ARV is so important to flippers, but what is it?
If you are an active real estate investor, it is likely you have rental properties.
When getting your rental properties to cash flow, you need to save money whenever you can. If you are just starting out, it is possible to do quite a few things yourself to save on your maintenance costs. Below are some of the things we see real estate investors self perform:
Drywall Patches Between Tenants
(while certainly not a fun gig, if you have the patience, it can save you quite a bit of money)
Mini Bathroom Remodels
If you’re looking at ways that you could possibly look to increase rental rates, consider some upgrades. A little can go a long way to what a renter is seeing.
Renting a carpet cleaning machine from a local vacuum store or big box like Home Depot or Loewe’s.
Curb Appeal like adding mulch can make your rental property more desirable to tenants
Replacing Light Fixtures
We hope that these ideas get your mind working to see how you could possibly save money by self performing some improvements to your rental properties between renters.
As you are getting started real estate investing, you might be seeing offerings for passive investment.
Some of these investment offerings require their investors be accredited. So what does that mean?
The full requirements are linked here:
For an individual to be considered an accredited investor:
their net worth (not counting their primary residence) is $1,000,000 + OR
they make $200,000/year in gross income in the past 2 years OR
they make $300,000/year in gross income filing jointly with a spouse in the past 2 years
These rules exist to help protect investors who could be “duped” by investment offerings, hoping that investing in these types of offerings wouldn’t be catastrophic for the average individual.
It is still very possible to invest in real estate without being accredited, but certain offerings are only available to those individuals.
At TABS, we meet many new investors who frequently have questions about how to get started in real estate investing. A frequent question we receive is “Should I become a Real Estate Agent?”
Our Answer….it depends (I bet you didn’t see that coming)
Here are some pros
automatic access to MLS
access to view properties without scheduling with a real estate agent
saving on paying commissions to a real estate agent
With that, there are some cons
In Colorado, you are required to “hang” your license under someone for a period of 2 years. That company will likely have requirements that they be paid sometimes a monthly fee in addition to a cut of all sales. They will probably also have sales requirements.
You’re new. So you would be learning two new trades rather than relying on the expertise of an experienced real estate agent. An experienced agent can help you navigate a decent deal, can offer up suggestions on what repairs buyers are looking for, can appropriately help price a home. They also have contract and negotiating experience that could be of help.
There is more potential for liability with a license. A license requires insurance, which can create a target if someone is looking to sue
We hope this helps you make your decision.
New Construction in Riverwood Neighborhood of Breckenridge, CO
Purchase Price Land $487000 in October 2017
Sold Newly Constructed Home for $2,995,000 in January 2019
Market Value of Property
This property was purchased at the end of June 2018 for $195k by an experienced flipper. This borrower requested a hard money loan amount of $180k. Rehab for the property was $35k. The flip took 4 months.
Source - Referral to Borrower
Status - Estate
Condition - Poor / Hoarder Home / Arson Property - see below before picture
Title took a good deal of time to close because several deceased persons were on title. All parties of the transaction had to be patient to await clean title from seller’s representatives.
Gas and Electric had been off at the home for a significant amount of time that Xcel required the borrower to obtain new service as if the home was newly constructed. This line item was over budget as that was unforeseen for the borrower.
Goal: Keep Long Term Tenants Who Pay Their Rent
To accomplish this goal, keep them happy. Here are some ways to consider doing that:
Make it easy to pay rent. There are online services that allow renters to pay through a web portal - often this will add the fee to the renter’s side of the transaction. Here are some options, but there are many out there for you to look into:
Consider allowing a reasonable amount of pets - especially in Colorado where many folks own dogs or cats. It is a very important component for them choosing a place to live.
If possible, add bathrooms. Renters will prefer a place with a bathroom per room rather than shared.
COMMUNICATION - Most problems stem from poor communication. If you’re trying to set someone up for a repair for instance, communicate the timeline so that they aren’t left wondering.
Consider offing a renewal incentive, if you have a good tenant you would like to keep. Good tenants are worth their weight in gold.
Let tenants know kinks about the property and how things work. Hopefully this will lead to fewer calls later about where to shut off water or power etc. Let them know how to look up if there is a power outage in their area rather than something wrong with the home. You would be surprised, but people aren’t always familiar with how to check.
Do not over-inspect the property. Give tenants pace and provide them notice if you need to come by.
If you raise the rent on a tenant who stays, consider making an improvement at the same time as an incentive.
If possible, don’t get the cheapest appliances - they won’t last as long. Consider getting a warranty should repairs be necessary.
Keep Your Investment Safe
Maintain proper insurance - vacant property policy
Cover street viewable windows - there are inexpensive options if you do not want to install permanent coverings
Alternate lights left on - can be done physically or devices set up
Make sure all doors lock. Add piece of wood to sliding glass doors
Keep construction supplies & equipment out of view
Post beware of dog sign
If vacant during winter, winterize the home to avoid potential damage
Perform regular maintenance
Post sign for a security company even if there isn’t an existing alarm