Friday, October 23, 2015

3 Tips to Selling your Home this Winte

Although the real estate business tends to slow down in the fall, the season can still be an attractive time to put a home on the market. If you want to sell your house in the next few months, it can be done. When my wife and I sold our primary residence in 2004, it was a sellers market like today, but we listed it in October 2004 and missed the prime seller's market of February thru July before school started. We eventually sold it in February 2005, but I'm confident we could have sold it sooner had we thought about a few strategies to improve our home's buyer appeal.

Potential buyers—such as empty nesters or Millennials who aren’t worried about moving after the school year—will compete for fewer homes on the market and will likely want to seal a deal before the holiday season kicks into high gear.  Here are three tips to help make your home more attractive in autumn/winter, so you can sell your house before winter ends.

1. Clean Up

As many regions slowly shift from a sellers’ market to a moderate or buyers’ market, you’ll want to do everything you can to make your house look its best. Pay particular attention to eliminating clutter and safety hazards that can crop up with cooler weather:
  • Make sure your yard, walkways and gutters are free of leaves and debris.
  • Mow your lawn so it looks neat..
  • If it is rainy, be sure you have a good doormat so visitors can wipe their feet and not traipse mud and water through the house.
  • Wash decks and wipe down windows so they sparkle instead of appear streaked by rain.
  • Vacuum and wash down the fireplace, especially if it hasn’t been used in months.
  • If it’s still warm enough to use the patio, make sure the area is inviting and arranged with the views from indoors in mind.
  • Above all, make sure your doorway and the rest of the house is clear from knick knacks, bicycles and toys that make your home appear cluttered.

2. Create Autumn Curb Appeal

If your house’s exterior looks drab, you may want to consider planting seasonal flowers and adding fresh mulch to your planter beds.  Potential buyers will make an instant judgment when they see your home, and you want to be sure it’s positive.  While you don’t want to go overboard with decorations that detract from the home itself, a few displays like a festive front-door wreath—and lighting so people can clearly see the path to your front door—can make your home feel fresh, even in the fall.

3. Keep the House Cozy

Entering a cold house could leave an unfavorable impression. So warm up your home with a fresh coat of paint and set the thermostat at a comfortable temperature.  Adding a programmable thermostat, such as a NEST, will not only save you money, but give your home a more modern technology feel to buyers.  Another way to warm up a home is with light, especially as days get shorter leading into winter. Be sure to open blinds and curtains so plenty of light illuminates the home’s interior.  A few embellishments like red, orange or golden yellow pillows can breathe new life into dull sofa—or a fall centerpiece can highlight a certain area of the home.  While you don’t want your home to look like the latest department store display, well-chosen embellishments that give potential buyers the impression you’ve paid attention to the fine details and taken care of any problems with the home will help you put your best face forward.  

Fall/Winter is always a little more challenging for sellers, but with these few tips and a little extra effort, you should get a better return on your real estate investment and home sale. Talk to your realtor about tips in your specific neighborhood and market to maximize your return.

Happy Selling!

My Top 5 Insights for Real Estate Investing

I call it the R.O.I. Journey to Financial Freedom.   I’ve seen hundreds of people like my wife and I move from Renter >> Owner >> Investor to achieve financial freedom.  My wife and I bought our first home in 1994 and moved from Renter to Owner.  In 2005, we moved from Owner to Investor and we’ve never looked back.  We now have over 40 units in our portfolio with a goal of reaching 200 in the next 5 yrs.  Our purpose is to build long-term wealth and passive income for our two children.  Our goal is financial freedom for ourselves while building long-term wealth for our kids and their kids.  Our first LLC is named after our kids initials, and oh yeah, our dog KC :).   With that said, I wanted to share our top 5 learnings with you about moving along the R.O.I. journey from Owner >> Investor and achieving financial freedom.
1. Have a clear vision and purpose of why you want to be a successful real estate investor, and what your business needs to do for you. Are you looking for short-term gains with flipping houses or long-term cash flow with passive income?  Do you want to do this full-time or part-time with property managers and others doing the day-to-day work for you? For my wife and I, our goal was to do this part-time while building long-term wealth via passive income over a 20 yr period.
2. Build a Great Team. Find great team members to help you pull off your overall vision and purpose. One person alone can only handle so much (and it limits your education).  You need a real estate attorney, a realtor, and accountant as a minimum to round out your initial team.  If you don’t want to be a property manager, but rather just want checks deposited in your account so you can focus on the next property acquisition, then hire a property manager.  Just build this property management expense into your business model which will run you between 6-10% of monthly gross rent.  It’s what I do.  My goal is to be a real estate investor, not property manager.  My current team is one that I’ve built over the past 10 yrs, but consists of a real estate attorney, a broker, 3 agents, 2 property managers, and a handyman.  I also have built relationships with 3 different mortgage lenders that I trust and they trust me.  Like any business, it comes down to building a great team that trusts one another and understands each other’s role on the team.
3. Know your business model and focus. It's easy to get emotional about a deal, no matter how experienced you are.  If you know your numbers and stick to them, it takes the emotion out of the equation.  This can save your wallet, big-time.  For us, every property has to be cashflow positive from day 1.  Meaning, I don’t purchase properties with negative monthly cash flow on a hope of significant future appreciation.  My business model is they have to be cash flow positive after all expenses are paid (mortgage, property mgmt, insurance, taxes, etc.) and I can put a plan together to achieve at least 25% annual return on my money after 1 yr.  If I can’t make a property perform at this level, then I move on to the next.  To be honest, it’s not that difficult to achieve this in real estate, one of the greatest leveraged investments around.  As an example, if you invest $20k on a $100k property (20% down), your tenant will pay down about $1300/yr in principle for you and if the home appreciates at the rate of inflation or 3% per year, that’s $3000 in appreciation + $1300 in principle reduction or $4300 gain in the first year.  This gives you just over 20% return on your initial $20k downpayment investment.  If you are cashflow positive and with depreciation tax deductions, you should be well over 25% annual return on your initial investment of $20k consistently year after year.  Compare this to 8-10% in the stock market.
4. Be fanatical about due diligence. Try to obtain and confirm every bit of information you can about an investment — not just the physical property but the history and potential future of revenue, operating expenses, and capital costs.  Work with your team to get you the data and put together the numbers to meet your business model or not.  That’s why you have a team (realtor, mortgage broker, property manager, etc) to work for you, get you the data, so you can make the investment decision or not.
5. Be a Closer Not a Poser. It only takes a moment to tarnish your reputation. You can’t fake it till you make it. If you can’t close, don’t make an offer.  If your plan is to be a long term investor in the area, you’re reputation is bigger than the deal.  Be open and realistic with your team.  Long-term trust is critical with not just your team, but also your reputation among other realtors, investors, contractors, the area.   If you burn the trust of a contractor, they talk to 10 other contractors, and your next fixer-upper/flip becomes impossible.
Take action. We all have fear when we do something that pushes us out of our comfort zone.  The only way around fear is to take action, learn, and educate yourself in the real world.   It will be uncomfortable at first, but like anything else, you will become used to it and will most likely get excited about it.  I know I did.  My wife and I love looking at properties, running the numbers, and envisioning what we can do to improve the property’s financial performance and how it might fit into our long-term vision of passive income and financial freedom for our family.

Happy Investing!

Friday, October 9, 2015

5 Steps to Start Building Wealth in Real Estate

When my wife and I bought our first investment property over 10 yrs ago, I regularly saw my friends holding back from investing in real estate. Whether they had little money or didn’t know where to start, the result was the same – they were not actively trying to grow their wealth. Most people I spoke to did not invest because they felt overwhelmed and didn’t know where to start.  They held back telling themselves they would start someday. It does not have to be that way. In fact, investing in real estate can be relatively simple if you have the right mindset, focus, and team around you. This mindset, when added to a long-term view of building your wealth, will set you up for success.

Start Investing by Paying Yourself First

It’s not really a shocker, but you need some money to invest in real estate just like any other investment such as, the stock market, gold, start-up ventures, etc. This can be a challenge if you’re a recent graduate or are paying off debt, but you can do it. Examine your budget for opportunities for savings and put a 20/30/50 plan together where you invest 20% of your take home pay in yourself first!  This could mean cutting back on $5/day on Starbucks to pay yourself $150/month first, or finding ways to make extra money. Determine an amount you want to start with and set a goal to reach it in a specific time.  The key is to take 20% of your take home pay and invest in your financial freedom before buying the new car or TV or vacation, etc.

Do Your Homework
There are thousands of markets and options to consider when it comes to investing in real estate. This can overwhelm you if you’re new to investing. Don’t let that hold you back. Just as there are many investment options, so there are resources to help you start investing in real estate.  A simple Google search for real estate investing will produce many online resources.  Like anything in life, you first have to invest in educating yourself and that starts by doing your homework.

Pick Somewhere to Invest

Now that you have some money saved and a knowledge base to work with, you need somewhere to invest. You should consider two options – short-term real estate investments in markets with high appreciation that you might only hold for a few months to a year or long-term real estate investments with the strategy of monthly cash flow and appreciation.   Flipping houses for short-term gains makes sense if you have a skillset or value to reduce your financial risk and maximize your returns, such as you’re a contractor and can do 80%+ of the remodel work yourself or possibly you’re a realtor and can save 3-6% on the transaction fees.  In high value markets like SF Bay Area or NYC, 3% savings on a $1M property is $30k on each side or $60k on the buy/sell flip transaction; that’s not bad.  For long-term cash flow and appreciation over time, it comes down to focusing on a market you believe in and can build a team in that market to support you long-term to build monthly passive income.

Come Up With A Plan

When you invest, it’s best done with a plan. Just like a budget can help you make decisions on how to spend your money, an investment plan can help direct how you will invest. This will require some thinking on your part to determine what your goals are for the money. Below are some of the common goals new investors have:
  • Starting to save for retirement
  • Be able to buy an investment house in the next 24 months
  • Building $10k/month passive income over the next 10 yrs
There are many more motivations to invest, but you get the point. Determine what your goal is and formulate a plan to meet that goal. This will help separate emotions from your investment decisions and base your action on quantifiable goals.

Don’t Be A Stranger

Once you start investing you might think you can set it and forget it. There is a fine line between thinking long-term and simply forgetting your investments. The former will serve you much better over your investing years.  Think about your investments as running a business that sets you up for financial freedom and building wealth over time.  The exact interval will depend on your goals and needs. That might mean once a month, once a quarter or twice a year you check-in on your property manager and financial statements, but I would encourage you to analyze your situation regularly and be more active in building your wealth. Whatever it is, make sure to do it to stay on top of how your investments are doing.  If you do that and ignore the white noise of the media that tells you to do this thing or that you’ll set yourself up for greater long-term success.  Investing in real estate can seem overwhelming, but it doesn’t have to be. With a clear focus, the correct mindset, and a team around you focused on building your wealth, you’ll begin to grow real wealth over time one step at a time.