Check Us Out on Social Media!
|
|
New Year’s Resolutions for Successful Real Estate Investors
|
|
If ever there was a year that warranted a fresh start it is certainly this one! By now (and, quite frankly, well before now) we are all ready to say farewell to 2020 and begin 2021 refreshed and renewed; and while most are ready to jump into the usual New Year’s tradition of setting personal resolutions that will likely be forgotten by February 1st, we have created a list of resolutions specifically designed to help real estate investors succeed for years to come.
|
|
Review Your Investment Portfolio
What is the current value of your properties and your portfolio as a whole? Do you use the annual tax notice and assume that it is the true current value? If so, your numbers are likely off. Perhaps this is the year to review selling your property and investing in another. It could also be the perfect time to buy another property to add to your portfolio. If you sell, discuss doing a 1031 exchange; you do not want unnecessary taxable gains! Contact us to discuss how we can help meet your investment goals.
|
|
Re-Evaluate Your Investment Goals
Once you have reviewed your current portfolio take a good hard look at your goals. If you’ve found that you're off track, you can plan to get yourself back to where you want to be by revising your short-term goals. Meeting with a financial advisor at the beginning of the year can also be to your benefit! You may find that, after investing for a while, your long-term investment goals have changed. Reviewing your goals at the beginning of the year means that you could be meeting your short-term goals before the year is up!
|
|
Review Your ROI
Make time each year to review your return on investment for each property. Once you know what your income and expenses are, you can plan more effectively for things such as large maintenance items or possibly buying a new investment (other resolutions listed in this article).
|
|
Think Preventative
Preventative maintenance is an inevitable part of real estate investing and will help prevent costly and unnecessary major repairs. When planning your yearly budget, create a budget item for these repairs so that you are prepared for them. This is the perfect opportunity to make an appointment with your property manager to review and discuss any recommended maintenance needs such as exterior painting, installation of lawn sprinklers, fence repairs or replacement, etc.
|
|
Review Your Property Insurance Yearly
The worst time to discover that your coverage is expired or inadequate is when you need it! Take some time to review your policy to ensure you are fully covered.
|
|
Plan for Long-Term Maintenance
Rental property is usually a long-term investment. Even with regular preventative maintenance roofs will age, carpets will wear, water heaters may give out, and more. Developing a budget for major expenses will help soften the blow if they happen or there is an unexpected emergency.
|
|
Organize Your Investment Tax Information
Organizing your tax information early could wind up saving you money! Start now rather than waiting until the last minute (We all do it! Because, seriously, who likes preparing for taxes) Maintaining your records and receipts throughout the year will ensure that you do not forget any important deductions.
|
|
Keep up with Legislation
While politics and legislation has become a topic even more sensitive than ever it still plays a major part in real estate investing. From service animals to late fees there is always something happening in the courts related to investment property! We do our best to keep you apprised of any big developments that can affect you, however it is important that you keep up with legislation as well!
|
|
Network More Effectively with Other Professionals
Networking is the lifeblood of any business and is especially important for real estate investors. Winning in real estate is as much about who you know as what you know. If you have let some professional relationships fall by the wayside, spend some time reconnecting and catching up. You just may be the person someone needs to hear from — and maybe you can help one another meet your goals more effectively
|
|
Learn Something New
Over the course of the year, it can get all-too easy to get wrapped up in our own investments that we don’t step back and look at the world around us. This year make the change! Dedicate yourself to researching, reading new books, or following a new blog (one of our favorites is Bigger Pockets https://www.biggerpockets.com/blog). Learn new strategies, investigate new trends and stay informed! You will gain valuable experiences through both successes and failures — but nothing if you stay inside your comfort level.
Remember, “what the new year brings to you will depend a great deal on what you bring to the new year.” Vern McLellan.
|
|
|
Jay Hartley MPM®, RMP®
Owner - Managing Partner
|
Office | 817.377.3190
Direct | 817.288.5546
Frontline Property Management, Inc.
3000 Race Street, Suite 132
Fort Worth, TX 76111
|
|
|
|
How to Perform Due Diligence on a
Long-Distance Real Estate Investment
|
|
Touring Properties Remotely with a Local Agent
Touring a property remotely is easy thanks to technology like Zoom and FaceTime. Your local agent can walk you through the property and answer questions as if you were there. Have the agent take plenty of photos and videos for you to review later. This is going to be part of the “rehab estimate,” as these images will help to determine what fixes will be needed on the property.
Contact Your Property Manager for a Rental Analysis
The next step is to find out how much the property will rent for (also known as the “value and financial estimate” step of due diligence). This includes looking at income items (rental income, other income, and vacant loss) versus expense items (management fees, repairs, insurance).
This is an important part of the due diligence process. Request a rental analysis from your property management company. If you are self-managing, find a way to get your hands on reliable rental analyses.
If you choose the property management route, your team will also be able to give you some feedback, such as:
- Is it the type of home people are looking for?
- Is this location good for rentals?
- What are the average days on market?
- What can you expect to rent it for?
Your property manager is your expert in the rental market. Knowing this, take advantage of their knowledge and experience.
|
|
Remote Rehabbing
The next step when performing due diligence is to find out what the house needs to rehab it properly. Videos and photos of the property recorded by your agent can be a good place to start. Make a list of necessary repairs or renovations using these photos and videos.
Hire an Inspector to Gauge the Condition of the House Accurately
Inspections that uncovered major problems saved Joe on the properties he dropped out of, so it is money worth spending. You want to know the condition of all the major systems and structure of the home including:
- HVAC
- Roof
- Plumbing
- Electrical
- Foundation
- Mold
Get Bids From Contractors
After compiling a list of renovations, it is time to find some contractors and get bids on the project. Contact investors that do rehab in your chosen market and ask them who they use. But remember, it is important to do due diligence on the list of potential contractors.
Know Your Rehab Budget Variable
Rehabbing can easily go over budget. Run the numbers and know what your maximum make-ready budget is. What is the most you can spend and still make the profit levels you are looking for?
|
|
Back to Work
How Texas Jobs are Returning
|
|
During the COVID-19 economic recession, Texas lost more than 1.4 million nonfarm jobs, dropping from a peak of 13 million in February 2020 to a trough of 11.6 million in April 2020, or 10.8 percent loss of total nonfarm employment (Figure 1). Over the same period, the U.S. lost 22.2 million nonfarm jobs (14.5 percent).
The recession's intensity varied widely across Texas Metropolitan Statistical Areas (MSAs), from a 5.5 percent loss in Sherman-Denison to 14.9 percent in Midland (Table 1). The Real Estate Center found three main factors that explain the recession's severity across MSAs:
- relative share of employment in the leisure and hospitality and other services industries;
- correlations between the growth rates of the state's metropolitan jobs and U.S. jobs; and
- the price of West Texas Intermediate (WTI) oil.
These factors have reversed. As a result, MSAs are regaining lost jobs.
|
|
Texas Job Losses by Industry
Job losses varied across the state's industries in the pandemic recession, from as small as 2.5 percent for financial activities to 41.4 percent in leisure and hospitality industry (Table 2). The latter, composed mainly of hotels and restaurants, bore the brunt of the recession followed by other services, mining and logging, and education and health services.
|
|
Leisure and hospitality jobs accounted for 10.6 percent of total nonfarm jobs in March 2020. Metros with larger shares of leisure and hospitality jobs, such Austin-Round Rock and San Antonio-New Braunfels, suffered more in the recession (Table 3).
|
|
Correlations Between Texas, U.S. Labor Markets
Economically, the U.S. suffered more than Texas in the pandemic recession, and Texas MSAs with economies that closely correlate with the U.S. economy suffered more than MSAs with economies that do not.
Correlations between Texas MSAs and U.S. job growth rates varied from more than 83 percent for Fort Worth-Arlington, San Antonio-New Braunfels, Dallas-Plano-Irving, and Austin-Round Rock to less than 50 percent for Laredo, Midland, College Station-Bryan, and Odessa (Table 4).
|
|
Oil Prices Take a Hit
Price of WTI crude oil fell from $57.50 per barrel in January 2020 to $16.61 in April 2020 (Figure 2). Texas metros with larger shares of mining jobs suffered more in the pandemic recession due to the price collapse. In March 2020, mining jobs accounted for 34 percent of nonfarm employment in Midland and 25.6 percent in Odessa. Consequently, these petroplexes bore the brunt of falling oil prices.
By September 2020, oil prices hovered around $40, not sufficient to stimulate overall economic conditions.
|
|
Regaining Texas Jobs
On March 5, President Trump signed an $8.3 billion emergency aid package to help combat the coronavirus and its adverse economic impacts. The Federal Reserve stepped in by:
- lowering the Federal funds rate to its zero lower bound;
- helping ensure interest rates will remain low;
- lowering long-term interest rates by purchasing massive amounts of long-term Treasury securities and mortgage-backed securities;
- providing short-term low interest rate loans to security firms (primary dealers); and
- offering Money Market Mutual Fund Liquidity Facility, repurchase agreement (repo) operations, and direct lending to banks, state and local governments, and other credit facilities.
From April to October 2020, the nation gained 12.1 million jobs because of actions by the U.S. government and the Federal Reserve and because of people's willingness to return to work. The gain accounted for 54.6 percent of jobs lost in the pandemic recession. Texas gained 786,000 jobs (55.7 percent of jobs lost in the recession) but remains more than 499,200 jobs below the year-ago level.
The latest job recovery indicator for Texas, defined as the ratio of the number of jobs in October 2020 to the number of jobs in April 2020 (seasonally adjusted and expressed as a percentage) stood at 95.2 percent (Table 5). Job recovery indexes among Texas industries currently vary from as high as 99.7 percent for the financial activities industry to 81.6 percent for the mining industry (Table 6).
|
|
National job gains are helping Texas MSA economies that track closely with the U.S. economy. Meanwhile, oil price recovery is helping metros with larger shares of mining jobs. As of October 2020, Waco ranked first in job recovery followed by Texarkana, Tyler, Austin-Round Rock, and Dallas-Plano-Irving. Midland had the smallest job recovery followed by Odessa, Corpus Christi, San Angelo, and Beaumont-Port Arthur.
|
|
Disclaimer: This is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Consult with your own attorney, CPA, and/or other advisor regarding your specific situation.
|
|
|
|
|
|
|