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Property Management Software – Is It Right For You?

Property Management Software – Is It Right For You? | Property Development | Scoop.it

Recently, we invested in a property management software system and all I have to say it is one of the best things we have ever done to help our business. The software system has made our lives as landlords so much easier that it has been well worth the investment.

Here are some of the software’s features.

It handles all of the accounting, creating easy to read reports for monthly operations and for tax time.
It produces timely reports regarding who has paid and who is behind.
It will generate the appropriate letters to those who are behind.
It comes with a website that provides us with an awesome web presence. On that webpage prospective tenants can:

View all of our available properties with picture and descriptionsApply directly online for one of those propertiesReview our terms and policiesCurrent tenants can use our webpage to:Set up automatic ACH rental paymentsReview their accountsSend us maintenance requests.The software automatically generates an ad on our webpage and on Craigslist and Backpage as well as other sites when a unit comes up for rent. Because of this feature, our out of state business has increased significantly.

Why Property Management Software? [...]

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Should You Buy More Rental Properties Or Pay Down the Ones You Have? [What is your exit strategy?]

Should You Buy More Rental Properties Or Pay Down the Ones You Have? [What is your exit strategy?] | Property Development | Scoop.it
Should you buy more or pay down your rentals? Depends on your goals! Read on...

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Richard W J Brown's curator insight, March 20, 2014 11:10 AM


There are two key questions to ask here but first...

 

Curating news stories and adding personal insights as I do, to some extent makes things easier as I get to react and comment on what is 'out there' and topical but on the other hand it can also be restrictive at times, as it might not allow me to speak what is currently on my mind. Today's article allows for both :)

 

Yesterday, I responded to a post on a forum on The Property Hub, which posed the question: What is your exit strategy?

 

Here is an extract of my response:

 

[I like this topic as it really made me think!

 

I tend to put my property investing plans into 3 stages: growth / acquisition, consolidation & exit - guess which one I have focused on the most? Yes, it's growth and the reason for this is that there is no point in having an exit plan if you have nothing or not that much to exit...after all a single BTL property doesn't really need a lot of thinking about.some but not a lot. The other reason why I have not thought about it that much is that it is a long way off and things will no doubt change by the time I get there or near. 

 

So, here are my current thoughts on my exit plan:

 

I am still in the growth phase and am working on the basis that I will have multiple properties with a market value of around £N to £Nx2 (where N is my target value) and a net equity position of around 25% to 33% of these figures by the time I get to the 'consolidation phase', which will probably be in +/- 10 years. The consolidation phase may last for say another 5-10 years and very notionally lead to a doubling of value (or slightly less possibly if the shorter period).

 

During the consolidation phase I expect to have a big enough net yield to be able to live off the portfolio. But equally my partner and I have aspirations to work in areas where we can help people through coaching and lifestyle changes, which may not pay that well, hence the need for a high asset base and its income generation.

 

As for the exit phase - this is really all about retirement and inheritance planning and by retirement I don't mean pottering about in the garden but being able to have homes in a couple of different parts of the world for sun / ski as well as close to family & friends.  This may mean releasing equity either by selling or refinancing some of the portfolio.  At present I favour refinancing to avoid a capital gains tax liability. This in very broad terms covers the retirement part of the plan.

 

In terms of the inheritance plan / leaving a legacy, I intend to maintain life cover sufficient to only leave my portfolio leveraged at 50% LTV after I pop my clogs - this will allow my beneficiaries to easily refinance on reasonable terms and will also leave them with income generating assets as a pension / trust fund.  If I manage to live to 100 [lol] then life cover may get progressively more expensive in which case I will effectively 'self-insure' by merely allowing the portfolio to sit and grow in value over this time period; improving the net equity position and maybe paying down debt a little if enough income.  I intend to start transferring properties into a company ownership once at the start of this phase (unless my accountant advises me to do it sooner, although unlikely due to financing issues). I then really liked the idea of an employee share incentive scheme that was highlighted in Ian Wallis' recent post here: http://thepropertyhu...nheritance-tax/ which should allow a smooth transfer of the assets to the kids and grandkids by then, assuming the structure still works by the time I get there. If it doesn't then I will look at specific trusts to transfer ownership with minimal IHT liability.

 

I don't plan to reduce my debt to zero as some would and nor do I favour the idea of selling up and picking up CGT charges; so a modest level of leverage will be the order of the day, whilst still leaving a reasonable fund for the kids.]

 

Drawing the link back to today's article; as it so happens I appear to have answered the two key questions posed: What are my life goals and what is my tolerance to debt (risk). I think these two questions are a good way to begin to think about our 'exit plan' as it will give us greater clarity on what we need to achieve and how we will get there plus it will help to address the point about whether or not we should i.e. take on higher debt. The two points can be symbiotic really.

 

Once the answers to these are known, we will then be better placed to actually determine what our exit strategy should look like too.

Richard W J Brown's comment, April 1, 2014 11:52 AM
Stanley & Sinja - thx for the rescoops and shares :)
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Buy-to-letwatch - Mortgage Strategy

Buy-to-letwatch - Mortgage Strategy | Property Development | Scoop.it
Mortgage Strategy Buy-to-letwatch Mortgage Strategy Recently I sat on the panel of the Paragon Great Buy to Let Debate which not only brought to light some interesting predictions for 2014 but also identified some market challenges for both lenders...
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Learning to Learn: fighting cognitive biases

Learning to Learn: fighting cognitive biases | Property Development | Scoop.it
Critical thinking is an increasingly important skill that has been overlooked by many as information becomes more accessible and superfluous. Today, a critical thinker is able to set him or herself apart by lending his or her brain to the many others who have not yet figured it out.
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6 Ways to Educate Yourself and Become Enlightened

6 Ways to Educate Yourself and Become Enlightened | Property Development | Scoop.it
While Webster's might define a nerd as someone who is unstylish, unattractive or  "hopelessly devoted to intellectual or academic pursuits" — nerds and geeks have increasingly become accepted among the mainstream. And lately, they've become more well-known for their enthusiasm for things they love. If you love to write or read, you might be a word nerd. If you have an unhealthy obsession for fashion, you could be geek chic.

No matter your interests, being well-educated is a great way to becoming a more well-rounded person. It also has a habit of making a person more enlightened, i.e. less judgmental and more congenial with others of different backgrounds. Here are some things you can do to keep your mind young and to expand your horizons. Continue reading →
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Episode #20: research and strategy in property investment, with Richard Brown

Episode #20: research and strategy in property investment, with Richard Brown | Property Development | Scoop.it
Richard Brown began dabbling in property during the 90s, when he became an accidental landlord due to relocating for work.

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Richard W J Brown's curator insight, January 21, 2014 7:31 AM

 

Well, this one is a little embarrassing to share to some extent but I am doing so here as during the course of an interview for The Property Geek with Rob Dix I was able to share a little about my background, strategy & approach to property investing and the reasons why I write my daily insights here.

 

It's a podcast, so sound required (or headphones if you are in a public place!).

 

Enjoy...or not as the case may be!

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Explore more. Web pages, photos, and videos | StumbleUpon.com

Explore more. Web pages, photos, and videos | StumbleUpon.com | Property Development | Scoop.it
StumbleUpon is the easiest way to discover new and interesting web pages, photos and videos across the Web.
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Let's Be Honest: You Won't Become a Real Estate Investor (Here Are 8 Reasons Why...)

Let's Be Honest: You Won't Become a Real Estate Investor (Here Are 8 Reasons Why...) | Property Development | Scoop.it
Don't kid yourself, you won't actually become a real estate investor. Unless you take the following actions, you might as well save your time and quit now.

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Richard W J Brown's curator insight, March 19, 2014 11:40 AM


Hard-hitting headline isn't it?

 

I found this fascinating because Tom Sylvester, the author of this piece, actually spent $15,000 on property training, along with 40 fellow attendees on 'training' with a 'guru'. Six years on, he revisited each of his 40 peers and found that only 3 were actively investing in property!!! That's less than a 10% success rate...

 

There is basically only one reason why the success rate is so low and that is: failing to take action...i.e. actually investing in a property, as that at the end of the day is the only way to be considered a property investor.  The underlying reasons for not taking action could be more complex but parting with $15,000 is at least one of them!

 

So, can 'training' offered by the 'gurus' work? Yes it can but it still relies on an individual to take the necessary action to follow through. Some of the high profile 'guru' trainers in the UK offer a kind of mutual support or mentor / coach programme alongside the information sharing and that has to be a significant positive benefit to help people to get more motivated to act on their learning.

 

Reading a bunch of property books and joining some online forums are a lower cost way of getting similar information (although the quality varies) and equally some allow some sort of mutual support and mentoring / coaching, albeit less formally than the 'guru' machines.

 

In terms of signposting some of the online communities, there is Property Tribes, Property 118 and more recently The Property Hub that people can link into in this aspect. I particularly like The Property Hub as the Plus membership has some neat added value components to it such as 'Masterclass' sessions and 'Mastermind' groups but even the free service seems to be an altogether friendlier place to share, learn and get / receive support from fellow investors (and potential investors).

 

I always suggest that would-be property investors sign up to the excellent Your Property Network magazine at around £6 a month also. So between these forums and the magazine plus a couple of books along the way the knowledge gathering exercise should come in at a fraction of Tom’s spend.

 

But after all is said and done...the buck does ultimately stop with us to get off our backside, get on our bike and actually do something that will result in us actually, really, physically owning (or at least controlling) one or more properties for investment purposes.  Perhaps we also need to take a very good look at ourselves and why we are not moving forward in our investing journey and a lack of money is not actually an acceptable reason anymore either, so in the words of the Imagine Dragons song Demons, perhaps only slightly out of context:

 

'Look into my eyes
It’s where my demons hide'

 

We can't let our demons from within hold us back and equally we must not let the 'demons' of the earth take what we can ill afford either!

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Majority of landlords unprepared for voids - National Landlords Association

Majority of landlords unprepared for voids - National Landlords Association | Property Development | Scoop.it
The vast majority of landlords (90 per cent) say they don’t factor in the financial impact of voids when letting their property, recent research from the National Landlords Association has shown.The research also shows that when it comes to covering the cost of a rental void, landlords with just one property use their day job earnings (19 per cent)

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Richard W J Brown's curator insight, March 11, 2014 11:56 AM


Wealth warning: failing to plan for cashflow can kill your investment property business stone dead

 

It is scary to think that the vast majority of landlords (90%) do not factor in the full costs of a rental property when considering investing in property. Failing to plan is planning to fail as they say and so ignoring voids, maintenance and for that matter other costs and potential interest rate rises is like trying to balance on a stool with a noose around your neck - one slip and you're a gonna. Add into this that according to recent research by Countrywide over 94% of landlords own only one property, which magnifies the risk of a void catching them out.

 

Let's take some numbers of a fairly typical investment property:

 

Property value £135k

75% LTV mortgage £101k

 

Gross rent (assuming national average of 6.2% as stated by RLA – BM Solutions hve just released figures showing it as 5.5% however) at £700 pcm 

Loan repayments (interest only) at 4.5% £380 pcm

Letting agent fees (10% plus VAT) at £84 pcm

Insurance & gas safety £18 pcm

Maintenance (actual repairs and provision for redec every few years) £58 pcm

Total costs before voids £540

 

Net rent £160 pcm

 

That's a profit right?

 

Well let's factor in the voids as recommended by the NLA of 2 month's rent at £116.67 per month and our net rent drops to a whisker above zero at £43 pcm clear cashflow - or £520 per year.

 

I bet in addition to ignoring voids that many landlords will also be failing to set aside a fund for maintenance to give an even more false picture of the profits involved.

 

So, let's play the 'what if' game then shall we?

 

What if the mortgage interest rate goes up? In this example even a rate resorting to the historic average of 5% would wipe out all profits, another 1% on top of that and we are having to put extra money from our own pocket to support the property.

 

What if we opt for a repayment mortgage instead? Switching to repayment would add another £183 a month to the cash costs of the property and wipe us out

 

What if we can't get agent fees at 10% plus VAT, or you are on a flood plain and insurance premiums are high or even not available?

 

What if the boiler blows up in the first year at a typical cost of say £1,000 just to replace it?

 

What if you added fees to your mortgage and the payments are higher?

 

What if your tenant not only does not pay but also runs off with a couple of suitcases of your copper pipes and leaves a trail of broken windows, kicked in plasterboard and graffiti for us to contend with?

 

OK, enough already with the scary stuff I guess you get the picture!

 

Any one of these events can potentially wipe out all of our cashflow profit - note that I deliberately distinguish between paper profit and cashflow profit here, as it is a lack of cash that actually kills most businesses, property-related or otherwise, just as a lack of oxygen is vital to a human.

 

Is there any good news here? Should we be doing this property investing thing at all in this case?

 

Well, thankfully there is some good news here yes, you will be pleased to hear.

 

Firstly, I have used the UK average rental yield in calculations and so if we can buy below market value and / or rent in a higher yield area, or let to higher yielding tenants groups (such as students or LHA but these can carry different risks) then we can beat the average and increase our income level in the process.

 

Second, over time rents should actually increase, whilst the mortgage debt amount (distinct from the interest rate) stays the same and this should allow us to have a better cashflow buffer - the only thing is that we will have to wait for it.

 

Third, we could self-manage to save on letting fees but I usually do not recommend this for new investors as a letting agent adds more value and should safeguard against a number of risks and traps that an inexperienced investor could fall into.

 

Fourth, we could put down more cash into the deposit to improve the cashflow position if we are prepared to tie up even more cash.

 

Fifth, we could take out rent guarantee insurance to offset much or all of the voids – check the small print if you do as some have massive gaps in them and as the recent highly publicised Wilson’s story highlights might not always be available for all tenants.

 

Sixth, we can set aside a fund to safeguard against voids and maintenance expenses and once it reaches a certain level let it sit there with some small inflationary increases over time – this is my personal choice as it is a form of self-insurance.

 

There will be more options but these are some of the key ones.

 

The bottom line however is the word ‘business’ – property investing is not actually an investment at all – it is a business and the business activity is that of letting out homes for people to live in. This business of letting out homes has a number of factors associated with it, as with all businesses, which means that income and costs are not always fully predictable or certain and so we should consider these and make contingency plans in case things do not go according to the back of the beer mat plan that we wrote for ourselves.

 

The really good news however, is that after around 5 years it does get a lot easier, as by then the rents should be starting to rise and improve the cash position and if we are lucky enough we may even see some capital growth too – although, as we all know capital growth is a paper profit and not a cash profit unless we actually sell. Projecting forward to say 15 years and the picture starts to get a whole lot better but this requires a large dollop of patience and careful nurturing of our business along the way…a final thought is that I read elsewhere recently that many of the world’s mega rich billionaires took around 30-50 years to accumulate their immense wealth…attaining sustainable wealth is usually a long-term gig.

 

In order to protect our future wealth we need to take steps today to not only manage our business properly and crucially all of its cashflows but equally we should make alternative plans just in case what we think won’t happen to us actually does.

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26 Time Management Hacks I Wish I'd Known at 20

26 Time Management Hacks I Wish I’d Known at 20 Etienne Garbugli Product Design & Marketing Consultant

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Mohawke's Best of the Best Free and Open Source Software Collection: Mac OS X and Windows software Collection

Mohawke's Best of the Best Free and Open Source Software Collection: Mac OS X and Windows software Collection | Property Development | Scoop.it
Mohawke's best of the best free and open source software: Everything you can imagine from free OS X and Windows software, games, and even operating systems.
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Tax Implications of Buy To Sell Refubishment - Property118

Tax Implications of Buy To Sell Refubishment - Property118 | Property Development | Scoop.it
Tax Implications of Buy To Sell Refubishment
Property118
(1) Having just moved back to the UK working overseas, I do not own my own property, but instead rent.
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