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Cost vs Value

Cost vs Value

Last Friday at our Movers and Shakers we discussed using a General Contractor versus hiring your own Sub Contractors. Almost like buying Retail and Wholesale. However there are many drawbacks lsuch as When do you have an Alternative or Plan B?

We also spoke about which improvements do you make to a property. Frankly if it’s a rental  and won’t add any Rent increase, take care of Safety and Health issues or prevent further deferred maintenance, then Skip it!

[email protected] of Ask the Builder suggested we look at Remodeling Magazines’ Cost vs Value Report which he generously sent the link for

http://www.remodeling.hw.net/cost-vs-value/2016/index.html

So before you start your improvements you may want to see what the payback is.

Mike

PS I believe the Boston Globe listened in Friday because their Real Estate section “Address” in the Sunday edition 2/7/16 had a similar analysis but also used Angys List. I noticed a big disparity in their answers. What do you think?

HOW MUCH and WHEN do you RAISE RENT?

HOW MUCH and WHEN do you RAISE RENT?

By Mike Hurney, Director of MassRealEstate.net

There’s a matter of position. You as a Landlord want to be perceived as Responsive, Fair and Honest, otherwise simple things won’t get resolved such as what’s “Wear and Tear” and what needs to be charged back to a Tenant. And you could even lose a good Tenant.

If you’re a Tenant, you never want the rent to increase, “It’s way too high already!”

And of course if you’re the Landlord “It’s been below market for too long, I’ve got to catch up!”

We need to get somewhere in between. As Successful Landlords say I didn’t get into this business to get a Job, I got into it to make Money!

Restrictions

Number 1 you’ve got to determine if there are any Rent Control Laws? Rent Control which limited or prevented any increase was originally instituted after the second World War when there was a housing crisis. Fortunately Massachusetts voters ended Rent Control it in 1994 after some Tenants in Boston, Cambridge & Brookline had enjoyed it for 30 years.

It’s more likely you would have Tenants on Section 8 than rent control. Section 8 is the Massachusetts version of Section 8 (Housing choice Voucher) program administered through local PHAs (Public Housing Authorities) and funded by HUD (U.S. Department of Housing and Urban Development) The Vouchers are mainly based on the applicants family income and nationality. There are strict eligibility requirements based on need and income. The PHA calculates the maximum housing allowance and the families contribution. It’s unlikely you’ll be able to raise the rent on families that have a voucher for your unit since it is set by the PHA and monitored by HUD.

Why

Owners and especially Non-Owner occupied properties have two reasons to keep their rents current with market rates. First it helps Cashflow (Rental Income minus Expenses) and Secondly it’s an indicator of value that Buyers use to justify a purchase price. GRM (Gross Rent Multiplier) and DSR (Debt Service Ratio) are two commonly used by Real Estate Investors.
 Here are some tips and guidelines for figuring How much and When to raise rents.

1. With annual leases, just include an increase at renewal time. Personally I give a 60 day notice not just the 30 days required by Massachusetts law.
2. Tenant-at-Will (month to month) I give the same notice of 60 days on the Anniversary. I like the TAW because we’re on the same footing, Landlords and Tenants that is. With an Annual Lease in Massachusetts a Tenant only has to give a 30 day notice for an action (such as leaving) but a Landlord has to wait until the term of the Lease for an action (such as an increase or notice to quit without cause). TAW we each can give the 30 day notice.
3. Your City or State may have different requirements for notice, Check that out first!
4. When raising rents for any unit in a building make sure you raise the rent for everyone with the same amenities the same amount. It takes Tenants about 3 minutes to find out what everyone else is paying;-) and you do not want to be on the wrong end of a discrimination suit which can take years. Incidentally the reporting requirement for HUD is 365 days, Massachusetts it is 360 days. Most Discrimination settlements are heavily weighted with Punitive damages against a Landlord.
5. Many Landlords have a policy of increasing the rent every year, even if it’s only a small amount, that way Tenants are used to the increases. Often new Landlords will take pity on a Tenant for some perceived reason and not raise rents. However once they need to raise the rent and it is a significant increase, look out. As the Irish say “No Good Deed Goes Unpunished!”
6. You could link your rent to the Consumer Price Index. For 2015 Housing, all cities in the US it was 3.2% but rents have skyrocketed in Metro Boston for 2015 with a severe shortage of units.
7. Some of my fellow Landlords will use Rentmetrics or RentoMeter to find local market rents but I like to check the competition using CraigsList. It’s a little more work but I believe I’m looking at the same units that my potential Tenants see.
8. Find the pain point, who will leave for $20 vs $50/month increase You know it costs at least a months rent to do over and rent a unit. Then there can be a period of vacancy.
9. If this is tough for you, hire a PM (Property Manager). Hire directly not the newest broker in a franchise who’s chasing FSBOs and Expired Listings. They’re answering two Bosses: The franchise Broker/Owner and You. Who do you think wins?

This information is for informational purposes only and cannot be substituted for Legal or Financial advice from licensed experts. When you consult these experts, Attorneys, Accountants and Tax Experts at least you know who to see if there is trouble! Mike Hurney is also the author and Coach of the Step by Step Course “How to Become a Real Estate Investor in 12 Easy Lessons” you can reach him at [email protected]

Copyright © 2016 Can be reprinted only in its’ entirety.

PS There are 7 Protected Classes that HUD prohibits any housing or Rental Discrimination against, Massachusetts has 8 more, New Hampshire has 4 more. As a Landlord, do you know

them?

Heart Attack help when alone

Heart Attack help when alone.
from [email protected] of Ask The Builder fame

1 Let’s say it’s 5:25 pm and you’re going home (alone of
course) after an unusually hard day on the job.

2 You’re really tired, upset and frustrated
3 Suddenly you start experiencing severe pain in your chest that starts to drag out into your arm and up in to your jaw.
You are only about five km from the hospital nearest your home.

4 Unfortunately you don’t know if you’ll be able to make it that far.
5 You have been trained in CPR, but the guy that taught the course did not tell you how to perform it on yourself.
6 HOW TO SURVIVE A HEART ATTACK WHEN ALONE?
Since many people are alone when they suffer a heart attack without help, the person whose heart is beating improperly and who begins to feel faint, has only about 10 seconds left before losing consciousness.

7 However, these victims can help themselves by coughing repeatedly and very vigorously. A deep breath should be taken before each cough, and the cough must be deep and prolonged, as when producing sputum from deep inside the chest.
A breath and a cough must be repeated about every two seconds without let-up until help arrives, or until the heart is felt to be beating normally again.
8 Deep breaths get oxygen into the lungs and coughing movements squeeze the heart and keep the blood circulating. The squeezing pressure on the heart also helps it regain normal rhythm. In this way, heart attack victims can get to a hospital.
10 A cardiologist says If everyone who gets this mail, kindly sends it to 10 people, you can bet that we’ll save at least one life.

11 RATHER THAN SENDING JOKES, PLEASE…CONTRIBUTE BY
FORWARDING THIS MAIL WHICH CAN SAVE A PERSON’S LIFE.

1st Deal [photo], number one Real Estate Question

This poor amateur gets beaten, bad, several times but ALWAYS picks himself up and tries again until he’s Victorious!

One of my favorite songs, by Jimmy Cliff
You can Get it if You Really Want It!
The refrain is:
You’ve got to Try, Try and Try, Try and Try You’ll Succeed at last!”

And of course Napoleon is credited with “Don’t wait until you know everything and have everything. Start now and you’ll pick up everything you need along the way!”

I see too many RE Investors quit too soon, so pick yourself and do things a little different, we learn by doing. keep trying and Just do it!

There are some fundamentals that will make it easier for you.
You may want to get Educated? As an Engineer I like to know what I’m getting into. I’ve spent a ton of money on courses e.g. every couple of years I take the Basic Practice course at the MCLE It’s three days of intensive CEU training in all aspects of Law by the top Legal experts in each field. By the way if anything will take you down in this business it’s lack of knowledge of the Laws involved and they’re adding more each day:-( There are many courses offered by our National Speakers, the best being ones that have a follow up local BootCamp, where they see where we live and how their system may be adapted.

Of course I’ve gone through something like an Associates, Bachelors and PhD at the infamous “University of Hard Knocks” but you don’t have to when Networking with Seasoned Pros at our events But you do need to understand what works and what’s BS. I check in on several Blogs periodically where about 50% of the information is wrong and from someone that does not know what it should be.

The Networking at our Real Estate Investors meetings is the most important part of the meetings, in addition to the informative speakers on hot topics. We have a one minute per person session so you can let people know what you do and what you need. Then a whole room full of RE Investors, Contractors and Landlords can help you or help themselves with these valuable connections.

Education, Networking & Blogs sure beat Hard KnocksFirst Deal and what do you do from here.
I can still recall my first deal. My girlfriend found a house that needed some work in Salem, MA. A “friend” of mine offered to “partner” with me for 51% of the deal. I don’t think I’ve seen that girlfriend move so fast, to put financing together for the two of us, before or since. There were more deals we did soon after closing. Salem turned out well. Purchase was $37,000. we sold it five and a half years later for $112,000. and glad the “well meaning” friend wasn’t involved. Yes that’s it the yellow one.

My first deal

Why not right now, write down what you need to do your next or first deal? Then we can knock those items off as we go! Even draw a house at the top of a page and a bag of money at the bottom and fill in what you think it takes to get there.

 

Again the Engineer in me tends to gather a lot of information and process it quickly, sometimes you even need to change your beginning assumptions before the deal.

So let’s fill your notebook with Where you’re not clear, what education you need and Get It! You’ll be glad you did it this way! And probably Successful at it!

At one time Robert G. Allen, the famous “No Money Down” guru, challenged me “If you think you know something about Real Estate, write a book about it. You will find out what you don’t know, fast!” After finishing my MBA I did write that book (and rewrote it about 50 more times, finally as a successful course).

Mike Hurney is a Successful Real Estate Investor, Director of MassRealEstate.net & NewHampshireREIA.org,  Speaker and Author of the step by step Course: “How to Become a Real Estate Investor in 12 Easy Lessons” which is still available. and he can be reached at [email protected]