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Property Management Blog

What Type of Insurance Should I Have for My Rental Properties?

Empire Industries - Wednesday, April 19, 2017

Why Should Tenants Get Rental Insurance?

Empire Industries - Wednesday, April 19, 2017

How much should I pay from property management services?

Empire Industries - Wednesday, April 12, 2017

Hey everyone, this is Steve Rozenberg with Empire Property Management. Today we’re gonna talk about is a lot of people ask how much should I even pay for property management services. As you know, as in any business, you have the low-level property management companies that offer just volume, flat bottom service; then you have the upper-end, boutique style that may be made you a little more…they may be a smaller company can offer different services, and depending on your needs and your philosophies, you may want one or the other.

I don’t think there’s a right or wrong way to know if you’re picking the right or wrong company. But what I would say is make sure you understand what the company is going to give you. So, for example, sometimes when a company is a low-cost company, they may do things like they may add on service fees for things, or they may upcharge things, or they may not give good service because, let’s face it, when you’re running a business, you have to have a certain amount of staff. In order to have that staff, you have to have money coming in, meaning revenue. In order to keep good staff, you have to be able to pay them equal wages. If all the same companies have the same expenses, someone is cutting a corner, maybe hacking on more properties with one property manager to where they’re not giving good service to everyone; maybe not doing some things and cutting corners.

So you wanna make sure what I would do is go and check out the Google reviews of the company. Look at them up on Yelp and other things like that. Talk to references. You know, we see hundreds and hundreds of investors, every month, contacting us about how we can help them and how we can even give them good advice, even if we don’t manage their property. We still wanna help them so I would say it depends on what your goals are. Make sure that you’re getting a partner. I always say we are relationship-based not transactional-based, meaning I want to make sure that when I’m working with an investor that they are getting the service that they need not the service that I wanna give them, so there’s a difference with that. If an investor wants to buy 50 houses, that may be a client for me. If an investor wants one house, that may be a client for me. If he wants to buy a commercial complex, that may not be a client for me because I don’t deal with commercial.

So you wanna make sure whoever you’re working with is aligned with what your goals are and that they can carry you because at the end of the day, they are a team. You are part of that team, and I would think that on the property management side, that is not where you wanna cut corners and save costs. You may wanna put that into your acquisition cost and make sure your numbers make sense when you’re purchasing the property, and factor that in, maybe have a conservative number.

For example: every place is different. One place may just charge flat rates, and that’s what the competition does. Other states, other cities may charge percentages, so I would call around, make sure you talk to competitors and you’re gonna see what the average is to know, and just remember cheaper is not always cheaper. I’ve learned that personally, from many personal experiences, before I realized the value of having a good partner that can look on the plus side to actually help you succeed not just where I can shave pennies and save money.

Hopefully this helps. If you’d like to talk to me personally, I’d be more than happy to talk to you. I do not need to manage your property, just to help you. I just want you to succeed and be better at knowing what you’re looking for, and you can give me a call. I can give you a free 30-minute consultation, 888-866-6727. Go to my website www.empireindustriesllc.com. You can contact me there or just go on our blog page. There are hundreds of videos to help investors just become better informed and help them. Again this is Steve Rozenberg with Empire Property Management. Thank you.

Am I responsible for maintenance deductible or can tenant pay for that?

Empire Industries - Wednesday, April 12, 2017

Hey guys. Steve Rozenberg with Empire Property Management here in Houston, Texas. Today we’re going to talk about maintenance deductible and can you charge it on the tenant or who is responsible for this thing that nobody ever really has an answer or knows who to charge?

So, a good rule of thumb is, when you…first of all, you have to have it in the lease of what the fee will be. So let’s just start with that. Make sure it’s in your lease and it’s very clear what the amount will be. Now, when it comes to who pays for it, you wanna ask yourself: first of all, did the tenant break it? Or did the house just break it?

So, if the tenant broke it, right out of the gate, my opinion is that they should be responsible. Second thing I would say is…is whatever the problem, is it making the house unsafe or uninhabitable, meaning can the person not live in the house because of it? So, if the case is that the house is unsafe or uninhabitable, then I would say you have to fix the property; and normally you cannot charge if you’re making the house unsafe or uninhabitable coz that is a property code violation.

So a good rule of thumb obviously is have it in the lease, make that per your business model. I would also explain that to the tenant that basically if they break it, they will be paying for it; and I would be very clear in the beginning with them because you don’t want to have this discussion at 2 in the morning when something breaks, trying to decide who’s gonna pay the plumber when he gets there. So wanna make sure you clarify that with the tenant and also when you are running the business model and you have the tenant in the property and something does happen, you have to ask yourself: ok, is the house unsafe or uninhabitable?

At the end of the day, even if the tenant vacates the premises, you’re still gonna have the problem and you’re still gonna have to fix it. So now you don’t have a tenant. Now you’re out of cash flow. So just because you’re right doesn’t always mean you’re gonna win. So I would advise you to be very upfront with the tenant, explain rules of operation and how you expect things to happen; and if the tenant breaks it, they will be paying for it. If it is a violation of Texas Property Code or the house is unsafe, meaning the roof collapsed or the hot water heater doesn’t work, or things like that, then those are things that you will take care of and there will not be a charge.

So instead of kind of hiding things and not discussing them, I recommend going the other way and being very clear and upfront, because if there’s a problem, that may not a tenant you want to rent to, and it’ll be vocalized at that time.

Steve Rozenberg with Empire Property Management. If you’d like to know more information, just go to our website: www.empireindustriesllc.com. Click on our blog page and we will be able to show you hundreds of videos that help you, the investor, get educated on how to become a better business owner for your rental properties. Thank you very much.

Empire Industries: Good Advice on What to Do if Your Property's Been Vacant a Long Time

Empire Industries - Monday, April 03, 2017

Hey guys, this is Steve Rozenberg and Shannon Gear with Empire Industries Property Management and Realty Services.

Today we’re gonna talk about a lot of people will come up to this issue at some point in their investing career, where they say hey my house is vacant a long time. It’s longer than it should be. What do I do? Do I repaint the house? Do I drop the price? Do I offer incentives?

Shannon, you’re an amazing realtor; you do a lot of work with leasing and sales. What advice do you give people when somebody asks that question? If you’re an investor and you’re kind of starting to panic, what do you do?

We need to look at several things. We need to look at the pictures for the listing. We need to look at the price point of the listing. We need to also look at the competition in the neighborhood. Does everyone else in the neighborhood have granite countertops and you still have the old outdated? There are a ton of things to be considered. But first off, I would consider looking at the price point and the pictures because people buy online now with pictures and that’s…they don’t even go see the property.

If the pictures are ugly or, you know, they’re taken with your iPhone and you got a smudge mark on your lens, you know there’s things like that. It’s the attention to details. I think people look at that, and they go whoa they’re not detailed in their pictures. This is probably the best the house is going to look. If you want a quality tenant, you actually want someone that is that picky. That’s exactly right.

And so you wanna make sure that if you have a property, you know it’s price and product. If the price is right, then people will look at it. If they look at it and they don’t come, then it’s a product issue. Exactly.

First and foremost, price it competitively. You may have been able to lease it a lot more, maybe a year ago, but maybe the market has changed or even neighborhood shift. And sometimes in summer, you can lease a property a lot more than you can in the winter time. These are things you have to think about when you have a vacant property for a long time and you have to remember it is a business, and you have to do the smartest thing for your business.

Statistically every two weeks that your property is vacant, you lose 2% of annual revenue that you will never recapture; and a lot of times, if it’s vacant more than a month, you could lose all the cash flow that you were gonna make for the year. Just because you want to say that you leased it for x dollars as opposed to…

I remember someone told me a bad deal is better than no deal at some point. If it’s vacant for four months, you have not won anything. You may have won your ego and say I finally got it rented for x dollars, but how much did you lose in the process? And as a business owner, that is not the way to look at it for your property. do you agree with that?

That’s exactly right. You are a business.

You are a business absolutely.

So this is Steve and Shannon, and thank you very much. If you’d like to know more, give us a call at 888-866-6727 or go to our website: www.empireindustriesllc.com. We have a lot of video blogs just to try and educate you and help make you a smart investor. Thanks a lot. Buh-bye.

Empire Industries: How Many Properties Can I Buy with Conventional Lending?

Empire Industries - Monday, April 03, 2017

Hey everyone, this is Steve Rozenberg from Empire Industries Property Management and Realty Services. I’m here with Shannon Gear today; and what we’re gonna talk about today is how many properties can I actually buy with conventional lending.

Shannon, you’re knee deep in the realtor world. I’m sure you get asked that question many many times.

Yes, so typically you can buy 10 properties with one conventional lender. I do know of a couple products out there that allow you to buy 5 over that 10, but just plan on…

In general, 10 is the cap. Now that doesn’t mean necessarily you can’t buy more properties. That just means you can’t buy them with conventional lending. You need to take those properties in and roll them into a commercial lending.

I remember one time I had 35 properties; and the way that we would do it is we worked with a local bank, and they would get us a blanket loan, and we could just put the property in and out. It’s a matter of having that relationship or getting connected with that type of bank, to have that relationship where they have all your documents. Every year, we sent them our local information of our taxes. Once we talked to them and said hey we’ve got a deal, they would loan out that quickly because they knew we were guaranteeing the deal. They would just put the property into the blanket loan, and it worked really nice. It’s actually a lot easier. Technically, you’re gonna pay maybe a point higher than the going APR.

Yeah, and you have to put down a little bit more as well. The down payment is a little bit higher.

Yeah, yeah. There may be some things that you have to do. One of those things where you’re paying for terms or pricing.

This thing, you’re getting what you want. Normally you’re not able to get a conventional loan. This is a secondary type loan. I mean it’s not necessarily a bad thing. Some people start out that way and start buying. A lot of banks want to make sure you know what you’re doing before they loan you this type of money. They may want to see a track record of you having some conventional lending and paying back on time, and knowing what you’re doing before… They could technically be setting you up to fail if they just give you a blanket loan for half a million dollars and say go get em, and you start buying stuff and don’t know what you’re doing.

You don’t have a good business model in place.

They may want to see that you do your share of responsibility to be able to pay that money back.

Anyway, for conventional lending, you’re probably looking at around 10. You’re gonna start having some challenges after 10, but there are many many ways that you can do that. I know I have personally owned or financed properties to investors when they can’t get a loan, and I’ve got a property; and it just makes sense. They’ve got good credit. They’ve got good jobs. So you can get an owner-financed property from another investor, and they would be willing to do that because it’s win-win. It’s just a matter of making the deal work, which is so great about real estate.

If you’d like to talk to me or Shannon about that more in-depth, you can give us a call at our toll-free number, 888-866-6727 or you can look us online at empireindustriesllc.com. We’d love to help you and give you a free 30-minute sit down, talk about what’s working for you, what’s not working for you. Just give you some out of the box advice to help you make smarter decisions.

Again, this is Steve and Shannon. Thank you very much.

Empire Industries Houston Property Management Explains Tenant Rights And What They Are

Empire Industries - Monday, April 03, 2017

Hello everyone. Steve Rozenberg with Empire Property Management.

Today what we’re gonna talk about is what right do tenants actually have? A lot of people, they don’t really know what kind of rights tenants have; and they don’t know if they violated the law by saying something wrong or not doing something right; and I will let you know that the tenants do have a lot of right.

Here in Texas, we have what’s called the Texas Property Code that basically explains is the house safe and habitable; or if it’s not, there’s certain laws, regulations and timeframes to fix things that are not causing the house to be safe. Also, there is discrimination laws, fair housing laws, questions you can and cannot ask. So there’s a lot of things you need to know about, and when you have a rental property, you have to remember that you own a business. That business has laws and regulations that it has to abide by. You, as the owner, of that business are obligated to know what those laws are, and you have to make sure that you understand.

For example: the 7 protected classes. You want to make sure you understand the protected classes so that you do not violate them. They recently have added some things under the Fair Housing law that owners, or tenants are protected for. You wanna make sure you know those. When you are running a property, a rental property, whether you wanted to have it or you have it by mistake, you have to understand that that tenant has rights, and you have to know them. I would go to fairhousing.gov. You can go to our website, we have the manual that you can download for fair housing. Because you don’t want to find out that you broke the law and now you’re standing in front of the judge or mediation court because you violated it.

You definitely want to be careful. This is one of the reasons we do not let our owners pick the tenant. The owner is not schooled in fair housing, and they do not know questions you can and can not ask; and therefore they could get themselves and us in trouble by not knowing it. So you wanna make sure you know the law and you wanna make sure you know what you’re doing to make sure you don’t get in trouble.

Definitely know the law or hire a company that knows the law and is trained on the law. If anything, just to lease the property, we have a lot of lease-only listings for

investors that do not want to tangle with that; and they want a professional to do it. If they want to manage it, which is fine; but have a professional do it or know the law yourself.

So this is on how to know about what rights tenants have and you definitely want to take the time to learn those. If you like, go to our website: empireindustriesllc.com. Click on our blog page, we have many videos that you can watch and learn and educate yourself for free to become a better investor. Hopefully this helps. Thank you.

Empire Industries: Good Advice on How to Deal with Wholesalers

Empire Industries - Tuesday, March 28, 2017

Hey guys, it’s Steve Rozenberg with Empire Industries Property Management and Realty Services. As an investor myself, I am on the email list of hundreds and hundreds of wholesalers; and I seem to get them all the time. And I never really know if the deal is a good deal or a bad deal. I know it could be anywhere from a $2000 lot to a $500,000 house that I have to buy immediately, and I’ve got to put nonrefundable option money down. And I would say, I would advise you to be cautious when you work with wholesalers.

There are some that are fantastic. I know some great wholesalers here. They’re reputable; they do a good job, and then I know some that I’ve heard about that kind of rip people off. So my advice to you is, if you’re doing a deal with a wholesaler, check out their background of who they’ve worked with. Call their references. See if they’re on Google, if anything comes up on them. But you wanna make sure, I’m a pretty conservative investor, I don’t personally liked to be rushed into any deal, and it’s a big commitment when I’m buying an investment property, and I wanna make sure I know what I’m buying. And a lot of these wholesalers do not want you to take your time and they don’t want you to do your due diligence, because maybe you will find something that they don’t even know about.

And so, I would say that if you’re gonna work with a wholesaler, like I said, make sure you do your homework. Learn about them; learn about their background. Make sure they are even asking you the questions of what kind of properties you want. Don’t just get on the shock-on approach where they just send everything to you and you’re just buying it because you think it’s a good deal. Make sure if you’re buying something, that it fits your business plan and it fits your goals. Just a good deal is not a reason to buy a property.

So again, if you wanna know about anything in Houston, great connections, great guys that I personally know, that I would be willing to recommend, go to another city and ask around and I’m sure the ones that are good will have high recommendations. The ones that are bad, maybe not so much; or you just won’t know anything about them. Always be cautious when you’re making an investment, and make sure you’re doing right investment per your goals and your strategies.

This is Steve Rozenberg with Empire Industries Property Management. Thank you.

How Much Should I Charge a Tenant in Late Fees?

Empire Industries - Monday, March 20, 2017

Hey guys, it’s Steve Rozenberg here with Empire Industries Property Management Services.

Today what we’re going to talk about, a lot of people are always asking me what should they charge in late fees, what’s a good amount. You know, a lot of times, I get investors, new investors that they want to go ahead and charge a whole bunch of money because they want to intimidate the tenant; and that may be something that you think may intimidate them. However, you know, the way I look at it is a tenant that doesn’t pay rent is in one of two categories. The first category is they don’t care; they’re not gonna pay rent; they know the system and maybe they’re going to outsmart you and maybe they’ll stay in your property. and I would go back to maybe vetting the tenants better, and making sure you did the proper background check on them.

The other tenant category would be maybe they just don’t have the money and they can’t pay it. Most people know the first of the month the rent is due. They know that eventually if they don’t pay they will have to get evicted. So trying to scare them with late fees really I don’t think scares them. I think it’s better to instill the fact that you are running a business; you need policies, procedures; and you need to make sure that they understand those. Having some huge amount that’s gonna scare them could actually backfire on you because if you do have these late fees and you don’t enforce them every single time, then you actually could be violating the contract because you did not perform what you were supposed to be doing.

So a lot of people want to put a $250 late fee on rent and $50 a day, well you’re kind of setting up the tenant to fail; and what you have to remember, in my opinion, is the tenant is the client. They’re the ones paying your bills so you can have that property, and it does come down to making sure that you’re trying to create a win-win solution. But they also have to know that there is going to be a penalty just like if you pay your mortgage late; there’s a penalty for not paying that on time. But you don’t want to set them up so that you are making them lose and that they can never get ahead.

So this is Steve Rozenberg. This is how you deal with what you should charge a tenant, make it so that it’s scalable to a certain percentage of the rent and make it so that they get stung by the amount but it doesn’t totally put them out to where they can’t pay that amount. Hope this helps. If you’d like to learn more videos, go to our website http://empireindustriesllc.com. Click on our blog page; you’ll see hundreds of educational videos that we have to help you. Thank you very much.

How to analyze a real estate deal and know what is and what is not important

Empire Industries - Thursday, February 23, 2017

Hey everyone, this is Steve Rozenberg with Empire Industries Property Management Company located in Houston, Texas.

I get a lot of investors that always come and ask me, you know, they have a deal and they’re asking me, “is this a good deal?” And I don’t really know if it’s a good deal or not because I don’t know what their goals are. So, if you’re trying to get a deal and you wanna know if it’s a deal for you, I would suggest first thing you do is you figure out what your goals are. When I say goals, I mean your 20-30 year goals, and think about where you’re going with this, and how does it look as a finished product.

Now I’m gonna attempt to show you what you do when you’re analyzing a deal and how do I identify if something is or is not a good deal based on your goals. I’m gonna take a basic property. We’re gonna walk through it and I’m gonna give you my thought test on why something could or could not be a good deal.

So, let’s say for example, somebody comes to me and they have a house that is worth $150,000, and let’s say they’re gonna buy that house for $120,000. The cash flow on that property is gonna be roughly, let’s just say, for the sake of argument, $200 per month. So my first question is, when someone asks me is that a good deal, I have to ask them what are their goals. Where are you going with this, meaning do you need money to survive off of, because if you need money to survive off of, $200 a month may not be enough. If you have other goals, long term goals, which we’re gonna talk about, then maybe they are.

So the first thing you gotta think about is a lot of people hang their hat on cash flow, and they always tell themselves I want a property that makes a lot of money as cash flow. And the reality is I was one of the people that used to think that, and it was really just for my ego because I had a career; I had a job. I didn’t need the cash flow. I just wanted to be able to say that I had a cash flow in property.

So first of all, let’s say that you have a property, it’s worth $150, but maybe the motivated seller has something going on in their life that they need to sell it for $120. But the market value is $150 on the property. So right there when you buy the property, you’re gonna get equity capture.; and you’re gonna capture basically $30,000 in what’s called unrealized capital gain, meaning it doesn’t go into your pocket; it doesn’t go into your bank, but it is there because the property’s worth $150, you bought it for $120. So right here is you’re gonna get what is called equity capture. After you get the equity capture of that, let’s say you’re gonna put 20% down on the property, which is going to be $24,000. Okay so you’re gonna put $24,000 down and you are gonna finance $96,000. Now the thing to think about is you know the house is worth $150,000. Statistically if you are living on the West Coast or East Coast of the United States, property appreciates or doubles in value every seven to nine years. In the Midwest, it’s every twelve to fifteen years. Now the caveat to that is land appreciates but you depreciate the structure. So it’s not a straight line doubling of value. But let’s say that you’re a long-term investor, and you’re gonna hold this property for thirty years, okay. Let’s say that this property that you’re holding for thirty years, let’s say if you doubled it, it would be $300 and here in Houston, and then you held it for another fifteen years, it would be worth $600 in a perfect world. But we all know life is not perfect. Let’s say for the sake of argument that thirty years from now, this house is now worth $450,000. And I think we can all agree that that is a realistic number, $450,000.

So, when you bought the property for $120, it is now you put 20% down so you put $24,000 down. So the question is when you now have an asset worth $450,000, did you put 20% down? You didn’t. You really put about 4% down, because it’s 4% of the $450,000. That’s the first thing. Now you have an asset that is producing income every month. Now, once you pay back the rest of your $24,000, your return on your asset is infinite. You’re getting an infinite return because all the money you had invested, the $24,000, is back to you and now you have an infinite return.

Now let’s talk about this mortgage. The bank says, Mister Buyer, you give me an interest rate of 5% or whatever the interest rate is, and I will give you $96,000 that you’re gonna pay me over the course of thirty years. And over the course of thirty years, I don’t care if it goes up in value, goes down in value, you get to depreciate it, none of that matters to me. The only thing that matters to me is that over the course of thirty years, you pay me back $96,000 plus an interest rate of 5% and we’re square. Pretty good deal. Now something to think about: who pays down this $96,000? It’s not you, the tenant pays down the $96,000. So what happens is you get what’s called debt pay down, where someone else is paying down the debt for you. That someone else is going to be the tenant. Now you may have months and times where you’re going to have to put capital improvements in the property when you have vacancies, but that’s okay. You’re still gonna have someone paying down the debt. Now, you’re also gonna get appreciation, like I said, because every twelve to fifteen years, this is gonna double in value. That’s just the historical number. If you broke it down, you could see years in times like we had in 2007-2010, where it’s gonna dip, but historically it will double.

So now, something to think about: you have depreciation. Depending on if you are a W-wage earner or what your financial situation is, depreciation can be something that could be a big benefit for you. So, something to about: you now have cash flow, you have equity capture, you have appreciation, you have debt pay down, you have depreciation. This is all from a property that you bought for $150, no it was worth $150, you bought it for $120, you make $200 a month. Now here’s the thing: when this house is worth $450,000, do you think it’s still going to be giving you a $200 a month positive cash flow? No, because you have a fixed expense of $96,000 mortgage and you have taxes and you have insurance, now these may go up a little bit but they’re not gonna go up much. Is it safe to say that when this house is going through maybe $200 or $250,000 that this property rent is gonna go up as well? They call it the 1% rule, roughly 1%, it depends. It changes in different parts of the country. But they like to use the 1% rule. So if you use the 1% rule and you were even a little conservative, let’s just say you had the mortgage paid off, and now let’s just say the rent is $4,000 a month. Your rent is $4,000 a month, you have no mortgage, you just have taxes and insurance. So the return that you’re getting is much more than $200 a month. My point is that appreciation will always outpace cash flow. Always. But I would tell you, I would look at these 5 things: cash flow, equity capture, appreciation, debt pay down and depreciation, and for your own financial situation, you need to define what is the most important. So what I’d like to think of is I’d like to think of a three-legged stool. I would pick the three things that are the most important to me when it comes to buying property. If I had a good job and I do not care about $300 a month, except for my ego to tell people I’m making a lot of money, I would rather get a property that I’m gonna capture some equity. I’ve got a job so I would like to get the depreciation, and I would like it to have a tenant pay that down. To me, if you can find a deal that fits three of your main criteria, that may be a deal worth looking at. So what you’re doing is you’re basically identifying what you want to buy based on your goals. I don’t need to have $300 a month if I’m looking to retire down the road. I’m looking for depreciation. I’m looking for debt pay down and I want appreciation.

So again, it’s just something to think about that when you are purchasing a property that you really look at all the things that are the factors when you’re coming to buy a property. Don’t get caught up in the $200 a month, because that doesn’t mean anything when it comes to the long play, and the long play is you buy property for $120. It was okay, it was maybe a base hit, it wasn’t great. It’s worth $150 but you have to look downstream of what it would be, and what it would be would be a lot of cash flow, you have an asset that’s still producing income, and it fits your criteria. So hopefully this helps you when you’re looking to buy a property or trying to analyze a deal. This is something that I recommend you do. Put your numbers down. Make it a math computation. Buying an investment property is just math. Make sure you can analyze it based on numbers not based on emotion. This is Steve Rozenberg with Empire Industries Property Management. If you’d like to know more, you can give us a call at 888-866-6727 or go to our website at www.empireindustriesllc.com and we have a lot of video blogs and other educational topics that we can help you with. Thank you very much.


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