Home Owner Services

Who should own rental property?

Who should not own rental property?

How does one make money owning rental property?

What kind of single family home should I own?

Why hire Greenwell Property Management?

Why own rental property?

Advantages

Strong long term return on investment
Income tax deductions
Capital gains tax deferral
Current low prices on properties
Very low mortgage rates means higher monthly cash flow
Wide selection of properties
Unlike stocks real estate is tangible – it is very unlikely it’s value could go to zero
Allows you to easily leverage your money to increase returns
Current strong tenant candidates
Live mortgage free! If you bought a four-plex today your 3 tenants would cover the mortgage.
You can leverage your labor. If you are handy your can raise rents with little additional investment.
You and defer capital gains tax when you sell a property and buy another ( IRS 1031 exchange ).
You can pass on capital gains to your heirs capital gains tax free
Illiquid – an advantage in that if you lack discipline real estate provides a savings program in which it is hard to spend the equity in the property without selling or refinancing.

Disadvantages –

Illiquid – Unlike stocks, bond, and savings accounts, it takes time to sell real estate. With a few exceptions real estate investment should be looked at as a long term investment. In fact even though as Realtors we benefit when you sell, we advise in most cases that you don’t sell until you well into your retirement years.
Leverage can amplify losses in at down market if you have to sell during that period. Many overleveraged investors bought too many of the wrong properties with the wrong financing in 2000-2006. They are now bankrupt our suffering negative cash flows. We are proud to say that not one of our investor clients has suffered this fate. None have ever even missed one mortgage payment to our knowledge. We have provide a balances risk evaluation approach to investment real estate.
Property Management: Rent properties have to be managed well to product good returns.
Growing number of rentals. With the ongoing foreclosure volume, and the end of easy financing, there is an increase in the number of rental homes in the market. There is also an increase in the renter population. They trends are likely to continue until there is more economic recovery. Then more homes will likely be converted back to owner-occupied homes.
Government regulation: with the increase in rental houses and cities facing budget shortfalls, there is increasing burden being placed on rental property owners now.

Who should own rental property ?

Individual investors that:

Want to retire early or with a higher income
Own a home they can’t sell
Have a growing family, want to move but are upside down.
Parents that want a free college education for their children
Grandparents that want a free college education for their grandchildren
Families that want to live for free with no mortgage payment.

Who should not own rental property

Investors with no reserves. Anyone that depends on each and every month’s rent to survive for that month. It is a fact that rental property are occantional vacant or a tenant may stop paying. It is a fact and it should be priced into the purchase analysis. Over time a property managed property will generate cash for the owner. But in any one single month a property may have a loss.
People unwilling to maintain safe living environments for tenants. Weather directly from the owner or from a responsible property manager. Properties need to be maintained. Like a garden they will need care along the way to produce profit. Typically they require small amounts of time now and then. Unfortunately you can not usually predict when “now and then” will be. Tenants expectations tend to be immediate and can not be put off. A maintenance budget should also be planned for.
Short term investors - Even investors that purposefully buy a property rehab it and resell it (flip) should plan a full year for a complete and sell the project. If all goes well it may only take a few months. But real estate is not often a quick turn game. The biggest rental property profits come for long term holds, where time is your friend. Generally over time –rents and values increase, while you fixed rate mortgage payment does not. During this time you are deferring taxable gains and paying down the mortgage – building more equity and increasing cash flow.

How does one make money owning rental property?

There are for income sources on rental property:
Cash flow – this is operations money that comes from the rents collected minus the property expenses.
Tax reduction- This is the income tax savings you generate there deductions, depreciation, and deferral.
Mortgage pay down – Separate for the cash flow your receive, every month that mortgage balance is reduced, a little each month in the beginning and a lot near the end.
Appreciation – Over long periods of time real estate values go up slow and steady. The past decade has been and unusual exception to that. Values spiked up sharply peaked in early 2006 and have then crashed back to 2001-2002 values. That has given many people a bad taste and it is a large part of the reason there is some much good opportunity now.

Why single family homes?

Single family homes have advantages and disadvantages over multi unit properties. One is not better than the other. It all depends on you goals and situation. But there are some unique features of single family homes the merit pointing out..

Multi family properties, especially 3 units and above. have very little appeal buyers as a primary residence. Therefore they can only be valued by the amount of income the can produce from rents. This is the income value or “wholesale” value. A single family home, condo, or townhouse however, has a wholesale value AND a retail value. You buy the property based on its wholesale ability to product rents. But years later when it is time to sell, you sell it based on the “retail” price it will fetch from a owner occupant buyer.

Single family units have lower prices so they require a lower down payment to start investing than multi unit properties.

Single family units generally rent for more per unit, so they generally attract a higher quality tenant.

If you own a portfolio of single family units in a variety of locations your geographic risk is reduced compared to owning multiple units in a single location.

What kind of single family home should I buy?

It is critical that the selection be made carefully with knowledge of both the local retail purchase market and local rental market. Certain modest middle class homes work the best. Low end properties appear to cash flow better at first look, but can have costly maintenence surprises. They also tend to have lower rents, more vacancy, and tenant problems. In this climate there is a large surplus of high end properties. Then tend to have high vacancy and generate lower rents relative to their costs. Middle class 3-4 bedroom homes provide the best blend of stable mu

Ok so modest homes are where it’s at, but which homes in which neighborhoods, with what key features? That is the part that really requires the assistance of a Realtor experienced with investment property, in the area you are considering. As Realtors (www.GreenwellRealty.com) investment property owners, property managers, and general contractors (www.GreenwellHomeImprovement.com) Greenwell is the perfect blend of skills to assist you in property selection. We have helped our clients become millionaires. We may be able to help you too. For real!

Why hire a property manager?

Here are the facts: A property manager costs money. Property managers do the things you don’t have to do, so you can spend your time on other things, rather than worrying about your property. A GOOD property manager does this work every day and will likely do it more effectively than you would as a part time manager/owner. A good property manager will also help you avoid mistakes and will often earn you more extra money then their cost! A good manager’s judgment is not affected by emotional attachment to the property. Likewise, a good property manager maintains a buffer between you and the tenant. This is a business relationship and that buffer relives you from the emotional pressures a tenant my put on you with a sad story or misfortune that can grow into a larger charity than you ever intended. This has been the ruin of many a well meaning self managing landlords.

Why hire Greenwell Property Management?

There are many reasons. Here are a few:

Market Knowledge: We serve the north half of the metro and focus primarily on Anoka County. We live in and understand Anoka County housing. This is our area of expertise.

Experience :
We have been managing rental property in this area since the 1980’s. Don’t suffer from the mistakes of newbie managers. We have already made those mistakes on our own properties. Over the decades we have refined our systems through hands on experience, education, and law changes.

We eat own cooking:
We understand your position as property owner, because we are owners too. Greenwell’s founder, Jim, was investing in rental property before there even was a Greenwell Realty (1991).

Convenience
Should you need them, our wide range of related skills means you can get all the expertise of services in convenient place. In addition to Property Management we are full service Realtors, Licensed General Contractors, and professional landscapers. We know the real estate sales market, the rental market, construction, and finance. This gives you a leg up with interdisciplinary guidance and early notification on hot properties.

Accountability
Having one firm handling these multiple services means you have one point of contact that is responsible to deliver all your real estate needs, cost effectively, no excuses, period.

Aligned incentives
Most property management firms have flat monthly fees that do not vary. You pay regardless of the success of your investment. This can create an incentive for them to let your property sit empty. Our property management fees hitch our horse to your wagon. We have incentive prices. It reduces our benefit if your property is empty to zero! Like wise it rewards us for making you property profitable.

Representation – Just like in our Realty business we only represent one party in a transaction. This protects your interests from the pit falls of dual agency. Our contract establishes that our fiduciary duties are to you not the tenant.

Education
We understand education is important. We take far more education than that required by the State of Minnesota to renew our licences. For example, Jim has completed the course work necessary for the Minnesota Multi Housing Associsation’s Certified Property Manager (CRM) designation.

You are welcome to verify our professionalism first hand. References available upon request