Archive for the ‘ Turnkey Rental ’ Category

Do You Have a Property Inspection Checklist?

Over the weekend, Kelly and I looked at six properties we were interested in and we ended up putting an offer on one of them.  We didn’t hesitate on the offer we put in because we were very confident in the property.  Now, when you’re looking at investing thousands of dollars on a property, it is extremely important that you know what you’re buying.  You don’t want to miss things, and looking at the property with a critical eye is very important.  It’s very easy to overlook things when you’re inspecting a property and that’s why we always take our Inspection Checklist with us.

Click on the link and you can see that this is a simple 1-page form that we can use when inspecting a property.  We simply print it out, put it on a clipboard and we use it to systematically go through each house we look at.  This checklist is a system for us and it incorporates several important elements:

  1. First of all, it provides a full checklist of potential issues with a property.  When we’re done we can be sure that we’ve completed a thorough inspection of the property.
  2. It provides a way for us to document the repairs that are necessary or the things we want ask our contractors about.  When you’re looking at six houses in one day, the repairs can start to run together and it is very difficult (if not impossible) to remember what needs to be done on each property.  The checklist takes care of this problem and gives us a way to take very good notes.
  3. For each item in the checklist we also show directional pricing for common repairs that may need to be performed.  With this information we can quickly develop an estimate for the repairs that are necessary.  This is very important for turning offers around very quickly.  If we know it’s a good deal, there’s a good chance other investors will think so too.  If we can get our offer in and accepted before anyone else looks at the property we have a big advantage.

Now, there are some houses we walk into that we know are not for us with a few sniffs (sometimes literally).  But for the properties that pass the initial sniff test our inspection checklist servers as a great tool for us to fully evaluate the property.  Once we have the checklist filled out we use it as input to our financial calculations, and we can quickly develop our offer.

So this weekend we used this system to look at six houses and we wrote one offer…we’ll see where it goes, but hopefully it will be our next property.

Stay tuned…

2012
02/06
CATEGORY
Deal Analysis
Rehabs / Flips
Rentals
Turnkey Rental
Wholesales
3 comments

What We Look For In a Rental Property

As we talked about in our business plan, our long-term strategy for creating financial freedom is to purchase a number of cash flow rental properties.  We’re not just purchasing any properties though.  They have to meet strict criteria that we have developed.  These criteria are aimed at maximizing both our cash flow and appreciation potential for the properties that we are investing in.

Criteria # 1 – Location

The first three rules of real estate are LOCATION, LOCATION, LOCATION!  Well, it really is true because location is one of the few things you cannot fix on your property.  If you purchase in the wrong location, the performance of your property may be doomed from the beginning.

Now, there are specific things we look for with any location we are purchasing property in.

  • Good schools - when we say good schools, it’s really a relative thing.  You want the school district your property sits in to be better than the school districts in the surrounding areas.  This creates a natural demand for people to move into your area which drives home prices in  your favor and creates a generous supply of long-term renters.
  • Good neighborhoods – This goes without saying.  Obviously you want the neighborhood where your property is located to be a place where people want to live.  You need to look for things like well-kept lawns, flower gardens, and well maintained homes.  You don’t want to see weeds, overgrown grass, and houses that are falling apart.
  • Low home prices – At the end of the day, your property will need to cash flow.  Finding good neighborhoods is relatively easy, but finding good neighborhoods with low home prices is where things start to become difficult.  They do exist though…
Criteria #2 – Property Amenities

Once we find an area, we need to be looking at specific properties in that district.  This criteria is really aimed at maximizing your tenant pool by providing your prospective tenants with the amenities they are looking for.  So each property should have the following features:

  • 3 or more bedrooms – We really don’t like the idea of purchasing 1 or 2 bedroom homes because it simply limits your tenant pool, and your rental rate will be much lower.  We’ve found that 3 bedrooms is just about right for rental properties.  This size home will allow a family of 2, 3, or 4 to comfortably move into your property.
  • Basement – For us basements are a must.  They provide your tenants with extra room that they can use for storage or they make an excellent playroom for kids.
  • Floor plan – We don’t have specific requirements for a floor plan, rather what we are looking for here is to make sure there aren’t any oddities with the property.  For example, you don’t want to open the front door and walk into the kitchen.  Your tenants will find this weird too.  As a result you will get lower rents, and you may have a tougher time keeping your property rented.
  • More bathrooms are better – Obviously your property needs to have at least one bathroom, but having an additional bathroom is always a plus. It is not mandatory, but it will definitely make your property much more rentable, and it will increase your rents.
  • Garage – Garages are an excellent feature for a rental property because they provide extra storage space for your tenants.  Garages are not mandatory, but they make your property more rentable.
Criteria #3 – Property Condition

We’re not afraid of doing a little rehab on our properties especially if it means we’re getting a great deal.  However, there are specific things we’re on the lookout for with our properties.  These items can cause big issues and many times we don’t even want to deal with them because there are many properties out there that don’t have these types of problems.

  • Water Issues – We don’t like to mess with water because it can be a huge problem with any property. Water can cause damage to your property in many ways, and if you have water issues it can be a real nightmare. Generally if we see evidence of water in the basement or a leaky roof we start asking lots of questions.
  • Foundation Issues – Foundation issues can be very expensive to fix. If we see a foundation issue we really don’t like to consider the property.
  • Roof – Generally we want to see a new roof on the property.  If the property is in need of a roof, we may still purchase the property, but the cost of the roof replacement will be figured into our offer.
  • Windows – Windows can be a very expensive item to replace, so you’ll want to make sure they are in great condition.  Again, if they’re not, you need to figure in the replacement cost when you’re submitting your offer.
  • Mechanicals – We like to lump the plumbing, electrical and HVAC systems into one category called mechanicals.  The fact is these systems need to be in tip-top shape and up to code.  If they’re not, you need to figure in the cost of repairs in your offer.
Criteria # 4 – Cash Flow

Lastly, we need to make sure our property will cash flow, so you need to look at the rental income you can expect along with the expenses the property will incur.  We will talk about this more in our next blog when we discuss how to analyze the numbers on a rental property.

If you can meet all 4 of these criteria in the rental properties you are purchasing, you will be taking the right first step towards making your rental properties a success.  Remember, it’s all about planning with rental properties and meeting these criteria will help you maximize both your cash flow and your property’s potential for appreciation – both of which will increase your bottom line.

2012
01/15
CATEGORY
Deal Analysis
Getting Started in Real Estate Investing
Rentals
Turnkey Rental
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Day 49 – Sometimes You Don’t Need A Checklist to Evaluate a House…

Today we had intentions of showing you how we go through each property we put offers in on, but unfortunately this property was really just too rough to even complete one of our rehab checklists on.  We could tell with a simple walkthrough that the property needed way too much work for the numbers to make sense.  So, the lesson for today is that sometimes you don’t need a checklist to figure out the numbers aren’t going to work.

Honestly we probably shouldn’t have been wasting our time looking at this property, but the pictures were very deceiving online.  It happens sometimes, but we’ll have to do a better job next time…on to the next one…

More to come…

2011
08/16
CATEGORY
$60000 in 60 days
Rehabs / Flips
Turnkey Rental
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Day 19 – SOLD!

So yesterday we told you that we had completed our Michigan Cash Flow Property Tour and that we hadn’t sold a single property.  Well, about an hour after I published that blog post, one of the investors who had been in town over the past couple weeks phoned me on the way to the airport and we arranged for him to purchase one of our properties.  So, now we’re well on the way towards our goal. 

We purchased this property at the end of March, and here are the list of costs we’ve incurred for the property:

  • -$15,500 Purchase Cost
  • -$2,500 Financing
  • -$2000 Closing Costs (Buy & Sell)
  • -$15,000 Rehab, & Holding Costs
  • -$900 Tenanting Fees
  • +$1,800 Rent Collected

Total Cost - $34,100

Sales Price – $45,000

Profit – $10,900

That’s right where we wanted to be with this property, so we’re very pleased.

This puts us a big step forward in our goal, and we have now earned $12,000 towards our goal of $60,000 in 60 days.

More to come…

2011
07/16
CATEGORY
$60000 in 60 days
Deal Analysis
Deal Negotiation
Deals We're Doing
Rehabs / Flips
Rentals
Turnkey Rental
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Day 3 – Real Estate Investing Stinks!

That’s right, sometimes real estate investing literally stinks!  Our newest property at 659 Wesbrook in Pontiac was a great find, but there’s one little problem…IT STINKS!  Literally!  It’s clear to us that the previous owner had dogs living in the property, and there is a pretty strong wet dog odor throughout the house. 

This is a bit of a problem because our property manager has 10 showings setup for Friday (yes 10!), and we certainly don’t want to turn off any of these potential tenants because of the odor.

We have narrowed the issue down to the carpet which we could replace, but other than the odor, the carpet is in really good condition.  So, we’ve decided to experiment. 

First we used Glade Carpet & Room Odor Eliminator.  This product comes in a powder form, and you basically sprinkle the powder all over the carpet.  We let the powder sit on the carpet for a few hours, and then vacuumed the carpet.  This has already made a remarkable difference. 

However, we’re still we’re worried the odor might come back, so we’re also going to try a couple of techniques that, quite frankly, don’t make a lot of sense to me.  Our cleaning lady told us to use charcoal or vinegar left out in the open of the room.  The charcoal and/or the vinegar are supposed to absorb the smell.  I’m not sure exactly how this works, but if it works, then who cares how right?

So, we’re going to try both…we’re throwing the kitchen sink at this, and if we can save the carpet that will save us at least $1000.

We’ll let you know how this turns out in future episodes, but we’d also like to solicit your feedback.  Have any of you faced this situation, and are there any other methods or products we might try to remove the odor?

More to come…

2011
06/30
CATEGORY
$60000 in 60 days
Deals We're Doing
Turnkey Rental
Video
3 comments

Our Strategy to Provide Turnkey Rental Properties at Michigan Turnkey

As many of you know, we have been actively working at putting together our new company Michigan Turnkey, LLC.  We have been receiving a lot of questions about what exactly we are doing, so today we are going to dedicate this blog post to explaining our strategy with Michigan Turnkey.

So here goes…

In August of this year Kelly and I kind of stumbled into the Pontiac real estate market when we found a deal on a condo that we later ended up purchasing.  The numbers on this property were phenomenal compared to what we were accustomed to looking at on other rental properties.  Specifically, we saw the following:

  1. The cashflow on the property comes out at $442 per month which is about $300 per month higher than what we had been looking at in other areas.
  2. The purchase price was $17,500 which is less than 50% of what we had been looking at in other markets.
  3. The area we bought in was actually a really nice neighborhood (so nice, Kelly and I have seriously considered moving into the neighborhood). 
  4. If we had purchased for cash, our return would have been 30%…we leveraged financing on the property, and our return has skyrocketed to 68%.

So, we began to look at this and we are truly in love with this deal, and we want to find more.  So we began to look at the Pontiac market a little closer.  By evaluating more deals in Pontiac, we were able to figure out pretty quickly that we had gotten a pretty sweet deal on the condo we purchased.  However, we also found out that while most of the deals were not quite as good as the one we purchased, they were not that bad either.  We are finding that putting together a profitable deal with the following numbers is not too difficult at all to find:

  • Purchase price $25,000 – $40,000
  • Return on Investment 10% – 20% for a cash sale (leveraging financing nets higher return)
  • 3 bed / 1 bath with basement in nice areas of Pontiac

After looking at these deals, we decided that Pontiac was truly the place for us to be.  As we talked about in out article Getting to Know the Pontiac Real Estate Market, we started studying the market.  We wanted to find what areas of Pontiac were areas we should be investing in, and what areas we should be staying away from.  So, over a weekend we set out driving around Pontiac and we got a real good idea of where the nice neighborhoods were, and where the not-so-nice neighborhoods were.  We developed a “Green Zone” map in Google Earth and this serves as our first layer of evaluation for any property we look at in Pontiac.

Now, our strategy is quite simple.  We will take any property that we find in the green zone and apply the following process to it:

  1. Purchase the “Green Zone” property
  2. Rehab the property
  3. Conduct comprehensive tenant screening and place tenant into the property
  4. Place management company with property
  5. Sell property as a performing asset with tenant and property management in place

It is really that simple.  Now, we’re really not picky as to the status of the property when we purchase it.  If the property is vacant and in need of repair, we will buy it.  If the property is rented and in no need of repairs we will buy that one too.  In fact, if a property is in any state between these two scenarios, we will buy them.  The only thing that is going to vary is the purchase price we offer.  Obviously the more work we have to do to the property, the lower the price we are going to be able to offer.  It is really just a numbers game because in the end we have a targeted profit we’re looking to make on each property, and we want to be able to sell the property and provide our end buyers with a return on their investment of between 10% – 20%.

So, if you have properties to sell in the Pontiac market, please contact us.  We ARE buying.  Likewise, if you are looking for cashflowing investment properties that net between 10%-20% ROI and will cost you less than $40k to purchase, please call us.  We have properties that will make great investments for you.

2010
11/18
CATEGORY
Deals We're Doing
Turnkey Rental
Uncategorized
4 comments

Bandit Signs to Generate Seller Leads in Pontiac, MI

 

As we discussed in our previous post Real Estate Investing in Pontiac, MI we talked about some of the marketing techniques we are going to use to generate seller leads on properties in Pontiac.  Today we spent a good amount of time putting up bandit signs, 16 in total, and we wanted to share how we did that.

Location

In our post Getting to Know the Pontiac Real Estate Market we showed you how we were able to research which areas of Pontiac, MI that we are going to target to invest in.  We have established many “Green Zones” in Pontiac and these are of course the areas that we will be targeting with the bandit signs. 

For today, we have targeted two specific neighborhoods, each of which is about 0.25 square miles in area.  To cover these areas, we have placed 8 bandit signs in each neighborhood.

To keep track of where we have placed our signs, we are plotting them in Google Earth as shown in the picture below.  This will allow us to track where we have the signs, and also give us an idea about how long the signs stay up. 

Bandit Sign Locations

In our post Bandit Signs Creat Leads, we talked about looking for tall grass, busy corners and telephone poles.  In previous campaigns, we have placed signs on the ground using sign holders at busy corners.  Using this technique, our experience has been that the signs stay up for about a week.  This is okay to generate a maximum amount of exposure when trying to sell a property, however, in this instance we are marketing to homeowners in specific neighborhoods, so we are going to place the signs right in the neighborhood.  Because we are doing this, it is very difficult to find locations where we can put signs in the ground, so we have decided to put the signs on telephone poles. 

Installation

To install the signs, we have come up with a tool that will allow us to quickly install the signs on a telephone pole, and they will be installed at a height out of reach of someone standing on the ground.  As the video shows, the tool consists of a hammer stapler that is duct taped to a piece of electrical conduit.  The video shows we had a difficult time installing the sign, but this was the first go at it.  Once I had the technique down, it was actually quite simple, and the tool did a great job.

Testing & Tracking

As the video shows, we are trying out two different signs with the following messages:

We Buy Houses
Any Condition
Anywhere
248-812-9348
We Want Your
Pontiac House
-Call Us-
248-812-9713

You’ll also notice that we have two different phone numbers.  These phone numbers were generated using Google Voice.  If you have not used Google Voice before, it is a great service and you should really check it out.  It provides you with a phone number along with a voicemail service and it is completely free.  The nice thing is that when someone calls your Google voice number, you can have the call routed to any phone that you specify.  We have each of these numbers routed to our cell phones, so they will ring when someone calls.  One drawback of Google Voice is that you can only route one Google Voice number to your cell phone.  We have discussed a way around this by routing additional Google Voice numbers to prepaid cell phones.  We haven’t tried this yet, but we plan to in the future.

Using Google Voice with this system is a great option for a few reasons.

  1. We can set up a custom voicemail greeting that will simply ask them for their name, phone number, address of the property and their asking price.  This is a great way for us to screen the callers and put some information together on each property before we act on the lead.
  2. Using the different phone numbers will allow us to easily track how many responses we get from the two different sets of signs.
  3. Using Google Voice numbers allows us to keep our mobile phone numbers private
  4. These are bandit signs, and using Google Voice to screen the calls will prevent any run-ins with the city.

So, with any luck these signs will generate quite a few leads for us.  We will keep you posted… 

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2010
10/25
CATEGORY
Deals We're Doing
Marketing
Turnkey Rental
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Status Update on Our Deals…

Welcome back. Today we just wanted to give you an update on the deals we’re working on. We’ve had a lot of activity over the last week, and we just want to catch everyone up. So here goes…

Pontiac Turnkey Opportunities

As we have been talking about in recent blog posts, we have been focusing on our business plan to set up turnkey rentals in Pontiac.  We have been focusing on a number of different aspects of setting up this business including finding properties.

Last week we started on Monday and went through the following progression to find deals.

  1. We had our realtor send us a list of properties that met specific criteria that we were looking for.  The list she send had approximately 30 properties
  2. We reviewed this list and found about 15 properties that had “potential” based upon their size, price, condition and most importantly location.
  3. Kelly did a drive-by on these 15 properties and we decided to look at 4 of them.
  4. Of the for, we have submitted offers on 3 of them and we’re waiting to hear back on the offers.

This week, we have begun the same process although the list we start from will be smaller because there aren’t as many newly listed properties on the list.

Rehab Opportunity in Waterford

Kelly was approached last week by another investor that contacted her through one our ads on Craigslist.  Initially we didn’t like the property because of the list price, but the investor then told us they would take considerably less and gave us a target price to shoot for. 

So, we ended up doing a complete analysis on the property included determining the repairs necessary, conducting a market analysis of the property, and determined our return on investment.  After all of t his we were able to submit an offer on the property lat Saturday evening.

The numbers we have are looking pretty good, and we submitted a full price offer, so stay tuned to see how this one turns out…

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2010
10/11
CATEGORY
Deal Negotiation
Deals We're Doing
regular
Rehabs / Flips
Turnkey Rental
Video
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Real Estate Investors – The Time to Invest In Detroit and Southeast Michigan Real Estate is Now

With the burst of the housing bubble, home prices have fallen dramatically and Michigan has been one of the hardest hit markets in the United States. This might just make Michigan one of the best markets to invest in right now.

It’s no secret that the struggling automotive industry has caused widespread job losses throughout Michigan, and as a result, foreclosures have driven Michigan housing prices down more than 60% since 2006.  According to Realty Trac, foreclosures account for 33% of Michigan’s home sales through the 2nd quarter of 2010, and this trend is expected to continue through 2011. For real estate investors these foreclosures represent an excellent opportunity to purchase property at a steep discount.

The Michigan economy is not out of the water just yet, but there are some very encouraging signs indicating that things may be turning the corner.

1. Detroit‘s Automakers Are All Producing Profits

It is no secret that Michigan’s economy is heavily tied to the automotive industry. In recent years, the automakers have struggled tremendously, but the restructuring is starting to take hold. In the 2nd quarter of 2010 all three of Detroit’s automakers were in the black posting the following profits: 

  • Ford – $2.6 Billion 
  • General Motors $1.3 Billion
  • Chrysler – $183 Million 

This is welcomed news for the Michigan job market as these profits have already resulted in renewed investments into Michigan’s economy. The Michigan Economic Development Corporation reports that 17 of the world’s leading electric battery companies are investing $5.8 Billion into Michigan. This includes a $43 million investment by General Motors for a new plant that will manufacture the batteries for the Chevy Volt – the automotive industry’s first fully electric vehicle. These investments are expected to create approximately 63,000 jobs.

2. The State of Michigan Has Provided a 42% Tax Credit to Film Makers

In April 2008, the state of Michigan announced a 42% tax credit for film makers that produce films using Michigan workers. This has spurred a flurry of film making activity. Before the incentive, Michigan averaged five film productions annually. In 2008 thirty-one films were produced, and in 2009 thirty-five films were produced. This trend is expected to continue with the announcement of 3 major studios to be built in Pontiac, Detroit, and Grand Rapids. These studios alone are expected to bring 6500 permanent jobs to Michigan.

3. Investment in Renewable Wind Energy

Because of Michigan’s vast coastlines along the great lakes, the wind potential is phenomenal. Michigan has enacted the Renewable Portfolio Standard which requires 10% of the state’s energy demand to come from renewable resources by 2015. This standard is sure to drive investment into renewable energy resources in Michigan.

The Time to Invest in Michigan Is Now

All of this economic activity is sure to result in the appreciation of Michigan’s deflated housing prices. In fact, Yahoo Real Estate is projecting that the Southeast Michigan real estate market will appreciate by 33.1% by 2014!

For investors, the time to invest in Michigan real estate is now. Fortunately, investors do not need to live in Michigan to participate in this market.  Companies like Michigan Turnkey Investments are setting up cashflowing turnkey investment properties for out-of-state investors. These properties are solid investments that boast returns from cashflow in the range between 13% – 20% annually.  With these kind of returns and the prospect of heavy property appreciation, it’s a no-brainer – the time to invest in Michigan real estate is now.

2010
10/03
CATEGORY
Market News
regular
Turnkey Rental
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Turnkey Rental Properties in Pontiac, MI

In today’s blog post we are just going to give you an update on some of the things we have been focusing on over the past couple weeks.  We are changing our focus a little bit and we’re developing a business model for turnkey rental properties.  Our focus will be on Pontiac, Michigan, but we will look at any property in Southeast, MI.   So here’s what we’ve been working on to build this business…

Focus on Systems

First off, with everything we are doing in setting up this business we are focusing on systems.  Our plan is to have multiple properties in various stages of the turnkey process (negotiating, buying, rehabbing, tenanting, selling), and to manage all of this we need systems in place to ensure our operation runs smoothly.

Business Plan

Our first step is to lay out our business plan.  This plan has our ideas organized on all of the following:

  • A description of the product we are selling – Turnkey Rental Properties
  • Our pricing strategy for selling
  • A description of the “Target Property” we are trying to buy
  • Locations for where we want to buy
  • The price we need to buy for
  • Our formula for rehab
  • Our plan for how we will sell the properties

Marketing

We are putting together our marketing plans to generate leads for buyers.  We are going to focus on out-of-state and international buyers because they will benefit the most from what we’re doing.  Because of this, the majority of our marketing for buyers will be online.

Market Research

As we wrote about in our post “Getting to Know The Pontiac Real Estate Market” we are spending a lot of time researching the Pontiac market.  We are looking at homes, studying the rental market, and determining the best areas to invest in Pontiac.

Meeting With Investors

To fund our deals, we need money, and to do the kind of volume we want to do, we are going to need private investors backing us.  To communicate our ideas, we have put together a business plan that we are sharing with investors, and we are working with them on an equity sharing relationship in the business.

Business Structure

As with any business, you want to be setup correctly to maximize your tax benefits, and minimize your exposure to liability.  We are meeting with CPA’s to develop our business structure to accomplish these things.

So as you can see we’ve been very busy getting a bunch of stuff setup.  Stay tuned for more…

2010
09/30
CATEGORY
Deals We're Doing
Market News
regular
Turnkey Rental
Video
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