ARIZONA PROPERTY MANAGEMENT WITH NO SURPRISES.
Below, HomeLovers founders Michael Sargent and David Zundel answer common questions from investors on Arizona property management and investment portfolio planning.
If you have questions that are not answered here, just pick up the phone and talk to Mike or Dave by calling (800) 491-0375.
PLAN IT! Investment Property Portfolio Planning
Why is there so much emphasis on the HomeLovers Portfolio Plan?
What is included in the initial free meeting?
How can you do so much and not charge me anything?
How can real estate help me reduce or postpone taxes?
What can I do to minimize my liability and protect my assets?
Where do I find the cash to get into real estate investing?
Can you help me set up self directed 401k and IRA accounts?
Can you walk me through a 1031 exchange?
What is the right amount of leverage for me?
Once we decide to get into the game, what next?
BUILD IT! Investment Property Purchasing
How does 'leverage' help my investment?
What if I have a friend who really wants to help me get started?
Why is the right real estate agent so critical?
Where will I find the best properties?
How do I know if the property I am looking at is a great deal?
Do I need to keep reserves on hand?
Can it be a good investment even if there is no cash flow?
Are short sales, REOs and foreclosures a great way to get started?
Do you help me negotiate the best possible purchase?
Can you recommend mortgage companies that specialize in investor loans?
Where do I get the money to be an investor?
Once the sale is complete, what role does HomeLovers play?
Why is there so much emphasis on the HomeLovers Portfolio Plan?
There is no such thing as a universal plan that fits every investor perfectly. Even with the same investor, the plan that was perfect at age 40 will need adjusting by age 60! If it was just a matter of buying houses you like and crossing your fingers, there are literally thousands of hungry real estate agents that would love to collect a commission and wish you the best. Unfortunately, most of the homes people bring to us to manage were purchased with about that much planning.
There are so many variables that affect your results as a real estate investor! Missing even a few of these can turn a great opportunity into a disaster. We can't emphasize enough how vital it is to get the best possible experts on your team.
If you are wealthy enough to have the luxury of not worrying about the outcome, feel free to support any (friend, dad, cousin, neighbor, uncle) realtor you like and cross your fingers. If you are depending on the results being profitable, don't settle for anything less than excellence in your agent and investment team.
Be forewarned - if the first step in your agent's plan is to jump in the car and start looking at homes, you should keep looking for a real estate agent with the RIGHT kind of experience.
Here are just a few (of many) critical elements that should be explored before one of our investor specialists can be confident they are finding the best possible properties for YOU and your plan:
- How much experience do you have as an investor?
- How much real estate investing have you done?
- What type of income stream are you hoping your real estate portfolio will produce?
- When do you need that income stream?
- What resources do you have to create and grow your investment property portfolio?
- What resources do you have to support the portfolio as it grows?
- How tolerant or resistant are you to risk?
- Are you prepared to handle the very predictable things that happen in a real estate portfolio? Do you understand what is predictable?
- What can we do to maximize the tax benefits for you as an investor?
- How do you plan to structure your legal entities and estate to minimize liability?
- Who are the other experts you need on your team to be successful as an investor?
You will learn a lot about real estate investing, and possibly even about yourself, by the end of your initial portfolio planning discovery session. The team will all leave the meeting very confident about how real estate fits in your overall financial plan, what type and quantity of properties we need to obtain to establish your property portfolio, and the timeline for getting all the pieces in place.
What is included in the initial free meeting?
As much as you need! There are several important purposes of the initial portfolio planning meeting. We won't be out buying houses until you are excited about the plan we have developed, you are confident that real estate investing is a good fit for you, and that you are ready for all the good and "bad" that comes with it. You should be absolutely clear about what it will take to get in the game, along with and the kinds of things you can expect from us and the homes you are investing in. You should have all your questions answered and be ready to BUY before we ever look at our first property.
If we can accomplish all that in 30 minutes, fantastic- if you need all day, that is fine too. Somewhere along the way, you may even decide you aren't ready to be a real estate investor at all! A key difference between HomeLovers and the hordes of real estate agents you could jump in the car with is that we are much more interested in a LONG TERM partnership than a quick commission. If you aren't ready to be a real estate investor, we want you to find out BEFORE you buy that first property, not after!
How can you do so much and not charge me anything?
This may seem a bit obvious - but to become a real estate investor, you have to buy real estate! We are confident that by the end of your portfolio planning meeting, we will have demonstrated our significant expertise and how it will ensure your path to maximum returns. As HomeLovers' Investor Specialists work with you to build your portfolio, we will earn commissions that are paid by the sellers of any properties that you purchase. These commissions are all the income we need for assisting you with your investing; we never charge anything for the education and planning that we provide our clients.
How can real estate help me reduce or postpone taxes?
That really depends on many factors. We look at your income, your legal structure and your retirement plans to help you maximize tax benefits from investing through self-directed IRA's and 401k's, deferring capital gains through 1031 exchanges, and taking advantage of write-offs like depreciation, portfolio-related expenses and more. Most investors can reduce their taxable income and possibly even move them into a lower tax bracket! We love letting our portfolios help us pay a smaller percent on a lower amount!
What can I do to minimize my liability and protect my assets?
We can definitely point you in the right direction but at the end of the day, this will be a question for the attorney and/or accountant on your team. We will tell you what we do and make sure you have the best possible experts working with you to get things structured right. The main thing is to protect what we build. The bigger you get, the more people will see you as a target. Let's keep your portfolio working for you, not for an opportunist with a good attorney!
Where do I find the cash to get into real estate investing?
You may have the resources to secure a nice retirement through real estate and you just don't know it! You will have a chance to explore your financial possibilities during in the initial portfolio planning meeting.
The key to your retirement could be the unused equity in your existing real estate. Maybe it is time to put your house to work! Like most, are you disgusted with the constant roller coaster ride of the stock market? We can work with most retirement accounts, and even help you liquidate real estate that isn't performing as needed.
We feel the more important question is "Do I have enough reserves and/or discretionary income to sail through the predictable speed bumps without creating financial hardship?" We meet with many people who had the right idea but the wrong mentor, and are losing properties they never should have purchased. Protecting your ability to maintain the portfolio is just as important as building it.
Can you help me set up self directed 401k and IRA accounts?
Absolutely! We will work with you to choose a company to make your accounts self-directed, then work with them to use your retirement funds to purchase homes in your 401k or IRA. You can still contribute to your plan to assist with vacancy, expenses, or funding the next purchase in your HomeLovers Portfolio Plan.
Can you walk me through a 1031 exchange?
We work with qualified intermediaries for the actual exchange, but we can certainly assist you every step of the way. You will have ample notice of upcoming deadlines in the exchange, and we will stay away from deals that may not fit the time-constraints of the transaction.
What is the right amount of leverage for me?
Higher leverage generally enhances every aspect of your ROI (return on investment), from appreciation to tax benefits. If you take that thought too far, though, you can be buried with negative cash flow and unable to keep up with the home. This is one of the most important issues to work though in the portfolio planning meeting, so you are getting the most return for your money while staying within a level of risk that you are comfortable with. Again-no single plan will work for every investor. That's why we are so hard on the "one-size-fits-all" infomercials and seminar "gurus."
You won't see a crystal ball during the portfolio planning meeting, but we will give you our best estimate with the reasoning behind it! Right now, we are seeing unsustainably low housing prices at a historically low. You could wait for the total "rock bottom" price on a home, only to find that interest rates have climbed, making a higher net mortgage payment every month. The experts at HomeLovers are saying the time to buy is NOW. We believe that either higher prices or higher interest rates (or BOTH) will have most investors in six months wishing they had bought now.
Once we decide to get into the game, what next?
DO IT! It doesn't matter how perfect your plan is and how great your expert team is, if you never get started. Once you make the decision to start investing, let's get the assets in your name and working for you! It is time to BUILD IT!!
Take the time on the front end to get the right experts on your team! The better your team is, the less work you will have to do, and the better your results will be. The real key is that they have to be the expert in their field, and that field has to fit your individual need. Take a hard look at why you are considering any specific member of your team and choose each member as if your financial future depends on your choice. It does!
Take lawyers, for example. There are great lawyers in every imaginable nook and cranny of the legal world. Being an expert in medical malpractice doesn't make somebody an expert on real estate law. Being related to you doesn't make somebody an expert on estate planning, and being a real estate agent or Realtor doesn't make someone an expert in investment property
You are welcome to find your own team of experts, or use our proven experts that deserve that title. Either way, we are committed to your success as an investor and will guide you to the best of our ability.
How does 'leverage' help my investment?
Leverage allows you to control a much larger asset base than you can control with traditional paper investments. The comparatively small cash requirement to buy real estate generates a much greater return. Real estate may be the only investment where you can borrow most of the value of your investment. Appreciation is dramatically amplified over time as a result of leverage.
What if I have a friend who really wants to help me get started?
If your friend happens to be the most qualified expert in their field, by all means use them! In general, though, be very cautious with anybody who enjoys a spot on your friends and family list. More damage is done by well-intended but poorly qualified friends than we care to think about. If you want to help a relative, write them a check- but don't let them "help" with your financial future!
Why is the right real estate agent so critical?
Because the wrong real estate agent can cost you a fortune! Being an agent, without any other expertise, isn't much of a qualifier. There is a new crop of agents obtaining their license every week, and over 90% of them are not successful. It only takes $1,000, 90 hours of class time and enough study time to get 75% on the exam to become a real estate agent.
What does it take to earn a spot on my team? CONSIDERABLY more than that! Here are a few questions an agent better nail if they want to convince me they are an expert:
- How long have they been an active real estate investor?
- What results have they had in their own real estate portfolio?
- How many investment properties do they own, or have they owned?
- How much of their time is spent creating custom portfolio plans for investors?
- How much hands-on experience do they have with property management, tenants and maintenance?
Without expertise, you are counting on luck to land you in front of the perfect property. Literally everything impacts your results:
- What are the best cities for maximum appreciation?
- Where will I get the best cash flow?
- Within each city, what subdivisions are best?
- In each subdivision, what builders are best?
- What floor plan works better for renting quickly?
- Does it matter what part of the subdivision the home is in?
- Would the exact same house perform as well in a totally different city?
The hardest thing about choosing properties is that the answers can change from one city to another, and even from one neighborhood to another. A house that is way too big in Sun City may be way too small in Chandler. The popular two story in Gilbert may be a painful mistake in Youngtown.
If you don't know, why guess? With commissions paid by the seller, HomeLovers expertise is free, so there is NO reason to leave property selection to chance.
Where will I find the best properties?
There are great properties in every part of town- we need to look at your specific needs and build your custom tailored portfolio plan to find the best properties for YOU. A portfolio stacked for cash flow includes a very different set of properties than a portfolio stacked for appreciation. We won't start shopping with you until we are both clear which type of investor you are, and what mix of properties will work best in achieving your specific goals.
How do I know if the property I am looking at is a great deal?
This is a common mistake. There is usually a reason why a particular property is a "great deal". Would you chase a "great deal" even though it is on the completely wrong property - one that may be prone to vacancies and very difficult to rent, or in a neighborhood guaranteeing low income tenants with financial problems?
Once we are clear about the best plan to take you to your specific goals, we will identify the very best properties to fit in that plan. THEN we will look through those properties that offer the best possible value, terms and "deal".
Do I need to keep reserves on hand?
YES! The speed bumps in this business are all fairly predictable, but they all cost money. How much of a reserve you should hold depends on many things - how many homes you own, what the price range of the homes are, how much discretionary income you have each month, etc.
You never want to be sitting on a vacancy with no money for repairs, hoping a tenant will come along that will take your home as-is before your next mortgage payment comes due. You always want to be able to get your property into the best possible condition, so it will attract the best possible tenant - and be able to make mortgage payments until that tenant comes along.
Can it be a good investment even if there is no cash flow?
Some of the very best investments are actually a little upside-down every month! We do not subscribe to the popular belief that if it doesn't pay you every month it is a bad investment. Imagine how much differently we would look at traditional stock market investments if we only considered companies that pay us every month! We have the tools to analyze an investment from all angles to determine what the long term return is, regardless of the monthly payment.
We almost never see the best cash flow scenario beating even a modest 1% difference in appreciation over the long haul, and it is easy to show more than a 1% difference in appreciation across the various neighborhoods in Maricopa County. Cash flow may be the best plan for you today, but it rarely creates maximum long term wealth.
To truly understand the value of an investment, you have to consider appreciation, tax benefits, debt reduction AND cash flow. It is free of charge to consult one of our investment experts to learn what approach to real estate investing may be best for you.
Are short sales, REOs and foreclosures a great way to get started?
There are so many of these opportunities in the market right now that the answer is yes- but ONLY if the property we are considering is a perfect home for your portfolio plan! Never forget that a "great deal" on the wrong home is never a great deal. If we can pick up a nice piece of instant equity on the perfect home through a short sale, REO, or foreclosure, then we are all over it! We also have access to extremely good deals on builder lease-backs, wholesale properties, no-qualifying investor sales, and loan programs for foreign investors.
Do you help me negotiate the best possible purchase?
Every time. Sometimes the offered price is solid and right. Sometimes we can negotiate closing costs and/or price reductions. HomeLovers will always negotiate the best possible terms on every purchase.
Can you recommend mortgage companies that specialize in investor loans?
We only work with experts who have proven themselves to us through a long history of successful transactions, or who come to us highly recommended by someone we trust. We are happy to interview your expert to ensure that you are getting the best loan and rate, at the most discounted cost available to you.
Where do I get the money to be an investor?
It may not take as much as you think! We have programs where you can get into a home for $7,500 total investment and walk away with significant equity in the home. We work hard to find our investors ways to get the most possible real estate working for them with the money they have.
Our partners can assist with making your 401k, 403b, or IRA money self-directed for real estate purchases- even with checkbook control over YOUR money. You may also be able to leverage equity from other real estate properties you own through second mortgages, home equity lines of credit, or refinancing to take cash out.
We frequently work with investors who followed bad advice and got into the wrong home(s). In these cases, we can help with liquidating the underperforming property and 1031 exchanging the equity into better properties.
The bottom line is this. If there is a way for you to get into the game and you are committed to being a real estate investor, we will work with you to find a way to make it happen!
Once the sale is complete, what role does HomeLovers play?
That is where the real work and the long term relationship begins! One of the key reasons to choose HomeLovers as your Arizona investment property expert is that if we don't want to manage it... we don't want you to buy it!
You never worry about getting stuck with a nightmare property just because your agent wanted a quick commission. We want you to be thrilled with your investment portfolio while we manage it for you.
Need expertise in Scottsdale investment or Phoenix investment opportunities? We know this area like the back of our hand - call today for your free consultation.
Top 10 Questions Investors Ask
Call today for answers to these and ANY other real estate investment question! |
