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Flipping Strategy That Works

Television flipping shows intimidate me. Designer colors and finishes that all go together, walls removed, windows added, stairs moved and roof pitches changed entirely. One designer always paints the brick, another one always strips the paint off. Don’t even get me started about the insanity of California homes of 1,100 square feet with 4 bedrooms and 2 baths on 1/5 of an acre, miles from the beach, and $800,000 price tags.

Which kind of proves my point in this article. People in California, New York, Chicago, London and Tokyo might have $100,000 in cash and good credit for real estate investments, but they cannot afford anything in their own back yards. Investor money is pouring into Alabama for single family rental houses up to four-plexes. They don’t care about trendy tiles for the backsplash or mid-century modern light fixtures. The only question that matters is, “Do the numbers work?”

I can deal with that type of flipping! Experts say we are seeing an explosive demand for single family rental properties. Older people were traumatized by the Great Recession and an inability to sell their homes. Younger people want maximum flexibility and near-instant gratification. That means rental housing, but not apartments. Start investing now, so you don’t miss this opportunity.

Do you want to learn more about flipping rental houses? How to find properties, how to find investors, and what they need in order to making buying decisions sight-unseen? There’s an app for that! No, not really. But there is a class for that, coming to cities all over Alabama. Check out the schedule and see if there is a date and time convenient for you, or order the video if that will be more convenient. Click HERE for details.

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Renters Insurance

Landlords should insist on renters insurance for their own protection. As a marketing tool, you can often include the insurance as a free bonus to tenants.

Renters insurance can be purchased for around $210 a year for $10,000 replacement cost coverage, $100,000 liability, and a $500 deductible. That quote is for a policy that does not depend on checking credit scores or insurance history. Tenants who suffer a loss are less likely to sue the landlord (for the tornado, the theft, the fire, whatever) if they have insurance they can use. The money has to come from somewhere, right? The liability portion provides a fund in case the landlord has claims against the tenant for being the one who burned the place to the ground, as one example. Another situation would be if your tenant were sued for harming somebody, he would have money available to pay your rent while his renters insurance pays for legal fees and paying off claims.

Tenants often have no idea the insurance is so cheap. They are usually reluctant to spend the time calling for quotes or filling out online forms. Many have been unable to get economically priced insurance for health or auto. Or, they bought insurance in the past and then lost it when they could not keep up the monthly payments. To them, it seems like a waste of time to try to get renters insurance.

In my experience, a landlord who spends $17.50 a month on renters insurance can almost always price their rent $20 a month above the market, if they offer the insurance at no charge! Plus, just offering the insurance gives them a competitive advantage in the market place.

Call your own insurance agent to check out prices, policy limits, deductibles, and underwriting criteria that might cause the premium to be higher. Then have your lawyer help write up the disclaimer language that goes with your marketing, so you don’t get locked into paying higher premiums than you intended. Let us know how it works for you!

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Extra Revenue

Most apartment complexes have open parking. The first one to find a spot, gets the spot. Until next time. When someone else might get the good space.

Apartment complexes around the country are setting aside 10% to 15% of their spaces for reserved parking. Tenants can pay for the expense of a sign for their reserved spot, plus parking space rental of $20 to $200 per month, depending on market conditions and apartment rental rates. The tenant of a luxury apartment renting for $1,500 a month would think nothing about spending another $100 for a reserved place. If you charged only $20, you’d be leaving money on the table.

Yes, there are some headaches with people illegally parking in someone else’s reserved spot. A large fine to the guilty party if a tenant, or towing the offending car if anyone else, will send the right message and avoid future problems.

Using a conservative cap rate of 6%, adding $1,000 a month in reserved parking fees results in $12,000 a year of additional revenue and an increased value of $200,000 for the property. There are no additional expenses in creating that revenue and value, because the tenant pays for the sign!