Indy Rental Market Staying Strong

Indianapolis touts one of the most stable real estate markets in the country, in both sales and rental markets. While many of our nation’s cities suffered a 30-50% decline, our real estate market dipped a modest 7% throughout the last recession.

Our rental prices have soared 11+% over the past year. Indeed, real estate is a solid choice in rounding out an investment portfolio. Buying and holding for income and appreciation has been my goal from the start … flipping has always been a popular topic of conversation but is no guarantee of immediate or long-term return.

I like Larry Arth’s explanation of the value in real estate investment. He wholesales properties in several locations, and Indianapolis is one of his favorites. Here’s his take on the concept, as stated in Personal Real Estate Investor Magazine:

“IDEAL is the acronym for the 5 wealth building principles

I (INCOME) positive cash flow

D (DEDUCTIONS) interest, depreciation, repairs, all expense are tax deductible

E (EQUITY) as tenants pay down the mortgage the principle builds up is equity for you

A (APPRECIATION) annual property value growth

L (LEVERAGE) O.P.M. (other people’s money) you gain all the above from borrowed money

There is no other investment available that can fulfill all 5 of these wealth building principles. Most investments will return 1 or 2 of these wealth building principles and only real estate has the ability to return all 5.”

Nice!  :-)

 

 

Rent to Own?

Seller financing, rent to own, land contracts … these are creative ways to achieve homeownership if you can’t qualify for a mortgage. As a real estate investor here in Indy, I’ve sold a few of my rentals this way. It can be a positive route for both the seller and buyer. Laura Agadoni included me as one of her sources in the following Trulia article about seller financing. If you — or someone you know — is in the market for this type of financing, her piece is a good way to get familiar with the process:

http://www.trulia.com/blog/pros-cons-seller-financing/

Personally, I enjoyed giving people the opportunity to become homeowners when they wouldn’t otherwise be able to do so. For the most part, they took excellent care of the properties, knowing the home was “theirs.” I even had one family make multiple repairs and updates as they moved through their contract.

The downside was that occasionally, tragedy strikes. People get sick, lose their jobs, split with their spouses, etc. But as I stated in the article above, they usually just “bow out” gracefully and apologetically, pack up, clean up, and leave. The seller keeps the down payment, and moves on.

Bottom line? As Laura states, seller financing can work well for everyone. The seller earns good interest on the loan, and the buyer achieves the American Dream … home ownership. It’s a win/win. :-)

 

 

 

Don’t Throw it Out!

When one of my tenants moved out of my Indianapolis rental property — it was a bad scenario — he left a filthy apartment behind, including a grease-caked stove top. My handyman suggested I throw it out, but I knew I could save it. Here’s what it looked like half-way through the clean-up:

IMG_2197[1]My handyman was astounded! LOL

Here’s what I used to produce this miracle result: the day I went in there (after the eviction and after the judge had ordered my tenant out) I sprayed the entire stove top with Easy Off (fume free) over cleaner. I also sprayed the outside of the refrigerator with it.

I then proceeded on to some other tasks … painting, small repairs, etc. I didn’t touch the stove again that day.

When I returned the following morning, I sprayed the entire stove top with my trusted Krud Kutter and got to work. I used a flexible, 2″ putty knife. All of that crusted-on grease came right off … no scrubbing! Afterwards, I used a Scotch Brite (dark green) scrub pad to get the remainder and voila!

I get my used appliances cheaply, about $160 for a stove like this. But why spend that money when you don’t have to?

Investing in real estate is an income-producing journey. If I can put more money in my pocket by contributing a little sweat equity, I’ll do it!

Onward and upward …. :-)

Applicants With No Credit

If you’re a landlord and your properties are mid- to high-end, you probable run credit checks on your applicants, as you should!

With my lower income properties, I don’t normally do this, as many of my tenants have never established a credit history … they pay cash for everything. This is unbelievable to many, but makes a lot of sense to some people. They’ve decided they’ll never buy anything until they have the money to purchase! What a novel idea, right? And not a bad one, at that! Others who have had credit in the past have totally trashed it … unpaid bills and credit cards, etc.

But that scenario isn’t limited to lower income folks, believe me. And so we get back to the issue of credit checks on the mid- to higher-income applicants. When you run someone’s credit (I use National Tenant Network — they’re excellent) and it comes back as non-existent, you’ll need to check on a few issues:

  1. Did they record their Social Security number correctly on the app? Have them repeat it back to you for verification. If that can’t be done, raise the red flag!
  2. Maybe they really don’t have ANY credit that’s been established. This is certainly possible, especially with young people who have not used credit cards or had utility bills in their names.
  3. That person may not be included in that reporting bureau’s files. There are three major bureaus — Trans Union, Experian and Equifax. Make sure you recheck that.
  4. Did they mention any credit cards on the application? If so, and there’s no report that comes back, they’re lying. If you have a credit card, you have a credit history.  Recheck the driver’s license, SS number, etc. Something’s not right … get ready to raise that red flag.

Many people present well, and aren’t what they appear. That’s why the application process is another tool we use to help determine qualifications.

On the other hand, I’ve rented places to people with no credit trail, and I’m not afraid to do that. I talk with the employer, verify income, talk with the previous landlord, do a drive-by of the previous residence to check the neighborhood and condition of the property, and assess the applicant personally. And from there, if there are no other parameters to lean on, I go with my gut.

Happy screening!

 

 

E-Cigs and Renters

E-cigarettes are all the rage. They come in all flavors, shapes and sizes, and have become popular not only with those who are wanting to quit smoking (via a “step-down” process) but also with a whole new segment of people who’ve never smoked in the first place. Many see the e-cig as a harmless replacement for the traditional cigarette.

While they don’t contain tar, e-cigs definitely contain nicotine, so they aren’t harmless. The goal for those trying to stop smoking traditional cigarettes is to decrease the amount of nicotine in the refillable/replaceable cartridge used.

I’m not here to discuss the pros and cons of the e-cig, but what about landlords who don’t allow smoking in their single-family homes? Should that include e-cigarettes? Hmmmm….

Here’s my thought: it’s the tar in traditional cigarettes that causes the nasty yellow film that sticks itself to every wall and other surface in the home. Believe me, I know too much about that. I allow my tenants to smoke inside, although I encourage them to step outside to do so. Most aren’t super-heavy smokers and it’s not labor intensive when they move out. But with a heavy smoker who’s been with you a while, you’ll need to wash down the walls. Ick!

So, I’d welcome the e-cigs over regular cigarettes, of course. No tar, no nasty yellow film. But if you’ve not allowed smoking inside, and you own a large complex, do you allow the e-cigarettes? Here are my thoughts on that:

  1. If you have a non-smoking apartment complex, that’s part of your marketing strategy. If potential applicants see tenants smoking (“vaping”) the e-cigs, public perception may change, thus hurting your occupancy.
  2. From a distance, it’s difficult to distinguish the two. The e-cig “vapor” can be mistaken for smoke. Do you really want to try and police that? Will other tenants see someone with an e-cig, think it’s real and cause a ruckus? Again, perception becomes an issue here.

It’s a tough call. With my small units (single to four units in a building) I’m okay with it. If I had a non-smoking apartment complex, I’d keep it that way. Cigarettes? No. E-cigarettes? No. Candy cigarettes? Maybe …. LOL

 

 

 

Small Money, Big Improvement!

IMG_1645[1]I try to make small improvements to my Indianapolis rental properties each time a tenant moves out. Kitchens and baths are the two most important rooms, in my opinion … for the other rooms, if you have fresh paint and decent floor coverings (I suggest carpet for the bedrooms, for sure, and I usually put it in the living areas as well), it’s all good!

But the kitchen and bath need to be fresh, clean, and updated where possible. The cabinets in this duplex were very old, metal ones that had been painted. I’ve had the house for over ten years, and it was just time to get rid of them. The drawers weren’t shutting well any more, and were rusting out in places.

IMG_1723[1]So I bit the bullet and had my handyman install these stock cabinets from Lowe’s, prefinished, and a stock counter top. The counter top is just formica, granite look-alike … so inexpensive, but durable and nice looking!

So, for under $1000, I have a new kitchen, which attracted a good-quality tenant who was excited about the update!

Of course, I won’t take the “good quality” assessment for granted … I’ll do apartment checks periodically, as we all should, to ensure our tenants are caring for the property and keeping it in good condition.

As I look to the new year, I hope to serve more people in need of reasonably-priced, clean housing. Establishing good relationships with tenants, taking care of the properties I manage … these are the keys to a successful 2015!

Happy New Year!

 

Renter’s Insurance

Some landlords force the issue and require their tenants to purchase renter’s insurance, some do not. It’s a personal choice.

For many, money is tight and spending extra money on insurance isn’t an attractive option for them, even though it’s fairly inexpensive … about $10-20/month, depending on what value you place on your belongings.

I make my own tenants aware that the owner has insurance on the building, but not their contents, and I leave the decision to them. But a few people I manage properties for have made renter’s insurance a requirement in their lease agreement. The tenant has to provide me with proof of insurance.

And this past year, a supply line for a toilet at one of those properties broke while the tenants were at work. Three rooms totally flooded, damaging several pieces of furniture. Those tenants were sooo glad they had that insurance!

The policy protects them in several situations:

  • Robbery
  • Vandalism
  • Flooding of the house due to rain or broken plumbing
  • Fire
  • Liability — the dog bites someone, or a guest gets hurt at the home
  • Many policies cover hotel cost in the event the tenant would have to move out temporarily

So although I don’t require it, renter’s insurance is probably worth the expense … just ask someone who’s had to submit a claim!