Property Management

Good v.s Bad Property Managers

In today’s video we’ll discuss a common concern, what are the difference between good and bad property managers? In doing so, we’ll also touch on the role of what a property manager does. Check out the video below or keep reading for more information. If you have any questions or comments, please leave them in the comments below.

First thing’s first, not all property managers are created equal. So what makes the difference?

Bad Property Managers

Bad property mangers can cost you more money than if you hadn’t hired them in the first place. Here are some signs of bad property managers:

  1. Vacant properties. The bad property manager won’t have a tenant lined up when one moves out, as a result, having a vacant lot will cost you more money.
  2. Mishandled maintenance. If you don’t fix a problem, for example a plumbing issue, correctly it will end up costing you more. Unfortunate that happens more often than you would think.
  3. Late rent. This becomes a perpetual problem and the longer it goes on, the more difficult it will be to resolve
  4. Misappropriation of security deposits. This means that the property manager might send back the security deposit without fully inspecting the property, and as a result, you are the one stuck with the bill.

Good Property Managers

A good property manager will make it easy for you to sleep at night because you won’t be worried about them. They are keeping up with the market and invest in success. Here’s what you should look for in a good property manger:

  1. Maintaining market rents. This means the property manger is helping you maximize your profits. To do this they are keeping up to date with market rates to make sure they are charging the right amount of rent.
  2. Timely advertisement of vacancies. Having a new tenant lined up before the current one moves out is crucial to avoiding long periods of vacancy. It’s also weight off your shoulders.
  3. Proper handling of maintenance. This one is quite self explanatory, they look for the right people to fix the problems. It might mean a larger up-front cost, but down the line it will be saving you a lot of money and stress.
  4. Handling late rent. Good property managers have a plan in place to resolve late rent issues quickly, which will prevent the problem from getting larger.
  5. Prepare for problems. A good property manager knows what to do and is ready to act when a problem arises. Why? Because they know what to do and where to go to fix it, and don’t waste time doing so.

To sum everything up. A bad property manager will cost you much more than you think, while a good property manager will save you time and money while protecting your investments.

If you’d like to schedule a consultation, contact us at our website here.



Property Management

How Property Managers Work with Real Estate Agents

How does a property manager work with a real estate agent? Is it possible for a property manager to no 1. At Kasteel Property Management, we don’t practice real estate sales. 2. We have a great referral program that benefits both the realtor and Kasteel Property Management. 3. We will review properties with potential buyers to provide our opinion, insights, and experiences. 4. Quick with communication. One problem we see is misappropriation of the security deposit. How does this happen? Where did the money go? Another problem we see is poor communication.


Property Management

Why I Got Involved in Property Management

Why should anyone get involved in property management? Who really wants to get calls in the middle of the night about clogged toilets or leaks? There were several factors that lead me to property management as a business. I LOVE PROPERTY MANAGEMENT! I grew up in the rental property world – my parents had properties and it always interested me. So about 15 years ago, I acquired a few rental properties and hired a property management company. Unfortunately it didn’t go well and I spent a lot of time managing the management company. So I made a career change and became a property manager.


Property Management

How Kasteel Property Management Helps Real Estate Investors with This Channel

We aim to help investors find information to help them be more successful as a property owner. We are an authority in the property management world and want to share our experience with our subscribers. We will provide online documents, tips on how to avoid red-flags with tenants, and much more. How do you know when there’s a problem with a property? We’ll talk about what kinds of properties we recommend as rental properties. We look forward to working with you. To schedule a free consultation, visit today!


Property Management

How to Handle a Tenant Who Doesn’t Pay Rent


Best Practices to Handle Late Rent

OH NO!!!  My tenant hasn’t paid their rent.  What do I do?

Far too often, when this happens to a new landlord, they end up throwing in the towel and deciding they don’t want to be a landlord anymore.  The stress of a situation like this is more than they want to deal with.  Don’t give up.  See how the pros at Kasteel Property Management do it.

A tenant that is not paying rent can be a very frustrating situation.  In most cases though, if you screened your tenant well then hopefully you have a great tenant and the situation quickly resolves itself.  The tenant communicates their situation and promptly gets caught up and pays their late fee. (See our blog on screening rental applications)

Although that is what we hope for, there are those times when the tenant is not as forthcoming or as truthful as they should be.  If you are not prepared then the situation can become very stressful.

Maybe the tenant isn’t communicating at all, or has made several promises about getting caught up and continually fails to follow through.  Adding to the frustration they start ignoring your calls, leaving you feeling like you need to keep chasing after them, when all you really want is for the rent to get paid.

Lets go over some best practices to handle late rent.  As I discuss my process keep in mind each State has different laws.  My process is affective in Utah and compliant with Utah law.  If you are in a different State I think you can still learn valuable information here but you will need to individualize it to your own State laws.

6 Ways to Help Prevent Late Rent.

As with most things in property management, planning ahead and forming a plan of how to deal with a situation before you are faced with it will save you a lot of headache and time.

  1. Before you even have tenants make sure you either have a firm knowledge of how to evict someone or have a good attorney that is experienced at doing it.  You hope you never have to evict someone but just having that information or resource in place gives you peace of mind and allows you to quickly get your rental property back on track when you are having trouble with a tenant.
  2. Another thing to do before you get a tenant, is develop a written step by step process of how to deal with late rent.  Ideas for this will be covered in the next section.

  1. After a new tenant signs up, send them a welcome letter that outlines basic information they need to know including the information that there is always a late fee when rent is late.  Make this clear in the lease and set this expectation upfront.
  2. The welcome letter should also tell the tenant that if they are going to be late with their rent they need to email you before hand to let you know the date they plan on having it paid.  They need to understand they will still be charged a late fee.
  3. Be firm.  No exceptions.  There is always a late fee as outlined in the lease agreement.  My lease provides a grace period before the late fee is charged. I make sure they understand their rent is due on the 1st, late on the 2nd, and the late fee is charged after the 5th.  If they choose to wait until the end of the day on the last day of the grace period to try and pay their rent but can’t because some problem arises in their day or with their payment method or whatever and they want to try and use that as an excuse, I tell them I already gave them 5 extra days after it was late before charging a late fee and it’s now too late.  Being firm on this can encourage them to figure it out earlier next month and help prevent late rent in the future.
  4. Your actions today can determine their behavior when paying rent in the future.  So follow through with your procedures for dealing with late rent.  Don’t sit and wait and hope things work out.

6 Step by Step Procedures to Follow When a Tenant Doesn’t Pay Rent

Below is my procedures for dealing with late rent, based on what is allowed in Utah.  Check your State for individual laws.

  1. Charge a late fee as outlined in your lease agreement.
  2. Because I have prepared my tenants (See “6 Ways to Help Prevent Late Rent” above), in most cases my tenants will send me an email before they are late to let me know they will be late that month.  They include what day they plan on having it paid and that they will include the late fee.  As long as the day they plan on paying is not too far away (within a week or so) then I thank them for letting me know and that is usually all that is needed.  This shows responsibility on their part and that they have a plan.
  3. When they have not communicated about being late by the day the late fee is charged, I send them an email that morning asking about rent and reminding them that they need to send me an email before they are late.
  4. If they don’t reply to the email in #3, or haven’t paid rent, then by about 2:00 in the afternoon, I send them a text with the same message as the email.
  5. The very next morning, if needed, I deliver a 3 Day Pay or Vacate notice.
  6. After the 3 days have passed, if they still have not paid the rent, then I turn them over to my attorney to begin the eviction process.  This does not necessarily mean it is over for them and they get evicted.  It just means the process for eviction has begun and while that process takes it course the attorney makes efforts to collect payments and get things back on track.

Because I take effective steps to prevent late rent I usually don’t get past step #4 before things have been resolved.  Sometimes I get to step #5 and rarely is step #6 necessary.  Although, how far I progress through each step is dependent on the tenants actions and nothing else.

I make sure to move very quickly on late rent because it doesn’t take long before the next months rent is due.  For the sake of everyone involved a resolution needs to be found quickly otherwise the situation will get much worse.

8 Things to Avoid When Dealing with a Tenant Late on Their Rent

  1. Never agree to let them be late.  This can be trickier than you might think.  Often a tenant will ask me if it’s ok if they pay late this month.  I have to be careful that I don’t answer in a way that is making an agreement different than what the lease says.  If they ask by email, I can usually reply by just saying, “thanks for letting me know” and ask any follow up questions I need to know like what date they plan on having it paid.  That way I didn’t agree to anything.  If they are on the phone or really push for an answer I politely say, “It’s never okay to be late. We’ll have to follow the lease and there will be a late fee but thank you for letting me know.”
  2. If things start to get “hairy” don’t engage in too much conversation or arguing with them.  Follow your procedures and let their actions do all the talking for them.

  1. Don’t be afraid of moving forward in your process.  The legal process of actually evicting someone has plenty of warnings and delays.  Don’t add your own delays to it.  Move quickly.
  2. Don’t get too anxious and don’t move around the law.  Let the process play out.  If you have prepared, as explained above, then you already have your process in place and you will know the timeline for an eviction in your State.  The tenants may get things resolved on their end or they might not, or they might just move out.  You’ll just need to wait and see which resolution works out first based on their actions.
  3. Don’t withhold repairs.  You don’t want to become the bad guy.  Keep up on your responsibilities otherwise you might create more issues than just the unpaid rent.
  4. Don’t negotiate more time after the Pay or Vacate notice has been delivered.  If you get to the point of needing to deliver a 3 Day Pay or Vacate notice and now they want to communicate and want more time, it’s too late.  You can politely explain, “you should have communicated earlier and because you didn’t you’ve created more problems for yourself.  The legal process has started and I can’t undue what has been done.  You have 3 days to pay or vacate.  If you don’t, it’ll be turned over to the attorney and you’ll need to work it out directly with the attorney including the additional attorney costs.”  This is usually very motivating for them.
  5. Never ever waive a late fee.
  6. Keep your emotions in check.  You getting upset and arguing with them will make things worse.  Remember #2.  Being prepared before there is late rent with your procedures and the legal resources you need will help you feel in control and calm.

What if it’s a really nice tenant in a bad situation?

I think it’s important to mention that sometimes it can be really hard to stick to your procedures for late rent.  Especially, if the tenant is a really nice person in a bad situation.  For example, they lost their job, or they got sick, were injured somehow, or had a death in the family, etc.  Although these scenarios may be cause for being extra understanding and helpful it is still important to be consistent and stick to your preplanned procedures.  The tenant still needs to be able to pay rent or they can’t live there.  I know that sounds harsh but read on.

When I’ve been faced with situations like these I’ve found it works out as long as the tenant is communicating.  Communication is key.  If they let me know they won’t able to pay rent anymore, then they also know they need to move.  If they are communicating and in the process of moving, then there is no need to also evict them.  They need to be planning on moving out as soon as possible.

  • I express my concern to them and wish them the best of luck.
  • I also thank them for letting me know and that I want to help them as much as I can.
  • I tell them I know money must be tight right now and if we can get someone else living there right away it’ll save them the costs of continued rent payments, especially if they are still locked into a lease.  I ask them to work with me to show the place while they are still there so I can help them sell their lease.
  • I let them know I also hope to be able to return all of their deposit.  I then give them a list of commonly missed cleaning items that get deducted from peoples security deposits to help them out.

They are usually very understanding and grateful. You don’t need to sacrifice your own needs and financial security to be kind and helpful.  You can get them on their way, hopefully it works out to be able to refund them some deposit money, and you are able to get your rental back on track as quickly as possible.

You can do this!

If you are prepared, with your written step by step procedures and having the resources that you may need ready, then your stress level will be greatly reduced when faced with a tenant that is not paying their rent.  Leave the stress of the situation on the tenant’s shoulders, not your own.  You can be nice and polite and hope for the best for them at the same time that you are moving forward with your procedures.  Remember, how far you get down the road towards eviction is based on their actions, not yours.

Stay tuned for more written blogs and videos from Kasteel Property Management.


Property Management

How Do I Screen Tenants?

How do I Screen a Rental Application?

Of all the things a property manager or landlord does, screening their rental applications is one of the most important.  You will learn in this post some pit falls to avoid, vital steps to take, and red flags to watch for.

What do I Need to Know when Screening a Rental Application?

Before you even start advertising a place for rent you want to make sure you have the right tools, rules, and procedures in place so that you will know how to answer people’s questions and know what to do with applications when they start coming in.  You will absolutely need the ability to run credit and do criminal background checks. 

At Kasteel Property Management not only do we have this capability but we also have additional tools that come free as part of our regular services.  Such as, screening applicants against our attorneys database.  Our attorney is used by hundreds of management companies and has been in business for decades. 

As a result, their office has a very large database of problem tenants and we check all our applicants against it.  This resource is not only great for screening applicants but it also creates a network of hundreds of property management company’s working together, through the attorney, to help with collection efforts. 

Another resource we have that benefits our clients is the software we use.  It will show us the rental payment history of applicants that have rented from other places that use the same software.  Often, we can quickly rule out a bad application before we even get to the cost of ordering a credit and criminal history report.

10 Must have Criteria you Should Require for Rental Applications:

Establish your rules and criteria that an application must pass to be approved.  Make sure you write them down for reasons I’ll explain later in this post.  Here are some examples that I have written down that I apply to all of my applications:

  1. Application must be filled out completely.
  2. All adults must have applied.
  3. They must have toured the property.
  4. They must have provided picture ID and current pay stub.
  5. Their preferred move in date needs to be within one week of the property’s availability date.
  6. They are not trying to move in too many people.
  7. They must not be in the middle of bankruptcy.
  8. No evictions or collections from previous landlords in the last 10 years.
  9. I do not look for a specific credit score.  Instead, I like to see that their credit shows they are currently paying their bills and have been for at least a couple years.
  10. Criminal history generally disqualifies them but the severity, frequency, and time from last incident are taken into account.

Some things you may want to use your discretion on may include unpaid medical bills, only one short period of time when bills were not getting paid but the rest of the history looks good.

How to Pick a Good Tenant:

Now that you are set up with tools, your rules, and your procedures for screening applications, you are ready to put the vacancy ads up and hopefully soon, you get your first application.  Then it happens.  You see an application in your inbox.  You are eager to run it and you are hoping it is a good one. 


Before running an application you first need to get your head straight.  I’ll explain.  Even though getting the vacancy filled and getting the rent money coming in is very important, you cannot let that desire pressure you into approving an application that may not qualify. 

To help you keep the right focus when reviewing an application, know why you are renting out the home.  It’s not because you are in the business of providing housing.  It’s very important you realize this.  This may be considered a bit of a heartless way of looking at things but it’s important to know to help you get the right tenant.  If your job was to provide housing to people you’d be performing very different tasks than you do as a landlord.  You are actually in the business of real estate appreciation and cashflow.  Renting out the property is only a necessary part of that.  Don’t loose that focus during the application process.  It’s easy to get caught up in someone else’s desire and need to live at your place.  Let me reiterate, you are not looking to provide housing for someone.  You are actually looking for a business partner.  Applicants need to be approved on their own merits and you can tell them “no” if they do not fit your criteria as a good business partner.  You are planning on entering a contract (lease agreement) with this person where you will perform certain functions and they will perform certain functions.  That is a business partner, not someone that is just the recipient of a nice place to live.  Remind yourself, you can solve most problems before they even happen with a thorough, consistent screening process so that you get the right tenant as a business partner.

7 Red Flags to Watch for When Screening a Rental Application:

This is where you have to be a bit of a cynic.  For the most part I believe people are good and want to be honorable but to be good at screening rental applications you need to watch for those people that are trying to hide certain information from you.  You also need to watch out for people that are too high risk even if their intentions are good.

  1. Splitting up the Deposit.  Never let someone split up the deposit to pay over time.  If someone asks to do this, I tell them that if they need to do that, then this place must be too expensive for them and they’ll need to find a cheaper place to live.  Almost every time I say that they say something similar to, never mind I can figure it out.  Remember, your goal is not to figure out a way to provide them with the housing they need.  Your goal is to get a good business partner and if they really can’t come up with the deposit, then they really can not afford to live there.
  2. Bully’s. Don’t let yourself get bullied.  This can take some time to learn.  When you aren’t expecting someone to verbally single you out, belittle you, make fun of you and your policies, and make you feel like a bad person it can be very upsetting.  Your established set of rules and procedures can protect you from a bully.  You may have the momentary thoughts of, “am I being unreasonable, or am doing this wrong or unfair?” You can be reassured by the fact that you have well thought out rules written down to fall back on.  When first encountering a bully it can be very upsetting, but as a landlord, realize you have all the power, and you can simply tell them, no.  Let them say their final rude comments and hang up.  No need to give them any more time or energy.
  3. They are Special.  Another red flag to watch out for is very similar to bullying but uses a different approach.  It is people telling you all the reasons they think this home was meant for them, that they have been led to it, or prayed about it and know it should be their new home.  These kind of comments, delivered very differently than what the bully does, is still often intended to have the same affect.  They want to pressure you into overlooking their short comings and do what they want rather than what you would usually do.  Following your written rules and procedures will protect you from that pressure.  Either they qualify or they don’t.  The rest doesn’t matter.
  4. Meeting in Person. It sounds strange, but my “spidey sense” goes off when someone pushes to meet in person to turn in a paper application and “discuss the details”.  I’m not necessarily opposed to meeting people in person but in today’s world everything is online, including our application process.  Online is quick, easy, and expected by most people.  When someone wants to meet in person it usually means they want to put on their best show to help me overlook their credit or something they want overlooked.  I politely let them know our process does not need a meeting and if they are interested they need to fill out an application like everyone else and it’s first come first serve.
  5. Incomplete Application.  An in complete application can tell me a couple things.  Either they can’t follow instructions or they think they don’t need to follow instructions.  Either one is a red flag for me.  If I have another application in line I move on to it and if there is still time before the place is filled I’ll send them an email saying they need to complete their application if they want to be considered.
  6. Someone in a big hurry or that wants to apply before they have seen the place.  Kasteel Property Management can certainly accommodate someone in a hurry and have many times, but people aren’t usually needing to move in a hurry without there being a reason, and it’s prudent to find out more information.  When I ask what the rush is, sometimes I find out that they are being evicted.  That tells me all I need to know and I respond it’s not going work out with me either, saving us both some time.  To me, it never makes sense for someone to apply for a place they have never seen.  Either they know they aren’t likely to get approved and they want to find out before putting in much effort, or they really don’t care about where they live and what they live in.  Both of those scenarios are not something I get excited about as a landlord. I’m able to show properties quickly and easily and there is rarely a reason someone won’t want to check it out first.
  7. The final tip is let people talk.  I can’t count the number of times that people call me up and tell me all their problems, why they wouldn’t quality, that they can’t pay their bills, that they have criminal history, etc.  Once you have enough information you can interrupt them and say, sorry it doesn’t sound like it’ll work out and wish them good luck.

As a Landlord, Should I Accept Multiple Applications? 

It’s important that you have established, documented, and consistent procedures and rules that you always follow for all your applications.  If you do, you don’t need to be considering multiple applications and you never should.  You never want to be in a position where you treat one person differently than another.  Doing so can open you up to lawsuits, Federal and State Fair Housing investigations and possible Fair Housing fines.  Fair Housing Laws make it illegal to discriminate against different protected groups of people, based on things like: race, religion, familial status, national origin, sex and, depending on the state you are in, there can be a lot more.  If you don’t protect yourself with written rules it can be easy to unintentionally discriminate.  For example, imagine this common situation: a friend and his family from your church ask to live in your rental for a short 3 months while they are in-between homes.  You agree.  Because you know them, it is kept pretty informal.  You never required them to apply because you knew you’d approve them anyway.  You knew it probably wasn’t the best business practice but for convince that’s what you ended up doing.  Usually if an application asks for a short term lease you tell them no but this time you wanted to help out a friend.  Unintentionally, you may have just discriminated against someones religion. You just created a situation where you have given special privileges to people that go to the same church as you do, which is the same as discriminating against those that don’t.  If someone feels you’ve discriminated against their protected class you could find yourself in trouble.  This is just one example, there are many more ways something like this can happen.  Don’t do this to yourself.  You need consistency.

To stay consistent and to be able to show your consistency, it’s important you process your applications in the order they come in, giving everyone an equal and fair opportunity to apply and to rent the home.  Do not collect several applications and then pick the one you like the best.  Doing that will make it hard to be consistent and even harder to prove you are consistent.  First come first serve is the most fair for the applicants and the best way to keep you protected.

Often a potential tenant will ask me, “How Long Does it Take for a Rental Application to be Approved?”  You should be able to tell them it will be fast.  Because your process is well defined and you are doing first come first serve, there is no reason you can not give the applicant an answer with in 24 hours.  You want to find out if the application is good, and if it is, you want to get them signed on a lease right away.  Don’t make them wait or you might loose them.  Some of my best tenants applied with me after waiting a week with other management companies.  I was able to run their application, approve it, and get them signed up right away, and the other management companies lost out.

What if I’m Not Sure About Approving a Rental Application?

Now you are finally in the middle of reviewing an application.  If everything looks good after completing all the steps and criteria that you wrote down for an application, then it’s easy.  You sign them up.  It’s also just as easy if it looks terrible. They don’t qualify.  Once you find a problem or problems that makes their application un-approvable you let them know it’s denied and you move on.  Although, what if the application is kind of good and kind of bad?  You may be comparing your findings with your criteria and find your screening criteria is insufficient to cover every possible situation and this application is not as clear cut as you’d hoped.  For example, they had a misdemeanor 5 years ago with no criminal history before that and nothing since.  Their credit has always been good up until 8 months ago when they lost their job because of the Corona Virus.  They have several late payments and collections that all happened about that same time but you can see payments are now being made because they got a new job 2 months ago.  In addition to that, they are looking for a place to live because they are in middle of a divorce.  This can be a tough situation for them, no matter how much they want to be responsible and no matter how much you want to believe them, stay focused on these things:

  1. Do they fit your screening?
  2. Will they make a good business partner?

If you still don’t know the answer to these questions ask yourself, what is the risk and how can I minimize that risk?  In these situations I will often require a double deposit.  That usually minimizes the risk to an acceptable level and usually works out great.  It’s important to note, a double deposit is not prepaid rent.  It is a security deposit that is returned only after they have moved out and their performance of living up to the lease agreement has been evaluated.  When I first offered the option of a double deposit I was a bit hesitant because it was a lot of money.  I’ve found that people usually understand though.  They know their situation and usually agree to it.  If they can’t come up with that much money, or don’t want to, then that is ok too.  Without it, the risk is too high so you move on to the next application.

By following these tips and rules you will solve most of your problems before they even happen.  Remember you are not in the business of providing housing, you are in the business of real estate appreciation and cash flow and because of that, you are not just looking for a tenant, you are looking for a business partner.

Stay tuned for more from Kasteel Property Management in the way of written blogs and videos.

Property Management

How Important is it to Screen Tenants?

Property Management

What a Property Management Company Should Do For You

More content could go here…

Property Management

Should an Investment Property always Cash Flow?

Too often I’ve had people tell me something like, “If my property is costing me around $100 every month it’s not even worth keeping it.” In the world of Real Estate, jumping to such a conclusion, could be the wrong decision. Let’s walk through this.

Having monthly cash flow might be ideal, but the way to get it may not be. It really depends on the situation. For example, in Utah the market is pretty high. Real Estate is kind of expensive. If you were buying an investment property with an average down payment, your mortgage payment might be a little higher than what you can rent the property out for. You can’t change the rental market to be able to charge more rent. If you tried to over charge, you will have a hard time finding a tenant and ultimately lose money by having the place sit empty. Your other option to make the property cash flow could be a bigger down payment to reduce your monthly mortgage payment. Although, that may not be ideal or even possible for everyone. It depends on your situation. So, if it is not cash flowing, does that mean it is a bad investment property? If so, that would mean Utah would be bad place to buy investment properties and that is certainly not the case.

Sometimes, your investment property needs some investing. Think of it like a retirement account that you might have. To help it grown, you make contributions to it. If you never contributed to it, then it wouldn’t have anything to grow from and you essentially don’t have an investment at all. It’s the same logic for an investment property. If you just sell it, or never buy it, because it costs you some money each month, then you lost sight of the big picture. Here is a common scenario to make the point clear. If that home is valued at $350,000 and is appreciating in value, at 5%-15%, it would be gaining in value around $17,000 – $52,000 every year. Isn’t that worth a small monthly contribution? Absolutely!

Keep in mind, rent also appreciates and your mortgage payment does not. So, after 1-3 years the rent will probably have increased enough to start giving you that monthly cashflow. Now imagine, ten years down the road. Your property has increased in value by maybe $200,000 and it’s been paying you hundreds of dollars a month for several years. You will be sitting pretty good and feeling glad you stuck with it through those first few years when it felt a little tight.

So, yes. Cash flow is nice but it’s not everything.

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

Please leave a comment below and happy investing.

Property Management

How Real Estate Out Performs the Stock Market

Even with a lower growth rate, we’ll explain how real estate could be your best bet for the future.

A stock broker will say you are best to buy stocks and a Real Estate Agent will say you are best to buy real estate. Which is better? It really depends on your goals and your comfort level. Kasteel Property Management can help discuss your goals and knows how to help you make informed decisions.

Real estate in Utah County is hot and has a lot of ways to propel a home owner towards their financial goals. Even though real estate is not for everyone, it’s still important to understand how it works so you can make the right decisions for yourself. When it comes to investing though, you can’t beat the appreciation of a few hundred thousand dollar asset (house) purchased with someone else’s money, that generates a monthly income to help cover the mortgage payment and maintenance costs along the way. It’s leverage combined with rental income that makes real estate out perform the stock market.

It’s not a complicated concept but many people, that think they are professionals, will give you bad advise because they have only ever thought one way and don’t fully understand what they are talking about.

Consider this scenario, simplified down to just the nuts and bolts to show the basic idea. Let’s say I have $40,000 to invest and lets say the stock market is growing at 10% and the real estate market is growing at only 5%. At face value one might think you could get twice the return in the stock market. Here is the game changer: $40,000 will by a $200,000 house while the same $40,000 will only buy $40,000 worths of stocks.

$200,000 house growing at 5% equals $10,000 of appreciation.

$40,000 of stocks growing at 10% equals $4,000 of growth.

Also, both stocks and real estate can go up and down in value but even in a down market you will always have the house. It’s a physical, tangible asset that doesn’t disappear into nothingness, while that is exactly what can happen to money that is in the stock market when it is down.

You might, rightly be asking, what about the mortgage payment? Interest on the loan, property taxes, property insurance, maintenance costs. Maybe you think that I am way over simplifying this. First, remember, I did state that I am purposely simplifying this down to the basic nuts and bolts to get the idea across. Although, these concepts are sound and accurate there are many details to consider. Second, I stated it is leverage combined with rental income. To counter the costs of the mortgage interest, property taxes and insurance, and maintenance on a house you rent the property out to generate extra income. It may not perfectly cover all the expenses for the first few years but eventually it will as rents go up.

The idea is to grow your wealth from the appreciation and the rent is to help you afford the asset (house) along the way. There are many more important details that can make or break your real estate investment but that is what you get a great property management company for. All you need is a firm grasp of the concepts of real estate investing then let the professionals take care of the rest for you.

At Kasteel Property Management we know how to take care of those details. We understand the rental market and we understand investors and their needs. If you want a successful real estate portfolio, whether it’s one property or several, you want Kasteel Property Management on your team. Check out the Owner’s Page on our website and give us a call. You’ll be glad you did.