Show Me The Money
Investments are all about making money, but in order to do so, you first have to spend it. So how do you make sure that you’ll make your money back on an investment, before signing the check? It helps to calculate your return on investment and your capitalization rate on a property. A return on investment (ROI) is a measurement used to estimate the success of an investment. In this market, a good ROI percentage is about 8-10%. How do you calculate an ROI: Annual Rent (AR) ÷ Purchase Price (PP) = ROI So, let’s say you buy a home for $170,000 (PP) and are renting it out for $1,500/ month. Your annual rent (AR) would be $18,000. 18,000 ÷ 170,000 = 10.5% This is your return before expenses. Think of the ROI as your gross return. A capitalization rate (CR) is your return on investment after expenses, or your net return. The ideal capitalization rate is between 6-7%. This is found by subtracting your annual expenses such as mortgage, taxes, insurance, or property management fees from your gross annual income, and then divided that figure by the purchase price.Gross Income (GI) – Annual Expenses (AE) = Net Income (NI) Net Income ÷ Purchase Price (PP) = CR Still using the figures from above, your property generates an annual income of $18,000. This is your gross income (GI). You allocate $600 per month toward expenses, giving you a total of $7,200 each year. 18,000 – 7,200 = 10,800 10,800 ÷ 170,000 = 6.35% Perfect! You can use these formulas to factor what your profits would be on a property prior to purchasing in order to decide whether it’s a good investment or not. Happy investing!
What is Your Experience in Property Management?
Teresa Penner, the owner of Penner Property Management, gained her Real Estate license in 1999 from Las Vegas, Nevada. She had managed over 250 single family homes from investors ranging in one property, to multiple properties. Developing systems was paramount to her growth and love for the business. Penner quickly learned that she managed the property– not the people. Penner has overseen many properties and endured many experiences ranging from house fires, floods, down to evictions, throughout the years. By being hands on, it enabled her to employ uniformed systems ranging from maintenance repairs, to homeowners association complaints, to paying owners debt services, to just overseeing day to day services. This has proved successful in keeping low turnover rates.
How is a Tenant Screened to Rent my Property?
All property management companies operate differently. At Penner Property Management, we run an extensive background check. Unforeseen life circumstances, such as a loss of a job or an accident, can happen to anyone. Nobody can predict that. That being said, we can predict someone’s fiscal responsibility based off past payment patterns. We run a credit report, eviction history report, criminal background checks, verify income, as well as confirm their rental or mortgage history. Employing such a thorough screening has proven to result in lower eviction rates. As a property management company, our duty is to serve you, the owner / landlord. We know that you depend on us to provide you with responsible tenants in order for you to make a good return on your property. We pride ourselves in going the extra mile to find tenants who are cooperative, accountable, suit your needs– and continue to do so even after they have moved in.
Do You Charge for Property Walkthroughs?
A property walkthrough is absolutely necessary in order to efficiently provide full service management. Because of this, Penner Property Management does not charge for walkthroughs. It is important to note that a walkthrough is merely an observation through the interior to verify that the tenants are upholding the terms of the lease in caring for your investment. It does not guarantee that the tenants will not cause damage to the property. If they are in breach of their contract, they are subject to be served a notice to comply or else they will receive a notice to vacate out of default. A walkthrough does not include an actual property inspection or guarantee that the tenants will not damage the property at a later date. An inspection would be an additional cost for you, the owner. Penner Property Management is connected to many different vendors and would love to refer you to one of our trusted inspectors.
