Archive for the ‘Real Estate Investment’ Category

Warren Buffett Says Invest in Rental Real Estate!

Tuesday, December 4th, 2012

In a recent interview with CNBC, Warren Buffett was asked his advice on whether a young individual investor should buy stocks or his first single-family home. Buffett recommended buying a single-family home with a 30-year mortgage, and if possible, buying a couple of them at distressed prices and finding renters.

Warren Buffett is known for his success in investing in assets he believes to be undervalued, so with the US residential real estate market at record lows, why not listen to Buffett’s advice and invest in rental real estate? The absence of big institutional investors in the US residential real estate market makes it less competitive than other investments including the stock market!

Rental real estate is a wonderful way to invest your money and grow wealth over time, but only if adequate property research is performed beforehand and an appropriate deal is made during the sale of the property. A good real estate investment will earn at least a 5% return on the rental figure each year. The good news is that home prices in Orlando are beginning to trend up and long-term mortgage rates are at record lows, so now is a good time to think about taking Warren Buffett’s advice and investing in a rental home in Orlando, Florida.

At Rental Home Management Services, our team of Orlando rental real estate professionals is dedicated to minimizing your stress while maximizing the return on your rental home investment. We help Orlando rental property owners by finding quality tenants, collecting rent payments,  arranging for maintenance and repairs, and more! Give us a call today at 407-261-5610 to learn more about our Florida rental home management services!

Is It Time to Update The Amenities in Your Orlando Rental Property?

Thursday, November 15th, 2012

Sooner or later, it will come time to make improvements to your Orlando rental home property. Some of these upgrades are naturally more costly and/or time consuming than other improvements. Even though it is hard to attach a dollar amount to the return you’ll get by making improvements to your Orlando rental home, remember that modern/upgraded amenities remain a big draw for renters. Therefore, the time and money invested in improvements will come back in the form of renters willing to pay a higher rental price.

When considering upgrades for your Orlando rental home, think about the following:

  • In-Home Washer & Dryer: An in-home washer and dryer is one of the most asked for features in a rental home. There is nothing more convenient than being able to do laundry in your own home, rather than dragging it across town to a local laundry-mat. If space is limited, stack-able washer/dryer units are available and are reasonably priced. This is an upgrade your renters will truly appreciate.
  • Better Appliances: Stainless steel is always a major draw for renters because of the clean, modern look that it offers a kitchen. No matter which appliances you choose, make sure they coordinate well with each other because this will show your attention to detail and style. Also, make sure you get a good warranty for your appliances because that way, when an appliance starts to have problems, the company will pay for it to be repaired or replaced, saving you hundreds of dollars.
  • High Speed Internet Access: To make your Orlando rental home competitive in the market, high speed internet access is a must. In today’s world of instant information, renters expect a wireless high speed connection for their homes because the Internet is such an integral part of everyday life.
  • Countertops: A lot of rental owners go for the cheapest option when it comes to countertops, such as paper laminates. Unfortunately, these cheaper options stain, scratch, and dent very easily. It may be a better use of money to choose an option like granite, that will last through years of tenant abuse without a scratch.

It’s a good idea to update your rentals every five to ten years, but you have to be careful not to spend more than you’ll earn by raising the rent. Rental Home Management Services of Orlando is dedicated to helping you manage your Orlando rental home property. Our services include helping you find quality tenants, collecting rent payments, and arranging all maintenance and repairs through our professional property management services. To learn more about our rental home management services in Orlando, call us today at (407)261-5610.

Single-Family Rental Homes Have a New Buyer

Tuesday, November 6th, 2012

According to a recent article published in the USA Today entitled “Investment Firms Look to Single-Family Rentals“, large corporate investment firms have emerged as new buyers in the market for single-family rental homes. This housing trend has prevailed as homeownership rates continue to fall and house values remain depressed in many areas of the country.

The USA Today article described how Fannie Mae, a government sponsored enterprise charted by Congress to help strengthen the US housing and mortgage markets, recently sold 2 bulk sales totaling 793 foreclosed properties, the majority of them single-family homes in Florida, to rental housing investors pledging to rent them for at least 3 years. The goal of these transactions was to help stabilize cities that were hit hard by the housing crisis.

Large investment firms and real estate trusts have been buying thousands of foreclosures across the nation in an effort to manage large portfolios of single-family homes similar to how they manage apartment complexes and office buildings. These corporate investors think of single-family rentals as an extension of their current housing strategy.

About 65% of the country’s metro regions, including Orlando, have seen the number of single-family rental homes increase by at least 10% in the past seven years. If you are searching for the right single-family rental home in Orlando for you and your family, search our Available Rental Properties in Orange and Seminole Counties. For assistance with your search for the perfect Orlando rental home, please call 407-261-5610 to speak with one of our Orlando real estate professionals!

Should you Rent or Buy?

Monday, September 10th, 2012

In the Orlando housing market, the gap between mortgage payments and rent payments has widened. Instead of a mere $20 as recorded in January of this year, mortgage payments average at $1,200 and rent averages at $1,050, according to Orlando-based FBC Mortgage. Even with this information, a potential homeowner or tenant may still remain undecided on whether to buy or rent a home in Orlando.

When you purchase a home, the freedom of moving on your own time vanishes. Granted, landlords require a tenant to sign a lease agreement, but it’s easier to not renew a lease than to undergo the process of putting your house on the market, hiring a real estate agent, and hoping to receive an acceptable offer in time if you’re on a deadline.

On the other hand, owning a home provides the security of home ownership and can be beneficial if you are starting a family. Before making the decision to buy a home, consider your plans for the next five years. If they involve marriage, children, or a long-term career in the same area, home ownership may deliver the best option for you. However, if you foresee a possible job relocation or aren’t quite ready to settle down, renting a home in Orlando provides the safer, more flexible option.

Whether you choose to rent a home or to rent out your home to other tenants, Rental Home Management Services in Orlando is here to take out the frustration and make the process as easy as possible. The satisfaction of our tenants and homeowners always comes first. Call us at 407-261-5610 to get started today!

Finding the Right Central Florida Rental Property Investment

Wednesday, August 22nd, 2012

Recent studies have shown that the Orlando housing market is on the rise. This is great news for buyers looking to invest in real estate because prices are trending up and interest rates on mortgages are at an all-time low. If you are considering investing in a rental property in Central Florida, but are unsure of where to start, consider these tips in choosing the right rental property:

Location: Research your market and get to know its neighborhoods. A quality residential investment in an established area is usually a sensible choice. Also, it can be quite profitable to discover an up-and-coming area. Properties in these areas have the potential to increase in value quickly if the neighborhood becomes a new “hot spot”.

Speak to Local Professionals: Talk with local real estate agents to learn who is buying and selling in the area and which types of rental properties are in high demand. In Orlando, single-family homes are currently in high demand because many people are moving out of their current homes due to foreclosures or short sales, and looking to rent another single-family home.

Find the Right Deal: Mortgage offers will vary depending on the scale of your rental property investment. Therefore, it helps to find a reputable mortgage broker to provide you with guidance and advice in financing the sale.

Orlando real estate is a wonderful way to grow wealth over time, but only if adequate property research is completed and an appropriate deal is made during the sale of the property. A smart real estate investor is thinking ahead to the future at least five years in that their rental property will be furnished with quality tenants and earning at least a 5% return on the rental figure each year.

At Rental Home Management Services in Orlando, our team of real estate professionals is dedicated to minimizing your stress while maximizing your return on investment. We are proud to help property owners by matching their rental property with tenants, collecting rent payments, and arranging all maintenance and repairs through our professional property management services. Give us a call today at 407-261-5610 to learn more!

Analysis: Cash vs. Mortgage

Wednesday, June 27th, 2012

Previously, I discussed advantages of buying rental homes and paying with cash. To further that discussion I offer this analysis:

Total purchase expense: $140,000.00

Rent amount: $1350.00 per month

Cash Purchase

Annual rent at $1350.00 per month                                 $16,200.00

Vacancy and collection (9%)                                          $ 1,458.00

Effective gross income                                                  $14,752.00

Less operating expenses:

Taxes                                                                         $ 2,000.00

Insurance                                                                    $ 1,200.00

Maintenance and management costs                                $ 2,950.00

Pretax cash flow:  (yield 6.1%)                                      $ 8,602.00

Mortgage Purchase Option 1

(Principal and interest $749.69

70% loan to value mortgage

15 year term, 4.5% interest)                                           $8,996.28

Cash flow income or loss:                                                 $394.28

Mortgage Purchase Option 2

(Principal and interest $535.50

50% loan to value mortgage

15 year term, 4.5% interest)                                           $6,426.00

Cash flow income or loss:                                              $2,570.28

My personal belief is that many people who buy a Central Florida rental home do not compare the numbers to ensure that there is a possibility of positive cash flow. Also, they may not plan for the upkeep and professional maintenance of a home that will be required during long-term ownership.

As I have stated previously, I believe that Orlando real estate is a wonderful vehicle in which to grow wealth over time, but only if adequate property research is completed and an appropriate deal is made during the purchase of the property.

As always, this is my opinion. I welcome yours.

Rental Home Management Services is proud to help the Central Florida community by matching single family rental homes with tenants, collecting rent payments for property owners, and arranging all maintenance and repairs through our professional property management services. To learn more about how we can help you, call us today at (407)261-5610.

How Should You Buy Your Investment Property?

Thursday, June 21st, 2012

A problem that conflicts many hopeful investors is how they should buy their Orlando rental home property. Which is a smarter decision, cash or mortgage?

First, start off by asking yourself this: What can you afford to do? Is your income high enough that you can afford to pay the mortgage and upkeep on your investment property in addition to your own living expenses? If you aren’t able to collect rent for three months, would your credit suffer?

Most economists and financial wealth managers would counsel you to have at least a dollar amount equal to six months of your total monthly expenses saved in cash before you think about investments.

Now, ask yourself this: Do you have additional cash saved to invest in a Central Florida rental home without a mortgage? A couple benefits of paying cash for a home include:

  • There is no monthly mortgage to pay whether the rent is received or not.
  • It is easier to fluctuate the rent amount with the periodic market rent and still enjoy a positive cash flow.

Consider paying cash for the property, place a qualified rent paying tenant, and then replenish your cash with a low loan-to-value ratio loan. Your interest rate as an investor will probably be lower than if you obtain financing without the rental income. The loan will also likely be easier to obtain because your single family rental property will already be showing a steady income stream.

Wealth through real estate is grown over time. If you pay cash for the properties, it might take you longer to obtain the number of properties you desire in your portfolio.

However, consider this: if you own three rental homes—free and clear—and you have a positive cash flow of $8,000 per year for each property, you are clearing $24,000 a year. If you are buying $120,000 worth of properties, you can buy one every five years. You’ll also certainly have less stress because you will not be worrying about being able to pay for maintenance, property management, or that roof that really needs to be replaced.

Now, imagine that you went the mortgage route. If you buy three properties with a 75% loan-to-value ratio, let us guess that you will make 25% of that number, or $2,000 per property, or $6,000 per year. It wouldn’t take many unexpected expenses or prolonged vacancies to lead you to a negative cash flow situation. If your loans are for fifteen years on these properties, it will be a long time before you are in the same position as the person that paid cash for their single family rental properties.

As always, this is my opinion. I welcome yours.

At Rental Home Management Services, our team of professionals is dedicated to minimizing your stress while maximizing your return on investment. To learn more about how Rental Home Management can help you, give us a call today at (407)261-5610.

Why You Should Buy Your Orlando Rental Home Now

Monday, June 18th, 2012

If you’re asking yourself “When should I invest in that rental property?” what are you waiting for? Now may be the best time to buy!

Prices in the Orlando Metro area are 67% below their peak, so the prices on single family homes may not get better than they currently are (according to some economists). Experienced investors already know that trying to time a market may mean that they miss the best opportunities. But, even if the price on the home you want to buy does go a little bit lower over the next few months, how much are you earning now? Probably next to nothing at all!

Taking that money that is just sitting there and making a 6%-7% yield on a Central Florida rental home just makes sense (this is an estimated yield on a cash purchase with a professional property management company handling the leasing and management of the property—the yield is higher if you decide to manage it yourself).

Even if you plan on leveraging the purchase, when do you think interest rates will be lower? Maybe next month, but maybe never!

So, find an investment property at a price that you are comfortable with. Do your research and know the potential rental rate and the positive aspects of the property that will cause today’s prospect to rent your home.

If you wait, the prices may go up, along with interest rates, and you will have a harder time finding the perfect deal.

In 2004, my husband and I decided to start purchasing rental homes. We bought two single family homes (with cash) early in 2004. We have enjoyed a steady rental income from these properties since that time.

The prices skyrocketed in 2005, 2006, and 2007. We did not buy any properties because the cash flow just wasn’t there due to the high prices of real estate during that time. As you may know, prices soon fell faster and came down more than they went up during those three years. In 2009, we were able to purchase another Orlando rental home (again with cash) that currently rents for over $1,500 a month. Yes, the price of that home has fallen a little more, but we collected $18,000 a year in 2010, 2011, and will again in 2012!

So, now is a perfect time to buy a rental property in Central Florida. To learn more about the Orlando real estate market and why you should invest in a single family rental home, give the professionals at Rental Home Management Services a call today at (407)261-5610.

Finding Your Next Central Florida Rental Property

Friday, June 15th, 2012

Continuing on with the theory that Central Florida real estate is still a good investment that will generate wealth over time, the decision must not only be what to buy, but also where to buy it.

If you are planning on investing within a reasonable market area close to where you live, study that rental market. Ask professional residential property managers about the real estate market where you are looking to buy. Don’t rely on sales professionals to provide you with the rental estimate! Sure, they are the best at guiding you to a good sales price, but probably are not well-versed in the rental market.

In the Metropolitan Orlando area, I recommend studying the zip codes that provide a higher price per square foot in a rental market analysis. Look for the best price on a single family home that will generate a rent rate that the median household income can cover (as stated in my previous post, Orange County is $1,350 per month, and Seminole County is $1,550 per month). By studying the area like this, you will be marketing to a large number of people who can afford your rental home. For every $100 per month you are over what the median household income can afford, you are shrinking you pool of potential applicants. This is especially important in our current economy, with households stretching every dollar they have to make ends meet while still providing a quality home to live in.

Once you find a potential single family rental home to purchase, consider what the neighborhood looks like. Will your renter be proud to rent this property and ask friends over for get togethers? Is the curb appeal positive? Can the curb appeal be improved with nominal dollars? Does the property allow easy access to shopping, schools, churches, and access roads?

Consider taking some friends to the property (those honest ones who will look you in the face and tell you the truth no matter what) and ask they if they would rent this property for your prospective rent amount. If they say no, ask why. You may learn a valuable lesson as to how others view the property. It’s certainly better to find out before you buy rather than after!

As always, this is my opinion. I welcome yours.

For years, Rental Home Management Services has been helping to take the frustration out of managing and searching for a Central Florida rental home. Whether you are an owner or a tenant, we are here for you. To learn more about our services, give us a call today at (407)261-5610.

Thinking about Investing in an Orlando Rental Home Property?

Tuesday, June 12th, 2012

Previously, I told you that I still believe investing in Central Florida real estate is still a good way to accumulate wealth over time. But, the decision of what to buy is very important—not just any old residential property will do.

First, study your market area or ask an investment professional for advice. If you research how the Orlando rental market behaves before you invest in the property, you won’t be surprised.

Studies are showing that the demand for rental properties is high, but the inventory is relatively low, thus causing monthly rental amounts to rise. Additionally, people moving out of their current rental home due to a foreclosure or short sale typically rent another single family home; they do not move into an apartment or condominium. Further, new Central Florida residents are renting their homes before they decide to purchase one. Why? Two very important reasons for this are:

  • They are not sure where they would like to live.
  • They believe prices are still going down and interest rates may go lower (I do not necessarily agree with this logic, but it is what new residents believe).

The median household income in Orange County is approximately $48,500 annually. In Seminole County, it is approximately $56,000 a year. As such, the rental amount a household in Orange or Seminole County would most likely pay would be $1,350 and $1,550 monthly, respectively (calculated by dividing the monthly household income by 3, making the rent about 33% of the monthly household income).

In the Central Florida real estate market, you can find a three bedroom/two bath/two car garage home for between $140,000 and $170,000. Let’s take a look at the cash flow for a rental home with a total cash purchase expense of $140,000.

Purchase expense                                                                 $140,000.00

Annual rent at $1350.00 per month                                            $16,200.00

Vacancy and collection (9%)                                                    $  1,458.00

Effective gross income                                                             $14,752.00

Less operating expenses:

Taxes                                                                                    $ 2,000.00

Insurance                                                                               $ 1,200.00

Maintenance and management costs                                           $ 2,950.00

Pretax cash flow:  (yield 6.1%)                                                 $ 8,602.00

This is a yield of 7.1%. Where else are you getting a return of 7.1% after expenses right now?

As always, this is my opinion. I welcome yours. Before making any sort of investment, make sure you contact a professional financial advisor.

At Rental Home Management Services, we are dedicated to helping new residents find their perfect Central Florida rental home. To learn more about the services we offer, give us a call today at (407)261-5610.