What to Consider Before Investing in a Rental Home with an HOA

Posted on by Bay Management Group

Homeowners associations in America don’t have the best reputation.  They have a history of complaints of abuse, mismanagement, and wasted finances, and things don’t seem to be changing. However, there are some benefits to investing in a home that is part of an HOA.

The best thing to do is, before you invest in a rental property in the Montgomery County region, investigate whether the property is part of an HOA.  After all, as the property owner you are liable for the tenants that reside in your home and pay a monthly rent.  This means any violations of the homeowners association’s rules and regulations by your tenants may fall upon you in the form of hefty fines.

Today we will look at some of the things you should consider before investing in a property monitored by an HOA.  This way, when it comes to deciding whether an HOA is right for your property investment needs you will be better prepared to make a knowledgeable decision.

 

Common HOA Complaints from Income Property Owners

Many Complaints Arise From People Who Are Part of An HOA Homeowners Association

As mentioned earlier, there is no lack of complaints against homeowners associations across the country.  Some of the most common ones include:

  • Wasting of association funds
  • No access to official records
  • Poor communication
  • Hostility towards homeowners or tenants
  • Manipulation of elections
  • Withholding of facility or service use
  • Poor maintenance of common grounds
  • Secret meetings
  • Violation of Fair Debt Collection practices

That being said, not all HOAs are bad.  And, if you take your Montgomery County investment properties seriously and research everything before signing on the dotted line and placing tenants in your home, an HOA may actually help maintain the value of your property and thus your monthly rental rates.

 

HOA Questions To Help Guide You

Here are some of the most important things to consider before purchasing a rental property that resides in an HOA.

What Services Does the HOA Provide?

Each HOA will have its own set of specific services it provides your community, though there are some general things every quality HOA should offer.  These basics include:

  • Administration services
  • Financial services
  • Customer service
  • Communication
  • Maintenance

It is a good idea to get a detailed list of everything the HOA says it is responsible for before buying a property.  You might also consider questioning the HOA’s level of involvement in the community to ensure it is following through on its obligations and staying proactive.

 

What is the HOA’s Financial History Like?

Take a Look at the HOA's Financial History to See How They've Used Money in the Past

Though every HOA differs in terms of daily procedures, homebuyers are entitled to see their potential HOA’s financials to ensure the HOA is not in the red.  You can receive this document via the homebuyer or directly from the HOA.  It will likely include things such as:

  • The balance sheet
  • Yearly revenue from monthly dues
  • Reserve fund balance
  • Notice of pending lawsuits
  • Information regarding recent assessments
  • Percentage of homeowners behind on their dues

Unfortunately, reading complex documents such as an HOA’s financials can prove challenging.  You might need to have someone you trust in the finance industry to help you decode all of the numbers.

 

How Do The Common Grounds Look?

HOAs are responsible for maintaining the common area of the community.  Do not simply focus on the property you are looking to purchase.  Rather, get a look at the community as a whole.  If a neighboring yard looks disheveled, chances are the HOA is not implementing its rules and regulations as strictly as you may like.

Because first impressions are so important, it is crucial the entire community looks well groomed.  No prospective tenant will want to lease from you if the neighboring homes are not up to par on their curb appeal.  Plus, if you are paying what can sometimes be hefty monthly HOA dues, you should be sure the HOA fulfills its part of the deal and maintains the grounds.

 

What is the HOA’s Method of Communication?

Communication and Community Are Key With Homeowners Associations To Ensure Voices Are Heard

A large part of what HOAs do is communicate with the board members and community homeowners.  A reputable homeowner’s association will effectively communicate the community’s needs in a variety of ways to make sure everyone involved in the community is up to date.  This includes phone calls, emails, live chats, and even a website for homeowners to know what is going on in the neighborhood.

 

How Does the HOA Assessment Collection Work?

One of the most disliked things about HOAs is their collection of monthly assessment dues.  Often inflated, many homeowners have no clue how their monthly dues are being used to help the community.

HOA assessment money is important for the stability of the community.  It helps to pay for the common grounds all residents enjoy as well as extra activities put on by the association for the benefit of the residents.  In addition, this money also pads the reserve funds that cover the cost of any major repairs to the community.

It is the responsibility of the HOA to collect assessments from homeowners.  And, if you own a Montgomery County rental property, it is likely you are paying the monthly HOA dues as a benefit to your tenants.  As a homeowner you are entitled to know that the community’s money is being put to good use and is used responsibly.  In fact, there are laws in place protecting residents from shady HOAs that use the assessment money poorly.

You should learn before making a property purchase how the HOA handles its finances and do your best to ensure the HOA is fulfilling its obligations to the community with that money.

 

Does the HOA Have The Following Traits?

Though it can be hard to judge the overall feel of a homeowners association without having actual experience with them, it is important you do your best before purchasing an investment property.  Try talking to the board members to get a feel for who they are and what their roles on the board entail. Or, try to converse with prospective neighbors and see how they like the neighborhood and what they think of the HOA.

Here are the most important things your future homeowners association should do for the community:

  • Respect all homeowner interests
  • Enforce the democratic process where all opinions are heard and weighed equally
  • Offer community services and amenities to all residents
  • Maintain the community’s values
  • Enforce the rules and regulations
  • Meet the financial obligations set forth in the CC&Rs
  • Conduct ethical behavior in all matters with transparency to all community residents
  • Balance the community’s needs and those of individual homeowners

 

In the end, where you plan to purchase your Montgomery County rental property is a big deal.  And, when you throw in the possibility of the property being in an HOA community, there is even more to consider.

If you are looking to purchase a rental property that has an HOA representing the community, make sure to do your research thoroughly.  You are financially obligated to an HOA once you invest in a property that has one and you want to make sure that you are happy with how the HOA conducts its business, maintains the value of your neighborhood, and enforces the rules, especially the financial ones.

In addition, if you are looking for an experienced property management company to help you manage your Montgomery County rental property, contact Bay Management Group today.  Not only can we help you with all things property related, we help manage your tenants and ensure they are following the HOA rules and regulations perfectly.  By enlisting the help of Bay Management Group, your concerns about HOA properties will disappear.

How Many Properties Should You Buy and Manage as a Montgomery County Landlord?

Posted on by Bay Management Group

Rental properties are a great way to invest your money and supplement your income. This is especially true if you are investing in the Montgomery County area. With plenty of properties to choose from in a quickly-growing region with lots of appealing amenities, owning rental property in Montgomery County will provide you a steady cash flow from the start.

But how many investment properties should you commit to owning and managing? 

The answer to this question is not cut and dry. In fact, a number of factors can potentially affect how many investment properties you have in your portfolio. Thus, it is essential you evaluate your own individual situation before making a decision.

That being said, there are some general things all property owners in Montgomery County can consider when deciding the total number of rental properties they would like to purchase and manage.

 

Rental Property Questions To Ask Yourself

Investment properties provide excellent opportunities to build a passive income and fund things such as your bank account, vacations, or even retirement. However, there are several things to ask yourself before investing in every Montgomery County property you find matching your rental needs.

 

Question #1: What Are Your Big Picture Goals?

Be Sure To Know Your Goals Before Deciding How Many Montgomery County Properties You Should Invest In

Many people want to jump right into the rental property business and start making money as soon as possible. The problem is, with no long-term goals in place, it is hard to determine how many properties are needed to meet those goals. Worse yet, not having a basic plan can ruin any goals you may have for the future. After all,

“If you fail to plan, you are planning to fail” – Benjamin Franklin

 

Here are some things to figure out before choosing how many rental properties to purchase:

  • How will you be financing the first property you plan to purchase?
  • Are you looking to supplement your income and keep a full time job, earn enough money for fancy vacations, or secure enough for an early retirement?
  • How much involvement in the management of each property do you plan to invest?
  • What is your exit plan should your rental property business not yield your desired results?

 

Question #2: How Will You Finance Future Purchases?

Getting your first Montgomery County purchase under your belt is one thing; making multiple purchases down the line is an entirely new ball game. You must have a way to finance future purchases. In the end, no matter how many properties you think you should own and manage, you must have enough money in the long term to purchase successive properties.

Here are some ways to save money in an effort to increase the number of property purchases you can make:

  • Regularly evaluate your property value so you know exactly how much equity is built in
  • Research your properties and only purchase ones with positive cash flow
  • Get an interest-only loan and place the excess cash into a separate account as savings for your next purchase
  • Continue saving money just like you did for your first rental property purchase

 

Question #3: How Will You Improve Loan Approvals?

Despite how many Montgomery County properties you want to own, or how much money you want to make each month, the bank has a great deal of control over what you actually do.

Bank lenders want to minimize their risk when it comes to loaning money to investors looking to purchase multiple properties. In order to continue building your portfolio, you need to improve your serviceability and prove to the bank you will pay up each month.

Here are some great ways to convince banks you will follow through on your financial obligations:

  • Increase your income any way you can – take a job promotion or start a side business, and save, save, save
  • Invest in positive cash flow properties – banks tend to approve loans for those receiving positive cash flow each month
  • Get experienced in negotiating with lenders – present all of the reasons you will follow through on your loan obligations and why you make a good investor

 

Question #4: How Much Time Do You Have to Manage Multiple Properties?

How Much Time Do You Have to Maintain Your Multiple Montgomery County Rental Properties?

If you are like many property owners, you have a full time job in addition to your involvement in the rental property business. Owning many properties can quickly become overwhelming if you choose to manage them all on your own. And, if you overexert yourself and spread yourself too thin, chances are your career and properties (including your tenants) will suffer in the long run.

If you aim to own multiple properties, but do not have a lot of time to manage them on your own, one solution is to hire Maryland’s leading property management company, Bay Management Group. The knowledgeable staff at BMG can manage every aspect related to your rental properties. This includes things such as:

  • Vacancy advertisement
  • Tenant screening
  • Lease drafting
  • 24/7 maintenance and repair services
  • Regular property inspections
  • Legal backup
  • Strict rent collection procedures

 

In addition to employing the help of an experienced property management company such as Bay Management Group, you might consider partnering up with someone so that some of the tasks related to your properties are split. In addition, the finances and experience of a well-balanced partner can make your rental property business that much more successful.

 

In the end, the answer to the question regarding how many properties you should own and manage is this: as many as you want, as long as you are willing and able to work for it.

Everyone’s situation will differ and pose challenges along the way when it comes to purchasing multiple rental properties. However, none of these difficulties can prevent you from achieving your goals as long as you educate yourself in the rental property business, have clear goals in mind, and have a plan before jumping right in.

Additionally, you can enlist the help of Bay Management Group to take a lot of the stress of owning multiple rental properties away and make matters even easier to handle.

 

If you are looking to boost your Montgomery County portfolio and add more properties to increase your income, contact Bay Management Group today and see how we can help you manage your multiple rental properties, leaving you room for the fun things in life.

 

 

 

Dealing with a Tough Homeowners Association for Your Rental Property

Posted on by Bay Management Group

 

What To Do if You Own Property in an HOA (homeowners association) That Is Tough To Deal WithHomeowners associations (HOAs) are gaining popularity all across the state of Maryland and property owners are flocking to purchase property that is part of an HOA.  Take a look at this list to get an idea of just how many HOAs there are in existence right now, with additions consistently being made.

So why the increase in HOAs?

Homeowners associations appeal to many property owners because their aim is to maintain property values, serve the best interests of those in the community, and keep some order amongst a diverse group of people.  And, as a property owner that leases a home, these are great benefits.

You want your home to maintain value.  You want your tenants to have their best interests served.  And of course, you want a peaceful neighborhood so your tenants want to stay.

 

However, HOAs have a reputation for being difficult to deal with.  And unfortunately, this difficulty trickles down to property owners, their property managers, and even their tenants.

Thankfully, we have some great tips for handling a tough HOA that you and your tenants can take advantage of to ensure the best possible leasing experience.  In addition, if you employ Montgomery County’s leading property managers to care for your property and tenants, these tips can pass from manager to tenant easily during the move-in period.

Today we will look at what exactly a homeowners association is and how best to handle one if they are tougher than the norm.

 

What is a Homeowners Association?

A homeowners association, or HOA, is a legal entity created to manage and maintain the common areas of a community.  These common areas include places such as pools, clubhouses, landscaping areas, parks, streets, and roads.

And, as mentioned earlier, they are quite popular.  As of 2012, nearly 60 million Americans live in a community that is regulated by a homeowners association.

HOAs are typically established in communities that include condominiums, single-family homes, or townhouses.  And, as the leaders of the community, HOAs provide rules, called the “Declaration of Covenants, Conditions, and Restrictions” (CC&Rs), regarding what can and cannot occur within the common areas of the community.

Here are some of the key traits of a typical HOA:

  • They are usually non-profit corporations
  • They have the authority to enforce the bylaws within the CC&Rs
  • Membership of the HOA is mandatory for all those living within the community
  • Mandatory dues are collected monthly from property owners
  • There is an elected board of members, most of which are volunteer homeowners of the community
  • Many HOAs hire a property management company to conduct things such as maintenance, bookkeeping, and dues collection

 

In addition, HOAs provide services such as maintenance of common area landscaping, neighborhood security, activity organization for residents, and approvals for exterior home improvements property owners want to make.

 

How to Handle Strict HOA Rules

The Do's and Don'ts of How To Deal With a Tough Homeowner's Association (HOA) in Montgomery County, Maryland

All HOAs expect residents, whether owners or tenants, to abide by the community’s CC&Rs.  However, as a Montgomery County rental property owner, it is your responsibility, or that of your property manager, to ensure your tenants follow the HOA’s regulations.  In fact, here are some things most HOAs will want property owners to provide any tenant that leases their home:

  • A copy of the HOA’s CC&Rs
  • HOA rules and regulations must be a condition in all lease agreements
  • Property owners or their property managers will be held responsible for tenant violations
  • Tenants must communicate with HOAs via the property management company
  • Multiple tenant violations can lead to termination of residency

As you can see, there is a lot of responsibility that falls onto property owners and their property managers when leasing a home that is a part of an HOA.

Here are some ways you can lessen that burden and ensure a smooth tenancy that satisfies both your community’s HOA board members and your tenants.

Know Your HOA Bylaws . . .

. . . and follow them.  It is a good idea as a property owner to read your HOA’s CC&Rs thoroughly.  Your Montgomery County property manager should do the same.  This prevents any unusual violations, such as parking in your driveway, from occurring.  After all, violations result in fines and possibly termination of your tenant’s stay.

Communicate with Your Neighbors

One of the benefits of owning property within an HOA community is that all of your neighbors are in the same HOA as well.  Everyone is following the same rules set forth by the HOA and everyone pays the same monthly dues.

In the case your HOA begins enforcing rules that you feel are unnecessary, or hiking monthly dues beyond that of what is reasonable, reaching out to neighbors you already know to voice your frustrations will be a lot easier.  Plus, you can all band together and make a common complaint against the HOA board.

 

Get Approval for All Changes

Yes, this can be tedious, and often seems unfair.  However, living in an HOA means you must have approval for all exterior changes to your home and landscaping, backyard included.

To make things easier with a tough HOA that enforces every single bylaw perfectly, just get approval first.

Getting approval will protect you from fines, complaints from neighbors, and legal trouble.  In addition, it is important that your property manager enforce this with your tenants as well.

Make sure your tenants are aware they cannot make any changes, even small ones such as adding a pet fence in their backyard, without gaining prior approval.

 

Pay Your Dues on Time

To Avoid Issues, Be Sure to Pay Your HOA (Homeowner's Association) Dues On Time

This seems obvious, but a quick way to get on the wrong side of a tough HOA is not paying your dues.  If you refuse to pay your HOA dues, or even just fall behind, your HOA may have the power to foreclose on your home.  Chances are very slim that late dues would result in the foreclosure of your home, but that hefty price for falling behind on dues is not worth the risk.

 

If You Get Fined, Pay Up

Maybe you have fallen victim to the toughest HOA in the country.  As unfortunate as that is, if you receive a fine and the HOA acted within their power to impose such a fine, the best option is to pay the fine.

However, there are three additional options for dealing with an HOA fine if you adamantly believe you shouldn’t have to pay it:

  • Ask for a variance. This means you or your property manager are requesting the HOA make an exception to the bylaw violation.  If the HOA does not initially agree, they may hold a hearing where other homeowners can come to hear your case and make a decision.
  • Take legal action. If the HOA was in violation of their power, with the help of your property management company, you can file a lawsuit against your HOA in response.
  • Don’t Pay. Although not recommended, you can refuse to pay the fine.  However, if you are dealing with a tough HOA, risking additional fines and a possible foreclosure is simply not worth it.

 

In the end, dealing with an HOA can be difficult at times. However, there are some wonderful benefits in owning property in a Montgomery County HOA that you may feel are worth the potential extra hassle.

If you are looking to take some of the work off your shoulders, and the stress of dealing with a tough HOA does not sit well with you, contact Bay Management Group today.  Working solely in property management and ready to take on the task of managing your property, tenants, and tough HOA, BMG will assure you peace of mind.

Bay Management Group is knowledgeable about how to draft solid lease agreements that include HOA regulation compliance and will protect you should any legal issues arise.

In addition, we are exceptional at taking care of tenant screening and placement, maintenance issues, rent collection, and everything in between that involves your property and tenants.

So, contact us today and start handling that tough HOA in a proactive and beneficial way.

The Benefits of Investing in a Foreclosure

Posted on by Bay Management Group

montgomery-county-md-foreclosure-rental-property-investmentFor many people, investing in a rental property in Montgomery County will be one of the largest, and most stressful, purchasing decisions made to date.

Finding an ideal property on the market, in the right neighborhood, with enough amenities to appeal to prospective tenants, and of course funding the down payment, just scratches the surface of what goes into investing in rental homes.

 

But what if I told you there was a way to ease a bit of your down payment funding stress by reducing the cost of home buying?

 

Oftentimes the word “foreclosure” conjures up negative feelings, especially for those who are looking to purchase a home.  Horror stories of ripped out plumbing and filthy interiors scare even the most frugal of homebuyers from considering a foreclosed home investment.

However, the truth is, investing in a foreclosure offers some wonderful and unique buying opportunities.  Moreover, if you take the proper precautions, you can actually grab a deal on your next investment property and be well on your way to a positive cash flow via your foreclosure investment.

And, once your Montgomery County property manager places a highly qualified tenant in the residence, the money investment will really start paying off.

 

Today we will look at some of the often overlooked benefits of investing in a foreclosure in Montgomery County so that the next time you are in the market to purchase a rental property, you might just consider investing in a foreclosed home.

 

What is a Foreclosure?

What is a Foreclosure?A foreclosure is a legal process in which the lender (typically a bank) attempts to retrieve the balance of a loan they had previously issued to a homeowner who is no longer making payments on their mortgage.  In a foreclosure, the lender can also claim possession of the property since the homeowner, or borrower, is no longer fulfilling their financial obligations.

There are many reasons a homeowner goes into foreclosure on their property:

  • Unexpected job loss
  • Inability to work due to medical conditions
  • Excessive debt and mounting bills
  • Divorce or other family problems
  • Job transfers
  • Market crashes in which the property’s value plummets far below what is owed (also known as an “underwater mortgage”)

 

During a foreclosure, the lender has several options to resolve the issue of non-payment:

  • Revise the payment schedule to make the house more affordable to the homeowner
  • Put the home up for public auction
  • Take legal ownership of the home in hopes of selling it privately

 

In the end, a foreclosure is actually a complicated process that seeks to protect both lenders and homeowners.

The process usually occurs in many distinct stages depending on how the loan was originally structured and what the individual circumstances surrounding the foreclosure are.

In fact, most foreclosures take months to fully resolve and will largely depend on how the borrower decides to react to the initiation of foreclosure proceedings.

 

The Pluses of Montgomery County Foreclosures

Despite the problems some foreclosures create when it comes to purchasing one to add to your rental property portfolio, there are plenty of benefits that you can capitalize on if you do your due diligence before buying.

 

Discounted Price

Foreclosed Homes Typically Have Reduced Prices to Get Rid of PropertyMany times a foreclosure’s sale price will be marked down significantly from other properties in the same neighborhood.

And, since foreclosures are not limited to poor neighborhoods with no nearby amenities, chances are you will be able to find a great rental property in Montgomery County that will have great appeal to potential tenants.  All you have to do is a little research.

In the end, opening up your eyes to foreclosures makes properties that might otherwise be unavailable to you now available, and at a considerable discount.

 

Increased Bargaining Power

In addition to coming in at much lower prices than value market prices, homes that have been in foreclosure for a long period of time are sometimes easier to grab at even lower prices with a little bit of bargaining.

Homes that are in foreclosure hurt lenders—they are not receiving any of the money they agreed to loan to the borrower during a foreclosure and as a result, the lenders suffer financially.  Lenders want to get rid of foreclosed homes quickly so that they can begin receiving money again.

Using this knowledge to your advantage, you may be able to provide a seriously low offer to a lender.  You never know—they might consider your “lowball offer” just to get rid of a property that has been sitting on the market for a long time.

 

Quick Buying Process

Lenders are looking to sell foreclosures as quickly as possible so they can recoup as much lost profit as possible.

This means closing deals tend to happen quickly.

The lender, acting as the seller, will have no reason to back out last minute, making you a proud property owner once the papers are processed.  Then you can hire your trusted Montgomery County property management company and get a tenant placed in the property as soon as possible.

And what does this quick buying process mean for you?

With this faster buying process, monthly rents will start coming in faster than if you purchased a property the traditional way, giving you the financial freedom to potentially invest in additional properties.

 

Lower Down Payment

Typically, lenders will accept lower down payments from investors on foreclosures.  This gives first-time rental property investors a great opportunity to get started in the rental property business with a property that is more valuable, and without having to come up with such a hefty down payment.

One important reason lenders tend to consider lower down payments when trying to sell off a foreclosed property is because investors demand it.  Since foreclosed homes usually have lower interest rates, those investing in them want to have a matching lower down payment requirement as well.

 

Value Building

If you invest in a foreclosure at a significantly lower price than other similar properties in the neighborhood, and the values of those homes increase as a whole, your buyer’s percentage increase will be greater than even your next-door neighbor’s.

In addition, buying a foreclosure “as is” means you have a great opportunity to upgrade and renovate the property as you see fit.  These improvements will skyrocket your property’s value and demand higher monthly rent rates.

Lastly, if you decide to sell down the road, your overall profit will likely be much higher than what you originally paid for the property.

 

In the end, a foreclosed property does not have to be a deal breaker.  There are many reasons why investing in a foreclosure will work to your advantage and make you more money in the future.

If you are looking to purchase a property in Montgomery County, consider the foreclosures available in the neighborhoods that interest you.

Do some thorough research, offer a low deal to the lender, and see what happens.  And, when you have made the deal of the year on a foreclosed property, contact Bay Management Group right away to begin the process of placing a tenant in your new rental.

Experienced staff knowledgeable in advertising vacancies, screening tenants, drafting airtight lease agreements, and managing your property throughout the lease term is just some of what Bay Management Group can offer you.

Ultimately, we offer you the peace of mind that your property and tenants are well taken care of so you can enjoy other important aspects of your life.

Should I Buy a Low-Income Rental Property in a Rough Neighborhood?

Posted on by Bay Management Group

prince-georges-county-low-income-rental-property
When people look for a rental property to live in, they might first look for a “nice” neighborhood.

In fact, you’ll probably never come across someone who says, “I want to live in the roughest neighborhood in the area!”

As a result, you might feel that purchasing a rental property in a not-so-nice neighborhood is a waste of money.

Don’t think that way. You’ll always find people who want to live in more affordable housing, and it’ll cost you a fraction of what you’d have to pay upfront for a middle- to high-income property.

Let’s delve a little further into what you need to know when you consider buying a low-income rental property in a “rough” neighborhood.

 

What Prince George’s County Landlords Should Know About Buying Low-income Rental Properties

Place-Based Investing

The differences between the properties you find in a rough neighborhood and those in a nice neighborhood can be pretty vast.

That’s because properties in neighborhoods across the country usually reflect the general income levels of their residents. And when you search for investments specifically based on such criteria, it’s called “place-based investing.”

While higher-income neighborhoods tend to have a single category of “nice” houses, low-income neighborhoods present a range of properties that are inexpensive for numerous reasons.

These range from uninhabitable homes to the upper level of low-income properties that are still inexpensive but can present a number of benefits to savvy investors who know an opportunity when they see one.

 

The Purchase Process

prince-georges-county-md-rental-property-purchaseAcquiring rental properties in low-income neighborhoods in Prince George’s County can be done in a number of ways – including the incredibly cheap foreclosure auction.

Truth be told, regardless of what type of property market – whether booming, busting, or flat lining – there are always advantages to investing in a “rough” neighborhood.

For example, it’s possible to invest in a rental property for very little money that could rent for just a little cheaper than a property you had to pay full price for in a higher-income neighborhood. In that situation, you’d have fewer expenses and get a proportionally better return on your investment.

Think about it like this:

If you buy a house for $40,000 that rents for around $900 a month, you’ll make money quicker than if you paid $100,000 for a house that rents for $1,000 a month.

But, because low-income properties are often so cheap to purchase outright, you should probably make as large a down payment as possible.

Paying off your mortgage on these should take a lot less time than a home in a “nicer” neighborhood, so reduce the time you spend dealing with a mortgage from the start. The larger down payment you make, the sooner you can turn a profit on the property.

Also, while these properties are usually much cheaper than many others, keep in mind that you may have to spend some money rehabilitating them. Any time you acquire a rental property, include the costs of rehabilitation and other expenses in your considerations.

 

Dealing with Tenants

The biggest concern most Prince George’s County property owners have when it comes to low-income neighborhoods is that they attract low-income tenants.

Remember that low-income neighborhoods by definition feature people who aren’t capable of paying high rent, so you’ll always have to keep your rent rates on the low end. If you run into a financial issue and realize you have to raise the rent on your low-income tenants, you may end up with a lot of vacant properties.

However, low-income tenants don’t necessarily have to be more troublesome than middle-income people. You just need to screen every prospective renter properly so you don’t end up with a particularly problematic tenant.

The best way to handle interactions with this wide variety tenants and upkeep on your properties is to hire a rental property management company in Prince George’s County. They’ll handle all of your unwanted landlord duties and make sure your low-income property investments are manageable.

 

Keep an Eye Out for Red Flags

prince-georges-county-md-property-management-tips
If you think you might go through with purchasing a low-income rental property, there are still some red flags you should look out for. These deal breakers are pretty simple, and should be known to any rental property investor regardless of what sort of housing he or she considers purchasing.

First off: if the seller can’t provide you with statistics or other hard facts, you should hit the road and never look back. Some of these include:

  • Rental vs. vacancy rates
  • Neighborhood allure
  • Year-to-year year profits
  • Crime rates
  • Average income levels
  • Employment rate

One thing investors need to know how to identify at once is something called a “trap house.” These properties harbor a higher-than-usual amount of the criminal element and can be identified by the frequent in-and-out traffic of people engaging in illegal activities.

Any time a trap house is nearby, there’s a good chance you’ll hear about it again in the future once you have tenants move in – and it won’t be pretty.

If property crime is known to be seriously high compared to other neighborhoods nearby, don’t make an investment there, plain and simple.

Tip: Check out this blog post for more information on preventing crime in your rental properties!

The damage to the property (as well as the potential for damage) also needs to be taken into careful consideration.

If the property is in decline or has been neglected for far too long, it might cost you more trouble than it’s worth in maintenance bills.

You should also avoid buying properties in neighborhoods that include severely damaged homes as a result of fire, flood, or otherwise. And, if there’s anything happening that you could reasonably expect to either destroy the property or force your tenants out within a few years, don’t risk it.

The low-income properties you should focus on are those nearest to schools, shopping centers, and highways.

 

The Bottom Line

Some rental property investors might never take the risk and put their money into low-income housing in rough neighborhoods. And they’re missing out.

Sure, there are poor investments and bad tenants in every bunch – even in middle- to high-income neighborhoods. But if you’re an aggressive investor dedicated to growing your business, you can’t be afraid to get your hands a little dirty.

Plus, there’s always the option of seeking the extra help of rental property managers in Prince George’s County.

The best course of action is to always do your research before making any major investment decision. If you come to a solid conclusion that you’ll turn a profit on a rental property in a rough neighborhood, why not go for it?

 

5 Questions to Ask before Investing in a Vacation Rental Property

Posted on by Bay Management Group

invest-prince-georges-county-md-vacation-rental

According to the National Association of Realtors, in 2015 an estimated 1.09 million vacation homes were purchased for investment reasons alone.  Representing an increase for the first time in 5 years, it might be time for you to consider investing in a Prince George’s County vacation home that you can lease to tenants looking to enjoy a long vacation.

There are many reasons why people may be drawn to leasing your rental home for vacation purposes, whether long-term or short:

  • More available space than a hotel room for large families or groups of people
  • The opportunity for longer stays at a more reasonable nightly rate
  • Extra privacy away from other vacationers
  • The livability factor – appliances, furnishings, stocked kitchen, and more
  • Avoidance of winter or summer months, depending on preferences
  • Local living (i.e. experiencing the culture a small town like Laurel provides visitors such as state parks, historical roots, art galleries, and annual festivals)

Today we will look at some of the important considerations surrounding a vacation rental investment to help you decide whether leasing a vacation home is right for you or not.

 

Top 5 Considerations before Buying Vacation Rental Properties in Maryland

1. Is It Legal?

Before investing in a rental property you plan to later lease as a vacation home, it is important you check with your state and local laws regarding short-term lease agreements.  Some zoning laws and homeowner’s associations will put minimum stay requirements on lease terms and some will even go so far as to not allow any leasing of your home to strangers.

Take the neighboring Montgomery County for instance.  As of October 29, 2014 it was made illegal for any homeowner to lease their residence for 30 days or less in all residential zones.  This means that landlords using their properties as vacation rentals or anyone using the popular Airbnb service for extra income are violating the zoning code if tenancy lasted under 30 days.  This also means they are subject to the penalties that come with those violations

Recently, there was a push for an amendment that would allow all forms of short-term rentals to be legal in Montgomery County but you must be careful before you lease your residence as a vacation rental to avoid legal trouble.

 

2. Can You Afford It?

As with every major purchase, you must balance the cost versus the return.  Since real estate is not a liquid asset, you must consider the fact that it may not sell for a profit should the need arise.

prince-georges-county-md-vacation-property-owner-financial-decisions

In addition, more so than with normal rental properties, there are associated fees to pay whether the home is being rented or not, including:

  • Utilities
  • Homeowner’s association fees
  • Property taxes
  • Insurance
  • Furnishing
  • Repairs
  • And so much more

 

3. Do You Have a Business Plan?

Leasing your Takoma Park rental property as a vacation rental takes the same amount of work that any normal rental property does.

  • Advertising of your property’s availability on a regular basis
  • Thorough tenant screening
  • A lease agreement or contract detailing the rules for occupancy
  • Collection of payment
  • Inspections and walkthroughs to ensure no damage is being done to the property
  • Appealing to tenants that want current market trends and fancy vacation homes
  • Cleaning in between tenant stays
  • Handling of bookings and dealing with cancellations

In the end, leasing your home as a rental actually becomes more work because there is far less responsibility placed on your short-term tenants.

Unlike a more permanent living situation where your home is made to feel like their own, and where certain responsibilities are clearly defined as your tenant’s duty, vacation rentals are more luxurious and casual for tenants.  Being prepared for this is a must.

 

4. Is it Protected?

Since the influx of tenants in and out of your rental property will be more than the normal rental property turnover, there is bound to be an increase in vacancies.

vacation-rentals-prince-georges-county-must-be-protected

Be sure to protect your vacant rental as you would any other property you lease.  Try to make it look as though someone is occupying the property to avoid trespassing, vandalism, and burglaries and conduct regular visits to ensure your property is safe.

 

5. Is it Vacation Ready?

Vacation rentals are supposed to come as a complete package.  It is your duty to make it feel like home rather than like a hotel so that tenants will enjoy spending their down time there and hopefully return as repeat customers each season.

Here are some great ideas for not only furnishing your property for everyday living, but for making it feel extra special for those on vacation:

  • Include daily cleaning supplies, a mop and vacuum cleaner, as well as things like replacement light bulbs.
  • Decorate – hang artwork or photography on the walls, add throw pillows to the couch, or place flowers in the kitchen. It’s the little things that will make a difference.
  • Include hangers in the closet and ensure that the dressers are free and empty. Vacationers want lots of space, especially in a vacation home.
  • Have books, magazines, and even board games for your vacationers to enjoy – it is a vacation after all!
  • Include TVs, DVD players, radios, and clocks.
  • Provide bedding and linens.
  • Consider providing local tour guide information so your tenants can visit the hotspots.
  • Take it one step further and provide a “Welcome Book” for your tenants to refer to.

In addition to making your Bowie property look nice on the inside with décor, it is crucial that you clean it from top to bottom for the next tenant regardless of how long your previous tenant stayed.

Consider hiring a cleaning service so that you don’t have to take that task on yourself.

Remember, this is not a typical rental property where you can require your tenants to thoroughly clean your home.  While a general sweep up is reasonable, don’t expect anything more than that.  You don’t clean your hotel room when you leave do you?

 

Final Thoughts

Owning a great rental property and leasing it as a vacation home can be very lucrative, but there is a lot to consider.  Just because the lease terms are shorter doesn’t mean there is any less work to do.

In fact, you may notice more work is involved due to a higher turnover rate and more landlord responsibilities.

If you are considering leasing your Prince George’s County home as a vacation rental, and need help with all aspects of managing the property, call Bay Management Group today and see how they can help.

As one of the leading property management companies in Maryland, Bay Management Group can help you with everything from screening your tenants, to drafting a lease agreement, to payment collection, and more.

Take your own vacation from property management and let Bay Management Group handle all of the challenges associated with making sure your vacationing tenants are happy.

 

What to Look for When Investing in Rental Properties

Posted on by Bay Management Group

So you are thinking about investing in rental properties but not exactly sure where to begin.

what-to-look-for-in-maryland-rental-property-1What makes a great rental property anyway?

Finding the right investment property can be overwhelming, especially for first-time landlords.

Buying an investment property in Maryland is not the same as flipping a house or even buying a home.

While some aspects may be the similar to buying your first home, there are other important factors to consider when purchasing a rental property.

 

Costs to Consider

Most first-time rental property investors are surprised by the hidden costs associated with becoming a landlord. When searching for your first investment property, take into consideration other costs than just the property’s price tag.

Property Taxes

When calculating the amount you should charge in rent, do not forget to cover the cost of property taxes, which vary throughout Maryland. If the investment property you are considering is in a county with hefty taxes, but does not have the potential to attract high value renters, then it is not worth the investment.

Tenant Search & Vacancy Allowance

Marketing your rental property to the right tenants is not always as easy as listing it on Craigslist. Finding and screening for high value tenants can be a costly process to do on your own. Also, the longer it takes to lease a property, the higher the cost becomes of owning it.

You can avoid these costs by working with a property management company. A great property manager will offer services like property marketing and tenant screening.

Rental Registration

Some states require all rental properties to be registered. For example, certain counties in Maryland have recently passed laws that require a licensed inspector to examine the property before it can be legally leased out.

Even if your state does not require rental registration, you still may be responsible for other costs and fees, such as lead inspections or association fees.

 

Determining the Right Neighborhood for Your Investment

Finding the right neighborhood in Maryland is the first step to finding the right rental property. The quality of the neighborhood is going to determine the quality of your tenants, your potential turn-over rate and your rent level. To attract high value tenants, look at the following features of the neighborhood:

Schools

top-considerations-choosing-howard-county-rental-propertyLook for neighborhoods within reputable school districts. Great schools attract long-term tenants because parents prefer not to bounce their kids from school to school by moving.

Montgomery County and Howard County both offer many reputable schooling options, making them prime locations to rent to families.

Jobs/Commuter Time

If the neighborhood has been hit harder than most during the previous recession, it might not be the best investment. You need a neighborhood that has a low unemployment rate or a high job growth rate.

On the other hand, you may want to look at investing in a neighborhood that has a reasonable commute to a larger city. For example, if you are a landlord in Maryland looking to attract high value renters who work in D.C., you should consider some of the neighborhoods in Prince George’s County that have been recognized by top media outlets.

If you want to invest in one of these neighborhoods, but your commute is unreasonable, or don’t have the time, you can still purchase the property and know it will be in good hands. Simply hire a reputable property management company in Prince George’s County to manage your income property.

Crime Rate

When researching neighborhoods, be sure to look at the crime rate. Buying a rental property in a neighborhood with a high crime rate comes with additional costs, such as the cost of installing alarm systems and/or security bars to windows. You are also more likely to attract low value tenants. These tenants are more prone to do damage to the property, have a higher rate of delinquency and a higher turnover rate.

Amenities and Development Plans

Look for a neighborhood that will provide your tenants with ample amenities. A community close to cultural centers, shopping and entertainment outlets are best, but also be aware of any future development plans. The perfect neighborhood you find today might become an example of urban sprawl in the future. Increased development can also lead to problematic parking situations for your tenants. One of the most undervalued criteria for potential renters is available parking. Please keep this in mind when you are searching for your investment property.

Finding the Right Investment Property

When selecting the right physical property, here are some basics to keep in mind:

Curb Appeal

howard-county-property-owners-consider-landscaping-to-attract-tenantsUnlike when flipping real estate, curb appeal is not necessarily a selling point when investing in a rental property. Yes, you want your property to look attractive, but keep in mind that the more complex the structure and/or landscaping design, the higher the cost of remodeling and keeping the property looking up to date.

When investing in a rental property, you should value adaptability over aesthetics. Can the property easily be remodeled to fit changing styles? If a tenant causes damage, how easily and cheaply can it be repaired?

Age & Condition

Again, investing in a rental property is not like flipping houses. The bargain fixer-upper you selected might cost you more in the long run than the newer property you passed over. Depending on your state’s tenant laws, an older property will cost even more when converted to a rental property because it will need additional remodeling to bring it up to code.

If you are not comfortable evaluating a prospective property yourself, hire a building inspector/general contractor to help evaluate the cost. It is a small investment that could save you from a money pit.

Utility Maintenance

Air conditioners will break. Pipes will leak. Emergency repairs will happen. You can keep the cost of these repairs low by ensuring that the property has easy access to its utility systems and they have been properly maintained by the previous owner. Making sure that the HVAC systems have the air filters changed every 6 months is very important. In multi-family buildings, Bay Management Group checks on every multi-family unit during the spring and fall to do preventative maintenance on the HVAC systems.

Similarly, hiring a property management company would also help keep the cost of emergency repairs down. It would also give you greater peace of mind, knowing that you won’t be the one woken up at 3 a.m. because a water heater broke. The right property management company will provide 24/7 emergency repair service for its clients.

 

Having the Right Property Management Partner

bay-management-howard-county-property-manager-logoBecoming a landlord isn’t easy, and becoming a profitable one is even harder. Yet, hiring a property management company can relieve some of the stress and costs of owning rental properties.

The best companies will work with you from the start by recommending inspectors, and continue to support you tenant after tenant with rent collection, evictions and monthly inspections.

Still have questions? No problem.

As the leaders of property management in Prince George’s County, Bay Management Group is happy to walk you through all of the steps involved in your next investment. Contact us online or call the office today to speak with an experienced property manager.