by Barker Realty, Inc. | Dec 6, 2022 | Property Selection, Raleigh Investment Property, Taxes & Financing, Tips for Property Investors
Owning property is a great investment, as it requires little daily effort once you’ve made the initial commitments. If you’re ready to break into the Raleigh real estate market, here are some real estate investment tips that will help you launch your investing career.
Remember that real estate property appreciates
Unlike some purchases, like cars, your real estate property investment will not necessarily depreciate after your purchase. In fact, some property owners find that the value of their investment far exceeds what they paid. For example, if you buy a single-family home or apartment building for a low price, manage it through a real estate management company, and sell it after it appreciates, you can get an excellent return on your investment with minimal trouble or hassle.
Don’t be afraid to start small
Perhaps you cannot currently afford to invest in a large apartment building–or you can, but are nervous about making such a big commitment. Not a problem! Even if you purchase a small house and rent out the property to tenants, you are still considered an investor. You can gain experience with your smaller purchase, and then work your way up to a bigger investment over time.
Work with a professional real estate manager
Rental property doesn’t come with the uncertainty that many investors suffer when putting their money into the stock market–but it does come with some risk. In order to ensure the best success possible, work closely with a real estate management company to understand the cost of maintaining a certain property; taxes and insurance requirements, and all the other details.
Build up a budget
While real estate can yield substantial returns in the long run, you should expect a minimal return for the first two years. For that reason, you may want to consider paying for your property in cash, so that you do not accumulate interest or risk foreclosure. You can also, of course, take out a small loan, if you are confident that you can pay the mortgage without monthly rent coming in. Barker Realty’s experienced sales brokers can help you explore the best financing option for you.
by Barker Realty, Inc. | Jul 5, 2022 | Investment Property Blog, Property Selection, Taxes & Financing, Tips for Property Investors
Benefits of Using a Property Manager for your Rentals
Investors in the real estate market typically don’t start out very big. Everyone has to start somewhere and most people end up living in the home before turning it into a rental after accumulating more financial resources. You have the opportunity to expand beyond owning a single property as a rental property investor to own and manage multiple homes.
Managing these properties includes maintenance, collecting rent, signing paperwork, and ensuring that the units remain occupied. If you’re investing in rental property as a secondary source of income, it might make more sense to work with an investment property management company to help with some of these tasks.
A good property manager represents their client’s interests well and can assist with screening tenants, ensuring the properties remain occupied and ensures fast repairs both during and in between tenancies. It’s crucial to stay in touch with your property manager for frequent updates and even driving by the properties themselves to see how they’re being maintained outside. Here are a few tips for investors thinking about hiring a property manager.
Long-term benefits
Don’t get too caught up in the short-term benefits of owning a rental property. There may be a few rough patches where you may need to spend more than you anticipated, but home values can increase over time. The potential for an increase in value is significant and typically less risky than other investments such as the stock market or savings account.
Stick with newer homes
Rental properties are a better investment if they’re on the newer side. Stick with houses that are no more than 20 years old to reduce repair and maintenance costs. You might need to repair the floors or paint the walls, but they aren’t as pricey as homes that are less than ten years old. If you want to do a complete and extensive renovation, feel free to buy a home that is 20 to 70 years old, but anticipate having to do significant structural, plumbing, or electrical work.
Contact us today if you are a rental property investor and think that you could benefit from hiring experienced Apex property managers to assist with your investment property management needs.
by Barker Realty, Inc. | Jun 21, 2022 | Local Property Management, Taxes & Financing, Tenant Management
It is not cheap to operate a rental property. The cost of operating a property goes up every year. Insurance rates, taxes and maintenance are some of the things that a rental property investor can expect to increase every year.
Our property managers often wonder whether they should raise the rent in order to cover the expenses. It is important to remember that raising the rent is not like asking for a raise. You cannot say that it is time for you to raise the rent because you have been there for three years.
Experienced property managers have to do a lot more than just send out a notice saying that the rent will be increasing. Your tenants may just move out. It can be hard for you to replace the tenants if the rent is too high and rental pricing should follow market value.
A rental property investor will have to decide whether it makes financial sense to raise the rent. You have to make sure that you will have to make an actual profit from raising the rent.
The rent increase has to cover holding costs for the next tenant. They also have to cover realtor commissions. You will also need to calculate repair costs and the changes that you will have to make before the new tenants come in.
For example, you currently charge $2,000 per rent. You increase the rent by $50 per month. You will only make an additional $600 per year. However, if it costs you $1,000 to make repairs and fill the vacancy, then you will not generate a profit.
It is important for you to not raise the rent above the current market value. Your current tenants will probably move out, and it can be difficult to fill the vacancy. You may find that you have to lower the rent in order to get a new tenant.
How to Tell Your Tenants About the Rental Increase
In many cases, it just makes sense to raise the rent. It is not based on the cost of insurance, maintenance or anything. The price is based on the market value. You will have to show the tenants that the increase is not due to your personal finances. It is due to market value.
Many tenants believe that property managers are rich and just in it for the money. That is why they are more likely to stay if they know that the rent increase is due to market value.
Want to know more about investment property management? Contact Barker Realty anytime.
by Barker Realty, Inc. | Apr 5, 2022 | Property Selection, Taxes & Financing, Tips for Landlords, Tips for Property Investors
Rental properties are lucrative investments in the modern society and seemingly becoming a trend for younger generations to try to capitalize on. With online platforms like AirBnB and Instagram, real estate has become “sexy” to get involved with. Thousands of business moguls in the world have dominated the sector because of its enjoyable benefits and they are sharing those experiences on their social media accounts daily. If you invest wisely in the real estate industry, you could make huge profits and live a lifestyle one can dream of.
Alternatively, you may want to focus on building what some consider “long term savings accounts” where you have renters paying down the mortgage and insurance, while your property maintains or even grows in value. When you sell, you are rewarded with a large chunk of change, tax free depending on the time you’ve owned the property.
If you want to invest in rental property, you have to ensure that it has the best features to attract excellent tenants while also working with a property management company to help market and manage as you build your portfolio further. Some of these features may include:
- Provide the best utilities
- Convenient location
- Spacious parking
- Safety and security of tenants
- Provide mutually beneficial terms of the lease
Below are 5 key benefits of investing in rental property from Barker Realty.
1. High Leverage
If you own rental property, you can easily access borrowed capital. The capital will enable you to maximize your returns on investments. Rather than using your cash, you can use the loans to invest in other opportunities. Rental incomes will cover the interest costs and monthly mortgage.
2. Property Value Appreciation
The value of your rental property should increase over time, in most markets. Real estate is not a volatile sector these days, unlike 2008/2009. In the long run, your property is likely to attract serious buyers or at the very least, maintain quality tenants.
Moreover, apart from your asset increasing, the rent prices may also rise. Therefore, rental properties are the best assets to own today because they always combat inflation.
3. Source of Passive Income
You generate a direct income stream from tenants every month, which is the biggest advantage of investing in rental properties. Many property investors call this “Mailbox Money”. It just shows up, every month. You can use the extra funds to launch other lucrative projects or build up your savings.
4. Tax Benefits
If you own a rental property, you will enjoy multiple tax benefits, which include these deductions:
- Insurance
- Interest
- Home office
- Depreciation
Therefore, we recommend speaking with your accountant or working with an accountant who is very familiar with real estate investing and has other rental property owners in order to maximize your annual deductions when it comes to filing your State and Federal returns.
5. Retirement Strategy
After retiring from a formal job, many people look to real estate to invest their money or to continue working, but for themselves. Others see this as a way to maintain income after retirement if they have owned property while also working a full time job.
It is advisable to hire a local property management company who are experienced in maintaining the value and condition of your property, vetting potential tenants, and marketing your property to obtain the highest dollar possible in your market and making sure your tenants are paying on time.
Contact Barker Realty for more information about getting started on the real estate investment path, or if you already have property, talk with us about having it professionally managed.
by Barker Realty, Inc. | Jan 26, 2021 | Investment Property Blog, Property Selection, Taxes & Financing, Tips for Property Investors
If you are interested in investment property management, then there are a number of factors that you will have to consider. The time of the year is one of the many things that a rental property investor takes into account to fine homes for ‘at-price’ or below list. Not to mention, much of the competition is off the market due to half of home purchases take place during the fast paced, over-priced spring and summer months.
However, studies have shown that people who purchase a home in October get a 2.6% fair market value discount. And those people who purchase a home in December and January get a 2% fair market value discount.
Fair market value discounts drop during the spring months. That is why the best time for a rental property investor to purchase property can be during the winter months. There are several other reasons why investors should buy property during the winter and our team helps explain a little more below.
Increased Demand During the Spring and Summer Months
Many people purchase homes during the spring and summer months. People who have families move during the summer months because they do not want their children’s school schedule disrupted. Competition increases when the demand increases. This increases property prices.
Most people are not interested in moving during the winter months. They spend time with their family during the holidays. They also do not have extra money for moving. This is why there is less competition. You will have fewer people to compete with if you buy property during winter.
Desperation
Decreased demand creates a problem with sellers. Many sellers are impatient and do not want to wait until the warmer months. That is why they are willing to decrease their prices. However, you have to be careful. Some sellers will sell property that is in poor condition.
Climate
Climate can change the way that a property looks. A property may look great in the summer, but it can look dull in the winter. Snow can hide the more appealing features of the home and make people less likely to buy, hence why sellers are willing to lower their prices in the winter.
Get in touch with our Apex property managers today for more information or to schedule a meeting with our team!
by Barker Realty, Inc. | Oct 20, 2020 | Investment Property Blog, Property Management Company, Taxes & Financing, Tips for Property Investors
Let’s run through an all too common scenario with real estate investors in the past…
You have a rental property worth $200,000, but you would like to sell it and buy a different one worth slightly more. The property will be used in the same manner as its predecessor. Usually, you would incur a tax liability from the net proceeds, leaving you with less capital for your intended investment.
That was until the introduction of the 1031 Tax Deferred Exchange that allows a real estate investor to defer capital gains tax liability, effectively releasing more money to you for investment. A full deferral means that you will invest the entire net proceeds in the exchange property, effectively dictating that the replacement be of equal value or worth more than the original.
Let us explain further…
What Does This Exchange Mean?
Section 1031 of Internal Revenue Service Code allows you as a real estate investor to defer your tax liability when you dispose of one property and invest in another of the same nature. The said property must be the used for trade to generate income.
What Are The Conditions For A 1031 Exchange?
The law states that the exchange property should be like-kind, meaning it should resemble the sale property in nature and character rather than quality. You can spread the net proceeds over one or more exchange properties.
Like-kind property considered in the deferral plan include:
- Exchanging an unimproved property for an improved one.
- Exchanging a single family rental unit for a multi-family one.
- Selling a vacant piece of land to buy a commercial building.
- Selling an industrial property to buy rental property in a resort area.
- Personal property does not qualify for 1031 unless for productive use in business or trade.
- In a full tax deferral, you are expected to invest the entire net proceeds in an exchange property.
Timelines
A real estate investor must adhere to strict deadlines if they are to benefit from this tax deferral plan. You should identify an exchange property within 45 calendar days of closing on of the sale property. After determining the replacement property, you should close the deal within 180 calendar days of closing the previous investment.
Practically, say you sold your property on January 1, 2017. The identification period ends on February 15, 2017, while the exchange period ends on June 30, 2017. If you fail to close the deal within that time limit, you lose your deferral privilege.
We are an experienced Raleigh property management company that would like to see you take advantage of this tax deferral. Talk with Barker Realty today for more information on 1031 Exchanges and managing your rental properties with ease!
