You’ve asked yourself this before, and we all have. It’s the age-old question: Is a stack of cash today better than a steady but smaller stream of income?
Investors have struggled with this concept forever, and the BiggerPockets forums show evidence of that. Daily, investors post, wondering if cashing in their equity is the best play or if they should play the long game.
There truly isn’t a wrong answer, though I’ll admit, I am quite biased, especially after years of conversations with chronic flippers who are filled with regret about not having kept some of their projects.
A Look at BRRRR vs. Flipping
BRRRR and flips are really two sides of the same coin—the real estate investing coin. Of course, much of this is market- and property-specific, but the main differences are that with flips, you might spend a little more on higher-end finishes than you would a BRRRR.
Either way, you are forcing equity in your property and addressing deferred maintenance and upgrades in the hopes of profiting at some point. If you plan to flip and are in a B neighborhood, maybe you spring for the stone counters and tile accent wall in the bathroom. If you are going to rent in a B neighborhood, maybe those upgrades are unnecessary. Besides, if you rent the property for 10 years, you can always add those upgrades later if and when you decide to sell.
Yes, sure, the BRRRR, if done properly, will allow you a trickle of funds indefinitely, whereas a flip is once and done. However, at the end of the day, they’re both strategies for quick(er) cash and (hopefully) leverage. You are forcing equity and hoping to leverage that profit.
How to Decide
So, how do you decide to sell or keep the property? Here are some factors to consider.
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The Cash Flow
First, my rule of thumb is that an ideal BRRRR will have you all in at 75% or less of after-repair value (ARV). If you can create at least 25% equity, you should be able to refinance the property and get close to 100% of your money back out.
It doesn’t always mean that you should sell if you have less, but you will likely leave some of your own cash in the deal. I’ve done that many times before and been perfectly happy with the results—but I planned on this as a possibility going in. Some people won’t keep a property if they have to leave any cash in it. That’s not a dealbreaker for me, and unless you have unique circumstances, it shouldn’t be the only criteria you consider either.
If you can BRRRR a property and it will more than pay for itself every month, that’s a good start to deciding if you should keep it. The monthly cash flow that you are willing to accept is totally up to you, but my market is an aggressively appreciating market, and I’m happy to ride that wave if someone else is footing the bill, even if I’m not making much every month.
If you are in a C area, you’ll need decent cash flow to weather the inevitable storms that come from holding those properties. If you are seeing regular, reasonable appreciation and rent increases, it should be less important that you fully cash out or that the property performs like a dream right away. That property will become more efficient over time and can eventually become your cash cow.
If you are in a market that traditionally sees lower appreciation, say the Midwest or parts of the South, selling might be a better option. This is because the velocity of the equity you have could be put to better use in another project (this is the leverage piece I mentioned).
If rents average only 2% increases every year, and appreciation is historically similar, or barely keeping up with inflation, you can and should take that cash and do much better in many other ways than keeping it in a property and renting it out. Just keep in mind that you need to budget for the taxes you’ll pay on that income.
I find it fascinating, and it really speaks to how dynamic real estate investing can be, that there are so many people doing one thing—and doing it really well. However, they have very limited knowledge of other types of investing within real estate, as well as the pros and cons of each.
I’m talking about chronic flippers. I’ve lost count of the number of professional and truly talented flippers who have never kept a single property as a rental.
The Taxes
In addition, I know many people who have been writing checks to the IRS for hundreds of thousands of dollars every year because of how much they’ve “killed it” flipping houses. Fast-forward a few years, and they learn about tax strategy and cost segregation, and suddenly, CoC return when holding a rental doesn’t seem anywhere as important as the tax benefits of those paper losses.
Flipping is extremely active income—both literally and figuratively. If you aren’t buying, renovating, and selling properties, you aren’t making money. You are constantly active, and it can be stressful to let up on the gas. The IRS sees it exactly the same way—as an earned income/wage—and you’ll be taxed as such.
It might seem like I am saying that flipping houses isn’t a good idea, which is absolutely not true. If done correctly, there’s not really a much better way to build immediate capital, especially as you are starting out. Also, there are many properties that make for fantastic flips that would be terrible rentals.
There’s absolutely a time and place for flipping houses. Our team works with lots of flippers, both bringing them deals and buying them as turnkey rentals once they are done.
That being said, I think it’s fair to say that everyone reading this article is on BP because they are looking for FIRE and passive income. Flipping houses is, and can be, a stepping stone on that path, but it’s not the destination.
One of the biggest challenges for newbies is wrapping their heads around the tax benefits of buy-and-hold investing. It can truly be life-changing, and it’s nearly impossible to see or understand until you experience it. If you are strictly flipping homes, you’ll never see those tax benefits and are actually creating a higher tax liability for yourself.
Don’t get me wrong—paying a bunch of taxes because you made a boatload of money is definitely not a bad thing. But isn’t paying little to no taxes and making a bunch of money objectively better?
By considering a BRRRR on flips where it might make sense, you are giving a gift of a tiny bit of freedom to your future self. Do that repeatedly, and those tiny future gifts can change your family tree forever.
The Bottom Line
Flipping is truly a great way to build capital and start your real estate journey. However, I would encourage you to change the way you look at BRRRR and analysis if you are looking for long-term wealth and FIRE. That BRRRR might not look like a great deal today, but five or 10 years from now, you are very unlikely to regret keeping and depreciating that asset. You can always sell a property in the future if it doesn’t work out, but once you sell it, it’s gone forever. It might seem counterintuitive, but in real estate, you get wealthy by not selling. Be patient, give it some time, and enjoy the passive fruits of your labor in the not-so-distant future.
Article Provided Bigger Pockets and Written By: Corby Goade Investor & Realtor, Boise Turnkey Investments
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Every landlord is intimately familiar with managing the finances of rental properties. While the allure of valuable tax deductions exists, realizing them can be challenging.
Although practical for general financial tracking, generic accounting tools might not highlight property-specific deductions such as depreciation, repair costs, or travel expenses related to property management. As a result, landlords may inadvertently overlook significant savings during tax season.
Enter specialized accounting software —platforms tailored to streamline the financial management process to ensure landlords fully leverage all available tax advantages.
In this article, we’ll examine how traditional accounting tools can fall short and why specialized software is the key to unlocking these critical tax deductions.
While basic accounting software can record transactions and manage finances, when it comes to maximizing tax deductions, standard tools often don’t account for property management’s unique challenges and opportunities.
Specialized accounting software is more than just another digital tool — it’s a strategic partner for landlords in today’s competitive real estate market.
TRACKABILITY
Specialized software offers a comprehensive platform to monitor everything from rent payments to property related expenses.
AUTOMATION
Specialized software offers automation capabilities tailored for many financial tasks in property management, such as monthly rent collection or recurring maintenance costs. Landlords can set parameters, such as due dates for rent, categorize types of expenses, and even set reminders for irregular property-related costs.
CLOUD-BASED ACCESS
The best accounting tools for landlords today are cloud integrated, allowing access to financial overviews from anywhere.
5 WAYS ACCOUNTING SOFTWARE HELPS WITH TAX DEDUCTIONS
For real estate investors looking to maximize their tax benefits, specialized accounting software can be a game-changer. Let’s dive into the five key ways these tools can help you take advantage of valuable deductions.
1) ENHANCED ACCOUNTING PRACTICES
Beyond simply tracking numbers, landlord-centric accounting software offers a suite of tools that brings clarity to the complex financial landscape of property management by providing landlords insights on potential tax deductions.
2) REAL-TIME FINANCIAL OVERVIEW
A landlord’s financial landscape can shift rapidly. Specialized accounting software offers immediate insights into this dynamic environment, eliminating the need for prolonged setups.
3) EFFICIENT TRANSACTION MANAGEMENT
Handling numerous transactions is an integral part of a landlord’s duties. Specialized accounting software streamlines this process, offering intuitive features that minimize manual oversight. As a result, landlords save time and keep potential tax-deductible expenses from slipping through the cracks.
4) INTEGRATED PLATFORM AND SIMPLIFIED TAX PREP
Juggling multiple financial tasks is a daily challenge. With specialized accounting software, landlords can manage everything in one place, simplifying data management and allowing for a less complicated and more efficient tax preparation process.
5) SCALABILITY WITH DETAILED REPORTING SCALABILITY
As a landlord’s portfolio grows, so must their financial tracking system. Specialized accounting software rises to this challenge, ensuring growth doesn’t compromise clarity. With in-depth financial reports and side-by-side comparisons, landlords can gain invaluable insights.
FURTHER INSIGHTS: BEYOND BASIC TAX DEDUCTIONS
The initial benefits of specialized accounting software for landlords are clear. In this section, we’ll venture beyond primary tax deductions to uncover how these tools can become integral to managing a successful rental property business.
TAX CODE UPDATES AND REAL-TIME ADJUSTMENTS
The prospect of an audit can be overwhelming for landlords, especially when dealing with extensive portfolios. This is where specialized accounting software becomes indispensable. Landlords can swiftly and securely archive essential paperwork such as receipts, invoices, or expense reports. Having a well-organized and easily retrievable record system can distinguish between a stress-free experience and a logistical nightmare. Real estate and rental income tax regulations are in a constant state of flux, challenging landlords to stay abreast of these changes. Specialized software aids in aligning with up-to-date tax codes.
Providing timely alerts ensures that landlords remain aware of significant tax amendments, enabling them to adapt their financial strategies accordingly and safeguard their profits.
ADJUSTMENTS AUDIT TRAILS AND PROTECTION
The prospect of an audit can be overwhelming for landlords, especially when dealing with extensive portfolios. This is where specialized accounting software becomes indispensable.
Landlords can swiftly and securely archive essential paperwork such as receipts, invoices, or expense reports. Having a well-organized and easily retrievable record system can distinguish between a stress-free experience and a logistical nightmare.
Looking for the next level of landlord software before handing off to a property manager?
Hemlane is a software that is built to grow with your needs as a landlord.
For a minimal amount, there’s a really good basic package but what we love is the option to upgrade and add 24/7 maintenance management on.
Hemlane offers complete financial support as well. You can link multiple bank accounts for direct deposit rent payments, add automatic late fees, sends reminder notifications to your tenants, and has a detailed profit and loss statement that can includes automatic and manual uploads of income and expenses.
It gets better! If you reach a place where you are ready to hand off management to a property manager, Hemlane has that too under their “Complete” option.
THE BROADER SIGNIFICANCE OF SPECIALIZED SOFTWARE
It’s essential to zoom out and recognize the overarching value such platforms bring to the property management world. When navigating the complex world of property management, landlords need tools attuned to their specific challenges.
The evolution of such software paves the way for landlords to confidently approach their financial management backed by timely insights, automation, and adaptability. With rental portfolios ever expanding and the property management industry becoming more complex, relying on specialized tools is no longer just an option — it’s a necessity.
Article provided by GEMMA SMITH Entrepreneur & Property Manager, Rent Magazine
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First, we would love to thank all of you who submitted questions via email. We received many and selected the ones we knew we could answer in about 5 minutes or so. Please feel free to send us a question to be asked in a future episode! Our emails are in the “LINKS” section below.
This episode includes questions from 5 listeners. One is a two-part question, so we actually are answering 6 questions in total that cover the subjects of:
- Rent discounts for seniors and single moms, are they protected from Fair Housing or can another tenant claim agism/unfair treatment when not receiving a discount too?
- How to properly save cash reserves if you are discounting rents for individuals?
- Operating manuals and criteria, how to handle if there are multiple properties involved?
- Old school landlords who take checks vs ones who use landlord software, is it too late?
- What is the most important thing to focus on in the business as a landlord?
- Tips on working with rental properties together with your spouse? Apparently, we make it look easy! 😅
This was a fun episode with several subject matters to cover!
LINKS
👉 TOGGLE Insurance
Your Landlord Resource has teamed up with Toggle, a division of Farmers Insurance that offers competitive pricing of renters insurance for tenants.
Policies can start as low as $5 a month!
Copy and share our link with your tenants to get them started: http://go.gettoggle.com/SH1E
Download this PDF to present to your tenants with your renters insurance request! Toggle Renters Insurance Flier.pdf
👉 Episode 36: ESA Insights and Pet Rules, an Interview with Logan Miller of Our Pet Policy
👉 Episode 28: The Cash Reserves Blueprint: Protecting & Expanding Your Portfolio
👉 Episode 6: Creating Standard Operating Procedures For Your Business
👉 Episode 4: The Importance of Rental Property Inspections
👉 Hemlane is a software that is built to grow with your needs as a landlord.
For a minimal amount, there’s a really good basic package but what we love is the option to upgrade and add 24/7 maintenance management on.
It gets better! If you reach a place where you are ready to hand off management to a property manager, Hemlane has that too under their “Complete” option.
👉 TurboTenant is a great option for landlords with just a few doors or for those who may be new to using rental property software.
For the most part, TurboTenant’s software is free to use so they are perfect for those on a tight budget.
👉 Fair Housing Institute: Courses to certify you or employees in all Fair Housing laws.
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This week on the podcast we are taking a step back from the educational focus of the Your Landlord Resource podcast and getting a little bit personal.
We have A LOT going on right now, personally, and professionally, so we thought maybe we would share what’s going on!
We are in the process of selling our last single family home rental which will grant us capital to buy the next multifamily. So, we will talk all about that process and the alternatives we have to make a decision on.
In our Sacramento complex, we are pivoting and converting one of our studio apartments from a long-term rental into a mid-term rental. So, we will discuss how that process is going. We will also talk about a potential remodel to a unit that is much needed as well as some other upgrades we are doing to enhance our tenant’s experience.
Your Landlord Resource has been our main focus for the last year so we will tell you about our plans coming up with that little side hustle we got going.
And don’t fret, we have some personal projects coming up that we will bring you in on as well!
Our lives are CRAZY busy with a lot of comings and goings so grab a seat and come hang with us while we fill you in on what makes up our lives!
LINKS
👉 Kwikset Halo Smart Lock: Wi-Fi enabled (no hub required), you can use the Kwikset app to remotely lock and unlock, share guest access, view activity history, and create up to 250 codes. We purchased it with the Halifax Interior/Exterior Passage Doorknob.
👉 Kwikset Re-key Set: This SmartKey system has been a lifesaver at unit turnovers and will continue to be so, even with the Kwikset Keyless entry systems!
👉 Email us your thoughts! Should we create a course about:
➡️ How to place your ideal tenant
➡️ Creating your operations manuals
➡️ Take marketing photos of your unit like a professional
👉 Stacie@yourlandlordresource.com
👉 Kevin@yourlandlordresource.com
👉Help other DIY landlords discover what we have to say… Please leave us a review of our podcast!
On Apple Podcast or ITunes, please scroll to the bottom of our main page (with our logo) and click “Write a Review”.
On Spotify, please click the 5.0⭐ on our the front page of our podcast page.
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👉 Follow us on Instagram, Like us on Facebook
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The landscape of fair housing has been continuously evolving. One of the emerging focal points is the protection against discrimination based on the “Source of Income.” While not federally recognized under the Fair Housing Act, this classification has steadily gained traction at state and local levels, expanding the purview of housing rights.
Defining “Source of Income”
In the realm of housing discrimination, the “Source of Income” pertains to the origin of a resident’s lawful earnings or funds. This can include earnings from employment, pensions, or other regular payments, but notably, it frequently involves rental assistance programs or housing subsidies such as Section 8.
Although it’s not yet a federal mandate, many state and local housing laws and ordinances have recognized and added it as a protected category.
Implications for Property Managers and Landlords
For those managing federally assisted housing programs, such as 202, 811, or tax credit properties, it’s often mandatory to consider housing subsidies as a valid source of income. This means refusing a tenant on the grounds of them receiving rental aid can have legal repercussions.
However, if a property doesn’t fall under these categories, it’s paramount to delve into local city or county regulations. A deep understanding of local ordinances is essential to ascertain whether “Source of Income” is protected in your jurisdiction.
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Resident Income Screening in the Context of “Source of Income”
When screening potential residents, many property managers and landlords have set income criteria that applicants must meet. When “Source of Income” is protected, this screening process requires nuanced handling. The focus should primarily be on the tenant-paid portion of the rent. Managers need to:
- Ascertain the amount of rental assistance the applicant receives.
- Determine the gap between the assistance and the market rent of the property.
Upon obtaining these numbers, they can be juxtaposed against the property’s income standards to ascertain eligibility.
The Rise of “Source of Income” as a Protected Class
Recent years have witnessed a surge in advocacy for “Source of Income” protection. Various legislative initiatives have been proposed to elevate its status at the federal level. This momentum is largely attributed to the pressing challenges of housing affordability and accessibility. Incorporating “Source of Income” as a protected category can alleviate these challenges, enabling a broader segment of the population to improve their housing conditions.
In Conclusion
The intricacies of housing laws go beyond federal mandates. For property management professionals, staying updated with state and local ordinances, along with training, is as crucial as understanding federal regulations. The categorization and acceptance of various income sources can profoundly impact resident selection and rental operations, underlining the importance of comprehensive knowledge in this domain.
Thank you to The Fair Housing Institute for providing this informative article! Our readers get 15% off any Fair Housing course by using our special code: YLR2023
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Deciding between a 401k and real estate investment for retirement is a critical choice that will affect you now and in the future. Both have unique benefits and drawbacks and understanding them can help you navigate the path to a more secure financial future.
401K As a Retirement Vehicle
In short, a 401k is a tax-advantaged retirement savings plan offered by employers, allowing employees to invest a portion of their paycheck before taxes.
As one of the most common types of retirement accounts, there are both pros and cons.
Benefits of a 401k
- Tax advantages: Contributions are often made pre-tax, reducing your taxable income. Additionally, some employers offer matching contributions, which is essentially free money for your retirement.
- Diversification: Within a 401k, you can diversify across various stocks, bonds, and other investment vehicles, reducing the risk of being tied to a single asset.
- Ease of management: Once set up and contributions are automated, there’s minimal active management required.
- Protection: 401k accounts have certain legal protections against creditors.
Potential drawbacks and limitations of a 401k
- Limited access: You can’t access funds without penalty until age 59½, except in certain situations.
- Fees: Management and administrative fees can eat into your returns.
- Market volatility: Being tied to the stock market means your investments can be volatile.
- Contribution limits: For 2023, the 401(k) contribution limit for employees is $22,500, or $30,000 if you are age 50 or older.
Real Estate as a Retirement Investment
Real estate as a retirement investment can take on many forms, like residential and commercial rentals, raw land, real estate syndications, and real estate investment trusts (REITs).
Benefits of investing in real estate
- Tangible asset: Real estate is a physical asset, which can provide psychological security.
- Cash flow: Rental properties can generate monthly income, which can be especially beneficial during retirement.
- Tax benefits: Real estate offers various tax advantages, including depreciation and the potential for tax-free capital gains.
- Appreciation: Over time, real estate typically appreciates in value.
Potential challenges and risks with real estate
- Management: Investment properties require active management, maintenance, and potentially dealing with tenants.
- Liquidity: Selling real estate can be time-consuming, and it’s not as liquid as selling stocks or bonds.
- Market fluctuations: While real estate can be less volatile than stocks, local property markets can still experience downturns.
- Large upfront costs: Purchasing property requires significant capital, and there are ongoing costs like property taxes and insurance.
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Key Factors for Decision-Making
Now that you’ve compared a 401k vs. real estate for retirement purposes, it’s time to focus on key factors for decision-making. Understanding these factors will help you determine where to invest your money, as well as how much to invest.
Personal financial goals and risk tolerance
Your investment decisions should be rooted in your financial goals for retirement. Assessing your comfort with market fluctuations and potential losses is important. Tailor your investment strategy based on your unique goals and risk profile.
Time horizon and retirement age
The time you have until retirement affects the kind of risks you can afford to take. Shorter horizons may require more conservative investments, while longer ones can entertain greater risks for higher potential rewards. Your targeted retirement age should shape the assets you invest in and their expected maturity.
Diversification of retirement portfolio
Diversifying your investments can help spread and minimize risks. Relying on a single asset class can expose you to sharp downturns specific to that market. A mix of assets, like stocks and real estate, can offer both growth potential and stability.
Market conditions and economic factors
The broader economic landscape plays a significant role in investment outcomes. Being attuned to trends in both the real estate and stock markets can offer insights into where opportunities exist. External factors like interest rates, employment data, and geopolitical events can also influence asset performance.
Tax implications and legal considerations
Every investment type carries its own set of tax consequences, which can impact your net returns. Familiarizing yourself with the tax benefits, such as deductions or credits, is vital to maximizing your investments.
Combining 401k and Real Estate for Diversification
There’s no rule that you have to choose either a 401k or real estate for retirement savings. For most people, it’s best to diversify by taking advantage of both options.
A 401k, typically tied to the stock market, allows investors to benefit from market gains, company matches, and tax-advantaged growth. Its diverse range of investment options, from stocks and bonds to mutual funds, provides a layer of protection against specific sector downturns.
Conversely, real estate offers the tangible assurance of physical property, potential rental income, and appreciation benefits that are somewhat decoupled from stock market volatility.
By investing in real estate, you can establish steady cash flow, which is especially beneficial during the retirement years. You can also enjoy the long-term appreciation of property values.
Together, a 401k and real estate can provide the growth potential of equities and the stability and income of tangible properties. The end result is a comprehensive approach to securing your financial future.
So Is a 401k or Real Estate Better for Retirement?
The truth is that there’s no right or wrong answer to this question. Some people should invest solely in a 401k, while others are better off going all in on real estate.
However, for a well-rounded retirement strategy, you may find value in diversifying between these two assets. Compare the finer details, including the pros and cons, to ensure that you make the right decision.
Article obtained by Bigger Pockets. Chris Bibey is a single-family home investor and real estate and personal finance writer.
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Whether you’re just beginning to explore smart locks or looking to upgrade an existing access control system, there are five essential questions to ask first. Read on to discover just what to ask and more importantly, discover helpful answers to guide you to the successful implementation of a keyless entry solution.
1) WHAT KIND OF COVERAGE DOES MY CURRENT INTERNET PROVIDE?
Most multifamily communities these days are equipped with some level of Wi-Fi. According to a 2023 report from research firm Parks Associates, 88% of renters of multiple dwelling units (MDUs) and multifamily properties in the United States report having access to Wi-Fi through their property, either in unit or in a common area.
Determining whether or not your existing network will support smart locks is often a question for a professional. Internet providers who specialize in multifamily properties can perform an assessment to uncover the way your building’s layout and construction impacts your network, pinpoint performance issues and suggest any improvements.
When it comes to keyless entry, just know that outfitting an entire property with Wi-Fi enabled smart locks may not be possible. Property owners and managers may discover that the building’s Wi-Fi network won’t stretch to connect to a smart lock on a pool gate or an outbuilding. Off-line locks provide great solutions for these outliers.
For example, ReadyPIN-enabled smart locks work on or offline. ReadyPIN-enabled smart locks do not ever need to connect online to validate the PIN because the PIN code itself is encrypted with all the access permissions needed. This allows users to bring remote access control capabilities to any door, with or without a Wi-Fi network connection.
2) CAN EVERY DOOR ON MY PROPERTY ACCOMMODATE A SMART LOCK?
Smart locks are wonderful and convenient, that’s for sure. But that doesn’t mean every door on your property can or should accommodate one.
What about glass doors like those often found on commercial buildings? The vertical metal frame on each side of a glass door is known as a stile. To align with the sleek aesthetic of a glass door, these stiles are often too narrow to accommodate a connected smart lock. Instead, these doors often require hardwired access or a door system that’s hardwired into your property’s power supply, requiring its own panel and wiring to operate.
The same is true for high-traffic doors like main entrances at a commercial or residential building. The batteries in even the best smart lock would wear out quickly with this constant traffic, so hardwired access is the solution instead.
Because such solutions require a powered connection, they must be installed by an electrical professional. In fact, any hardwired door requires guidance and installation by an access control specialist.
Looking for the next level of landlord software before handing off to a property manager?
Hemlane is a software that is built to grow with your needs as a landlord.
For a minimal amount, there’s a really good basic package but what we love is the option to upgrade and add 24/7 maintenance management on.
It gets better! If you reach a place where you are ready to hand off management to a property manager, Hemlane has that too under their “Complete” option.
You can try Hemlane out FREE for 14 days (no credit card required) to see if its a good fit for you!
3) DO I NEED WEATHERPROOF HARDWARE AT ANY OF MY DOORS?
Just imagine buying and installing a smart lock only to find it doesn’t function when it rains heavily or freezes on very cold winter days. Remember, each area of the country has its own climate challenges requiring certain grades and types of smart locks.
Again, relying on expert guidance ensures you’ll find the right solution. Such professionals are well versed in lock grades (developed by the American National Standards Institute) and their corresponding applications.
4) HOW MANY PINS SHOULD MY SMART LOCKS HOLD?
It’s not uncommon for a property owner to become enthralled with a certain brand of smart lock, purchase their favorite, and then discover it only accommodates 100 PINs.
If your property has a full staff and hundreds of employees, you can very quickly run out of codes. So, be sure to check PIN code storage and err on the side of more PINs if you think your business will grow.
5) DO I NEED SOFTWARE TO MANAGE MY SMART LOCKS?
Many people don’t realize that features like remote control, integrations with property management systems and visibility tools are enabled by access control software, not the smart lock. A cloud based access control platform, like RemoteLock, makes your smart lock even smarter by centralizing all of your properties, doors and locks onto one dashboard, allowing you to remotely manage all your smart locks from your smart phone or laptop.
When looking for access control software, make sure you are selecting a solution that can grow with you over time. For instance, a solution like RemoteLock offers compatibility with a slew of the most popular lock brands and hardwired access systems, too. Even better, RemoteLock’s open API also connects you to 3rd-party software providers you already know and trust, with others added all the time. Software solutions that give you a choice when it comes to hardware and integrations with other software means your solution can evolve as your portfolio grows.
AVOID MISTAKES WITH THE HELP OF EXPERT GUIDANCE
Just like any other technology, smart locks and access control software are always evolving. That’s why it’s wise to ask for help. The experts at RemoteLock can help guide you through details like user experience, security, connection technology, lock grades and more. Having served thousands of customers in multifamily, vacation rental and commercial sectors, they understand that every property has unique needs. Reach out to RemoteLock today to discover your ideal access control solution.
Thank you for this article by KIM GARCIA, Director of Marketing RemoteLock (obtained from AAOA RENT Magazine)
Kim Garcia is the Director of Marketing for RemoteLock. She has over 17 years of strategic marketing management and sales experience in the security industry. She specializes in corporate communications and product marketing with specific expertise in wireless security, access control, and integrator perspectives. Prior to joining RemoteLock, she led marketing for PSA Security Network and Inovonics.
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Who is better to give you questions to ask a property manager than a professional property manager!
This is part 2 of last week’s episode we discuss over 50 questions to ask when you are interviewing a new property manager to take over your rental properties. If you have not had a chance to listen to part one, STOP. Go back and listen to Episode 39 before continuing to this one.
In this episode we go over questions that pertain to:
- Leases
- Tenant screening
- Maintenance and inspections
- Move-in/move-out procedures, including marketing and renewals!
- Evictions
- Tenant communication
We not only give you the questions to ask, but we also discuss WHY they are important to you as a rental property owner. This is key because each of you has different aspects of property management that are important to you. So now you can decide how much weight to give the question based on its significance to your success.
I don’t know about you, but one way I learn best is hearing stories of what others did right or wrong to help me understand its importance. So, we make sure to share personal stories of not only how we manage our own properties, but how we manage properties for others and several issues we have found while using a property manager for our out of state property.
A LOT of good stuff in the episode! Part 2 will drop in a few days just so you don’t have to wait a whole week and lose your momentum on the questions.
BONUS! We created a Property Manager Questionnaire of all the questions we suggest you ask so you can just blast it out in an email or use it as a reference if interviewing a property manager in person! Download it FREE until December 31st, 2023, before we begin charging a nominal fee!
LINKS
👉 Property Management Questionnaire: FREE for a limited time! A PDF with over 60 must ask questions all set up in with boxes for the PM to answer in or for you to use for notes if interviewing them in person.
👉 YLR Episode 7: A Guide to Move Out Procedures and Security Deposits
👉 YLR Episode 20: The Nuts and Bolts of Residential Rental Property Insurance
👉 YouTube Video: Troubleshooting a garbage disposal. We include this link this in our tenant binder and send it to them when they text for help.
👉 Hemlane: A great alternative to using a property manager when you want some involvement in the management process. Each plan was configured to grow with you so you can eventually hand all management off to a professional PM within their system. They have a FREE 14-day trial (no credit card) if you’d like to sign up and try them out.
👉 Read our blog: Tips on Taking Professional Looking Rental Property Photos
👉Help other DIY landlords discover what we have to say… Please leave us a review of our podcast!
On Apple Podcast or ITunes, please scroll to the bottom of our main page (with our logo) and click “Write a Review”.
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FOR TRANSCRIPT OF THE EPISODE, CLICK HERE
With the large number of catastrophic loss events in recent years we have seen insurance companies leaving markets like Florida, and California, and the resulting higher cost of property insurance has become a big drain on NOI and property values for commercial real estate.
Given that property insurance premiums are increasing by as much as 300% in some markets, investors are struggling to determine whether the high cost of insurance is temporarily (and therefore creates a buying opportunity), or whether this is a systemic repricing of risk which will reset property values going forward.
To better understand the dramatic increase in insurance costs we need to dive into the factors that have driven the massive insurance losses of the last few years. Certainly, climate change plays a role in the increased frequency and severity of storms, wildfires, and other weather-related losses. Higher global temperatures are fueling stronger and more frequent storm systems.
Additionally, post pandemic inflation and a sluggish supply chain drove up replacement and repair costs faster than insurance companies could catch up. This is compounded by a systemic shortage of trades labor in the US, which continues to drive up the cost of skilled labor and increases the cost of repairs after a loss event.
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These factors have compounded, resulting in insurance companies underpricing the risk of loss events. This was further complicated by an overly competitive reinsurance market, as a result of the trillions of dollars governments around the world dumped into the economy, flowing through to the investment markets. Today capital in the reinsurance market has all but dried up, as the outflows of capital reimbursing losses has exposed the insurance market to the fact that they had severely underpriced the risk.
Normally the fact that real estate investments are backed by tangible assets is an advantage that protects investors from the volatility seen in intangible assets. However, the risk with tangible assets is that they can be physically damaged or destroyed, and insurance hedges against this risk.
Since insurance hedges the risk of damage or loss for everything – from properties, vehicles, businesses, health care, and almost anything else you can think of – it is insurance that underpins the value of assets, and of the economy as a whole. Material repricing of this risk is a repricing of the entire real economy.
So, where does this leave us? It is tough to say with certainty. Insurance markets have historically been cyclical. Capital tends to flow out when large losses are made, and capital tends to flow back in when large profits are made. And given the increasing premiums that insurance companies are now charging, we would expect their profits to be significant in 2023 (absent any major new catastrophes).
But maybe things are different this time. Climate change appears to be having a profound impact on the level of risk and inflation may be here to stay for a few years yet. There is a good chance that higher insurance costs are here to stay, and that real estate located in coastal markets, or markets with higher catastrophic risk, will see material devaluation due to increased insurance costs.
That being said, demand for housing in coastal markets remains strong as these are still very popular markets and are still experiencing positive net migration.
A dynamic market creates opportunities for the astute buyer. It will be interesting to see how these factors play out over the next few years.
Source: Equity Yield Group AAOA
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Smart, informed people face a unique risk in their investments: getting too “clever” for their own good.
All too often, they succumb to the temptation of trying to time the market, pick individual stocks, or ride the wave of the cryptocurrency du jour. And sometimes it even works—which makes it even harder to avoid next time.
Every time I’ve gotten cute or clever or smug about an investment strategy, it’s come back to bite me. I would like to think I’ve finally eaten enough humble pie to learn my lesson.
So, how do I invest today? Boringly, with wide diversification and small, regular investments like clockwork.
What Is Dollar-Cost Averaging?
Dollar-cost averaging (or DCA for money nerds like me) is the practice of making regular investments in the same broad basket of investments.
Investors most commonly practice DCA with passively managed index funds. For example, they may invest $300 each week in SPY, an index fund that mimics the S&P 500.
The market rises, the market falls, the market throws temper tantrums. You just keep investing through it all, week in and week out.
In the short term, you might lose money if the market dips. But over the long term, you’ll simply earn the average return for that index or sector or whatever you’re investing in. For instance, the S&P 500 has achieved an average annual return of 12.11% over the last 30 years.
Robo-advisors make this particularly easy. I use Charles Schwab’s free robo-advisor, which I set to withdraw money from my checking account every week. It invests the money based on my investment profile settings, spreading money among stocks in all sectors, market caps, and regions of the globe. It even rebalances my account periodically and harvests tax losses.
A human financial advisor could do this for you, too, but they don’t work for free the way some robo-advisors do.
Why Smart Investors Practice Dollar-Cost Averaging
To begin with, dollar-cost averaging ensures that you earn the long-term average return rather than underperforming the market by investing at a market peak or selling at a market low.
I know, I know. You think you’re smarter than everyone else and that you can time the market. So does everyone—and they get burned because of it. As I documented a few weeks ago in the math to becoming a millionaire, the average stock investor dramatically underperforms the market at large.
Dollar-cost averaging also prevents you from trying to get clever by picking individual stocks. You just invest in a broad mix of ETFs to diversify your portfolio across the entire market—or at least a huge swath of it.
Even the smartest, best-informed stock investors are wrong more often than they’re right. It’s why actively managed mutual funds usually underperform the broader market. If these high-paid professionals can’t time the market or pick stocks, you certainly can’t. Dollar-cost averaging saves you from yourself and your bloated ego.
Best of all, dollar-cost averaging is both simple and easy. I spent five minutes setting up my robo-advisor account many years ago. Today, I don’t have to worry about my stock investments at all; they just run on autopilot. In a word, it makes my stock investments completely passive.
How to Practice Dollar-Cost Averaging With Real Estate
Now that I’ve beaten that point to death, it raises a question for us as real estate investors: How can you possibly dollar-cost average real estate investments?
After all, real estate is expensive. Whether you invest in rental properties or passive real estate syndications, each investment requires tens of thousands of dollars. That makes it hard to invest small amounts steadily each month.
Consider these options to dollar-cost average your real estate investments, month in and month out.
Public REITs
Some investors love public REITs. I’m not one of them because they share far too much correlation with the stock market, which largely defeats the purpose of diversifying away from stocks.
But if you like publicly-traded REITs, they offer one of the easiest ways to dollar-cost average your real estate investments. Many REITs trade at $10 to $30 per share, so you can invest in shares every single week if you like.
Private REITs
Some real estate crowdfunding platforms offer private real estate investment trusts. They still pay out 90%-plus of their profits in dividends and often own many properties across the country. They don’t offer the same liquidity as public REITs, but they don’t have the same volatility either.
For a reputable example, check out Fundrise, which allows you to invest with as low as $10, making it easy to invest every week or month. I’ve invested personally in Fundrise, and while it’s had a bad 2023, that’s what markets do: Sometimes they go down.
Property-secured loans
Alternatively, you can invest small amounts in loans secured by real property.
My favorite two platforms for this type of investment are Groundfloor and Concreit. While Groundfloor has a minimum initial account balance of $1,000, you can invest $10 apiece in individual loans.
Every week, my Groundfloor account invests automatically in new loans as they become available. I’ve earned an average long-term return of 9% on these investments, and Groundfloor also offers notes currently paying 6.5% to 10.25% interest.
Concreit works differently, offering a pooled fund that pays 6.5% interest in weekly dividends. You can invest as little as $1 and withdraw your funds at any time.
Again, these simply offer one more way to dollar-cost average real estate investments. But I have thousands of my own dollars invested in both.
Fractional ownership in SFRs
Several platforms have popped up over the last few years that let you invest in fractional shares of single-family rental properties.
My two favorites are Arrived and Ark7. They let you invest between $20 to $100 per share in rental properties, and both offer short-term rentals in addition to classic long-term rentals.
As a fractional owner, you get both rental cash flow and your share of the profits on sale. The tax benefits carry over to you as well.
And yes, I’ve invested personally in properties on both of these platforms as well. I particularly like that Ark7 features a secondary market for selling shares at any time after the initial one-year holding period.
Fractional investing in syndications
Most syndications require a minimum investment of $50,000 to $100,000, which makes them impractical for dollar-cost averaging. That is unless you invest as a member of a real estate investment club, where you all go in on these together.
I know two investment clubs that operate this way, and they each work differently. One is my own company, SparkRental’s Co-Investing Club, where non-accredited investors can invest $5,000 apiece in deals vetted together by the club each month. The other is Left Field Investors, which is more geared toward accredited investors investing $10,000 to $50,000 per deal.
Don’t get me wrong: $5,000 isn’t chump change, and not everyone can invest that much each month. But even if you invest in deals every two or three months, it still offers a way to invest relatively small amounts on a regular basis while targeting the high (15%-plus) returns, cash flow, and tax benefits of passive real estate syndications.
The upshot? I own a fractional interest in thousands of units across dozens of cities, and the total I’ve invested is less than some people invest in a single property.
Boring Performs Better
Sure, it’s fun to brag at cocktail parties that you timed the market perfectly or picked the perfect property or stock investment and beat the market. You get to pat yourself on the back and feel clever—that one time out of five that it actually works out that way. In most cases, you’ll just underperform the market at large.
Aim to be wise rather than clever in your investments. Invest slowly and steadily in stocks and real estate, with small amounts every single week or month rather than occasional large chunks.
This is because investing shouldn’t be “fun” or a hobby unless you’re an active investor who loves renovating properties yourself. Investing should be boring. It should happen in the background, freeing you to enjoy your actual hobbies.
Nowadays, I only invest small amounts in diverse passive investments, exactly as I’ve outlined. And my returns have dramatically improved since I started investing this way.
G. Brian Davis Bigger Pockets
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