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Renovation Mistakes to Avoid for New Rental Property Investors

In this video, I discuss 5 renovation mistakes that kill the profits of new rental property investors.

[0:53] Excitement around designing rental property

[1:22] #1 Over-improving

[3:02] #2 Skipping required repairs by local municipality

[4:13] #3 Picking the wrong contractor

[5:37] #4 No value-added amenities

[6:59] #5 Mismanaging the budget

[9:14] Getting your renovation budget right upfront

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Rental Property Risk: Insurance Tips for Scaling Rental Property Portfolio

As you scale your rental property portfolio, many investors think more seriously about how they manage their risk. You may view rental property insurance differently with 1-2 rental properties vs. 5+ properties.

This video is an interview with investor property insurance expert, Jeff Jones of Best Insurance Pro. (https://www.bestinsurancepro.com/contact)

During the recording, we touched on some of the burning questions I hear as a property manager in Philadelphia around managing risk as a rental property investor including:

Question 1: What safety measures should landlords install in properties to reduce risk?

Question 2 What are the top repairs to reduce overall insurance costs?

Question 3: Which repairs are best kept as the landlord’s responsibility

Question 4: What is the difference between putting the property in an LLC vs keeping it in owner’s name from a liability perspective?

Question 5: What is most important to know about insurance as you scale your rental property portfolio

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How to Buy a Duplex and Rent Out Half

In this video, I discuss some tips to buy a duplex or triplex and live in one unit and rent out the others. This strategy is known as house hacking.

[1:00] Overview of house hacking

[2:29] #1 Focus on the neighborhoods that have the supply of multi-families

[4:26] #2 Check out tenant-occupied properties

[5:30] #3 Look for homes that do not need major repairs

[6:58] #4 Look for a property with separate utilities

[7:50] #5 Run the numbers on the investment over the long term

[9:14] Tip to avoid lender surprises

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Top concerns about buying a property with tenants

Some investors are hesitant about even thinking about buying a property with existing tenants because they don’t want to deal with the previous landlord’s headaches. They have fear around the hidden costs that they may encounter with tenant-occupied properties.

In this video, I will share the legitimate concerns and how to work around them to get a good deal when you buy a property with tenants.

[0:51] #1 Inheriting other people’s headaches

[1:57] #2 Limited information about the tenants

[4:07] #3 Hard to get rid of tenants

[5:09] #4 Challenge of managing the transition

[8:22] The tenant is also evaluating you as a potential landlord

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What’s In A Rental Property Budget

In this episode of the Rental Property Café™ Video Podcast, real estate financial planner Cynthia Meyer and real estate advisor Veronica Woods talk about the 6 common rental property budget mistakes that they have seen rental property owners make — and what real estate investors can do to avoid them.

☕ Rental Property Budget Mistake #1: Underestimating All The Variable Expenses [00:02:53]
☕ Rental Property Budget Mistake #2: Not Budgeting Enough For Turnover Expenses [00:06:08]
☕ Rental Property Budget Mistake #3: Not Including A Budget For A Property Manager [00:08:36]
☕ Rental Property Budget Mistake #4: Not Prioritizing To Build Cash Reserves [00:11:33]
☕ Rental Property Budget Mistake #5: Not Monitoring Your Actuals vs. Your Budget On A Regular Basis [00:12:55]
☕ Rental Property Budget Mistake #6: Not Tracking Your Budget At All [00:16:33]

About the Rental Property Café™:

The Rental Property Café™ podcast offers a real estate tool kit for busy professionals who are building a real estate portfolio. In each episode, co-hosts Cynthia Meyer & Veronica Woods explore ways to grow a successful real estate business while growing your career.

Connect with Cynthia Meyer:

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How to set the market rate for your rental property

How do you estimate the market rent that will allow you to maximize your rental income for your investment property?

In this video, I will share some best practices in deciding on what the current market rent is. I will cover 5 steps to ensure that you select the right rent to attract the right tenant and keep up with your operational expenses.

[0:30] Charging market rent for more wealth

[1:37] #1: Define your neighbor market

[2:25] #2: Be clear on target tenant profile

[3:39] #3: Review the rental comps

[5:20] #4: Test the market

[7:18] #5: Talk to real estate professionals

[8:22] Mistakes smaller landlords make

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How to Calculate the Numbers on a Rental Property – Estimating Cash flow

How do you figure out if the numbers will work with a potential rental property?

In this video, I will focus on cash flow and real estate math. A real estate investor makes their decision on whether they have a good deal by the numbers. I will cover 5 things to keep in mind when you calculate your estimated cash flow on a potential real estate deal.

[0:40] Defining a good deal by cash flow

[1:41] #1: Set a financial objective per door

[2:41] #2: Don’t underestimate variable expenses

[3:39] #3: Validate utility costs

[4:26] #4: Be conservative with fixed expenses

[5:26] #5: Validate the seller’s assumptions

[6:18] “Back of the envelope” tip for cash flow

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5 Things To Consider Before You Manage Your Own Rental Properties

Are you considering buying rental properties and managing them yourself? Many people dream of owning rental properties but are not sure whether they are ready to manage the properties on their own. Before you take the leap to be a hands-on landlord, it is important to understand what is required beyond collecting the money at the beginning of each month.

If you are thinking about managing your own rentals, watch this video which covers five things you will need to consider

[2:16] #1: How will you handle tenant screening
[3:46] #2: Which lease will you use?
[5:02] #3: How will you handle maintenance issues?
[6:29] #4: Which local legal requirements do I need to worry about?
[7:39] #5: Do I have the right mindset for the rental business?

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Real Estate Wisdom Update-6-27-18

Wealth. Legacy. Lifestyle.

 

Action Inspiration

The dream is free. The hustle is sold separately Unknown

Landlording in a Renter-Friendly State

If you were curious about where Pennsylvania ranks on the spectrum from renter-friendly to landlord- friendly, the data shows that the state skews more in favor of the tenants. According to a RentCafé study, New Jersey (#17) and Pennsylvania (#18) rank neck and neck.

Our neighbors in Maryland (#32) and New York (#39) ranked as more landlord-friendly. The landlord is most king-like in Arkansas (#51) where tenants face criminal charges for not complying with vacate notice. See full rankings here.

With the pending “good cause” eviction legislation before Philadelphia’s City Council, some are questioning whether PA may be leaning more towards tenants. The proposed regulation is supposed to combat tenants getting displaced by overzealous developers.

The bill would limit “good cause” for eviction to the following reasons (note-this is not a complete list):

  • The tenant isn’t complying with a specific part of the lease
  • The tenant isn’t paying rent
  • The tenant has caused damage to the property
  • The landlord or their relative is moving into the unit

In 2016, Philadelphia ranked #4 among large cities in the number of evictions (10,264) per year according to the Eviction Lab at Princeton. The #1 spot for evictions in a medium-sized city within PA went to Reading (1,143), with Delaware County cities Chester (#12 rank, 125) and Drexel Hill (#20 rank, 35) falling within the top 20.

For buy and hold investors, the time to shore up your property management processes is now. It is only going to get more complex. You may need more systems in place to manage move-ins and move-outs. If you own properties in multiple counties, it also means keeping track of the regulations for each town. You will need to manage your portfolio more like a business to maintain returns.

May Key Market Statistics

(Statistics shown are for rolling 12 months ending in May)

(19143) West Philadelphia-Cobbs Creek/Cedar Park

July 17 July 18% CHG
Total Sales44453220%
Lowest Sales $11K$14K24%
Highest Sales $1,545K $800K-48%
Average Sales $141K$154K9%
Days On Market 4637-20%

(19104) West Philadelphia-University City/Mantua

July 17July 18 % Chg
Total Sales 15518117%
Lowest Sales $13K$14K8%
Highest Sales $2,400K$1,250K -48%
Average Sales $255K$253K-1%
Days On Market 4538-16%

(19139) West Philadelphia-Walnut Hill/Haddington/Mill Creek

July 17 July 18% Chg
Total Sales 23227318%
Lowest Sales $5K$8K50%
Highest Sales $607K$585K-4%
Average Sales $89K
$109K22%
Days On Market 6041 -32%

Upper Darby

July 17 July 18% Chg
Total Sales 1,0381,0925%
Lowest Sales $14K$21K50%
Highest Sales   $415K$435K5%
Average Sales $127K$139K9%
Days On Market 7156-21%

Chester

July 17 July 18% Chg
Total Sales 2002105%
Lowest Sales $5K $5K0%
Highest Sales   $165K$255K55%
Average Sales $53K$57K7%
Days On Market 57 56-2%

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Why You Should Add a Multi-Family Property to Your Portfolio

Have you thought about adding a multi-family property to your portfolio? The property in the photo above is an example of a current opportunity (as of 5/8/18) of a 5-unit property for sale for $315K with over $4,300 in monthly cash flow.

If your goal is to build up your real estate income stream, multi-family investing is a good path to get there. This blog post covers some benefits of buying a small multi-family and shares some sales trends in the Philadelphia metro area.

Often, new investors equate multi-family investing to owning a large apartment building that requires a full-time maintenance staff. That is not always the case. The definition of a multi-family property is much broader. Real estate professionals break down the multi-family asset class into three general segments:

  • Plexes (2 to 4 units)– Most small investors get started here. These properties are considered as residential properties by the banks when evaluating financing options. Municipalities tend to impose similar rules for landlords of plexes and single-family rentals.
  • Small Apartments (5-50 units) – Some small investors (by themselves or with investment groups) move up to invest in small apartment buildings. These properties require commercial financing which require more detailed cash flow projections. Municipalities place more requirements on how these buildings are operated and where they can be built.
  • Large Apartment buildings (Over 50 units) – These properties are most often owned by larger real estate investment companies or institutional investors. The commercial financing and municipality requirements generally get more complex.

Since most small real estate investors start with 2-6 unit properties, we will cover some of the top benefits of investing in this smaller brand of multi-family property:

  1. More revenue opportunities  – Beyond rent, you can collect revenue from providing other services to tenants such as coin-operated laundry machines, storage units, private parking spaces, and other concierge services.
  2. Spread risk over more units – When your cash flow is dependent on one tenant paying their rent on-time, there is more risk that your property’s income. When you own a triplex, one bad tenant does not wreak havoc on your cash flow as long as you have two other good tenants.
  3. More favorable financing terms – One unique opportunity for investors with a duplex or triplex is get more favorable acquisition financing by agreeing to live in one unit for a period. Not only is your tenant helping you pay your mortgage but you are able to put less money down than the traditional non-owner occupied investment property.
  4. Economies of sale – Labor and material costs for maintenance items can be spread over more units. If you have three single-family properties with bad roofs it will be more expensive to repair than one triplex. It is also easier to get contractors to view problems at one address vs. single-family homes scattered across town.
  5. Less competition – In general, there are fewer people looking at multi-families in most markets. You are also less likely to get into a bidding war to acquire the property. Your competition is likely other investors who are equally-motivated to secure a good financial deal vs. a new homeowner who may bid using more emotional factors.

If you want to pick buy a multi-family property, you have to target the neighborhoods that have the most inventory (and favorable zoning). The tables below show the areas with the most transactions from 2017 in Delaware County and Philadelphia.

2017 Multi-Family Settled Transactions (Source Trend MLS)

2017 Delaware County, PA Multi-Family Sales

Units Sold
Upper Darby26
Drexel Hill23
Clifton Heights17
Chester15
Lansdowne15
Collingdale12
Darby12
Media10
Ridley Park8
Glenolden7

2017 Philadelphia Multi-Family Sales

Units Sold
19121 (Brewerytown)95
19111 (Northeast)81
19124 (Northeast)71
19139 (West Philadelphia)62
19144 (Germantown)58
19149 (Northeast)58
19104 (West Philadelphia)57
19143 (West Philadelphia)57
19135 (Northeast)51
19120 (North Philadelphia)50

Top Delco Multi-Family Sales Details

# of Sales% DuplexesAverage Sale Px per UnitMin Sales Px per UnitMax Sales Px per Unit% Cash Sales
Upper Darby2685%$56,979$22,555$80,00046%
Clifton Heights1776%$51,719$23,750$87,50053%
Drexel Hill2396%$69,544$48,500$95,00026%

What about investing in single-family properties? Of course, there are plenty of reasons to invest in single-family homes, including 1) lower price entry point, 2) Multiple exit strategies, and 3) Better price appreciation. I am pro single-family investing, too.

However, I think more investors should consider BOTH single-family and multi-family investment opportunities on the quest for more financial freedom.

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