BiggerPockets Daily

When the weather warms up, it’s a good time to clean out the nooks and crannies and not just the ones in your closet. Every year, you should take a step back, evaluate your processes, take care of your business “housekeeping,” and set new goals. 

You’ve just paid your taxes, so getting organized for next year is top-of-mind. If you want to take this opportunity to give your real estate business a refresh, we’ve prepared a checklist of items to address in your spring cleaning efforts, with tips from two real estate investment advisors. 

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In the past few months, we have published a couple of robust overviews of DSCR loans, a popular loan product that has entered the scene over the past few years. DSCR loans enable investors to qualify for a mortgage loan on an investment property without consideration for personal income or “DTI” ratios—making these loans a top option for investors scaling portfolios, especially for single-family rental properties.

Qualifying for the best rates and terms for DSCR loans is primarily driven by three factors: leverage, property cash flow, and credit. After that, investors can use advanced strategies such as optimally structuring loan terms such as prepayment penalties, adjustable rate options, and borrowing entities to tailor DSCR loans to their specific investing needs.

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Every great empire that has come before the United States has eventually fallen. Some have fallen at least somewhat gracefully, like Great Britain. Others, like ancient Rome, well, not so much. 

As I write these words, more and more ink has been spilled regarding the looming threat to the American-led world order. Words such as “de-dollarization” and a “multipolar world” are thrown out often, perhaps simultaneously or even interchangeably.

And indeed, “de-dollarization” is happening, albeit at nowhere near the speed some doomsayers describe. And we are likely already in a “multipolar world” where the United States is no longer the sole superpower. Instead, a new cold war—this time between the United States and China—seems to have dawned as East and West once again bifurcate and globalization slows down and begins to reverse.

Not surprisingly, what plays out over the next few years will have a significant impact on investors. But first, let us strip away the hyperbole and describe what exactly is happening.

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As a real estate investor, your business thrives when it’s properly maintained and optimized for future growth. You’ve counted the costs, done the research, and created a model for current success. But at a certain threshold, we all reach our personal limitations—or think, “There must be an easier way!”

That’s where property management software comes in.

Property management software can help real estate investors perform better in the present and grow faster in the future by simplifying everyday processes. But with all the property management software and app options available, what sets one apart from another? Which features are foundational, and which are fluff?

Let’s take a look at how you can determine which property management software is best for your real estate investing business.

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There’s been a lot of alarm in the real estate investment community lately over a newly enacted Federal Housing Finance Agency rule for Fannie Mae and Freddie Mac loans regarding mortgage fees. 

The gist of the complaint is that homebuyers with good credit will now have to subsidize those with bad credit. Technically, this is true. However, the way it is being framed is quite misleading. The general argument goes something like this: Those with a 620 FICO score will get a 1.75% discount, and those with a 740 FICO score will pay 1%.

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Median asking rents are beginning to dip in many markets, according to new data from Redfin, a turnaround from the skyrocketing rent prices observed last spring. The median national asking rent fell to $1,937 in March, a 0.4% year-over-year decline. Median asking rent prices are lower than they’ve been in over a year, and the days of bidding wars for an apartment are coming to an end in many markets. It’s indicative of a correction from overinflated rent prices that resulted in part from a pandemic-driven demand for more space. But rents are still about 20% higher than they were when the pandemic began. 

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A common question on the BiggerPockets forums goes something like this, “I have $50,000 and looking to invest in real estate. How should I start?”

In normal times, my advice would nine times out of 10 be house hacking for a first-time investor, especially given the markedly better rates and terms homeowners can get as compared to investors. However, in the past year, that delta in loan terms has compressed substantially, and so while house hacking is still an option, it’s not head and shoulders above everything else as it once was. Although, house hacking has certainly held up better than many other strategies. 

Indeed, if there ever was a challenging real estate market—particularly for new investors or those with $50,000 or so burning a hole in their pocket—this would be the one. This 2022 meme succinctly explains that challenge as much as any essay could (updated for 2023 audiences):

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Do Americans really vote with their feet, leaving high-tax states in favor of low-tax states?

While most people don’t move often—and many never leave their home state—we can look at trends and patterns among those who do move across state lines.  

I’m not interested in the politics of it. I’m interested in the actual migration numbers compared to tax rates. Set aside your politics for the next five minutes, and let’s focus on the raw population numbers. 

After all, population change is the foundation of demand for real estate. By understanding where people are moving, we can understand where real estate markets will boom over the next few years. 

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Everyone would love to reduce their tax bill and pay less money to the IRS. But did you know that you can write off home improvements on your taxes? The good news is that certain home improvements can reduce your tax liability. For example, home upgrades that add value to your property, improve energy efficiency, or are adaptations for medical purposes are tax deductible. 

Of course, not all home repairs can lower your tax obligations. And there are certain limits on how much you can claim on your tax returns. But capital improvements to your home make you eligible for tax deductions or tax credits. 

As with most tax laws, the rules on writing off home improvements can be complicated. Therefore, this article aims to disentangle the complexities when writing off home improvements on your taxes. 

Before learning about home improvement tax deductions, there are a few things to watch out for. First, the rules can change from year to year. Therefore, you should speak with a tax advisor about how much you can write off on taxes. Additionally, your income level can also impact home improvement deductions.

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Let’s face it. It would be tough to become a local expert in every market where you are interested in buying an investment property. It takes a great deal of time and effort to become an expert in your own neighborhood. 

You need to build relationships with contractors and real estate agents and learn about zoning, permitting, city ordinances, development rules, and short-term rental regulations– this is all in addition to constantly staying up to date on what homes are selling for in your neighborhoods.

It’s time well spent on your business. And investors looking to expand and grow their fix-and-flip or buy-and-hold rental business eventually realize that building a team becomes crucial for sustainable growth. And sanity, of course. 

Hiring a CPA, real estate attorney, and virtual assistant are pretty straightforward additions to help you organize and operate your business.   

But there are seven crucial relationships you need to develop to truly become a local market expert. How they can help you, however, might not be obvious.

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