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Property Management

Rental not Performing? How to Know When it is Time for a Change

 

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Property Management

Property Management and Emergency Maintenance Handled Right

 

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Property Management

What Should I Charge for Rent?

 

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Property Management

Defer taxes on Real Estate Investments with a 1031 Exchange

 

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Property Management

Best Practices to find and purchase a rental property

 

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Property Management

Protect your Real Estate Investment Property through an LLC and Your Living Trust

 

 

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Property Management

Maximize Your Profits By Keeping It Simple

Finding Success in Real Estate by Keeping it Simple

The success in renting your investment property, can depend on your commitment to keeping it simple. Every home and its rental agreement has a lot of factors and variables that you must manage. Many of these variables you can remove or mitigate in order to reduce complications and expenses. Keeping it simple means less work on your part and less problems that can arise. At the end of the video you will learn the investor’s secret for which type of rental you should buy in order to keep it simple.

First of all, not everything that wears out or breaks needs to be replaced. One example is a screen door. It’s nice for tenants to have but I find it is something that frequently breaks or wears out quickly, and it is not something that prospective tenants typically consider necessary in their search for a home. If you are in-between tenants and the screen door is showing signs of wear, just remove it and don’t replace it. Other similar examples include door handles on the fridge, curtains, reverse osmosis systems or water filters, and security systems. I recommend removing these items rather than replacing them. I find that neither having or NOT having any of these items affects your ability to get great tenants quickly.

Something that can save you a lot of money is to NOT provide a washer or dryer. More than half the time, renters already have their own, and if that is the case, you will have to deal with having yours removed and stored. If something IS provided when the tenant moves in, they may argue with you that they expect it to be replaced when it wears out because it was one of the things that “drew them to the house:” However, even if a tenant is living there and it breaks, you are not required to replace it if it doesn’t affect “safe and acceptable living conditions.” I highly recommend avoiding a potential argument by making the tenant aware from the beginning, and make it clear in the lease, that the washer and dryer will NOT be replaced or fixed if they break down and the tenant will be responsible to buy their own. However, kitchen appliances like the stove, oven, fridge, dishwasher, and a microwave, if it is built in, will be the owners responsibility to provide.

If you are looking to keep things simple and as complication-free as possible, it is best to avoid swamp coolers. I highly recommend only purchasing investment properties with central air or at least move towards switching it over to central air as soon as you can. Swamp coolers require another level of maintenance and potential risks that can cost a lot of money. It also affects how appealing your rental is for potential tenants.

Lawn care is something that can quickly cause headaches if it is not kept simple. Your tenants are unlikely to care for the yard in the same way that you would your own home and you certainly don’t want the expense of providing yard care for them. Avoid a lot of flower beds, shrubs, fruit trees or garden plots that will need pruning and weeding. Grass from house to curb is the best. If all a tenant needs to do is mow, then it will more likely get done and the yard will stay nice. Make sure that the lease agreement includes that tenant’s are responsible for lawn care. You will also find that most tenant’s don’t have a problem getting their own lawnmower and that is much better than the landlord providing it, servicing it, repairing it and inevitably replacing it.

In addition to providing tenants with only the basics, you will also want to incorporate some additional procedures and practices that will keep things simple and running smoothly.

For example, when carpet needs to be replaced or the walls need to be painted, evaluate whether it is time for other upgrades or repairs. In addition to paint and carpet, this can include updating fixtures, replacing baseboards, or taking care of minor wall repair. Often doing these things at the same time reduces labor cost and vacancy time. It’s easiest to schedule these to be done right after a tenant moves out. It is standard to include in the lease agreement that tenants give you a 30 day notice before moving, so if you call the needed service providers right away, this should give them enough time to schedule repairs for the day after the tenant moves out. For more details on saving money and keeping improvements simple, see our video, 10 Best Improvements to Make on a Rental Property. https://kasteelproperty.com/video-10-best-improvements-to-make-on-a-rental-property/

An excellent practice to keep it simple is to encourage your tenants to communicate with you via text or email, and then save those communications for future reference. This gives you a written history of what you have discussed so there are no misunderstandings. This practice has saved me a lot of trouble. When you can provide a tenant with proof of the exact details of your discussions, there is very little to argue about.

You can also avoid stressful arguments by keeping the lease agreement simple and straightforward. Avoid nit picking everything you want or do not want the tenant to do. For example, I often have owners that want to list specific things the tenant will be responsible for if they cause damage. For example: If they break a sprinkler head, a window, ruin the carpet, and such things. Rather, a lease can simply say that the tenant is responsible for any damages that they cause. One owner even wanted to require tenants to remove their shoes when entering the home. These kind of things can make it hard to enforce the lease and lead to unnecessary confusion and arguments. If your lease agreement is overly complicated and packed with every perceivable situation then a judge may frown on it when they are reviewing a conflict between you and your tenant. For specific wording and details it is best to consult with an attorney who is an expert in landlord/tenant law when writing your lease.

Above all, the best way to keep it simple is to find the right tenant. Proper screening that includes background, income, and credit checks will reduce the likelihood of problems down the road. To learn more on this subject see our video Top 7 Red Flags When Screening Tenants. See the link in the comments below. https://kasteelproperty.com/video-top-7-red-flags-to-watch-for-when-screening-tenants-for-rental-properties/

So what kind of rental property does a wise real estate investor buy in order to keep it simple? Usually condos and townhomes have less variables to deal with and provide a more stable investment. For more information on this see our video, What Type of Rental Property Should I Buy? A link is in the comments below. https://kasteelproperty.com/video-what-type-of-rental-property-should-i-buy/

If you found this video helpful please like it and subscribe. You can also find more short videos and helpful landlord tips by visiting our website www.kasteelproperty.com.

At Kasteel Property Management we do more than just watch your rental property. We protect it, cultivate it, and help your investment grow.

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Property Management

Top 6 Ways a DIY Landlord May Lose Money

 

DIY can be a great way to be independent, learn new skills, and often times it saves you money.  There are a lot of people taking the DIY approach as a landlord.  If a person has the time and resources to follow best practices, it can be a rewarding experience.  However, the majority of owners don’t have the time or resources to implement the practices that will help them maximize the profits on their investment property.  In these situations I often see that a DIY landlord has lost thousands of dollars, and often they aren’t even aware of it.  In this video you will learn the most common ways a DIY landlord costs themselves money.
Here are the Top 6 Ways a DIY Landlord May Lose Money or another way of thinking about it is the Top 6 Ways a Landlord Saves Money by Hiring the Right Property Manager:
  1. Delays in getting vacancies filled.  A DIY landlord has other responsibilities such as their full time job, family, home, and enjoying the things that matter most in life.  Sometimes an upcoming vacancy doesn’t get advertised right away causing it to sit empty longer than it should.  Most of the time, at Kasteel Property Management, we can have tenants lined up to move in right after the current tenants move out.  One month of lost rent is almost equal to an entire years worth of management fees.  Property management will pay for itself in just this one aspect.
  2. Poor tenant screening.  Most DIY landlords do not have access to all the tools a good property management company has for screening.  Approving an application that a property manager would have denied, may cost a DIY landlord thousands of dollars in damages, lost rent, eviction costs, and collection costs.  See our video “Best Practices to Screen Tenants” to learn about the resources we have for screening.  You can also see our video “Top 7 Red Flags to Watch For When Screening Tenants” for more helpful information.
  3. Putting off inspections.  As a DIY landlord, your investment property isn’t your daily or even monthly focus, especially when the rent is always coming in and no problems have come up.  This can lead to putting off inspections.  Sometimes inspections can feel awkward and a landlord would rather just trust the tenants and hope for the best.  However, regular and consistent inspections are critical in order to find and resolve issues before they become bigger problems.  If the home is being mistreated, you want to get that situation resolved right away rather than allow it go on for several more months or years.
  4. The most obvious is low rent.  Almost every time I take over managing from a DIY landlord the rents have been below market value.  Sometimes this is because the DIY landlord doesn’t have his or her eye on the market the same way a property manager does, and other times it is just hard to raise the rent on someone when you are the owner and interact with them personally.  Either way, a property manager has their eye on the changing market rate for rents and as a third party they can raise rent without it feeling personal.  One situation I had was a new client of mine that had been a DIY landlord.  He had 6 units and all of them were at least $200 too low.  After taking over I was able to increase his combined rents by $1200 every month.  Even with my management fees we was making more money than he was doing it himself.
  5. Opportunity Cost.  As a DIY landlord you can only fit so many things into a day.  Your time may be maxed out with only one or two properties.  If you didn’t have to worry about the time needed to manage them, you may be able to get several more.  Over time this can be a difference of hundreds of thousands of dollars in appreciation and profits.  On the flip side of that, I’ve heard many stories from DIY landlords that say they used to have a rental property but it became too frustrating to take care of, so they sold it.  They usually say they had an experience with a bad tenant that kept them awake at night and it cost them a lot of money.  This is always sad to me when the property they sold had likely appreciated tens of thousands of dollars from when they sold it and it is still appreciating in value.  They lost out on all that appreciation because of the hassle and stress involved, that I on the other-hand could have alleviated for them.
  6. Unnecessary services and equipment provided.  DIY landlords may think they need to provide things that in that local market or for that type of home is not necessary.  For example should you provide a lawnmower or lawn care? A refrigerator? A washer and dryer?  What maintenance should a landlord take care of?  What about air filters?  All of these questions would be known by a good property manager and having the right answer can save the property owner thousands of dollars.
There are many other ways the right property manager will save a DIY landlord money.  For more examples see our other video resources for landlords at https://www.kasteelproperty.com/blog/.
It’s also important to know that not all property managers are equal. Just as a DIY landlord can lose money, a poorly run management company or an inexperienced property manager can cause just as many problems and loses.  For help in hiring a competent property manager see our video “Top 5 Important Questions and Answers When Hiring a Property Manager.”
If you found this video helpful please like it and subscribe.  You can also find more short videos and helpful landlord tips by visiting our website www.kasteelproperty.com.
At Kasteel Property Management we do more than just watch your rental property.  We protect it, cultivate it, and help your investment grow.
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Property Management

Top 7 Problems When Renting Out Individual Rooms

Often landlords are looking for ways to maximize the rental income from their investment properties.   One common practice, especially in college towns, is to rent out individual rooms to single adults.  The hope, is that the accumulation of individual rents would add up to more income than what you would get when renting out the whole home on one lease.  Although this might sound like a great idea, there are several reasons this can cause you a lot of trouble.  I’ll go over the top 7 problems you can run into when renting out individual rooms.  You don’t want to miss the last two.

To examine, let’s imagine a fictional character named “Joe the landlord”.  Joe the Landlord has a 5 bedroom home and rents it out to five individual female adults, with 5 individual contracts.  Things start out great for Joe the Landlord but he quickly runs into some issues.

In order of smallest problem to biggest problem, here are Joe the Landlord’s top 7 problems that resulted from renting out individual rooms:

  1. Joe’s phone was always ringing because generally his tenants were young and inexperienced and in the middle of a lot of life changes.  As a result, someone was always needing to move and sell their lease to someone else or swap rooms.  Oftentimes parents of the tenants would call as well to discuss or negotiate something.  The phone calls never seemed to end.
  2. To attract his target market Joe the Landlord had to furnish the home.  Not only was this expensive but it exposed him to more maintenance and upkeep costs.
  3. During an inspection, Joe the Landlord discovered a broken cabinet in the kitchen, a rip in the couch, and a broken towel rack in the bathroom.  When he asked about them, none of the tenants fessed up to the damage.  With individual leases for each bedroom, the rest of the house was considered “common area” and without evidence or someone claiming responsibility, the repair costs fell on Joe.  Had the tenants all been on the same lease, he could have held them all equally responsible.
  4. When a vacant room came up, Joe the Landlord started advertising that a woman’s contract was available because all of the other tenants were also women.  Joe was soon contacted by an attorney that told Joe he was being sued because Joe’s advertisement discriminated against the attorney’s client that was a male.
  5. After changing his advertising so it didn’t specify the sex of the tenant, a 40-year old man applied.  The applicant did not have any credit or background problems so Joe had to approve him.  Joe the Landlord quickly had a lot of complaints from the four young women that were already living there and then his phone really blew up when the parents of those tenants started calling him.
  6. The city contacted Joe because neighbors were complaining about all the cars parked in the street.  Joe discovered he was violating city zoning laws by allowing so many unrelated, single adults to live in his rental.  He was now facing fines and legal action from the city.
  7. Joe the Landlord received a letter in the mail informing him that he was being investigated by Federal Fair Housing because the attorney suing him had reported him for discriminating against a protected class of people in the case of advertising a women’s only contract.

This may seem like an extreme scenario with Joe the Landlord, but every one of these problems are very real and really do happen.  Had Joe watched our video about Federal Fair Housing Laws, see the shared link, or hired a competent property manager, he would have been able to save himself a lot of grief and expense.  For your own property management needs, and to avoid the fate of Joe the Landlord, contact Kasteel Property Management today.

If you found this video helpful please like it and subscribe.  You can also find more short videos and helpful landlord tips by visiting our website www.kasteelproperty.com.

At Kasteel Property Management we do more than just watch your rental property.  We protect it, cultivate it, and help your investment grow.

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Property Management

Is Your Plan the Best Plan to Accomplish Your Real Estate Goals?

 

Real Estate is a fantastic way to diversify your investments and create financial security for a stable retirement.  Establishing a plan is important for accomplishing those goals.  In doing this, you need to be careful that your plan does not become more important than your goal.  I’ll give you several examples of what I mean by this and how it can be easy to put hard work and money into efforts that don’t produce the level of financial success that was in your goal.  It’s easy to slip into these subtle mistakes, so make sure you pay attention to each example that I give.

A common plan is to rent out your current home when you decide to move rather than selling it.  This can be a great plan to reach your goal, but in some circumstances it may not.  Owning a rental is always a good idea, but stop and ask yourself if this particular home is the most profitable as a rental or whether a different one would be better. Simply because you already own the home does not always mean it should also be the investment property you want.  In many circumstances, you may be better off selling it in exchange for something that will be a more profitable rental.  See our video, What Type of Rental Property Should I Buy for a better understanding of what makes a good rental property. https://kasteelproperty.com/video-what-type-of-rental-property-should-i-buy/ .  I have heard people say they want to keep their home as a rental so they can avoid paying taxes on the capital gains.  However, this can be avoided through a 1031 tax exchange when you sell one investment property and take the profit directly into the purchase of a different investment property. (See our future video on 1031 exchanges)

Just as a thriving company can go out of business because they won’t adapt to a changing market, your real estate is the same.  You need to be willing to adjust and change so that your goal stays more important than your plan.  To keep this focus you may need to clearly define what your goal is and even write it down.

Sometimes we fall in love with a particular house or plan to the extent that we are willing to go to great lengths to stick with that specific property or plan, when in reality there may be better, more profitable options out there.  For example, lets imagine you own an older home that needs landscaping, a sprinkler system, has a partially finished or functional basement, an outdated kitchen, or faded siding.  Or maybe it doesn’t have the problems of an older home, but the yard is really big or complicated.  It has difficult neighbors or is in a rough neighborhood, or it’s in a remote location.  There are many reasons a particular property may not be the best investment in the long-run.  The important thing is to remember what your goal is and to let your plan change, as needed, to best accomplish your goal.

I’ve seen real estate investors that have been dreaming of moving out of their home and turning it into a rental property for so long that they are unwilling to consider any alternative courses of action.  Even when the home has a long list of things that need to get fixed, updated, changed, or improved upon that will cost tens and tens of thousands of dollars and take many years to accomplish.  There isn’t anything wrong with owning or buying a home like this to live in if a person’s goal is something like being closer to family or having a project to work on, or getting more square footage for a growing family that they otherwise couldn’t afford.  However, if our goal is to maximize our profits in the real estate market, this would not make a good investment as a rental property.

Another common situation is inheriting a home and wanting to keep that home as a rental.  Again, having a rental property is always a great idea but you need to ask yourself, is your goal to keep that specific home or is your goal to have a successful investment property.  Either goal is a great goal but if your goal is the latter you should ask yourself if your inheritance could be used better by selling that home and using those funds to purchase something that will perform better as a rental property.

Also, sometimes circumstances can change and what was a good plan, now needs to be adjusted to stay on track with your goals.  Maybe the property is getting older or the community is changing, HOA rules can change, markets can change, etc.  If you aren’t willing to also change and update your plan as needed, you will have a much harder time accomplishing your financial goals.

You can find financial freedom and success in real estate if it’s done right.  Define your goals, stay focused on them, make plans, and change plans as needed to reach those goals.

If you found this video helpful please like it and subscribe.  You can also find more short videos and helpful landlord tips by visiting our website www.kasteelproperty.com.

At Kasteel Property Management we do more than just watch your rental property.  We protect it, cultivate it, and help your investment grow.