Revenue Generating Property Management Strategies

One of the first ways property owners often think of to increase revenue is to increase the rent. And this might be a good strategy! However it is not as simple as deciding how much money you want to make and dividing by the number of units. Instead, you should start by researching the market rent prices and looking at similar (age, amenities, size, etc.) complexes and their rent and vacancies. (Pro tip: this is where a property management company comes in handy! It is our job to know the market trends and identify income generating opportunities for you.)

You want to ensure that the rent increases at minimum, cover your costs and, ideally, create a higher profit margin. But you also want to be wary of increasing rent too much or too quickly and creating a high vacancy for your property. To help avoid this, whenever possible, create some added value when increasing your rent prices.

One of the key strategies for marketing your property at your ideal price point is to determine a property theme and target customer. Are you marketing your property for low-income singles? Professional commuters? Young families? Once you know who you want to market the property to, you can refine your services and offerings for that group. Identifying and understanding your ideal client will help you generate income in two ways.

The first is that your property will become better known in the community you are marketing it to— meaning you will get increased interest and referrals. And if your property is well suited for your target market, you can also decrease turnover and vacancies.

The second way that having an ideal client helps generate income is by being able to offer value added services, where you offer amenities and/or services for an additional fee. And the more tailored your market, the easier it will be to sell! For example, if your complex is primarily multi-room apartments, marketed towards families, additional storage units, housekeeping services, or small gardens might be very good offerings. Or if your property is mostly studio apartments, with young singles, laundry services or live fitness classes could generate additional income.

(This tactic is also a cost saving technique, as one of the biggest mistakes investors make is to over-improve a property without focusing on the ability of the improvement to increase revenue. AKA if you upgrade your units with marble countertops but your ideal tenant isn’t willing to pay a higher rent or stay longer at the property for them, you are wasting your money!)

Finally, you may have the option of adding additional units to your existing property! Under new laws passed in 2020, you can add 2 new ADU units to any multi-family property AND up to 25% more units— all without additional parking, given your property is located within a half a mile of a local bus stop.

For example with a… 

• Duplex: You can add up to 2 units + 25% (convert the garage to a unit), giving you a 5-unit complex
• 4-plex: You can add up to add 2 units + 25% (1 unit), becoming a 7-unit complex
• 20 unit: You are able to add up to add 2 units +25% (5 units), creating a 27-unit complex
• 100 unit: You can add up to add 2 units + 25% (25 units), now a 127-unit complex

As you can see, the larger the complex, the more exponential your growth opportunities. 

Cost Saving Property Management Strategies

The first step in reducing costs is to look at your costs! Go back over the past three years of expense statements and see where the money is going. Often utilities are one of the largest expenses— especially if there have been cost increases that were not passed onto the renter. (AKA the silent profit killer!)

If utilities are currently included in rent, consider making some upgrades to the units, such as installing low-flow shower heads and energy effect light bulbs. You can also switch to Renters Utility Billing Service (RUBS.) This is where you, as the landlord, pay the utilities upfront and bill the tenant their portion. Billing amounts may be derived from sub-metering and/or by allocation. This is a way you can insure you break even or make money. It has been found that water usage is cut by up to 80% when the tenants pay for their usage.

Do keep in mind that some municipalities have laws regarding the methodology permitted for RUBS and could impact the total amount of your rent increases.

Also be sure to take a look at your maintenance costs and see if some preventative maintenance and regular inspections could help you keep costs down. Oftentimes small changes upfront can help you avoid much larger repair bills down the road.

Finally, you might even want to consider refinancing for a lower rate. Even a reduction of 1/2 of a percentage point can make a big impact on your bottom line. However, this is not always the best option for everyone. It will depend on your goals and finances. To see if it is an option for you, calculate the break even point— determine the costs of the refinance and divide that by the monthly savings and see how long it will take to recoup your costs.

In summary, increasing your rental property cash flow will not only help you sleep better at night but in many cases, these strategies also increase the value of the property itself! Giving you a future of good sleep. And should you ever have questions or want a professional on your side, the Reynolds Realty Advisors team would be honored to help you make your property as profitable as possible. Contact us for a free property assessment today.

The post Ways to Increase Cash Flow for Your Multi-Family Property appeared first on Reynolds Realty Advisors.

As everyone knows, the past year has been filled with plenty of ups and downs. But it’s been over a year since our first shut-down due to COVID-19 and, here at Reynolds Realty Advisors, we are excited to say that when it comes to the real estate market in Orange County, many trends have been steadily and substantially on the rise!

And the good news doesn’t stop with real estate. Before we dive into the specific markets here in the OC, it is important to take note of the general economy. Throughout Q1 2021, Orange County has been ramping up– tourism is on the rise, hotel occupancy is up, and retail sales continue to increase to numbers higher than 2019 and 2020.

Jobs are also coming back, as companies are beginning to hire and expand once again. At the end of March, 2021, unemployment numbers in Orange County were just above 6%, nearly 2% less than the national average. While, similar to life, things are not quite “normal,” everything is trending in the right direction and we are looking forward to an even better Q2.

Now, let’s turn our focus to the real estate market. In this article we will be focusing on four areas of real estate: the office market, the industrial market, the retail market, and the multifamily market.

Office Real Estate in Orange County

Not surprisingly, the office market has had a tough time over the past year. Q1 2021 was the fourth consecutive quarter of negative absorption, this combined with new supply coming to the market has resulted in office vacancies continuing to rise, reaching 12% at the end of this March. Contributing to both the vacancy rates and the higher supply, is the continued trend of many companies continuing to let go of office space, at least for the time being, as more people are working from home.

However, with more companies letting go of space, more subleasing has been occurring and subleasing offers some exciting opportunities. There are companies using the high volume of available space to expand their operations. For example, California Pizza Kitchen is moving from their current 33,000 sqft space in Playa Vista space into Costa Mesa to take up residence in a 37,000 sqft space.

On another positive note, Q1 2021 was the strongest quarter when it comes to leasing since 2019. We started the year off strong when Anduril signed a 450,000 sqft lease in February at The Press in Costa Mesa, which was the largest lease in Orange County since 2016.

With all of that said, annual office rents dropped for the 3rd quarter in a row. This is primarily due to newly built, Class A properties having to compete with the high number of properties on the market, as well as the Class A sublet spaces offering a lower rent price. Class C properties have seen some positive rent growth as they are able to offer a competitive, affordable price. And finally, it is worth noting that while rents did decrease, they are still higher than 2018 numbers.

As the state and country continue the re-opening process, these numbers will likely change and how companies decide to go back will have a significant change on the market. For example, if more companies choose a hybrid approach of in office and virtual employees, they may need smaller private spaces or utilize coworking spaces. But if companies opt to bring everyone back, many may choose to spread out and will need more space for their employees. These next few quarters will be key and should offer more insight.

Industrial Real Estate in Orange County

While the office market has been having a tough year, things are undoubtedly looking up in the industrial space. Q1 2021 was the strongest quarter for growth in the industrial market in Orange County since 2019.

As 2020 was a major year for e-commerce, it is natural that a significant number of companies have been expanding their industrial space over the past year. This trend of course includes Amazon, who has leased a significant amount of space in the area over the past year, including the former Mitsubishi and Boeing campuses. A number of biotech and biomed corp companies are also expanding their industrial footprints in the area.

Overall, we are seeing a lot of positive trends in this sector including increasing demand, low vacancies (just over 3% at the end of Q1, well below the historical and national average) and steady rent growth, even throughout the past year.

Over the past year, some of the strongest submarkets for rent growth have been La Plama, Buena Park, Orange, Anaheim, Garden Grove and other northern parts of the county. These areas in particular offer warehouse space, which has really driven rent growth in those markets.

Some areas with more modest growth include southern communities such as Irvine Spectrum, Laguna Hills and Newport Beach. In general these areas are more expensive but they also have a higher percentage of R&D and flex spaces.

We are excited to conclude the industrial report by saying that the majority of the county is back above its historical average for industrial rent growth.

Retail Real Estate in Orange County

Similar to the office space, retail vacancies continued to expand in Q1 2021, as retail spaces were still closing in the beginning of the year. Although, as we are reopening, these numbers may shift in the other direction as more previously closed businesses reopen and new businesses are created.

Unfortunately, there is still a decrease in the number and size of leases. This trend toward smaller leases is evident when looking at the 5 year average size of retail spaces in Orange county being 3,030 sqft, compared to the average for 2,100 sqft in Q1 2021. It is interesting, though perhaps predictable, to note the larger leases that have been taking place have been signed by more affordable retailers, such as Dollar Tree, Dollar General, and Grocery Outlet.

With more vacant space and reduction in leasing, there has also been a loss in rent asking price. The height of 2020 retail same-store asking rent had around 5% YOY increase and in Q1 2021, this number was less than 4%. This of course is not helped by the increase in competition with e-commerce, which has picked up even more in the past year than before.

On a positive note, there are some new and unique development possibilities for the retail space. We may begin to see more of a blending of retail and multifamily in the same complexes. For example, the Fountain Bowl in Fountain Valley, a 4.88 acre lot, was recently sold for $17.4 million. The new owners have said they are interested in developing this space into multifamily and mixed use space.

There are still a lot of questions and potential changes when it comes to office and retail space but if you have any questions, we encourage you to reach out to us at elizabeth@reynoldsrealtyadvisors.com.

Multifamily Real Estate in Orange County

Apartments got hit hard in the first half of 2020 but since then, we have seen a strong recovery throughout the county. Let’s take a look at demand numbers for example. Last year, demand for apartments dropped well below historical averages in March, April and May. But since then, demand has been very high. In fact, with the exception of March 2021, which was slightly lower than the historical numbers, every month since June 2020 has been above historical averages. The trends we are seeing from early 2021, point to a very strong spring and summer leasing season.

In the first quarter of the year, apartment vacancy has been very low, even lower than pre-pandemic numbers. Alongside the low vacancy, there has been a steady increase in rents both in Orange County and nationally. In Orange County specifically, the data seems to show a trend to 1+ bed units, rather than studios. While studios have returned to similar rent prices of pre-pandemic times, 1, 2 and 3 bedroom apartments have soared above January 2020 numbers. This seems to be a reflection of the stay at home orders and the popularity of working from home.

The other trend worthy of note is where people are moving in Orange County. In the second half of 2020 and beginning of 2021, there has been significant rent growth in South County, Newport Beach and other coastal submarkets, as well as Irvine, which was able to fill many of the new units built in the early part of the year.

Finally, last summer, concession rates increased as managers tried to make up for the low spring leasing season. During that summer, 1 in 4 properties were offering concessions. The end of the year also saw higher concessions but they were much lower value concessions than what was seen in the summer. As we moved into 2021, concession rates have returned to lower numbers of properties offering concessions and the trend of more modest concessions continues.

As for all of the markets, it is clear that Orange County, and the nation as a whole, is undergoing a lot of change. But there is a lot to be hopeful about, as well as some real and exciting growth in particular markets. If you are interested in getting involved in the Orange County commercial market, the Reynolds Realty Advisor team would be honored to answer your questions and assist you in finding and managing the right property. Please reach out to us at (866) 613-7772 or elizabeth@reynoldsrealtyadvisors.com. You can also connect with our team on Facebook or our founder, Elizabeth Reynolds on LinkedIn.

*Data and analysis from this article is courtesy of CoStar. This material should not be relied upon for predictions of future results but to provide you with background, information and education.

The post Market Update: Orange County appeared first on Reynolds Realty Advisors.

Keep in mind…

• “Good” is a state of execution that meets one’s customers’ expectations at a given point in time.
• “Great” is the execution of good property management services measured over time
• “Premier” Property Management is excellence in execution, sustained over a long period of time

Question 1:  Is owning Real Estate a good idea?

Answer:  Owning real estate is always a good idea over the long run.  There are so many benefits to owning real estate such as; cash flow, equity growth, leverage, tax benefits, appreciation, pride in ownership, and the ability to will these assets onto the next generation.  Building wealth in real estate can be done, but it is not always easy.  Successful real estate investors become the experts in the territory in which they invest and the type of products they hold within their portfolio.  Further, successful real estate investors know every aspect of property management, whether they manage the properties themselves or hire the right firm to manage it, on their behalf.

Question 2:  What is the benefit of hiring a property management firm vs self-managing?

Answer:  Hiring the right property management firm is key if you want to enjoy your real estate investment, realize passive income, travel and not deal with the plumbing issues in the middle of the night.  As Robert Kiosoki details in his “Rich Dad’s Cashflow Quadrant” book, one can be an Employee, Sole Proprietor, Business Owner or an Investor.  Purchasing your real estate portfolio, which allows you to quit your JOB, is an outstanding step in the right direction.  This will move you into the Business Owner quadrant.  However, property management of your portfolio is a 7/24 job, which does not allow for vacations, family time, days off or sick time.  This will ultimately take its toll on you as the Business Owner/Operator.  The investors we meet are highly energetic, adventurers by nature, love the art of sourcing and closing on a good deal and take great pride of ownership.  By partnering with Reynolds Realty Advisors, our clients are able to focus on what they do best, growing their portfolio, securing new deals and enjoying the benefits of their passive income.   Reynolds Realty Advisors focuses on all the operational aspects of the portfolio for our clients, ensuring we maximize our clients’ NOI and exceed their expectations through employee training/retention, compliance management, strategic marketing, property common area management, maintenance management, tenant management, accounting/cost management, repositioning/ renovation and owner reporting.

Question 3:  How do I find the right property management firm?

Answer 3:  There are several factors to consider when looking for the right property management firm such as:

• Will they help you to source your next property?
• Will they help you to evaluate the deal you’re considering to purchase?
• Can they help determine the capital improvements, costs, and repositioning opportunity of this property?
• Do you have a connection with the management team of the firm? Are they personable?
• Do they have experience managing the type of properties that are in your portfolio?
• Do they have proven best practices in place, ensuring compliance in every aspect of the business?
• Do they have a proven track record for increasing clients’ NOI?
• Do they leverage best in class accounting systems and owner reporting methodology?
• Do they provide “value-add” to your portfolios?

Question 4:  I would like to have more time, but not sure I am ready to let go of my portfolio to be managed by a third-party management company.  How can you work with me?

Answer: Many owners who have been self-managing their portfolio, but would like to turn it over to third party management, have a difficult time letting go.  Premier Property Management services is all about providing “Excellence in Customer Service,” customizing our model to best fit our clients’ needs.  Trust is the foundation to every relationship, to include that between an owner and his/her property management team.  To build trust, we must work together to find the balance that works for our clients.  Some clients like to take time up front to complete a lengthy due diligence process about our firm and then turn over their portfolio, all at one time.  Whereas others, decide quickly that we are their firm of choice, but transition the properties over to us gradually.  We have other clients who like to walk the properties with us in order to receive verbal updates, whereas other prefer to have reports distributed monthly or bi-monthly.  The key to moving forward with the right property management company is to find the company that will work with you.

Question 5:  Cost management is very important to me, how can I stay involved in this area of property management, while having a third party management firm manage my portfolio

Answer 5: Transparency is key and our clients receive just that.  With owner access to the portfolio operating bank accounts, accounting system, budget development and alignment, cost reporting monthly and quarterly, our owners are completely apprised of the income and expenses associated with their portfolios at all times.  We realize that maintenance and repair costs are a big part of what makes the property cash-flow or not.  As such, we pay close attention to that category, tracking spend to budget weekly, ensuring we are within or under budget every month.  Capital improvements, remodeling and renovations is one of our areas of expertise, understanding the highest and best use of the property and where to spend the capital improvement dollars in order to realize big returns is what sets us apart from our competitors.

Call us today for a free Property Management Assessment at (866) 613-7772 #1, or visit us on our website at www.ReynoldsRealtyAdvisors.com.

We look forward to helping you to achieve your personal and financial goals through real estate!

The post Frequently Asked Questions appeared first on Reynolds Realty Advisors.

Published in the Apartment Association of Southern California Cities, May 2016 issue

The post Commercial and Multi-Family Property Exit Strategies appeared first on Reynolds Realty Advisors.

How to Make the Right Choices when Acquiring New Assets

By Elizabeth Reynolds

• Looking to expand your real estate portfolio?
• Are you a new investor and interested in building wealth through real estate?
• Partnering with Reynolds Realty Advisors will help you to achieve your goals fast!
• We are here for you, every step of the way. We become an extension of your team, managing these properties for you, providing you more time and more money!!

There are three main methods for evaluating real estate properties and their ultimate value:

1. Market Models: Leverages local comparable data
2. Cost Model: Utilized in the event that local comparable data is not available
3. Income Model: Leverages the income generated from the property

Commercial property is generally valued based upon the Income Model

• Office, retail and industrial/warehouse buildings, square footage is most important because, it is valued based upon the square footage
• Apartment complexes, the number of units is key
• Knowing the year a property was built is important because you need to know its actual age versus it effective age.
  • Effective Age is important in negotiating a longer amortization period on your loans
  • Preventative maintenance has a positive effect on the effective age of the property Below is a list of a few key areas to consider, that can impact the effective age of the property
    • Upgrades bringing the property to most current and/or state of the art conditions
    • HVAC
    • Roof
    • Electrical
    • Amenities
    • Elevator
    • Parking upgrades

Valuation Methods:

• Cash-on-Cash return: Cash flow before taxes/Initial investment
• Gross rent multiplier (GRM): Value of Property/Gross Potential Rental Income
• Price, Income and Expense per unit (PPU): Price of the Property/Number of Units
• Price, Income and Expenses per Square Foot: Price/Total Rental Square Foot
• Operating Expense Ratio: Operating Expense/Gross Income
• Break Even Ratio: Effective Gross Income/Operating Expense +Debt Service
• Maximum Loan Amount: Takes into account the maximum Loan to Value (LTV) of the individual bank based upon the debt coverage ratio and the current net operating income of the property

Capitalization Rate:  As refinance rates increase, the value of the property decreases

• Value is determined by: NOI/Cap Rate
• Cap Rate: The lower the cap rate, the higher the value of the property

• Cap Rate Modifiers: Investors need to adjust the cap rate based upon the following modifiers
  • Potential Appreciation
  • Management intensity
  • Tax benefits
  • Ability to get money out of the deal
  • Ease of financing
  • Risk involved

Conservative Guidelines:

• Vacancy factor of 5% is generally used by lenders
• Total operating expenses should be approximately 45% to 55% of Gross Operating Income (GOI), before debt service
• This is not true for retail or office buildings, where pass through costs are common
• Replacement reserves should be 3% of GOI
• Repair and Maintenance costs should be 18% of GOI, depending on the type of neighborhood, age of the property and the amount of deferred maintenance
• Management costs should be about 5% of GOI
• Total Operating Expenses:
  • Office Building:  30% to 40% of GOI
  • Industrial/Warehouse: 10-15% of GOI
  • Note: be sure to carefully evaluate the property’s marketing package in order to ensure that all the expenses are included, especially if the expenses seem to be low

Three Powerful formulas to learn:

• NOI: Value * Cap Rate
• Value: NOI/Cap Rate
• Cap Rate: NOI/Value
• Debt Coverage Ratio (DCR): NOI (annual)/Debt Service (Annual)

Evaluation Systems/Team Members:

Partner with Reynolds Realty Advisors to complete the property financial modeling evaluation, physical property assessment and determine the properties upside based upon all the factors as outlined within this article.  Further, Reynolds Realty Advisors will support you through the due diligence and overall property evaluation.  Once you close escrow on your new investment property, we are here for you every step of the way, managing the property in order to ensure you realize the upside of your new real estate investment.

Call us today to get started!  1-866-613-7772, #1

Elizabeth Reynolds

Broker/Owner

3844 Atlantic Ave

Long Beach, CA 90807

Phone:  (866) 613-7772, Opt 1

Website:  www.ReynoldsRealtyAdvisors.com

Email:  Elizabeth@ReynoldsRealtyAdvisors.com

The post Evaluating Real Estate Opportunities appeared first on Reynolds Realty Advisors.

There is certainly value in the networking that may come at one of these groups, but attend knowing that the goal of the club is to sell you something. Leave your credit cards at home and you should be able to soak in some good information.

Here you  you’ll find some real estate investment groups to look in to:

OC REIA

Real Estate Club LA

Orange County Investment Club(FIBI)

Coachella Valley Real Estate Investors Association (CVREIA)

Prosperity Through Real Estate

The post Southern California Real estate Investing Group Directory appeared first on Reynolds Realty Advisors.

http://www.goodmortgage.com/Calculators/Investment_Property.html

http://www.westpac.co.nz/home-loans/calculators/property-investment-calculator/

http://investfourmore.com/rental-property-cash-flow-calculator/

The post 3 Calculators That Will Help You Assess Your Next Investment Property appeared first on Reynolds Realty Advisors.

2. Do You Have a Plan?

3. What Kind of Property Should You Start With?

4. What is the Neighborhood Like?

5. Do You Know All Your Investment Expenses? 

6. How Will You Finance Your Property

7. Should You Self-Manage or Hire a Professional Manager?

8. Can You Be Your Own Bookkeeper?

9. Do You Have an Exit Strategy? 

The post Your First Investment Property: 9 Questions to Ask Yourself Before You Buy appeared first on Reynolds Realty Advisors.

In apartment investing, success stories give us the courage to overcome obstacles and inspiration to establish and go after more goals.

For beginners, they offer evidence that creative real estate investment deals can be achieved in today’s marketplace. With hard work and smart effort, your first real estate venture could be just around the corner.

For experienced investors, these stories refresh our perspective and lift our spirit. They motivate us to get back out there and pursue that next deal.

Here are 3 apartment investing success stories from across the country that will inspire your real estate goals.

1. These real estate partners did their research, were patient, and smart enough to look into alternative lending and over nine years, have accumulated enough wealth to provide for their families for years to come. In fact, they’re doing so well, they’re looking in to setting up a scholarship fund for the children of their tenants. Read their story here.

2. With the help of a professional property management company, there investors increased the cash flow of an already profitable community and earned a return of 14%. Read more.

3. An investor and property manager give some great insight on the advice he follow to maintain success. He recommends being understanding of your client’s needs will also remembering that it is your building they live in. He also keeps rents high by maintaining and putting money back into his properties. One of his most insightful pieces of advice is to always have a goal in mind and always work towards that goal. Read more.

Do you have apartment investing success stories? Or are you looking to become one? Contact Reynolds Realty Advisors and we’ll help you reach and surpass your investment goals.

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Any knowledgeable real estate investor knows that putting money into a rental properties is more than just signing and collecting checks. The passive income you can generate from real estate investing is a great thing…but it takes a lot of active work to build and single investment to an empire. Here are some basic rules that can get you on your way.

Rules:

1. Get Started

Many people take several years studying the market, consulting experts, and waiting for the conditions to be better. This kind of activity can sometimes make you lose out on great opportunities. Potential real estate investors should know that you must get started in order to learn to handle investment challenges and pitfalls. It is easier to eventually become a millionaire by investing now than to sit and wait for the best time. Just get started.

2. Don’t Follow, Go the Extra Mile

Prudent real estate investors will usually analyze their knowledge, money and time to conduct market research to find places where they can easily design investment strategies that best fit their needs. You must also remember that there is magic solution in real estate investing. Your hard work, passion, persistence and commitment will turn your investments into profitable ventures.

Start as soon as possible, generate leads, evaluate deals, submit offers, close deals and manage your exit strategy. With these steps, you will easily be on the road to multi-million dollar profits.

3. Recognize that Business Debt is Good

All real estate investors (except those who already have extreme wealth) should turn to lenders to take up money for investing and expanding their property portfolios. While consumer debt is usually bad and detestable, business debt is good because the borrowed money will be earning more returns than the rate at which the amount is borrowed.

Real estate investors become millionaires because they learn how to take out and use borrowed money repeatedly and responsibly.

4. Forget About Instant Gratification

Some investors are tempted to celebrate their successes lavishly, with things they could never ordinarily afford. As a real estate investor, you should always remember that money is an essential tool that can turn around and increase your fortunes exponentially when used properly. Therefore, you should learn to spend wisely and prioritize on re-investing your profits into real estate property as you keep your eyes fixed on being a millionaire.

Ignore all the temptations to spend on consumer items (liabilities). Invest as much as you earn.

5. Look to the Experts

Millionaires tap into the wisdom, experiences, time, skills and the efforts of professionals, agents and other real estate investors in order to make prudent decisions and steady gains. Therefore, you will need to hire the best minds to help you build your real estate empire.

As a real estate investor, learn to work with other people who can advise you, connect you with reliable contractors and property sellers and direct you to the best markets and opportunities.

Do you have your own experience with these rules? Have more to share? We’d love to hear from you!

The post Building a Real Estate Empire: the 5 Rules appeared first on Reynolds Realty Advisors.