Smart Single-Family Rental Investing

Opinions often vary regarding the advantages of investing in single-family homes (SFHs) over multi-family complexes (MFCs). Some feel the short-term potential of MFCs surpass that of SFHs. While others cite the long-term potential of the SFH as being a preferable trait. The reality is—of course—it depends.

What are your long-term goals? How much is your available capital? What is your overall tolerance for drama? Depending upon your answers to those questions, smart single-family rental investing in a city can indeed be preferable to multi-family rental investing when you take the following factors into consideration:

Lower Barrier to Entry

On the whole, it’s easier to get started with SFHs. In fact, a good strategy for young investors is to purchase a starter home in which to live while they save and help appreciation bolster the value of the property. Once their equity position becomes sufficient, they can then refinance the house to purchase a larger home. If you start at age 25, repeat this process every five years with 15-year mortgages and acquire your last property at age 50, you’ll have a nice home free and clear when you turn 65 — along with six paid-for rentals from which to derive retirement income.

Easier to Afford

Buying a SFH generally entails much less expense than acquiring a MFC. They are lower-priced, easier to finance and require much less liquid capital to buy. Plus, if you ever need to sell, they also tend to move more quickly when they come on the market—assuming they’re well maintained and in good locations.

Faster Appreciation

Single-family properties tend to appreciate more rapidly in cities than complexes do. The resell market is much broader for SFHs, as they can attract people who need to purchase a home as their primary residence as well as investors looking for nice rental properties to add to their portfolios. On the other hand, MFCs tend to appeal only to investors. As a result, the pool of potential buyers is smaller, so demand isn’t as great and appreciation happens more slowly.

Easier to Manage

Maintaining a SFH is much less involved than keeping up a MFC. In a rental house, you’re likely to have at best three toilets. In a MFC the number of units multiplies the number of toilets. Ditto appliances to fix, carpeting to replace, walls to paint and all of the other aspects of keeping your property in tip-top condition. Yes, good property management companies can relieve you of much of the burden, but even then, your costs are lower with SFHs.

More Desirable to Families

In general, SFHs are easier to rent when they’re in good locations because people with children prefer to live in houses. This also means your turnover rate will be lower because all things being equal, a family is more likely to stay put — as long as the place remains comfortable and meets their needs as a family. Further, most people with children prefer a neighborhood setting with backyards, trees and other like-minded people nearby. This is more likely to be the case in a neighborhood of SFHs, than in an area zoned for MFCs.

Fewer “Personality” Problems

Anytime you put a bunch of people in close proximity to one another, you’re inviting personality clashes. Yes, you can screen your tenants very carefully, but it won’t guarantee Tenant A’s preference for the Raiders won’t irk Tenant B’s love of the 49ers. In SFHs, the person who pays the rent calls the shots for the behavior of the occupants of the entire place. In a MFC the number of units multiplies this factor and everybody doesn’t have the same sensibilities, which can lead to landlords finding themselves in the uncomfortable position of arbitrator.

For these reasons and many others, many people prefer smart single-family rental investing in cities to multi-family complexes. Ultimately, it all depends upon the particulars of your individual situation.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Smart Shopping: Top Tips for First-Time Homebuyers

Buying a home for the first time can be incredibly nerve wracking. With a few tips in mind, however, you can navigate this tricky experience to land a home that’s ideal for you and your needs. When shopping for your first home, be sure to reflect on the following advice.

Sweat Equity

Sweat equity is the amount of labour you are willing to put into a home to make it your ideal. Making improvements to you new home, especially if it’s an older home, is a great way to increase the home’s value as you improve your enjoyment of it. To find a new house, you can tell your property agent you are interested in a home you can fix up. Only, be sure that the required fixes are ones you have the know-how to tackle.

Know the Deal Breakers

When shopping for a house, you’ve got to understand innately what properties will have a poor return on your investment. Many prospective homebuyers will turn their back on properties that have a history of flooding or that have serious foundation and structural issues. Some people don’t even want to deal with the headache of old windows or a worn-out roof. When shopping, consider what elements of a home you don’t want and be sure to let your real estate agent know.

Choose a Knowledgeable Real Estate Agent

When you want to go house hunting in a particular area, it can be important to select a realtor who has experience and expertise in the area you’re interested in. Agents that know the communities can provide homebuyers with the information they need to know such as the nature of the schools, the types of healthcare centres in the area, and the types of shops that are in the vicinity too. Make sure that your agent understands your wants; if they continually show you properties that are outside your interests, you may need to find a different agent who is willing to work for you.

Get Pre-Approved

These days, pre-approval is a must. When you get pre-approved for a mortgage, you’ll know exactly how much money you have to play with. You may not want to purchase a home at your price cap, but at least you can avoid looking at homes that are well out of your price range. It can be quite disappointing to fall in love with your dream house only to realize that the bank won’t agree to approve a home loan for it.

Down Payment and Credit

Having good credit is essential for purchasing a home. You’ll also want to save for a decent down payment. However, don’t put off purchasing those new winter boots or jacket you need. Put them on your credit card. Lenders want to see that you have active credit. Just be sure to pay on your credit cards to keep your credit rating up. On the other hand, saving for a down payment is no time for spending frivolously either. You may want to avoid making pricey purchases on items that are not essential.

Explore the Community

When you buy a new house, you are also buying into a new neighbourhood. If you wind up thinking it’s absolutely boring, it might not be the best location for you. Be sure to explore the neighbourhood carefully when selecting your home. When trying to choose between two homes, you should definitely consider the impact of the location. Choosing the home that’s closer to your work place or public transportation might be a wise choice for you.

Have a Professional Inspection

Before purchasing your home, you’ll want your own inspector, someone working for you, to carefully inspect the house in question. You don’t want to move into your new dream house to find that the electrical wiring isn’t up to code or the furnace is ready to fail at the sign of the first frost. Once you have your inspection in hand, you can use it as a powerful negotiating tool. If, for instance, the home does need a new heating or air conditioning system, you naturally want to offer a lower price or request that the seller make the upgrade. They may not be open to the idea, but it’s definitely worth negotiating over.

With these tips in mind, you can begin your hunt for a new house. With a bit of patience and careful assessment of the properties in question, you’ll eventually find a wonderful place to hang your hat.

Sienna Walsh helps to arrange property funding options and is always willing to share her tips and ideas with an online audience. She is a frequent contributor for a number of relevant websites.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Making the Downsizing Decision: Reasons It May Not Be for Everyone

The bulk of money and real estate experts laud downsizing as a fabulous way to get ahead, not just financially, but also socially, physically and mentally. The common advice to declutter and move to a smaller space is not as one size fits all as you might believe, however. In fact, some pretty compelling facts support the concept of staying right where you are with what you have.

Saving Money Might Be a Pipe Dream

Most homeowners who downsize do so in hopes that the move will cut their expenses. For example, they rationalize that they’ll come out ahead with a lower mortgage, reduced heating and cooling expenses and a trimmed-down insurance package. Unfortunately, other costs can negate what you might save. Taxes might be higher in your new neighborhood, for instance, or you could have new homeowners’ association fees to cover. You also need to consider the expenses related to the move, such as truck rental, closing fees, buying new furnishings, making necessary modifications or repairs, closing and opening utility accounts and travelling back to see friends and family members after you’re settled.

Even if you end up saving money when your downsizing process is complete, you still might lose out if you aren’t smart with the funds the move generates. If you are tempted to throw the extra cash into “dead” purchases like cars or vacations, which don’t provide a continuing stream of income, you might end up on less stable financial ground than if you had stayed put.

Stress

Reputable estate agents and other professional companies work hard to make your move as seamless as possible. Even so, downsizing is work–as in, a lot of work. It can be stressful to go through everything simply because of the physical energy it takes, but there are other emotional components, too. What you have likely has memories attached, and letting go of your stuff might feel like you have to let go of who you are. You also might disagree with your family members about what to keep and what to toss, which can mean big conflicts. Downsizing also can mean going to an entirely new neighborhood, which might widen the gap between you and your loved ones. Although that offers a great opportunity to make new friends, you might struggle as you distance yourself from those you care about.

Loss of Status

To many people, having a lot of possessions or a large house stands makes a statement. It shows that they have worked hard, played by the rules and earned some luxury. When you downsize, you have to distance yourself from this ideology. Your sense of accomplishment cannot have a material measure anymore, so you might feel a stark loss of prestige or embarrassment, even though you know that the downsizing process makes logical sense. Others might make this problem worse by asking you why you’re giving up what you have or prodding to find out if you’re in financial need.

No Centralization

Somefind that, after many years of living in a community or raising their children, their home has become a sort of Mecca.  In other words, it’s  a centralizing point where loved ones know they can come for support and company. If this is the case for you, you might need to consider how disruptive it really would be if you transferred to a new place.  What if you couldn’t entertain?  Moving to a new place wouldn’t necessarily be bad in terms of encouraging independence in others. However, it might not be worth it if the downsize would completely unravel critical links within your family and friend network.

Privacy

Downsizing can be good in that being in closer quarters can encourage better and more frequent communication. Nevertheless, in a smaller property, you’ll likely have less privacy than if you had more room to spread out. If you’re more of an introvert, then a smaller space might do nothing but grate on your nerves.

Clutter

Smaller properties usually mean less cleaning, but they also can become cluttered very quickly. That can lead to functionality issues and feelings of anxiety. You probably will need to be much more critical about what and how much you buy after you get into your new property.  This could make you feel like it’s hard to be spontaneous and enjoy yourself.

Conclusion

Downsizing indisputably is the right choice for many individuals and families. Still, it’s not appropriate for everybody. In some cases, it might be more trouble than it’s worth. Before moving forward, weigh these disadvantages against the potential benefits carefully.

Nicholas Moore has carved out a career in property and understands the pros and cons of downsizing. He enjoys sharing his insights with an online audience and writes for a variety of property and lifestyle websites.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Real Estate Investing: Avoiding the Most Common and Lethal Mistakes

Many investors get into the real estate game because they believe they can get rich quickly.  They buy property, collect great amounts of rent for a couple of years, and then sell when prices appreciate. This is not how real estate investing works, however.

It takes time, even decades, to see significant returns. It also takes care, learning, and a willingness to put in years of effort to make the most of such an investment. When one is willing to invest all this in a real estate venture, returns can be far better than can be realized in the stock market. However, investors who believe they only need to throw money at a property and do little else usually do not do well. This is only one of several cardinal rules of successful real estate investment.

If you’re interested in real estate investing, you need to make sure you understand the way the world of property investment works. Here are the mistakes that you should stay clear of.

Taking on more than you can manage

A number of things go wrong when you take on far more property management than you have time for. You can take in tenants to fill up your rental units, but you aren’t able to pay attention to them to make sure they comply with the rules.

It also can be hard for you to comply with your end of the bargain too. Keeping up with calls for maintenance, and finding the cash to deal with maintenance needs, can take work. You can even find it hard to find new tenants when people move out.

The answer to some of these problems is to sign on with a qualified lettings agent to manage your properties. This will free you to do what you do best — find the resources to manage and maintain your investment. Specific tasks are usually best done by dedicated professionals.

The problem of inadequate management comes about when people get into real estate investment without giving adequate thought to the responsibilities involved.

Not creating a proper accounting system

Whether an investor owns one property or several, it’s a business, and it needs to be treated as such. Investors need accounting, record-keeping, and management systems. Without these in place, there’s likely to be much trouble during tax time; money will be lost to missed potential deductions and penalties for underpayment.

Not understanding cash flow

Many people believe that all they need to succeed at business is a great product. They think  that “if you build it, they will come,”. This is hardly true, though. Dozens of businesses with successful products and full order books file for bankruptcy each year.  This happens because owners are unable to understand the distinction between ensuring income and ensuring cash flow.

A full order book and plenty of sales will ensure that there is enough money coming into the business when income is averaged over a period of time. General accounting deals in averages. Cash flow accounting, on the other hand, deals with the availability of cash to pay bills and other obligations at specific moments when those obligations come due. If a businessman is unable to pay a supplier because he had been looking only at average cash inflow and not at whether he would have cash at a given time, he will be sued or will at least lose his reputation.

This is the problem that many inexperienced real estate investors face. If they have a couple of empty rental units in a given month, they may not have enough cash for maintenance or property tax when such needs come up. Any investor who hasn’t budgeted for enough savings to manage such lean periods can get into serious trouble.

Refusing to get advice

Many first-time investors get into real estate hoping to be the strong, silent, and independent type, who doesn’t need help. But no matter what appearances may suggest, it isn’t possible to do well in any kind of business, let alone real estate, without the help and intervention of advisers who have had success in the business. Advisers are needed for the business aspects of investment and property management.  They also provide valuable information on how the physical work of maintaining property is done. The more advice you get, and the more you pay heed to it, the more successful you will be.

The best way to avoid serious mistakes in real estate investment is to do your homework. Not only do you need to read up, you need to work in a successful real estate investment firm to see how they deal with things. It’s hard to go wrong when you observe those who are successful.

Lauren Khan works as part of a property investment team.  She enjoys sharing her experiences and suggestions with an online audience. She writes for a variety of investment and property websites on a regular basis.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.