The Do’s & Don’ts Of Real Estate Investing For Retirement: HAPPY MEMORIAL DAY!

It is very possible to build a dependable retirement investment portfolio. Although the real estate market is known for having its up’s and down’s, the best investors know how to manage their investments and time their deals correctly to best optimize for success.

If you want to lower your risk and protect your invested capital to prepare for retirement, make sure to cross these items off your to-do list:

Save

It doesn’t matter if you’re 20 years old or 60. What matters is your ability to stay dedicated to building a savings. Investing in passive income properties is arguably the best way to earn consistent cash flow during retirement. You have your property (or hopefully, properties), you have renters, you have a property management company taking care of day-to-day tasks, all while you sit back, relax, and collect your profits at the end of every month.

Sounds great, right?

The truth is, it can be. So long as you have the initial lump sum to afford a down payment or two. That’s where things can get tricky. Which is why I’m here to give you a few tips that will help boost your savings regardless of your age or current income.

• Spend Smarter: This probably sounds obvious, but it is easier said than done. Small cut backs here and there will add up quickly. Make your own coffee instead of indulging in that daily Starbucks habit. Clean out your closet and sell old clothes at a second hand store. Split restaurant meals with a friend or significant other instead of purchasing two entrees. These simple lifestyle changes will help keep your expenses low.
• Open An IRA: Establish an individual retirement account (IRA) to help build your nest egg. Both Traditional and Roth IRA’s are viable options depending on your income and whether or not you or your spouse’s day job has a retirement plan in place. Talk to a professional to find out which account will benefit you in the long run.
• Make It Automatic: The easiest way to safeguard retirement funds is to automate your savings. Set up your online banking account that sets aside a certain amount of money each month. Before you know it, your savings account will have significantly increased in size.
• Set Goals: Did you know that people who take the time to physically write down their goals are 87 percent more likely to achieve those goals? If saving for retirement so that you can invest in real estate is something you’d like to accomplish, write it down! Create a timeline to help keep yourself on track and be sure to reward mini milestones along the way. Holding yourself accountable by setting a specific goal is the best way to stay motivated.

Identify Your Niche

There are many options to choose from when it comes to investing in real estate. Because there are a myriad of avenues to take, it is important to identify your niche and select an exit strategy that’s right for you. With so many areas to choose from, this task can seem overwhelming. Fortunately, it’s easier than you think.

Of course, your goal is to be financially free in retirement, but how will you get there? To answer this, you must first ask yourself some questions:

• How much do I currently have in my savings?
• Do I prefer a more hands-on or hands-off style of investing?
• How much time am I willing to put into my investing business?

If your savings account is nothing to write home about, wholesaling real estate is worth a shot. You don’t need much money to get started and you have the potential to earn profits quickly. If you are ready to put substantial time into your business, rehabbing is an exit strategy to consider. You must have a hands-on personality, be open to risk, and have an eye for design; however, if you possess these traits, rehabbing is a great way to make significant capital.

Finally, if you’d prefer a more passive style of investing (which most desire in retirement), rental properties are your answer. Once you find tenants, hire a property management company, and pay a down payment, you have the ability to earn a steady stream of passive income that will aid you in living a financially stable retirement.

Worry Less About Cashflow

Whether you decide to go the rental property route now or later, it is important to live by the principal “worry less about cash flow”. The most successful investors prioritize capital growth even if that means sacrificing cash flow for the time being. Think about this: if you purchase a rental property and put down a 50 percent down payment, your monthly cash flow would be significant. On the other hand, you  could invest in two properties and put down only 25 percent on each property. This option would reduce your immediate cash flow but benefit you greater down the line.

Make sense so far?

Look at it this way: with either option you get the same percentage yield. Sure, if you go with option two, you’ll have less cash flow to start. But in retirement, you’ll double your income if you worry less about cash flow and more about capital growth.

Keep these principles in mind when real estate investing for retirement and you’ll be living the life you deserve in no time. We are here to assist Diamond Dust Property Management 561-541-4409 Email: dds@daddyo.biz

 

How To Lower Your Utility Bill This 2017 New Years

How To Lower Your Utility Bill This 2017 New Years

1. Unplug Gadgets

According to the Environmental Protection Agency (EPA), small, unused gadgets are responsible for draining 100-billion kilowatt hours per year of unnecessary energy loss. When left idle, these same 100 billion kilowatt hours cost households a staggering $10 billion annually.

As referenced in Time magazine, Rob Caiello, vice president of marketing for AllConnect, suggests unplugging video games, microwaves and even battery chargers to keep rising energy costs at bay.

Quick tip: Because it may be inconvenient to unplug each item individually, consider plugging in all energy-draining smaller gadgets or appliances into the same power strip to make powering down easier.

2. Lower The “Heat” In Your Water Heater

The U.S. Department of Energy reports that water warming accounts for up to 18% of a household’s energy consumption. Setting your water temperature to 120°F can help you see small changes in your energy bills over time. It can also serve as an invaluable safety precaution, preventing injuries like hand-scalding or bath-time related injuries in households with small children.

Though, as Jay Best, founder and president of Green Audit USA, shared with LearnVest,  “Don’t go below 120 degrees, as some bacteria can grow at lower temperatures.”

3. Prevent Heat-Loss From Your Fireplace

Many families rely on fireplaces to heat a house and prevent extensive wear-and-tear on their heating, ventilation and air-conditioning (HVAC) units during winter. This makes your fireplace an unlikely culprit of heat-loss. However, drafty fireplaces are one of the main sources of escaped heat that can show up within a home.

To prevent heat-loss from your fireplace and chimney, try one of these energy-saving solutions:

• Insert caulking around the fireplace hearth.
• Keep your fireplace damper closed unless ready to build a fire.
• If you don’t plan to use your fireplace, seal and plug the chimney flue. Keep in mind, once plugged and sealed, you’ll need to reverse the process before making a decision to safely resume active use of your fireplace.
• Install tempered glass doors.
• Opening the dampers, located at the bottom of your fireplace, can greatly reduce heat-loss.

Alternatively, you can also open a nearby window, approximately one-inch, and close all doors leading into the room to achieve the same effect.

4.Keep A Clean Landscape

Overgrown or crowded greenery can prevent airflow from reaching the HVAC elements of your home. Not only does this hamper performance, but the additional shade can serve as a catalyst for your unit to “freeze over” in the winter.

To lower winter energy bill costs, and protect the health of your HVAC, keep landscaping near your central heating and air unit uncrowded and well-trimmed. (Bonus: This can also keep your house looking its absolute best when company comes over for the holidays.)

5. Decrease Drafts From Electrical Outlets

Electrical outlets in residential spaces are not often insulated. A lack of proper insulating behind electrical outlets can lead to cold air sneaking in through these unexpected energy-zappers, and increase the amount of heat required to warm a home.

To decrease the amount of air that enters through your outlets, remove the cover plate and use a quality caulking or foam filler to help seal off drafts that may be present. With just a few minutes of DIY work, you can make a huge impact on that skyrocketing winter-energy bill.

6. Bundle Up

Keeping your thermostat at a steady, set temperature may keep you consistently warm, but it also raises your electrical bill more than you might realize (especially in the evenings, and when nobody is in the home).

Putting on an extra sweater, or reaching for that nearby blanket — instead of cranking the thermostat — can help prevent your HVAC from working overtime. According to Dr. Christopher Winter, medical director at Charlottesville Neurology Sleep Medicine, people who sleep in colder rooms not only sleep more efficiently, but are also healthier in general than those who sleep in warmer spaces.

If you need more incentive for making things a bit colder before bedtime, a four-month study, conducted by the National Institute of Health (NIH), revealed those who slept in rooms at 66°F burned more calories while awake than those who did not, and were at a lower-risk category for developing certain metabolic diseases.

7.Inquire About Special Programs

If it’s time for an appliance upgrade in your home, many electric companies — even the government — may offer rebate incentives you can take advantage of when replacing an old appliance with an Energy Star-approved model. This can offset, significantly, the cost of a new appliance and lower your energy bill long-term.

If you own a rental property, discuss the possibility of upgrading to appliances labeled “Most Efficient” — a step up from the Energy Star seal of approval. This will not only save you money on your utility bill, but prepare your passive income property for future renters.

As Benjamin Franklin once said: “An ounce of prevention is worth a pound of cure.” And the same is true of your winter energy bill; it’s a little late, after you receive that astronomic winter energy bill, to begin the process of making your home more energy-efficient.

Just know by taking small, simple actions — and by paying attention to “how” and “when” you consume energy in your home — you’ll do far more than lower your utility bill in the coldest months of the year. You’ll build wealth, one penny at a time.

HAVE A HEALTHY & HAPPY  NEW YEARS

FROM Diamond Dust Property Management LLC

TO YOUR FAMILY

Happy Thanksgiving

This is the perfect time of year for us to take the opportunity to let you know just how thankful we are that you allow us to be of service to you.

On behalf of our office, at the Diamond Dust Property Management LLC, we would like to extend our best wishes to you and your family to have a safe and enjoyable Thanksgiving holiday.

 

Why Should You Get Started In Real Estate?

Time

Time might be the one thing money can’t buy. No matter how much money you have, you will never be able to get back the time you spent accumulating your impressive bank account. What you can do, however, is create more time for yourself in the future. And if real estate has taught me one thing, nothing can rival the amount of time investing in real estate awards savvy entrepreneurs. In fact, it’s quite common for people to become real estate investors for the sole purposes of owning their own time.

Cash Flow

Not surprisingly, the most common reason people start investing in real estate is because of the money they have seen other people accumulate — and for good reason. If for nothing else, real estate is an investing vehicle capable of realizing impressive profits for those that are willing to put in the work. Few investing platforms, for that matter, can match the earnings potential synonymous with today’s best investors. That said, it only makes sense that cash flow is a priority for those who want to get started in real estate.

But what exactly is cash flow? As it’s name suggests, it has everything to do with the income of a respective investor. In its truest form, cash flow represents the amount of capital left over after all the bills on a subject property are taken care of.

Tax Benefits

While not as widely advertised as its cash flow counterpart, tax incentives associated with owning real estate can quickly eclipse even the most ambitious pay days. In fact, there are scores of investors that will swear tax benefits are more beneficial than cash flow. When someone asks you “why you should get started in real estate,” it’s hard not to point out how advantageous some of today’s tax breaks can be.

For starters, it is entirely possible to deduct any interest you pay on a mortgage. According to Investopedia, “Homeowners can deduct the portion of their mortgages attributable to interest payments on their tax returns. These payments are higher during the early years of the mortgage and gradually decrease as the mortgage is paid off.”

While less popularized, but no less beneficial to homeowners, there is one tax deduction in a class of its own: depreciation. For what it’s worth, depreciation can turn a good investment into a great one. According to Investopedia, depreciation allows investors to “recover the cost of income-producing rental property,” the whole cost. Through depreciation, rental property owners can write off a portion of the home’s cost for up to 27.5 years.

The important thing to remember is that nobody is going to hold your hand through the process. Any attempt to take advantage of the tax benefits that coincide with real estate should be met with a proactive mindset. More specifically, there is only one way to ease your tax burden through real estate come tax time: due diligence and a working knowledge of what is within your rights to deduct. As always, consult a tax professional before you decide to make any deductions of your own; just know that real estate is ripe with great tax incentives.

Equity & Appreciation

In a sense, both equity and appreciation go hand-in-hand; it’s rather difficult to have one without the other. That said, real estate investors should appreciate a great equity position on any property they own. Few things can combine to benefit an investor more so than these two indicators. But what is it about them that remains so attractive? Why should you get started in real estate for the purposes of realizing equity and appreciation? Let me explain.

If history tells us anything, it’s that homes appreciate in value much more often than they depreciate. While this may be hard to believe after experiencing one of the worst recessions in American history no more than a decade ago, consider how far we have come. Home values are roughly within two percent of their 2006 peaks, and that is after a significant downturn. If you were lucky enough to buy in 2012, you are likely the beneficiary of some impressive appreciation rates. If you waited until later, there is always the option of improving your equity position.

Every time you pay the mortgage, you are growing your equity. But real estate investors have the added benefit of allowing someone else the privilege of paying off their mortgage, essentially turning their property into a savings account — a very big one. When you buy a property with the help of a mortgage, you have a monthly obligation to pay down the principal. However, nobody ever said the payments had to come out of your pocket. It’s entirely possible to rent out a property to a tenant, and use the rent they pay you to pay off the mortgage. Landlords can very easily improve their equity position in a property without using their own money every month.

It’s important to note, however, that neither equity nor appreciation should be your sole reason for investing in real estate. If for nothing else, these two things are more or less contingent on the state of the market as a whole. The amount of equity you have in a property and how much it appreciated by — or depreciates in some circumstances — are more reflective of market conditions than anything else. Property owners are more or less along for the ride, but what a ride it can be. With that in mind, equity and appreciation shouldn’t be counted on, but rather appreciated when they work in your favor.

So why should you get started in real estate? Quite honestly, there are countless reasons, but those I mentioned above are the most popular. If you want to get into real estate for the sole purpose of proving you can do it, feel free to do so. Perhaps you want to create a legacy to leave for future generations of your family. Whatever the reason is, make it yours and aim high. Only then will you truly know why you should get started in real estate. Follow  us Diamond Dust Property Management or call (561) 541-4409 to get started in real estate.

Today Is Better Than Tomorrow

Today Is Better Than Tomorrow

Those currently taking the steps to learn how to begin a career in real estate will almost certainly be glad they did so today, as opposed to a decade from now. At the very least, investing in real estate takes time; accumulating wealth is the result of time and knowledge. While not necessarily the equivalent of compound interest, the sooner you get involved in real estate, the sooner you can start reaping the rewards. Start building equity in a home and find out for yourself.

It’s time that learning how to begin a career in real estate coincided with reading market trends. All you have to do is listen to what the market has to say to understand why now is a great time to invest in real estate. Allow us to work with you Diamond Dust Property Management LLC.

Prices Are Relatively Low

Prices Are Relatively Low

Yes, it’s true: homes have appreciated a great deal since they hit rock bottom during the worst part of the recession. However, while prices have risen dramatically, many cities have yet to see their home values exceed their pre-recession peaks. What’s more, today’s low interest rates are making it much easier for real estate investors and regular home buyers to afford the property they want. Remember, lower mortgage rates make it possible to do more with the money you have at your disposal; that theory holds weight whether you are a first-time home buyer or a new investor learning how to begin a career in real estate.

It is worth noting that there are still great deals to take advantage of. That said, if you are one of the many people that want to learn how to begin a career in real estate, you should pay close attention to the foreclosure market. According to RealtyTrac, “there are currently 912,490 properties in U.S. that are in some stage of foreclosure.” While foreclosure filings have improved dramatically, it is still possible for savvy investors to find great deals on properties they can flip.

Contact Diamond Dust Property Management LLC                                                                     Allow us to help grow your portfolio.

Rent is Rising the Fastest

The real estate industry has seen its fair share of ups and downs over the last 10 years. However, as the economy has expanded, so too has the housing market. In fact, homeowners are now privy to equity that they never thought they would see again. Appreciation has nearly returned home values to pre-recession levels. Subsequently, rent has seen changes of its own. It is common knowledge that rent in big cities like West Palm Beach and Fort Lauderdale is increasing at a historical rate, but the same can be said about smaller metros. Nearly every city across the country has seen a spike in rental rates – even cities that have struggled to recover. Rents are rising faster than the national average:          Allow Diamond Dust Property Management assist you with your real estate wealth.                       DiamondDustPropertyManagement.com (561) 541-4409

 

 

5 Ways To Increase Rents And Improve Rental Property Value

Owning a rental property is one of the best ways to accumulate both short and long term wealth. However, owning a rental property alone doesn’t guarantee a positive return.  The best owners take an active approach in improving their property.  Without constant maintenance and upgrades even the best properties slowly deteriorate.  When they do instead of being an asset they turn into a liability.  Fortunately there are a few things you can do to always stay one step ahead of the curve.  By thinking outside the box and treating your property like the investment it is you will maximize the return.  Here are five things you can do to increase your rent and improve your rental property value.

• Add A Bedroom. One of the great things about real estate is that you can change just about anything with the property. If you want to increase the size of a room you can explore the option of knocking down a wall. If you want to replace the cabinets in the kitchen you can give the room a face lift. An option you should look at in your rental property is adding an extra bedroom. Not only will this give you an extra room for your tenants but will have a great impact on the resale value. The most likely option for this would be if you have a dining room off of the kitchen. The reality is that formal dining rooms just aren’t as popular as they once were, especially in rental properties. By adding a wall and a closet you may have enough to turn your dining room into a bedroom. This can add 10-15% to your monthly rent and be a great selling point down the road.

• Interior Upgrades. Adding a bedroom in your rental property would be a home run but may not always be practical. Instead of making wholesale changes there are plenty of minor upgrades you can make. Tenants are very much like buyers in that they like new things. Sure, you can stretch your old dishwasher to last a few years but with all of the seasonal sales available buying a new one may be more beneficial. The same is the case with any outdated or worn down appliances. Most renters would consider paying slightly more per month on a unit with updated appliances. The same is the case with the overall general appearance of the property. The hallway walls might not be dirty but think of what a fresh coat of paint would do. Every year or so you should consider adding new paint to the interior. If you are using the same neutral colors you won’t have to waste time priming or worrying about a second coat. A final interior upgrade you should consider is with the fixtures. In much the same way as the appliances old fixtures give a horrible first impression. Updating these will not break the bank and will increase short and long term value.

• Exterior Upgrades. The exterior of your rental property is where first impressions are created. Not only does a strong exterior help generate tenants but it can keep them in your property for an extra lease or two. When most landlords think about the exterior they think about the yard and landscaping. These are important but they are just the tip of the iceberg. If you want to create value and demand you should look at the presentation of the exterior. Consider cutting down any large trees or bushes that may hinder the appearance of the property. Think about resealing the driving or transitioning from stone to pavement. The improvements you make to the exterior can make all the difference.

• Amenities. There are several items in a property that can greatly enhance the appeal. Renters want their residence to feel like home. One of the ways you can do this is by adding every convenience. The first item you should look at is an onsite washer & dryer. A dedicated laundry room in the basement or some portion of the property adds immediate value. For many tenants this amenity alone can be a decision maker. Another amenity that retains value is a deck. Your deck doesn’t have to be a giant, elaborate structure. Something relatively small off of the back of the home is often enough. On the flipside you should avoid amenities such as pools and swing sets that take up space and only fit a niche audience. As much as you may like swimming many tenants do not want to have to deal with a pool. When it comes time to sell a pool can actually be a hindrance instead of a help.

• Create A WOW Factor. As soon as potential tenants step foot in the property you want to create a “wow” factor. Regardless of the market there is still plenty of competition out there. You want potential tenants to leave your property with a positive impression. One of the ways you can do this is by updating the flooring. You don’t need to replace the existing flooring but you should definitely rebuff the hardwood floors or steam clean any rugs. Little things such as new welcome matts or new patio furniture give the house a clean, welcoming feel. Whenever renters or buyers leave your property after a viewing you want to create a favorable, lasting impression.

It is not enough to purchase a rental property and wait for checks to roll in. You need to take a proactive approach on building and sustaining value.  The little things you do and minor improvements you make will help increase rents or build long term value.                                    Let the Professional at Diamond Dust Property Management LLC HELP YOU WITH ALL YOUR REAL ESTATE PROPERTIES. 561.541.4409

Happy July 4th

 

4 Things To Consider Before Financing Your First Rental Property

Now may be one of the best times ever to acquire a rental property due to the hefty tax deductions and the positive affect it can have on your investment portfolio. However, those that have yet to do so should mind due diligence and consider what they are getting into before they make the jump.  You must find the right tenants, decide on whether or not you want a property manager, and make the necessary updates while keeping up with basic rental property maintenance. While there are a myriad of things potential landlords should consider before financing their first rental property, I highly recommend starting with the following four:

Rental Property Consideration 1: The Numbers

Prospective rental property buyers must run the numbers to see how much they can afford to spend before they even start looking at houses. Having said that, you must have a good understanding of four very important factors: financing, market indicators, transaction fees and management fees. Let’s take a closer look at each of these things individually:

Financing: In the event you are unable to close with cash, you will want to familiarize yourself with the financing options that are likely to be available to you at the time. Nothing, for that matter, will have a bigger impact on how your future deal will transpire, or even which deal you pursue. Mind your due diligence and research your options. At the very least, talk to a mortgage broker and find out how much money you could potentially have at your disposal. At this stage of the process, you will also want to find out how much of a deposit you will need to put down in order to secure manageable monthly premiums. Don’t be afraid to shop around either; there is a mortgage out their with your name on it if you are willing to look for it.

Transaction Fees: Never assume that there isn’t a cost of doing business; nobody works for free. Don’t forget to account for taxes, legal fees, stamp duties, and any other additional costs that may accompany whatever it is you intend to accomplish. I highly recommend you do your research; each state has become synonymous with its own set of individual fees. However, I encourage you to consider these fees as a cost of doing business, not as an added burden. Therefore, fees should always be factored in to individual transactions. Neglecting to do so will only hurt your bottom line.

Management Fees: Rental properties are unique, in that they typically take place over the course of an extended period of time. Whereas most real estate exit strategies span anywhere from one month to six, rental properties can produce cash flow for as long as the property is in use. Of course, that means someone will need to manage it for the duration it is rented out. That said, only one question remains: will that person be you? You must decide whether you want to manage the property or enlist the services of a property management company. Either way, there will be costs to consider; make sure you account for them all.

Market Indicators: As perhaps the most important numbers to crunch, market indicators should give you a good idea of which properties to look at. Understand how much the average rent being charged to tenants in your area is, and compare those numbers to what you will probably pay on a mortgage. It’s a good idea to know how much a rental property will yield in a given market. I also recommend looking at trends, as you will likely have the property for a long time. Don’t let one hot season corrupt the data you are choosing to base your whole purchase off of.

Rental Property Consideration 2: Location

We have all heard it before; location, location, location. At this point, it is safe to say that location is king. The neighborhood you choose to rent in, for that matter, is just about the only thing you can’t change on a property; make it count. Only once you have run the numbers and know how much you are able to invest in a rental property can you even consider a location. But what makes for a good rental property location?

An Attractive Neighborhood: Not surprisingly, you will want to acquire a rental property in a neighborhood that is desirable. While your price point may dictate where you buy, I can assure you it is better to own a less attractive property in a desirable neighborhood, than a pristine property in a neighborhood that nobody wants to live in. Remember this: demand will be your best friend or worst enemy as a rental property owner. If you are having trouble finding a home in a neighborhood that is already desirable, try doing a little research of your own. Try to identify trends and predict which area is destined to become one of the most popular neighborhoods. Go to your local municipality and see where new malls are being planned, or even schools for that matter. Stay ahead of the curve and you my find a property to rent out with limitless potential.

Local Amenities: Renters, in particular millennials, are always going to favor locales with amenities over those without. That said, you should consider which amenities are located close to any prospective rental property you are considering. Are there any good schools near by? Does the area have public transportation? Are there plenty of places within walking distance? All of these things, and more, factor into a great location.

Rental Property Consideration 3: Ideal Tenants

I highly recommend catering to a specific type of tenant. However, I wouldn’t necessarily commit to making that decision yourself; the location in which you plan to rent should dictate whom you are most likely to rent to. With an idea of whom you intend to cater to, you can better focus your efforts. Remember this: different types of tenants will have different needs. If you are renting near a school, you may want to consider shifting your focus towards students. However, landlords in a place like Florida may want to take advantage of the year-round weather forecasts. In other words, let the location dictate who you rent to and how you intend to do so.

Students, in particular, will typically place an emphasis on location and low maintenance. Anything within a close proximity to the school should catch a lot of attention, but don’t forget that they will be mostly occupied with school, so they won’t want to have to worry about a lot of upkeep.

Families, on the other hand, are more likely to favor unfurnished properties; ones they can use as a blank canvas to represent their own home. Don’t hesitate to let families leave their own mark on a property, as long as it is constructive. Families will want to paint walls, decorate and make the house feel like a home. If you allow them to do so, it will be a lot easier to find tenants.

Rental Property Consideration 4: Credit

Those in pursuit of the perfect rental property had better make sure they are prepared for what is in store. That said, there is one thing you must do before you even consider transcending the barrier between homeowners and investors: check your credit. The sooner you are able to come to terms with your own credit score and any subsequent mistakes that may come up, the better off your rental property search will be. If for nothing else, you will be able to address any concerns that could become potential obstacles in the future. Be proactive and take care of any credit issues before they prevent you from closing on a property with positive cash flow.

Those that are made aware of blemishes on their credit history are advised not to take drastic actions, but rather consult an expert. Someone with experience in handling credit issues will know the proper course of action, whereas someone who has no idea what they are doing could potentially do more harm than good. Not surprisingly, even small changes can have a lasting impact. Do not attempt to close old accounts or pay off collection accounts without first confirming that doing so would be in your best interest.

Financing a rental property can be a great career move, and could potentially generate passive income for years to come. However, don’t make the jump to become a landlord until you have considered what is in store. Allow us to help you the rest of the way.  Diamond Dust Property Management  561-541-4409

We source discount properties for real estate investors so that they can free up their time & focus on what they do best. Investing & buying properties.
We are Real Estate Investors helping Real Estate Investors find properties to wholesale, buy and hold for passive income, and/or flip for quick profit.

5 Things You Need To Know Before Getting Into Commercial Investing

One of the keys to a successful real estate business is a diversified portfolio. The different avenues you have for creating wealth the safer your business is.  There are many investors who are intimidated at the prospects of a Commercial Property. They feel that the greater number of units the riskier the investment is.  The reality is that the opposite is often the case.  Some of the wealthiest people in the world have benefited greatly from commercial investing.  The right property in the right market can yield returns that cannot be generated from any other type of real estate.  That being said there are a number of things you need to know before you get going.  Here are five areas to focus on prior to your first commercial investment.

• Education.   Investing in commercial properties is much different than your traditional single family purchase. Many times these differences can be complicated to understand. For starters a commercial property can be anywhere from five to twenty or more units. They can be stand-alone units, such as a strip mall, or connected to an existing business. It is important that you understand all of the various types of properties and what makes them different. You should also educate yourself on the numbers associated and which items effect supply and demand. You should also learn any local commercial laws and guidelines which can impact your purchase. Soaking all this information in can be frustrating and confusing at times. The amount of due diligence you would do on a single family purchase and a commercial one is often completely different. Before you get too far you need to learn as much as you can about the different property types and the process to close.

• Market. The market you choose to invest in is always important. With commercial properties it is everything. Large commercial buildings are dependent largely on the local economy to supply tenants in the way of business owners. If the market is poor you will have a tough time finding tenants which in turn will make your investment difficult to manage. The type of building or the location it is in is not as important as the local market. Market changes are never easy to predict but you need to look at indicators to supply clues. Has there been an increase in the general population? Are businesses leaving the market? Are there any changes to the taxes or other demographics that can have a negative impact? Before you consider a commercial property you need to know where the market is headed. You may be able to get a good deal on a commercial property but you need to know it will be strong well into the future.

• Valuation. One of the biggest differences with commercial properties is with how they are valuated. On a non-commercial property you look at comparable sales and listings and evaluate the data. You can get a pretty good idea of your list or sales prices by looking solely at this information. Just by the sheer volume of commercial sales this method does not apply. There are far fewer commercial sales in a given market. Inside of these sales the size, layout and style of the properties may be totally different. Instead of looking solely at sales you need to look at the income they generate. This method, known as the income approach, looks at the total rent that the property brings in over the course of the year. There are other factors that influence commercial value such as the specific tenant, the type of business, the market and the location. The bottom line is that commercial values can be a moving target and much more difficult to estimate than your average single family property.

• Tenants. An average single family lease is roughly one year in length. Some can be as short as nine months and others can last several years. With a commercial building the leases are much longer in length. The average commercial lease is three to five years. Because of the longer lease period it is critical to find good tenants. The strength of the tenant is typically based on the type of business they own. As simple as it sounds the stronger the business the stronger the tenant. There are also many different types of leases that a tenant can take. One expense you will definitely need to make is to have an attorney draft a specific lease for your property. Finding a commercial tenant takes more than simply making a post on social media and waiting for your inbox to blow up.

• Financing. The final area that you need to know is the financing. While there are a few similarities with residential financing commercial financing is very different. In addition to a strong credit score and 30% down payment you need income to support the property. Some of the income can be offset by rents received but most of it comes in the form of personal income. This needs to be document and evidenced with two years of tax returns. Another major difference is in the terms of the products offered. There are many more adjustable term and balloon mortgages in the commercial world than in residential. You can’t overlook this point. You may be satisfied with your loan today but in a few years’ time everything can change. If this wasn’t enough the total closing costs are also much higher than what you may expect. There are some steps that may be the same as to what you are accustomed to but many that are quite different.

You have a much greater chance hitting a home run with a commercial property than you do a single family residential. The key is to understand what you are getting into before you get started.  Use these five areas as a guide to help you on your way.

To learn More visit DiamondDustPropertyManagement.com or call 561-541-4409              We are always here to help.