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Rental Property Negotiation Tips

Rental Property Negotiation Tips

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Making an offer on a property should be a well thought out, calculated process. We do not recommend blasting every listing with a “lowball” offer, hoping something sticks.  Lowball offers are generally a waste of time and effort and, if accepted, it is probably the result of poor research and a hasty decision. An eagerly accepted low offer likely reflects that the property has serious issues that were deceptive to the quick buyer.  Proper property acquisition should be viewed in three processes, described below.

Property Value and Capitalization Rate

Before making an offer on any property, we need to establish a maximum acceptable offer. This process involves establishing the property value and the capitalization rate.

Establishing the actual property value starts with finding comparable property sales for your targeted property. A real estate agent should provide you with the comparable sales, but you should always verify them yourself.  Zillow will list recent sales. You should review sales that our within a mile of your property and have similar square feet and features to your targeted property.  Be sure to drive by the comparable sales to ensure they are, in fact, equals.

Capitalization rate is basically the net profit (gross rent minus all expenses, maintenance, property taxes, and property management fees, if applicable) divided by the cost of the property. The ideal capitalization rate for any property will vary in each market. Capitalization rate is dependent on many factors.  Examples on how capitalization rates vary include: areas that have a higher appreciation will produce greater property equity which will allow for a lower capitalization rate; areas that are more transient (such as homes adjacent to a college campus will require additional time and labor as the unit is likely to turn over yearly or biyearly, resulting in a lower capitalization rate.  Establish the capitalization rate in your area by speaking to other investors or researching actual listed rentals and their property value. It is a good indication that you have calculated the correct property value, if that property value equals the capitalization rate for your area, as these numbers directly correlate.

Making The Offer

Once the property value and capitalization rates are established, we can then create our offer. I like to make my maximum offer between 12 and 18 percent below the true market value.  This will ensure that if you need to exit the property for any reason, you should not lose any money, as the real estate fees for your sale will be 6 percent and you will have a few percent in property acquisition costs (title fees and closing costs if applicable).  An offer in this general area will be viewed but the seller as not ideal, but possible.  I generally recommend making my first offer my maximum calculated offer and I do not move from this price.  This ensures that my emotions or pressures from real estate agents won’t put me into a situation I later regret.  In addition to the offer, understand what is valued to your seller and who your seller is.  A private seller probably doesn’t care if the offer is cash or a loan.  HUD owned properties are similar, they will accept the highest offer regardless of how the funds are secured.  However, a REO (real estate owned) by a bank may value a cash offer, especially if the property is in disrepair. This is due to the fact that FHA (Federal Housing Administration) and convention loans are only available for habitable properties.  If it is a private sale and the property is vacant, the closing time probably has value to the seller.  Define your offer price to the seller.  Include your comparable sales plus bids for required repairs to seller allowing the seller to understand why your offer is lower than expected.  This tactic holds real value to REO properties where the seller is emotionally removed from the sale price, and the sale price only needs to be justified.

 

Negotiating The Offer

Most people believe since we already made our maximum acceptable offer there, is really nothing to negotiate. But remember, the terms of the sale still hold monetary value.  This is where understanding the seller’s situation can be exploited.  If the property is older, counter with accepting the offer in the “as is” condition.  This holds extreme value to the private seller.  If the property is bank owned, reduce the closing time and include in the offer a 3 percent non-refundable earnest money.  The bank will realize that closing is extremely likely and, if it the closing falls through, they have cash to offset their carrying costs. Countering with the same price plus a closing concession reaffirms your price while providing the seller some additional value and another chance to accept your offer.  After you have exhausted all negotiations, inform the agent or the seller that the offer is good for 30 days, if the seller should change their mind.  Remember, some of the best deals are the ones we don’t make and there will always be another opportunity.
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Property Management Software

Property Management Software

Proper property management in today’s industry is paramount in maximizing profits and limiting your time requirements. Lucky, maintaining self-made excel files and personally depositing checks are no longer required.  Today’s online property management software can manage all aspects of the property-management process and, when utilized to their complete potential, they can replace the services of the traditional property-management companies.  Savings can be extensive, as most property-management companies charge 10 percent of the monthly rent to manage the properties.  They also charge between 50 percent to 100 percent of the monthly rent for tenant placement.  The savings from moving to the online platform is substantial, providing investors additional liquid capital needed for expansion.  Below are property management software reviews of some of the industry’s preferred property management software options.

Buildium Property Management Software

Buildium is a full service online property management software that automates almost every expect of property management and provides detailed accounting. Listing rentals is a snap with Buildium. The software will save your previous listings’ narratives and photos and with one-click of a button, it automatically uploads the listing to Zillow, Trulia, Hotpads and MyNewPlace, reaching large audiences.  The resident portal allows residents to authorize automatic payments and request repairs.  The accounting software easily tracks accounts receivables and billings, allowing quick review of your complete financial performance.  The document storage feature provides an organized location for all your leases and forms.  Renter applications and tenant screenings are performed electronically and quickly on the Buildium platform.  The Buildium software provides a standard application and allows you to customize it to fit your needs. The e-leasing option allows for electronic leasing agreements with legally binding electronic signatures.  The intuitive software is easy to learn and Buildium provides unlimited phone support from 9:00 am to 8:00 pm EST.  Similar to Rentec Direct, Buildium offers a free professional website.  Buildium offers multiple packages depending on your needs and property quantities, the core package for twenty units or less is available for only $45 per month and $150 per month for the pro service.  Pricing for one hundred units is $150 for the core package and $200 for the pro service.  Pricing continues to escalate and is available at Buildium.  Buildium does provide a 10 percent discount when paying for a full year. The Buildium platform is ideal for landlords needing the full range of services, who own a few properties all the way to a few thousand properties.  The core package features include property accounting, financial reporting, maintenance management and leasing management.  Additionally, the core package offers online payments (50 cents per transaction, electronic leasing (5 dollars per lease), and basic tenant screening (criminal, credit and eviction) for 15 dollars per person (tenant screening should be paid by the prospective tenant).  The pro service provides all of the basic core package services plus offers the online payments, property inspections, electronic leasing and tenant screening services for no additional cost.  Buildium offers a free 15 day trial.
Buildium

Rentec Direct Property Management Software

Similar to Buildium, Rentec Direct is a full service online property management software with two pricing options. Both pricing options escalate depending on the quantity of units.  The Rentec Pro starts at 35 dollars per month for 10 units or less.  While the Rentec PM option starts at 35 dollars. Pricing for one hundred units is $90 for Rentec Pro and $100 for the Rentec PM package.  Pricing continues to escalate and is available at Rentec Direct. Rentec PM is really designed for property managers and the features of the Rentec Pro will meet the needs of most landlords.  Features for the Rentec Pro software include property and tenant accounting tools, automatic payments (credit card transactions are subject to a 2.75% transaction fee), online property advertisement, online rental applications, tenant portal, maintenance and work order tracking, and tenant email and SMS messaging. Rentec Direct even offers a free professional website for users.  The website can feature listings, and includes links to receive applications and application fees.  Use the website to promote lease-to-own programs, list important phone numbers and to add tenant testimonials describing favorable experiences.  The cost of a website can be hundreds or even thousands of dollars, making this an excellent feature.  Rentec Direct is ideal for any landlord looking to automatic property management.  Rentec Direct offers a free 30 day trial.

Clear Now

ClearNow Online Rent Payment to Collect Rent Automatically!ClearNow Online Rent Payment to Collect Rent Automatically.  Clear now is a cost effective solution for landlords not requiring all of features offered by the full service software products. The program only charges a small monthly fee of $14.95 for the first debit transaction, plus only 2 dollars for each subsequent debit transaction.  While clear now’s focus is cheap automated payments, they do offer additional free services including tenant screening and a simple-to-use profit and loss calculator, reporting of your 1040 schedules E’s, making filing simple and easy.  Receipts are automatically generated and emailed to your tenant upon payment.  Clear now is reputable and reliable as they have been serving landlords and property managers across the nation since 2000 and hold a perfect BBB rating.  The most overlooked feature is the tenant reporting to Experian credit reporting.  This is a must-have option for landlords who utilize lease options to tenants who need to build their credit.  Additionally, building credit for the millennials is major selling point as rental properties for new graduates have become a required a stepping stone to home ownership and good credit will reduce the cost of ownership for your tenants.  Most people recognize the value of a good credit, but lack the means to achieve it.  Clear Now’s flat fee format makes it the most cost effective option for landlords with smaller portfolios.

Landlordmax

Unlike the other property management software, Landlordmax requires a low cost, one-time fee. The software provides an easy-to-use interface for all of your accounting needs.  The program has many reporting options including graphs and charts.  Additionally, the software allows you to organize all of your rental business information, including mortgage information, insurance and pictures for each unit.  Landlordmax does lack the automated payments and the tenant portal tools that other software offer.  Priced at a low, one-time cost of 200 dollars, Landlordmax is ideal for users who just want to manage their financials, and don’t value the interactive tenant options offered by the other platforms.  This service, coupled with an online screening service, can automate a majority of the tasks landlords take on.  A Free trial is also available.

Traditional Property Management Services

The use of a traditional, live property manager, while costly, is desired for certain landlords and situations. Tradition property management is recommended for landlords who are operating out-of-state or for whom the commute is rather long to your properties.  It just becomes impractical and costly to be an absentee landlord and very difficult to fill vacancies and review property repairs from a long travel distance.  Traditional property managers also provide value to new landlords whom may not know the local laws and just need help learning the ropes.  A good local property manager will handle listing and showing vacancies, payment processing and handle maintenance requests.  They will also provide recommended repair and maintenance companies for the repairs.  The referenced repair companies are generally reliable, educated and probably a little cheaper than commercial repair companies found online.  Traditional property manager’s charges for their services are usually around 10 percent of the monthly rent, plus a placement fee equal to half or one month’s rent.  The associated costs are generally negotiable.  Reductions should be available for large portfolios or for individuals who will burden portions of their services, such as tenant placement.  Try to team up with a few other investors when shopping property managers.  This partnership will increase the quantity of properties to the point where the property manager may agree to reduce the monthly costs from ten percent to six or seven percent, or even five percent if all of your portfolios are concentrated in one area.  Referrals are the best method to finding a good local property manager.  Ask reputable realtors in your area for references or join local real estate investment groups to learn and discuss property management groups with other local investors.

Besides the cost savings, the other major benefit of all of the rental property management options is the time you save. Time saving extends beyond the obvious rental management tasks to responsibilities such as tax preparations.  The organized payment and expenses options allow for quick completions of 1040 schedule E. Both Buildium and Rentec Direct can manage and file your 1099s.  The electronic online applications and lease agreements reduce the quantity of face-to-face visits between you and possible tenants.

In the grand scheme of things, all of these options are priced extremely fair. Remember the costs are a business expense and are paid with before-tax dollars, making the advertised pricing actually lower since the income would be taxed if we didn’t utilize their services.

Buildium, Rentec Direct and Landlordmax all offer free trials. Try all three of them simultaneously with just one test property. Utilize the three to find out which features you need and which software is the easiest to operate.  Remember usability should be paramount as the program you chose will be used on a daily basis.  Also, switching between software packages isn’t advised, as the major benefit is the long term record keeping features. The more you use the program and input data, vendor information, property information and listing information, the more time you will ultimately save.

No Cost Ways To Increase The Profitability of Your Rental Property Portfolio

No Cost Ways To Increase The Profitability of Your Rental Property Portfolio

BuildiumCash
In any business, the difference between getting by and success is simply maximizing efficiencies and profits. Real estate and the landlord business are no different.  It doesn’t always require additional money to maximize profits.  In this post, we will review zero-cost ways to maximize profits.

Listing Vacancies In July

When you list a vacancy, the month during which you post absolutely makes a difference in the rental income your property will produce. The rules of supply and demand apply to leasing.  We want to lease in the environments that produce the highest possibly quantity of qualified tenants.  I once purchased a property in the November and, by necessity, listed it on the normal outlets (craigslist, Zillow, etc.).  I had only one showing in two months and, in December, was forced to accept a lower rent.  The same unit posted, the following July, resulted in four showings during the first week and an increase in rent of 200 dollars.  The holidays are a horrible time to list vacancies, as individuals are focused on family obligations and saving money for their respective celebrations. In direct contrast, July is usually the time of highest potential renters.  High school and college graduates enter the job market place and require new housing.  Families are far more likely to move during the summer so they don’t disrupt their children’s school year.  These two factors (among others) make July the best time the most profitable time to list vacancies.

Appeal Property Taxes

For most landlords, property taxes are the single largest expense besides mortgage payments. Therefore, you should always invent the time and effort to appeal your taxes.  While each county’s appeal process varies, the process is generally quick and easy and starts with a simple application.  Most counties will publish what comparable (“comps”) sales are used by the assessor to establish your reported value.  Review these comps for inconsistencies with your property.  For example, I had a property where the comps used were exact equals of my property and located within a mile of my property.  However, my property was located on a busy street, while the comps were all on quieter side streets.  It was easy for the assessor to recognize the inconsistency in the comps and reduce my property tax appraisal.  Also, find your own comps and submit them as true comparable properties.  Use Zillow to look up recently sold comps to your property.  If you can’t build a good case, or have time to perform the research, use a professional property tax consultant to dispute your taxes of your behalf.  These services generally charge 50 percent of the reduction savings.

Reduce Insurance

While property taxes are generally the largest expense landlords endure, insurance isn’t far behind. Increase your deductible to the highest deductible available (usually 2,500 dollars).  If you don’t specify a high deductible, chances are your broker or insurance agent has your deductible set to a more expensive amount.  The savings can be a hundred dollars or more on most properties.  Remember that as investors, it doesn’t pay to make small claims, as claims will raise your premium and you may be dropped altogether if multiple claims are made in a short period of time.

Open a Line of Credit

As landlords, we need to carry reserve funds to pay for sudden vacancies and unexpected major repairs. Most experts recommend carrying 6 months of your total property portfolio rent amounts.  I would recommend carrying closer to a year’s worth of rent, if you only hold a few properties and reducing to 3 months if you own twenty or more properties.  These reserves, while a necessity, do limit our profitability, as we have large sums of cash sitting on the sideline.  The reserves don’t necessarily need to be all cash.  You should consider opening a line of credit on a property you either have a lot of equity in or own free and clear.  Credit lines are also available on a group of properties.  The interest rates are generally adjustable and benchmarked one or two points above the prime rate.  Once set up, the funds are easily accessible, similar to a checking account.  Remember that you will still need some cash reserves for the typical repairs and issues that may arise.  Make sure you are capable and comfortable with the monthly payments if you choose this option.  Also, remember even if you carry a zero-balance on your line of credit, mortgage underwriters will count the total available line of credit against your debt-to-income level.  This option isn’t for everybody, but, when exercised, it frees up investment capital for what we do best: rent properties.

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Reasons Why Real Estate (Rental Properties) Will Always Beat Stock Market Returns Part 2

Reasons Why Real Estate (Rental Properties) Will Always Beat Stock Market Returns Part 2

Refinance now before rates go up! Get multiple rate quotes at GetMyLender.com.

Part 2 (Part 1 can be found here): In this post, we will take a look into the typical returns between traditional stocks and rental properties. The numbers used for this analysis will be industry acceptable values. Your returns, and expenses will vary.   We will also assume the rental property is leveraged as most real estate investor utilize leverage for their investments. The example below is based on a $20,000 investment utilizing historic returns of the S&P 500 compared to a $100,000 dollar rental property purchased with $20,000 dollars down payment and an $80,000 loan.  We will compare taxes of both investments based on a single filer making less than $90,750. State taxes are excluded as they vary with some states having no income taxes.

The median return of the S&P 500 since 1970 is 12.6%. 3.4% of the total returns comes in the form of dividends. Currently, the tax rate for both long term gains (the investment is considered long term gains if held for longer than 12 months) and dividends is 15% for single filers making less than $90,750.

Stock Investment Calculation

$20,000 investment x 12.6% (median S&P returns) = $2520 gains

Taxes – $2520 x 15% = $378

After tax gains = $2142 or 10.7 percent.

Rental calculation parameters:

Yearly Rent = 12% of property value ($100,000) = $12,000

Property Appreciation = 3% of property value ($100,000) = $3,000

Maintenance – 1% of property value ($100,000) = $1,000

Property taxes – 1% of property value ($100,000) = $1,000

Insurance – .5% of property value ($100,000) = $500

Interest – 4% of loan note ($80,000) = $3200

Loan principle – 1.25% of note ($80,000) = $1000

Property depreciation – The IRS allow the building value (not including property value) to be depreciated over 27 1/3 years and this amount is deducted from our taxable income. It is important to note, when selling a property you will be subject to a 25% recapture tax (in another post we will discuss ways to avoid this recapture tax). In our example we will assume the building value is $80,000. $80,000 divided by 27.333 = $2,926 yearly depreciation.

Rental Property Calculation

Total rents $12,000 minus costs (property taxes, maintenance, interest and insurance) $5,700 = $6,300 returns – $2,926 depreciation = $3374 total taxable income.

These returns are subject to ordinary income taxes rates. FICA taxes are not included in this calculation as most investors aren’t considered a real estate professional per IRS guidelines. Individuals who work more than 15 hours per week can qualify as a real estate profession, which changes taxes and tax deductions. We will discuss the advantages and disadvantages of a real estate professional in another post. The tax rate for single fliers making less than 490,750 is 25%.

Taxable income $3374 x 25% = $843 total taxes paid

Total Investment Gains

After tax gains = $5,457

Property appreciation gains – $3,000 -$450 (capital gain taxes) = $2550.

Principle reduction = $1,000

Total gains = $9,007 or a 45 percent gain on our original $20,000.

While this calculation was only hypothetical, it is intended to indicate how the use of smart leverage and tax advantages of rental properties can provide a substantial, low risk return.
Standard Lease Agreement

Buildium vs Appfolio

Buildium vs Appfolio

Buildium vs. Appfolio is one of the burning questions in the world of property management today. You know that you have apps available to help make all the day-in, day-out drudgery of managing your properties simple. You know this will give you more time to focus on areas of your business that really matter, really require your attention and offer the prospect of growing your investments. What you don’t know, however, is which is the best platform for you. Here’s the lowdown on making the right decision on the question of Buildium vs. Appfolio.

Buildium vs. Appfolio: The Tale of the Tape

Looking at some of the basics is the first place to start making the right decision regarding Buildium vs. Appfolio.

  • Buildium is only for residential properties, while Appfolio is for both residential and commercial properties. Thus, Buildium tends to be more popular with smaller renters while Appfolio tends to be more popular with large commercial landlords.
  • Another reason Buildium tends to be more popular with smaller renters is the price point for managing fewer than 20 properties. The basic Buildium costs $45 per month, with a Pro version available for $120 per month. Appfolio starts at $250 per month.
  • For between 20 and 100 properties, the prices become significantly closer. Buildium clocks in at $150 per month for the basic program and $200 per month for Pro. Appfolio starts, again, at $250 per month.
  • Each require a fee to get your account started and again, the price difference is stark. Buildium costs $99 to get started with, while Appfolio will cost you a whopping $400 just to get started.
  • Each offer customer service, however, Buildium’s runs from 9 a.m. until 8 p.m., while Appfolio’s is open only from 8 a.m. to 5 p.m.
  • Buildium is the clear favorite when it comes to marketing your properties. It allows you to create a basic website, and this is included in the cost. You can also post directly to websites like Zillow and HotPads from Buildium. Appfolio offers the latter feature, but making a website will cost you an extra $50 per month — with a $1000 setup fee, the cost is reoccurring Appfolio problem.
  • Both allow you to receive payments online and conduct credit, criminal and eviction checks. However, Buildium requires a $99 setup fee to begin receiving online payments.

In terms of basic features, Buildium is the clear favorite online property management software, especially for smaller renters managing a handful of properties. It provides many of the same features as Appfolio, some of which (such as customer service) stand out above and beyond Appfolio for a fraction of the price.

However, Appfolio excels in other ways. First, you simply can’t manage commercial properties using Buildium. It’s just not an option. And, while Buildium can manage over 10,000 units, it’s not generally preferred by real estate companies with large and diverse portfolios. That honor goes to Appfolio. They’ve made such an effort to get big-time real estate investors buying into their brand that they seem to neglect or even price out smaller real estate investors. In fact, the prices are much lower at per-unit cost once you hit 100 units on Appfolio.

Buildium vs. Appfolio: Making the Final Decision

The good news is that both platforms offer free trials allowing you to see which works best for you. You can try Buildium for 15 days. No credit card is required for a sign up. Appfolio also offers a demo version for you to try without entering your credit card information. There’s never any substitute for trying out an application and seeing which is most intuitive to you; which fits best with your business and its rhythms and flows.

But there’s the small matter of price. Particularly for single property landlords and smaller-investors (those with 100 units or less), the price difference between these two platforms will be significant. On the other hand, however, just because your organization has the money to throw down for Appfolio, that doesn’t mean that you ought to. Try out both platforms, compare their features side by side, then see which is the best fit for the daily needs of your company. Only after you do that can you make an informed decision about whether or not the cost is ultimately worth it.

The Hidden Value of LLC’s

The Hidden Value of LLC’s

Standard Lease Agreement

Most real estate investors will agree the use of LLCs (Limited Liability Companies) in the rental industry is a must for all investors, regardless of the number of properties owned. However, a major value is overlooked, especially for the passive investor, whom does not manage his/her own properties.

The main purpose or value of an LLC is exactly as the title says, to limit the liability of the LLC owner to only the assets held under the LLC. To minimize exposure, each property should be held in a separate LLC and controlled under one master LLC or series LLC.  When you set up an LLC, you will receive a federal tax ID for the master LLC, and you should open an checking account under the LLC for all properties (depending on where you live, this is most likely a state law).  Utilize a local law firm that practices real estate law to set up your LLC, the cost should be only 300 to 400 dollars.  Creating a relationship with a local lawyer is a good idea, as in the future they can assist in other frequently-encountered issues, such as evictions.

While filing for an LLC is relatively simple and could be done by most investors without outside legal guidance, filing individually should be avoided, as the overlooked value of the LLC is the anonymity that the LLC provides. The owner’s name of the LLC is concealed from public record, making it impossible for tenants or others to identify the LLC owner.  The only name that is public record is that of the individual that filed the LLC (e.g., your lawyer).  Don’t use your name or any other identifying attribute for your LLC name, as this may jeopardize the anonymity of the LLC.  This anonymity provides unlimited value for the passive investor, who utilizes property management companies to run their day-to-day operations.

Standard Lease Agreement

How To Buy HUD Owned Properties At The Lowest Price Possible

How To Buy HUD Owned Properties At The Lowest Price Possible

I recently submitted a contract on a HUD (Department of Housing and Urban Development) owned property. In the past, I have found success in HUD owner properties and believe they can be easily acquired below market value, which is both rewarding and a goal we all have.  HUD handles every property it acquires similarly, as it pertains to the handling and award of contracts.  Understanding how HUD operates will allow the buyer to acquire the property at HUD’s lowest acceptable price.  The following article is based on my understanding of HUD and consistencies I have observed when submitting and purchasing properties from HUD. It should be noted that this is, no way, a guarantee.

 

HUD properties are often listed for sale on the MLS (Multiple Listing Service) but all properties can be found at www.hudhomestore.com.  When HUD lists a property for sale, it will be listed as exclusive for either 5 or 15 days (depending on the insurance carried of the property).  Exclusive listing are only open to bidding from government entities, HUD-approved nonprofit organizations and owner-occupants.  After the exclusive period expires, the property will enter the extended bidding period.  This opens the bid to all bidders, including investors, and this is when the knowledgeable investor has the opportunity to acquire a property greatly below market value.

HUD has a preset acceptable offer price for all properties. HUD refers this to the minimum acceptable bid. The minimum acceptable bid is the net value HUD will receive after all commissions, technology fees, and any seller-paid costs.   The formula for this is not known and will vary based on area, market conditions and even on property backlog.  Contrary to popular belief, an all cash offer holds no more value than a financed offer.  If your offer does not meet the minimum acceptable bid, HUD will send you a letter or email that states the exact amount of HUDs minimum acceptable offer and the letter will state the bidding period has been extended for 24 hours.  As illustrated above, your initial offer should be only considered as a mechanism to find the minimum acceptable offer and should be well below market value.  If HUD accepts your offer, be aware you just over paid for the property.

Now that we know the lowest price, we can close on the property or as I would recommend, continue waiting. Offers to HUD can be submitted as both a primary offer and a backup offer, meaning HUD will hold your offer as a backup. It is important that you submit as a backup offer.  Like all motivated sellers, HUD will reduce their asking price as the property stays on the market for a certain duration.  Unlike finding the minimum acceptable bid, this duration is not known or easily speculated on. I purchased a HUD property where the price reduction happened 6 weeks and was followed up by another reduction a month later.  Currently, in my market, there is a property that has been on the market for 50 days, with no reduction, so the exact timing will vary greatly. The same day HUD reduces the price, they will review all backup offers and will send notice of acceptance to the highest-priced offer, above the revised minimum acceptable offer. Essentially, your backup offer allowed you first bid at a reduced priced HUD property.

Following this method for biding will provide you both the guarantee that you bought at the lowest price possible, and allow you the advantage of essentially receiving first right of refusal upon a price reduction.  Good luck finding your next tenant in a great new property.

Buildium.com

Buildium vs. Rentec Direct

Buildium vs. Rentec Direct

Buildium.com

Buildium vs. Rentec Direct

For the property manager or owner, Buildium and Rentec Direct are godsends, simplifying and streamlining your drudge work, providing total management, allowing you to focus on what really matters in the world of property management. But which is better for the needs of you and your business? Many investors and property managers aren’t sure which makes the most sense for them and make their decision purely based on Rentec Direct’s lower price point. Here’s how to sort out Buildium vs. Rentec Direct and make the right decision for your business.  Unlike other Buildium reviews, we performed a direct comparison of Buildium vs. Rentec Direct.

Buildium vs. Rentec Direct: What the Two Platforms Have in Common

One reason landlords can have a lot of trouble determining which platform to use is because of how much they have in common. For example, both platforms are web based and both offer phone support. Buildium additionally offers online support and a knowledge base, while Rentec Direct only offers video tutorials in addition to phone support. For the property manager who doesn’t have time to wait on the phone, this can be a significant difference.

Both offer tenant and lease tracking, work order tracking and payment tracking, as well as credit card processing. In fact, most of what you need done can be handled by both platforms. So where does the difference lie?

Buildium vs. Rentec Direct: Don’t Be Deceived by Price

When comparing the two, don’t be instantly pulled in by Rentec Direct’s lower price point. Many of the features that you will want, such as SMS messaging or ACH payments are going to close that gap real quick. Price shopping shouldn’t be your main consideration when it comes to finding the right property management solution. However, you should know that when it comes to comparing these two, the cost differences are negligible for anything but individual landlords seeking the most bare bones solution — and they probably won’t be using an app to manage their properties anyway.

Buildium vs. Rentec Direct: Features

Buildium is superior when it comes to marketing features, which is a must for larger firms managing scores or even hundreds (or thousands!) of properties. Buildium allows you to track your lead sources as well as marketing statistics, neither of which is offered by Rentec Direct. However, Rentec does offer one feature that Buildium doesn’t when it comes to marketing your properties: online vacancy postings.

Many of the accounting features overlap: Both accept online payments, integrate with your bank account, allow for uploading of bank statements, track invoices, offer online statements, allow for ACH, integrate post rent and late fees, print checks, generate profit and loss reports and run both your payables and receivables. Both are accessible from your laptop, desktop or iOS or Android-enabled mobile device. That’s important for the real estate professional on the go who has to manage all of his properties while he’s on the road.

Buildium vs. Rentec Direct: The Number Don’t Lie

Buildium is an older and more established platform than Rentec Direct. They’ve been around since 2004, compared to Rentec Direct’s 2010. This makes a huge difference in the amount of money that they process — Buildium has an estimated sales volume of $1.83 million versus a mere $168,000 and change with Rentec Direct. What this means is that the Buildium platform has already scaled in a way that Rentec Direct has not.

Buildium vs. Rentec Direct: Numbers Aren’t Everything

What’s more, when reading reviews of the two platforms, one feature of Buildium jumps out that’s hard to quantify: Most users just find it a heck of a lot more intuitive and easy to use. That’s something you can’t put a price on. If you plan on using a platform day in and day out, don’t you want it to be the easiest possible platform to use? This might be where the rubber hits the road for a lot of property managers and investors: Once you have all the features you need to run your business and your investments, why not just choose the platform which is easiest to use?

Fortunately, both platforms offer a free trial, allowing you to compare them, side by side, to see which works best for you and your business — and which is just the easier of the two to use.

Things That Must Be Done This Tax Season Before The Door Closes

Things That Must Be Done This Tax Season Before The Door Closes

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Tax time is a great time to review your portfolio’s performance but it is also an important time for you to maximize profits and follow IRS requirements. Let’s review 4 must-do things during tax season:

    • Send Contractors a 1099 – The IRS requires you to send any contractor whom you paid a total of six hundred dollars or more a 1099. It is important to note, the six hundred dollars is a total per calendar year and not per receipt or job. Online property management software can automate this process for you.  At the time of service, have your contractor fill out a W-9 (Request for Taxpayer Identification Number and Certification). This is not only a requirement, but also a protection to you, as it proves the contractor was not your employee and you aren’t required to pay FICA taxes on his pay. I also like to use this a negotiation tactic. When my bids come in above the six hundred dollar threshold, I quote the requirement and offer to pay five hundred and ninety nine dollars. More times than not the contractor accepts the lower amount.

 

  • Depreciate Your Property – The IRS allows residential rental properties to be depreciated over 27.5 years.  This depreciation includes only the building or structures on the property, not the land value.  This value is a tax deduction, lowing your total taxable income.
  • Review Your Earning – Review your earnings and taxable income and estimate next year’s earnings and taxes. If you paid more in taxes than you want, next year plan on performing upgrades on properties that will provide quick tax deductions. Appliances, carpet, kitchen and bathroom upgrades, roof replacements and most other property upgrades all provide tax deductions through property depreciation. The depreciation period time varies depending on the IRS property class. IRS property classes are 3 year, 5 year, 7 year 10 year, 15, year and 20 year property. Appliances and carpet are depreciated over five year. The IRS does allow you to accelerate your depreciation, allowing you to deduct more depreciation earlier in the recovery period. Review this option in detail and discuss the option with your tax advisor as acceleration may force you into the AMT (the alternative minimum tax).
  • Set Up an Online Management Service – Online management software provides a quick, cost effective way to manage your property’s financials, property vacancy listings, tenant screening, repair notices and payments all easily for a low-cost monthly fee. Buildium is a great online property management software that offers a free trial period and has software options starting as low as 45 dollars a month.
Ways To Find The Correct Tenant In A Crazy United States Market Place

Ways To Find The Correct Tenant In A Crazy United States Market Place

 Finding the right tenant is absolutely paramount in the landlord business, especially for part-time investors for whom time is limited and has the responsibilities of fulltime employment. A good tenant will likely result in a good landlord experience, while a bad tenant is guaranteed to result in a very bad landlord experience.  While we cannot eliminate the possibility of a bad tenant, through proper property characteristics and a detailed tenant screening process, we can diminish the possibility of bad tenants, save money and time, and, most importantly, reduce stress.

While financial means to pay for rent alone does not make a good tenant, it is a prerequisite. Purchasing properties in areas where median income supports your targeted monthly rent will increase the tenant pool of financially qualified tenants.  In addition to monthly income, review the unemployment rate and the proximity of quality jobs in given area.  For example, if your property is close to a good, large corporate headquarters, it is reasonable to expect new employees and recent graduates will want to live close to their job.

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Look for properties with unique features that distinguish the property from similar properties in the area to maximize the number of potential applicants. For example, a property in close proximity to a school or park will appeal to both singles and families, increasing the quantity of possible tenants. Furthermore, being located close to a school will also promote less transient applicants, as they will probably stay in a given area while their kids finish that portion of their education.

Finally, renting in areas with limited supply will increase your tenant pool, allowing for a more selective screening process. The limited supply will also increase demand, which is directly correlated to higher rent. Review the area’s owner-occupied percentages.  Areas with a high percent will result in less single family homes for rent in your area.  Areas with a large quantity of apartment complexes will saturate the market, reducing the quantity of applicants.  Search Craigslist and Zillow to see the quantity of properties currently available in your target market.  Watch the listings to see how quickly postings are removed to get a good idea of the demand in the area.

After you have selected a property that will attract the most qualified applicants, you will need to screen them ensure they meet your minimum standards. Create a list of minimum requirements that a tenant must meet in order to be considered.  Establish a minimum credit score.  I also use lenders typical debt-to-income ratio of 45%.  You may also require a tenant to have a job for a certain amount of time.  Once you have established your minimum standards, don’t make any exceptions to them as this could be considered discriminatory.  I would even recommend stating your minimum requirements in your listing.  Use a local or online screening service to perform your screening.  Buildium.com provides a cost affect screening process starting at $15.  Include credit score, income verification, criminal background and review of pervious landlords in your screening process.  Exclude tenants with a criminal history or who have past evictions or a history of late payments.  The cost of this screening is the liability of the possible tenant.  Clearly indicate the screening costs as a nonrefundable fee on your listing.

After selecting a good tenant, you will want to maintain a good tenant/landlord relationship. Treat your tenant with respect and be reasonable and understanding when your tenant does have issues.  For example, even though my lease may allow me to charge a late payment, I won’t exercise it as long as they notify me in advance.  Remember, a happy tenant is worth more than a late payment.  When raising rent, benchmark it a half point below market increases and share both your proposed increase compared to the area increase.  The US Department of Housing and Urban Growth publishes statistics for most areas that include average rents.  Try to fix property issues quickly and be transparent in the process.  These little things will promote a two-way relationship where your tenant will want to stay for multiple years and respect your property.