Property Management


My First Property: Right rehab, wrong tenant
10 Jun 2014

My First Property: Right rehab, wrong tenant

Alex De Marco didn’t let negative opinions from his peers stop him from investing in real estate and for him, finding the perfect property came easily. It wasn’t until he became a landlord that this investor went from doing rehab repairs to replacing tenants.

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Full name: Alex De Marco
Current location: Jersey City, NJ
First real investment: A half duplex townhome just outside of Pittsburgh, PA purchased in March 2011 for $8,500, now worth $25-30K

How did you decide where and what to buy?
My wife and I attended a local real estate education seminar advertised on the radio in May of 2009. The speakers at the event convinced us that real estate investing was a good idea.

We decided to learn the business by doing our own analysis and experimentation in addition to the advice we received from my wife’s cousin, a landlord, and other local investors that we met at ACRE, a real estate investing club in Pittsburgh where we were living at the time.

Not having a lot of money for this first investment and uninterested in borrowing from a bank during the financial crisis, we targeted neighborhoods where we could buy inexpensive properties, make minor repairs and then rent out. The goal was to have the monthly cashflow repay our out-of-pocket cash investment within 3-4 years.

I had just changed jobs, so I had some cash in my old 401K plan. I rolled it over into a self-directed IRA (SDIRA) and used it to buy our first property from a wholesaler, who we met at ACRE. The vacant property needed some renovations, but it was nothing we felt we could not handle.

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Marco Before After House 5Jun2014 EC

How did you purchase and finance your first real estate investment?
We bought the property inside our SDIRA and used CamaPlan as our plan administrators. The wholesaler and settlement attorney made the transaction quite easy. They had recently done deals with buyers using their IRAs, so they were familiar with the process.

The seller was motivated and wanted out. For the acquisition, we bought the contract from the wholesaler, made a small downpayment and the seller financed the rest. They held a note secured by a mortgage on the fixed-up and no-longer-vacant property for a couple of years.

The repairs were done by contractors and service providers who were paid in cash from the SDIRA. All I needed to do was fill out some forms and attach invoices and receipts authorizing the IRA administrators to pay the contractors.

Did you encounter any issues before or after closing?
The transactions and repairs were a breeze. The problems began when I signed a lease with my first tenant. I guess all landlords have tenant horror stories, but this problematic situation really was my fault.

I was not strict enough in my tenant screening process and was too eager to get someone in the property. Unfortunately, I ended up having to evict her within a few months and pay for additional repairs after she trashed the place.

I have since decided to use a property management firm to screen future tenants and have been much happier and productive this way. I get to do more of what I enjoy, which is buying “neighborhood eyesore” properties, fixing them up and turning them into safe, clean and affordable housing.

Marco Before After Kitchen 5Jun2014 EC

What was the biggest challenge in buying your first piece of real estate?
The biggest challenge was overcoming my own fear. Early on, I dealt with negativity from naysayers telling me why investing in real estate was a bad idea and that fueled my fear and anxiety about pulling the trigger.

The reality is that most people don’t know what they are talking about. They, or someone they know, may have been burned in the past because they were emotionally attached and didn’t think of it as a business, didn’t plan for the unexpected (i.e. inadequate cash reserves) or they didn’t educate themselves about the local market and financial analysis required to determine if an investment opportunity is a good deal or not.

Furthermore, I learned a great deal by attending monthly real estate investor meetups and going to inexpensive seminars. There are also a lot of online communities like BiggerPockets that are great resources for investors.


4 Do’s and don’t’s for first time landlords
03 Jun 2014

4 Do’s and don’t’s for first time landlords

With the height of rental season rapidly approaching, New York City is set to see an exponential increase in first time real estate investors looking to rent out their properties. According to Redfin, as a growing number of New Yorkers and 39% of prospective homebuyers nationwide consider renting their property, it’s important to understand how to maximize a property’s appeal.

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1. Make sure to enhance curb appeal

If a property’s exterior appears neglected, it will directly impact the value, as potential tenants will conclude the building is poorly maintained. While keeping up with the landscaping is highly important, it’s also good to keep other aspects such as the appearance of the sidewalk, awnings, entry level doors and windows in pristine condition.

2. Use lighter finishes to amplify space

In a real estate marketplace renowned for its limited space, it’s crucial to make a space appear larger than it actually is. Using darker finishes negatively impacts a room by making it appear cramped and smaller. Instead, utilize lighter finishes, such as white or eggshell, to reflect light and lend the room a more spacious feel.

3. Leave units unfurnished

According to STR, extended stay hotels are increasing in popularity, with revenue per available room rising 5.7% last year alone and New York City has seen a decline in popularity of furnished units. Rooms that remain unfurnished tend to go faster than those that are, as most tenants will want to furnish their apartments if they stay over 6 months or a year.

The leasing pool for unfurnished apartments is also much larger.

4. Maximize space by repurposing underutilized rooms

As most New Yorkers tend to underuse rooms such as dining rooms, these become obsolete and underutilized space. By repurposing these unnecessary rooms as bedrooms, investors can appeal to a wider range of tenants, while increasing profits made from increased rental rates.

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This article was published by Dylan Pichulik, CEO and founder of NYC-based XL Real Property Management. He provides property management services focused on managing individual units, townhouses and small buildings owned by foreign and local investors, as well as off-site owners.

Photo by: helveticaneue.


Why you should consider hiring a property manager
13 May 2014

Why you should consider hiring a property manager

“Is it worthwhile to hire a property manager if I’m only renting out 1 house?” This is one of the most frequently asked questions we’ve heard from beginner real estate investors.

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Ask most property managers, and you’ll get a resounding “YES,” but before you jump to the conclusion that they’re just trying to hit their sales quota, understand that the true value of a property manager may be much more complex than you think.

Despite common misconception, you aren’t paying property managers to collect rent checks and fix broken microwaves. The value of their service is in risk mitigation which should also be your highest priority when it comes to renting out your property.

This is surprising to a lot of newly coined landlords. How about rent revenues?

Isn’t the money I make the primary reason I decided to rent?

Truthfully, reducing your liability is the best way to maximize your revenue because when it comes to landlord-tenant relationships, poorly-handled legislative conflicts and property damages are the biggest expenses and can easily drive property owners into bankruptcy.

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Property managers reduce the liability for owners by using highly efficient systems. These 3 systems keep the property managers informed and ready for emergencies so that you’re protected.

1. Day-to-day tasks

Since property management firms handle multiple properties simultaneously, they’ve developed efficient frameworks for each stage of the rental process. Thus, inspections and payments are always promptly processed.

There’s a steep learning curve for novice landlords managing their own properties. Just to give you an idea, responsibilities may include (but not limited to):

  • Finding a tenant.

  • How and where to advertise a rental property.

  • How to optimize an open house or showing.

  • Screening the tenant.

  • How to get credit reports and background checks on a potential tenant.

  • How to verify current and past residency.

  • Signing the lease.

  • How to draft a legal lease that will hold in court.

  • Finding what sorts of evidence you collect at the beginning of the lease to protect yourself against future damages.

  • What sort of disclosure documents are you required, by law, to provide.

  • How much deposit can you collect in relations to rent.

  • Maintaining the property.

  • What amenities are legally required for the property to be inhabitable.

  • What to do if a tenant doesn’t pay rent.

  • How to properly evict a tenant, without violating tenants’ rights.

  • What to do if the rent check bounces.

After a good amount of time on the internet, a landlord can probably find answers to most of the questions above, but it’s incredibly time-consuming and difficult to verify the information unless you consult a legal professional, whose fees add up quickly.

Perhaps more significantly, it only takes one violation of tenant’s rights for the landlord to end up in deep waters. Every state is different, but California, for instance, is very pro-tenant, which makes it easy for a novice landlord to accidentally break a rule. This brings us to the next, and arguably, most important system property managers have in place.

2. Staying informed about legislation changes

As you can probably tell by now, the best thing property managers can do for you is preventing legal conflicts. This is especially valuable because real estate legislatures are constantly evolving; every court case can set a new precedent and change the rules of the game.

In fact, property management licensing often require managers to attend courses on fair housing legislature twice a year, since that’s how quickly the rules evolve in this industry.

To give you an idea of the time commitment, according to Lyle Hass at Colorado Realty & Management, all his employees are required to attend continued education classes to ensure they always know which laws are in place and which might come into effect soon.

He also has a panel of attorneys with which he meets 1-2 times every week to learn the latest landlord/tenant laws and attends numerous NARPM (National Association of Real Estate Property Managers) conventions and chapter meetings to network and exchange information.

While a new landlord can probably slowly learn his/her day-to-day tasks over time, it’s impossible for anyone to stay current to the ubiquitous legislative changes without spending upwards of 10 hours per week. And this doesn’t’ even account for unpredicted emergencies.

3. Emergency responses

Unpredicted events that cause serious property damage are particularly problematic because they are expensive and require immediate assistance. A landlord might not have cash available on hand, or struggle to find a contractor who can be deployed immediately.

One such scenario is natural disasters. For instance, during the Colorado flooding in the last week of October last year, many of the properties Colorado Realty & Management managed were badly damaged.

In the aftermath of the disaster, every Colorado resident tried to get a contractor to his/her property, but because Lyle Hass already had a close business relationship with a contracting company in the area, he was able to surpass the 200+ person waiting list and receive assistance on his properties immediately.

As unfair as it might seem, individual landlords simply do not have the influence of a property management firm that will continue to supply a contracting company with business.

For liability purposes, property management firms also usually save some cash for each of their properties in case of emergencies. Even if the expenses are higher than the preserved amount, the firm has collected enough rent from other properties that it is able to cover the costs for the interim.

An individual landlord does not have that luxury.

If he/she cannot afford to repair the property immediately after a flooding, the unit becomes uninhabitable and the tenant is forced to move out. The landlord now feels pressure to borrow money quickly in order to perform repairs before further damage to the property, in addition to the lost in rent revenue.

Aside from knowing that professional property management firms can save you time and minimize your liability as a property owner in quantifiable ways, there are also more qualitative benefits. For one, it’s one less burden to bear!

Managing a property is in itself a part-time job, not to mention an incredibly stressful one even if you’re unfamiliar with the industry. Letting the professionals deal with the rent chasing, midnight maintenance requests and other sorts of nitty gritty issues will give you peace of mind.

This also applies to family members or friends moving into your property. It’s much easier to let the property manager be the “bad guy” who’s requesting background checks and on-time rent to ensure you’re financially protected, rather than doing so yourself and potentially straining your relationships. Given the horror stories we’ve heard of friends and families falling apart due to rental disputes, I would say a property manager is money very well-spent.

Rand is the Director of Marketing at Happy Inspector and has been investing in real estate for nearly 5 years. Prior to working for Happy Inspector, he started and ran several small businesses.

Photo by: Davor Sunjara.


Top 5 tips for successfully marketing your property
08 Apr 2014

Top 5 tips for successfully marketing your property

You could have the most luxurious, well-appointed and reasonably-priced property for sale in the area, but if your marketing strategy lacks punch, your property could remain on the market far longer than it needs to. People need to find your property in order to discover just how great it is, and that calls for a marketing plan that has a broad reach.

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Furthermore, your marketing plan must also inspire certain emotions from potential buyers. By implementing these 5 essential marketing steps, you will add a little extra value to your investment and have a better chance of a quick sale.

1. Create attractive and professional photos

Photos are the shop window into your property; if you can get them right, you can make the property inviting and attractive to potential buyers. Blurred, grainy and badly lit photos could deter people from even viewing your property, so it is vital to use images of a professional quality as part of your marketing campaign.

You should use high-quality photos with the following requirements:

  • Use only high resolution, optimized photos in your marketing campaigns.

  • Include only relevant objects wherever possible, and crop any that detract from the property’s aesthetic.

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  • Ensure your rooms are well lit.

  • Include a mix of general photos as well as some more detailed images of particularly appealing rooms and features.

2. Include an interesting and detailed description in listings

A great photo will attract people to your property, but fully engaging their interest requires the use of rich, descriptive and concise language. Highlight the particularly attractive or unique features, and refer to any practical functions that certain rooms and amenities can offer.

Your listing should be fully checked for spelling and grammatical mistakes, and it should be posted on as many real estate websites as possible.

This is a chance to create a mental picture with buyers by giving your property’s photos some context, so it is important that your listing description really captures the imagination.

3. Embrace the latest marketing opportunities

  • Create a virtual 360-degree tour, so people can walk through your property without ever leaving their computer. This can showcase it as a complete entity, and it could give your property an edge over others on the market.

  • Promote your property on discussion forums, blogs and specialist websites. Engaging directly with potential buyers could generate genuine interest.

  • Allow potential buyers the chance to print high-quality photos of your property; they may use them to ask for advice and opinions from friends and family members.

  • Include sharing options in your posts and online content, as this is a good way of getting buyers to help you in spreading the word.

  • Engage in local property discussions on social media platforms. Retweets, ‘follows’ and ‘likes’ can be a great way to garner genuine interest.

4. Adopt a ‘can do’ attitude with viewings

People are living increasingly hectic and irregular lives, so it is important to be accommodating when it comes to opening up your property for viewings.

Make yourself, a friend or family member available to receive viewings at all times – particularly during early evenings when many people have just finished work.

If you can keep your property prepared for viewings at all times, you will have the flexibility to accept appointments at short notice.

5. Hold open house events

Some buyers will be put off by supervision and interference when viewing a property, or they may just want the freedom to explore at their leisure. An open house event provides buyers with these opportunities, and having several prospective buyers in your property at once could secure a buyer far more quickly than by holding a series of individual, private viewings.

Vivienne has over 25 years experience in real estate.  She is currently is a relationship manager at openagent.com.au, where she helps people liaise with and get the best out of their real estate agent every day.

Photo by: Wikimedia


The Dirty 30: Where are they now?
28 Feb 2014

The Dirty 30: Where are they now?

Last year, we profiled 30 young investors on their inspiring start in the real estate game. We caught up with them recently to see how their investment portfolios were progressing and the lessons they’ve learnt in the past year. Here’s what they had to say…

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Beau: Real estate reality star

Beau Eckstein had a great 2013. Over the past year, he completed a luxury home renovation – his largest project to date. He is currently renovating a 2 unit building and was even cast in a reality show titled ‘Flip It To Win It.’ Beau says:

“2013 was an amazing year. If you bought anything you could have made money with the market upswing. However, it’s important to realize the market is going to be much tighter in 2014.

For this year, my strategies are to buy, fix and hold.

I’m looking at purchasing properties where I can add value.

The idea is to purchase multi-family units with a future exit strategy of converting into tenants in common (TIC) units.

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I’m also purchasing rental properties in affluent neighborhoods. The strategy of these purchases is to rent out the properties while working on plans to add square footage to maximize the selling price.

Incorporating a buy and hold strategy will help attain long term wealth. I would also encourage helping others invest in real estate. There is over $4.6T in retirement funds with only 2% of these assets being self-directed. We all need to take charge of our futures.”

Dan: Doubled portfolio in 1 year

Over the past year, Dan Botwinik was able to finalize a 70 unit acquisition he was working on and close a handful of other deals that almost doubled his portfolio to 400 units. Dan says,

“2013 was a big year for me and my partners at Cougar Capital Real Estate, largely made possible by the infrastructure investments made in 2012. Our biggest accomplishment was achieving significant rent increases to the 70 unit complex and creating a template for future developments. The complex appraised for $3.45M more than we paid for it, with an investment of $2M in construction – we paid $1.85M and it was appraised for $5.3M.

Improvements in sourcing and construction management are also allowing us to bite off larger projects and get them completed more quickly and to a higher level of finish, while still coming in at a compelling number compared to appraised value. This has enabled us to attract better tenants and have fewer headaches further down the ownership cycle.

These projects have also been helpful in determining which projects are the best fit, add the most value, and the fastest. We just bought another large complex near the original complex and the repositioning of the new complex no longer seems intimidating.”

Doug: Ready for renovations

After spending a year building the foundation of his business, Doug Medvetz was finally able to start buying and renovating houses. He says,

“Our first year was spent building the foundation of our business and though it is an important piece, it was not as exciting as our first year actually running the business.

Over the past year, we have been involved in 3 renovations. Initially, we focused on single-family homes and have already completed 2 single-family home renovations, but are now also interested in 3-family condo conversion projects and recently purchased our first 3-family condo conversion for over $500K.

The most challenging aspect of the business has been managing the financial side of the renovation projects.

We are currently using hard money loans to fund our rehabs. This requires us to negotiate with our contractors to take payment after they perform their part of the project.

That being said, we learned that when looking to partner with another company/investing group it’s best to form a 50/50 joint venture partnership and identify in writing the responsibilities of each group/company involved. In the future this is how we will structure most partnerships when renovating a house.”

Jonathan: Facing the storm

Hit hard by Hurricane Sandy, Jonathan Dieguez learned first hand why it’s important to have a diverse portfolio of investments. He says:

“Over the past year, I have been focusing on commercial real estate vs. residential. My company has shifted our business model from predominantly dealing with loss mitigation departments and homeowners over to asset managers and builders who ran out of financing on their development deals.

I also started a new company, Creative Equity Group, with 3 other partners which capitalizes on the new crowdfunding in real estate concept.

Hurricane Sandy also took a toll on my fully renovated properties. Not only do I still have properties listed for sale on the market, but my builders insurance did not cover any of the damages caused by the storm. Two particular properties were located right near the flood zones and have cost me a combined total of more than $150K in re-repairs and list price reductions.

However, my commodities fund with Absolute Capital Homes received a 23% annual return for 2013. This is a perfect example on why it’s so important to have a diversified portfolio of investments as well as multiple revenue streams so that if one suffers or underperforms, it’s not the end of the world.”

Peter: Quit his job to start a successful company

After acquiring 6 investment properties with a partner in Columbus, Ohio, Peter Lohmann fell in love with real estate and decided to quit his job as an engineer to start a successful property management company. He says,

“Starting my own company was both the most challenging and most rewarding thing I have experienced over the past year.

The best investment you can ever make is starting a successful company because all you have to do is invest a few grand and can have an infinite return.

Since starting the company in April 2013, our portfolio has grown from 0 to 150 units with 4 employees.

Although not much has changed in how I make investments, the most important thing I learned was the difference between debt and equity. Understanding that in a very practical way has helped me think more clearly about future investment opportunities.”


Get rich with vacant houses, Part 3
18 Feb 2014

Get rich with vacant houses, Part 3

Last month I revealed the solution to the ever increasing problem of zombie mortgages. In this article you will follow a real life example which will enable you to see those steps practiced in real life and how you can do it.

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Starting with the usually unsuspecting zombie mortgage homeowner, real estate investors must help these people out of their predicament, settle debts with their creditors, clean up these properties and help with the economic recovery of the US, while quickly recouping their at risk capital allowing very good profits in the process.

Here are the numbers of a real life example of how this can work for you:

Zombie mortgage

This property is located in the city of Brockton, Massachusetts. It’s a typical 3 stacked apartment on 3 separate floors with 3 bedrooms each.

Year 1, January – Homeowner #1 purchased the property:

  • Purchase Price: $388,000

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  • Down Payment: $11,640

  • 1st Mortgage: MERS – $310,400

  • 2nd Mortgage: MERS – $65,960

  • Total Mortgages: $376,360

Year 3, October

The homeowner tried to keep it going but finally gave up and moved out of the property. The property stayed vacant for over a year and a half. Meanwhile, either the city or the bank boarded up and left the property abandoned.

Year 5, May

After about a year and a half later the zombie mortgage investor found the owner of the property and acquired the property rights (without legal title). That being said, the property was still vacant and boarded up, the copper plumbing was stolen and many of the windows and doors were smashed.

The investor then fixed up the apartment and started renting it out. Using the rent money to repair the other units allowed him to only be out of pocket a few thousand dollars. Over the course of a few months, the entire building was rented out and the continuing rent money allowed for further improvements and positive cash flow to the investor.

  • Down Payment: $100 (Yes, only one hundred dollars)

  • Total Repair cost: $11,200 (expended over time)

  • Monthly rental income: $3,000

  • Total number of months until property is purchased: 14

  • Total rent collected $31,000 (there were vacancies)

Year 5, September

After collecting rents for about a year and a half and without paying any mortgage payments or property taxes, the investor purchased the property at short sale for $120K. All back taxes and municipal bills were paid at closing and was included in the purchase price.

Year 5, November

Only 1 ½ months later, the investor (#1) sold the property to another investor (#2) for $210K, which was still a bargain value.

  • Income from sale: $90,000

  • Income from total rental: $31,000

  • Total Income: $121,000

  • Repair/renovation costs: $11,200

  • Total Profit: $110,000

13 months later, investor #2 resold the property for $255K.

This was a case where the zombie investor #1 made profits on the property before closing by renting the property out, then short selling and flipping the property, and finally leasing it back and operating it as a normal house.

This is a typical zombie mortgage property acquisition using the specialized methods discussed in last week’s article with very little money down ($100), no credit needed and cash flow during the short sale process. Initially, only a small amount of money was needed for repairs allowing future rents to cover the repair/renovation costs. I know this because I was zombie mortgage investor #1.

Obviously, the more times an investor takes on a zombie property the more people he can free from the stressful burden that all the bank fraud and financial collapse has entombed them in their zombie mortgage property.

The neighbors are delighted because the hazardous property that was dragging down their neighborhood and their property values has been transformed into an asset to the community. The town collects taxes and has fewer “problem calls” associated with the property. It’s a win- win situation and that’s how real estate investing should be done.

What also occurs is that positive cash flow is almost immediate. As the example above illustrates, the cash flow allows the investor to recoup the monies initially expended on bringing the property up to rental standards – a risk the investor takes on.

Each month thereafter, the investor realizes a monthly profit until either a successful short sale brings ownership to the investor or – if the lender is legally able to – a proper foreclosure is completed and recorded.

When either of these 2 actions occurs, the zombie property owner will finally be free of the financial and legal responsibility of the property. They also finally begin the psychological emotional healing that is much needed.

The more people you help, the wealthier you become and this is a way you can do both – real estate investing at its best.

Alan Kosinski is the co-founder of ZombieMortgage.com where homeowners can learn & find help, and ZombieInvestors.com where investors can see how it’s done. This is the third article of a 3 part series. See part 1 to learn what is a zombie mortgage and part 2 for the 10 steps to zombie mortgage success.

Photo by: Gary Tucker.



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