The Best Real Estate Investment Nobody Knows About! - Part 2 by Mark & Lloyd Walters 2-1
"10 YEARS MAINTENANCE FREE!
"
Like I mentioned before, I have usually only invested in resale houses because
one can find motivated sellers and create profitable deals.
I still believe that, but there's more than one way to find opportunity in real
estate. Besides, I always like to keep my mind open for new discoveries because that's
also a way to find deals. One big consideration in owning rental property is
maintaining the property. That's especially true when you start owning more and more
houses.
Obviously, the older a house gets, the more upkeep will be required over time.
If one were to purchase a brand new house with the intention to rent it out, they
wouldn't be responsible for repairs other than natural wear and tear maintenance for
many years. What does this mean to your pocket book? How does this affect your cash
flow? How does this help create and maintain a positive cash flow? It helps plenty.
Think about it. New homes are under warranty for many years. Structurally, the
builder covers many new homes for 10 years. So, if there's a problem with the house
outside of damage by tenants, the builder is often going to be responsible for the repair.
Roofs usually have a shorter warranty than 10 years, but still should supply you with
good service for many years to come. And that's saying a lot considering the cost of
having to replace a roof.
"HOMEOWNERS ASSOCIATIONS ARE ON YOUR SIDE"
In life we usually gravitate towards situations that give us the most freedom. We
don't want to be told what to do and we strive for independence. Along those lines,
there are two sides to the homeowner's association's existence. Most new subdivisions
have them nowadays and that can be good or bad depending if you're living in the
house or renting the house out. First, what is a homeowners association and what are
its responsibilities? The association is comprised of a management company and
homeowners that uphold the covenants, conditions and restrictions of the subdivision
and it's common areas.
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There is a monthly fee paid by homeowners to carry out any continued common
area maintenance and future overall maintenance that's not controlled by the city.
Simply put, they make sure that front yards are maintained and the general
environment of the neighborhood remains attractive. A professional landscape
company usually comes through every couple of weeks to maintain greenbelts and
other common area vegetation.
The reality is, there are residents in the subdivision that have too much time on
their hands and they usually love being a part of these associations. They walk around
the development looking for homes with a few weeds and little garbage on the ground.
Then they make a complaint to the association who sends a letter to the homeowner
telling them to fix the problem in a timely fashion or they will be fined. It's frustrating
when you're the occupant particularly if there's really not too much wrong and yet you
still receive a letter.
Conversely, it's great when you're a homeowner renting the house to others. It's
like you have a property manager always ready to tell you when the tenant is not
taking care of the property. When I receive one of these letters, which really isn't that
often, I just forward it to the tenant telling them that if they don't take care of this, the
association will charge a fine and I will be forced to pass the fine on to them. I texture
the letter with compassion letting them know that I realize it's not that big of a deal.
That's assuming the tenant is keeping up their side of the rental agreement in a
responsible fashion.
The bottom line is our tenants know they are expected to keep the property in
good condition. We always educate our tenants before they move in as to what our
expectations are. When we receive a letter from the homeowners association, it gives
us the opportunity to let the tenant know they must adhere to the rules no matter how
silly it may seem. This is one of the good reasons to have a homeowners association if
you're renting out a home and most new subdivisions have them. In figure #1 you'll see
a letter I received on a rental property. I had forwarded the first letter to the tenant
noting the original complaint. At that point I went about my business. Three weeks
later I received the letter in figure #1.
I sent that on to my tenants and charged them the fine with their next month's
rent. After that I never again received a complaint on that property.
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It's subtle but it's effective! When things go smoothly it's always easy. But when
a tenant starts to act up, the landlord begins to worry a little bit. The advantage that the
homeowners association in new subdivisions provides is a little more peace of mind
and preservation of a nice piece of real estate. Yet another good reason to invest in a
newer house.
"SPARKLING HOUSE READY FOR MOVE IN!"
Is the fact of little to no maintenance the only reason why one should consider
investing in a new house? No, but it's not bad for starters. If you don't live in a new
house yourself and many of us don't, consider how you feel when you go over to
someone's house that is new. Or just drive around newly built subdivisions and notice
what is all around you. If you go looking at these subdivisions, first you'll often drive
in some main entrance that has beautiful vegetation growing along the road leading
you to the entry marked by signage saying "Rolling Hills Estates" or something catchy.
We're not talking about exclusive communities, just nice modern developments.
Amenities and landscapes are trendy. Builders know what people like and they try to
provide it so one will purchase a house from them.
As you're looking around at different new communities you'll notice similarities
in landscapes even if the prices are dramatically different. But even on very affordable
new housing, fancy street entrances are becoming the norm.
"DRIVING UP TO YOUR NEW SHINNY HOUSE"
Think how it must feel for these people to live in such a new pristine
environment. It's summed up in one popular phrase, "pride of ownership". Let me tell
you this, renters feel the same pride! They too want to feel a part of something special.
It's called "keeping up with the Jones'". But more than that, when an area is new,
people are out fixing up yards and keeping the front of the house tidy. That rubs off
onto others.
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I've had properties where renters really felt like part of the neighborhood and
they should! They make friends with neighbors and begin lives interacting with others
on their street. I've had tenants in newer homes ask to do improvements at their cost!
Sometimes I'll chip in some money if I know it will increase the value of the property
and the price is right. That's called sweat equity…but the equity is all mine!
When a tenant puts in their time, energy and money to improve a property, they
don't want to leave! They've made friends with their neighbors and have an emotional
commitment to the house. They are proud to be living there and it shows. My
experience has shown if you screen your potential tenants well, you will find good
people that will appreciate the opportunity to live in such an attractive and new
community. Long term tenants are what all landlords strive for. Newer housing can
achieve that. Less turn over means more cash flow to the bottom line. Less has to be
spent for rental ads, fix up, painting etc.
Plus, and this is one huge plus, it's an unbelievable experience offering a brand
new house for rent.
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"Attracting Renters to Your New Home"
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