041 - Investing In Rental Properties
This is episode forty one on the list our podcast did you know that historically in the United States? A red door signified that a homeless, a safe place for travelers to stop and rest. He people would paint their doors. Read to communicate that they are welcoming. It is a sign of inclusion and signifies that they value community. Hello action takers welcome to live blissed out a podcast where I have authentic conversations with business owners and subject matter experts to help us get the scoop, the four, one one, and the low down on a variety of topics, tired of hesitating or making decisions without having the big picture WanNa be in the know then. This is the place to go I'm your host Mersa Houston helping achieve bliss through awareness and action. Thanks for joining me the information opinions and recommendations presented in this podcast are for general information. Information only and any reliance on the information provided in this podcast is done at your own risk. 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Hey, Tim, it's great to have you on the show today. Well, thanks for having me really appreciate it Marissa well. I'm looking forward to talking to you about rental properties. There are many reasons why. Why people want to purchase a home as we all know, people buy homes because they plan on living in them, or perhaps they're moving to a different location, and they need to get a home, or they're up sizing downsizing. There's many reasons, but in particular we're going to be going through the process of how to consider using property for either investment or current income, so like to. To start by asking you. What are some of the considerations that somebody should have if they were to decide to buy a rental property in terms of the purpose whether they want to use it long term, or as a way to increase their income on a monthly basis, I'm a big proponent of long term planning and long term thinking so really. There are strategies that I. I look at when a person is thinking about going into the landlord business. I is understanding that you are buying future income, so you are sacrificing a little bit now for the future, secondly is appreciation. The way houses appreciate in price is a bonus. I don't really consider that a primary factor but man. It's really good if you look at the history of owning houses third you. You. WanNa buy quality or break, even cash flow properties, so the cash flow at the beginning isn't so important, because the goal is that you own rental properties free and clear me no mortgage. That's where the magic is with owning investment properties speaking of that then how do we get to that point? So? Of course we're going to be talking about money and how the money? Money is going to be invested and there many ways to approach that we can put a minimum down payment and get a mortgage. We can put a larger down payment. We could probably cut the amount of payments that we put in so that we can own the home faster, or we can even pay in cash if we have it. So what are some of the options there? There and the pros and cons because I'm sure there are benefits to certain decisions, and I'd like to get a better understanding as to what we should be thinking about when we're thinking about making the investment while the first call would be to your realtor who is knowledgeable on rental properties and how that works, and typically your realtor really needs to own rental properties themselves so. So they have a better understanding of that. Really it's also up to the lender that you talk to to get that down typically, if you're buying and investment property, which means, you would not be living in it. You do have to put about twenty five percent down. That's a really good number to have. It gets you the better interest rate in it eliminates mortgage insurance which all. All has to do with cash flow another methodology of doing it though is if you're younger and you don't mind moving a few times, you can buy a property with the mindset that I'm going to turn this into a rental property and you can do that a few times over I recommend that people stay for at least two years in the House that they have gone. Gone cash is always king. You'll end up getting a better price on the house and the cash flow is immediate, but you wanna look and see what is the best fit for you based upon the cash flow, and what's called Roi, which is return on investment? Basically what percentage rate you're getting on the money you put in? We come across a lot of realtors in every realtor. Realtor as far as I'm aware, at least they specialize in different things. So how do I know what to ask in? How do I look for realtor? That has a really good knowledge specifically, when it comes to investing in real estate for some sort of rental income, there's questions you can ask real estate agents to Kinda Fair it out if they know about mental properties one. One is tell me what the ROI would be on rental properties if they don't know what that means, that's probably a good sign me, not WanNa. Use Them. I would ask them how many rental properties they own, and how many rental properties have they helped? Clients by those are the types of questions that you can ask also another great way of finding out who the good realtors. Realtors czar is cost some of the property management companies around and ask them. Who would you recommend I'm looking at buying rental properties? What real estate agents would you recommend that I use? That's a really good tip. Actually because they come across realtors that really specialize in this area, and so they'd be able to direct people to the right realtor that has experience in that area. Speaking of property management companies then when we're considering a property for this purpose, they're obviously different property types that we need to be thinking about. For example we want a duplex. Do we want the Condo a patio home single family home? Do we want to be in an area that has an Hoa or not, because there are definite advantages, and maybe disadvantages to those decisions based on our ultimate objective. So how do we decipher what the property type is that we should consider? That's something that our realtor could help us. Think about yes, absolutely and really the way you. You look at it is a term called risk versus reward. If you're willing to take more risk, the rewards are greater so for example when you're dealing with a town home or a condo. You don't have to take care of the outside. That's typically covered in the homeowners association dues not always, but usually. If you're risk averse to having to pay for things like roofs, exterior paint, also landscaping that can be very expensive. You may be better off going to a town home or a condo. The return is going to be a little bit less though the Roi will. will be a smaller percentage. That's really how you look at it. It all up to the individual how they WANNA do it. The same applies with property management. If you want a property manager to help you, there's no real standard rate typically somewhere between seven to ten percent of the monthly income that you received so that's going to take away from your our ally, but that means you manage it yourself, and they're certainly risks and rewards to that as well so it all depends on the individual, and what type of risk. They're willing to take getting into that then. Then in terms of managing yourself. I think that one of the things that people get concerned about is that they don't know enough about how to so. For example we have laws to consider we have to find the right tenants that we know are going to appreciate being in the home and taking care of the home end being their long-term. If that's what we're looking for, and then there's maintenance issues to consider as well as general expenses that sometimes we don't even think about front, so not sense. How do we go about learning about how we should handle? Handle it if we decide that we would like to do it ourselves. Versus hiring a professional are certainly books out there that you can read one that I read was called landlord. It's a really good book. The other way is your real estate agent should be able to help you navigate some of these things as well go online. Go to YouTube. You can do videos. There's plenty of information out there about how to do it yourself. If you're doing landlord, but certainly your real estate agent, they're knowledgeable in the investing side of things should be able to guide you. You and help you get started with that I've done that many times, so in other words do your research right I mean. There's a lot of tools and resources. Now that we have access to that. We never had before and that way. If we can gather as much information, upfront as possible will be more prepared. Absolutely real estate attorneys are real good resources well, they can do lease agreements for you. They can do. LLC's all sorts of things like that to help you. Protect yourself and have a good experience having rental properties. How do we know when it's? It's the right time. The values of properties increase and decrease in things fluctuate, and sometimes you're thinking to yourself. Oh, it might be a good time to invest. Because property values are higher now, and in some cases you're thinking. No, actually it's better to wait until they get lower. And of course we don't know we don't know when things are going to go up and down. They change a lot. So how do we know when we should start thinking about this? If this is an avenue that we want to pursue in the future well first of all I, think. Think, we can all say that it doesn't matter if it's nineteen. Hundred or twenty twenty real estate feels like it's always too expensive. I said that back in the eighties when I bought my first patio home at forty thousand dollars I thought that was ridiculous and boy. I wish I had thirty of those now, so there are things that we can look at and that are localized. The local market is what's important. The Denver Market for example since one thousand, nine, hundred, seventy seven. We've had an annual appreciation on real estate six point one percent even with the. But, there are indicators that I watch for from a localized methodology. The first one is employment, so if the employment numbers are going up now. I'm not talking about unemployment I'm talking about how many new jobs have been added to the market. If it's going up, that's a really good sign once it starts going down. That means it's going to be about twelve to eighteen months and real estate prices are going to start going down. That's typically what happened. Not always supply and demand is second, the greater the supply, the last demand, the lesser appreciation we have in houses, and that also affects rental rates and thirties affordability. How affordable! Affordable is the area that you're looking at. Those are the three things that I focused on when I look at. Is it a good time to buy or not? For the last five years up until last year, I was telling people. It's not a good time to buy. Because pricing was just not there. It's starting to now. We're starting to see home starting to cash flow, and that's the other thing that we look at so hope that answers your question in a nutshell, it definitely does him. This might not be the right fit for certain people, and so what I'd like to get a sense of is what does it. It typically look like to be a land owner to be somebody who's renting out property. What are some expectations that you need to have to determine whether or not? This is the right approach something that you should be thinking about for yourself well. There's a couple of things one of the things that I do sit down with people and talk about is how much extra money at retirement you want, and that helps me and where they're at as far as do. They want to be a landlord or not. Is there risk? Yes, you have to be able to not take personally when somebody would burger up your place and it's. It's probably going to happen. You do have to set money aside for repairs. You also have to look at things long. If you're not looking at it long term and have the discipline to look at it long term, this may not be the right fit for you. Everybody's heard of fixing flips. I typically don't like doing that, but in this case you WANNA, hold pay it off as quickly as possible so that your properties are free and clear and understand that you may have to go in and do some repair work, and if you're not comfortable doing that, it's probably not right for you, but if you have a long-term. long-term mindset and attitude, it's a great way to have additional income when you're retired. Coming in every single month, bats the goal, so in other words you need to understand what is required of you and how that's going to look in terms of how you're going to participate in the process, and if you don't feel it, something that you can do yourself, or at least be a part of an are not even interested in doing it then, perhaps, it's not a right fit, but if you feel like you're excited about it, and it's something you really want to be involved in this. Be something to consider not being involved with. With it, you can't have property management do that and that's perfectly fine. The real question is are you willing to look at this long term? Are you willing to make a little bit of sacrifice now for later? That's a really good tipped him. If people wanted to get a hold of you and ask you about more information regarding this, how do they reach you? There's a couple of different ways you can reach me by phone by number is three, zero, three, six, six, nine, two, six, seven six. You can email me at T -pointment H., Y. M. N. at Diene one hundred dot com. I'm more than happy to answer. Answer any questions that you would have. No obligation won't sign you up for anything and on a monthly basis on the third Thursday of the month. If you do live in Denver, I have a meeting and we talk about how to be a landlord, and what issues there are, and what is the name of this group that you have on a monthly basis, Tim? It's called my wake up money team and the wake up money stands for if you wake up in the morning and you have this income coming in. Would it feel good? And of course the answer is yeah. It's great to know that people have more resources. Resources and information so that they can make the best decisions for themselves. Thank you so much. Tim I really appreciate all his invaluable information. You shared with us today. It was really great having you on the show. Well, it's my pleasure. Thank you so much. Marissa. That's all for this episode of Live blissed out. Thanks for listening and thanks to Tim. Hoi Men for being my guest. If you find value in our show, please visit live blissed out dot com to reach out, subscribe and share on social media. This show is made possible through listeners like you. Thank you so long for now and remember to keep moving forward.