Houston Real Estate Guide for Out of Town Investors. Table of Contents

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2 Houston Real Estate Guide for Out of Town Investors Table of Contents Introduction Page 3 Chapter 1 Good Reasons for Investing Page 5 Chapter 2 The Benefits of Investing in Houston Page 8 Chapter 3 Succeeding as an Out of Town Investor Page 10 Chapter 4 Selling or Renting During Relocation Page 13 Chapter 5 Tips for Out of Town Owners Page 16 Conclusion Page 19 Houston Real Estate Guide for Out of Town Investors 2

3 Houston Real Estate Guide for Out of Town Investors Introduction In the first book that Empire Industries provided to landlords and investors, we talked about the pitfalls and mistakes that new and even experienced rental property owners make. We gave you some ideas about how NOT to fail as an investor. This guide is a little bit different. In the Houston Real Estate guide for Out of Town Investors, our goal is to help landlords who live outside of Houston feel more comfortable owning property in one of the hottest rental markets in the country. Whether you live on the other side of town, somewhere else in Texas, in a different state or even out of the country, the right processes, procedures and professional help will ensure your rental property is a success. You don t need to live close to your investment property in order to earn money from it. As long as you have the right tools and resources in place, you can live anywhere you want and hold onto your Houston home. In the Houston area, we have a diverse selection of properties and a growing tenant pool featuring renters who are looking for single family homes, condominium units and rentals in small multi-family buildings. Owning rental property in this market will bring you immediate short-term income through the collection of rents as well as long term growth while your asset appreciates. Houston Real Estate Guide for Out of Town Investors 3

4 At Empire Industries, we are not just property managers. We are also investors ourselves. We work with a large population of out of town investors, and we are able to customize our services for people who are not local. In this book, we ll tell you why it s a good idea to invest, why you should invest in Houston and how you can succeed as an out of town investor. We ll even help you decide whether you should sell your home or rent it out if you need to move for job relocation or other reasons. Our years of experience in real estate investing and property management have helped us develop a specific expertise in this area. If you are an out of town investor, you have a lot to learn about Houston and its rental market. We re here to help. Houston Real Estate Guide for Out of Town Investors 4

5 Houston Real Estate Guide for Out of Town Investors Chapter 1 Good Reasons for Investing Property managers hear a lot of questions from investors about why they should invest in real estate. At Empire Industries, we are investors ourselves, so we know all the good reasons to invest in rental property. The most important thing you need to know is this: When you invest, you want to make sure you have an exit strategy or a final plan. That means knowing why you are doing this. Maybe you want to survive off monthly cash flow or you want some properties you can use in retirement. Whatever your plan, you want to act according to that plan. For the video, go to: Houston Real Estate Guide for Out of Town Investors 5

6 Here are the best reasons to buy investment property: Cash flow Lots of people think cash flow is the only reason to invest in property. It s not the only reason, but it s a good one. Cash flow enables you to make money off your investment. People have different perceptions of what kind of cash flow they want and what they expect. Some investors are willing to take less cash flow in exchange for more equity. It just depends on your plan. Appreciation Real estate will appreciate over time. Something that you bought 40 years ago will certainly be worth more today than it was at the time you purchased it. Tax Depreciation You can depreciate a lot of things on your investment property portfolio that you cannot depreciate as a regular W-2 wage earner. Equity You will get the equity in your property while someone else is paying the mortgage for you. You can purchase a property that has a tenant in the house, and then that same tenant could still be living there 20 years later when you decide to sell. Sometimes a single long term tenant can pay your entire mortgage for you. Wealth Accumulation Investing in real estate gives you the opportunity to build wealth over time. You can leverage real estate to build multiple pots of wealth, and it can be a passive income. Keep building in accordance with your overall plan. Houston Real Estate Guide for Out of Town Investors 6

7 In order to fully take advantage of all the benefits property investment can offer, you need to have a plan in place and a goal in mind. If you need help establishing what those plans and goals are, talk about an investment strategy with a qualified property manager. You ll get even better results when that property manager has experience with personal investments. Houston Real Estate Guide for Out of Town Investors 7

8 Houston Real Estate Guide for Out of Town Investors Chapter 2 The Benefits of Investing in Houston Now that you know how lucrative property investment can be, you may be wondering what to look for in a profitable rental market. The Houston market is an excellent place to buy property, and there are a few specific reasons why. For the video, go to: Houston is the fourth largest city in the country and it also happens to be the fastest growing city. Companies from all over the world have established headquarters and corporate centers in Houston. And they re still growing. For example, Exxon is opening up a 385-acre headquarter campus here. That will attract around fifteen thousand employees and about another twenty thousand total secondary people moving to this area. Houston Real Estate Guide for Out of Town Investors 8

9 There has been a lot of recent construction. We re adding freeways, widening roads, building schools, and building new houses just for this new construction project. Houston is also home to one of the top Medical Centers in the world. It s well known for cancer research, and we have seen statistics that show the Medical Center alone is big enough to make it the 16th largest city in the U.S. Two major airlines have operations here. United Airlines, which is one of the largest in the world, and Southwest Airlines are based in Houston. A lot of employees live in the local area. NASA is here, and there s a large population of employees that live down in the southern part of Houston, which makes up a large economy for that area. Houston offers an excellent pool of tenants as well as a huge opportunity to make money. The median average house price is about $150,000 in Houston. The next city to Houston is Chicago, and that s about a $385,000 median house price. Then you have New York and Los Angeles. Compared to those cities, Houston is a growing, dynamic city. Houston Real Estate Guide for Out of Town Investors 9

10 Houston Real Estate Guide for Out of Town Investors Chapter 3 Succeeding as an Out of Town Investor There are a number of out of town investors in the Houston market, and at Empire Industries we work with many of them. Just to give you an idea, out of all of our investor clients, percent do not live in the city of Houston, in the state of Texas or even in the country. We work with investors who live in Australia, China, Canada, Israel and all across the whole United States. For the video, go to: If you are an investor from outside of the area, choosing a property management is especially important. You need a company that can offer a complete turn-key operation for their investor clients. You need a company that can help you find the perfect investment deal. At Empire Industries, we are investors ourselves, so we know what you are looking for. Houston Real Estate Guide for Out of Town Investors 10

11 The property you find in Houston must not only fit your needs but also your business plan for being an investor. In many cases, we have been asked to take over current situations where a lot of investors have problems with their current tenants and their current situation and they want us to step in and make sure that we can manage their property and get the tenant on track or just get rid of the tenant and find a new tenant. As an out of town investor, you need a complete make ready bidding process to get the property rent ready. Good property managers will have state of the art bidding software. You should receive volume based pricing and you shouldn t be expected to pay an up-charge. As the client, you should get the same price that the property manager negotiated with the vendor. We understand how frustrating and costly it can be when maintenance problems occur, and when you re out of town it can be even more stressful. When it comes to selecting a tenant, look for a rigorous screening process. At Empire, we have a twenty point tenant selection process. You need a manager who will conduct a full credit and criminal background check. Your success depends on a very strict policy of who will be accepted into the property. You ll also need to make sure that all Fair Housing and Discrimination Laws are considered and you ll need to comply with the Texas Property Code. When you re living outside of Houston, it can be hard to understand what s required. The average eviction rate in Houston is 9 percent, but you want to make sure you choose a property manager with an eviction rate that s much lower. At Empire Industries, our eviction rate is only 1 percent. That demonstrates the value that a thorough screening process can bring. Houston Real Estate Guide for Out of Town Investors 11

12 As an out of town investor, you are not in a position where you can develop a relationship with your tenant. We do that for you. A property manager will be the liaison between you and your tenant. All correspondence with the tenant is through us, and we will deal with all lease and tenant violations and ensure rent is collected on time. When necessary, we evict tenants and take care of problems without involving the owner. Property managers want to make sure that as an out of town owner, you get your money. You should expect to have your money wired to the bank account of your choice. At Empire, we start wire transfers on the 5th of the month. You will also get a full reporting every month with reports on your property incomes, expenses, and profit and loss. At the end of the year we will take care of all your tax documentation. Basically, your property manager makes sure your property runs as a business. We make sure that it is a profitable business. We enforce policies and procedures and do everything we can to increase your success rate and decrease your chances of getting sued. When you re talking to property managers, find out what they re doing to specialize in out of town investors like you. Houston Real Estate Guide for Out of Town Investors 12

13 Houston Real Estate Guide for Out of Town Investors Chapter 4 Selling or Renting During Relocation If you re relocating out of the Houston area permanently or temporarily you may be wondering what to do with your home. Should you rent or sell your property? With all the business in Houston, lots of people are moving in and out of the city. For the video, go to: Financial Considerations First, don t get into a bad situation. If you need money to move, even if it s less than you bought the house for, you should sell the property right away and get whatever cash you can. Then, you won t have the liability of this asset. Houston Rental Market Houston Real Estate Guide for Out of Town Investors 13

14 Other people see the advantages of having investment property, but they are scared to have a long distance renter. That s a big concern. Right now, Houston is one of the top investment cities in the country. There are a lot of investors here. The market is going up and prices are going up with them. That s why it might be a good idea to wait before you sell. Four out of 10 people rent. The remaining six out of 10 are landlords. You will probably make money in this market if you have the right strategy in place. Professional Help If you are going to lease your property, the best thing you can do is not do it long distance. Make sure you work with a professional property manager who has a great team in place. You want to hold someone accountable and you want to be able to call and find out what s being done. A property manager will ensure that house is being taken care of. It s an expensive investment with a lot of money at stake. Business Opportunity Some people become accidental landlords who end up with a property they didn t expect. It s still a business and you need to treat it as such. Even if you didn t expect to have this property, you have tax and legal obligations that need attention. You must pay attention to fair housing laws and avoid discrimination. Being a landlord requires you to be knowledgeable about all these things. If you aren t up on all the current laws, use a property manager who knows those laws. You want a property manager who is certified and up to date on every single law dealing with evictions, security deposits and other landlord and tenant legal issues. It s not hard, but policies and procedures must be in place and followed so you don t get a call at 3am wherever you Houston Real Estate Guide for Out of Town Investors 14

15 are with the bad news that you re getting sued. A lot of great companies can do this for you and make it painless. If you don t want to worry about an investment property, it might be best to sell. Houston Real Estate Guide for Out of Town Investors 15

16 Houston Real Estate Guide for Out of Town Investors Chapter 5 Tips for Out of Town Owners Whether you live in another town, another state or some other part of the world such as Asia, the Middle East or South America, you need to know what to expect when you own investment property in Houston, and you need to have the best professionals taking care of it. For the video, go to: Follow these tips to ensure you re protecting your investment property when you live far away from it. Initial Analysis Have your property manager visit the property for you. We do this for our out of town investors at Empire Industries. We provide a full analysis and video of the Houston Real Estate Guide for Out of Town Investors 16

17 property just to give the owner our opinion as investors of what we think about the property. We explain what kind of rent you ll be able to earn and what kind of tenant pool you ll have in that particular neighborhood. Being out of town or out of the country, we know it s going to be hard for you to keep up on market trends and market prices. That s why you need a knowledgeable property manager who is local. Gain Education Rely on your property to make sure you are not at a disadvantage when it comes to taking care of your investment. You may not be as aware of certain conditions that we may know. A property manager s goal should be to help educate you to make sure that when you are buying an investment property you re making the right decision. Put Together a Team A big part of being a successful investor, whether you re local or out of town, is having the right team in place to make sure that when you do make that financial decision to purchase a property, you are doing it with all the information at hand and you re making a smart business decisions. Treat Investments as a Business When you buy a property, it is a business and you want to make sure that you are treating it like a business. You want to have the proper procedures in place, and you want to make sure that everything is in place before you make that acquisition. Houston Real Estate Guide for Out of Town Investors 17

18 Modern Technology At Empire Industries, we make things as easy as possible for our out of town investors. You need a property manager who provides online access to your accounts so you can see everything that we see. You should be able to communicate with your property manager through their software. You need a portal that you can log into with full access to see maintenance tickets, check lease documents or follow up with any tenant issues that may exist. Before you buy any property as an out of town investor, talk to an experienced property manager who knows the Houston market. This will make a huge difference in your short term and long term success. Houston Real Estate Guide for Out of Town Investors 18

19 Houston Real Estate Guide for Out of Town Investors Conclusion If you are already an out of town investor who has properties in Houston, we hope this book has helped you sharpen some of your procedures and set even bigger goals for what your property can accomplish. If you have been thinking about investing in Houston, we hope this book has convinced you that it s the right thing to do. When you have the right property managers taking care of your property for you, it doesn t matter where you live. A good property management company will have the technology, skills and systems in place to keep you involved with what s going on at your rental home. You ll be able to feel secure in the tenants you have in place, the condition of your property and the safety of your investment. You don t have to live in Houston to invest here. There are a lot of opportunities available, and you can talk to us at Empire Industries about where you are and where you want to go. Houston Real Estate Guide for Out of Town Investors 19