801: Season Eight Opener-Stabilizing Your Portfolio
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00:01
Welcome to Episode One of Season Eight of the Growing Empire show. This is our Season Eight opener, and today you're going to get a sneak peek into what season eight is all about and what you can expect to get out of it. So stay tuned.
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Welcome to Growing Empires. Hosted by real estate entrepreneur and trusted investment advisor Jennifer de Jesus. Growing Empires provides insight to building wealth through passive income producing real estate investments for those who want to build and manage a more profitable real estate portfolio.
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Season Eight is here, and I'm so excited. Our theme is stabilizing your investment portfolio. And this has got to be one of my most favorite topics to talk about. So I am really excited for all that Season Eight has to offer. I'm even more excited about a special guests interview that I did that as a two part segment. You will hear that in Episode Two and Three of season eight. And that was my guest interview my special guest interview with Joshua Kim on SBA loans. And I know I got so much out of that conversation, and I know that you will as well. And he talks in detail about how he used SBA loans to fuel his investment strategies. So I'm really excited to share that with you. We are also going to talk about how to analyze your portfolio each year and what specifically to look for to make sure that your properties are always appreciating and that your income is always growing year over year. We're going to talk about how to find and keep the very best tenants that are out there. We are going to do our question and answer segment. So please do not forget to submit your questions. And we're going to talk about how to make the right improvements to your properties. Whether it be cosmetic or capital improvements, how to know what to do, when to do it, and how to analyze how much money you should be spending on those improvements. As well as what the returns are going to be once those improvements are done. So let's jump right into this season. Today we're going to talk about market rate. What is it and why does it matter? Why do you need to know all about market rate. So let's start by talking about the value of your property. Everybody knows that the value of their real estate is dictated by the value of the surrounding properties. So if you're in an area where there's a high foreclosure, you're going to find that your property values are decreasing. Whereas if you're in a marketplace where property values are constantly increasing, your property's value is going to be impacted by that as well. So how do you find what market rate is for rentals. It's the exact same as how you find the value of your property as a real estate investment. So you're going to look at, in a similar area in a very short mile radius, you're going to look at what else is out there. So let's say for example, you're in the Lehigh Valley. Well, the Lehigh Valley is a very broad area. We would want to drill down a little bit further to the city that I'm located in. So if I have investments in the town of Bethlehem, I would want to look at rentals in the Bethlehem area to compare them to figure out what the market will bear and what the top market rate is for like kind or like size properties, I would want to focus on the area of the town. So for example, Southside Bethlehem, which is the city is very different in value than the north side, or the township, which is very suburban living. So you've got to really break it down even inside of that area to the specifically the town and you want to find like kind properties. So if you have a multi unit building where there's a couple of units in the same building, and you have a one bedroom apartment, you're going to want to find other one bedroom apartments in similar setups to your building, and roughly the same amount of size. And then that is going to help you figure out the highs and the lows of the market. What is the minimum that the tenancy is paying for those one bedrooms, and what is the maximum that the tenants are paying for those one bedroom apartments? And the reason that I say that you want to look at similar type of properties is, let's say you have for example, a two or a three bedroom apartment, a two or a three bedroom apartment in a multi unit complex is not the same as a two or three bedroom house. Okay, so I want to make sure that we have that distinction understood. You want to look at similar type property. So if I have to go to the third floor, to get to my three bedroom unit, I would want to look at three bedroom units that are on the second or third floor because they also don't even have the same value as what's on the first floor. So there's a lot of dynamics to this. You want to look at accessibility to the property. You want to look at the floor that these units are on. You want to look at the square footage, the bedroom and bathroom count, the area that they're located in, the part of the city that they're located in. And then you want to look at things like accessibility to the property. You want to look at the floor that these units are on, you want to look at the square footage, the bedroom and bathroom count the area that they're located in the part of the city that they're located in. And then you want to look at things like, is there off street parking? Is there garage space? Is there additional storage space, and those all help you kind of drill down and find some really comparable units to yours so that you can figure out what market rate is. And don't worry, if you're not an expert on that marketplace, you should be able to find a real estate broker or agent that can help you lease out the property or at least help you figure out what market rate should be. And of course, if you've hired a property manager, this is absolutely 100% their duty is to help you understand what the market will bear for those similar types of units. But why do you want to know market rate? Well, the reality is, is that for you to get the most amount of money out of your property, you have to make the most income and you have to decrease your expenses. Those two things have to work together. So if you are the type of landlord that likes to operate their own properties, and you just want to keep things simple, and you don't want to have turnover, you likely are charging well under market rate for your units. And although that may work out great for you right now, because the inactivity of your units turning over may be something that is appealing to you, the reality is, is that you're not maximizing your portfolio. And I don't know about you, but I don't like to leave money on the table ever for any reason. So it's important that at least for the properties that we are managing that we are helping the owners to understand what the market rate is. Now, that doesn't mean that when you buy a property or even if you have a property that has tenants that are paying far below market rate, that you necessarily want to throw everybody out at the same time. I'm not saying that because we don't want to, you know, Rob Peter to pay Paul in some respects, right? We want to make sure that we're making good financial decisions on the health of our portfolio, and how to stabilize that portfolio means we've got to look at things like how to get from where we are currently. And how do we get to market rates so that we're truly maximizing the portfolio's ability to generate income. The other thing that you want to think about in regards to market rate is the simple fact that if you ever go to sell your property, you want to make sure that you make the most amount of money possible. And if you fail to get market rates, you can't sell your property based on what it can be, you have to sell it based on what it is. So if you fail to take it to that next level, you're not going to be able to capitalize on that.
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The episode will continue in just a moment.
07:48
If you're like me, you know the importance of diversifying your investment portfolio. Real Estate Investments, whether you're an active or passive investor, are a great way to add variety and reduce risk to your overall portfolio. But what about stabilizing that portfolio? If your portfolio is diversified through real estate, you still have to stabilize your properties with the right tenancy, know when and exactly what capital improvements to do, nd assess your entire property's portfolio to maximize property values and their income potential year over year. Yes, it's a lot and you'll need help to make sure you're looking at everything as objectively and strategically as possible. Get the guidance you need to assess and make the right decisions that will stabilize and optimize your property. so their longevity is assured. Book a call with me and I'll guide you through the process and answer your questions. Go to growingempires.com and click on book a consult and you'll be on your way to a healthier, more stabilized and diversified portfolio with real estate.
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So what you're going to want to do is with any investment, whether it's a single family home a multi unit, a large apartment complex, you're going to want to look at your portfolio as a whole, not individual pieces. And you're going to want to look at where the money is, how much money you need to make to make a profit, how much debt coverage you need, how much your taxes are monthly, how much your insurance is monthly, and how much you need to put away for reserves for things that break or need maintenance. And then what you want to do is look at each of your apartments and figure out how far away each one of them is from where they currently stand to what market rate is. And then utilizing your property managers expertise, you should be able to strategize how to get from point A to point Z in being able to increase your portfolio's profitability and getting to market rate truly is the key. The other thing that I will point out is that as the market shifts, so does market rate. So market rate is always for rentals going to follow the real estate market in general. So if the market is increasing, that means the rental rates are increasing if the market is decreasing in value, so are the rental rates. So you're going to want to make sure that you pay attention to the fluctuations of the real estate market. Because they have everything to do with the value of the rentals in your area. And although sometimes it'll be high, and sometimes it'll be lower that fluctuation is really where you're going to get a lot more profitability because you're going to be maximizing your portfolio. I've often had people ask me, Well, how do I get from, you know, let's just say market rate is $1,000 and I'm only charging 500, it's not realistic to think that somebody is going to pay an additional $500. Or maybe can even afford that. And you're right about that. But the other thing is, is that I assure you that tenants know the deals that they're getting, right. I assure you, you're not going to find a $500 apartment ever. In the Lehigh Valley. I mean, even our studio apartments are, are more than $500. So whatever the reason was, that somebody was renting an apartment for $500, I assure you, they realized that they had a benefit for whatever the amount of time was. So in some cases, I find that people are willing to get to market rate because they realize the stress of having to find something else in a market where the rental rates are ever increasing, and the inventory is very low, like what we're experiencing today, the likelihood of them finding in other places is slim to none. And then the ability to find something economically priced is also going to be slim to none. So a lot of times you can get the tenants to work with you and likely pay several $100 more than they currently were. So you've got to then think about Okay, well, if I can't get them to 1000, but I can get them to seven or $800 per month in rent. Is it worth it to take that kind of deal? Or should I just throw them out and get the $1,000 for rent? And then my answer to that question is always Well, it depends on what you have to spend to get to $1,000, right? Because if the tenant is staying, they're currently paying 500. And I can change them to say even $700, that's $200 more per month than I was making income, another $2400 a year. So if I have to spend more than $2400, to renovate the unit to get a new potential tenant at that market, right, I may want to think about whether that's the best strategy for me. And then if I'm going to make those improvements, and I do decide to change over the tenants, how long is it going to take me to recoup that investment? And does that make sense? So there's a lot of things that go into play with making a decision on whether or not you should change your tenants from their current rates to market rates. And then there's also a strategy or should be a strategy behind how you actually navigate that path. I will tell you that as property managers, we are the absolute experts in this topic and experts in this marketplace. So we can very easily help our investors navigate those waters, to make the best decisions, whether it is to keep the tenant, move on with the tenant, or do the improvements to the property and what that's going to help them achieve as far as market rates. The most important thing is that you want to have goals for your properties. And you want to make sure that you are looking toward getting those goals achieved as your length of ownership increases. And you want to make sure that you're making strategies so that your portfolio is stabilized. And then if you ever did go to sell that you could capitalize on that sale or that profitability, because you've already achieved market rates and you've already have achieved stabilizing your portfolio. I hope you got a lot out of today's show and until next time, please take care.
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For more information about how Jennifer can help you plan, develop and manage a strong real estate investment portfolio, visit growingempires.com