Management: There are two types of management. You can manage your properties yourself or you can hire a management company. Typically, as a new investor it's best to find property within an hour or so of your home (less is even better) or office so that you can start off managing yourself. This will help you learn what works and what doesn't and when you end up hiring property managers you can properly manage them. If the property has a strong NOI and you can afford to hire a management company (typically they'll charge 10% of your gross collected rents - this will vary from area to area and with size of property), you can set up meetings with them regularly so that you understand the process well. If you own buildings now or are considering buying apartment buildings, you can get some great training at www.-R-E-A-N.com.
Increasing Profits: There are generally only three ways to increase your profits. You can increase your rents, decrease your expenses or you can increase or maintain rents/revenue by keeping your vacancy to about 3%-5%. Anything higher than that means you (or your property manager) may need to sharpen your skills to attract new tenants. If the vacancy rate is lower than that your rents may actually be too low.
Things to consider when dealing with rents:
• Always be somewhat on the aggressive side with respect to rent increases. You want to be in the top 5%-10% of your local rents.
• The best time to increase rents is when you have a unit empty and you need to fill it.
• Another great time to increase rents is at the yearly anniversary. It's almost expected by most tenants. A small increase of about $15-$25 is what I call an annoyance increase. Your tenant may be slightly annoyed but it's not enough to drive them out. That is important because tenant turn over could be expensive for you.
• Increasing your rents, in addition to providing actual cash flow, also increases the value of your property as your NOI (net operating income) improves with each increase assuming stable or decreasing expenses.
Controlling & Decreasing expenses:
• Get 2-3 bids for each job over $500 on your property because most of your budget will be repairs and maintenance.
• The biggest mistake new investors make is avoiding repairs to keep costs down. When you do that you can run into other challenges. Other challenges could include things like: decreasing your property value, making it more difficult for you to rent to new tenants looking in the area, extremely annoyed existing tenants who may leave to a better kept building in the area.
Seven ways you can reduce expenses:
1. Charge your tenant for any repairs or required maintenance that is their fault. Make sure your rental and lease agreements stipulate that.
2. Get three insurance bids each renewal period at least 60 days before renewal time. Don't assume insurance rates are the same for all agencies -you will be surprised.
3. Install motion lighting in common areas and incandescent lighting in the halls.
4. Install water saving shower heads and faucets in your units.
5. Put all heat on a controlled thermostat unless the tenant is responsible for their own.
6. Put all common lighting on a timer.
7. Give one of your tenants some incentive to watch the place for you and to pick up for you and handle small things that pop up. I've found when one tenant is designated as the on site helper (or watch dog!) they take pride in that and treat it like it's their home. Clearly, home ownership carries with it a different respect for the property than renters.
Chris Prefontaine is a Internationally recognized real estate coach & trainer. Whether you're a seasoned investor, or new to the industry be sure to check all state guidelines and laws before you invest. You can visit http://www.hugewhy.com and sign up for a FREE weekly e-zine. It's the perfect way to jump-start your week! Sign up today and start receiving the 7-Day Focus on Success, dedicated to success!
Article Source: http://EzineArticles
0 comments:
Post a Comment