Category: Birmingham Property Management

If I am a real estate agent, why would I work with gkhouses?


Matthew Whitaker - Tuesday, September 18, 2018

Hey there. Matthew Whitaker here. Another segment of “Questions Owners Ask.” Today I’m talking about real estate agents. So, “If I’m a real estate agent, why would I work with gkhouses?”

Well, the first thing I’d like to talk about is how you can use us a resource for information. Sometimes your owner’s house just won’t sell and you need rental information on that house.

I mean, the last thing you wanna do is lose that listing. You want that listing to be able to come back to you one day and you may need some information to understand, to help the owner make the best decision for themselves.

The next one is, you certainly don’t wanna turn the house over to somebody who’s not a reputable management company. And that’s what we are. I’ve been managing rental houses for 15 years, I’ve been doing it for others for almost 11 years. So you wanna turn it over to somebody who knows what they’re doing.

And the last thing is, for real estate agents, there is a $555 referral fee that we pay for each house you refer to us. So not only is it in the client’s best interests sometimes, but it’s also in your best interests financially.

So that’s it. That’s “Questions Owners Ask.” Talking about real estate agents today, “If I’m a real estate agent, why would I work with gkhouses?” Thank you.

Why is it important to have local property management?


Matthew Whitaker - Tuesday, September 18, 2018

Hey, everybody. Matthew Whitaker here.

I’m doing “Questions Owners Ask”. Today’s question is, “Why is it important to have local property management?” So, why is it important for the manager to be local?

First thing is local knowledge of the market. How do you know what things rent for? How do you know what houses in the area do? What’s a good street? What’s a bad street? Having a local manager that is familiar with the area is so super important.

Number two, local maintenance vendors. The kind of big boy property management companies typically don’t have local maintenance vendors. We actually employ our own maintenance vendors, so they’re obviously local. And, you know, having eyes and ears in that house for you that work for us is very important.

The third thing is a local trusted brand. So, renters rent from people that they trust. And if you have a local trusted brand, then your house is probably gonna rent faster. In other words, they already have a cycle of tenants that are coming through that you’ll be able to tap into that.

So, today’s question was, “Why is it important to rent from a local property management company?” I’m Matthew Whitaker with gkhouses.

3 Things To Consider Before Buying Birmingham Rental Property


Spencer Sutton - Wednesday, July 11, 2018

I want to give you three things to consider before you buy in, what some people call, high return areas of Birmingham.

And typically what that means is people are looking to buy in areas where they get cap rates of, you know, 10% to, some people say, 20% cap rates. But typically this means they’re in areas that are cheaper houses, low to moderate income areas, where they can push the rents a little bit, and so, they can achieve that higher return.

Before you buy in these areas, I want you to think about three things.

Number ONE – You need to think about the area of the home you’re gonna buy.

This may sound like common sense and I get it. But I hear a lot of people talking about the street scene or “Hey, this area of Birmingham may be rough, a high crime area.”

However, there are still good streets in this neighborhood or whatever. And yes, that is true. I mean, really, Birmingham is a street-to-street area.

You can be in a place called East Lake or Ensley and you can find pockets that are really nice. But this is what I want you to really think about. And that is that 99% of the time these areas are not going to improve, right?

There’s more than likely not going to be some major turnaround in these areas. I’ve lived in Birmingham my entire life. And I’ve invested in these areas for the past 15 years. So, I know a thing or two about what’s going on and have seen a steady decline in most of these areas that are considered a high return. I see a lot of investors buying houses in these areas.

Think about that. If you’re a long-term rental investor and you’re buying houses for the long term, you need to understand that things on the street that you buy on will more than likely go bad than they will improve.

If you’re a wholesaler or a flipper, you know, you’re selling houses to people in different ways that may work because they’re short term, and right now the market is good, you can sell a house to people. And especially if you can buy deep enough, you can make some money on that.

But if you’re a long-term investor and trying to build a rental portfolio, just have that in your mind, that some of these areas will never get better and it’s gonna decline.

You won’t get appreciation either. You may get rental appreciation.

The rental price may go up a little bit over time, but I’ve looked at the performance that people put out there, what they’re saying, “Hey, you’ll get a return and appreciation return on these houses.” And that’s just simply not fact, not gonna happen.

That’s point number one.

Number TWO – You need to think about the age of the home.

The age of the home matters because, with these older houses, so areas like East Lake, Ensley, Tarrant, West End. Some of these areas…the houses were built in the ’20s, and ’30s, and ’40s, and with that comes more repair.

If you’re doing your…you know, put together your spreadsheet, and looking at your, you know, analyzing the returns, you should get, think about higher maintenance and repair costs. Not only when somebody’s living in the home, but also when somebody moves out. You’re gonna have to do more work.

Also with the age of the home, you’ve got to think about the insulation of these homes is not very good, in the walls, in the attics, and the windows.

And so, the higher utility bills means that tenants can only afford to pay so much rent.

Something else to be thinking about is just the Alabama weather on these houses is pretty harsh.

All these things factor into your buying decision. You can think about you’re gonna get higher returns, but if you’re thinking long-term, areas decreasing, and if you’re thinking about higher, you know, repair numbers, then just add that into your calculations because all is going to play a part of that.

Something else with these lower-income areas is this (a little bonus material here) – is if you wanna buy a house and have it rented out Section 8, which we manage a lot of Section 8 houses, you need to understand that a Section 8 tenant is gonna live in the house more than a tenant that has a job and goes out and works every day. Be prepared to spend more money in repairs for a Section 8 tenant. They’re going to live in that house more than a tenant that has a job and goes out every day to work.

Number THREE – Maintain a long-term mindset.

You wanna think about buying a house and owning it. If you’re trying to build a rental portfolio, you want to do this with a mindset, you’re thinking, “10, 15, 20 years down the road, what is this investment gonna look like?”

This will look a lot different than if you buy a house in a B-class neighborhood. Say a Hoover, or a Calera, Alabaster, Helena, where you will still have some appreciation, like price appreciation for the home. You’re also going to have good solid rents. And you’re repairs will be less.

Now, the home will cost more. Your net cash flow may not be as much as you want it to be, but 15, 20 years down the road is going to look a lot different than if you bought in the West End. The reason I know this is because I have bought in probably some of the worst places in Birmingham or some of the places I would say I bought in areas that I would tell you, as an investor, don’t buy in that area.

I, you know, suffered consequences of that. I lost money, made money. But I always want to try to give investors solid advice.

CONCLUSION

So, these are three things you need to think about. Number one, think about the area of the home when it’s probably not going to increase in value.

Number two, the age of the home. These homes are typically older. You’re gonna have more repairs.

And then three, what kind of mindset do you have? Most people, when they’re thinking about real estate, think very short-term, But it’s a long-term game. Buying rental portfolio is a long-term game because especially in a hot market like we’re in today, you probably gonna pay a little more than you would have five years ago.

And so, if you need to sell…if you’re thinking short-term and you need to sell in four or five years, don’t be surprised if you don’t get even what you paid for the house out of it. We see that a lot with investors. Just think about those three things, make good decisions, do your homework and be very patient.

So, that’s all I have for you today.

P.S. Be sure to check out another article where I try to TALK YOU OUT OF BUYING BIRMINGHAM RENTALS!

5 Reasons You Shouldn’t Buy Birmingham Rental Houses


Spencer Sutton - Thursday, June 28, 2018

I’ve thought of at least 5 reasons are you shouldn’t buy Birmingham rental houses?

And in this video, I walk through each of them one by one.

[TRANSCRIPT] Hey, Spencer Sutton here with gkhouses. And today, I wanna give you five reasons you should not buy Birmingham rental property.

Now, you may think that’s kinda strange coming from me. Especially since we manage a lot of rental property here in Birmingham. And I think rental property is great and if it’s for you then great. But I want to give you…if you’re thinking about buying rental houses, I want to give you five reasons you shouldn’t buy Birmingham rental property.

Now, when I say that I’m mainly speaking to investors that we see a lot that we’re coming into Birmingham, most of them live out of state. They’re coming into Birmingham and they’re buying low to moderate income houses because of the promises of high returns.

I’m not necessarily talking about a homeowner who needs to rent their house because they’re, you know, they’re moving away, they’re moving out-of-state or they can’t sell it for some reason. That’s not the person I’m speaking to. I’m talking to you as an investor.

So, here are the five reasons:

1) You’re undercapitalized

So, this is a big one, right? If you don’t have the money to deal with repairs and maintenance, and the term when a tenant moves out vacancy. If you don’t have the money to deal with this, then this is not the place for you to buy rental houses.

As a matter of fact, you shouldn’t be buying rental houses. You need to make sure you have plenty of cash.

I have personally seen a lot of investors go by the wayside because they were undercapitalized. They thought

“Hey, day one I’m gonna start making cash flow, and I’m gonna take this money for the first 12 months, I’m gonna set all the cash flow aside in this bank account. And that way I’m just gonna, you know, have this money.”

Unfortunately, a lot of people will teach you that you take that money and, “Hey, you know, you need to have a car like I have.”

And so you take that cash flow, and you go buy things, huge mistake. I mean, owning rental property costs money. There is a cost of doing business with rental property. And if you’re buying in these low to moderate income areas you can be guaranteed that you’re gonna have some repair and maintenance issues come up.

Because these houses are older and tenants are a little bit harder on houses. Alabama weather, the summer is very hot. It’s harder on houses. Winters can get…sometimes can get pretty sketchy around here. So, if you’re undercapitalized, you should not buy rental property here in Birmingham.

2) You don’t do your homework

I’ve bought a lot of rental houses here in Birmingham. I’ve bought and sold rental houses, but I always went to the property. I always looked at the property. I always walk the property. And I knew what I was getting into before I bought it and even then, even then, I still made some really bad decision.

Like, even as little as eight months ago, I sold a house for like, $ 3,000 that I’d bought a long time ago. It was a piece of junk. I intended to sell it, I had to hold on to it for rental property and bad decision.

So, if it’s hard for me. So much harder for somebody who’s living out-of-state, who’s just may be looking at pictures, who has never been to Birmingham, who has never driven the streets.

There is another post that I had on here where I talk about doing homework and how important it is. You can look at Google images of houses and if you look at the top left-hand corner it will tell you the date of the picture.

A lot can change in a matter of months or a matter years, on a street in some of these low to moderate income houses.

So, if you don’t like to do your homework you do not need to buy Birmingham rental property. I can promise you that.

We had a couple investors from Reno, Nevada come into town some time ago and they did it the right way. I mean, they went to these different houses, they had somebody who was trying to sell them a bundle of houses, a portfolio I think of like 10 houses and they had the money to spend.

They had like $800,000 that they were gonna invest in Birmingham. So, they were doing their homework. They called us and said, “Hey, can we come by and get your opinion on these houses.” We said, “Sure.” So, they came by, sat down at the conference table and we just looked at the list of properties.

We knew the areas very well. Our advice to them was to take their money and keep it, do something else with it. And that’s exactly what they did. They didn’t, you know…if you’re buying houses from somebody they wanna tell you one thing, but if you get an objective opinion, you can probably do a lot…make a lot better decision in those cases.

So, these two gentlemen went back to Reno, Nevada with $ 800,000 and they were better for it based on the portfolio that we looked at. So, do your homework, if you’re gonna buy houses.

3) You’re too nice

So, owning rental property and dealing with tenants means that you have to be tough sometimes.

If you cannot stomach tough conversations and can’t be very candid, very transparent with people, even telling them things that they don’t want to hear, then you don’t need to be in this business. You don’t need to buy rental property.

This is a big one because there are…unfortunately, there are many professional renters out there. And they know exactly what they need to do to take advantage of different situations. If they can get in your house and begin slow pay and no pay.

So, if you’re worried about having these conversations and eventually evicting somebody, then definitely don’t buy Birmingham rental property in some of these areas. Areas you might otherwise consider because you’re going to have to have hard conversations.

You’re going to have to get tough with some people and it’s not gonna be fun. So, that’s reason number three.

4) You’re a short-term thinker

I have mentioned this before, but buying rental property is a long-term game.

You know, I talked to a lot of younger investors who, you know, are just now buying and everything sounds great and everything sounds like, you know, it sounds like they have it all together, but this is just year one or two.

This isn’t year 10 of owning rental property. And so, it’s a long-term game. You need to have that mindset. It’s not something that you’re gonna come in and you’re gonna buy from another investor. So, if you think you’re gonna come in and buy a house from another investor, hold it for a year or two and then sell it for more money. I would say that’s probably not gonna happen.

And I’m speaking from our experience. We see plenty of real estate investors who are asking us to sell their property. Unfortunately, they’ve bought too high and there’s no market for overpriced rental properties when they’re either vacant or they have a tenant that’s not paying. There’s just no market for that.

Another point about long-term thinking is that you really need to consider the things that you’re gonna have to deal with over 15, 20 years of owning rental property.

You’re gonna have vacancy that you’re gonna have to handle. You’re going to have…in some of these areas, you might have of vandalism. So, something that we see here or we’ve seen here a lot is HVAC theft, condensing units being stolen. Copper throughout the house gone.

So, you gotta think about those things, vacancies, vandalism. You gotta think about eviction like we mentioned before. Potential eviction. Not getting paid. I mean, there’s several different things if you’re a long-term investor you have to think about. So, and then you gotta think about rental rates, right?

So, if you have a house that’s rented for $750 and the tenant moves out in a year, and then you can’t find somebody to rent it for that amount again. Then you’re gonna have to lower that rental amount. And if you lower that rental amount, think about what is that gonna do to your return model or your financial return model, and how you need to adjust that.

So, if you don’t have a long-term mindset, you don’t need to be buying Birmingham Rental Property.

5) You’re not committed to owning at least 10 or more

I mean, I think that I see plenty of people who come in here and they buy one or two houses and then after a year or two, it just becomes a pain in their neck. You know, it’s exciting at first, it’s cool to think about owning rental property. But if you don’t have a plan for buying 10 or more, 10, 20, 30 houses over time, rental property is probably not for you.

I know that from personal experience, you know, that wasn’t my plan going into it. So, I was buying and selling houses. I was wholesaling houses, that was my goal. I ended up with rental property because some of these houses I couldn’t sell just based on they weren’t great houses and so I stuck them in rental portfolio.

And then in 2007, 2008 when the bottom fell out, the market crash, ended up holding a lot of rental property. So, that’s not a plan. You need to plan better than I did to have rental property.

So, those are the five things. Five reasons you shouldn’t buy rental property in Birmingham.

Number one, you’re undercapitalized. Two, you don’t do your homework. Three, you’re too nice. Four, you have short-term thinking. And number five, you can’t commit to buying 10 or more. So, I hope that these tips help you in some way.

And if you ever have any questions, don’t hesitate to reach out to us at 205.940.6363 ext 3.

Birmingham Real Estate Investing Advice


Spencer Sutton - Wednesday, June 27, 2018

Have you ever wanted some free advice on Birmingham real estate investing?

Then you have come to the right place. This short video is the same advice I gave a friend on Birmingham real estate investing.

[TRANSCRIPT] Hey. What’s up, everybody? Matthew Whitaker.

I just wanted to give you some quick advice from gkhouses.

I had a friend call me yesterday, and he’s looking to get into real estate investing. And I was reminded of something that I thought was really important that I thought I’d share with you.

Become a specialist

My best advice for somebody who’s getting into real estate investing is to specialize in one area.

I think too often…and I did this when I first got started…we get really focused on something broad like all of Birmingham and looking for the best deal in Birmingham.

And particularly, in this competitive environment, it’s important for you to find one area that you understand really, really well.

That way, you know what a deal looks like, and when a deal comes across your table, comes across your computer, you can go out and buy that deal really fast.

That’s what I’ve found that some of the best investors do. They just understand areas really, really well, and when the opportunity comes along, they are ready to jump at it.

Especially when you’re getting started, learning just one area is a lot easier than learning all of Birmingham or all of Nashville or all of Little Rock.

So that’s my best advice. If you’re getting into investing in real estate, focus on one area. Learn it really, really well. Once you’re an expert in that area, then you can move on to another area.

This is Matthew Whitaker with gkhouses and if you ever need some advice, check out all of our videos or give us a call. We love to help investors make great decisions about Birmingham real estate investing!

What Every Birmingham Real Estate Investor Needs To Thrive


Spencer Sutton - Thursday, June 14, 2018

If you are a patient and cautious Birmingham real estate investor, times are good.

However, if you’re an anxious and eager Birmingham real estate investor, you could be headed for trouble.

Every Birmingham real estate investor needs patienceNot since early 2006 has there been such interest in buying and selling real estate in Birmingham.

Whether you’re looking to buy and hold or you want to flip or retail, there is plenty of activity.

Sometimes it almost feels like a gold rush.

As you might imagine, at gkhouses we have interaction with hundreds of investors. We meet with investors in all of the cities we serve – Birmingham, Nashville, Chattanooga, and Little Rock.

These interactions, as well as our own experience, give us the opportunity to learn many lessons.

A Story

I started buying and selling Birmingham real estate back in late 2003. I owned a Homevestor franchise with some friends. We would purchase houses at deep discounts that we would turn and sell to local investors.

These investors would either rehab them and sell them on the retail market or would hold on to them for rental properties.

From 2003 until 2008, our franchise was the 800lb gorilla of Birmingham investment real estate. At times we would receive over 100 calls, make as many as 30 offers, and buy four or five houses per month.

We were selective and trusted the numbers on our offers. We understood what was not a good buy for us may be a reasonable buy for someone else.

But we started to notice something happening in late 2005. The market became a little crowded, and more investors were searching for the same kinds of houses we were buying.

When this happened, an interesting thing occurred – a kind of FOMO (Fear Of Missing Out) started creeping into our business.

We started trying to make deals seem better than they were and the result was that we bought houses we should have walked away from.

I remember buying a ten house package without walking inside any of the homes. This eagerness not to let those houses slip away led me to make a poor buying decision.

Even though I sold several of the houses quickly, I held on to the ones I couldn’t sell. And in case you’re wondering, that’s not a good strategy for a Birmingham real estate investor!

I still have one of those houses today.

The good news – I have had the same tenant the past eight years.
The bad news – It’s not a great house, and when my tenant moves, there will be a ton of work to do.

So what lesson can you learn from my story?

Patience

Today’s market is much more competitive than it was from 2003 to 2008. The recession gave us plenty of inventory, but the number of investors from around the world has increased as well.

Why has it gotten so much more competitive?

Here are a few things that have made it more competitive for the Birmingham real estate investor:

  • The Internet – Marketing for houses to buy has never been easier with Google organic and paid search like Adwords and Facebook Ads. The internet has flooded the market with good and bad solutions for motivated sellers.
  • “Gurus” – I’m not talking about The Beatles guru, Maharishi Mahesh Yogi. I’m talking about your slick real estate ‘guru.’ Using the internet, you can find a real estate guru on every web corner. Most of them are selling their real estate courses to investor ‘wannabes’ from anywhere between 1k to 50k. The method most taught is how to market and put a house under contract (with no money down) and sell that contract. This investing is a form of wholesaling.
  • Institutional Investors – For the Birmingham real estate investor, it’s important to understand that some of your competition has more money than you do and are willing to pay potentially higher prices. Funds willing to buy houses at higher prices than the typical Birmingham investor have been flooding the market since around 2013.

These factors have driven some investors to make mistakes and buy houses they have no business buying.

Just a couple of months ago we onboarded a new client who made a massive error.

This owner had just bought two rental properties here in Birmingham “sight unseen.”

Unfortunately, this is not an uncommon practice for a Birmingham real estate investor who lives out of state. But even though it’s a common occurrence, it doesn’t make it a good practice.

This new client, when their purchase was complete, had no real idea about the state of the home or tenant pay history. This means that until this time they had neither seen the house or spoken to the current tenants.

This became such a problem (an avoidable problem) that this client is now suing the former property manager.

Patience is the key to avoid catastrophic circumstances.

While there are a lot of houses for the Birmingham real estate investor to choose from, a vast majority of them are not good deals.

Here are some tips to make sure your patient and making a right decision:

  1. Have a good understanding of your risk tolerance in regards to the class of neighborhood you are buying a house. Many of the homes I have seen for sale and touted as B or C class are C and D class neighborhoods. The seller is motivated to sell the house and so what’s the harm in bumping it up a street class? A lot of harm to you if you don’t prepare yourself for the risk involved in owning rental property in those areas.
  2. Visit the property and drive the street, block, area. Don’t rely on Google to do your street scene homework. You need to see what’s happening with surrounding houses and the neighborhood. I used to love to buy homes in areas where I could see and feel a pride of ownership.
  3. Call and verify information about the area from local property management companies. This includes the estimated rental amount as well as inside information about the particular area and neighborhood.
  4. Make an offer that makes sense for you and be willing to walk away. When you begin experiencing FOMO, take a deep breath and remember that there will be another deal…possibly a better deal…come your way shortly.

Conclusion

Even though the market is hot, there are still deals that you can take advantage of in Birmingham. Be disciplined, do your homework, and listen to people who don’t necessarily stand to gain whether you buy a house or not in Birmingham.

If you’re patient, an opportunity will come that will be a home run in the long term.

Best of luck and let us know if we can ever help you!