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AskTheBigGuy.com is a source for property management, home buying and selling services and real estate investment strategies.  We serve Philadelphia, Bucks, Montgomery, Delaware and Chester County.

BIG Blog!

Philadelphia Multi-Family and Affordable Housing Forum

Chris Benedict

Are you an investor with a penchant for affordable housing, or looking to grow in the multi family sector? Tickets are limited.  Starts at 7:30am, Thursday July 28, 2016.

Bisnow is proud to announce the 2016 Philadelphia Multifamily Forum, with a twist. This year we'll be discussing the state of the Multifamily market as well as diving deep into an extremely important, and often overlooked issue, Affordable Housing.

We'll be bringing together the cream of the crop in the Multifamily and Affordable markets to discuss the rental population explosion, new trends, current projects, and ideas for the future. Philadelphia's economic renaissance has led to rising rents for virtually all residents, including those needing low-cost housing. From policy to finance to development, how can we preserve the low-cost housing that now exists and create more affordable housing options in the region?

Find out why our experts think Philadelphia is in the midst of one of the biggest growth stories for multifamily development. As always, enjoy breakfast and networking with colleagues and friends before and after the program!

2-day Event! Multi-Family & Apartment House Expo!

Chris Benedict

The following is direct from the expo information:

Philadelphia's First Annual Single/Multi-Family & Apartment House Expo is scheduled to take place on Saturday and Sunday, March 14th - 15th weekend.   

For those who do not know, Single & Small Multi-family properties is the most popular type of asset that people buy when it comes to cash-flow investing.   If you don't already have, 1, 5, 10, or 100 of these assets it is because you either don't understand the value to them, or just don't know how to get started.  If there is a way for you to get in and get 100% of all your money out in 6 months to a year would you do it, why not right?  Now I know it may sound ridiculous to anyone that has never heard of such a concept but this is really why we all do it and these strategies are done by Donald Trump and David Lindahl everyday.  All it takes is the know how to find motivated sellers, evaluate the opportunity, cut the deal, place the money and your done.  Once you get all the above mastered, the process is a walk in the park!  

After Single & Small Multi Family properties comes the business of going bigger.. we are talking Apartment Houses here.  To be a master at this game, you must know how to work with brokers to get deals or know how to find them yourself.  Then you will need to know how to value them, manage teams and get paid when you buy!  Knowing how to raise capital so you can do the entire business with no money out of pocket through private lenders, money partners or hard money doesn't hurt either.  

In the end both of the above business models are very simple but until you have the workflow down and all the right team members to make it happen it can be an uphill battle.  With that said, join us for our event to learn and meet everyone you could ever need to know in order to excel in this business...

What is more exciting is the opportunity to meet and learn all of the above topics from the best of the best investors in the Tri-State area.  Think about it.  How much easier will it be for you to apply strategies taught to you by the same people actively doing it in your very own backyard?   The speakers are not here to sell you programs. They are here to share what they know and spread the wealth.  

FEATURED SPEAKERS:
Dave Lindahl - Creative Success Alliance  
William Holly - Holly Nance
Aaron Fragnito - People's Capital Group
Dave Tran - Cheap Cheap Houses
Christopher Benedict - Big Realty
Ryan Fischer - Camaplan
Jim Zaspel - The Greater Philadelphia REIA
Marc Sherby - Sheriff Sale Guru
Susan Naftulin - Rehab Financial Group
Chris Tucker - Innovative Property Group  
Phil Falcon - Addicted to Real Estate  
Paul Ullman - Asset Based Lending  
David Hansel - Alpha Funding   
- & 10+ more speakers!   

Christopher Benedict with BIG Realty speaks at the Diversified Investors Group

Chris Benedict

The Diversified Investors Group (www.DIGonline.org) has approximately 1000 members that consist of full-time and part-time investors, beginning investors, real estate brokers and agents, attorneys, accountants, property managers, renovation specialists, appraisers, bankers, and people like you who want to enjoy the many benefits of real estate investing.

Every month DIG offers speakers on their panels to discuss various aspects of real estate investing.  The topic of discussion for February 2015's meeting was "Working with Property Managers."  Christopher Benedict with BIG Realty was invited to participate as a panel speaker, along with Rob Coldwell with Your Local Leasing Company.

"Landlording in the 21st Century can be a challenging and sometimes daunting task.  With all of the rules and regulations you need to be aware of, not to mention the time commitment, it's no wonder they say the average life of a landlord is LESS THAN 3 years!  You've probably thought about using a property manager but didn't know where to begin.  Thursday night's DIG meeting is just the spot.  Our Panelists manage thousands of properties and they will be sharing their knowledge, tips, and secrets for navigating the Property Management landscape." 

Overall, the event was a great success as both Chris and Rob educated investors on the benefits of hiring a property management company.

 

Multiple Unit Real Estate Investing. Is Multi-Family Right For You?

Chris Benedict

Anyone who wants to get into real estate investing will usually start with the simplest option.  While you have a lot of options to choose from, single family homes are the usual go to, because they are usually the most affordable for first time investors.  In addition to single-family homes, you have duplexes, apartment buildings, office buildings, strip malls, etc. Similarly, there are many a multitude of ways to invest: real estate flipping, wholesale dealings, buy-and-hold, and everything in between.

Why not start with apartment buildings? Unlike single family homes where value is simply based purely on market demand,  apartment buildings are valued by the cash flow and expenses. The value of an apartment building is calculated by a value formula: Purchase Price= Net Operating Income (NOI) / Capitalization (CAP) Rate.

CAP rate? What the heck is a CAP rate? Well,. mathematically speaking, CAP = NOI / Purchase Price. The CAP rate is the ratio of a property's net operating income to its purchase price. , the CAP rates of properties will be within a narrow range. As a general rule, the higher the CAP rate, the higher the risk. Inversely, the lower the CAP rate, the lower the risk. Plus, the lower the cap rate, the more of an effect changes in the NOI will have on the value of the property.

The ability to affect the CAP rate is what makes apartment buildings more lucrative.  In a 20 unit building, raising the rents just $10 per unit will increase the gross income by $2400 per year.  As an example, if the CAP rate it 5%, and the NOI goes up by $2400, that could raise the building's value by a whopping $48,000!  ($2400 NOI / 5% CAP rate)  

This ability to make small changes in rent with increases, or decreasing expenses over many units is what makes multi-family the best choice for those looking to create value in their property portfolio!

Setting Your Property Management Fees

Chris Benedict

As is the case with any employment scenario, when it comes to hiring a property manager, landlords walk a fine line between ensuring they hire the best help possible and obtaining the most competitive price. Particularly because property management is not a one-size-fits-all kind of field, setting your property management fee at a rate that is both profitable for you and appealing to potential customers can be tricky. While standard property management fees today are set at 10 percent of a unit's monthly rent rate (and go down to as low as 6 percent), there are a few things you should consider before setting your fee for any given project.

Percentage-based fees, flat fees, and per-project billing
Some property managers find a percentage fee works best, while others charge on a flat fee (see minimum charges below) or per project basis. In a case where you charge the landlord a percentage-based fee (let's say 10 percent of a unit's monthly rental price) for your services or a flat fee for all of your services on a monthly basis, the landlord can easily add your fee to his projected monthly expenses, building it into the rental unit price. Property managers can do likewise, relying on a set amount of income per customer on a monthly basis.

Sounds simple! So why consider alternate methods? Particularly in the case of landlords who are only looking to commission a certain, irregular set of tasks such as assistance in renting out or advertising units (as opposed to day-to-day repairs and maintenance) or maintenance and repair work, an hourly or project fee may be a better alternative.

Minimum charges
Particularly in cases where a property is large or work-intensive enough that you will have to think twice about taking on additional clients in order to adequately service that single employer, you may want to consider setting a minimum monthly charge or a flat fee. For example, if a complex has 35 units renting at $1,000 per unit, you will be paid a minimum payment of $2,500 per month regardless of vacancies. Some property managers work on a straight flat fee while others may add on additional charges once vacancy rates dip below a certain level. For example, in the case above you might be paid an additional 10 percent per unit on top of the $2,500 per month when 28 units or more are filled.

Specify included tasks
As mentioned above, different property owners will require different levels of assistance with their units. While, in some cases, property management may be a near full-time job, in others there may be little more work to do than renting out the unit and collecting monthly rent checks on behalf of the property owner. To ensure you are being fairly compensated and that your client remains satisfied with your work, be sure to clearly define the tasks you will be performing during fee negotiation.

Also be sure to discuss an hourly or per-job payment scheme for any additional work not included in your regular duties. Obviously, you can’t plan for everything but setting some basic guidelines up front will serve you well in the future.

Know the going rate
Because property owners are really watching their bottom line right now, property managers are working hard to entice new customers. One way of doing this is by offering incentives. For example, some property management companies are not requiring unit advertising and marketing payment fees from property owners until the unit is actually rented out.

With incentives like this being given on a more regular basis, make sure you are aware of the services, fees, and incentives other local property managers are currently offering. While you want to make the money you deserve, you also want to make sure that you are remaining competitive and abreast of current market trends.

With all of this in mind, remember that before you can even begin to worry about figuring out your fee schedule, you have to identify potential clients. When doing this, be sure to advertise not only your prices but also the other intangibles you offer. Remember that in many cases you will be representing the property owner to tenants and vendors as well as looking out for his business interests. It’s crucial that a property owner find someone that represents him well—someone who is approachable, efficient, pro-active, and budget minded. Make sure you let potential clients know that you possess all of these qualities—and then demonstrate them on a regular basis.

Michael Pickett works for Buildium LLC (http://www.buildium.com), maker of online property management software for landlords, professional property managers, condos and homeowner associations (HOAs) and is author of the The Buildium Property Management Blog (http://blog.buildium.com). .

The author has permitted the reprinting and redistribution of this article.

What is your time worth?

Chris Benedict

What is your time worth?

The average person works 50 weeks a year, for 40 hours a week.  This equates to 2000 hours.  If you make $50,000/year, this equals:  $50k / 2000hrs = $25/hr.  Take your income (excluding rental income), divide by 2000 (or the number of hours you work per year) and this will give you your time’s value!

How much does acting as your own landlord cost?

Take inventory of your time and expenses. Be truthful, and add up all the time you spend, even the time you just spend THINKING about your properties:

·         Picking up mail

·         Opening mail

·         Scanning check copies

·         Prepping bank deposits

·         Bank runs

·         Bookkeeping

·         Paying bills

·         Emails

·         Faxes

·         Listening to voicemail

·         Returning calls

·         Leaving voicemails

·         Listing units for rent

·         Screening tenants

·         Running applications

·         Showing of units

·         Prepping leases

·         Reviewing leases with tenants

 

·         Move in/out inspections

·         Taking photos

·         Hiring vendors

·         Time spent driving

·         Cost of gas

·         Cost of car wear and tear

·         Filing court docs

·         Eviction preparation

·         AND ALL OTHER TIME SPENT!

 

Add up all the minutes you spend, and divide by 60 and you will know how many hours you spend each month on your rentals.  Add any other costs such as gas, mileage, office supplies, etc.  Once you calculate the true cost of your time and energy, you can then compare the cost of hiring a professional property manager compared to what you are spending of your own time value! 

REMEMBER: TIME = MONEY!!!