American Apartment Owners Association

Housing affordability reaches 10-year low

Mon, 08/13/2018 - 9:39am

Housing affordability has now reached a 10-year low in the second quarter of 2018, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index.

“Tight inventory conditions and rising construction costs are factors that are holding back housing and putting upward pressure on home prices,” NAHB Chairman Randy Noel said. “Meanwhile, tariffs on Canadian lumber imports into the U.S. are further eroding housing affordability.”

Homebuilders are struggling to ensure pricing does not outpace expected gains in wage growth, according to Noel.

In fact, only 57.1% of new and existing homes sold between the months of April and June were affordable to families earning the U.S. median income of $71,900.

This is the lowest reading since mid-2008 and is down from the 61.6% of homes sold in Q1 that were affordable to median-income earners, according to the report.

“Rising household formations, along with a strong economic expansion in the second quarter that has fueled job growth, will support housing demand in the second half of 2018,” NAHB Chief Economist Robert Dietz said. “However, growing trade war concerns and the expectation of higher mortgage rates are additional headwinds negatively affecting housing affordability.”

In Q2 of 2018 the national median home price jumped from $252,000 to $265,000, which is the highest quarterly median price in the history of the HOI series. Average mortgage rates also jumped more than 30 basis points from 4.34% in Q1 to 4.67% in Q2.

Notably, New York was home to the nation’s most affordable major and smaller markets.

In Syracuse, New York, 89.1% of all new and existing homes sold in Q2 were affordable to families earning the area’s median income of $74,10. In Elmira, New York, 97% of homes sold in Q2 were affordable to families earning the median income of $71,000.

Not surprisingly, California was home to the nation’s least unaffordable markets, including Los Angeles, Long Beach, Glendale, Anaheim-Santa Ana-Irvine, San Jose-Sunnyvale-Santa Clara and San Diego-Carlsbad.

Specifically, San Francisco was the nation’s least affordable major market for the third consecutive quarter. In this city, only 5.5% of homes sold in Q2 of 2018 were affordable to families earning the area’s median income of $119,600.

 

Source: housingwire.com

 

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4 ways real estate can turbocharge your retirement income

Mon, 08/13/2018 - 9:33am
  • There are a number of real estate plays that can boost your retirement income.
  • They include, but are not limited to, real estate investment trusts, rental-property purchases and shares in crowdfunding ventures that redo houses or buy commercial property.
  • But while there are great opportunities, there are also risks, and investors must be willing to keep money tied up and weather real estate dips.

It’s not unusual: An investor five or 10 years from retirement worries the nest egg will come up short, wants a boost over the finish line but already has a typical lineup of stocks and bonds.

So what else could fuel the afterburners? Would real estate do the job?

True believers recommend a range of possible real estate plays, from real estate investment trusts to rental-property purchases to shares in crowdfunding ventures that redo houses or buy commercial property. The risks and opportunities run the gamut.

“Among all the private investment opportunities, real estate typically outperforms other asset classes and is usually less volatile,” said Brian Dally, CEO and co-founder of Groundfloor, a firm that lends investor money to house flippers and other developers. “In addition, people are familiar with the idea of homeownership, so real estate investing isn’t overly complicated to comprehend.”

“Real estate can be a great asset class and diversification tool,” said Jeffrey Feinstein, a vice president with Lenox Advisors in New York City. “It’s typically not directly correlated to the [other financial] markets and can provide income from rentals or refinancing. Hold period is around four to 10 years, so it can be looked at as a long-term, retirement-friendly strategy.”

The median price of single-family homes hit $318,000 in the first quarter of 2018, up from $257,400 in the first quarter of 2007, overcoming the losses homeowners suffered in the Great Recession, according to Bureau of Census data.

Yet after nine straight years of real estate gains, there are mounting concerns that residential real estate is nearing another bubble, and the national average does not reflect a rise everywhere.

Feinstein also noted that the investor must be willing to keep money tied up and be able to weather real estate dips — that median dropped to 208,400 in early 2009, for example. “You don’t have access to the capital at all times, unlike a brokerage account, and there’s often market risk you can’t control,” he said.

Here is an overview of the most common ways real estate can boost your retirement income.

Tapping equity in your home

The most straightforward way to fund retirement with real estate is to tap equity in a home that is all or mostly paid for. Downsizing means selling the current home to buy a cheaper one and pocketing the difference. Moving might also reduce property tax, maintenance and utility costs. For a couple filing a joint return, up to $500,000 in gains on a home sale are free of federal tax.

Currently, the Treasury Department is studying whether it can bypass congressional approval to index long-term capital gains to inflation. This means that the appreciation in an asset’s price that could be attributed to inflation would not be taxed. Homeowners whose houses have surged in value over the years could benefit from such a tax cut.

“While there may be many reasons to consider downsizing your home, a reduction in expenses is usually the top of the list,” said Kurt Rossi, CEO of Independent Wealth Management in Wall, New Jersey. “Downsizing proceeds may also allow you to pay down other debts, replenish cash reserves or even provide a much-needed boost to your retirement savings.”

Homeowners can also tap equity with a home equity loan or cash-out refinancing, which is taking out a new mortgage for more than you owe on an older one. Both approaches typically require an income to qualify and require the homeowner to make monthly payments.

To escape that, the homeowner age 62 or older can get a reverse mortgage, borrowing against the equity in the home. Instead of payments, the interest charges are added to the loan balance and paid after the home is sold by the borrower or heirs. The lender cannot force a sale or call the loan so long as the property is kept up and taxes and insurance are paid, even if the debt grows greater than the home’s value. The homeowner or heirs are never on the hook for more than the home fetches in a sale, so other assets are protected.

Proceeds can be taken as a lump sum, credit line or monthly payments and are guaranteed to continue for the borrower’s life with no income tax. Older homeowners can borrow more than younger ones, since there’s less time for the debt to grow to more than the home is worth.

But reverse mortgages can sometimes create trouble and might not be a good fit for everyone. Fees can be an obstacle, and interest, and interest on interest, can drain any equity that might otherwise be left to heirs. Also, the loan must be paid off if the borrower moves, even if it is to an assisted-living facility. As the mounting debt erodes equity, other options, such as downsizing, become less feasible. Many seniors have found themselves in trouble or at odds with children hoping for an inheritance, because they didn’t understand these loans well enough.

Steve Irwin, the executive vice president of the National Reverse Mortgage Lenders Association, said U.S. homeowners 62 and over have $6.8 trillion in home equity that can help with retirement expenses. “The numbers tell a reassuring story about housing wealth in an era when large numbers of retirees and near-retirees fear running out of money before the end of their life,” he said.

REITS

Publicly traded real estate investment trusts are like mutual funds that own commercial, residential or industrial property, or mortgage securities, instead of stocks and bonds. They pass to investors rental income, gains from properties that are sold, or payments received on loans in mortgage-backed securities.

REITS can produce capital gains, though steady dividend income is usually the main attraction. They avoid taxation at the corporate level by passing at least 90 percent of earnings to shareholders.

At the end of 2017, there were 220 “equity” REITS, and 41 mortgage REITs – with total assets of just over $1 trillion, according to NAREIT, the industry trade group.

Some REITs pay pretty well. Ares Commercial Real Estate Corp. (ACRE), for example, yields just over 8 percent.

But as with many other fixed-income investments, REIT prices can fall when rising interest rates make older investments less generous than newer ones. While this can be offset as the REIT raises rents on tenants, and as newer mortgage securities offer higher yields, there may be a lag, and experts say these assets are best for investors who can wait out the downturns and are diversified with other types of assets like stocks and bonds.

“For a passive real estate investor, the best investment would be in a publicly traded REIT index or [REIT] mutual fund with low fees,” says Jeremy Salzberg, a partner at Sugar Hill Capital Partners, a private equity real estate firm In New York City.

REITS are traded like stocks and therefore are very easy to buy and sell, a chief advantage over owning investment property directly. They are professionally managed, and since the fund owns numerous properties it is diversified. But you don’t have the control you would by owning a property yourself.

Brian Finkelstein, CEO at Broad Financial in Monsey, New York, recommends buying REITS in tax-favored accounts like IRAs, ROTH IRAs or 401(k)s to avoid annual income tax on dividends that are reinvested, and he says REITS are not especially good for investors seeking long-term growth because REIT share prices generally don’t grow very fast. Income-oriented investors can start receiving interest earnings right away, as payouts typically come every quarter.

Direct ownership

Many advocates swear that owning investment property — a business, residential building or vacation rental — is the way to go. At the modest end, it could involve renting out a spare bedroom on Airbnb or buying a vacation rental or long-term rental. At the other extreme it could be the purchase of an apartment building.

Mark Painter, founder of EverGuide Financial Group in Berkeley Heights, New Jersey, said, “The best way to magnify real estate returns to boost your retirement is the use of income-oriented real estate and leverage. He recommends borrowing at least half the cost of the investment property. That would add some risk but double any profit on the amount invested.

Borrow half of a $500,000 purchase, for example, and a 10 percent gain in property value would be a 20 percent gain on your initial investment. But the same math means a 10 percent price decline would be a 20 percent loss of invested capital. And borrowing means shouldering loan payments, which can erode annual earnings and be tough on a retiree with limited income.

A good property, he said, would earn at least 6 percent a year on the investment, as rents and other income exceed costs like mortgage, maintenance and taxes. “Real estate is all about location, location, location, and if you can find a property that has good cash flow — at least 6 percent — then buying an individual property is the best bet and can help you weather any pitfalls that may face real estate as a whole.”

Investors can avoid annual tax by setting up a limited liability company within a self-directed IRA, including a feature called checkbook control to streamline transactions, Finkelstein said. “That means that there is no middleman to go through in order to access your retirement funds,” he says. “If you want to buy real estate with your IRA, just write a check to the seller. If you want to buy supplies for renovations, just write a check at your local hardware store. … Having access to your self-directed IRA via a checking account allows you to effectively cut out the fees and the aggravation of third-party processing.”

Among the chief benefits of direct ownership is having control. But that can also mean doing a lot of work and having many eggs in one basket.

Crowdfunding

In recent years a number of firms have started to offer investors chances to buy shares in specific real estate ventures, such as flipping individual homes or fixing up business space through crowdfunding platforms like Groundfloor, with a minimum investment of $100, or RealtyShares, with minimums as low as $5,000, depending on the project.

The investor can select from among a list of properties vetted by the investment firm, with estimated income and capital gains disclosed on the website but not guaranteed. It is an alternative to finding an investment property yourself, and the investor need only buy a small share of an individual project, making it possible to spread your money among various projects to reduce risk.

“Crowdfunding involves the pooling of funds by a group of investors into a real estate project,” explains Ralph DiBugnara, president of Home Qualified, a website for real estate investors. “Investors earn money first through rental income and then ultimately when the property sells. Originally these platforms were only offered to experienced investors, now they have been expanded where anyone can get involved.”

While REITS leave the property selection to the fund managers, crowdfunding allows investors to pick and choose themselves, he says. But he notes that crowdfunding investors are often required to commit their money for five years or longer, which could be a problem if a better investment came along or the market turned sour.

“It is very new and untested,” DiBugnara says. “So we don’t have a lot of historical data and it will be a while before investors can really analyze long term returns.”

These platforms vary widely in how they screen potential investments, in terms like minimum investments and procedures for making withdrawals, so experts urge investors to look carefully at rules and track records, and to avoid putting too many eggs in one basket.

Source: cnbc.com

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How to Structure your Business to Grow without Growing Pains

Thu, 08/09/2018 - 2:56pm

Today on The Property Management Show, Robert Locke is joining us to talk about how to structure your business without growing pains. This probably sounds impossible, but Robert is going to help us elevate the conversation and explain some BIG IDEAS.

Why We Should Learn from Robert Locke

Robert started his property management company 35 years ago with 50 units. He is candid about having made all the mistakes possible in the first few years. But, he sold his large, very successful and immensely profitable property management company to a Fortune 500 enterprise.

That sale came with a nondisclosure agreement. He couldn’t speak or teach for a while after the acquisition. Today, he’s finally able to deliver his knowledge to the world, and we’re humbled that he chose to make his debut on The Property Management Show.

The Things You Think are Critical May Actually be a Hindrance

Robert started with five rental houses in 1980. He began selling properties to investors who said they would buy the homes if Robert promised to manage them. So, Crown Realty and Management was born.

After 10 years of steadily growing his business, it became clear that at every level of growth, it was necessary to let go of some of the things that had seemed so sacred and necessary and important to running a business.

When you go from 200 properties to 300 properties, you learn some lessons.

When you go from 500 to 600 properties, you learn some more lessons.

Most property managers build a system that works for where they are today. Whether that’s 50 properties or 500; there’s a tendency to design a structure that works for what you have right now. But then, if you double in size, it’s easy to crash and burn.

A critical mistake that will hinder your growth is holding onto the things that you think are essential to your management model. What works for you at 200 properties will not work for you at 400 properties. Many of the systems that were working perfectly will hold you back.

When Systems Hinder Growth: Some Examples

One property manager had a sales model where he gave every owner and every tenant his personal cell phone number. His pitch was that if people didn’t like the answer his staff gave them, they should call him directly.

This works when you manage 50 or even 100 properties. But, it won’t scale. It would be impossible to get bigger than 200 properties because you cannot have 400 owners with your cell phone number. Beware of building things into your model that will prevent you from going to the next level.

Another property manager in Savannah was managing 200 units. His model was to send the full rent to the owners every month and then invoice those owners for the management fee. That’s $60,000 of accounts receivable every month, and an accounting firm had to be hired to handle the invoicing and collecting.

Obviously, that’s not scalable. You cannot go from 200 to 500 properties by invoicing your owners every month. It became a hindrance, and the owner of the property management company had to give that up and begin taking the management fee from the rent that was collected. It required some conversations and some strategizing, but changing the system was absolutely necessary to grow. Now, that company has doubled in size and the wheels haven’t come off the business. 

Everyone builds things into their systems that impede growth, and those of you who have gone to the next level can spot them. You know what you had to give up once you move from 300 properties to 500 properties. But, at 300 properties, you don’t necessarily see it so clearly. 

The Mac Daddy of Slow Growth: Are you an agent or an Agent?

A lot of people who move into property management come from real estate sales, where you’re an agent (small a). They do what the owner asks them to do. The owner is in charge, and the agent executes on the owner’s directive. It makes sense in sales, but it doesn’t translate with property management.

In property management, agents think that they have to confer with an owner before approving an application. They think they need to call the owner before handling maintenance or dealing with an eviction. They think that because it’s what you do in sales. You are facilitators and scribes. You don’t make decisions and you collaborate on everything.

You have to change your thinking and become an Agent (big A).

The number one hurdle preventing property management companies from getting to the next level is the idea that you have to collaborate with your owners on every decision.

You don’t.

An Agent gets authority through the management agreement to approve and deny applicants, to handle maintenance under $500, and to file an eviction when it’s time. You can handle the wobbly deck and deal with the deadbolt that’s not working. You can replace a dead shrub, and you can do all these things without calling the owner first.

Get a spending limit and stop collaborating with owners all the time. It’s stagnating you and preventing you from going to the next level. It’s consuming your staff’s time.   

Part of the problem is that property managers often teach owners to behave this way. You have to educate your owners and earn their trust.

If you’re not familiar with Steve Crossland, listen to his podcast with Jordan Muela on The Profitable Property Manager. He is extreme about being a Big-A Agent. He insists that owners trust him to make strong decisions and to enforce them. His maintenance limit is $500, but he is very clear with his owners. If the air conditioning fails, he is going to send his tech to replace it. There’s no collecting bids and there’s no making phone calls. The tenant will not be left suffering in 105 degree heat. Not everyone is okay with that, but Steve will only work with owners who accept it.   

Owners who want to be more hands-on may not want to work with you. But, if you want to grow, you cannot co-manage. You cannot be micromanaged. You are the expert. You are the authority. Don’t waste your time collaborating with owners who don’t have the same skill and training as you.

Too many property managers are worried about losing an owner. This hinders them from raising fees or offering extra services or doing other things that will make them money. One property manager had 400 owners and he introduced a new fee that was a couple of hundred dollars per year. He lost five owners, but he made $75,000 extra that year on his remaining owners.

Don’t structure your business based on the fear that you might lose an owner.

Adopting a Formula for a Nickel-and-Dime Business

There’s an important formula that you need.

Here’s the truth: Property management is a nickel-and-dime business. You’re not chasing $5,000 checks. You’re chasing $80 dollars a month from your clients.

All nickel-and-dime businesses require volume.

To create volume, you need speed.

What does speed look like?

It’s approving applications without calling the owner. It’s handling maintenance under $500 without collaborating with the owner. Those things create speed. Processing an application and signing the lease without the owner and moving the tenant in on your own creates speed, which creates volume.

You need speed for scalability. If you have to collaborate with your owners, you defeat speed and you can’t scale.

When you’re collaborating with owners, you’re driving a motor home that’s clunky, slow, and guzzling gas.

When you let that go, you can drive a Ferrari, which is fast, racy, and efficient.

If your owners hate it, they can let you go. And that will be okay.

Educating Your Owners Starts with the Management Agreement

If you’re constantly blogging and communicating with your owners through newsletters and other methods of communication, you’re going to be able to set the expectations and earn the trust you need to follow this formula and claim your authority as the property management professional.

The process of owner education starts with the management agreement.

Build a management agreement that isn’t sluggish and slow. Have the right language that tells owners they can trust you to make good judgments.

Owners don’t know what’s going to be in a management agreement. They do not spread out three different management agreements and see how others do it. If your contract sounds logical and intelligent, they will sign it.

Growth Strategies: Remote Lockboxes and Outsourcing

If you want to grow, you need to stop meeting your tenants at the property to move them in. Once you get to a certain level, it becomes chaos and takes up too much time.

Remote move-ins are easy and efficient.

Let go of the personal move-in process and set up a system where you can send the lease via DocuSign and tenants can go onto their portal to pay the rent and the security deposit. You cannot scan them a key, but you can create a lockbox mechanism that’s controlled remotely.

If you think you have to be there when they move in, you’re not thinking about speed, and you won’t be able to grow.

Remote showings are also essential. You don’t actually need to have an agent there to show prospective tenants which room is the living room and which room is the kitchen. They can take a look around themselves and contact you with any questions.

Society today is becoming less personal. There’s a tension there, and it’s easy to worry about losing the personal relationship with prospective tenants. But, there are benefits. Think about fair housing. Remote showings will do a better job of keeping you compliant.

The personal relationship is important in the sales process. You’re showing off the home. It’s a big ticket item. With rentals, tenants don’t need you there to help them make their decision.

Some property managers really want to keep their process personal. They want to shake hands and fawn over the kids and pet the dog. This is fine if you want to stay small and have relationships. It’s just not scalable, and you won’t be able to grow past a certain point.

Outsourcing is the current catnip in the NARPM world. If you want to grow, embrace outsourcing.

Virtual assistants cost less and they get a lot of your administrative work done. They can handle phone calls and answer questions. This is critical not because it makes you more money but because it holds your costs down. It’s a critical element to becoming scalable and profitable.

Property Management Assets: Employees and Tenants

Virtual assistants allow your staff to play a more strategic role in servicing your owners and your clients. This is important because turnover – whether it’s employees or tenants – will kill your ability to grow.

You’ll make a lot more money from a tenant who is in the property for five or 10 or even 20 years. You’ll hear a lot of property managers say we work for the owner. But, if the tenant is happy, the owner is happy. 

The longer you keep tenants, the longer you keep owners. Make sure your tenants are feeling valued, and make sure your management agreement doesn’t renew with the lease, but with the tenant’s departure.

There’s much more in Robert’s course that can help property management companies grow without growing pains. If you want to dig in deeper, check out his online workshop at: 

There is a button with courses that are both on-site and online. There’s even a series you can subscribe to that’s completely free and available to everyone.

Source: fourandhalf.com

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Governments Target Rental Application Fees

Wed, 08/08/2018 - 11:44am

If you own rental property you will want to listen to this one.  In a recent episode of the Rental Property Owner & Real Estate Investor Podcast, Brian Hamrick discusses rental application fees with RPOA’s Executive Director Clay Powell about recent moves by the Grand Rapids, Michigan City Council to institute a rental application fee ordinance.  This is an issue that has ramifications nationwide and affects landlords, property managers as well as the people they’re trying to serve. It is about property rights and could actually inhibit the ability to provide affordable & safe housing to those that need it most.

“As tenants find it increasingly difficult to locate and afford housing, those communities and their elected representatives are pointing the finger of blame at landlords, investors and property management companies, and looking for ways to legislate our behavior in order to solve this problem.”

 

Source: realestateinvestingtoday.com

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Freddie Mac to lower financing costs for landlords who cap rent rises

Wed, 08/08/2018 - 11:29am

Freddie Mac, the country’s largest backer of apartment loans, is rolling out a new program that will offer lower-cost financing to owners who agree to cap rent increases for the life of their loans.

The initiative acts similar to rent control—which has been gaining traction in many parts of the country—by keeping units in private hands and controlling the rate of rent increases. But it comes with less political baggage because it is voluntary.

“Maybe there’s a way we can help change incentives,” said David Brickman, an executive vice president at Freddie Mac FMCC, +0.32%   and head of its multifamily division. “We can provide an economic basis for private, profit-oriented developers to pursue a strategy where they didn’t raise rents by quite as much.”

The program, which is set to be announced Tuesday and begin immediately, will be available all over the country. Brickman said he hopes hundreds of properties will take advantage of it.

The initiative comes at a potentially appealing time for real-estate investors who are facing a slowing rental market. Freddie Mac will provide mezzanine debt—which is more risky but pays a higher interest rate than senior debt—at below market cost.

 

Source: marketwatch.com

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Investing in a Vacation Rental Home? Start at the Beach

Wed, 08/08/2018 - 11:20am

The advent of online rental firms like Airbnb has changed the way many people think about vacations. Renting a vacation house for a week or two offers good value and doesn’t tie people to a single second home.

While renting a house at the beach or in the mountains for a vacation has been around for at least decades, the number of rental properties in these locations is growing. If you are considering purchasing a vacation home to use as an investment, you want to get the best return you can for that investment.

Vacation rental manager Vacasa has fashioned a list of the top 25 U.S. locations for buying a vacation rental property. The firm analyzed historical home sales in high-density vacation rental markets then factored in the gross rental income less typical operating costs for vacation rental properties in each given region. By comparing each region’s net operating income with the cost of buying a home, Vacasa created a picture of each vacation rental market’s aggregate capitalization rate, or cap rate*, and used it to order its list of the top 25 vacation rental markets.

The firm also offers these tips if you are shopping for a vacation home:

It’s a great time to buy Even though the word is out and more people than ever before are investing in vacation rentals, there are still plenty of affordable areas to buy a vacation home.

More markets are extending their booking seasons Growing rental demand and improved guest experiences such as online booking and hotel quality amenities have led to many vacation rental markets extending their seasons. As booking seasons expand, so does occupancy, effectively increasing revenue for vacation homeowners. Buying low in a 1-2 season market that shows potential to become a 3-4 season market is likely to pay off down the road.

Going big can pay off To maximize [return on investment], consider investing in large vacation homes that make good family rentals, but don’t have much demand as primary residences. For example, seven-bedroom homes make great income-generating properties, but there’s little demand for these homes because seven-bedrooms is more than most families need as a primary residence.

Here are Vacasa’s top 10 markets along with the median home sales price and Vacasa’s cap rate. Visit the firm’s website for the full list of 25 top markets.

Forgotten Coast, Florida >Median price: $336,900
>Cap rate: 9.6%

Smoky Mountains, Tennessee >Median price: $231,100
>Cap rate: 8.1%

Kissimmee, Florida >Median price: $253,400
>Cap rate: 7.1%

Myrtle Beach, South Carolina >Median price: $251,000
>Cap rate: 6.9%

Hilton Head Island, South Carolina >Median price: $423,500
>Cap rate: 6.8%

Emerald Coast, Florida >Median price: $397,400
>Cap rate: 6.5%

Ocean City, Maryland >Median price: $291,100
>Cap rate: 6.5%

Okemo/Ludlow, Vermont >Median price: $273,600
>Cap rate: 6.1%

North Kona, Hawaii >Median price: $543,900
>Cap rate: 6.1%

Lake Chelan, Washington >Median price: $388,600
>Cap rate: 6%

 

Source: 247wallst.com

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The Advantages Of Investing In Single-Family Rental Houses Vs. The Stock Market

Wed, 08/08/2018 - 11:18am

I started my financial career in banking, eventually progressing to insurance and then to financial advisor over a 24 year career — 21 years as a Series 6 and then Series 7 securities licensed representative. In that span of time, I developed a unique perspective regarding the advantages of the rental market since I owned rental houses and also stocks and mutual funds in my investment portfolio.

First, it should be said that having IRAs, 529 plans for children and 401(k) plans are all excellent vehicles to save for the future. Most investors are limited by the options they are offered. This is true particularly for 401(k) plans where the investor cannot take advantage of owning residential real estate. And although there is an exception for self-directed IRAs, it has limitations — the balance of the account being a notable one.

On the other hand, the advantages of investing in real estate are numerous. First, one advantage of owning rental houses is that you can use leverage of five-to-one compared to the two-to-one in stocks. For example, if an investor buys a $100,000 house, he or she can do so with an investment of $20,000 financing the balance of $80,000 thus owning $100,000 of real estate. Conversely, an investor who owns stocks can invest (“leverage”) the same $20,000 and borrow $20,000 from the brokerage firm where they maintain an account or from a bank who will accept that as collateral.

Both examples involve investing $20,000. In the real estate scenario, the investor has obtained a $100,000 asset. The stock investor will have $40,000 of stock or mutual funds. If both increase in value — let’s say 5% the first year — the real estate investor has made $5,000, while the stock investor has made $2,000. That is significantly more for the real estate investor on the same $20,000 investment. Compound this over 20 or 30 years and it could account for a difference of tens if not hundreds of thousands of dollars.

The second advantage of owning rental properties is that the investor can take depreciation starting the first year, and doing so over time can reduce the tax burden in April because of the IRS’s treatment of rental property. Stocks and mutual funds cannot be depreciated to lessen the tax burden. However, they can be in accounts that are tax-deferred. Rental properties grow tax-deferred as well.

The third reason, and for many the biggest reason, is that people can touch and feel real estate. It is tangible. Some investors want to see their houses with their own eyes. They want to work on these properties to improve the value and positioning that asset, generating greater yields through increased rent. As a rental house increases in value, the owner can “harvest” profits by taking out a new loan or refinancing, thus cashing out. This new money can be used to purchase other houses, increasing the value of the portfolio and creating a higher and larger return. If this process is utilized every few years an investor could own five, six or even 10 rental houses after making one initial purchase. Remember, $100,000, $200,000 or even $300,000 of real estate only requires an attritional $20,000 to $40,000 investment.

Regardless of what individuals believe or chose to do, eventually single-family rental homes provide the small investor the ability to diversify and deliver sold gains that may yield significantly larger profits than alternative investments.

 

Source: forbes.com

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Half of U.S. homes are now more valuable than before the real-estate bubble burst

Wed, 08/08/2018 - 11:15am

There’s a split emerging in the U.S. housing market: Some are becoming more valuable than ever, while others struggle to emerge from the financial crisis.

More than half of the homes nationwide are now more valuable than their pre-recession peaks, according a report released Thursday by real-estate website Zillow ZG, +4.21% The national median home value is now $217,300, an increase of 8.3% on the year and 8.4% above the bubble-era peak. In 21 of the nation’s 35 largest markets, the median home value is now at an all-time high.

Driving much of the home value appreciation nationwide is a reduction in the number of homes available on the market. Inventory contracted 4.8% over the past year. Indeed, the tight supply of homes for sale has contributed to what some have called the most competitive home buying season on record.

Some markets have rebounded faster than others post-recession. In seven of the country’s largest housing markets — Dallas-Ft. Worth, Seattle, Denver, San Antonio, San Jose, Austin and Portland, Ore. — more than 95% of homes are worth more than the pre-housing boom peak.

Denver has experienced a particularly notable rebound: The median value is now $397,700, or 65.5% higher than its previous peak in 2006, and more than 99% of homes are more valuable than they were in the bubble years.

Metropolitan areaShare of homes worth more than pre-recession peakMedian home value (June 2018)Year-over-year change in home valueUnited States50.4%$217,3008.3%New York, N.Y.28.5%$429,3006.7%Los Angeles-Long Beach-Anaheim, Calif.64.4%$646,3007.6%Chicago, Ill.14.6%$220,4005.8%Dallas-Fort Worth, Texas97.7%$229,40011.6%Philadelphia, Pa.35.9%$228,1005.9%Houston, Texas97%$198,6005.8%Washington, D.C.22.1%$399,5004.2%Miami-Fort Lauderdale, Fla.9.6%$272,9007.7%Atlanta, Ga.64.3%$204,60011.6%Boston, Mass.83%$455,6007.2%San Francisco, Calif.85.8%$953,60011%Detroit, Mich.32.5%$154,9009.7%Riverside, Calif.6.5%$356,8007.4%Phoenix, Ariz.12.5%$254,7008%Seattle, Wash.97.3%$492,70011.4%Minneapolis-St. Paul, Minn.61.3%$261,3007.6%San Diego, Calif.63.4%$583,7006.6%St. Louis, Mo.51.3%$161,4005.5%Tampa, Fla.18.9%$204,60010.9%Baltimore, Md.8.7%$264,8005%Denver, Colo.99.6%$397,7007.4%Pittsburgh, Pa.87.8%$141,3007.9%Portland, Ore.94.8%$391,2005.9%Charlotte, N.C.88.2%$195,80011%Sacramento, Calif.19.8%$400,1006.4%San Antonio, Texas98.8%$185,0005.6%Orlando, Fla.5.4%$226,9009.7%Cincinnati, Ohio63.9%$160,9006.6%Cleveland, Ohio31.2%$141,1007.1%Kansas City, Mo.71.6%$181,4009.2%Las Vegas, Nev.0.8%$264,30015%Columbus, Ohio83.6%$182,2009.1%Indianapolis, Ind.68%$152,8008.5%San Jose, Calif.98.7%$1,287,60027.2%Austin, Texas98.7%$296,5005.7%

But almost the opposite is happening in Las Vegas, where less than 1% of homes are worth more than their pre-recession peak. “Despite widespread and consistent home value growth today, the scars of the recession still run deep for millions of longer-term U.S. homeowners, and it may take years of growth for their home to regain the value lost a decade ago,” Zillow senior economist, Aaron Terrazas, wrote in the report.

Meanwhile, renters are faring somewhat better these days, according to Zillow. The median rent nationwide only increased 1.3% over the past year to $1,440, marking the second straight month in which rent appreciation has fallen below the overall rate of inflation.

For those renters who are looking to buy homes in the near future, that’s certainly welcome news, as it can now take years to save up enough for a down payment thanks to the breakneck pace of home price appreciation.

 

Source: marketwatch.com

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A Look at WalletHub’s Top 20 Markets for Renters

Wed, 08/08/2018 - 9:29am

WalletHub recently published a study comparing more than 180 rental markets based on 22 key measures of attractiveness to generate a list of the best and worst markets for renters.

Arizona dominated the list with eight of the top 20 markets coming in that state. Only two east coast markets—Nashua, N.H. and Lewiston, Maine—cracked the list. (Tampa just missed the cut, ranking 21st in WalletHub’s list of 182 cities.)

The worst markets on the list included markets like Detroit, Memphis, Tenn., Cleveland, Baltimore and Providence, R.I.

Despite notoriously high rents, markets like New York (123) and San Francisco (45) weren’t near the bottom of the list.

To generate its score, each of 22 metrics was graded on a 100-point scale, with a score of 100 representing the most favorable conditions for renters. That was used to generate a weighted average across all metrics.

The firm’s data set ranges from the difference between rental rates and mortgage payments to historical price changes, the cost of living and jobs availability.

The following slideshow features the top 20 markets in WalletHub’s study: 

 

Source: nreionline.com

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First-Time Landlord: 8 Things You Need to Know

Mon, 08/06/2018 - 10:44pm

Are you ready to be a landlord? Here are eight things you need to think through before you find your first tenants.

By: Daniel Caughill

Thanks to HGTV and the allure of passive income, many people dream of investing in rental properties. Of course, becoming a landlord can be a great way to build your wealth or to make use of a second property that you own. However, property management can take a lot of work, too. Whether you’re leasing your apartment to family friends or to tenants you just met, you need to understand one thing up front: You’re not a host. You’re a business owner.

With that in mind, here are eight things to keep in mind when preparing to rent out your first property.

1. Find your rent-price range. You’ve probably put a substantial investment into your rental property, and you’re likely dependent on the monthly income it generates to keep up with mortgage payments. However, depending on your region’s rental market, you might also face stiff competition from other landlords in the area. That’s why it’s important to put thought into how much you should charge for rent. Ideally, you’ll have enough to cover all of your monthly expenses and still make a profit, but you also need to make sure your property is attractive to potential renters.

Some advisers will encourage you to use the “1% rule,” which states that you should charge about 1% of the property value of your home each month. So, a house worth $200,000 would demand a rent of approximately $2,000 per month. If your rental market allows you to hit this benchmark, you’re probably doing well as a landlord. However, the rule is overly simplistic and probably too high for most rental markets.

Instead, you should determine your base rent by calculating the total amount it costs you to own that property each month, and the maximum amount you charge should be driven by the market.

Tally the cost of all your monthly expenses to determine your minimum rent. This calculation should include mortgage payments, insurance premiums, maintenance fees, property taxes, estimated vacancy losses and any other costs you’ll face. If you’re at least earning this amount, you’ll know you’re not losing money on the property. If the rental market doesn’t allow you to bring in this much, you’ll need to decide for yourself whether retaining the property for a monthly loss is worth it—or if you’d be better off selling it.

To determine the maximum amount of rent you can reasonably charge, you’ll need to turn to the market. You can use online house-hunting tools like Trulia, Zillow or RentHop to compare prices in your area. You can also check the newspaper for local listings or ask other landlords and property managers what they charge. Make sure you compare your property with similar homes in the immediate area. You may struggle to find tenants if you’re charging the same price for a studio apartment as a larger one-bedroom apartment across the street.

Once you’ve determined this range, you can decide how to price your rent. Slightly lower rents may earn you less, but they may allow you to minimize the amount of time your property is vacant. Higher rents will earn you more but could take longer to fill.

2. Make rent collection a priority. Since your property is a business, and your rent is the primary revenue that drives it, you’ll need to make sure you collect rent on time. Set clear expectations to your tenants about the day rent is due, and outline how many grace days they’ll have for late payments. If they exceed that limit, enforce a consistent late-payment penalty. Of course, you don’t want to be harsh to someone struggling to make payments. But if they can’t fulfill their obligation to you, you might not be able to fulfill your obligation to your mortgage lender.

The best way to manage rent collection is to offer automatic online payments. Not only will this eliminate the need to cash checks each month, but it will also lead to consistent, timely payments.

3. Purchase and require insurance. Insurance is a crucial part of your rental property business. If you’re renting out a home you previously lived in, you may have assumed your homeowners insurance policy would continue to cover the house with its new tenants. Unfortunately, that’s probably not the case.

Landlord insurance
Most homeowners insurance policies exclude long-term rental properties from their standard coverage. Instead, you’ll need to purchase landlord insurance. Generally, landlord insurance provides the same basic coverage as a standard homeowners policy, but with a few differences.

First, a landlord insurance policy may offer more liability coverage than standard homeowners policies. On the whole, rental properties face more liability claims than primary residences, so increased liability coverage is a good idea for most landlords.

Second, landlord insurance may provide loss-of-income coverage, either as part of the standard policy or as an optional rider. If you depend on your rental revenue to pay your mortgage and any other bills associated with a property, an extended vacancy could be disastrous. However, with loss-of-income coverage, you’ll be compensated if a covered peril, such as a fire, makes your rental property temporarily uninhabitable.

There may also be additional coverage you choose to add to your policy to fit your property’s needs. However, your landlord policy will also be priced to compensate for this increased coverage—about 25% more than standard homeowners policies on average, according to the Insurance Information Institute.

Renters insurance
While your landlord policy will cover your property and qualifying liability lawsuits you could face, it doesn’t protect your tenant’s personal property. It also doesn’t cover any liability lawsuit your tenant may face. Because of this, it’s a good idea to require your tenants to carry their own renters insurance policy. By doing so, you’ll further distance yourself from potential liability lawsuits, and you may lower your own liability insurance premiums.

Umbrella insurance
While not a necessity, it can be a good idea to look into an umbrella insurance policy as well.

Umbrella insurance provides liability protection above and beyond your landlord policy’s liability coverage limit. This could be necessary if, for example, an electrical shortage in your property leads to a fire that damages neighboring property. Such a claim would likely exceed your landlord policy’s liability insurance limits, but umbrella insurance could step in to cover the remaining cost. Umbrella insurance can typically be bought in million-dollar increments and is relatively inexpensive since it provides secondary coverage.

4. Keep clean records. Owning a rental property comes with several desirable tax benefits. You may be able to write off some or all of your maintenance fees, mortgage interest, insurance costs and listing fees. However, you’ll need need to commit to keeping clean expense records to defend these tax deductions—and to gauge how well your business is doing. Develop meticulous recordkeeping habits, and save a record of every expense related to your property. If you choose to keep your records on paper, it’s smart to digitize them for storage purposes. Or you may choose to use a web-based system, such as Quicken or Cozy, to manage your rental expenses. This is advisable if you’ll be managing multiple properties.

It’s also smart to photograph your property before tenants move in, to create a record of its condition. When your tenants decide to move, you can compare these photos with the current state of your property to assess any damage. However, keep in mind that general wear and tear is the responsibility of the landlord, not the tenant, so don’t try to use your tenant’s security deposit to repaint the apartment after they move.

5. Know your local laws. Each state may impose different rules governing how landlords conduct their business, and each city may take those differences even further. For example, do the zoning laws in your area permit residential rentals? Are you required to pay for heating? Do you know how much you’ll be allowed to increase your rent each year? Make sure you fully understand your area’s laws regarding rental properties, rent increases, evictions, building codes and anything else relevant to being a landlord.

Try talking to an experienced property owner in your region about which legal pitfalls to avoid.

6. Screen all potential tenants. When you allow somebody to move into your property, you’re putting a lot of stake in the assumption that they’ll make timely payments, honor their contract and take good care or your home. Taking the time to screen these applicants can go a long way in protecting your investment.

Verify their income
Does your annual rent exceed one-third of your tenant’s total annual salary? If it does, they might struggle to keep up with payments. Check your tenant’s income history, and ask for proof of employment to verify that they can afford your property.

Pull a credit check
Obtain the written permission of each applicant to run a credit check, then pull a full credit report from each of the three credit unions: TransUnion, Experian and Equifax. To do so, you’ll need the applicant’s full name, Social Security number and former address. If your applicant has a poor credit score and a number of concerning debts, it may be a sign that they won’t be a reliable tenant.

It costs around $20 to pull a credit report. Most landlords require prospective tenants to pay this fee as part of the application process. However, even if you decide to pay for it yourself, it’s worth the cost to know the creditworthiness of your applicants.

Ask for references from past landlords
Obtaining references from former landlords is a great way to weed out potential problem tenants. If the applicant was late making payments or left a huge mess after they left their last apartment, their landlord will let you know. If this is your applicant’s first time renting, ask for professional references instead.

Be mindful of fair housing laws
As you screen your applicants, take special care to follow the fair housing laws of your region. For example, even if you do not allow pets in your apartment, you might not be allowed to turn away an applicant due to their service animal. Understanding your fair housing laws can go a long way in protecting yourself from a lawsuit.

7. Plan for vacancies. As mentioned above, loss-of-income insurance may protect you from vacancies caused by covered damage to your property. However, insurance won’t typically cover a decline in demand due to a cool rental market or short-term vacancies between tenants.

Set aside money to cover your mortgage and other costs during periods when no tenant is living in your property.

If you’re having a hard time finding tenants to fill your apartment, it’s probably a sign that you need to lower your rent. However, you should also consider staging your apartment with a few pieces of furniture, such as a table, chairs and curtains, to make it look more inviting.

8. Consider hiring a property manager. If being a landlord is more work than you expected, you can hire a property manager to do much of that work for you—passive income at its finest. This is common practice for property owners who amass multiple homes or apartments.

However, a property manager will also take a cut of your profits. If you already work full time and are only investing in a rental property as a side stream of income, you may be able to afford, say, a 10% deduction in profits. However, if being a landlord is your sole gig, you’ll need to carefully consider whether a property manager is something you need or can afford.

Daniel Caughill Daniel is a Staff Writer at ValuePenguin, covering insurance, retirement and other personal finance topics. He previously wrote about compliance and best practices for K-12 school districts at Frontline Education.

 

Source: Value Penguin

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Will California Be The First State to Repeal Rent Control Limits?

Mon, 08/06/2018 - 10:38pm

Overturning limits on rent control will be on the ballot in California this November now that organizers have garnered enough signatures to certify Proposition 10.

BY KARIM DOUMAR

After nearly a quarter century of trying, tenant activists in California could be on the cusp of repealing the state law that forbids rent control from being applied to new housing units.

Overturning limits on rent control will be on the ballot in California this November now that organizers have garnered enough signatures to certify Proposition 10. California could be the first state to repeal state-wide rent control limits via ballot initiative as a number of other cities are challenging similar laws in other states.

The law Californians are seeking to repeal, the Costa-Hawkins Rental Housing Act, was originally passed in 1995. It prevents cities from enacting rent limits on any structure built after 1995, bans vacancy controls, and excludes single-family homes from rent control ordinances. In January, a bill in the California state assembly to repeal Costa-Hawkins died in committee.

Rent control imposes limits on rent increases during the duration of a tenant’s stay. Ordinances in cities grew in popularity during the 1970s, when inflation was high, according to Jenny Schuetz, a research fellow at the Brookings Institute Metropolitan Policy Program. In the decades that followed, most states banned the practice.

Many researchers have found that, over a long period of time, rent control measures actually make housing less affordable overall. But many advocates consider the policy an important stopgap protection for people at risk of being driven out of their neighborhoods or cities, particularly after other more radical proposals to address California’s housing crisis failed to pass the state legislature this year.

“Most people agree there’s a need throughout California to increase housing, especially housing for low-income people, but it takes a process of years,” said Sara Kimberlin, a senior policy analyst at the California Budget and Policy Center. “The question is what sort of solutions can you put into place to help those folks right now?”

As California’s housing crisis has become more acute in the last few years, political will for rent control in California has grown substantially.

“The momentum has been shifting drastically,” said Shanti Singh, the communications and development director at Tenants Together, a California tenants organization.

A 2017 poll by the Institute of Governmental Studies at the University of California–Berkeley found that 60 percent of likely voters support rent control.

In most states, including California, the decision about whether to impose rent control has been decided by states legislatures, which then preempt cities from passing their own rent control measures. Some increasingly expensive cities are balking at this state control, and escalating their calls to give cities their own discretion on rent control.

In Washington state, a state bill similar to California’s to repeal its rent control law failed in committee. In Chicago, a non-binding referendum on rent control showed that nearly 75 percent of the city supports lifting Illinois’ ban on the practice, and two gubernatorial candidates in that state also support rent control. Rent control was endorsed by both California’s and Washington state’s democratic parties. In 2017, Portland voters found a clever way to circumvent Oregon’s state ban on rent control. Landlords in that city must now pay moving fees up to $4,500 to tenants if they evict them or raise their rents by more than 10 percent without just cause.

In 2015, over half of all renters in California are considered cost-burdened (that is, their housing costs take more than 30 percent of their salaries) and nearly 30 percent are severely cost burdened, spending half or more of their income on housing, according to analysis by the California Budget and Policy Center. Of cost-burdened renters, more than two-thirds are people of color. Since 2006, the statewide median rent has increased more than 13 percent, while median annual earnings have increased only 4 percent.

As rents have risen, and eviction rates with them, tenant protections have become an increasingly central part of California politics. In 2016, Mountain View and Richmond became the first California cities to pass new local rent control ordinances in decades, both limiting how much landlords could increase rents on buildings constructed before 1995, the years not covered by the state ban. And as the mid-term elections approach, nearly a dozen California cities either have rent control measures on their ballots, or local activists are trying to get them on the ballots.

But growing popular support by no means guarantees the proposition’s passage.

“It will be a David and Goliath fight,” said Igor Tregub, a Berkeley rent board commissioner. The California Apartments Association, a group that represents landlords, developers, property managers, and investors, has raised $12 million so far to fight Proposition 10, as well as local rent control measures throughout the state. The Los Angeles Times reports that the CAA, which is leading the fight to keep California’s statewide rent control laws in place, is willing and able to pour more than $60 million into the fight. Meanwhile the Yes on 10 campaign has raised only $2 million.

“We’re going to run a very aggressive campaign to defeat it,” said Steven Maviglio, communications director for the No on 10 campaign. “The situation with affordable housing is so desperate in California that people are grasping for the easy silver bullet, and we don’t think rent control is that—and on top of that it will make matters worse.”

But the CAA isn’t the only group with deep pockets. So far, most of the funding for the repeal effort has come from the AIDS Healthcare Foundation. Its controversial leader, Michael Weinstein, has poured millions into other initiative fights in the past.

Over the last year, the California legislature has floated a number of proposals to help assuage the state’s housing affordability crisis, including a radical plan to upzone major transit corridors that failed in committee in January.

In the absence of change in the legislature, reformers have taken to the ballot. And rent control is not the only housing affordability issue up for a vote in November. Proposition 1 would give the state $4 billion in bond money to provide grants and support toward building affordable housing for veterans, and Proposition 2 would provide the state $2 billion in bond money for homelessness prevention housing. In San Francisco, another proposition would tax big businesses to pay for homelessness initiatives.

In addition to waging a tough fight against rent control, the CAA will be throwing its support behind Proposition 1. Maviglio says that building affordable housing is the only way out of the crisis, not rent control.

But some advocates think rent control is directly linked to building more housing including some YIMBYs, advocates whose name—”Yes in My Backyard”—signals their advocacy for supporting denser zoning and transit-oriented development. Victoria Fierce, co-executive of EastBay4Everyone, a Bay Area YIMBY group, thinks that enacting more rent control will assuage concerns over displacement and gentrification that might accompany the construction of new housing supply. While the fight against the CAA and its deep pockets may be difficult, Shanti Singh is optimistic.

“I don’t want to downplay the fact that we have a massive growing movement,” she said. “That’s going to be the driving force behind this.”

Source: PS Mag

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The new housing play: helping priced-out renters become long-distance landlords

Mon, 08/06/2018 - 10:31pm

Like many money-making ideas in real estate, this one comes with rosy assumptions — but are they justified?

Leland Char is a 28-year-old product manager for a large San Francisco–based tech company. He loves the Bay Area’s “very authentic Asian food and New American cuisine, smart, well-educated people, the multiple job opportunities, the friends that I’ve made, and fantastic hiking.”

What Char hates is the house prices, and the fact that, even with dual incomes, he and his fiancée can scarcely afford to buy a home in their community, let alone have in-laws join them as they put down roots.

So he settled on a solution that’s unorthodox, but which suits him: He bought eight houses in Texas.

He’ll continue to rent in San Francisco, and has leased out the far less expensive properties in Texas, expecting to reap a better return than he could from stocks or bonds, while also building equity.

Char, who built extensive spreadsheet models with all kinds of scenarios to test assumptions, doesn’t see a contradiction in becoming a “first-time homeowner” of a property he may never set foot in. Like a good tech worker, he found a way to make his investments online, using a fintech startup called Roofstock.

Launched in late 2015, Roofstock is one of the leading platforms for the burgeoning market in single-family-house rentals for long-distance investors. While there have been landlords for as long as there’s been property, this particular market moved in a different direction in the aftermath of the housing crisis, when large institutional investors like Blackstone began scooping up houses by the thousands at fire-sale prices in order to rent them out.

‘It’s great to bring technology to bear on those challenges of owning property thousands of miles away, but it does boil down to making sure you can trust those boots on the ground.’

Daren Blomquist, Attom Data Solutions

Now a new crop of individuals, like Char, are eyeing the big players’ business model and adapting it to their circumstances. Rather than trying to swing the purchase of an expensive home by renting out the basement, or pursuing an extra income stream by buying and renting out a nearby property, platforms like Roofstock, HomeUnion and Investability make it possible to research, purchase, finance, lease out and manage rental properties, regardless of geographical locations, with just a few clicks. For many investors, those properties are thousands of miles away, where prices for many investors are vastly lower, rental demand for houses is constant, and, in many cases, courts and regulations tend to side with landlords, not tenants.

The business model has a lot of merit, and Char told MarketWatch he’d had “a great experience” and would recommend Roofstock to others. Still, like many new investment propositions, it also carries risk. Some industry observers wonder if novice investors, especially those who may not have clear memories of the housing crash, are really prepared for possible downsides. And a decade after the crisis, others question whether the overall housing market can withstand another deluge of investors whose interest is detached from the communities in which their money is being put to work.

Daren Blomquist has watched plenty of new ventures spring up in the nearly two decades he’s been lead spokesman for real-estate service provider Attom Data Solutions. Blomquist put it this way: “It’s great to bring technology to bear on those challenges of owning property thousands of miles away, but it does boil down to making sure you can trust those boots on the ground and those eyes and ears in that market to be working in your best interest. It’s going to take time for platforms like Roofstock to establish that trust with buyers. I think technology can go a long way but hasn’t been fully proven yet in my mind.”

A few minutes browsing on Roofstock.com gives a sense of what Blomquist means by “technology can go a long way.” On a recent morning, 322 properties were available for sale. Clicking on any one shows the precise address as well as a treasure trove of data: results of an inspection, tenant occupancy and current rental payment information, a Roofstock reckoning of the quality of the neighborhood, and more. And there are extensive assumptions, all of which can be fiddled with: property taxes, property management fees, repairs and maintenance set-asides, and more.

Roofstock doesn’t own any of the properties on its site. It brokers them for a 2.5% fee — much cheaper than the standard 6% that most real-estate agents charge. (Buyers also pay a 0.5% fee.) But more important to sellers may be the fact that the platform enables quick, seamless sales that don’t disrupt cash flow from tenants already living in the homes.

HomeUnion, Altisource’s Investability and OwnAmerica offer similar — but less robust — online data about their properties, one reason Blomquist labeled Roofstock “the most mature” of the platforms.

And while Blomquist offered healthy skepticism about the model, arguing that out-of-town investors should always visit the areas in which they’re thinking of buying and get their own independent third-party inspection, he also sees a big benefit to having larger, more prominent firms taking a leadership role in this marketplace, he said. “Where we hear horror stories is with small regional players.”

Consider this recent exchange in the online real-estate chat room Bigger Pockets, in which a California resident wrote about a “Turnkey nightmare with Morris Invest.” The conversation generated over 200 responses, many of them echoing stories of subpar work on the part of Morris Invest, the fix-and-flip company founded by former “Fox and Friends” host Clayton Morris. (Morris Invest did not respond to a MarketWatch request for comment.)

“I do think the benefit of having a name brand out there is that there is some credibility at stake,” Blomquist told MarketWatch. “I think that they’re trying to avoid those worst-case scenarios.”

So far, Char hasn’t had anything close to a “worst-case scenario.” Still, since closing on his properties late last year, he said he’s faced around $20,000 of unexpected expenses, including remodeling, HVAC upgrades and plumbing. He is trying to get a sense of how many of those expenses may recur and which were simply one-time needs.

He’s also trying to decide how comfortable he should be with his current property manager, or whether he should look for a new one.

One of Roofstock’s pitches is that its buying power enables it to negotiate with individual property managers around the country, bringing a level of professionalization and transparent pricing to a business that’s the epitome of local, low-tech and reactive.

Both steps demonstrate how much care Char is putting into the process — but also serve as a reminder that an investment marketed as “passive” may require a lot more effort than may be apparent from financial model spreadsheets.

Still, Roofstock CEO Gary Beasley said he believes that robust tenant demand for single-family rentals means investors like Char are in the catbird seat, notwithstanding short-term bumps in the road. He described buying an investment property for himself, as one of the first purchases made on Roofstock. The tenants moved out a couple of months after he closed, Beasley said. It was leased again shortly after, for $250 more per month.

“I was able to turn it from a good investment to a really good one, but when I first got the notice that the tenant was going to move out, I was not happy,” Beasley said.

But it’s worth noting that many, if not most, investors have financial profiles more similar to that of a tech worker than that of a tech CEO. What’s more, while Beasley argued that Roofstock builds ample cushioning into the financial models attached to every property, including an annual 5% “vacancy factor” for every rental, such assumptions may be more reasonable for institutional investors with large portfolios than for a small landlord with a few properties.

Put another way, if Char had bought one house and found himself in the position Beasley did, he would have been out a down payment, several months of mortgage payments and likely some unexpected repair costs, before even collecting a dime from a tenant, a very different outcome than a 5% haircut on expected revenues.

Roofstock says that since inception, the overall gross yield of its properties has been 10.3%.

Still, Blomquist called the vacancy-rate assumption “a big deal,” noting that there are operating expenses, including property taxes, to be paid, even if owners haven’t financed the purchase. For his part, Beasley stressed that the company is very clear with investors that there is “variability in the cash flow.”

“One of the things that’s always been a problem with this kind of real-estate investment is excessive optimism in the assumptions,” said Ellen Seidman, a senior fellow with the Urban Institute’s housing finance policy center. “That’s a problem for investors that may turn into a problem for the tenants if they try to raise rent or cut back on maintenance.”

Seidman, a longtime advocate for fair lending and consumer-oriented approaches to housing, said she doesn’t think out-of-town investors are necessarily detached landlords. One of the benefits of the institutional investor presence in the marketplace may in fact be a higher level of service on maintenance issues, because they have economies of scale that a single landlord can’t match, she said.

MarketWatch reached out to multiple organizations that advocate for tenants and consumers in the housing market, including the National Community Reinvestment Coalition, the National Fair Housing Alliance, the Center for American Progress and Make Room, but all either did not respond or declined to comment, citing a lack of awareness.

Roofstock investors, judging by their blog posts on the website, are cognizant of whether markets in which they invest are considered “landlord-friendly.” Yet in some ways the influence of these platforms on the housing market may be more nuanced than one-sided assumptions about “investor landlords.”

Daren Blomquist has had his eye on Memphis, which has been a hotbed for the turnkey fix-and-flip industry, thanks in part to a local organization that started snatching up homes even earlier than the Wall Street players. MemphisInvest was buying in 2007 and 2008, “when everyone else was running,” as its president, Chris Clothier, said.

Attom’s data show that Memphis is the top market in the country for property flipping. “A high percentage of the flips are sold to cash buyers,” Blomquist said. “What that tells me is there’s this whole flipping industry feeding the single-family rental industry.”

A full 33% of single-family homes are non-owner-occupied in Memphis, Attom’s data show, and, with its home market so saturated, MemphisInvest has started to look elsewhere for opportunities.

As Blomquist put it, “one of the things that I don’t really know the answer to is, is there some kind of unforeseen impact of this ability to buy rental homes across the country very easily, [and] will there be some kind of unintended impact on some markets if conditions change?”

David Lenoir, a county commissioner in Memphis said to take an interest in issues relating to the tenants of the investor-owned rentals, did not respond to requests for comment from MarketWatch.

Beasley argued that single-family house rentals are a safe bet even if the economy or housing market does downshift. “Rents tend to be very sticky downward and don’t drop as much, if at all. In fact, during the recent downturn between 2007 and 2011, prices dropped over 30% nationally, but on average rents for rental homes did not drop at all.” For that reason, rental houses are a great defensive investment, he said.

Still, it’s likely that many investors browsing for investments through marketplaces like Roofstock are searching for offensive plays. And as the real-estate cycle rolls on, and more players crowd into increasingly saturated markets all over the country, another big question is whether investors will find the kind of returns they’re expecting.

Char said he’s estimating returns in the mid-20% range “in terms of internal rate of return,” which is one of several ways of calculating returns on real-estate investments.

“Most people should understand that most of these markets that are good for buying rentals are not going to be good for price appreciation,” Blomquist said. “If you’re in Seattle and you’ve seen prices go up double digits for the past few years, you should not expect that from a Memphis or a Cleveland. It may happen, but that would be icing on the cake. You’re not going to build a lot of equity fast.”

In fact, many homes available on Roofstock offer negative cash flow based on the default assumptions that the company populates in its property descriptions.

Blomquist argued that most of the investment opportunities that are available through platforms like Roofstock may need to be held for as much as 20 years in order to realize any return. People who scooped up properties a few years ago, when prices were at rock bottom, were successful in making their investments a five-year play, he conceded, and it’s possible some investors entering the market now are expecting to duplicate that.

“Investors buying now can’t expect to experience such big home-price returns over the next five years,” Blomquist said. “They’re best off holding for the long term to realize the increasing cash-flow returns they should be able to get as rent rates rise over time.”

That’s not even taking into consideration the massive amounts of fresh supply that are hitting the apartment-rental market and making some industry participants nervous. Beasley said that in many of the markets Roofstock serves, occupancy rates are high — in the 90% vicinity — and that single-family tenants stay longer — an average of three years across the industry, roughly double the average tenure of apartment dwellers. And single-family rental dwellers tend to be a different demographic: older, and more families, making it a market separate from the multifamily space, he said.

Despite his unexpectedly rocky start, Leland Char said he’s looking forward to investing again later this year when he receives his bonus. “That’s the way that I triage against being hit in a downturn and upturn, by investing as money becomes available, not trying to time a cycle,” he said. “People are bad at timing markets.”

 

Source: MarketWatch

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Is Owning an Airbnb a Smart Investment?

Mon, 08/06/2018 - 10:26pm
The old adage “location, location, location” is true even more in vacation rental ownership.

It’s easy to see the rise in popularity of Airbnb and other online vacation rental sites and think it’s a good idea to buy a property dedicated to short-term housing. But that strategy may not be as simple or lucrative as it seems, experts warn.

The old adage “location, location, location” is true even more in vacation rental ownership.

“Certain areas are better for year-round renters,” says Will Woodard, a certified financial planner in North Carolina’s Outer Banks. He explains the climate in his hometown: “The weekly [vacation] rental market on the Outer Banks is very competitive and requires significantly more costs. There is a relative lack of supply in the year-round rental market so there is robust demand for rentals, especially those in the nicer neighborhoods that aren’t overpopulated with weekly rental cottages.”

The catch is that housing is expensive and though rents are high compared to surrounding, non-resort areas, they would only reward an owner that’s owned more than 15 to 20 years due to high purchase prices, Woodard says.

These are the sorts of market conditionsinvestors should know when evaluating a property to hold as a rental. But there are other co

nsiderations you should take into account.

Examine the local ordinances and rules.The biggest threat to the short-term rental business is swift-changing local laws that limit their use.

With affordable housing “in such a bind,” most major cities are enforcing regulations on short-term rentals, forcing landlords to put their rental properties back on the markets for families as long-term rentals, says Shawn Breyer, owner of Breyer Home Buyers in Atlanta.

And in Charleston, South Carolina, where Carolina One Plus real estate agent Susan Matthews says vacation rental margins are “super generous” because of year-round tourist attractions, vacation rental income isn’t legal unless the operator owns and lives on the property full-time. That’s in addition to city rules that require short-term rental operators not only to obtain a special license, but also pay fees and accommodations taxes. They can only host up to four adults at a time, she says.

If you are buying in a foreign country, consult a lawyer to make sure you understand the local laws, and make sure the lawyer is fluent in your language, says David Johnson, founding director of Halo Financial, a London-based firm that provides foreign exchange services.

Make sure the property works as a long-term rental or other use. Short-term rentals listed on Airbnb.com, HomeAway.com or VRBO.com are a great supplement to your rental income, but it is not a good long-term strategy, Breyer says. That’s because the business ebbs and flows, and consumer demand could change.

So when you’re analyzing a property to be made into a rental, make sure it cash flows as a year-long rental too.

“If your cash flow numbers don’t work with a good long-term strategy, then don’t buy the property,” Breyer says.

You could also look at adapting the property to other models, such as furnished student housing or long-term relocation housing, Matthews says. In Charleston, the College of Charleston, Medical University of South Carolina and other schools create high demand for student housing while business growth has created a need for long-term relocation housing. “These rentals also offer good margins,”Matthews says.

Think about the tax rules. IRS tax code provides that rentals at less than fair market value disqualify the owner from taking into account expenses, says Morris Armstrong, an enrolled agent, investment advisor and rental property owner with Armstrong Financial Strategies in Cheshire, Connecticut. That means you can’t keep it for personal use and still get the tax write-offs, and you have to be careful about where you set your rates. If you rent the home less than 15 days a year, it’s exempt from income tax.

Consider the expenses of a short-term rental. Vacation rental properties are more costly to operate and maintain due to furnishings, frequent cleaning and repairs, Matthews says.

You also have to keep the gas, water, electric, cable and internet paid up, Armstrong adds. Discuss with a local real estate agent likely occupancy rates and competitive pricing.

That’s not to mention that you’ll need to spring for the kind of amenities that command higher prices and enough bookings to cover your costs. The top desired vacation rental amenity is a pool, with 19 percent of VacationRenter.com survey reporting so. That’s followed by pet friendliness at nearly 18 percent, and air conditioning at about 13 percent. VacationRenter.com aggregates vacation rental listings from multiple sites.

Not having what the customers want can turn your cash cow into a net loss.

“If you are looking for income and profit from a rental, then you have to step up your game,” Armstrong says. “I have a client with a dated cottage that in Cape Cod. They refuse to update it with central air conditioning or a more modern look to the kitchen. In the past, they could count on it being rented out most of the summer season. Now, they are lucky if it is rented out two weeks.”

Kayleigh Kulp is a freelance journalist who also writes or has written for CNBC, The Daily Beast, Afar, the Washington Post, Travel Channel, Travel + Leisure

 

Source: US News

 

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Why is it important to keep roof gutters clean?

Mon, 08/06/2018 - 10:21pm

 

Roof damage is the worst and dangerous scenario for any homeowner. There are plenty of reasons responsible for damaging the roof; it could be because of improper installation, bad material choice or because of irregular or no maintenance. The debris and the clogged gutters can worsen the situation for you as they pollute the air circulation of your house and can also cause adverse damage to the roof. The gutter cleaning is often neglected by most of the homeowners.

Cleaning the eaves-trough is an important task which must be performed twice or thrice a year. The clogged gutters can cause water overflow which can cause damage the landscaping and foundation of the house. Moreover, the overflow may cause gutters to pull lose because of the increased weight and can lead to rot behind the fascia or trim. The regular maintenance and cleaning of the roof gutters by roofing contractors canton MI can protect you from a number of difficulties. Some of them are:

Roof damage

Leaves can build up and clog the downspouts, which can cause water damage to your roof and fascia (the board behind the gutter).  Water pouring over the gutters or from leaks can end up next to your home’s foundation, in the basement or crawlspace. Proper cleaning and maintenance can save your money and the building from the damage.

 

Increases in pests and insects

Clogged up gutters can be the perfect nesting sites of different birds, insects, and mosquitoes. If you don’t want your residence to be the alluring nesting site of a variety of pests and insects you should start giving attention to the maintenance of your house.

 

Ice damming during winters

During the winter months, clogged gutters can lead to ice damming which further will cause roof leaks. The ice will fill the gutters and will form on the rooftop; it will also form between the layers of roofing. The heat from the house will cause the ice to melt and leak into the structure.

 

Damage to fascia

The clogged gutters can lead to overflowing of water and the overflowing might increase the weight on the gutter causing it to pull apart and can damage the fascia which is an important part of the gutter system.

 

Cracks in the foundation

If water overflows and pools along your home’s foundation, it can end up freezing, which can cause it to expand and generate cracks in your foundation.

 

Overwatering garden beds

The clogged gutters lead to overflow of the water and the chances are excess water will spill over the sides and into your garden area. Overwatering can damage the health of your plants and if the overwatering continues it will completely damage your garden beds as overwatering is as harmful as not watering enough.

Gutter cleaning can save you from the above-mentioned issues and problems. The gutter cleaning process can be dangerous so you must hire a professional and skilled individual to clean it. Proper cleaning and routine maintenance will help you cut off the dangerous situations and will also increase the life of your structure.

Source: Realty Times

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Evictions: landlord says tough love helps tenants stay put

Mon, 08/06/2018 - 10:01pm

The owners of Smoke Creek say they created an oasis in the quiet hills south of Snellville. Children now shout in a swimming pool that was once filled with murky water. A small fountain in the manufactured housing park churns in a clear pond once described as “mosquito alley.”

Working-class renters can have all this, plus access to Gwinnett County’s acclaimed schools, for a couple hundred dollars less per month than what they’d pay for a house in one of the subdivisions nearby. If you have troubled credit, Smoke Creek can help. Six months of on-time rent earns residents a chance to buy one of the manufactured homes.

Yes! Communities, which operates Smoke Creek, is the nation’s fourth largest landlord of manufactured homes with affordable housing in its mission. Stepping in where government has pulled back, the for-profit company gives working-class families a rare shot at renting or owning in safe neighborhoods near decent schools.

But it’s also one of metro Atlanta’s most aggressive eviction filers, The Atlanta Journal-Constitution found. Yes files eviction notices at nearly twice the average rate, according for an AJC analysis. This amounted to about 1,000 filings for its nearly 1,800 units in 2016. It filed days earlier and far more often than the landlord it replaced.

Yes is a big player in a trend recently revealed by the AJC: landlords are increasingly using the threat of eviction as leverage to collect overdue rent, rather than to remove tenants. This practice, which surprised even the experts, emerged from an examination of seven years of eviction filings in Clayton, Cobb, DeKalb, Fulton and Gwinnett counties.

Yes argues that its eviction filings are only a small part of a unique approach that makes for financially stable, happier families. An eviction notice encourages tenants to choose to pay the current month’s rent sooner, which helps them pay on time the following month, said TC Brown, Atlanta regional manager for Yes.

“It sets them on a path to success,” Brown said. “It’s always their decision on what they’re going to do.”

About 90 percent of households that receive eviction notices from Yes catch up on their unpaid rent, late fees and utilities, according to Yes’ figures.

Yes has resounding financial support for its brand of private, affordable housing. It arranged for $1 billion in financial backing from government-sponsored housing behemoths Fannie Mae and Freddie Mac and is now majority owned by an investment fund run by the Singapore government. With that support, Denver-based Yes has grown to operate more than 54,000 home sites in 18 states — enough to make up a mid-sized city — and currently holds six parks in metro Atlanta’s core counties.

Yet for families who live paycheck to paycheck, take on too much financial risk to live in better neighborhoods, or simply overestimate their ability to abide by the terms of their leases, the threat of eviction puts many tenants in a state of crisis, with no good ways out.

Rent comes due

Priscilla Vetaw had already staved off four eviction attempts in eight months when May rent came due at Smoke Creek.

The math was the same, no matter how many times she counted. Between the money in her bank account, a state tax refund, an uncashed check, three pre-paid cards and a handful of cash, she was $162 short on her rent.

Payments at Smoke Creek were due on May 1, late on the second and drew penalties after the 5th. Vetaw’s next payday from her customer service job fell on the 8th. New rules she found tacked to her door warned that if she missed deadline one more time she and her four children would be evicted.

To understand the impact of repeated eviction filings on tenants in Atlanta’s increasingly unaffordable housing market, the AJC followed Vetaw as she tried to stay in her Smoke Creek home.

She’d worked as a phlebotomist, medical assistant, food truck proprietor and a security guard at one of the tallest buildings in the world to support her children. So far, she had made it work. Her eldest son was set to graduate from Shiloh High School in May and planned to go on to college.

Vetaw tried to turn on the kitchen sink, which hadn’t run for hours because of maintenance problems. It still didn’t work.

“I feel like I’m on the edge of an emotional breakdown,” she whispered.

Yes: ‘A lifestyle of feeling’

Yes launched in 2008 when the manufactured home industry’s fortunes were at their worst. Mortgages had been so easy to get during the run up to the housing crash that consumers turned away from manufactured homes, which only lose their value with time. The industry was also notorious for predatory practices that trapped buyers and renters in homes they could not afford.

With the help of longtime business partner Stockbridge, a $2.6 billion San Francisco-based private equity firm, Yes used its access to hundreds of millions of dollars to buy and operate communities that hearkened back to the industry’s affordable roots. Its managers boast they run communities, not trailer parks, and showcase holiday gatherings and pool parties. Charities can use their clubhouses for English language and after school programs.

“It’s really a lifestyle of feeling, of relationships,” said Kim Kurz, a Yes division vice president. “We do spend an awful lot of time finding ways where residents can interact positively with one another and us with them.”

Yes’ homes can be more expensive than other affordable housing. Rents at Smoke Creek reach $1,250 for a new trailer and lot, which is roughly equal to the mortgage payment on a $250,000 house. Payments fluctuate according to demand, rising when more families are eager to move in. The landlord accepts no federal housing choice vouchers, known as Section 8, to avoid paperwork and yearly inspections for which they say they are not equipped.

What makes Yes parks accessible to families living paycheck to paycheck is that it is easier to move in. Leasing agents can use their discretion to admit applicants with monthly incomes that equal only two times their rent payment, which is far less than the standard three times rent that many landlords require.

“With a company with a name like Yes, we try not to say, ‘No’,” said Brown.

Company’s rapid growth

Yes’ approach fueled rapid growth. By 2010, it was chosen by a trade group as its Manufactured Home Community Operator of the Year. In 2013, it bought Smoke Creek in a deal involving 64 manufactured housing communities with over 14,000 home sites, including eight others in Clayton, Cobb, DeKalb and Gwinnett counties. Yes announced that it was one of the largest manufactured housing communities in the United States after the deal.

Yes brought the rent collection strategy that it uses at all of its communities to the hills south of Snellville: On average, it files for eviction days earlier than Smoke Creek’s previous owner. It accepts no partial payments, and those who pay after the 5th of the month are subject to a $75 fee. Late tenants must pay an additional $200 if they submit their rent after Yes files for eviction. This can increase renters’ monthly payments by double the 15 or so percent in penalties that Gwinnett County eviction judges often deem reasonable.

Smoke Creek residents struggled to adjust to Yes’ strict rent collection. Eviction filings more than quadrupled in the two years following the acquisition before settling at near double their prior rate, an AJC analysis found. Under the new rules, tenants had to realize that rent comes first, Brown and other managers said. Those who are short on cash can contact nonprofits for assistance.

“These are grownups making life decisions and they’re either paying rent or they’re not,” Brown said.

More than 700 miles away in a town outside Gary, Ind., Vetaw made the decision to move with her children and her sister’s family to Gwinnett in 2014. “We literally went and did research for the best school system in Georgia and we came up with Gwinnett County,” said her sister, Shema Vetaw-Charleston, 39.

It was an ideal place for Vetaw, who lived as a child in Chicago’s most dangerous neighborhoods and witnessed her sister lose an eye to a stray bullet shot into their living room. In Gwinnett, she charmed her way into a medical assistant job during prenatal doctors’ visits for her youngest son, and rented a house on a hill not too far from Smoke Creek. Its rocking chair front porch overlooked a lake.

It was a good time for Yes as well. For three years, income rose an average of 12 percent per year for each community, according to an investor’s memo. In 2016, Singapore, an affluent city-state renowned for its progressive housing policies, made a $1.5 billion investment in Yes through one of its massive trust funds. Fannie Mae and Freddy Mac, two federally sponsored institutions that boost house and multifamily apartment purchases, helped finance the deal.

At the time, a Fannie Mae executive said that the deal would “make a difference for families and communities across the nation.”

By then, Vetaw’s streak of good fortune was over. A layoff and overdue tax bill forced Vetaw and her family to crowd into a $199 per week room at a hotel so dangerous that she kept her kids indoors. The highlight of her youngest son Jayceon’s day was a walk to the snack machine to buy a honey bun, she said. A daughter was so miserable she left to live with her father.

That’s when Vetaw found Smoke Creek. Her intention was to buy one of the homes, not to rent, so she could be on safer financial footing and get her life back on track. Lenders approved her for a $52,000 loan.

It was a well-calculated risk for Yes, which could easily rent or re-sell Vetaw’s house because it buys up and services the loans made by third parties on its homes. It spelled financial peril for Vetaw, who only satisfied income requirements because she worked 70 hours a week as a certified nursing assistant, she said. The loan’s 7.9 percent interest rate was so high that federal consumer protection regulations deemed it risky for consumers.

In the end, delays forced Vetaw to rent because she spent much of the savings she hoped to use for a down payment. Her leasing agent said the only available unit cost $929 plus utilities, which was pricier than one Vetaw saw advertised online.

“She continued to remind me it’s better than you and your kids being homeless,” Vetaw said.

“I stepped away and said a prayer,” Vetaw said. She signed the lease.

A safe community, at a price

Still, Vetaw and other residents said they were grateful to live in Smoke Creek. The streets are free of trash and the narrow lawns are neatly clipped. Residents said that violence is rare, although an 18-year-old was slain in May at the basketball court.

The housing has its appeal. At Smoke Creek, even 20-year-old trailers like Vetaw’s have floors covered to look like wood and counter tops speckled like granite.

Yes residents also complain of chronic maintenance problems. Toilets overflow, water service shuts off repeatedly, and repairs can run weeks or months late. Over time living under Yes’ terms can take a toll. Yes writes its leases to allow it to change community rules at any time, which means that an unmown lawn, a sofa on a porch, or a large work truck parked in a driveway can bring fines and fees that can topple a tight budget. A sign written in magic marker at Smoke Creek’s entrance warns that the penalty for a lawn violation is $75.

Yes’ fines, fees and rising rents leave many feeling trapped, residents said. The AJC interviewed more than two dozen current residents at Smoke Creek and other Yes communities, most of whom requested that the AJC withhold their names for fear of upsetting their landlord.

Late fees and due dates can change with 60 days notice, which is allowed under Georgia law. They changed for Vetaw in late winter with only 39 days notice, around the time a Norcross lawyer took on her fourth eviction case for free. Niquita Sanders discovered that Yes filed Vetaw’s case under the name of a company that was not registered to do business in Georgia, records show, and was unable to prove that it had given her required notification of the eviction filing. Yes also acknowledged in court filings that in the past it had accepted Vetaw’s rent weeks late until managers changed their minds.

A judge denied Yes’ bid to evict Vetaw, but her win seemed to only aggravate the park’s managers.

A notice threatening eviction arrived a week later: “Failure to vacate the property will result in your belongings being set out of the unit for anyone to rummage through and claim/steal as abandoned property,” it said.

Managers insisted she had an unspecified past due balance worth more than $2,350 that Vetaw said didn’t add up. The amount ballooned by $330 over three months with no explanation on her monthly bill. Yes did not comment on her case.

Vetaw longed to leave, but saw no way out.

“My fear is my children and I will not have a place to live after the lease is up,” Vetaw whispered. “My fear is they are willing to go above and beyond to make it really difficult for me because I took legal representation, and I have nowhere to go.”

Fatigue and anxiety for Vetaw

No side jobs or loans came through for Vetaw by the morning of Tuesday May 1, the day rent was due, so Vetaw took to her phone. Any plan to stave off eviction had to be launched from home. She had given up her broken-down car in a voluntary repossession.

First was a call to the state’s Division of Family and Children Services, which subsidizes daycare for her children, to say she could no longer afford her $400 monthly payment because a contract job was ending. The automated system hung up on her twice. No one picked up on her third try.

Next were job applications for Walmart and an emergency dispatcher position.

“I’m so excited,” she said. But the next morning there was no word from DFCS, Walmart or the dispatch job, and she left empty-handed from a faith-based charity because it was closed for client services. She sank into her rocking chair after returning with Jayceon, who was home from daycare because she was late on payments.

“Give me some lovin’,” she said to Jayceon, and stretched out her arms.

“Two lovin’s,” the boy said, and hugged her twice.

It was Friday morning before Vetaw learned she could pay her rent. A check of a pre-paid card she used to receive child support payments showed she had $200 she thought wouldn’t arrive for weeks.

On the afternoon of Saturday the 5th, Vetaw climbed out of her sister’s minivan, clutching an envelope containing a money order for $929. She slid it into the leasing office deposit slot instead handing it to an agent inside.

“I did it,” she said and gave a weary smile. “I’m going to sleep well tonight.”

She had so many reasons to be grateful. Vetaw’s kids were going to a party with a bounce house that day. Vetaw found a free space at a public park for her eldest son’s high school graduation celebration. Family would be coming to town to celebrate.

She still had no job, but she could worry about that later. Next month’s rent would be due in three weeks and five days.

Source: myAJC

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The No. 1 Way To Build Healthy Tenant Relationships: Communication

Mon, 07/30/2018 - 10:43am

It’s no secret that communication is the key to any successful relationship, whether it’s with family members, a partner you’re romantically involved with or colleagues at work. Open and direct communication between tenants and property managers is no different. Establishing a strong foundation of communication is important from the start, even when someone is still a prospective renter, because it helps rental issues get solved quickly and mitigates future problems.

So how can property managers best communicate with their residents?

Use Tech To Communicate More Effectively

Luckily, technology advancements have made communication between property managers and tenants quicker and easier. Mobile usage is so much a part of our everyday lives that it has changed tenant expectations — including how they expect their property managers to get in touch with them. Text messaging is commonplace and allows property managers to quickly send important, personalized updates to tenants, including package delivery notifications, late rent reminders or community announcements.

Property managers are also utilizing software portals to set up and send emails and text messages to help streamline the maintenance process, which creates more proactive communication with tenants. Today, people tend to screen or ignore calls, but a text from their property manager that more information is required on their maintenance request will likely get their attention and prompt response.

In addition, many property managers are embracing social media to communicate with residents. Creating custom Facebook pages, Twitter accounts and building websites have supplemented, and in some cases replaced, the mailroom bulletin board as a way to share resident-related information. This method ultimately allows property managers to communicate to a broader reach of their residents with the click of a button so they get more done in less time and tenants get the benefit of enhanced updates.

Hone-In On Core Communication Skills: Listening

Technology has enabled property managers to build more open lines of communication with their tenants. However, without demonstrating core communication skills, the technology will just fall flat.

We learn one of the first (and most important!) rules of communication when we’re children: To be a good communicator, you must be a good listener. Property managers must ensure they’re actively listening to their tenants’ complaints, notifications and preferences — and then responding. This will foster trust with your residents and create an approachable relationship without tension, which is the engagement property managers are striving for.

Purposefully listening to tenants can also save property managers time if, for example, a tenant calls with a maintenance request or lease updates. Listening saves property managers unneeded follow up communication with tenants and, in some cases, can prevent costly litigation if details were discussed but not paid attention to.

Fast Follow-Up

Some maintenance issues can take a while to resolve. As a property manager, you have to clarify details and gather data that can take several calls, emails and follow up messages, especially if you’re working with an outside vendor to fix the problem. And, any missed calls and unanswered emails during this time will just add to the tenant’s wait time for the issue to be resolved.

Although a maintenance problem itself may take a while to get fixed, tenants will get even more frustrated if they feel like they aren’t being updated on where things stand. It’s the property manager’s responsibility to keep the tenant updated on all they’re doing to remedy the issue in a consistent manner. For instance, through text messaging, a property manager can reduce the need for tenant follow-up since they can receive steady maintenance updates.

Personalize Your Message

Using technology, property managers can now automate a number of the messages they send to residents but must be wary of form notes being seen as generic or coming off as inauthentic. A little personalization goes a long way.

For example, it’s important to add the first name of residents to email blasts instead of just the standard “Hello.” Note how your tenants like to be contacted, whether it be via phone, text or email, and stick to these preferences whenever possible. Does a tenant work the night shift and can only be reached via phone during certain hours? Does another travel a lot for work and want to be reached via text messaging due to the different time zones they’re in? Knowing these preferences creates a better customer experience.

Open Lines Of Communication = Resident Retention

Property managers need to be in regular contact with their tenants to build a trusting relationship, not only when there’s a maintenance issue or its lease renewal time. An open line of communication leads to an overall better customer experience, and this leads to residents who want to stay put at their properties, as well as recommend them to friends and family. And in a competitive market, this positive word-of-mouth can be the best marketing tool a property manager has.

 

Source: forbes.com

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Expert Advice on Investing in Vacant Land

Mon, 07/30/2018 - 10:35am

Investors looking for creative ways to maximize returns in a competitive, hot-selling real estate market may be interested in buying vacant land, which has the potential to create outsized returns when held or improved.

“A client of mine purchased a downtown Atlanta vacant lot in 2012 for $1,500 and was recently offered $80,000 cash and decided to hold out for more,” says Bruce Allen, a real estate agent and attorney for Re/MAX Town and Country in Atlanta.

But experts say the asset class is unique and requires utmost caution and diligence. Unpredictable market trends over the long-term with few opportunities to earn income from vacant land make investing risky if not done right.

Experts offer the following advice before investing in vacant land.

Have a shorter, rather than longer, exit timeline. Sitting on land for the long haul is risky because it could go down in value, says Michael Ross, vice president of asset management and entitlements for Rockspring Capital, a private equity firm that specializes in land investment in Houston, San Antonio, Austin, and Dallas.

“Time is our greatest risk,” he says; that’s why Rockspring’s exit horizon is targeted at 18 to 36 months from purchase to resale once it’s ready for development.

Look for an income producing use pre-development. If your goal is to develop the land, look for ways to make money on it while that process is under way, says Danny Mulcahy, director of equity for Northstar Commercial Partners, a commercial real estate firm in Denver. Leasing the land or using it for agriculture, self-storage, parking or billboards can provide income during pre-development.

Get the right entitlements. Development-readiness involves doing the leg work to get the property zoned, cleared, subdivided and/or permitted for builders, also called entitlements, Ross says.

Entitling can add value to land and lead to big returns, but only if you’ve obtained the right entitlements for the marketplace, says Russ Moroz, first vice president of investment properties at Marcus & Millichap, a commercial real estate investment brokerage.

“Obtaining the wrong entitlements can make land virtually worthless,” he says. “Or leave you in a worse spot than if you sold the land without them, like if you agreed to certain obligations with nearby property owners in order to get your entitlements.”

Due diligence is necessary. It’s a good idea to do a title search and purchase title insurance, which protects the holder from financial loss due to defects in a property’s title, says Jordan Barkin, a real estate agent with Harry Norman Realtors in Atlanta.

If your goal is to build a single property, make sure the lot is actually buildable and qualifies for permits, says Matthew Briggs, chief executive officer of Briggs Acquisitions, a private real estate investment firm. Check for environmental restrictions or issues and planned zoning changes that could affect the property, he says.

You need to understand the utilities’ capabilities to handle the proposed development and how adjacent uses may affect your property. Research prior uses in case something was buried there or caused contamination, Mulcahy says.

Barkin advises also having a plot survey and percolation test performed by a licensed professional.

Buy in a high growth location at the right time. The key to successful land investment and development is buying where there is high demand and growth, Ross says. If you don’t have individual knowledge about areas to target, a third party market analysis is a good idea, he says.

Buying land within 15 to 30 miles of major urban growth centers is a good benchmark, says Edward F. Del Beccaro, senior managing director of Transwestern in Walnut Creek, California.

Investors can consider tech cities such as Seattle, San Francisco, Oakland, Denver, Austin and Los Angeles, where economists project 10- and 20-year job growth horizons, or land within three blocks of major highway interchanges, ports and mass transit. Underutilized, rather than vacant, land in these areas can be a great way to turn a profit while you work on redevelopment, Del Beccaro says.

Because land parcels and lots can decline by 75 percent or more in recessions, buying land at the right time is critical to making outsized returns, Allen says.

“Buying land at the bottom of the market and selling in the recovery offer the best opportunity for high returns and lower carrying costs,” he says. “Buying at the top often means having to carry through a recession, which adversely impacts returns.”

Take your time. A land purchase requires careful consideration and planning, so learn the ropes beforehand. Know your market at a granular level.

“It’s very specialized knowledge,” Ross says of land investment, noting investors in land development have typically worked for builders or in real estate beforehand.

“It takes years of learning to not walk into every bear trap that’s been laid out,” Ross says.

“Don’t let anyone pressure you into buying anything,” Barkin adds. “Deadlines are important but take the time to discuss your goals with your financial advisor. Do not expect to ‘flip’ land overnight for a profit.”

Source: money.usnews.com

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What to Look For in a Fixer-Upper: Signs the Home Isn’t a Money Pit

Mon, 07/30/2018 - 10:28am

Renovating a fixer-upper is not for the faint of heart. It takes money, hard work, and patience. But if you’re able to pull off a successful transformation, you’ll reap the benefits.

“Fixing up a house is an incredible opportunity, but should never be viewed as a TV show. It’s real life,” says Elizabeth Enright Phillips, a financial coach at Running Creek Properties in Lancaster, OH, who has renovated nearly a dozen properties.

Best-case scenario: You’ll end up building your dream home and increasing the value of the property. But fixing up a ramshackle house can cost a fortune. Unforeseen problems can surface that will make your fixer-upper a real money pit.

When looking at real estate listings, you’ll notice that no two fixer-uppers are the same. One may have sat vacant for a while, another may be in desperate need of a new roof, and another may have a mold infestation. Each of these scenarios will cost money to rectify, but some situations are more manageable than others.

To help you out, we tapped experts to identify the features and characteristics you should look for in a fixer-upper, to make the renovation go much more smoothly. On your hunt for that hidden gem of a fixer-upper, keep your eye out for the following signs.

Strong structural elements

A solid structure is ideal for any home, but it’s especially critical when you’re buying a fixer-upper. If the home has a crumbling foundation or serious roof problems, you’ll have to decide if you’re willing to pay to repair this type of damage.

These are the five important structural elements:

  1. Roof
  2. Heating, ventilation, and air conditioning (HVAC)
  3. Plumbing
  4. Electrical
  5. Foundation

Mike Coughlin, owner of Summit Design Build in Stoneham, MA, says you can get a good idea of the house’s structure by exploring the basement, attic, and unfinished areas. Focus on those areas rather than the pretty, recent additions to the home.

“You want to look at the basement rather than the granite counters and new bathroom fixtures. All of that shiny stuff is really easy to fix,” says Coughlin, who is working on a nearly 300-year-old home that he bought with his wife, Francine. “The stuff behind the walls is what’s more important. As long as the bones are good, you can pretty much do anything.”

Only minor plumbing problems

There’s a good chance that your fixer-upper will need plumbing work. Depending on the scope of the project, the work will be either a quick fix or a significant undertaking that will eat into your budget. Some fixer-uppers may have low water pressure (fairly minor problem), while others may have pipes that need to be replaced (a big problem).

Before buying a fixer-upper, make sure you’re comfortable with the amount of plumbing work required to bring the place up to snuff.

That said, you shouldn’t immediately flee any fixer-uppers that need plumbing work. If you really love the house, it’s all about balancing costs and diverting money from one project to another.

A sound layout

A logical layout is important in any home (no one wants to walk down a long hall to get to the guest bathroom), but it’s especially critical when you’re looking at an old home. Older homes are often divided into small rooms, but many people in this decade favor an open floor plan.

“The entire family wants to be connected; no one wants to be stuck back in the kitchen when everyone else is hanging out. With an open floor plan, there is no separation between the zones of the house,” says Jean Brownhill, founder and CEO at New York City–based Sweeten, which matches people who have major renovation projects with general contractors.

If you envision needing to knock down walls to create a more open, airy interior, know that the job can be expensive, time-consuming, and dusty.

Little to no infestations

It’s not uncommon to encounter a fixer-upper that has an infestation, be it mice, termites, mold, dry rot, or asbestos. A minor issue such as mice can be resolved by putting out traps and filling holes in the house. However, severe termite damage could require a costly solution, including lifting the house (yes, right off the ground) to access the foundation and check for further damage.

A seller is required to disclose such infestations, but a home inspector will also uncover any issues during the inspection that may occur after the house goes into contract.

If you find any of these problems in your fixer-upper, it’s a good idea to get an estimate from a contractor to resolve the issue.

Recent occupation

Buying a foreclosed home that’s sat dormant for a few years might get you a low sale price, but it may also present a challenge when you start renovating it.

“You never know what’s going on with plumbing behind the walls,” Coughlin says of homes that stand empty for an extended period of time. Maybe the water wasn’t turned off properly in the winter, which can cause the pipes to freeze, split, and leak.

A home without humans can also become a refuge for critters such as squirrels and bats.

“We have found dead mice and rats and a live mother possum feeding her two babies in attics,” says William Begal, president of Begal Enterprises, a disaster restoration company in Rockville, MD.

All of these problems can be fixed—they’ll just add more to your bottom-line costs.

Source: realtor.com

 

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Forget a Garage—Buyers Won’t Budge on High-Rated Schools

Mon, 07/30/2018 - 10:25am

Buyers have their eyes on schools, and with the irrefutable link between the quality of schools and values, a district with high ratings trumps all—even coveted features of a home, according to a new realtor.com®survey.

To get into their desired district, 78 percent of the homebuyers surveyed had to let go of something on their wish list. When asked what they would compromise on, approximately one-fifth (19 percent) of respondents would forgo a garage, while 17 percent would go without a kitchen that has been remodeled. Another 17 percent would settle for less bedrooms.

Being within an in-demand district is “important” to 73 percent of respondents to the survey, and even more so to those with children, and those who are younger. What are the characteristics of a “good” school? Accelerated programs, arts and music and diversity are all factors, but the most important is test scores, according to the survey.

“Most buyers understand that they may not be able to find a home that covers every single item on their wish list, but our survey shows that school districts are an area where many buyers aren’t willing to compromise,” says Danielle Hale, chief economist at realtor.com. “For many buyers, ‘location, location, location,’ means ‘schools, schools, schools.’”

Generally, homes in proximity to sought-after schools move quicker than others, and are pricier.

 

Source: rismedia.com

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40 percent of Seattle landlords are selling due to new rental rules

Mon, 07/30/2018 - 9:20am

Landlords are a bit displeased with the Seattle City Council at the moment, and they are taking their investments and going home. A recent University of Washington study on Seattle rental housing found that 40 percent of landlords have sold or are planning to sell their properties as a result of the new rental rules.

“Don’t think of an apartment or house or dwelling as anything other than a place where one can put your money, like a stock,” said KIRO Radio’s John Curley. “A building is an investment, and one wants to have a return on their investment.”

But Seattle landlords don’t find the new rental rules to be worth it. Those rules include expanded source-of-income protections, a ban on using criminal records as a determining factor, restricting the size of security deposits, and the First-in-Time law, which forces landlords to take the first renter that applies and meets the criteria. It was recently struck down by a Superior Court judge, but the City of Seattle has filed an appeal.

“All the noise we had heard from the wonderful, illustrious city council was about tenants’ rights, and about how horrible landlords are,” Curley said. “And we’re going to come down with one after another regulation on you because you have a bias, and don’t rent to this person, or you charge them too much money.”

Not only are landlords finding it difficult to maintain their properties under all the new ordinances, they don’t believe any of them are actually making Seattle more affordable. According to the report, one in five increased their rent in the past year in response to new city ordinances. And 40 percent reported that they have already adopted stricter rental requirements as well.

Seattle landlords and social expectations

For Curley, government interference and the demonetization of landlords is suffocating the rental market.

“The market will dictate the price of the apartment,” Curley said. “But once the government gets in and says, ‘Oh, that’s too much money to charge, or that’s unfair to somebody who has a right to live in this apartment.’ At that point everybody says, ‘You know what? I’m not going into Seattle. I will not build apartments in Seattle because they’re going to restrict how much money I can make, and therefore I’ll go build somewhere else.’”

KIRO Radio’s Tom Tangney doesn’t believe the ordinances are driving all landlords away.

“There are plenty of people who are willing to rent in Seattle, and those 40 percent may sell to people who are willing to rent them,” Tom said.

“The reality is that we have certain social expectations of landlords, and yes, I’m sure it bites some landlords. But the idea that you can’t have rent increases on substandard housing units seems like a fair deal.”

From the renters’ perspective, the city-funded report indicated that the biggest issues with housing are affordability, discrimination, a lack of adherence to and awareness of rental laws, and limited transparency in the application process. Rental prices remain high, but have been gradually flattening out, according to Zillow.

Perhaps most striking of the statistics gathered is that 89 percent of landlords believe their perspectives are not even being considered by local government.

“Part of their problem is who you have to rent to, first person in, and when you can take the security deposit. The majority of landlords said that the city council is against them,” Curely noted.

“So congratulations city council, you’re getting what you want, which is driving landlords out. But what you didn’t intend for was to have the rents go up, which is what’s going to happen.”

 Source: mynorthwest.com

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