Archive for February, 2012

We’d all like to have a crystal ball when investing our hard-earned cash in real estate, wouldn’t we? How great would it be to know what markets are poised for the greatest increases or which ones to avoid? If that single family home is the best investment, or if you should look at the more expensive duplex around the corner?

Unfortunately, like everything else in life, the future is unknown, but these tips from Zillow will help you as you get started in real estate investing.

1. Home Inspection

A fairly standard piece of knowledge since most people know to always have a home inspection completed when they are buying property. However, there is more to consider here with investment property. While a home inspection will note the items in the house that need repair, the inspector is not pricing out the costs to get all those items fixed, nor other items like painting, flooring, etc. that you might plan to have done. It’s your job as the owner to put together a list of all the work and get with your contractor to price them out. Put that number into your financial analysis and note that properties in poor condition rarely sell at a large enough discount to compensate for all rehabilitation work that needs to be done!

2. Title Abstract and Insurance

Title insurance is another necessity when buying real estate. It is vital to safeguard against problems like when it turns out the property was only part-owned by the seller, and the other party involved didn’t authorize the sale. Should something like this happen, it is the title insurer’s responsibility and they would then be accountable for any costs involved with the dispute, up to the policy maximum limit, unless the title issue was “Excluded” from the title policy.

The Schedule of Exclusions will note issues the title insurance policy will not cover. Investors should take notice of these exclusions because any title issues excluded from coverage become the buyer’s responsibility.

3. Survey, Plats, Legal Description

Exactly what the investor is buying should be legally defined. Investors should confirm that what they believe they are purchasing, in fact, matches the records, be that a county plat or a survey done of the lot lines. In any case, you should walk the property and compare what you physically see to what is on the plat/survey. Make sure you are comfortable that no neighbors’ fences, driveways or other items are encroaching on your space. For buyers of condominiums, it’s important to review the recorded rights to items such as patio areas, parking spaces, interior space, etc.

4. Homeowners Association

When you purchase property in a common interest development like a condominium or town home, you are not only buying your individual unit, you are buying into the larger entity. This means you are responsible for Homeowner Association (HOA) fees, or your share of the cost of common expenses. These HOAs come with some additional risks and conveniences, but you need to evaluate these as part of the entire equation. Investors are encouraged to carefully analyze the HOA they are buying into to make sure it is adequately funded.

5. Financing

Investors who take out a mortgage should shop around as many lenders as possible to make sure they get the fairest deal possible.  Just getting one bid from one lender is not good enough so make sure to compare interest rates with fees to find your best deal.

6. Insurance

Lastly, do you have the proper type and amount of insurance coverage in place? You will need more than the traditional homeowner’s policy so be sure to discuss the options with your insurance agent and determine what you need to be adequately covered. Look into umbrella policies as well as disaster policies so nothing is missed.

But all of this is nothing if your rental property is not cash-flow positive, based on conservative efforts and provides you a fair rate of return on your investment.

Investors need to do everything they can to minimize their risk as much as humanly possible. When you look at investments gone wrong, most of them could have been mitigated if the investors had carefully analyzed and researched what they were buying. The good news is those who do their homework will surely reap the rewards.

Photo by: Larry McCombs

One of the most important tasks as a landlord is turning your apartments as quickly as possible between tenants. This is time that your rental is vacant and any day you do not have a tenant paying you rent, is money you will never be able to get back. But how do you prepare your rental for your new tenant?

Here are 5 steps to make sure your empty apartment is move-in ready as quickly and efficiently as possible.

1. General Cleaning

The general cleaning should take place right after the previous tenant moves out. This is the time for you to evaluate the amount of work needed to prep your unit. Start by taking out any items and trash left behind by your former tenant. Be sure to check any storage or garage spaces too.

2. Maintenance

Hopefully, your former tenant left your unit in good condition and most of your repairs are minor. Common repairs include replacing burned out light bulbs, tightening loose towel racks and hanging closet doors that have fallen off the track.

During the maintenance period, be sure to inspect all plumbing fixtures and electrical components of the property. Check for leaky faucets, clogged drains or running toilets. The circuit breaker should be working properly and all fuses should be in place.

Appliances should be checked to make sure they are in proper working order. This is also the time to change air filters and hire pest control for preventative maintenance. Clean out the fireplace (if your unit has one) and have the chimney and flue inspected.

3. Painting

Most of the time you will only need one coat of high-quality white paint, unless you are changing the color from something darker. Make the job easier by preparing the walls and securing the proper tools. Remove any nails, screws, picture hangers or tape. Fill all holes with putty, then sand before beginning.

4. Final Cleaning

Next comes the final cleaning. Clean up after any maintenance and painting messes left behind. Wipe down all surfaces and vacuum floors. Make sure to pay close attention to the kitchen and bathrooms. Remember, clean sells!

5. Flooring

The final step is to address the floors in your unit. If you have wood or linoleum flooring this can be combined with the final cleaning. Carpet that is still in good condition should be cleaned and handled by professionals. If the carpet is dated, worn or damaged, it should be replaced.

These are the 5 the most efficient steps to prep your vacant units as quickly as possible. Remember, professionals can be brought in at any time to help with the process, especially if you are not very handy or do not have the time to do it yourself. With just a little work, your apartment is ready for your new tenant to move in and hopefully will not need to turn this unit again for long time.