The Investor's Toolkit: Tracking Essentials in Real Estate | A Deep Dive into Managing Expenses, Rent Income, Rehab Costs, and Growing Equity

If you have one property or if you have 150 properties. You, as a real estate investor, own an buisness. Wheather you have an LLC or your properties are in your personal name (I reccomend an LLC) you have an appreciating asset that a customer rents from you to create cash flow and income for yourself. By definition you own a buisness.

 

To ensure this buisness is a growing and profitible buisness it is important to track various aspects of your buisness. Not only is it important to track these aspects to ensure growth and profit, but tracking will also insure you have all the correct information you need when it comes tax time. In this article we will outline a couple of the most important figures to track in your rental real estate buisness.

Rent & Expenses

 

Renting a house is more than sticking someone in there and collecting a check every month. There are expenses that go into owning and maintaing the property. Managing and keeping track of your monthly and expenses on a monthly basis will ensure that you don’t end up holding onto a property for to long that isn’t making money. I have used simple excel spreadsheets in the past but have recently moved all my tracking to Quickbooks. This allows me to input the rent that I recieved, the mortgage, and any repair or maitenance costs, that come out of the rent each month. I also track what portion of that rent goes towards my vaccancy expense and my capitol expenditures each month and this shows me exactly what my cashflow was each month. Allowing me to see my annual cash flow per property. This will take into account any changes in rent or any changes in my mortgage payment as well. When I pull these reports I immediately know what my strong cashflowing properties are and what properties I may need to find a solution to increase the cashflow.

Rehab on New Purchase

 

This may be the most important piece to track if you are planning on buying run down properties to force equity into. Each item that I purchase for a rehab goes straight from the reciept onto a spreadsheet. I note what the item cost, how many did I purchase, and what the item is, sometimes include a brand or size so I can reference that later. I also catagorize what catagory this item is for; switches and outlets are “electrical”, vanities are “bathroom”, faucets are “plumbing”. You would want to catagorize what these are into data sets that work best for you. What I use this for is so that I can look back and say “a bathroom this size with these repairs will cost this much” it helps me get a better idea of what aspects and costs go into a rehab when I’m walking through and setting a budget for a new project. Keeping these notes also allow me to go back and replace it with the same part; for example if a bathroom faucet needs replaced in a 2 bathroom home I would want to get the same faucet to match so I can go back and find the part number and where I purchased it and it’s all right there. Keeping these records will help you maintain the property in the future, get closer estimates on your budgets for new projects and be an archive of expenses for when it’s time to do your taxes.

 

Equity Holdings

 

Last but certainly not least is tracking the amount of equity you have in each property. Every month I pull my mortgage balances and input them into a spreadsheet. This allows me to track the principal paydown on each loan. I can then compare this mortgage balance to the current market value of the property and that will show me the amount of equity I have in the property. This is important because you want your equity to be working for you. If at any point your equity is more than 30% LTV you may want to ask yourself if its worth getting a heloc or refinancing the property to put your equity in a different deal that may be more profitable. By tracking all of your equity you will also be able to determine if you have enough equity across all your properties to start looking into a bulk line of credit or a comercial loan on multiple properties to make a bigger deal happen. If you know what your equity is on each property it also allows you to pair that with your other financials to track your net worth.

By keeping a close eye on your equity and financials across all properties, you'll not only make informed decisions but also track your growing net worth. As you continue your journey in real estate investing, remember that meticulous record-keeping and financial management are the keys to long-term success.

Investing Pros and Cons in the 2024 Real Estate Market

The real estate investment market has been on a wild journey in recent years, and 2023 was no exception. It kicked off with historically low interest rates, soaring rents, and substantial appreciation gains, only to take a turn with rising interest rates, high inflation, and constant recession speculation for homeowners.

If you're feeling a bit disoriented by these ups and downs, you're not alone. The burning question now is whether investing in rental property remains a wise move in 2024.

To unravel the potential risks and rewards of the 2024 rental market.

Pros of Investing in the 2024 Real Estate Market 

 

1. Rental Homes: The Inflation Safeguard

 

As inflation takes its course, so do rents. Real estate investments, especially those tied to fixed-rate mortgages, act as a buffer against inflation. While interest payments remain fixed, rental income has the potential to ascend over time. The added benefit? Building equity in the property sets the stage for long-term gains from inflation and appreciation. With the higher interest rates it may be intimidating to purchase a property that may not have an exorbitant amount of cash flow. Keep in mind rent as well as home values are estimated to increase over the next couple years. 

2. Property Value Resilience Post Downturns

 

Despite recent economic hiccups, housing appreciation has witnessed remarkable spikes. While economic uncertainties pose a risk, historical patterns suggest that property values tend to rebound and soar after downturns. This implies that long-term investments may hold promise even amidst short-term value fluctuations. Values are still up and you may think that you should time the market and wait until they come down. You have a better chance of success if you hunt and find the properties you can get under market value. Some estimates of 2024 home prices still indicate a 13%-15% increase due to low supply and talks of bringing interest rates below 5%.

3. Fueling Rental Demand: Low Affordability

 

Housing prices might ease in some markets, but they remain beyond the reach of many Americans. Projections indicate that home prices will continue to climb in 2024 due to a shortage of available homes. This scarcity can sustain the appeal of rental investments in sought-after neighborhoods, attracting long-term residents with low vacancy rates. Along with home prices, Insurance and property taxes have also increased across the country. Not only is the renter to first time home owner gap expanding, I am expending more and more homeowners to be priced out of their homes from their payments going up. This won’t be a “flood” of inventory but you may have those homeowners selling or getting foreclosed and being forced to rent. 

Navigating the Risks in the 2024 Real Estate Market

 

1. Scarcity of Inventory for Lucrative Investments

 

In hot demand periods, many cities transform into seller's markets, presenting challenges for new investors in finding profitable opportunities. Existing property owners may reap benefits, but newcomers might face short-term hurdles in rental cash flow. Finding the opportunities to invest in will take significantly more work. Think about sellers that are distressed or don’t have to buy a new home. Finding off market properties is going to be paramount.

2. Persistent High Interest Rates

 

There are so many outlets forecasting different outcomes for the interest rates in 2024, navigating these conditions might require a substantial capital reserve for a sizable deposit. Don’t purchase anything with negative cashflow in hopes that interest rates will come down. If we do see a reduction in interest rates you could refinance and increase your cashflow. 

3. Potential Stall or Decline in Rental Prices

 

As inflation and home prices increase it could be that renters have less and less money for their housing. Rent prices may plateau as renters can’t afford the rising prices. Vacancy rates may increase. It may be that renters start looking outside of bigger cities in search of lower priced rents as well. 

4. The Looming Threat of an Economic Downturn

 

The trajectory of the U.S. economy remains uncertain in 2024, raising the specter of a potential economic downturn. Such an event could pose risks to house prices and rental growth. Thorough research into investment locations becomes paramount in potentially volatile markets.

As the real estate narrative continues to unfold in 2024, it becomes clear that the script is multifaceted, presenting both challenges and opportunities. Investors equipped with informed decision-making, strategic planning, and a nuanced understanding of market dynamics will be better positioned to navigate the complexities and find success in this dynamic landscape.

Topeka Real Estate Market

Topeka ranked No. 1 on Fall 2023 Emerging Housing Markets Index

Sunflower Association of REALTORS®, Topeka, Kansas (October 26, 2023)

Topeka, KS one of the real estate market areas served by the members of the Sunflower Association of REALTORS®, Inc., was ranked No. 1 on the Fall 2023 Emerging Housing Markets Index issued jointly today by the Wall Street Journal and Realtor.com®. Click here to read the Index. This is the 2nd time Topeka has been included in the index in 2023.

According to information published by The Wall St. Journal and Realtor.com®, “the index analyzes key housing market data, as well as economic vitality and lifestyle metrics, to surface emerging housing markets that offer a high quality of life and are expected to see future home price appreciation. Markets offering lower-cost living, strong employment, and convenient commutes performed best as higher mortgage rates and prices have caused home sales to slow nationwide”

“Topeka’s market is showing no sign of decline and has been listed on the Wall St. Journal and Realtor.com® Emerging Markets Index seven (7) of the last eight (8) years. The cost of living is among the most affordable in the nation; our culture is diverse and inclusive; and the business environment is thriving. All reasons Topeka just might be on the Summer 2024 Index.” Linda Briden, CEO, Sunflower Association of REALTORS®, Inc.

Joining Topeka on The Top 10 Emerging Housing Markets for fall 2023 are:

1. Topeka, KS
2. Elkhart-Goshen, IN
3. Oshkosh-Neenah, WI
4. Fort Wayne, IN
5. Lafayette-West Lafayette, IN
6. Racine, WI
7. Manchester-Nashua, NH
8. Concord, NH
9. Columbus, OH
10. Johnson City, TN

The analysis highlighted the following key trends shared among markets on the list.

- More for less
- Demand outpaces inventory: price growth and dwindling for-sale listings
- Mid-sized markets gain popularity
- Home shoppers are browsing out-of-market

According to the jointly issued report, the index methodology looks at:

The ranking evaluates the 300 most populous core-based statistical areas, as measured by the U.S. Census Bureau, and defined by March 2020 delineation standards for eight indicators across two broad categories: real estate market (50%) and economic health and quality of life (50%). Each market is ranked on a scale of 0 to 100 according to the category indicators, and the overall index is based on the weighted sum of these rankings. The real estate market category indicators are: real estate demand (16.6%), based on average pageviews per property; real estate supply (16.6%), based on median days on market for real estate listings, median listing price trend (16.6%). The economic and quality of life category indicators are: unemployment (6.25%); wages (6.251%); regional price parities (6.25%); the share of foreign born (6.25%); small businesses (6.25%); amenities (6.25%), measured as the average number of stores per specific “everyday splurge” category (coffee, upscale/specialty grocery, home improvement, fitness) per capita in an area; commute (6.25%); and estimated effective real estate taxes (6.25%).

Calculate Your New Shawnee County Real Estate Taxes

Shawnee county, KS has seen amazing appreciation in real estate but a lot of people are upset at how much this has raised their real estate taxes. The new 2023 tax bill will come out in December this year and you should be prepared for your lender to either raise your payment to make up the deffiecny or ask you to make a defficiancy payment in a lump sum. Calculate your estimated taxes and start putting some money away for this day!   #topeka #topekaks #topekarealtor #realestate #budgeting #realtor #buyahome #closingcosts #buyingahome #topekaagent #buyahome #buildwealth #investing #investment #invest #equity #rental #rentalproperty #taxes #realestatetax

Appeal Your Shawnee County Tax Evaluation

March 1st Shawnee County mailed out tax appraisal evaluation notices. More than likely your tax value went up which in turn will increase your monthly payment to your escrow account. If you don't think your home would sell today for what they have it valued at you can appeal their evaluation. Here is the process! Give me a call at (785)-817-9724 for a free home evaluation. This evaluation can be used to provide proof that your tax appraisal is to high.

Earnest Money Is The Engagement Ring Of Your Offer

Earnest Money is probably the number 1 most overlooked aspect of an offer that could determine whether you have the winning offer. #topeka #topekaks #topekarealtor #realestate #budgeting #realtor #buyahome #closingcosts #buyingahome #topekaagent #buyahome #buildwealth #investing #investment #invest #equity #rental #rentalproperty

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Topeka, KS 66614