Do-It-Yourself Landlord's Blog - Acquiring

Watching The Neighborhood

nospam@example.com (Craig) — Sun, 15 Apr 2007 21:24:20 -0500

You never know who is living next door. Not that there’s a need to promulgate any further paranoia of our neighbors, but it is good to know who is who in your direct vicinity.

Knowledge, after all (and as the cliché goes), is power.

And safety, or the feeling of it, is very valuable within all communities. Continuing along that line of logic, it’s important to your renters that the neighborhood they live in is relatively safe, especially from violent or particularly disgusting crimes as those perpetrated against women or, more importantly, children.

Among the many cool sites out there made available for us to search out our ‘hoods from the comfort of our homes, we have Family Watchdog and Family Beacon. You just enter the street, zip code and such, and then pow: up pops an interactive map with color-coded indicators of particular offenders: Offenses Against Children, Rape, Sexual Battery, and "Other". The details are pretty nice, too, including photos and descriptions of the offender.

I do believe I've actually seen one of the offenders near one of my properties.

Obviously this service is valuable in helping an investor when analyzing a new potential region for purchasing property, or for re-analyzing the marketability of properties currently in a portfolio. After all, safety is indeed a selling point.

But I do wonder a bit about the "Other" section being lumped in with rapists and such. Do I really want to get worked-up over a neighbor with a load of traffic violations? I mean, what is IN "Other"?

A Duplex Discussion

nospam@example.com (Craig) — Mon, 22 Jan 2007 07:29:00 -0600

I’m currently dipping my toe back into the duplex market, back on the hunt. I’ve been particularly pleased with my current Tenant set, wondering why everyone else in the world doesn’t just leapfrog through duplexes.

Which, of course, led me to the interweb to find some contradictory, or at least counter-opinioned stories of duplex investing. I didn’t really find any true horror stories out there. I found the usual recommendations concerning repairs, Tenant selection and such. That’s all fine and dandy, but I honestly wanted to hear of some grizzly investing woes. Properties gone totally awry.

I found this story on Sitting Pretty Financially, one which I’d already read back in April, discussing the merits of different real estate investments (and a kinda healthy dose of bragging on the writer’s part, but that’s alright by me). She maintains the Duplex recommendation while giving fair warning on the dubious nature of Condo purchases.

Oh, Condos! Such the investment cad! So willy-nilly and difficult to pin down!

I am not a big fan of the Condo as a means of real estate investment. You own no land, just the rights to a piece of space above some land of which you may or may not own some miniscule number of voting shares for. Town Homes are typically slightly better, but only because they more resemble an actual home and there are fewer “owners�? per square foot. Fewer cooks in the investment kitchen.

Regardless, my search was for duplex stories, and I stumbled one of the friendliest, most earnest approaches to landlord blogging I've ever read. And I read lots of them. This one’s called I Bought a Duplex! I can’t tell how long he/she’s been writing, or whether they'’ll continue, but it’s a rather good read!

Obviously nothing is dissuading me from my pursuit of another Duplex investment. Especially since I feel that we're passing the soft-rent plateau of the past five or so years, as rental rates continue to solidify under current market conditions.

Zillow: Everything is for Sale (at the Right Price)

nospam@example.com (Jeremy) — Sun, 10 Dec 2006 20:40:30 -0600

Zillow made two announcements this week of interest to real estate investors. First, Zillow will host FSBO ads for free. The second, and more interesting feature is called, Make-Me-Move whereby owners can make a more limited advertisement that a property might be for sale, for the right price. Zillow’s Make-Me-Move service requires that you verify that you own your properties, and once that’s complete, you can indicate a price at which you would consider selling.

Clearly, lots of things can go wrong with the Make-Me-Move service: realtors can use the site to prospect potential sellers (simply because they listed a Make-Me-Move price). Owners could list Make-Me-Sell prices that are wildly beyond all reason, making the whole thing pointless. Owners could try to raise the price of their property once a buyer contacted them, wasting everyone's time.

That said, for real estate investors, if you have not already, bookmark Zillow because this is one more site in your toolbox. First, you may find it a useful as a way to prospect properties for acquisition. If an owner is willing to set a price, they may be open to a counter-offer (and you can negotiate directly with the owner). Second (and this is our recommendation), real estate investors can set Make-Me-Sell prices for their entire portfolio, giving them a way to gradually sell-off their properties without ever formally listing the property for sale.

Investors know that everything is for sale, for a price. Zillow offers a practical way for real estate investors to test the market. If the right buyer comes along, investors can take their profit and find the next great deal. Remember, selling is required if you want to see your return, but you make your profit when you buy. So think of Make-Me-Move as a way to get more opportunities to buy.

Anti-Gentrification Measures a Potential Boon for Landlords

nospam@example.com (Craig) — Thu, 7 Dec 2006 00:09:33 -0600

Buying in downtrodden areas, with the intent to renovate and resell has always been the trail marked by flippers. And in most cases, it’s probably best that it stays that way. Long term rental investors and multi-dwelling managers usually get hammered in these areas if they march in, build or repair, and then see the property taxes skyrocket at a speed that far outpaces that of rising rental rates.

They get cash squeezed.

The Crossland Team blog brings up this point in a recent post. The area in question is in Austin, and I’m very familiar with it. I almost purchased property in its center. So I believe I understand all the pieces in play. It's a large section of central Austin that is mere minutes (if not walking distance) to downtown. From an outsider’s point of view, there’s no reason why it took so long to be developed considering how far the city has been built up on all other sides of downtown. But from an insider’s pov, there has ALWAYS been a stigma against that side of the city. “The other side of the tracks,�? as it were.

Now, after a few brave investors headed the wave several years ago, investors took notice, started doing their homework, and they want to buy up lots of property fast, for quick high-end development. The frenzied dealing and bidding put upward pressure on property values, and those who have lived there for generations are now taking arms to battle the onslaught of “evil�? gentrification.
Continue reading "Anti-Gentrification Measures a Potential Boon for Landlords"

Test Drive: Neighboroo

nospam@example.com (Craig) — Mon, 13 Nov 2006 18:24:44 -0600

Book Review: "The Complete Guide to Your Real Estate Closing" by Sandy Gadow

nospam@example.com (Eryn) — Wed, 27 Sep 2006 06:45:00 -0500

Closing. If you've already been to the closing table, hearing the word may evoke feelings of accomplishment. If you're just starting out in the real-estate business, however, the mere word can trigger overwhelming feelings of dread and foreboding. If you want to become a success in real estate, closing is a rite of passage that you cannot and should not avoid.

Unless someone helps you walk through the process, attending a closing can make you feel like you're visiting a foreign country where nobody speaks your language and everybody knows what's going on but you. When traveling, you can alleviate these fears by reading a travel guide written by an insider whose experience skillfully guides you through your journey; for example, a Frommers guide. When attending a real estate closing, you can read The Complete Guide to Your Real Estate Closing by Sandy Gadow.

Don't hesitate to judge this book by its cover because the title describes exactly what you get. The book follows the closing process chronologically from beginning to end so you can visualize each step of the process and understand why each step must take place in the order it occurs. The author ingeniously titles each chapter with a question that the buyer/seller/investor may ask at that point in the process. Gadow then provides the answers to these questions clearly, concisely, and in layman's terms without adding fluff or irrelevant narration.

The first chapter alone is extremely helpful -- a complete overview of the closing process from beginning to end. In one simple chapter, Gadow answers all the questions about who does what and when. If you need a visual representation that shows when events take place, the end of the chapter includes an actual timetable for a typical closing. The timetable helps alleviate anxiety associated with a closing by putting the timing of events into a cohesive perspective.

If you want further proof of the author's expertise, flip to the sections in each chapter called "A Typical Misunderstanding" and "The Way Things Really Are." In my opinion, it takes an insider to know which aspects of a process often are misinterpreted and how to clarify them for readers. These sections in conjunction with the "Tips" sections leave little doubt about the author's experience in real-estate transactions.

Although The Complete Guide is not presented as a handbook, you can use it as a practical guide. The book is an incredibly user-friendly reference tool complete with checklists and forms. The tables, appendices, glossary, and index are relevant, helpful, and easy to use.

Gadow's book is the best tool I've seen that covers the subject of closing. After you read it, the practical knowledge you have gained may eliminate the dread you once felt and allow you to approach a closing with the sense that you not only speak the language but that you've been there before.

Test Drive: Trulia

nospam@example.com (Craig) — Wed, 13 Sep 2006 15:43:47 -0500

There are a host of web-based real estate tools out there for anyone looking to acquire, revalue, or manage their properties. What I see out there is that because of the last few years being dominated by moving of single family homes, almost all of these tools are geared for the buyers with that intention.

However, there has to have been some thought put into these online services that allows for them to be easily used by those of us who are in the business of finding, acquiring, and reassessing rental housing. What about us? Hm.

Trulia.

The apparent point of Trulia is to become a more user-friendly version of an average MLS database, free for buyers. Just as with Zillow, you can hit the “advanced search�? where after you specify State, all sorts of pick menus blink up. You can go by county, city, or school district (NO zip code). If you pick a particular city that is supported by Trulia’s database, a list of neighborhoods pops up for inclusion into the search! And then you can further break it down by price range, square footage, and fifteen varieties of “Property type�?.

I chose a neighborhood that I own property in, curious to see what was available for sale nearby. While I'm not currently "in" in the market, it's always good to keep tabs. Besides, if there are some nearby deals out there, I just might bite.

The pros:

The interface is pretty slick, with all the presented information on one page: pricing, rooms, footage, map, a photo, links to source website, etc. Then there’s the “Property Indicators�? which tell you how the price per sq ft of a property compares to others in the same area, which is great. Furthermore, there are “Market Indicators�? listed, which intend to display general market data, along with census and school district overviews for the general area you’re looking in.

The cons:

Unfortunately, the “advanced search�? won’t allow you to do so within a particular zip code (you can search by zc off the main search, but not in advanced). It simply isn’t an option, and this is rather obnoxious if you know your markets are mainly divided along zip code lines. They don’t have near the number of properties in their system as I KNOW are available in the area. In fact, it only produced one property, when I know there are three other properties currently for sale on that same street. So, the inventory is rather lacking when compared to the joe-shmoe local MLS route, which is strange considering the stuffing of this data is supposed to come from web scraping. Also, there is not indication of contract interest, so I’m not sure if any of these properties are in the final throes of a soon-to-end bidding war. Additionally, there is no indication of lot size, which is an EXTREMELY important piece of information for any property buyer. And finally, the “similar homes for sale�? section is stacked with comparably priced single-family homes when I’m looking at multi-unit dwellings, and that isn’t very helpful.

It will be interesting to see whether or not services such as Trulia bump out the traditional MLS groups.

Test Drive: Zillow

nospam@example.com (Craig) — Tue, 12 Sep 2006 20:41:32 -0500

Why Do The Duplex?

nospam@example.com (Craig) — Mon, 10 Jul 2006 23:28:55 -0500

It’s something of a tired subject, but duplexes are pretty hot on the market these days. Sure, they usually sell for less than comparably sized single family homes, but that’s because they’re priced primarily on cash-flow expectations rather than speculative demand or emotional first-time buyers.

So they aren’t that attractive for speculative buyers who want to see huge increases in the paper value of the property. Those who buy and sell, or “flip�?, over very brief periods of time are not usually interested in buying used duplexes unless there’s something special about the property (like, super ridiculous crazy cheap, or a natural disaster like Katrina leaves your surviving duplex in goldmine status, which is the strangest blessing ever). Something particularly sellable.

Landlords want a property to become profitable as soon as possible, and then wind it up and let it go (hoping that maintenance and repair issues keep at a minimum).

Well, if owning multi-unit properties is such a long-view project that involves patience and planning, why are they so popular right now?

Apparently, lots of families or friends are joining finances to purchase duplexes instead of individual homes. Other than that, it's hard to say why everyone's diving into the Landlord Game.

Not everyone is always so excited about Duplex livin’… But it’s better than renting someone else’s apartment any day.

FLAGS to Consider Before Falling In Love (with a Potential Investment Property)

nospam@example.com (Eryn) — Wed, 7 Jun 2006 09:58:00 -0500

Before you commit to any type of new relationship, you often can spot “flags” that help determine whether it’s a good idea to get involved. No one wants to spend a lot of time and money on something that drains their resources and offers little in return. This is especially true with investment properties, which have their own set of flags you can detect.

When I visit a property for the first time, I think of my encounter as the first-impression phase of a relationship, and look for potential flags. Afterwards, I have a pretty good idea about whether I want to proceed with getting to know the property better. Although you should consider a number of in-depth issues when buying an investment property, first impressions are still extremely important. Unless you plan to live on the property, you are entering into a type of love triangle with the property and potential tenants. No matter how much you love the asking price, financial figures shouldn’t be your primary consideration until you’ve determined that the property can be loved through the eyes of a future tenant as well as through your own.

Imagine a visit to a property for sale. The asking price is in your ballpark, your funding is lined up, and you are dying to make your first/next addition to your real estate portfolio.

Whatever you do, resist the temptation to buy based on sheer opportunity. An investment property isn’t simply an investment of money, it’s also a long-term relationship and a substantial money/time/energy commitment. Don’t make this decision hastily.

You can use the FLAGS memory device to decide when to look more closely at a property and when to walk away. This tool is solely for an initial assessment and is in no way an all-inclusive method for choosing a property. However, I’ve found it helpful in determining which properties have potential and which ones could turn into the proverbial money pit. When the urge strikes you to impulse buy, take a deep breath, remind yourself that there are plenty of other fish in the sea, and focus on these FLAGS:

F= Foundation

L= Location

A= Appeal

G= Garaging

S= Safety

Foundation

A property’s foundation is extremely important because it is a clue to the overall soundness of the structure. Whether the structure sits on pier and beam or on a slab, you need to be aware of the condition of the foundation. Check the property carefully for these typical flaws:

Obvious cracks in the foundation

Uneven flooring

Cracks in walls

Additions that have settled and shifted

If any of these flaws are present, consider consulting a professional engineer or appraiser before becoming attached to the deal. Correcting a foundation problem can be a costly endeavor.

Location

“Location, Location, location!” Just because we’ve all heard this rule of thumb a million times, that doesn’t mean it’s not true. When assessing whether a property is in a desirable area, keep the following list in mind:

Access to public transportation

Good neighborhood (low crime)

Minimal new development

Access to major highways

Proximity to target tenants

Access to shopping/businesses

If you are not familiar with an area, consider consulting a realtor or an appraiser who can show you the growth trends in a particular location or city. If the property does not allow easy access to important roadways, it may be seen as a disadvantaged property. Also, a lot of new construction in an area may cause potential tenants to be lured away from your property by newly available options.

Appeal

While appeal can be considered subjective, several factors can increase your likelihood of keeping a property leased. Check properties for the following aspects:

Curb appeal

Number/size of bedrooms and bathrooms per unit

Updated rooms

Neutral colors

Easily maintained yard/interior

Natural light

Privacy

It’s not necessary for you to want to live in the property yourself, but you should choose something that will appeal to your target tenants. If you are planning to cater to college students, consider different amenities than you would if you are planning to lease to professionals, young couples, or families. Keep your target tenants in mind and try to see the property through their eyes.

Garaging

“Garaging” refers to the tenants’ needs for vehicle accommodations. Investors often focus too closely on a property’s structure and not enough on the tangential details of tenancy. The need for vehicle accommodation can be regional -- in many neighborhoods, pedestrian tenants abound and parking is not essential. However, in general, it is a good idea to determine the following garaging elements:

Available parking options (off-road, carport, garage)

Protection from elements

Number of spaces available (especially for multiple-family properties)

Width of driveway (if catering to multiple tenants)

Bicycle storage

Again, picture the type of tenants you want to target and identify their needs. Limited or inconvenient parking can make any property undesirable no matter how many other amenities it may have.

Security/Safety

Unless tenants are desperate, they seldom stay in places where they do not feel safe. Some safety issues can be resolved by finding a good location. However, the property itself should also possess a feeling of security and safety. Check whether the following safety items are present or can be easily installed:

Solid external doors with locks/ deadbolts

Windows (secure but not painted shut)

Shrubs (not blocking visibility of windows and doors)

Visibility/privacy (tenant bedrooms/bathrooms not visible from street)

Fences/play areas for children (structurally safe and integrally sound)

Compliance with city ordinances (fire alarms, electrical/plumbing codes, fire escapes)

Security for garages and storage areas

These details not only make your tenants feel comfortable enough to move in, they increase the possibility that your tenants will renew their lease at a future date. Additionally, safety compliance can reduce your liability if problems occur.

If your prospective property passes all the above FLAGS, you can safely move into a deeper, more meaningful relationship. The next phase of the commitment is to review seller disclosures and order a full inspection of the property by a professional. Just as in interpersonal relationships, cosmetic touch-ups may be hiding deeper issues that are overlooked by the untrained eye. With careful observation and a little luck, you will be well on your way to a long, prosperous relationship with a property that is worthy of your love.