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What is Your Investor Personality?

What is Your Investor Personality?
You’re probably reading this because you’re as addicted to click-bait quizzes as most people on social media. In real estate, however, all those investor personality quizzes won’t do you much good. Spoiler alert: there are two investor personality types, and you can be both at any given moment. Personality A: The Wealth-Builder Property investors who play it smart earn 12-30 percent ROI, depending on risks and market timing. That’s a sizable advantage over stock market investment returns, which average about 3-9 percent annually. Real estate investing builds wealth, and more risky strategies like flipping can build it more quickly. Investors who are risk-averse, however, might stay more in the second personality type most of the time. Personality B: The Retirement Plan Long-term investors are those who are focused on building wealth for the long-term, specifically, for retirement. Creating a portfolio that will make ends meet after going on a fixed income is a naturally risk-averse venture—no one wants to bet their future on something that might result in a loss. Retirement Planners opt more often to buy and hold safer investments, staying out of the property trading arena as much as possible. How To Be Both A and B Different seasons and goals may require diversification of an investment portfolio. Just like when investing in the stock market, it’s a good idea to periodically re-evaluate your goals, portfolio growth, and income potential and take a multi-faceted approach to real estate investing. As long as you stick with the tenets of smart purchasing—......
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7 Ways Property Managers Increase Income Property Profitability

7 Ways Property Managers Increase Income Property Profitability
Paying a property management company might seem like a needless extra expense at first blush. But, before you dive into managing your own investment properties, consider a few ways property managers can use their resources and experience to actually boost your profits. Save time, save money. Some tenants are easy-going and can handle minor property maintenance and small repairs. Others are more high-maintenance. Spend time working or with family rather than hanging light bulbs, greasing squeaky hinges, and trimming bushes at the rental property. Save on maintenance and repair costs. Property managers regularly employ bonded and insured contractors and maintenance staff. The volume of maintenance and repair work that property managers handle means they pay less, understand the work, and can supervise effectively. Collect rent without a runaround. Property managers handle all collections and any legal issues that arise from nonpayment, including eviction. Keep properties rented. Management companies vet tenants to find the best ones, keep tenants longer than owner-managers do, and keep vacancies to a minimum. Managers set a fair rent for your property and market it effectively to attract the best tenants. Maximize property values. Management companies know all about the best improvements you can make for your money to improve its actual market value. They'll share that knowledge with clearly written, easy to understand proposals that are tailor-made to increase your profit margin. Simplify income taxes. Property management contract payments are actually tax-deductible expenses. A good property manager also keeps all your paperwork and receipts in one place,......
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Why All-Bills-Paid is a Case-by-Case Scenario

Why All-Bills-Paid is a Case-by-Case Scenario
I recently met with a first-time multifamily investor who was in the search phase for the perfect property. We discussed the importance of neighborhoods (i.e., location), current tenants, property classifications, and the many other considerations that go into such investments. Then, he made an interesting statement. “If I offer all-bills-paid, I won’t have to worry about anything else as much. Everyone likes having all their bills paid.” While there’s truth in the statement, I found it to be a great opportunity to discuss the unique considerations that accompany such properties. Here’s a brief recap: It’s not widely applicable. You can’t just choose any property and make it all-bills-paid; at least, not without considerable additional investment. All-bills-paid properties are designed as such, without meters on each individual unit. While you can turn a property from an all-bills-paid property to one that is not, and vice versa, there is an associated cost. So, it’s often best to purchase a property that is already setup to accommodate your planned pricing strategy. Your pricing strategy will determine the type of tenants you attract. He was right when he said that everyone likes all-bills-paid. And, for this reason, all-bills-paid properties rarely have vacancies. Yet, the stereotypical tenant for these properties aren’t always on-time with payments, don’t always take care of the property the way they should, and aren’t likely to be loyal, long-term tenants. Understanding this as you go into the decision to offer all-bills-paid will at least help ensure you have realistic expectations of what’s to come.   It can......
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The Top 3 Things Many Investment Plans Omit

The Top 3 Things Many Investment Plans Omit
Real estate investing is a business proposition, even if you’re only buying one small rental property. Property owners need a business plan with some features specific to real estate. Remember to speak to your lender, and include market research and an outline for when to sell. Consider Your Target Audience Your business plan is a sales pitch, and what you’re selling is profit. Your audience is a bank lending agent, so highlight your own experience and introduce your team. List your partner(s), legal representation, financial, contracting and real estate resources, along with brief bios that tell a lender that your team has the experience and dedication to make this investment plan turn a profit. Expand Your Guiding Principles Among your guiding principles should be step-by-step instructions for pre-purchase property research. Think of it as a “how-to” guide for when you or someone on your team might want to cut corners. Set up a system that outlines exactly what due diligence looks like to make sure each and every property you buy is a great investment that meets your current needs. The biggest mistake an investor makes usually comes with a mortgage, so get detailed enough to avoid buying properties that will cost you in the long run. Exit Strategies When you buy a property, you usually know up front if you’ll buy and hold, rehab, or wholesale for more immediate returns. Your business plan exit strategy is a great place to detail some “if, then” scenarios in which you would have no doubt abou......
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Why Multifamily Investing Requires Homework

Why Multifamily Investing Requires Homework
Apartments are an investment that can weather just about any market, according to a recent report by the National Multi Housing Council. Investment property ownership returns generally average about 7 percent, but nearly a quarter of all investment properties are apartment complexes. Why? Because, over the last compiled 20-year sample, apartments provided an average return on investment of more than 9 percent, a number that market conditions impacted just minimally. If you’re looking for a solid investment that offers a good rate of return and shows promise in the rental market, invest first in some solid homework. Investors are ever-mindful of the adage, “buyer beware,” but with a major investment like a multifamily residential complex, the devil is in the details. The details should come together in a real estate feasibility study which includes: The property's income and expense statements Area demographics and growth projections Comparable properties and suggested amenities Market analysis based on projections and comps Estimate of total cost of suggested improvements Timeline from purchase to projected solvency Feasibility studies look different depending on who puts them together, but should be comprehensive and address the needs of prospective investors, renters, and the local community. In addition, it's a good idea when looking at comps to put together a cost analysis per square foot to ensure you pay a fair price for a viable property. Comparing local rents will also help you see where rent should be increased or amenity value should be added to the property. While the market shows......
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Understanding Property Classification: For Investors

Understanding Property Classification: For Investors
If you’re new to property management, you’ve become or are becoming familiar with multifamily property classifications. Also referred to as ‘types,’ these classifications of either A, B, or C allows a property to be rated against a certain set of standards by which rent rates can then be determined. Here is the breakdown of how each type is defined: Class A: These properties are the cream of the crop. They have been built using the best quality materials and construction process. They have the best management companies on-board and are maintained to the highest of standards. And, while they are typically new or fairly new construction, there are some Class A properties that are a bit older, but receive such a rating because their quality standards are on-par for the class. Class B: These are the ‘average’ apartments in terms of quality. The materials and construction process used weren’t the very best, but not the worst either. They are typically somewhere between 10 and 50 years old and, while they offer space and functionality, have very little to offer in the way of anything unique or special. Class C: These, as you can imagine, are on the lower rung. They are built and maintained purely in the name of affordability, and therefore tend to utilize construction and materials that are below average. They are older buildings and have very few, if any, amenities. The Recommended Approach Without knowing, the average investor might think the Class A property is an easy, no-brainer investment. A......
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Due Diligence and Hiring a Property Management Team

Due Diligence and Hiring a Property Management Team
One of the most important decisions you’ll make in relation to a multifamily property investment, other than deciding on which property to invest, is whether you will hire a property management team. So, why then would you make such a decision without having performed as much due diligence as possible? It’s important to understand that just because a property management company has been in business for a while or has a large portfolio of properties doesn’t mean it’s suited to meet the very unique needs and demands of you and your property. Due diligence is a must in ensuring the needed alignment is there. Why it’s important A few reasons why you want to take the time to thoroughly vet any property management company with which you’re considering a partnership include: Face value: The company you choose will essentially be your face to the world. The people they hire for the office and contract work will be an extension of the property’s brand and a representation of that brand on the job and in the community. Everyday responsibilities: A property management company must be able to manage the daily business. Researching the company’s track record for approach and best practices is necessary to determining suitability. Reputation. How well is the company known and what things, good or bad, are said about it? What do online reviews look like and how likely are they to be from credible sources? When calling on the list of provided references, what is the overall consensus and are those r......
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Due Diligence: What Every Investor Should Know Before Making an Offer

Due Diligence: What Every Investor Should Know Before Making an Offer
In 2008, this was a headline we read: “It is the Best Time in 30 Years to be Investing in Apartments.” Fast-forward 7 years and this headline just appeared in a June article on NJ.com: “Apartment Buildings Offer Strong Returns on Investments.” Why so little change? Because, while investment property ownership typically generates about 7 percent, multifamily has generated somewhere in the neighborhood of 10%-18% over the past 5 years (Source: NCREIF Property Index). But, before you go jumping into what you expect will be the most profitable investment of your career, you must first understand that these are averages and, like everything else, a property can flop if your investigating skills aren’t as shrewd as your investing skills. What you need, at a very minimum, is a feasibility study, to include the following components:  The property's income and expense statements Area demographics and growth projections Comparable properties and suggested amenities Market analysis based on projections and comps Estimate of total cost of suggested improvements Timeline from purchase to projected solvency Feasibility studies look different depending on who puts them together, but should be comprehensive and address the needs of prospective investors, renters and the local community. In addition, it's a good idea when looking at comps to put together a cost analysis per square foot to ensure you pay a fair price for a viable property. Comparing local rents will also help you see where rent should be increased or amenity value should be added to the property. Remember the words of ......
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Ready to Manage an Apartment? Take the Quiz to Find Out

Ready to Manage an Apartment? Take the Quiz to Find Out
Investing a large amount of money into multifamily properties can be risky for the unprepared. Answer the following questions and check your answers at the end to determine if you're ready to start shopping for properties.  1.    Which of the following functions are the responsibility of an apartment manager?  a)    Lawn and landscaping services  b)    Pest control  c)    Tenant relations and dispute mediation  d)    Emergency repairs (HVAC, plumbing, electrical, etc.)  e)    All of the above  2.     What are the two methods of communication a majority of all apartment residents prefer?  a)    Mail  b)    e-Mail  c)    Doorknob hangers  d)    Telephone calls  e)    Texting  3.    What is the largest expense for an apartment renter?  a)    Groceries  b)    Car payment  c)    Day care  d)    Utilities  e)    Rent  4.    What are the biggest risk factors for a multifamily housing investment?  a)    Contractors  b)    Maintenance  c)    Customer Service  d)    All of the above Answers: 1.     Answer: g) All of the above. And then some. As soon as a property owner signs those closing papers, he or she becomes “the management.” Apartment management involves all facilities maintenance, customer relations and emergencies, just as a sample. 2.     Answer: b) e-Mail, and e) Texting. A recent survey by SatisFacts and TurnSocial revealed that 87.2 percent of renters today have smartphones, and they want apartment management to communicate through them. 3.     Answer: e) Rent. Tenants pay a majority of their income to live in a property, and they expect the property manager to address issues quickly and efficiently. 4.     Answer: d) ......
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3 Predictions Based On REIT Market Gains

3 Predictions Based On REIT Market Gains
Many indicators in the U.S. still point toward achingly slow economic recovery in the coming months and years. A recent study cites a significant one-month Real Estate Investment Trust (REIT) gain as a sign that investors are starting to believe the economy will continue to improve. According to NAREIT's Brad Case, a 3.4 percent increase in August 2014 REIT returns means three things: Economic recovery will continue, albeit slowly, for the foreseeable future Demand for commercial real estate will increase, indicating business sector and job growth Rents and occupancy rates will increase as lagging construction fails to meet increased demand While this is a rather simplistic set of deductions from the FTSE NAREIT All REITs Index report, history shows that a bull market such as this one has become generally has a run of about 15 years. An S&P bull market, on the other hand, usually only lasts four. That means that REITs are a better indicator of long-term financial health and stability than the stock market. So, where is the smart investor looking for steady increases in returns and overall market stability? REITs. And, they're diversifying their holdings. The best performers in the market were those in infrastructure, health care, and timber. That represents a significant change over recent years, indicating that REIT investors, according to Case, are becoming more comfortable diversifying their portfolios and expanding their horizons. The result, he said, will be that investors enjoy less portfolio volatility moving into a long-awaited investors' market. The broader picture rev......
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