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Property Investments

Real Estate Portfolio Guide: Managing Properties in 2022

This upcoming year, set up your property investments for success with this real estate portfolio guide.

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Long-term investing can lead to passive income and ROI, especially when it comes to rental property investments. Not only does this appear to be a great arena for investors at the moment, but it can be a step toward consistent passive income for the long run. That is not all your investment will bring, either.

With rental properties, investors often get to experience everything they are looking for – and that’s cash flow, portfolio diversification, appreciation, leverage, and equity growth. It is one of those investments that, as long as you do your due diligence with the particular property and market, it just makes sense.

If you want to make the most out of your real estate portfolio, you need to look at your investing as a business rather than a side hobby for some extra cash. You need to come up with a ‘business’ plan, set some goals, and give yourself some direction before you even start. Discover various criteria that will allow you to monitor your progress so that you know whether you are getting the most out of your investments – or if you need to make some changes going forward.

Today, we are going to look at all the steps for success in this real estate portfolio guide.

Preparing Yourself For Your Future

Getting started in managing rental properties doesn’t just happen overnight. Well, it could, but that’s not usually how wise investing occurs. There is prep work that should be done to help you feel confident that you are moving in the right direction – and are making sound decisions about your investments.

Consider following these steps.

1. Goal-Setting

Before you begin building your portfolio, you need to define your goals for your investments. What is it you hope to achieve with the investment – are you going to continue to work or looking to replace your job with this investment? Is this for retirement-building? Are you looking for financial security? It is important to know what you are working towards so that you continuously have direction.

Of course, setting goals for your returns is important, too. How much you are looking to make from your investments will determine just how many properties – and what type of properties – you may need to invest in.

2. Collecting Your Funds

Before you can start investing, you need to have the funds to do so. You don’t necessarily want to strap yourself for money to make that first purchase, but rather find ways to invest that can cause less stress to your life. For instance, work for a better credit score so you can obtain a loan with a low interest rate, rather than depleting your savings in hopes of making good on your investment.

Take a hard look at your personal financial situation, then do some research to find the best way for you to invest in rental property.

3. Build a Network

You can jump into rental property investing alone, but you may choose to work with a network. When you have a network of other investors, property managers, vendors, real estate agents, and the like, you have access to lots of knowledge and skill that you may one day need to tap into. These professionals all come with experience that can be beneficial to your investments, both now and in the future.

Growing Your Portfolio

The next step in our real estate portfolio guide is to grow your portfolio. Once you have gotten started in your investments, you may hang tight for a while – or you may decide it is time to push yourself toward growth. Again, this isn’t something that happens quickly. It takes a few calculated steps on your part. Let’s take a look.

1. Diversifying

Many investors look to diversify their portfolio so that they can lower their risk. For example, they may focus on different housing types, such as multi-family investing and single family investing, as well as in different housing markets. Consider all the trends of different areas and keep your investment options open and diverse.

2. Strategize

You cannot just jump into investment without a strategy – and expect to be successful. Instead, you need to decide how you would like to invest so that you can best grow your portfolio. In real estate, some investors find flipping houses works great for them. While home improvement shows make this look easy, you may want to take a deep dive into all that is involved before you make a final decision.

Other investors simply prefer to take things slow and consistent with rental properties. As we said, you can still diversify your portfolio by choosing different types of properties in different markets – while still only focusing on rental properties.

The Health and Value of Your Investments

Once you are ready to make your investments and start to build your real estate portfolio, you cannot just assume that a good deal in a good neighborhood will be a great rental. You need to do some looking at the numbers to determine whether the investment is going to add value to your portfolio – or if it will drain it.

1. Run the Numbers

A few of the things you will want to look at when it comes to rental property investments are the cash flow (the amount you will bring in after expenses) and the cap rate (the returns you’d have if paying cash).

2. The 1% Rule

This calculation will help you determine if the investment is a good option. You calculate the initial cost of the investment with the necessary expenses to have it ready to rent. What is 1% of that amount? If you can’t rent the property for at least 1%, then you may want to re-think the purchase.

Managing Your Properties

With this real estate portfolio guide, you can set yourself up for success. As you take the time to put together your portfolio – including building your network, getting your funds together, learning about available markets, and so forth – why not make life easier with a highly-experienced property manager that will help you focus on your investments?

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Property Management Tips

How to Calculate Rental Property Cash Flow: What Is Considered “Good” Cash Flow?

Understanding cash flow is an important aspect of investing in real estate. Learn how to calculate rental property cash flow today.

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Investors have certain things that they follow for each of their assets to make sure they are still providing a benefit. One of the most important when it comes to their rental property is cash flow. 

If you are just starting out, you may be trying to determine just how much cash flow you should have or intend to have with your investment properties. A lot of investors look for those properties that will bring in 1% to 2% of the purchase price every month. This may sound ideal, but the truth is, there are so many factors that come into play here so it is nearly impossible to predict your cash flow without taking them into consideration. 

So, what is the right amount of cash flow you can expect? What is cash flow? How can it be calculated? And, what should you be looking for in an investment? We are going to touch on all of these and more. 

Cash Flow: What is it?

For rental property investors, cash flow can be defined as the amount of money that a property is creating after expenses. It is, in other words, your profit. You will have expenses that need to be paid for running your rental property, but you will also (hopefully) earn an income from it. Having the right balance will create your cash flow

There are two types of cash flow: gross cash flow and net cash flow. How are they different? Well, gross cash flow refers to any income generated off the property. This includes rent, application fees, late fees, etc. 

Net cash flow is the money left over after all the bills are paid. Keep in mind that you will want to deduct things such as maintenance, taxes, insurance, marketing, utilities, property management fees, and the like. 

If you deduct expenses from gross cash flow, you get net cash flow. You, of course, want this number to always be positive – this shows you have the right balance between income and expenses. Unfortunately, when major repairs come up or you are dealing with a vacant rental, this could fall into a negative – meaning you have a negative cash flow, spending more than you are bringing in. 

To get a true idea of your cash flow, you have to be honest about what you have coming in and what you have going out. 

What Influences Your Cash Flow?

As with any type of cash flow, there are always going to be factors that impact just how much you make and how great your expenses are. The same holds true for rental property cash flow. Below are a few of the biggest factors that play a role in determining your level of cash flow. 

Property Location

The locations of your property will play a role in your cash flow. In fact, it may play a significant role. See, the market where it is located sets the bar for the rent that you can charge. You can’t maintain a rental property in an area that rents for a comparable unit of $1,000.00 and decide you want to charge $3,000.00. It doesn’t work that way. Sure, in an imaginary world, that would greatly increase your income, but, in reality, you are going to have a vacancy until you lower the rent. 

Further, you will want to consider property taxes, insurance rates, and even HOA fees if they apply. All of this is why location is such a big factor.

Financing

If you take out a mortgage on a rental property, you will have an interest rate and mortgage insurance to worry about it. These can both influence your cash flow. Depending on your credit history, credit score, down payment, and the price you are willing to borrow, you may end up with the ability to have more or less cash flow. For example, low credit scores and a low down payment can lead to bigger mortgage payments every month and higher interest rates. This will decrease your cash flow. 

Rental Property Details

Depending on the size of the rental and whether you want to rent it long-term or short-term will impact your income and, ultimately, your cash flow. 

How to Increase Your Cash Flow

Increasing cash flow is the ultimate goal, isn’t it? You want to bring in more money than you are spending so you can feel successful at what you do. If you find yourself with a lower cash flow than you had imagined, there are a few things you can do that may help. These include: 

Find High-Quality Tenants

Having vacancies will kill your cash flow as you have nothing coming in. But you don’t want to just settle for any tenants, you want good tenants. Otherwise, you may find yourself dealing with missed rent payments, legal fees, major repairs to damage in the unit, and more. 

Add Value to the Property

While the local market is going to ultimately dictate the rent amount, adding value to your property allows you to be able to charge on the higher end of those market rents. This can include updated fixtures, landscaping, new paint or flooring, kitchen appliance upgrades, and more. 

Stay on top of Repairs

Not keeping up with regular routine maintenance can cause you to have to shell out more money for major repairs. Keep up with them as you go and you will save yourself some money. 

Hire a Property Manager

Perhaps one of the best things you can do to positively impact your cash flow is to hire a property management company. These professionals know how to handle all these things that increase your cash flow, such as helping you find the best tenants while reducing your vacancy rate, as well as staying on top of repairs and routine maintenance. They also have vendors and connections within their network that handle these things. That means they have better rates to get the work done which means less expense to you. 

At Real Property Management Evolve in Phoenix, we understand the importance of maintaining a healthy cash flow – and we strive to maintain your property in a way that helps you increase your earnings. 

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Property Investments

2022 Real Estate Investing Strategies

The new year has brought about new strategies and ideas for investing. Here are the latest 2022 real estate investing strategies.

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It is a new year, and it has brought about new strategies and ideas for investing. COVID-19 may have been – and may still be – a huge downer on many different levels. But one thing is for sure. It set off a positive chain reaction in the world of real estate. For instance, at a time when you would have imagined buying and selling homes would halt, it has actually soared. 

So, what does that mean for 2022? What will this year’s real estate investing strategies look like?

Factors to Consider

Before making that leap into a new investment strategy, investors may want to take a moment to overlook a few things. We wouldn’t always recommend this with such urgency, but some major changes have happened over the last year or two. It’s a good idea to take a look at your current strategies for investing and determine ways you may want to adjust them.

Consider investment location

The housing market seems to be growing around the U.S. though some areas are growing at faster rates while others are lagging behind. Investors shouldn’t pay attention to the housing market as a whole but rather keep an eye on the markets that they are interested in.

Time it right

With some areas bursting with opportunities, your pockets could be bursting at the seams, in a crazed need to invest because it seems like you should. Don’t get caught up in it just for the thrill. Instead, do your due diligence, use good judgment, and only buy when you are ready.

Hire a property manager

If you find yourself tied up with investments, whether one or a few, then outsource the work to a property management team. You may find that property rentals give you a great source of passive income, but it isn’t really passive income if you have to work hard for it, is it? Choosing the right property manager, such as Real Property Management Evolve in Phoenix, can land you big benefits. Plus, it frees up your time to focus on investing.

Know how much money you’re working with

Smart investing will not send your bank accounts in the wrong direction. You need to know how much you can afford and stick to your budget. Otherwise, you may easily find yourself in hot water.

Investing Metrics for 2022

There are many metrics that investors should keep in mind as they decide on their next move – and, depending on their strategy, they may find that some of these metrics can play a big role. Surprisingly, there has been a lot of transitioning for people.

Rising Rental Rates

Rental rates are rising in markets all throughout the country. According to Apartment Guide, one-bedroom apartment rates in Phoenix have more than doubled. But rents for single-family homes have jumped significantly in price across the country. In fact, the New York Times reported that rental rates from January to October 2021 increased 16.4%. In some markets, landlords have their pick of tenants with bidding wars taking place.

Demand for Housing

There has been a demand for housing as people are on the move. Certain areas are getting flooded with new growth. For instance, Phoenix is becoming a profitable location since the demand for housing continues to be persistent.

Solid Returns

The housing market is thriving in all ways leading to solid returns for investors. Not only is this a good thing for the investment at hand, but it increases the chance for future investments, too.

Need for Larger Units

Those who are moving or transitioning are looking for more space. Since the global pandemic, more and more people have been staying at home – and working from home. Having additional space for home offices, for example, are a huge factor in those looking for rentals.

New Real Estate Investment Strategies 

Remember that it is important to review your own portfolio and finances and then use them to form your own investment strategies. However, let’s take a look at a couple of the most common for this year.

Playing it safe with risk assessment

We understand that the marketing is looking mighty good right now. But some investors have their eye on the still-present coronavirus and its new strain, omicron that is spreading rapidly. The supply chain woes don’t seem to be getting better – and some would even argue that they are getting worse. So, the truth is, we don’t know what is to come throughout the rest of 2022. So some are taking this time to review their portfolios, making sure they are in a good position in case there is a pullback, as well as increasing their liquidity.

Buying rental real estate

Rents are up, so it makes sense to a lot of investors to look into buying rental property. It may or may not be your ideal solution, but there is no denying that buying and holding may be a really good idea. The appreciation rates are high, the rental rates are high – all you need is a property management team to handle the property for you.

Focus on single-family homes

With the trend of single-family homes increasing in popularity amongst renters due to the interest in additional space, spending more time at home, and moving out of urban areas and into suburban neighborhoods, many investors are finding this their go-to option for investment in 2022.

Hire a Property A Manager

As you review your portfolio and make decisions about your next steps for the new year, don’t forget to make your life easier with a property manager. It is perhaps the best rental investment strategy you can take. You will have access to experts in the field who can handle your rental properties, regardless of whether your portfolio only contains one property or 101. Work smart and utilize this strategy so that you can focus on what you are good at – and let the property management team handle what they are good at.

The new year has just started, and it is already looking good. What do you plan to do with it?

Categories
Property Investments

Understanding SFR Real Estate Trends

Single family rentals are a popular real estate investment strategy. As the new year begins, let’s take a look at SFR real estate trends to consider. 

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Many investors who invest in rental property tend to navigate toward single-family residential rentals. They may have a portfolio filled with all types of real estate and other investments, but there is a good chance that there is a single-family residence or two. The reason for this is that, over the years, many have found these homes to be a smart move in diversification. They tend to appreciate over time and are relatively easy to manage – especially with an experienced landlord.

SFR Real Estate Trends

Case-in-point, COVID-19 hit our economy hard in many different ways. A lot of small businesses closed up and many lost their jobs. One thing that continues to successfully climb despite it all? Single-family residential rentals. And, believe it or not, in many areas, rents are climbing, too.

Let’s take a closer look at these SFR real estate trends as we head into the new year.

1. Occupancy Rates

Occupancy rates have gone up considerably. Referred to as The Great American Move, people all across the country have made some changes to where they live as a result of the global pandemic. It could be due to job situations, a desire to be closer to family, or just wanting a change thanks to more freedom and work-from-home positions. Whatever the reason, the U.S. saw the biggest increase in occupancy rates – hitting 97% mid-year. That’s incredible. And the vacant-to-occupied time is short and fast, too. This implies that rental homes are filling quickly, reducing your vacancy rate.

2. High Rental Rates

SFR real estate trends are also seeing higher rental rates. These new tenants are paying roughly 17% more than the prior tenants. Rental rates are surging across the country – especially for single-family residences.

Landlords took a really big hit in 2020 due to the eviction moratorium and inability to deal with non-paying tenants – some legitimately due to the pandemic, others likely taking advantage of the situation. Many left feeling helpless about their investments. Regardless, landlords now have the upper hand in the rental market.

Due to the high occupancy rates and the demand for rentals, many landlords have used the situation to their advantage and have hiked up the rental rates on vacant single-family homes – as well as on existing tenants who are interested in renewing their lease.

3. The Rise of Home Prices

Despite the rise in home prices for initial investments, investors are noticing that the rental rate that is common in most local markets still allows the investment to make sense. More and more people are moving out of the apartment or multi-family home living situation and are seeking single-family residences. In fact, there are many predictions from those in the industry that the trend will continue to grow and more people will begin to seek SFR rather than apartment-living.

There has been a slight, steady increase in those moving out of apartments and into single-family rentals. But since COVID-19 hit, this seems to be more of a trend. Whether it has to do with spreading out away from others and shared living spaces due to health and safety reasons, looking for more space with a backyard due to spending more time at home, or simply having more freedom thanks to remote work, we may never truly know. But, there is a good chance that these things are playing a role in the trend.

4. Big Players in the Space

Along with individual investors, there are some big players in the rental game these days. Throughout the country, and heavily in Arizona, Texas, Alabama, and Georgia (primarily Atlanta), large corporations and investment firms are trying to buy up land and create build-to-rent communities. Rather than use the property for apartments or other multi-family living, many are considering single-family residential rentals. With tenants willing to pay a premium for an SFR new construction in a great area, it may not be a bad idea.

5. Benefits of Investing in SFR

If you are an investor, whether seasoned or new to the game, you may be wondering if there are any additional benefits to investing in a single-family residence. Sure, the trend looks great, but are there other perks to owning these types of rental properties?

  • You are more likely to find long-term tenants in a single-family residence than you will find in an apartment.
  • There is a consistent resale value. Unless something drastic happens, most single-family homes come with a decent level of appreciation over time.
  • Easier to purchase if a new investor. Multi-family investments can come at a high cost. For new investors, this is not always a feasible option. SFR is much more affordable – and it comes with cheaper property taxes, too.
  • There is less to maintain. You don’t have to worry about multiple tenants or many different issues going wrong all at one location.
  • Higher-quality tenants tend to gravitate toward single-family residences. Generally, you will find tenants who are looking for a long-term residence and are more likely to abide by the lease. This is not always the case, so you still want to make sure you have a thorough tenant screening process.

6. Weigh Your Options, Hire a Property Manager

Not every investment type is for everyone. Depending on where you are looking to purchase a rental property as well as what your financial and investment situations look like, you may or may not find a single-family residential rental a wise choice for you. Weigh your options, talk to your advisors, and do what is right for you.

If you do decide to go with an SFR rental property based on the SFR real estate trends, then you may want to consider hiring a professional and experienced property manager. Unlike apartment and multi-family buildings, single-family homes can be spaced out and inconvenient when it comes to your time management. At Real Property Management Evolve, we understand the rental business in and out. We have extensive experience and the most advanced systems for managing every aspect of your single-family residential property rentals (multi-family, too).

You stay up on the SFR real estate trends and we will take care of your properties as you invest in them.

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