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Do You Know the Most Common Types of Depreciation?

Depreciation expense is used in accounting to allocate the cost of a tangible asset over its useful life. In other words, it is the reduction of value in an asset over time due to usage, wear and tear, or obsolescence.  By depreciating an asset an investor can offset their income by the annual amount they depreciate the asset, thus increasing their “in pocket” cashflow. Straight-line Straight-line depreciation is a very common and simple method of calculating the expense. In straight-line depreciation, the expense amount is the same every year over the useful life of the asset.  Under new IRS guidelines, an investor can now depreciate an asset over a 25 year period. Depreciation Expense = (Cost – Salvage value) / Useful life Double declining balance Compared to other depreciation methods, double-declining-balance results in larger expense in the earlier years as opposed to the later years of an asset’s useful life. The method reflects the fact that assets are more productive in its early years than in its later years. With the double-declining-balance method, the depreciation factor is 2x that of a straight line expense method. Periodic Depreciation Expense = Beginning book value x Rate of depreciation Units of production This method provides for depreciation by means of a fixed rate per unit of production. Under this method, one must first determine the cost per one production unit and then multiply that cost per unit with the total number of units the company produced within an accounting period to determine its depreciation expense......
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3 Tips to Make Your Property Improvements Pay for Themselves

  Multifamily housing is a competitive market, whether you manage new Class A's or performing Class B's and C's. This is as true now as it has ever been, especially when it comes to multifamily rental properties. Consider where market conditions are today — high demand, limited supply, relatively low interest rates, and a strong job market — along with how quickly new technologies are presenting different amenities and solutions to problems. And the biggest dilemma facing anyone who owns or manages multifamily properties is how to properly invest today in order to stay ahead of the competition now and into the future. Unless you have a crystal ball, this is no easy task.   One of my favorite professors once told me that understanding value is simple, as value is simply a function of the utility provided by a product or service divided by its cost. In recent years, market conditions have allowed market forces to drive up the price part of this equation. However, the strong economics that have been a tailwind to rate increases have also spurred new supply investments — both traditional and new asset classes like professionally managed single-family rentals — that are coming online over the next couple of years. Whether you serve rent-by-choice or rent-by-necessity residents, the right amenities are the tools that can differentiate an asset and attract and retain tenants, regardless of the economic cycle.   Most of the amenities that drove differentiation in the past cycle are now considered table stakes. ......
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What Causes HVAC Systems to Fail and How to Prevent It

What Causes HVAC Systems to Fail and How to Prevent It
Preventative maintenance goes a long way in keeping HVAC systems operating as they should be, but breakdowns can still occur. These complex systems are made of many components. Without being familiar with how HVAC units and their many parts work, diagnosing issues can be difficult. Especially when you’re managing large multifamily properties, it’s helpful to know about some of the most common causes of HVAC problems, as it can save you, your team, and your residents from a lot of frustration.   Swollen Capacitors  Air conditioners cannot run on their own when their capacitors stop working. The job of a capacitor is to start the motor and to help keep it running. It does this by sending jolts of the energy it stores to the fan. Without the jolts, the fan simply can’t get going. There are a few ways to tell if a capacitor has gone bad. A visual inspection is often the easiest, as a swollen capacitor is a problematic capacitor.   What causes capacitors to swell? Gas is created when the conductive electrolyte within the capacitor decomposes, which happens with time or damage. Capacitors have a lifespan that can vary but is definite. The HVAC systems that house them can outlive them, meaning there naturally comes a time when a capacitor must be replaced. Swelling is a sign that the time has come, as any swollen capacitor has reached its end. You can tell that a capacitor is swollen when its shape has become altered, usually resembling a can of soda ......
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Should Your Apartment Community Get Involved with Local Crime Watch or Neighborhood Watch Programs?

I am a big believer in being involved with your local crime watch or neighborhood watch programs. I’ve seen firsthand how it has positively impacted investments with apartment communities that we’re involved with. Here are just a few reasons to get involved: Deters criminal activity Many of the attendees will communicate issues they are having in their community, some of which may not have been reported or available in any other form, and that will in turn allow you to keep an eye out for such activity. Creates a greater sense of security If your residents know you have their interest in mind they will tend to feel more like it’s also their community and a great place to call home.  Many crime watch or neighborhood watch programs have flyers and stickers that you can place in your office, or on the building that shows you are an active member. Builds bonds with neighbors. People look out for one another. When your residents know you are taking steps to improve the community, other residents will also do their part to help.  A program gives them an opportunity to voice their concerns and to be heard. Stimulates neighborhood awareness Your residents become more aware of what’s happening in your community and will usually “step up” and help keep you informed. Reduces the risk of becoming a crime victim and in turn reduces the physical, financial and psychological costs of crime Helps to create awareness, and potential criminals may avoid your community if they know y......
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How Not to Be a Bad Property Management Company

How Not to Be a Bad Property Management Company
There’s nothing special about bad property management companies. They ought to be literally a dime a dozen, because they usually end up costing owners far more than they can bring in or help keep. Bad property management companies provide much opportunity for great property management companies. They can snatch business away from the bad ones easily, as well as gain big through referrals. But, how can you know if your company is good or bad? Here are a few things that make it good: Care About the Residents Caring about the residents should be the number one rule. They are the ultimate source of profit after all. Ironically, the trouble starts when you think of residents more as numbers than people. A cold-hearted push to reduce costs and maximize revenue at the expense of your residents’ happiness will only undermine your goal. Think of your residents as a community and communities as families; serve them well and the benefit will be great. Care About the Property Generally speaking, the better the condition of the property, the happier the residents, the lower the repair costs, and the greater the potential to attract great residents who are willing to pay decent rent rates. To be a great property management company, go the extra mile in upkeep and maintenance. Get creative. Do what you can to make the property you manage a wonderful place to be.  Care About the Owner Besides taking good care of their property and its residents, how can property managers show the......
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The Positive and Negatives of Owning A Rental Property

art.pngInvesting in property is no small affair; investing in property and deciding to rent is even scarier. However, knowing exactly what you’re getting yourself into in advance can help save a lot of headaches. So, before making your final decision, take a look at what the potential benefits and downfalls of renting a property. The Pros When weighing out the pros and cons of renting your property, the advantages seem to be slightly outnumbered by the disadvantages. However, the pros are more powerful, and if you put in enough time and energy into research before investing, it can pay off. Property is always in high demand and often much more predictable than other markets. It makes it a long-term investment that you can benefit from for years to come. Perhaps the most motivating factor is a monthly rent. Such a stable income is hard to argue with, as occupied property means monthly rent checks that go straight into your account. Monthly rent can also help settle your monthly expenses if you’ve purchased a property with the help of a bank loan. Another big plus is property value growth over time. Your property value increases, and you can bring in so much more income over the years without you investing more. However, this is where proper research is vital. If you invest in an upcoming area, your property can experience a significant rise in price. There are also many tax benefits you can claim and take advantage of to deduct your costs annually when owni......
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Four Reasons Why Property Managers Must Embrace Text and Email

Text and Email      With 88 percent of residents preferring to communicate via email and 90 percent of text messages being read within 3 minutes of delivery, property managers can no longer ignore the fact that the mainstream expectations on how a resident prefers to communicate has changed. It makes sense - texting friends and family is second-nature, it’s only natural that they now prefer to communicate with their property managers in the same immediate and convenient channel. It's also minimally time invasive and gives your residents the opportunity to stay connected no matter where they are or what they're up to.Still not convinced? Here are four reasons you should seriously consider embracing text and email as a day-to-day way to communicate with your residents:Reason 1: Bye-bye Baby Boomers, hello Millennials We’re all witnessing a paradigm shift away from baby boomers and over to the future of business growth in millennials, specifically in the housing category. According to Pew Research, millennials have surpassed baby boomers as the largest living generation and are driving up the rental market every month. To meet this shift, property managers need to embrace the communication channels that this new generation has grown up with. More importantly, they must provide experiences that allow everything to be resolved on a smartphone without them having to pick up and call. This new-age group is a large percentage of the renters that will be shopping and comparing your community, and ultimately determining whether or not they want to sign or renew a lea......
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3 Effective Tactics to Boost Revenue From Your Rental Property

  The usual tactics to boost revenue from property rental is acquiring as many properties as possible. While this may be a valid method for those who are in the property business per se, when it comes to “regular” people that have just a few properties to rent, a better approach would be to focus on their current portfolio and see what they can do to earn more without investing more. Let’s talk: Minimize Turnover Turnover is one of the worst things for everyone in the property rental business. Every turnover costs money and going through tenant after tenant will cost you more than you’ll earn. Apart from advertising costs, there are costs of vacancy, patching and painting walls, replacing and repairing flooring, or fixing anything else left broken by your previous tenant, etc. But, how do you minimize turnover and keep the right tenants in place? There are several points to it: Lowering the rent: Although this may sometimes be counterintuitive, it does show the tendency to increase revenue, long-term and here’s why. When tenants don’t have to pay high rents, they appreciate the place they live in and usually tend to keep it in good shape as if it were their home. Also, they are less likely to leave. Customer service: Whether you have a property manager or personally manage your properties, you’ll keep your tenants in place if you treat them with respect. The more professional you are, the longer they’ll stay, meaning – make sure their concerns are valued and their reasonable reques......
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Top 5 Reasons To Invest In Rental Properties

They say that more millionaires made their money through real estate then through any other means. There are of course many avenues for investing in real estate, but I’ve always preferred rental properties for various reasons: Real estate investing can be simple and straight forward to get started- The pathway to investing in real estate can be quite simple, you can start talking to experienced investors, read a few of the thousands of books available to learn the basics. Once you have the down payment saved and an understanding of property management (or hire a professional to help you manage) you can start. Ability to invest with leverage- By using leverage you can spread your investment wider and be more diversified. Also, if interest rates are lower than what the current return on the property is, you will effectively be borrowing money for less than what you make on it, thus increasing your return. Utilizing your connections is a good investment- Utilizing your connections in the real estate industry is key to finding the right investments, in some other industries it might be considered insider trading. Stability and Predictability- The real estate market is one of the more stable and predictable investments you can make, do the proper due diligence and manage the assets with care and you will find that it will end up better than most other investments. Multiple ways to grow your investment- With a real estate investment you have multiple ways to help your money grow, ren......
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What to consider when buying a single or a multifamily investment

Many first time investors have the idea that their first investment should be a single family home due to the cost of entry and ease of managment, however, this may not always be the best path to go down. One of the main issues that you have to consider is the fact that if the single family homes goes vacant you will have to cover the entire mortgage until you find a new renter, now if you have a duplex, triplex or fourplex that mortgage will be spread out across more units giving you some cash flow to help with the mortgage. Another reason the first time investors tend to like the single family homes is that you can put a lot less down then you can on a commercial loan and the residential loan can be amortized out over the life of the loan. Residential loans can be on properties that have 4 units or less and can be acquired with as little 5% down, however, commercial loans are on 5 units or more will require at least 25% down and you will need to show a business plan plus as well as management experience and cash flow. When shopping for a commercial loan, be prepared to answer a lot of background questions regarding the property. Some of these questions include: Who pays the utilities? What types of maintenance are required? Numerous questions regarding cash flow will also be asked. Commercial mortgage borrowers should be prepared to provide proof of......
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