Residential & Commercial

Mixed Properties and Options

Earn while you learn…

Already own a home?

If you already own a home and aren’t interested in moving every few years, the second home market is a great alternative. Websites like VRBO and AirBNB make renting easy. Guests usually stay a short time and are there to have fun, not to nitpick or look for problems. You will have the responsibility of paying for utilities and cleaning but also the option of using the home yourself whenever you want. It’s a great way to save money on your taxes as the depreciation should offset any earnings.

  • Step 1. Research the rental market in your area of interest. Understand the seasonal nature and how often it will be rented. See if there is a market for off-season rentals. Calculate your costs to hold the property- mortgage, taxes, fees, heating and cooling, providing electricity, cable and internet, etc. Determine the top price you’re willing to pay for the home.
  • Step 2. Find a property – this can be anything from a fixer upper – if you’re so inclined – to a fully-furnished, perfectly appointed home.
  • Step 3. Advertise –
    • Get professional photos
    • Open accounts on websites like VRBO and AirBNB
    • Let your friends know, they can be great advocates
    • Make a Facebook page or website for the home
    • Consider advertising it on places like Craigslist in the local paper

Many websites that cater to vacationers have a review process. You will review the guest and the guest will review you. It’s imperative that you get good reviews, especially at the beginning. Make a point of responding quickly to guest requests and providing handy items like shampoo, paper goods and spices. I like to stay in the home at least a few times before renting and periodically thereafter. You’ll discover nice-to-haves that will make the guest experience richer. My NH homes are fully stocked with everything from pots and pans to puzzles and games, DVDs, extra blankets and pillows, etc. but some hosts require that guests bring their own bedding, towels, etc. The important thing is setting expectations. If guests know what they’ll need when they arrive, then all is good.

 

Looking for a bigger project?

On the other side of buying and selling is buying and holding. In this scenario, you’re buying one or two properties a year, getting them rented with reliable tenants and watching the checks roll in. This strategy works for residential, commercial and industrial properties.

  • Step 1. Learn the market – understand the average per-bedroom or per-square-foot rental rate and what features differentiate the various quality levels.
  • Step 2. Locate a property with a favorable cap rate and below-market rents. Review leases and evaluate tenants. If possible, talk with tenants and see which would be willing to stay if rents increased. Ask for the building to be delivered vacant if you plan to make major renovations or are not satisfied with the credit-worthiness of the existing tenants.
  • Step 3. Make some investment in the building or grounds that will be immediately felt and appreciated by the tenants. Raise rents.

It’s possible to do a kind of slow flip by buying properties where rents are lower than the market and perhaps the property needs some work or can be restructured to improve things like parking or floor plan. Secure higher rents from new tenants or existing tenants. This will increase the cap rate of the building and thus its value to future investors. Now you’re ready to sell or refinance.

Being the Bank

One way to earn money in real estate that is largely hands-off is to finance an experienced home developer or flipper. This can be great if you do your homework and choose the right partner and a potentially expensive lesson if you do not.
  • Establish a legal entity to do the actual lending.
  • Develop clear criteria for lending. Use the same criteria for all applicants to avoid the appearance of discrimination.
  • Partner with or hire an attorney who will create the proper loan documents and evaluate deals.
  • Partner with or hire a person experienced in the type of construction that you’re thinking of financing.
  • Read this great series: https://www.fortunebuilders.com/becoming-private-money-lender-part-1/
  • Ask lots of questions. Make sure you understand every aspect of the arrangement including all of the worst-case scenarios

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