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!
4 Tips on Taking Great Photos to Get Your Investment Property Rented Quickly in Overland Park [VIDEO]
Research shows that you should have at least 8 to 10 good photographs of a property to draw the most interest from prospective tenants. Today, we are helping Overland Park landlords take better marketing photos. These tips will help you rent out your investment property quickly.
Take Pictures During Vacancy
Take your pictures while the property is vacant. That way, you don’t have any personal items interfering with the pictures or causing distractions. You can lightly stage the property, not with furniture, but with accents like towels in the bathroom and a candle, or a teapot on the stove in the kitchen. These things will provide a homey feel for your photos.
Interior and Exterior Photos are Needed
Pay attention to where you are taking pictures. Outside photos are needed for sure, and you should take two to three pictures of your kitchen, even if it’s small. You’ll need a photo of the master bedroom and the bathroom, as well as the living area. When you’re taking a picture of the bathroom, make sure the toilet lid is down. Pay attention to those details.
Think about the time of day you’re taking pictures. If you show up to the house and you look at the front of the house and there are lots of shadows, come back when there’s more direct sun, or when the sun is not creating so many shadows. Even pictures on a cloudy day would be better.
Focus on Angle
Pay attention to your angle. Not every house looks beautiful in a photo straight on. Angle it when necessary. Always minimize the amount of driveway you see. More sky and less driveway is more flattering. Inside, don’t take all the pictures standing from your eye level. Think about squatting or taking a photo from cabinet height so people get a different viewpoint.
These four tips should help Overland Park landlords take better marketing photos. If you need help with your picture taking, or you have questions out Overland Park property management, please contact us at Home Rental Services.
When you’re looking for Overland Park tenants, you want to find people who are responsible, reliable, and willing to pay rent on time while taking good care of your property. Today, we have some advice on screening for the best renters.
Pre-Screen Your Tenants
When potential tenants first contact you after seeing your listing, start qualifying them right away. If it’s October and your house is currently vacant, and the tenants don’t want to move until January, I would cut that call short and move onto the next tenant. Pre-screening during the initial contact is important and will save you time and money.
Have a High Quality Application
Your application should have a release for the renter to authorize you to pull credit, check with previous landlords, and research employment history. You’ll need every applicant to fill out the application completely, and to sign it before you can begin the screening process.
Verify Applicant Income
It’s important to make sure your tenants earn enough money to pay the rent. We recommend a requirement that three times the gross rent is earned by all tenants living in the property. So, if your house is $2,000 per month, you need a tenant who earns at least $6,000 per month. For self-employed individuals, ask for tax returns, and for employees, get two sequential and recent pay stubs.
Develop Written Screening Criteria
Have written criteria that explain what requirements a prospective tenant needs to meet before becoming approved for your property. You can email the criteria or share it with any applicants when you show the property. Put it on your website. Be consistent in screening so there won’t be any conflicts with federal fair housing laws.
Pull a Credit Report
Have renters run their credit and provide you with a report, or if you run them regularly, get an account with a credit bureau so you can run it yourself.
This Overland Park landlord advice should help you find some of the best renters in the market. If you have any questions or you need help with Overland Park property management, please contact us at Home Rental Services.
Author: Paul Branton
When I started at HRS back in 2010, I had the pleasure of being the property manager for one of our investor clients. For the purpose of this story, I’ll call him Dave.
When Dave and his wife brought their first property to us, I believe it was more of a decision for strategic planning rather than a desire to own a rental investment. If you recall, the real estate crash around 2008 had caused home values to decline. It wasn’t a good time to sell a property.
Dave was moving out of the Kansas City area for new employment opportunities. He really didn’t want to sell his property and lose equity, so he and his wife turned to Home Rental Services to professionally lease and manage their former residence.
In hindsight, we can plainly see that this was a wise decision. We’ve been collecting rent for Dave for years. The mortgage is getting paid off. And home values have recovered nicely.
Interesting stats from this report:
The average sales price for homes rose 5%
Pending sales were up 14%
Inventory was down 30.4%
I’m giving you the history of our relationship with Dave because we’ve been working together for six years and he and his wife recently closed on their fifth rental investment property! They learned from the experience of their first home the “Hey, this really works!” feeling, and decided to jump in and build a portfolio of homes over the past few years.
Here’s a quick synopsis of how this most recent deal came together:
- They reached out a couple weeks ahead of their trip back to Kansas City and let me know they would be looking with their Realtor® for their fifth investment property.
- I told them to narrow their search over the weekend and I would plan to visit properties with them the following Monday morning.
- We met Monday morning, looked at a few homes, went to lunch at Joes Kansas City, discussed the pros/cons/potential of each of the homes and chose the “winner.”
- With the help of their Realtor®, they presented the offer, got the property under contract and inspections scheduled.
- I attended the mechanical inspection, took a couple hundred photos and prepared my suggested renovation budget.
- They negotiated post-inspection repairs/price and moved on to closing.
- Final walk-through the day prior to closing – We met at the home with a general contractor to prepare for improvements.
(Outline scope, get bids etc.)
- Closing Day – We went to the home, installed our sign and lockbox and activated online marketing.
- The day after closing – The general contractor began work and leasing agents began showing the home.
- Six days after closing – Offer to lease was presented and accepted. (We actually had 2 competing offers!)
- Fifteen days after closing – Rehab work completed and home inspected for tenant possession.
- Twenty days after closing – Tenants moved into the home.
If you’re ready to jump into the world of real estate investments, give us a call. We would love to help you!