As an investor, you always need to be looking for ways to maximize the return on your investment. When I analyze the financials of a prospective property, I am always looking to see where money can be saved, and where additional revenue can be gained. Areas like laundry, storage, and parking can all be sources of additional revenue that a previous owner may not have taken into consideration, or not utilized to their maximum potential.
A classic example that I run into in so many multifamily investment properties is laundry equipment contracted out to third parties who supply and maintain the equipment, and the return is almost comical it's so low. I have found that by purchasing my own equipment, and financing it over several years, I can make more money than if I had someone else managing the equipment. I find this only works if you are using the current generation of smart-card based machines, as opposed to coin operated. No more coins to collect, sort, roll, and deposit; just bills! The machines are also less likely to be vandalized if there is no money in them.
Another more lucrative method of making more money is to resell all of the utilities and telecommunications services that your tenants use. What if you could earn money off of your tenant's telephone, Internet connection, cable or satellite TV, and gas bills? Did you even know that was possible? You can even make money off your friends and family, and get a rebate on your own telecommunications and utility bills. And the best part is, their bills may even end up lower than they are now.
I am offering gift card incentives for my tenants to sign up for all their services through me. For every service the sign up for, I give them a $5 gift card. The best part is I make residual income off of their telecommunications and utility bills for as long as they remain on those services. How sweet is that!
If you're interested to find out how you can cash in on this alternative revenue stream on all of your investment properties, drop me a line and I'll tell you how to do it.
My primary investment focus over the last year and a bit has been multifamily in the Cleveland, Ohio market. Cleveland has a very diverse market with 'D' class neighborhoods right along side 'A' and 'B' class neighborhoods. East Cleveland is one of those 'D' class neighborhoods that many of you wouldn't want to walk around in at night, or even in the daytime in some areas. For investors comfortable with that market, it can be a great investment opportunity as long as you understand that market and are prepared to work in it.
East Cleveland has a problem with derelict and unsafe buildings scattered throughout the city, and it is very evident anywhere you go. With a recent federal grant all that should start to change. As a recent article in The Neighborhood Voice
outlines, the City is now able to tear down many of these derelict buildings and prepare the sites for new development, or public green space. There is a feeling that with derelict buildings gone, and space made available for new development, some new investment will come East Cleveland's way, and with it some new found prosperity.So why does this interest myself and you, fellow investor? The multifamily market in Cleveland has dried up over the last several months, and the
number of good turn-key and value-add investment opportunities are getting harder to find. There are lots of properties avaiable at 10 caps and below, but the plethora of 15+ Cap opportunities have almost disappeared. East Cleveland was a great source for value-add properties and some of those are now facing the wrecking ball.What this also means is that for those of us who are in, or getting into the market now, there is renewed hope for some appreciation on our assets on top of the great returns these buildings offer. The hope of asset appreciation in the East Cleveland market
was not generally expected from most investors, but that may change now.If you are interested in this market, and want to get in now on one of these rare opportunities, contact us now
as we have a great asset available in East Cleveland for a cash investor. Total commitment is under $450,000 including rehab for an estimate 18 Cap property.
After a couple of years finding great investments for the students of some of the top real estate seminar companies, Investor Mentor Group is teaching Canadians how to break into the lucrative commercial real estate market in the USA.
Unlike a lot of the other real estate training organizations out there, IMG is actually in the market on a daily basis, finding, acquiring, and managing multi-family investment properties for and with their students. Their students/investors are also at the training sessions to answer questions and offer advice. It's not a bunch of professional seminar people trying to teach you something they may or may not be actively doing themselves. They are focusing on multi-family and other commercial investments, and not single family homes, so the focus is quite different from their competitors.
The first event is mid-March in Montreal, so if you're in the neighborhood check out the free preview events and find out what it's all about. There will be several active student investors at the previews as well as the following training session 2 weeks later. Previews are also scheduled for Toronto and Vancouver, with others in Calgary and Edmonton after that. Prepare for information overload!
I love progress. It's always great to see things moving forward and opportunities expanding. I've got some cool news I'm dying to share with everyone, but I can't just yet. I'll be able to make an official announcement in mid-February so stay tuned!
On the same sort of topic, I just spent a week in the South looking at properties in Atlanta, Memphis, Dallas and Houston. All I have to say is Wow! There are some fabulous opportunities for the savvy investor down there. I really liked what I saw in Houston. It was especially nice to hang out in the sunshine in jeans and a t-shirt in the middle of winter. Very nice. I will be back down there in the next few weeks evaluating some properties and making them available to our investors. Those of you on our email list will get first crack at these deals, so if you haven't asked to be placed on our mailing list yet, do so now. You won't regret it.
Happy New Year everyone! I hope you're as excited about the coming year as I am. We have so much good stuff in the pipeline for this year that I'm almost afraid of it all happening! Even if only 25% of it works out it will still be a banner year.
I tend to spend way to much time on my computer, for a number of reasons, and during one of my resource searches I stumbled on a great real estate investor's forum that's been around since 2004. The forum owner and his sidekicks have done a great job at keeping the sleazeballs and marketers off the forum, and attracted a lot of good, knowledgeable people who re all there to share their knowledge and experience with anyone who cares to listen.The following paragraphs are right off their 'About Us' page and kind of summarizes a lot of what they're about:"Unlike most other real estate investing and "educational" real estate websites, we do not promote "gurus" in an effort just to gain affiliate sales. Our purpose is to help educate our members directly on our site. Through our forums, articles, member blogs, and BiggerPockets Blog, users can get an education that they'd spend thousands of dollars for elsewhere. We believe that there should be an alternative to high-priced, and often outdated guru materials, and BiggerPockets is designed to fill that void.
Our site is here for the consumer. We are not fans of the sleazy sales pitch and that shows if you take a look at our forums and other areas of the site! We kick out spammers and leeches and focus on providing our members with a safe learning, networking, and marketing experience free from pressure and solicitation."Works for me! I have spent way to much time on the site over the last few days, but it's been worth it.
So go ahead and check out BiggerPockets
and see what all the fuss is about! You'll see me lurking around there I'm sure.
The best advice to anyone managing a rehab is 'be there'. That is, be on site and manage the rehab. Keep an eye on the work being done, and ensure everyone is on task, on time, and on budget. Unfortunately for many of us, that's not possible due to the distance between our homes and our investments.
After being burned by a couple of contractors who started off great, then became total nightmares, I've developed a system which is now working really well. The main problem seems to stem from contractors wanting cash up front for work they haven't done yet. If you aren't going to be onsite watching over them, this is a bad idea. It's probably a bad idea even if you're onsite! The system I now operate under is work is invoiced on a weekly basis by the sub-trades, then vetted by the contractor for accuracy. The invoices and photos of the completed work are emailed to me the following week, and I approve them for payment. I have set up a separate bank account for my contractor that has $100 in it, and he has signing authority. As I approve invoices for payment, I transfer the appropriate amount into the contractor account at my bank, and I print the checks to a pdf file, and email it to the contractor. The contractor prints the pdf onto a blank check, signs it, and gives it to the sub-trade for payment. If you use a program like Quickbooks Pro, you can print your checks on a laser printer. The nice feature is that the checks don't have to be in your laser printer; they can be in your contractor's printer. By printing to a pdf file, the contractor simple puts the blank check in his printer, and prints the pdf file, and signs it and he's done.
There are some great advantages to this scenario, and few negatives. My sub-trades always get paid, and on a weekly basis, so they are happy and want to work on my jobs. Most other sites they have to wait for the contractor to get paid, then get around to paying them. That's usually 3 or 4 weeks if they're lucky. I know my sub-trades are getting paid because the checks are being made out to them, and I see a scanned copy of the check online after they cash it, so I know they got the money, and the contractor didn't pocket it. The contractors are happy because it minimizes their paperwork and they don't have to manage any money except their own. I also like it because I pay exactly what the sub-trades charge, without contractor markup.
The only place this doesn't work is with the larger jobs that need to be done, like roofing, new windows, or paving. However, for these types of jobs I know well in advance the work is being done, and those jobs usually require 25% to 33% down, with installments paid as the work is completed. This is easy to manage with a mailed or couriered checks if you don't want your contractor to handle that much money, or you can use the same process as with the sub-trades. As with the sub-trades. installments and final payments are not made without photos of the completed work, and sign-off from my contractor. I also try and make sure I have the chance to inspect the work personally on the larger jobs.
As an owner, you really must make the time to inspect your properties on a regular basis. This is even more important when you have major rehab work under way. I make a point of checking my properties on a monthly basis when work is being done, and every 4 to 6 months if it's operating normally. I know of investors who haven't been to their properties in quite some time and they wonder why things aren't running as smoothly as they expect. Property managers and contractors don't have the same attention to detail that you would with your own property. It just makes good business sense!
Every professional has his or her tools of the trade, and property investing is no different. I perform a quick analysis of prospective properties twice; once when I get a listing, and a second time when I get an approximate rehab cost and firmer P&L numbers. If it makes it to the next stage based on the initial analysis, I do a thorough analysis once I've done a walk through of the building and personally evaluated it.
SPOTR is a great little mobile app that I use to perform quick commercial property analysis, and it lets me decide quickly whether or not a deal is worth pursuing. I also use the features of the Unlimited version for more complex analysis. It's available for iPhone, iPad and Android phones. Check it out at thespotr.com
There's a free version, and an Unlimited version. The free version is great for a quick analysis. The Unlimited version is good for a more detailed analysis and generating 'what-if' scenarios, and sending reports out to clients.
Did you ever wonder why your investment advisor is always focused on selling you stocks, bonds, RRIF's, RRSP's, and mutual funds, and never recommends real estate? Because he's not making money on real estate, that's why! I stumbled on an old article by the Financial Post which kind of sums it all up nicely, and outlines the all the tax and other advantages real estate has over most of these other investment vehicles, and why your investment advisor isn't telling you about it (again, it's a money thing..he won't make any money off of it).Check it out on the Financial Post
People keep asking me "Why Cleveland" when I tell them where I am buying multi-family investment properties, and I keep telling them because the prices are low, vacancy rates are low, and rents are good. It's also because Cleveland itself is doing extremely well with positive job growth and lots of long term investment money coming in.
Marcus & Millichap's 4th quarter apartment report is out and things look great for continued growth in the rental market. Have a look at https://www.marcusmillichap.com/services/research/webreports/Cleveland/Apartment.aspx
. Contact me if you'd like to have a copy of the full report, or you can download it here
I sat through a very interesting webinar today discussing how 95% of the LLC's out there are not correctly set up to protect the owners, provide the proper tax environment, or protect the company itself. If you don't set up the LLC correctly, and maintain it properly, a judge can strip your company's status as an LLC and make it a partnership. Now you are personally liable, and everything you've worked so hard for can be taken away.
I. like many of you, have gone online and set up an LLC in a matter of minutes by filling out some basic forms and registered an LLC. Sure, you have an LLC now, but without the Operating Agreement and a lot of other paperwork to support it, the LLC is practically worthless as an entity. So you hired a lawyer to set up the LLC. Did the lawyer hand you a stack of paperwork to support the LLC including the Operating Agreement, Resolutions, and other supporting paperwork? Did he let you know about the annual filings, AGM minutes, and other supporting resolutions you need to have to maintain that LLC? My bet is no.
I'll list some of the questions you need to ask your lawyer in a future post, as well as some more details about what you need to help make your LLC bulletproof. I am not a lawyer, and everything I post here is my view on the subject and you must consult your own legal and financial professionals to confirm everything that you plan to do for your own LLC. Do your research, and get informed, as it could mean the difference between a retirement on the beach, and a retirement scraping by on a pension cheque.