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Neil Fjellestad's Blog

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By Neil Fjellestad | Property Manager in San Diego County, CA
  • FBS Property Management eNewsletter for Ocean Beach 92107: The Value of Independent Rental Ownership in Your Retirement Plan

    Posted Under: General Area in 92107, Agent2Agent in 92107, Rentals in 92107, Investment Properties in 92107  |  June 29, 2013 2:29 PM  |  1,111 views  |  No comments
    The Value of Independent Rental Ownership in Your Retirement Plan
    By: Neil Fjellestad and Chris De Marco
    FBS Property Management & Advisory

    Rental ownership has a long history of satisfying the primary investment priorities of personal financial independence: safety of capital, inflation hedge and tax-favored income. Traditionally, if the detailed financial statements of the wealthy are available for review it becomes apparent that long-term income producing real estate assets directly or indirectly contribute substantially to their net worth.

    Certainly there are exceptions that get the notoriety. There are the entrepreneurs that hit the jackpot with a new invention, the right innovation at the right time and/or the market control of a needed commodity. Then there are the speculators that successfully capture the benefits of leveraged capital, cheap labor or some windfall in the short-term that cannot be repeated with consistency.

    However, forget the outliers and the top one-percent and concentrate on the basics of what has worked for the top twenty-percent. Locally understood and available rental properties purchased carefully one at a time consistently becomes the safest real asset to own. Note that a small share in a national real estate investment trust may seem like a “safe way to get the benefits of real estate ownership” but in fact, this is just another financial asset with the same characteristics and historically similar results as any other stock market investment.

    Well-located, rental-producing real estate has usually fared better as a long-term hedge against inflation when compared to financial investments. The closer your investment resembles a small business serving customers with an essential part of daily life the more likely that its operations and value are going to keep up with the cost of living.

    Though assets may hold value no reliable income is produced. Equity in your personal residence is its own goal providing a sense of financial well-being, a source of emergency funds and a reduction of household expense as you approach retirement; but no income. However, a well maintained and managed rental (house, condo, duplex, and apartments, commercial) that is held free of debt produces tax-favored income on a consistent basis.

    Finally, providing ongoing rental housing for households and/or businesses within your community is socially responsible and should be a greater source of personal satisfaction and connection compared to institutional financial investments.
  • Why FBS in Ocean Beach/ Sunset Cliffs 92107? More Property Acquisition & Management Experience for Independent Investors

    Posted Under: Agent2Agent in 92107, Rental Basics in 92107, Investment Properties in 92107  |  May 3, 2013 9:52 AM  |  1,051 views  |  No comments

    Why FBS Can Add Value to Your Investment in Rental Properties

    There are numerous articles highlighting the latest investment strategy of Wall Street. The financial prowess of the likes of Warren Buffet and Blackstone seem to be focused on the following strategy: acquisition of thousands of distressed homes, fixing and operating as rentals going forward maybe selling them at a later time but maybe just hold as income property.

    The acquisition of single homes and operating them as rentals is not new. For more than a decade FBS (though always headquartered in San Diego) was the largest rental operator of single homes in the state of Arizona. Purchase criteria had to be established based on our investment objectives. Utilizing this criteria a buying team was assembled and trained. Thousands of acquisitions were considered one house at a time and turned down. Relatively few (50 or fewer per month) were negotiated one seller at a time and closed one escrow at a time. During this incubation period we assigned each acquisition to one of our holding entities, an individual investor or small group of investors we represented. The acquisition and assignment of these assets went on for years and was a lot of hard work that was questioned by more than a few critics.

    However, the required energy and organization that went into this acquisition process paled in comparison to the leasing, maintenance, rent collection, property operational reporting and ongoing management of these homes. All accomplished without today's technologies including: showing and application online via smartphones, rent payments and maintenance requests via mobile internet access, property inspections with financial reporting and investor cash flows all getting to owners in real time via secure portals. As a matter of fact back then we could not find an out-of-box property management computer application to handle our Arizona rental portfolio that had grown to over 3000 single homes. In addition, we operated other real estate-related businesses that needed to be coordinated with our rental portfolio. Last but not least, we operated an 1008 unit apartment community while executing a major remodel and repositioning to capture additional market value. We learned in house what we needed to computerize our operations and created FBS proprietary software that kept our departments and property management teams on track.

    Then there were the tax planning, physical improvements and equity refinancing to reposition these assets for resale and/or exchange to optimize return on investment. Perhaps as many as one-third of these properties are still held for investment and operated as rentals. It was all harder than we could have imagined and taught us more than we could have hoped. We had always understood that the financial benefits of real estate are long-term. We had always suggested to our investors that there are only two REAL problems with independent rental ownership. One is the lack of comprehensive professional advice over the life of each real estate investment. The other is the daily business management of each rental property. The practical experience of more than four decades of specialized activities that define our experience has created a body of FBS expertise and best practices. This legacy continues today with the value we add to every assignment we do for our clients and the quality rental housing we make available to preferred renters.

    Sincerely,

    Neil Fjellestad

  • Your Ocean Beach Home is Not a Real Estate Investment. Really?

    Posted Under: Agent2Agent in 92107, Rentals in 92107, Investment Properties in 92107  |  April 19, 2013 2:41 PM  |  1,032 views  |  No comments

    Your Home is Not a Real Estate Investment

    by John Wilhoit Jr. with Comments by Neil Fjellestad

    My house is not real estate? Well, yes, it is “real estate”. It’s just not a real estate “investment”. Real estate investing represents an on-going part of a well diversified investment strategy.

    Most investors are under-allocated in real estate believing that their personal residence is part of this allocation. Excluding your home, do you own real estate? Your home, while looking like real estate, is not a real estate investment you look to for yield or income.

    Investment real estate provides four different forms of yield. They are:
    • Income – as derived from rents or other ancillary income generated
    • Tax shelter – provided by depreciation of the physical asset over time
    • Appreciation – the increase in value over time
    • Mortgage pay down – the increase in value created as income is utilized to decrease debt

    Allocation theory suggests that a portfolio should have between 5% and 15% of assets in real estate (excluding your personal residence). Thus, investors should have between $50,000 and $150,000 in real estate for every one million dollars in net worth.

    When excluding your personal residence, what percentage of your investment portfolio is in real estate? Direct real estate ownership provides a buffer to the daily market swings in stocks and bonds. Real estate is an important part of a balanced portfolio. The financial impact of owning your primary residence debt-free cannot be over emphasized. It stands right beside "always paying yourself" and "never spend more than you earn" as pillars of financial management. "Rental ownership" is less known and not available to everyone but is vital to serious building of wealth and reliable additional retirement income. Those that have a firm goal to retire in southern California must understand and apply the potential of long term rental ownership. Neil Fjellestad's comments are seen here in bold italics.

  • Fjellestad (FBS) Sponsors BBB Gathering at UT Bldg on Thursday

    Posted Under: Market Conditions in 92107, Rent vs Buy in 92107, Investment Properties in 92107  |  March 6, 2013 12:02 PM  |  1,092 views  |  No comments
    FBS has been a Better Business Bureau Integrity Award Winner going all the way back to 1996 when the BBB first introduced this recognitiion of companies that practice what they preach when it comes to business ethics and customer satisfaction. The BBB has always been impressed that FBS is able to accomplish such integrity in the rental property business where misrepresentation and misunderstanding between landlords and tenants are common. The BBB's successful relationship between its 6000 members and local consumers hinges on trust which is exactly what FBS has promoted for more than 40 years between its Rental Owner Clients and Renters at rental properties in 69 zip codes throughout the region. Neil
  • Rentals for Retirement Planning in 92107

    Posted Under: Home Selling in 92107, Rentals in 92107, Home Ownership in 92107  |  August 13, 2012 10:10 AM  |  1,217 views  |  No comments

    Rental Ownership: Bedrock of Retirement Security
    By Neil Fjellestad and Chris De Marco
    FBS Property Management  

    Think the recession is over? Nearly three-quarters of recent respondents in southern California think not. Think that local real estate prices are going to take off again? Again, the majority believe maybe but not for years. Despite the current set-backs, San Diego is a great place to live but an expensive place to build. Nearly fifty percent of the area’s residents rent and will continue to do so even as the local economy picks up. So, regardless of whether real estate prices are at the bottom and will stay there; whether there are more reductions before prices come back; whether that comeback is fast and dynamic or slow and variable dictated by neighborhood, price range and lending policies here is a fact that you can take to the bank. San Diego’s mild climate and a healthy lifestyle will make your retirement (however you define it) as enjoyable as anywhere in the world. Rental ownership will finance your retirement prosperity.

    Don't misunderstand. Investors have made mistakes owning rental homes and apartments even in San Diego. Here are the primary mistakes we and others have made:

    • Owning too much of a good thing: too many properties; too little equity.
    • Many real estate decisions: terms of purchase, management choices and maintenance criteria are based on short-term profits instead of a long-term holding strategy.
    • Churning real estate. Buying-selling-trading up looking for a bigger or better property.
    • Selling prematurely because of a problem tenant, deferred maintenance or bad loan.

    Here are key factors for successfully turning your rental ownership into the bedrock of your retirement:

    • Own well-located homes, condos and apartments maintaining at least a 30% equity position. Pay down loans to achieve this safe equity position as quickly as possible.
    • Repair and refurbish the property to maintain physical quality.
    • Carefully qualify applications from potential renters and retain quality residents by responding to legitimate service requests via a professional manager that keeps you buffered from the daily drama, personal liability and/or premature sale.
    • Keep good records to document expenditures and optimize your tax write-off.
    • Protect yourself with adequate insurance and control your liability with professional property management that inspects your property and respects your renters as customers.

    ·         Generally, rental property should be acquired, maintained, improved and held; never sold. Instead, periodically evaluate whether you should refinance existing property and purchase additional property but the end goal is rental ownership free of debt.

    ·         Don't lose valuable equity to selling expenses. Rather, retire with the rental income and a reserve for contingencies.

  • SD Property Management Companies 92107: FBS eNewsletter

    Posted Under: Agent2Agent in 92107, Rentals in 92107, Investment Properties in 92107  |  August 7, 2012 10:42 AM  |  1,101 views  |  No comments
    Please take a moment to check this out. This year we are celebrating four decades of continuous real estate advisory and complete property management services for independent rental owners. In addition, we have provided and maintained quality rental housing for over 40 years. Currently we operate rental properties in 69 zip codes within the region.  We have been nominated as SDBEST and we appreciate our rental owners and our renters that made this possible. Neil   

    http://email.e-mailnetworks.net/private/zHh9/hU3/QU4wqCL/browse/16701561  
  • Homes for Rent in Sunset Cliffs 92107

    Posted Under: Agent2Agent in 92107, Rent vs Buy in 92107, Rentals in 92107  |  July 16, 2012 9:42 AM  |  1,168 views  |  No comments

    Rent Sense: What Renters Want
    By Neil Fjellestad and Chris De Marco
    FBS Property Management

    We can’t tell you how often a rental owner comes to us with a vacancy problem and wants to tell us what the rent needs to be and their concerns for a qualified renter at that rate. Perhaps in no other industry do small businesses (independent housing providers) of goods (rental homes) and services (renter services) spend so little time responding to their customers or even asking what priorities do their renters deem important?

    On the other hand, property management companies are very concerned about what our rental customers want and we talk to them a lot to find out. If we don’t keep our finger on the pulse of renter requirements and preferences how can we continue to produce optimum results for the independent rental owners we have represented for over four decades.

    Certainly, there is a myriad of concerns when a potential renter looks at one rental property and compares it with another as they work out the best solutions to their financial and lifestyle requirements. These concerns have been addressed in past columns.

    There are also concerns a renter has when considering doing business with one housing provider compared to another.

    Here are a few priorities-

    ·         The rent payment needs to be securely handled with accuracy every time.  Scams flourish that somehow extract rent from a trusting potential renter without delivering product or avoid total accountability for rents, fees, and deposits upon move out. Most qualified renters prefer (68%) paying their rent to a regular rental management company versus an individual landlord.

    ·         All renters want their security deposit held in a separate account where these funds are subject to reasonable review.

    ·         The rent payment is time sensitive and should be subject to late penalties. Having said that, qualified renters are busy and over loaded. Most renters (59%) want to utilize an online rent payment option for speed, convenience and financial security.

    ·         Renters want an emergency contact available at all times for possible property issues that need immediate attention. In addition, renters rely on smart phones and the internet to convey their routine maintenance concerns at their convenience.

    ·         Financially concerned renters want the handling of their move-out:  inspection of condition, returning keys and refund of security deposits to be transparent, direct and fair. 

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