Lessons learned from owning & managing properties

[Satyam Mistry]

🏠 (Part 2) Lessons I have learned from owning & managing residential & commercial properties over the last 5 years in the Omaha, Nebraska market:

• We often start with & focus on the interest rate when shopping lenders, but other terms can be more important than a small difference in the rate such as length of the loan, amortization period, origination fees, & prepayment penalties. These are all items that can be negotiated with your lender!

• Having a lender that does not get offended if you shop around to get the best terms for your investment is important. You want to create a strong & trusting relationship with your lending contact, but occasionally looking at different options should not be discouraged. You can improve terms by having lenders match or compete on certain items.

• Loan origination fees can vary from bank to bank. Shop around & note this amount as it can be a difference of thousands of dollars. Some lenders do fixed amounts for their origination fee & others do a percentage of the loan.

• The power of leverage on even a smaller portfolio can be powerful. On a commercial loan you can look at doing a combined loan on multiple properties & potentially get a lower rate & a new balloon period which can help lock historically lower interest rates for longer periods of time. Important to ensure no prepayment penalty exists if refinancing.

• Experimenting with leases that are both shorter & longer than the standard 12 month length. If commanding top of market rent a longer lease term such as 18 months can lock in more guaranteed income & reduce turnover costs. If considering a shorter length term such as 6 months you can charge a premium above market rate. You can also offer a month to month at a premium on a renewal at the end of an existing lease.

• Ending leases between March to July can make re renting a property easier due to the weather & more people looking for homes at that time of the year. Staggering different properties to end at different months within this range helps to ensure you don’t have all your vacancies occur at the same time as well. Utilizing a shorter or longer lease to accommodate this can be beneficial.
• New lease preparation & lease renewal fees help compensate for your time or cover subscriptions for electronic signatures. Utilizing electronic signature software is a huge help when signing new leases or doing renewals.

• Ensure the strength of your lease will hold up for collection purposes. You don’t need a 20 page lease, but ensure that however long it is that it will hold up for eviction & collection purposes if ever required.

• Utilizing tenant tip letters 1-2 times a year can be helpful reminders for things such as winter preventative maintenance or general care. Physically mailing these letters that include visual imagery can resonate better than being lost in email inboxes.

• Having a folder of saved templates for common forms such as leases, renewals, rent increases, inherited tenants, move in/move out reports, lead paint disclosures, etc. help expedite preparing these as they are usually the same few forms that are continually repeated.

• Protest property taxes yearly. Nebraska is among the highest property tax states in the country. You can protest your property taxes yourself or have an appointed officer during the protest period that does not cost you anything. It is well worth taking a shot and seeing if you can capture any savings on one of the largest operating expenses.

• Your reputation with tenants, contractors, service providers, and other investors have a tremendous impact on helping your success. They give you referrals, prioritize your service calls, & expedite requests where time is essential. You can start building these relationships from your first property on.

• Experimenting with different scenarios & options is a great way to learn what works. You can do these trials with lease structures, materials & finishes used for a rehab, trying different service providers, etc. Like any business you're continually looking for opportunities to improve your operations.

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Would love to hear lessons and tips others have learned!