Q & A Saturday – What is NOI for Rentals?

Welcome to our Q & A Saturday video.

In these Q & A Videos we will answer your questions about real estate.  Any real estate related topic from questions about  selling your house, buying a house, real estate investor questions, land lording questions, local market questions and many others things are all fair game. 

Today’s question is “What is NOI for Rentals?

In this video Shaun talks about what the Net Operating Income (NOI) for rental properties.

 

Some of the main points covered in this video are:

1)      What is NOI? = Net Operating Income.

2)      But what exactly does that mean?

3)      Why is it important to know this?

4)      What should you shoot for with your NOI?

 

The Net Operating Income (NOI) for a rental is basically the Net income after taking into account all expenses other than financing costs.  By financing costs this would be the principle and interest payment part of your mortgage payment, not taxes and insurance if those are included in the mortgage payment.  Those two items would be included when calculating the NOI.  For a quick synopsis you take the Gross Rental Income less vacancy and credit losses (i.e. non-payment of an occupied unit) less all of the non finance expenses such as property taxes, home insurance, maintenance and repairs, management, owner paid utilities, other municipal fees, any kind of rental registration fees and then any other expenses that you need to pay for your rental.

Why is this number important?  For commercial sized rentals (Apartment buildings with 5 or more units and any non-residential or mix use building) this number is directly used to determine the value of the property for resale and bank financing.  Obviously in those cases it is a vitally important number since the “Sold Comps” appraisal method used for small properties is not used.

For smaller rentals like condos, single family houses, duplexes, as well as 3-4 unit places.  In these cases the familiar appraisal methods are used so they are not directly used for financing.  However for selling the property to investors the income and expenses will be of paramount importance.  For single unit properties many of the potential buyers will be resident owners and this will not be important but if the property is in a heavy rental area it will be an issue.  It also will be important for anything over 1 unit the person will be at least a partial investor, even an owner occupant in a duplex. 

 

 

Do you need to sell a rental house in Massachusetts or New Hampshire and don’t know what your NOI is?  If you would like to sell your home  fast and hassle free  schedule a consultation  with us today.

 

Hope you enjoyed the video and leave any other questions you have about the topic below or any other topics you would like to see covered in future videos.  I encourage anyone that has things they would like to talk about to let me know what they are.  You can always fill out a contact us form here and put Q & A in the subject, just leave a comment with your questions below here, send an email to info@masshomesale.com, or post it on our Facebook page or Twitter account.

 

Some useful resources:

          Our Video on using The 50% Rule for Rentals.

          All of our posts on Land Lording Topics.

          If you want to sell a house in Massachusetts or in New Hampshire we can help.

 

 

 

 

 

(Image credit: Net Operating Income via Property Metrics)

 

Q & A Saturday – Can I Cash Out Refinance My Rental?

Welcome to our Q & A Saturday video.

In these Q & A Videos we will answer your questions about real estate.  Any real estate related topic from questions about selling your house, buying a house, real estate investor questions, land lording questions, local market questions and many others things are all fair game. 

Today’s question is “Can I Cash Out Refinance My Rental?

 Buying a House with Cash - Doing a Cash Out Refinance on a Rental Property

In this video Shaun some of the requirements usually needed if you want to do a cash out refinance of a rental property.

 

Some of the main points covered in this video are:

1)      The typical seasoning requirements

2)      Commercial vs. Residential loans

3)      What if I own it in my businesses name?

4)      Oh by the way you still have to do all the typical stuff to qualify for the loan as well!

 

A strategy many investors hope to use when building a rental portfolio is to refinance properties to get more cash to help purchase more properties.  In the past this was an easier proposition than it generally is these days.  While these loans can be done there are many restrictions on them, in the most common places to get them, which makes it difficult.

If you are getting a typical non-owner occupied residential loan (these are your 30 year fixed rate ones with good rates) you generally have to own the property in your personal name and cannot have more than 5 mortgages in your name already.  Beyond that you have a seasoning requirement that means you have to own the property for more than 6 months to be eligible, and many banks want closer to 12.  Even at that they will often only give you around 70% of your purchase price for that kind of loan.  That might be fine unless you bought something at a good price because it needed work and you spent a lot of the repairs.

For example you buy a house for $100K cash then put $50K in to it to get it in great shape and it then appraises for $200K.  In this case you would hope to get 70% (or more!) of that appraised value so you can get most of your capital our, and still have a lot of equity.  However often at the 6 month mark you might only get 70% of the initial $100K which means you have $80K still tied up in the property.  The issue there is if the exact same deal presented itself again the investor now needs to find an additional $80K beyond what they started with to be able to do it.

 

Do you want to sell a rental house with equity?  Do you need to sell a house in Massachusetts or New Hampshire and can’t get the money out of it you need?  If you would like to sell your home fast and hassle free schedule a consultation with us today.

 

Hope you enjoyed the video and leave any other questions you have about the topic below or any other topics you would like to see covered in future videos.  I encourage anyone that has things they would like to talk about to let me know what they are.  You can always fill out a contact us form here and put Q & A in the subject, just leave a comment with your questions below here, send an email to info@masshomesale.com, or post it on our Facebook page or Twitter account.

 

Some useful resources:

–          Fannie Mae Cash Out Refinance requirements.

–           Freddie Mac Cash Out Refinance requirements.

–          Our Video on How Many Mortgages you can have.

–          Our Video on the Costs to Rehab a House.

–          If you want to sell a house in Massachusetts or in New Hampshire we can help.

 

 

 

 

(Image credit: Buying A House Cash via 702homebuyers.com)

 

Q & A Saturday – How Do I Evict a Tenant?

Welcome to our Q & A Saturday video.

In these Q & A Videos we will answer your questions about real estate.  Any real estate related topic from questions about selling your house, buying a house, real estate investor questions, land lording questions, local market questions and many others things are all fair game. 

Today’s question is “How Do I Evict a Tenant?

Eviction Notice - Massachusetts Eviction Process

In this video Shaun discusses some of the basics of the eviction process and the timelines involved.

 

Some of the main points covered in this video are:

1)      What are eviction basics

2)      What are the statutory guidelines in Massachusetts

3)      Congratulations if you are in another state, it should be a lot easier

4)      Some of the major costs associated with an eviction

5)      Best case timelines and more realistic ones    

 

Being a landlord can be tough.  Being a landlord with bad tenants can be REALLY tough.  If you are a landlord long enough it is inevitable you will have to understand the eviction process.  Even if you highly lucky and do not have to do one there will be tenants that will have issues and you will want to get out of your property and even if you can avoid the actual eviction you have to be ready to proceed if needed.  The process is fairly complicated and very stringent so make sure to understand what you need to do, and best idea is to hire an experienced attorney at least for the first time to ensure things go right.  In Massachusetts if you make a mistake in the process you will have to start over at least from that step and possibly from the very start and given that best case timelines are well over a month you do not want to have that reset on you.  How much is the rent you are missing?  If the attorney’s cost is less than a month’s rent then it is probably a good deal for you.

Dealing with an eviction?  Do you need to sell a Massachusetts rental house?  If you would like to sell your home fast and hassle free  schedule a consultation with us today.

 

Hope you enjoyed the video and leave any other questions you have about the topic below or any other topics you would like to see covered in future videos.  I encourage anyone that has things they would like to talk about to let me know what they are.  You can always fill out a contact us form here and put Q & A in the subject, just leave a comment with your questions below here, send an email to info@masshomesale.com, or post it on our Facebook page or Twitter account.

 

Resources mentioned in the video and some other useful resources and good articles:

–          MA Government guide to the eviction process for Land Lords

–          Massachusetts eviction timelines from MassLegalHelp.org

–          Nice realistic timeline case study from MassLandLords.net

–          Another good article summarizing the MA eviction process by Rich Vetstein’s Mass Real Estate Law Blog

–          However the grass isn’t always greener, check out our video about Investing in Out of State Rentals

–          Also see our Face Book album of a Trashed Rental House (and our Instagram for other “fun” pics)

–          What if they also trashed the place?  See our article about Fixing up a rental house

–          If you want to sell a rental house in Massachusetts or in New Hampshire we can help.

 

 

 

 

(Image Credit: eviction-attorneys via Reinfeld & Cabrera P.A )

 

Q & A Saturday – Should I Invest Out Of State?

Welcome to our Q & A Saturday video.

In these Q & A Videos we will answer your questions about real estate.  Any real estate related topic from questions about selling your house, buying a house, real estate investor questions, land lording questions, local market questions and many others things are all fair game. 

Today’s question is “Should I Invest Out Of State?

Trashed Master Bedroom in PA rental

In this video Shaun discusses some of the pros and cons of investing outside of your local areas.

 

Some of the main points covered in this video are:

1)      Discussion of the rentals we have out of state

2)      Reasons why someone might want to invest out of state

3)      Some pros and cons of out of state investing

4)      Shaun’s advice for those that are seriously considering investing out of state

 

 

The propensity of out of state investing seems to have really increased the last few years.  There are many reasons to get into it but at least as many pitfalls you can encounter as well.  The biggest piece of advice is to be leery of jumping into out of state investing if you have no prior land lording experience.  Even if your intention is to have a property manager and to have little direct involvement without some prior experience it will be hard to “Manage the Manager”.  Without some direct knowledge it will be hard to understand what is going on when there is a problem, if the manager is giving you adequate communication or just if they are doing a good job.

 

Hope you enjoyed the video and leave any other questions you have about the topic below or any other topics you would like to see covered in future videos.  I encourage anyone that has things they would like to talk about to let me know what they are.  You can always fill out a contact us form here and put Q & A in the subject, just leave a comment with your questions below here, send an email to info@masshomesale.com, or post it on our Facebook page or Twitter account.

 

Resources mentioned in the video and some other useful resources and good articles:

–          Good Investopedia article on buying property out of state

–          Our Instagram account to see more photos of the abandoned rental house we just saw in a trip to visit our out of state properties

 

 

 

 

 

 

(Image Credit: Photos of Abandoned Rental via Instagram)

 

Q & A Saturday – How Many Mortgages Can I Get?

Welcome to our Q & A Saturday video.

In these Q & A Videos we will answer your questions about real estate.  Any real estate related topic from questions about selling your house, buying a house, real estate investor questions, land lording questions, local market questions and many others things are all fair game. 

Today’s question is “How Many Mortgages Can I Get?

In this video Shaun how many mortgages an investor is allowed to get from large institutional lenders aka banks.

 

Some of the main points covered in this video are:

1)      What is a Residential Mortgage?

2)      Who are Fannie Mae and Freddie Mac and why we care about how many mortgages they think we should have

3)      The loan limits set for each organization (Mea Culpa on misspeaking to this below)

4)      Alternative loan products if a residential mortgage is no longer an option

5)      The extra costs that can be associated with these products

 

 

This should give you an understanding of how many residential mortgages any individual is allowed to have and some of the alternatives if that number gets maxed out.  A few additional points is that I DID misspeak in the Video and Fannie Mae allows for up to 10 mortgages and Freddie Mac is 4, however after recording this I discovered they will some be changing that to 6 (See links below).  This goes to show that I should continue with my normal practice of getting my links to other recourses before recording the video.  :) 

 

Hope you enjoyed the video and leave any other questions you have about the topic below or any other topics you would like to see covered in future videos.  I encourage anyone that has things they would like to talk about to let me know what they are.  You can always fill out a contact us form here and put Q & A in the subject, just leave a comment with your questions below here, send an email to info@masshomesale.com, or post it on our Facebook page or Twitter account.

 

Resources mentioned in the video and some other useful resources and good articles:

–          Fannie Mae’s Maximum Loan Guidelines

–          Freddie Mac’s Maximum Loan Guidelines

–          Good article explaining how to find a Portfolio Lender (Alternate Loan Option)

–          General definition of a Commercial Real Estate Loan (Alternate Loan Option)

–          Out recent video on “What is a Hard Money Loan” (Alternate Loan Option)

 

 

 

 

(Image Credit: Fannie-Freddie via UrRepublic.com)

 

 

 

Q & A Saturday – What is the 50% Rule for Rentals?

Welcome to our Q & A Saturday video.

In these Q & A Videos we will answer your questions about real estate.  Any real estate related topic from questions about selling your house, buying a house, real estate investor questions, landlording questions, local market questions and many others things are all fair game. 

Today’s question is “What is the 50% Rule for Rentals?

 50% Rule for Rental Properties

In this video Shaun gives a quick overview on the basic aspects of the “50% Rule” and estimating rental expenses:

 

Some of the main points covered in this video are:

1)      Explaining what exactly the 50% Rule is

2)      A discussion of what a rental expense ratio consists of

3)      Pitfalls a new investor need to be aware of

4)      Why a seller needs to understand what the expenses are when selling to an investor

 

While not many specific expense items were discussed in the video it is important to be aware of many of the most common and important.  Some are pretty obvious and most people will account for them like taxes and insurance expenses.  Others that people will not consider as often are vacancy, maintenance and repairs, management costs (should factor in even if you plan on doing this yourself), Capital Expenses/CapEx (Major infrequent items like roofs, furnace/boiler, hot water heater etc.) and many others.  Any questions on other possible expenses feel free to leave a comment and I can go into as much detail as needed.

 

Hope you enjoyed the video and leave any other questions you have about the topic below or any other topics you would like to see covered in future videos.  I encourage anyone that has things they would like to talk about to let me know what they are.  You can always fill out a contact us form here and put Q & A in the subject, just leave a comment with your questions below here, send an email to info@masshomesale.com, or post it on our Facebook page or Twitter account.

 

Some resources showing the validity of the 50% Rule:

–          “In terms of operating ratios, less than 50 percent of a typical property’s annual collections were used to cover operating expenses. All four building types remained relatively stable with low-rise buildings with 12-24 units experiencing the highest operating ratio at 49.7 percent, factoring in a 3.1 percent decline from the prior year. Elevator building reported the lowest operating ratio at 42.0 percent, representing a 1.5 percent decline from 2012.” From the Institute for Real Estate Management

–          Report on 2014 Operating Income and Expenses from the National Apartment Association

–          Cost of Operating US Rental Housing: 2013 Infographic

–          The 50% Rule: How to Quickly Analyze a Multifamily Investment Property via BiggerPockets

 

 

 

(Image Credit: discount offer 50 via designcrowd.com)