Categories
Real Estate

Things to Consider Before Investing in a Rundown Property

Eager investors think about the idea of buying a rundown property and of being a real estate shark who renovates quickly and flips the property for a significant profit. Yet the discipline, knowledge and experience required in the endeavor is more substantial than first-time real estate investors would like to believe.

Make Money on Every Deal

Understanding the numbers behind a deal is crucial. Being vague about any of the aspects of a real estate deal for the purchase of a rundown property is likely to only get the buyer into deep water.

The theory that a cash-flow neutral rental situation is acceptable following the fix-up period of a rundown property (assuming it is rented out after being improved) should be questioned. This kind of thinking leads to real estate investors justifying poor rental yields following improvements by believing that all real estate rises in value significantly faster than inflation during all real estate cycles.

Making money on every deal requires either a significant margin between the purchase, renovation and financing costs, and the likely sale price, or both a healthy property re-valuation and a promising rental yield post-improvements.

What Will the Property Improvements Really Cost?

Rundown properties regularly require extensive renovations, changes to fixtures and fittings, and other improvements that can become more expensive than the initial budget indicated. For this reason, it is a good idea to get more than one estimate for every piece of renovation work to get a more accurate picture of the true costs.

Know the Local Neighborhood

Neighborhoods aren’t all the same. A couple of roads over and the whole area can be entirely different. Neighborhoods can be on-the-rise or on the way out. Unless the purchaser knows the general area or that particular street it is difficult to know whether the neighborhood is a good place to buy.

An attractive property in a bad neighborhood can take forever to sell. And often sells at a significant discount to the targeted resale price in order to get the property off the books. If the rundown property was purchased with financing in place then this additional holding period can eat rapidly into the profits that would have been realized post-sale.

Have the Right Equipment Ready for the Renovation

Usually with a rundown property there is plenty to tear down or weld together. For the smaller builders, they may not have access to stick welders or safety apparel. A company can provide stick welders which use shielded metal welding methods to weld together broken cylinders and other objects that need to be re-sealed, as well as other products that will be useful in the renovation.

Kitchens and Baths

It might surprise you to learn that what can sell a property is the bathroom and the kitchen. Outside of the living room or the den, when back from work most home owners spend a significant amount of their waking hours in either the kitchen or the bathroom. Because of this, buyers pay particular attention to the kitchen and bathroom to see how modern and well appointed they are.

If the existing design in either the bathroom or kitchen of a rundown property looks a bit dilapidated then the buyer will need to factor in replacement costs in the budget if they want to get top dollar on the re-sale.

It is still possible to get some excellent returns from investing in rundown properties, but it does take careful consideration before taking the plunge to ensure a profitable outcome.

Categories
Real Estate

Property Management Services – How Much Money You Need To Pay To Get These Services

Property management refers to the process of looking after a real estate or single or multi buildings in such a way, so as to increase its product value. Property management companies help to rid the property owners off the number of tasks involved in managing a building.

Things to Consider While Selecting a Property Management Company

  • One must always select an experienced company to oversee one’s property. Such companies use their experience and knowledge to serve people and benefit them financially. Owners should mostly hire a company, which has worked with properties of similar sizes.
  • The most important factor, which increases the value of a property, is its state. A properly maintained property has a higher value as compared to those properties, which are not managed properly. Hence, a property needs to be professionally managed.
  • Overseeing a property can turn out to be a costly procedure. It can cause the property owners to spend an unnecessary amount of extra money in emergency expenses and to settle legal issues. A property management company can predict such problems and save the property owner from spending any extra money.
  • A property management company can well fill the gap between larger companies and owners of small properties. This can turn out to be quite helpful as no two markets are the same.

How much do you have to pay a property management company?

  • Never settle for cheap property management companies as there are chances that the services offered by them will not be up to the mark. Such companies will not only settle with cheaper deals, but will also leave you unsatisfied.

A cheap rate property management company cannot fulfill all your needs to the fullest extent and hence, do not settle for a management company just because they cut down your expenses by a large margin.

  • You need to inspect the agreement properly and even inquire for any undeclared fees. These are the fees, which are thrust onto your face out of nowhere and thus, increasing your expenses by quite a margin.
  • Sometimes the management companies add some extra charges for the maintenance. The landlord may not know about these surcharges, when they are entering into an agreement with the company or even after they have been paying the company for quite some time.

Most companies make huge profits through these extra charges. It is suggested that you inquire into such matters properly.

  • You need to ask the manager of the property maintenance company to explain all the services, which will be offered by them, in case you enter into a deal with them. If you are not satisfied by the explanations given by the manager, then you need to abstain yourself from paying for services, which you do not need and hence, consider another company.

Thus, property management companies are extremely important and make the lives of the landlords much easier.