4 Ways to Increase Your Investment Property Value in 2022

Increase Value

Increase ValueAs a real estate investor, your primary goal is to seek ways to maximize your profits. The more value you can add to your investment property, the more money you can make from the resale. If you are renting it out instead, well-planned remodels can help you to increase the rent, reduce maintenance costs, and boost your profits.

While there is no guarantee that any renovation project will affect resale value or rentability, certain home improvements have been shown to provide a higher financial return than others. When planning renovations, keep this in mind: To add the most value to your home, changes should conform with the neighborhood and flow with the rest of the house.

Outdoor improvements and renovations to kitchens, bathrooms, roofs, and windows generally provide the most financial benefit. Here are some tried-and-true ways to add value:

  1. Upgrade the Kitchen

One of the biggest deciding factors in purchasing a home is the kitchen. The kitchen is a place where homebuyers and renters will likely be spending a large amount of time. You can update the kitchen by replacing old appliances with stainless steel ones, adding a new backsplash, repainting the kitchen island, refitting cabinetry, and investing in durable and modern countertop materials.

  1. Freshen Up the Bathrooms

Making your bathroom feel fresh and new can be as simple as updating a few small items. Changing out the vanity in your bathroom is a sure-fire way for an instant facelift. Many places sell vanity combinations with sinks and fixtures already attached to make installation even easier. Lighting can also make a big impact. From overhead lighting to wall sconces to chandeliers, the options are endless.

  1. Improve Curb Appeal

In real estate, first impressions matter. Sprucing up your property’s curb appeal can attract more foot traffic and more bids. While there’s no one-size-fits-all fix, enhancing the exterior of your property can be as simple as making sure to keep your lawn and shrubbery well-manicured and water your plants and flowers to keep them lively.

  1. Invest in Security

Safety is top of mind for renters. In addition to curb appeal, real estate investors turned landlords should make security a priority. Not only will security features earn more value, but they may also shield property owners from liability for injuries or damages sustained on the property due to negligent security.

Would you like to speak with a member of the RLG team to discuss the value of your current investment real estate portfolio and determine areas for improvement? Give us a call today! We would love to help you with the properties you currently have and multiply your investment portfolio.

4 Reasons You Must Run Tenant Background Checks

background checks

background checksRental properties are a tried-and-true investment strategy that provides passive income while giving you the option to sell when the time is right. Additionally, owning a rental property allows you to diversify your portfolio. That said, any real estate investment comes with risks, and your profitability is contingent on being able to attract and retain high-quality, dependable tenants.

A tenant background check is a critical piece when determining whether a prospective tenant is suitable. A thorough screening should provide a comprehensive look at the applicant, including everything from rental history to criminal record. This may not only save you thousands of dollars down the line, but also a lot of headaches.

Here are four reasons landlords should never skip tenant background checks:

Safety

Landlords are responsible for providing a safe place for renters to live. Whether you own a multifamily property or a condo unit, it is your duty to ensure that every new tenant is carefully vetted.

Renting to someone with a violent criminal history could get you embroiled in a legal nightmare if the tenant harms someone else at your property. By the same token, renting to a registered sex offender could potentially lead to a lawsuit if your property is located near a school, park, or areas frequented by children. Note that sex offenders are not protected under the Fair Housing Act, so landlords can turn down a registered sex offender and face no legal retribution.

Liability

The Fair Housing Act prohibits discrimination based on a number of different criteria, such as sex, religion, race, color, national origin, familial status, and disability. If you do not screen an applicant and end up denying the application, you may face legal issues from people who may claim the refusal to rent was discriminatory. A background check helps lay the groundwork for denied applications based upon merit.

Eviction

Evictions are lengthy and costly processes. Tenants with poor past rental history and many evictions are more likely to fall behind on rent and damage the property. By running a background check, you can ensure that the applicant has a stellar payment history and minimize the chances of having to file eviction lawsuits against delinquent tenants down the road.

Turnover

When a property manager cannot collect rent due to vacancy, real estate investors must account for the loss of income as well as utility bills and potential vacancy taxes levied on underutilized properties. In other words, vacancies can put a significant squeeze on investors’ profitability. While background checks may set you back a few bucks, it pays off hugely compared to costs associated with vacancy losses.

Are you ready to invest in real estate and see the value it can provide? RLG would love to help you! Call us today to learn more.

What Is a Real Estate Exit Strategy and Why You Need One!

Exit strategy

Exit strategyJust as a great deal of planning goes into crafting a business plan, so too must an equal amount go toward preparing a solid exit strategy. By having a robust exit plan, you can hedge against the occasional bad purchase and maximize the total return on your investment when the time comes to divest.

The more exit strategies you can come up with, the more control you may have over external forces. For instance, if you purchase a house to flip and find yourself stuck with a property you cannot sell at a profit, you may rent it out instead and protect your investment.

In real estate investing, you should hold on to properties that best suit your goals and divest yourself of those that do not. When formulating goals, make sure to follow the time-honored S.M.A.R.T. model, which stands for goals that are Specific, Measurable, Attainable, Realistic and have a Timeframe.

When divesting, the best way to go about it is to spread the sale of your properties over a number of years so as to minimize capital gains taxes. If possible, try to sell assets that are at least a year old so you can qualify you for the long-term capital gains tax rates instead of short-term capital gains tax rates. In addition, by strategically harvesting gains in certain tax years, you can potentially reduce your tax liability. Many investors will purposefully await years in which they fall into a lower tax bracket to realize capital gains on their investments.

Here are some common property investment exit strategies:

Sell and Walk Away: If you go this route, keep in mind that you’ll be looking at capital gain taxes. Investors who can bide their time are more likely to maximize returns as they are able to harvest tax gains, make improvements and repairs to increase home value, and take advantage of favorable market conditions.

1031 Tax Deferred Exchange: To minimize capital gains taxes, some investors opt for a 1031 exchange and move all of their equity into a like-kind property. Like-kind properties are real estate assets of a similar nature that can be exchanged without incurring any tax liability under Section 1031 of the Internal Tax Code.

Lease Option: A lease option is an agreement that gives a renter a choice to purchase the rented property during or at the end of the rental period. This is a great option for investors who want to exit an investment in the near future but do not want to rush.

Seller Financing: Seller financing is a real estate agreement where financing is provided by the seller instead of a traditional bank or lender. These arrangements typically include a down payment of at least 30% and a balloon payment due from two to five years. While it allows move a home faster and get significant return on the investment, it is not without its risks. A buyer may default on the payment forcing you to take the property back.

Cash-Out Refinance: If you have equity in a home, a Cash-out Refinance is a method you might consider that allows you to both refinance your home and borrow money at the same time. A cash-out finance replaces your existing mortgage with a new loan with a higher balance, sometimes with more favorable terms. The difference goes to you in cash so you can perform upgrades to your home, consolidate debt, or for other financial reasons.

Do you have any questions about real estate investing? RLG has the tools and experience to guide you with your personal and investment properties. Call us today to learn more and experience firsthand the dedicated, personalized customer service and undivided attention that RLG has to offer!

How to Find Motivated Sellers

Motivated sellers

Motivated sellersThe primary objective of real estate investors is to find motivated sellers from whom to buy homes at discounted prices. But what is a motivated seller? In a nutshell, motivated sellers are people who want or need to sell their home for a host of reasons. Whatever their motivation may be, these sellers are most often willing to agree to a lower offer price or discount in exchange for a quick close.

Here are some scenarios where real estate investors are more likely to encounter motivated sellers:

Foreclosure

A foreclosure occurs when a homeowner is no longer able to make mortgage payments as needed, which allows lenders to recoup the balance of the loan by forcing the sale of the property. When a foreclosure looms large, homeowners will usually seek to offload the property in order to repay the lender and avoid negative hits on their credit history. This is the best time for investors to negotiate and snap up a pre-foreclosure home.

Delinquent Taxes

When homeowners fall behind on taxes, many will list their home and resort to the sale proceeds to repay overdue taxes. Note, however, that once the local authority places a lien on a property, it cannot be sold or refinanced until the taxes are paid and the lien removed. Investors are allowed to purchase property tax liens from municipalities and collect the payment themselves. If the owner cannot pay the lien by the deadline, the investor has the authority to foreclose on the property and assume ownership.

Distressed Property

If a homeowner cannot afford to maintain or repair a property, they will often sell it in its current condition for a discounted price. There are numerous distressed homes available on the market. It is important that investors establish the extent of the renovation far in advance as the repairs may sometimes be too costly.

When determining the maximum price you should consider paying for a property, many real estate investors abide by the 70% rule, which states that the highest price you should pay for the property is 70% of the ARV minus costs of repairs. Imagine the after-repair value (ARV) for your property is $100,000, and it needs $25,000 in repairs, then the most you should pay for it is $45,000.

Relocation

Whether it be due to a sudden job loss, a career change, or to care for ailing relatives, people are constantly on the move. Real estate investors can profit from this opportunity to close great deals. As few people relocating have the means to afford a second mortgage in a different city or part of town, these motivated sellers will put their home on the market and typically favor immediate, all-cash offers.

Are you interested in learning more about real estate investing? RLG would love to help you find a suitable investment strategy for your goals! Call us today to learn more!

What You Need to Know About Seller-Paid Appraisals

appraisal

appraisalA home appraisal — conducted by a professional home appraiser — is a neutral opinion of a home’s value. If you are buying, selling, or refinancing a home, the home appraisal is an important piece of the financial transaction. When you are buying a home, the appraisal determines if the contract price of the home is appropriate. In a refinance transaction, the appraisal ensures that the mortgage lender is not lending more money than the home is worth.

Now, if you are selling a home, opting to hire a professional appraiser may provide you with an unbiased valuation of your home. Though the vast majority of home appraisers are independent experts with years of experience, some may lean in favor of the buyer or make mistakes.

But the benefits for sellers go beyond that. Following are some advantages to enlisting the help of a professional appraiser:

Avoid Surprises: if your appraisal report comes back with a market value below your asking price, you will be armed with the information needed to take action and increase your home’s value. Whether it be damages you did not account for or the changing housing market, you may opt to make repairs or hold on to the property for a while before selling. Conversely, a higher valuation may warrant a price hike.

Save Time: By being proactive and footing the bill yourself, you may speed up the process and save time. Appraisals are normally scheduled weeks in advance, so a deal that falls through may set you back months.

With that said, most buyers will still need to pay for an appraisal to obtain financing, as lenders are unlikely to accept a seller-paid appraisal alone.

Are you ready to plunge into investing in real estate? RLG has the tools and resources at its disposal to get you on your way and not waste a moment of your time. Call us today to learn more and experience firsthand the dedicated, personalized customer service and undivided attention that RLG has to offer!

5 Must-Know Tips for Home Flippers

Home flipping

Home flippingFlipping properties can be an immensely profitable line of business. Turn on any home or DIY network or browse social media platforms and you will find thousands of folks showcasing their home flips. While the business is equal parts satisfying and lucrative, it requires careful planning and a considerable amount of elbow grease.

If you are thinking about flipping a house as an investment strategy, make sure to follow these tips:

Do Your Due Diligence

As more big-shot players enter the picture and manage to cut down on delivery time and costs, the competition is nothing short of fierce. But even large corporations are prone to misjudging the housing market with Zillow being the latest company to halt its home-flipping business after reporting continued losses.

Be sure to do thorough research of every aspect of the process and the property you plan to flip. This includes ordering home inspections, assessing basic facts about the neighborhood, looking into the history of the home, understanding tax and zoning laws, speaking with an insurer about insurance costs, and staying on top of housing market trends.

Get Multiple Quotes

Don’t settle for the first contractor who claims they can do all the work. Getting multiple quotes from reputable contractors are key to keeping costs down and turning a profit. Additionally, when hiring contractors, it is important to check if the prospective company offers their workers proper liability and worker’s comp so you aren’t held responsible in the future for any alleged wrongdoings or accidents.

Plan for Unexpected Expenditures

No matter how meticulous you are in recording your expenses, there will be some that occur during the renovation that you cannot anticipate. By creating a budget that is too strict, you could be setting yourself up for failure. Make sure that your budget is flexible enough to allow for these unexpected expenses.

Decide on a Strategy

While many real estate investors will sell a house once it’s been renovated, some find that turning the property into a rental may yield more returns. Make sure to weigh your options and select one that aligns with your long-term goals.

Talk to a Professional

Education is a key factor in unlocking the benefits of home-flipping. With a specialty in residential investment property financing, Ridge Lending Group comes to you equipped with a vast portfolio of knowledge and experience suitable for all aspects of real -estate finance. RLG maintains a continued commitment to being the best resource it possibly can to its customers all while setting itself apart from other lenders as a leader in both education and technology within the lending industry.

The overarching goal of RLG is simple but powerful: to educate investors on the options that are best suited for their situation and help them achieve real estate investment success both now and in the future.

Are you interested in learning more about real estate investing? RLG would love to help you find a suitable investment strategy for your goals! Call us today to learn more!

4 Reasons to Buy a New Construction Home

New construction

New constructionFolks looking to break into the real estate industry will often face the question of whether to invest in older homes or new construction homes. While there no hard and fast rules, new construction properties have some unique benefits that may make them an attractive option for real estate investors.

Following are four advantages to new construction homes:

  1. More Appeal

Whether renting or buying, people love the feel of a new home and can more easily see themselves living in the space. In addition, new homes are more likely to be located where a growing segment of buyers want to live – the suburbs. The covid-19 pandemic has also helped accelerate this shift in preference as people have grown increasingly wary of touring occupied homes.

  1. Less Maintenance

While some investors enjoy buying fixer-uppers and taking on large-scale renovation projects, some people would rather invest in a home that may be ready to rent or sell as is. Old homes tend to have a lot more maintenance issues from bad insulation, plumbing, and wiring.

  1. No Upgrades Needed

New construction homes feature modern trends in design and functionality, including open spaces, laminate floors, and brand-new appliances. Replicating the aesthetics and contemporary luxuries in an older home can be prohibitively costly and labor-intensive.

  1. Great Warranties

Most newly built homes come with a builder warranty that covers items that are typically a permanent part of the home, like concrete floors, plumbing, or electrical work. While the length of the coverage varies depending on the component of the house, some builders give coverage for up to ten years for “major structural defects,” sometimes defined as problems that make a home unsafe and put the owner in danger.

Are you ready to plunge into investing in real estate? RLG has the tools and resources at its disposal to get you on your way and not waste a moment of your time. Call us today to learn more and experience firsthand the dedicated, personalized customer service and undivided attention that RLG has to offer!

Five Important Inspections for Investment Properties

Home Inspections

Home InspectionsReal estate investors may sometimes be willing to shrug off the need for professional inspections as they plan to renovate their properties. A home inspection, however, can save both residential homebuyers and investors serious headaches and money down the line.

Licensed inspectors will thoroughly examine the house for issues and conditions that sometimes are not apparent to the untrained eye. Armed with a detailed report, investors are more likely to make an informed, financially sound decision on the purchase and have more latitude to negotiate the price with the seller.

As an investor, there are some areas that you should pay careful attention to during the inspection to ensure you’re investing in the right property. Following are five of these areas of concern:

Structural Components

Inspectors will examine the foundation of the house as well as the attic space to search for any damage or water leaks. Should there by an foundation repairs necessary, many real estate investors will choose to walk away and look elsewhere for a property as these repairs can be exorbitant

Roofing

Roof inspectors examine roofs and ceilings for leaks, damage, mold, rotting wood, and more. If the house you are purchasing has a roof that is 20-25 years old or shows visible signs of damage, you may want to consider a roof inspection. Replacing a roof can be almost as expensive as some structural repairs, so investors should thoughtfully take inspection findings under advisement.

Plumbing

Inspectors will examine pipes, drains, vents, and waste systems to ensure they are free of leaks and obstructions. As plumbing is something that requires professional expertise, expenses can quickly add up. A proper inspection can save you quite a bit of cash!

Appliances

While you may expect to upgrade dated appliances such as fridge, stove, and dishwasher, there are other appliances that you are less likely to replace. These include heating and air conditioning units, hot tubs, and electric fireplaces.

Mold

Mold inspectors visually assess the house for mold and test surfaces and air. If your general home inspector picks up any mold during their inspection, it is a good idea to have the home inspected further for mold issues. Fungal growth not only poses a health risk to residents, but also weakens the structure of your property if left untreated.

Are you ready to invest in real estate and see the value it can provide? RLG would love to help you! Call us today to learn more.

How to Rent Out an Apartment Fast

Apartment

ApartmentAs real estate prices in large cities continue to skyrocket, the popularity of apartment living is on the upswing. If you are considering getting into the apartment rental business, there are a few ways to ensure your property remains occupied. Read on to find out how to rent out an apartment posthaste.

Place an Ad

Start out by placing a classified ad in your local newspaper and online. The key here is to create a rental listing that tells prospective tenants about basic information such as rent price, address, number of bedrooms and bathrooms, and highlights the best features – that could be amenities or nearby attractions, for example.

Be sure to take high-quality photos of every room so tenants can easily visualize the space and see themselves living in your property. If the apartment complex has a social media presence and a website, these could be great places from which to advertise vacancies for free.

Lastly, remember to put up a “For Rent” sign, where permitted, along with your contact number. Sometimes, the simplest solution is the best.

Be Responsive

As tenants look at multiple properties to decide which one is right, the ability to effectively manage inquiries cannot be overstated. To avoid losing out on opportunities, make sure to reply to prospects as quickly as possible, ideally faster than your competition.

With that said, the speed of response does not mean that you should gloss over the screening process. It’s important to filter out good potential tenants from the sea of applications you might receive as troublesome tenants can cause you more issues and cost more money than if the apartment sat empty for a few months.

Hire a Professional

Hiring an experienced property manager can be a great avenue to explore if you’re looking to save on the time and hassle involved in renting out and managing the daily operations of being a landlord.

Not only will these professionals take charge of your marketing efforts, but also captain tenant screening and background checks, collect rent, conduct inspections and repairs, communicate with tenants, and more. If you have lots of rental units, live far from where the apartment unit is located, or don’t have much time on your hands, a property management company is a no-brainer.

Are you ready to invest in real estate and see the value it can provide? RLG would love to help you! Call us today to learn more.

How Long Does It Take to Close on a House?

Couple closing on a home

Couple closing on a homeWhile the house hunting stage can often take several weeks and visits, real estate closing times can also take longer than you may anticipate. Even if the entire process goes off without a hitch, you should count on a minimum of at least a couple of weeks to reach the finish line, as closing on a house involves several steps. Following are some common steps in the home buying process:

Purchase contract signing: Buyers and sellers agree on a purchase price at this stage.

Cash deposit: The buyer submits an earnest deposit in an escrow account.

Due diligence: A due diligence period is a length of time in which a homebuyer has the ability to terminate their contract and receive a refund of their earnest money. During the due diligence period, the buyer will complete tasks, such as a home inspection, as well as evaluate the area. It typically lasts up to ten days. 

Home insurance: The homebuyer is required to purchase homeowners insurance prior to applying for a mortgage. The insurance protects homeowners from specific damages to the home, depending on the policy you buy. 

Appraisal: Lenders hire an independent home appraiser to judge if the price of a home is fair based on the price of the other homes in the area of comparable size and value. The fee is typically paid by the buyer as part of the closing costs.

Financing: You must produce the proper documentation to verify the information you provided on the loan application about you, your income, assets, credit and other real estate you may own.

Contingencies: This is the time when buyers must settle contingencies on their end. For example, some contracts require that the homebuyers complete the sale of their former home before acquiring a new one.

Title search: A title search is an examination of public records to determine and confirm a property’s legal ownership as well as find out whether any claims or liens exist on the property. A clean title is required for any real estate transaction to be completed.

Walk-through: Though optional, homebuyers are advised to schedule a final walk-through of the home to confirm the condition of the home is the same (or better) as it was on the day that the offer to purchase was signed. The final walk-through should always be scheduled after the seller has moved out and prior to closing on the home.

Fund transfer: The closing attorney receives the lender’s funds, the earnest deposit from the escrow account, and the down payment.

Closing: Generally, the closing will happen at the office of the settlement agent (potentially an attorney, depending on which state you close in), or the closing could take place at one of the real estate agent’s offices. Your real estate agent, the seller’s agent, the title agent, and a notary may be there to witness the transfer of the property rights to your name.

According to Realtor.com, closing times average out at 50 days. Homebuyers normally utilize this period to do due diligence and tie up any loose ends. With that said, the timeline to finalize the closing process can be several weeks shorter or longer, depending on whether there are title issues, the number and extent of repairs the parties agreed upon, contingencies, and your ability to turn in closing documents in an expedited manner.

While you shouldn’t feel pressured to rush through things without fully reviewing and understanding them, there are some ways you can speed up a closing. For instance, you can start gathering the necessary documents during the house-hunting period.

Are you ready to invest in real estate and see the value it can provide? RLG would love to help you! Call us today to learn more.