Tips for Buying A Commercial Investment Property

Buying a property is always a great way to invest. However, there are several things to keep in mind before buying an investment property.

How well you manage the proceedings will go on to determine whether your financial goals will be realized.

You don’t have to be wealthy to buy an investment property. Yet it is extremely important to make wise decisions whether you have bought three investment properties or this will be your first.

Since the property market is one of the most volatile ones, understanding the correct dynamics can be pretty difficult, especially if you are not familiar with the market.

Hence, it would be prudent to make a purchase only with much forethought. The following tips can be helpful.

Choose the right property and the right price

Investing in a property is only sensible if the given property is going to increase in value in the upcoming years. In addition to this, it is also equally important to understand the correct market price so that you make a fair deal.

Since the market prices of real estate are not highly transparent, it can be difficult to understand the actual price.

Therefore, it would count to do some background research. This is also where using a qualified local realtor can really pay off.

Prepare a long-term financial plan

If done in the right way, property investment can be one of the most profitable sources of income generation, giving you very quick returns.

However, it is important that you have a clear financial plan. For example, you can use a loan or a mortgage when buying the property and then later rent out the property. This way, the rental income itself can be used for paying the mortgage.

However, the rental income will also be affected by the system of taxation followed in the area. Therefore, make sure that you learn about the cost of all insurances and taxes before making a move. Many areas charge a bed tax which can be between 10% – 15% on top of normal taxes.

Hire a property manager

Buying a property involves a massive financial investment. If you are not familiar with the market, it can be hard to understand the actual value of different properties. Along with this, the process also involves a number of other things such as taxes, legal process, rental laws and much more.

Property managers, being professionals in the field, can easily help you through all of these issues. You may have to shell out some amount as a fee for the property managers. However, they will definitely help you secure a constant flow of renters in your home as well as make sure maintenance is kept up.

Understand the area

When you are buying a property, it is important to understand the area. It is not possible to learn everything on the internet. Hence, it would be advisable to talk to knowledgeable local real estate agents. This is important because your local realtor will know which neighborhoods have the best chance or history of increasing or decreasing property values.

Go for a massive down payment

FHA and VA mortgages are generally not available when you are buying an investment property. However, you can always opt for conventional financing, which will require you to make a down payment of 20%.

You can also opt for a higher down payment so as to bring down the rates and monthly payments. It should be noted that the mortgage rates for investment property tend to be higher than those of primary residences. Hence, it is important that you plan on this when adding up your potential profits on homes you’re looking at.

Additional costs for repairs

If you are buying an old property, you may have to make a number of repairs before renting them out or making a resale. Not doing so can affect its market value. Hence, it is important that you include the cost of upkeep and repair to the total cost of the property.

Do not put off making repairs to save money. It will cost you much bigger in the end.

While investing in property, it can be tempting to go for large-scale investments with the expectation of getting an equally large profit line. However, this can be very risky unless you have grown very familiar with the market and can afford to play around with the investments.

If you are new to the area, it would be more advisable to start small and then gradually move on to larger properties when you are prepared enough to handle them. This will give you an idea of how things work out in the market while also giving you a continuous profit on the side.

 

Why Tech Will Not Replace The Role Of A Real Estate Agent

One of the biggest value-adds of utilizing technology is that it can automate mundane tasks — and that’s especially true for real estate professionals.

For example, property managers can leverage automated workflows to help them do everything from collect rent to see through maintenance work orders, and investors can use online tools and analytics to access cash and grow their portfolios.

Meanwhile, when it comes to real estate agents, historically, there have been fewer technology solutions available.

However, there are some incredible ones available that help agents do their jobs better. At first glance, these technologies do, in fact, automate some of the core responsibilities of the modern-day agent, but, ultimately, they serve to change the nature of the real estate agent role.

Bringing Simplicity to Unit Showings

One of the biggest (and perhaps more tedious) responsibilities of a real estate agent today is unit showings. Apart from the back-and-forth with prospective tenants when trying to schedule unit showings, agents also deal with a lot of cancellations, late appointments and no-shows, all of which waste agents’ valuable time. When prospective renters do show up for viewing appointments, agents then have to spend time, of course, showing them the unit or home.

This can be a time waste, too, especially with prospects who are not seriously considering moving or signing a lease just yet — often, people want to check out available units simply to gain perspective into the rental market. Yet regardless of a prospective renter’s intentions, real estate agents have to make time for these showings, many of which have no business impact.

Newer technologies have slowly started to alleviate some of these frustrations with the unit-showing process, allowing for self-service by the prospective renters. The value-add here is not so much that it eliminates a time-consuming part of an agent’s day, but that it allows agents to fill their days with more important activities, like marketing the units, identifying the best prospects, being better advisers to those clients and closing deals faster.

Transforming the Screening Process

Once prospects have viewed a property and want to move forward in the leasing process, real estate agents then need to screen them to determine if they’re the right fit (have good credit, never been evicted, etc.). This is easier said than done. Doing background checks on prospective tenants can be challenging and very time-consuming.

Most importantly, even once agents have all the proper information on hand, they still need to pick the best tenant based on that information. A bad renter can cause many headaches, so properly screening prospects is vital for long-term success, and its why tenant screening is one of the cornerstones of our business.

Technology advancements expedite the screening process, making it easier for agents to make these kinds of determinations based on criteria and data, all while aiding in compliance with Fair Housing Laws.

Even the concept of “closing the deal” can beget more success through tech solutions that enable immediate lease completion, helping agents secure renters quickly.

Revitalizing the Agent’s Role

Self-service showings and the streamlined screening process ultimately give time back to agents to do what they do best: close deals and spend time with prospects who are serious about renting. Agents can devote more of their time to answering prospects’ questions, addressing concerns and ultimately persuading them to move forward with signing a lease.

It also gives agents time back to strategize on areas of their business that could use a revamp, like average success rates or turnover rates, for example, and gives them a chance to better assess how they can improve those areas. The modern agents of today can be more successful and more effective than ever before, because they finally have time to be. Tech eradicates the tedious tasks, but not real estate agents’ roles.

The technology only serves to enhance their roles, giving them more time to act as strategic advisers to their clients and prospects. Real estate is a people business, so humans will always be a critical part to that.

So where do agents start on this journey? The most important step is to do some research into different technologies to find the most user-friendly tools.

Deciding to embark on a digital revamp in one’s profession doesn’t mean that it has to be a tedious overhaul with a significant learning curve. That’s the beauty of so much modern technology: its ease of use. Approaching research in this way will, inevitably, limit the number of unforeseen challenges with tech implementation.

Another important part of this process is identifying the specific challenges in the business and what is most important to solve for first. Agents, to be successful, must focus on solving for a specific business pain point to gain true benefits.

Just throwing technology at all aspects of a business won’t necessarily help solve for the most pressing issues and may, frankly, create more work than necessary. That’s why identifying a specific business case to apply technology to is critical before any implementation.

For agents who may be reticent to adopt technology when they are so used to doing every part of their job manually, it’s a good idea to look closely at ways in which competitors are using technology.

Where there’s technology, there’s more power, so if an agent is adamant about doing things the way he or she has always done them, that person will never have the upper hand against a competitor who sided with tech.

What’s more, nurturing client relationships is real estate agents’ bread and butter, and agents should always be on the lookout for ways to improve upon those relationships by making all processes as seamless as possible.

Developers Are Hiring Property Managers During Construction

Developers are bringing property managers into the fold earlier. The emerging trend is an effect of the massive amount of multifamily product under construction. With several thousand units per year coming to market, developers are leveraging property managers earlier to help curb competition. Property managers are also requesting that developers hire them early on in the development cycle to better prepare for leasing.

Analyzing both existing apartment stock and the construction pipeline is integral to developing a leasing strategy. The most important aspect of preparing to lease a new community is analysis of what is currently working combined with research on what is coming to market, both locally and on a national level.

This includes looking at current design trends and amenity offerings among the apartment product that is under development. We look at new trends in apartment homes such as bike repair rooms, pet-friendly amenities including pet daycare and grooming, as well as new fitness offerings, and from there we make strategic recommendations on what is needed at the property level. We also look carefully at how our team will communicate with residents, and gather details on how our prospective residents like to shop for apartments.

In addition to analyzing the market and potential competition to develop a leasing strategy, hiring a property manager during construction can give developers an opportunity to form its operational strategy. We can also work with the developer to ensure that all operational processes and procedures are in place so the property can operate smoothly from the start. This will help to garner positive resident experiences from the beginning, which can be shared to attract new residents as the lease-up continues.

Forming operational policies early can also help to curate the leasing strategy and ensure it is strong well after the delivery. From there, we draw upon tried-and-true leasing strategies that our team has used to successfully lease multifamily properties throughout the U.S. In the current market, this means setting up and preparing for the property’s digital footprint, including creating, running, and monitoring online and social marketing sites. In addition, we typically plan a series of on-site events to ensure potential residents have the opportunity to connect personally with the property and our team.