Prosper Newsletter: January 2007 > Real Estate
You understand that the following information is educational in nature and is not intended to be legal, accounting, or tax advice. You are responsible for your own financial decisions and should consult your own legal, accounting, and tax advisors before making your financial decisions.
Patience Paying Off
You said to let you know how I am doing. Well, how does fantastic sound? I will close on a HUD home in two weeks. As is appraisal is $158,000. I am paying $128,000 with HUD paying the closing costs. It is a 2002. Needs 1 window fixed, still under warrantee. I will paint the entire inside, just minor nicks, just to make it look nicer. I will also put in new carpet in the family room and living room. Upstairs carpet looks great. Small amount of landscaping. Total repairs, about $1,200 max.
Every home in this development sells in 2 months or less and min. asking price is $202,000. I know you said not to be greedy, but with numbers like this, it is hard not to get excited. I will probably list it at $175,000 - 185,000. Should profit $20,000, minimum, but more likely much more than that.
My patience, and your help, is finally paying off. I will e-mail you with the end result, but I am so looking forward to getting this one fixed up. Kind of sad that someone had to foreclose already. Very nice home in excellent condition. Also, they roughed in a family room / bedroom in the basement. Just needs drywall and a little work to finish. Take care. I know what you are saying...fantastic!!!!!!!!!
- Sonya S.
Johnstown, OH
Working while others aren't can be very profitable! Many investors notice that there is always a lot of interest in HUD and VA reposed homes in their areas and perhaps a lot of competition for others listing on the MLS as well. They may find that throughout the year they are consistently being outbid by other investors and end use buyers who plan to occupy the home they purchase. Rather than giving up on your efforts to buy through these channels, you might want to consider going for consistency. Some investors have found that they regularly get bids accepted and purchase properties at great prices around major holidays. Many would be buyers are taking some time off to celebrate major holidays leaving less competition for the rest of us who are still placing bids on the homes that are being offered during those periods. You'll surely still want to spend time enjoying the holidays with your family, however, if you stay active in your offers during each holiday season, you may find that you pick up several more houses each year than you would have otherwise.
Landlording Hints
Good tenants make good landlords. A tenant that pays rent on-time every month and takes decent care of the property is a valuable commodity. It starts with choosing the right property. Choose properties that will attract the type of tenants you would like to have. The cheapest properties are not necessarily going to be the best deal. The cleaner the property is kept and the more decent the neighborhood, the better the tenant is going to be.
Use a good application for potential tenants to fill out that will allow a check into their background. It must be a selective process. It is helpful to look for a local or state landlord association that will be familiar with local landlord-tenant laws. The county government may also have sample or suggested lease application forms. Generally, avoid forms that are heavily loaded with legal terminology.
There are things to consider making negotiable about the lease or rental agreement. For example, lower the required cash deposit, offer a repair guarantee, allow a lower rent for a shorter lease agreement, or guarantee a lease renewal. In a competitive situation, where there are a lot of vacancies for people to choose from, consider doing some of these things to gain a competitive advantage. Also, in a competitive environment, it is wise to be strict about the rules that have been established. If the rules are not enforced, the risk of losing good tenants is increased.
Perhaps consider working in a benefit for tenants who pay rent early or on time. For instance, write up the rent as $800 per month, but if paid early the tenant receives a $40 discount. If tenants are late with paying rent, there should be more than just one deadline. The penalty could be $5 per day after an initial grace period.
When considering the amount to set for the security deposit, do not set the security deposit equal to one month's rent because people may get the idea that they have pre-paid their final month's rent.
Take care of the tenants, especially those tenants who are good, reliable tenants. Show them that they are valued. It is not out of line to remember their birthday or send a little something at Christmas. Be friendly.
Which are you - a landowner or a landlord? Perhaps it would be best to think of yourself as someone who provides a product - housing, and does what they can to compete well with other people providing the same product; to give a better product and a better deal to your customers - your tenants.
