All investors have heard horror stories from single and multi-family investing: bad tenants, rehabs gone wrong. Often these stories result in investors paying much more in out-of-pocket capital than was accounted for. This remains a major contributing factor preventing would-be investors from making the leap. Though there are successful strategies one can adopt to deal with bad tenants or to facilitate successful rehabs, many investors are still wary of residential asset classes.
However, there are ways to earn cashflow without having traditional tenants or making unneeded rehabs to the property.
Larry Goins is one investor that does not rely on having traditional tenants or doing property rehabs.
Listeners may remember Larry from Episode 106 where he discussed finding creative ways to make money in rising markets. Larry is a 30 year investor and investment mentor. He is an author, speaker and educator sharing his wealth of investment experience with beginner investors. This episode, Larry discusses his strategy of offering lease options instead of traditional tenant leasing.
Earning Cashflow through Lease Options
Homeowners in Training
Prospective tenants are given lease with option to own
Tenants have stated intent to purchase property
Tenants put up non-refundable down-payment stating consideration to purcahse
For Dodd-Frank compliance, tenant’s down-payment only goes to closing costs; no rent credits can be given during lease agreement
Make sure tenant is responsible for minor repairs and maintenance for “x” amount per occurance
As real estate investors, sometimes what we think is a good investment strategy does not turn out quite as expected. While a single family investor may be able to stick to a strategy and adopt minimal changes, this is not usually the case for the apartment investor.
Your investment strategy should suit the deal you are making. It may become necessary to change your strategy in order to make a deal work.
While this may mean an extra headache in the short-term, a change in strategy could mean the difference between a successful investment and a failure.
We’ve been hearing a lot about Florida’s single family property markets, but what about multifamily-residential property?
Though multifamily-residential may not share the same spotlight that single family is getting, apartment investing makes up a big economic portion of Florida’s real estate market and there are some big legislative changes coming to multifamily residential property that investors need to be aware of.
This time, she discusses some key changes coming with the 2016 legislative updates. This episode, Courtney also gives us a Florida multifamily market overview in addition to sharing important legislative updates for multifamily-residential property owners.
Florida Multifamily-Residential Property Overview
Jacksonville – largest apartment growth (new construction)
Sarasota/Bradenton – decline in growth
Over 96% occupancy statewide
New construction focused on Class A and Class Super A – $145k/unit costs
Lack of affordable multifamily developments
House Bill 535, July 2016
Apartment investors with 100 unit or more buildings
HVAC repairs can now be made by on-site building maintenance and not HVAC contractor
Time is money. Property managers spend a lot of money on their time and this is true whether they are managing residential, multifamily or commercial properties. Often times, property managers may get caught up in the timing of things, letting their financial records and organization fall by the wayside. Not only does this cause added stress on the property manager, but it can also hurt the value of a property. When it comes time to sell a property or to refinance, proper financial details mean everything in determining how much the property is valued at.
Dan Pepper knows the importance of organizing and recording all the financial details of a property. Through his company, Palm Companies, a combined investment and property management firm, Dan oversees 190 multifamily units with nearly 50 units managed by Palm. With so many factors to keep track of, paying attention to financial details has become imperative in streamlining property management efficiency. This episode, Dan shares what he has learned about managing properties effectively and increasing property value by organizing and tracking financial details.
Automated Property Management Systems
streamline record keeping, bill pay and rent collection
Appfolio – good mid-market, fully-integrated automated system; 80+ units
Import photos or scans of bills for services and expenses into an easily accessible database
Capitalizing Expenses vs. Annual Expenses
Clearly define and categorize expenses that are capital improvements and what are annual expenses
Buyers can reconcile their investment concerns with detailed records
Lenders can asses precise values on properties
If unfamiliar, google search “capitalizing expenses”
Dan and Palm Companies are focused on multifamily properties ranging between 30-150 units in Southwest Florida. They focused primarily on property management ventures currently, but are open to viable multifamily deals. Palm Companies also has an interest in retail investments. Check out their website for more information.
Full-time real estate investors know more than anyone that there are only so many hours in the day. Finding time to actively land new investments can be hard when its necessary to manage other investment properties. Maximizing time is one of the most valuable tools a real estate investor can have. Shortening the time you spend on your investment properties can greatly improve your quality of life as a real estate investor.
Gavin Welch, an entrepreneurial real estate investor, knows just how precious his time is. With seven properties in his portfolio and work commencing on an apartment development, Gavin has a lot on his plate. With a goal in place of acquiring 25 investment properties, Gavin simply cannot afford to spend time on everyday property management concerns for each of his properties. He has implemented a method that allows him to attend to his current investment properties while providing himself enough flexibility to focus on his investment goals.
provides automated information for tenants and clients to call in for property info and maintenance requests
Limited property showings
Schedule property showings and open houses for set days and times cuts down on time spent visiting investment properties
Auto pay system for tenants
Tenants pay automatically when monthly bill is due. Landlords and property owners don’t need to spend time tracking down payments
Bandit signs circulate property availability
Youtube videos provide property details and photos
Using the same materials and paints on all properties greatly reduces time on maintenance and up-keep
Gavin is currently in the market for viable single family investment properties in the Lakeland, FL area. Suitable fix-and-flips or rental property offers may contact Gavin through his website by going to the Contact Us page. Listeners should also check out Gavin’s own podcast, The Real Estate Loop for more investing advice.
The sob-stories; the hard-luck-tales; the down-and-out pleas. There are many reasons tenants might ply a landlord for a special leniency or exemption. Whether these are legitimate reasons or or not, landlords and property managers can end up assuming a lot of extra stress on a property by allowing tenants to take advantage of a situation through emotion. Sometimes, the hardest thing for investors who manage their own properties to do is tell their tenant “no”. It is easy to put yourself in someone else’s shoes, but at what point can empathy hurt your investment? Real estate investors need to know how to keep tenant turmoil at arm’s length when it comes to the viability of an investment.
Adrian Smude may know better than any the importance of managing interaction with tenants. As an investor in single family residential properties in and around Plant City, FL, Adrian has experienced the short-comings of allowing tenants unchecked leniency. Adrian’s start in single family residential investing stems from an unpleasant tenant/landlord experience: eviction. After being evicted from a rental house in college, Adrian ended up purchasing his own single family property and converted into a multi-tenant rental. Wary of the poor experience he had as a tenant, Adrian opted towards a more empathetic approach to landlording. Eventually, he found his tenants abusing their privilege. Adrian had to find a way to separate himself from thinking like a tenant and more as a landlord. Adrian adopted a system that put distance between himself and his tenants while avoiding the hard-line approach. Join us for the first episode of “Landlord Tales” as we discuss holding rental properties in a land trust.
Property placed in name of land trust. Property owners can designate themselves as trustee, separate from beneficiary
Managing property and tenants becomes easier by separating function as landlord from property owner
Adrian is actively in the market for single family residential properties and mobile homes of up to $120k in areas around Hillsborough County and Polk County, including Brandon, Plant City, Lakeland and Winter Haven. If you believe you may have a potential investment opportunity, contact Adrian at (813) 720-7874.
Commercial real estate investors and developers know the term: “Green”. In Florida, it seems that “green” is the phantom criteria for real estate: many have heard of it, few have seen it. The term brings to mind vague notions of sustainability and energy efficiency, but what exactly is it? What is the merit in “going green”? As an effort to shift toward sustainability becomes a rising trend in the nation, Florida continues to lag behind as commercial developers and investors grapple with the nebulous nature of sustainability and green construction.
Sandra Adomatis, SRA, and LEED green associate is an appraiser with a focus on green initiatives and sustainability in real estate. Based out of Punta Gorda, Florida, Sandra has over 25 years of experience in real estate appraisal in the state of Florida. Sandra is a green valuation expert for the Appraisal Institute. Through course development, seminars and literature, Sandra has been helping commercial real estate investors integrate sustainability and energy efficiency into their investments.
6 Elements of a True Green Building
Low-flow plumbing, greywater recycling, rain barrels/cisterns, energy star rated washing appliances
One of the downsides for real estate investorsbuying single family homes has always been the large amount of time and financial investment it takes to certify an asset. Buyers most conduct thorough due diligence to verify a property’s physical condition, legal standing and yield potential. Buying single family homes can be a stable financial option, but it requires a lot of personal commitment that some investors just can’t afford.
Roofstock may provide investors with a solution to this problem. This episode, RoofstockCEO Gary Beasley stops by to talk about the new platform that is changing the way investors are buying single family homes. By removing the stress and mess of the due diligence process, Roofstock can greatly decrease transaction fees and increase market fluidity by providing investors with a certified, reliable and transparent marketplace for buying single family rental homes. They are also proving that buying leased single family homes can be a greater asset than vacant singe family properties.
Launched in FL – Tampa, Orlando, Cape Coral, Jacksonville, Miami
Also Atlanta and California
Grow to 10+ markets in U.S.
3rd party valuation report, title report, property inspection, rent surveys, financial calculator est. returns based on several rental situations, vets tenants and property managers
Buyer freed from operational component of investing
Buyers able to rely on surety of data
Cheaper, More Effective than MLS
Roofstock – 2.5% transaction fee from sellers; .5% marketplace fee from buyers : MLS – 6% transaction fee
Standardized marketplace of available, leased single family homes
Investment fund opportunity
Recent launch of 100-property fund
Provides readily available market for investors in need of exchange property
To find out more about the great services Roofstock offers investors buying single family homes, check out their website! You can also contact Gary directly at email@example.com or the senior client adviser, firstname.lastname@example.org
Whether investing in a multifamily property with value-add intentions or simply as a stable addition to your portfolio, it is important to consider the building structure and the costs associated with structure maintenance.
Jillian Bandes, of Bandes Construction Company knows just what to look for in building structure when valuating a potential multifamily investment. This episode, Jillian shares six hot topics for investors to consider about building structure when buying multifamily properties.
Costly repair and improvement item
Determine property’s inside and outside amperage
Enlist licensed electrician for any repairs or improvements
Unwise to cut costs on roofing materials and construction
Find dependable roofing companies, use quality materials
Roofing Warranties: 1-2 yr Workmanship Warranty; 10-20 yr Manufacturer Warranty
Air-conditioning represents a huge aspect to determine in Florida properties
Requires secure maintenance schedule
Replacement costs can be substantial
Doors & Windows
Many things to take into account with doors and windows
Observe building jurisdiction’s code requirements
Buying replacements in bulk may be more cost-effective than as-needed replacements
Interior trends fluctuate. Stay current with trends that tenants want
Value-add investors may want to put more into interior costs up front for greater tenant appeal and longevity: energy star appliances, natural stone counter-tops, removing partitions, adjusting ceiling heights
Frame vs. Masonry
Wood frame structures usually require much more extensive evaluations than masonry structures: water-proofing report, site level, landscaping, water table, drainage, etc.
Repairs and rehabs can be costly on frame structures
Masonry offers more stability and investment assurance
For more information from Jillian about important items to consider about building structure she can be contacted through Twitter @jillybee or by visiting Bandes Construction Company’swebsite.
When transitioning from residential or simply starting your investment portfolio in commercial real estate, it is important to remember one thing: commercial leases are not the same as residential. Commercial leases are subjected to a much higher percentage of risk if not properly structured.
Elise Batsel has made it her business to ensure landlords are protected in any commercial lease issue from the ground up. As counsel with the Tampa firm Phelps Dunbar, LLP, Elise specializes in commercial real estate land-use and zoning. Elise represents developers and institutional lenders in acquisitions, dispositions, financing and transactions as well as all aspects of commercial leases. In this episode, Elise discusses seven hot-topics all landlords and owner/operators should know about commercial leases.
Commercial vs. Residential Leases
Commercial properties have different costs and expenses that can be transferred to tenants: common area maintenance expenses (CAMs)
CAMs may include: utilities, landscaping, management fees and other costs associated with owning and operating commercial properties
CAM and Triple Net Leases
Triple Net Lease – For landlords and tenants who want stability; does not account for unanticipated expenses or for properties without a familiar investment history
CAM lease – Serves as umbrella to protect landlord/owner from future costs and expenses incurred from property management; specifies expenses and tenant liabilities
Though not frequently addressed in lease, tax implications are a major tenant-landlord discussion that could be beneficial for both parties
Leases can stipulate landlord ownership over tenant-improvements with proper recompense for tenant
Americans With Disabilities Act (ADA)
Commercial real estate considered public accommodations and subject to more ADA compliance regulations
Represents huge liability for landlords not in compliance
Sub-letting and Tenant-Assigned Leases
Landlords can address sub-leasing and assigning terms in commercial leases
Landlords entitled to portion of income from tenant leases
Do not attempt to draft generic commercial leases if self-managing property
There are many changing facets to follow when drafting commercial leases
If drafting your own lease, have attorney or specialist review
Protection Against Bad Tenants
Always ensure strong deposit from tenant
Write effective demand letter to tenant
For any commercial lease, zoning or land-use issues and questions, Elise can be contacted by phone at 813-472-7564 or through email at email@example.com