Property and Maintenance Service

6 mistakes landlords make

2011-10-18T07:26:00.000-07:00

6 mistakes landlords make

Investing in real estate right now can be surprisingly profitable. But if you're going to become a landlord, watch out for these common pitfalls.

By Karen Blumenthal of The Wall Street Journal

© fStop/SuperStock

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Traditional investments are delivering low returns, and home prices are at bargain levels. Is it time to consider buying some rental housing?
Investing in real estate right now can be surprisingly profitable, if everything goes well. Rents are climbing in many areas, and more properties may be coming on the market. Last month, the Obama administration asked for proposals on how to convert at least some of the bulging inventories of foreclosed homes from Fannie Mae and Freddie Mac into affordable rentals.
Investors used to aim for rents that were 1% of the purchase price, or $1,000 a month for a $100,000 home — an annual gross return of 12% — says Michael McCreary. His firm, McCreary Realty, manages about 300 properties in the Atlanta area. Today, he says, some of his investors are getting as much as 2% of the purchase price each month.
In general, though, average returns after expenses are far less, more like 5% to 6% of the property value per year, says Ingo Winzer, president of Local Market Monitor, a real-estate forecasting firm. But that still is well above what many other investments yield.

Bing: Find an investment property

Before you start scouring for deals, keep in mind that owning rental properties is time-consuming, expensive and fraught with challenges. Many investors lose money. You will want to avoid falling into one of these common traps.

Home affordability calculator

Mistake 1: Confusing a cheap deal for a good deal.

It is true that you can buy some homes for ridiculously low prices — but that doesn't mean you can rent them out. Homes in deserted subdivisions aren't any more appealing to renters than they are to buyers. The same is true for less attractive properties or those in less desirable school districts.
Investors from the San Francisco area often look at the Sacramento market assuming they can get Bay Area-like rents, and end up overpaying, says Robert A. Machado of HomePointe Property Management. He uses several resources, including the website FinestExpert.com, to estimate rents. Other experts suggest canvassing apartments nearby to see not just their rates, but whether they are offering special deals, such as a couple of months of free rent.

Mistake 2: Overlooking key costs.

Knowing the potential rent isn't enough. Before you buy a property, you should also factor in closing costs of 3% to 6%, the costs to fix up the place and maintain it, and your holding costs. Then add the profit you expect to make -- and more closing costs, if you intend to turn around and sell it. Only then can you figure out what you can afford to pay.

Mistake 3: Forgetting that time is money.

In real estate, "time is your biggest enemy," says David Hicks, co-president of HomeVestors of America, a franchiser whose motto is "We Buy Ugly Houses." You lose money when your property is empty, whether you are painting it or are between tenants. You also lose if you buy in the fall and can't replace the roof until spring. You may be better off accepting a lower rent than waiting for a higher-paying tenant.
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Mistake 4: Assuming you will sit back and watch the rent roll in.

"When you become a landlord, you become a rent collector," says Mark Kreditor of Get There First Realty, which manages 1,600 rentals in the Dallas-Fort Worth area.
Just like homeowners who can't pay the mortgage, tenants lose their jobs and stop paying the rent. Evicting them can take several weeks, and some steal appliances or other property. Kreditor says that once or twice a month, a tenant removes a home's copper tubing on the way out the door to sell the copper for its meltdown value.
You will need to screen prospective tenants carefully, or pay someone to do it for you.

Mistake 5: Underestimating repair costs.

As with all homes, you will be making lots of repairs. You may find wood rot or mold when you remove that cracked bathtub. Carpet in rental homes typically must be replaced every five years, and you may have to repaint after every tenant. Tony A. Drost, president of the National Association of Residential Property Managers (NARPM), suggests setting aside six months of expenses so that you will have money if a major repair is needed.

Mistake 6: Assuming that owning a rental is the same as owning a home.

You might put up with flaws that a renter wouldn't tolerate. In addition, many states and communities have strict and complex laws for landlords, even if you own only one property. A property manager can handle most of the headaches, but you should expect to pay one up to a month of rent for finding and screening tenants — and up to 10% of the monthly rent for management fees.

Listed: Homeownership drop largest since the Depression

You can find property managers through the websites of trade groups NARPM and the Institute of Real Estate Management. In addition, many communities have local real-estate investor associations, which can provide support.
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3Comments

Newest

24 minutes ago

I am a landlord.........not for much longer..........if I can break even dumping that building, I will be ecstatic.

Tenants have entirely too many "rights" to put a landowner in the poorhouse.
Paying rent can be real trial for anyone who has been "downsized" in this miserable economy, no argument there. Paying a lawyer to evict an unfortunate tenant, is a real lake of quicksand.

Tenants that trash an apartment, and then vaporize overnight, seldom to be seen again, can cost a landowner untold misery. A simple gallon of chlorine or sodium hypochlorite bleach into a septic tank, can come back to bite real hard. Fortunately I knew how to get it pumped / purged and jumpstart a new pool of biological necessity before the leach field was damaged.

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me2159

50 minutes ago

Want to make money in rental property ? First, join the Mafia. Then hire Guido the Legbreaker and Louie the Enforcer. Next, rent to people who actually have jobs with an income. Make sure they have no children. Photocopy their drivers license. Always, always, always call the former landlord. Meet with the former landlord if you can. If the renter is from out-of-state skip that potential tenant. It's not just a possibility that they will default, it's a certainty.,

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17571

1 hour ago

In my view,the biggest mistakes landlords make today is first listen to a realtor trying to sell you a rental property, and the second is to make the assumption that ANY tenant will pay his rent. With the slightest bump in their economic road the first obligation to not be met by a tenant is the rent. With legal aid as a free attorney and a list of legal aid fabricated justifications, legal aid will answer the standard unlawful detainer and buy a deadbeat tenant up to six months free rent The system is designed to protect and support the so called POOR tenant, who will milk every day of free rent they can steal. I got out of renting residential properties before tenant rent scammers broke me. Tenants know most landlords don't report non-payment to credit agencies as they don't have access to the process. It may take years for the real estate market to rebound, in the mean time you could go broke subsidizing tenants who don't pay the rent.

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Statewide Valuations Pty Ltd

2011-10-16T03:37:00.000-07:00

Statewide Valuations Pty Ltd

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Statewide Valuations are an independent network of university qualified property valuers providing property valuations from $175 inclusive of GST throughout Sydney. Our teams of senior valuers are all practicing valuers licensed to value property throughout NSW without limitation.

Our valuers are proud to offer clients independent property valuations and property valuation services. All our property valuers are familiar with and will take the time to work you through the valuation process if necessary, to ensure you are completely happy with our property valuation service. All our property valuers abide by a Code of Professional Practice, Code of Ethics and Rules of Conduct.

Property Valuers provide solutions to all types of property valuations, and are a convenient service for Property Valuation Professionals and their clients.

Property Valuers provide independent valuations and act in YOUR best interest.

General Information:-

There are three general groups of methodologies for determining value. These are usually referred to as the "three approaches to value"which are generally independent of each other:

    * The cost approach
    * The sales comparison approach
    * The income approach

However, the recent trend of the business tends to be clinging to the scientific methodology of appraisal which relies on the foundation of quantitative-data, risk, and geographical based approaches. Notwthstanding the above a review on the methods used in the industry by comparison between conventional approaches and advanced ones is the general approach.

The appraiser at OZ Property Valuers using three approaches will determine which one or more of these approaches may be applicable, based on the scope of work determination, and from that develop an appraisal analysis. Costs, income, and sales vary widely from one situation to the next, and particular importance is given to the specific characteristics of the subject.

Consideration is also given to the market for the property appraised. Appraisals of properties that are typically purchased by investors (e.g. - skyscrapers) may give greater weight to the income approach, while small retail or office properties, often purchased by owner-users, may give greater weighting to the sales comparison approach. While this may seem simple, it is not always obvious. For example, apartment complexes of a given quality tend to sell at a price per apartment, and as such the sales comparison approach may be more applicable. Single family residences are most commonly valued with greatest weighting to the sales comparison approach, but if a single family dwelling is in a neighborhood where all or most of the dwellings are rental units, then some variant of the income approach may be more useful.
The cost approach

The cost approach was formerly called the summation approach. The theory is that the value of a property can be estimated by summing the land value and the depreciated value of any improvements. The value of the improvements is often referred to by the abbreviation RCNLD (reproduction cost new less depreciation or replacement cost new less depreciation). Reproduction refers to reproducing an exact replica. Replacement cost refers to the cost of building a house or other improvement which has the same utility, but using modern design, workmanship and materials. In practice, appraisers use replacement cost and then deduct a factor for any functional disutility associated with the age of the subject property.

In most instances when the cost approach is involved, the overall methodology is a hybrid of the cost and sales comparison approaches. For example, while the replacement cost to construct a building can be determined by adding the labor, material, and other costs, land values and depreciation must be derived from an analysis of comparable data.

The cost approach is considered reliable when used on newer structures, but the method tends to become less reliable for older properties. The cost approach is often the only reliable approach when dealing with special use properties (e.g. -- public assembly, marinas).
The sales comparison approach

The sales comparison approach in a real estate appraisal is based primarily on the principle of substitution. This approach assumes a prudent individual will pay no more for a property than it would cost to purchase a comparable substitute property. The approach recognizes that a typical buyer will compare asking prices and seek to purchase the property that meets his or her wants and needs for the lowest cost. In developing the sales comparison approach, the state licensed real estate appraiser attempts to interpret and measure the actions of parties involved in the marketplace, including buyers, sellers, and investors.

Method of Data Collection Data are collected on recent sales of properties similar to the subject being valued, called comparables. Sources of comparable data include real estate publications, public records, buyers, seller, real estate brokers and/or agents, appraisers, and others. Important details of each comparable sale are described in the appraisal report. Since comparable sales are not usually identical to the subject property, adjustments may be made for date of sale, location, style, amenities, square footage, site size, etc. The main idea is to simulate the price that would have been paid if each comparable sale were identical to the subject property. If the adjustment to the comparable is superior to the subject, a downward adjustment is necessary. Likewise, if the adjustment to the comparable is inferior to the subject, an upward adjustment is necessary. From the analysis of the group of adjusted sales prices of the comparable sales, the state licensed real estate appraiser selects an indicator of value that is representative of the subject property.

Steps in the Sales Comparison Approach
1. Research the market to obtain information pertaining to sales, listings, pending sales that are similar to the subject property.
2. Investigate the market data to determine whether they are factually correct and accurate. 3. Determine relevant units of comparison (e.g., sales price per square foot), and develop a compararive analysis for each.
4. Compare the subject and comparable sales according to the elements of comparison and adjust as appropriate.
5. Reconcile the multiple value indications that result from the adjustment of the comparable sales into a single value indication.
The income capitalization approach

The income capitalization approach (often referred to simply as the "income approach") is used to value commercial and investment properties. Because it is intended to directly reflect or model the expectations and behaviors of typical market participants, this approach is generally considered the most applicable valuation technique for income-producing properties, where sufficient market data exists to supply the necessary inputs and parameters for this approach.

In a commercial income-producing property this approach capitalizes an income stream into a value indication. This can be done using revenue multipliers or capitalization rates applied to the first-year Net Operating Income. The Net Operating Income (NOI) is gross potential income (GPI), less vacancy and collection loss equals (Effective Gross Income) less operating expenses (but excluding debt service, income taxes, and/or depreciation charges applied by accountants).

Alternatively, multiple years of net operating income can be valued by a discounted cash flow analysis (DCF) model. The DCF model is widely used to value larger and more expensive income-producing properties, such as large office towers. This technique applies market-supported yields (or discount rates) to future cash flows (such as annual income figures and typically a lump reversion from the eventual sale of the property) to arrive at a present value indication.

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How Publishing Really Works: Copyright vs. Publishing Rights

2011-09-30T03:08:00.000-07:00

How Publishing Really Works: Copyright vs. Publishing Rights: Copyright and publishing (or reproduction) rights are two different things. Copyright is a legal term. In the UK and the USA at least, al...

Court ruling clarifies the duty of care owed by landlords to tenants.

2011-09-26T09:10:00.000-07:00

Court ruling clarifies the duty of care owed by landlords to tenants.

A recent NSW court decision makes it clear that all owners throughout Australia have a ‘duty of care’ to tenants to provide a safe and habitable property, after more than $840,000 was awarded to a tenant injured by broken glass.

FOR IMMEDIATE RELEASE

PRLog (Press Release) - Jun 16, 2011 - A recent NSW court decision makes it clear that all owners throughout Australia have a ‘duty of care’ to tenants to provide a safe and habitable property, after more than $840,000 was awarded to a tenant injured by broken glass.

The ruling has made clear exactly what ‘duty of care’ an owner and their agent owes a tenant, their awareness about potential problem areas in rental properties, and the importance of complying with building codes when conducting even routine maintenance.

The Australian government defines duty of care as “an obligation to take reasonable care to avoid foreseeable harm to another person on their property.”

The ruling means that owners and managing agents will have to closely examine the present condition of their properties and review maintenance records to ensure that even work don’t in the past meets building codes.

In this case, a tenant of a rental property in Ashfield was seriously injured after his hand struck and shattered the large glass panel that formed part of the front door. The tenant sued the owner of the property, the Roads and Traffic Authority, and the managing rental agent, alleging negligence because, contrary to building codes, the door had not been fitted with safety glass contrary to building codes.

The court found in favour of the tenant, awarding him $843,146 in damages plus costs, with liability for paying the total bill being split into a 25 per cent share for the owner and 75% share for the managing agent.

The judge found that the owner and managing agent were responsible for the tenant’s injuries because they failed to install safety glass when conducting repairs on the premises.

While the use of safety glass was not mandatory at the time the rental premises were built, the judge found that the owner and managing agent were responsible for the tenant’s injuries because they failed to install safety glass when conducting repairs on the premises after it became mandatory.

In March 2005 – one month before the injury was sustained by the tenant – a glass panel in the door to the bedroom was broken during a failed burglary attempt. The judge found that no measures were taken to install safety glass in the property.

The court also rejected arguments that the tenant ‘accepted’ the premises as it was at the time the tenancy agreement was signed. The judge said that the owner must still take reasonable care ‘in respect of dangers not readily apparent on inspection.’

The decision is currently being appealed.
http://www.exchange-property.com.au/

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Exchange property sales and management is an integrated real estate sales and property management agency specializing in Sydney’s inner west. It achieves great sales prices through the application of its five-step sales plan, on-time rents through its energetic attention to detail.

--- end ---

Contact Email	:	***@gmail.com
Issued By	:	Ian Comnys
Phone	:	02 9146 5324
Fax	:	02 9146 5324
Address	:	5/28 Kingston Road
	:	Camperdown
Zip	:	2050
City/Town	:	Sydney
State/Province	:	New South Wales
Country	:	Australia
Industry	:	Real Estate
Tags	:	property management company, real estate inner west, property management services, property management sydney
Last Updated	:	Jun 16, 2011
Shortcut	:	http://prlog.org/11543937

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Property and Maintenance Service

6 mistakes landlords make

6 mistakes landlords make

Investing in real estate right now can be surprisingly profitable. But if you're going to become a landlord, watch out for these common pitfalls.

Mistake 1: Confusing a cheap deal for a good deal.

Mistake 2: Overlooking key costs.

Mistake 3: Forgetting that time is money.

Mistake 4: Assuming you will sit back and watch the rent roll in.

Mistake 5: Underestimating repair costs.

Mistake 6: Assuming that owning a rental is the same as owning a home.

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Statewide Valuations Pty Ltd

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Video: Interview with the Jade Owner

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How Publishing Really Works: Copyright vs. Publishing Rights

Court ruling clarifies the duty of care owed by landlords to tenants.

Court ruling clarifies the duty of care owed by landlords to tenants.

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