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The 5 Points Property Blog
Welcome to the 5 Points Property Management Blog!
Stay tapped in for the latest real estate news, tips and opportunities for Ohio landlords, and new rental property listings in multiple Cleveland neighborhoods…
Should I Use A Turnkey Real Estate Service Or Invest On My Own?
Is DIY rental property investing or turnkey real estate investing the best move for you?
Income property investing should be a core staple of every individual and family’s finances. There is no question about that. One thing that some do debate is whether they should be trying investing on their own, or using a turnkey real estate service to find and manage their income property investments.
What Is A Turnkey Real Estate Service?
Turnkey real estate services provide a full service experience. They find the properties, evaluate and screen them, help with renovations and repairs, place tenants, and then ensure professional property management is in place.
It is a done for you approach to real estate investing. While it is a newer concept in the US, it has been the go-to method for real estate investors and especially sophisticated investors internationally for much longer.
The Truth About Being A DIY Landlord
You can make money as a do it yourself, self managing landlord. You can learn to find properties, go through all the steps to buy them and lease them, and then manage them until you get tired and sell them off.
It is possible, but the reality is that it is work. Being a DIY landlord is a job. Probably more than a full time job. Don’t expect any vacation time or to ever not be on call. Make sure that when you are calculating your returns you are also factoring in a fair wage and salary for yourself for all of these hours.
If you are doing it from scratch there is a lot of trial and error too.
Why Can’t I Build My Own Team?
Another alternative is to build up your own company with team members to handle all of the things a turnkey service does.
That means hiring people for:
- Marketing
- Leasing
- Acquisitions
- Bookkeeping
- Rent collection
- Maintenance
Unless you just want to create another job for yourself recruiting and hiring and managing all of these people full time, then you’ll also need to hire great executives and managers to manage these other people.
This takes time and money to do.
Compare that to a turnkey service or professional property management company. Can you do all the above for the same 5% or 10% of rents they would take in fees? Unlikely.
At some scale it may make sense. Though the numbers just won’t add up for most investors.
The Benefits Of Turnkey Real Estate Services
Among the many advantages of going turnkey are:
- Harnessing years of expertise overnight
- No salaries, benefits packages, or employee lawsuits to worry about
- Leveraging established local and national connections and relationships
- Benefiting from group discounts on contractors, repairs, maintenance, etc.
- Eliminating risk of direct engagement with tenants
- Generating truly passive income
There are some things you can DIY. You can wash your own car on the weekends if you have nothing else to do. You can cut your own grass if you really just love being out there doing it. It’s not very efficient, but if you are bored it can fill your time and get you out of the house. Other things should absolutely be left to professionals. Like taxes, dentistry and surgery. Where does investing fall on this scale for you?
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The Q3 2020 Update For Real Estate In Cleveland
What’s happening in the Cleveland, OH property market now?
Check out the latest data and trends for Cleveland property investors and landlords. Find out the challenges, and the great things that are happening now. Plus what the best moves are to make this season.
OVERVIEW
In this update we’re covering:
- The Fall Season For Landlords
- Lending & Rates
- Local Market Stats
- Big Factors Affecting The Market
Overall the outlook is still very bright for real estate investors. In fact, things seem to be in far better shape than many would have expected given the events of 2020.
The Fall Season For Landlords
What does this season bring for property in Cleveland and real estate investors?
We’re going through the weirdest back to school season ever. Many families may be overjoyed at discovering home school and saving a lot on back to school clothes and supplies, and gas money. That could be a great thing for renters and in turn their landlords.
For those who are adamant about putting their kids back in a classroom and can, we may still see a few weeks of flurried activity as parents desperately look to sign new leases and by homes in new school districts. They are highly motivated.
As this action fizzles out and the weather cools down, we also enter one of the best property purchasing seasons of the year. The retail home buyer spike of the summer is over. Properties don’t always quick look as pretty as the trees lose their leaves. This leaves a lot of desperate sellers on the market. They listed high, didn’t get it sold, and may have made other financial commitments. This is when we traditionally see a seasonal dip in property asking prices. They may make asking price reductions or just be more open to negotiating. Realtors still need to eat, and sellers get nervous with fewer showings.
It’s a great time to pick up deals as an investor.
For landlords, it is also a season to brush up on property maintenance. Check those gutters, tidy up the landscaping, repair any roof issues while you still can, and service the furnace.
Lending & Rates
If you have captive equity in properties that you want to preserve or maybe even use to expand your portfolio right now, refinancing could be the answer.
Many major banks have cut back credit and mortgages. They’ve tightened up criteria a lot. Of course they are still making mountains of money trading on the new tsunami of tens of billions of dollars in defaulted loans in the background. Yet, they still want to make money originating new loans if you have good credit.
Interest rates are at incredible lows. Falling into the 2% range for long term fixed rates in September 2020. We do have relationships with strong local lenders who say they are still making real estate loans. So, if you do want to grow your income and money with new real estate deals, or recapitalize, this is probably the best time to do it that you may see for a while.
Get in touch for a referral today.
Local Market Stats
Cleveland property prices have been roaring. If anything, the mayhem of 2020 has only fueled more demand for properties here. Especially for single family homes in the suburbs.
While Zillow seems to have oddly stopped reporting any new real estate data (not that it was accurate anyway), the latest Cleveland real estate market statistics show average home prices up to $105k. That’s up 12.5% year over year. Acreage prices per square foot are up to, at $65 per foot according to Realtor.com and as high as $77 according to Redfin.
Redfin reports hot homes are selling within 9 days, for an average of 3% over listing price. Other homes are still selling in around 30 days and for within 4% of asking prices.
Average rental rates still stand between $878 and $1,079 per month.
Big Factors Affecting The Market
The three big things impacting the market now and through to 2021 are:
- Covid restrictions
- Finances
- Elections
There are a lot of new protocols around COVID-19. It’s a lot of extra work for property managers, yet in spite all of this 5PPM has still been able to secure its clients with new qualified renters in 2 weeks or less.
While everyone seems to be acting like everything is okay on the surface, the data is starting to show a lot of very contradictory trends happening under the surface.
Auto dealers are reporting a new tsunami of repos, credit card companies are slashing credit limits and have stopped offering help, and tens of billions of dollars in mortgages are delinquent.
Stimulus money and creditor programs have muted this activity until now. We may still not really see it make the headlines until after November, but there are ripples happening.
While we don’t want anyone to suffer stress or loss, investors can benefit handsomely by stepping up to help by buying distressed homes and apartments, and leasing to those who are downsizing to right-size their finances.
Of course, the presidential election is still a major wild card this year. It could be one of the most controversial yet. The outcome could send the economy in either direction. Though ultimately landlords will be in the best position to benefit from either trend. Now is the time to find the best deals, while others are frozen with uncertainty.
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The Importance of Hiring Property Management for BOTH Local & Remote Investors
Whether you own rental properties on your own block or are investing out of state, it is important to recruit and use a professional third-party property management company.
Here are just five of the reasons you need it...
1. Generating Truly Passive Income
Rental property investing is frequently promoted as a way to generate passive income. It can be, however, taking the DIY approach to being a landlord rarely passive and profitable. You might get blessed and get a property with perfect existing tenants, who pay 12 month’s rent in advance and never have any issues with the property. That’s the rare exception.
To truly achieve passive income, you need to use a property management company who will handle all the daily management. Like bookkeeping, advertising, tenant screening, leasing paperwork, handling phone calls, scheduling contractors and fielding quotes, and regular inspections and maintenance. That does not include all of the extra work if tenants are struggling to pay on time.
To be truly passive, you want someone else handling it, and to just receive the check every month while your property goes up in value.
2. Privacy
Privacy is incredibly important. We don’t have much of it left these days. So, preserving whatever we can is more important than ever.
There are several ways to build in privacy as a real estate investor, including how you hold title. Still, if you break protocol and contact tenants in person, you’ll end up losing that privacy forever. It may not seem like a problem at first. Then you’ll start getting calls to your home and cell phone, and maybe even unhappy tenants showing up at your door at all times of the day and night with problems. You really don’t want that.
Using a property management company can help keep you anonymous.
3. Reducing Liability
It is a terrible shame at how litigious our society has become. Yet, it is the reality of the environment we live and invest in. There are countless professional criminals and opportunists out there who make their money and free rent by preying on other individuals, investors and business owners.
An experienced pro property management company can go a long way to helping you avoid running into these bad actors in the first place.
If they do sneak through or go bad, the last thing you want is personal interaction with them. Showing up to collect rent or inspect your property can result in numerous reasons for a frivolous or malicious lawsuit, even if you do nothing wrong. Then there are always personal safety concerns. Just don’t put yourself in that situation.
4. Great & Consistent Customer Service
Ultimately, real estate and rental property investing is a people business. You personally probably shy away from bad customer service experiences and gravitate to where you are treated well. Tenants are the same. You can either deliver consistently great service and get consistently great and exponentially increasing results, or the opposite.
To do well and get referrals, enjoy loyal, performing tenants who take care of your place you need to be instantly responsive to calls and emails, texts and repair requests and be able to do it in a friendly manner, even when you don’t feel like it. You also want eyes on the ground to watch and inspect your property regularly.
5. Compliance
Staying on top of landlord-tenant laws is a big full-time job. One wrong date on a notice can cost you everything.
Do the math and it is invariably cheaper and more profitable to use a great property management company. Especially when you add in the discounts on repairs and maintenance they can get you, and the ROI on your time.