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.