Tag: rental properties

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Property Management Tips

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

rental property cash flow - RPM

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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Landlord Tips

Understanding Tax Deductions for Rental Property

Diversifying your portfolio comes with many advantages, one of them being tax deductions for rental property. Here’s what to know

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Investment strategies will vary from one person to the next based on personalized goals. Most active and seasoned investors are always looking for ways in which they can see a greater return on their investments. There are many ways this can happen.

For those investors who have a percentage of their portfolio containing rental property investments, there are additional benefits than those found on the surface – and they come in the form of tax deductions for rental property. A CPA will have all the details you need in regards to your specific properties so it is highly recommended you find someone in your area.

In the meantime, we’ve put together a list of the most exciting tax deductions for owners of rental property.

Property Taxes

Property taxes are due every year on all property you own, whether you live there or have it as an investment property. Many local and state governments use this money to invest back in the community, such as maintaining roadways, schools, special projects, and more. And the amount you pay is based on where the property is located and its current value. It is necessary to pay the property taxes for each property or you could find yourself dealing with tax liens against the property – and that could lead to even bigger hassles.

There have been changes to the IRS deductions so, to make sure this deduction is not forgotten and to make sure it is done right, it is important that you work closely with a CPA. Don’t miss out on this benefit.

Mortgage Interest

If you have a rental property that you didn’t purchase with cash and instead have a mortgage payment, then technically, the interest you pay on that mortgage is deductible. The reason? It is a business expense.

At the beginning of each year (usually within the first month or two), you should receive a 1098 Form from your lender. This will show you the interest you paid throughout the year. Be sure to keep this form and give it to your accountant. As your tax return is prepared, this deduction can often be added to the IRS Schedule E (for residential rental property owners) and the mortgage interest you paid for the year can be deducted.

Your CPA will be able to go over all of this with you to make sure you are getting the most out of your rental properties.

Repairs

Repairs can come often – and they can be very costly. This is multiplied if you have more than one property. So, it is likely music to your ears to hear that repairs can be deducted when preparing your taxes. The thing is, however, that you are going to need to work with an accountant to see what will and will not count. For the sake of this article, let’s look at a few of the common repair tax deductions for rental property.

Repairs for things such as can be deducted:

  • Repairing a broken stove burner
  • Painting the walls
  • Fixing a leaky toilet
  • Changing locks

Now, there are some repairs you may make on your rental property that cannot be deducted, but rather are made to be capitalized. Certain things that add value to the house become, well, part of the house. A few examples of these items include storm windows, flooring, AC unit, additions, water heaters, roofing, etc.

Let’s say you purchase a home for $250,000.00 and immediately add a new roof for $15,000 and new windows for $7,000.00. The IRS will not allow you to write off the roof and window expenses, but it now looks at it as if you purchased a rental property for $272,000.00.

These bigger, value-changing repairs get capitalized. And, while it may not excite you too much at the moment, it does often mean you could have a greater depreciation amount to deduct.

As we said, things get tricky in this area and you don’t want to misclassify anything, then keep receipts for your records and then let your CPA put your repairs in the right classification.

Depreciation

Rental properties are investments. And, for the most part, their value tends to increase over time. But, as a business owner, your equipment, machinery, building, and so forth will depreciate over time – and you are able to deduct this from your taxes. Can you view your rental property as a depreciating asset of your business? Maybe.

Talk to your CPA and see if this is something you can do. And if so, leave it to the professionals to take care of. Calculating depreciation normally can be mind-boggling if you aren’t an accountant  – and calculating depreciation of rental property is different.

Misc. Expenses

Finally, there are some miscellaneous expenses that you may be able to take deductions on. Knowing what applies to you and what doesn’t is something you can learn from your CPA. But, as a general rule, we’ve listed a few expenses to consider for tax deductions for rental property.

  • Utilities, such as water, gas, electric
  • Advertising and marketing of the rental property
  • Any insurance premiums
  • Transportation costs regarding rent collections, maintenance, and repairs

There are a lot of possible situations when it comes to these expenses. For instance, you can deduct transportation costs, but not if you are driving from your home to the rental property as this is considered a commute. Though, if your home is considered your place of business, you may be able to deduct it.

Final Thoughts

Without a CPA on your side, it would be hard to know which way is up with the IRS – and your financial documents are the last thing you want to mess up.

Having a property manager like Real Property Management Evolve handle your rental properties makes it easy for you to track expenses and have your reports organized and ready to go to your accountant when needed. Don’t miss out!

Categories
Property Investments

Buying an Investment Property: 7 Things to Consider

Buying an investment property comes with many advantages, here are 7 things to consider to make your investment as successful as possible.

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When it comes to buying an investment property, you may not just want to jump at the first property you see. Rather, you want to have a strategy, making sure that your purchase will bring you a healthy return on your investment. After all, there is a good chance you would like to continue building up your portfolio.

Investing can be very rewarding, but it can be challenging, too. So as you make the move to buy your investment property, here are 7 things you may want to consider.

1. Are You Ready to Be an Investor?

Anyone can be an investor, but there are a couple of characteristics that you should have. For instance, a good investor can be described as someone who is financially stable. First, if you intend to get a traditional mortgage, investment properties usually require around 15% or more for a down payment. Plus there will be inspection costs, routine maintenance, repairs, and so on. Some of these things may even be urgent, such as if a tenant calls to say that the roof is leaking or the air conditioner stopped working. You will need to have the funds in your hands to address these issues.

Next, do you have time to give the proper attention to an investment property? An investment property will require your attention, unless, of course, you have decided to turn it over to a property management team.

2. The Type of Investment Property You Will Focus On

As part of your strategy as an investor, you need to decide what type of investment property you will focus on. For instance, are you interested in single-family residential properties? Or how about investing in multi-family residential properties? Or maybe commercial space is more your cup of tea.

Whatever you take a liking to and that fits your strategy and future goals, that’s what you should focus on. And once you know this, you can narrow down your search and find the best deal — that will lead to the best ROI.

3. The Property Taxes

Depending on where you are, property taxes can vary, but they are based on the value of a piece of property. You may find a great deal on the purchase of a property but the property taxes may be incredibly high. Or, maybe you find a property that is a little more expensive, but of lower value, resulting in the taxes being lower.

As an investor, it is important to keep this in mind as these taxes are something you will be responsible for every single year. And, since property taxes are based on the value of the home. So, even if you get a good deal — those taxes could be high.

4. To Invest Alone or Partner Up?

Sometimes friends or siblings like to go in together on an investment property. And sure, it seems like a great deal when you can put your money together, right? Purchase costs, maintenance and repair costs, taxes, and all can be split which means you only have to carry half the burden in the investment. However, you will also only be getting half the profits, too.

If something goes wrong legally, you will also find yourself dealing with the repercussions, whether you were the one who made the mistake or not because you are both responsible.

5. Where You Will Invest

Before you can invest, you need to consider where you want to invest. Like property taxes, there are a few things that make an area more profitable than others. Dive into the housing market, the rental market, the job market, etc. of the area you would like to invest in. A thriving, growing area is a good sign of future growth. And always keep an ear out for plans within communities that may stimulate growth, such as future entertainment complexes, new locations of major corporations moving to the area, and so on.

6. Avoid Investment Properties Requiring a Lot of Work

If you turn on the TV to a home improvement show any hour of the day, you will likely find someone who is flipping a house. They bought it for a really good price and have decided to add $15k of updates and renovations and then flip it, making tens of thousands or more in profit. The idea of this sounds amazing. The reality, not so much.

Unless you are a contractor and can do renovations at a relatively low cost, you may get yourself in over your head. If you are an investor who is looking for rental property, the last thing you are going to want to have to do is to fix up a property before you can rent it out. Instead, look for a great deal on a future rental that only requires minor repairs to get it tenant-ready.

7. Be a Landlord – Or Hire a Property Management Company?

Finally, consider whether you want to be a landlord or if you would prefer to hire a property management team. The idea of being a landlord always seems like the ideal job – you own rental property, rent it out, and sit back collecting money. Right? Wrong.

There is a lot that goes into managing rental property. And many new landlords tend to get overwhelmed and feel underprepared to handle it. For those who are new to investing and still have a regular full-time job, being a landlord can interfere.

This is why so many investors nurture their relationship with an experienced property management team, such as Real Property Management Evolve. This team of experts will go to work marketing your property, screening tenants, handling lease signings, maintenance and repair, and so much more. And you, as the investor, can continue working on that portfolio of yours – and finding the next great deal.

Congratulations on deciding to buy an investment property. As long as you consider all aspects of the process, you will likely find it to be a very rewarding step for your future.

Categories
Property Investments

6 Reasons to Invest in Arizona Rental Properties

If you’re looking to diversify your portfolio, you may want to consider investing in Arizona rental properties as there is so much growth potential. Here’s what to know.

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As an investor, you make moves. You strategize, network, inquire, and never cease to find the best investment for your future. When it comes to buying Arizona rental properties, you know that there are certain criteria you look for before you go any further.  For instance, you want to make sure that the market is thriving and that the return on your investment will be worth it.

Thanks to property management companies, you can buy rental property anywhere in the country – and you don’t have to reside nearby. However, if you are looking for one of the hottest places to plant your rental roots, Arizona may be exactly what you need. And we’ve got 6 reasons why.

 

1. Employment Rates Are High in Arizona

The coronavirus pandemic hurt many people due to closed businesses, lack of business, supply chain issues, layoffs, furloughs, and more. The unemployment rate soared nationwide. Some areas have struggled to recover, but Arizona has not. In fact, the employment rate clearly shows that people are getting their jobs back – or finding new ones.

What does that mean for you as an investor? It means business and the economy are both healthy. Employees likely have money to pay you rent. And, those who cannot find work in other areas may find themselves in Arizona to take advantage of the available work.

 

2. Landlord-Tenant Laws in Arizona are Landlord-Friendly

Engaging in fair and appropriate rental practices is necessary to keep yourself out of hot water and ensure the rights of everyone involved are properly met. However, there are some states that make it, well, difficult to be a landlord. For instance, if you have a non-paying tenant, landlords find that evicting that tenant from the property is a hassle and involves jumping through a lot of hoops.

In Arizona? If you have a tenant who has not paid rent or is behind in rent and has defaulted based on the terms of the lease agreement, then you, as the landlord, are entitled to an easy and quick eviction process.

 

3. Arizona is Seeing Incredible Levels of Growth

There are certain cities in Arizona that are seeing an abundance of growth. And, the Phoenix metro area is number 7 on the list of most people moving in from other states. In other words, it is really beginning to make its name known – Phoenix has a lot to offer its residents.

Maricopa County (home to the Phoenix area) is one of the largest counties in the country. Yet, it is still affordable for landlords and tenants. But with so much growth activity, it may not be long until things start getting a little more expensive here. So, getting in now may be a very good idea.

In addition, Phoenix has been dubbed “the new silicon valley“. As tech giants like Facebook, IBM, Intel, and Amazon expand in the valley of the sun, their employees are bringing cash to fund their large real estate purchases. The growth is simply not slowing down ad more and more tech workers call the Sonoran Desert home.

If you are interested in the Phoenix area, investors are encouraged to look at all surrounding cities and suburbs as the metro area here is spreading greater and wider.

 

4. Properties are Still Affordable

It is a lot easier to make a decision on an investment when the risk is minimal, isn’t it? While the home prices will vary based on the area and amenities, compared with other places, the homes in Arizona are affordable. Though, we should note that an investor should never just blindly invest in a rental property just because it is affordable. Combining all the other reasons to invest in Arizona rental properties along with the affordability factor means you may very well have a great investment.

 

5. The Rental Vacancy Rate is Low – Historically Low

When it comes to buying Arizona rental properties, buying something that seems like a great deal won’t do you much good if the rental market has a high vacancy rate.

The vacancy rate tells you just how many rentals are not currently occupied at any given time. The lower the vacancy rate, the better it is for investors. It means that the rental properties that are in Arizona are rented by tenants – and earning money.

We suggest including a 5-10% average vacancy rate in your underwriting. Figure at least one month per year your rental property will be vacant while you place a new tenant. If you have a tenant that stays longer than one year, you just gained a full month of cash flow you didn’t even count on getting! Always hope for the best, but plan for the worst.

 

6. The Best Property Management Services

Investing in rental property is one thing. Managing that property in the role of a landlord is entirely different. Landlords have to deal with a lot. Finding and screening tenants, looking for high-quality individuals only, requires experience. Being available all hours of the day and night for emergency repairs takes time and patience. Being able to handle routine repairs and inspections means having knowledge in various special trades. And then there is rent collection, document management, monthly transaction tax payments, yearly tax preparations, registering with the county, walk-through inspections, showings, and much more.

Being a landlord may sound like a great idea in theory, but, when it comes down to actually doing the work, it is tough. And time-consuming. Which means less time focusing on your investment opportunities.

Property management teams work to care of rental properties throughout the entire process, freeing up the investors time – your time – so that investment portfolios can continue to grow and flourish. And, the best property management team – the one found at Real Property Management Evolve – is located in Arizona. The Phoenix metro area to be more specific.

This is just one more reason why investing in Arizona rental properties just makes sense. The experts are there, so you may as well use them!

 

Investing in Arizona Rental Properties

As an investor, you know that there are many things that you must take into consideration when investing in Arizona rental properties. You know that there is not just one thing that makes or breaks a deal, but rather a number of factors.

As you experiment with what works for you, then you will learn how to tell which properties and which areas make the wisest investments. Currently, though, experienced investors around the world have their eyes on Arizona. Places like Phoenix, Glendale, Mesa, Scottsdale, Queen Creek, Buckeye, San Tan Valley, Peoria, and more are all areas that are seeing a rise in interest and investment activity.

Wherever you choose to invest, just make sure you have access to an experienced property management team to take care of the day-to-day business of your property as you focus on that investment portfolio.

Categories
Property Investments

7 Reasons to Invest in Long Term Rentals Over Short Term Rentals

When investing in properties, there are many options to choose from. Here are 7 reasons to consider investing in long term rentals and properties over short term rentals, vacation rental properties, or month-to-month properties.

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As a landlord or property investor, you know that one of your goals is to reduce your vacancy rate and keep your units occupied. After all, if they are sitting there empty, they surely are not bringing in any money, are they? That’s why when a property has been vacant for any length of time, it may make you want to want jump at every opportunity to get some cash flowing again.

Here’s the thing – short-term leases, vacation rentals, or month-to-month rentals may sound better than no rental at all. But, we’ve got 7 reasons why you should invest in long-term rentals. Check them out.

 

1. The Demand is There for Long Term Rentals

People will always need a place to live so there will always be renters. There is no need to put yourself through the hassle of short leases. Besides, research is starting to reflect an increase in the number of renters — so the rental market is high in 2021.

 

2. Long Term Tenants Equal Less Work For You

Tenants that are in and out quickly will mean more work for you. Cleaning and maintenance between tenants/guests along with paperwork, tenant screenings, and so forth. If you decided to invest in rental property as a means of securing a form of passive income, short-term rentals and such may not make sense.

 

3. Long Term Tenants Give You Consistency in Income

Speaking of income – with a long-term lease, you have consistent income over, at least, a 12-month period. You will get your tenant screened, the lease signed, and then collect the rent. Unless, of course, maintenance or repairs are needed. Regardless, it is a monthly fee you can rely on.

 

4. Long Term Rentals Provide Low Vacancy Rates

Believe it or not, the vacancy rates are higher for short-term and vacation rentals – by a lot. If your property is not rented now, you may feel as though your rate is going to go up. But, realistically, once your unit is tenant-occupied with a long-term lease, you will not have to worry about that rate again for at least 12 months or so.

 

5. Long Term Tenants Cause Less Wear and Tear

With short-term rentals, you will be expected to furnish the property with nearly everything one may need while living there. This includes furniture, televisions, linens, small appliances, dishes, pots and pans, and so on. With each new tenant, you will need to make sure everything is in presentable shape and working order.

If not, it will need to be replaced. This could get expensive. Not to mention the hassle of having to keep it looking great for the next guest. Remember, the expectations of your short-term guests will be high.

With long term rentals, tenants will bring their own furniture and their own dishes. You provide the bare rental and they will move in with their belongings. This puts less strain on you. Sure, you will have to check the property when the lease is up and there may be some minor wear and tear, but nothing like you would see with vacation rentals.

 

6. Long Term Tenants Take Better Care of the Property

Even if you don’t find the most high-quality tenants out there, long term tenants tend to take care of their homes better than a guest does at a vacation rental. They live there and they want to be proud of where they reside. Any issues, they will call you or take care of the issues themselves. Short-term summer renters? Not so much.

 

7. You Won’t Have to Worry About Reviews with Long Term Tenants

The internet is a wonderful tool. But, for those trying to please guests and short-term tenants at vacation properties, the internet can quickly turn into a nightmare. Some companies hire a person or department for the sole purpose of keeping the peace online because one or two bad reviews can really put a damper on your business.

Sadly, the reviews may not even be accurate or they could be the result of an over-demanding tenant. Even so, the world will hear about it — and you will be left to pick up the pieces or try to make things right.

Long term rentals have long term tenants. They aren’t usually leaving reviews of their landlord online so that’s one less thing for you to worry about.

 

Are You Still Leaning Toward Short Term Rentals?

If you have read these 7 reasons to invest in long term rentals and you are still focused on short-term vacation rentals, that’s ok. We each have our own interests, investment strategy, and goals. It works well for many people – and it may very well be rewarding for you, too.

If you ever find yourself overwhelmed with the process, though, just know property managers may be able to help you with short-term leases. Not all provide this service, but it is worth looking into.

 

Keep Your Units Filled with Long Term Tenants

If you find that you are struggling to get your long term rentals occupied, consider changing up a few things. Take a look at your requested rental rate. Is it reasonable? Does it fit the area? Check around at comparable rentals and make sure you aren’t coming in too high.

Next, switch up your advertising and property marketing methods a little bit. Maybe you are not reaching the right audience? Maybe you aren’t even having those seeking rentals see your listing? Change the wording of your listing, throw in some fresh pics. Sometimes giving it a little online makeover may help.

Finally, seek the professionals. Hiring a property manager may not be something you have considered, but when it comes to getting properties rented, well, that’s what they do. The best property manager in the greater Phoenix area – Real Property Management Evolve – knows that to successfully rent properties, you have to have the right strategy. And, when you’ve spent your life honing those skills, then you know how to keep that vacancy rate down — and long term rental agreements signed.

    GET A FREE RENTAL ANALYSIS TODAY    

Categories
Property Investments

Becoming Real Estate Investors: 5 Ways to Get Started

Choosing to become real estate investors can be a fantastic way to increase passive income, here are five tips to get started.

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Investing in real estate takes a plan and skill. While blindly taking your money and randomly investing it in properties just to invest may land you a nice profit, the likelihood of this happening is pretty slim.

Real estate investors know that investing involves a strategy; and if you want to get started investing, you are going to have to have a strategy of your own.

Most investors will suggest that you start small, with REITs or crowdfunding, and then work your way up. It is less risky and helps you build up your portfolio and your capital, too. Jumping head first into flipping houses could leave you feeling overwhelmed – and in over your head.

Keep it simple and build your strategy. It is ok to start small.

Below are 5 ways to get started as real estate investors. Look at your skills,  your available funds, and your experience – and decide which option would work best for you.

 

1. Short Term or Vacation Rentals

The idea of vacation rentals and websites like Airbnb and the like are very popular these days. Those who are traveling find it more enjoyable to stay with a short-term rental or vacation rental than to stay at a hotel. You usually get a more homey feel, more amenities, and a better overall experience.

As you are getting started in real estate investment, you may want to generate some real estate income without having to do any real investing. Or maybe you need to generate the income for investing. If this sounds like you,  you could get your feet wet by offering up a room for rent or even listing your property for a vacation rental on certain days of the week or times of the year.

Although this investment model can be very easy and profitable, there are always downsides. For example – there are people who rent Airbnb’s simply for the sole purpose of throwing a huge party that will destroy your home. Using a professional management company for your short term rental can help protect your property.

 

2. Buy REITs

REITs or real estate investment trusts involve you investing in trusts – not the physical property. REITs are like the mutual funds of real estate because they consist of large companies that own huge pieces of property (think office buildings, hotels, apartment buildings, etc). And they pay dividends.

No, REITs are not the way you are going to get rich on real estate investing, but they are a good place to start for someone just trying to understand what it is all about. In general, publicly-traded REITs can be a sound investment choice.

 

3. Flipping Properties

If you have spent your Saturday afternoon watching HGTV, then you’ve probably thought, I wonder if I could do that? Show after show has couples buying run-down, forgotten properties and turning them into breathtaking masterpieces. Updated features, flooring, paint, remodeled bathrooms, and kitchens, etc. are all part of transforming a property.

Truth is, flipping properties is not necessarily as easy as it looks on television. First, how good are you at carpentry, plumbing, or electrical work? Do you know someone who is? Or will you have to pay an outside company to handle the work for you? Will you even know if that company is doing a good job, or cutting corners that will cost you later?

Even more, are you able to look at an investment and have a good idea of the costs it will take to renovate the space? And then, of course, you will have to compare all your investment costs with the market rate for re-selling the property. Will you make a profit? Is it a good deal?

Flipping properties involves a lot of strategy and calculations. It can make you a lot of money, but it can also cost you if you don’t know what you are doing.

 

4. Real Estate Crowdfunding

Real estate crowdfunding is investing in a group of others on either debt or equity. Debt investing means investing in a mortgage loan on a piece of property – then receiving a share of it when it is paid back. Equity investing means investing in the actual property and sharing ownership. You will receive money in however the property generates it.

While it may seem similar to REITs, crowdfunding for real estate investors involves investing in a project of your choosing and the minimum investments are usually higher. Because it is one piece of property, rather than investing in a collection, this type of investment is a little riskier.

 

5. Invest in Rental Properties

When you first think about investing in rental properties, you likely think about all landlords have to go through — and want to run the other way. But there is a huge difference between being real estate investors and being landlords.

Did you know that you can invest in rental properties, but leave the managing of the property to someone else?

Property managers are experts in handling rental properties. They can do everything from getting a rental property in shape to rent, marketing and advertising the property, tenant screening, lease signing and document management, routine maintenance and emergency repair, rent collection, inspections, monthly accounting documents, and more.

This means that you can focus solely on your investment portfolio while someone else helps you bring in the income by managing your properties. And, if you are new to real estate investing, this may be your safest option to get in the game.

When you are ready to jump into real estate investing you need to have a clear goal of what you are seeking — and how you are going to obtain it.

If investing in rental properties is your go-to method of investing, then Real Property Management Evolve may be able to help. Known as the best management company in the greater Phoenix area, your rental properties will be in good hands.

You can keep honing your investment skills and let Real Property Management Evolve do the rest.

 

Final Thought

Well, now you know available to start as real estate investors – short-term rentals, REITs, crowdfunding, flipping houses, or rental property investments. Dig deeper into each, reviewing the pros and cons. Then weigh your options with your skill level and determine what your first move should be.

Then, put your real estate investment strategy together. It’s time to do some investing!

“Ninety percent of all millionaires become so through owning real estate.” – Andrew Carnegie

Categories
Phoenix Property Management

What to Expect in the Arizona Housing Market

As an investor or homeowner, it is imperative to know what to expect from the Arizona housing market for the rest of 2021 to best prepare and increase your return on investment.

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There has been a lot of changes to life in the last year. The pandemic affected a lot of jobs and incomes. It affected where and how we worked. It also affected our schools, hospitals, and local dining and shopping places. COVID changed us.

And it has greatly changed the Arizona housing market.

The question is – what should expect for the rest of 2021? With eviction bans, increases in home sales, and a slow in new home builds, what does this mean for landlords and investors?

Let’s take a look at the Arizona housing market from a few different angles.

The Impact of Pre-Foreclosures

As we said, many people have lost their jobs or have suffered financially over the last year. This has sent a surge of homes into pre-foreclosure status. This is the time period that begins with the mortgager sends out a default notice. Payments have been missed, a foreclosure appears to be on the horizon, but no legal paperwork has been filed yet – and no writ has been issued.

No homeowner wants to lose their home to foreclosure, but sometimes the best option is to sell.

So, what does this mean for investors? Typically, pre-foreclosure homes are sold below the market value. They want to get out from under the house so they drop the price. Investors who swoop in and buy up these houses often end up with a decent property that has the potential to be turned into something great. A little renovation and may have just scored something incredible.

Though, investing in pre-foreclosures does not come without risk. There could be hefty repair issues within the property that you may or may not know about until after the closing. Plus, with the law allowing sellers the right to rescind, there is always that chance a transaction will be canceled no matter how good it looks.

Regardless, more and more investors seem to be taking the leap and jumping on these cheap properties.

Home Sales are on the Rise

Home sales are on the rise and the competition for them is on fire. Many are saying it is thanks to millennials who took advantage of super-low mortgage rates during the pandemic. And it is existing homes they were after.

Many industries slowed down during the pandemic – including the construction of new homes. This has pushed the influx of buyers to focus on the available inventory: existing homes. With new homeowners and investors seeking the same thing, there has been a lot of fighting to be the one in the buyer’s seat.

All this demand is bringing a slight increase in sale prices, but it is not likely to lead to any serious market crashes down the road. Not to mention that as more construction starts building back up again, the supply with be greater.

Mortgages are Hard to Come By

Unless you’ve got a great credit score and a chunk of money for a down payment (at least 20%), you may not find it easy to get a mortgage. Lenders are dealing with a lot of open mortgages and even more missed payments. And with all the uncertainty that comes with the economy right now, they don’t know when payments are going to start coming in – if at all. As a result, incredibly strict lending standards have been put into place.

The good news is that thanks to these stricter lending guidelines, there are less likely to be any issues with the Arizona housing market in the future like we saw 15 or so years ago.

What do you do if you are an investor? Well, if you are an investor, you may want to consider other types of funding in order to purchase your properties.

The Arizona Housing Market is Doing Better Than You Think

The rental market took a hard hit over the last year with many landlords scrambling to make mortgage payments on their rental properties – especially with many renters unable to afford rent. Thanks to government assistance, those who owed back rent were able to get caught or reduce the money owed, at least.

The current situation has turned many potential investors away from rental properties and it has brought great concern among those who are already there. But what is to come? Will the rental market stay stagnant, or will there be a blossoming in the near future?

Most of those who spend their time analyzing the market feel that rents will recover, especially as life returns to normal thanks to herd immunity. Something to keep an eye on are those properties in more rural areas. With more and more people working from home, convenient commutes are no longer a top priority.

The important thing to remember is that not everyone is going to purchase a home. There will always be renters. Now more than ever, though, you will want to make sure you have a well-established tenant screening reporting process. While it may not do much to counteract unforeseen issues like the global pandemic, we have learned a lot about what could go wrong – and what to look for.

Property managers have been working hard throughout this last year learning ways to keep rental vacancy rates low and rent payments coming in despite everything. If you do end up investing in a new rental property, you may want to let the professionals handle it.

At Real Property Management Evolve, we have a deep understanding of the local Arizona housing market. We recognize that rental rates don’t seem to be improving just yet, but they will.

Final Thought

The pandemic is slowly lifting and everything is starting to show signs of life again. The Arizona housing market has changed quite a bit since this time last year – in ways we never could have imagined. But as our economy begins to really open up and improve, home sales continue to be up, rental rates stagnant – change is sure to come that will even everything back out soon enough.

Categories
Landlord Property Management Tips

Landlord Responsibilities: 9 Things You Need to Know As A Homeowner

There are many landlord responsibilities to be aware of when deciding to rent out rental properties – here is what you should know. 

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Many people choose to invest in a rental property and become landlords with the idea of earning income without actually having to work. So you buy a rental property, let tenants move in, and sit back collecting rent. Simple, right? Wrong.

While the idea sounds fantastic, the actuality of it is not. The truth is that there are a handful of landlord responsibilities – and they take on a lot of work. It does not take much time for those new to the industry to feel overwhelmed and stressed.

Understanding Your Landlord Responsibilities

If you are considering investing in a rental property or you are currently a landlord who is feeling the struggle, putting a few practices in place can help you tremendously. When it comes to landlord responsibilities, here are nine things you should know.

1. Perfect the Art of Tenant Screening 

Before new tenants move into your rental property, they need to be properly screened. You are looking for high-quality tenants with steady employment, a positive rental history, and a good credit score. Of course, the specifics of what you require will vary on your own preferences or the tenant’s personal situation. The idea is to thoroughly screen your tenants to weed through those that may cause problems or not be able to afford the rent. Watching out for scammers is essential, too.

Having a screening process in place helps reduce risk and brings you peace of mind.

2. Maintain Open Communication with Your Tenants

Communication is key when it comes to your landlord-tenant relationship. They need to know that they can count on you to respond when they reach out – and you need to know the same. You must be available for your tenants and share your preferred method of communication. Knowing they can count on you increases the chance that they will properly care for your property.

3. Address Repair Requests ASAP

As a landlord, you do not want to hear that a repair is needed at one of your properties. It is just one more thing you have to take care of. However, you must address these repair requests as soon as possible. Not only does it mean they will call you next time something else breaks, but it also keeps you from facing major repair bills.

Minor repairs, such as a leaky faucet, can be an easy fix. However, if left alone, this small plumbing issue could turn into a major, more expensive repair down the road. Not to mention, this lack of action may be disheartening to the tenants – who may not call you the next time a repair is needed – which can cost you big time. 

4. Keep Yourself Organized

With so many responsibilities, landlords need to be organized. This is even more important if you have multiple properties. Tenant applications, signed lease agreements, repair orders, move-in / move-out reports, rent payments and receipt, and so on all need to be maintained and organized for each tenant at each property.

It may be overwhelming at first, but finding a system of organization will help ease the burden a bit.

5. Make Sure Your Lease is Legal, Effective, and Thorough

Many new landlords jump online and print off a generic lease agreement. If you want to protect yourself and your rental property, you want to make sure you have a well-written, thorough, and legal lease. Consider speaking to an attorney or a professional within the field who can guide you with this process.

Your lease is a contractual agreement between you and the person(s) living in your rental – and it is there to protect you.

6. Be Proactive with Property Maintenance

Maintaining your properties regularly can help reduce the need for major repairs. And it can help you stay focused without having to worry about additional issues arising. Have a set schedule throughout the year when preventative and/or routine inspections is to be performed.

7. Stay on Top of Market Trends

You are a landlord, but you are also an investor. Therefore, you need to stay on top of market trends to ensure that your property is set at the right rental amount to reduce vacancy while also keeping you from selling yourself short.

8. Have a Clear Understanding of Applicable Laws 

There are laws that landlords are to know and have a clear understanding of, such as fair housing laws and landlord-tenant laws. Unless you want to find yourself in hot water, do your due diligence and know the law as it applies to you at the federal, state, and local levels. This also includes understanding eviction laws, as well as when and how to use them.

9. Be Respectful and Courteous

Most importantly, tenants want a landlord who is respectful and courteous. They are renting a property from you, but they do not need to be made to feel less than you. Speak kindly. In addition, respect your tenant’s right to privacy while residing in your property.

How a Property Manager Can Help

Renting properties is a lot of work with many landlord responsibilities. Even the most well-seasoned landlords can get overwhelmed with the stress that owning rental property brings.

The best solution? Hiring a property manager. After attempting to handle everything independently for a while, many landlords decide that hiring a property manager can bring a sense of relief.

A property management team professionally handles rental properties, which means they have everything down to a science. Thorough tenant screening, repairs and routine maintenance, rent collection, an effective lease agreement, and more follow and tried-and-true process to gain and keep high-quality tenants – while keeping landlords happy and free.

At Real Property Management Evolve, we are the best property management team in the greater Phoenix area. We make it our job to know the laws, the current market and strive to reach nothing but the best for your rental properties.

If you are a landlord who is new to the arena or find yourself feeling overwhelmed from all of your landlord responsibilities, a property manager can help. It is what we do.

Categories
Homeowners

8 Ways to Improve Your Rental Property ROI

As a property owner, you want to ensure that you receive the highest returns possible. Here are 8 ways to improve your rental property ROI.

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Your rental property is an investment. You did your research and bought the property intending to earn money. After all, it is no secret that owning rental property is a great way to earn passive income. With the average return on investment falling between 6% and 10% per annum, it is a great investment opportunity. 

To calculate your current rate of return, you will divide your net profit by your incurred costs. The formula will look something like this: 

 

ROI = Investment Gain – Cost of Investment
                            Cost of Investment

 

If you are not satisfied with your calculation and would like to make your rental property ROI more appealing, you can. That is one of the perks of rental property investment – you can take steps to increase your ROI and earn higher returns. This involves making the rental property more enticing, offering additional services or conveniences, and making wise decisions. Here are eight ways you can improve your rental property ROI.

1. Always Evaluate Rental Rates 

The market is constantly changing, so it is important to keep tabs on it, always evaluating current rental rates. Make sure you are not shorting yourself – keep your rental rates within the market average. Don’t make the mistake of going too high outside the margin, or you will likely have a high turnover rate resulting in vacancy and even a damaged ROI.

2. Advertise a Home Office

Today, more people are working from home than ever before. If your rental has a small bedroom, why not refer to it as a home office? It will make your property seem more appealing – and more beneficial to the renters’ needs. Help the potential tenant see the value (a home office) in that tiny bedroom or extra space. 

3. Go Green

As a society, we are becoming more and more aware that our earth is the only one we will ever get. Taking steps to go green is two-fold. Not only does it show that you are a landlord who cares, but it also gives future renters the ability to save money. 

Going green doesn’t mean engaging in huge renovations. Rather, replace your bulbs with LED light bulbs, use only energy-efficient appliances, and consider investing in plumbing fixtures that minimize water usage.

Another way to increase rental property ROI while maintaining energy efficiency is to include solar in your property. Say you are a landlord that includes electric costs in your rent price, which allows you to increase rent by $200 per month, but most of the year there is no electric bill for your tenant. It allows you as the homeowner to increase your recurring revenue.

These small investments can win over new tenants big time – thus helping your increase your rental property ROI.

4. New Flooring, Fresh Paint, and New Hardware

Tenants want their home to look good, even if it is a rental. Having worn flooring or stained carpet is not going to spark interest at all. If you add new flooring that will look good and last a long time, you will increase its marketability. 

Just like new flooring, a fresh coat of paint can make a huge difference, too. It can make some of the oldest places look brand new. Adding small upgrades, like replacing knobs and pulls on cabinets in the kitchen and the bathroom, can give the space a makeover. 

These are relatively cheap ways to freshen up the rental, bring more money into your pocket, and, in turn, up your rental property ROI. 

5. Vamp Up Your Tenant Screening

You want high-quality tenants that you can keep long-term. Having to put out money to clean and repair the place every year or ending up with tenants who cause damage or do not pay can really do some damage to your rate of return. 

Put time and effort into developing a thorough and effective tenant screening so that you get the prime tenants every time. 

6. Landscaping

Pulling up to a rental that has curb appeal is already going to be more marketable than one that does not. Make it look good. Then, if you would like, add a landscaping service to your rent so that you can charge a bit more. Knowing their rental home will look good without effort on their part is always a win-win for a tenant. 

The extra money the landscaped yard will bring in throughout the year can increase your ROI.

7. Include Home Warranties

Home warranties are a great way to improve ROI as they can cover large replacement costs like air conditioning and water heaters. As a landlord, it is up to you to ensure these major appliances work well, and when they need repair, well that falls on you too. With a warranty, appliance breakdowns will be met swiftly, keeping your tenants happy, while allowing you to increase your ROI.

8. Hire a Property Manager 

One of the best decisions you can make when it comes to increasing your rate of return is to hire a property manager. They do more than just manage your property – they work to nurture your investment and increase your rental property ROI.

See, as a regular part of their process, they handle repairs, landscaping, charge pet fees, perform thorough tenant screening to gain the best tenants, offer innovative and automated solutions, and so much more.

At Real Property Management Evolve, we are Phoenix’s best of the best when it comes to caring for your property. We know that you are an investor and that your rental property is a means of income. That is why we do everything we can to ensure that you maximize those profits.   

Do not risk losing money while trying to figure out how to gain money. Instead, leave it to the professionals – and hire a property manager.

Categories
Landlord Tips

The Importance of Rental Property Inspections for Homeowners

As a homeowner, rental property inspections are an important aspect of renting out your home to tenants; here is why.

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To keep your rental property healthy, you must perform regular inspections. Think about this: most dentists recommend a cleaning and dental exam every 6-months. This not only gets you to stay on top of your brushing, flossing, and other routine care, but it allows your dentist to make sure your teeth are healthy. Should a small cavity appear, it can be addressed quickly and painlessly. Otherwise, that small cavity could become larger and more painful in time, requiring oral surgery like a root canal.

Inspecting and monitoring your rental property will help you avoid major issues down the road. They not only help you maintain your property but also spark the tenant to show care for the property, as well.

Types of Rental Property Inspections

Several different types of inspections occur at various times throughout the term of the lease. During each of the inspections, you will want to document everything with dates, clear notes, and pictures. This will help you maintain a condition report of the property and, if needed, could be used during a legal proceeding.

Here are the four main types of rental property inspections.

1. Move-In Inspection

This inspection is done at the beginning of a tenancy and often involves a walkthrough by the property management company (or owner) and the new tenant. Everything is documented so that the tenant will not be held liable at the end of the lease.

2. Move-Out Inspection

This inspection occurs immediately after the tenant has vacated the property. Cross checking the move-in inspection report with move-out report, you can see what damage, if any, has been caused that goes beyond normal wear and tear.

3. Seasonal Inspection

Certain types of proactive maintenance occur on a scheduled time frame. These rental property inspections allow you to check up on your tenant’s care of the property while also addressing issues that require maintenance in the upcoming season.

4. Drive-By Inspection

Sometimes taking a drive-by your property allows you to assess its condition. You don’t invade your tenant’s space, but you can still gather an idea of the level of care and overall condition.

Some property managers hold pre-move-out inspections to give the tenant time to cure anything that may be violating the lease term or affect their deposit return. Pre-management inspections are another type of inspection that is common when a management company takes over a new rental property. They inspect all aspects of the property and document it so that everything has already been reported and addressed when the first tenant moves in. Of course, this also ensures that the property itself is in healthy condition for a tenant – and that it is up to code.

Make Sure Your Tenants Expect It

Many tenants feel that rental property inspections are a violation of privacy and may be hesitant to allow someone to come through the property. It is crucial that your lease clearly states the details of the inspections.

At the lease signing, be sure to review each term of the lease – and discuss the inspections. This allows for transparency and stresses the importance of following the terms stated within the lease. After all, during the inspections, you will be making sure the tenant is holding up his/her end of the agreement, too.

Why You Need Inspections

While there are many reasons you will need to inspect your rental property regularly, we have listed a few of the most important here.

Be proactive with maintenance. As we have already discussed, not addressing some maintenance concerns, such as a minor roof leak, can leave you facing significant repairs down the road.

Pay attention to lease violations. When you are inspecting your property, you are doing so beyond the scope of maintenance. You want to make sure that the tenant is abiding by the lease terms so that your property is in good hands. Because they know you will be inspecting, they have more incentive to follow the terms of the lease.

Increase communication. Again, transparency is essential. If your tenant knows you are monitoring their care of your rental home, then when some issues arise, they are likely to report it. Having a good landlord-tenant relationship is imperative for maintaining quality clients.

How a Property Manager Can Help

Hiring a property manager can take the burden of rental property inspections off of your shoulders. They will take the time to review the property, document the inspection, and often store this info electronically to easily access it in the future. They are familiar with the lease and know what to look for in terms of violations. Also, their experienced team knows preventative maintenance and what needs to be inspected and addressed. Any issues that arise can be handled accordingly to keep your rental property healthy.

It is important to note, however, that not all property managers are the same. When you hire someone to take care of your rental portfolio, you want to make sure you clearly understand the agreement you sign – as well as any fees. Unfortunately, many property managers hide their inspection fees, giving you the impression that it’s a routine service until it happens.

RPM Evolve Sets the Bar High

Real Property Management Evolve thrives on providing the best property management service with an honest approach. We know the practices of other property management companies, and that’s why we set the bar high. At RPM Evolve, we stay away from shady practices and only have the best interest of your rental property in mind.

We list the fees for our inspections right on the pricing page of our website! And, depending on your membership, your property inspections may be included.

We believe that regular inspections throughout the length of the lease will help us manage your property the best. By monitoring the health and condition of your property, we are better able to keep it healthy for years to come without leaving you any hefty repair costs. RPM Evolve has a team of experts in their field who know what to look for and how to address it.

Conclusion

Rental property inspections are a necessary part of managing your properties. Avoid significant issues down the road and keep your tenants adhering to the lease terms with these regular inspections. If you want to leave it to the professionals, hire a top property management team – Real Property Management Evolve!

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