dedicated pet area for Fido’s daily droppings, playing fetch, or socializing is greatly appreciated by pet-owning and non-pet-owning tenants alike. These types of value-adds also cut down on the nastiness that can be discovered when a tenant exits the unit if those things are not provided.

 

8. Storage

Extra storage, whether it is a storage facility or an extra closet on the patio, is a value-add most do not think about. So many tenants have no place to keep that Christmas tree they put up every year, among other items. This extra space also makes the property more valuable.

 

9. Submetering

Many multifamily properties pick up the tab each month for water or some other utility. By individually metering the units and billing tenants for their individually measured utility usage, you will SAVE A TON of money.

 

10. Trash Pick-Up

Without overstating the obvious, people produce trash. Make it easier for them to get rid of their trash and have it hauled away. Convenient trash cans, trash shoots to a bigger receptacle, or being able to walk to the driveway’s end with a provided can will keep your property clean and help to invest your tenants in the cleanliness of the property.

 

These simple steps are effective for landlords to control and increase property value. Moreover, these steps help control tenant retention and create a community that is valued in your area and shows value in your monthly returns. Best of Luck out there!

 

About the Author:

Brian T. Boyd is a licensed attorney in Tennessee who handles commercial, real estate, construction, and business issues for clients. He and his wife also invest in real estate. To learn more about Brian, visit www.boydlegal.co.

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How to Manage Your Apartment Property Manager

As the asset manager of an apartment investment, one of your main responsibilities is to oversee the property management company.

Here is a blog post where we outline all the GP’s duties after the acquisition.

This blog post will address five frequently asked questions about interacting with and managing the property management company after you’ve acquired a deal and assumed your position as the asset manager.

For all of the FAQs, your property management company may or may not be onboard (for example, they may not send you every report that you ask for), which means you must set expectations with them BEFORE finding a deal. You need to ask the right questions based on the FAQs below when conducting property management interviews.

1 – How often do I interact with the property management company?

You should have monthly performance calls with your property management company at minimum. During the stabilization period (i.e., when you are performing renovations), the calls should be on a weekly basis. Once the asset is stabilized, you can continue the weekly calls, change to monthly calls, or have calls on an as-needed basis.

The weekly performance calls should include you and the onsite manager at a minimum, and ideally the regional manager as well.

During the calls, you will review property reports and key metrics (more on these two things below).

2 – What reports should I expect from my property management company?

You will get what you ask for. If you ask for nothing, you will likely receive nothing or just the bare minimum.

The reports you want to receive on a weekly basis are:

  • Box score: summary of leasing activity, including the number of move-ins and move-outs and unit occupancy status (vacant-leased, vacant-not leased, vacant-ready, notice-leased, notice-not leased, model, down, other use)
  • Occupancy: physical occupancy (percentage of total units occupied) and economic occupancy (rate of paying tenants)
  • Occupancy forecast: the projected occupancy based on future occupancy status (i.e., units that are occupied, units with expiring leases that are leased, and vacant units that are leased)
  • Delinquency report: list of resident delinquent (i.e., past due) amounts
  • Leasing reports: summary of leasing activity (traffic information, leasing information, concession information, marketing information, projection information)
  • Accounts payable: summary of money owed to vendors (including to the management company)
  • Cash on hand: the asset’s liquidity

The reports you want to receive on a monthly basis in addition to the weekly reports above are:

  • Income and expense statements: detailed monthly report with all income and expense line items, as well as the dollar and percent variance compare to the budget
  • Deposits: summary of security deposit information (balance, forfeits, returned checks, refunded)
  • General ledger: summary of all financial transactions
  • Balance sheet: summary of assets, liabilities, and capital
  • Trial balance: summary of all debits and credits
  • Rent roll: summary of all unit information (occupancy status, market rent, current rent, move in, lease start and end, other fees, deposit)
  • Expiration reports: summary of expiring leases
  • Maintenance reports: summary of maintenance issues and costs

Again, make sure you set reporting expectations with your management company BEFORE you have a deal.

3 – How do I obtain these reports?

The simplest way to obtain these reports to is to ask your management company to create custom reports using their management software and have them sent to your email on a weekly/monthly basis.

Another option is to ask for access to their management software so that you can have real-time access to these reports.

If your management company doesn’t use a software or if you don’t like the look of their reports, you can create your own custom spreadsheet and ask your management company to update it on a weekly/monthly basis. Click here to download a free Weekly Performance Review tracker.

4 – What metrics should I focus on the most?

The most important metric to track is the cash flow relative to the projections you presented to your investors. Track the forecasted vs. actuals on the income and expense report, focus on the line items with the greatest variance, and create a strategy to bring those line items back on track during your weekly performance calls.

For the value-add business plan, the number of units renovated relative to your forecasted timeline and the rental premiums demanded are important during the first 12 to 24 months because both will have a large impact on your cash flow.

Additionally, certain metrics, like leasing metrics, capital expenditure costs, and total income, may vary from your projections during the value-add portion of your business plan. For example, the total income may be lower than forecasted after owning the asset for 3 months due to a higher number of move-outs than anticipated. Or, you spent a larger percentage of your capital expenditure budget in the first three months because you are ahead of schedule. So, the key metric during the value-add portion of the business plan is the forecasted vs. actual rent premiums for renovated units.

Other metrics to track that may be the cause of a high income and/or expense variance are the turnover rate, economic occupancy, average days to lease, revenue growth, traffic, evictions, leasing ratio and other metrics from the reports outlined above.

Again, the best strategy is to track the variance on the income and expense reports, strategize with your management company to identify the cause by reviewing the other reports and come up with a solution if needed.

5 – What other things do the best asset managers do?

First, look at your property management company as a partner and screen them accordingly. Are they someone you want to work with for a long-time? Does their track record speak for itself? What are the tenants saying about them? How professional are they when speaking with a potential tenant (you can role play as a potential tenant to find out)? Are they willing to change if needed? Do the employees like working at the company? Are they engaged on social media?

Next, the best asset managers always look ahead. You should evaluate the market, evaluate the competition to compare your property to, track and maximize income growth and expense decline, and ensure tenant satisfaction by checking reviews, social media, and hosting community events.

Also, even though the property management company is your partner, you should watch them like a hawk. Most people focus on the front-end activities, like finding deals, sourcing capital, whether they need to form an LLC, etc. Fewer people focus on the back-end activities, like asset management, which take years and decades to do. So much of the asset’s success and your company’s ability to scale is dependent on your property staff and property management company, so you have to watch them like your career depends on it, because it does. If things don’t work out, don’t be afraid to part ways.

Lastly, visit the property at least once a month in-person. If you invest out-of-state, a great strategy is to ask someone local to mount a GoPro on their vehicle and drive the property on your behalf.

How to Manage Your Apartment Property Manager

Set up frequent phone calls with your property management company, starting with weekly calls.

Request the proper weekly and monthly reports to see how well or poorly the property management company is implementing your business plan. Track the most relevant KPIs, like cash flow variance, number of units renovated, rent premiums, etc.

Properly screen the property management company upfront and continuously evaluate their performance.

Visit the property in person to make sure the reports match reality.

 

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Why and When to Bring Apartment Property Management In-House

The property management company that manages your apartment investments is one of your most important team members. Because they are responsible for overseeing the day-to-day operations of your apartment investments and implementing your business plan, they can make or break your business.

Many apartment investors start off by hiring a 3rd party property management company. However, the other option is to bring property management in-house.

Why Bring Property Management In-House

The primary reason to bring property management in-house is to improve the performance of your apartment portfolio. You do not bring property management in-house to make money. In fact, it is possible that your in-house property management company operates at a loss. The purpose of bringing property management in-house is to improve the overall performance of the individual apartment asset and your portfolio as a while. In-house management can result in higher quality customer service for residents, better marketing, faster unit turnover, more training opportunity for staff, top talent, etc. The important word here is “can.” Therefore, If you don’t think you can do it better, don’t do it at all.

Secondly, there are greater alignment of interests with in-house property management. 3rd-party property managers typically make money from a percentage of the collected revenue (referred to as fee-based management). The major issue with fee-based management is that the 3rd-party property management company isn’t incentivized to maximize revenue. Let’s say a 3rd-party property management company charges a 3% management fee. If the property generated $100,000 per month in revenue, they make $3,000 per month. If revenue increased by 25% to $125,000, they make $3,750, or only $750 more per month. An increase in revenue of 25% is huge for you and your investors, but not so much for a 3rd party property management company. However, when property management is in-house, maximizing revenue (or whatever else you decide) will be a top priority.

Lastly, bringing property management in-house improves communication. Since it is your property management company, you decide how often they send you the property’s KPIs. If you want a daily report, no problem. Whereas with 3rd-party property management, they may only agree to send weekly or monthly performance reports. Similarly, since it is your property management company, you can be as involved in the actual operations of the property as you want. In turn, you will have more up-to-date, detailed information to share with investors about the status of your business plan, as well as make faster adjustments if challenges arise.

When to Bring Property Management In-House

There are only two times when apartment investors bring property management in-house: day 1 or when they have achieved scale (i.e., thousands of apartment units). Neither option is objectively better than the other but there are potential pros and cons.

Pros of Bringing Property Management In-House Day 1

Bringing property management in-house day 1 results in zero disruptions. There are a lot of moving parts when transitioning from 3rd party to in-house management. You need to provide notice to the current company, terminate contracts, create the new company, and then move the all the operations over to your company. This may involve all new staff as well. All of this is a major disruption for residents and potentially operations.
Bringing property management in-house day 1 results in smaller overhead. You will not need to build out an entire operation with Executive, Directors, etc., which is expensive and time consuming, especially since the team and infrastructure need to be created before taking over management and generating revenue. Instead, it is likely that it is just you and your site staff. Over time, as needed, you can bring on additional team members and naturally grow to a full-sized business.

Pros of Bringing Property Management In-House When You Have Achieved Scale

Bringing property management in-house when you have achieved scale allows you to attract top talent. Property management and business professionals are eager to bring their expertise to a brand-new company that will manage thousands of units. They cannot wait to be actively involved in implementing a business plan they had a hand in creating. You will have a difficult time attracting the best-of-the-best to your property management company when it only manages one building.
Bringing property management in-house when you have achieved scale can generate a profit. As I mentioned earlier, the purpose of creating a property management company is not to make money. However, waiting to bring management in-house when you have thousands of units may allow you to generate a small profit, or at least breakeven. Having one apartment will not cover the costs of an in-house property management company and you will operate at a loss.
Bringing property management in-house when you have achieved scale allows you to implement best practices. The top talent you attract will also come with the best property management practices. They have years of experience working for the best property management institutions. They will have intimate knowledge of the market. As a result, they will bring their expertise to your portfolio, allowing in your ability to implement the best practices to improve operations. When you do not have a track record and large portfolio of properties, you won’t attract the top talent, meaning you likely won’t be implementing the best practices.

Why and When to Bring Property Management In-House

The main reason why you bring property management in-house is to improve the operations of your apartment portfolio. It will also increase alignment of interests and improve communication.
You can either bring property management in-house day 1 or when you have achieved scale. The benefits of bringing property management in-house day 1 are no disruptions and smaller overhead. The benefits of bringing property management in-house when you have achieved scale is your ability to attract top talent, start with a profit margin, and implement best practices.

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How to Provide Best-In-Class Customer Service to Your Multifamily Residents

Multifamily investing offers the opportunity to profit tremendously when you sell your property, and a well-managed property will also throw off regular income throughout your ownership period. As a commercial real estate investor, you have devoted a tremendous amount of time, energy and money into the purchase of a great property. You want to do what it takes to optimize your return on investment, but successful commercial real estate investing involves more than buying and maintaining properties. Your tenants are the lifeblood of your investment, and they should receive just as much care and attention as property upkeep and number crunching.

Get to Know Your Tenants as People

While your multifamily property is a financial investment to you, it is the place that your tenants call home. Each of your tenants has unique factors to consider related to their lifestyle, finances, interests and goals, and these are often entwined with their living experience in vital ways. When you get to know your tenants as people rather than as names on a lease, you can offer them a higher level of customer service. In the process, you may decrease turnover and improve online reviews. These factors directly feed into a healthy bottom line. How can you serve your property’s residents as customers rather than solely as tenants?

Be More Than a Rent Collector

Your property’s residents will be more likely to renew a lease and to recommend your property to their friends and family members when they feel valued and respected. In many cases, the relationship between a tenant and a landlord is purely financial, and it is entirely dictated by the terms of the lease. You must abide by the terms of the lease, and you must ensure that rents are collected in a timely manner. However, your relationship with your residents should extend beyond the monthly rent collection process. For example, you can send tenants birthday cards or call to check on their unit’s condition periodically. Small gestures like these can go a long way toward developing a positive relationship with your tenants.

Be Proactive

The top brands today stay on top of their customers’ needs, and they anticipate behavior when possible. Your multifamily property is a business, and your tenants are your customers. With this in mind, you need to nurture relationships and proactively anticipate your customers’ needs. For example, reach out to your tenants a few months before their lease expires to give them renewal options. Implement a loyalty program that rewards renewals, transfers and referrals. A high turnover rate at your multifamily property can dramatically erode profits, so creating a reward system that encourages renewals can be cost-effective for your business. At the same time, the benefits of the reward system likely will be appreciated by your customers.

Support Your Residents’ Goals

While some residents may move out of an apartment building that is poorly managed, others will vacate for reasons that are not related to property management at all. For example, they may need a larger space or may be ready to purchase a home. When your tenants decide to vacate, avoid creating stressful and unnecessary roadblocks. Consider collecting moving boxes and other materials from new tenants and offering these to tenants who are vacating as part of your service. Offer to do a walk-through before the tenants vacate so that they can recoup as much of their deposit as possible. You should support your tenants just as much when they are vacating as you did when they were moving in.

Approach Rent Increases Transparently

For the majority of your tenants, their monthly rental payment may be their largest expense. An unexpected increase can create immediate stress and anxiety, and this may be followed by a kneejerk reaction to look for a new and more affordable place to live. From your perspective, maintaining rents at market rates is essential in order to optimize profitability. How can you maintain market rents while also retaining happy tenants? Create a small report for your tenants that shows current market rents in the area. This report should substantiate the rental increase at the time of renewal. If you launch a rewards program for loyal residents, consider outlining any savings that they may enjoy by renewing their lease. This type of detailed and customized report could actually help your tenants to feel positive about renewing their lease at a higher rate.

Be Readily Available

Tenants commonly reach out to their landlord or property manager because they have a complaint or a repair issue that requires prompt attention. In many cases, tenants are provided a single phone number to call for assistance, and landlords may let those calls go to voicemail to screen them for urgency. To tenants, the inability to quickly and easily reach you when they need assistance with their home can be stressful. More than that, it could create the impression that your tenants are a bother to you. To counter this, offer multiple communication channels. In addition to a phone number for verbal communication, offer text communication, an email and a website. Make a point to always answer the phone when a tenant calls and to respond to all other methods of communication promptly.

Cross-Sell with Your Other Properties

Do you own more than one multifamily property? The apartment that a tenant lives in today may no longer meet their needs, but one of your other properties could be a better fit. If you have provided excellent customer service to the tenant throughout his or her residency period, the tenant may be happy to consider relocating to one of your other properties as long as the property meets their current needs. Likewise, consider extending the rewards for your referral program to all of your properties. These practices will help you to maintain higher occupancy rates overall, and the increased options can bolster customer satisfaction.

Ask for Reviews

Your existing tenants will directly impact your bottom line from multifamily investing long after they move out. This is because potential tenants often read online reviews from past tenants to learn about important factors like property management responsiveness, rent increases, property maintenance and more. Because unhappy tenants may be more likely to post reviews than tenants who have loved living in your property, soliciting feedback from satisfied tenants is essential. Consider asking tenants to leave reviews at different stages in their experience. For example, you may ask for feedback about the move-in process after they get settled. You may also ask tenants to leave comments when they renew a lease or after they move out. In addition, use feedback from negative reviews to make improvements.

As is the case with other types of businesses, you will not be able to please all of your tenants at all times. However, because success from multifamily investing is intricately linked to tenant satisfaction, it is essential that you develop a sound customer service policy that touches your tenants throughout their experience. Properly managing tenant relationships may require more time and energy than you initially anticipated. Consider hiring a reputable property management firm if you are challenged in this or other critical areas of commercial real estate investing.

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The CDC Eviction Moratorium – What You NEED To Know

You may have seen recent headlines referring to an “eviction crisis”: 

The COVID-19 Eviction Crisis: an Estimated 30-40 Million People in America Are at Risk – The Aspen Institute 

 

Experts fear the end of eviction moratoriums could plunge thousands of people into homelessness – CNBC

President Trump signed an eviction moratorium order that effectively bans evictions nationwide through the end of the year. According to the Centers for Disease Control and Prevention (“CDC”), the moratorium order has been issued to provide housing stability and to prevent the further spread of COVID-19. However, it is important to note that rent is NOT cancelled through the end of the year. Let’s dive into how this order effects landlords and owners of real estate…

 

According to the moratorium, there are stipulations in order to receive this “eviction protection.”

Those who are eligible must meet additional criteria before presenting their landlords with a declaration, which will be made available on the CDC website. This criteria includes: 

  1. The resident has sought all available government rental assistance
  2. The resident will earn no more than $99,000 in 2020 (or $198,000, if filing jointly)
  3. The resident can’t pay their rent in full due to a substantial loss of income 
  4. The resident is trying to make timely partial payments, to the extent they can afford to do so
  5. The resident would, if evicted, likely end up homeless or forced to live in a shared living situation

What to do if you (the landlord) receives a CDC Declaration from a tenant?

 

According to Colton Addy from Snell & Wilmer Law, if a landlord receives a CDC Declaration from a tenant, the landlord should respond in writing to the tenant to encourage the tenant to make partial payments of rent (and similar housing-related payments) to the extent the tenant is able, in accordance with the CDC Declaration. Additionally, the landlord’s written correspondence should remind tenants that the rental amounts are not forgiven and will ultimately need to be paid. 

 

Additionally, many tenants may not be aware of the government assistance programs that are available to tenants to help tenants pay their rent during the COVID-19 Pandemic. Landlords should include a list of available resources that tenants can use to pay their rent. The Department of Housing and Urban Development (HUD) has stated that nonprofits that received Emergency Solutions Grants (ESG) or Community Development Block Grant (CDBG) funds under the CARES Act may use these funds to provide temporary rental assistance to tenants. 

 

The following websites provide information on federal assistance that is available:

 

www.hudexchange.info/programsupport

https://www.hud.gov/coronavirus

https://home.treasury.gov/policyissues/cares/state-and-local-governments 

 

Additionally, landlords should include other programs that may be applicable in their jurisdiction. Landlords may also consider filing an eviction proceeding for one of the reasons permitted by the CDC Order, but landlords should use caution in pursuing such actions as eviction proceedings in the current climate are likely to draw additional judicial scrutiny.

 

Penalties:

 

The penalties for individuals who violate the Order are severe, including:

 

 

  • A fine of up to $100,000 and up to one year in jail, if the violation does not result in a death; or
  • A fine of up to $250,000 and up to one year in jail, if the violation results in a death.

 

The penalties for an organization violating the Order are even more severe.

In summary, the moratorium order provides temporary relief to those residential tenants facing eviction who submit the required declaration, through the end of the year.  The order, however, does not absolve a tenant from paying rent or restrict a landlord from applying penalties, interest, or late fees on the tenant’s account for non-payment of rent.  Additionally, the order does not relieve landlords of their debt service obligations if a tenant seeks relief under the order. 

 

Disclaimer: The materials contained in this blog post are for educational and informational purposes only. Nothing in this blog post is to be considered as the rendering of legal advice. Readers are advised to obtain legal advice from their own legal counsel. Additionally, please note that the orders and laws related to the COVID-19 Pandemic are changing on a daily basis and your jurisdiction may have stricter rules related to evictions in place. Please verify the rules currently affecting your property at any given time.

 

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How COVID-19 Has Impacted May Rent Collection for Landlords

COVID-19 has caused a lot of uncertainty for landlords and property managers over the past few months, especially with the recent changes to rent collections and evictions. In an attempt to help tenants who may be struggling financially, many states are beginning to restrict evictions during the pandemic. For landlords, this can be scary as it may translate to less rental income with no ability to evict and find a new tenant.

Changes in rent collection during COVID-19 are expected. However, recent rent collection data shows landlords may not be as impacted as they initially expected.

In fact, data shows that rent collection is down by a few percentage points. While new eviction laws may be scary for landlords, the data shows it is not as bad as it seems.

Here’s what you need to know about COVID-19’s impact on rent collection for landlords:

Rent Collection is Down

Understandably, rent collection has dropped – but this was expected. Going into a recession of any kind means people have less money. Sometimes, this even means missing rent payments.

Luckily, rent collection hasn’t been affected as much compared to previous economic downturns. In fact, as of May 2020, rent collection is only down 1.5% from May 2019.

Better yet is that data shows rent is up over 2% from April of 2020, which also indicates  landlords may not see a massive decrease in rent collections.

As for rent collection percentages, 80.2% of tenants paid rent by the end of week May 6th, 2020. This is only a 1.5% change from the 81.7% of tenants that paid rent by the end of week May 6th, 2019.

Source: National Multifamily Housing Council

Year to date, rent collection is down a total of roughly 3% from 2019, but this is promising. For the time being, the spread of the virus seems to be slowing down. Additionally, steps are being implemented to get the economy rolling again, meaning in the short-term, the worst may be over.

Of course, we don’t know any of that for a fact yet, though. What we do know is rent collection is down only slightly – a good sign for landlords.

Why is Rent Collection Down So Little? Will it Get Worse?

The obvious reason for this is government stimulus checks are finally hitting bank accounts. With many stimulus checks making their way to citizens towards the end of April, it makes sense tenants are able to pay rent.

Of course, as of now this is the only stimulus check confirmed for Americans. There have been talks from President Trump about distributing a second round of stimulus checks, though. The main reason for this is because data shows that 63% of Americans will require a second stimulus check in order to pay bills within the next three months.

Depending on whether the economy reopens, the next few months could prove to be unstable. The good news is many states are ramping up unemployment help efforts, as nearly 15% of the country is unemployed.

With all the federal and state help citizens are receiving as of currently, it is likely rent collections won’t fluctuate too much. Again though, none of this can be said for certain.

Eviction Routines are Changing

Perhaps more important to know than the current rent collection numbers are the change in evictions laws. While not all states have implemented new evictions laws, many states have – and they are important to know.

Take a recent case in Minnesota, for example, where a landlord was charged for evicting a tenant during the pandemic.

States are beginning to require landlords to allow tenants to live in their property even if they cannot pay rent. As of now, there are 15 states which have suspended or changed eviction laws until further notice. Each state’s new eviction suspension is different, so be sure to stay updated on your current state’s eviction laws.

Most states who have changed their eviction laws require landlords to keep tenants in their homes even if they cannot pay rent. New York, for example, declared an eviction and foreclosure moratorium and prohibited late fees for up to 90 days, even allowing tenants to use their security deposits to pay past rent.

Luckily, these changes have clearly not changed rent collection too much – yet. But it is still something that should be prepared for. At the very least, be willing to work with tenants during this difficult time. Even if you are able to evict tenants, finding new ones during this time may not be easy.

Remember – It’s Temporary

Though we don’t know when, the economy will recover. In fact, real estate investments like apartment investing may even come out of the recession stronger than before.

While rent collections have been slightly affected, it’s nothing too concerning as of now. Just be sure to stay on top of your states’ eviction laws and suspensions during the pandemic and prepare accordingly.

For more reading, c to find out what you can do to help “recession-proof” your real estate investments during a recession.

 

 

 

 

 

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Class A asset apartment interior

Tops Ways to Develop Class A Assets & Luxury Rental Properties and Increase Your ROI

Maybe your heart is set on owning an apartment property that is unlike anything you’ve developed before. In the past, you focused on middle-income properties that targeted tenants who valued affordable yet quality housing.

Now, you’re taking things up a notch. Your goal? To develop a Class A asset and luxury rental property—one that will help you to boost your ROI on rental property.

Fortunately, I’ve compiled a guide on the top ways to develop Class A assets and thus watch your bottom line soar in the years ahead.

First, Why Luxury Property?

The prices of luxury properties continue to soar, as this type of real estate remains in high demand—especially along the United States’ coastlines.

In fact, research shows that between 2007 and 2017, the number of people who could afford homes but still preferred to rent properties increased by 175%. In addition, the yearly increase in the number of renting households earning $150,000-plus per year is now faster than that of home-owning households.

For this reason, now is the perfect time to get your feet wet in the growing area of luxury real estate investing. In this area, you’ll cater to high-income tenants looking for first-rate and flexible housing options, and as a result, you can easily boost your ROI on rental property.

What Exactly is a Luxury Rental Property?

Before you attempt to develop a luxury rental property, it’s critical that you understand what constitutes a luxury property in the first place.

The reality is, a hefty price tag is not enough to place a piece of real estate in the “luxury property” category. Instead, along with featuring a high price, the property must be exclusive and unique. In other words, it needs to be highly desirable. After all, wealthy individuals don’t mind paying premium prices for assets perceived as superior.

As a general rule of thumb, your high-end renters want the same types of features that other renters want, just on a bigger scale. They’re looking for beauty, opulent finishes, top-tier amenities, and lots of attention to detail.

Let’s take a peek at a few ways you can increase your ROI on rental property by creating luxury properties for renters.

Customer Services, Like Trash Pickup Services

One way you can make your rental property stand out from the rest is to offer your tenants custom services.

For instance, if you have a maintenance professional, have them pick up your tenants’ trash from their doorsteps two times a week and take them to your property’s dumpster for a monthly fee. This will keep your tenants from having to take the trash out on their own, which will save them time and energy. They’ll love the special treatment they receive through such a service.

Renovations

Renovating your apartment property is one of the most effective ways of boosting your ROI on rental property. Renovations may include:

Rehabilitating the Entire Building

You could perform a moderate asset rehabilitation, where you rehabilitate your entire apartment building, for example. Any existing residents of the building would have to be displaced for a few months, but they’d return to new heating/cooling systems, flooring, bathrooms, countertops, cabinets, appliances, windows, and even paint.

This approach to renovating your property may cost you around $20,000-plus per unit. But it’ll lead to a beautiful finished product, and as a result, you could very well increase your rent prices anywhere from 50% to 100%. In the end, you can expect to develop a more desirable tenant base in the future.

Rehabilitating Individual Units

Rather than renovating your entire apartment building, you could complete renovations as each lease turns over. For instance, once a tenant vacates a unit, you can add quality finishes to it, such as fresh cabinet faces, faux hardwood flooring, fresh carpet, or new vanities.

These kinds of fixes may put you in a position to increase your rent between 20% and 30%. As a result, this approach is an excellent option if you’d like to increase your ROI on rental property by boosting the property’s value while still maintaining cash flow.

Additional Modifications

To further develop Class A assets, you can offer premium parking to your tenants. These parking spaces would be directly in front of their rental units, and they would pay you to reserve them. This will immediately drive your ROI on rental property up and benefit your bottom line. You could also provide a garage for your tenants to park in, which can increase your ROI as well.

In addition, consider adding light-emitting diode lights to your property’s common areas. These lights will save you money in that they use minimal energy and can easily last you 25 years, thus saving on maintenance costs.

Other Possible Changes

Be sure to install washers and dryers in your rental units. This is one of the best ways to generate revenue at rental properties. In addition, feel free to add a children’s playroom, exercise room, or rooftop deck to further boost your ROI on rental property.

Greenery can also make any living space feel new and fresh. So, try to add new landscaping in the exterior of the building. You can also add plants to apartment balconies or your lobby to add life to these areas.

Your Property Location

Location, location, location—this is another extremely important consideration when you’re trying to increase your ROI on rental property.

When you search for a rental property to turn into a Class A asset, look for a property in a “hot” neighborhood. The best neighborhoods are generally those near high-end shopping, the arts, and dining.

Also, try to locate your property near other luxury properties or near a body of water. For instance, many luxury renters value living at waterfront locations or at least in areas where they can enjoy stunning lake, ocean, or river views. A property with an excellent mountain or countryside view can also be good for your ROI.

Start Developing Class A Assets and Boost Your ROI on Rental Property Today!

If you’re serious about watching your bottom line grow, this summer is a good time to start exploring properties that you can turn into luxury rental properties. The good news is that you don’t have to take on this task all by yourself.

I can guide you through the multifaceted process of transforming properties into top-of-the-line assets. Get in touch with me to learn how you can develop Class A assets and start enjoying new levels of financial freedom.

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Hud Loan Programs for Apartment Syndicators: Everything You Need to Know

Hud Loan Programs for Apartment Syndicators: Everything You Need to Know

Let’s talk about one of the top loan program providers that apartment syndicators use on their deals: Hud.

Hud can be a great option for apartment deals. We’re going to cover each of their common loan programs, including their permanent, refinancing, and supplemental loans.

Loan 1: 223(f)

The first Hud loan, which is the permanent loan, would be the 223(f). This is very similar to agency loans, except for one major difference: processing time. Plus, the loan terms are actually a little bit longer. So for the 223(f), the loan term is going to be lesser of either 35 years or 75% of the remaining economic life. 

So if the property’s economic life is greater than 35 years, then your loan term is actually going to be 35 years. It’ll be fully amortized over that time period. Whatever the loan term is what the amortization rate will be. If you’re dealing with a smaller apartment community under the $1 million purchase price, then this is not going to be the loan for you.

In regards to the LTVs, for the loan-to-values, they will lend up to 83.3% for a market rate property, and they will also lend up to 87% for affordable. So that’s another distinction of the housing and urban development loans, which is they are also used for affordable housing. There will be an occupancy requirement, which is normal for most of these loans. 

The interest rate will be fixed for this loan, and then you will have the ability to include some repair costs by using this loan program. For the 223(f) loan, you can include up to 15% of the value of the property in repair costs or $6500 per unit. If you’re not necessarily doing a minor renovation, but if you’re spending about $6500 per unit overall, then you can include those in the loan.

The pros of this loan are that they have the highest LTV. You can get a loan where you don’t have to put down 20%; you can actually put down less than 20%. It also eliminates the refinance as well as the interest rate risk, because it is a fixed rate loan, and the term can be up to 35 years in length. You won’t have to worry about refinancing or the interest rate going up if something were to happen in the market. 

These loans are non-recourse as well as assumable, which helps with the exit strategy. There’s also no defined financial capability requirements, no geographic restrictions, and no minimum population. There’s essentially no limitation on them giving you a loan for a deal if the market doesn’t have a lot of people living in it or the income is very low. 

There are also some cons involved when considering a Hud loan. The processing time is much longer than some. The time for a contract to close is at a minimum of 120 days to six or nine months is actually common. Other loan providers have processing times between 60 and 90 days. Hud loans take a little bit longer to process. They also come with higher fees, mortgage insurance premiums, and annual operating statement audits.

Loan 2: 221(d)(4)

The next Hud loan is 221(d)(4). These are for properties that you either want to build or substantially renovate. 

Similar to the 223(f) loan, these loans do have very long terms. The length of the loan will be however long the construction period is, plus an additional 40 years. That is fully amortized. 

This isn’t the loan for smaller deals, because the minimum loan size is going to be $5 million. So if you have a deal that you want to renovate and has got a $1 million purchase price, you’re going to have to look at some other options. 

Similarly, this is for market-rate properties as well as affordable properties, with the same LTVs of 83.3% and 87% respectively. These loans are also assumable and non-recourse as well as fixed interest with interest-only payments during the construction period.

The CapEx requirements for this loan are quite different than the 223(f). For the 223(f), it was up to 15% or up to $6500 per unit, whereas for the 221(d)(4) loan actually needs to be greater than 15% of the property value or greater than $6500 per unit. 

The 221(d)(4) pros and cons are pretty similar to the 223(f) pros and cons. There’s the elimination of the refinance and interest rate risk, because of that fixed rate in a term of up to 40 years. They’re also higher leveraged than your traditional sources. Those longer processing time and closing times can be a pain. There’s going to be higher fees, and you also have those annual operating audits and inspections.

Loan 3: 223(a)(7)

Hud also offers refinance loans as well as supplemental loans for their loan programs. Their refinance loan is called the 223(a)(7).

If you’ve secured the 223(f) loan or you’ve secured a 221(d)(4) loan, you’re able to secure this refinance loan, and it has to be one of those two. You can’t go from a private bridge loan to this refinance loan– that’s not how it works.

The loan term for the refinance loan is up to 12 years beyond the remaining term, but not to exceed the term. If your initial term was 40 years and you refinanced at 30 years, then this refinance loan will only be 10 years, because it can’t be greater than 40 years. 

It will be either the lesser of the original principal amount from your first loan, or a debt service coverage ratio of 1.11 or 100% of the eligible transaction costs. These loans are also fully amortized. The occupancy requirements are going to be the same as the existing terms for the previous loan. These are also going to be assumable and non-recourse with that fixed interest rate.

Loan 4: 241(a)

Hud also has a supplemental loan program available, which is the 241(a). This is only probable if you’ve secured the 221(d)(4) or 223(f). 

The loan term is coterminous with the first loan. Whenever you acquire it, it’s just going to be the length of the remaining loan. You’re essentially just adding $1 million or $5 million to your existing loan. 

Your loan size can be up to 90% of the cost of the property, so essentially a 90% LTV, because you need to have at least 10% of equity in the property at all times. It’s going to be fully amortized. 

They’re also going to base the loan size on the debt service coverage ratio. Because of this, it needs to be 1.45. That’s a ratio of the net operating income to the debt service. Then, the minimum occupancy requirements are going to be the same as whatever the terms are for your existing loan. Like all the loans, they’re assumable, they are non-recourse, and the interest rate is fixed.

And that’s it for Hud loans! What do you think about taking out loans through Hud for real estate purposes? Tell us what you think in the comments below!

Image Courtesy of Pixabay

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Navigating the Mechanics of an Apartment Deal

Navigating the Mechanics of an Apartment Deal

From the types of roof, electrical wiring, heating and cooling to the parking lot condition, windows and hot water heaters there are alot of checklist items to consider when negotiating your apartment deal.

Nathan Tabor shares his insight into some of the the nitty gritty so you won’t be left in the lurch after closing. Read on to find out what you may not have been thinking about for your ideal setup.

 

Check for city complaints

How do you know if the plumbing is alright? Or the electrical connections are okay?

“So the number one thing on top of my list that I do first when I start due diligence is to go to the housing authority or whoever is writing city complaints and get the last two years’ worth of city complaints. The reason why – I got burned on this.” says Nathan Tabor.

This will give you a general idea as to what issues you’ll be facing. From the housing complaints, you can determine what else is probably wrong with property revealing any expenses you will incur so you can factor them into your deal.

 

Thinking about the roof

The type of roof you have not only impacts your installation and maintenance costs, but plays a part in insurance costs as well.

Let’s look at pitched vs flat roofs. A flat roof is cheaper to install but that’s about as far as the benefits go. A pitched roof has a longer life span and has a more appealing appearance while flat roofs have an institutional vibe. You see a flat roof and the first thing you’re thinking about is a medical facility as opposed to something that feels like home.

Usually, flat roofs cost more to insure because they’re not going to last for very long and also have a greater chance of developing leaks. Not to mention the host of other problems a leaky roof would present in your apartment building.

Nathan on flat roofs: “…[With flat roofs] you’ve gotta climb up there often, make sure that the drains are unstopped… Depending on where you are in the South, flat roofs just make your electrical bills more, because in the summer it’s hotter, and in the winter you don’t get the sun.”

 

Look out for fire hydrants and mailboxes

Nathan sheds light on some other hidden costs:

“Do you know who owns the fire hydrants on the complex you’re getting ready to buy?”

Most folks would never think of this until there’s a gigantic puddle next to the fire hydrant. Sure, you can call the fire department to come over and fix it, but since it’s on private property you could be on the hook for a surprise $6,000 expense.

Nathan on multi-unit aluminum mailboxes: “I just thought hey, it’s stamped on the side of it “Property of the USPS”, they maintain it. Guess what they don’t do? They don’t maintain them.”

When Nathan looked into the replacement cost of a 4’x4’ mailbox seven years ago it was…wait for it…$1,800.

 

Water metering

Having one meter on a multi-unit complex means you’re footing the bill for your tenants no matter who is taking 20-minute showers, outside washing their cars or letting their faucets run. Having individually metered units means you can bill your tenants individually holding them responsible for their own water needs. If you’re looking at buying a complex with a single meter find out the the average cost of the total water bill. Then weigh the cost of conversion and savings over time to help you decide which route you want to take.

What does your due diligence look like? Let us know in the comments.

 

Image courtesy of Pixabay

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Property Development or Fix-and-Flip Deals: Which is Better for Your Strategy?

You’re ready to make money in real estate and watch your bank account grow to new levels. But how? Should you focus on building new construction or on rehabbing existing properties?

 

The truth is, property development can be an extremely lucrative option if you’re presented with the right market and the right opportunity. And it’s a great way to generate equity as well. Fix-and-flip real estate can also be a good way to go if you’re looking to make a significant return on your investment.

 

So, which is better for your strategy? The answer isn’t black and white, as it ultimately depends on a number of factors, including your personal goals and your industry experience. These strategies are different, so we’ll take an in-depth look at both below. But the reality is that both real estate development and a fix and flip business plan offer great promise if you know what properties to look for.

A Glimpse at Property Development

In years past, people treated real estate development like a niche career field. Only people with robust real estate experience and cash reserves were active players in this industry. However, in today’s world, property development is becoming increasingly popular due to current efforts to gentrify neighborhoods, improve the stock of housing, and promote urban consolidation.

 

Of course, this field does carry a great deal of risk, but it can also be rewarding for those who have development and construction experience—if you pursue opportunities in a hot market.

 

It’s also a viable option if you’re willing to overcome the learning curve associated with developing your own project. By the same token, it’s a good move if you find it easier to build something from the ground up versus working with an existing property. You’ve got to have patience, though, as developing properties takes time.

Growing Markets for Development

Desirable areas in large cities can often be good places to target for property development. That’s because the demand for brand-new homes—especially apartments—and their supporting infrastructure in these areas is continuous. Co-living accommodation is an especially growing trend, where people live in communities that are supportive instead of in isolated homes. So, smart developers in the years ahead will jump on it.

Funding for Development

A perk of going the development route is that, if you’re working with a traditional lender who is relatively conservative, you may find it easier to secure financing than you would for a flip. You can get great terms if your development prospect happens to be very good. Part of the reason why conservative lenders like development is that new development usually features fewer unknowns compared with flipping. Plus, the returns can be easier to predict with new development versus fixing and flipping a property.

Funding Future Investments

Let’s say you choose to treat your development like a long-term real estate investment. The value of the investment will keep increasing over time. Then, you can use it to fund other projects down the road.

 

What’s especially great about this strategy is that it offers you some “insurance” in the event that the market experiences a shift at some point. That’s because you can hold onto your properties and then simply rent these properties out to generate cash flow until it’s a good time to sell them.

A Glimpse at Fix-and-Flip Deals

What’s great about a fix and flip business plan is that you can make a profit relatively quickly compared with developing a property. In fact, it’s not impossible to earn significant returns in just a few months.

 

However, it’s critical that you do market research prior to buying a property to flip. Looking at homes that have sold recently should provide you with a glimpse at what buyers are searching for in an area. For instance, although modern designs might be in demand in certain areas, traditional designs may be big winners elsewhere.

Personal Development during Fix-and-Flip Deals

Another reason to choose a fix and flip business plan over property development? Fix-and-flip deals are generally a great way to get your feet wet in real estate investing if you don’t have much of a background in this industry.

What You’ll Learn

During these types of deals, you’ll learn firsthand about budgeting for unanticipated costs, like holding costs if you cannot sell your fix-and-flip property as rapidly as initially expected. Other unexpected costs may include those related to contractor disputes, material delivery delays, construction delays, and building permits.

 

In addition, you’ll learn about real estate in general. This may include learning about how foreclosures or short sales work, for example. You’ll also learn about the different financing options that are available to investors like you. Yet another skill you’ll have an opportunity to hone is negotiation, as you’ll be doing a lot of negotiating to get the best deals on properties and materials.

Boost Your Network Both Development and Fix-and-Flip Deals

A common benefit of both property development and a fix and flip business plan is that you can grow your real estate network relationships like never before. That’s because you’ll develop many new contacts, such as other investors, insurance brokers, building inspectors, contractors, attorneys, and real estate agents. All of these contacts may prove helpful for future investments.

Start Making Money through Property Development or Fix-and-Flip Deals Today!

If you’d like to increase your earnings this year, you can’t go wrong with developing properties or flipping houses. The challenge you could face, of course, may be how to find the right properties and approach transactions involving development and flipping.

The great news is that you do not have to figure it all out on your own. Get in touch with me, Joe Fairless, to find out more about the unique benefits of property development and fix-and-flip deals. I may be able to help you build your investment strategy; acquire the resources you need to make it a success; and capitalize on it, full speed ahead.

 

Are you a newbie or a seasoned investor who wants to take their real estate investing to the next level? The 10-Week Apartment Syndication Mastery Program is for you. Joe Fairless and Trevor McGregor are ready to pull back the curtain to show you how to get into the game of apartment syndication. Click here to learn how to get started today.

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The Pros of Finding Private Investors vs Investment Property Loans

You’ve got the passion and the business sense you need to flourish in the competitive real estate market, but do you have a healthy bank account to go with it?

 

If you could use some outside funds to help you to kick start your real estate investing business, there’s good news. The lending market for commercial real estate was robust last year, despite increased trade tensions coupled with volatility in the financial markets. So, there’s promise that it will fare well this year, too.

 

The question that remains, though, is, should you seek funding from a private investor or should you stick with real estate investment loans from the bank? The reality is that choosing to find private investors offers several advantages over seeking out traditional bank loans. Let’s take a look at a few of them.

Flexibility

This is one of the major benefits of choosing private investors. The grim reality is that banks usually have requirements for credit scores, down payments, and income verification that are very rigid. You’ll basically need a credit score that is near perfect, a financial history that is squeaky clean, and an explanation of your outgoing and incoming funds.

 

Other documents you’ll need when seeking investment property loans from a bank include 1099 or W2 forms, bank statements, personal financial statements, profit/loss statements, and tax records. And there’s more. Be prepared to submit paycheck stubs, records of your existing mortgage payments, and a list of your current assets and debts. If what you look like on paper doesn’t match what the bank is looking for, you likely won’t get the loan you need.

 

Private investors you find as you network, on the other hand, are more interested in your track record of finding and making great deals and the proposed asset’s value. You get to know them on a personal level and will likely work with them over and over. These kinds of working relationships provide you with some flexibility based on trust.

Speed

In addition to being inflexible, banks usually have lengthy approval processes. With a bank, you may not secure cash for a whopping 90 days. That’s because gathering all of the abovementioned documents takes time and can be challenging. In addition, the paperwork itself can be extensive and you’ve got several levels you have to clear.

 

Meanwhile, with capital from a private lender, the process of qualifying for funding is less complicated and thus less time-consuming. Instead of having to clear multiple levels and deal with an annoying middle man, you’ll be dealing with your lender directly. And this lender raises and controls all of the funds and makes its decisions in-house.

 

As a result, you won’t see your approval times dragging on for several weeks. Instead, your private lender will work with you directly and will simply assess your particular project to see if you qualify for the hard money loan you need. Same-day approvals are not uncommon, so you can easily expect your funding within one week.

Customization

If you decide to find private investors, you’ll quickly learn that you’ll have much more liberty to develop a repayment plan that is based on ROI. With large financial institutions, this freedom simply doesn’t exist. Instead, you’ll have no choice but to accept the bank’s payment terms. You might be able to make some adjustments, but more often than not, you’ll have to abide by the bank’s established payment structure. And to make matters worse, you may face hefty pre-payment penalties.

 

Once you find investors with whom you’d like to work, you’ll simply start discussing with them your financial need. Then, you’ll work toward a mutually satisfactory plan in which you each receive a portion of the monthly rent (if you invest in a rental) and the final sales price. You can easily come to your own terms since no established lending requirements typically exist.

Cost Benefits

When you choose to find private investors, you’re essentially choosing to save money in closing costs and fees. That’s because bank investment property loans tend to be more costly in these areas.

 

You will also not end up shelling out thousands in interest rates if you work with investors. Many banking institutions demand application fees upfront, even before you are approved. In addition, rates and terms may vary significantly. Still, banks often offer fixed rates and lower interest rates that you can repay over a certain number of years if you’re actually able to secure funding. If your loan terms are fluctuating, or adjustable, you may end up with higher payments over time.

Find Private Investors and Start Investing in Real Estate Today!

If you’re ready to take the plunge into real estate investing, now couldn’t be a better time to try to find private investors. They’ll help you to get started on your real estate investing career without the hassle you’ll experience with big banks.

 

Understandably, though, knowing where to start when it comes to finding the right lender can be challenging. As with any type of loan, it’s critical that you understanding your investment property loan terms as well as the impact it will have on your financial health. This is where doing your due diligence in researching your various lending options comes in. That’s the only way you’ll get the best deal available to you right now.

 

Get in touch with me, Joe Fairless, to find out more about how to find private investors and kick your real estate business into gear.

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4 Ways to Partner with a Property Management Company on Your First Apartment Syndication Deal

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The major challenge first-time apartment syndicators face when pursuing a deal is a lack of credibility. They’ve never done a deal before and don’t have a proven track record. To put it lightly, being taken seriously by real estate brokers, apartment owners and passive investors isn’t a guarantee.

 

However, there are many ways to portray yourself as a credible syndicator who is capable of closing on the deal. For example, a long-term strategy is to create a thought leadership platform. But if you find a deal before you’ve established a thought leadership platform, a faster technique is to find and partner with a property management company. By partnering with a property management company, the you can leverage the management company’s experience in order to establish credibility with the seller, the lender, and your private money investors.

 

Based on my syndication experience, there are four distinct ways a first-time syndicator can partner with an established property management company.

 

Method #1 – Sign the Loan

 

The first way to partner with a property management company is to have them sign on the loan. As a result, they will become a general partner in the deal.

 

This is ideal if the syndicator doesn’t personally have the liquidity or net worth to qualify with a commercial lender. By having the property management company’s signature, the syndicator can leverage their liquidity to be approved for a loan.

 

To compensate the property management company, the syndicator can offer a one-time fee of 0.25% to 2% of the loan balance paid at closing, or offer a general partnership ownership interest, or a combination of the two.

 

Method #2 – Invest in Deal

 

Another way is to have a property management company invest in the deal and as a result, become limited partners. For this method, they will have the same compensation structure as your passive investors.

 

Method #3 – Bring on Investors

 

A third way is to have the property management company invest in the deal and/or bring in their own investors. The extra benefit of following this method is that it adds another layer of credibility (i.e. the property management company’s investors) and it adds another level of alignment of interests since the property management company and their investors have their own skin in the game.

 

Similar to method #2, they will have the same compensation structure as your passive investors.

 

Method #4 – Ownership Interest

 

The final way that a syndicator can partner with a property management company is to exchange the property management fee for ownership interest in the general partnership.

 

The benefits of this method are three-fold. First, it establishes credibility right out of the gate for all parties, as the experience property management company is part of the general partnership. Two, the first-time syndicator can leverage the property management company’s liquidity or net worth to qualify for the loan. And three, since the property management company will likely bring in their own money and/or their investor’s money, it decreases the amount of money the syndicator must raise.

 

Are There Any Downsides?

 

The downside of bringing on a property management company as a general partner is that they and the syndicator are essentially married. Therefore, if the management company falls off the face of the earth, completely forsakes the property, or they turn out to be bad people, the syndicator is going to have a very messy divorce. If this happens, the syndicator will have to buy them out in some form or fashion.

 

If you decide to follow any of the four methods, in order to mitigate your risk, you need to make sure that you have proper clauses in the contract that stipulates a buyout process. Also, you have to be careful about who you select as a property management company. (See All You Need to Know About Building a Solid Real Estate Team)

 

From personal experiences, I believe the benefits of partnering with a property management company outweigh the potential downsides, as long as you’ve planned for them in advance. I have successfully overcome the challenges mentioned earlier (i.e. lacking in credibility and/or liquidity/net worth) by partnering with property management companies on past deals using all four of the methods described above.

 

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

 

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Best Ever Success Habit of the Nation’s #1 Landlord Aid

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Linda Libertore, who created the number one tenant communication and payment assistant company in the nation that supports over 1,000 landlords, is one of many speakers who will be presenting at the 1st annual Best Real Estate Investing Advice Ever Conference in Denver, CO February 24th to 25th.

 

I interviewed Linda on my podcast mid last year and she provided her Best Ever Advice, which is a sneak preview of the information she will be presenting at the conference. The main, practical takeaway I had from our conversation was find something, a habit, technique, etc., that needs to be done to further your success and do it on a daily basis.

 

Linda attributes much of her success to being a big “daily person.” In other words, she is always looking for specific activities that will bring or has brought her tangible success. When she discovers one, she exploits that success habit by doing it on a daily basis. Not on odd days or even days only, and not weekly or monthly, but she makes the commitment to doing it daily.

 

When Linda first began her tenant communication and payment assistant company, she was starting from scratch. The only real estate experience she had was obtaining a real estate license, so she did not have many connections with landlords. The only way she could expand her business was by conducting everyone’s favorite activity – cold calling. Being a “daily person” and understanding the power of consistent and persistent activity, she committed to making a certain number of cold calls every single day, no matter what. Linda knew that if she wanted to create a large, successful business, she couldn’t give up in the face of rejection or even miss a single day.

 

Another habit that Linda commits to daily is widening her education of the real estate industry. She is involved in eight local real estate associations. In order to add value to those meetings and not just sit silently, she must perform research prior to attending meetings and remain dedicated to her self-taught education. And with eight meetings to attend every month, she has committed to conducting some from of research or self-education every day in order to continuously have information she can provide to others.

 

Education and cold calling are just two of many examples of success habits you can introduce to your daily routine. Reading, journaling, running numbers on deals, or creating posts on BiggerPockets are a few other examples of success habits that you can implement daily, but your options are basically limitless. Once you find an activity, habit, exercise, etc. that furthers your real estate success and brings you tangible benefits, exploit that activity by performing it each and every day, no matter what.

 

What are some of your daily habits that have furthered your real estate success?

 

 

Want to learn other real estate professional success habits, as well as a wide range of other real estate niches? Attend the 1st Annual Best Ever Conference February 24-25 in Denver, CO. It’s the only real estate investing conference whose content and speakers are curated based on the expressed needs of the audience. Visit www.besteverconference.com to learn more!

 

 

Related: Best Ever Speak Brie Schmidt Sneak Peek How to Avoid the Shiny Object Syndrome in Real Estate Investor

 

Related: Best Ever Speaker Kevin Bupp Sneak Peek Lessons Learned From Losing Everything During the Financial Crash

 

Related: Best Ever Speaker Theresa Bradley-Banta Sneak Peek Don’t Invest in Real Estate on Unfounded Optimism and Emotions

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tenant

How to Create the Ultimate Tenant Experience


“If you go above and beyond, so will your bank account” is the mantra of Susan Colwell, who has spent 5 years of managing two successful vacation rental companies. In our recent conversation, she provided her best ever tactics on how to give yourself an advantage over the competition. While this advice was provided in the context of vacation rentals, one can easily tweak these techniques and apply them to almost any aspect of real estate investing.

 

Professional Photography

 

The main tactic Susan attributes to her success is taking the hotel or resort experience and applying it to her rental portfolio. And the best way to emulate that experience is to hire a professional photographer to take amazing pictures for all of your listings. Photos are the first windows a potential tenant is going to look through to see what you have to offer. Therefore, you don’t want low quality iPhone photos, or worse, junk in your shots. Rather, you want to portray a 5-star experience, even if you have a modest property. That means your property must be immaculately clean, well lit, and inviting, which you bring together with a great photographer that captures it all and conveys that feeling to the tenant.

 

Before preparing a listing, Susan will go on various hotel websites, browse through the pictures of the highest quality rooms being offered, and model her pictures after that. Typically, it is as simple as getting some nice fluffy pillows for the bed and furniture, making sure nothing is wrinkled or cluttered, among other small additions, which makes everything in the unit look pristine. All of this ties into the aspirational aspect of vacations. Tenants aren’t just looking for a place to rent. They are looking for the entire luxurious experience.

 

 

Provide Phenomenal Customer Service

 

The next area of focus is backing up the experience you’ve promised from your amazing photos with phenomenal customer service. Susan has an amazing assistant, and between the two, their top priority is to make sure that the tenants are taken care of. Their service starts before the tenant even arrives, because they work towards anticipating specific needs before they occur. For example, Susan provides all of her tenants with a list of local amenities, like food delivery services and nearby restaurants, shops, parking locations, etc. Or, if a property has a unique feature, (one of Susan’s properties has a steep spiral staircase) she discloses that information upfront so that there are not any surprises. Essentially, she offers a service that is similar to what a hotel concierge service provides and is completely truthful and transparent about the features of the property.

 

It is also important to anticipate a game plan for when things go wrong, because in real estate, unforeseen issues are almost a given (A/C breaks down, minor flooding, clogged toilets, etc.). Since you know that these types of things will happen, how you deal with them is key. For Susan, when an “expected” unexpected issue arises, depending on the severity, she will give the tenant money to get dinner or will provide a discount. However, at the very least, you must commit to answering any problems – or questions – as soon as possible. It helps to identify with their frustrations by putting yourself in their shoes. Ask yourself, “If I were renting a property and the toilet goes out, what type of response would you want?”

 

As the owner, it is about understanding the frustration and easing the pain as quickly as possible. If you’ve followed the “professional photography” advice and are selling a high quality experience, you don’t want people to think that you did a bait and switch. You really have to follow up on that amazing experience that matches the amazing photos that you put out there.

 

 

 

 

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a helping hand

Best Ever Success Habit of the Nation’s #1 Landlord Helper

 

In my conversation with Linda Liberatore, who created the number one tenant communication and payment assistant company in the nation that supports over 1,000 landlords, she provided me with her Best Ever success habit: find something that needs to be done to further your success and do it on a daily basis.

 

Linda can attributed much of her success to being a big “daily person.” If she finds a specific activity that brings her tangible success, she exploits it by doing it daily. Not on odd days or even days only, but she makes the commitment to doing it daily.

 

When Linda first began her tenant communication and payment assistant company, she was starting from scratch. She had previously obtained her real estate license, but did not have many connections with landlords. Therefore, the only way she could expand her business was by conducting everyone’s favorite activity – cold calling. Being a “daily person” and understanding the power of consistent activity, she committed to making a certain number of cold calls every single day, no matter what. Linda knew that if she wanted to create a large, successful business, she couldn’t give up and miss a day.

 

Another habit that Linda commits to daily is her education of the real estate industry. She is apart of 8 real estate associations locally. In order to add value to those meetings, she must perform research and self-education. And with 8 meetings to attend every month, she has committed to gaining knowledge every day to always have information she can provide to others.

 

Education and cold calling are just two of many examples of success habits you can instill to you daily routine. Reading, journaling, running numbers on deals, creating posts on BiggerPockets are a few other examples of success habits that you can implement daily, but the options are basically limitless. Once you find an activity, habit, exercise, etc. that furthers your real estate success, exploit that activity by performing it each and every day, no matter what.

 

What are some of your daily habits that have furthered your real estate success?

 

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Awesome Resident Recognition Ideas

Recently I was brainstorming ways to recognize my residents of a large apartment community. I want to let them know we value their role in our community and appreciate everything they do.  That’s the human objective. The business objective is to develop more of a sense of community and goodwill which in turn will lower turnover and increase the NOI. 

My criteria:

  • No rent concessions
  • Costs $5 or less per resident
  • Minimal coordination required to pull off

For the brainstorm process, I posted on BiggerPockets.com to get some ideas from other landlords. (view post here).

I got a ton of great responses, some of the highlights:

A community garden

  • While this takes a bit more time to create (breaks one of my rules above) I love the idea because I could buy in bulk from a local flower shop (helps them get more biz), it would make the property look nicer and could lower turnover because residents who garden want to stay. Plus, it strengthens the community since the residents will likely interact with each other more as a result of the garden

Five crispy dollar bills with a note that says “High Five! Thank you for making 123 Elm St. Apartments Your Home. We really do appreciate you.”

A handwritten thank you card

Some other ideas I had:

Portrait of Family Drawn by Artist

  • You could go on Fiverr.com and get that for $5. This is more involved as I’d need to get a picture of them. However, I like how it lasts a long time and is something they might treasure

Give everyone a $1 scratch-off lottery ticket with a nice note

Give everyone a cutting board (or something else that helps keep property looking nice)

  • If they have a cutting board they’d be less likely to cut on the counter top therefore our countertops would last longer

Partner with a local restaurant to offer free or discounted food

 

I’m going to be implementing something in the next couple months and will report back on how it goes.

 

 

 

 

 

 

 

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3 Rental Ad MUSTS

If you’re a landlord finding tenants, there are only three things you need to include in your ad to create a successful real estate ad. I define success by potential tenant taking the action you desire.

And, if you follow my stuff, you’ll know that I ALWAYS use a property mgmt company so this info is based on my experience working with them and doing some first-hand testing for my latest acquisition (a 168-unit apt community).

Here we go:

Big, beautiful pictures – think you’ve got more than enough in the ad already? Add 5 more. Seriously, pictures are the key. A good online program my management company uses is Smore.com. It’s a free online service gives you design templates so you just plug in copy and pics and you’ve got a nice looking online flyer in minutes. I have zero design skills so this was a godsend when I came across it.

Contact info stated multiple times in multiple ways. This is your call-to-action and needs to be stated multiple times. Make sure to give the address, email address and phone number. Everyone likes to communicate in different ways so you’ll want to give them all three options.

Include legitimate scarcity or urgency. If you have an apartment building and only have one 2-bedroom left then say it. People want what others have deemed as valuable. If you have a move-in special program then end it on a holiday weekend so you can have a definitive deadline for the potential tenant.

Go ahead and try this approach. Let me know how these ads do compared to your normal ones. If it’s anything like my properties, you’ll be pleased with the results.

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