What type of loan do you need to get when doing a 1031 tax exchange?
To recap, if you sell an investment property, a 1031 tax exchange allows you to defer paying a capital gains tax on it as long as you use the funds to purchase another investment property. In other words, you can keep that money invested in the new property and watch it grow.
To qualify for this exchange, you need to be investing in a “like-kind” property, meaning it can’t be your residential home or a second home.
The type of loan you need for this exchange depends on how you hold title to the original property—do you own it in your own name or did you purchase it in the name of an LLC?
If you own it under your name, you can use a conventional loan. If it’s owned on behalf of an LLC, then you need to purchase your new property on behalf of that LLC, and you can’t use a regular residential loan—you need a commercial loan (a client of mine recently found this out the hard way).
It’s very important that you work with a knowledgeable agent when doing a 1031 tax exchange. If you’re thinking of doing a 1031 tax exchange and you need any assistance, don’t hesitate to give us a call.
As always, if you have any other real estate needs, feel free to reach out to us as well. We’d love to help you.
Change can be scary, especially when it involves one of the largest and most valuable assets in your investment portfolio. There are a lot of good reasons to stick with your current property management company. However, if they’re not meeting your needs and they’re not delivering the results that you expect, you should consider looking around for better management.
When clients come to us from other Chapel Hill property management companies, it’s usually for one of these reasons.
Accounting and Money Matters
The finances associated with your rental property are obviously very important, and you need to be sure your management company is handling them properly. If you’re not receiving regular accounting statements and reports that detail your income and expenses, you should definitely look for new management. Good property managers provide online portals that allow you instant access to the accounting records associated with your investment. You should be able to see how your property is performing 24 hours a day, and the information should be accurate and transparent.
When you do receive reports but there are charges and expenses that don’t make sense, it’s also a problem, and something you should address with your property manager. If you’re not aware of the maintenance that you’re being charged for or there are extra fees for services you thought were included with your management fee, you can probably find a property manager who is more forthcoming with your financials.
Communication or Lack Thereof
Communication is important and with all of the technology available today, there is no excuse for poor communication from your property manager. A responsive management company will be available by phone, text, email, and even on social media. There should be no delay in returning calls and messages. If you cannot get a hold of your property manager, there’s a good chance that your tenants aren’t getting timely responses either. This does not bode well for the condition of your home or the expectation that you’ll retain tenants for the long term. Discuss your communication expectations before you sign a management agreement. If the property management company doesn’t deliver, you can and should look elsewhere.
Poor or Lacking Management Services
If your management company promises fast tenant placement but two months have gone by and your property is still vacant, you need a new property manager. If your management company isn’t paying you rent consistently every month or inspecting your property when they say they will, you have every right to leave your management agreement. You need a manager who will collect rent, enforce the lease, and maintain your home. When your management company is unable to deliver on what they have promised, you cannot allow your investment to be left at risk. Find a property management company that does what they say they will do and impresses you with more income and lower expenses.
If you’re unhappy with your current Chapel Hill management company, we’d be happy to talk through your problems. We’d also love to tell you about our own services and the reputation we have for delivering outstanding property management and customer service. Contact us at Real Estate Experts for more information.
Real Estate Experts provides comprehensive property management services in Chapel Hill, Carrboro, Hillsborough, Durham, N. Chatham County, Cary, Morrisville and now Mebane and Burlington, North Carolina.
Visit our new web site at www.realestateexperts.net or give us a call at 919-928-5131 x 1 to discuss our property management services.
Property inspections are a critical way for landlords to check on maintenance issues that are needed and to ensure their tenants are following the terms of the lease agreement. When you’re inspecting your property, make sure you’re thorough and detailed. The things you look for will depend on the type of inspection you’re conducting. A move-in and move-out inspection will have you documenting the condition of the property and making a list of any repairs that are required. These are some of the things you should have on every rental inspection checklist.
Check for Leaks and Water
Water can do damage to a property faster than anything else. You want to take care of leaks immediately, no matter how minor they seem. Even a dripping faucet can turn into a major leak under the sink that causes rot and mold. Look for areas where water might be getting inside the house from the outside. Spots on walls and ceilings may indicate that a pipe is leaking somewhere. Look under bathroom and kitchen sinks, check tubs and toilets, and make sure you don’t have any water coming in where it shouldn’t.
Look for Repair and Replacement Needs
If you’re inspecting before a tenant moves in, you want to make sure the property is ready for occupancy. Everything must be functioning the way it should. Check each electrical outlet, turn on all the lights, and run the appliances. Make sure the doors and windows are locking and check light bulbs, air filters, and smoke detectors.
Check for Safety Issues
As a rental property owner, you’re responsible for providing a safe and habitable home for your tenants. Any inspection should include a check for safety issues. Make sure the doors and windows lock. Check your smoke detectors, carbon monoxide detectors, and any security systems you have installed. Look at the exterior lighting and make sure it’s sufficient. Handrails should be secure and not wobbly, and pools should have fences. Make sure the driveway and walkways are free of debris and trip hazards.
Maintain Standards of Cleanliness
When you’re doing a move-in inspection, you need to make sure everything is perfectly clean. Baseboards and ceiling fans should be free of dust, kitchens and bathrooms should sparkle, and the home should look and smell beautiful. When you’re doing a move-out inspection, you expect the same level of cleanliness after a tenant leaves. If the property clearly has not been cleaned, make notes and take pictures so you can withhold cleaning costs from the security deposit.
When you’re inspecting during a tenancy, it’s important to remember that everyone has different standards of cleanliness. Your tenant may not keep things as tidy and spotless as you do. But, you do want to make sure that it’s not unclean to the point that the property could be damaged. You don’t want to see piles of trash or evidence of pests and rodents.
Enforcing Your Lease
During routine inspections, make sure your tenant is following the lease. If you did not approve any pets and you see dog bowls or cat litter, you’ll need to address it. If you rented the home to two adults and one child but you see five cars in the driveway, you may want to follow up on that. Inspections are a good time to make sure everyone is doing what’s required of them, and it’s also a good opportunity to check in with your tenants. Make sure they’re happy, and find out if there’s anything you can do to make their rental experience better.
Real Estate Experts provides comprehensive property management services in Chapel Hill, Carrboro, Hillsborough, Durham, N. Chatham County, Cary, Morrisville and now Mebane and Burlington, North Carolina.
Visit our new web site at www.realestateexperts.net or give us a call at 919-928-5131 x 1 to discuss our property management services.
The Real Estate Experts work with a lot of investors, and Teresa Parker from Union Home Mortgage always does such a great job with them, so we thought it would be beneficial to bring her in to answer some loan-related questions for our investor clients.
So, is it better for a real estate investor to purchase a property with cash or with a loan?
Teresa typically recommends that clients review their options. A lender should be able to put something together that will show them the benefits of either utilizing a loan so they’re not depleting all of their liquidity, or buying with cash.
She uses a program that allows investors to clearly see the benefits of purchasing investment properties by using leveraging with a loan versus depleting all of their liquidity to buy a property. This tool can also show people their projected liquid net worth and total net worth over certain periods of time. It can look forward five, 10, or 15 years, and allows you to view a comprehensive analysis of how much better off you would have been if you’d purchased with a loan or with cash. It can also show you whether, if you leave your funds invested as they are, you’ll grow using that vehicle.
A house is going to appreciate at the same rate, regardless of whether it’s fully leveraged or whether it’s fully owned outright. Homes don’t appreciate any faster than what the market dictates. When an investor makes a cash-only purchase, they’re missing out on the opportunity to place those funds in an interest-bearing account, where they’ll grow.
So what are the biggest challenges Teresa faces when working with investors?
One of the issues Teresa has frequently seen, especially with newer investors, is their tendency to convince themselves that they can’t qualify to buy an investment property. While they make a very good income, have sufficient funds to support the down payment, and have the desire to become an investor, they just feel like they can’t qualify.
However, the lender should be able to show the investors ways that they can qualify for buying an investment property, as well as how to utilize and leverage some of the potential rents on the particular property they’re buying. That also helps them with their debt-to-income ratio. Is it better for an investor to purchase a property as an individual, an LLC, or a corporation?
Clients that Teresa works with are buying homes in their own names, whether that be a single-family, duplex, triplex, or quadruplex. Clients that buy using their own name will get regular preferred loan interest rates. If you buy an investment property in the name of an LLC, the loan will be in the name of the LLC. In that case, you’ll be looking for a commercial loan, which have different terms and rates associated with them. In a future video, we’ll address what happens when you buy a property individually and then want to assign it to a corporation.
If you’d like to contact Teresa for questions or information, she can be reached at (919) 697-2598 or at [email protected].
For my team’s part, we would love to know what kinds of questions you have for us. Reach out and let us know, and we’ll be sure to address them in future videos. We hope to hear from you soon!
Investing in real estate can be a great way to earn passive income and build wealth. But it also comes with a lot of risk. Whether you’ve been a landlord for years or you’re just starting out, you have likely heard some terrible horror stories about awful tenants or impossible situations.
We’d like to address some common landlord fears, and offer some sensible strategies that will help you avoid the worst case scenarios.
Terrible Tenants Who Don’t Pay Rent
One of the most common landlord fears we hear about is anxiety that a tenant won’t pay rent. Your cash flow and your ROI depend on consistent rental payments, not to mention your own obligations such as your mortgage, insurance, and tax payments. You may have heard horror stories about having to chase down late rent every month or moving to evict a tenant because months have gone by and a landlord still hasn’t been paid.
This is an understandable fear, but one that can usually be avoided. If you have a strong tenant screening process, you can be sure you’re only placing good tenants with a history of paying rent on time. Verify income to ensure they earn enough to afford the rent. Talk to current and former landlords and ask about whether rent was paid on-time. Your lease needs an enforceable rent collection policy. Bad things can happen to good tenants and you might have a late payment once in a while. But, with a good screening process, it shouldn’t be common.
Finding Property Damage after Move-Out
Another horror story you might have heard is the landlord who walks into the home after a tenant has moved out, only to find devastating damage that’s been left behind. Large holes in the walls, doors dangling from their hinges, appliances that were abused and misused, yards dug up by what would appear to be a pack of feral hogs, and floors that are scratched and warped are all some of the terrible things that landlords might worry about. There may be property damage left behind after a tenant moves out, but it is rarely more than the security deposit you collect.
Again – tenant screening can help mitigate this risk. Another tool is the property inspection. Even if your tenant never requests maintenance or has a repair need, make an appointment to get inside the home for an inspection at least once a year. This is the best way to look for unreported maintenance and check for lease violations. At Real Estate Experts, we inspect all of our properties on a regular basis; we inspect the inside monthly and the outside quarterly. Protecting your asset is a key part of our mission.
There Weren’t Supposed to Be Pets
Fearing pets is another thing that’s common among landlords. They don’t want to risk the damage and the potential liability of allowing pets in the property. What you need to understand is that more than half of the tenants in Chapel Hill have at least one pet. So, not allowing pets may extend your vacancy.
It might also encourage people to sneak pets into your property. If you say no pets and you discover that a pet is, in fact, living in your home, you’ll have two choices. You can either screen the animal, collect a pet fee and maybe even pet rent, and go on with the tenancy; or, you can insist that your tenant get rid of the animal to come back into lease compliance. We always collect an appropriate pet fee and we find that tenants with pets take excellent care of our rental properties.
We recommend you allow pets so that you don’t have to worry about tenants bringing unauthorized pets into your property. There’s rarely damage that exceeds the amount of the security deposit and your pet fee. At Real Estate Experts, we make sure your asset is protected.
Talk to us about your other fears, and we’d be happy to help you come up with creative solutions and reliable ways to avoid bad situations. Contact us at Real Estate Experts, and we’ll tell you more.
Real Estate Experts provides comprehensive property management services in Chapel Hill, Carrboro, Hillsborough, Durham, N. Chatham County, Cary, Morrisville and now Mebane and Burlington, North Carolina
Visit our new web site at www.realestateexperts.net or give us a call at 919-928-5131 x 1 to discuss our property management services.
Real Estate Experts provides comprehensive 
Real Estate Experts provides comprehensive property management services in Chapel Hill, Carrboro, Hillsborough, Durham, N. Chatham County, Cary, Morrisville and now Mebane and Burlington, North Carolina.
