Rents Rise, Vacancies Go Down
Rents Rise, Vacancies Go DownNo comments Wall Street Journal, Real Estate, July 7, 2011
On the image below (click to enlarge) you can see the sample table:
According to Q1 2011 Zillow® Real Estate Market Reports, here are the declines in 25 largest metro areas. Read the rest of this entry »
Why? Because, now I will be able to do an exact comparison of the returns I was expecting more than a year ago (when I went to the US and purchased the 2 properties) and the actual REAL results, after one year of ownership – the real incomes, real expenses and maybe the not so glorious TRUTH.
The closing was in the end of October 2009, so I counted November as the first month of operation. There were some “repairs” in November, but basically it was just carpet cleaning, a few fixes and touch up paint for $400. Otherwise the unit was ready to be rented out. Read the rest of this entry »
Even though I have already written the next post, for my calculations of the first year returns on my 2 properties (in Las Vegas and Phoenix), it happened that I am changing again a property manager in Las Vegas. When looking for a new one, I have read my old posts to remind myself what I should be asking them, but also I have read this good article at Biggerpockets blog. It can help you guys, who will need to find a good property management company for your investment property.
http://www.biggerpockets.com/renewsblog/2011/02/25/hiring-best-property-managers/
I know that there are various software solutions (most of them paid), which can provide you with a similar result, but for my needs (3 properties), it’s more than what I need. What I use is a simple excel spreadsheet, which I have developed over the first months of ownership of the first 2 properties. From both of the property management companies, I get property statements every month in a form of PDF documents, including all the numbers. However it isn’t easy to look for certain information in dozens of these PDF documents I have in my folder, and also I can’t add any notes in it.
Therefore I always rewrite the values from each monthly statement into my own spreadsheet tables. You can see an example of this table below (click to enlarge):
I have similar tables on separate sheets of the spreadsheet file, for each investment property. The columns are following:
As you all probably know, I am the author of a free property analysis tool called Real Estate Analysis FREE. I am happy to announce some new features which I have been developing in the past few months. As always, this tool is free for anybody and I will be just happy if more people will be using it, instead of paying the crazy amounts for the commercial real estate investment software. I am trying to make this tool better and better in my free time, so if you have some suggestions for new features or changes, just let me know, and I will try to add them in the new release! So are you wondering what is new in the second version of the real estate analysis free software?
I have been working on the following things:
Visit: http://www.RealEstateAnalysisFREE.com
Btw I moved to Australia, I know that lot of you guys reading this blog are Aussies!
Read the rest of this entry »
As I described in the last post at Buying Property in USA blog, I was quite lucky, because I found a great real estate agent, who presented me with a few investment properties, with possible seller’s or so called owner financing. I have read a lot of things about seller’s financing before, but it was still something really new for me. I had to offer and negotiate the terms before I could again buy house in usa.
I knew that the seller was quite motivated to sell the property, since it was more than 180 days on the market. That was definitely quite a big advantage. Disadvantage on the other hand was that the seller still had an unpaid mortgage on the property, with quite high payments and she obviously wanted me to cover the payments fully.
First, I needed to get all the information possible about the property. I requested details about the leases of the tenants (4 of 5 of the units were occupied), the utility bills (seller was paying all the utilities – this was very important information, possible deal breaker), time period of major repairs (roof, hot water heater etc) and also the information about the owners underlying loan. Marta (my real estate agent) helped me with most of that.
Second, I had to put together an offer. It’s hard to calculate how much the terms of the mortgage matter, and therefore I created an excel spreadsheet, where I could test all different scenarios (various down payment, balloon length, interest rate and amortization periods). I had some kind of benchmark (70%LTV @ 6% 20y) and I have calculated Net Present Value of this financing. Then I was comparing all the other scenarios and I chose one with similar NPV (very good one for me).
Third, I put together the offer, with a closing date in the beginning of the month (2nd or 3rd). This is very important, especially for occupied multifamily properties. The trick is in the fact, that the rents (but also utilities) are always pro-rated. That means, if you close on the 2nd, you will get almost a full month of rent. However the mortgage payments are usually on the 1st of each month (or you make sure they are). So you will have all this extra money at closing, but your first payment will be almost one month from that date.
Then I sent in the offer and waited for the seller. We had a few rounds of negotiations, mainly because the seller wanted ARM (adjustable interest rate) and I wanted fixed. Her reasoning was simple – the underlying loan was ARM as well, and she wanted to be sure that I will be always able to cover it with my payments. In the end I have agreed on the 6% ARM, but at least I got 80% LTV (20% down only) and price under the listing one.
Read the rest of this entry »
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Vacancies … fell in 72 of the 82 markets during the second-quarter vacancy rate to 6%, the lowest since 2008 and compared with 7.8% a year earlier, according to Reis. [...]A few key points:
The average effective rent, the amount paid after discounting, was $997 in the second quarter of the year, up from $974 a year earlier [...]
Landlords filled a net 33,000 units in the second quarter, a slowdown from the 45,000 units they filled in the first quarter. [...]
Meanwhile, supply remains constrained. Roughly 8,700 new apartment units opened during the second quarter, the second-lowest quarterly tally for new completions since Reis began collecting data in 1999.
- Vacancy rates are falling fast (the excess supply is being absorbed). Note: The excess housing supply includes both apartments and single family homes.
- A record low number of multi-family units will be completed this year (2011). Only 8,700 apartments came on the market in Q1 (in the Reis survey area). This is the second lowest quarter since Reis has been tracking completions – the lowest was 6,000 last quarter.
- The falling vacancy rate is pushing push up effective rents. This also pulls down the price-to-rent ratio for house prices.
Categories: buying property in usa, market research
13Jun
Keeping track of expenses and incomes for your accountant (CPA)
No comments In one of the last posts here at Buying Property in USA blog, I shared with you my file for keeping track of each individual investment property incomes/expenses and other data. There is one more file you will need though, if you have also founded an LLC and have a CPA (accountant) who is preparing your taxes. I have again just created an excel spreadsheet table for this purpose, nothing fancy. It can just save you a couple of hours figuring out the best way of keeping track of these numbers.On the image below (click to enlarge) you can see the sample table:
Categories: buying property in usa
30May
How Home Prices Declined in 25 Largest Metro Areas
No comments In this post, I will just republish data put together by Zillow. It is always important to do the market research before buying real estate in USA, because the market decision is sometimes even more important than the decision about the particular property. Anyway, thanks to servers like Zillow, the market research is quite simple.According to Q1 2011 Zillow® Real Estate Market Reports, here are the declines in 25 largest metro areas. Read the rest of this entry »
Categories: buying house in usa, buying real estate in usa
24May
One year of investment property operation data in Phoenix, Arizona
6 comments so far Following my Las Vegas property 1-year break down, I am going to present to you the numbers for my second property in Phoenix, AZ. I also bought this condominium on N Cave Creek Rd during my 3week trip to the USA in the summer 2009. It was much easier to find the investment property in Phoenix (in fact it took me just one afternoon), but how did this property do during the first year of operation? Here is the table (click to enlarge):
As you can see, I already started with some rehabs in October 2009, but since it was from the middle of the month, I counted November as the first month. Therefore the official first year of operation is ending by the end of October 2010 the same as my Las Vegas property. You can see again, that I was charged initially for the property management fee by RPM Phoenix Metro. This property however was in worse shape than the one in Las Vegas. We needed to put new windows in, change a couple of doors, cabinets and paint the whole place. This rehab project was, in the end, quite expensive and you can see these expenses in the repairs column. Read the rest of this entry »
Categories: buying property in usa
12May
One year after buying property in USA (Las Vegas) – numbers, thoughts, strategy
2 comments so far I owed you guys who are following the Buying Property in USA blog this post already for a few months. It has been 1 year since I bought my properties in Las Vegas and Phoenix already last October (2010). However I was in the middle of purchasing a new property in Topeka, Kansas and also working on my property analysis tool, and therefore I didn’t write a proper post and haven’t done the calculations. Finally it’s here though, and it should be something important for all investors who followed my journey and my articles or are thinking about investing in the United States.Why? Because, now I will be able to do an exact comparison of the returns I was expecting more than a year ago (when I went to the US and purchased the 2 properties) and the actual REAL results, after one year of ownership – the real incomes, real expenses and maybe the not so glorious TRUTH.
Las Vegas
So let’s start with my first property, Condominium located on E Sahara Ave in Las Vegas. Below you can see the table for the first year of operation (click to zoom in):
Categories: buying property in Las Vegas, buying property in usa
06May
8 Tips for Hiring the Best Property Manager
3 comments so farEven though I have already written the next post, for my calculations of the first year returns on my 2 properties (in Las Vegas and Phoenix), it happened that I am changing again a property manager in Las Vegas. When looking for a new one, I have read my old posts to remind myself what I should be asking them, but also I have read this good article at Biggerpockets blog. It can help you guys, who will need to find a good property management company for your investment property.1. The first thing I always want to know is how many properties (units is a better measure) are they managing. This is followed up with how many employees are managing these units. Here is what I have found based on our experience building our property management capability internally and then handing the entire portfolio over to property managers: a trained employee with the right tools and proven processes can manage between 30 and 40 units – assuming the accounting function is not included. So, if you are qualifying a property manager and they have no employees and are currently managing 37 units and you want to hand them 7 more, how good do you think their service to your portfolio will be?Continue reading here:
2. Do they own any rental properties themselves? For me this can be a deal breaker! Here is what I have experienced: while it may seem like a benefit for a manager to own properties because they can better relate to what an investor experiences, I see it differently. The way I see it is my properties and my tenants are in constant competition with the managers and their properties. If the manager has a vacancy at the same time you do, how can you know that your property will be filled first? You don’t!
3. A critical component in managing both properties and tenants is getting into those properties on a routine basis. As part of your discussions with prospective managers, you want to get a commitment from them how often they will conduct formal inspections of your properties. In some cases, managers will be very accommodating. In most, however, they will balk at this requirement or use it as a way to increase the fee they will be charging. I am not too impressed with property managers who believe that conducting routine property inspections is an extra – not part of their normal package of services. I would be very leery of this type of property manager.
http://www.biggerpockets.com/renewsblog/2011/02/25/hiring-best-property-managers/
Categories: buying property in Las Vegas
02May
How to keep track of your property’s operating data (incomes/expenses), simple and free
1 comment so far Today’s post is not providing anything revolutionary, and for some people may be almost unimportant. However in the previous articles here at “buying property in USA” blog, I promised to show you guys how I keep track of my property incomes, and expenses (and any other operation data and information) – in a simple and free way.I know that there are various software solutions (most of them paid), which can provide you with a similar result, but for my needs (3 properties), it’s more than what I need. What I use is a simple excel spreadsheet, which I have developed over the first months of ownership of the first 2 properties. From both of the property management companies, I get property statements every month in a form of PDF documents, including all the numbers. However it isn’t easy to look for certain information in dozens of these PDF documents I have in my folder, and also I can’t add any notes in it.
Therefore I always rewrite the values from each monthly statement into my own spreadsheet tables. You can see an example of this table below (click to enlarge):
- Month
- Rent Income
- Property Management fees
- Repairs
- HOA (Home Owner Association fees)
- Insurance
- Net Operating Income without insurance = reported by property management (NOI definition)
- Balance (staying at the property management account every month)
- Owner draw (check from the property manager)
- Tax (monthly portion only)
- Net Operating Income (including insurance and taxes) (NOI definition)
- Notes (my personal notes, explanation etc.)
- TODO (to do list)
Categories: buying house in usa
11Mar
Real Estate Analysis FREE: New features!
No comments
As you all probably know, I am the author of a free property analysis tool called Real Estate Analysis FREE. I am happy to announce some new features which I have been developing in the past few months. As always, this tool is free for anybody and I will be just happy if more people will be using it, instead of paying the crazy amounts for the commercial real estate investment software. I am trying to make this tool better and better in my free time, so if you have some suggestions for new features or changes, just let me know, and I will try to add them in the new release! So are you wondering what is new in the second version of the real estate analysis free software?I have been working on the following things:
- Optimizing the whole application to make it work and crunch the data faster, I have almost doubled the overall speed of the software!
- I have created new financing options – mainly the so called “Creative financing” – which includes balloon payments, interest only financing, refinancing after a certain amount of years.
- You can enter Rehab costs into your investment – this will be used only in the first year of operation, and you can choose if and how the rehabilitation will influence the value of the property (this is very useful for fixer upper strategy)
- Expenses and incomes can be now entered not only as annual values, but also as a percentage or monthly amount
- 50% Rule – introduced at BiggerPockets Forum, it’s a great way for investors to estimate the expenses and check the overall investment
- Social media sharing! Requested feature by some of the investors. Facebook, Twitter and Email sharing of the property analysis reports is available!
Visit: http://www.RealEstateAnalysisFREE.com
Btw I moved to Australia, I know that lot of you guys reading this blog are Aussies!
Categories: market research
11Feb
Price-to-rent ratio and Gross Rental Yield in USA
9 comments so far As I promised in earlier post at Buying Property in USA blog, I have calculated price to rent ratios and gross rental yield of all the US states. I am currently writing an article with more details how I exactly got the numbers etc. However for the most of foreign investors is interested mainly in this table: Categories: market research
22Jan
Seller’s financing – my experience, process of buying property in Topeka
11 comments so farAs I described in the last post at Buying Property in USA blog, I was quite lucky, because I found a great real estate agent, who presented me with a few investment properties, with possible seller’s or so called owner financing. I have read a lot of things about seller’s financing before, but it was still something really new for me. I had to offer and negotiate the terms before I could again buy house in usa.I knew that the seller was quite motivated to sell the property, since it was more than 180 days on the market. That was definitely quite a big advantage. Disadvantage on the other hand was that the seller still had an unpaid mortgage on the property, with quite high payments and she obviously wanted me to cover the payments fully.
First, I needed to get all the information possible about the property. I requested details about the leases of the tenants (4 of 5 of the units were occupied), the utility bills (seller was paying all the utilities – this was very important information, possible deal breaker), time period of major repairs (roof, hot water heater etc) and also the information about the owners underlying loan. Marta (my real estate agent) helped me with most of that.
Second, I had to put together an offer. It’s hard to calculate how much the terms of the mortgage matter, and therefore I created an excel spreadsheet, where I could test all different scenarios (various down payment, balloon length, interest rate and amortization periods). I had some kind of benchmark (70%LTV @ 6% 20y) and I have calculated Net Present Value of this financing. Then I was comparing all the other scenarios and I chose one with similar NPV (very good one for me).
Third, I put together the offer, with a closing date in the beginning of the month (2nd or 3rd). This is very important, especially for occupied multifamily properties. The trick is in the fact, that the rents (but also utilities) are always pro-rated. That means, if you close on the 2nd, you will get almost a full month of rent. However the mortgage payments are usually on the 1st of each month (or you make sure they are). So you will have all this extra money at closing, but your first payment will be almost one month from that date.
Then I sent in the offer and waited for the seller. We had a few rounds of negotiations, mainly because the seller wanted ARM (adjustable interest rate) and I wanted fixed. Her reasoning was simple – the underlying loan was ARM as well, and she wanted to be sure that I will be always able to cover it with my payments. In the end I have agreed on the 6% ARM, but at least I got 80% LTV (20% down only) and price under the listing one.
Read the rest of this entry »
Categories: buy house in usa
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