5 Questions You Should Ask an Appraiser

Hiring an appraiser is an essential part of the real estate acquisition process. In order to receive the most accurate appraisal, you’ll want to make sure you’re hiring a qualified, reputable appraiser. Today, I’m sharing five questions you should ask before hiring an appraiser to evaluate your rental properties.

You have to know the right questions to ask in order to receive a proper and thorough appraisal on your rental properties. Different appraisers have different qualifications, memberships, and knowledge bases; it’s not a one-size-fits-all role. I’ve hired the wrong person before, but you can avoid that mistake by using these tactics.

These five questions will ensure that you hire an appraiser who is qualified, local, and knowledgeable. Your real estate business can run smoothly, as long as you know the right questions to ask. Any reputable appraiser would be glad to address your questions and concerns.

  1. What is your license number? It’s imperative that you hire a licensed appraiser. If you ask a prospective appraiser for their licensing number and they can’t supply you with the number, that’s a huge red flag!
  2. Where is your office located? This is so important—I once hired an appraiser and later discovered he was located in an entirely different state than the property he was appraising. A qualified appraiser knows the area the property is located in.
  3. Do you work alone, or with a company? Generally speaking, an independent appraiser doesn’t have regular contact with other appraisers. Routine discourse with others in the industry allows appraisers to discuss consistencies, and more about their specific market.
  4. Are you licensed or certified? There’s a difference between the two. They have different educations, and can appraise different values. 
  5. Are you a member of the local MLS? The Multiple Listing Service is a local resource where realtors list their properties. Because it’s regionally based, you’ll want to hire an appraiser who has access to this resource in your rental market. 

Want to know more about getting the right team in place? Here are five questions you should ask a property management team. 

If you're interested in a more passive investing experience, turnkey investing might be a fit for you! Book a free call with our team to discuss your real estate goals. 

The Inevitable Real Estate Investing Setback

Last week, I shared a video on our YouTube channel in which I received a violation from the health department.  Immediately, people started commenting about how fearful they are about this scenario, and how it makes them hesitant to invest. This was not my first letter from the health department, and it won’t be the last.

I understand that receiving an official slap on the wrist can be nerve-wracking. The first time I opened one of those letters my heart sunk. They use intimidating wording, but the truth is: this is not a big deal. It’s part of the business!

Particularly if your properties are located in an investor-heavy area, you should expect to receive these letters occasionally. This is because the health department is a county-operated part of government, and they realize that there’s money to be made from investors.

However, I have never paid the fees associated with a health department violation. Not once! So when you inevitably receive the first letter, do not automatically write a check and send it off.

If you run your business the way I recommend, these issues will likely be taken care of before you even receive the letter! A professional, effective property management team will know how to resolve issues with the health department. I recommend having mail regarding your properties sent to your property manager first. Doing so ensures that someone locally is notified of any issues immediately.

Please don’t let small bumps in the road like health department discourage you from taking action. I promise you that the benefits of owning rental real estate far outweigh the disadvantages. If you need further convincing, check out this podcast episode with one of our investors—he shares his experience dealing with the health department.

Ready to pick up your own cash flowing real estate investment? Let’s talk! Pick a 30-minute slot that works with your schedule, and we’ll talk about how turnkey real estate can help you reach your goals.

How I handled a letter from the health department - plus how to handle those inevitiable real estate investing setbacks.

The BRRRR Method for Real Estate Investing

The BRRRR Method is an effective strategy used in real estate for exponentially growing your real estate portfolio. This strategy is a powerful and proven way to leverage. If done correctly, the BRRRR Method can help you quickly grow your real estate business in a matter of a few short years. 

If you’ve ever wondered how successful investors turn one rental property into a robust portfolio, this is it! In the last few years, the BRRRR Method has become extremely popular, and I see our investors employ this strategy on a regular basis.

Here’s how to do it:
Buy - You don’t want to just purchase any house. Don’t simply call up a realtor, and pay over market value for a house plus closing costs. You want to find a property below market value, so that you can add value in repairs. The purchase is very important in this process—buy low!

Repair - Repairing can be tricky, because you don’t want to spend more than necessary, but you still want to create a solid home for your tenant. It’s a balance. Don’t over-upgrade the property. You don’t want to take too long either, because then you aren’t making money from rent checks. Check out my video on how to renovate a rental property.

Rent – Get a tenant in there, so the property begins to produce cash flow. If you’re working with a professional property management team, they’ll take care of this step for you.  

Refinance – I suggest approaching a local bank. They’re way easier to work with than big banks on refinances. Local banks tend to have great introductory rates for refinances. Sit down with a banker, talk about the property, and let them know what your goals are. They’ll be able to match you with a great product that meets your needs. You should expect to receive 75-80% of the valueof the home.

Repeat – Once you’ve pulled the money back, out purchase your second and third rental properties! Rinse and repeat!

Have you used the BRRRR Method on your journey to financial freedom? Come leave a comment on our YouTube video on the BRRRR Method. We’d love to hear your thoughts!

The BRRRR Method is an effective strategy used in real estate for exponentially growing your real estate portfolio - a powerful and proven way to leverage.

Single-Family vs. Multi-Family Investments

How do you decide between single-family and multi-family investments? Most things in real estate come down to a personal preference. For example, some investors love mobile homes, commercial properties, or duplexes. There’s no right or wrong answer, but I typically suggest choosing one niche and sticking with it.

For me, single-family homes are my bread and butter! I do own a few duplexes, but there’s something about single-family homes that works for our business. I don’t have to deal with some of the issues that accompany hosting multiple tenants on the same property. There are bound to be issues when you have many people living in one space. In single-family homes, you don’t have your tenants complaining about each other.    

I also find that my single-family tenants love their rentals; they treat my properties like their own homes. It just feels good to come home to an actual house with a driveway and a yard. Their children have their own bedrooms; their pets can play in the fenced-in yard. They view the property as their home, and I love that. Not only do the tenants take care of the house, but they also tend to stay a long time! It’s not uncommon for me to sign a multi-year lease on a single-family home.

As for multi-family homes, it does appear on paper to have higher ROI than single-family. However, multi-family properties tend to have a higher tenant turnover rate. Like I mentioned, the tenants simply don’t get attached like they would to a single-family home. It’s just not as comfortable and homey!

However, if you’re set on multi-family investments, there are a few ways to mitigate that tenant turnover. Make sure you find a larger duplex with a higher square footage. You want your tenants to stay put, as tenant turnover can be one of your highest expenses. Another thing to consider is qualifying your unit for Section 8 housing. That qualification can convince your tenant to stay longer, just because it can be difficult and time-consuming to find Section 8 housing.

Regardless of what you decide, it’s important that your rental property is a great home for your tenants. For me, real estate investing is not only about ROI, but also providing safe homes for my tenants and revitalizing neighborhoods.

Interested in picking up a totally done for you single family home in America’s best rental markets? Let’s talk! Pick a 30-minute time slot from our schedule, and we’ll talk about how turnkey real estate can help you reach your goals.

How do you decide between single-family and multi-family investments? Here are some things to consider when investing in real estate.

Why I Love C Class Properties

C neighborhoods are older, and the properties are typically in need of extensive renovations. You might read stories on the internet claiming that C class neighborhoods are dangerous or unprofitable. You might be surprised to learn that I purchase all of my properties in C neighborhoods, especially if you’ve been reading internet forums.

I love purchasing in C neighborhoods. The properties can be acquired for cheaper than B neighborhoods, and the rents are comparable. Therefore, the return on investment is higher. Simply put, it’s a better value. Remember, that’s why we do what we do! It’s all about ROI.

A lot of people worry about the quality of tenant in a C neighborhood, but truthfully, I rarely have issues with my tenants. These are hardworking, blue-collar Americans. They are satisfied with the homes that my team renovates. The neighborhoods are quiet during the day, because the tenants are away at work.

Not to mention, I don’t communicate with my tenants anyway! All of my properties are in the hands of effective property management teams. Should a problem arise, the property management team handles it quickly and professionally.

It might seem counterintuitive, but A neighborhoods are typically the neighborhoods that have problem tenants. Those tenants have higher standards, and are more likely to complain about insignificant details.

It irritates me to hear uninformed investors spew condescending misinformation about C neighborhoods. I’ve had nothing but great experiences with my properties. To me, there’s nothing more exciting than revitalizing neighborhoods! My tenants love their homes; it’s a win-win situation.

Interested in picking up your very own C class property with high ROI? Let’s talk! Pick a 30-minute time slot that works with your schedule, and we’ll match you with a great property!

Here's why it pays to invest in Class C rental properties. It might seem counterintuitive, but A neighborhoods typically are more likely to have problem tenants. Those tenants have higher standards, and are more likely to complain about insignificant details. On the other hand, I’ve had nothing but great experiences with my Class C properties.

Should You Pay Off Debt or Invest in Real Estate?

Should you pay off debt before you begin investing in real estate? Is being debt-free a requirement for investing? This topic is one of our most frequently asked questions, understandably.

Debt can be overwhelming, but the prospect of creating passive income is enticing! Many people understand the value of real estate investing, but are concerned about approaching investing when weighed down by debt. How can you choose what is right for you?

Deciding how to approach real estate investing when you have debt is not always simple and straightforward. There are a few factors to consider. This is a decision you’ll have to make for yourself, but we want to help you weigh your options.

The first thing you should do is write down all of your debts, so you have a clear picture of where you stand. Assess the kind of debt, as well as the interest rate for each. Then calculate how much money you have each month to allocate toward paying off debt. 

Sometimes, debt is necessary. Perhaps you had to take out a loan to buy a car, or maybe you have some student loan debt. Typically, anything under 4% interest is not a priority to pay off immediately.

For us, all of our real estate investments accrue a minimum of 10-12% return on investment. It's all about determining which rates are higher. For example, if you have a store credit card with 22% interest, you will likely want to consider paying that off as quickly as possible. 

Next, weigh what you’re paying monthly in interest against a potential investment. For example, if you have $500 each month to allocate either toward paying off debt or investing, you’ll have to assess how quickly that $500 can help you reach your goals.

You should also consider that it’s not an all-or-nothing approach! You can split the money up and approach the situation creatively. Investing is not black and white, it’s about what finding what works for you and benefits your specific situation.

Want to know more about turnkey real estate investing? Book a free, no obligations call with our team! Just pick a 30-minute slot that works with your schedule, and we'll talk about how rental real estate can help you reach your goals. 

Debt can be overwhelming, but the prospect of creating passive income is enticing! Many people understand the value of real estate investing, but are concerned about approaching investing when weighed down by debt. How can you choose what is right for you?

Investing in Real Estate Using Self-Directed IRA - Guest Post by Dmitriy Fomichenko

Late last year, we featured Dmitriy Fomichenko of Sense Financial on the podcast to discuss solo 401ks. That episode has been incredibly popular. Since we highly endorse Sense Financial, today Dmitriy is back with a guest blog post about getting the most out of your investment tools. 

How do you picture your retirement? In our mind’s eye, most of us probably imagine getting rid of all of our debt and being able to cover our daily expenses with passive income.

A vast majority of Americans are struggling to achieve that goal, however. According to a report from the National Institute on Retirement Security, the average American household approaching retirement has a median retirement account balance of $14,500, barely enough to live on for a few months, let alone years of retirement.

Most people know of the traditional investment plans, such as workplace 401(k) plans, and IRA and Roth IRA plans. All of these plans offer various tax advantages, but in each case the account holder — you — doesn’t have much control over which investments are made. A financial institution typically manages the plan, choosing from among mutual funds, stocks and bonds.

Often, people concerned about retirement are looking for investment options that give them freedom to invest in other areas. One option that may be appropriate for some people is the self-directed IRA. This type of plan, which can be set up as a Traditional IRA or a Roth IRA, is also overseen by a financial custodian, but in a more passive way — the custodian simply executes the wishes of the account owner. Under this setup, the account owner can make decisions about where to invest from a greater array of options, such as real estate, trust deeds, precious metals, private limited liability companies, private banking, corporate debt and more.

Direct control over a checking account
My firm serves this role for clients, offering self-directed retirement plans for a fee and allowing our clients to choose the assets they want to invest in. As an example, two of my clients, Debra and Tim, used a self-directed IRA plan to purchase a property in Belize. Using a setup called a “Checkbook IRA”, they receive direct control over a checking account with retirement funds. They can write a check or make a wire transfer from the account on behalf of the IRA.

A regular self-directed IRA, without checkbook control, also provides the account owner with investment freedom, but in that case plan owners must wait for the custodian to process transactions.

Debra and Tim were able to establish their account and roll over their existing retirement funds into a checkbook IRA. They bought two adjacent pieces of land in Placencia, Belize, a place they first visited and fell in love with in 2009 on a sailing trip. With the checkbook feature, Debra was able to wire the funds directly to their real estate agent’s escrow account.

The couple plan to construct a simple vacation home on one of the pieces of land, and they plan to rent it out until their retirement. Considering a high vacation rental demand in Belize, the couple expect decent returns on the investment and a low vacancy rate.

Keep an eye on the rules
Here are a few things to keep in mind before investing in real estate through a self-directed checkbook IRA:

The self-directed checkbook IRA holds title: Your retirement plan will hold the title of the property, and you may sign on behalf of the plan. Taking title in your personal name would disqualify the IRA.

All expenses are paid by the account: Per the rules governing self-directed checkbook IRAs, any expenses incurred during the transaction should come from the retirement account only. You cannot use your personal funds for regular maintenance, repairs or any other expenses associated with the property.

Rental income goes back to the account: If you purchase an income-generating property, any income out of the property should flow back into the retirement account only. This is the same as with conventional IRAs that are invested in mutual funds or stocks — dividends are paid back to the account, not to the account owner individually.

The account owner cannot receive any personal benefits from the investment property while it is owned by the IRA until retirement age. At that time, the account owner can start taking distributions from the account or distributing the entire property out of the IRA (which is known as in-service distribution) and converting it to a personal residence.

You may not live in a property owned by your IRA. That would disqualify the IRA as a qualified retirement plan, making the entire IRA treated as distribution. You would be hit with taxes and penalties on the entire amount, plus the IRS might assess additional penalties for violating the rules.

Tim and Debra plan to distribute the property to themselves and pay taxes on the property upon retirement. Until then, the couple will collect extra income from renting the house to another tenant. The key is to make sure that any rental income earned from the property must find its way back to the self-directed checkbook IRA only.

Weigh the pluses and minuses
This kind of retirement strategy is not for everyone — real estate purchases are long-term investments and take time to liquidate. It must be calculated into your overall investment and retirement planning strategy to make sure that you have other income sources that are liquid.

While there are many benefits to investing with a checkbook IRA, plan owners need to do their research. The rules and guidelines mentioned above can result in tax consequences if violated. Plan owners should consult a tax professional when in doubt.

Would you like to explore the possibility of taking control over your retirement monies with self-directed IRA? Contact our office and request complimentary consultation: (949) 228-9394. And don’t forget to mention that you heard about us from Morris Invest in order to receive 10% discount on our services. 

A self-directed IRA may be appropriate for some people who want to invest in real estate as part of their retirement investing plan.