How To Find A Reliable Contractor

Behind any good real estate investor is a reliable contractor. Whether your business is built on flipping houses or buying investment properties, a quality contractor is essential. They will help keep your project moving in the right direction and cut off potential problems before they get too big. They will handle everything from simple maintenance on a rental to customizing your kitchen to look exactly how you want.

There should be little question as to how important they are, however finding a keeper is not as easy. You may go through half a dozen before you find the right fit. The key is never to settle for an average contractor and when you find one you mesh with to do everything in your power to keep them. It is not a stretch to say that a good contractor can completely change your business for the better. Here are five tips to help find a reliable contractor.

  • Use Personal Contacts/Network:  There are several ways to find a contractor. Anything from Craigslist to social media groups can be a good source under the right scenario. As with most things in business you are almost always better off starting with your personal contacts. You may be surprised at just how many people you have in your business circle. You never know who may be able to supply a quality contractor referral. Reach out to your attorney, real estate agent, mortgage broker and fellow investors and ask if they would be open to referring anyone to you. You should also keep your ears open at local networking events and real estate investment groups. From the people you know and the contacts you have made you should be able to find a handful of potential contractors you can reach out to.
  • Don’t Wait:  One of the universal keys to business success is to always be a step ahead rather than a step behind. This is especially the case when looking for a contractor. Regardless if you are an active investor or still looking for your first deal, you should have a contractor in place. Your business and your goals can change over time, but you never want to have to scramble to find a contractor when you need them. This opens the door to making rash decisions that you may regret later on. If you do have a deal you anticipate closing, you want to keep the ball rolling without any delays.  The first thing you should do is strike up a conversation with a potential contractor and see if they are a good fit. They can do the best work in the area but if they are booked solid for weeks it doesn’t do you any good. You also need to know that they will return calls and be where they say when they say it. The sooner you can get on the same page with your contractor the more comfortable you will feel making offers and pursuing projects.
  • Remember Big Picture:  It is human nature to always try to get the best possible deal. Whether we are buying a house, car or phone there is the instinct to negotiate. However, you need to know when to pick and choose your battles. You often get what you pay for in business. Instead of looking for the contractor that can give you the best quote or undercut the competition you are looking to find the right fit. You need to balance quality of work with availability with price. Out of those three price should be the lowest on the pecking order. You make money in real estate by doing quality work that generates demand which in turn influences your sales price. If you use a contractor simply because they can help you save a few bucks you aren’t looking at the big picture. Ultimately this kind of thinking is small minded and hurts your bottom line in the future.
  • References/Referrals: It is ok to ask a contractor for referrals.  There is a large segment of investors who are scared to ask necessary, and important, questions. You should treat finding a contractor almost like interviewing someone for an important job. You need to know who you are aligning yourself with before getting too far. Ask if there are any references or other projects they can provide. If they get offended and upset, it can be a red flag that they are not real professionals. If they don’t mind getting what you ask for you know they are someone you can trust and want to work with. Regardless of how you connected with a potential contractor or how well you know them, you need to always ask for references and referrals before working together.
  • Try An Audition Job: The first job you have together doesn’t have to be a make or break rehab project. In fact, there is nothing wrong with starting out small and building a rapport. You can start with a minor project on a rental or smaller project and see how they respond. Are they clear on what they are going to do and how they will do it? Are there any last-minute issues that make you think twice? Do they want more work and are confident they can handle bigger tasks? Starting out on an audition project is a good way to get to know each other and see if there is a good fit.

There are plenty of good contractors in every market. Don’t wait until you need one to start looking. Use these five tips to align yourself with the right contractor for you and your business, today.


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How To Improve Your Rental Property Listing Photos

One of the most common places to find new tenants is the internet. There are more rental property listing sites today than ever before. In just a few clicks tenants can find a handful of rentals in their desired market, at their price point and in their timeframe. Gone are the days of relying on classified listings and bandit signs. Today, if your listing doesn’t pop off the page online, you could have a hard time finding tenants.

With all the competition for rentals it is not enough to throw any ad together and wait for calls to come pouring in. You need attractive pictures and descriptive words that prompt a prospective tenant to act. Without visualizing where they may spend the next nine months, or more, they will move on to the next listing without thinking twice. Here are five tips to help the quality of the photos in your next rental property listing.

  • Declutter:  When looking for a tenant it is always important to put yourself in their shoes. Like most tenants the first thing you would look for is the price. Assuming that the price point works, the next thing you would want to see is the actual property. Here is where you need to stand out from the crowd. You want to include every room of the property, however big or small. It is critical that you clean and declutter before taking the photos. When you have a window between tenants and the property is vacant, use that time to snap off some pictures. The alternative is having pictures with your tenant’s clutter in the background. Not only is this unappealing, but it will make the rooms look small and unorganized. If you do not have a window, get the property professionally cleaned prior to your photo shoot. This may seem like an unnecessary expense, but you will use these pictures in your listing for the foreseeable future.
  • Use Quality Camera:  The goal of posting pictures with your listing is to generate interest that ultimately leads to finding the right tenant. As obvious as this seems, it is lost on many investors. Don’t spend time, and money, taking pictures just for the sake of posting something. If you have a new phone with a quality camera option, this could work. However, you are better off using an actual camera. You can probably find a friend, co-worker or colleague that has a camera you can borrow. If you haven’t seen camera photos in a while you will be shocked at just how different they are from your phone. As we stated, these photos will be on your listing for years to come. You are better off doing it right with a camera and not have to worry about pictures again forever. You can certainly get some useable pictures with your phone, but they aren’t the same quality as a camera.
  • Multiple Angles:  If you go through the expense of getting the property cleaned and finding a quality camera, you should be prepared to spend some time taking the pictures. Some rooms are not easy to get the right shot you desire the first time. You may have to experiment with different views and angles to get the picture that looks the way you want. Again, your goal is to make the property look as appealing as possible, without distorting the facts. All the camera tricks you can think of won’t do you much good with a small room. But, if you use the angle that includes a window, it can seem more livable. You don’t need to hire a professional photographer, but you should be willing to put some time into your pictures. A few extra minutes at the property isn’t exactly how you want to spend your day, but in the big picture for your business it can yield large dividends.
  • Don’t Ignore Exterior:  The starting point for your listing photos should be the exterior. Prospective tenants want to see how the outside of the property looks, how big the yard is and if there is a driveway. You need to include photos of the exterior, including the front and back of the property as well as a shot from the street. The more pictures that can give a feel of the neighborhood the more work that is done for you. Your tenant will already have real interest of the property before they ever step foot inside it. You won’t have to spend time selling, you simply have to discuss dates and terms. Always include a handful of exterior photos with your listing.
  • 30 Second Video:  As productive as pictures are we live in a world where we want instant gratification. Instead of pouring through 20 pictures it is usually easier, and quicker, to click on a video. Your video doesn’t need to be professional quality, but it shouldn’t make you sick watching it either. A good video should just enhance what is seen on the photos. Give a tour of the property without getting into too much detail about every room. This should just be a preview, so people know what they are renting. If you spend too much time on every room, you will lose your audience and the video will become counterproductive.

The quality of your pictures can make or break your rental listing. Go the extra mile and make sure that your pictures stand out from the crowd.


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Rehabbing Mistakes To Avoid

Anyone can rehab a property, but not everyone will be successful at it. From the outside it would appear that all you need to do is buy a property, throw some money at it and wait for offers to pour in. If you have ever flipped a house before you know that this is not the case. There are several seemingly minor things that can ultimately have a huge impact on your bottom line. Omitting, or ignoring, these important steps can make all the difference between an average return on investment and a significant one. Sometimes knowing what to avoid is more helpful than knowing the right steps to take. Here are five common rehabbing mistakes you should avoid at all cost.

  1. Looking at purchase price alone. Inexpensive does not always correlate to a positive ROI. There are times when you will legitimately get a good deal on a property and other times the asking price is fools gold. Just because you get a discount from the asking price doesn’t necessarily mean you got a good deal. With any property you need to do your own due diligence and come up with a value and a purchase number that works for you. It is common for a seller to value their property much more than they should. They have an attachment that the public does not, and they ignore the data in front of them. As an investor you should only use data as your guide. You need to factor in the condition, potential value added, market appeal, cost of repairs and time commitment and come up with a number that works for you. If the price is still too high, it is ok to try to negotiate and get the seller to see things your way. If not, you need to walk away and move on to the next property.
  2. Doing work yourself. Real estate investing is very much about picking and choosing your battles carefully. There is a fine line between saving money and creating a greater expense. Just because you can do some, or most, of the work on a rehab doesn’t necessarily mean that you should. There are a couple of important reasons for this. One, unless you are a professional in multiple areas the quality of work will suffer. Improvements on a rehab are not the same as improvements on a rental property. With a rental you can get away with putting a Band-Aid on a problem until the end of a lease. With a rehab, everything must be perfect. If a buyer sees substandard work, they will submit a substandard offer. Secondly, you must consider how much time you are adding doing the work on your own. Every day you own the property is costing you money. An extra 30-45 days can add thousands in expenses. This may not seem like much but at the end of the day it does impact your bottom line.
  3. Poor budgeting. The goal of any rehab is to realize a profit. The reality is that you can make your budget and projections to look any way you like. By taking the best case on some items all you are doing is hurting yourself down the road. When you start your project, you will quickly realize that you may have shortchanged the work needed and need more capital. Without working capital, you will make short sighted decisions that will negatively impact your bottom line. You will try to cut corners where you shouldn’t and everything on the project will suffer. On almost every project you will spend more than you anticipate. Always give yourself a buffer and do everything you can do stick to your budget without missing the big picture.
  4. Unrealistic ARV. Improvements don’t necessarily equal value. One of the biggest mistakes rehabbers make is assuming the market will agree with their value. Before even making an offer, you need to know everything about the market. Look at all previous sales and current listings. See if you can pick up anything about buyer preferences that you can use on your rehab. Over improving a property does not mean you will sell for a higher price. You need to know the market and the buyers in it. If you are unrealistic in your ARV you will put unnecessary work in which will diminish your return.
  5. Rehabbing to pattern. All rehabs are not the same. It is important to recognize when you need to change gears and stray from your usual pattern. It is also essential to keep your personal preferences out of your rehabs. Something you would do for your primary residence may not make much sense for a rehab property. Trends are nice, but they don’t work for every property. Listen to the advice of the people around you and be willing to shift gears every now and then. If you rehab the same on every property in every market eventually you will be stuck with a finished product that doesn’t move. This leads to a price reduction that ultimately forces you to take much less than you ever thought at the start of the project.

For all the upside that rehabbing offers, it is not without some landmines and pitfalls. There are many mistakes to avoid but focus on these five common rehabbing errors.

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The Pros And Cons Of Investing In Student Housing Rentals

Some of the best investments require a leap of faith. You have probably heard for a while that to make money in real estate you need to think outside the box. One of the most out of the box buy and hold opportunities is with student housing rentals. On the surface, these may seem like more trouble than they are worth but when you break down the numbers the ROI can be through the roof. Like any other investment, choosing the right location and quality management are critical to success. For every investor who despises student rentals there are a handful that sing their praises to anyone that will listen. Like anything else in real estate, it is essential for you to do you own diligence and gather all the information prior to making a decision. Here are a few pros and cons with investing in student housing rentals.


  • Large Rental Pool: An investment in a college town is an investment in education. When is the last time you saw a college or university close? Nothing has grown more over the last decade than the cost of college and the need for higher education. When you buy a rental near a school you have a built-in rental pool. Most upperclassmen are required to live off campus, or at least have a strong desire to. Depending on the school this could mean literally thousands of students who may want to rent your property. If you take care of your property and market in the right places you won’t have to worry about finding tenants. This should give you confidence that your property will avoid vacancy and be a strong investment.
  • Consistent rent prices: Rent prices are usually not just thought up out of thin air. They are greatly influenced by supply and demand. Since student rental properties are typically in demand, you can be confident you can get your number. This doesn’t mean you can swing for the fences and price yourself out of the market. It means that you should be able to charge market prices and get them year in and year out. Renters may be more inclined to pay a little more every month because it may actually be a savings in relation to what they would pay to live on campus.
  • Vacancy reduction: The amount of vacancies with student housing rentals should be minimal. The key is to adjust the dates on the lease to start in the summer months. Instead of ending the lease after the school year and starting in August you can start the lease on June 1st. This allows you to avoid any vacancies for June and July and keep a solid 12 months of rent. Most tenants won’t have an issue with the lease starting before they arrive on campus. It gives them plenty of time to move in and get things situated exactly how they want. Additionally, for a house the really want the extra two months of rent is a minimal expense.


  • Turnover: Even if you are lucky to get a junior interested in the property, the max time they will stay there would be two years. A more common scenario is to rent to seniors who will stay for just one lease.  This leads to plenty of turnover with the property. With that you will have to find new tenants every year which means plenty of showings, marketing, applications and documentation. If there is an issue with the property or the security deposit it could alter the timeline and pull time and focus away from other areas of your business.
  • Maintenance: The biggest reason that most investors stay away from student housing rentals is because they want to avoid renting to tenants. Most students are right around the legal drinking age and have never lived away from home before. This produces plenty of calls about almost everything in the house. They don’t know much about a fuse box, furnace or boiler. It will also produce a fair share of simple maintenance calls. Students will not treat and take care of the home, and appliances, the same way a newly married couple would. The couple knows they want to live in the house for the foreseeable future where the students know they are out at the end of May.
  • Management: If you own a student rental, you should expect a higher need for management. As we stated, you are renting to young adults who have never lived away from home before. They will call you at all hours of the night, usually with items that are far from an emergency. They may have problems with the neighbors and issues with property. You can expect to make a trip to the property at least once a month for something that is a relatively simple fix. You will also have to deal with moving in and out which will be filled with plenty of questions and time. Most students are well intentioned and things will go smoothly, but there will also be a lease that can make you second guess ownership.

Like any other buy and hold investment let the numbers be your guide. With student rentals the numbers will be in your favor, but you also need to account for management. Don’t listen to a disgruntled landlord who may have had a bad experience. Do you own diligence and make your own decision.

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How to Become a Private Lender

Private investors seeking alternatives to the stock and bond markets can find more opportunities in private lending (aka hard money lending). If you understand the basics and perform the adequate due diligence for each deal, you can earn solid returns while minimizing your risk as a private lender. 

The returns can be sweeter in private money loans (compared to pushing a button to buy or sell a stock) because it requires a little more knowledge, a little more effort, and a bit more patience. And if you are willing focus and put in the time to learn how it works, you can hit home runs every time you bat. So let’s do exactly that – learn the game of lending. 


At its heart, investing in hard money loans is a lot like investing in a bond, which returns a fixed yield and pays off at maturity. 

Example: If you make a loan to a borrower for $100,000 at 8.00% interest, and require interest-only payments, you will earn an income of $8,000 every year. And if the borrower does not default, the loan will pay off at, or before the maturity date, and the original invested principal will be returned.   

Tip: If you make a loan to a real estate investor who is in the business of flipping property, you should offer to lend the total project cost (acquisition of property plus renovation cost) only if the investor comes to the table with 20% down. This way, the investor has “skin in the game” and also provides you with the appropriate due diligence -proving why the flip project has the highest chances to succeed.

When researching how to lend capital to others for a yearly return, you’ll discover a few important factors that make the private loan investment considerably more involved than a bond investment. If you can master these, then you can win.

  1. Liquidity. If you think you’ll need the money that you expect to invest before the maturity date of the loan, absolutely do not consider becoming a private lender. Even though most loans payoff, there is a chance that it may not pay off as expected. 
    In the event that you do need your invested capital returned prior to the maturity date, you can try to sell your loan using an online loan exchange such as LoanMLS, or offer it to another private investor for sale through a hard money loan broker. However, keep this in mind: performing and non-performing private money loans are typically sold at a discount, so be prepared to take a haircut on the amount of capital returned to you. 
  2. Collateral Valuation. This is where you mitigate risk! The underlying collateral for a hard money loan is very important to your overall security and participation in the transaction.  Carefully evaluate the value of the collateral and use several sources to make your valuation.   
    A common mantra among private lenders is to “drive the comps yourself.”  That means do not just look at photos on an appraisal and assume you have an accurate value. Take the appraisal, get in your vehicle, and drive to the subject property as well as each comparable to make the determination of value for yourself. You’ll may be surprised at what you find.  
    Also, use multiple sources to confirm valuation.  In addition to an appraisal and driving the neighborhood and comparables, consider using an Automated Valuation Model or a Broker Price Opinion.
  3. Advances. Some loan investments require that lenders advance additional funds for a variety of reasons.  Advances may be required to cure delinquent property taxes, cure a senior lien position, hire an attorney, pay to defend bankruptcy claims, or even renovate and re-model a property if a foreclosure occurs.
    The lesson here is do not invest in hard money loans without leaving yourself a cash cushion.  Take a conservative approach and leave plenty of liquidity in your personal finances to handle unexpected circumstances. A good tip here is to always keep Murphy’s law in the front of your mind: “Anything that can go wrong, will go wrong.”
  4. Title. Make sure you obtain title insurance which insures your lien position as a lender and offers fraud protection against forgery. 
    Unlike homeowners insurance, where if you suffer a loss with your homeowner’s policy you submit the claim and get a quick reimbursement, Title insurance is an indemnity policy. Therefore, you are reimbursed only for a proven loss and not the potential for a loss. 
  5. Borrower Credit. Carefully reviewing the borrower’s capacity to make monthly payments is a very important key to a successful loan investment. Private money loans are often made based on the asset, or collateral, but the best loans also give equal weight to the borrower’s past credit track record and capacity to repay the loan when a balloon payment is due, or when the loan matures.
  6. Private Lender Insurance. Make sure the property owner has the appropriate fire and liability insurance in the amounts you desire as a private lender. The insurance company must also be notified to include you as an additional insured on the policy. In the event of loss, you want the check sent to you first!
  7. Documentation. Documenting the loan, by creating the appropriate security documents and disclosures to the borrower, is complicated and time consuming. There are a many state and federal regulations to be followed, and a violation of these regulations could invalidate the loan and result in lost interest and/or fees. Ensure that you engage the appropriate counsel to guide you through the process!


Once a loan is originated, payments need to be collected from the borrower, along with various tax, regulatory and informational statements sent regularly to the borrower.

There are many loan servicing options to choose from and a quick Google search will help you identify a few options. 

What Happens If A Borrower Doesn’t Pay?

If a borrower does not pay, investors must be prepared to go through a foreclose process to claim the collateral.  This will be an involved process which requires a significant amount of expertise and expense. Again, ensure that you engage the appropriate counsel to guide you through the process!

Befriend Another Lender 

Private lending can provide returns substantially greater than those generally found anywhere else (i.e. stocks, bonds, mutual funds, etc). And now that you have discovered the business of private money lending, take your time to fully understand the nuances, ins and outs of the business, and most importantly, your investing personality. Only then take the next step of identifying and capitalizing on opportunities.

A great way to get started and to learn more is to seek the help of professionals who are already in the business of providing loans to investors.  In the past, these individuals were referred to as hard money lenders, loan brokers, or also mortgage loan originators.  The term “private money lender” describes a highly skilled business person originating private money loans.

If you’re just starting out, the services of a private money lender are invaluable and they will help walk you through the transaction.  Most investors who are not real estate professionals maintain life-long relationships with their private money lenders just as business executives would maintain a relationship with their financial advisors.  When you work with private money lenders, you should be aware of the various methods you can invest in loans and the pros and cons associated with each method.  

  1. New Loans. The new loan can be for either the purchase or construction of a new property or for the renovation/rehab or refinance of existing debt on a property.

    In this scenario you are lending specifically to one party and have control over origination, documentation requirements, terms, servicing, etc.  You will not have potential liability for a previous originator or servicer’s mistakes.  If this is a new loan made to a previous client you have the previous performance history readily available.
    Con: If this is a new client, there will be little to no prior payment history on which to base a lending decision. You will have to rely upon other credit performance or on the accuracy of conversations or reports from previous lenders.  
  2. Buy Notes. Private money lenders can also purchase loans that have already been originated. When you buy loans from private money lenders (either performing or non-performing), they can be purchased at face value, at a discount, or if it’s a great loan (high yield, low LTV, great borrower), at a premium. 

    There is a performance history that can be analyzed and evaluated. For non-performing loans, a combination of solid valuations for collateral and deep discounts at purchase can provide excellent yields for an investor who is willing to go through the foreclosure process. Some notes, while currently non-performing, may either payoff to avoid foreclosure or be “rehabbed” and restructured to become a performing note in the future. 
    You can potentially buy an existing liability if the note was not originated or serviced properly. Non-performing loans may force you to foreclose to recoup your investment that this can be a lengthy and costly process. In addition, your due diligence process will always be at the mercy of the records available from the current lender. 
  3. Pools of Loans. The process of buying a group of loans in one transaction. 

    You will get a much better discount for buying loans in bulk.  And for performing loans, there are established performance histories to evaluate.
    Files may not be readily available to conduct due diligence. Buyers are often rushed to make a bid when evaluating numerous loans across different cities and states. This only means one thing: it’s easier and more likely for mistakes to be made in the analysis. For the privilege of buying in bulk, you’ll get some good loans at a good price, but you’ll also likely get some duds.
  4. Syndicated Capital. There are companies that offer opportunities to pool together funds from many investors and create a single entity to loan money.

    You don’t have to make individual loan decisions as these are handled by a pool manager and your investment is diversified across a wide variety of loans.
    Con: You can’t foreclose and liquidate just one loan and may be subject to the entire pool closing before you can get your funds liquid.
    It’s also important to know that your success is directly tied to the success of the pool.  If the pool manager makes poor decisions, it will jeopardize the stability and return of the entire fund. 
    It can be difficult to sell your position once you invest.  The pool manager will only be able to accommodate your request if another party is interested in investing.
  5. Fractionalized Loans. Similar to a pool, but in the case of a factionalized loan, private investor funds are gathered and vested on the security instrument.  For example, if a borrower required a $1 million loan for a shopping center, the note may be fractionalized across 10 different investors, each investing $100,000.  All 10 investors would be vested on the recorded security document. 
    Investing in a factionalized note is different from investing in a mortgage pool.  In the factionalized note, all investors have an interest in a singular note.  When the note liquidates, the investment liquidates.  In a pool, members have an interest in the overall pool and not a particular note.
    It is common for fractionalized transactions to be structured in an entity such as a limited liability company (LLC). This way, the 10 members from the example above would be members of the LLC and the manager (typically the note originator) is responsible for decisions about the note.  It is commonplace to see transactions are structured in this manner because it can avoid a conflict when decisions about advances or foreclosure have to be made.  If all investors have equal interest in a note, all members must agree on every course of action and with the LLC in place, the manager can make decisions in the best interest of the group as a whole.

    Investors can diversify by investing in multiple fractional transactions instead of all funds in one bucket.
    Everyone in the fractionalized group must agree on foreclosure and advances, unless the transaction is set up as an LLC with a specific individual named as the manager.  If any one member does not agree, or cannot advance needed funds, it could create problems detrimental to the investment.
  6. Junior (2nd Position) Liens. You can earn higher returns by buying seconds or other junior liens, but the risks and complications of servicing escalate substantially.  Junior lien investments are not for the faint of heart.  You may be called upon to reinstate the 1st, payoff the 1st, or, if the market drops or a bankruptcy is filed, your likelihood of being wiped out entirely is much greater than a 1st lien position.

    Higher rate of return and less initial cash outlay.
    Significantly higher risk.   If a borrower defaults on the first mortgage, you may have no choice but to bring the 1st mortgage current or pay it off to protect your investment.  A declining market could turn the property upside down unless you are able to “ride it out” until the market swings back. A bankruptcy filing by the borrower could also easily wipe out your investment completely as first liens will take priority over you in the proceedings.

Overall, there is no “right” way to invest in loans. The only thing you can control is a relationship with private money lenders you have researched, feel comfortable with, and trust with your investment.  Remember, there is no substitute for your personal due diligence, whether it’s on the lender or on the property. Rely on proven professionals for advice, but make the private lending underwriting decisions yourself after careful due diligence.

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Indications Of A Strong Real Estate Market

 As an investor, in a perfect world you would only invest in markets on the way up. Being a little too early on a market, is much better than a little too late. Finding emerging markets takes diligence and the ability to pour through data. It also takes discipline to know when to walk away, when the risk isn’t worth the reward.

Strong markets rarely pop off the page. They may have a few areas where they can hang their hat, but it takes several to be considered a sure thing. Growth, economy, job creation and sales history all play a key role in breaking down a potential investing area. The market a property is in is often just as valuable as, or more than, the actual property. If you can keep your portfolio to only strong markets, you can be confident in the upside. Here are five areas to focus on when evaluating a new market.

  • Population Growth:.  The first indicator of a market’s strength is in the population growth. As simple as it sounds, more people coming into a market means that more people find it attractive. With increased population, there is more money spread around throughout the market. This has a direct impact on the property taxes and the reserves of a town budget. The schools should be stronger, the streets improved, and the quality of the area increased. It has an indirect impact of drawing attention of business owners and home buyers. With more business owners coming into town, property demand will increase, and home values will rise. On the flip side, when people flee a market property values plummet and business look elsewhere. Look at a five-year population history at town hall or online to get an indicator on the strength of a market.
  • Economy:  Population growth is a good indicator of a market but doesn’t tell the whole story. The best data you will find of a market is the strength of the economy. It is no secret that people will often go to where the jobs are. If the local economy is on the upswing and money is flowing people will look to stay, or buy, in the market. An indicator of the economy is the growth of local business. If there are restaurants, factories and shops opening up, it is a sign that the market is solid. Large retail companies are savvy enough to avoid areas in the decline. They often have years of research and data behind them prior to breaking ground. As we stated, if business in the market is expanding it has a trickle-down effect to everyone else. More jobs mean that more people need a place to live. Most people want to live as close as possible to their employment if all other things are equal. Rental or ownership demand will push home prices, and values, higher for the foreseeable future.
  • Real Estate Transactions:  All home sales are not created equally. It is too much of a blanket statement to say that the volume of transactions indicates strength in a market. There are still pockets in certain markets that haven’t fully recovered from the mortgage collapse. They had excessive foreclosures and property values haven’t reached pre-2009 numbers. What you want to look at is the number of transactions, in addition to the average days on the market plus the average sales price. A high number of transactions show that buyers are looking to get into the market. A reduced average days on the market indicate that home sales are not dragging, and as soon as homes become available buyers are pouncing.  An average sales price increase shows that demand is outpacing the supply and values should continue to rise. Looking at just one piece of real state data is selective and could get you in trouble. Look at as much info as the items mentioned as you can find.
  • Rent Increases:  Rental numbers have continued to climb steadily over the last decade. Long gone is the stigma that renting is a bridge to buying. There are many people who, for a variety of reasons, do not want to own a home and prefer renting. If you are interested in a market you should look at the rental history. Go to the Trulia, Zillow and any other rental website you can find and look at the current rental property inventory. Reach out to the owners and ask where the market has trended over the last five years. Assume the worst case and compare your property to other rentals that are listed. If you are comfortable in the number, you have a fall back exit strategy that makes investing in the market even more valuable.
  • Appreciation Potential:  You should never invest on appreciation potential. We all saw what happened last decade when property value increase came to a screeching halt. You were left with a declining asset you had trouble getting off your books. That being said, while not investing solely on potential it should be a consideration. Look at comparable sales and current listings in relation to your property. Assigning future value on improvements you make is tricky, but the comps should give you a guide. If there is upside and potential value there, it should be considered a great place to invest.

Simply put, a strong market often makes a strong investment and a weak investment vice versa. Prior to committing to any deal always take the time to evaluate the market before making a decision.


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4 Things To Consider When You Are Selling A Property

There are a handful of subtle things you should be doing if you are selling your property. Some of these are common sense but all of them can have a tremendous impact on your bottom line. Even in a seller’s market, it is not enough to list your home and wait for the offers to roll in. If you overplay your hand, buyers will simply move on to the next property. Doing excellent rehab work or making appropriate upgrades is not enough. You need to always present your property in the best possible light. Here are five things you need to consider if you are selling your property:

  • Use An Agent You Are Comfortable With. There are a lot of great real estate agents out there. To complete a successful sale, you need to choose the right agent for you and your specific property. A good buying agent may not be the best at listing properties. An agent in one market may not be as knowledgeable about the market your property is in. You need to treat your listing agent search like you would anyone else on your real estate team. Don’t be afraid to ask them how well they know the area and how they intend to market the property. Commission is always important but may not be the most important factor. The goal is to get the property sold at the highest price. If you have to pay an extra half a point commission to get that done, it will be worth it in the long run.  You should be able to feel if you and your agent are a good fit after talking with him or her a few times. You and your agent will communicate dozens of times throughout the entirety of your transaction so it is therefore important that you are comfortable with whomever you end up working with.
  • List At The Right Price. One of the most important things you can do to procure a quick sale is list at the right price. Not only will this help you sell quickly but it can also help you sell for the maximum price. Buyers and real estate agents are often influenced by the initial listing price. By pricing higher than the market suggests you run the risk of losing interest quickly. Instead of generating a buzz and creating a multiple offer situation, your property will most likely sit vacant while cheaper houses are being sold. With a high list price, you probably won’t get the showings you anticipated, and within a few weeks, you will be forced to make a decision about lowering the asking cost.  Do you lower the price or hold steady and wait for buyers? Neither option is ideal. If you lower your price, it might be viewed as a sign of desperation and you can expect below asking price offers to come in. On the other hand, If you hold at your price, you could easily go weeks or months before you have a showing. The best option is to list at the right price from the start. This keeps your property fresh and real estate agents and buyers interested.
  • Perfect Conditions Every Showing. Listing at the right price helps but it may not be enough to get an offer. When listing your home, you need to put yourself in the buyer’s shoes. Walk the property through their eyes. Whatever your first impression of the property is, the odds are, it will be the same for potential buyers. Start with the exterior of the home. For as long as your home is on the market, you need to constantly update the grass and landscaping. You can’t have overgrown shrubs or brown grass.  The moment a person steps inside the property, the first impression needs to be strong. Avoid cooking strong smelling foods the night before you have a morning showing. It is tough to mask the smell of a fishy dinner, which could be enough to drive a buyer away. If the house is vacant, you need to stay on top of the temperature. With the weather warming, the house shouldn’t be too hot. Having a strong heat hit your buyer as soon as they open the door will having them speeding in and out of the showing. First impressions are critical with every buyer. Make sure the property is perfect every time you show it.
  • Accept The Right Offer. It is important not to be tempted to take the highest offer. Price will always be a strong consideration but there is more to an offer than price. You need to check out the financing, closing date and contingencies. If you accept an offer that ultimately doesn’t close will force you to start the process all over again. There is no guarantee that buyers that were interested in your property weeks ago will still be around. It is quite possible that they have moved on to other homes. Review the pre-qualification letter with your real estate agent. Look at the type of loan they submit and the down payment. From there, you need to review the contract line by line. Are they asking for contingencies that are excessive or unreasonable? Are they looking for a credit or to keep certain items in the property? If the buyer is difficult when submitting an offer, odds are, they will be throughout the process. Only you, as the seller, knows what the final number is that you will accept. The right offer is usually the one that ends up closing in the easiest possible manner.

Selling your property can be confusing and overwhelming at times. Real estate markets change all the time and it is important to do everything right to get the highest possible price.

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5 Actions To Take When You Apply For A Traditional Mortgage Loan

There are many real estate investors who are utilizing traditional lender programs. With interest rates continuing to slide this has become an increasingly viable option.  As popular as lender programs are not every borrower can get approved.  There are still strict guidelines in place and a mountain of documentation that has to be provided.  With a strong credit score, significant down payment and low debt to income the process can seem as easy as it has ever been.  However, if there is even the slightest blemish you need to have everything in place well before you consider making an offer.  The more organized you are with your loan items the easier the process becomes.  If you are considering applying for a traditional mortgage here are five actions you need to take.

  • Review Your Credit Report. Regardless of what type of loan program you are considering everything revolves around your credit report. If you are considering bank financing the very first thing you should do is obtain a copy of your credit report. For starters this will give you an idea of your score but it will also provide you with all of the liabilities and negative items. If you haven’t looked at your credit report in some time there may be old accounts on there that catch you off guard. One erroneous account or old collection can single handedly pull your score down. The quicker you can get a jump on removing them the quicker your scores will improve. Starting this process after your offer is accepted may not give you enough time. The difference between a 690 score and a 722 can not only impact your interest rate but your approval as well.
  • Deposit Funds ASAP. Loan guidelines for investment loans are different than traditional single family purchases. In addition to stronger credit score requirements investment loans require down payment funds to be seasoned for at least sixty days. Simply put this means the money needs to be in a dedicated account for two months.   If you plan on pulling money from a stock account or anything else you need to do so as soon as possible. Lenders have strict guidelines regarding how long the funds must be in the account for. It is not enough to have them available. If they are not in the account for a full 60 days you will not be able to move forward with the application. In addition to the down payment amount the lender may ask for a few additional months of the mortgage payment for reserve funds. The bottom line is that if you are considering using a bank you need to put all of the funds in one account before you start your search.
  • Pay Down Debt. If your score is dangerously close to the acceptable level you need to focus on how you can give your credit a quick boost. If there are old items on your credit report you can get them removed and have your score updated in as little as 30 days. However, this only works for legitimate accounts. The only other way to quickly improve your score is by paying down your debt. The amount of available balance is second only to payment history when it comes to calculating your credit score. The lower your balance is in relation to your maximum balance the higher your score will go. First look at situations where a balance transfer makes the most sense. From there you should consider pulling funds from your bank account to pay down accounts you are maxed out or near maxed out on. The sooner you can lower your debt the sooner you will see the impact on your credit score.
  • Review Bank Statements. With every loan submission you are required to supply at least two months of bank statements. In addition to verifying the deposit amount you will also need to document any large deposits and withdrawals. A large majority of real estate investors are self-employed and deal largely in cash. This can create a problem when it comes to verifying items on the bank statements. Start by looking for any item over $500. Determine where the funds came from, or went, and write down an explanation. If your offer is accepted you will need to write a letter of explanation for each item and possibly supply cancelled checks. It is a good idea to have your lender review your statements and tell you exactly what you will need to provide.
  • Shop Around. Long gone are many of the loan programs from last decade. Almost all local banks have the same set of investor programs. There may be some slight change in the interest rate but the programs are basically the same. If you are looking for an investment loan your best bet is to shop around and find as many different options as possible. The best way to do this is through a local mortgage broker. Most brokers have access to dozens of banks with several different programs. All it takes is one to be a good fit for you and what you are looking to do. Before you commit to anyone you should talk to at least three different companies. Instead of having them pull your credit you should come armed with your credit score and bank statements. Ask about specific programs and guidelines and find the person or company you are most comfortable with.

There are many advantages of using lender financing. The key is to find the right program for your credit profile.  After your offer is accepted is typically too late to change gears.  Get everything in line before you start your property search.


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5 Mistakes You Should Never Repeat Twice

 Everyone in business makes mistakes. When you are self-employed your mistakes tend to sting a little bit more. Instead of explaining yourself to a boss, there is nobody to blame but yourself. Under the right circumstances a mistake can be used a learning experience. However, if you continue to make the same mistake again eventually it will start to impact your business. All it takes is on misstep to change your reputation, your bottom line and how people view your business. Instead of acting after an error you are better off taking a step back and learning from your actions. You are only human to make a mistake once, but you are a fool if you make the same one twice. Here are five important real estate investing mistakes never to repeat twice.

  • Not asking questions. Real estate investing is a difficult business. There are investors who have been in the business for years, who still get stumped on a scenario from time to time. It is ok to admit that you don’t know everything and need to reach out for help from time to time. One of the worst things you can do is get involved with a deal you don’t know everything about. A wholesaler may present you with an opportunity that is seemingly time sensitive and needs and immediate response. Regardless of the situation, if you don’t understand what you are walking into you need to take however long you need until you do. There is often little recourse if you find something out about the property after the fact. There are many people, websites and resources you can tap into to find out whatever you are looking for. Never accept someone at their word without doing your homework and asking questions where need be.
  • Leaning on emotions. Real estate is often full of wild swings. One day you are at a closing table and the next a deal falls out at the 11th hour. As high as the closings and accepted offers can be, the fallouts are equally as brutal. It is important to always stay on an even keel. Never let recency bias influence your next action. Losing a deal can be tough, but you don’t want to compound it by reaching for a bad property. It is important to have a system, or checklist of actions, prior to moving forward with a deal. If not, it is easy to let your emotions take over and fall head over heels for a property. As obvious as it sounds, your goal is to make a profit and not simply buy properties you like. A home may have everything you personally look for in a home, but if you can’t generate appreciation you will be left with a poor asset you can’t get rid of. Emotions and business don’t go well in the world of real estate investing.
  • Overpromising. Your reputation is one of the most important things you have in any business. As much as you want to do everything for everyone around you, it is important to know where to draw the line. By overpromising and under delivering you instantly lose credibility with the people around you. It is ok to say that you can’t do something, or you don’t know an answer. By doing so, people will respect and appreciate your honestly. The alternative is saying yes to everything and leaving them disappointed a few days down the road. Not only will they be more disappointed, they will be far less inclined reaching out to you in the future. Any chance you had of building, or enhancing, a relationship will be lost. If you can’t do something, it is ok to be honest and lay your cards on the table. Not doing something isn’t the end of the world but saying you can then not deliver can be damaging.
  • Not getting help. Just because you can do something in your business doesn’t always mean that you should. There are many things you are far better off outsourcing. By driving to and from a rental property to cut the grass every few weeks, you pull yourself from work with a greater potential for return. The same is the case with trying to handle all the marketing, accounting, property management and lead generation. There are items you need to outsource, even if you don’t think you can find the capital to afford it. These items will create time or directly help generate new business. This business will often produce a greater return than whatever money you would have saved.
  • Chasing deals with limited upside. There is nothing wrong with making a minor profit on a given deal. However, with any deal the return must justify the time and financial investment. Working on a property for six months only to scratch a minuscule profit is not worth the time and effort. Not only is this risky, but it leads to burn out and frustration. This doesn’t mean that every deal will be a home run, but you need to pick and choose your battles. Look for deals where you can generate appreciation or get out with a profit and move on. It is the deals that drain your time and money that are an anchor to your business. They will pull everything down and leave you wondering what you are doing.

Mistakes are part of life, and business. That being said learn from them and never make these five investing mistakes twice.


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Rental Property Exit Strategies

With any investment it is always wise to consider the exit strategy prior to diving in. Things may look good on paper, but reality is often a different story. As Mike Tyson famously said, “everyone has a plan until they get punched in the face.”  How you want the property to go is not always the case. It is smart to have at least one solid exit strategy laid out, before even making an offer. This can change over time, but at least you will be prepared for a sudden change of plans. Markets change, finances change, and your loan term goals can change over time. The best investors are those that have their exit strategies laid out well before anything happens. Here are five rental property exit strategies you need to consider.

  • Sell: Most rental property owners only think of short-term monthly cash flow. They spent hours running the ROI and monthly numbers that they fail to see the long-term big picture. It is rare that you will hold onto a rental property forever. Unless it is in a prime location with a perfect layout and consistent returns you are most likely going to sell eventually. The question you need to ask yourself if when. Do you want to hold onto it for a certain period of time until you recoup your initial investment? Is there a magic number you would take tomorrow if someone offered it? Are you looking to net a certain number? These may seem like questions for five or ten years down the road, but you should answer them now. Any work you do and updates you make impact the future value. The decisions you make when redoing the kitchen will influence the value for years down the road. Knowing when and even why you would sell should be thought about prior to taking ownership.
  • Own Outright: The thought of owning your property outright and netting all the rent received is an appealing thought. However, unless you put down a large deposit this will take years to happen. Your strategy to pay down, or pay off, your loan balance should start with the first payment. If you want to own the house outright in as little time as possible you should look at your repayment schedule. The more you put towards the principal every month the faster you will pay down the balance. This works whether you are looking at a 30- or 15-year loan. It certainly won’t happen overnight but think of the impact of not having to repay a loan. You can use the property as a form of retirement or even primary income. The only items you will need to pay will be the property taxes and insurance, as well as any agreed upon utilities. If this is truly your goal you should start working towards it right from month one.
  • Refinance: There are a handful of additional options available that most rental property owners aren’t aware of. It is no secret that rental property loan programs and guidelines have changed quite a bit in recent years. That being said, with the right credit score and equity you may have more options than you realize. One option to explore is a cash out refinance. These loans are usually capped at 75-80% loan to value, depending on the number of units. This means your new loan can be up to say 75% of the appraised value. You will pay off your existing first lien and keep the residual cash out to use any way you like. If used the right way the cash can help grow your business or be used as a down payment on a future property. Either way, if you have equity but don’t want to sell you can explore a refinance option.
  • HELOC: Another option you have if you would like to keep your property is to add a home equity line of credit (HELOC). A HELOC is essential a new second mortgage behind the existing first lien. Everything about the first loan stays in place but you have a new loan behind it. HELOC’s are unique in that the repayment terms, rates and fees are different than a first mortgage. They offer an interest only option for the first ten years, followed by principal payments for the next ten. This keeps your payment as low as possible. They also don’t have the same closing costs and prepaids as a traditional loan. Also, you can probably find a lender who will do a line of credit for a few hundred dollars, or less.
  • Stay The Course: Sometimes doing nothing is the best thing you can do. As contradictory as it sounds you can keep the property without having a dedicated exit strategy. Now, you should always be ready to act but give yourself a predetermined period of time to evaluate where you are. This can be annually, every five years or at the end of the ten-year mark. What you shouldn’t do is just pay the mortgage on the property every month without a vision or a long-term plan in mind. Take a step back every so often to consider what you want to do with the property.

Without an exit strategy you will make decisions without much thought or reason. Bracing for the unexpected is a way to be one step ahead of anything that comes your

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