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Too often I’ve had people tell me something like, “If my property is costing me around $100 every month it’s not even worth keeping it.” In the world of Real Estate, jumping to such a conclusion, could be the wrong decision. Let’s walk through this.
Having monthly cash flow might be ideal, but the way to get it may not be. It really depends on the situation. For example, in Utah the market is pretty high. Real Estate is kind of expensive. If you were buying an investment property with an average down payment, your mortgage payment might be a little higher than what you can rent the property out for. You can’t change the rental market to be able to charge more rent. If you tried to over charge, you will have a hard time finding a tenant and ultimately lose money by having the place sit empty. Your other option to make the property cash flow could be a bigger down payment to reduce your monthly mortgage payment. Although, that may not be ideal or even possible for everyone. It depends on your situation. So, if it is not cash flowing, does that mean it is a bad investment property? If so, that would mean Utah would be bad place to buy investment properties and that is certainly not the case.
Sometimes, your investment property needs some investing. Think of it like a retirement account that you might have. To help it grown, you make contributions to it. If you never contributed to it, then it wouldn’t have anything to grow from and you essentially don’t have an investment at all. It’s the same logic for an investment property. If you just sell it, or never buy it, because it costs you some money each month, then you lost sight of the big picture. Here is a common scenario to make the point clear. If that home is valued at $350,000 and is appreciating in value, at 5%-15%, it would be gaining in value around $17,000 – $52,000 every year. Isn’t that worth a small monthly contribution? Absolutely!
Keep in mind, rent also appreciates and your mortgage payment does not. So, after 1-3 years the rent will probably have increased enough to start giving you that monthly cashflow. Now imagine, ten years down the road. Your property has increased in value by maybe $200,000 and it’s been paying you hundreds of dollars a month for several years. You will be sitting pretty good and feeling glad you stuck with it through those first few years when it felt a little tight.
So, yes. Cash flow is nice but it’s not everything.
At Kasteel Property Management we do more than just watch your rental property. We protect it, cultivate it, and help your investment grow.
Please leave a comment below and happy investing.
Even with a lower growth rate, we’ll explain how real estate could be your best bet for the future.
A stock broker will say you are best to buy stocks and a Real Estate Agent will say you are best to buy real estate. Which is better? It really depends on your goals and your comfort level. Kasteel Property Management can help discuss your goals and knows how to help you make informed decisions.
Real estate in Utah County is hot and has a lot of ways to propel a home owner towards their financial goals. Even though real estate is not for everyone, it’s still important to understand how it works so you can make the right decisions for yourself. When it comes to investing though, you can’t beat the appreciation of a few hundred thousand dollar asset (house) purchased with someone else’s money, that generates a monthly income to help cover the mortgage payment and maintenance costs along the way. It’s leverage combined with rental income that makes real estate out perform the stock market.
It’s not a complicated concept but many people, that think they are professionals, will give you bad advise because they have only ever thought one way and don’t fully understand what they are talking about.
Consider this scenario, simplified down to just the nuts and bolts to show the basic idea. Let’s say I have $40,000 to invest and lets say the stock market is growing at 10% and the real estate market is growing at only 5%. At face value one might think you could get twice the return in the stock market. Here is the game changer: $40,000 will by a $200,000 house while the same $40,000 will only buy $40,000 worths of stocks.
$200,000 house growing at 5% equals $10,000 of appreciation.
$40,000 of stocks growing at 10% equals $4,000 of growth.
Also, both stocks and real estate can go up and down in value but even in a down market you will always have the house. It’s a physical, tangible asset that doesn’t disappear into nothingness, while that is exactly what can happen to money that is in the stock market when it is down.
You might, rightly be asking, what about the mortgage payment? Interest on the loan, property taxes, property insurance, maintenance costs. Maybe you think that I am way over simplifying this. First, remember, I did state that I am purposely simplifying this down to the basic nuts and bolts to get the idea across. Although, these concepts are sound and accurate there are many details to consider. Second, I stated it is leverage combined with rental income. To counter the costs of the mortgage interest, property taxes and insurance, and maintenance on a house you rent the property out to generate extra income. It may not perfectly cover all the expenses for the first few years but eventually it will as rents go up.
The idea is to grow your wealth from the appreciation and the rent is to help you afford the asset (house) along the way. There are many more important details that can make or break your real estate investment but that is what you get a great property management company for. All you need is a firm grasp of the concepts of real estate investing then let the professionals take care of the rest for you.
At Kasteel Property Management we know how to take care of those details. We understand the rental market and we understand investors and their needs. If you want a successful real estate portfolio, whether it’s one property or several, you want Kasteel Property Management on your team. Check out the Owner’s Page on our website and give us a call. You’ll be glad you did.
At Kasteel Property Management, we see things from both the perspective of the tenant and the home owner.
Governor Herbert, of Utah, recently sent a shockwave through the industry by announcing Rent Deferment through May 15th in a press conference, without giving any details of what that meant. This sent a great deal of worry to Utah County property owners. One of the attorney’s, at the office that I have on Retainer, is also a Utah State Attorney, so my resources there were quickly able to send out a clarification of what the Governor was talking about. He “jumped the gun” a bit by bringing it up in a press conference earlier than his advisers expected. He quickly went to twitter to say it was only for those that qualify.
The Rent Deferment Program he was talking about is actually the same program my attorney’s office and the Utah Apartment Association were advising him on and had already been adopted by Kasteel Property Management. Although, this got our hearts beating pretty fast, and I’m sure yours too, we were a step ahead of it and we are already in complete compliance with what the Governor has enacted.
You may still be concerned about how this will impact you and if your tenants are going to be late or not. I will have more details on that after the 5th, which is the usual deadline before tenants get a late fee. As of right now, out of 145 tenants only about 13 replied to my first email and had asked for rent deferment. If a tenant qualifies my clients will get an email notifying them of what agreement was made. Any agreement made always has everyone’s best interest in mind. The goal is not to let tenants get behind on rent but to get them back on track as quickly as possible.
Kasteel Property Management is not taking any request for rent deferment lightly because we understand how it affects both the property owner and the tenant.
I don’t anticipate this being an issue that will impact most people. Most of the tenants have already paid their rent and, as usual, many more will pay right on the 5th of the month.
On a different but important note, Kasteel Property Management is a supporter of Operation Underground Railroad (O.U.R.). O.U.R. heroically rescues the most helpless and innocent from the most vile and evil. It’s hard to acknowledge the reality of it, but sexual slavery has rooted itself in our world and our country, and children are the victims of it. These children need to be rescued, and those running the sex slave industry need to be captured and prosecuted, and O.U.R. has the resources to do so. O.U.R.’s rescue mission doesn’t stop with bringing the children home either. It carries on by providing counseling and therapy to give the kids the best hope of recovery. O.U.R. is on the front lines of a dark, hidden war to fight the most filthy evil and protect the most precious innocence.
Kasteel Property Management is an abolitionist in this fight against slavery and is donating, on a monthly bases, $5 per month for each new property unit (door) that it starts managing as of September 24th, 2019. Our goal is to grow this donation to at least $500 per month. If you would like you can contribute to our fundraiser at https://my.ourrescue.org/fundraisers/kasteel-property-management. You can also contribute by helping us grow our monthly donation by referring your friends and family that need a property manager or are thinking about getting into real estate and have questions.
Please stay safe and healthy.
Picking the right company to manage your investment property can mean the difference between saving you thousands of dollars versus costing you thousands of dollars.
A good management company should be able to prevent a lot of problems before they happen. If they are organized, they should have form letters and procedures to deal with almost everything that might come up on any given day. If they are not organized, they will be running around all day putting out fires, so to speak. All of those fires will result in them being stressed, unreliable, and hard to get a hold of.
One indicator, as to how well their company runs, can be something as simple as how long it takes for them to get back to you when you leave a message or send them an email. You will quickly loose confidence in your management company if they are difficult to reach. Poor communication in the beginning is a sign of problems to come.
A property manager’s experience and knowledge of the industry can also play a big factor in how well they will manage your property. Inexperienced managers may not understand some of the dangers and risks that can come from allowing tenants to do certain things or how to handle certain maintenance issues. Even how a tenant’s seemingly innocent question is answered, can lead down a path to big problems. Experience and training can give the foresight needed to steer clear of several dangers.
Make sure you ask a lot of questions. Personally, I love it when a potential client asks me questions. The more questions you ask, the more confidence they should be able to instill in you. You should feel that you can trust them and rely on them.
Some helpful questions to ask a property manager would be:
How long have you been in business?
Why did you become a property manager?
What area do you cover? (You don’t want them spread too thin over too big of an area).
How often do you inspect the property? (2-3 times a year is usually sufficient)
How do you handle maintenance issues? How do you handle maintenance emergencies?
How do tenants report maintenance issues?
How do tenants pay their rent? How do I, as the property owner, get paid? (This should all be automated with online payments, deposits, and online portals for statements).
How do you handle late rent? At what point do you take steps for eviction? How do you handle an eviction? How do you handle a problem tenant? (These should be done swiftly. Speed and consistency is a major factor here. By the time the rent is late, rent will be due again in only a few short weeks so this needs to get resolved, or be on a clear path to being resolved, before the amount owed doubles.)
What efforts do you take to stay current on the laws and to keep your lease agreement current and updated?
What collection efforts do you use on a tenant that has moved out and owes money?
What legal resources do you have for a situation that is turning bad or has gone bad?
What do you do to fill vacancies? How long does it usually take to fill a vacancy? (A property manager should understand that a vacancy is a huge expense. They should be trying to fill it immediately after they’ve been informed someone is moving out. It’s not always possible, but their goal should be to have a new tenant lined up to move in as soon as the old tenant has moved out).
These are a lot of direct questions, but remember, these are things that a property manager deals with on a regular basis. They should be able to confidently answer these questions with no hesitation. You want a property manager that knows the problems that could come up and how to immediately deal with them.
Also, avoid part-time managers. You don’t want somebody that can only take care of your property if their other responsibilities do not get in the way. Avoid somebody that is managing it as a favor for you, like a neighbor, friend, or family member. Not only for all the reasons stated above, but often it’s illegal. In many states, to manage a property that is not your own, you are required to have a license.
After interviewing a property manager you should have a pretty good feel for how they run their company, and in turn, how they would run your property.
At Kasteel Property Management we thrive on keeping our systems and procedures simple easy and consistent for the benefit of our tenants and our property owners. We do more than just watch your rental property. We protect it, cultivate it, and help your investment grow.
Please leave a comment below and happy investing.
Kasteel Property Management
Stop worrying about your rental property and give Kasteel a call. They are dedicated to keeping you worry free about your investment and additionally take good care of the tenants. Highly recommend!
– Katrina Long, Summit Spa & Float
“We used Kasteel Property Management to take care of our rental property when we moved out of state. Jeff was so great to walk us through the process so that everything made sense. His diligence in background checks provided us with fantastic renters both times we filled it. He made sure the renters were keeping up the property by walking through the property every 6 months. The rent was always paid in a timely manner and the emailed owner statements were very useful and helpful.
“When maintenance issues came up he always contacted us immediately and let us choose who to use to take care of the problem. I was very impressed with his professionalism but was even more impressed with his friendly and easy manner. I would very gladly recommend him to family and friends looking for a property manager.
“We could not have been happier with our experience with Kasteel.”
We leased a home and were treated with professionalism, promptness, and politeness. Jeffrey Stinson was a real pleasure to work with. The home was cleaned and “polished” on the day promised. Moving in with the remote process clearly outlined by Jeffrey was easy and painless. I really couldn’t imagine the process being any more user friendly. Truly a good experience.
I hope this company is the future of property management. Efficiency and treating people right goes a very long way.