What You Need to Know About Being a Landlord

renting out property

 

Venturing into the real estate industry without a thorough grasp of business planning is as risky as jumping out of the window without a safety net. Rental property is the primary business for many people. If you should take any relevant action of this nature you must plan carefully.

The first step in any business planning is to understand what you want to do. Some people start a business without a clear path. They wander around and soon find themselves burned out and with no where to start. This occurs because they lack a definite goal.

So where should you begin? Before venturing into the rental real estate sector you should have a clear idea of what you want from this occupation. Is it short-term rental? Are you in the rental real estate business for the long-term? How much do you earn per rental unit? How much are you willing to spend? Depending on these factors, you can reasonably determine how much rental income you will need to break even with all costs for your business. Part of your business plan for rental property should be a planned marketing budget. You’ll need to spend money to run rentals, but you’ll want to budget a reserve for unexpected repairs and maintenance costs. So you’ll have to give careful thought to how you can calculate this loss and determine if it’s realistic in the financial outlook. The first step is to come up with a preliminary marketing plan.

Marketing Your Property Yourself

It’s wise to place the burden of marketing yourself on a qualified real estate agent. Make a list of reliable agents and contact them directly with a proposal. There’s no need to try and impress a potential client. Simply let them know that you are looking for a property in their desired area with specifics – pool, fenced yard, outdoor living pergola, fireplace, etc.. Unless you’re in the business of leasing, you won’t need to hire an agent. But as you may have discovered, hiring a property manager is not cheap. You’ll want to have a solid financial base for your business to be taken seriously. Consider it a necessary expense.

Selling Purchased Properties

The most logical solution to this problem would require you to sell your rental properties. One way of doing this would be to set up separate accounts and deal with properties directly. A realtor will place your properties on the Multiple Listing Service (“MLS”) database for all to see. Once it’s on the MLS property find an agent to work with who will also find interested parties and negotiate the sale on your behalf. In today’s internet world this is the easiest way to sell a property. “Buying and Selling (Probate) Properties” web page is a good source to refer to. You may even place a small ad in your local newspaper.

Failures

This is not a market for the complacent. However, as with any industry there are many who go in with the intention to buy and sell properties just like you. Unfortunately some are very good at what they do or may even be very skilled at it. You need to carefully watch them and watch them carefully. Even successful “flippers” will fall and get injured. Remember that even a seemingly likable character could be behind you in the streets if you make one wrong move. Bottom line: Live where you live.

 

Securing Financing For Real Estate Investments

Real Estate Investment Financing

 

The issue of real estate finance is not as straightforward as it may initially seem. There is more than one way of doing things and, no doubt, there is money to be saved on some real estate deals, as there is on other investments. Different individuals have different skills and have different finance options with which they can conduct business.

That said, to lay the smack down on all real estate finance issues would be to miss out of the real underlying intent that goes behind the different financial mechanisms in the first place, and concentrate only on the things and practices themselves. If you have the wealthiest investors in the world confusing token gain on the stock market with the up-side and downside risk of real estate, all you might be able to do is watch and wonder.

All of the above says that the first thing you have to do in real estate finance is very clear – have a good deal or business that is based on a solid factual foundation just like repairing a house foundation with residential waterproofing. Without this, you will be led astray. You will throw out the baby code and start being charged adult penalties.

The industry professional has faced all kind of losses – the domestic mortgage crisis which led to government intervention and recapitalisation of banking systems. The crises in the US and the European debt crises that led the governments to impose huge amounts of fiscal retraction. So the point here is that you have to have a profit cushion or else there will be no other way to cover your losses.

The next point is that it is not a well well-kept secret anymore that you can avoid a lot of finance costs if you can put up a far higher rental yield than the prevailing market rate. When those markets are depressed, you can make a lot of money by taking a profit and lending out the excess proceeds to property investors.

So how do you get access to suitable financial markets to earn the required returns?

Marrying the process is often the hardest part for new property investment hopefuls. In their simplest terms, they should be quite flexible when it comes to what they are seeking. Remember, lenders will be looking for some considerable proof of any property purchase, and the more evidence the better.

If you want to qualify for investor loans, they will look for a property that is a good ‘fit’ – a property that actually performs to the lending criteria will always get the investors’ attention. The only other thing you need to ensure is that you can advertise the rented property as a mortgage and that cash flow can be documented. Once you do that, you can get the necessary finance as and when the situation demands.

Investing in shares can be a bit more complicated, though you can sometimes ‘shift’ the shares in your own way by entitling them as a property investment, and then executing a change of control arrangement as soon as the profits start rolling in.

A final approach to getting the finance for your property investment may seem to be the most obvious, yet is often the hardest to implement. It is to negotiate and convince the seller to accept a better price than they are asking for.

As an aside, you should always remember that most transactions do go through without a hitch, and there are always plenty of buyers looking for properties. If you keep a level head and think through your real estate finance in advance, you should be experiencing some real profits from your investment properties in no time at all.