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Avail, AppFolio, and Buildium are high-quality property management platforms that are widely used by landlords, property managers, and real estate investment companies. These three platforms offer useful tools that help streamline workflow and improve the rental experience.
The best choice between these three platforms will likely depend on the number of units you manage. AppFolio and Buildium cater to property managers and large real estate investment companies that own more than 50 units. Avail, on the other hand, offers features and pricing better suited for landlords with less than 50 units. This article will compare the features found in each platform to help you find which product is right for your property.
Who Uses Each Product and Who Is It Best Suited for?
All three platforms offer a variety of tools that help landlords run their businesses. However, each platform is best suited for different types of customers.
- Avail is the best product for individual landlords, usually those with one to 50 units.
- AppFolio is the best option for large companies and investor groups that manage a high volume of properties, best for those with 100+ units.
- Buildium is the best platform for property managers and landlords that manage a medium to high volume of properties, best for those with 50+ units.
Which Type of Property Is Each Software Best For?
Avail, AppFolio, and Buildium are best suited for different types of properties. Here is a breakdown of property types that each platform specializes in.
- Avail: Best for residential single units, residential two to four units, small to medium multifamily (five to 50 units).
- AppFolio: Best for large multifamily, commercial, student housing, and community associations.
- Buildium: Best for medium to large multifamily, student housing, community associations, affordable housing.
Comparing Features: Avail vs. AppFolio vs. Buildium
In order to better understand each platform, it is important to analyze the features that they offer. Below is a comparison of the top features found on Avail, AppFolio, and Buildium.
Account Setup Fees
Both AppFolio and Buildium do require an upfront fee to set up an account, unlike Avail.
- Avail: No setup fees required to create an account. Avail is free for unlimited units, and you can upgrade to Unlimited Plus for $7/unit per month to access additional benefits like waived ACH fees, custom rental applications, and more.
- AppFolio: There are no setup fees required, but they do charge $250 per month as well as flat fees for the different types of properties managed. Each residential units costs $1.25, commercial costs $1.50, community association costs $0.80, and student housing costs $1.25.
- Buildium: $99 setup fee, with an additional $40 to $95 monthly fee.
Rental Listings Feature
You can publish rental listings across the top dozen rental sites like Realtor.com® and Apartments.com.
Tenant Screening and Rental Applications Feature
Avail, AppFolio, and Buildium all offer credit, criminal background, and eviction checks. In addition, all three platforms allow you to add a residence history section in the rental application. Here is a cost breakdown for tenant screening reports.
- Avail: Credit, criminal background, and eviction checks are $30 per screening report, and $55 for all three reports. However, this can vary by state due to local landlord-tenant laws.
- AppFolio: Credit and eviction checks are $15 per screening report. Credit, criminal background, and eviction checks are $20 for all three reports.
- Buildium: Credit and criminal background checks are $15 per screening report. Credit, criminal background, and eviction checks are $18 for all three reports.
Lease Agreements Feature
All three platforms allow you to send online lease agreements with digital signatures. Only Avail and AppFolio offer customizable, state-specific leases that have already been reviewed by trusted lawyers. Here is a cost breakdown for this feature.
- Avail: Digital, state-specific lease agreements are included with Avail Unlimited. Customizable lease agreements are only available with Unlimited Plus. They can be digitally signed at no additional cost.
- AppFolio: Unlimited e-leases included in paid subscription.
- Buildium: $5 per e-lease in Essential Plan. Unlimited e-leases in all other plans.
Rent Collection Feature
With Avail, AppFolio, and Buildium, you can collect online payments, receive partial payments, and set up automatic late fees. Here is a breakdown of the fees associated with online payments.
- Avail: No ACH fee with Unlimited Plus ($2.50 ACH fee, paid by tenants, with Unlimited). Credit transaction fee is 3.5%.
- AppFolio: ACH fee is $0.50 per transaction, credit transaction fee is 2.99%, and the debit transaction fee is $9.99 per transaction.
- Buildium: ACH fee is $0.50 per transaction (waived in Growth and Premium Plan). Credit transaction fee is 2.75%.
Maintenance Management Feature
All three platforms provide maintenance management tools that help landlords track requests, upload notes and photos, and communicate with tenants. However, AppFolio is the only solution that offers advanced maintenance features such as their 24/7 maintenance contact center.
The contact center allows businesses to utilize AppFolio’s call center agents who can respond to calls and take care of administrative work. This is a great tool for larger businesses that receive a greater quantity of maintenance requests. This is not as useful for independent landlords that can manage calls and maintenance requests themselves.
Tax Help/Tax Management Feature
Avail, AppFolio, and Buildium offer tools that help landlords with taxes. However, only AppFolio and Buildium allow you to file 1099s directly on their platforms.
Avail, on the other hand, makes it easier to prepare for tax season and track important transactions. The Rental Property Accounting tool automatically populates rental payments and logged maintenance costs managed through Avail to simplify the bookkeeping process.
The income and expense tracker can also be exported into a customizable spreadsheet to add additional details or share with tax professionals to complete your tax forms.
Ability to Boost Renter’s Credit Score
Avail and AppFolio allow renters to report on-time payments to credit bureaus to boost their credit score. Avail offers a service called CreditBoost where on-time payments are automatically reported to TransUnion to contribute to a tenant’s FICO 9, FICO XD, and VantageScore credit score. AppFolio has partnered with Experian RentBureau to provide this service as well.
White-Labeled Application for Buildings/Companies
AppFolio and Buildium offer white-labeled websites where tenants can log in to pay rent and access files. With Avail, tenants have access to their own accounts and dashboards to manage their renter profile, complete rental applications, and pay their rent online.
Renters Insurance Integration
Avail, AppFolio, and Buildium allow tenants to enroll in renters insurance through their platforms. Here are the insurance partnerships for each platform.
- Avail: Lemonade
- AppFolio: Value+
- Buildium: MSI
Avail is the only platform that offers rent default insurance through their partnership with Steady.
Customer Service
All three platforms offer chat, phone, and email support. Only Avail offers live phone support seven days a week. Here is a breakdown of phone support hours for each platform.
- Avail: 9:00 AM – 5:00 PM CT, seven days a week
- AppFolio: 8:00 AM – 5:00 PM CT, Monday to Friday
- Buildium: 6:00 AM – 5:00 PM CT, Monday to Friday
Which Is Right For Your Rental Properties?
Avail, AppFolio, and Buildium are all useful platforms that can help improve your rental business, but perhaps the most important metric to determine which solution is right for your property is the number of units you manage.
- Avail is the best platform for individual landlords managing one to 50 units.
- AppFolio’s features and pricing makes it the best option for large companies and investor groups that manage more than 100 units.
- Buildium is an ideal platform for landlords that manage more than 50 units.
If you’re a DIY landlord with 50 or fewer units, Avail can help you manage every step of the rental process — free for unlimited units. Create an account for free today.
This guest post was written by SoftwarePundit. SoftwarePundit provides advice, information, and tools to help property managers select the best software for their needs. Read SoftwarePundit’s full analysis of Avail or take a closer look at AppFolio vs. Buildium.
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As roughly 29 million Americans are estimated to be at risk of eviction by the end of 2020, private and public rent relief programs around the country have launched to keep renters in their homes and help landlords retain some of their rental income.
Landlords across the country have provided tenants with rent relief options like rent payments plans, rent discounts, and rent referrals, but Avail found that the majority of renters have been relying on government aid and assistance or taking out loans to pay their rent during the pandemic. But as future government assistance for those who are unemployed remains uncertain, renters have fewer financial resources to lean on.
In addition to a lack of rent relief options, evictions over unpaid rent during the pandemic will leave both parties at a disadvantage as eviction courts begin to reopen. Landlords will face average eviction costs of $3,500, according to data from TransUnion SmartMove, along with eviction processing times that will likely increase substantially due to a backlog of evictions. Many renters, on the other hand, will be left without homes in the face of a global pandemic that can require they have a safe place to quarantine.
To keep renters in their homes, the COVID-19 Eviction Defense Project has initiated a much-needed rent assistance program for renters and landlords in Colorado. Under the program, landlords will receive a single cash payment for up to five months of rent (including three months of rent owed and up to two months of future rent payments) if they forgive a portion of a renter’s debts.
The fund will pay 65% of rent debts directly to a landlord if that landlord forgives the other 35% of owed rent, and will pay landlords 75% of future rent if the landlord forgives the remaining 25%.
The fund then issues tenants a zero-interest loan to pay back over four years. Landlords keep their rent payments from the fund even if the renter defaults on the loan.
The program is available to renters in the Denver metro area, and more details about the program and who is eligible can be found here.
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Under Internal Revenue Service code section 1031, investors who exchange ownership of real property for a like or similar property can preserve wealth by deferring capital gains taxes and depreciation recapture. Since there are four different ways investors can rollover the proceeds from relinquished assets into new properties, it’s important to have an exchange strategy in place prior to selling any existing assets.
The Main 4 Types of 1031 Exchanges
Investors can use one of these four common 1031 exchange methods when relinquishing real property for new assets:
1. Two-Party Simultaneous Exchange
Simultaneous exchanges are the oldest of these four 1031 exchange methods. Two property owners agree to swap deeds and ownership interest of their properties. While this method eliminates the need to find buyers, it’s usually very difficult for exchangers to find fair-market-value properties with matching debt and equity structures. Delays in ownership transfer can also negatively impact the integrity of the swap and expose exchangers to serious liability.
2. Delayed Exchange
Delayed exchanges are the most common form of 1031 exchanges. Exchangers have 45 days to identify a like-kind replacement property and must close on the property within 180 days. These two timelines are usually non-negotiable with the Internal Revenue Service; however, the IRS issued Notice 2020-23, which extended these deadlines in certain instances due to the COVID-19 pandemic.
3. Reverse Exchange
This type of exchange occurs when exchangers acquire a like-kind replacement property prior to fully relinquishing ownership of current assets. Since exchangers cannot simultaneously have ownership of their relinquished property and the target asset, they must have an Exchange Accommodation Titleholder (EAT) temporarily take possession of the relinquished or target property via a special purpose entity such as a single-member LLC. The EAT then takes possession of either the relinquished property or target property under a Qualified Exchange Accommodation Agreement.
4. Construction/Improvement Exchange
Under this method, exchangers can make improvements on a target asset using their equity generated from the exchange. Exchangers can either refurbish or make capital improvements to existing real property, or build new from the ground up. Improvement exchanges can significantly enhance the value of the acquired property.
However, the improved or new replacement property must have the same value as the relinquished property. And the 45- and 180-day deadlines still apply, which can complicate this type of exchange transaction since exchangers have just under six months to complete all capital improvements.
Other 1031 Exchange Strategies
A fifth method, personal property exchanges, used to be more common, but the IRS limited like-kind exchanges to real property with the passing of the Tax Cuts and Jobs Act effective January 1, 2018. Previously, exchangers could include assets such as aircraft, boats, machinery, or equipment in personal property exchanges.
At their core, each one of these exchange methods is executed to defer capital gains taxes while also potentially generating passive income from target assets. Each exchange method has its own intricacies and opportunities, and real estate investors should carefully weigh the pros and cons of each option before initiating the 1031 exchange process.
Realized is the end-to-end partner for investment property wealth management. The company aims to make it easy to transform individual property assets into investment property wealth solutions.
This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.
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Ben Mizes is the co-founder and CEO of national startup Clever Real Estate. He’s used the 1031 exchange to scale up his real estate portfolio from a single unit to 26 units in less than two years.
Before I was the CEO of Clever Real Estate, I was a real estate investor in my hometown of St. Louis, Missouri. I initially built up my portfolio by purchasing and rehabbing small multifamily units, a process that taught me a lot of different skills, from how to install new flooring to how to get an accurate contractor estimate to how to manage tenants. But it wasn’t until I really scaled up my investments that I learned about one of the most powerful tools in the investor’s toolbox: the 1031 exchange.
The IRS defines the 1031 exchange as “when you exchange real property used for business or held as an investment solely for other business or investment property that is the same type or ‘like-kind.’” To put it in simpler terms, the 1031 exchange allows you to “trade” one investment for another more valuable investment, while deferring capital gains.
In a very short time, the 1031 exchange can help you massively scale up your holdings — my portfolio increased exponentially in only 13 months — without having to hand over a huge chunk of your profits to the IRS. Here’s how it worked for me.
Starting My Investment Portfolio
My first investment was a modest multifamily building that I bought using the “house hacking” strategy, meaning that I lived in one of the units, essentially rent-free, while the cash flow from the other tenants paid the mortgage. This property was in good shape, and didn’t require serious rehabbing. It gave me my first taste of being a landlord and, more importantly, my first taste of successfully investing.
Within a month I’d partnered with a friend to look for a more ambitious project: a multifamily unit for a gut rehab. We pretty quickly found a huge fourplex that needed extensive renovations, and we bought it off-market. Looking back, I’m almost surprised that it worked out as well as it did. We were 23, there was a lot we didn’t know, and we had no real idea what we were getting ourselves into.
In a very short time, the 1031 exchange can help you massively scale up your holdings— my portfolio increased exponentially in only 13 months — without having to hand over a huge chunk of your profits to the IRS.
We started off by calling 20 contractors to the property at the same time, to give competing estimates on the rehab (to say they were unhappy about this is an understatement).
From their estimates, we put together a rough budget of what we thought the renovation would cost, though it was really just a guess. Things were awry almost immediately; after one of our first contractors badly damaged the property, we ended up doing most of the renovations ourselves, learning as we went.
It was a baptism by fire, but I learned the business from the ground up. A few months later, I started Clever Real Estate, a referral network that connects home buyers and sellers with agents at a discount rate.
Scaling up With a 1031 Exchange
Now the 1031 exchange enters the picture. After the fourplex was done, my investment partner and I started looking for a more ambitious acquisition. Through a combination of luck and networking, we learned that an 18-unit complex was about to hit the market. It was a great opportunity, and we weren’t the only ones interested; a group of more experienced (and more capitalized) investors was also circling. To add more pressure to the situation, we’d been planning on buying eight units, so we didn’t have quite enough cash on hand to put a down payment on 18 units.
What we did have, luckily, was the power of the 1031 exchange. If we could sell the units we already owned, we’d be able to use a 1031 exchange to flip all that money into the 18 units. Of course, the 1031 exchange comes with a lot of restrictions. You have 45 days to identify up to three like-kind properties that you could potentially acquire, and then you must close on at least one of them within 180 days of selling the initial property. That’s a tight timeline.
Identifying the replacement property wasn’t an issue, since we already had our eye on the 18 units. But could we sell the initial property in that small window of time, before other investors swooped in?
Luckily, we pulled it off. And it really was close — if we hadn’t been able to defer capital gains taxes on that sale, we wouldn’t have had enough money to close on the 18 units. I’ve since learned that investors in similar situations who aren’t able to meet the strict time limits have other options (which I’ll detail below).
When to Use a Reverse 1031 Exchange
A reverse 1031 exchange is a variation on the classic 1031 exchange that gives investors a little wiggle room on the time restrictions. Let’s say you run into some trouble selling your initial property, and you can see that you aren’t going to be able to wrap up the sale within the 180-day limit.
The reverse 1031 allows the third-party intermediary that handles the actual “exchange” logistics to take ownership of the replacement property, and hold the title until the investor is able to sell the initial property. It can also work the other way, with the exchange company purchasing the initial property, and holding it until a third-party buyer can be found.
A reverse 1031 exchange is a variation on the classic 1031 exchange that gives investors a little wiggle room on the time restrictions.
The bottom line? If you’re determined to use a 1031 exchange, you can probably make it work even when the timelines don’t line up perfectly.
The Finer Points of the 1031 Exchange
So is a 1031 exchange right for your situation? It depends. There are a few other restrictions on how they can be used. Primarily, there’s a “like-kind” rule — but this rule probably doesn’t mean what you think it means: You can exchange an apartment building for land, or a ranch, or even a strip mall. The important rules are that the properties are both used for business purposes and are located in the U.S. — surprisingly lenient rules, and quite counter-intuitive.
I should also emphasize that using a 1031 exchange doesn’t eliminate your capital gains taxes; it only defers them. However — and this is where you can see just how powerful the 1031 can be — if you eventually use a 1031 exchange to “trade up” your newly-acquired property, you continue to defer your capital gains taxes. By repeatedly using 1031 exchanges, you can upgrade your portfolio until your tax liability is dwarfed by your net worth, or you can literally continue deferring them until your death.
No one likes the taxman, but the next time you’re tempted to badmouth the IRS, just remember that they’ve given us an incredibly powerful tool to build a real estate empire, tax-free.
Learn more about the different types of 1031 exchanges or join our Avail community forum to see how other landlords have leveraged the 1031 exchange in their investment portfolios.
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So you’ve found what appears to be a great rental investment property. It looks like it offers fantastic value, it’s in a great location, and it meets the 1% rule. It’s a slam dunk, right? Not necessarily.
Before you go full speed ahead, you should keep digging. When you find a property that hits all the numbers, it can be tempting to pounce; after all, you’re not the only investor out there. But there’s a difference between moving ahead expediently and moving ahead recklessly. The history of failed investments is littered with cases where buyers ignored warning signs and “followed their gut” right into bankruptcy.
What are the most common warning signs that could signal a dicey investment? Let’s go over four of the most frequently-seen red flags.
1. The Property Tax Trap
You’ve found a great deal on a house in an affordable neighborhood that’s about to take off. Maybe the local government’s designated a nearby run-down commercial strip an “opportunity zone,” or a new public transportation station is going in, or maybe the coffee shops and artists have, for whatever reason, decided to filter in. Congratulations — your investment is about to skyrocket in value.
But that can come with an unexpected downside: a parallel spike in property taxes. Property tax increases lag behind a neighborhood’s development, so they can sneak up on an inexperienced investor. How much can they go up? One investor saw a 300% increase overnight.
Property tax spikes can be ruinous for landlords. If you base your rent on your old, lower tax rate, you could find yourself looking at a year when the rental income from your property just barely covers your expenses, or even falls short. And once you do adjust the rent to take the new tax rate into account, you might find that it’s harder to attract tenants at the new, higher price point.
How do you avoid the property tax trap? A little research can save you a lot of pain later. Check the historical property taxes for the area and look into tax spikes experienced by similar up-and-coming neighborhoods in other cities. Smart investors run a comparative market analysis (CMA) on prospective investment properties to check price accuracy, and you can do essentially the same kind of research on the tax side of things. Don’t forget to research your local property tax laws; some municipalities charge higher property taxes on rental properties.
2. Big Repairs
You’ve found a property that’s perfect in every way; the location, the condition, the price. The only problem is, well, that there’s one big problem. Maybe it’s the roof, the septic system, or the foundation. But to make it more tempting, the seller is offering a discount. Should you take a chance on damaged goods? Probably not. That one big problem can easily snowball into an even bigger problem, and seller discounts often don’t cover the eventual cost, especially once you include the time and effort you put into remediation.
Two of the most serious repairs to be aware of are foundation and roof problems. These are urgent, necessary repairs; the longer you delay, the more serious damage will be done to the property. And they aren’t cheap. As of February 2020, the average cost of a new asphalt roof is around $7,200, and that number can exceed $25,000 if you decide on a metal or slate roof. For foundation repairs, the average cost range is $1,841 to $6,599, depending on how bad the damage is.
Other common (and pricey) repairs are mold remediation, which costs an average of $2,299, central air-conditioning replacement, which costs on average between $3,758 and $7,263, and septic system replacement, when can cost up to $9,392. And these prices are for a single repair; foundation and mold issues often require several treatments. The upshot? Unless the seller is offering a five-figure discount, it’s probably not a good deal.
3. A Questionable Neighborhood
There’s a fine line between an up-and-coming neighborhood and a down-and-out one, and being able to tell the difference is a skill every investor needs to master.
We all know what a great neighborhood looks like; the rate of homeownership is high, the lawns are manicured, and the homes are very well-maintained. Ironically, these neighborhoods don’t typically offer great investment value; the homes are priced so high that any rent that would cover the mortgage is nearly prohibitive.
The best neighborhood for investment is a middle-class, blue collar area with a owner-to-renter ratio of around 65-to-35. In areas like this, homes are reasonably priced, demand for rentals is high, and the community is stable. Investors can get into trouble when they try to find an even better deal in a slightly less stable neighborhood.
Neighborhoods with high crime rates and low property values can be tempting to investors for reasons that are essentially a mirror image of the “great” neighborhood: If property values are low, even a modest rent will easily cover the mortgage. Demand is as high in these neighborhoods as in any other, and if young professionals move into the area, your investment could triple or quadruple in value.
But high value and potential come at a cost. These can be high maintenance, hands-on properties, which require a lot of your time, or the services of a professional property manager. Once you take that into account, along with the occasional non-paying tenant, the deal looks a lot less attractive.
4. Buying at the Peak
Peaks are only obvious in retrospect, and by then it’s too late. But good investors can read the tea leaves and make an educated guess about where their local market is in the boom-bust cycle.
One easy way to peek into the future is to look at the stock market, since stocks represent future earnings expectations and are much faster and more responsive than the real estate market. If the stock market looks good, the real estate market can reasonably expect a year or two of clear sailing.
Another way to anticipate (and avoid) the peak of the market is to look at vacancy and construction rates. At the beginning of a boom cycle, there’s little to no new construction, and vacancy rates are headed down due to tight supply. This is a classic seller’s market, and the peak is a long way off in this phase. In the next phase, construction picks up, and vacancies continue to decline as pent-up demand is met. This, too, is a relatively safe time to get into the real estate market.
But when vacancies go up while new construction is still high, the peak is likely near. Investors should be cautious about buying in this period or they could find themselves holding an underwater mortgage. How far off is the peak? No one knows for sure, but as the saying goes, it’s better to get out a year early than a day late.
An excellent buyer’s agent with experience in buying and selling investment property can help you navigate these pitfalls with ease, so consider consulting with one before you fall in love with your first property.
Once you’ve decided to move ahead with purchasing an investment property, be sure to do a rent price analysis to see what other properties in the area are renting for and ensure you get the most out of your investment.
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]]>The post The Benefits of Investing in Duplexes and Multifamily Homes appeared first on Avail.
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Investments don’t just come in the form of a volatile stock market or your 401K retirement account. Investing in real estate can often outperform both of these options while giving you steady income before retirement. Real estate investing also allows you to take a more active role in growing your assets and capital, which is why people often combine the three investment options.
It can be difficult to know where to get started in real estate, especially if you don’t have a background in the industry. But if you’re looking to grow your investment relatively fast, duplexes and multifamily properties may be a good place to start.
Both types of properties grant the opportunity to capture rents from two or more tenants while owning just one property and managing fewer expenses; you’ll pay just one property tax bill and maintain a single property with multiple units instead of having to run all over town. Here are the advantages of investing in duplexes and multifamily homes.
What Are the Benefits of Duplexes?
Purchasing a duplex is one of the easiest and least risky ways to get started in real estate investing, especially if you’re willing to live in one side while renting the other out — known among investors as house hacking. This is a great option for the following reasons:
1. Financing
For a conventional mortgage on a home you’d live in or a loan for an investment property, you’d need around 20% of the purchase price as a down payment. If you don’t have this available, you can opt for a Federal Housing Association (FHA) loan, and if you qualify, you may pay as little as 3.5% down.
But here’s the caveat — you can only get an FHA mortgage loan for a home that you’ll live in for at least one full year. FHA loans also cannot be applied to multifamily homes with five or more units. But, this is the perfect loan if you plan to live in one side of a duplex and rent out the other.
2. Live for Free
If you do it right, your tenant’s rent can cover the mortgage, bills, and any other expenses while you live rent-free and build up equity in the property. Then, you could move out in a year and into another duplex to restart the process, or find a single-family home to move into and enjoy the start of your investment career. Plus, duplexes — and rental properties in general — also qualify for a large amount of tax benefits, allowing you to save money while you make money.
You can do even better if you’re handy. If you don’t mind a bit of sweat equity, you can save on the initial purchase by finding a duplex that needs some work. Depending on the amount of work needed, you can fix up one side, fill it with a tenant, and then do a more thorough renovation on the side you’re living in. This can increase the value and selling price of your property if you decide to sell later, or could help bring in higher rents and quality tenants if you keep it as a rental property.
What Are the Benefits of Multifamily Properties?
You can also get a great start in real estate investing through multifamily complexes. While you’ll still enjoy many of the perks listed above, you’ll also be able to diversify your risk over multiple units.
1. Financing
While multifamily homes won’t qualify for low-down-payment FHA loans, you’ll generate more revenue from multiple units instead of just two. Even if one unit is empty, you can still bring in rent from the others — and this pads your risk. While you may miss out on some profit with one unit sitting empty, the other three units will likely generate enough to cover your expenses until you’re able to fill the vacant one. This way, you won’t be left footing the bills out of your own pocket.
For this reason, a multifamily property may actually be more likely to be approved by a bank for a loan than a single-family home or even a duplex. Multifamily homes tend to have a stronger cash flow each month because one unoccupied unit isn’t likely to make or break your ability to pay the mortgage. Thus, the likelihood a lender would need to foreclose on a multifamily property is relatively low.
2. Economies of Scale
Another benefit of multifamily homes is the cost-sharing of such a model. Multifamily properties share structures and amenities among tenants — this includes a roof, exterior walls, and landscaping, but may also include shared laundry or a parking lot. Because the cost of these items and their upkeep are divided among the units, you’ll benefit from economies of scale.
For example, imagine your four-family property needs a new roof. The roof will be larger than that of a single-family and more expensive to replace, but it won’t cost four times as much. Plus, it will be paid off in the form of rent from the four tenants who live under it.
3. Faster Growth
If you tried to pick up four different single-family properties to add to your rental portfolio, it would take a considerable amount of time to deal with the separate transactions, not to mention paying multiple closing costs, setting up multiple insurance policies, and making each home rent-ready.
This process can be accelerated by investing in a multifamily complex. Since you’re only purchasing one property, you’re only dealing with one transaction. And while the property likely costs more than a single-family unit in most markets, you can quickly gain equity by having multiple rents as income. Then, it’s on to your next buy!
For more information on owning multiple rental properties or selecting the best type of rental property financing, check out the Avail guide to buying rental property.
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Both new and seasoned landlords will agree that buying rental properties is often anything but straightforward. The process involves dozens of steps, many people working together and several key decisions that need to be made before a successful purchase.
Analyzing potential rental properties, projecting their future performance and determining whether they will make a good investment is definitely one of the most important ones. Many say that money in real estate is made when you buy, so having accurate cash flow projections and valuation estimates is extremely important.
Fortunately, modern technology has made it possible to analyze potential rentals in seconds right from your computer or mobile device.
Let’s take a look at how you can analyze investment properties with the popular DealCheck property analysis app.
What Is DealCheck?
DealCheck is a property analysis calculator that you can use to analyze rentals, flips, rehab projects, multi-family and commercial deals.
It can help you calculate your potential cash flow, investment returns, total profit after the sale, and dozens of other financial metrics that are important when evaluating potential rental properties.
You can get it online here. And when you do, use the coupon code: AVAIL to save 25%!
How to Quickly Analyze Potential Rental Properties
1. Import Available Property Data From Public Records
One of the cool features of DealCheck is that it allows you to quickly search for properties by their address and import their basic home facts (beds, baths, square footage, year built, etc.), estimated value, estimated rent, list price, photos and description from public records and active listings.
With so much property data available online, it only makes sense to take advantage of this to help you save time and avoid mistakes with manual data entry.
Once you’ve imported the basic information about a property you’re interested in, it’s time to customize the deal to match your actual acquisition and operating strategy.
2. Customize Your Financing, Closing Costs, Rent, and Expenses
Every deal is different and you’ll get much more accurate cash flow and return projections if you take the time to customize the parameters to the best of your knowledge.
If you can break down your closing costs, financing terms, rehab budget, and operating expenses, you can use DealCheck’s step-by-step worksheets to enter this information.
Alternatively, you can use rough total estimates to get your analysis projections more quickly, which DealCheck allows you to do as well.
There are three areas where investors often get hung up when analyzing potential rental properties, so let’s look at them in more detail:
Estimating the ARV of the Property
While the After Repair Value (ARV) of the property will not directly impact your cash flow, it will help you understand where the asking price is relative to the market value and will impact your long-term return metrics like return on investment (ROI) and internal rate of return (IRR).
The best way to get a sense of the current ARV of the property is to look at recent comparable sales in the area. DealCheck comes with a built-in sales comps tool that will show you a list and a map of comps, their average sale prices, and several potential valuations of the property.
Estimating Potential Rent of the Property
The rent you collect from your tenants will have a direct impact on your potential cash flow.
A great way to estimate it is to look at recent comparable rental listings in the same area. DealCheck also comes with a built-in tool for getting rental comps and their average listed rents to help you do that.
Estimating Operating Expenses
And finally, you’ll need to estimate the operating expenses of the property. These will typically include property taxes, insurance, property management fees, maintenance, capital expenditures, and HOA fees.
If you have a good idea of what these numbers will be for this specific property, you can enter them one at a time for more accurate projections.
Alternatively, you can enter a rough estimate as a percentage of the gross rent. For example, the common “50% rule” allocates 50% of collected gross rent toward operating expenses for a quick estimate.
3. View Projected Cash Flow, Investment Returns, and Long-term Projections
Once you’ve customized the deal parameters to the best of your knowledge, the hard part is done – DealCheck will handle all of the financial calculations for you and show you a complete analysis of the property and your expected returns.
You should focus especially on the following numbers:
- Total Cash Needed: The total amount of cash you will need to purchase and rehab the property. This is the money you’ll need out-of-pocket before the closing date.
- Monthly & Yearly Cash Flow: The total amount you will receive from the rental property as income each month or year. This is your final take-home pay after all expenses and loan payments have been paid.
- Cash on Cash (COC) Return: A rate of return of the rental property based on comparing the yearly cash flow to the total invested cash. This is effectively the yearly cash yield on the money you’ve originally invested.
- Return on Investment (ROI): The total return on your invested capital that you will receive if you were to sell the property. Even if you’re not planning to sell anytime soon, the ROI gives you a cumulative rate of return that takes into account your cash flow, loan paydown and property value appreciation.
- Internal Rate of Return (IRR): The annualized value of the ROI metric above. You can use the IRR value to compare the total annual return of different potential properties.
You can also view the long-term buy and hold projections to see how your cash flow and returns will change as you continue renting the property and paying down your loan.
4. Put Together an Offer Based on Your Target Investment Criteria
Not every property you come across will be a good long-term investment. In fact, most likely won’t be.
The good news is that price negotiations are common in real estate transactions. And if you’re able to negotiate a lower purchase price with the seller, you can turn an ok deal into a great one.
So how do you know what price point will make sense to you, the investor?
This is where DealCheck’s Purchase Offer Calculator can be a huge help. This tool uses reverse-valuation to work backward from your target criteria and calculate the highest price you can offer on the property to meet it.
For example, let’s say you’re aiming for:
- A minimum of $250 cash flow from the property per month
- A Cash on Cash (COC) return of at least 10%
- Total acquisition costs no more than $100,000 (because that’s all the money you have to invest right now)
You can plug in the above criteria directly into DealCheck’s Offer Calculator and get the exact price you would need to offer to the seller to meet your criteria.
Once you have this number, there are two possibilities:
- This number is slightly below the asking price, but still realistic. In this case, there is a good chance you may be able to negotiate with the seller and bring the price down toward your target.
- The suggested offer price is way below the asking price and simply not realistic. It’s probably unlikely that you’ll be able to convince the seller to drop the price by 30% or more, so if that’s the only way to make the deal work, it may be worth moving on to the next property for now.
If the offer price is realistic, you may have found yourself a winner! Time to contact your real estate agent and start working on putting together an offer on that property.
Analyze Your Investment Properties
Analyzing potential rental properties is an absolutely crucial step in helping you close on your next deal, but it doesn’t have to take hours and involve complex Excel spreadsheets to get it done right.
With powerful online tools like DealCheck, it’s possible to analyze investment properties, view recent sales and rental comps and put together offers in seconds. As real estate markets across the country become more and more competitive, it’s all about having the best tools to get an edge over the competition. If you want to take advantage of DealCheck’s tools, get 25% off your subscription with promo code AVAIL.
Anton Ivanov is a real estate investor and entrepreneur with a 40 unit rental portfolio spread out across 4 states. He is the founder of DealCheck – the leading real estate analysis software used by 100,000+ investors and agents to quickly analyze and compare investment properties.
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]]>The post How to Use Smart Home Technology to Add Value to Your Rental appeared first on Avail.
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Let’s say you’re a landlord in Chicago — your main goal is to get the highest rent possible for your property, but you’re worried that it is just not technologically up to date. You’ve read local rent reports, you know what dollar amount will earn you a profit, but now you need to make some upgrades.
Perhaps other less desirable-looking apartments have rented for more than your unit, and you are sure it is because those other property owners took a deep smart technology dive.
Let’s look at seven things you can do to bring your apartment up to smart speed in a hurry.
HVAC
A smart thermostat is an absolute must. If you have one of those old, round things that have a spring-loaded mechanism attached to a glass ball that contains highly poisonous mercury, your place is no better than your parents’ old house.
A smart thermostat, on the other hand, will allow your tenant to control the unit’s temperature from their mobile device.
You may even have a programmable thermostat, but if it is outdated, you may need a technical degree just to program it.
If you have lost the manual, you’ll have to download it online, and these things are just not user-friendly as adding a week’s worth of presets can take hours.
With a true smart HVAV thermostat system, you and your tenant can easily set temperatures that include multiple presets. And again, everything can be controlled remotely — even thousands of miles away.
Lighting
This is simple: Get rid of as many incandescent and fluorescent lights as possible and replace those dinosaurs with LEDs. LEDs are becoming cheaper, they last for many, many years, and their hues and brilliance can be controlled by a smart lighting app that is controlled by a mobile device.
Some of the best systems will even interface with outdoor ambient light and adjust indoor lighting accordingly.
Garden
If your apartment contains any green space at all, get a smart gardening app.
This will help avoid those embarrassing situations where your tenant accidentally waters during a thunderstorm because they forgot to adjust the old manual sprinkler system in their unit. Smart apps for the garden can measure soil moisture and help keep water bills low.
Entryway
Tired of charging your tenants for key replacement, or are you constantly worried about unauthorized keys? Put worries to rest with a smart keyless entry system.
The first keyless systems were great, but they had to be manually programmed and presented many of the same issues as did the ancient programmable thermostats.
New smart keyless entryway systems can be set with a mobile app and you can easily move in a new tenant without calling a locksmith as all you’ll have to do is change a code.
Security
Motion detectors were a big thing when they came onto the scene, and smart security apps take it one step further by adding cameras. You and/or your tenant will be able to watch over your property at any time and your mobile device will even alert you when someone comes to the door.
Your smart system will also allow you to take a survey of the premises at any time, and if events like leaks and fires occur, you’ll know immediately.
CO Detector
As you have been told many times, carbon monoxide (CO) is a colorless and odorless gas that can kill you.
CO detectors are a necessity and may even be required by local laws. Get a smart one and you’ll know if CO levels have risen dangerously because your mobile device will alert you.
Automate It
Finally, while a series of individual apps will help add value to your property, you should really consider having everything at your tenant’s fingertips on a pad or computer.
With all of the apps in one place, your apartment will be completely automated, and all of the systems in the entire unit can be easily controlled.
You already know that paint, new fixtures, and nice window treatments will go a long way toward adding to property and subsequent rental value.
Seriously consider the seven tips above as a technologically smart apartment will certainly bring you a higher monthly rent. Don’t let your competitors outpace you — get smart today, and you’ll be on the road to higher rental margins quickly.
And if you want to streamline the entire rental process for you and your tenants, see how Avail can help.
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]]>The post 10 Proof of Income Documents Landlords Can Request from Renters appeared first on Avail.
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One of the most important questions a landlord can ask renters is how much money they make to determine if they can afford the rent. In addition to checking their credit scores and rental backgrounds, verifying income is a crucial part of the screening process that can help landlords find a renter who will be able to pay rent on time.
However, renters can have various income sources that require different documentation types. For that reason, we outlined how renters can provide proof of income when applying for a rental property.
10 Proof of Income Examples Landlords Can Request
Here are 10 proof of income examples landlords can request from prospective renters during the tenant screening process.
1. Pay Stubs
Renters with a full-time or part-time job generally receive this document from their employer. Landlords should ask for a renter’s two most recent pay stubs to determine whether the renter’s income fluctuates monthly, how often they are paid, and what their gross and net salary is.
Pay stubs also include a renter’s official title at their company, which can help landlords verify if the information on their application is accurate or a fake pay stub.
2. W-2
In addition to a pay stub, landlords can also request an applicant’s W-2 form, which will show their declared income from last year and whether or not they had consistent income over the previous year.
3. Tax Returns
Tax returns are the best indicator of a renter’s current income, but they can show unearned income and overall income history. Renters can submit their recent tax returns, but the 1040 form, which contains all of one’s income sources, will likely be the most useful document within their tax returns, according to TurboTax.
4. 1099 Form
If you’re renting to self-employed individuals, they won’t have a W-2 because they don’t have a traditional employer. A landlord’s next best bet is asking self-employed renters to submit their 1099 forms for proof of income, which proves wages and taxes for a self-employed individual.
5. Bank Statements
Requesting bank statements is particularly useful for self-employed renters because they won’t receive regular pay stubs like they would from a traditional employer. Ask for pay stubs dating back to the previous two to three months.
6. Letters from an Employer
Once the applicant provides employment references, landlords can reach out to their employer to verify that their salary and other information is accurate.
If a renter submits a false reference or their salary information is incorrect, that could be a warning sign.
7. Social Security Benefits Statement
It may be hard to believe, but seniors are increasingly becoming renters. In fact, a Rentcafe.com review of U.S. Census data revealed that households of renters over 60 years old have gone up by 43%. Retired renters or their loved ones can download and submit a copy of their Social Security proof of income letter as income verification.
8. Pension Distribution Statements
According to TurboTax, recipients of retirement benefits such as pensions, annuities, or other retirement plans will receive a 1099-R form. Retired renters can send in this form from their most recently available tax returns.
9. Workers Compensation Letter
If a renter was hurt in a workplace accident, they are likely receiving workers compensation. Renters can obtain copies of this letter from the insurance company or the court in charge of their case.
10. Court-Ordered Award Letters
Are you renting to a divorceé or a single parent? They may be receiving compensation from a former spouse or partner. If a renter has received compensation from an agreement such as alimony or child support, renters can obtain a copy of these agreements from the court.
What to Do If Renters Cannot Provide Proof of Income
There may be instances where prospective renters can’t provide proof of income, such as newly graduated college students. In those instances, you can require them to get a lease guarantor or co-signer if you believe they’ll be a great tenant, even if they don’t meet your income requirement. They will also need to complete the screening process to ensure they meet your criteria and have their name on the lease agreement.
If you instead choose to deny their application, you can provide them with a rejection letter that states your reason for declining their application.
How to Spot Fake Proofs of Income
Ideally, applicants would submit accurate proof of income, but that may not always be the case. If you feel like a form is falsified, check for the following details:
- Confirm the applicant works at the company or has been contracted to work by them
- Check the numbers total on pay stubs to their annual income on their application
- Request additional information from their employer to confirm documentation is correct
- Do online research to verify if their employment information is correct
Make Renting Easier With Avail
It’s relatively standard practice for landlords to verify a renter’s income to ensure they can pay their monthly rent. Collecting a prospective renter’s proof of income can take time, but leveraging a tenant screening service like Avail can help you streamline the screening process and collect proof of income for various applicants.
For renters, you can create an Avail Renter Profile to add proof of income documentation to share with multiple landlords. Whether you’re a landlord looking to screen multiple applicants at once or a renter looking to make the apartment search easier, Avail has solutions that can make renting easier.
Create an account today to get started.
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As a tenant, you most likely use the internet to compare prices on goods and services, such as cable, TV, mobile phones, and hotels. But have you considered doing the same thing with your electricity bill? Taking advantage of the competition in the electricity market could not only significantly reduce your electricity bills but also allow you an opportunity to start to “go green” with renewable electricity at no additional cost.
Why You Need to Compare Electricity Providers
Deregulation of many industries brought several benefits to consumers, such as lower prices, better services, and more choices. If you live in a deregulated energy state, you can compare your electricity providers the same way you compare and choose your suppliers for cable, TV, mobile phones, hotels, airline tickets, and so on.
In deregulated energy states your standard electricity bill consists of two parts: delivery and supply. There is nothing you can do about the delivery part, as it belongs to your local utility and serves important functions, such as service and billing. You can, however, manage your supply part, compare and choose among multiple electricity suppliers that are competing for your business.
If you are not unaware of your electricity options and do not choose your electricity supplier, your local utility will supply your electricity by default and, most likely, will charge you a variable rate. That variable rate fluctuates from month to month and could be quite volatile. If you don’t pay for your own utilities, ask your landlord about this.
The process of comparing and switching to the supplier of your choice is easy. There are no appointments to make and no installations to perform. Just like almost everything else, you can simply do it online.
The process is instant, digital and free and takes only a few minutes. Your electricity billing remains exactly the same, as billing is still managed by your local utility. Any service issues or interruptions are also part of the delivery part and, as described above, are managed by your local utility.
Benefits of Comparing Electricity Rates
There are several major benefits when it comes to comparing electric rates. The first benefit is if you are responsible for covering utilities at your place, you can save money on your energy bills. As there are no reasons to overpay for electricity, finding and switching to the cheapest supplier could save you up to 37%. In addition, managing your electricity supply and knowing exactly how much you are paying for electricity strengthens your financial discipline.
The second benefit is to lock into a budget-certain fixed-rate plan instead of remaining on a volatile variable plan offered by your local utility. Variable rates could rise rapidly based on multiple factors, including the weather or geopolitical situation, significantly increasing your electricity bills.
The third benefit of comparing electricity suppliers and their plans is an opportunity to go green. As more and more suppliers compete for your business, some of them are throwing in green options for free. That means you have a chance not only to save on electricity but also to get green renewable energy at no extra cost, as described below.
Where Does Your Electricity Come From?
Together, non-renewable electricity sources account for 82% of generated electricity and produce numerous downsides. Environmental pollution is the biggest one, as burning fossil fuels releases carbon dioxide, which is directly linked to global warming. Oil spills, for example, are disastrous for the ocean and land and can be deadly for the animals that live there.
In addition, burning fossil fuels can lead to lung problems and asthma attacks in humans. The limited supply of natural resources that cannot be renewed is another major downside that could lead to rising costs.
As a tenant, the only way you can get renewable energy is to compare electricity suppliers and switch to a plan with a green option, as described above. If you choose to do so, your money for the supply portion of your bill will go towards building a wind turbine or other renewable energy source instead of towards burning fossil fuels.
Oftentimes, a plan with a green option will also be the cheapest plan, giving you a chance to save both the planet and on your energy bills.
Start saving on your electric bill.
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