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Archive for September, 2008

Property Manager…or Not

Mark Evans, REALTOR

As an out of state rental property owner, I can relate some of pros and cons of hiring a property management company to oversee your investment and maximize revenue.

The first decision you will have to face , as an owner of rental property, is whether to self manage or hire a professional property management company. Some may see this as a no-brainer when faced with the property management fees you’ll encounter in the interview process. Generally for our area at the beach, the number will run from 20%-30% of Gross Revenues. This is revenue that could flow directly to the bottom line net for you as the owner. But at what expense? By this I mean the value of time…your time and the effort you have to expend to secure desirable rentals for your property.

Some owners would rather invest their time and effort to secure their own rentals via the web (VRBO.com, Homeaway.com, etc) and keep the proceeds from Gross Revenues flowing into their own pocket. What is the impact of this approach as it applies to you and your your time? In just about every case, the impact will be time consuming if you want to ensure you maximize your rental revenue flow.

The first item on your agenda will be to secure a marketing website using a popular vacation portal such as VRBO.com. This process includes stating the price of your rental adjusted for seasonality, the terms of the rental agreement, check-in/check-out times, photos, property description, etc. This process is time consuming during the initial registration of your property, then it’s just a matter of maintaining the website.

Next you have to locate a very dependable maintenance company for repair items that are the norm for rental properties. Changing air filters, light bulbs, running toilets, A/C issues, etc. When these issues arise, you must have a dependable company to ensure items are addressed in rapid fashion for your tenants. And you, as the self appointed property manager, will be the point of contact for any repair issues that may occur during the rental period. So be prepared to answer your phone at any time, day or night.

Securing desirable rentals is also very important. And by desirable, I’m referring to tenants that you would welcome back on an annual basis. These are the renters you will want staying in your home and you want to maintain contact to keep them coming back. This is where you have to learn the screening process to find the right tenants. And trust me, the spring breakers are not the clients you’re looking for when it comes to your property. Your screening process must be fine tuned and adhered to or you could find your phone ringing constantly with complaints about your tenants.

I’ll wrap this article with a recommendation based on my experience self managing and using a property manager. Having done both, I would always recommend the use of a professional property manager. They’ll have their own website, have an office staff to secure bookings and handle any issues or complaints. Maintain the property with contracted housekeepers and maintenance staff. They know the local market and will make sure you’re pricing is competitive when rentals may be slower than the norm. Books are maintained by the property manager where they handle all finances including rental income disbursement to the owner and filing of state and local bed taxes. And foremost, they are your eyes and ears at the beach, overseeing a very valuable asset…your beach house.

Mark Evans, REALTOR
mark@eimersgroup.com
850-837-8880 Office | 817-637-2453 Cell

 

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Dana

It is a great time to be a real estate buyer right now, but it can be overwhelming because there are so many options from which to choose. (Even though you get your “pick of the crop”, it can be hard to decide which one is best.) You know you are ready to start looking for a rental property to purchase, you have decided on the beautiful Emerald Coast, you search online in your price range and you find 300 properties available…how do you decide?

Well, having been a front desk manager at a local Resort, being a rental manager for short term properties, and now being a Real Estate Sales Associate, I have seen the rental market from all aspects. There are a few important factors to consider for finding the best rental property.

Amenities: Is there a pool, is it large enough to accommodate all guests comfortably, is there a hot tub (everyone likes to “relax” when on vacation); these are the minimum amenities to look for, but there are numerous others that can add even more value. These are fitness centers, indoor pools, heated pools, on-site shopping and/or restaurants, entertainment, covered/garage parking, kids’ activities, wine coolers, flat screen TVs, internet access, grilling areas, etc…

Simplicity of beach access: Obviously, if you can afford to be right on the beautiful beaches, this is the ideal, but if not, the next best thing is a property with a view. And, regardless of the view and location of the property, the beach access needs to be easy—quick walk, bike, golf cart, or tram ride to the beach.

Heads in beds: When it comes to a vacation rental, people want to be able to sleep as many people as possible in one condo/house. A lot of guests who visit our area have families with kids, so if you can find a unit with bunk beds and/or a sleeper sofa, you are likely to get better rental numbers than a similar sized unit with no bunk beds or sleeper sofa. Most vacationers would rather spend less money on the condo rental, and spend money out doing fun things while they are here.

Resort atmosphere: The Destin area is well known for its high end, luxury homes and resorts. When most renters come to visit they are looking for that Resort feel also. So, whether you can purchase a property in a resort or at least make your property feel like a Resort getaway, you will get better rental numbers. Decorating inside the unit and if a house, the exterior, will catch the eye of the vacationer, as they all like to see pictures of the place they are renting online before they arrive.

The above aspects are all important, but if you are going to be using the property yourself, then you need to make sure the property meets your needs also…not only now, but down the road a few years. The bottom line is…find and purchase a property that you would love to vacation at, and the rental guests will come too!

Dana McIntosh, REALTOR
dana@eimersgroup.com
800-775-5914 Main | 850-428-0243 Cell

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Since 1975, the Employee Retirement Income Security Act (ERISA) has permitted self directed Individual Retirement Plans to purchase real estate and notes.  Today, less than 3% of the four trillion in retirement accounts is invested in real property. 

The Entrust Group (www.theentrustgroup.com), with corporate offices in Reno, Nevada, is the leading third party administrator of self directed IRAs (SDI).  With franchised offices across the country, The Entrust Group provides superior customer service, local educational events, and faster transaction time for Investors, Realtors, CPAs, Attorneys and Financial Planners.  Entrust does not promote any product or assets, only offers Self Directed Plans and provides record keeping for all assets within the plan.  This allows the taxpayer control to invest in all types of assets, just not securities but in what the taxpayer knows best. 

Types of retirement plans that can be self directed include:

  • Traditional IRA
  • Roth IRA
  • Individual (k) including the Roth Individual (k)
  • SEP
  • SIMPLE
  • Rollover IRA
  • 403(b)
  • 457
  • Coverdell Education Savings Accounts
  • Health Savings Accounts

Self directed investment choices include:

  • Land
  • Rentals
  • Real Estate Options
  • Pre Construction Contracts
  • Private Placements
  • LLC and Partnerships
  • Privately Held Stock
  • Tenants in Common
  • Timeshares
  • Notes/Mortgage Receivables

Prohibited investments are collectibles such as art, antiques, metals or gems, stamp, coin and alcoholic beverages.  The asset held by the SDI cannot be used personally or by family members and friends.  Nor can the taxpayer receive any benefit such as compensation for providing property management or repair services.

It’s an easy process to open an Entrust account.  To start an account is opened, funded with proceeds from either partially or fully liquidating a retirement account.  Enter into a purchase contract for the asset, funds are wired to the closing and the property is deeded to “Entrust FBO Richard Eimers.”  Upon the sale of the asset, the net equity is wired to Entrust and follows your instructions to purchase another asset or to open a securities account with your broker. 

A self directed account can fund a limited liability company (LLC) with the sole member as the Individual Retirement Account.  Real property could be purchased and held be the LLC.  Expenses can be paid and rental income received by the LLC.  Once the property is sold the equity is returned to the LLC.  No capital gain or recaptured depreciation taxes are triggered given the LLC is owned by a self directed retirement account.  This is better than a 1031 tax deferred exchange!

The fee to open an account is $395 which includes the first year maintenance fee of $250 per asset.  If the value of the asset is less than $32,000, the percentage fee option can be selected for the annual maintenance fee.  All expenses such as home association fees, taxes are paid from your Entrust account.  Your Entrust Administrator will alert you to an upcoming expense and request a contribution. Or you may hold additional cash to pay for the expenses.

To learn more about how an Entrust Self Directed Retirement Account can benefit you, contact Andy Gustafson in Destin, Florida at 850-837-1031 or andgus@atlas1031.com.  To learn more about Andy and Entrust go to www.atlas1031.com

The Entrust Group does not offer investment, tax, financial or legal advice to clients.  Individuals who believe they need advice should consult with the appropriate professional(s) licensed in that area.

 

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10 Easy Steps to Buying the Right Property

Dana

It is not uncommon for a buyer to tell me, ‘Wow, I can’t believe we are under contract and buying this property already. How did this happen so fast?’  The answer is it didn’t.  Real Estate buyers start the search long before they even realize it.  Here’s what you can expect from your property shopping experience, and how to get the most out of the process in order to find the right property for you:

  1. Figure Out the Benefits: Are you buying your first home and this will be much better than renting? Are you buying a second home or investment property so you can enjoy the beach without wondering where you will be staying each time, and realize the appreciation down the road? Whatever your goal, you should have weighed the benefits and decided the purchase option is the best decision for you.  This is a major hurdle overcome, and you are now focused and certain.
  2. Talk To a Local Lender: Determine the price you can afford so you don’t waste time searching for a property only to find out it is too expensive, or you could have afforded more and got that extra amenity or bedroom you wanted. Most sellers in today’s market will be more negotiable in the purchase price if the offer is not contingent on financing.
  3. Define Your Search Parameters: What is important to you…gated community, near work/school, Gulf front or Gulf view, rentability, age of property, available amenities, etc…
  4. How Long Should it Take to Find What you Want?  Depending on your goals & needs, with the amount of inventory on the market it should only take a couple weeks to find the right property.  This is if you have done your homework in reviewing the area’s comparable properties and recent sales and have realistic expectations.
  5. How Many Properties Will You See?  The average number of properties I show on a given day to any buyer is seven.  Any more than that and the brain is on overload.  Therefore, don’t expect to see 20-30 properties at one time.  It may be physically possible to do so, but you won’t remember details about any of them.  If you have a list this long it is helpful to do drive-bys of the properties first to determine if you like the property from the outside.
  6. The “Perfect Shoes” Experience:  Women will relate to this one.  Say you need a new pair of shores. You go to the mall. At the first store, you find the perfect pair.  You try them on and they fit perfect.  They are glamorous, exactly what you had in mind, and the best part…they are priced right!  Do you buy them? Of course not. You go to every other store and try on all shores until you drop from exhaustion.  Then, you go back to the first store and buy the perfect shoes, as long as someone else didn’t buy them already.  Don’t shop for a property this way.  When you find the perfect property, buy it.   There is a reason you like this property, and other buyers will like it to.
  7. How To Rate & Compare Inventory: Bring a camera and start at each property with a close up of the house/unit number. Take notes of unique features of each property. Pay attention to surroundings-what is nearby? Do you like the location? Immediately after leaving each property, rate the property on a scale of 1 to 10, with 10 being highest.
  8. View Top Choices a Second Time: After viewing properties for a few days, you will probably know which ones you would like to buy.  Go back and view those again because you will notice elements you didn’t see the first time.  At this point your agent should find out the motivation level of each seller and double check to see if any offers have come in to make sure the property is still available.
  9. Make the Selection:  I can usually tell out of a list of choices which property a buyer is going to purchase.  But I do not want to steer them in any direction, it is our job as agents to provide the facts so the buyer can make an informed, educated decision.  I do, however, like to point out any defects so we can utilize this in our negotiating.
  10. Write the Offer: I use an online forms program that makes it very simple to put together an offer in the most professional manner. So, with just a few pieces of information and about 15 minutes we can present our offer in the best light.

How do you make your offer the best?  Find out in next month’s newsletter, or call me at 850.428.0243 to discuss.

 

 

Dana McIntosh, REALTOR
dana@eimersgroup.com
800-775-5914 Main | 850-428-0243 Cell

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