omni

Rental Investment Strategy

Wed, 24 Apr 2019 07:00:00 GMT

Strategy – Rent and Flip

There are all kinds of strategies you can explore when it comes to real estate, but we are going to focus on just one: Rent and Flip. Rent and Flip is a strategy that involves dodging major repair bills and aim to hold mid-term rentals. This strategy is ideal for investors who do not want to hold on to their properties for the long term. While following this strategy, an investor should plan to hold their properties between three to ten years and is disciplined enough to facilitate careful and thorough research on all properties before purchase. It is crucial to the development of this strategy to flesh out a fully encompassing investment plan before purchasing any properties. At Omni Property Management, we look at 5 major points when developing this strategy for potential investors:

Total Cumulative Costs
Annual Costs
Annual Rental Income
Foreseeable Future Repairs
Forecasted Future Sale Price

The primary goal of this strategy is to map out when major repairs and maintenance will be needed on any given property. Most major repairs have an estimated life span, which allows any potential investor to have a general idea as to how long things in a property will last. For example, HVAC systems, water heaters, and roofing have general lifespans that are relatively similar across the board, so estimating your potential investment property’s major repair cycle is not necessarily something that should be considered impossible. Moreover, this strategy allows you, as an investor, a more accurate representation on your expected Return on Investment (ROI) and can give a more detailed roadmap as to what to expect over the lifetime of your investment property.

Total Costs

Total costs include every dollar spent on getting the investment property tenant ready. This includes, but is not always limited to, total sale cost, closing costs, repair costs, and any other one-time costs that must occur before your tenant can be placed. At Omni Property Management, our practice is to add an additional 10% to this estimated cost to allow you as an investor to plan for any unforeseen costs that could occur during construction.

Annual Costs

Annual costs are any costs that are recurring year to year. These costs include, but are not limited to, management fees, insurance, mortgage and loan payments, HOA fees, taxes, and any other reoccurring costs. It is vital to collect all of this information before you close on a property because these costs can easily push you over your budget. Remember that all of this information is available online and will take your time to research. We also recommend that you double check all of the information that the seller provides for you before closing on a property.

Annual Rental Income

When planning this strategy, you don’t want to assume your property will be rented 12 months out of the year as this is not the case for most rental homes. Therefore, we assume 10 months’ rent when calculating annual rent. This gives you about 60 days to have a tenant placed and will provide an accurate projection of rental income. We assume 60 days time for turnover to provide a better understanding of the potential investment. If the investment cannot earn the desired ROI with a 60 day vacancy time it would be better to rethink the investment.

Foreseeable Repairs

We at Omni Property Management look at three larger repairs when evaluating these repairs: roof, water heater, and HVAC. These appliances have a foreseeable life span, if properly maintained, and considering these major repairs on the forefront of your investment is critical. We recommend that every potential investor research the life spans of these major appliances and best practices for maintaining each appliance. Although there is no way to know exactly when any of these could stop working, statistically a roof lasts 20 years, an HVAC lasts 15 years, and a water heater lasts 8 years if properly maintained.

Future Sale Price

The final consideration an investor should take is the forecasted future sale price. Every property is an asset, and it is important to have an accurate projection of how much that asset will be worth in the upcoming years. Typically, the market value of any given property will be relatively slow and consistent, therefore you can use your property’s past market values as a guideline. However, if you notice seemingly random positive or negative spikes in past values, we recommend that you research any major changes or activity in the area surrounding the property. For more information about calculating the future sale price on an investment property, read this Motley Fool article.

There are 4 questions you need to ask when developing a strategy:

How much will this cost me?
How much annual income will this produce after annual expensive?
When is the next time this property will need renovations and how much will they be?
Lastly, how long do I want to own this property?

Looking to invest in Memphis Real Estate? Choose an agent that specializes in rental investments. Choose Omni Property Management for your property investment and management solutions, call us at (901) 372-5513 to start developing a portfolio!

What Real Estate Agents Do for You

Tue, 04 Dec 2018 08:00:00 GMT

Buying or selling a home can be very stressful, especially if you’re trying to navigate the waters on your own. If you’ve hosted a showing of your home or have gone to any open houses, you’ve likely been bombarded by agents. As annoying as they may sound, most of these agents are actually trying to help you with the buying or selling process. However, the tricky part is finding an agent who you trust and has your best interests at heart.

What is a Buyer’s Agent?

A Buyer’s Agent is exactly what it sounds like — someone who is there to assist you in finding and purchasing a home. They will be there to help you every step of the way, and they can actually save you a ton of money and time.

How can they help me buy a home?

Your agent will start by narrowing down properties based on what you are looking for in a home and assist you to determine your budget. Next, your agent will narrow down a list of potential homes for you. At Omni Property Management, our Buyer’s Agents have access to a database with every property listed for-sale in the licensed areas in both Tennessee and Mississippi. Therefore, they can find the perfect property that meets all of your criteria. They will then go on private tours of these homes with you and point out any repairs, renovations, or potential hazards within the home.. Once you’ve narrowed down your agent’s list, your agent will then help you choose the home that best suits you and your needs.

Once you’ve selected your perfect home, your Buyer’s Agent will then help you with negotiating your offer. There are likely multiple offers on the property you’re interested in. Having an agent on your side will help you in choosing an offer that is reasonable and attractive to the seller of that home. Your agent’s experience with realtors and negotiation can save you a ton of money in this process, and they can help you avoid buying a home that has underlying issues.

You also have the advantage of your agent’s network. Omni’s agents have spent decades in the real estate world, and have encountered a plethora of mortgage brokers, home inspectors, movers, real estate attorneys, and more. Having access to this diverse network will save you money on each step of the home buying process and will make each step much quicker and smoother.

One of the biggest reasons to use a Buying Agent is avoiding mistakes in all of the paperwork that comes with buying a home. The paperwork can begin as early as determining a budget. Your agent will help you choose the right bank to take your mortgage out from, and they will help you understand every detail of your mortgage agreement. You will also have to put in a formal contract when you place an offer on a home, and your agent will draft the document and submit it to the seller. Once your bid is accepted, the agent will help you file for the home inspection which will ensure that you’re not buying a home with any major issues. If the inspection comes back clean, your agent will then draft a contract to transfer ownership of the property to you and file all paperwork with the county, state, and city for tax purposes. Your agent will also keep copies of each document on file. Having a Buyer’s Agent assist you with all of this paperwork ensures that each step is completed and done correctly and legally.

What is a Seller’s Agent?

Similar to a Buyer’s Agent, a Seller’s Agent is exactly as the name puts it — someone who helps you sell your house. They will make sure your home is listed correctly and marketed to as many buyers as possible.

How can they help me sell my house?

Your real estate agent will first tour your home and take pictures of the home in order to put it into the property database. Following their tour, Omni Property Management will provide you with a list of optional renovations that will increase the value of the home along with an estimated cost for each renovation, the current value of your house, and how much you stand to profit off of each repair. Omni will offer to finance the repairs for you if you cannot afford to do so at that time, and you will not owe anything until after your home is sold. For more information about this, please contact Omni Property Management at (901) 372-5513.

Following the repairs, your Seller’s Agent will stage your home with appropriate furniture and take updated photos. These photos will then be uploaded to the online listing service that local real estate agents use as well as public listing services such as Zillow, Trulia, and other online listing services. Omni Property Management uses a software to automatically update your home’s listing on every possible online real estate platform to ensure that your home is reaching the maximum audience.

Once your home’s listing is updated, your Seller’s Agent will handle each inquiry about your home. They will host open houses, handle every private home tour, and answer every question from potential buyers. They will also handle all negotiation for the home’s price and ensure that you will get the maximum sale price for your house.

Once you have accepted a formal bid, the Seller’s Agent will draft a contract that outlines the transfer of ownership of the home to the buyer. They then coordinate with the buyer to get all of the appropriate documents signed and make sure that you get your money from the buyer. Ultimately, a Seller’s Agent ensures that your home is sold following all city, county, and state regulations and all tax codes.

Credit Scores Explained

Tue, 13 Nov 2018 08:00:00 GMT

What Is a Credit Score?

Your credit score is essentially a calculated number that banks and lenders use to determine your ability to repay debts. Many factors are taken into consideration when calculating your credit score, and there are three main bureaus (Equifax, TransUnion, and Experian) that track your score. Your credit score can be used by lenders or bankers to determine whether you qualify for any line of credit, interest rates, deposit amounts, length of repayment, and more aspects that determine the overall terms of your line of credit. It is very important to understand the factors that these bureaus look at when configuring your score so that you can start building an impressive credit score.

Typical Score Range:

Credit Score Factors:

Payment History

Your payment history makes up about 35% of your credit score. Lenders and bankers use your credit score to determine the amount of risk they will be taking on if they offer you a line of credit. The largest part of that risk is whether or not you can be trusted to pay back your debts in a timely manner. The best way to start building a better credit score is to pay your bills on time.

Credit Utilization

Your credit utilization measures how much credit you have used compared to the overall amount of available credit. This ratio makes up about 30% of your credit score. You should aim to keep your credit utilization as low as you can, but not necessarily at 0%. Lenders and bankers want to know if you are responsible and financially stable. Therefore, your credit utilization will show them that you are using your lines of credit wisely. For example, if someone owes $30 on a credit card that has a $300 limit, they appear more responsible than someone who owes $200 on a credit card with a $300 limit.

Length of Credit History

This factor only makes up about 10% of your overall credit score, but it can definitely be used to boost your score if you use it to your advantage. Having an open account with a history of timely payments and no derogatory marks will only help you reach that excellent credit score. Again, lenders want to know if you can be trusted, so having an aged account will show them that you are accountable.

Credit Mix

The types of credit you take out make up another 10% of your credit score and include things like loans, mortgages, credit cards, and store accounts. The three major bureaus do consider the different lines of credit you have and your overall number of accounts so that lenders can judge whether you can be trusted to use a variety of accounts responsibly. Having a healthy credit mix can definitely help you build a good credit score so long as you are making all of your payments on time.

Hard Inquiries

Hard inquiries come from things like credit applications and make up about 10% of your overall credit score. The best way to avoid hurting your credit score in this regard is to avoid applying for any lines of credit you don’t truly need. The effects of a hard inquiry will stay on your credit report for up to two years. Additionally, once you obtain a hard inquiry there is nothing you can do to alleviate its effects.

What is not on your credit score:

Race
Religion
Sex
Ethnicity
Salary
Occupation
Use of Public Assistance
Age
Children
Any other information that is not found in your credit report

You can access your credit report for free on multiple platforms. The federal government allows you to have access to your official credit report from all three major credit bureaus once every 12 months at annualcreditreport.com. You can also use Credit Karma to track monthly updates on your credit score for free. Credit Karma shows you a breakdown of each of the listed factors, ways that you can improve your credit, and will recommended lines of credit for your personal needs. For more information about ways to improve your credit, call us at (901) 375-5513.

Should I Raise the Rent on a Good Tenant?

Thu, 01 Nov 2018 07:00:00 GMT

Good tenants are hard to come by. So when you have one, it’s normal that you’d do everything in your power to keep them. But, is it possible to raise the rent on a good tenant without losing them? This is a question that many landlords ask themselves.

Sometimes it’s necessary to increase the rent when property expenses such as insurance or taxes go up. Other times it comes up when a tenant leaves.

It goes without saying that raising rent can be a risky prospect for any landlord. Opting not to raise the rent or raising it too little can mean leaving money on the table. On the other hand, raising it too much can leave your tenants scurrying for a new place to live.

That said, as a landlord, raising rent is inevitable. It’s something that you’ll have to do at some point in your career. Remember, as a landlord, one of your priorities is getting a great ROI on your properties.

Before deciding to raise the rent, here are three important questions to ask yourself.

Question #1: Can I raise rent without losing my tenant?

As long as you do it delicately, raising the rent on a good tenant without losing them is possible. The following are some tips to help you in this regard:

Be honest and communicate kindly. Remember, your tenants are people too. Start by notifying them about the increment well in advance. In the notice, make sure to mention the specific amount as well as the reasons behind the raise.
Provide plenty of notice. Generally, the more notice the better. Most states have guidelines that specify the notice period to give.
Remain competitive. Keep it at a slightly lower price than your competition. This way, even if your tenant begins looking around, he or she will eventually realize they are still getting a good deal. This will incentivize them to stay.

Question #2: What’s the rental’s current market value?

As every landlord knows, getting good quality tenants isn’t a piece of cake. It requires a lot of time, effort, knowledge and experience.

The first step to getting a great renter is by setting the right rent amount. So, how do you know the market value of your rental? Here are some few good sources.

Do-it-yourself comparables. Craigslist, Redfin, and Zillow are great platforms to help you figure out how much rent to charge your tenants. Although it takes time, it won’t cost you any money.
Property managers . A good manager can help you calculate the best rent amount for your rental market.

Question #3: Is the current rent still profitable?

The main way a rental property can make money is through cash flow. This is the amount of rental income minus the expenses.

For example, if a property costs $1,500/month to rent, and has annual expenses of $11,000, then the annual cash flow will be $7,000.

In this case, the property is said to generate a positive cash flow. In other words, it means the property is profitable.

Reviewing the price of rent prior to renewing a lease is therefore crucial. This is because your operational expenses may go up. Upcoming maintenance needs might be costly. Insurance premiums may increase. Taxes may go up.

Before signing a new lease at the same rent price, ask yourself the following questions.

What’s my monthly mortgage?
Do I expect an expensive maintenance any time soon?
Do I expect any costs to go up?
What were my expenses on the rental the previous year?

Sum up all your operational costs and minus from your rent. Will the current rent still be profitable? If so, reconsider raising the rent amount, especially if you have a great tenant. A great tenant is far much worth than a minimal percent rent increase.

A landlord job consists of a bit of everything. The job requires one to be in marketing, maintenance, accounts and more. But, most of all, being a landlord entails customer service. This is especially true when the time for raising rent comes.