Categories
Shortterm Rentals

How to Diversify Your Short-Term Rental Portfolio

Investing in short-term rentals (STRs) requires you to apply one of the main two schools of thought that exist when it comes to real estate investing in general:

  • Diversifying: Balancing risk and reward by spreading out investments across varied property types, locations, classes, and strategies.
  • Specializing: Focusing on investing in the same property type—repeating what you’ve found successful without spreading your resources too thin.

Both strategies are valid approaches to grow your portfolio. One focuses on horizontal expansion, while the other does it vertically. While investors tend to stick with one over the other, there is a way to have a hybrid—focusing on STR investments across different locations but keeping just to one specific asset class. Doing this can help you mitigate risks while focusing on one property type of your choice.

Before you set out to diversify your short-term rental portfolio, let’s look at the benefits of this approach.

Why You Need to Diversify Your STR Portfolio

There are two primary reasons why you need to diversify your STR portfolio: 

  1. To remain resilient in the market, especially with the unique rhythm of vacation rentals. Compared to long-term rentals that give consistent income year on year, the income generation of STRs is highly dependent on the season, the location, and their respective peak times.

A lake house will attract more guests in the summer, a log cabin near a ski resort will be profitable in the winter, and homes near Disneyland will be in high demand during school vacations.

  1. To meet the rising post-pandemic demand, where travelers are now seeking alternative accommodations to minimize human interaction and maximize flexibility.

In fact, the bookings’ reservation volume this year is now 400% higher than 2020 and 50% higher than 2019. With this increase in demand comes higher prices as well, where STRs are charging 20% more than they did last year.

As an STR investor, you want to protect your portfolio and capitalize on the growing demand—expanding your coverage to include rentals in other locations and of different class levels.

How to Diversify Your STR Portfolio

Now that we’ve discussed the benefits, let’s look at two ways you can diversify your portfolio. One way to diversify is opting to have STRs in multiple locations, which can bring more stability to your investments.

Diversifying By Geographical Location

While the STR demand in one city might be booming, another might be slowing down. By having investments in different locations, you can take advantage of a market’s natural ups and downs for a more stable and consistent revenue flow.

For example, take a look at how Big Bear Lake, South Lake Tahoe, Gulf Shores, and Sedona performed vastly differently over a two year period (thanks to seasonal demand, among other factors):

Source: AirDNA

If you have STRs in only one market, the success of your investments will completely be at the mercy of that market’s performance. Instead, consider spreading your investments across different geographical locations, so you’re not vulnerable to the same risks simultaneously.

In choosing where to spread your investments, AirDNA shares a list of different markets that covers the key factors of a successful STR investment:

  • Growing rental demand: Where the annual occupancy of rentals and listing growth rates are increasing. A good number means the STR and travel demand in the market is healthy.
  • Financial viability: Where you compare the home value to the average income of other STRs in the area (e.g., Airbnbs) to evaluate the rent-to-price ratio. The rule of thumb is to make sure that the monthly rent you can charge is at least 1% of the purchase price.
  • Increasing revenue growth: Where the income earned from STRs increases over time. You can calculate this by looking at the year-on-year change of revenue per available room (RevPAR) for the rentals that were booked in both time periods.

Here are some locations to consider, based on AirDNA’s top performers for these metrics:

Source: AirDNA

Diversifying By Asset Class

Generally, real estate asset classes are divided into four letter grades: A, B, C, and D. While these scores refer to property condition and neighborhood livability, it also describes the type of guests or tenants you’ll attract:

  • Class A properties: These are the most expensive and best-maintained homes in the market. They attract guests and tenants who can afford to live in luxury and enjoy the special features available in the property.
  • Class B properties: These are slightly smaller and more affordable than class A properties, but are still well-maintained. They attract those who want a pleasant place to stay without spending too much money.
  • Class C properties: These are reasonably maintained and decent homes. When times are tough, guests and tenants who used to stay in class A or B options might opt for class C instead.
  • Class D properties: These are older homes in areas that guests find less favorable to stay in. Aside from being in a more dangerous neighborhood, class D homes are likely far from shopping areas or grocery stores. Typically, they don’t make profitable STRs.

There are specific asset types to consider for Airbnbs as well. Properties are not divided into the same letter grades, but are categorized according to the type of guests they’ll attract:

  • Unique Stays: These are unusual but beautiful places to stay for a vacation. Whether it’s a yurt in the woods or a houseboat in a scenic lake, unique stays will attract guests looking to splurge on an adventure.
  • Entire Place: These are typically whole houses where guests have complete privacy to enjoy amenities and other activities exclusively.

Since these can be the likes of single-family homes, you can keep the letter grades in mind to diversify your “entire place” offers.

  • Private Room: These are single rooms in a bigger property. These listings attract guests who have no problem with shared spaces, such as kitchens and bathrooms. Travelers passing through the city or students on a budget tend to choose these.
  • Shared Room: These are similar to private rooms, except the guest can have another person sharing the room with them. These options often attract guests who are younger and more budget-conscious, like backpackers. 

The list is not exhaustive, but it shows how STRs are attractive to guests with varying budgets. Based on how guests generally respond to economic changes, it’s safe to assume that higher-class or luxurious properties would fare better in good economic times, while lower-class or budget ones will become necessary in tougher times.

The bottom line is you should consider the guests’ needs and preferences to diversify your STR portfolio and remain profitable in all parts of the market cycle.

Conclusion

The goal is to diversify your STR portfolio to appeal to a broader base, creating more stable revenue streams in your investment model. Doing so will help you weather market cycles and peak seasons, helping you meet the increasing demand for STRs in the post-pandemic world.

Any other tips on how to diversify a portfolio that’s focused on STR investments?

Image courtesy of Alexandr Podvalny

Categories
Landlords

Should Tenants Be Allowed to Make Home Improvements?

Nothing is worse than having a tenant who took “please feel at home” way too seriously.

While some tenants will only install their own wall decor or child safety latches on kitchen cabinets, some tenants make more permanent changes to the rental without your permission. This creates a whole lot of trouble—broken lease agreements, depleted security deposits, and costly restorations when they finally move out.

So, should tenants be allowed to make home improvements in any circumstances? Let’s look at some considerations.

Common Home Improvements to Expect from Tenants

Here are some examples of rental property alterations often done by tenants:

  • Painting the interior walls
  • Changing light fixtures
  • Changing appliances
  • Installing new locks on doors
  • Upgrading security systems
  • Changing the landscaping/garden

While these changes may be considered an actual improvement or upgrade to the property, you need to ask yourself the following questions before allowing them:

  • Will your tenants do a good job? They may not have the skill to carry out the project and may not adhere to safety or industry standards.
  • Who will pay for the improvements? They might expect a decrease in rent due to work done and materials used—even if the changes made are not up to par. 
  • Can you reverse the renovation? It’s possible that they deviate from the purpose of the original design (e.g., laminated floors are easier to clean than hardwood, simple landscaping is easier to maintain, etc.), which could require reversals in the future.
  • What does the lease state? Allowing them to break agreements might lead to them pushing their luck—further ignoring other clauses beyond just home improvements. 

You need to remember that your rental property is an investment—one that you should take ownership over, improve, and maintain according to your standards. Moreover, your tenants should see the importance of adhering to the contract and, ultimately, respecting you as their landlord.

What to Do If They’ve Done It Already

Should you discover that they’ve already made the improvements without authorization, here are three steps that landlords should do:

  1. Send a written notice of the home alteration, expressing your disappointment that they did not notify or seek permission before implementing the changes. Point out the specific lease clauses that they have violated.
  2. Warn the tenants that there should be no further changes done to the property without permission and that you’ll happily consider any changes they might still want to make.
  3. Outline the consequences of their action. This could range from just a fair warning to requesting that they reverse the renovation made—at their expense. If the alterations are extreme, you can deduct the cost from their security deposit upon Move-Out or proceed with eviction due to lease violation.

How to Prevent Tenants From Making Unauthorized Home Improvements

As they say, prevention is better than cure. So if unauthorized home improvements have been made by your tenants, make sure to review the lease agreements. Ensure that the following lease clauses are clearly stated:

  • Improvements that can only be done by the landlord or with landlord’s written permission
  • Improvements that can be done by either party
  • Consequences for alterations that devalues the property

Your goal is to create a space for tenants to freely improve their living conditions while being firm and clear with the boundaries. Even if you lucked out this time and the tenants did a great job improving the home, an unclear lease will open you to future problem alterations…and your luck may just run out.

Conclusion

Every rental property will need renovations and improvements from time to time. From repairing to re-flooring, landlords need to stay on top of their rental properties and make the necessary renovations when needed.

If your property can use a bit of work and you see that the tenants are capable of doing a good job, you should have no problems allowing them to improve the space. The bottom line is to make sure that they understand the boundaries and adhere to your lease agreements, and you should be good to go.

Do you allow your tenants to make home improvements? What are your non-negotiables? 

Image Courtesy of Polina Tankilevitch

Categories
Flipping

How to Find the Ideal General Contractor to Flip Houses

Finding a general contractor (GC) for your house flip can be challenging.

You want someone who knows what they’re doing, is trustworthy, has affordable prices, and has good reviews. This means you need to do proper research before hiring a general contractor—don’t hire the first one you find!

As a flipper, your main goal is to earn a high flipping profit in return for your investment. To do that, you need to renovate the house within a specific budget and timeframe, which means using contractors who stick to deadlines and understand the importance of flippers’ margins.

While simple repairs are easy to budget for and can be done within a month, more complex renovations can easily incur budget overruns and take more than a couple of months to complete. In these cases, it’s best that you hire a general contractor to handle the project for you, or assemble a team of go-to contractors that you work with regularly on your flipping projects. Which you go for will depend on your needs, but this article focuses only on general contractors.

Let’s go through some best practices for finding the ideal general contractor for your flip projects.

Independent Contractor vs. General Contractor

Before we go any further, it’s important to make a distinction between independent and general contractors:

  • Independent Contractors: These are contractors that you directly contract to perform tasks on a contractual basis. They complete the project themselves, without the help of subcontractors.
  • General Contractors: These are also directly contracted; however, tasks are subsequently contracted to subcontractors to complete. They complete the project along with their subcontractors instead of completing the project by themselves. They also handle all the administrative tasks needed (e.g., paying subcontractors, securing building permits, getting insurance for all workers, etc.).

General contractors will coordinate with necessary subcontractors on your behalf and oversee the project for timely and on-budget completion. They are ideal for major renovations and flips, because you can get all aspects of the renovation handled by a single entity.

What to Look for in a General Contractor

Here are the key things to look for in a general contractor:

  • A Good Reputation: The best way to find a general contractor is by asking for recommendations. Contractors work largely based on referrals. Ask your friends and the real estate community if they can vouch for somebody reliable, communicative, and punctual.

Once you have a list of options, go the extra mile to read online review websites and visit the Better Business Bureau to check their reputation and ask about the projects they’ve worked on before. 

  • A Good Contract: Hiring a GC on a handshake is not a good idea. You’ll want a contract that spells out what they will do and what you will do, with deadlines. The more thorough the better! Otherwise, there’ll be no accountability and your project can go sideways quickly.
  • Appropriate Payment Practices: A good general contractor will accept payments in the form of checks and wire transfers. They would also agree to sign a lien release before payment and negotiate with you on the payment schedule.

Stay away from contractors who want you to pay in cash or a lot upfront. Cash payments are not illegal; however, contractors who ask for them might be avoiding paying income taxes. This is a practice done by less-than-reputable contractors. Moreover, a down payment of 30% of estimated costs is typical to cover an initial retainer and materials, but an established contractor won’t need your full payment to start the job.

  • Local Coverage: Hiring a general contractor who lives and operates within the area of your flip is your best option. They will know the local building codes, city inspectors, have a network of subcontractors ready to help them, and you can easily contact them in the event of an emergency.
  • Proper Licensing: General contractors need to be licensed to pull the necessary permits for your property. Without these, your property won’t abide by the local building codes or pass inspection. You’ll end up financially responsible for bringing up the property to the required standards.

Instead, verify their license by asking for the license number. Check it with your state’s licensing board. For licensure information in Michigan, visit the state’s Department of Licensing and Regulatory Affairs website for details on the Bureau of Professional Licensing’s requirements.

  • Proper Insurance: General contractors should be insured for General Liability Insurance and Workers’ Compensation. You can ask to see a copy of their policy and call up the insurance company to verify the information. The insurance should be current and have clear policy limits for you to check. You should also be added as an “additionally insured” on their policy, until your project is complete.
  • Warranty in Writing: General contractors should provide warranties that cover the work they’ve done in your property. A warranty assures them that they won’t be coming back for multiple repairs over an extended period of time (warranties typically last one year only) while guaranteeing you a good renovation result.

This list isn’t exhaustive, but it’ll put you on the right track in finding your ideal general contractor.

Questions to Ask During the Interview

As part of the process, you should also have an interview with the general contractor. Here is a list of questions you can ask to help you identify those who’ll fit your criteria:

  • How many people work for you? How long has your crew been working together?

You want to work with an established company that has a large team of managers and assistants.

  • Where are you operating, and what is your service coverage?

You want to work with a local company that knows its way around renovations in the area.

  • What similar past projects have you completed?

You want to see their experience concerning the project you’re giving them. If they’ve never done what you need them to do, ask them how they will approach the project.

  • How do you communicate with your clients?

They should give you daily or weekly progress reports with photos and send itemized, detailed quotes and invoices.

  • For this project, will you be using subcontractors or just your own team?

If they are using subcontractors, make sure that all workers are trained, licensed (if applicable), and insured.

  • Are you licensed and insured?

Licenses should be updated and registered in the state where your property is situated. Insurance should include General Liability Insurance and Workers’ Compensation.

  • What would our contract look like?

Not all general contractors will have contracts. If they don’t, you can draft one up. Regardless, have your lawyer review it before everybody signs.

  • Will you provide warranties?

Make sure the warranty is written down and will conform to the requirements of the contract.

  • How will the payment schedule and plan work? Will you agree to sign lien releases?

Agree and sign the payment schedule before the job begins. They should agree to sign lien releases before payment.

  • Have you ever had to deal with lawsuits?

If they’ve been sued, ask what happened and how they handled it. If they’ve sued a client, ask for further information and check public records. If they’ve had serious accidents before, ask how they dealt with the situation and what they’ve improved to make sure it doesn’t happen again.

Conclusion

We hope this article is enlightening and helpful in your search for a general contractor. It might take a lot of effort, but having a reliable and skilled general contractor will protect your budget and timeline for a successful and profitable house flipping project.

The better your general contractor, the more houses you can flip fast, at the highest quality, and for the most competitive price.

Any additional tips for finding the ideal general contractor as a flipper?

Image courtesy of Andrea Piacquadio

Categories
Landlords

How Landlords can Easily Raise Rents

Many landlords dread raising rents on their tenants for fear of the tenants moving, or the landlord just finds the whole process unpleasant. So, it’s not uncommon to find landlords that haven’t raised rents in 2, 3, or more years. 

Raising rent is actually a regular (albeit not the most fun) part of being a landlord. A landlord should raise rents as the market dictates, because: 

  • Keep up with inflation
  • Be able to afford rising maintenance costs
  • Accommodate property tax & insurance increases
  • When you’ve renovated a property to a higher standard

When that time inevitably comes, you need to know the right way of increasing your rent. Doing it the wrong way might cost you, tenants, leading to longer vacancy periods and costlier turnovers. Plus, no landlord wants to feel like the bad guy, so it’s important to show you’re being fair by handling rent increases diplomatically.

This article will teach how you can raise rent amounts and generate more income while communicating the situation professionally to your tenants. We’ve even included a sample rent increase notice that you can use for informing your tenants as amicably as possible. 

How should you approach a rent increase?

Depending on local and state laws, the required notice period for rent increases can range from 30 to 120 days. In Michigan, you have to give 30 days’ notice, but if you’re raising rent by 10% or more, you have to inform the tenant 60 days ahead of time.

Most people draft a letter informing tenants of the increase (like the one we’ve included below) and send it out to them, but there’s another way to approach this: 

  1. Go on Zillow, the MLS, or Rent-o-Meter to find what the market rent for this property is.
  2. Compare that to what the tenant is paying.
  3. Submit that information to the tenant and ask them what seems fair in terms of an increase

Note: At this point, you haven’t told them the rent was going up, but you’ve implied it. You’ve also involved them in the decision, so they’re more willing to accept it, making this a more subtle, non-aggressive approach to raising rent.

  1. The tenant’s response will typically be to offer 50% of the full increase, although some will say they don’t want to pay any increased rent at all. A good way to address either of these scenarios is to ask: “Why do you think that low of an amount is fair?” Make them defend it. 
  2. Then they’ll explain why they shouldn’t pay an increase (personal emergencies, poor maintenance on your part, etc.). Then you can ask: “Are you sure that’s your best offer?” 

The best part about this is that it lets you raise rents without TELLING the tenant there will be an increase, but rather including them in the process.

Tenants may even surprise you by offering more than what you expected! 

How much can you increase?

Ideally, you’ll want to keep the raise to less than 5% per year. Any higher, and your tenants will most likely move away—even if the rate is similar to your competitors in the market.

Why?

Think of the other rule of thumb that’s often used in screening tenants: rent amounts should only be a third of the tenant’s monthly income. This means most people can’t afford to spend an additional hundred dollars a month on rent payments – unless the tenant base in your area is on the up and up, like because of new employment opportunities or developments nearby.

Jacking up the amount too high without good reason will therefore jeopardize your rental income, as tenants will struggle to pay fully and on time. 

Plus, once a tenant has been there a while, they feel entitled to zero rent increases forever. If you raise it from $800 to $900 overnight, they’ll freak out. Even if the rent in the area is $1,100, they can’t afford it. So you’re better off with consistent smaller rent increases, like $25 a year, rather than waiting 3 years and increasing your rent all at once to reflect current market value.

On top of this, some cities have rent control laws in place. These maximum rent caps on what landlords can charge and are implemented by the government. Be aware of your local regulations before implementing any rent changes (just FYI, rent control isn’t allowed in the state of Michigan, but it is common in markets in New York and California).

Sample rent increase notice

When you’re ready to implement the raise, here’s a sample rent increase notice that Colleen F. shared in the BiggerPockets Forums. This letter is great because it helps tenants understand the landlord’s own financial obligations and view an increase in rent as a necessary business decision, rather than thinking you’re just being greedy.

Feel free to use it as a basis for crafting your own notice:

Dear John Tenant,

Thank you for being a tenant here at 123 Main St, Apt 1. Our goal is always to provide a nice place to live, at a fair price. Whenever the prospect of raising rent comes up at any property, we take a good hard look at it to make sure it’s necessary.

In that light, we have decided it is necessary to raise the monthly rent on your unit, effective September 1, 2020, to $1,050 from $1,000. This is partly to offset the increasing cost of property taxes, insurance, high heating expenses, maintenance costs, and upgrades since our purchase of the building in 2010.

Even after this increase, we believe we are still at or below the average market rent for a unit of this type. Rather than pay an increase, you may choose other housing. Should you intend to vacate at the termination of your lease, the original lease agreement states that you have to provide 30 days written notice of your intent to move. If you choose, signing this form checking off that you will not renew and returning the form to us 30 days in advance of your expected renewal will be considered your written notice.

Sincerely,

Management

Conclusion

There’s no guarantee that your tenants won’t complain about an increase in rent. However, if you increase your rent fairly and strategically, you can manage their expectations and prepare them ahead of time to budget appropriately. 

When they’re prepared and you communicate openly with them about the situation, your tenants won’t see you as the bad guy for increasing their rent. 

Any other concerns related to increasing rent amounts? Leave a comment below!

Categories
Wholesaling

5 Wholesaling Myths —Debunked!

Real estate wholesaling often gets a bad rap, but is it fair to call this an illegal or shady form of real estate investing? How did it get this reputation in the first place?

The problem is, wholesaling is usually chosen by first-time investors as a way of getting into the industry with little or no upfront capital required – which is great. But it also means that newbie investors get into this field and make a lot of mistakes, and that has led to some serious misconceptions about wholesaling over the years.

If you’re an investor who’s excited to get started as a wholesaler but is hesitant because of things you might have heard about it, this article will pull back the curtain on five of the most pervasive wholesaling myths. 

Wholesaling real estate is not outright illegal, but it’s governed by specific laws that require you to have certain contracts and documents before you can proceed. Wholesaling gets its bad rap largely due to the illegal practice of unlicensed brokering, which isn’t the same as wholesaling.

1. “It’s illegal to wholesale real estate.”

To ensure full compliance with local real estate law, here are some steps to take when wholesaling properties:

  • Have a bilateral contract with the seller that stipulates your acquisition of the equitable interest.
  • Have a proof of funds letter to prove your intent to purchase.
  • Wait until the house is under contract with the original seller before finding new buyers.

In the event of needing to defend your wholesaling activities in real estate commission hearings, having everything documented is essential for proving you’ve acted within the law.

2. “Wholesaling is only for beginner investors.”

Just because it takes minimal capital to get started with wholesaling, doesn’t mean it’s easy. For example, since you’re the middleman in deals, a buyer or seller can easily get rid of you to avoid paying an additional wholesaler’s fee—effectively taking you out of the equation altogether.

Secondly, while there is a low barrier to entry, wholesaling has a high barrier to sustainability. People tend to think that wholesaling fulfills a need in the market, where investors are looking for people to help them find their next deal. In reality, the investors themselves are already good at finding deals themselves. This makes finding good deals extremely hard. Plus, investors don’t want to subcontract finding deals to wholesalers, and those who do certainly don’t want to pay top dollar. 

Wholesaling can be a stepping stone for beginners to get into real estate investing, but that doesn’t discount the fact that it’s highly lucrative for experienced wholesalers. Mastering the skills and acquiring the connections for a steady flow of good deals enables you to earn as much as other investment strategies.

3. “Wholesaling is inferior to house flipping.”

Let’s put the two investment strategies side-by-side for an accurate comparison:

Depending on your reason and goals for investing in real estate, you might choose one over the other. Either way, based on these key differences, wholesaling isn’t inferior to house flipping at all, it’s just a very different approach with a lot less maintenance required.

4. “Focus on buyers who’ve already bought from you.”

Often called the “easy button buyer” mistake, this refers to the tendency for beginners to send future deals only to the buyers that were willing to close on earlier deals. This is a common myth that wholesalers believe to be effective, but in reality, limits your potential returns.

Think of it this way: businesses thrive on supply and demand. After closing a couple of deals, you now know the area, the numbers, and what features attract more particular buyers. In other words, you have the supply to meet the demand in more than a couple of markets.

Position yourself as an opportunity to as many potential buyers as possible, and you’ll ensure you have a scalable wholesaling business for years to come.

5. “A buyer’s list is necessary to be successful.”

Many investors will say that you need a buyer’s list to be successful in wholesaling, but this is not exactly true. 

The typical buyer’s lists are full of investors who do a lot of deals on a regular basis, meaning they’re serious buyers who can close with cash in 10 days. This is exactly what you want as a wholesaler, but you don’t need to have a buyer’s list to do this.

Instead, new wholesalers should focus on finding quality deals, rather than quality buyers. If you can find a great property, serious buyers will follow.

We’ve written elsewhere on how to find buyers for your wholesale deals, should you need further tips.

Conclusion

All these myths surrounding wholesaling real estate may give some the impression that this investment strategy is shady and unsustainable. However, with these common myths easily debunked, you can see there are actually many solid reasons that prove why wholesaling is an excellent way to invest in real estate. 

If you want to learn more about wholesaling in the current market, we’ve also written an article that explains the top five insights you need to successfully wholesale real estate after a year of COVID-19.

Image courtesy of Monstera

Categories
Landlords

How to Market your Rentals Online: Screen Appeal and Listing on Digital Platforms

From digital walk-throughs to Zoom tenant interviews, real estate marketing has officially transitioned to digital in light of the COVID-19 pandemic.

Virtual showing techniques aren’t new, but COVID-19 has certainly pushed the industry to adapt as a necessity. Landlords that didn’t have videos of their properties pre-COVID are now rushing to create virtual tours and trying virtual staging methods.

At this pace, digital marketing will fast become an integral and permanent part of real estate marketing before we realize it!

What does this mean for landlords? 

Prospective renters are now viewing and shortlisting properties from their screens, making “screen appeal” a crucial factor to promote your rental property. You want your offer to stand out where the prospective tenants are: online.

In this article, we’ll go through the ways to increase your property’s screen appeal, write an effective ad online, and list your properties where tenants are most likely to find them.

Increase screen appeal with noticeable features

First, you need to make your rental look impressive in photos. To do this, invest in features that will stand out in photos—even if the prospect browses on their tiny phone screens. 

These are the things that will make a huge difference in digital listings:

  1. Sparkling kitchens with shiny appliances, glossy countertops, and newly-painted walls and cupboards
  2. Spotless bathrooms with new showerheads, clean mirrors, and re-grouted tiles
  3. Fresh blinds and curtains without any mold or grime that are updated to fit the aesthetic of the property
  4. Blemish-free walls freshly painted with a color that makes the room look bigger, brighter, and homier
  5. Brand-new fixtures everywhere—from light switches to faucets to doorknobs and fly screens
  6. Clean carpets that even look like they smell great
  7. Bright lights in every room to make the rental property feel new, and more importantly, show that you’re confident enough to put everything in the spotlight

Make sure that you use a camera that does your rental justice! None of the spectacular features you updated and cleaned will be seen if you use the front camera of your beat-up phone. If you need to hire a photographer for decent equipment, it’s worth the one-time payment to get a lifetime of great photos for your listing. 

Write an effective ad that highlights relevant details

Once you’ve updated your rentals with photogenic features, you need to post them on digital platforms. But what do you say? How do you write an effective ad that attracts your tenant pool? 

Here are the important factors to focus on:

  1. Write a great headline. Rentalutions’ formula suggests including the key information tenants look for (e.g., number of rooms or location) plus one feature that makes your rental unique.
  2. Use professional word choices that add value to your listing, as long as they’re an accurate description of your property. You want to avoid generic words such as “great” and “nice”, instead, choose words like: upgraded, spacious, tasteful, landscaped, modern, luxurious, and charming.
  3. Add more information on the key features. Knowing what tenants want (as you should), make sure to highlight these features in your ad. Are you expecting to attract tenants who put importance on parking spaces, walkability, nearby supermarkets, or proximity to a great school? Your copy should indicate that.
  4. Add detailed property descriptions. Similarly, also indicate what the tenants will want from the property itself. How many rooms, floors, and bathrooms? Will they be attracted to a lush backyard or extra storage areas? Flesh out all of the important details to attract tenants.

Lastly, prove what you said with great photos! When you use great photos to compliment everything that you verbally promoted on your listing, your screen appeal will skyrocket. This is where the prospective tenants should go “Wow! They weren’t kidding!”

List your rental on industry-popular websites

Armed with your impressive photos and well-written ad content, it’s time to post your listing where it matters. Most people are baffled by how many options there are to list online, especially since there isn’t a one-stop-shop solution that posts to all the rental listing sites. 

Zillow—the favorite of most landlords—allows you to create detailed listings that they’ll syndicate out to 26 partner sites (including Trulia, Hotpads, and MSN Real Estate), but it still doesn’t cover all of the sites available.

To get started, check these sites that are known to be effective and user-friendly:

  1. Zillow
  2. Trulia
  3. Hotpads
  4. Craigslist
  5. Facebook

Apart from those, you can also consider these lesser-known platforms:

  1. Apartments.com
  2. Apartment Finder
  3. Apartment Guide
  4. Apartment Home Living
  5. Apartment List
  6. Backpage
  7. Byowner.com
  8. Cozy
  9. Doorsteps
  10. Move
  11. My New Place
  12. Nextdoor.com
  13. Oodle
  14. Realrentals.com
  15. Realtor.com
  16. Rent.com
  17. Rentals.com
  18. Rentdigs.com
  19. Rentlinx
  20. Saletraderent.com
  21. Sublet.com
  22. Walk Score
  23. Zumper

All of these websites allow you to post for free. You just need to do some research and decide which platform enables you to attract the tenants that you want. For more details on the sites we mentioned above, check Smart Move and Landlordology.

Conclusion

Technological development waits for no one. In order to keep up and remain competitive in the rental property business, it’s time to level up with online marketing!

The steps are easy enough—simply increase your property’s screen appeal, write an effective ad describing the best parts of your property, and list them on websites where tenants are likely to browse for new homes.

Any other tips on how to market rentals online? Where are your rentals listed so far?

Image courtesy of Joshua Miranda

Categories
Landlords

Perks of Having a Property Manager That’s Not You

Property management is extremely labor-intensive. You need to collect rent, evict problematic tenants, coordinate with contractors, maintain the properties, and so much more. 

It’s not easy, either—if you’ve ever experienced difficult tenants or irresponsible contractors, then you know what we’re talking about. 

However, if you have a rental investment property, you can’t go without it. The solution to your stress? Hiring outside help in the form of a property management company.

If you have a lot of properties, you may not have the time or energy to manage them all. PMCs can take care of the dirty details for you, which frees you up to expand your portfolio or focus on other things. More than that, property management companies provide expertise—expertise that you don’t have. 

We understand that you may be hesitant to share your profits. Are property managers really worth the cut? 

Let’s take a look at some of the benefits of having a property manager that’s not you. 

You’ll fill vacancies faster

A good PMC uses their experience to find you the best tenants. You’ll still have the final say on who rents your property, but a property management company can pre-screen applicants for you.

Plus, good property managers will know how to keep tenants and encourage them to renew their lease. This means lower turnover rates for the PMC (so less work for them to do) and steadier revenue for you.

You’ll have more thorough rent collection.

Collecting rent payments is every landlord’s most dreaded task. But if you have a PMC, you won’t have to worry about consistent and persistent rent collection anymore.

Property managers will take over collecting the rent, enforcing lease policies, and implementing fees. With a good PMC, your income as a landlord should be much more stable.

You’ll have a more aggressive eviction process.

Whether it’s a problematic tenant that slipped through the screening process or someone who turned sour overnight, you don’t have to go through the grueling eviction process anymore.

PMCs will enforce the policies in your lease and ensure that difficult tenants are evicted. Plus, with a more thorough screening process, property management companies can help you avoid renting to problematic tenants in the first place!

You’ll have well-maintained properties.

No more attending to tenant repair requests and making sure the rental is well-maintained. PMCs will keep your properties in top shape and field tenant concerns 24/7. They’ll do everything from scheduling and monitoring to documentation and evaluation of the repairs. PMCs are also in charge of paying your suppliers and utilities at the end of the year.

Keep in mind that property managers may not help you with cutting costs. However, you can leverage their expertise and connections to get better deals on maintenance.

You’ll have better legal compliance.

Keeping up with legislative changes is part of a property manager’s job. This will help you avoid having a lease or process that’s out-of-date, in violation of a new law.  

You’ll have the time and ability to scale.

If you want to grow your company and portfolio, you can’t spend most of your day managing tenants and properties. You’ll need a team to take on some of the responsibility. The less time you spend fixing problems, filling vacancies, and evicting tenants, the more time you’ll have to expand your investments.

Paying a PMC to manage your properties will result in less stress and an improved ability to scale. The bigger a revenue source you are, the more they’ll want to protect their relationship with you—so don’t skimp! Both of you will benefit from this working relationship in the long run.

Conclusion

Are property management companies really worth the money?

Well, having one will ensure that you have quality tenants, complete rent payments, someone to process evictions, well-maintained properties, updated legal requirements, and the time and ability to scale your real estate portfolio.

Just note that not all property management companies will do a good job—cheaper rates usually mean cheaper service. So, instead of asking if they’re worth the cost, ask “how can I make sure I hire a PMC that IS worth the money?”

Interested in hiring a PMC? What aspect of property management do you struggle with the most?


Categories
Landlords

5 Problems You can Avoid with Great Screening

Rigorously screening your tenants is everything in landlording. Why? Because great tenants will make you wish you got into landlording earlier, however, problematic tenants make some landlords wish they never began investing in the first place.

If you don’t want to end up with regrets – screen your tenants! Here are just a few of the problems you can avoid by doing so:

  1. MISSING & LATE PAYMENTS

The occasional late payment is one thing, especially if the tenant is just going through hard times (like a pandemic). But no landlord wants to end up with tenants that never pay on time, or never pay at all. Non-paying tenants will give you a headache trying to reach them, turn a blind eye to the lease agreements, and eventually, when you finally threaten them with eviction, pay only partially, just enough to stay a bit longer in your rental.

However, by screening well, you’ll see their employment status, current income, credit history, and talk to their past landlords to find out if they pay rent fully and on-time. This is the only way to help guarantee yourself consistent income through their rent – which is the whole point in renting out your properties.

  1. EVICTIONS

Processing evictions is expensive, time-consuming, and extremely stressful. Common reasons for evictions are non-payment of rent, lease violations, property damages, or illegal activities – all of which are pains you can avoid by screening well. 

You can avoid getting yourself into situations that require evictions by looking out for any concerning things during the interview screening. How responsible are they with their finances? How did they behave in their past rentals? Are they rule followers (e.g. did they follow the lease agreements at their previous rental)?

For more on how evictions work in Michigan, head on over to this link.

  1. PROBLEMATIC TENANTS

Some tenants don’t take their landlords seriously. They may seem great prior to renting, but this doesn’t mean they will continue to behave once they’ve secured your property. 

Some will damage your property. Some will harass the neighbors. Some will want you on standby to attend to any of their requests, no matter how unreasonable or small. Just look up “tenant horror stories” on Google and you’ll see what we mean! They will make you wish you hired a PMC (which you can obviously consider doing, too) or at least have screened them properly before handing the keys over to them. 

It’s just not worth it when you can verify their historical data and call up their references to check their behaviors. 

4. DIFFICULT MAINTENANCE

Since tenants have no attachment to the property, many lower class (C and D) tenants won’t take care of it as much as you wish they will. But you’ve invested good money in your units, so why wouldn’t you also invest in good tenants to take care of them?

It only takes one sloppy tenant to reverse the improvements you’ve done into costly damages you’ll be forced to fix. One dog to scratch the hardwood floors, one lazy tenant to neglect the overheating boiler, and one hoarder to turn your rental into an insect hub.

To avoid this, ask previous landlords how they were during their tenancy. Were there any problems with property damage, housekeeping issues, or living habits? Also ask if deductions were made from their security deposit, and get an explanation as to why. If tenants can’t provide a suitable, well-documented explanation for any sketchy rental history, beware!

5. HIGH VACANCY RATE

The words “high vacancy rate” should scare any responsible landlord, because an empty rental investment is just losing you money by the month. The vacancy rate compares the amount of time your property could have been rented versus the time it’s actually rented, so you want it to be as low as possible. Common reasons for vacancies can be because the tenants you get are always leasing short-term, the tenants are often problematic and have to be evicted, or the tenants ruin your property and you need to do major repairs – either way, your business is not generating profit during this time.

To prevent this from happening, verify the following during screening: Do they tend to move residences often? Do they have stable employment? How long do they plan to stay in your rental, and do they have the financial stability to commit to a longer lease? Look at past rental history, previous addresses, credit and employment history to figure this out.

Tenant screening is the last area of your property management that you want to skimp on. By being cautious before accepting an applicant, you can avoid more than just these five problems – you can eliminate most, if not all, of the things landlords have to stress over. 

Any experience you’d like to share on how tenant screening saved your life as a landlord? Comment below!

Image Courtesy of Ketut Subiyanto

Categories
Shortterm Rentals

How to Attract Short-Term Rental Guests During COVID

If you want your rental portfolio to stay in business during the coronavirus pandemic, you need to align your offering with people’s priorities in the new normal. 

Safety and protection are of utmost importance right now, so what safety measures should you implement to assure your guests? 

Furthermore, why are they renting in the first place – are they going to have a staycation since traveling abroad isn’t a safe option anymore? What can you then provide to make your STR attractive, given the rapidly-changing consumer behaviors we’re now seeing?

Here are some ideas to help your short term rental business adapt to these new times:

  1. Contactless Check-In and Out

Plenty of us have experienced arriving in a new country and checking yourself in to the AirBnb rental you’ve reserved beforehand. You don’t even meet the owner, you just use the passcode they gave you to enter the cute little apartment unit. Days later, after you’ve eaten all the street food and bought all the souvenirs possible, you check yourself out simply by locking the door behind you, before heading to the airport. It’s easy, safe, and keeps human interactions to a bare minimum (owners or property managers only show up when something goes wrong with the unit!).

With all the tools and technologies available, you can implement contactless checking-in and out in your rentals too, and operate with increased health and safety protocols. Digitizing and revamping your check-in and out process will help to assure guests that you provide convenience plus safety. All you need is: 

  • Digital key or lockbox access
  • Welcome card with house directions & local info
  • List of contact numbers
  1. Refund Policy

COVID has cancelled a lot of plans – but not a lot of payments. One of the biggest head-scratchers during this pandemic is how most of us can’t cancel expensive flights, gym memberships, or reservations in resorts without a whopping, heartless cancellation fee. 

To assure renters that your refund policy considers the pandemic and related governmental restrictions, try including these two in your emergency policy (at least, for bookings made prior to March 2020):

  • Flexible credits – Offer the guest a full credit for the amount they’ve paid if they are beyond your cancellation window. You can allow them to use these credits to book your property again in the future (post-pandemic), so at least it’s just a “rescheduling” for both of you. 
  • Refunding – Offer the highest refund you can in your cancellation policy, while still protecting yourself. If the guests are unable to accept credits, and you can’t commit to a 100% refund, then at least give them back 50%. With the pandemic, uncertainty is our reality nowadays, so take this opportunity to show understanding to your travelers – it will result in higher chances of them returning post-COVID.

3. Sanitizing and Documentation

Take the extra mile to sanitize your STRs – not just clean them. What’s the difference? Cleaning is removing most germs, dirt, and dust using a soapy sponge or damp cloth. However, cleaning does not remove all the germs and bacteria that are hidden in the deeper layers. By using chemicals to deep-cleanse, sanitizing your rental will lower the risk of infection and further assure your guests of a COVID-free home. 

Document all the sanitizing measures you’ve done using the simple guideline below. Feel free to add more details as you go along. You can even post this as part of your listing to make any prospective guest feel at ease:

  • Wear protective gear or PPEs while you clean.
  • Ventilate the rooms before you clean (as recommended by the CDC).
  • Wash your hands properly and thoroughly before and after each cleaning. 
  • Clean first, then sanitize. Use detergent to remove dirt, dust, grease, and most germs. Afterwards, spray and wipe with disinfectants using clean cloths.
  • Use disinfectants that are registered by the Environmental Protection Agency (or has 70% alcohol) as these are believed to be effective against the virus. 
  • Pay attention to all surfaces–especially those that are frequently touched. For rugs, sofas, drapes, or anything else that’s similar, machine-wash if possible.
  • Avoid touching your face while cleaning to prevent the spread of germs.
  • Wash all linens at the highest heat setting recommended by the manufacturer.
  • Empty all appliances and disinfect their surfaces.
  • Dispose of your cleaning supplies properly. 
  • Safely remove your cleaning gear after you’re done. 
  • Include a card in the property, informing newly-arrived guests that the property has been disinfected (listing all these steps, if desired!), and publish this
  • information online – it will help set your property apart when people are searching for a place to stay.

4. Comfort Features

Lastly, figure out why they are renting your property during COVID. If they’re planning a staycation, then it’s best to fit your property with entertainment and other comforts. This could mean additional towels, a coffee maker, board games, or free Netflix. (It will also differ, depending on where your STR is situated and what kind of guests you attract. Features that rowdy 20-year-olds will appreciate are quite far from those that 80-year-old elderlies will kiss your cheek for!)

Here are some features to consider:

  • Provide quality basics – Strong water pressure, fast and reliable WiFi, AC units and heaters that work without fail are all examples of levelled-up basics. Having these basics at good quality gives the guests everything they need for living, working, and relaxing in the easiest way possible.
  • Offer ample amenities – Stock your bathrooms chock-full of toiletries any of your guests can appreciate (especially when one of them forgets their toothbrush or shaving cream). Prepare your kitchen to handle an entire family cooking together with all the pots, plates, wine opener, and sponges. People are cooking in more now than ever before, so having things like spices and oil might be a nice additional touch, too. 
  • Have unexpected features – If Netflix is now an expected offer, then try installing a Nintendo Switch for your guests to enjoy. Throw in a foot massager in the living room too, for mom to get pampered while the kids play Mario Kart on the big screen. Perhaps you can put a couple of cold ones in the fridge for dad to kick back and relax as well. These are all small items that you can offer specially for COVID-escaping staycationers that will stay in the rental for days at a time, and these small touches go a long way towards garnering awesome reviews.

COVID may have hindered a lot of businesses from operating, but that doesn’t mean yours should stop too. There are ways to keep your short-term rentals attractive even in the midst of this pandemic. Try out these tips and comment below on how they worked for you!

Image Courtesy of Evgenia Basyrova

Categories
Flipping

Do Flipper TV Shows Help or Hurt the Industry?

Ah, the world of reality TV shows. Most of us have a love-hate relationship with these, as they supposedly mimic real life, yet need to be entertaining enough to make us forget about actual reality. But is that irony helping or hurting the flipping industry?

Over the years, reality shows centered around house flipping have remained amongst the most popular on TV. Just a quick search and you’ll see The Vanilla Ice Project, Fixer Upper, Genevieve’s Renovation, Flip or Flop, and My First Place – all exciting demonstrations that expose newbies to the real estate business.

So, are these shows a force for good – helping to encourage flippers and grow the industry as a whole – or are they making flippers’ lives more difficult?

The Good
These shows might be helpful to the market, as they introduce the real estate business to a wide audience, showing them the appeal and benefits of flipping houses.
They often reflect real-life house-flipping experiences, informally preparing people for what to expect – like how properties often have hidden repair costs. Fortunately, this also makes for an exciting narrative.
They may, therefore, help scare off people who realize that the trials and tribulations of flipping houses aren’t their cup of tea (or maybe not).
They’ve made flipping so widely-known that it’s not hard to explain to buyers and sellers the value of what you do (compared to other REIs, like wholesalers).

The Bad
The flipside of flipping’s TV popularity is that buyers and sellers alike may assume you’re in it to make a load of money, making negotiations more difficult.
These shows might very well be responsible for encouraging people to get into flipping before they’re fully prepared, i.e. committing to a huge investment, equipped only with information that was intended more for entertainment than education.

These newbie flippers will make mistakes on their pricing, leading them to overpay for properties. This makes it more difficult for experienced flippers to make money and stay in business.

In a worst-case scenario, these flippers end up negatively affecting the properties they work on – turning homes into worse shape than how they started, and with too much debt to be restored by anybody else.

The Conclusion
Real estate investing – especially flipping – can be quite lucrative, but that’s because it’s also quite risky. That’s something which reality flipping shows actually capture pretty well.

What they don’t communicate as strongly is the fact that, when you’re flipping houses, you really have to know what you’re doing, because it requires a huge financial and mental commitment from your end.

That said, it’s vital to know where and when entertainment deviates from reality. Oftentimes, these shows play down the risks (the cost and process of renovating and selling a house) and play up the benefits (the “insane” profits you’ll get in a short amount of time). So make sure you do your research if you’ve been inspired by one of these shows, so you don’t end up stuck with a half-flipped house that nobody wants.

Remember that the ones being featured on these series are experienced professionals – so make yourself as knowledgeable as possible before trying to follow in their footsteps.

Any stories about flipping TV shows impacting your real-life flipping business? Share them below!

Image Courtesy of Monica Silvestre