What is ARV?

ARV is so important to flippers, but what is it?

DIY Projects You Can Do in Your Rentals

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

Painting

(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.

Carpet Cleaning

Renting a carpet cleaning machine from a local vacuum store or big box like Home Depot or Loewe’s.

Minor Landscaping

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.

what is an accredited investor?

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:

Electronic Code of Federal Regulations

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.

Hold It or Fold It - Getting Started with Rental Property Evaluation

If you are new to real estate investing, there are some things to consider when buying an investment property.

First - Consider the location of the property. Is the property in a desirable part of town? Is it an area with with many tenant opportunities? Is it near public transportation? The area will also determine what the property can rent for. Be sure to look at what neighboring properties are renting for and note their condition.

Property Due Diligence -

Repairs : what repairs will you need to make in order to make the property rentable? If you are used to flipping, there are different repairs that will be necessary if you are now planning on renting. Such as being able to get away with not including some appliances when flipping, but needing to provide those to make tenants choose your property over others available. What repairs are necessary for health and safety of your tenants and to limit your liability as the owner?

Holding Costs : what will insurance, taxes, vacancy, utilities, etc cost you over time? What will you need to reserve for any repairs?

Financing : what financing are you able to get? how much will you be required to put down? and after all of that, will the property cash flow. Not only will you want your investment to cash flow, but your lender will feel more comfortable providing financing to you if your investment “pays for itself”. Hopefully in addition to the monthly cash flow, your property will appreciate over time. This will allow you to sell for a profit on top of it generating monthly cash flow to you over time.

You will hear us preach this time and time again. But money is made on the buy. Make sure you do not get excited about a seller, wholesaler or agent’s sexy numbers of what you can rent a property for. Be sure you do not overpay for the property.

Be a good landlord - if you can keep tenants in the property for long periods of time rather than needing to get new tenants constantly, it will make your life and your wallet better.

TABS provides financing to landlords in Colorado. And our management team has been a landlord - we are happy to counsel you if you are just getting started.

Good luck!

Homeowners Associations

first - what is a home owners association? a real estate developer will generally set up a home owners association in a master planned community. this association will determine rules or covenants for the people who live there, generally to keep the look of a community consistent and to make sure that everyone keeps up the neighborhood - removing trees that are dead, not keeping a recreational vehicle parked for an extended amount of time or changing the paint color unless approved. the HOA will also collect assessments from the home owners in order to maintain common areas. The developer will generally be a member of the HOA until an agreed upon number of homes are sold. A recent development in Colorado is that an association must be managed by someone or an entity with a CAM (community association manager) license. This is generally necessary because the management of the HOA handles funds from sometimes a sizeable amount of people and those need to be properly accounted for and disbursed to protect the owners who live within the community. 

another consideration in properties with home owners associations, is whether or not a traditional lender can provide financing. there are instances, such as the case, with non-warrantable condos where a portfolio or alternative financer would be required. a non-warrantable condo could exist for example if there are more owners within a community who do not occupy their property as their primary residence than people who do. this information is provided by the homeowners association. some banks find these loans riskier than a community that is a majority owner occupied. if you do find aproperty within one of these subdivisions, also consider your exit strategy. will your end buyer be able to get financing? or does this limit your pool of buyers?

real estate investing is all about whether or not a deal makes financial sense, unlike your primary residence where there is an emotional element: a desire to be in a certain neighborhood, near a certain school, a property with blue shutters, whatever the case may be. homeowners association dues can be pricey, especially in communities with extra amenities such as clubhouses, pools, fitness centers or golf courses. homeowners dues could rise. these liens also take a superior position to any loan should you not pay them which would be of great concern to your lender. when evaluating a property, it is always wise to think of multiple exit strategies. should this house not flip, what do i do? if the market changes, how do i deal with this property? think of these items: will you be able to rent out the property if needed?  would i be able to re-finance my hard money loan? 

we are here to help and call attention to these issues as they are discovered. not only do we have experience as being a hard money lender to colorado investors buying properties with home owners associations, but we have developed projects and set up these homeowners assocations, been directors of their boards of directors. if you ever have any questions, we are here to help!

structural issues in colorado

Colorado is known for its "special" soils. If you are coming from out of state, you might not be as familiar with swelling soils. This is something that is very heavily disclosed in new construction from home builders, but not as common in resales. I've included a link here to the Colorado Geological Video regarding Swelling Soils:

An educational video about hazardous soils in Colorado; includes collapsible or compressible soils and swelling or expansible soils. This geologic hazard causes more damage in Colorado than any other. Covers types of damage, prevention, mitigation, safety hazards, economic losses. Produced by the Colorado Geological Survey - www.colorado.gov/geosurvey

This is something to be aware of when purchasing real estate in Colorado. There is a chance that in the lifetime of the home you are purchasing, it may have shifted, may have some sort of compromised foundation. This is fixable, but will be more expensive and generally scare off a new investor. Experienced investors who dabble in homes with foundations know that there is a high risk but potential high reward when fixing and flipping these properties. Some institutional lenders or even hard money lenders in Colorado may shy away from homes with structural issues. Here are some things you need to keep in mind: you will need a qualified structural engineer, a qualified structural contractor, you will need to disclose these issues to potential buyers and you will likely need to come in under market for it to sell. But this also means that you should be able to purchase these homes at a very steep discount if there is existing structural problems that the owners are not willing or able to fix. Proceed with caution and get your ducks in a row. As always, let us know how we can help. We are a Colorado Hard Money / Private Money Lender with tons of experience!

what should you diy?

As a Flipper, it is beyond important to keep costs low. One way of doing that is to perform some work yourself. If you happen to have a career in construction, this is a no-brainer. But for many flippers, this might be your first experience building something yourself. Working for you is the ability to access tutorials online or in person. YouTube has endless videos for just about any piece of the rehab project and Home Depot offers free classes if you found a topic of interest to you. Always consider if your work will not be up to the quality necessary for the home to fetch top dollar. Some ideas for just getting started are below, but as you educate yourself more, the options are endless to how you can save yourself money. 

  • demolition
  • light landscaping, tree trimming, lawn maintenance, clean up
  • some painting
  • install hardware on cabinets
  • install doors
  • hang mirrors
  • install towel bars
  • post-construction clean up
  • light staging

Purchasing Real Estate in Colorado - The Basics

Hi All!

From time to time we get clients who have not bought real estate before or maybe it's been a while and they are unsure of what the general process was. We thought a video would help! It's very basic taking you through the steps, but if you have any questions, feel free to contact us. We are here to help and lend to borrowers with all levels of experience!

real estate vs. the stock market

Investing in real-estate Vs Stock Market

When it comes to long term financial plans, investments play an integral role. Besides all the other areas of expenditure, investing in a prospective field is a great way of increasing the financial resources. Real-estate and stock market are among the mostly targeted areas in terms of investing. Potential investors wonder whether they should invest in stock market or real-estate; this article reveals the facts related to both the options, so you can decide the best matching option for you. Under general circumstances, investing in real-estate is considered to be the best option by many investors; however, it may depend on the facts like personal interest and preference too.

Real Estate

One of the most obvious benefits of investing in real-estate is that it is that it is a physical property. Since it is a tangible asset, the owner can inhabit, renovate and sell whenever it is necessary. Also, owning a home is an important aspect for a person’s life; after all, it is a tangible aspect that is associated with a measure of success.

Apart from that, there are some other benefits associated with real-estate investment:

-          The chances for defrauding in this sort of an investment are fairly low. In fact, since it is a tangible aspect, you can evaluate the same thoroughly. You can see and assess the condition of the property and current value easily.

-          Leveraging the real-estate investment will be relatively safer compared to the stock market investments. 

-          In the event of inflation, real-estate investment will provide protection. As a matter of fact, inflation maximizes the value of the property parallel to the cost of living and the power of purchasing of the respective currency.

-          Even after the initial investment, you can develop the land and increase the return on the investment. This is exactly what happens during fix and flip business.

-          If necessary, you can immediately convert your investment into a revenue generator with leasing or rental agreements.

Stock Market

When it comes to stocks, investing on them is a riskier compared to real-estate. Things can become worse upon inflation in contrary to a real-estate investment. Nevertheless, mentioned below are some of the notable benefits of stock-market investments.

-          Investing in stock market is relatively effortless.

-          If you can end up with high-quality stocks, you can expect a good annual income 

-          You have the opportunity to reinvest the dividends.

Despite the mentioned benefits, stocks are associated with several drawbacks. These drawbacks has made stock market investing is a less attractive one compared to the real-estate market. The tumultuousness of the stock market during the complex economic situation will cause significant losses for the investor. Unpredictability and the necessity for sound knowledge in investing are other significant drawbacks pertaining to stock-market investing. 

how to manage your new business' finances

Regardless the size, managing money correctly is exceptionally important for any business. The key to survive in a volatile economy and heavy competition is the proper financial management. When it comes to small businesses, however, it needs a great amount of caution in order to put the things right from the beginning. To run a business, you obviously need more than a good idea; proper financial structure is an essential aspect to generate good profit and stay credible. Here are some good tips to manage small business finance.

Educate Yourself

First thing you should consider when it comes to small business finance is getting sufficient knowledge about the essential aspect of finance. Particularly, at the initial stage, you should know how to read the financial statements at the least. Reading financial statements correctly will allow you to gain a strong insight about the sources of money and the changes occurred.

Cash flow statement, statement of the shareholder’s equity, balance sheet and the income statement are the essential details included in the financial statements. Each of these aspects represents different segment of information you should know and referring them with good awareness is essential for a good financial management.

Maintain Personal Finances Seperately

Personal finance should be strictly kept away from your business. One of the most effective ways to do so is getting a credit card or debit card for the business and put all the business related expenses on it. It is a great way of keeping tracks on the expenses incurred. However, you should be smart enough to make the payments on time; otherwise, penalty fees will incur more cost on your business budget. Also, having a separate bank account for your business is mandatory.

Reduce Costs

When it comes to a small scale business, it is quite important to know how to reduce costs. . Know about both fixed and variable costs. In general, fixed costs are mandatory costs that occur – no matter whether your company generates revenue or not. Purchasing of infrastructure, furniture, machinery, building rental, salaries etc. are fixed costs that can be hardly changeable even when you run at a lost.

Always Track Performance

Make sure that you maintain a strict watch on money; they way the money moves particularly when the large payments are involved. Don’t neglect the small, frequent costs as they accumulate into big sums over the time. Compare the financial statements with the past month and year to get a clear insight about the financial control. Such approach will help you to identify the potential areas you can rectify.

If you are not 100% sure about your knowledge about business finance, the best approach is to hire a professional. Although it might cost you some money to employ a professional business finance expert, at the end of the day, it will be a long-term investment considering the benefits associated with.