Categories
Flipping

Taxes Made Simple for House Flippers

Source: Zillow

House flipping is a popular real estate investment strategy in which investors purchase properties, usually at a significant discount, fix them up and then resell them for a profit.

While the practice has been around for decades, it only gained popularity recently, particularly in the wake of the housing market crash of 2008, when many homeowners lost their homes to foreclosures—leading lenders to sell for cheap, and investors to buy rundown homes to rehabilitate and sell at profit.

Still, interestingly, house flipping is not just for professional real estate investors. Anyone can be a house flipper with the right knowledge and drive. In fact, many first-time investors have found success in this niche market—we’ve seen it happen.

If you’re thinking about getting into house flipping, there are a few things you need to know about the tax implications of this type of investment. Check them out below.

1. Document Every Expense!

As with any other investment, you must keep good records when flipping houses.

This will help you in two ways:

  • Doing so will make it easier to calculate your profits (and taxes owed) when you sell a property.
  • It will give you the documentation you need if the IRS audits you. As you can imagine, flipping houses can generate a lot of documentation, so it’s essential to have a sound system for organizing and storing your records.

2. Expenses to Deduct During Tax Time

If you’re flipping houses, there are a ton of expenses you can deduct when it comes to tax time.

There are two main types:

  • First, just about everything you spend buying, fixing up and selling the property.
  • Secondly, your business expenses, like auto payments, gas, for your auto, computer stuff, marketing the property, even snacks you buy for the contractors!

Say you spend $10,000 repairing and renovating a house that you sell for $50,000. In this case, you can deduct the $10,000 in expenses from your profits, leaving you with a taxable gain of $40,000.

3. You’ll need to pay capital gains tax on your profits.

When you sell an investment property, you must pay capital gains tax on any profits you earn. Capital gains tax is simply a tax on the profit you realize from the sale of an asset. In the case of house flipping, your asset is the property itself.

The good news is that there are ways to minimize your capital gains tax liability.

For example, if you hold the property for more than one year before selling it, you will be eligible for the long-term capital gains tax rate which is generally lower than the rate for short-term gains. Additionally, you can take advantage of certain deductions, such as the costs of improvements made to the property.

4. You may be subject to self-employment tax.

Another issue you can face is if you’re flipping houses as a business venture—then you may be required to pay self-employment tax on your profits. Self-employment tax is essentially Social Security and Medicare tax for the self-employed. The current rate is 15.3% which includes the employer and employee portion of the tax.

However, there are circumstances under which you may not be required to pay self-employment tax.

For example, you may not be subject to this tax if you’re flipping houses as an individual investor (rather than through a business entity). And if your total income (including your flipping profits) is below the self-employment tax threshold ($400 for 2019), you will also be exempt from paying this tax.

Of course, nobody is going to flip a home for a mere $400. But you get the point.

5. You can avoid capital gains tax via a 1031 Exchange.

Let’s suppose you’re looking to reinvest your profits from a house flip into another property. In that case, you can do so without paying any capital gains tax by taking advantage of the 1031 exchange provision. This provision allows investors to defer their taxes by rolling their profits into a new investment property.

For example,  if you sell a house for a $50,000 profit, then you can use that money to purchase a new investment property without paying any capital gains tax on the sale.

The negative of doing a 1031 Exchange is that you can’t use any of the funds from the sale to live off of.

6. Other taxes depend on your location.

In addition to federal taxes, you may be subject to state and local taxes on your house flipping profits.

These taxes will vary depending on your location, so it’s important to check with your state and local tax authorities to determine what you’ll owe. For example, in some areas, you may be required to pay transfer taxes when you sell a property.

7. You may be required to pay estimated taxes.

Next up, if you’re flipping houses as a business, you may be required to pay estimated taxes on your profits. Estimated taxes are periodic payments made to the IRS throughout the year, based on your expected tax liability for the year. They’re due yearly on April 15th, June 15th, September 15th, and January 15th.

If you fail to make your estimated tax payments, you may be subject to penalties and interest. Therefore, staying on top of your estimated taxes is crucial if you’re flipping houses as a business.

Uncomplicated Tax, Uncomplicated Profits

We hope this quick overview gave you a better understanding of the tax implications of house flipping.

As with any type of investment, it’s important to do your homework and consult with a tax professional before getting started. But if you’re looking for a lucrative investment opportunity, house flipping may be just what you’re looking for.

Maximize your flipping profits today! Join as a REIA member, attend our upcoming meetings, and sign up for our informative newsletter. We can help you take care of all the details, from repairs and renovations to accounting and taxes.

Categories
Landlords

5 of the Most Important Clauses Your Lease Agreement Should Have

: A beautiful single-family residence along E Kirby St., Detroit
Source: Zillow

We’ve seen many poorly written leases – and the legal implications can be devastating. That’s why it’s important to avoid cookie-cutter leases that fail to give you the protection you need as a landlord.

Because the truth is this.

No matter what kind of property you’re leasing, you need to have a great, not just a good, lease agreement. This document will protect you and your tenant by outlining the lease terms, including the rent amount, length of tenancy, and rules for using the property.

To help you create a strong lease agreement, we’ve compiled a list of 5 critical clauses that every lease should have, in addition to term, lease payments and other basics.

1. Use Clause

The first clause in your lease agreement should be the use clause. This clause outlines how the tenant may use the property. For example, if you’re leasing a commercial space, the use clause might specify that it can only be used for retail purposes. If you’re renting a residential property, the use clause might determine that it can only be used as a primary residence.

2. Subletting Clause

The second clause in your lease agreement should be the subletting clause. This clause outlines whether or not the tenant is allowed to sublet the property. If you ‌allow subletting, include provisions about how it must be done (e.g., the tenant must get your approval first).

3. Maintenance and Repair Clause

The third clause in your lease agreement should be the maintenance and repair clause—this clause outlines who is responsible for maintaining and repairing the property. In most cases, the landlord handles major repairs, and the tenant is responsible for minor repairs and routine maintenance.

4. Utility Clause

The fourth clause in your lease agreement should be the utility clause—outlining who pays for utilities, such as electricity, gas, water, and trash service. In most SFR residential leases, the landlord is responsible for paying for trash service, while the tenant is responsible for paying for electricity gas and water.

5. Security Deposit Clause

Your lease agreement’s fifth and final clause should be the security deposit clause. This clause outlines the security deposit amount and how it will be used. For example, the security deposit can be used to cover damages to the property or unpaid rent at the end of the tenancy. Be sure to include provisions about how the security deposit will be returned to the tenant at the end of the lease.

Don’t Make Mistakes with Your Clauses

Including these 5 crucial clauses in your lease agreement can help ensure that you and your tenant are protected throughout the tenancy. And don’t forget that these aren’t the only clauses you should include in the agreement! Several other clauses are commonly included, such as a late payment fee clause, a pet policy clause, and a no smoking clause.

Do you need help drafting a strong lease agreement? We can help!

Join as a member today and get in touch with us. You can also sign up to our email newsletter so you never miss any important information like this.

Categories
Wholesale Wholesaling

6 Tips on How to Wholesale Real Estate in a Recession

Source: Usman Yousaf on Unsplash

Real estate investors are now finding out that sales prices and rents don’t always go up. It’s not as unstable as blockchain, the metaverse or crypto—but the real estate investment world isn’t completely protected against economic shifts.

The Federal Reserve is expected to continue to raise its overnight rate until inflation is brought back to acceptable amounts. These increases have a negative impact on bond prices, including mortgage-backed securities, which has caused mortgage rates to spike.

Of course, wholesaling has its challenges in an uncertain market.

That being said, knowledgeable wholesale real estate investors navigate them easily—simply because they know how to play the game. So, here are our 6 tips for experienced wholesalers and new ones alike to keep in mind.

1. Increase Your Lead Conversion Rate

Finding motivated sellers is key to a real estate wholesaling business. You have to constantly find people who need to sell their properties fast (usually because they’re facing foreclosure or have inherited a property they don’t want to maintain), because they present an opportunity for you to swoop in and make an offer.

In an uncertain market, finding motivated sellers should be easy, as more people looking to sell won’t be able to find buyers. You can find them by networking with real estate professionals, driving around neighborhoods to search for distressed properties, and more.

But it’s not just about finding motivated sellers; it’s also about increasing your conversion rate:

Number of deals closed / Total number of motivated sellers = Conversion rate

The higher your conversion rate, the better you can weather any uncertain market storms. So, it may be time to cut your marketing budget or at the very least, refocus it on the most motivated sellers. Continue to find motivated sellers, and improve your chances of closing deals with them.

2. Focus on Landlords

Typically when it comes to wholesaling, you’ve probably been selling most of your deals to house flippers. Well, they’re going to have challenges selling in a recession, so they won’t be buying as much from you. Luckily there is another market out there you can target. Landlords.

S, instead of selling to house flippers, you can replace them with landlords.

Now, remember if you’re selling to a landlord means that you’re selling to another investor. In other words, you’re going to have to be savvier and convince that you’re a reputable wholesaler.

3. Know Your Clients’ Numbers

Many wholesalers don’t care about how their clients run their numbers, but that’s a rookie mistake. Because when you think about it, helping their business succeed is just as important as making your own real estate wholesaling business succeed.

So, to stand out from the competition you need to start taking note of your client’s numbers—not just your own. Helping your clients by providing more services is how you stand out and attract new clients. That way, you’ll have a much stronger relationship with them.

4. Have a Plan B

Next, you may want to either consider doing some flips yourself or becoming a landlord. For that, you’ll need to sort your financing, look into flipper insurance, and a lot more depending on how you pivot your business model.

There’s always the possibility that something could go wrong, whether it’s:

  • The deal falls through
  • The market is taking a turn for the worse
  • Property values are dropping significantly

Or a combination of all of those factors. So, make sure you have another plan when wholesaling doesn’t work out.

5. Get Your Financing in Order

If you’re going to wholesale real estate, you need to have your financing in order before you start looking for properties. Getting your ducks in a row is important because, most of the time, the properties you’ll find will require some form of creative financing, like using:

  • Hard money loans: Loans based on property’s value instead of the borrower’s creditworthiness
  • Private money loans: Loans from private investors if you can’t qualify for traditional financing
  • Partner with another investor: Pooling resources together with a partner to finance a property

If you don’t have your financing set up beforehand, it’ll be hard to take advantage of these opportunities when they come up, especially when dealing with uncertain market conditions simultaneously.

For example, if the market crashes and you’re trying to get a loan from a bank, they’ll be much more hesitant to give you the money. Whereas if you have a hard money lender lined up, they’ll be much more willing to finance your deal.

6. Know Your Numbers

In an uncertain market where things can change rapidly, you need to be extra conscious of unnecessary business costs harming your cash flow. Are you spending too much on lead generation? Can you do without the tech subscriptions? Have an honest conversation on how you can keep expenses down to protect your cash flow in an unstable market.

Moreover, know your numbers well enough to make quick and sure deals without costing you dearly. Things like being clear on your maximum offer price, estimated repairs, and expected profit margin all play into the success of your wholesaling investment opportunities.

Say the market crashes and property values drop significantly—you’ll find yourself in a situation where the property is worth less than what you paid, depleting your chances of any profit margin. Only by knowing your numbers well can you adjust accordingly and still come out ahead.

Being Certainly Profitable in Wholesale Real Estate Investing

By following the tips we’ve outlined in this article, you can ensure that your business is as resilient as possible to market fluctuations. So whether you’re a seasoned investor or just starting, remember to increase your lead conversion rate, get your finances in order, know your numbers, and have a plan B.

With these strategies, you’ll weather any storm and continue making money by wholesaling.

Do you need more help? Then, get a membership, subscribe to our newsletter, and join our upcoming meeting! We’ll discuss key industry trends and expert tips—you wouldn’t want to miss out.

Categories
Flipping

Increase Flipping Power: How Financing and Loans Work in House Flipping

Source: Zillow listing as of August 2022

Most house flippers don’t have the cash themselves to purchase a property & renovate it outright, so many have to learn how to acquire loans. But if you’re new to house flipping, securing financing may seem daunting.

So the question is—where do you start?

We’re here to help guide you through the process of financing your first flip. Here are the 4 steps to getting a loan for house flipping, so you know how to get one yourself.

1. Determine How Much to Borrow

The figure differs for every individual and investment. Generally, it’ll depend on your current purchasing power, the property’s purchase price, and estimated repair costs (ERC). If you’re new to house flipping, we recommend you work with a trusted and experienced inspector to have accurate numbers.

Once you know the total amount necessary, decide on what type of loan to get.

2. Decide on the Loan Type

Now, different types of loans are commonly used for financing a flip. However, if you want to play it safe, the most common loans are conventional, hard, and private money loans. Here’s the low down on a few different loan types:

Conventional Loans

Conventional loans are usually the best option if you have good credit and can qualify for a traditional mortgage. The interest rates on conventional loans also tend to be lower than other types of loans, making them more affordable in the long run. The only negative is that the property must be in livable condition, which doesn’t lead to the best deals.

Hard Money Loans

Hard money loans are typically easier to qualify for than conventional mortgages, but they come with higher interest rates. Hard money lenders will also often require that you have some skin in the game by putting down a higher down payment or using your own personal funds for the renovation.

Private Money Loans

Private money loans are given by private individuals or investors instead of banks or other financial institutions. Because of that, they usually have more flexible lending criteria than traditional lenders, making them a good option for borrowers with less-than-perfect credit. However, they take higher interest rates and fees.

3. Shop Around for Lenders

Once you’ve decided which type of loan is best for your financial situation, it’s time to look for lenders. You can find lenders online, through a local chamber of commerce, or by talking to other flippers in your area.

When you’re comparing different lenders, pay attention to the interest rate and fees associated with each loan. You’ll also want to ensure that you’re comfortable with the repayment terms. Some loans may have prepayment penalties which means you’ll owe a fee if you pay off your loan early.

4. Apply for the Loan

Finally, you’ve found a few lenders that you’re interested in working with; it’s time to start the application process. The first step is to fill out a loan application. You’ll need to provide information about your financial history, as well as the details of the property you’re planning to flip.

After you’ve submitted your loan application, the lender will review your information and decide whether to approve your loan. If your loan is approved, you’ll be given a loan estimate that outlines the terms of your loan, including the interest rate, monthly payment, and repayment schedule.

Take your time reviewing all options, sift through the best ones, and accept the one that gives you the best terms. Don’t accept loans haphazardly, or you’ll dig a financial hole before you even start flipping.

Expand Your Purchasing Power with Flipping Loans

You’re now ready to shop around for the best deal on financing your next flip!

As you can see, using a loan is much better than using cash, as it increases your flipping power. Even if you’re a seasoned flipper and have a ton of cash on hand, you still want to increase your deal flow as much as possible to flip more properties. Loans allow you to work on bigger and better projects—even multiple projects at once—without tying up all your own cash in them.

And if you need more help, don’t hesitate to join as a member of REIA today and attend our upcoming meeting. You can also sign up for our newsletter so you never miss any important tips to become a successful house flipper.

Categories
Landlords

How to Evict a Tenant in Michigan in 2023

Source: Sandra Davidson Real Estate Agents

No matter how well you screen your tenants, you’ll inevitably come across problematic ones who are more trouble than they’re worth. In addition to tenants that stop paying their rent for various reasons, some could be running a liability nightmare or shady business out of your property (putting you at risk of legal consequences), while others may be slobs turning your beloved unit into a garbage dump. You’ll have to evict these problematic tenants before they negatively affect your investments.

But evicting tenants is time-consuming and complicated, requiring you to understand all the regulations involved.

In this article, we provide an overview of the Michigan eviction process to ensure that the ordeal goes smoothly. We also give some information for you to navigate the court system if your tenant contests.

The 5 Steps to Evicting a Tenant in Michigan

There are many reasons why tenants can be evicted from their rental property in Michigan, but here are a few of the most common ones. Having proof of this behavior is not enough to evict them—you should follow specific procedures before they can be legally forced to leave your property.

Here are the steps to evicting your tenant in Michigan:

Step 1: Identify the Grounds for Eviction

As a landlord, you must abide by Michigan’s landlord-tenant laws, which stipulate that tenants may be evicted from a rental property for the following reasons:

  • Failing to pay rent: Tenants who fail to pay their rent on time without giving you any prior notice may be evicted according to Michigan law. Rental payments are immediately considered overdue when they are paid a day past the deadline. A grace period is sometimes provided.
  • Violating the rental lease agreement: Both parties must comply with the signed rental lease agreement for the tenant’s entire stay. While the specific terms vary from landlord to landlord, it usually includes rental property damage.
  • Conducting illegal activity: Under Michigan’s landlord-tenant laws, illegal activities include theft, violence, assault, and involvement in the creation, distribution, or consumption of controlled substances (e.g., drugs and other illegal substances).

If your tenant does one of these things, start the eviction process by serving the tenant with an official written notice. Each reason for eviction has its own rules regarding the length of notice.

Here’s a quick breakdown of each:

Step 2: File the Complaint in the Appropriate Court

After issuing the tenant an eviction notice , the next step is to head to the justice court where the rental property belongs. There, you must file a complaint, which typically costs $45 in Michigan. You might get additional fees of up to $150 though if your case involves overdue payments or damage fees.

An officer of the court will then serve your tenant with the complaint and court summons at least three (3) days before the hearing. They must do so via first-class mail and at least one of these:

  • Giving a copy to the tenant in person
  • Leaving a copy with the tenant’s family member with a request to deliver it to the tenant
  • Posting a copy on the main entrance of the tenant’s rental property

The officer should also have a return receipt confirming that the complaint was sent via first-class mail.

Step 3: Attend the Court Hearing

The eviction hearing takes place within ten (10) days of the summons being issued by the court. However, the court may sometimes decide to hear the case within just five (5) days.

Tenants may object to the eviction by filing a written letter to the court, but it’s not a legal requirement.

If the tenant fails to show up for the hearing, the court will issue a default judgment in your favor. In some cases, the judge can choose to postpone the hearing for seven (7) days, but if they don’t, then they’ll issue a writ of restitution, allowing the eviction process to continue.

This step of the eviction process is usually over within five (5) to ten (10) days, depending on the court’s rules. But if one party files an appeal against the judge’s decision, it will likely take longer.

Step 4: Wait for the Issuance of the Writ of Restitution

If the court decides in your favor, it will issue a writ of restitution, which serves as the tenant’s final notice to vacate the rental property. It also gives the tenants the chance to remove all their belongings before the authorities forcibly remove them and return the unit to you.

The writ of restitution is usually issued ten (10) days after the court serves its judgment, which gives the tenant enough time to file an appeal. However, if they are being evicted for illegal drug activity or health and safety violations, then the writ is issued immediately.

Step 5: Give the Writ of Restitution to Law Enforcement Officials

You have to give law enforcement officials the writ of restitution within seven (7) days of it being issued by the court. However, state law does not specify how quickly you must act, so that’ll be up to your discretion or the number of other evictions already scheduled.

Some areas have introduced guidelines on how quickly the authorities must carry out the writ of restitution, so be sure to familiarize yourself with your local laws.

After receiving the writ of restitution, check with your area’s laws to see if there are local guidelines on how quickly the authorities must carry it out.

Evicting Tenants in Michigan is Complicated, But Doable

Evicting a tenant takes anywhere between two weeks to two months, depending on your circumstances and the reason for eviction. It takes even longer if the tenant decides to appeal the court’s decision. The eviction process may be complicated, but it’s easier with a trained lawyer and property management company.

Get in touch with our team today to help you with everything—from serving official notices to providing writ of restitutions. You’re in good hands with our experienced, expert team.

Categories
Wholesale Wholesaling

How Much Should Real Estate Wholesalers Offer on a House?

Source: Photo by Medienstürmer on Unsplash

As a real estate wholesaler, you always look for the best deals to offer your clients. But how do you know how much to offer on a wholesaling agreement? And what factors should you take into account when negotiating with the motivated seller before they lose interest?

Let’s discuss what you should consider when deciding how much to offer on a property.

Cost Considerations for Real Estate Wholesalers

In general, wholesale real estate investors should aim to offer around 50-70% of the property’s “After Repair Value” (ARV). By doing so, you leave room for them to make a decent profit after necessary repairs and improvements.

However, you also have to consider:

  • The market conditions in your area
  • The condition of the property
  • Your own investment goals and objectives

The costs of repairs and improvements can vary widely depending on the scope of work required. In some cases, getting away with a lower offer may be possible if you are confident that you can complete the repairs yourself at a low cost. Conversely, if the property requires significant work, you may need to increase your offer accordingly.

Ultimately, the amount you offer on a property will come down to your risk tolerance and goals.

For example, if you’re looking to make a quick profit, you may need to offer less than 50% of the ARV. However, if you’re willing to take on more risk (and potentially hold the property for a more extended period), you can offer a bit less. It’s up to you to decide what works best for your business.

4 Tips on Wholesale Real Estate Investing

To wholesale a house, you need to find a property worth more than what you offer to pay for it. Here are 4 tips to go about wholesale real estate investing:

  1. Do your research. As we mentioned, it’s essential to know the local market conditions and the estimated ARV of the property before making an offer. This will give you a good starting point for negotiation with the motivated seller.
  2. Don’t get emotionally attached. It can be easy to get emotionally attached to a property, especially if it’s your first deal. However, it’s important to remember that this is a business transaction and you should approach it as such.
  3. Know your numbers. To make a smart offer, you must know your numbers. Have a clear understanding of the estimated costs of repairs and improvements, as well as your expected return on investment (ROI). Once you have all of this information, you can start to play around with different offer prices until you find one that makes sense for your business.
  4. Be prepared to walk away. If the sellers are not willing to budge on price, be prepared to walk away from the deal. There’s no point in overpaying for a property, even if it started as a potential opportunity to reap great returns.

Making an offer on a house can be a tricky business, but if you follow these tips, you should be able to negotiate a fair price that works for both parties involved.

Offer the Right Price for the Right Real Estate Wholesaling Business

When wholesaling a house, it’s key to find the balance between offering too much and not enough. You want to make sure that you are making a profit on the property, but you also don’t want to scare off potential sellers with an unreasonably high offer. By doing your research and understanding the market conditions in your area, you should be able to come up with a fair offer that leaves everyone happy.

Become a REIA member today! Join our upcoming meeting and sign up to our newsletter to stay ahead of the real estate wholesaling game in your area. Equip yourself with the knowledge that’ll bring you to wholesaling success—one property at a time.

Categories
Flipping

5 Easy Ways Flippers Can Spruce Up the Lawn Before Sale

Source: Curbed

Are you getting ready to flip a house? If so, it’s important to make sure the outside looks as good as the inside.

After all, no one wants it to look like a neglected eyesore or it will scare away any potential buyers. And yet, you have to strike a perfect balance because you don’t want to spend too much time or money on it either.

In the house flipping industry, time is money—the longer you spend remodeling the property, the less profit you earn. Landscaping tends to eat up a ton of time and effort, which means that if you’re investing in long-term lawn care, you’re not flipping fast enough.

On average, flippers spend between 5 and 10% of their budget on landscaping. This may not seem like much but you’d be surprised at how much value this brings. In fact, studies have shown that sprucing up the lawn can increase the home’s value by as much as 20%.

That’s a lot of additional profit for each flip. But this isn’t the only reason why you should invest in landscaping. Keep in mind that construction work to renovate other parts of the property will likely mess up the yard, so much so that you might need to redo the entire lawn.

So, let’s take a closer look at how you can effectively spruce up the lawn without going over budget.

How to Spruce Up the Lawn Without Breaking the Bank

No flipper wants to dedicate a huge swath of their budget to landscaping. So, here are a few cost-effective tips for you to improve the lawn without going over budget. The goal is to ensure that the home will attract potential buyers—notably, the target market that you want to reach.

1. Remember Your Audience

Before going crazy with your landscaping to-do list… first, consider what your target buyers will want. For example, if you’re hoping to sell to an older group of people, then perhaps it would be better to not have a lawn at all since they may not want to regularly maintain it. Young professionals, however, would likely opt for a patio or outdoor deck to entertain their friends, rather than a high-maintenance yard.

But if you’re targeting families, then feel free to go level up the landscaping. Chances are, these buyers are prioritizing wide open spaces for their kids and pets to play in. In fact, not having a poorly-maintained lawn may turn them off from seriously considering your property.

Apart from your target buyers, also consider what real estate class the neighborhood, tenant pool, and property belong to. For instance, it won’t make sense to create a beautifully-landscaped lawn for a Class C home since an expensive feature to maintain would be the last thing its tenants want.

2. Make the Grass Greener

A well-manicured lawn and tidy garden can go a long way in boosting your property’s curb appeal. The grass, in particular, has the most visual impact on guests when they first see the house.

Simply adding either fertilizer or grass seeds can go a long way. In fact, do this the minute you start on the flipping project. That way, the grass will already be fuller, healthier, and much greener by the time you’re finished and ready to sell.

As tempting as it is to constantly mow the lawn, it actually puts stress on the grass, especially if you trim off more than 20% at once. So check the cutting height of your lawn mower before turning it on and going to town with it, and ensure that you’re not mowing the grass too often.

This shouldn’t stop you from regularly pulling out the weeds, though. After all, who wants to see an overgrown lawn?

3. Edge the Lawn

If you want the lawn to appear tidier to potential home buyers, use an edger to trim the grass along its perimeter. Doing this creates a crisp and neat border that will make your property look cleaner and more professional, undoubtedly increasing its curb value.

Edging can also highlight landscaping design elements, which is important if you want to draw a buyer’s attention to a particular area of the lawn. It also prevents weeds and turf grass from growing into flower beds, so you no longer have to worry about the aesthetic appeal of your blooms.

4. Don’t Forget the Grass Clippings

For many, grass clippings are sent straight to the garbage can. But for flippers, they’re heaven-sent. Rather than bagging them after mowing the lawn, leave them where they are. Since they’re small and comprised of mostly water, it won’t take them long to break down and fertilize your garden.

However, make sure to clean up the grass clippings from your driveway, the sidewalk, and the other hard surfaces surrounding your lawn.

5. Invest in Lawn Repair Mix

You can easily fix bare patches on the lawn with a lawn repair mix, which typically consists of compost, fertilizer, and grass seedlings.

For better results, remove the dead grass and loosen the soil until at least three inches below the ground. This will give the lawn repair mix enough space to grow. Take care not to overwater this spot to prevent the seeds from scattering.

Sprucing Up the Lawn Won’t Break Your Budget

As always, the goal is to create a lawn that fits the criteria for selling that particular property to a particular target market. You don’t want to spend too much time, effort, and energy on a project that won’t pay off. In all flips, the faster you sell it, the more money you’ll get to keep, so make sure that your remodeled lawn will help you earn the profits you want.

In this article, we proved that landscaping projects aren’t as scary, expensive, or as time-consuming as you think they might be. With just a few easy fixes, you can increase your flipping profits without spending too much time and effort beautifying someone else’s lawn.

For more house-flipping tips, reach out to our team of experts at Logical Property Management. We’ve been serving the Metro Detroit real estate market for more than two decades now, and have everything you need to succeed in the area.

Categories
Landlords

5 Pro Cleaning Tips for Short-Term Rentals

Source: The Cleanest Room NJ

Whether you’re a new Airbnb host or landlord with a portfolio of short-term rentals, it’s crucial to learn how to clean your space for guests. Doing so not only protects your reputation, but also ensures that the home’s well-maintained, generates consistent bookings, and gives you high and stable profits.

But while deep-cleaning your rental may be at the top of your to-do list—it’s innately a daunting task. It’s different from maintaining your own home, as it comes with a slew of specific challenges, like:

  • Fixing damages caused by guests
  • Coordinating cleaning with guest check-in and check-out times
  • Making sure the cleaning adheres to COVID-19 rules

If you’re dealing with all these challenges, don’t worry. We’re here to help. Here are our expert tips and tricks for cleaning and maintaining your short-term rental.

1. Establish Standard Operating Procedures (SOPs)

Step-by-step SOPs are the backbone of any successful business, which is why you should implement them in your short-term rental. Apart from ensuring that the cleaning process is running smoothly, they also help coordinate your staff, allowing them to work like a well-oiled machine.

Here are a few examples of what they should include:

  • How do you recruit, onboard, train, and manage new cleaning staff
  • How do you schedule, coordinate, and communicate with the team
  • How your team handles things that guests leave behind
  • How your team documents any damages caused by guests
  • How does your team cleans each part of the rental (e.g., what products to use)

You can even turn this into a checklist for your cleaning staff to remember all the things they must do. They can use it to check off tasks as they’re completed, standardizing the entire cleaning process and ensuring nothing was overlooked.

When they follow the SOPs, you can better maintain consistency and reduce the chances of extra stress and unexpected surprises for you and your guests.

2. Adjust Your Turnover Time

Competition on Airbnb is fierce, so most hosts tend to cram as many bookings as possible—often at the expense of maintaining the property. However, if your cleaning measures require more time to execute, consider lengthening your turnover time so the property is completely clean before the next guest arrives.

Adjusting your turnover time may seem like it could hurt your business. But that isn’t the case.

A clean and well-maintained property emphasizes that, as a host, you’re consistent, trustworthy, and reliable. All highly valued by short-term renters. On the other hand, finding crumbs on the floor or broken appliances will put guests off from booking your space again, stopping any chance you have of acquiring rebookings and high occupancy rates.

Cleanliness will make or break you. So always allot time to complete it, or your guests won’t return.

3. Consider Using Digital Tools

Thanks to technological advancements, there’s now a slew of digital tools for real estate companies that you can use to maximize your cleaning process.

Here are a few examples:

Digital real estate tools solve tedious management responsibilities, like scheduling and payroll. Specific ones like remote smart locks also allow you to grant and revoke access without stepping foot on the property, so you can coordinate cleaning and repair work while keeping the rental secure.

5. Be Transparent

The COVID-19 pandemic has made travelers more aware of their health, so they’ll undoubtedly appreciate knowing the various measures you’ve taken to ensure the rental’s cleanliness. Even a simple note saying you changed the bed linens will increase the chances of them returning.

Here’s what your welcome note can look like to assure your guests:

Hello there! Our team has cleaned this rental for your safety. We are fully vaccinated, wear masks while cleaning the home, and use professional-grade products to disinfect every nook and cranny. Should you have any concerns, feel free to reach out to us and we’ll address your issues immediately.

Transparency also helps reinforce what a great place your rental is, making guests feel confident they’ll enjoy their stay away from home without compromising their health. If you took any additional precautions, mention them in the note as well. Guests will love that!

Short-Term Rental Cleaning: Tough, but Manageable

Cleaning a short-term rental isn’t just about mopping the floors and wiping the counter. It also involves managing the staff and ensuring that the property remains consistently well-maintained—no matter the number of guests who walk through its doors.

As long as you have established standardized processes and staff trained to adhere to them, your short-term rental will undoubtedly stay sparkling clean and, ultimately, profitable.

Do you need more help? Get in touch with our team of expert property managers at Logical Property Management. We have more than two decades of experience and can answer any of your questions.

Categories
Wholesale Wholesaling

Wholesaling Tips: How to Wholesale Empty Land Instead of Houses

Vacant land in Downtown Detroit
Source: Zillow

Empty land is a valuable commodity. In some parts of the country, it’s worth more than homes—simply because there’s always a market for land for building a new structure or something else.

It’s also easier for wholesalers to find buyers for vacant land than for houses, as there is less competition in the market for land deals. As a result, you’ll find better deals on properties ripe for development than those with established homes.

So, if you want to learn how to get into this small real estate niche, we’ve got tips to get you started in the wholesaling process.

5 Steps to Wholesale Empty Lots

We’ve all seen those empty gravel lots in our neighborhood. But now, you’ll see them as more than just a pile of dirt. Instead, they’re an opportunity. While the land is valuable everywhere‌, some lots are worth more than others—highly sought after by the buyers you want to attract.

So, here are 5 ways you can start wholesaling land:

1. Look for Developing Areas

Look for areas that are being developed or zoned for development, as it’ll give you a good sign of where the market will move to in the coming years.

You can attend city council meetings to get a sense of which areas are being approved for rezoning or development variances. Search online for local land auctions—being good indicators of where the market is moving, and scan MLS listings for “raw land” or “vacant land” to identify hotspots.

2. Research the Title and Zoning

Do your due diligence when researching a piece of property. Check the title to see if there are any liens or encumbrances, and ensure that the property is zoned for the type of development your buyers have in mind. It’s also essential to determine if easements or rights-of-way could affect your prospective buyer’s development plans.

3. Get a Professional Opinion

Before making an offer on a piece of property, it’s always a good idea to get a professional opinion. Have a real estate attorney look over the contract, and have a land surveyor assess the property to determine its potential uses. You can also use the information to market the land to potential buyers.

4. Make an Offer

Once you’ve decided that a piece of property is a good fit for your portfolio, it’s time to make an offer. When making an offer on vacant land, it’s important to be realistic about the value of the property and the costs of development.

Remember: It may take longer to sell vacant land than it would to sell a finished home in some areas, so you’ll need to take the additional waiting time into account.

5. Close the Deal

With a buyer now confirmed, close the deal using a professional team to help with the process. Ensure that all the necessary inspections have been conducted and that the property is free of any environmental hazards, secure the appropriate permits for development from the local municipality, and verify that the title is clear and there are no outstanding liens or encumbrances on the property.

Turn Empty Lots into Enticing Deals

Next time you walk by an empty lot, remember that it’s more valuable than you think. By following these steps, you can successfully wholesale vacant lots in no time. Just remember to be patient, do your research, and work with a professional team to get the best results.

Want more real estate advice?

Join REIA as a member today! Or attend our next meeting so you don’t miss any important information—just like this article. If you don’t have the time to spare, sign up for our newsletter instead to get content delivered right to your email address.

Categories
Flipping

Does House Flipping Qualify as QBI Deduction?

Man repairing a house
Source: GO Banking Rates

Over the years, the IRS has been cracking down on taxpayers taking advantage of the qualified business income (QBI) deduction. Because of that, some house flippers are wondering whether flipping houses can still qualify as a business.

So, let’s dive in and see what you need to know.

QBI Deduction: What Is It and Who Can Claim It?

QBI deduction is a tax break that allows business owners, freelancers, and independent contractors to write off up to 20% of their total taxable income. This effectively decreases the income tax they owe to the IRS. However, not everybody is eligible for it.

For instance, only business owners with pass-through income may take advantage of the QBI deduction. This includes the following:

  • Sole Proprietors: An individual, such as a freelancer or independent contractor, who runs an unincorporated business
  • Partnership Members: Two or more people who made a formal agreement to oversee a business together, sharing in its profits and liabilities
  • S-Corporation Shareholders: People who own shares in an S-Corporation and include its income and/or losses on their personal tax returns

In short, you’ll have to double-check if you qualify for the tax deduction to take advantage of it, as there are some income limits and business types that may affect your eligibility.

What Does Not Count as QBI?

Now, not all income types qualify for QBI. In fact, there are nearly 20 different income types that the IRS does not consider as QBI. Here are a few of them:

  • Income from out-of-country businesses
  • Investment items (e.g., capital gains and dividends)
  • Interest income not related to a business or trade
  • Annuities received from something unrelated to a business or trade

Of course, as a house flipper, your only concern is if income from flipping is included on the IRS list. Well, it’s not specifically mentioned by the IRS. So, are you eligible for the 20% tax write-off?

Does House Flipping Qualify as QBI Deduction?

The law says that the QBI deduction will only apply to taxpayers who are sole proprietors of a business or trade, a member of a partnership, or a shareholder in an S-Corporation. So those in the fix-and-flip business will be eligible if your operations are conducted within one of these entity structures.

However, there are still rules dictating how much you can deduct from your total taxable income:

  • If you’re single or unmarried and your total taxable income is less than $164,900, then you can deduct 20% of your qualified business income.
  • If you are married and filing jointly with your spouse and your total taxable income is less than $329,800—then you can deduct 20% of your qualified business income.

Because of W-2 wage limitations, things become more complicated when your total taxable income exceeds these thresholds. If this is your situation, then it would be better to call an accountant for advice.

Confused? Don’t sweat it—here’s a quick example to help you understand QBI deductions better:

Let’s pretend that you’re a single-house flipper whose net operating income is $100,000 and W-2 wages are $50,000. Since you fall below the $164,900 threshold, you can deduct 20% from your net operating income, amounting to $20,000.

Assuming that you belong to the 24% tax bracket, this QBI deduction will save $4,800 on your tax bill.

Yes, House Flipping Qualifies as QBI Deduction

The QBI deduction has undoubtedly benefited a lot of industries, particularly real estate, where house flippers are now seeing more profits earned from every sale they close. But if you are still confused about the calculations, then we recommend working with a certified public accountant (CPA).

Calculating your QBI deductions is a huge headache and as a busy house flipper, you simply do not have the time for that. That is why you should consider joining the Real Estate Investors Association of Oakland County—our members have access to tons of resources that help them take their house-flipping business to new levels of success.

From landing sales on your fix-and-flip projects to help you determine your tax write-off, REIA has everything you need. Interested? Check out our website to see what your next steps should b

Calculating your QBI deductions is a huge headache—which you may not have the time for. Consider reaching out to REIA and our team of experts to help you with everything. Subscribe to our newsletter as well and join as a REIA member to attend our upcoming meeting!

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