Residential vs Commercial Property Management

Residential Property

Those who enter the field of real estate investment in the Lone Star State likely begin the process by seeking out an investment property lender in Texas. However, the next professional service they need after securing investment property loans is a property management service to run the day-to-day operations of their recently acquired properties.

For many who invest in real estate, hiring a property management firm provides an excellent way to let real estate provide a steady, reliable stream of income with minimal hands-on hassle. Managing your own properties can quickly evolve into a full-time job, which is why many investors choose to turn their property management tasks over to a property management firm for convenience and effectiveness. Property management firms are concerned with attracting tenants, negotiating lease terms, and keeping tenants happy. They must also make sure that the property is maintained and that when tenants depart, they leave the property in good order. However, property management isn’t a one-size-fits-all affair. Commercial real estate investors have needs that differ from those for residential real estate investors. Keep reading to learn more about a few of the key differences that distinguish commercial property management from residential property management.

Complexity of the Job

When a person enters the field of property management, he or she will most likely begin in residential property management. There’s a good reason for that. Residential property management is far less complex than commercial property management. Commercial property management involves the management of numerous details that are of little concern to residential managers, and therefore the burden of documentation is much greater. The lease agreements involved in commercial property management feature a far more complex structure as well, which requires more technical expertise to properly execute.

Tenant Types

Obviously, commercial and residential properties attract distinctly different types of tenants. Therefore, commercial property managers must have a more diverse understanding of the needs of potential tenants, how to attract them, and how to accommodate their business goals. Residential properties, even those of a multi-family nature, attract people who want to use the property as a residence. Commercial tenants will use the property primarily in the pursuit of business endeavors such as retail, food and beverage service, manufacturing, industrial, warehouse space, or other service-driven sectors.

Commercial Property

Tenant Expenses

Residential property management features a straight-forward agreement between the tenant or tenants and the property management firm and property owner. Residential tenants typically pay a monthly rent or lease that includes a set fee. Within that rent agreement there may be pre-determined services that are offered. For example, some leases for multi-family units include not only the rental fee but utility costs as well. However, commercial leases are far more detailed. In fact, there are multiple lease structures used in commercial agreements, including triple-net, modified net, gross lease, and percentage lease agreements. For example, a triple net lease requires the tenant to pay the cost of property taxes, common area fees, and building insurance in addition to the lease fee. Percentage lease agreements require the tenant to pay a base fee plus a percentage of sales.

Property Management Responsibilities

The responsibilities of property managers for commercial properties and residential properties are quite different as well. For example, residential properties are used for residential purposes and are governed by a different set of regulations than commercial properties. As a result, residential property managers have a greater level of responsibility to quickly attend to the needs of their tenants. For example, if a residential tenant communicates that the plumbing has sprung a leak at 2 a.m., it’s incumbent upon a residential manager to provide a speedy remedy as soon as possible. Commercial property managers don’t bear the same level of responsibility because their properties are not used for residential purposes and many properties are only occupied during business hours, making the likelihood of after-hours call-outs lower.

Property management firms offer a great service to both residential and commercial property investors, as they can streamline the tenant acquisition and maintenance process significantly. However, there are different demands for the two types of property managers regarding their required expertise and responsibility. To learn more about the differences between residential and commercial property management, contact Investor Loan Service at (409) 735-6267.

Fixed vs Variable Rate Term: What’s Right for Your Investment Loan

Loan Application

Interested in getting an investment loan for some real estate in Texas? Loans differ from person to person, and the investor of your real estate loan needs to understand what your needs are before you can finalize the deal. Investor loans in Texas come with two rate term options—fixed and variable. Here is a simple guide to help you decide which term rate is best for you.

Fixed-Rate Loan

A fixed-rate on investor loans will stay the same for the whole term, no matter how much market rates change during that time. How much the payments will be will depend on what the interest rate environment is like when you take out the loan. A fixed loan will stay at whatever the interest rate was at the time of the loan was made, so you will know what you will pay, in total, over the life of the loan. Fixed rates are common for student loans, mortgages, auto loans, and unsecured personal loans.

Variable Rate Loan

With a variable rate loan, the interest rate on your loan will change every time interest rates on the market change. This means that your payments will vary the entire time the loan is in effect. The variation in the rate will continue while payments are a combination of principal and interest. Variable rates are typically attached to changes to what’s called a well-known index, which is the variable-rate the loan will be charged to. The variable includes the interest the bank will charge and the rate the charges will vary over time (usually on a monthly basis).

Loaning Money

What Is the Best Choice for You?

Figuring out which rate is for you depends on what your situation requires and how flexible you can be regarding payments. A fixed-rate is a better choice if, for example, interests are low at the time, but are about to rise. You’ll also want a fixed loan if you prefer to know exactly what your monthly payments will be over time, or if you are going to pay the loan over a long period of time, say 10 or 20 years.

If, on the other hand, interests are declining, then you might want to consider a variable interest loan. A variable loan is also ideal if you want maximum savings, are flexible enough financially to make higher monthly payments, or you’re going to pay the loan off in a short period of time (10 years or less). Talking to lenders for a real estate investor can be helpful in making a final decision.

If you would like to find out more about interest rates for loans, contact Investor Loan Source via website, email, or phone today.

Situations Where a Hard Money Loan Can Help

Real Estate Agents

If you’re considering real estate investment, there’s a tool that could be helpful in bringing your investment dreams to fruition without extending your credit or hurting your bottom line. That investment tool is known as a hard money loan. Hard money lending in San Antonio can provide investors with quick access to funds for investment without the long, drawn out application period of traditional loans. Hard money lenders help connect real estate investors with the funding they need to take advantage of a dynamic market. They use the value of the purchased property as collateral instead of relying on the borrower’s credit alone.

Hard money loans are perfect for many real estate investment purchases because of their speed of processing and easy accessibility. In fact, they are tailor-made for a few specific circumstances that are common among investors who play the real estate market. Keep reading to learn more about top situations in which hard money loans can help buyers in need of funding.

When Time Is Critical

In real estate investment, those who aren’t ready to act in the moment often find themselves missing out on potentially lucrative real estate deals. A wise investor should have constant access to a sizable amount of funding in order to successfully play the real estate market and outbid competitors for the premier investment properties. That’s one reason hard money loans can be helpful to those in the business. It can provide quick funding that allows investors to seize opportunities to buy high quality properties. While those who apply for a loan from a traditional banking source are waiting for their applications to be processed, hard money borrowers can take action and close on a purchase in short order.

Keys to House

When Credit Is Damaged or Overextended

With traditional financing, your ability to borrow is only as strong as your credit history. That’s because traditional lenders base their decision to loan you money based on the way you’ve handled previous loans as well as your current debt obligations. That helps them assess the risk of loaning funds to you. If you have damaged credit, your chances of getting a loan through a traditional source are significantly lower than they are for someone with stellar credit. However, hard money loans don’t rely on your credit score to make a determination about loaning money to you. Instead, the value of the property you are purchasing is the critical concern of the lender. In other words, the property you are purchasing will serve as collateral on the loan. Therefore, damaged credit doesn’t matter nearly as much, which increases your chance of getting a hard money loan even when you’re not eligible for a traditional loan.

Funding Capital Improvements

Hard money loans can also be helpful in situations that involve extensive remodeling of a property that you already own. For example, if you purchased an investment property only to discover that the renovations will be far more extensive than you anticipated, you could run out of funding. In that case, you’d still have to pay back the traditional loan you took on the property without the benefit of revenue generated from it. However, you could also secure a hard money loan quickly that would provide the funding to allow you to move forward with your renovation so that you could pay back both principals in a timely and efficient manner.

Hard money loans can provide real estate investors with an excellent tool for seizing opportunities and creating profit-generating real estate projects. To learn more about the ways that hard money loans can benefit real estate investors, contact Investor Loan Source at (409) 735-6267.

Top Private Equity Strategies Investors Should Know

Review financial documents

Private equity has long been a strong investment opportunity and has shown little signs of slowing down. This type of investing allows those looking to invest to purchase shares of private companies. There are a number of strategies that can be used by investors that are looking for private equity investment. Here are some of the top private equity investment strategies that investors should know.

Venture Capital

Every year there are a large number of new companies forming. Many of these companies need investment but have little or no record of profitability. While they may be new and have a short history, new industries continue to pop up and some of these companies become extremely successful. Finding the right one of these companies could allow you to easily invest and escape in a short period of time with a large profit. Investors that are able to successfully determine which of these new companies will grow in the coming years will see the highest profits.

Real Estate

Real estate has long been a popular investment strategy and continues to be today. There are four primary strategies used for private equity real estate investment: core, core plus, value-added, and opportunistic. Core real estate investments offer a low, predictable return but are low risk. Core plus investments will require some form of value-added and, therefore, feature moderate risk and reward. Value-added properties will feature medium to high risk and reward, depending on which property you purchase. The idea is to improve the property and sell it for a profit. Opportunistic properties are the highest risk as they need the most amount of enhancements before being sold for a profit.

Growth Capital

Venture capital investments can be very profitable, but it can be difficult to determine if a new company will be successful. A safer bet is growth capital investments. These companies are mature with proven business models. This allows you to make a more analysis-based decision on your investment. Most of these companies are looking for minority capital for the purpose of expanding or restructuring operations, entering new markets, or financing a major acquisition. These companies have been successful and have some capital but need some more investment to achieve certain goals.

Investment opportunities

Mezzanine Financing

Another option instead of growth capital for established companies is mezzanine financing. This type of financing is used to finance the expansion of a company. The companies take on debt capital and will give the lender the ability to take on ownership or equity interest if the loan isn’t repaid in a timely manner or in full. An advantage of this type of investment is that these companies are well-established with a successful product or reputation in the industry. They will have a history of profitability and a viable expansion plan. Many established companies use this method of raising capital as they won’t have to give up much equity ownership if they are able to repay their loans. However, this type of investment forces the lender to take on greater risk as the financing isn’t collateralized.

There are a number of ways that an investor can invest in private equity. The right type of strategy depends on how much risk they are willing to take on and the level of return they want to expect. These are some of the top strategies that private equity investors should know. Contact Investor Loan Source if you’re looking for private real estate investors in Texas.