Tag: #advantages

The Cons of BRRRR

Posted on | by Allison Zuck

Now that we know what BRRRR is and what the pros of doing it are, we can take a quick look at some of the cons. Whenever we talk about cons, it isn’t to deter you from trying something new. Instead, sharing some of the drawbacks of certain types of investments can help you decide what you need to watch out for in trying this new venture! Or, it can encourage you to try a different type of investment; one better suited to your station in life.

Now, the cons:

Interest and Appraisal

First, you’ll need to consider money. You will most likely get a short term loan, which will have high interest and could result in an initial negative income. However, if it’s the right property, this should only be a temporary setback. But if you’re already struggling with making ends meet, this may not be the best plan. Additionally, fixing up a house means knowing how much that will cost, so make sure your initial appraisal is close to correct. Unfortunately, in home repair, things pop up all the time that could add to not only the expense of the upgrade, but also the time.

Refinancing and Loans

Banks have a “seasoning” time, where they wait a set amount of months (usually half a year to a year) before refinancing the property. While this is very reasonable, it could cause some problems, depending on how long your short-term loan extends. Therefore, make sure it is at least 18 months long, giving the bank plenty of time to “season” your property. As for the loans, you’ll have to juggle two: the short term one, and the one you take on when the property is refinanced. Make sure to shop around for the right lender and get the best deal on fees.

Property and Tenant

Make sure you are up to doing major renovations yourself. If you don’t like heading up big projects, BRRRR may not be for you. Additionally, don’t get so wrapped up in the project that you don’t select the right client. It’s still important for you to get a right tenant, so continue good practices in vetting the tenant before you approve them.

BRRRR shouldn’t be scary. These past three posts are here to help you realize if it’s right for you, not scare you away! It can be an accessible start to real estate, but make sure you know what you’re getting into!

For more information about BRRRR, check out the article that inspired this blog: https://www.biggerpockets.com/blog/brrrr-pros-and-cons

Turnkey Real Estate: The Whats and Hows

Posted on | by Allison Zuck

No, not turkey real estate! Turnkey real estate isn’t that prevalent, but it can be a great option for you to dive headfirst into the world of real estate.

Definition

What is turnkey real estate? Well, it refers to buying a property that tenants are still occupying with an active lease. While this sounds scary because you’ll be responsible for tenants you did not choose, it does mean that you’ll get instant cashflow.

How Does It Happen?

Well, sometimes property owners are not equipped to hold onto their property as long as they thought they could. That is where you come in and save the day. You obviously can buy a property that has a current lease, but it can also refer to buying a property that is instantly ready for tenants. If you just buy a property that is ready for tenants to inhabit, you won’t get the instant cashflow, but it does mean you get to choose your tenants.

Should I Go With Turnkey?

Well, it depends on what you are looking for. If you’re looking for a relatively easy investment, go for it! You should probably look for already inhabited properties though. If you want a non-hassle property, but still want to choose your clients, then having a prepared property without tenants is the right choice for you. If you are new to real estate, it’s a great way to wet your appetite, as it’s relatively low stakes. Additionally, if you are really busy, or don’t want a hands on property, turnkey is a solid way to bring in income without a lot of work.

Pros of Turnkey

First off, Turnkey does sound a bit like too much guesswork. Tenants you don’t know? Easy to dismiss. However, you will have the history of the property. No one will expect you to make an uniformed decision. You will have relatively instant cashflow, and it can be as hands-off as you want. You can even get a turnkey investment in a different state. Because you already have tenants, you can hand the property over to a property manager to keep up with it, and you just reap the benefits.

Cons of Turnkey

While you will have details about the property, chances are you won’t see the property before you buy it. That’s taking a huge leap of faith. Additionally, if you aren’t careful, you may pay higher than what the property is worth, or the property may just cost you more than it makes. Bottom line: don’t jump into turnkey investing without doing your research. A little bit of digging is better than losing money.

Next blog post, we’ll dive into the steps and tips that will make turnkey rentals simple for you!

For more information about this topic, check out the article that inspired our blog: https://finance.yahoo.com/news/2021-clear-simple-guide-turnkey-181431989.html

Renting Your House

Posted on | by Allison Zuck

There are a few reasons why you could be interested in renting out your home. It can turn your property into a financial asset, while also paying for itself. If your rent is the right price, you can pay off your house expenses while still making some money. Renting a house is also a great option if you had to relocate temporarily and know you will be moving back into the area. Therefore, renting can be a great option. If you want to avoid the stress of managing it, a property manager is always a great option to do much of the on-the-ground work. Here are some tips for some of the details of that process.

Tenants

The first issue you run into, though, is finding possible tenants. It actually isn’t as hard as it seems! Craigslist is quite popular for this (just remember to not put the exact address on the listing), or, if you want to go the old fashioned route, just put a sign in the yard.

Tenant Information

As people apply then, you look at their information. Before you meet them in person, you should make sure they meet a set criteria, which usually includes employment, gross monthly income of 3x the rent, and a few other specifications. This way you can easily discount some unfavorable candidates.

However, do not discriminate when it comes to giving prospective tenants the application. Make sure you require an application fee (this should cover the background check), but don’t bother with the background check if the candidate does not meet any other criteria. Your application should ask for information including the applicant’s birthday, social security number, previous addresses, phone number, as well as other information. Each application should be viewed on a first-come, first-serve basis.

Learning About Your Tenants

The next step will be background and credit checks. You ultimately get to decide what you will allow each of the limits of these histories to be, but make sure to consider a few different things. For background checks, look for felonies and other criminal history. For credit checks, call their current employer and verify their job status and claims. Another resource is former landlords. Be sure to check with landlords from the previous 5 years. Make sure that there aren’t any landlords that your possible tenant did not list on their application.

When you reject a tenant, put it in writing and very clearly state your reasons for rejection. However, when you accept tenants, you can give them a call and let them know they’ve been approved.

Rent

There’s no set amount you should be charging for rent. The easiest way to figure out the range you are working with is to search houses in the area and see their rental rates. Make sure that you are viewing properties that are similar in size, location, and condition. In addition to rent, the security deposit is usually around the sum of one month of rent. Hold the security deposit in a separate location, so that you can return it to the tenant when they move out. States can limit the amount you can charge on a security deposit, so make sure you look up that information before finalizing your amount.

Leases

Your lease can vary in the time amount it binds your tenant to the property. You are also allowed to make your own stipulations in the lease. Just make sure you have all the information necessary in the lease, such as: rent amount, security deposit, laws, fees, any restrictions, etc. It can be helpful to walk through the lease with your tenant. That way you make sure they understand your conditions, and they sign each place that they need to.

Other Things to Consider

Make sure you have a property inspection before your tenant moves in. Both you and the tenant should note the condition of every room, so that when the tenant moves out, it is clear if they caused any damage to the property. Requiring renter’s insurance is another way that you can protect yourself.

 

For more information about renting out your house, check out the article that inspired this blog: https://www.biggerpockets.com/blog/how-to-rent-your-house

 

 

Why Hiring a Property Manager can be Your Best Decision Yet

Posted on | by Allison Zuck

When managing rental properties, it can be hard to let go of having complete control of your properties. You’ve worked so hard to obtain them and now you work even harder to maintain them. It’s daunting to pass over your work to someone else. However, having a property manager you trust could be the best decision you ever make. 

 

Here are a few benefits:

For the amount of work they do, and the amount of time they will save you, they are well worth your money. So even though you will be paying more money, the net gain is worth it.

Property managers are your one-stop-shop for most of the smaller repairs your rental properties face, dealing with things that eat up your time. Another advantage to this is that they will keep track of all the services they offer, so that it is easy for you to keep track of the finances involved. And, if there’s ever the need to go to court, they can handle it, so that you have one less thing to worry about.

They also take other legal issues off your plate, such as making sure you are up to date on all property requirements and licenses. They also can screen tenants to make sure you do not end up with nuisance renters. You won’t need to spend your time doing all this busy work.

They also handle showings, for both tenants and inspectors. You don’t need to run back and forth from property to property, because your property managers will. You will rest easy, knowing that you always have a professional interacting with your clients.

 

Now, it’s easy to list all the benefits of property managers without noting two things to consider. Hiring property managers obviously limit the monthly cash flow. If you have the time and inclination to handle your properties, doing it yourself may be the way to go. The other disadvantage is that you are not in control of everything anymore. While this does take a lot of work off of your plate, it also means that you do not know the nitty-gritty details of each of your properties. As with everything, there are pros and cons, but, in most cases, property managers outweigh any cost.