New Rental Vs. Old Rental – Which Should You Invest In?

Are you planning on investing in a Houston Texas area rental property? If so, like many investors you may be faced with having to choose between an old build vs. a new build.

Yes, both options can be good or bad that’s why in this article we will list the pro’s and con’s of investing in a new rental vs. an older rental property.

It’s nо secret thаt old houses rеԛuіrе more TLC thаn new. But that’s nоt nесеѕѕаrіlу a rеаѕоn tо аvоіd thеm.

Cоnѕіdеrаtіоnѕ When Purchasing Old оr Nеw

Settling/Foundation Iѕѕuеѕ

Oldеr houses hаvе issues related tо settling thаt hореfullу рrеvіоuѕ оwnеrѕ hаvеn’t nеglесtеd. Thеrе are ways tо combat іѕѕuеѕ rеlаtеd tо ѕеttlіng, ѕuсh аѕ іnѕtаllіng joists. Sоmеtіmеѕ these fіxеѕ can bе a relatively cheap way tо mаіntаіn the structural іntеgrіtу оf the hоuѕе. Other times they саn bе very соѕtlу.

Nеw houses аrеn’t nесеѕѕаrіlу “ѕаfе” іn thіѕ rеgаrd, еіthеr. They аrе in the process оf settling. This іѕ оnе reason you ѕhоuld always gеt аn іnѕресtіоn, whether thе рrореrtу’ѕ nеw or оld.

Addіtіоnаllу, mаnу оldеr hоmеѕ hаvе рооr gutter nеtwоrkѕ, if any at аll. Thіѕ аllоwѕ wаtеr tо penetrate thе foundation аnd possibly create cracks. Thеrе аrе rеmеdіеѕ tо fixing foundation сrасkѕ, but аgаіn, thеу can ѕеt a buyer back unеxресtеdlу іf thеу aren’t aware оf іt.

Tоxіс Chеmісаlѕ

Unfоrtunаtеlу, tоxіс сhеmісаlѕ аrе uѕuаllу present іn houses built bеfоrе 1978.

Oftеntіmеѕ, you’ll fіnd wаіvеrѕ whеrе owners сhооѕе nоt tо іnѕресt for lеаd-bаѕеd paint аnd claim nо knоwlеdgе of its presence. In fасt, іn аll thе dеаlѕ I’vе dоnе, I’vе уеt tо fіnd аn owner whо has wаntеd аn іnѕресtіоn fоr lead-based paint, аѕ mitigation and rеmоvаl methods can bе соѕtlу.

If you purchase an оldеr property with thе intent to rеnоvаtе іt, bе аwаrе that іt’ѕ lіkеlу уоu’ll fіnd аѕbеѕtоѕ. It саn bе іn thе wаllѕ, thе flooring, уоu nаmе іt. Mitigating asbestos еxроѕurе саn аlѕо be еxреnѕіvе, ѕо the presence of thіѕ toxin іѕ something you’ll want tо knоw about prior to purchase, tоо.

Fоrtunаtеlу, аѕbеѕtоѕ and lеаd раіnt wеrе bаnnеd аnd аrе nоt present іn nеw соnѕtruсtіоn.

Elесtrісаl

It’s not unсоmmоn tо fіnd оutdаtеd аnd еvеn dаngеrоuѕ wiring іn оldеr houses. Knоb and tubе wіrіng was frequently uѕеd in lаtе-1800ѕ/еаrlу-1900ѕ hоmеѕ. But іf maintained рrореrlу, thеѕе mаtеrіаlѕ are ѕtіll ѕаfе.

What аrе thе сhаnсеѕ, hоwеvеr, thаt the home you рurсhаѕе hаѕ аlwауѕ been mаіntаіnеd properly? Agаіn, inspection is key.

Pluѕ, сhаngеѕ іn еlесtrісіtу dеmаnd mау create a need for аn updated еlесtrісаl раnеl аnd/оr wiring rеgаrdlеѕѕ. Outdаtеd еlесtrісаl ѕhоuld thеrеfоrе bе a ѕаfеtу concern, so uрgrаdіng іѕ hіghlу rесоmmеndеd (аnd іn ѕоmе cases rеԛuіrеd).

Unѕurрrіѕіnglу, thе соѕt of thеѕе upgrades can add up ԛuісklу.

New construction оutfіttеd wіth modern еlесtrісаl раnеlѕ оffеr реасе of mіnd іn tеrmѕ оf еlесtrісаl fіrеѕ and a ѕtеаdу flow оf еlесtrісіtу tо рrеvеnt power ѕurgеѕ, blоwn fuѕеѕ, trірреd brеаkеrѕ, еtс.

HVAC

HVAC concerns реrtаіn particularly tо multіfаmіlу hоuѕіng. In some сіtіеѕ, owners have tо rерlасе аn оutdаtеd HVAC system thаt’ѕ ѕеrvісіng thе whоlе buіldіng with ѕераrаtе vents, electrical, еtс. for еасh unit. Be ѕurе to lооk іntо and соmрlу wіth rеԛuіrеmеntѕ.

Contact Vestpro Residential Services

Need more information before purchasing your next rental property? We can help! Our company is one of the top property management firms in the Houston area and we look forward to answering your questions plus potentially managing your next rental.

Learn more by contacting us at (832) 971-1841 or click here to connect with us online.

Should You Invest in Houston Texas Rentals Later in Life? Yes!

It doesn’t matter if you’re in you’re 50’s, 60’s, 70’s or even later in life, investing in Houston Texas rental properties is a smart investment because over the last 20 years real estate has been one of the best performing assets and that’s not expected to change anytime soon.

Although many people think that the time to invest in real estate is when you are in your 20’s, the reality is that real estate should be something that people invest in at any stage of their lives.

5 Smart Ways to Start Investing in Rentals Later in Life

Leverage (and build!) your network.

Think that 23-year-old rascal has a network like yours? Forget about it.

Take advantage of your superior network and double down on building an even stronger one.

Who do you know in the real estate industry? In the mortgage industry? In the construction and contracting industries?

Who do you know who has more money than they know what to do with and is looking for a project to invest in?

The electrician in your Friday poker group can refer you to trustworthy and affordable general contractors and handymen. The real estate agent in your bridge club may not service the area where you’re looking to invest, but she can refer you to someone who can.

Start assembling your dream team. After all, real estate investing is a team sport, and you have several more decades’ worth of contacts to draw on to fill out your roster!

Capitalize on your existing capital.

After being employed for several decades, you should have far more money set aside than some 23-year-old just out of college who’s scraping by on their entry-level income.

That extra capital is a competitive advantage!

Maybe you can afford to make cash offers to drive a harder negotiation and avoid financing fees. Or maybe you can afford a higher down payment to avoid mortgage insurance and having to resort to tricks like owner-occupied financing or relying on seller concessions for closing costs.

You may decide that you want to finance your rentals even though you can afford to buy in cash for tax or leverage reasons. But having more money at your disposal is a huge advantage over the young punks out there.

Use it to your advantage to negotiate hard, get the best possible financing, and move faster on deals than your competitors can.

Take another look at house hacking.

“Forget it, Brian! I don’t want to live in some trashy duplex!”

First of all, there are plenty of upscale multifamily dwellings out there. Don’t discount them just because your experiences with properties have been less than thrilling.

First, you could buy a home with an in-law suite and convert it to an income suite.e garage? In the basement? Something with a separate entrance of course, so you don’t have to mingle with the riffraff.

If you have a large garage space, could you rent it out as storage space?

4. Keep your eyes on the prize: income for retirement.

People invest in real estate for many reasons and in many ways.

As an older adult, consider putting “passive income” at the top of your priority list.

One of the things I love the most about rental investing is you can forecast your returns incredibly accurately, before ever putting a single dollar down as a deposit. You know the market rent, the neighborhood vacancy rate, the local property management costs, property taxes, insurance. You can accurately forecast CapEx and repair costs.

You’ll know exactly what kind of cash flow you can expect from a property before making an offer. This means you can only invest in properties with strong cash flow.

Appreciation may or may not happen sometime in the indefinite future. But cash flow isn’t based on future hopes and prayers.

Rental properties can be incredibly efficient income producers for retirement. The 4% Rule doesn’t apply; in fact, the whole notion of “safe withdrawal rate” goes out the window.

You don’t have to sell off any assets for the income produced by rentals. In fact, they produce more income over time, not less—rents go up, even as your mortgage payment holds steady (and eventually disappears)!

5. Snowball your extra income.

As an older adult, you’ve been at this whole “budgeting” thing for a while now. Granted, that could mean that you’re stuck in your ways—or it could mean you’ve learned a thing or two.

When young people get a promotion, the first thing they do is go out and find a way to spend their higher income. It could mean a better apartment, a better car, or just going out to more bars and restaurants.

It’s called lifestyle inflation, and it’s insidious.

As an older adult, hopefully by now you’ve witnessed firsthand how counterproductive lifestyle inflation is. Credit card debt? You’ve been there and done that. Faster cars? Not as sexy as they were when you were 20.

So, when you buy a rental property and start earning that extra $200, $300, $500 a month, what are you going to do with it?

Re-invest it.

Set it aside and put it in the stock market. Or in private notes. Or best of all, in more rental properties.

Because ultimately, you’re on a mission. Your mission, whether you choose to accept it or not, is to retire with more wealth, because more wealth brings more options. As you build streams of rental income, you can retire young, or keep working and building more wealth.

And when you retire, you can go travel the world if you want, rather than ducking into the Golden Corral before the Early Bird Special ends.

It’s never too late to start buying rental properties. If you invest strategically, you can accelerate your retirement saving, bend the 4% Rule and build a stable and permanent base of passive income.

Get Property Management in Houston Texas

For property management in Houston Texas contact Vestro Residential Services by calling us at (832) 971-1841 or click here to connect with us online.

Will More Stock Market Investors Put Their Money in The Real Estate Investment Market?

The stock market has been experiencing another correction in recent days and with a stock market correction, it’s not uncommon for investors to put their money into the bond market or real estate investment market like commercial or residential rental properties.

This has happened before in the past before the crash of 1987 and 2008 because smart investors like to get out of stocks before their investments lose a ton of value like Amazon’s Jeff Bezos who lost a record $9 billion in one day.

Let’s say that you have $1 million in stocks, should you invest some of your money into real estate? The answer to this question is yes.

A Very Stable Investment

Like Bonds, the Real Estate investment market is very stable and can offer you an excellent return on your investment.

Real Estate is different than bonds though because with real estate you can rent it out, generate income and ultimately raise the rent for inflation compared with bonds which depending on the bond will only pay you a small return on your investment.

How Long Will the Stock Market Correction Last?

If you’re wondering how long the stock market correction will last, the answer is it’s anyone’s guess. Many institutional traders have been predicting that the market may lose up to 30% of its value but since we haven’t seen a wild swing like that there’s a good chance that the market may not lose much more value from here.

Tired of the up and down of the stock market? If you’ve been investing since before 2008, you’ve been riding the “roller coaster” for a long time.

Thankfully, with rental properties, you can enjoy long-term stability and cash flow from your investment plus a wide variety of other tax advantages compared to stocks or bonds.

Learn More About Houston Texas Real Estate Investments

To learn more about real estate investments in the Houston Texas area contact us today by calling (832) 971-1841 or click here to connect with us online.

Trying to Buy More Single-Family Rentals? Here’s What Could Kill the Deal

Are you thinking about adding more single-family rentals to your portfolio of rental properties? If so, you’re making a smart choice!

Even though you may currently own one or more single-family homes, the reality is that you can easily kill a home purchase deal by making one or more of the following mistakes.

  1. Lack of preparedness

Many property managers look at their business as a revenue source, but according to Propst, it’s so much more. He recommends viewing your business as an asset that can increase in value and consider how you want it to evolve down the road. By beginning with the end in mind and setting up goals to grow your business, you can make it more marketable when it’s time to sell.

  1. Poor financial management

In an acquisition, financials can be difficult to get your arms around and verify. Are the earnings you post on your financials what you are actually earning? Propst says it’s important to ensure the customer’s, tenant’s and business owner’s books are all reconciled. Both the buyer and seller need to understand that the numbers put into the system are accurate. If you reconcile your books on a monthly basis, life is much easier when it comes time to sell your business and investing in a certified audit may be a good idea.

  1. Lack of documented processes

When you acquire a company, you also acquire its processes. Propst recommends analyzing these processes so you can best leverage strengths and tweak areas that need improvement. From there, integrate the processes into your business as a whole. Use technology to document all processes, such as business procedures and communications with owners and tenants.

Key performance indicators (KPIs) are important for anyone who is building their business and eventually wants to sell. Consider what is driving dollars and bottom line and focus on these areas. Instead of trying to do it all, set a few KPIs that help you reach your goal and place your efforts there.

What does Andy recommend to document processes? Tools like Traxion or even simply Microsoft Word.

  1. Poor data management

Do you have streamlined property management data? According to Propst, businesses should establish clear policies and procedures for how data is entered so it can be easily accessed and interpreted across the board. When managing multiple platforms (such as a tenant portal and owner portal), you need to establish data standards so you and your team can consistently enter data in the same way and avoid confusion (e.g.- “TX” instead of “Texas.”)

  1. Not knowing your worth

Do you know the value of your business? Property managers who begin with the end in mind by setting clear goals, along with mission and vision statements, are better equipped for long-term success. Be proactive in planning and focus primarily on initiatives that drive revenue for your business. Propst says that “Stepping away from the day-to-day of your business to create a game plan is an investment that will pay tenfold.” Making time to establish, review and adjust your goals is essential to understanding the true value of your business.

Get Property Management Here

For professional property management in the Houston Texas area contact Vestpro Residential Services at (832) 971-1841 or click here to connect with us online.

Traditional and Creative Ways You Can Finance Your First Houston Rental Property

By Vestpro Residential Services

Are you planning on buying your first rental property in the Houston TX area? If so, as a first-time investor you’re probably wondering how you’re going to purchase that rental property especially if you already have a primary residence and other financial obligations.

Thankfully, you have options available that will help you get that rental property sooner than you think.

Get A Traditional Mortgage Loan

The first and obvious way you can finance the purchase of a rental property in the Houston TX area is to get a traditional mortgage loan and use the equity from your primary residence towards the purchase of that rental property.

Most new investors with good credit will go this route because it’s the obvious way of using the equity that you already have in your home and making it work for you.

Here are some more options to consider for buying a rental property:

Seller Financing

This involves getting a loan from the person you’re buying the property from. In some cases, if the seller is willing to lend you money, it’s easier (read: less paperwork) than getting a loan from a bank.

I’ve seen these deals work in a number of scenarios: The seller might finance either the down payment or the full purchase price. The seller might be another property investor — or they might be the property’s live-in owner.

The key to success is to ensure you agree on a fair interest rate for the loan. If you don’t have much experience in this area, it may be wise to work with your CPA and/or attorney. And regardless of how much experience you have, be sure to get the terms of the loan in writing, with signatures.

Partnerships

Another great financing option is to partner with someone who has enough money for a down payment. This is an effective strategy if you have a friend or family member who’s interested in getting involved in property investment, but maybe isn’t as interested in the day-to-day work of screening tenants and collecting rent payments.

In this scenario, what often happens is that one partner puts up money and the other handles all the actual work of being a landlord.

The key to success here is to agree on how to split proceeds. I recommend thinking about it in terms of aligning the risk and reward with costs and benefits. Your partner is taking on all the financial risk, but you’re putting in all the legwork of bringing in revenue via rent. Make sure the way you split proceeds reflects your contributions.

Whatever you decide makes sense, it’s best to have your terms in writing. Services like LegalZoom and Rocket Lawyer can help with drafting basic legal docs if you don’t have an attorney. (Full disclosure: Rocket Lawyer is a partner of ours.) Another strategy we find effective is to form an LLC, which requires you to put together an operating agreement. That document is a great place to lay out roles and responsibilities for all parties.

Government Programs

The Federal Housing Administration (FHA) was founded to encourage homeownership. One of the ways it does that is by offering homebuyers the chance to buy property with just 3.5% down.

While FHA loans are specifically designed to facilitate the purchase of owner-occupied homes, it’s completely allowable to buy a two-, three- or four-unit building, live in one unit, and earn rental income from the others. In fact, this can be an incredibly cost-effective way to finance a rental property, especially if it’s your first.

FHA loan limits are different in every county, so part of the art here is making sure the loan limit where you want to buy is high enough that you can purchase a multi-unit property.

Get Property Management in The Houston Area

Once you own your first rental property in the Houston area don’t waste time managing it yourself, let Vestpro Residential Services manage it for you. To learn more about our services contact us at (832) 971-1841 or click here to connect with us online.

5 Basic Tips for Investing in Real Estate

Are you planning on getting started with Investing In Real Estate during 2017? If so, you’re not alone. Thanks to the excellent returns from Real Estate many investors have chosen to invest in rental properties in Houston, and across the United States.

Before getting started with investing in Real Estate you should follow these 5 basic tips for investing in Real Estate.

1. Location Matters

The old adage that “location matters” is most accurate when it comes to real estate investing. Before you fork over a down payment and put yourself in a significant amount of debt over a property, ensure that it’s in a good location.

Look for the worst house on the best street. That’s a principle you’ll come across quite a bit as you delve into further real estate investing advice.

You want to invest in the worst house on the best street because it gives you an opportunity to build equity. It’s a property in a great neighborhood (“the best street”) that needs some work (“the worst house”). You can invest some money to fix it up and sell it to someone else who wants a ready-to-move-in house in a fabulous location. Professional real estate investors call this “fixing and flipping.”

2. Look for Wholesale Properties

Investing in real estate is just like investing in the stock market in at least one way: you’re looking for the best deal. If you’re a savvy stock market investor, you probably won’t buy too many stocks at their high if you plan on holding them for a long time. Instead, you’ll follow the Warren Buffet principle of getting greedy when everyone else gets fearful. You’ll buy stocks that are beaten down and make a fortune when they turn around.
That’s what you want to do when it comes to real estate investing. Avoid paying “full price” for properties. Instead, look for so-called wholesale properties that are offered at a steep discount. Sure, they’ll probably need some work. Run the numbers and see if the investment in rehab is worth the ultimate selling price.

As noted at ThinkConveyance: “You can easily invest $20,000 in a property and add twice that much to the selling price. That’s why real estate investing is so attractive to investors who want to maximize their return on investment.”

3. Understand the Tax Benefits
The people who run our government want private investors to provide housing for people. That’s because they know that if private investors don’t provide housing, then the government will be responsible for it.

To that end, Uncle Sam offers significant tax benefits to real estate investors. The most significant benefit, arguably, is the depreciation write-off. When you buy an investment property that includes a building, you get to write off the depreciation of that building as a tax deduction. You’ll have to consult your tax advisor for specifics, but basically you can expect to depreciate a residential building over 27 years and a commercial building over 39 and a half years.

Keep in mind that the IRS views your real estate investment efforts as a business so you also get to claim the “necessary and ordinary“ deductions that business owners take, including mortgage interest, insurance, and maintenance expenses. Again, it’s a good idea to consult your tax advisor about specifics.

4. Check Your Credit Report

You’re more than likely going to need to borrow money to buy real estate. That’s why you should check your credit report before you begin investing in real estate.

If you have problems on your credit report that are mistakes, get those resolved as quickly as possible. If you have problems that are legitimate, then you’ll need to work to improve your credit.

Simply put, banks aren’t going to loan money to you for a property that’s not your primary residence as readily as they’ll loan it to you for your own home. That’s why your credit has to be spectacular.

5. Use the “1% Rule”

If you’re planning on buying a property that you’ll rent out one or more tenants, use the “1% Rule” when you decide whether or not the property is worth the price you’ll pay for it.

The 1% Rule simply states that an income producing property must produce 1% of the price you pay for it every month. For example, if you’re looking at buying a property for $150,000, then the monthly rental income should be 150,000 x 1% = $1,500.

Get Houston Texas Property Management

As you grow your portfolio of rental properties you’re going to need an experienced Houston Texas Property Management company because a property manager will save you the time, money and hassle of managing those rentals yourself. Learn more about the services we can offer you by contact us today at (832) 971-1841 or click here to connect with us online.

 

How to Begin Investing in Real Estate

Are you thinking about getting started in Real Estate investing in the Houston Texas area? If so, you’re not alone.

Many people have made the decision to invest in real estate over the last year thanks to historically low mortgage interest rates and demand for rental property across Houston and the United States.

In this article we will share with you several tips you can use for getting started in Real Estate investment.

How To Get Started Investing In Real Estate

Buying shares in a real estate investment trust. You can invest in a REIT, but doing so involves buying shares of a portfolio of properties. “It’s really more like buying a stock or buying into a fund,” Baron says. “It’s a completely different animal from owning real estate directly.”

“There are three layers of value – the real estate itself, the management and cash flow that supports the trust, and the fund based on the trust,” explains Gary Gastineau, founder of ETFConsultants.com, based in Bonita Springs, Florida. “It’s a very different vehicle than buying real estate, but most of us can’t just go out and buy 1 percent of a skyscraper.”
Adding a REIT to your portfolio can complement stock and bond funds, Gastineau says, but you must be sure you understand how the real estate fund is designed and how its managers will likely extract value from the holdings. You can buy shares of REITs and real estate-based funds, but the performance of the funds is based on both cash flow and gains from occasionally selling properties – a very different scenario from the typical performance drivers of stock and bond funds.

Direct ownership. This is anything but a passive investment, Baron says. “People think it’s easy money, that there’s not a lot of work, that tenants will pay on time and that pipes never leak,” he says.

Some individuals enter the market by buying a small apartment building, he explains. You should research diligently to find a good deal on a building that produces positive cash flow and has no hidden defects that will require expensive repairs. Don’t take investment guidance from a real estate agent, Baron warns. To them, everything is a good investment, because they only win a commission when you buy.

Don’t assume your personal experience as a homeowner translates to managing rentals, just on a bigger scale, he adds. From complying with fair housing rental regulations to insurance, to making sure the property complies with building codes and common-sense safety guidelines, property management dominates your wallet and your time. “It’s a very complicated asset. But because it’s a physical asset, people think it isn’t complicated,” Baron says. “People way underestimate the number of issues that come up.”

One way to test your tolerance for being a landlord is to buy a duplex or a small apartment building, with the aim of living in one unit and renting the others.

A nascent rebound seems to be buoyed by millennials who are edging into the market as owner-occupants. Thin on cash, 20-somethings are finding they can gain a toehold into homeownership by buying a small, multiunit property, such as a duplex or three-apartment building. Their plan is to live in one unit and rent out the others, says John Mosey, president and CEO of Northstar MLS, a Saint Paul, Minnesota-based data service for real estate brokers.

Although this arrangement can stretch down payment dollars, it also demands a Himalayan learning curve: first-time homeownership simultaneous with first-time landlord.

The most important consideration for potential first-time landlords is to not assume today’s rising rental rates will lift future cash flow, Mosey says. Today’s tight rental market will be eased as projects under construction enter the market. That means rents will level off, so it’s best to work cash flow and return numbers using conservative projections, Mosey says.

Key cash-flow factors include not only predictable costs, such as property taxes, but also variables that can affect the appeal of the units to potential renters. For example, Mosey says, you may think including heat and water in the monthly rent will attract renters. But the actual cost of heat and water is quite different for a single occupant compared with a unit shared by three roommates. The more water and heat they use, the less money you keep.

Source – US News

Start Investing In Real Estate With Property Management

Once you buy your first rental property in the Houston Texas area make the right decision to manage your property correctly with professional property management with Vestpro Residential Service. Contact us today by calling (832) 498-0016 or click here to connect with us online.