How to Grow Your Rental Business

 

Growing Your Rental Home Business Using Equity Reinvestment

Once you start building your rental home business, the potential for growth is self-generating. Over time, each property builds equity which you can re-invest in both property improvements and down payments on new homes to add to your portfolio. Equity is a powerful asset in any real estate investment business. This is especially true with rental home,s where the business model is designed to steadily build up equity in each property over time.

How can you use equity to grow your business? Reinvestment is an effective strategy for any real estate investor.

 

Methods to Access Your Rental Property Equity

Renters are already slowly but surely paying each rental property mortgage and building your equity. How do you access that equity and make use of the funds? There are three popular methods.

Home Equity Loan

A home equity loan allows you to borrow against your equity, gaining access to the cash value of each property that you already possess in the form of a fixed loan. This is sometimes called a second mortgage.

HELOC

A home equity line of credit or HELOC is a rotating loan where you can borrow and repay as much as you need in rotation. This is ideal for repairs and upgrade projects and the money doesn't have to be used on the HELOC'd property. 

Cash-Out Refinance

A Cash-out refinance is when you refinance your mortgage at a higher amount than you strictly need. The extra loan amount is a way to transform equity into cash-in-hand.

 

Benefits of Equity Investment in Your Rental Properties

The equity already accumulated in your rental properties has a lot of potential. Currently, it is not earning you anything, simply building up to total property ownership. But with a little planning and financial strategy, you can put that equity to use by acquiring new properties or improving the properties you already have.

Make a Down Payment on a New Rental Property - Without Selling First

When you find a promising new rental property, the downpayment is a serious investment. While you might normally sell a house to buy the new property, with equity funds, you don't have to. Using an equity loan or cash-out refinancing, you can access the cash you need

The cost of buying a new investment property doesn't have to come from selling a property first. Instead, you can extract some of your equity from property that's partially paid off. Those funds can go toward your downpayment on the new property immediately while the opportunity is still available.

Turn Static Equity Into New Income Sources

Buying new rental properties with your current rental equity allows you to open new income streams. As soon as the new property is ready for a tenant, it can start earning. Depending on the neighborhood and home quality, you can charge enough to cover the new home's expenses and accelerate your ROI on the equity loan or cash-out refinance.

By using the money (property value) that you already possess, you can quickly increase your rental income and long-term earning potential.

Upgrade and Repair Your Portfolio Properties

In addition to buying new properties, you can also put rental equity funds toward property upgrades and repairs. After all, an up-to-date rental has a better earning capacity than a home that becomes shabby or outdated over time. While minor repairs may be included in your annual budget, major upgrades like new appliances, roof reinstallation, or timely renovations can be paid for with a HELOC, equity loan, or cash-out refinance funds.

Planning ahead for long-term rental profitability sometimes requires sizable reinvestment. With access to your equity funds, you can put the value you've earned in a property right back into keeping that property desirable and competitive as a rental home.

 

Growing Your Rental Business with Property Management Insights

If your goal is to grow your portfolio, you have more options than you might realize. By accessing the equity that you have already accumulated, you can invest in improvements and new properties to watch your potential for returns continue to expand.

Accessing your rental property equity is a pro strategy learned from years of property management services. If you're looking to expand your portfolio and your skills in maximizing long-term profitable rental homes, Leaf Management can help. Contact us today to learn more.

Upscale Rentals

 Evaluating Rental Potential in Upscale Neighborhoods

If you're looking for a quick way to profit from real estate, buying and renting out upscale homes seems like a smart investment. However, things are not always as they appear. It's true that luxury and high-end properties can rent for more and provide higher returns. But not all upscale properties are the same. What makes a property upscale and the factors involved in profitable rentals can vary quite widely.

At Leaf Management, we've seen it all. Let's dive into the meaning of luxury and upscale rental, along with the pros and cons of such investment plans.

 

Upscale Property Rental Myths

First, let's start by dispensing with a few upscale real estate myths. Many rental investment buyers have a few notions about luxury rentals that just are not consistently true. They can be true, but you can't count on them and disaster can strike in the times when these three common assumptions about luxury real estate prove wrong.

"Luxury Rentals Are Already in Top Condition"

First, homes in upscale neighborhoods are not automatically low-maintenance.

What makes a property "luxury" is not always high-end materials and great maintenance. Sometimes, an upscale property is in a crumbling yet beautiful historic building on a high-demand downtown block. Or a glorious estate with failing plumbing and flickering old wiring. Luxury is about what people will pay for it, not necessarily the structural integrity or upkeep quality.

"Rich Tenants are Better Behaved"

Do not assume that high-paying tenants will be more respectful of your property. Wealthy tenants are just as likely (if not more) to throw raging parties and expect you to pick up the bill.

"You Can Rent Any Property You Buy"

Not all upscale properties can even be rented. Always read the fine print. Many condo associations and gated communities drastically limit the number of properties that can be rented, and the quota may already be occupied. So don't buy an upscale rental property unless you're sure it can be rented.

 

The Pros of Investing in Upscale Rental Homes

What are the advantages of investing in upscale and luxury rentals? Even after removing the myths, these pros are clear for the world to see.

1. Tenants Pay More for Luxury

You can ask a much higher rent for luxury properties, especially in high-demand areas like downtown and prestigious neighborhoods. If you got the property at a good price, upscale rentals can be quite profitable.

2. Property Values are Probably Rising

When it comes to resale value, upscale locations typically see a steady climb in property values. Therefore you can rent the place out for a while and resell at a profit, in most cases.

3. Separate Market Stability

The luxury real estate market is separate from the typical housing market in any region. Wealthy residents create a more predictable demand providing more market stability if your property meets the required standards.

 

Cons of Investing in Upscale and Luxury Rentals

Of course, as with any investment, there are potential downsides. These are most likely to manifest for investors who are not careful in their research when selecting a property and property management strategy.

1. High Investment Cost

Luxury properties cost more, which means a higher initial investment cost. This, of course, means you also have more to lose should your investment go awry or prove less profitable than you initially calculated for.

2. High Maintenance and Upkeep Cost

Upscale properties can cost far more than expected in maintenance and upkeep. After all, you must use high-end materials for repairs and maintain top-of-the-line appliances. Most importantly, expect to save back about 1-2% of the property's sale value per year for repairs. Anything you don't spend, save for those big repairs like roof replacement and water heater repairs - just like a normal rental property.

3. Tenants Have Higher Expectations

Lastly, wealthy tenants have higher expectations from your property management service. They are more likely to demand repairs and be impatient with delays because they are paying more to live in luxury, and you are providing the property as a service.

 

Succeeding in Upscale Property Rental with Leaf Management

If you have selected the right property and prepared for the predictable expenses, you can make a tidy profit from renting out properties in upscale neighborhoods or investing in luxury homes. The final piece of the puzzle is a capable and experienced property management team to handle maintenance, repairs, and tenant care with the aplomb and responsiveness that your upper-crust tenants have come to expect.

At Leaf Management, we know exactly how to optimize an upscale property for profitability as a rental home. Contact us today to learn more about luxury and upscale property management services.

Rental Homes + Smart Devices

 

Should You Include Smart Home Devices in Your Rental?

When preparing a property as a rental home, naturally you want to create an appealing and upgraded space. You might repaint the walls, replace old flooring, and of course, replace the old locks. You might caulk the windows and add new weather stripping. You might even replace the water heater or HVAC to ensure years of reliable service.

Shopping for the latest home features, you may also come across the desirability of smart home rentals. Smart home devices represent the cutting-edge of home technology, and some features are extremely desirable for modern renters. But is it a good idea for your property? Which of the many smart home upgrades are ideal for rental homes?

We can provide a quick and practical guide to smart home upgrades for any rental property.

 

Best Smart Home Features for Rental Homes

In the world of smart home design, some devices can make a home feel high-tech and high-quality. These are the best smart home features for a property owner to install before listing the home. In fact, you might even create an opportunity to increase your rental asking price. Here are the top four smart home upgrades that tenants are both practical and highly desired by tenants right now.

Smart Thermostats: Comfortable and Energy-Efficient

A smart thermostat is a programmable thermostat that can make smart decisions based on local and household data. It can remember temperature preferences and learn a family's routine, then optimize for energy efficiency and comfort. It can minimize power use when the house is empty and even adjust based on weather forecasts.

Tenants like smart thermostats because they make comfort easier and reduce the power bills. Investors benefit because they also extend the life of the HVAC and make the property more sustainable.

Smart Locks: Smart, Responsive Security

Smart locks are a useful way to increase home security. A smart lock can be locked using a phone app or voice command, on a schedule, or even based on a tenant's phone distance. This means the doors can lock themselves after dark, when tenants leave the house, and be easily operated by tenants during the day.

Keypad smart locks can even provide a separate code for each family member, codes that only work during certain times of day for guests and services, and create records of which code is used over time.

Smart Lights: Cool, Efficient, and Replaceable

Smart lights are normal screw-in LED light bulbs with RGBW (colorful and white) light options and smart home controls. They are easy to install and energy-efficient. They also make home life more convenient and fun with voice commands and routines instead of light switches.

Leak and Surge Detectors

Wifi leak detectors and surge detectors also provide you with live maintenance information, so that a leak below any sink or appliance or any unusual power fluctuations can be detected and repaired immediately.

 

Selectively Desirable Smart Home Features

Then there are smart home updates that can be cool, but are not universally desired. These should be installed with consideration for your audience and how each feature might be perceived.

Smart Home Appliances

There are tons of smart-home-capable appliances. Smart fridges that count the eggs, smart ovens that can pre-head with a wifi command, and so on. The usefulness of these appliances is still debatable. Some tenants will delight in having an all-smart kitchen or laundry, and some won't care, and some may think it's silly.

Video Doorbells

Video doorbells are an interesting convenience and security feature, but they're not for everyone. Some people will love being able to see out their front door at all times and use their doorbell as an intercom, but some may be uncomfortable being seen by their own doorbell coming home each day.

Smart Security Systems

Smart security systems are in the same boat. Some people will be excited about having wirelessly watchable security cameras and window alarms, and some will find this uncomfortable. That said, neighborhoods where most homes have security systems are more likely to consider this a positive upgrade.

 

What Smart Home Features to Avoid 

Lastly, there are a few smart home features that should be left to your tenants to decide on. These are either plug-and-play features that rely on personal preference or features that are a little too personal to share with one's landlord.

Plug-and-Play Smart Home Speakers

Smart lights, smart thermostats, and smart appliances are service-agnostic. This means their control apps can be connected to any smart home system. But the smart speakers decide which smart home assistant and network of services is used.

Let your tenants decide their own smart home core system. They might want Alexa, Apple, or Google, and the choice should be theirs. Plus, most smart home speakers are plug-and-play, making them more like furniture or personal devices rather than installed features like a thermostat or locks.

Smart Security Cameras

Interior security cameras are a touchy subject. If your tenants want internal smart cameras, let them choose, install, and fully control the cameras on their own. This way, there's no worry that anyone else might be watching their home interior.

 

Smart Home Upgrades for Rental Properties

With the right smart home upgrades,  you can increase the value and desirability of any rental home. From cozy apartments to lavish estates, a few smart home features can make a home feel convenient, comfortable, and cutting-edge. But it's also important to choose your upgrades carefully.

DIY Kitchen Updates

 DIY-Friendly Kitchen Repairs to Quickly Spruce Up Your Flip

Flipping a home to sell or rent is often about taking a shabby-looking house and sprucing up. A house with "good bones" still has a sound structure. It may have good insulation, well-built cabinetry, and a welcoming floorplan but the surfaces have become shabby and the style may be dated. This shows especially in the kitchen where people want to fall in love with a modern, charming space. 

The question is: How can you quickly DIY an older kitchen to make your flip more appealing without busting your renovation budget? Fortunately, we have several ideas that will bring your flip to life and transform the kitchen into a space that new buyers or renters will love.

 

1) Replace Small Kitchen Hardware

You don't have to rebuild your kitchen to modernize the hardware. In fact, kitchen hardware is one of the smallest yet most impactful ways to update your kitchen. Choose a new kitchen faucet such as a swan-necked pot filler with an extending hose for washing. Choose your favorite style of faucet handles. Then update your cabinets with a pack of new drawer-pulls and cabinet handles.   

 

2) Repaint Your Cabinets and Trim

Paint is one of the most affordable ways to completely transform your kitchen. You can also invest in vibrant (and washable) wallpaper for the parts of your kitchen with exposed drywall. A fresh coat of paint can give your cabinets and trim an entirely new color scheme. You can choose a new primary theme, accent colors, and contrasting colors. 

 

3) Strip and Stain Cabinets Instead

If you have painted cabinets, you can strip the paint and then restore the natural wood hues of your cabinetry. You can oil-polish the wood, or you can stain your wood cabinets to any natural shade you desire. Reseal the stained cabinets for a warm, welcoming look. If your cabinets are currently wood, you can stain them a new shade or paint them instead.

 

4) Re-Tile Your Backsplash

Your backsplash makes a big impact on the appearance of your kitchen. Many types of tile are quite affordable, making a new backsplash a great addition to any budget kitchen renovation.

 

5) Install New Decorative Molding and Cabinet Trim

You can even change the shape and style of your cabinets and kitchen design with the strategic use of molding and trim pieces. Trim pieces can add detail to your cabinets and subtly change their design style. Molding adds subtle elegance to your kitchen near the baseboards and ceiling. Explore shapes and style differences that you might prefer.

 

6) Place New Shades On Your Light Fixtures

You can also reinvent your existing light fixtures. most kitchen lighting can be completely transformed just by changing out which light shade you use. If the fixture is of standard sizes, you can swap out light covers for a completely different style. You can restyle flush lights, pendant lights, and even some chandelier styles.

 

7) Color Stain and Reseal Stone Countertops

Did you know that you can change the color of your countertops? While we don't recommend painting beautiful natural stone, you can color stain granite and other natural stone to give your countertop a whole new look without investing in new stone. Strip the current countertop seal, apply the stain, and then reseal your stone to protect it from moisture and unwanted staining.

 

8) Update Your Pantry Organization

Pantry renovations are very popular, but don't have to break the bank. Consider ways you can update your pantry organization without a costly new pantry system. You can install sliding wire drawers, new hanging shelves, and sectional spaces on your own. You can also update your pantry simply by organizing everything into baskets, trays, and matching dry storage canisters.

 

New Kitchen, New House

The kitchen is the heart of any home. The freshness and modern style of a kitchen can strongly sway buyers or renters which means focusing on kitchen updates with any flip. These DIY projects can help you completely change the look and feel of an older kitchen while keeping all the sturdy hardware and ergonomic flow of the original design

Leaf Management can help you choose the right renovations for your flip along with many other strategies to ensure every real estate investment has greater profit potential. Contact us today to learn more.

Flipping One-Car Garage Homes

 What to Do With One-Car Garages in a Two-Car Garage World?

Everything about it is perfect, or so you thought. You find an older home that has an attractive price tag and a delightful charm to it. The only problem? It only has a one-car garage, and you know that most of your prospective tenants are looking for a two-car garage. As a real estate flipper, you know that this could put some obstacles in the way of your plan to begin renting out the property as soon as possible. However, before you move on from this older home in search of another investment, consider the ways that you can still make this work. 

Install a Covered Driveway

Outright expanding the existing driveway is almost certainly too costly to make sense. Besides that, it is possible that such a project might fly in the face of local ordinances and/or building codes. As such, it is best to look for other solutions that can be far more effective for you. Among those options include installing a covered driveway. 

Among the benefits of a covered driveway include: 

• Protection from the Weather - Vehicles that are parked under the covered driveway will enjoy protection from the outside elements in ways that they wouldn't if they were left out in the open. This is particularly useful during periods of stormy or snowy weather. 
• Maintains a Cool Temperature in Your Vehicle - The summer months can be brutally hot in some areas, and it is not pleasant to get into a vehicle that has been left out in that heat all day. A covered driveway makes it possible to keep the internal temperature of the vehicle much cooler than it otherwise would have been. 
• Improved Appearance for the Property - There is an upside to the curbside appeal of any property that has a covered driveway installed. People instantly recognize this as an upgrade, and they might even decide that they want to take a closer look at any property that has such features. 

These benefits can help to offset the fact that the property is limited to a one-car garage. Prospective tenants are more likely to be forgiving of that fact if they know that they have a covered driveway available to them. 

Covert a Portion of the Backyard Into a Parking Space 

Just because a property is limited to a one-car garage doesn't mean that more space can't be converted. In fact, many investors will seek to convert at least part of the backyard into a parking space to provide their tenants with a little more room for their vehicles. It is not necessarily the case that all tenants will want to utilize every square inch of their backyard for recreational purposes. Therefore, why not offer them more space to park their vehicles and help alleviate some of the issues around the lack of a two-car garage?

Offering a More Reasonable Price 

Another tactic that many savvy investors use is to simply offer to lower the rent that they charge or even lower the total selling price of the property that they are considering selling. In either case, this can prove highly effective. They are giving up a little ground on the asking price, but they are far more likely to attract interested parties by doing so. Giving up a little piece of the action because the two-car garage is not available shows that the investor is a rational and reasonable person who is willing to work with prospective buyers or tenants. 

Before dropping your asking price too far, make sure you have done your homework on the comparable properties in the area. You don't need to undercut yourself too far, and you certainly don't want to give up potential equity that you otherwise would have been able to cash in on. With that in mind, always make sure you offer to cut back on your asking price only to the point where it makes financial sense both for you and for the buyer. 

The lack of a two-car garage on any property does not have to mean that the property holds no value to you at all. In reality, there are plenty of outstanding one-car garage properties that you can snap up for a great price and potentially make a significant return on your investment. Simply understand what it will take for you to cash in on the available properties out there. 

Remaining Solvent Amidst Flat Rental Rates

 What to Do If Rental Rates Are Staying Flat?: A Guide for Staying Solvent

The bill for your property insurance hits your mailbox and you let out a sigh of frustration. Your premium has increased again, and yet, you aren't able to raise the rent on your rental properties to cover this added expense because rates in the area have remained flat. What is a landlord supposed to do under these circumstances? 

There are a few key strategies that any landlord can use when faced with rising costs in a rental market that remains stubbornly flat. We seek to explore what some of those techniques are and how you can use them to ensure that you can remain in the game even if rental rates aren't moving. 

Work on Tenant Satisfaction 

Focusing on tenant satisfaction might seem like an odd place to start when you are concerned about your own rising costs. However, this is precisely the area that you need to focus on. The reality is that it is far more cost-effective to retain a current tenant than it is to try to find another one. As such, you should do what you can to keep your current tenants happy. There are many ways that you can go about this, including:

• Promptly Responding to Maintenance Requests - One of the top concerns for tenants in any rental space revolves around getting their maintenance requests fulfilled. They want to live in a safe and comfortable space, and this means that they might have to call out for a maintenance service request from time to time. The sooner that you can respond to those requests and resolve them, the happier your tenants will be.
• Respect Their Privacy - Everyone expects and is entitled to a certain level of privacy while they are within their own living quarters. You should always be respectful of this fact and allow your tenants to carry out their day-to-day lives with the privacy that they deserve. 
• Maintain Flexibility and Communication - Whenever possible, you should try to be flexible and understanding with your tenants. You might opt to bend some rules for them such as allowing pets in their space or working out a payment plan if they fall behind on the rent. Don't let your tenants take advantage of your kindness, but always try to be understanding of where they are coming from as well. 

Those are a few ways that you can improve tenant satisfaction in a meaningful way. Small improvements like this can have significant impacts on your ability to retain the tenants who already live in your rental properties. 

Diversify Your Pool of Tenants 

When rental rates aren't moving, you can still take that time to expand your tenant pool and diversify the kinds of people that you are marketing to. It may be the case that you need to diversify the type of tenants that you are reaching out. The more diverse your pool of potential tenants, the more likely it is that you will enjoy stable and predictable income and growth. That can't always be said when you limit the scope of people that you reach out to. 

Diversifying your tenant pool may look like taking out advertisements on platforms that you haven't before. It might also mean expanding your geographic reach to a larger segment of the population than you once did. When you do that, you can put yourself in a position to speak with as large of a segment of the population as possible. 

Make Low-Cost Upgrades

Not every upgrade that you make to a rental property has to be costly to be worthwhile. In fact, some of the less expensive upgrades can pay off in spades when rental rates refuse to budge. These upgrades add value to the property, and that will pay off for you when rates start to climb again in the future. Those rates will eventually start moving again, and you certainly want to ensure that you are ready to capitalize on them when they do. Take the time while things are a little stagnant to put in those low-cost upgrades. 

Be Patient and Wait for This Cycle to End

The world of real estate is cyclical, and you can fully expect that the rental situation that you are experiencing now is not the one that you will experience forever. Be patient and understand that rates will eventually climb once again. It is simply a matter of waiting until the tide turns and things begin to head in the right direction once again. 

Security systems, yes or no?

 Should You Have Security Systems on Your Rental Properties? | Pros and Cons

Should You Have Security Systems on Your Rental Properties? | Pros and Cons

Home security systems seem like a universally good idea. They provide added protection and lower insurance rates. But the issue becomes more complex when you're talking about a rental home. People feel differently about a security system installed and managed by someone other than the resident family. So the question is: should you install security system for your rental property?

It's important to weigh your options, costs, pros and cons, and the likely response from your tenants as you make this decision.

 

Pros and Cons of a Rental Home Security System

Pros

• Lower insurance rates for comprehensive security
• Security systems discourage crime and mischief
• Greater protection for your property and tenants
• Record of activities surrounding the house
• Protecting a home during renovations and vacancies

Cons

• Significant upfront installation costs
• Tenants may be uncomfortable
• Cost of monitoring or maintenance

 

Security System Installation Costs

The cost to install a basic outdoor security system is becoming more approachable. Camera resolution, digital storage, and data transmission technology are all increasing in quality and affordability. However, a comprehensive or managed security system still represnts a significant investment of a few hundred to several thousand dollars. For a live monitored system, expect an ongoing expense as well.

 

How Tenants Feel About Rental Home Security

Tenants often have mixed feelings about a security system installed by their landlord. To be fair, cameras watching your lifestyle controlled by someone else are something that could make anyone uncomfortable. Even if you turn over control to your tenants during their stay, they have every reason to believe that you still have admin access and could be watching their outdoor activities. Indoor cameras, of course, are out of the question.

However, other forms of security systems may be welcome. For example, tenants often appreciate locking gates, security codes, and other non-camera-related security measures designed to keep them and the house safe without any risk of invading their privacy.

 

Liability and Security Cameras

Landlords must also be acutely aware of liability issues for any property decision. While security cameras provide more security for your property, they come with some serious liability considerations. If your camera, even one pointed at a driveway or side yard can see through a window into a private room like a bedroom or bathroom, there are problems. Cameras that include neighbors in their scope may also create liability related to others' privacy.

Liability also becomes an issue if you are storing or transmitting footage of private activities regarding either tenants or neighbors.

 

Alternatives to Security Camera Systems

The good news is that there are several effective alternatives to security camera systems. You can protect your rental properties and your tenants effectively without introducing the problems inspired by the cameras themselves.

These alternatives can still contribute to lower insurance rates from implementing effective home security emasures while your tenants remain comfortable and may even feel more secure as a result of the security system installation.

Motion-Activated Outdoor Lights

One of the reasons motion-activated lights are so commonly seen is their simple and non-invasive protective results. No thief wants to be spotlighted as they sneak up to a house, and people often appreciate a little extra light when coming home late. Motion-activated lights effectively discourage mischief. They will even chase off wild animals from causing trouble in the yard while making tenants feel safe in the dark.

Entrance Detection Security Systems

You can also install a security system that detects open doors and windows. Commonly known as house alarms, entrance detection security systems keep track of whether doors and windows are closed and locked. Tenants who enjoy a high degree of home security will gladly take over house alarm management, and feel more protected by the system. This allows you to closely monitor entry to the home without pointing cameras toward your tenant's private indoor spaces.

Tenants are also less worried that the landlord may have some remaining control over a house alarm system compared to camera access. Especially if the system beeps with every door opening even for someone who has the code.

 

Temporary Camera Installations for Renovations and Vacancies

The final consideration is home security during times when the property is either vacant or more vulnerable during renovations. One of the biggest advantages of a camera security system is that you gain added protection and the ability to monitor a home when a tenant is not in residence. You can ensure no one has tried to illegally move in to your vacant property or interfere with renovation materials overnight.

Fortunately, with the modularity of modern camera systems, it is entirely possible to temporarily install a camera security system during times of vacancy and then remove the cameras again before your next tenant moves in.

 

Rental Properties + Equity

 

Can a House Have "Too Much Equity" to Be a Rental?

One of the advantages of a rental house is that it builds its own equity. Rental payments cover mortgage payments and you gain equity over time. However, when it comes to market conditions, sometimes the most profitable choice is not to continue renting a property. You may find yourself in a situation where properties in your rental regions are seeing a significant incrase in property values but a lag in rental rates.

This means rental properties in the area could make you significantly greater profits if listed for sale compared to the slow pace of local rental income. How can you best use your properties for the overall benefit of your portfolio and rental business? As an experienced property management team, Leaf Management can help by sharing a few insights we've learned from seeing these market conditions before.

 

Equity and Profit Potential

Equity plays an important role when deciding what to do in a high property value market environment.  The more equity you have in a home, the more profit you can make from a sale because you have less of the remaining mortgage to pay back from the sale price. While you rent a house, it build equity through paid mortgage payments and when the mortgage is fully paid, 100% of the profits from rent goes to you instead.

However, it's also important to consider your greater rental business strategy. High equity spells opportunity if you know how to use it. This is especially true with homes where the property value is outstripping the potential for rental income.

 

Investing in Portfolio Growth

Another important consideration is that a sudden influx of profit from a home sale can make it possible to grow your portfolio. Landlords use a number of equity-related strategies to create the resources to buy new rental properties. This can increase your overall rental income and potential for long-term profits.

You could sell the high-equity home while property values are high and use the proceeds to buy a house in a neighborhood with higher rental rates, or invest in two starter homes instead for double income at a lower rate. You could also reclaim the equity itself through a HELOC or equity-based loan for the same effect while holding onto the original property and growing your portfolio at the same time.

 

Sell the Home: Buy Low, Sell High

One way to look at rental homes is like any other investment, where the goal is to buy low and sell high. Rental homes make money while in your portfolio, but you can also maximize your profits by selling a home when it's value peaks in the local market. Just as it is more profitable to buy homes at their lowest sale value and spruce them up for a good rental income, selling high is equally strategic.

 

Cash-Out Refinancing

Cash-out refinancing is when you borrow more money than you currently own on the property and take the excess in cash. It's a way to access your equity without significantly changing the terms of your mortgage.

For example, if you started with a $300,000 mortgage and paid it down to $100,000 left with $200,000 in equity, you could then take  cash-out refinance mortgage of $150,000 and get $50,000 in cash from your equity to use as a downpayment on your next portfolio property.

The smaller mortgage would likely come with significantly lower monthly payments meaning more profit per month and/or a shorter repayment period and better terms.

 

HELOC Improvements to Raise the Rent

You could also use the equity to reinvest in the house. Rather than letting the lagging rental rates slow your roll, access your equity with a HELOC and make improvements. The right strategic renovations can help the house step up into a higher rental rate bracket, attracting more upscale and luxury renters willing to pay more for the home.

 

Keep Renting for the Long Game

Your final option is to hold position anticipating that market conditions are always changing. If this property has been steadily profitable and/or you have reliable long-term tenants who you don't want to displace, then you don't have to make a change. That equity will still be there when you need it and home prices rarely drop significantly after they rise. Holding steady is often the right answer when managing rental properties where long-term strategies tend to provide reliable returns.

 

Strategize Your Portfolio with Leaf Management

Knowing the right strategy to optimize your portfolio is not always clear. When market conditions leave you wondering about the best way to improve your rental home profits, Leaf Management can help. Contact us today to talk portfolio strategy any time.

Desirable Features that are Rental Liabilities

 

6 "Desirable" Features That Are Liabilities in Rentals

You want your rental home to be profitable. One of the best ways to charge a little extra rent is to have luxury features that renters love. While it's easy to find lists of desirable features, what the trend lists don't tell you is the risks that come with each upgrade. Certain features may be in high demand, but renters don't realize the liabilities involved.

Whether you're considering properties for your portfolio or profitable renovations, it's important to know the risks associated with otherwise attractive features in a rental home.

 

Swimming Pools

If you've ever lived in a home with swimming pool, you know how much work they require. Cleaning, covering, and chlorinating in a constant cycle or the water because not just green, but a fetid water-filled pit and mosquito breeding ground.

If you have a rental property with a swimming pool, either you need renters comitted to maintaining the pool or to provide a pool service to keep the pool in good condition. Even well-maintained, pools increase the risk of on-proprty injuries and accidents.

 

Wall to Wall Carpet

There was a time when carpets were considered the height of home luxury. Now we know how quickly they accumulate wear-and-tear. Carpets require regular cleaning and replacement every few years. They get stained, compacted, burned, and the carpet pad is a magnet for mold after spills and leaks. In contrast, laminate wood floors are extremely popular right now and provide a flooring that is both more elegant and longer lasting.

While you might not turn down a home with carpets, wall to wall carpets will likely need to be replaced in the near future.

 

Solar Panels

Eco-friendly renters love the idea of renting a home with solar panels. But they won't expect the responsibility of maintaining those panels. In addition, the tie-in to the home's power system and the electrical grid add to the liability potential if something goes wrong. Like a swimming pool, solar panels are a feature landlords must plan to maintain themselves no matter how attractive renters find them.

All-White Kitchen/Bathroom

Then there's the oh-so-trendy all-white kitchen (or bathroom). An all-white design may look amazing when clean. However, nothing shows dirt, spills, or damage like an all-white kitchen. Scuffs on the cabinets, scratches in the cooktop, and other little wear-and-tear occurences will make an all-white kitchen fade all too quickly. 

Rental homes benefit from durable and wear-tolerant designs. Neutral colors and textured surfaces will not only help your tenants enjoy their kitchen between pristine cleanings, but it will also minimise the need for touch-ups during turnover for your kitchens (and bathrooms) to maintain their appeal.

 

Whole-Home Generators

A whole-home generator sounds like a great idea. Who doesn't want backup power during storms and outages? The only problem is that a whole-home generator isn't one of those convenient "set it and forget it" features you can let your tenants take care of. A large generator connected to the home's power grid needs constant maintenance and inspections. And if something goes wrong, the generator itself can become a source of danger. It might produce carbon monoxide, become a fire hazard, or cause a power surge in the home's electrical system if poorly maintained or used improperly.

 

Basement Bedrooms

Finished basements can be a big hit with renters who like the extra space and the potential for a sound-proofed den or home office. Some homes have a basement kitchen or a convenient extra bathroom. What you want to avoid is a basement bedroom or suite unless you are 100% sure that the bedroom conforms to the building code. In most states and cities, bedrooms absolutely must have a window (for fire escape reasons) and not all basements are suitable. While a house might have a finished basement, you can't list that space as a bedroom (and should encourage renters not to use it that way) unless it meets bedroom safety design requirements.

 

Building a Secure Rental Portfolio

When building your rental home portfolio, avoiding unecessary liability should factor into your plans.  Why take the risk of unecessary property damage, tenant injuries, excessive maintenance requirements, unpredictable equipment failure, or future safety-related lawsuits when you don't have to? Simply avoid these high-liability features no matter how attractive they might be to renters in your area.

For more useful insights on how to keep your rental portfolio safe and profitable, call Leaf Management.

Unique Flips and Their Unique Risks

 

4 Unique Risks of Pier and Beam Flips—And How to Handle Them

Pier and beam homes are set on foundations of piers - concrete or wood posts set deep into the ground - and beams which support the house set on top of the piers. This type of foundation is excellent for regions with shifting soil and periodic flooding. So you'll see them frequently in regions where these conditions are common. Of course, like any architectural style, pier and beam homes also come with their own challenges.

When flipping a house with a pier and beam foundation,  it's important to watch out for the unique risks that come with a house that's up off the ground. Let's talk about what to expect and how to handle each challenge to make your flip a success.

 

1) Pests Below the House

Pier and beam homes have a crawl space that is usually not well-sealed this means it creates a sheltered space for pests to move in. From local insects to rodent colonies, any pier and beam property might be home to an entire secret "family" below. This can catch flippers unawares but if you know it's a risk, the proactive steps are easy to plan.

Have the area below the house inspected for pests big and small. If there are insects, call the exterminator. If there are bees, have them collected by a pollinator preservation service. And if there are rodents, call animal control for humane removal, if possible. Then leave deterrents and seal up the outer sheathing to keep them from coming back.

 

2) Hidden Mold Growth

Pier and beam can also hide a different kind of colony. Mold colonies love to live below pier and beam homes where moisture gets trapped between the lumber beams and the damp earth below.  It's dark and protected, the perfect environment for vast and dangerous mold growth. This can pose a health hazard and long-term structural hazard if undetected. But knowing is half the battle when it comes to mold.

Have the crawl space of your flip inspected for mold. Make sure mold isn't eating away at the wooden beams or any wooden elements of the piers. Check for sponginess and hidden spaces. If mold is found, call a local mold remediation service to have it removed. Extensive mold damage can mean you might need foundation repairs as well, but pier and beam repairs tend to be more affordable and less extensive than slab foundation repairs.

 

3) DIY Plumbing Arrangements

Another risk that you might not see coming with a pier and beam flip is DIY plumbing (or electrical) arrangements. Because previous owners could reach the plumbing under the house, they might have decided to get creative about adding new fixtures or repairing damaged pipes. This could cause some serious problems in the future, including issues with building codes. It may be even more problematic if there are DIY electrical splices down there.

Get your crawl space inspected by a licensed plumber and have anything questionable built to code. Do the same with electrician if you see unsafe or DIY-looking work below.  This ensures you will be legally protected and future residents will be safer when it comes time to sell or rent the home.

 

4) Damaged Piers or Sagging Beams

Pier and beam foundations also have a shorter lifespan than most slab foundations. However, the individual components can be shored up, repaired, or replaced more easily than a concrete slab. Check the level of the floors inside the home and check the pier and beam structure below the house to find out if there are any lurking maintenance issues or major repairs that need to take place before you complete the flip.

 

Flipping a Pier and Beam Property

When planning to flip a home on a pier and beam foundation, make sure to have the crawlspace inspected and calculate for proactive maintenance steps in your total flipping project budget.  While it is possible that a pier and beam home might have none of these problems, it's always better to never be caught by surprise.  Leaf Management has worked with properties in every architectural scope and our pros have useful insights to improve your local flipping strategy. Contact us today to learn more about how we can help you pick and plan the most profitablef flips.

Security Deposit Best Practices

 

Landlord Security Deposit Tips and Best Practices

Security deposits represent an agreement of trust and security between a landlord and their tenants. When a tenant pays the security deposit, they agree to take care of the property or accept deductions from the money they could get back. When a landlord sends the security deposit back, they are acknowledging that the tenants were good stewards of the property. It encourages responsibility, timely repairs, and teamwork to protect your investment. This is why it's important for landlords to have a rock-solid policy that both rewards good tenants and fairly covers expenses for undue damage and costs.

The security deposit covers for tenants who are rough on a house, even if they are not malicious, and eases guilt if tenants have to leave an inconvenient mess due to a personal emergency. It also rewards tenants who can take the time to fill holes, paint over scuffs, and request repairs before they leave by sending money to them during their move, when they likely need it the most.

So, what are the best practices for managing security deposits as a landlord? Here's how to use security deposits both to protect your properties and reward good tenants.

 

Set a Reasonable Security Deposit

The first step is to set a security deposit amount in proportion to the property. States that have laws regarding security deposit typically set the limit at this amount, as well. Setting the security deposit higher than one month's rent is only reasonable (and possible) in states with a higher limit and with high-end properties where your tenants are more likely to be high-income with more liquid capital to invest in a rental home up-front.

 

Define What Can Be Deducted From the Deposit

Next, clearly define the damage and expenses that can be deducted from a security deposit. This should exclude normal wear-and-tear that can occur no matter how quietly a family lives. It should include overt damage, unreported repairs, and cleanup required if the tenants left a mess.

What to Deduct

• Holes in the walls
• Burnt or badly scratched floors
• Broken plumbing and major clogs
• Unreported damage
• Unreported visible and excessive mold
• Unpaid utility bills
• Unpaid rent
• Abandoned property disposal
• Valuable property shipping to the tenant's new location
• Destroyed landscaping features

What Not to Deduct

• Minor nail holes 
• Scuffs on walls and doors
• Loose but not broken fixtures
• Worn but not damaged carpets
• Dry grass and flower beds
• A few missed non-valuable items (lost socks)

 

Complete the Move-In and Move-Out Inspections

Move-in and move-out inspections are valuable for both landlords and tenants. A move-in inspection proves the condition of the home just before the tenant moves in. Make sure the inspection is done right, with photographs and notes that are stored as records in your property manage documents or online platform. 

The move-out inspection proves the condition of the property immediately after the tenant moves out. Make sure this is also completed thoroughly with photos, notes, and records. The move-out inspection should be completed on the last day, with the tenant present if possible. If the tenant can't stay, complete the inspection ASAP after the truck is gone with a hard-coded timestamp.

This ensures that any damages you deduct from the security deposit are definitely left behind by the tenant. And if any damage occurs after they are gone, it cannot be charged to them.

 

Respond Quickly to Repair Requests

During the tenant's stay, make it clear that you welcome repair requests for the good of the property. Then, respond to requests with a friendly attitude and send your repair teams as quickly as possible. This builds a routine of teamwork with your tenants to keep your property in top condition, prevent little problems from growing into major damage, and addresses issues promptly.

Not only do quick and friendly repairs make tenants happy, it also increases the overall quality of the home when your tenants hand it back so there is a far lower chance of problems that could be charged to the security deposit. If tenants complete their duty to report needed repairs, they won't be charged for the repair costs.

 

Provide a Move-Out Checklist

Help your tenants leave the house in the best possible condition with a move-out checklist. When your tenants report that they won't be renewing the lease, or 2 months before their move-out date, provide a checklist of everything that will be included in the move-out inspection. 

Remind your tenants to:

• Fill nail holes from decorations and furniture installations they remove
• Touch up paint over scuffs and minor damage, or request your assistance to do so (if your paint colors are hard to match)
• Clear out all storage areas, including often-forgotten spaces like the attic or crawl space
• Broom-clean, vacuum, and wipe down the house. It doesn't have to be spotless, but empty and clean
• Request any final repairs before they are penalized

You can also provide a copy of the move-in inspection with photos and notes to show the move-in condition of the house. Tenants who address the move-out checklist can secure all or most of their security deposit returned.

 

Return the Security Deposit On Time

Check your state laws to determine your time limit on returning the security deposit. Check with your tenants on the best route to send them the money back, and do so within that time limit. If you make deductions, define each one in an itemized list including the damage and the repair costs.

Clarity can ensure that your tenants understand any deductions and appreciate your prompt return of money they can use to help smooth their transition to a new home.

 

Handle Security Deposits Right with Leaf Management

If you want to make sure every one of your rental homes handles inspections and security deposits correctly and on-time, Leaf Management can help. Our skilled property management team will ensure that move-in and move-out inspections are conducted with full documentation, your tenants receive timely repairs, move-out checklists are sent out, and security deposits are sent back with itemized deductions in time with the state laws for each property location. Contact us today to explore property management for your rental homes.

 

Adding Someone to a Lease

 Can You Add Someone to a Lease?

 

 

A rental home lease is usually one year long. However, life rarely conforms to that kind of schedule. When people need to change living arrangements, these moments happen organically. Perhaps your romantic partner is ready to move in, or maybe a good friend needs a place to stay. You might have a roommate moving out and need to bring in someone new. There are two sides to each situation. One side is personal and the other is logistics.

Inviting someone to live with you is personal, but adding them to the lease is absolutely necessary. Any time someone will be joining you for more than a single month, they probably need to also join your rental home lease.

 

Can You Add Someone to a Lease?

Yes. It's easy to add someone to a lease if you understand the process.

Reasons Why a New Person Might Need to Join Your Lease

• Moving In a Romantic Partner
• Welcoming a Friend Who Needs a New Place
• Taking Care of a Relative
• Sharing the Rent with a New Roommate

 

How to Add Someone to a Rental Home Lease

To add a new person to your lease, they will need to fill out an application. This provides information about the new person's income to run a background check . There will be a simple 4-step process:

1. Fill out a new tenant application
2. Pay the application fee
3. Complete the background check
4. Get added to the lease

An application ensures that landlords know who is living in their community and occupying each unit. In most cases, the new person will be approved - especially if you have already met the rent-to-income financial requirements. Then, the new person will be asked to sign a copy of the lease.

Landlord will make a new copy of the lease available with all current names, either printed or digital.

 

Why Add To Your Lease vs Just Moving In

There are plenty of reasons why someone might move in. Life happens, and living arrangements can change. However, a long-term guest is not the same thing as living together with a romantic partner or having an official roommate.

Equality

Two adults on a lease are equals. They are equally responsible for paying rent and taking care of the rental home. With only one person on the lease, the other person is just a guest. They are both staying on the good graces of the leased resident and also free to leave whenever they want without obligations. Sharing a lease is sharing permanance and equality.

Following the Rules

Leases also usually have rules regarding long-term guests. You could get into trouble if someone is living in your rental home that didn't go through the application process. This is seen as potentially unsafe by landlords because non-leased residents can lead to liability issues. If you don't want to violate your own lease, new living partners should apply, get their background check, and get officially added to the lease.

 

The Benefits of Adding Someone to Your Lease

Being on the lease provides some important benefits for everyone who shares a rental home. This isn't just for the sake of compliance with the lease terms regarding long-term guests. The current resident, new resident, and landlords benefit when everyone is on the lease.

Tenant Rights and Protections

The new resident gains the full rights and protections of a legal tenant. This includes the right to request repairs, access to amenities, and respect of their possessions as a rightful resident of the rental home.

Proof of Residence

The new resident can use their recently signed lease as proof of residence. This can be useful when applying for things like insurance, jobs, identification, and local discounts, among other things.

Shared Rent Responsibility

The current resident gains assurance that their new roommate can be held equally responsible for the rent. This often provides peace of mind when friends or friendly acquaintances move in together.

Liability for Damages

Likewise, all parties share liability for damage so no one can be left fully in the lurch if something goes wrong.

 

Can You Remove Someone from a Lease?

Yes. Swapping roommates is completely normal. When someone moves out, the practical answer is to have them removed from the lease. This gives you the right to take back their key and for all remaining (or new) residents to claim full control over the home.

You can have someone removed from the lease by talking to the landlord. If the person confirms that they are moving out, they can sign an addendum document that removes them from the lease for the rest of the term year.