5 Types of Maintenance - Why & When They Matter

How long you hold an investment property for determines how much you would invest in maintenance and capital improvements. Typically, the longer you hold a property, the more you spend on enhancements to maintain its value.

Preventative Maintenance. These activities are routinely scheduled, relatively minor in scope, and are quick to complete. Preventative maintenance includes changing filters in AC & Heater units, landscaping, weatherproofing, cleaning the gutters, etc. No matter how long you hold a property for, it is important to avoid being short-sighted. These preventative measures minimize the risk (and the cost) of larger issues that could arise if these activities were not implemented on a regular basis.

Predictive Maintenance. These activities involve larger equipment with sensors, alarms, or alerts that give advance warning to prevent equipment failure. That means that you should have a good idea of when you’ll need to take equipment offline next. For example, pool equipment and access systems should all be maintained according to manufacturer guidelines. This type of maintenance ensures that equipment is functioning appropriately and managed for the long term.

Scheduled Maintenance. Scheduled maintenance refers to activities during which you will be taking a piece of equipment offline or shutting down a facility for an extended period of time (1-3 weeks). An example of this would be maintenance on AC chillers that need to be removed, cleaned, replaced, or rebuilt every 10 years or so. Knowing the standard useful life of equipment and scheduling maintenance around it could reduce chronic operating problems. It’s important to keep an eye on these activities so that you can schedule them at the appropriate times and adequately notify tenants of any down-time.

Pop-up Maintenance. These activities are minor in scope and quick to complete like preventative maintenance, but they are NOT predictable. These include light-bulb changes and clogged sinks. Again, most of these activities will need to be addressed regardless of your investment hold period. If not cared for, it may significantly affect tenant satisfaction & safety, building reputation, and the ability to generate maximum revenue streams.

Emergency Maintenance. These are unexpected, catastrophic issues like burst pipes, electric fires, etc. They are often expensive to remedy, but need to be addressed immediately to ensure the safety of tenants.

Key Takeaways:

Investors who are holding a property for the short-term (up to 3 years) should invest funds primarily to ensure the asset is clean, in working order, and up to code. Typically, you wouldn’t invest in large capital expenditures, because you won’t hold the property for long enough to recoup investments.

Investors holding assets for up to 5 years would do everything the short-term investor does, and if they intend to reposition the asset, should budget 2-3 years upfront to plan and execute the renovations. An additional 1-2 years post-repositioning will help recoup capital investments, generate a stabilized higher cash flow, and increase the overall market value of property.

Long-term investments (5+ years) should be highly valuable assets in good locations. These investments should be extremely profitable. If the intention is to hold these assets indefinitely, they warrant strong maintenance for the long-term and consistent capital investment.

Mosaic Fund - We Are Fully Funded!

BENA Capital is pleased to announce that the Mosaic Fund is now fully funded. The Mosaic Fund is a premier debt-free real estate fund that will generate stable rental income streams from multifamily assets in growing markets throughout the United States. The Fund was formed for the purpose of investing in core-plus and value‐added real estate properties, targeting cash flow and reliable dividends over the 4-6 year investment hold period.

Contact Us now to be placed on the waiting list for our next Fund and to receive BENA Capital Insights.

Figuring Out the Zoning for Your Investment Property

At a networking event last week, I was chatting with an investor from Houston who had purchased a 2-acre parcel of land in Southern California. Her real estate agent had sold her on the prospects of subdividing the plot and developing the site - her dream on a blank canvas. She considered the value of homes in the neighborhood and decided the price of the land was a steal. It wasn’t until after the transaction closed and she had dug into the zoning ordinances that she realized the required setbacks, easements, and environment restrictions would render her original plans completely infeasible. And even if the zoning itself were to be ignored, the proper plan approvals and permits would take her more than three years, in the best case scenario.

Most cities have zoning regulations and permitting processes that govern land uses and regulate the form, design, compatibility of development on certain tracts of land (Houston is a rare exception and does not have zoning laws that regulate land use). Whether you are buying vacant land or an existing property, not thoroughly educating yourself on these regulations before a purchase can cripple the viability of your investment and lead to severe “investor’s remorse.”

Getting Started:

Different areas in the city are designated to have different development uses, commonly referred to as “as of right uses” – allowing for schools, manufacturing, offices, apartment buildings, etc. Physical development standards are applied that establish the building’s relationship to property lines, called “setbacks” and “yards,” building height can be limited, as well as the size and total amount of buildable area. Some cities even require developers to reserve special open spaces.

Zoning is typically enforced by City Planning or the city’s Building Department, and you can usually find your site’s zoning designation online on these city websites. Search for the city’s zoning maps, and locate your specific site on the map. Match the pattern/color coded overlay to the map legend, which will give you a zoning code. Then, check this code against the city’s zoning regulations chart for permitted uses and building restrictions.

Do’s & Don’ts

• Do make sure that you work with a real estate agent familiar with local zoning laws, who can help double check your work. Don’t assume that different cities have the same types of zoning restrictions.

• Don’t rely solely on the zoning designation on the MLS listing. Mistakes happen, so always verify the zoning yourself.

• Do understand that you may have to pay for additional environmental tests, depending on your project, and factor this into your timeline.

• Do take utility access into account. (Don’t wait until after the fact to find out that the lot you purchased has no access to city sewer and won’t pass septic inspection.)

• Don’t assume you can have your property easily rezoned. While citizen design review processes can allow for public input regarding zoning, these are typically triggered by larger developments.

Zoning can present key advantages and disadvantages as they relate to the investor's objectives. While you may not have control over all these items, you should always factor zoning and permitting into your analysis and timeline, and develop strategies to address any potential issues. Do your homework and invest wisely.

How to Negotiate on Real Estate Like a Pro

How do you negotiate the best value on a property? Find out what strategies real estate pros use in this Forbes Real Estate Council article: 11 Ways To Negotiate Property Price When The Seller Wants Too Much.

Don't miss BENA Capital Managing Director Kimberly Yeh's tip (#6)!

BENA Capital Announces Multifamily Acquisition in Lexington, KY

The BENA Capital Mosaic Fund is pleased to announce the acquisition of a new multi-family apartment asset in Lexington, KY.

Lexington has one of the nation's most stable economies, benefiting from a diverse and balanced business base. Named one of the best cities for "Businesses and Careers" by Forbes and ranked 10th in a list of America's most educated cities, Lexington has seen rapid economic growth the past few years, especially in the high-tech and life sciences sectors. The city is home to industry leaders such as IBM, OpenText, and the world headquarters of Lexmark. The county is a major health care hub in Kentucky, with the second-most health care establishments and employees in the state, earning the fourth-highest wages. U.S. News & World Report named UK (University of Kentucky) HealthCare as the #1 hospital in Kentucky for the fourth year in a row, and the Markey Cancer Center in Lexington is ranked among the best cancer centers in the nation.

The property is centrally located in downtown Lexington, next to the brand new $250MM City Center, a mixed use development featuring a 12-story office tower, two hotels, and retail. Less than 5 minutes away from the apartment sits the University of Kentucky and the $300MM Lexington Convention Center redevelopment that is scheduled to complete in Spring 2022. All units are currently 100% occupied. We are very excited about the prospects of this property due to its desirable proximity to demand generators, strong cash-flowing history, and the robust investment activity in the immediate vicinity.

The acquisition is the third of BENA Capital’s Mosaic Fund - a Stable Income Fund focused on generating strong rental income streams from core-plus and value-add assets in growing markets throughout the United States.

The Mosaic Fund is currently open to new investors through December 2019. If you are interested in earning stable quarterly dividends, feel free to reach out directly via email or call us at 408-421-8608.

Warm Regards,

Kimberly Yeh
Managing Director - Real Estate Acquisitions

About BENA Capital

BENA Capital manages real estate investment funds, with a central focus on the acquisition and management of residential multifamily assets in growing markets. BENA Capital's funds provide investors with ease of entry, reliable quarterly cash flow, and portfolio diversification. Our proven strategies emphasize sound investing in carefully researched, quality properties that have steady, long-term capital appreciation potential.

Click for Mosaic Fund Overview PDF: Mosaic Fund Overview

Click for Investor Overview PDF: BENA Capital Overview

How To Sell Your Real Estate Investment: Top Five Preparation Tips

This article by Kimberly Yeh, BENA Capital - Managing Director, was originally published via Forbes

Just as important as acquiring a real estate investment is knowing how you are going to exit. Selling a property takes a great amount of knowledge and coordination, and it can take months to prepare and execute. The smartest investors map out an exit strategy for each property they acquire prior to closing on a sale. The sale may be years in the future, and the plan will be reassessed often to take into account the latest market trends, economic health and demand generators, but it is key to know the end game.

Once you decide to sell a property, these are the five most important areas you’ll need to consider to ensure the sales process goes smoothly.

1. Asset Condition: Whether you are doing the work yourself or working with a property management team, make sure the asset is in attractive physical condition. To maximize investment returns, you will want to keep work and expenses to a minimum, but there are several basic items that go quite a long way in attracting buyers. Enhance the property’s curb appeal by landscaping, adding lighting and cleaning all areas. You'll also want to touch up paint; repair any holes, tears or stains in the flooring; and remove clutter and unused inventory. All of these will make for a good first impression during open houses and buyer walkthroughs, especially if you are not planning to stage the property.

2. Stop CapEx: Capital expenditures are designed to produce a future benefit by adding value to an existing asset. This type of work includes new roofing, installing heating or air conditioning units, and purchasing major appliances, for example. As soon as you have decided it is time to sell your investment, you'll want to review all capital expenditures. With the exception of some rare cases, you don’t want to initiate any new capital projects, because you won’t be owning the property long enough to recoup the benefits of investment.

3. The 3 C’s — Codes, Certifications And Contracts: In order for you to sell the property and transfer ownership to your buyer, you’ll need to ensure that the asset is in good standing with the city. Some cities require inspections prior to a sale; others may require rental certificates that must be periodically renewed. Make sure that your property is up to code and has all necessary certificates, as any violations could delay closing. Contracts are legal obligations that, in some cases, may be assigned to the new owner. As such, any existing contracts associated with your asset must be reviewed and presented to the buyer. It is important to plan ahead because in the event your buyer does not want to assume an existing contract, you will need to buy out or terminate the agreement prior to closing.

4. Employees: If you employ a management company or other employees at the property, you will want to be as transparent as possible with them about selling. The sale of your asset could cause the current group to lose their contract. By proactively addressing the sale with your employees or contractors, you control the messaging. Keep them informed of the timeline, and assuming that you've had a good relationship with them, make sure they understand that you would contract with them again should you acquire a new property in the area, and that you would not hesitate to recommend them to the buyer and others in your network. It will help to maintain the relationship and facilitate a smoother transition.

5. Taxes, Taxes, Taxes: Good news: You’ve made a sizable profit, and now you’re ready to cash out. Bad news: Selling your investment property could lead to a significant tax hit. When preparing to sell, engage a tax professional to talk through all your options for offsetting your tax burdens. Depending on your investment goals, income bracket and hold time, strategies may include tax-loss harvesting to deduct losses from capital gains or leveraging a 1031 exchange to defer taxes into the future. Developing a game plan before you sell will help you understand what you can do to maximize your investment profits.

You will need to consider each of these areas prior to selling an investment asset. Use this as a tool to create your own checklist of important action items and issues that need to be addressed. It's important to remember that selling your property is a complicated process, but with the right preparation and mindset, you'll be well-equipped to take on and overcome whatever roadblocks come your way.

Signs To Look For When Considering Investments In High-Potential Neighborhoods

Before thinking of investing in a property, most real estate investors need to ensure they know the lay of the land — literally and figuratively. Gaining insight into what changes are coming for a market can mean the difference between finding a long-term investment, or discovering that a property isn't worth half what you paid for it.

So what signs should real estate investors look for when looking in specific neighborhoods or regions? Which factors impact properties with high-potential values and how can investors find out about them?

BENA Capital’s Yousif Abudra and other members of Forbes Real Estate Council open up about the signs they look for when investing in certain regions with potentially high values.

Pay Attention To City Planning/Zoning Meetings

To be ahead of the curve, you can't wait until you see the cranes and construction trucks. Sign up for city planning/zoning update meetings, which are posted online for many municipalities. These will tell you where the next new major developments will be, giving you plenty of time to acquire and improve adjacent properties just before values increase. - Yousif Abudra, BENA Capital, LLC

To read more about what they look for, check out the original Forbes Council post here.

Smarter Investing For Today's 'Risk-Averse, On-Demand' Generation

At a leadership conference last year, I heard the term “on-demand generation” used to describe American consumers today. Regardless of whether they are a boomer, Gen Xer or millennial, members of this “generation” are not bound by birth dates, but by the way people today consume products and services. We are a generation powered by on-demand media like Netflix, on-demand food delivery like DoorDash and on-demand transportation like Lyft. As a consumer, you can now marathon-watch entire seasons of your favorite TV show, order dinner without leaving the couch and then track where your food is — as it’s being made and picked up and then street by street as it’s getting to your front door. You can request a ride home with a click of a button and know that the driver is two minutes out so you don’t have to step outside in the cold until the car turns the corner.

This on-demand generation also happens to be extremely risk-averse. At our fingertips, millions of firsthand testimonials exist on Yelp, TripAdvisor and Amazon to take the risk out of our purchasing decisions. Before we even set foot in a restaurant or hotel, we know what’s on the menu and which rooms have the best view. There are even free browser extensions you can now install on Google Chrome and Firefox to compare Amazon products. Specs and ratings are listed side by side, including a YouTube video review and the same item’s price on eBay.

Over the past decade or so, this way of living has become so deep-seated in our everyday lives that it’s impacting not only how we consume products and services but also how we approach investing our money. Today’s “risk-averse, on-demand” generation of investors wants control, convenience and capital preservation.

Up-Down, Up-Down

Stock market investors have been on a roller coaster ride. After seeing substantial gains in 2017, the FTSE All-World index, which tracks more than 3,000 stocks in 49 countries across different market sectors, plunged 12% in 2018. At home in the United States, this stock market volatility manifested as a $3.73 trillion tumble in household net-worth in Q4 2018, giving investors PTSD flashbacks of the 2008 global financial crisis. While markets seem to have rallied in 2019, many are left speculating when the ax will drop next, especially as tariff threats hover over recent U.S.-China trade negotiations. This “up-down, up-down” instability has Americans, on average, holding 58% of their assets in cash. But there is a solution for investors seeking more stable investment opportunities and more control: real estate.

Controlling Risk With Real Estate

Companies can go bankrupt and stocks can fall to zero, but there will always be inherent value in land and in tangible assets. Real estate is uncorrelated to stocks and bonds, providing opportunity to invest large sums in a very short period of time without singularly moving the market and raising prices. Strategic diversification protects your capital investment, and if you’re able to correctly identify the phase each market is currently in, good investments can be found, whether the market is in a recession or expansion period, by adapting your investment criteria and exit strategy. You can effectively control risk by doing homework on the local real estate market dynamics and assessing economic trends, future developments and demand generators.

Increasingly popular among the on-demand generation is the income enhancement strategy. This strategy is useful to investors seeking stable, long-term cash flows and high risk-adjusted returns in a real estate portfolio. By selecting leasing and property management talent or retaining a private real estate investment firm with a superior talent network and history of exceptional tenant relations, investors reap the rewards that accompany an optimized asset management strategy without the headaches of having to manage the properties themselves. Typically, an experienced real estate investment firm implementing this strategy will utilize a rolling approach to stabilize cash flows and minimize business cycle risks. Aging properties are slowly refreshed with new ones — capital improvements are made, vacancies are reduced, rents are raised while being cognizant of managing tenant turnover and economies of scale are achieved — yielding stable annual returns.

There is no such thing as a 100% guarantee when it comes to investments, but there is a next best thing — options like real estate — where there’s intrinsic value in the assets. This allows investors to minimize risk by being extremely selective and adapting their strategy to market demands and economic trends, and there’s the ability to exercise control over how assets are managed. Whether you are chasing dividend yield, looking for low-volatility growth or seeking safe haven from market fluctuations, allocating a slice of your investment portfolio to well-managed, quality real estate is a powerful tool for investors to build wealth, generate consistent cash flow and hedge against inflation and vulnerability in the stock market.

Seven Tips To Remember When Establishing Real Estate Goals

Real estate can be a tricky industry. Success as an investor, developer, or broker requires one to pay close attention to cyclical market trends, both on the local and global level. At the same time, you must also consider bigger industry changes that stem from evolving technologies and consumer expectations.

BENA Capital’s Kimberly Yeh, Managing Director of Acquisitions, was featured in a Forbes Expert Panel discussion highlighting what to keep in mind when planning your real estate goals.

Sign up for monthly BENA Capital Real Estate Insights and Offering information using the Contact form below.

About BENA Capital

BENA Capital manages real estate investment funds, with a central focus on the acquisition and management of residential multifamily assets in growing markets. BENA Capital's funds provide investors with ease of entry, reliable quarterly cash flow, and portfolio diversification. Our proven strategies emphasize sound investing in carefully researched, quality properties that have steady, long-term capital appreciation potential.

Click for Mosaic Fund Overview PDF: Mosaic Fund Overview

Click for Investor Overview PDF: BENA Capital Overview

BENA Capital Announces Multifamily Acquisition in Rio Rancho, NM

The BENA Capital Mosaic Fund is pleased to announce the acquisition of a multi-family apartment asset in Rio Rancho, NM.

Only 20 minutes north of Albuquerque, Rio Rancho is the largest city in Sandoval County. It was named the “Best Place to Live in New Mexico” by MONEY’s Best Places to Live in Every State. One of the fastest expanding cities in New Mexico, it has grown over 15% since 2010. That growth is expected to continue steadily over the next two decades.

Rio Rancho is a thriving economic hub, and the area is supported by a diverse mix of industries, including tech & software, healthcare, education, manufacturing, customer service centers, retail and tourism. Among the high-profile employers are Intel, US Cotton, HP, PCM and Lectrosonics.

In recent news, Intel announced it will move technology development for its 3D XPoint memory technology to its facility in Rio Rancho. The move includes the addition of over a hundred jobs at Intel’s Rio Rancho site. Perhaps the most notable of newcomers to the area is Netflix, who inked a billion dollar deal to open a U.S. production hub in Albuquerque late last year. The deal is expected to bring an additional 1,000 jobs per year to the state.

The property is centrally located, less than 15 minutes away from some the city’s largest employers — the Intel and HP campuses, and the award-winning UNM Sandoval Regional Medical Center. It is currently 100% occupied. Over the next quarter, BENA Capital will work with local property management to make strategic capital investments to improve the property and enhance operating income. We are excited about the prospects of this property due to its desirable proximity to demand generators, strong cash-flowing history, and continued investment in the immediate vicinity.

The acquisition is the second of BENA Capital’s Mosaic Fund - a Stable Income Fund focused on generating strong rental income streams from core-plus and value-add assets in growing markets throughout the United States.

The Mosaic Fund is currently open to new investors. If you are interested in earning stable quarterly dividends, feel free to reach out directly via email or call us at 408-421-8608.

Warm Regards,

Kimberly Yeh
Managing Director - Real Estate Acquisitions

About BENA Capital

BENA Capital manages real estate investment funds, with a central focus on the acquisition and management of residential multifamily assets in growing markets. BENA Capital's funds provide investors with ease of entry, reliable quarterly cash flow, and portfolio diversification. Our proven strategies emphasize sound investing in carefully researched, quality properties that have steady, long-term capital appreciation potential.

Click for Mosaic Fund Overview PDF: Mosaic Fund Overview

Click for Investor Overview PDF: BENA Capital Overview