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Author: brioproperties

CategoriesReal Estate Investing

Mixing It Up

By brioproperties,

I’m the type of person who likes variety in life. I like spicing up my life by traveling different places, trying new restaurants, and giving some things the good ole college try as hobbies. But one thing I haven’t done is mix up my investing strategy…yet.

All my life I’ve been around buy and hold rentals.  What my family did and my jobs in real estate have all been about long term rentals. It’s what all my transactions have been so far.  I know there are other investment strategies out there…I’ve just shied away from them.

Mostly it was because of what I’ve read from Robert Kiyosaki and others who advise mastering one form of investment before moving on to another.  If you start out in long term rentals, stay with those until you feel you’ve gained a substantial amount of knowledge. I believe Robert’s barometer of preparedness was “Do you know enough about a segment of investing, that you feel confident having your mother wage her entire retirement on a deal you’ve evaluated and prepared?”  Once you’ve can say yes to that, you can try out another strategy.

My need for new experiences and temporary exhaustion of long term rentals is leading me down a different path this summer and I have two choices.  I can become a long-distance investor of vacation rentals or stay local and do a flip with a trusted acquaintance.

Vacation rentals are something I hear people make amazing money from. A friend of mine made $7,000 by renting out her home over the course of 2 years.  Not bad for part-time (she and her family obviously had to live there most of the year). I have an investor buddy in Florida who right now nets over $50K on 2 properties. But when it boils down to it by dabbling in vacation rentals…I feel that all I’m doing is giving my zebra fuschia stripes instead of black ones.  It’s still a zebra. I’m buying a property to hold on to. I’m renting it out to other people to use. I’m responsible for the maintenance. It’s still a zebra.

Flipping is different.  Flipping is a race. You’re acquiring a property, fixing it up as soon as you can, and selling it as fast as you can.  You aren’t renting something out. You aren’t holding on to the property long term. You get in, work, and get out. Once the property sells you’ve cut cords.

Flipping is expensive.  If I didn’t have connections with an active flipper with their own private money sources this wouldn’t be an option right now.  Most flipping requires private money (or a large stack of your own cash) because properties might not be lender worthy OR they require substantial remodeling.  

Flipping is time consuming.  Even if you hire out to contractors. Its picking out supplies, lining up contractors,  checking on those contractors, paying the contractors, being excruciatingly efficient with your “go time” as my friend calls it (the time between when you purchase and aim to get it on the market).  All while watching the home sales market to detect a change that might affect your on the market deadline.

Flipping pays.  A flip done properly (with experience or experienced partners) can net $20,000-$50,000. Down side to it? It’s not passive income like buy and hold. You are taxed at your normal rate.  

If I didn’t have experienced friends, if they didn’t have their own private money network I wouldn’t be entertaining this necessarily.  I wouldn’t go at it alone even if I had the financial capability myself. Why? Because I feel that buy and hold is so different from flipping that I want someone who will be sure I’m making decisions based on being a flipper than a buy and hold mentality creeping in.  

By no means do I believe this is a permanent shift.  It’s satisfying a curiosity. It’s providing me variety.  I will still be learning about rentals. Society is always changing, you are never really done learning about any given topic.  Ultimately I understand that true wealth comes from buy and hold. I will continue to acquire new rentals. I’m just spicing it up.  

Rather than painting my zebra’s stripes pink, I’m going to go befriend a cheetah.  

CategoriesReal Estate Investing

Who’s Says There’s No Creativity In Real Estate?

By brioproperties,

Over the past few years I’ve begun to appreciate a side of real estate investing that doesn’t get a lot of play, and that I honestly didn’t anticipate.  As investors we love talking about earning income while we sleep, or retirement plan, or freedom of time from a 9-5. Normally this is what we use as the great things about real estate.  Yet the part I’ve most began to love is: the creativity. If anyone has ever said there isn’t any creativity in real estate, they are dead wrong.

Now I’m not talking about creative financing or the like.  What I love about real estate is the imagination it fuels in me.  Trips to Menards, Home Depot, are fun. I love browsing the light fixtures, bath vanities, and countertops.  When I pass the paint section I often zone out for a few moments dreaming of repainting the exterior of my buildings.  I don’t want to give you the impression I’m a ‘rehab addict’ per say. I don’t let my imagination run away with my cash flow in hand.  

I even like contemplating the more irrational or aggressive imaginative ideas.  The thought of converting an upper/lower unit into a SFR with 3 bdrms, mother-in-law kitchen and large rec room. Or restoring a Victorian buildings common areas to truly Victorian with original floors, woodwork that is stained and not painted, etc.  Many of these won’t come to fruition but it keeps me passionate about real estate investing.

When I’m walking around a city or passenger in a car I look at vacant or blighted buildings.  I take a few moments to let my imagination run wild with how I would “save” the building, how I would restore it.  I begin to imagine what’s it’s best use would be. A small building located along a river downtown would make a nice pub or coffeehouse.  An old firehouse used as a restaurant. A historic church turned into a banquet hall.

This creativity often ends up leading to useful ideas.  From these moments of imagination I’ve made plans for landscaping a backyard, adding “metal” backsplashes to my kitchens for less grease damage and easier cleaning, and pulling up old vinyl out of sheer curiosity to find an original  geometric mosaic tile pattern from the 20s in good condition.

Whoever said there’s no creativity in real estate never took the time to appreciate it.

CategoriesEntrepreneurship

What Is Your Time Worth?

By brioproperties,
In today’s society we are pulled in so many different direction.  We are pulled in the directions of work, family, leisure pursuits, day to day life.

If you have a spouse, children, nieces, nephews, grandchildren, we get pulled into their lives.  We become a part of what’s pulling them in different directions. Many times it just feels like we are operating a 3-ring circus.  It’s these moments that it’s very hard to sit down and wonder what your time worth.  Yet, we should be.

Figuring out what our “hourly rate” is for things we do in our lives is something we all need to do. It’s an integral part of moving our lives forward and determining how to allocate our time. The day-to-day or ordinary life tasks can often bog us down and become excuses why we don’t have time to  do something (I.e. attend a seminar, sign up for a masterclass, look at more rental properties). How many of our day-to-day tasks are we better off paying someone else to do? If we paid someone else to do somethings, how could we then spend that gained time?

Two common tasks I personally love offloading are grocery shopping and lawn care.  Most stores offer curbside pickup or delivery. These services are anywhere from $5-$15.  If it saves your 40-70 minutes, what would you do with that time? Evaluate 2 extra properties a week?  Read a few chapters from an investing book?

Lawn care is a touchy one.  I know some people are very particular about their lawns.They like it cut a certain way, the lines have to make a certain design layout, etc.  I’ve known two of these people in my life (gladly neither me nor my husband are one). For the rest of us that aren’t as picky, how much time would you gain if you paid someone else to do this?  What if you hired a service? Paid a neighbor cash to do it? Maybe a son, daughter, niece, nephew, etc? If it takes you 2 hours to mow the lawn where does the $39 to service fall on the worth it scale?

What are some other things you can outsource?  Well beyond grocery shopping most big box stores have in-store or curbside pick up for domestic goods as well.  House cleaning? Services can sometimes be pricey but may be you know an entrepreneurial teenager who would do the major cleaning for $10/hour cash?

Remember, when you outsource something be sure you are using the time to make yourself more productive and more profitable.  It won’t pay to outsource the small stuff if you swap it for tv time or video game time (unless you have a Youtube channel as a gamer of course).

So I ask you, what is your time worth for domestic tasks?

CategoriesLong Term Rentals

It’s Okay To Let A Good Tenant Go

By brioproperties,

A very good long-standing tenant of mine recently gave notice to move.  Of courses I’m not thrilled at the prospect of having to find another renter but I’m accepting it and a little excited about it.  Why on earth am I excited about having a long-time good tenant leave? Market rent.

For starters, this tenant has been in the property for 8-9 years. A good tenant. Quiet. Very few work orders.  Does random acts of kindness for me as the owner. Great guy. I’ve been in this guy’s shoes before. I remember when I was renting I got a version of the seven-year itch.  I started to dislike going home. I started spending more and more time away from home (much to the displeasure of my disabled husband). I was actually depressed by my environment I’d been there so long.  When I got my tenant’s notice, a little of my personal experience played into my reaction. But even more was the realization that I could now more easily get the unit up to market rent.

The market I invest in is changing.  Big time. In a good way. Rents are going up almost exponentially.  For those of use operating middle class rentals, it’s great news. But it’s “appreciated” so much that it’s difficult to keep up when the units are occupied. Very few people will stick around when you get a $25 or more rent increase.  They will instinctively move-on.

Part of the logic is “well if I’m going to be paying more…I may as well move somewhere else because I want to be closer to Target…[or on the other side of town, etc]”.  Basically they will rationalize their reason for moving with anything that could possibly be out of your control. They just don’t like spending more money on the same thing. It’s like when you get a notice from your cable company that your bill is going up.  Your getting the same services, but your bill is going up.

I know I will have to put money into the unit.  I will have to get carpet and vinyl but in my mind it’s for the better of the portfolio.  I’d rather spend $1200 getting the unit ready, bring the unit rent up by $100 and be at market rate sooner.  Even if the tenant only lasts one year I will have the unit revamped and have paid off the turnover. If the market goes up again, I can tack another $10 on if the tenant stays.

Plus, I won’t lie.  I’m a little excited by the creativity and possibilities that come with a unit rehab.

CategoriesLong Term Rentals

Forgotten Property Purchase Lessons

By brioproperties,

I recently had the opportunity to network with about a hundred real estate investors from the Midwest.  The most entertaining part of the gathering was the “purchase war stories” we shared in the lounge. Not only were investor’s having fun making jokes about their failures but we were learning from their mistakes no matter how mundane or…odd their mistakes were.  Here’s a few of the reminders we got over drinks that night.

Lesson 1 (and 1 ½) Decide (or reaffirm) what type of property you want to invest in before moving into a new market (and take off your love goggles).

Joe had spent the first 10 years of his career as an investor in Joliet, IL.  He had focused on single family homes in the city, mostly by accident. He was ready to expand into another market so he started looked at Schaumburg.  He quickly fell in love with Schaumburg but was having trouble finding SFR deals that made sense. So he changed his approach to invest in what was available.  His eyes caught a mixed use building within his price range. A fixer-upper with 3 residential upstairs and two commercial downstairs. The commercial units were a mess and vacant.  The residential had one vacant and 2 occupied units in…decent condition. Despite not having any knowledge or passion for commercial Joe proceeded with the deal. He rationalized it as a way to get his footing in Schaumburg. His excitement for the market got in the way of him making a sound investment decision for himself.

Lesson 2: Visit your new rental markets…more than once and at different times during the day.  

Mallory and her husband moved practically cross country for his job with a news corporation.  They decided to sell their rental properties in North Carolina where they had been living and buy new ones in Minnesota, their new home.  They were invited out to a co-worker’s house for a Saturday afternoon barbeque in a suburb of Minneapolis. During the 4 hours they spent their midday, Mallory and her husband really liked that area of town and decided to start buying rentals there.   It had local amenities including restaurants, grocery and chain stores. A few weeks later they found a deal on a triplex with 2 vacants and went to view it Saturday afternoon. Mallory and her husband quickly moved forward and closed the deal. Due to the old house set-up there wasn’t a driveway which they didn’t think would be a problem.  Until a couple months after their first tenant moved in the tenant began complaining about not being able to find parking when they got home from work. The triplex was situated in a 3 block radius that was very popular with the after-work drinks crowd who frequented the pubs and bars. Their tenant was having to park 4 blocks away most nights.  

Lesson 3: Know thy neighbor’s….even businesses.

Steve and Karen regaled us with their property “horror” story purchase in Des Moines area.  Steve and Karen made their first purchase 17 years ago with a quad located in the suburbs of Des Moines.  It was a beautiful ornate turn of the century home previously converted into 4 apartments. When viewing the property they noticed the bank a block over, and the fast food two blocks over.  There was a commercial property with a medium sized parking lot located next door. The business was quiet didn’t seem to attract noise and usually had no more than 5 cars in the parking lot when they drove by.  A few weeks after viewing the property they made an offer and closed. What was the issue? Their commercial neighbor was a business named “Closet Trinkets”. Steven and Karen never went into the business prior to purchase. They thought they were covered because they drove past at different times as suggested by their mentor at the time. Steve & Karen learned the truth about Closet Trinkets when Karen dropped in hoping to buy a birthday gift for her mother.  It wasn’t a place she was going to find a gift for her mother, but it was definitely items you keep in a closet…or nightstand. It was an “adult goods store”.

CategoriesLong Term Rentals

Three Common Listing Mistakes By Owners

By brioproperties,

Too specific screening criteria in the ad

Many investors thinks it saves time when they extensively list their screening criteria in the ad.  Some ads will include specifics about credit score, income requirements, job stability, background check, eviction or foreclosure history, etc.  Here’s an ad I just pulled off an ad on Craigslist out west:

“ You must meet the following: credit score above 650, income must be 3xs the monthly rent, must be in current position at company at least 2 years, no felons or misdemeanors, no evictions, no foreclosures within last 5 years…”

The problem with this ad is it actually discourages people from being interested.  The rental investor looks demanding and difficult to please, not qualities a tenant wants in a landlord. The rental investor is better off trimming the ad for the necessities of qualification and leaving the rest for when the tenant has seen the property.  If the tenant views the property and falls in love with it, they might not be as turned off by the requirements (and by how the investor comes across in person versus on paper).

What are the necessities to have in your ad?  You still want to include things like no pets, no cats, etc.  If you feel you want to include some screening criteria steer clear of income requirements or credit score.  List 2 qualifications from criminal background, foreclosures, or evictions. Whatever you view is highest in priorities.  

Out of Date Pictures

The only thing worse than no pictures is out of date pictures. If your pictures show incorrect flooring, countertops or vanities you’re misleading the prospect about the unit. When the prospect arrives and the flooring  or other items are different your showing may have already ended before it started. Your pictures should be redone every 3-4 years depending on the work you do in between vacancies. If you change out any of the above new pictures are best.  

No electronic forms of contact

In today’s society it is increasingly important to have electronic means of communicating with your prospects. No one sits down at a table after eating dinner scouring listings to make a call list for the next day anymore.  If they can’t send you a message the moment they view the ad, they move on and forget about you. You can go the “low-tech” way and allow responses via email. Or you can go more high tech and list the vacancy on websites like Zillow or Trulia that have features where prospects can ask for more info or request a viewing.  


CategoriesEntrepreneurship

Entrepreneur Burnout is Real

By brioproperties,

I was recently nursing a migraine in bed and watching Youtube videos to pass time.  A Youtuber I follow posted a video in response to a new article about Youtubers and content creators getting burnout.  When the video was done I scrolled the comments and stumbled upon one that got under my skin…and continued to 3 hours later.  “I thought if you loved what did it wouldn’t feel like work.”

I believe they are right, if you find your passion it doesn’t seem like work (most of the time at least).  But the commenter was missing the larger point. Getting burnt out has little to do with whether you love what you do or not. Let’s look at this abstractly.  Think of the food or drink you love the most. Mountain Dew, tacos, french toast, whatever it is. If you regularly consumed that food or drink for 90 days, 180 days, or 572 days you will get sick of it.  It’s what naturally happens.

Authors go through burnout in the form of writer’s block.  Stephen King has talked publicly about writer’s block. Even after writing dozens of novels and short stories he gets writer’s block once and awhile.  Writer’s block is an extension of burnout. This doesn’t mean Stephen King doesn’t like writing anymore or isn’t passionate about it. He feels the pressure from his publisher to stay relevant and produce good content.  He feels the pressure from his fans.

As entrepreneurs (even as real estate investors) we get burnout. I’ll admit I have.  There have been weeks I haven’t written blogs, created online content, did bank reconciliations, market surveys etc.  I burnt out It doesn’t mean I’m not passionate about real estate investing anymore.

In fact when I get burnout I’m happy! It means I’ve been running hard and used all my mental and physical resources. I embrace hitting burnout.  If I hit burnout I’m excited. I just recently hit burnout in November so when my offices were closed for the time between Christmas and New Years I was ecstatic.  I spend the time recharging and still somehow managing to come up with new ideas for my real estate work.

Burnout is what makes us human.  As entrepreneurs it’s what makes us relatable.  We shouldn’t hide it like a sin. Wave it like a battle flag or wear it like a battle wound.  Embrace it. Be grateful for it. Because if you are doing something you love it means a lot more than just being tired.

CategoriesLong Term Rentals

Don’t Leave Your Unit Condition to Chance

By brioproperties,

Documentation is always your best friend in rentals and definitely with security deposits. For security deposit documentation is often key to prevent losing a ton of money from a security deposit return contested in court.

The one we always think of first is the move-in and move-out condition report.  The sheet which represents a written list of the condition of the unit when the tenant took possession and surrendered it. This the form where the tenant should write down the nicks in the countertop or the scratches around tub drain.  Be specific with extent of the existing damages: how many cigarette burns are in the carpet in the living room, how many bleach spots on the countertop, etc. Whatever form you do use, be sure it is has ample writing space. If you accidentally write beyond the section dedicated to move-in condition, your problems could snowball at move-out and you might find yourself with a perfectly legal form that has been invalidated by writing outside the boxes too much.  

Incorporated into your lease as a signed addendum should be a list of possible move-out charges.  Consider it the warning shot across the bow of a ship. It should lay out what the charge would be if: the cabinets are not cleaned properly, the walls are scuffed, smoked in, and need to be painted, the toilet is dirty with urine spots, etc.  Having the maximum charge amounts noted in the lease will make sure the tenant knows the monetary consequences of a poorly kept unit and it may limit move-out inspection surprises. Doing this reinforces in the beginning how serious you are about move-out condition.

It also helps to give them some direction as to your expectations in the lease as well.  Unfortunately “give it back as you got it” may not cover you in court. Phrases like “no hairs in the refrigerator” or “no sticky residue” help create expectations for condition. Also, make sure your maximum charges are reasonable.  You don’t want your security deposit or lease being invalidated because you had a possible fridge cleaning fee of $150.

Also consider  incorporating a clause which lays out what is proper surrender of the unit and where the responsibility lies for scheduling a move-out appointment.  We now require our tenants to use a standardized move-out form which includes the options to be present for move-out appointment within 2 days of the move out OR to waive their move-out appointment. We also lay out what constitutes as surrender: “When surrendering your unit return your keys to the office either in person or in the dropbox. Surrender only happens when this done.  Failure to do so can result in daily charges of rent if keys are left in the apartment.”

An integral part of a thorough security deposit procedure should include move-in condition pictures.  When you have finished getting the unit ready for the new occupant, take pictures of the rooms in general (for flooring and wall condition shots) then snap zoomed shots of things like the inside of the refrigerator, oven, tub, etc. Make sure your lighting is good so it correctly reflects wall colors (especially important if you use lighter shades or white or ivory).  If there are damages that are existing make sure to document that in the pictures as well. For example, if the countertop has 2 sections with nicks get up-close pictures of both sections. Pictures should be taken again up on move-out regardless of the whether your tenant is present for move-out.

Happy Move-Out….err….hope this helps.

CategoriesLong Term Rentals

Normal Wear and Tear & the Security Deposit Dilemma

By brioproperties,

As a landlord and property manager I look at security deposits with two different hats from time to time.  I will admit the views can be stark different at times. As a landlord I tend towards the view of maximizing cash and going heavier on security deposit deductions (I’ve had my own management company employees lovingly call me Scrooge McDuck).  As a property manager I lean towards making sure a reputation is not developed for being a company that doesn’t return security deposits or handle them unfairly. I recently went through security deposit boot camp per say. After talking with a colleague and meeting with a real estate attorney I began to see the reality of security deposit confusion regarding normal wear and tear and how in reality it may come down to having a precise procedure in place.

I was one who used to charge for any crumbs in the cabinets even if it was just a few.   Or charge for cleaning the mirror when it wasn’t spotless or dust on the closet shelves.  My attorney called me on it when a tenant decided to contest her security deposit.  I asked my attorney to step in hoping to avoid the hassle of a court case. I was surprised when my attorney informed me that my charges were a bit steep for the condition the unit was left in.  He urged me to settle with the tenant outside of court because he believed a judge would award the tenant more than what the tenant had wanted back.

If you remember back to your school days, your English teacher told you the worst way to give a definition for a word is to define it by using phrases that describe what it is not. I.e. bad definition of liquid would be “It is not a solid matter.”  The Wisconsin State Legislature did not listen to their English teacher: 704.28(3) Normal wear and tear. This section does not authorize a landlord to withhold any amount from a security deposit for normal wear and tear, or for other damages or losses for which the tenant cannot reasonably be held responsible under applicable law. Thank you for….nothing.

Judges in various states have issued opinions declaring that anything a landlord does as a routine procedure for a “make ready” cannot be charged to the tenant if the time or cost was not significantly increased.  This may still seem a little vague but it begins to make sense if you think it out a little. Consider this: If you normally wipe out the kitchen cabinets before a tenant moves in it may not may make sense to a judge if you charge a tenant for a few lone crumbs in a couple of the cabinets.  If the cabinets were sticky, goopey, or every cabinet had multiple crumbs and debris in them then it would be reasonable to charge them. If you normally paint every unit top to bottom after move-out, you may not be entitled to withhold money for scuffs or hand prints on the walls. If the tenant’s child left their interpretation of Picasso as finger painting on the bedroom wall, you can charge.  The key to remember is: if it adds significant time to your routine procedures then you may have grounds for charging.

Yet the key to having a smooth move-out and security deposit return goes beyond knowing normal wear and tear versus damage.  A smooth move-out begins days before the tenant moves in. In the next blog, we will look at security deposit procedures that will save you hassle and grief.   

CategoriesLong Term Rentals

Generation Z Brings A Wave of Changes

By brioproperties,

In the last blog we covered some of the differences we can expect to see with Millenials and Gen Z.  In this blog we specifically at how the rental industry will be affected. You are probably wondering how quickly these changes will take place.  Within the next 5-10 years the majority of how we have conducted our business for 70 years will no longer be applicable.

#1 New generations are increasingly entrepreneurs. Interiors become more important.

The newer generations will have nearly 50% of their working force as describing themselves as self-employed entrepreneurs (even part-time).  Many of them will be internet based entrepreneurs that don’t have a brick and mortar office. This means that your tenants are no longer spending 50-65 hours a week working somewhere else.  Interiors will thus become a priority for these new generations. Afterall, they will now spend around half of the 50 hours dedicated to a career from home.

#2 Being self-employed means newer generations will have increasing means to afford the rentals they want.

This is not to say you can arbitrarily raise rents because they can afford it.  In practice it’s the exact opposite of that. This means competition will get tighter to fill your units because unlike having to go a boss and ask for a raise (and get approved) to afford something, the entrepreneur can simply sell a couple more online courses a month or take on a few more clients and meet the difference. Suddenly that other duplex on the cross side of town which is $50 more per month and has updated kitchen and bath is in the price range for more tenants. They will look it at and say “How can I afford it?” and they have many solutions to making it happen.     

#3 If they can accomplish something without talking to someone that is the route they will go.

These generations want to be able to pay their bills without having to go an office, or drop something in the mail. Online payment is a necessity.  Whether it be Paypal, Google Pay, etc. They want to be able to view their ledgers and contact you through the internet. Having a bookkeeping service that provides for online access for tenant is a must.

#4 Location matters…but not for work.

New generations want to be close to their stores and restaurants.  This why we are seeing a trend of condo and apartment developments within man-made minitowns.  (Google “The Corners of Brookfield” or Drexel Town Square” to get an understanding.) This doesn’t mean that you need to sell your duplexes and quads so you can build a development.  If you understand that the newer generations want close amenities, your online listing can read “Walking distance to 3 restaurants, pharmacy, and Aldi’s.”

#5 All of this means their priorities are shifting.   

When apartment searching previous generations usually followed a priority list like this:

  1. Price
  2. Location (ease of commute; proximity to job)
  3. Amenities

With the new generations it’s shifting where price is number 3 on this list and amenities and location to restaurants and retail is taking priority.

How On Can You Be Ready?

Starting making the small changes now.  Don’t wait until the market requires to make the changes and you are losing ground.  Get ahead of the curve and start updating your interiors. You can start with new light fixtures at the next turnover. Start researching the most economical way to introduce online portals and showing scheduling to your services.  (If you are stumped on this Google “property management apps” or “property management software” and start comparing features.) Lastly, prepare your mindset. Understand that you will likely see more and more applications that are “self-employed” and likely have description lines of “Youtuber” or “social media influencer” or “freelance entrepreneur”.  Remind yourself that your industry is changing and what you did previously won’t mean survival down the road. Be open to the changes and seek advice when you feel lost.

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