Live Blissed Out
Live Blissed Out
041 - Investing In Rental Properties
Joining me is Tim Hoyman, the Mozart of Real Estate at the Denver 100.
Whether you are buying your dream home or selling one, Tim makes it happen.
Tim will orchestrate the buying and selling of your real estate with his finely tuned knowledge of relevant market trends, maximizing internet and online state-of-the-art high traffic exposure, expertise in negotiating skills, attention to every detail with trust and confidence, resulting in top dollar for his clients.
If you are investing in residential real estate he can make your profits soar!
Tim serves as the President of the Board of Directors for the Sensory Processing Disorder Foundation, and Chair of the Grievance Committee for the Aurora Association of Realtors. He is a 20 year member of the Littleton Symphony, and has dedicated 20 years of life in the Colorado Army National Guard.
Tim gives back to his community, clients and service providers.
To learn more visit https://timhoyman.com/
In this episode we will cover:
- 3 Strategies
- Investment Options
- Selecting The Right Realtor For Rental Properties
- Risk vs. Reward
- Learn About Landlording
- When Is The Right Time?
- Indicators
- What To Expect
- Wake Up Money Team
Thanks so much for tuning in again this week. I appreciate you 🙂
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Special thanks to Tim Hoyman for being on the show.
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So long for now and remember to keep moving forward!
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Marisa: This is Episode 41 on the Live Blissed Out Podcast. Did you know that historically in the United States, a red door signified that a home was a safe place for travelers to stop and rest? People would paint their doors red to communicate that they are welcoming. It is a sign of inclusion and signifies that they value community.
Hello, Action Takers! Welcome to Live Blissed Out. A podcast where I have authentic conversations with business owners and subject matter experts to help us get the scoop, the 411, and the low down on a variety of topics. TIred of hesitating or making decisions without having the big picture? Wanna be in the know? Then this is the place to go. I'm your host. Marisa Huston. Helping achieve bliss through awareness and action. Thanks for joining me. The information, opinions and recommendations presented in this podcast are for general information only. And any reliance on the information provided in this podcast is done at your own risk. This podcast should not be considered professional advice. Sending a Ko-Fi Mugshot Shout out to Peggy L in Centennial, Colorado. Thanks for filling my Ko-Fi cup, Peggy and being such a cool bean. If you'd like to help keep me fueled, head over to www.liveblissedout.com and click on the caffeinate me tab to give me a boost and redeem your bonus as a thank you for supporting the show.
Joining me is Tim Hoyman the Mozart of real estate at the Denver 100. Whether you're buying your dream home or selling one, Tim makes it happen. Tim will orchestrate the buying and selling of your real estate with his findings to knowledge of relevant market trends, maximizing internet, and online state of the art high traffic exposure expertise in negotiating skills, attention to every detail with trust in confidence, resulting in top dollar for his clients. If you're investing in residential real estate, he can make your profits soar! Tim serves as the president of the board of directors for the sensory processing disorder foundation and chair of the grievance committee for the Aurora association of realtors. He is a 20 year member of the Littleton Symphony and is dedicated 20 years of life in the Colorado Army National Guard. Tim gives back to his community clients and service providers. To learn more, visit www,timhoyman.com. Searching for a minimal versatile handheld tripod? Look, no further . Switch pod works with any camera from a phone to a DSLR and simplifies video making. Switch Pod is lightweight, compact, and nearly indestructible. It will save you time between shots so you can focus more on shooting and less on messing with your gear. Just head over to the partners tab at www.liveblissedout.com and click on the Switch Pod Link to let them know I sent you and help support the show. Hey, Tim. It's great to have you on the show today.
Tim: Well, thanks for having me really appreciate it, Marisa.
Marisa: Well I'm looking forward to talking to you about rental properties. There are many reasons why people want to purchase a home. As we all know, people buy homes because they plan on living in them or perhaps they're moving to a different location and they need to get a home or they're upsizing or downsizing.
There's many reasons, but in particular, we're going to be going through the process of how to consider using property for either investment or current income. So I'd like to start by asking you what are some of the considerations that somebody should have if they were to decide to buy a rental property in terms of the purpose, whether they want to use it longterm, or as a way to increase their income on a monthly basis?
Tim: I'm a big proponent of longterm planning and longterm thinking. So really there are strategies that I look at when a person is thinking about going into the landlord business. The first is understanding that you are buying future income. So you are sacrificing a little bit now for the future. Secondly, is appreciation the way houses appreciate in price is a bonus. I don't really consider that a primary factor, but man, it's really good. If you look at the history of owning houses. Third, you want to buy quality or breakeven cashflow properties. So the cash flow at the beginning, isn't so important because the goal is that you own rental properties free and clear, meaning no mortgage. That's where the magic is with owning investment properties.
Marisa: Speaking of that, then how do we get to that point? So of course, we're going to be talking about money and how the money is going to be invested in. There are many ways to approach that. We can put a minimum down payment and get a mortgage. We can put a larger down payment. We can probably cut the amount of payments that we put in so that we can own the home faster, or we can even pay in cash if we have it. So what are some of the options there and the pros and cons, cause I'm sure there are benefits to certain decisions and I'd like to get a better understanding as to what we should be thinking about when we're thinking about making the investment.
Tim: Well, the first call would be to your realtor who is knowledgeable on rental properties and how that works. And typically your realtor really needs to own rental properties themselves. So they have a better understanding of that. Really. It's also up to the lender that you talk to to get that down. Typically, if you're buying an investment property, Which means you would not be living in it, you do have to put about 25% down. That's a really good number to have. It gets you the better interest rate and it eliminates mortgage insurance, which all has to do with cash flow. Another methodology of doing it though, is if you're younger and you don't mind moving a few times, you can buy a property with the mindset that I'm going to turn this into a rental property.
And you can do that a few times over. I recommend that people stay for at least. Two years in the house that they have bought. Cash is always King. You'll end up getting a better price on the house and the cash flow is immediate, but you want to look and see what is the best fit for you based upon the cash flow. And what's called ROI, which is return on investment. Basically what percentage rate you're getting on the money you put in. We come across a lot of realtors and every realtor, as far as I am aware, at least, they specialize in different things. So how do I know what to ask and how do I look for a realtor that has a really good knowledge specifically when it comes to investing in real estate for some sort of rental income?
There's questions you can ask real estate agents to kind of fair it out if they know about doing rental properties. One is tell me what the ROI would be on rental properties. If they don't know what that means, that's probably a good sign you may not want to use them. I would ask them how many rental properties they own and how many rental properties have they helped clients buy? Those are the types of questions that you can ask. Also, another great way of finding out who the good realtors are is call some of the property management companies around and ask them, who would you recommend? I'm looking at buying rental properties. What real estate agents would you recommend that I use?
Marisa: That's a really good tip actually, because they come across realtors that really specialize in this area and so they'd be able to direct people to the right realtor that has experience in that area.
Tim: That's correct.
Marisa: Speaking of property management companies, then when we're considering a property for this purpose, there are obviously different property types that we need to be thinking about. For example, do we want to Du-Plex? Do we want a condo, a patio home, a single family home? Do we want to be in an area that has an HOA or not because there are definite advantages and maybe disadvantages to those decisions based on our ultimate objective. So how do we decipher what the property type is that we should consider? Is that something that a realtor could help us think about?
Tim: Yes, absolutely. And really the way you'd look at it is a term called risk versus reward. If you're willing to take more risk, the rewards are greater. So for example, when you're dealing with a townhome or a condo, you don't have to take care of the outside. That's typically covered in the homeowners association dues. Not always, but usually. If you're risk averse to having to pay for things like roofs, exterior paint, also landscaping, that can be very expensive, you may be better off going to a townhome or a condo. The return is going to be a little bit less though. The ROI will be a smaller percentage. That's really how you look at it. It's all up to the individual, how they want to do it. The same applies with property management. If you want a property manager to help you, there is no real standard rate. Typically it's somewhere between 7 to 10% of the monthly income that you receive. So that's going to take away from your ROI, but that means you manage it yourself. And there are certainly risks. And rewards to that as well. So it all depends on the individual and what type of risk they're willing to take.
Marisa: Getting into that then in terms of managing it yourself? I think that one of the things that people get concerned about is that they don't know enough about how to. So for example, we have laws to consider. We have to find the right tenants that we know are going to appreciate being in the home and taking care of the home and being there longterm, if that's what we're looking for. And then there's maintenance issues to consider as well as general expenses that sometimes we don't even think about upfront. So in that sense how do we go about learning about how we should handle it? If we decide that we would like to do it ourselves versus hiring a professional?
Tim: There are certainly books out there that you can read. One that I read was called Landlording. It's a really good book. The other way is your real estate agent should be able to help you navigate some of these things as well. Go online, go to YouTube. You can do videos. There's plenty of information out there about how to do it yourself if you're doing landlording. But certainly your real estate agent, if they're knowledgeable in the investing side of things should be able to guide you and help you get started with that. I've done that many times.
Marisa: So in other words, do your research, right? I mean, there's a lot of tools and resources now that we have access to that we never had before. And that way, if we can gather as much information upfront as possible, we'll be more prepared.
Tim: Absolutely. Real estate attorneys are real good resources as well. They can do lease agreements for you, they can do LLCs, all sorts of things like that to help you protect yourself and have a good experience having rental properties.
Marisa: How do we know when it's the right time, the values of properties increase and they decrease and, you know, things fluctuate and sometimes you're thinking to yourself, Oh, it might be a good time to invest because property values are higher now and in some cases you're thinking, no, actually it's better to wait until they get lower. And of course we don't know. We don't know when things are going to go up and down. They change a lot. So how do we know when we should do. Start thinking about this, if this is an avenue that we want to pursue in the future?
Tim: Well, first of all, I think we can all say that it doesn't matter if it's 1900 or 2020 real estate feels like it's always too expensive. I said that back in the 80"s, when I bought my first patio home at $40,000. I thought that was ridiculous. And boy, I wish I had 30 of those now. So there are things though that we can look at in that are localized. The local market is what's important. The Denver market, for example, since 1977, we've had an annual appreciation on real estate of 6.1%, even with the recession. But there are indicators that I watch for from a localized methodology. The first one is employment. So if the employment numbers are going up now, I'm not talking about unemployment. I'm talking about how many new jobs have been added to the market. If it's going up, that's a really good sign. Once it starts going down, that means it's going to be about 12 to 18 months and real estate prices are going to start going down. That's typically what happens, not always supply and demand is second. The greater the supply, the less, the demand. The lesser appreciation we have in houses. And that also affects rental rates. And third is affordability. How affordable is the area that you're looking at? Those are the three things that I focus on when I look at. Is it a good time to buy or not? For the last five years up until last year, I was telling people it's not a good time to buy because pricing was just not there. It's starting to now. We're starting to see homes starting to cashflow. And that's the other thing that we look at. So I hope that answers your question in a nutshell.
Marisa: It definitely does, Tim. This might not be the right fit for certain people. And so ,what I'd like to get a sense of is, what does it typically look like to be a land owner, to be somebody who is renting out property? What are some expectations that you need to have to determine whether or not this is the right approach? Something that you should be thinking about for yourself?
Tim: Well, there's a couple of things. One of the things that I do is sit down with people and talk about is how much extra money at retirement do you want and that helps me understand where they're at as far as do they want to be a landlord or not. Is there a risk? Yes. You have to be able to not take personally when somebody would booger up your place and it's probably going to happen. You do have to set money aside. For repairs. And you also have to look at things longterm. If you're not looking at it longterm and have the discipline to look at it longterm, this may not be the right fit for you. Everybody's heard of fix and flips. I typically don't like doing that. But in this case, you want to hold, pay it off as quickly as possible so that your properties are free and clear and understand that you may have to go in and do some repair work. And if you're not comfortable doing that, it's probably not right for you. But if you have a longterm mindset and attitude, it's a great way to have additional income when you're retired coming in every single month.
Marisa: So in other words, you need to understand what is required of you and how that's going to look in terms of how you're going to participate in the process, and if you don't feel like something that you can do yourself, or at least be a part of and are not even interested in doing it, then perhaps it's not a right fit. But if you feel like you're excited about it and it's something you really want to be involved in then this might be something to consider.
Tim: Not being involved with it, you can have property management do that. And that's perfectly fine. The real question is, are you willing to look at this long term? Are you willing to make a little bit of sacrifice now for later.
Marisa: That's a really good tip, Tim. If people wanted to get a hold of you and ask you about more information regarding this, how do they reach you?
Tim: There's a couple of different ways you can reach me by phone. My number is (303) 669-2676. You can email me at thoyman@den100.com. I am more than happy to answer any questions that you would have. No obligation. Won't sign you up for anything. And on a monthly basis, on the third Thursday of the month, if you do live in Denver, I have a meeting and we talk about how to be a landlord and what issues there are.
Marisa: And what is the name of this group that you have on a monthly basis, Tim? It's called my Wake Up Money Team and the Wake Up Money stands for, if you wake up in the morning and you have this income coming in, would it feel good? And of course the answer is, yeah.
It's great to know that people have more resources and information so that they can make the best decisions for themselves. Thank you so much, Tim. I really appreciate all this invaluable information you shared with us today. It was really great having you on the show.
Tim: It's my pleasure. Thank you so much, Marisa.
Marisa: That's all for this episode of Live Blissed Out. Thanks for listening and thanks to Tim Hoyman for being my guest. If you find value in our show, please visit www.liveblissedout.com to reach out, subscribe and share on social media. This show is made possible through listeners like you. Thank you. So long for now and remember to keep moving forward!