Categories
DIY

Low Cost / High Return Remodeling Tips

A row of houses.

If you’re not getting the quality of renters you want, it may be time to do some remodeling.

There are plenty of low budget upgrades you can do to add value to your property while adding eye appeal. The perceived value will allow you to get the rental rates you deserve and attract the tenants you’re looking for.

No matter what market you’re in, chances are if you’ve decided it’s time to remodel, you’ve probably got your sights set on the kitchen and bathrooms. Those are the best areas to start but don’t overlook other tasks that will impress and delight a prospective tenant.

In the Kitchen

  • Remodeling a kitchen brings you one of the highest ROI.
  • Upgrade the appliances to energy-efficient, they will last longer, save you money, and tenants are starting to expect them.
  • Cabinets, like appliances, are the face of the space.If they’re worn and dated, you can save a lot of money by refurbishing/refacing them instead of replacing them. 

Bathrooms

  • Again, like kitchens, bathroom remodeling produces a high ROI.
  • You don’t have to go all out here, but sometimes it’s makes more sense to replace instead of refurbishing. The vanity, for example, is easy to replace and will bring a fresh look for not much money. Big-box retailers will have plenty of low cost, quality options. 
  • New faucets and energy-efficient low flow showerheads will give the space a modern, updated feel. 

Painting

  • A fresh coat of paint is arguably the best and easiest way to freshen up your rental. Don’t get too racy here, keep the transformation subtle by sticking to neutral tones. 
  • An inexpensive way to get a good return on your investment by appeasing more potential tenants.

Outdoor Improvements

  • To ensure that they make it past the driveway to see what you’ve done inside, don’t overlook curb appeal.
  • No need to go crazy here either, keep it clean, neat, and low maintenance. 
  • Keep a well-trimmed lawn, replace the mailbox if looks worn or install sensor lighting for safety.
  • Give your front and garage doors or shed a facelift with a clean coat of paint. 

Things To Be Aware Of

  • It can’t be overstated enough, do not over remodel for your market, you’re renting a house, not creating your dream space.  
  • Plan to exceed your budget and time frame. Keep vacancy in the front of your mind. If your projects will make your property unrentable for too long, break it up into smaller jobs that can be done between tenants.
  • You may like being a DIY landlord, but don’t exceed your abilities. There are laws and ordinances that you need to abide by. It’s best to contract work you are unqualified for or feel uncomfortable doing. 
  • Make safety a priority. Before you start doing cosmetic upgrades, make sure the structure, electricals, and plumbing are in good working order and up to code.

Higher Rental Markets

If your property is located in an area that demands higher rental rates, you might be able to get away with a bit more luxury. Understand your particular market and see what comps in the area are offering. Accents like crown molding or upgraded countertops will add perceived value to the space. As always, don’t over-renovate, do as much as you are sure you can recoup in rent. 

As a landlord, you want to keep your expenses manageable while offering a clean and pleasant home to your tenants. As a DYI landlord, you understand your property better than anyone, repair what you can, replace what’s needed, and upgrade when it makes financial sense. 

Categories
Wholesaling

How to Wholesale Houses with Mortgages

A row of houses.

To be a successful wholesaler, you have to be prepared to work every deal you find, even when they aren’t ideal situations

A motivated seller is a motivated seller. If there is money to be made, don’t let a small glitch prevent you from considering a deal. Wholesaling houses with mortgages is part of that deal.One of the burdens of home ownership is the mortgage. Even homes in affluent neighborhoods go into foreclosure. Remember the crash of 2008? Millions of homeowners lost or were at risk for losing their home because they were underwater on their loans. 

Equity Is King

Some wholesaling deals will involve houses with debt. What matters to you as a wholesaler is the amount of equity the seller has in their home. It’s much easier to close a deal if you can offer them more than what is owed. They’ll simply use the proceeds from the sale to pay off their loan. 

Some homeowners are still hesitant because they aren’t motivated enough. When the seller needs some convincing, remind them of the cash they’ll have in their pocket when this is all over. Look, the seller wants two things from the sale of their home, 1) to get out from under their home debt, and 2) to walk from the deal with some cash in their pocket. If your offer price is higher than what they owe, then the latter is true, but that’s not always the case.

The Short Sale

A less desirable option is the short sale. This type of transaction occurs when a seller owes more on the house than it’s worth. Though this is not ideal, anything is possible. Many wholesalers would, instead, not get involved with short sales because of the extra hassle involved and find it not worth their time, so they move on. This presents you with an opportunity. The seller would already have to be in default on their loan, be willing to take a hit to their credit score AND be able to bring cash to the closing table.

It’s important to realize that there are many reasons why a seller might be eager to sell or why they are behind on their mortgage payments. They may have inherited the home or suffered a job loss. Just because they are underwater on their mortgage, doesn’t mean that they don’t have cash in the bank. They may be going through a divorce or being relocated for work. The takeaway here is, don’t presume anything, your goal is to make money. If the deal presents an opportunity to do so, don’t make assumptions about the seller’s motivation.

Wholesaling houses with mortgages is really no different than most real estate transactions. It is far more common to find a seller that still owes on their home than one who owns it outright. As a wholesaler, that is the leverage you want. Your only concern is, can you find a buyer? It doesn’t matter to you how much the seller owes if you can strike a deal that turns a profit. 

Categories
DIY

And You Thought Being a Landlord Would Be Fun and Easy

That dream of living off “passive” income, however, takes a lot more work than you think.

Can landlords be available 24/7?

You’re tired of your 9 to 5 grind and figure buying real estate and renting it out will be a low-stress way of making a living, so you can eventually quit your day job. Rest assured, there’s more to that story. Yes, real estate can indeed be very lucrative — the world’s supply is limited, after all.

Rent Collection

Monthly rent checks are probably one reason you decided to get into the rental business. Collecting the rent is not as easy as walking to your mailbox on the first of the month. Though most renters are good at paying on time, it’s the inconsistent tenants that will cause you to gray prematurely. When the time comes, be ready to change your hat from the nice welcoming landlord to the merciless rent police. If you stay in business long enough, you’ll hear enough creative excuses to write a book.

How Hard Could It Be?

Any job is easy and enjoyable when things are running smoothly. But when the A/C goes out in August, a pipe burst in January or a tenant trashed the place before moving out, that’s when you will find out if you truly love your new job. All these things, and much more, will eventually happen. You need to be mentally and financially prepared to deal with them. 

For example, replacing the section of a frozen pipe is no big deal and relatively inexpensive, any plumber can do that. With the service call, drive time, and the hourly rate, you should be able to get it for around $250. Remember though, a frozen pipe doesn’t leak. What if it thaws at noon when the tenant is at work? They come home to water spraying out from under the sink or in the basement laundry area.

The area is flooded, the carpeting is soaked, and it’s Friday evening. Now you’ve got a mess, water damage, you may have to replace the carpeting, or least hire a professional cleaner. Wait, there’s more. The plumber is charging double or triple time because it’s after hours and a weekend. Don’t be surprised if you’re flirting with $1500 when all is said and done.

Managing Problem Tenants

No matter how vigilant you are with tenant screening, sooner or later, someone will sneak through that can summon your Satan. You may have heard all the horror stories, but you say to yourself, “I wouldn’t let that happen to me.” Oh, don’t worry, it will.

It’s Time For You To Go!

Evictions get ugly, are time-consuming, and the bills add up quickly. First, you’re not collecting current rent due. Then there are court filing and attorney fees. Chances are the property is going to be a mess or worse yet, damaged. If the tenant left a bunch of stuff behind, you may have to pay to store it. Then, of course, you’re not able to rent to other tenants until you bring it up to standards. And finally, you have to find a new tenant. If you’re lucky, you’ll only lose two or three months’ rent. Including court costs, your final bill could easily hit $4000 to $6000.

What’s A Balance Sheet?

If you’re the kind of DIYer that doesn’t mind getting their hands dirty but hates numbers, sorry but you’re going to have to learn. Oh sure, you can “just pay someone else to do it,” but an accountant or CPA doesn’t come cheap. Even if you can afford to hire it out, you should at least become familiar with bookkeeping and the finances of your new venture. You expect complications with your tenants, you don’t want to get ripped off by some bookkeeper.

You Need To Be A Good Banker

Hopefully, your properties are fully occupied, and you’ve got plenty of cash flow to meet expenses, and you’re stashing some away. For most landlords, the reality isn’t so dreamy. That’s why you need to stay on top of finances and bank some cash. 

Tenants come and go, but your fixed costs don’t go with them. You’ll have times when money is rolling in, and then you’ll face spurts of vacancy. It’s vital to put some money aside to keep as a reserve to get you through the dry times.

Property rentals can be very profitable, but as with any business, it’s not all peaches-n-cream. Real estate is not for everyone. There will times when you’re ready to sell the farm, followed by times that make your investment and hard work all worth it.  

Categories
Uncategorized

Beware of These Tenant Scams

You do your best to find quality tenants for your rental property through proper screening, but there will always be scammers who try to “work the system”. Though larger multi-unit properties are not immune, rental scammers tend to target individual landlords.

Scammers know many DIY landlords have loose requirements & screenings, and feel confident they can talk landlords into their scams. Implementing strict procedures and being aware of common scams will help you avoid frustration, court costs, and loss of rental income.

Be Aware Of These Common Tenant Scams

Watch out for signs of tenant scams

The Wire Scam

This one is an oldie but a goodie, its use is not limited to landlords. After the application is approved, the renter “mistakenly” sends a check for more than the required amount and asks for the excess to be wired back to them. Of course, the original check is bogus but will take time to bounce. By that time, the bank notifies the landlord, the money has been wired, the recipient has received his “refund,” and the landlord is out the cash.

Fake Pay Stubs

You can buy anything online. Nowadays, the internet is an incredible source for counterfeit documents. Also, with today’s technology, it can be difficult to recognize falsified documentation. Always make sure to verify employment as part of your screening process. Lookup the employer online and call the number you find for them. An applicant may not make enough money to qualify or doesn’t have a job at all. Either way, you’ll have problems collecting the rent through the lease term. 

Fake Verification

This one is as old as the telephone. The prospective tenant provides bogus contact information, so when you call to verify, you’re actually talking to an accomplice in on the scam. If you’re calling to check employment, don’t assume the information is correct, cross-reference the number with a quick internet search. If the applicant has provided a cell phone, call the business directly and ask to speak to someone in human resources. Same goes for verifying rent payments with current &previous landlords.

Falsified Credit Reports

Similar to faking pay stubs, an applicant may attempt to provide you with a faked copy of their credit report. Often these are cut & paste hack jobs that are relatively easy to spot if you’ve seen actual credit reports in the past. It’s always better to obtain an applicant’s credit report via your own resources, than accept one they provide.

The Illegal Sublet

This bit of deceit is unique in the fact that it not only affects the landlord, but an innocent third party as well. The original renter sublets to another person, without telling the landlord. They collect rent from this sublettee, often for months in advance, and pocket it instead of paying the landlord. The landlord is then stuck having to evict the scammed sublettee, who often takes their frustrations out on the innocent landlord.

Delaying Eviction 

There are a couple of ways to execute this one. First, the tenant makes partial payments for past rent due after the eviction process has been initiated. By accepting money from the tenant, you may need to restart the eviction process anew giving the scammer more time in your unit. Second, on the day of eviction, the tenant will ask for a little more time to get their things out. By allowing a “little bit of time” after a legal move out time was set, a landlord may be inadvertently resetting the clock on the eviction process.

The Tenant Swap

This list of tenant scams is by no means complete, as shysters are always coming up with ways to hoodwink an unsuspecting landlord. The best way to avoid falling victim to tenant scams is to implement a comprehensive screening process. If you sense that something is amiss, double-check information and don’t allow the applicant to sign a lease until you’ve been able to eliminate any doubt. Even when it’s not a matter of trust, it’s just good business.