Investing Tips for Single-Income Couples in Howard County

There are many reasons why your family might be living off a single income.  Maybe one of you is taking some time off because you have children to care for.  Or, one of you may be attending school.  Regardless of the reason, many single-income couples still want to invest in Howard County rental properties.
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After all, investing in rental property is a great way to supplement your monthly income.  And, if you and your partner are currently living off one income, any extra positive cash flow is most likely welcome.

Today we will share some property investing tips for single-income couples in the Howard County area looking to get into the rental property business.

 

Investment Tips for Single-Income Couples

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Purchase in Strategic Names

For those couples that have an above-average income (despite it being a single-income household), consider taking advantage of one of the most common strategies used in property investments – purchasing in strategic names.

By negatively gearing your investment and having the higher-income earning spouse (or only income earning spouse) make the purchase, you will be able to offset the full value of the tax deductions against your income tax.

Not sure what that means? 

Here are some facts about negative gearing and how it may affect single-income couples looking to invest in rental property:

  • Negative gearing occurs when the cost of owning a rental property outweighs the income it generates each year. This creates a taxable loss that can offset against other sources of income to provide a tax savings.
  • This only becomes profitable when the property is eventually sold in a housing market where property values are rising not falling.
  • In this situation, the investor must have the income to cover the shortfall between income earned and interest due until the property is sold.
  • The property’s interest rate must be locked in at a low rate as well because a variable interest rate will create more of a shortfall between income earned and interest due that the investor must cover.

Negative gearing an investment property is not a quick and easy investment tip for single-income couples.  This type of financial decision is very complex and needs careful consideration.

 

Invest in a Family Trust

Setting up a family trust and investing in assets such as rental properties through it instead of your individual name may save you a large amount of money in household tax fees.  Since the trust is tax-free, distributions can apply to lower-income families (such as a single-income couple).  However, keep in mind that the beneficiary of this family trust will need to pay the taxes.

This investment strategy will not work for negatively geared investments since you cannot distribute a loss when using a family trust.  It will, however, give the single-income couple control over the property despite not having legal ownership of it.

 

Purchase Property Using a Land Trust

Another type of trust that may be beneficial for investing in a Howard County rental property is the land trust.  Since a trust is simply an arrangement in which someone holds something of value for the benefit of another party, a land trust can be explained as an arrangement in which someone holds the title to a piece of real estate (e.g. your rental property) for the benefit of another party (e.g. the single-income couple).

Here are some of the top reasons you might consider using a land trust to invest in rental property:

  • The beneficiary of the trust remains private
  • Easily transfer interests of the property
  • Avoid the costly and time consuming probate process
  • Purchase price privacy
  • Possibly avoid transfer taxes

Again, consulting with an accountant or financial advisor before investing in rental property using a trust of any kind is your best option for protecting you and your family.

 

Get Life Insurance and Other Income Safeguards

If you are the sole income-earner, having income safeguards in place is essential to you and your partner’s financial security and stability.  Should anything happen to the sole breadwinner in a single-income couple such as an injury, illness, or death, financial disaster can creep in quickly.

Having life insurance will secure the financial well being of the non-income earner and other family members should the sole income earner pass away.  After all, if you invest in rental property and pass away leaving your partner without a job, and with bills to pay, food to purchase, shelter to pay for, possibly kids to care for, and a rental property to handle, they are going to need some sort of lump financial sum to help.

In addition, having other income safeguards such as short-term disability helps protect all of your assets, including the rental property you invested in.  Short-term disability is great for times when the sole earner becomes too injured or ill to work, but has not passed away.  Sometimes covering up to 60% of an employee’s weekly gross income, short-term disability can help with life’s daily expenses and the maintenance of a rental property.

Altogether, having financial safety nets in place is even more crucial when a single-income couple decides to invest in something as large as a rental property.

 

Tips for Investing as a Low-Income Earner

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Just because there is one income earner in a couple does not mean that earner makes enough money to purchase investment properties left and right.  However, it is possible to invest in Howard County rentals as a low-income earner by following some of these exceptional tips:

  • Understand how much you can realistically afford
  • Come prepared with a large down payment
  • Reduce your current debt as much as possible before applying for a loan
  • Compare different loan types
  • Use equity in any existing properties you may own
  • Research the market and purchase prices for properties
  • Have an emergency fund for rental property maintenance

 

Though many of these tips are similar to what any property owner should do before investing in a rental home, as a single-income couple, these tasks are more vital than ever before.  When relying on one person’s lower-than-average income to pay for everyday life, in addition to a rental property, there is a lot of preparation that should take place before jumping in and purchasing a property.

There are plenty of options available for those single-income couples looking to invest in a Howard County rental property.  And, if the proper precautions are taken, becoming a property owner may not be as difficult as you might have originally thought.

If you find yourself a property owner that also works to provide for your family and you want a break from managing your property on your own, contact Howard County’s top property management company, Bay Management Group.  We have experienced staff on hand to take the burden of managing the day-to-day tasks of your rental property off your hands.

By employing Bay Management Group you can concentrate on spending what little time you have free from work with your partner and family.  The peace of mind that Bay Management Group offers, in addition to the full spectrum of property management services we provide, is priceless.


8 Ways to Instantly Improve Your Rental Property and Boost Its Value

improve-rental-property-boost-valueAs a Montgomery County property owner, you want your investment properties to appeal to high-quality tenants, bring in the highest monthly rent possible, and of course, increase in value over time.

Good news:  There are things you can do right now to improve your rental property’s value. 

These immediate things can boost a rental property’s value, attract higher paying tenants, and pad your bank account.

Here are the top updates you can make to improve your Montgomery County rental property today.

 

Top 8 Improvements to Increase Your Rental Home’s Value Today

1. Upgrade Plumbing Fixtures

Faucets, sinks, and sprayers in your rental’s bathrooms and kitchens have the tendency to turn dingy and become outdated.  That’s why it is suggested that every 10 years or so, regardless of their condition, you replace all plumbing fixtures with more modern ones.

Chrome is now the standard when it comes to plumbing fixtures.  If you want to splurge and really make your rental home’s interior stand out, consider investing in high-quality, refined finishes such as bronze or brushed nickel.  Just keep in mind that your rental property’s plumbing fixtures should all match to keep a nice consistent appearance throughout.

2. Increase Storage Areas

increase-storage-areas-improve-property-valueTenants love additional storage in their homes, especially when it comes to bedroom closets.  However, adding storage to other areas of your rental as well will certainly appeal to those interested in leasing your property.  For example, you can add hooks in entryways and bathrooms for hanging keys, purses, and bathroom towels.  In addition to boasting a large walk-in closet, you can add closet organizers to capitalize on the available space.

If you want to invest a little bit more money in the hopes of making it back with a higher monthly rent amount, try installing permanent shelving in your garage, creating built-in shelves or wall storage in family rooms, or even adding a shed in the backyard.

 

3. Add Architectural Design

Spicing up a boring room is easy when you focus on the details.  For example, adding crown moldings to join the junction between the walls and ceiling is a simple way to add elegance to any room.  There are many styles of moldings available, from minimalist to ornate, and you can choose the one to match the overall look and feel of your rental.

In addition to crown moldings, consider upgrading your rental property’s baseboards.  There is nothing worse than filthy, beat-up baseboards.  If you want to take things a step further, there are decorative trims you can add to the top of your baseboards to make them more stylish.

 

4. Change Windows and Doors

change-windows-doors-rental-property-increase-valueThere are many benefits to changing out your rental property’s windows and doors.  In addition to adding an aesthetic appeal, it can reduce outside noise, lower heating and cooling and bills, and even increase the natural light that is allowed into the home during the day.  All of this is going to be an attractive selling to point for any prospective tenant looking to lease a home in Montgomery County.

Again, if you want to invest a little more and really stand out amongst the competition, consider adding French Doors that lead out to the backyard rather than keeping the standard sliding door in place.  French Doors add elegance, open up the area, and let beautiful light in.  In addition, you can add skylights to brighten up areas of the home that may be lacking.

 

5. Change the Overall Floorplan

Depending on how much money you have allotted to improve your Montgomery County rental home, you may be able to go so far as to change the entire layout of your property’s floorplan.  For instance, you might take down a wall that exists between the kitchen and living room to open up the area.  Or, you might expand on the master bathroom’s accommodations to add things such as his-and-her sinks, a larger bathtub, or an upgraded shower.

Other ideas include taking space away from a room to make another room larger.  For example, you might make your property’s living room area smaller to make space for a walk-in kitchen pantry.  The possibilities with floorplan changing are limitless, so long as your finances allow for it.

 

6. Wash Your Property’s Exterior

wash-rental-property-exterior-increase-property-valueOne way to improve your property that many people may not think of is washing the exterior of their rental property.  Something as simple as scrubbing the main sections of your home with sponges and a bucket of soapy water will do wonders to make your home look more alive.  And don’t forget to clean the rain gutters and windows while you are at it.

Additionally, you can power jet wash your driveway, sidewalks, and pathways to get rid of dirt and stains from years of use.  Just remember, you should not power wash the actual exterior of your home.  The power of the stream can wash away paint and even damage brick.

 

7. Re-caulk Taps, Pipes, and Showerheads

In an effort to fix water damage and discoloration that results from cracked caulking around things such as taps, pipes, and showerheads, you should re-caulk all sealed surfaces in your property.  Not only will this help with any dripping issues you have in the kitchen or bathrooms, it will make your seals look fresher and more inviting.  Just make sure you use the right shade of color so that the new caulking doesn’t clash with the surrounding area.

 

8. Upgrade Countertops

Many rentals utilize cheap laminate on both their kitchen and bathroom countertops.  Unfortunately, this material is prone to damage and discoloration from liquids and burns.  Installing granite, slate, quartz, or other solid material for countertops will make any kitchen or bathroom look better.  Plus, the countertops will be durable and look better, even with prolonged use.

 

In the end, there many things you can do to improve your Montgomery County rental property.  Even choosing just a few options from the above-mentioned list will greatly improve the overall look of your rental.

If you own a property in Montgomery County and are interested in improving your rental to entice high-quality tenants to lease from you, try adding some of these things to your to-do list when it comes to staging your vacant property.

And, if you want an even better experience once your tenants have been placed in the property, contact Bay Management Group today.  As Maryland’s leading property management company, and with experience in tenant screening, lease drafting, rent collection, and more, Bay Management Group can handle everything related to your rental property so you can rest assured your property is handled in the best way possible.


Setting 2017 Goals for Your Rental Property Business

setting-2017-goals-rental-property-businessAs we readily welcome 2017, the importance of setting goals rather than resolutions cannot be underestimated.

But how are goals different?

Whereas resolutions are the hope that you will achieve something, goals are the plan that will garner your success.

Today we will explore the importance of setting 2017 goals for your rental property business and some top goals you may be interested in setting for yourself so that you can have the most successful year yet.

 

Why Set Montgomery County Rental Business Goals for 2017?

Setting goals for your Montgomery County rental property business will do several things, so long as you follow through on them:

  • They propel you forward. Goals are solid ways to achieve what you want.  They provide you a starting place, help you visualize a concrete endpoint, and fill in the middle with how you are going to get there.
  • They break it down. Oftentimes dreams seem impossible to accomplish.  Even though you want to hit that end result and call yourself a success, your dreams can appear complex and daunting.  Goals help break your end result into easier-to-maintain milestones.  This makes moving forward with progress much easier.
  • They fuel ambition. As you begin to hit each milestone (or goal) that you have set up for yourself, you become more confident in your abilities to obtain your end result.  Not only do goals hold you accountable for your actions, they provide the necessary inspiration to push forward even when things get tough and you want to give up.
  • They help you understand you failures. If you fail to set a goal for yourself, and you experience failure, how can you measure that failure and truly learn from it?  Goals will show you what is working and what is not.  They will teach you where your weaknesses lie, and where your strengths shine.  They will allow you to re-evaluate your plan so that you achieve the ultimate end result.

In the end, setting goals will give you a solid path to follow on your way to accomplishing your dreams.  Whether your goal is to quit your corporate job and manage your properties full-time, fund your retirement, or simply have extra cash on-hand for extra vacations, setting property goals for 2017 will clear the way for you to achieve things you never thought possible.

 

Top Goals Any Property Owner Would Love to Achieve

Whether you self-manage your rental properties or enlist the help of Montgomery County’s best property management company, all property owners aiming for success in the rental property business should set the following goals for this upcoming year:

 

1. Befriend Those in the Real Estate Industry

 befriend-others-real-estate-businessNetworking with those that are in the real estate, rental property, or even property management industries can be valuable to your overall success.  They have the knowledge and resources that come with experience and can teach you a thing a two about being successful in the rental property business.  What’s better, they can share with you their past failures, teach you what they learned in the process, and help you avoid making the same mistakes.

In addition, you can meet many like-minded people by joining your local landlord association.  By helping property owners with a multitude of property management related problems, you will learn from other members how to be a better property owner and how to handle your tenants more efficiently.

 

2. Get Organized

There is nothing more harmful to a business than poor organization.  Ultimately, it is your responsibility to maintain proper bookkeeping practices when it comes to your rental properties.  And, if you fail to do so efficiently, you may lose your rental property business altogether.

Legal documents relating to your Montgomery County rental properties, tenants, and expenses must be saved in a secure place.  And you must be able to access them at any given time.

Staying organized from the start will cut down on any missed paper trails, prevent loss of important documents, and will be especially helpful if you plan on building your investment property portfolio in the near future.  Every property you lease should have its own separate filing.

If this sounds like too much work for you, don’t worry.  Property management companies like Bay Management Group can handle all of your bookkeeping so you never have to worry that something is missing.

 

3. Make Tenant Screening a Priority

prioritize-tenant-screeningUnless you are lucky enough to have perfect tenants that don’t plan on leaving anytime this year, a great goal to set for yourself is to work towards achieving just that – perfect tenants.

The way to meet this goal is to make tenant screening a priority.  If you do not already have a Montgomery County property management company handling tenant screening for you, make sure to update yourself on everything related to proper screening procedures.

For instance, in addition to checking for red flags such as low income, poor references, prior evictions, and any past criminal behavior, it is crucial you do not violate any of the housing discrimination laws that are in place to protect tenants.

Here are some great tips to add into your 2017 goal of better tenant screening:

  • Set high standards. Do not accept any tenant (no matter what) unless they meet standards such as earning three times the monthly rent, have solid references, zero evictions, and a clean criminal record.
  • Pre-screen before a showing. Never show your rental to anyone that has not already met your initial standards.  This will help weed out the bad tenants and save you time.
  • Create a thorough application. This is essential to making sure you are choosing the right tenant for your property.  It should include a multitude of questions so that you can understand what kind of tenant they are likely to be while residing in your rental.

Having a concrete tenant screening procedure in place is one of the most important foundations of your rental property business success.  And, even if you already have one, there is always room for improvement, so set out this upcoming year to make it better.

 

4. Create a Tenant Retention Plan

Besides landing the perfect tenant and placing them in your Montgomery County rental home, the next best thing is keeping them in your property long-term.  This is where a retention plan comes into play.

Sometimes, the best way to retain a good tenant is to offer them incentives such as cash, gifts, rent discounts, utility payments, and property upgrades.  In addition, fostering sincere relationships with your tenants and addressing their needs (such as maintenance requests) will help to encourage them to want to stay.

The important takeaway here is that you should have a list of ways in which you plan to keep your tenants in your property for the duration of their lease agreement, and beyond.

 

5. Employ a Property Management Company

employ-property-management-companyIf you have not already done so, one of the biggest goals you should set out to achieve in 2017 is the employment of a high quality Montgomery County property management company such as Bay Management Group.  Here are just some of the reasons why:

  • Experience and knowledge about the rental property industry
  • Bookkeeping services that are transparent and legally compliant
  • Strict and thorough tenant screening procedures
  • Exceptional customer service for property owners and tenants

With a property management company on-hand to help you with all things property-related, not only can you achieve success with little effort thanks to their experience, but your time is also freed up to pursue other goals you have set out for yourself.

 

So, contact Bay Management Group today and share your 2017 rental property goals with us.  We will be able to answer all of your questions and get you on your way to the most successful year you have ever had.


The Pros and Cons of Keyless Entry Systems in Rental Properties

When it comes to keeping your Howard County rental property safe from unwanted outsiders, there are plenty of precautionary actions you can take, including: installing a high-tech alarm system, strategically placing lights around the property to deter criminal activity, and ensuring all windows close properly and lock securely.
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But have you given much thought to the locks that are on your entry doors? 

As smart home technology increases with automated home security, keyless entry systems are quickly following and gaining popularity.

It used to be that only in the movies did people see the keypads that use a number sequence to open the door to someone’s home.  However, now widely available to the public, these keyless entry systems have jumped out of the movies and into reality, and are becoming the norm for many homes.

If you own a Howard County rental property and are looking for a unique way to keep it safer for the tenants that reside there, you may want to consider installing a keyless entry system on your entry doors.  But, before investing that kind of money into what can be an expensive technological upgrade, take a look at the pros and cons of having a keyless entry system in your rental property.

 

Benefits of Keyless Entry Systems in Howard County Income Properties

Here are some of the great benefits your Howard County tenants will enjoy, should you decide to install a keyless entry system in your rental property.

 

1. No Physical Key Required

benefits-keyless-entry-howard-county-rental-propertyPeople like keyless entry systems because they are convenient.  With so many keys hanging off your keychain, people typically welcome the chance to take one off the ring.  In addition, without having to use a key to enter the property, there is no need to fumble around in the bottom of your purse, pocket, or briefcase looking for the house key.  Plus, if you are in a hurry or have your hands full, being able to use the keypad rather than a key makes life much easier.

For those worried about the battery on a keyless entry system dying, don’t.  Most keyless entry systems have a key cylinder override or other form of backup system to ensure that if your batteries die or the power goes out, you will not be locked out of your home.

2. Speaking of Being Locked Out . . .

Keyless entry means never being locked out of your home because you lost or forgot your keys somewhere.  Instead, you simply enter the code on the keypad and enter your house.  Better yet, for added security, some of the most advanced keyless entry systems are fingerprint activated so you can extend entry to your closest friends and family without ever worrying that someone unwanted knows the code to get into your property.

 

3.  No More Key Under the Mat

key-under-mat-howard-county-rental-propertyFamilies who fear being locked out of their home have long practiced hiding a spare key somewhere near the door.  However, this poses a huge security risk.  Those looking to break into your home are aware that many people hide a spare key outside and are usually able to find it and gain entry into the home.  By providing your tenants with a keyless entry system, you are better protecting them and their personal belongings.

 

4.  Tracking System Included

One of the biggest benefits of having a keyless entry system is the ability to track who is entering and leaving the property at any moment.  If your rental home is equipped with an automated security system, you may be able to receive notifications on your smartphone or via email when a door opens or closes on your home.  This is great for those who are on vacation and fear someone breaking in.

Additionally, you can assign different codes to different people depending on the role they have when it comes to entering your home.  And, if for any reason you feel a code has been compromised, or you no longer want to allow a specific person entry, you can easily deactivate a code to prevent further entry.

 

Drawbacks of Keyless Entry Systems in Howard County Rental Homes

Despite keyless entry systems being beneficial in many ways to your Howard County property, there are some cons to consider before investing in this type of technology.

 

1.  There Are Still Accessories

howard-county-property-management-keyless-entryOkay, so you may not have a key to deal with anymore, but that does not mean you are free of the accessories needed for keyless entry systems.  Some of them come equipped with a remote for unlocking your door as you pull up to the house or locking things up as you drive away.  Yet, this poses the same problem that a key does: if you lose or misplace the remote, you run the risk of someone finding it and potentially entering your home.

The one way to solve this issue is to forgo giving your tenants the remote to use.  Sticking with the keypad alone is going to be the best way to keep your property secure.

 

2.  There is Some Maintenance Required

Changing your codes frequently is one of the biggest hassles you will have to deal with when it comes to a keyless entry system.  Imagine what the keypad might look like after lots of wear using the same code.  It will be obvious to anyone looking at the keypad what the code is.  This defeats the purpose of having a keyless entry system.

Furthermore, you should maintain a master list of some sort if several codes are assigned to multiple people, which of course takes effort and organization. You do not want your codes being handed out to just anyone, and it is a good idea to keep close tabs on who has access to your home at any given moment.

 

3.  Keyless Entry Systems Cost More

keyless-entry-systems-expensive-rental-property-howard-countyFor a traditional key and deadbolt lock, you might spend upwards of $50.  Upgrading to a keyless entry system may set you back a couple hundred dollars, possibly more if you opt to integrate it into a bigger home security system.  In addition, you may have to pay monthly fees and have additional charges for specific actions.

 

Your Howard County rental property’s security should be a priority to you.  After all, protecting your property and the tenants that reside there is important.  However, how much you want to spend on security is a largely personal matter.  There are many factors that play into how much you are willing to put into your rental property’s security, and installing a keyless entry system may or may not fall within that budget.

If you own a Washington DC, Laurel, Montgomery, Anne Arundel, or Howard County rental home and are looking for more security to add to your keyless entry system, entrust your property to Bay Management Group.

 


The Investment Property Owner’s Guide to a 203(k) Loan

203k-loan-montgomery-county-rental-propertyIf you are looking to purchase a Montgomery County rental property that needs a little extra TLC, and have noticed that the lenders have become very strict with loan approvals, you are not alone.

And, in light of this tight-fisted approach, investing in a fixer-upper rental property becomes problematic, even for a seasoned property owner.  In addition to a large down payment, exceptional credit, and all of the other hoops you must pass through for a loan approval, you must have enough cash left over to make home improvements in order to make a fixer-upper appealing.

So what is an investor to do when he needs to purchase a home that requires extensive remodeling?

Though there are plenty of creative ways to finance a rental property in the Montgomery County area, if you are looking to purchase a residential rental property that requires renovation, you may benefit from getting a 203(k) loan.

 

What is a 203(k) Loan?

An FHA 203(k) loan allows you to borrow money for a property purchase and home improvements.  In other words, this type of loan finances both the cost of the property and the amount needed to fix it up, all in one mortgage.

Guaranteed by the FHA, this loan is less of a risk to lenders than other types of loans.  With the lower risk level, you are more likely to be approved and with a lower interest rate than a traditional bank loan.  In fact, some 203(k) loan interest rates can be as low as 3.5%.

In addition, using a 203(k) loan will give you quick and efficient access to the much-needed cash you will need to pay for repairs, renovations, and improvements on your less than perfect Montgomery County rental.

 

What Improvements Can You Make?renovating-rental-property-montgomery-county

Since this loan helps investors improve their properties for occupancy, it is important to understand the eligible repairs you can make on your property with the loan money you receive.

Here is an overview of the types of home improvements covered by a 203(k) loan:

  • Roof replacement or repair
  • Replacement, repair, or upgrade of HVAC system
  • Repair or replacement of plumbing
  • Full interior or exterior painting
  • Replacement of old windows
  • Appliance replacement
  • Attic finishing
  • Replacement or repair of deck, patio, or porch
  • Bathroom remodeling
  • Landscaping such as: tree removal, driveway/sidewalk repair, or grading correction

Keep in mind, luxury items that do not become a part of the real property—such as BBQ pits, exterior hot tubs, swimming pools, tennis courts, and satellite dishes—are ineligible for repair under a 203(k) loan.

 

Types of 203(k) Loan Programs

Two loan types fall under an FHA 203(k) loan program.  Which one you need will depend on the cost to purchase the property and the estimated cost to repair your Montgomery County rental.

Standard 203(k) Program

This loan is for properties that need extensive repairs, including major additions and structural changes to the property.  Take a look at the stipulations for the standard loan:

  • Allows for a loan amounting to 110% of the after-improvement value determined by appraisal
  • A thorough property inspection must be conducted by a 203(k) consultant
  • A minimum of $5,000 must be borrowed for repairs
  • All other guidelines are similar to FHA standards

Streamline 203(k) Program

This loan is for properties that require repairs that will cost less than $35,000.  This includes cosmetic improvements that will not affect the structure of the property or do not include an addition.  Furthermore, you will finance your property using a streamline loan, meaning your property will not require an appraisal and the approval process is finished quickly.

 

The Rules of a 203(k) Loan

rules-203k-loan-montgomery-county-rental-property

Since 203(k) loans are a unique kind of loan, there are specific regulations you must follow upon loan approval.

Here are some of the things you can do with a 203(k) loan:

  • Purchase a fixer-upper. 203(k) loans are for those properties that need improvements or remodeling.  Since banks will not typically finance a house that is run-down, a 203(k) loan is a great way to invest in that rental property you know is a diamond in the rough.
  • Do the work yourself. If you can prove you have the ability to do your own remodeling, and can finish within the 6-month timeframe, you can use your 203(k) loan money to do so.  However, you can only use the money on supplies.  Since you are performing the work yourself, you cannot pay yourself as a hired contractor.
  • Expect multiple inspections. An inspector will inspect your property’s progress throughout the 6-month time period.  This is why your contractor must be reliable—he must start working on the home within 30 days and cannot stop work for longer than 30 days.  In addition, there is that ever-looming 6-month timeline.
  • Use the loan money to make the mortgage. You are able to do this even if you cannot yet occupy the property; you can use the loan to pay for up to 6 months of principle, interest, insurance, and taxes.  This is the beauty of having a two-for-one loan.
  • Upgrade your property to be energy efficient. You can get approval for a 203(k) loan to upgrade your rental home to be energy efficient.  An added bonus is that these improvements do not require appraisal.
  • Make mini-renovations. If you invest in a Montgomery County rental that needs a minor renovation such as a new kitchen, bathroom, or room addition, you may quality for the streamlined 203(k) loan mentioned above.  This is assuming the improvements fall within the eligible repair limitations and cost under $35,000.
  • Start over. With a 203(k) loan, you can tear down the entire property and build up again, so long as you keep the foundation in place, and again, make the deadline.

 

Here are some of the things you cannot do with a 203(k) loan:

  • Invest in a new-construction home. The home you are looking to remodel with 203(k) loan money must be at least one year old.
  • Make repairs under the $5,000 minimum. You must spend at least $5,000 of your 203(k) loan on renovations.  This means you cannot replace one or two appliances and pocket the rest for mortgage payments.
  • Break any 203(k) loan rules. You can trust that your 203(k) loan lender will hold you accountable to all of the stipulations such a unique loan has.  He will be involved in every step of your property’s renovations and in the end, you can bet to find yourself in a lot of trouble if you violate any of the loan provisions.

The One Major Downside of a 203(k) Loan

Now that you have a clear idea what a 203(k) loan is all about, there is one major downside to using the 203(k) loan as an investment opportunity that needs to be addressed.

In order to prevent rental property investors from using 203(k) loans to build their portfolios quickly and efficiently, and thus avoiding the hardships many lenders pose as portfolios grow, investors are not allowed to use 203(k) loans to finance their rental properties.

Those looking to utilize a 203(k) loan must occupy the property themselves for a minimum of 12 months, unless you are a qualified non-profit organization.

However, a 203(k) loan can still be an excellent opportunity to buy a property, enjoy it for a while, and then turn it into a rental property after the 12-month minimum residency.

If you are looking to turn your primary residence into an investment property, you should definitely look into the pros and cons in using a 203(k) loan.  Though there are some restrictions in place, this type of loan can be a great way to get quick financing, remodel your property for additional value, and get it into the rental property market looking great.

 

In addition, property owners that need a highly experienced Montgomery County property management company should contact Bay Management Group today.  Bay Management Group can help you keep your remodeled rental home in shape with a 24-hour maintenance staff ready to fix any issue, regular inspections to ensure your improvements are not going to waste, and managers to help you set the highest rent rates possible for your new and improved property.

So get in touch with Bay Management Group now to get started with your rental property business.  You will not regret the peace of mind this exceptional property management company provides its Montgomery County property owners.


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

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?

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

 

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.


6 Tips to Successfully Show a Rental Property

how-show-maryland-investment-property

Showing a client’s vacant rental property to prospective tenants is one of the principal roles of a property manager.

Though emphasis is often placed on appealing to the right tenant pool, as well as the importance of proper tenant screening, the truth is that the in-person showing of the home to potential renters is just as crucial.

Staging a vacant rental property can be done easily and without a great deal of time.  With a little bit of curb appeal and a nice looking interior, you will have more tenants wanting to lease your client’s rental home than you know what to do with.

But there is more to getting a tenant to sign a lease agreement than just a nice exterior and inviting interior.

Today we will look at the top tips for showing an unoccupied rental property.  If you follow these simple yet effective steps, you will find great success in your showings.

 

6 Tips for Wowing Tenants with Your Rental Property Showing

1. Remember The Basics

Every property manager knows that there are basic staging rules for showing a potential tenant their client’s rental home.  Let’s look at those basics:

  • Do not underestimate the power of curb appeal. Make sure the yard is well maintained, the property is freshly painted, and the all-around feeling is inviting as a tenant pulls up.
  • Clean, clean, clean. Nothing turns a potential tenant away faster than a dirty home interior.  Make sure to inspect the property beforehand to make sure its cleanliness meets you and your client’s standards.
  • Redecorate or upgrade. Install new carpet, paint the walls an appealing and neutral color, fix the window treatments, and make sure all appliances are updated and working.

In the end, these selling points will make a huge difference in whether a tenant is interested in leasing a property from your client.

 

2. Pre-Qualify

prequalify-maryland-renters

As mentioned earlier, tenant screening plays a significant role in the leasing process.

Before you begin showing a property to interested tenants, pre-qualify them.  This will save you time, energy, and money and will ensure you are only showing the property to qualified tenants.

Here are some great topics to ask about when someone calls to set up a property showing:

  • Their credit score
  • Reason for moving
  • Estimated move-in date
  • Whether they have pets
  • Smoker or non-smoker
  • Number of people moving in
  • If they have references
  • Eviction history
  • Estimated income
  • If they have any questions

Keep in mind that pre-qualifying tenants for a property showing cannot violate any of the Fair Housing laws that are in place to protect prospective tenants.  In addition, make sure the pre-qualifying questions are the same for all prospective tenants to avoid discrimination allegations.

 

3. Be Safe

have-emergency-plan-maryland-rental-property

Before showing a rental property, put your safety first.  Every year a number of realtors, property managers, and landlords are injured showing homes to prospective tenants.

If someone calls asking to see a rental home, get his or her full name and conduct a background check on your state’s public record website before agreeing to show the property.

Here are some ways you can protect yourself from potentially harmful situations while showing rental properties:

  • Always show properties during the daytime, never after dark
  • Call your office every hour to let them know where you are
  • Introduce yourself to neighbors so they are familiar with you and your vehicle
  • Have an “escape” plan in place for when something feels “off” (for instance, take an emergency phone call outside or inform the potential tenant another agent is on the way)
  • Always leave all doors unlocked and stand by the doorways while showing the property
  • Park on the curb rather than the driveway for a quick getaway, if necessary

Gathering information ahead of time about potential tenants and being aware of your surroundings will ensure your safety as well as a more successful property showing.

 

4. Make a Good First Impression

Small, seemingly insignificant (yet very effective) things you do before, during, and after a rental property showing will leave a lasting impression on potential tenants that view the home.

There are several ways to convince potential tenants that this property is perfect and that they need to sign a lease right away.  For instance:

  • Call and confirm scheduled showings a few hours beforehand
  • Set the temperatures in the rental to be comfortable upon arrival
  • Turn on all of the property’s lights
  • Dress professionally and check your personal hygiene
  • Smile when you greet tenants, shake their hands, and formally introduce yourself
  • Show them the grounds, both on and off the property (for example the pool, gym area, laundry facility, parking structures, BBQ areas, or roof decks)
  • Have general information about the property on hand so the tenant can remember you later. Include things such as pictures of the property, square footage, monthly rent and deposit amounts, number of bedrooms and bathrooms, and any extra amenities
  • Have applications ready for tenants to fill out immediately following the showing

In short, making a tenant feel welcome, at ease, and well informed about the property can go a long way in securing a lease agreement.

 

5. Be Informed

In addition to knowing everything about the property you are showing, it is a good idea to be knowledgeable about the surrounding area.  People often move to certain locations because they like the neighborhood or have heard it is great.

Emphasize the area’s selling points – nearby restaurants, shopping, entertainment, attractions, schools, parks, and roads for commuting.

The more information you can give potential tenants on the spot, without them having to pry, the better equipped and more trustworthy you will seem.  Plus, this information will help them to make a quicker decision and possibly forgo viewing other properties.

 

6. Follow Up

maryland-property-managers-should-have-emergency-plan

Property managers should base their entire showing process around customer service.  Doing so shows potential tenants that you are a reliable company that they can trust and easily contact to work out any issues that may arise with the property, should they decide to lease.

A day or two after showing the property, consider sending a follow-up email or making a call to the potential tenants who saw the property.

Make sure they have no further questions about the property or leasing process and wish them luck in finding their next home.

Although this seems trivial, a little kindness can go a long way when it comes to deciding which property to lease and call home.

In the end, the way you present yourself and your client’s property to potential tenants can make all the difference when it comes to getting a lease agreement signed.

By taking the proper steps before every showing, you ensure that your client will be satisfied with the amount of effort you put into filling their vacant rental.

On top of that, going above and beyond when showing rental properties can help motivate the most qualified tenants to lease your client’s property, making it a win-win situation for everyone.

 


6 Reasons Not to Invest in Rental Properties with Family

Mistakes to Avoid with Washington D.C. Property Management Company

Investing in a rental property, such as one in the Washington metropolitan area, sometimes requires an investment partner.

And who better to trust than a close family member?

Working with family can be fun; it is a great bonding experience. Plus, it is an effective way to get things done.

Unfortunately, when it comes to matters of business, Engelo Rumora ‒ successful property investor, motivational speaker, and serial entrepreneur ‒ says it best:

“Keep your friends close, enemies closer, and family as far away as possible.”

While many of us love our families very much and want nothing but the best for them, mixing business with family can open up the possibility for some precarious situations. Thus, while there are some professionals that will attempt to convince you otherwise, it is often best to keep family out of your Washington, D.C. investment opportunities.

Today we will look at 6 of the most important reasons why you should not include family in business matters, especially when it involves the complexity of rental properties.

 

1. Generational Gaps = Conflict

Tips Buying Rental Property Washington DC Area

Every generation grows up slightly different. Many times, there are different views on education, job opportunities, how to raise a family, and even how to run a business.

If you choose to invest in D.C. rental properties with older family members, you will likely have very different outlooks on how you should run your business.

From which property to purchase, to how much time and money to invest in fixing it up, to running day-to-day operations, the chances are high that you will not always see eye-to-eye.

This is especially true for family members that may have a difficult time separating their personal feelings from the business.

This conflict could potentially harm your future success and ruin a familial relationship, neither of which you want.

 

2. Trust Issues Crop Up Everywhere

Investing Rental Properties Family Washington DC Area

How many times have you uttered the phrase “But I trusted you!”?

The truth is, family-related trust issues can pop up anywhere, especially if money is involved. In fact, oftentimes the money being generated from income properties can breed distrust and cause family members to behave in ways you have never seen before.

The comfort of family relationships can cause professional boundaries to blur and allow relatives to take advantage of certain situations, sometimes without you even knowing it. This happens because we often tend to over-trust family members.

Sure, trust issues can occur with non-family investment partners as well. However, taking the personal relationship out of the equation makes decision-making, oversight measures, and money-related problems less emotional and much easier.

 

3. Lack of Experience

Just because your cousin has money to invest in a Washington metropolitan area property with you does not mean he is cut out for the rental property business.

When it comes to investing in rental homes, especially when partners are involved, there should be a balance of expertise.

One partner should be knowledgeable about the rental property industry, as well as the real estate industry as a whole.

The other partner should be money-wise when it comes to accounting, taxes, and balancing the income and expenses to tip in your favor.

Investing with family may cause an imbalance when it comes to workload because of lack of experience and expertise.

Investing in a popular area such as Washington, D.C. requires solid strategies and teamwork. If each partner does not bring a certain level of skills to the table, you risk your entire portfolio crashing. This is why it is better to seek out a reputable investment partner.

 

4. Misunderstood Long-Term Goals

Investing Rental Properties Washington DC Metro Area

Communication amongst colleagues can be difficult. This is truer with family members.

Initially, a family member you choose to invest with may seem be onboard with your long-term goals. In reality, however, they may not even fully understand what your goals are, how you intend to achieve those goals, or what kind of hard work and dedication it will take to get there.

Sometimes, family members get so excited at the thought of being able to work with family and make a little dough in the process that they overlook seriously evaluating whether this is the right investment opportunity for them.

For example, maybe you and your dad invested in a couple of properties in the D.C. area. Come to find out, two properties are plenty for your dad, who is nearing retirement age and simply wants to boost his retirement income. You, on the other hand, sought to build a strong portfolio over the course of many years. Now you and your dad are stressed about the reality of your investments and your father/son relationship will suffer in the end.

 

5. Leniency Creeps in

No one wants to be harsh with family members. But the truth is, when working with family, you run the risk of not being able to put your foot down as hard as you may like when things are done incorrectly.

Demanding work to be redone, negotiating salary, and even requiring strict deadlines become awkward conversations.

These harsh realities of investing with family may cause you to upset your family member or cause you to become too lenient in order to preserve his/her feelings. In either case, your rental property business is going to suffer.

 

6. Legal Situations Are Uncomfortable

Washington DC Investment Property Mistakes Avoid

In reality, any legal situation with an investment partner is going to be difficult. However, this is intensified when it involves a family member.

There are two scenarios that can cause legal trouble for you when you are working with family members:

  • You are forced to sue. If you have a solid contract in place and the family member you invested with breaches that contract thus forcing you to sue, expect things to get ugly. In fact, the consequences of this may even spread throughout the rest of your family causing irreparable damage.
  • You failed to have a contract. Since family members often feel so close, it is not unusual to see them go into business together without proper contracts. Then, when something bad happens that should be handled by the courts, there is no written contract backing your case. This can lead to a lot of damage to your finances and career as an investor.

There is only one way to avoid having to take a family member to court as an investment partner that went awry.

That is to never employ a family member as your partner.

In the end, there are two sides to every decision. However, in order to preserve the precious family relationships you have, it may be a better option to avoid going into the rental property business with a family member.

That being said, if you currently own a Washington, D.C. income property and are looking for a high quality property management company to help manage your growing business, contact the best – Bay Management Group. Whether you have invested with a family member or not, Bay Management Group can help you with all things income property-related and give you the peace of mind that your properties are being well-cared for.