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Real Estate Investment Cost Cutting

Below is a guest post on real estate investment cost cutting from Kyle Uchitel, half of chemicals business Avky Inc and an avid real estate investor. 

In down markets, investors need to find a way to increase the value of their investment, while still maintain competitive rents. Many investors turn to reducing their costs by deferring or eliminating important maintenance items. During down times investors need to stay focused on the long-term and continue to perform maintenance capital expenditures at a minimum.

Real Estate Investment: Maximize Revenues or Minimize Costs

Investors seek to maximize value in two ways, increasing rents and decreasing expenses. In down markets, they only have one tool available to them, decrease expenses. As investors seek to do this, many make the mistake of eliminating important maintenance capital expenditure items. Novice investors especially fall prey to this temptation.

Investments like cleaning gutters, changing filters, trimming trees, inspecting furnaces, etc. represent relatively small expense items in the budget. Deferring or omitting these types of expenses will hurt the long run value of the property. Additionally, investors can expect to need to put additional dollars into larger repairs at a later date. The short-term savings will cause investors long-term pain.

Real Estate Investment: Watch the Competition

Another consideration investor need to factor into their investment decision is the look of comparable properties. In down markets it is even more important to keep pace with competitors. If a competitor property has additional capital improvements, then deferring these improvements in a down market could mean significant vacancies.

As competition heats up, the investor with the best property and service with competitive rents will win every time. A lack of spending at this point will lead to increased vacancy. This will further decrease the income coming from and going into the property. At some point, the investor must break this cycle and inject additional cash to stabilize the property and make it more competitive in the market.

Real Estate Investment: Involve the Tenant

Investors should consider more creative ways to cut costs. Consider writing leases where tenants pay the first $200 of any repairs. This will prevent tenants from worrying the landlord for small repairs and might make them more responsible about the treatment of their property. Additionally, an investor might consider sharing the total property budget with the tenants and awarding the tenant some percentage of any cost savings at the end of the year.

These creative ways of keeping costs down enroll the tenant in the process and serve to get them more invested in the property. In the long run this will be the best way to keep costs low and tenants happy. This allows investors to maximize revenues and minimize costs.

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Real Estate Auctions: How to Buy and What to Do

The following is a guest post on real estate auctions from Avky Inc real estate entrepreneurs Kyle Uchitel and Aleksandr Vasser.

Real estate auctions can be a great place to find a hidden gem. Smart investors use real estate auctions as one of their many sourcing strategies for good real estate investments, but beware; real estate auctions can also hold many dangers.

Real Estate Auctions: Prepare for the Auction

Most auctions send out a property list some time before the auction or hold a public viewing of the properties before the auction. These are a must visit for any investor potentially looking to purchase a property at the auction. Investors should do their best to take pictures and do a thorough review of the physical property. If possible bring an inspector along. They can point out the not so obvious issues with the property and even give an investor a potential costs to correct any damages. While this look will certainly be preliminary, it should help an investor avoid an obvious bidding mistake.

Next, head down to the local courthouse and do a lien search. Investors that want to become serious bidders at auctions should be very familiar with this process. To be certain that when the property is purchased from the primary lien holder, its ownership will revert to the investor, an investor must verify that there are no other lien holders. Most importantly, any property taxes or government liens on the property will not mysteriously go away after the auction process. These must be paid or settled and should be factored into the bidding price.

Last, come up with a maximum bid price. Create an investment plan for the asset and then work backwards. Understand how much a fully renovated property would sell for, how much it will cost to renovate the property, pay off the liens and hold the property until a buyer is found. Add a healthy profit margin for cost overruns and that will be the maximum price.

Real Estate Auctions: Bidding at the Auction

After preparing for the auction, investors should take their time at the auction. It’s helpful to have multiple properties researched and ready to bid on in case there are multiple bidders. It helps to come early to get an understanding of the environment and the bidding process. Stick to the maximum and never go over. If investors do their homework right, they should never have a reason to increase their maximum bid despite human nature.

Auctions are a great way to find good investment opportunities. They are often quick sales and require quick analysis of the properties and a quick ability to close them. Investors that prepare and understand the process, stand to reap huge rewards from this buying method.

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Connecting with the Right Realtor: Real Estate is a People Business

Real estate is a people business. Novice investors often struggle with finding the right people to do business with. The right real estate agent brings deals to an investor and helps investors determine if a property is a fit from an investment objective perspective. Similarly, strong realtors can recommend other professionals to round out a real estate investment team. Here are some tips and tricks for connecting with the right realtor.

Connecting With The Right Realtor: The Lynchpin

Sourcing great investments starts with a good real estate agent. A good realtor is the most connected person an investor needs in the world of commercial real estate. Not only will they have their ears to the ground when it comes to market pricing and investment opportunities, but they can also provide important connections to contractors, lawyers, accountants, title companies, etc.

Finding a good realtor starts with recommendations. Investors should consider attending a local real estate investment club meeting, a local real estate trade show or simply speaking with a local mortgage broker. Starting with an investment professional assures an investor that he/she will be getting a trusted recommendation. This also assures that the realtors an investor speaks with will have experience working with investors.

After compiling a list of three or four local brokers that work with investment professionals, call each of these professionals in for an interview. The interview should help an investor find a real estate professional that meets their needs. It will be important for an investor to have a very clear idea of their investment objectives and their investment potential. There is no point in interviewing a realtor that specializes in 10-20 unit multifamily buildings if an investor only plans to purchase single family rental homes.

Connecting With The Right Realtor: Interviewing Real Estate Professionals

The goal of interviewing real estate professionals is to ensure that their style fits the investment needs of the investor. Not only should they be very familiar with the property type, but they should also be familiar with the investor’s investment style. Novice investors should be cautious about working with realtors that traditionally only work with veteran real estate investors. The agents might assume the novice investor is familiar with the area and the way business is done and omit critical details around a potential investment.

Investors should also be very clear in what they expect from a realtor. If an investor knows nothing about the market, they should seek to understand the market fundamentals from their realtor, as well as be connected to other important real estate professionals. Good realtors can provide these connections. Importantly, the quality of the referral also reflects the quality of the realtor. Before signing any exclusive engagements speak with the mortgage broker, lawyer and accountant that the agent recommends. If these are not a fit, the realtor is probably not a fit either.

Don’t overlook this process. Connecting with the right realtor will increase the chance of finding a successful investment.

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Foreclosed (Distressed) Properties: Finding and Buying

Want to know what the questions most often posed to me is? “How do I find a foreclosed property?”. Everybody wants a good deal. Mot people seem to believe that asking someone out of the blue is the best way to find them. They’re right!

First, lets expand on foreclosed properties…what you are actually looking for is DISTRESSED properties–they do not necessarily have to be foreclosed. Distressed properties include foreclosed homes, neglected homes and/or abandoned homes. They could include seized properties, estate properties and properties with out-of-town owners.

Finding a foreclosed property is relatively easy…check with the courthouse, reading the newspaper and checking out government sites like http://www.hud.gov/homesale.html that list government foreclosures (HUD, VA, Fannie Mae, IRS, etc…). HUD and VA also list properties in local newspapers on designated Wednesdays and Thursdays.

If you are a keen observer you will spot the foreclosures in your target area well before they are actually posted for sale–which will give you ample time to research your top-dollar bid. I suggest you drive a different route (thru neighborhoods) everyday and look for properties with overgrown yards, possible neglect, or graffiti. If power has been shut off the electric meter will either be removed or turned to the side–that’s a clue the property is abandoned. I suggest you focus on neighborhoods that have “low money down” or HUD/VA financing specials/incentives–they usually have a larger number of foreclosures because they appear to cater to the homeowner that really could not afford the home in the first place.

Research the property be searching the tax assessor files of your county through the internet or in-person. If they are not updated, perhaps they will lead you in the right direction. Also, don’t be afraid to ask the neighbor–I have found them to be a wealth of information! You should prepare yourself by having a good knowledge of the values in the area and an idea of what cleaning and repairs are needed.

Deciding what to bid on a foreclosure can be tricky. Let me tell you this story…A few years ago there were two houses that were on the market for over a year with a real estate firm–both were foreclosed properties that were horribly in neglect, abandoned and vandalized–one even had a small fire.

The smaller house was on the market for $40,000 and sat there–it never sold. The larger was on the market for $79,000 and it, too, never sold. Homes in the areas sold for mid $60’s and $130’s respectively–but these homes were horrible!!! The real estate firm recommended that the lender auction these properties off in conjunction with another real estate auction–perhaps they could unload them there…Well, customers, who had NEVER seen these homes, got caught in the excitement of the bidding wars…and paid $76,000 for the home that was available for $40,000 and $109,000 for the home that was available for $79,000.

Every agent in attendance (self-included) just about choked–we were laughing really hard but also amazed that people would do such a stupid thing… Later I found out one was a rather arrogant doctor trying his hand at “investing”–he bought the more expensive of the two homes and renovated it. Three years later he sold it for $124,000, I am told. He didn’t make much of a profit, considering he had $50,000 in repairs/renovations…OUCH! That’s an expensive lesson to learn–but let it be at someone else’s expense–DO YOUR HOMEWORK!

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Finding Great Tenants: How to Attract and Screen Good Renters

You rent your property to a nice couple. You thought you had great success finding great tenants. They only had half the first month’s rent but you let them talk their way in anyway on their promise you’d get the rest in two weeks. You specified no pets but a week later there’s a dog in the yard and cats in the windows. And who’s that thuggish looking guy that seems to be there all the time? Two months and eight police calls later from the neighbors for noise, they still haven’t paid rent.

You file for eviction but your tenants shows up on court day and claim they can’t work for medical reasons so the judge gives them another 30 days in your place. On the 29th day they pull a midnight move out leaving behind a mountain of garbage, holes in walls, doors ripped from hinges and it looks like someone was using the living room to change the oil on their Harley. On top of it, they took the appliances. Don’t let this happen to you. Here are some tips on heading off problems by proper screening of potential tenants.

Charge an Application Fee to Potential Tenants

Charging an application fee can sometimes weed out the deadbeats among potential renters who are just going to waste your time. This can assist you in finding great tenants.

Use a Tenant Screening Service to Screen Applicants and Assist in Finding Great Tenants

The web offers several subscription-based tenant screening services where you can access comprehensive data services for screening tenants. Criminal checks, credit and past rental histories are the most useful. Some even check your applicant against the government’s terrorist watch list if that sort of thing concerns you. Use the application fee you charged to cover the screening costs. Large apartment companies and some individuals report bad tenants to the networks but not all. Most landlords and apartment leasing agents don’t look too closely at credit problems; many renters have credit issues.

Stick to Your Rules for Renters

If you don’t allow cats, don’t let them talk you into it. A nice but firm attitude that conveys you will not tolerate violations of rules sets the landlord-tenant relationship on the right foot from the start. Some landlords use an addendum to the lease that clearly and specifically states their policies — no cats, no guests over 10 days, no cars parked in yard, etc. Get the tenant’s signature to document they have been notified of your rules and policies. It can come in handy later if you end up in eviction court.

Call Past Rental References to Further Screen Tenants

Talking to someone familiar with their past behavior as tenants can provide invaluable information and foreshadow what you can expect as well.

Roommates? Get Them All on the Lease as Renters

Renting to a group of roommates or college students? List each as a tenant and have them sign. If a dispute arises between them or one is violating terms of the lease, you’ll find it easier to evict the troublemaker.

Nothing guarantees you’ll always get a sparkling tenant every time. If you’re a landlord, sooner or later you’ll get stung by a bad tenant, it’s just part of being in the rental business. Using good techniques and some common sense during the screening process can make for a healthy tenant/landlord relationship, and assist you greatly in finding great tenants.

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Low Income Real Estate/Foreclosure Attorneys

No cost real estate legal services, including assistance with foreclosure and evictions, are available to eligible individuals. Legal services for poor, low income, and moderate income earners are provided in various communities by government and privately funded agencies. Privately owned residences and federally funded housing may be eligible for free mediation legal services. This article presents tips and ideas for finding these legal resources.

Low Income or Pro Bono Real Estate Legal Services

No cost real estate legal services (for example Metro Volunteer Lawyers in Denver, Colorado) provided by pro bono attorneys are grouped in specific legal subjects. Generally, services include help with housing and foreclosures cases. Individuals with low to moderate income levels can find free assistance with the following legal cases:

  • Foreclosure avoidance
  • Loans modification assistance
  • Renters’ evictions
  • Disputes between tenants and landlords
  • Federal subsidies for housing

It’s important for persons seeking no cost real estate legal advice to find out the time line provided by the free attorneys. Most real estate cases are time-sensitive and due dates for filing court papers and for responding to orders must be strictly followed.

Who is Eligible for Free Real Estate and Foreclosure Lawyers?

The majority of free legal services are extended to persons with low income and to members of specific groups, such as veterans or farmers. There are various types of legal aid organizations providing no cost services. Some of these offer help to the general public and other to specific members of a community who qualify. The following are included in most pro bono real estate and foreclosure programs:

  • Poor and moderate income individuals
  • Homeowners with foreclosure issues
  • Renters with eviction notices
  • Poor farmers
  • Persons with disabilities
  • Families with disabled children
  • United States veterans
  • Older Americans
  • Low to moderate income families with children
  • Persons victims of domestic violence

Finding Low Income or No Cost Real Estate Attorneys

Some of the pro bono legal services for assistance with civil law cases also provide real estate legal services. The services are performed by pro bono and volunteer attorneys working on behalf of specific organizations or agencies. These groups are advocates for the poor, the elderly, disabled and other individuals.

  • The Legal Service Corporation or LSC – it’s a non profit organization that provides grant money to independent legal services agencies. These agencies and their attorneys offer free legal services and advice to people who qualify. The LSC maintains a list of regional legal aid offices to find free lawyers at lsc.gov.
  • States Bar Associations – these associations offer referral legal services to find pro bono attorneys in a state. A list of volunteer lawyers can be found by state at abanet.org.
  • Lawhelp.org – this is a referral program that assists low income persons find no cost legal help in local areas.
  • Pro Bono Commissions – some states have pro bono commissions and special interest group pro bono commissions offering free legal services.