By Paul Branton, Director of Investor Services for Home Rental Services talking about the recent trip to the NARPM® convention in Florida.
Just a few weeks ago, Caitlin, Kandy and I traveled to Florida to go to the 29th annual convention and trade show for the National Association of Residential Property Managers (NARPM®). The theme of the convention this year was “Engineered for your Success!” and it was held in Orlando at one of the largest hotels I’ve ever visited, the Rosen Shingle Creek.
We’re Committed to NARPM
This marks the second conference that I’ve attended, the sixth for Caitlin and the TWENTY-THIRD for Kandy.
Home Rental Services has been a member of NARPM since 1991. We continue to receive value nearly every day from the relationships, educational opportunities and member designations.
The biggest takeaways from the 2017 NARPM conference:
- We implemented additional screening criteria to ensure we remain compliant with Fair Housing Regulations.
- We added a feature to our website that allows prospective owners to receive a Free Rental Analysis report.
To see our Free Rental Analysis report system in action, click the screenshot below and enter a rental address. In less than an hour, you will receive a detailed rental report with comps in your inbox!
Quotable quotes from the keynote speakers:
- “If you’re not failing often, you aren’t trying enough.”
– Scott Steinberg
- “If you don’t have a crystal ball, perhaps it’s time to get some brass ones.”
– Troy Hazard
- “Do we want to be tools of our tools, or let our tools be our tools?”
– Curt Steinhorst
While we didn’t have quite enough time to make it to Disney World, I at least got to see this Topiary of Mickey Mouse!
In closing, we highly encourage you to make sure when selecting a property manager, that they are members of NARPM®. Why? NARPM promotes a high standard of business ethics, professionalism and fair housing practice. The Association also certifies its members in the standards and practices of the residential property management industry and promotes continuing professional education.
By Paul Branton, Director of Investor Services for Home Rental Services, talking about acquiring investment properties during football season.
As the weather changes and the temperature begins to drop, so begins the “off-season” for housing activity. While things are heating up between your favorite football rivalries, we usually see the demand for housing cooling down. That’s exactly why football season is a great time to buy!
Now you might be asking “Why would I want to buy when there is less of a demand?” Let me expand on this idea and give you a few reasons why:
- Not as much competition.
- With families settled into school and not wanting to relocate during colder months, this leaves sellers with fewer buyers.
- Lower Prices! With less competition, prices are lower than in the summer months.
- Summer is typically the most expensive time to buy real estate. When buying during the Fall (September through November) you can expect prices to be about 3% less than summer. If you wait to buy in the winter (December through February) prices in the KC metro are typically 6% lower than in the summer months.
- Inventory is lower. (Wait, how is that a good thing? Refer back to my first point about competition.)
- Ok, I realize it would not be a good thing to simply have less inventory. The GOOD NEWS is that while there are fewer homes on the market, there are even fewer buyers. In some markets during this time, there are nearly double the number of homes per buyer than in the summer.
- Banks want to get bad debts sold by the end of the year.
- In order to start off the New Year in a better position, banks tend to be open to offers in the fourth quarter that they might otherwise reject during the first three.
- Contractors are not as busy.
- This allows you the opportunity to negotiate better deals for the home improvements and probably get the job done sooner too!
Now that you know it’s a great time to buy, are you ready to get started?
Fortunately for us, not all property management companies are equal. Unfortunately for investors, having a bad management company can be expensive and very stressful. Here are some snippets of conversations we’ve had recently with clients leaving their current property management company and coming to Home Rental Services:
“I didn’t know my property was up for rent, let alone that renters weren’t renewing, until I saw it on a ‘For-Rent’ website!”
“My online account shows that I have money but they are not sending it to me!”
In the last month, Home Rental Services has taken over management of about a dozen properties because of these kinds of problems with the investor’s current management company.
This isn’t typical of our market.
Often, investors fear change. People will stick with mediocre service for a long time. But the unknown leads to desperation. We understand that. Not knowing why money is no longer coming in. Not knowing a renter is going to, or already has, moved out. Not ever being able to speak to an actual person for months. Don’t let yourself get to that desperation point!
If you find yourself in a similar situation, here are a few tips:
- If you have online access to your property rental information, log in right away to save/print every document and statement that you can find. Statements, leases, renter ledgers, etc.
- Check your old emails, especially those with attachments, for other documents you may have been sent. For example, copies of leases, owner statements and management contracts.
- Search for your property address on Google to find out if it’s been listed for rent on any websites.
- Send a written request (we recommend regular mail with proof-of-delivery) for any documents you cannot find. Be sure to find out who is holding the security deposit funds. Ultimately it’s your responsibility, as the owner, to account for and return the deposit to the renter.
Property management isn’t easy, and it’s not always perfect. But one thing we can promise is that during the business day, our phones are answered by a REAL person. Our owner clients receive a monthly statement and any disbursements available. Home Rental Services is not a one-man-show. We have property managers, leasing agents, listing agents, admin and support staff, and more. Renters can reach emergency maintenance personnel 24/7!
If we can help you protect your investment, or you want to learn more about Home Rental Services, please call or email us… we will answer!
We’ve all heard it said before, “If it sounds too good to be true, then it probably is.”
Recently I was working with an owner on his vacant property. He insisted on subbing out the flooring job to “his guy” instead of using one of our professional vendors. The reason he made this decision was solely based on cost, and the hope that he could “save” some money. That’s when I wish I would have told him, “If you think it’s expensive to hire a professional, wait until you hire an amateur.”
The money he “saved” was lost in the extra time it took for his guy to get the job done. (Additional days of vacancy due to project work means lost potential income.) The situation got even worse. The job wasn’t done well, which required us to have professionals come in and fix the problems at additional cost. This resulted in even more vacancy.
When hiring a contractor, you typically get what you pay for.
You can typically choose only two of these three categories: Cheap, Fast and Great
- You can have Cheap and Fast but the results will likely not be Great.
- You can have Cheap and Great but it likely won’t get done Fast.
- You can have Fast and Great but that doesn’t usually come Cheap.
Don’t focus solely on the cost… consider the rental ROI.
In business, there are times when you have to spend money to make money. When it’s time to spend, you shouldn’t dwell on how to save money but focus on how to spend your money wisely.
If you have questions about what improvements might bring the best rental ROI for your investment property, give us a shout. We’d love to help you figure it out!
Author: Paul Branton, Director of Investment Services
It has arrived! Summer 2017 officially starts today, June 20th! I can hardly believe that its already here, can you?
If you can recall, back in March I authored a post asking “Who’s ready for the Madness!?!?” and in May I wrote “You have to spend money to make money.” Well, I’m happy to report that the Home Rental Services team was ready for the madness! (and now we’re ready for Summer!)
Over the past few months, we’ve had the privilege of helping quite a few investors do exactly what I discussed in my previous posts. We’ve been able to help these investors in a number of ways such as: identifying properties, preparing renovations budgets, coordinating renovation work and of course, professionally leasing and managing the properties as long term rental investments.
In order for you to have a better idea of the process, here are a couple of examples:
Investment Property Example #1
Location: South Overland Park
Under Contract: 3/16
Purchase Price: Low $300’s
Home Specs: 2 Story Plan with 4 Beds, 3.5 Baths, Finished Walkout Basement, Approximately 3,000 Sq. ft., 2 Car Garage
Rental Rate Projection: $2,300-$2,500
Renovation Budget: $13,693
- New Deck w Cedar and Composite Materials
- Adjust Doors
- Glaze Hall Shower
- New Tile Floor in Master Bath
- Demo Fluorescent light in master and install LED can lights
Work Started: 5/1
Work Completed: 6/2
Lease Starts: 6/12
Lease Term: 3 years
Rental Rate: $2,395/month
Investment Property Example #2
Location: South Olathe
Under Contract: 3/27
Purchase Price: Upper $200’s
Home Specs: California Split Plan with 5 Beds, 3 Baths, Finished Walkout Lower Level, Approx 2,500 Sq. ft., 3 Car Garage
Rental Rate Projection: $1,950-$2,150
Renovation Budget: $15,439
- Junk Removal
- Extend downspouts
- Demo Concrete pad and install sod
- Paint Garage Walls and entry door
- Remove Curtains and Install 2” White Faux Wood Blinds
- Install new Hardwood flooring at front living room area
- Misc. Painting
- Tile Master Bathroom
- Install new Vinyl Plank Flooring in Lower Level Rec Room
Work Started: 5/1
Work Completed: 6/3
Lease Starts: 6/30
Lease Term: 2 years
Rental Rate: $2,250
On new acquisitions, I tell Investors to plan for about 45-90 days of combined renovation and marketing time. As a frame of reference, in 2016 our average combined renovation and marketing time for new acquisitions was 59 days. This means that once the home closed, it was placed on the market for rent, renovations completed, the lease was executed and tenants moved in, all in under 60 days!
If you or someone you know is interested in learning more about real estate investing in Kansas City, please let us know! We would love to help!
Now I’m headed to the driving range… right after I grab my first Quik Trip Dr. Pepper for the summer of 2017! Have a fun and safe summer everyone!
Author: Paul Branton
“You have to spend money to make money!”
For starters, you have the initial purchase which requires a down payment, closing costs, inspections, etc. and those are simply to buy the property. Next, you will generally need to make some capital improvements in the way of new paint, flooring, lighting, countertops, etc. that will require more money. Last but not least, in addition to the capital improvements, there are typically repairs or deferred maintenance that also require your attention and money when you purchase a property.
The good thing about the capital improvements is that those will bring you a more immediate return in either increased rent, increased property value and/or reduced vacancy. (Hopefully, it gets you all three!)
While addressing the general repairs and deferred maintenance will not necessarily bring you a return, it will certainly help maintain the value of your investment as well as safeguard against potentially greater damages/costs in the future.
Vacancy is the enemy!
When looking at spending money on improvements, you should not only ask the question “How much will that cost?” but also “How much can this potentially save me?” For example, If your property rents for $1800/month, every week of vacancy is costing you $450 and every day is eating up $60. So wouldn’t it be worth removing the dated wallpaper, and painting that room for $450 bucks, if it will get the home leased a week or two quicker?!
Why am I saying all of this? Why am I telling you it can require a good deal of money when you invest in real estate?
Because it’s important. Because we want you to be prepared… and successful!
As we continue forward in this journey of real estate investing, while some of our secondary objectives may differ slightly, I am certain that the primary is the same: Making Money/Building Wealth. If that’s true, then I highly encourage you to remember this old adage when looking at your current portfolio as well as new opportunities… “You have to spend money to make money.”
Please reach out and let us know if we can provide any guidance on acquisitions or capital improvements for your portfolio.
Have a great week!
Author: Paul Branton
It’s the time of year we fill out brackets, “pool our money” and watch lots of basketball!
While that’s a ton of fun, did you know it’s also one of the best times to get under contract on investment property?
Spring is here and summer will arrive before we know it, and that means folks will be moving. Typically, when you acquire an investment property, it’s vacant, so it makes sense to have it available for occupancy during the time when more people are relocating. According to a report released by AMSA, the American Moving and Storage Association, the most popular months for moving were: May, June, July, August and September.
With that in mind, here is my suggested timeline for March Madness – Investor Style:
- March-April: Locate your ideal property and get it under contract.
- April-May: Close on the purchase, make improvements to maximize rental rate and lower vacancy
- May-June: Market the property, screen and qualify tenants and sign the lease.
- June-July: Tenants take possession, love the home and stay for multiple years!
In addition to capturing this “moving season” for new acquisitions, the team at Home Rental Services does their very best to negotiate leases so that they will end or renew in April, May, June or July.
So, who is your pick to win this year? Don’t forget to fill out your bracket! The tournament starts on March 14th and ends on April 3rd.
There are several joys involved with owning investment property. You hear a lot about the negatives, and there are definitely negatives, but there are great things about owning an investment property as well.
This is an opportunity to have someone else pay your mortgage payment as the house appreciates and gains value. You’re contributing to your wealth, and increasing your ability to save for any number of things.
Source of Income
Owning an investment property means you have a steady source of income from your Overland Park tenants. There will be periods of vacancy where you aren’t earning anything from your property, and you need to be prepared for that. But generally, it’s a steady source of rental income.
Diversification of Income
When you purchase investment property, you’re diversifying your overall portfolio. Instead of just being in stocks and bonds, you’re doing something different by owning real estate.
Owning investment property is really low risk, especially compared to other types of investments. It’s highly unlikely that a property will disappear and the land will suddenly have no value. Most properties appreciate and grow in value, which makes you money. And, you’ll always “own the dirt” as my dad used to say. That’s a good thing and less risky.
You can put as little as 20 or 30 percent down on a property. You then have a large investment for the amount of cash that you’ve actually had to put in. So, you’re highly leveraged but at a very low risk. That allows you to grow your wealth faster because you can own more properties with less risk or investment.
The IRS isn’t always our friend, but there are lots of great tax write-offs and advantages to owning rental properties. This is something to consider if you’re wondering whether or not to invest.
These are just some of the joys of owning investment properties. If you’d like to talk more, please contact us at Home Rental Services. We can answer any of your questions about property management.
Author: Paul Branton
The Great Exchange… no, I’m not talking about Obama v. Trump. While it would be apropos to discuss politics and the “transfer of power” or “alternative facts” in light of that recent great exchange, I would rather stick to what I know best and that is REAL ESTATE. (Real Estate also happens to be a lot more fun!)
The Great Exchange that you should know about as a seasoned or potential real estate investor is known as the 1031 Exchange.
In the past few weeks, I’ve had the pleasure of working with two of our investment property owners that are in the midst of navigating through the requirements and timelines associated with what is commonly referred to in real estate and the tax code as a 1031 Exchange. (also known as a Starker Exchange.)
With this fresh in mind, I wanted to take the time to share the basics of what you should know about these types of property exchanges.
2 quick notes:
- Be sure to consult a tax professional before considering a 1031 Exchange.
- In June of 2016, the House Republicans created a “Blueprint for Tax Reform” called A Better Way. The proposed changes threaten 1031 Exchanges. If you’re considering an exchange, you may want to pursue it before any substantial changes are passed.
What is a 1031 Exchange?
- A 1031 Exchange is a wealth building strategy known as Internal Revenue Code Section 1.1031. It’s used for the exchange of real and personal property held in the productive use of a business or for investment.
- With each 1031 Exchange is a timeline requiring strict adherence.
What are the Timeline Requirements?
- Starting from the day the “relinquished property” closes, you have 45 days to “identify” potential replacement property.
- Starting from the day the “relinquished property” closes, you have 180 days to acquire the replacement property.
- The exchange must be completed in 180 days. (not 45 + 180)
How do I “Identify” a “like kind” replacement property?
- By the end of the identification period, the potential replacement properties must be unambiguously identified to the qualified intermediary. (Legal Description or Property Address)
- You may identify up to three properties of any value with the intent of purchasing at least one.
What is “Like-Kind” property?
- This is a very broad term, meaning that both of the properties must be “the same nature or character, even if they differ in grade or quality.”
- In terms of real estate, you can exchange nearly any type of property, so long as it’s not personal property.
What is a “Qualified Intermediary”?
- This is the name for the entity through which the proceeds from the sale must pass.
- The proceeds from the sale must go to a qualified intermediary in order to be reinvested and remain tax deferred.
- The sale proceeds must not come to you or they become taxable.
- Any proceeds retained from the exchange (“Boot”) will become taxable.
Why should I do a 1031 exchange?
- The main reason is the tax deferral of the federal and state capital gains and recaptured depreciation taxes assuming the replacement property is of equal or greater value and is acquired within the exchange timeline.
- The 1031 exchange allows you to, rather than paying the tax, use those dollars towards a replacement property that may generate additional cash flow, have greater depreciation, be in a better location or no longer require as much effort to maintain.
In summary, a 1031 exchange has limitations and guidelines, but when done correctly could help you offset or defer paying capital gains taxes on your investment properties.
Until next time….
Author: Paul Branton
If you’ve visited my LinkedIn profile, you may have seen that I list the following items in my professional headline: Director of Investor Services | Real Estate Consultant | Project Manager | Estate Sale Enthusiast | Ice Cream Aficionado.
Today, I would like to take a moment to talk about the “Estate Sale Enthusiast” side of my life and introduce you to a not-so-secret, secret…. You can see a lot of great houses by attending estate sales! In the past year, I’ve been able to attend estate sales all across the KC Metro including Olathe, Lenexa, Lee’s Summit, Raymore, Prairie Village, Leawood, Stilwell, Overland Park and Mission Hills.
The other secret about estate sales is that they almost always precede or coincide with the home going on the market. It’s the sale before the sale. So, by going to the estate sale, you are able to get a sneak peek of the house and you may discover it’s a worthwhile investment opportunity!
I understand the purpose of going to an estate sale for the majority of people is to score a great deal on some furniture, housewares, jewelry or perhaps a vintage figurine. For me, it’s more about seeing the house. I enjoy seeing the old construction with vintage décor and original woodwork. I enjoy seeing the older home that’s been renovated to meet today’s modern tastes, and I enjoy getting lost in the custom built, Italian marble adorned mansion that has rooms for days.
Don’t get me wrong, I also try to find great deals. After finding something, I think about whether or not my wife will give me “the look” when I bring this “treasure” into our home; then, and only then, do I decide if it’s a worthwhile purchase.
Here are a few of those items:
Here’s a tip for finding out the details on estate sales. It’s a website called www.estatesales.net and more recently, they released an app which is super handy while on the go! It will tell you where the nearest estate sales are, provide you with all the details of the sale and give you directions!
Let me know if you end up using the app or if you have your own treasure stories to tell about estate sales!