You’re ready to hire a property manager to handle your investment property but what should you look for in a property management company?  This choice is an important one. After all, you will be working closely with the people assigned to your rental property.  These folks will handle your investment and ensure your budgeted profit is met.  The key is to make a choice that best fits you as an investor.

 First, you should feel the company’s representatives see this endeavor as a partnership.  After all, this real estate investment is important to you but it will also be important to the property management company.  If the property is managed well, you make a profit.  You’re happy with the company and the firm continues to renew their contract with you and in turn make their management fees.  The company could potentially see the relationship grow through additional investments and contracts if that is part of your investment plan. 

Any property manager worth their weight realizes the benefits in working with the owner.  An ability to talk to your property manager and know he or she hears you is very important.  But, the reverse is true as well.  Remember, the folks that do this job every day know a lot about the ins and outs of managing a property and turning a profit. Listen to their advice.  When the property does well, the investor, the individual managers and the company do well.  It’s a team effort. 

Then there are the practical things to look for in a firm.  Does the property management company offer all the services you need?  If you want a manager that will handle making plumbing repairs but can also advice you on additional investment opportunities in your market, you wouldn’t want a company whose manager is really a tenant relations type only.  The firm you will be looking for is one where the manager wears many hats or perhaps there are multiple people within the company; one to handle the leasing of your investment, one who maintains the property and an investment advisor to work with you on growing your investment portfolio.  

Something else to consider is the location of the firm you choose.  Do you want your management firm to be local to you or just your investment?  While telecommunications has made keeping up with things from afar tremendously easy, you may be the type that prefers face to face meetings without a trip on a jet involved.  Then again, if you work well previewing budgets and communicating via email, finding the best firm possible may be your only priority. 

While most property management companies offer similar services across the board, there are those that stray from mainstream.  Decide first what your needs are in a property manager.  Investigate your options and choose the one that best fits your needs.  The partnership you choose can be one of the most important decisions to your investment property.

Jay Redding

SuperiorPrivateMoneyReturns.com 

The value of your investment property is really the key to your investment.  Whether you are purchasing or selling, the property’s value is one of the first things to consider.  But, as an investor, how do you figure out what a property is worth?  

Determining a property’s fair market value is really determining what a potential buyer, who may be you in this case, is willing to pay for that particular building.  Numerous assets are considered when trying to decide a property’s fair market value.  

The size of the property’s lot, the façade or exterior building materials and condition as well as the style and age are all considered the property’s curb appeal.  A two story colonial home built in 1850 is very different from a split-level constructed in 1960.    

Inside the property, the number, size and locations of the bedrooms and baths also add value. The quality of the building materials, any upgrades to an older home that may have been done and the efficiency of the heating and air conditioning are important to note.  A home with a brand new kitchen sells differently than a home still having the same refrigerator as June Cleaver may have used. 

Another important item to determine is the market demand, or basically how many similar properties are available and how many potential buyers exist.  Are properties sitting on the market for months or are they gobbled up within weeks?  

Lastly, what can you say about the location of your property?  A home located in a neighborhood with well maintained similar homes will be more attractive than a house sitting on a corner of a busy street. 

Once these items have been determined, a sales comparison report can be done to calculate what most buyers would lie down to purchase the property.  A real estate agent or appraiser will pull numerous comparable sales looking for those properties that are as close to the subject property as can be found.  However, there probably will not be three or more properties that are exactly the same.  

The subject property may be on a ½ acre lot while a comparable may be on a ¼ acre.  Or perhaps one property is the same style, similar year and condition but only has 3 bedrooms to your 4 bedrooms.  These comps can still be used, but adjustments need to be made.  For instance, agents and appraisers know about how much another bedroom is worth to a buyer and can add that amount to the comparable with 3 bedrooms.  This will increase the actual sale price for that property and give you a slightly higher price to potentially use for your investment property. 

Once all the adjustments have been made, an average sales price can be determined.  You now have a good idea of your investment property’s fair market value.  This value will help you in determining your offer for a potential investment or the sales price to market your current investment for sale.

Jay Redding

SuperiorPrivateMoneyReturns.com

What is the most important aspect of an investment property?  To the investor, the property’s worth to be sure.  The worth is the reason for taking on the property in the first place.  

When choosing or selling an investment property, deciding its’ worth is one of the first steps.  To determine a property’s value, comparables are used.  Comparables, or comps as they are referred to in short, are recent sales of properties similar to your investment. 

Comps give you an idea of the worth of your investment property.  If you are looking to purchase a property, comparables will give you a good idea what to offer the seller.  When you are ready to sell an investment, comps will be used to determine your asking price from potential buyers. 

A CMA, or comparative market analysis, is a real estate agents’ tool in deciding on pricing for their properties.  An agent will also use this report to help their buyers figure out how much of an offer to make on a property.  As well, real estate appraisers typically use three to six comparables in their analysis to determine a property’s worth.  

So, how do you decide which comparables to use?  First, determine your property’s most important assets.  

For example, if you wanted to be sure you were paying a competitive price for a car, you would look at other dealers with the same make, model and year.  You would even want to check for similar mileage and condition if your market was a used car. Probably before you even left your house, you would have researched online dealers, typing in exactly what kind of car and the extras you wanted.  This would give you a good idea of that car’s value and what you should be willing to pay. 

Real estate comparables work the same.  If your investment property is a single family home with 4 bedrooms and 3 baths, the comparables will all have the same number of rooms.  In some cases, a comparable may not have the exact number in which a deduction or addition is made to account for the value of the difference.  

For instance, if your property has a finished basement but the other homes sold in the neighborhood have unfinished basements, you could determine that your house was worth slightly more than the most recent sale.  Local real estate agents and appraisers can shed light on the value certain attributes have in a particular market. 

Comps are really the basis for determining value.

  Jay Redding

SuperiorPrivateMoneyReturns.com

       Speaking to a group of real estate investors recently on finding private lenders to fund deals reminded me of how often people never start investing in investment property because of fear. Fear can be a great motivator or it can absolutely stifle people in their tracks.  Fear is a healthy emotion because it warns us that caution needs to be exercised. This is normal and healthy and used by our body as a protection mechanism to keep us safe.  Remember one thing however, fear is an emotion, and as such, emotions often cannot be trusted to be true or factual.  I am reminded of the acronym FEAR which stands for the following:  False Evidence Appearing Real. Ninety percent of the things we worry about that might go wrong or could go wrong never materialize.  It is the fear of the unknown that scares us. Even if something does go wrong, most of the time it never is as bad as we might think as long as we follow some simple guiding principles.     Any time you attempt to step out of your comfort zone in trying something new, you are going to feel some apprehension, fear and uneasiness.  This is quite normal and healthy because you have never done anything like it before, and it is unnatural to you.  At the same time, if you are never willing to step out of your comfort zone and learn new ways to better yourself, you will never receive the rewards of accomplishment, self confidence and success that you deserve. 

      So, how do you overcome the fear you are feeling? #1. Educate yourself about the situation from competent instructors that have done or are doing what you want to do.  Seek out the best you can find. #2. Seek out the advice and guidance of a competent mentor or coach that is doing or has been doing what you want to do. #3. Be willing to “Act” upon what you have learned under the guidance of a mentor.  #4. Evaluate what you have accomplished or not accomplished. What went well and what did not?  What must you improve upon next time to raise your competency level?

      Just remember back when you were a child trying to learn how to ride a bicycle.  You probably didn’t learn how to ride the two wheeler the very first time you tried.  You probably had a few bumps and bruises along the way, but nothing life threatening.  The same is true in being a real estate investor in investment property. 

      If you are teachable and willing to listen to competent advisors you are going to be fine.  Education with wise counsel plus action equals success over time.  (Education + Wise Counsel + Action = Success) Don’t allow yourself to be controlled by fear. Learn how to manage yourself through fear by reducing the unknown.

 :)  Jay Redding

SuperiorPrivateMoneyReturns.com

     Investment real estate is a great addition to an investor’s portfolio for creating wealth and long term capital gains. Every investor seeks ways to increase wealth and reduce risk.  This is primarily accomplished through portfolio diversification.  The traditional thought promoted by securities dealers is that you need to be diversified into stocks, bonds and mutual funds to reduce risk. These funds are further dissected into small cap companies, mid cap companies and large cap companies in addition to sector funds such as health care, utilities and technology. The types of funds that are available are almost endless.  The bond funds are almost as endless as the stock funds. Now I ask you, how does the average securities dealer stay on top of all of these funds selecting the best ones for your situation when he is dealing with multiple clients at the same time?  It is a challenging task. Don’t get me wrong, I am not bashing the securities dealers.  They play a vital role in wealth creation, however, you need to understand their limitations.  Also keep in mind that most securities dealers work for a specific company. That company also has a specific agenda. That agenda may be in line with your agenda and it may not be.  How do you know?  Remember it is your money and you  utimately have control and responsibility.

Their are funds available that offer you the opportunity to invest in real estate for further diversification via a REIT. (Real Estate Investment Trust). This is one way you can invest in real estate.  Keep in mind though, do you understand what the fund invests in, what is the track record of the company and how much of the profits are siphened off for management fees and overhead? That could be money in your pocket!  These are things you really must understand.  If you are someone that wants to have a little more control over your money and know exactly where it is being invested, then real estate investing through owning investment property or being a private lender to talented real estate investors is clearly an option for you. When you understand and follow the proven principals of real estate investing that have demonstrated success repeatedly over time, in my opinion, it is safer than the stock market and more predictable than the stock market.  

Here are just a few of the additional advantages owning investment real estate provides:

• Leverage – The ability to control and grow an asset exponentially without all of the money up front.
• Appreciation- The increase in value of property over time via market appreciation, forced appreciation through higher and better use or rehabilitation.
• Depreciation – Tax advantage right downs on long term held properties.
• Capital Gains - Long term capital gain rates significantly lower than ordinary income rates or short term capital gains.
• Cash Flow - The consistent monthly income provided to you after expenses. If done properly, far out performs the dividends received on stocks or bonds.
• Security – When done properly,your investment capital being secured by an asset that will never be zero.  Not necessarily true in the stock market.
• Peace of Mind – Knowing where your money is invested and the details of the investment asset.  Do you really know what is going on inside the company of the stock you have purchased?

Investing in investment real estate provides an investor unique advantages compared to stocks and bonds plus diversification for one’s entire portfolio. It is not unusual for the financially astute individual to be invested in stocks, bonds, mutual funds and investment real estate.

Jay Redding

SuperiorPrivateMoneyReturns.com

     Profitable real estate investing demands that you wisely purchase investment property. If you don’t, it will not take long for you to be broke!The savy investor looks for opportunities through foreclosures, short sales, distressed owners or distressed properties to name a few.  The key principle is that the investor is seeking an opportunity to purchase an investment property significantly under market value. 

     How do you know if the property is under value? You find this out by looking at the comparable properties that have sold in the area recently.  If you don’t know how to do this, obtain the services of a local real estate agent that works with investors and ask for them to provide comps to the investment property you are evaluating as well as a market analysis of the area.

     Just finding a property under value is only part of the equation however.  The better question to ask is what is your goal for investing?  Is it to gain appreciation, is it to gain monthly cash flow, is it to gain both appreciation and cash flow or is it to wholesale to another investor to put a few bucks in your pocket.  This ultimately determines the type of investment property you are seeking to purchase.  Once you have the end in mind, it is much easier to determine the best approach to acquiring the type of investment property to meet your objective.

Jay Redding

SuperiorPrivateMoneyReturns.com

If you are a real estate investor using private money, then you understand that having private lenders are critical to your success. They are the cornerstone of your business and should be treated like royalty. Without them, you don’t have capital to invest, and finding a few good private lenders could be the difference between success and failure. So, once you have a private lender, how do you ensure that he/she will continue to invest? The answer is not finding the best real estate deals and making the most profit, although surely that will help, but rather it is structuring real estate investments to fit the expectations of the private lender.

The first step is to have an in-depth discussion with your private lender to understand their expectations and reasons for investing. Is he new and inexperienced, unfamiliar with real estate? If so, you may want to invest short-term with his money, either on retail flips or rental properties, so he doesn’t get scared and back out. During this discussion, it is necessary to explain all the options and types of investing that you do and suggest the best choice for them. Is your private lender very experienced in real estate? In this case, the lender is more likely to want to assess the deals carefully and this may become more of a partnership than an average lender. You may want to structure the deal to split the profits instead of paying a fixed interest rate. This gets your lender more involved in the process and he may be willing to take bigger risks resulting in more profit, both for him and for you. Once you have a private lender, make sure to have a discussion about their expectations and reasons for investing immediately. It will make them feel more secure and reduce the chance that they are unhappy with the results.

The second step is to explain the risks to your lenders. Some factors are out of your control, and they should have a clear understanding of your goals and expectations. Obviously, you will not be able to predict 100% of the time what the market will do or how quickly a house will sell. As long as you keep them clued into your process, i.e. the logic behind your conclusions, they will be patient if the unexpected happens. After all, investment carries risk, and they should be prepared to accept that.

The third step is to create an emergency fund of your own, and of course, let the investors know it exists. This fund should cover any losses that the investor incurs or at least help to ameliorate the loss. If necessary, it is better to incur some personal loss than to lose part of the private lender’s principle. The private lender will more than likely be willing to invest again and you can try to recover your losses on the next few deals.

Understanding the private lender’s expectations, thoroughly explaining the risks, and creating an emergency fund will help to ensure that your lenders will be happy with your performance and will agree to invest again.

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http://www.superiorprivatemoneyreturns.com

Based out of Indiana, Jay Redding is a real estate entrepreneur, consultant and educator with experience in residential and commercial investing.