Landlords Need to Know Their Tenants

32397088_sI remember the morning of Sept. 11, 2001, as if it were yesterday. I believe that to be true for most of us. Things changed in our country after 9/11, from security checks at airports to the questions banks asked of us when we opened new accounts, to the information required to apply for a loan. The residential leasing world also came under question as some of the known terrorists were tenants, renting in our state.

The purpose of this article is not to engage in political debate about the state of the world, but to remind all landlords that they need to know their tenants! Unfortunately, there are ruthless and corrupt people everywhere looking to lease property. In today’s world, potential renters could be terrorists, drug dealers, human traffickers or hardened criminals. Here are some ways landlords can get to know their tenants:

  • Prior to leasing, have all applicants fill out the exact same application. The quality of the application is sometimes more important than the quality of the lease.
  • Capture government issued identification. If something appears to be suspicious, contact law enforcement.
  • Call all listed references and check on employment.
  • Run a credit report, public report and a criminal background check.
  • After leasing, inspect your property on a regular basis.

It is very important that landlords know all laws in regards to leasing, especially Fair Housing requirements. A good rule of thumb is to simply treat all applicants and tenants equally! If you do not understand Fair Housing or any other law, contact an attorney and educate yourself. Fair Housing penalties are very severe. Of course, it is always a good idea to hire a property manager to provide leasing services. A good, professional property manager will be current on Fair Housing laws, process applicants consistently by reviewing all reports and background checks, and will increase the landlord’s odds of placing great tenants in their property.

Source: flagstaffbusinessnews.com

Here’s Why Renters Will Still Struggle to Buy a Home in 2016

Real-estate agent giving keys to new property owners

The classic back-and-forth between renting and buying is not expected to cease anytime soon. While rising rents will ease in 2016, they will still be unaffordable, adding to the list of complications preventing renters from getting into homes.

A Zillow report found that rents will flatten in 2016, but will still be unaffordable in most markets. This presents yet another challenge for the aspiring homebuyer on top of rising rates, tightening credit, and flat incomes.

According to Zillow’s Rent Forecast, rent appreciation is expected to flatten  over the next 12 months and will slow to an annual rate of 1.1 percent by December 2016. Nationally, the index is forecast to be $1,396 by the end of the year, compared to $1,381 in December 2015.

“Hot markets are still going to be hot in 2016, but rents won’t rise as quickly as they have been,” said Zillow Chief Economist Dr. Svenja Gudell. “The slowdown in rental appreciation will provide some relief for renters who’ve been seeing their rents rise dramatically every single year for the past few years. However, the situation remains tough on the ground: rents are still rising and renters are struggling to keep up.”

In housing markets where home values are constantly rising, first-time buyers often struggle with coming up with a down payment and end up renting versus buying a home.

Most renters are putting about 30 percent of their monthly income toward their rental payment, which makes saving for a 10 or 20 percent down payment difficult, a November 2015 Zillow report showed.

“In general, paying a mortgage is more affordable than renting, and has been for some time. Unfortunately, many current renters aren’t able to realize the savings that come with homeownership because as home values and rents keep rising, it’s getting increasingly difficult to clear the down payment hurdle,” said Dr. Svenja Gudell, Zillow’s Chief Economist.

For many years, buying a home has been considered to be an obvious choice when compared to renting a home, but this is not always the case. For some, it may make more sense to purchase a home versus renting a home and vice versa.

A new report from Smartasset did not completely shut renting out of the game, especially if the rental market is better suited for consumers’ needs. Even though home prices continue to rise, purchasing a home is still a better choice across the U.S. compared to renting.

“If you were spending 30 percent of your income on housing anyway, might as well spend that hard-earned dough on something that would retain its value for you in the future,” Smartasset said. “Renting, in contrast, was like lighting your money on fire and tossing it in the trash. The rent versus buy decision was a straightforward one.”

The report continued, “That all changed in 2007, when the housing bubble that had been silently growing suddenly went pop. A house, it turned out, could lose value—and, as some real-life cases demonstrated, could do so in spectacular fashion. Those with the misfortune to buy at the peak of the market in 2006 lost thousands or even millions of dollars overnight. Mortgages went underwater. A foreclosure crisis ensued. Meanwhile, the renters of the world were doing relatively well.”

Source: themreport.com

Tips for Making Your First Property Investment the Right Way

piggy-bank-house-real-estate-investingYou only have to look at the profile of a large number of wealthy people to spot the obvious connection between these people other than the fact that they have been successful in making money.

Investing in property is one of the main cornerstones of wealth creation and if you talk to a Montrose realtor or anyone who has a sound understanding of real estate, they will tell you that if you do it right, investment property can earn you some excellent returns on your money.

Big money investment

The first thing to say that simply investing in real estate is never going to guarantee you a long-term profit.

The historical trends for property prices in general are very encouraging for anyone considering investing in property but when you are putting in a large sum of money in one go, you definitely want to know that the odds are as much in your favor for making a profit as they can be.

Buying and selling stock by comparison, can be done at a relatively modest level so that any investment mistakes are not too damaging and you can spread your risk around a number of different stocks if you want to.

Buying real estate means betting on one stock as it were, which is fine as long as you do your research and understand the fundamentals of investment property.

Landlord responsibilities

Buying a property that you are not going to live in is an entirely different scenario and it means that you have to adopt the mindset of a landlord rather than viewing the property as your home.

If you are considering building a portfolio of different properties in order to generate a regular rental income as well as enjoying capital growth, and investment property is obviously what you want, but you do have to consider how you are going to deal with the repairs and issues that could easily erode some of your profits.

Some property owners are good at DIY and are competent enough to tackle a number of minor repairs themselves to save costs, but if you are not going to be doing this you will need to ensure that the property you are looking at can generate a sufficient level of rent to cover a contingency amount that you can set aside for when repairs are needed.

Financing the property purchase

There can be a difference of opinion when it comes to how you should finance your property investment.

The ideal scenario would be to pay cash for the property and simply enjoy the rental income you generate without having to find any mortgage payments.

When you are first starting out in building an investment property portfolio there is a good chance that you may need to finance part of the purchase price with a mortgage. There are plenty of examples of savvy investors who have started out being highly leveraged but have been able to grow their portfolio more quickly with an aggressive financing strategy.

This is risky and it highlights the importance of doing all of your sums to know that you have enough money available to pay for repairs and general maintenance on your properties when it is needed and also that you have enough cash reserves to pay mortgage payments when there are rental voids to contend with.

Leave a margin

A good guide to making sure that the numbers check out sufficiently on a property that you are considering investing in, is to ensure that the price you are paying and the rent you can generate, allows you a margin.

The ideal margin for a private property investor to work to is about 10%.

Work out how much your finance payments will be and calculate your annual maintenance and insurance costs. If you estimate your maintenance costs at about 1% of the property value on an annual basis, this is normally a fairly reliable guide.

Make sure you detail all of your expenses including property taxes, garden and building maintenance and even things like pest control, so that you know the price you are paying for the property gives you the opportunity to leave a sufficient margin.

Another sound piece of advice if you are just starting out in property investing is to resist the temptation of buying a property on the cheap with a view to fixing it up. The odds are quite high that you may end up paying too much to renovate.

A better approach would often to try and buy a property below the market value that needs only minor repairs to bring it back up to standard.

Source: nuwireinvestor.com

The Top 7 Real Estate Predictions for 2016

2016Considering all the ups and downs experienced in the real estate market over the past decade, many people are questioning what to expect for real estate in 2016. If you’re thinking of selling, will it be a good time to put your house on the market? If you’re thinking of buying, will it be the right time to purchase a home or even build a brand new home? Will it be a good year to purchase an investment property or is the market over valued? To answer these questions, we’ve gathered the top real estate predictions from experts like CoreLogic, Realtor.com and Trulia to present you with 7 key real estate trends to expect to see in 2016.

1. A Return to Normal

The housing market crash created some very unstable conditions in the real estate market over the past decade as construction slowed, homeowners defaulted on mortgages, and banks became more stringent in their lending guidelines. These factors plus the resulting economic recession have caused some abnormal trends in the real estate market.

However, in 2016, we are expected to see a more normal housing market that will grow along with the economy. Realtor.com predicts healthy growth in both home sales and home prices, similar to what we saw in 2015, although at a slightly slower pace. 2016 should be much more predictable and stable than past years.

PwC echoes the sentiments that 2016 will be a good year for real estate. This interactive tool allows you to look at predictions for over 50 major US cities. On the map, you’ll notice that all major cities are predicted to have fair to good markets in 2016.

2. Rising Interest Rates

With a stronger economy, the federal government has begun to raise interest rates. We saw the first rate hike in nearly a decade take place in December 2015 as the Federal Reserve determined the market was strong enough to increase the interest rate by 0.25 percent. This small increase will likely lead to further increases in 2016 with predictions there will be approximately a one percentage point increase between now and the end of the year.

Many people see rising interest rates as a bad thing. However, as Bankrate points out, there are actually some strong benefits to higher interest rates. The increase will mean a stronger dollar, more interest income for retirees, and higher returns for savers. A higher interest rate will also increase banks’ willingness to lend money. This means 2016 will be an ideal time to find financing for your dream home or a good long term investment property. Acting sooner rather than later will allow you to lock in a lower interest rate before rates climb higher later in the year.

3. Millennials Enter the Housing Market

During the years after the housing market crash, there was a lot of talk about about how millennials (age 18 to 34) were not buying homes at the rate of prior generations. There was a good deal of emphasis put on “boomerang” kids – college students who move back in with their parents after graduation, and a large number of millennials choosing to rent rather than buy.

These observations (along with countless research studies on the topic) caused many to assume that millennials were an entirely different generation and that the traditional ideas of homeownership and the American Dream did not resonate with them. However, new evidence from a 2014 Fannie Mae survey suggests that homeownership is in fact still important to millennials, and it is their ability to purchase a home, not their desire, that is holding them back from homeownership.

In 2016, we expect to get more hard evidence on this point. As the economy improves and millennials find themselves in a better financial position, they will become an active part of the real estate market. In 2015, millennials represented nearly one-third of homebuyers. The trend will continue into 2016 with many millennials becoming first-time homebuyers within the next year.

4. Increasing Home Sales & Prices

As mentioned earlier, the housing market is predicted to continue to grow in 2016 – pushed by an increase in lending options and more millennials joining the market. This increased demand for housing will mean home prices will also rise. In fact, CoreLogic predicts that home prices will rise at a faster rate than inflation.

With home prices predicted to increase by 4 to 5 percent and a lot of new buyers in the market, 2016 will be a great time for home sales. Increased equity, an improved economy, and feelings of financial security will lead to more people selling their homes in 2016.

5. Baby Boomers’ Dual Role in the Buying & Selling Markets

Another key demographic in the 2016 housing market will be baby boomers, especially those older boomers who are approaching retirement or have already retired. Several of the other factors on this list play into this trend including (1) higher interest rates mean more interest income for retirees and more lending options, (2) growing home prices and increased demand make it an ideal time to sell, (3) a motivation to get in the housing market early before interest rates increase further.

2016 will be an ideal year for baby boomers to sell their home at a higher price than in years past. After selling, many boomers will look to downsize their new home in order to lock in a lower cost of living for their retirement years. In particular, boomers will be drawn to new homes over resale homes in 2016, where they can downsize their home but also customize it to their needs and lifestyle.

6. Affordable New Home Construction

With more buyers in the market (and coming from multiple generations), new home construction is also predicted to increase in 2016. More specifically, experts believe home builders will find their niche by building more affordable new homes to meet the growing demand of young buyers.

In particular, millennials will bring an influx of first-time home buyers to the market. They’ve saved and they’ve waited, and when they finally decide to buy, many will want the ability to customize their own homes while trying to keep costs down. Because of this, many home builders will expand their affordable new home options in order to cater to these entry-level buyers.

7. Increasing Rents

We’ve already mentioned the fact that the improved lending market and the desire to get in while interest rates are still low are two main reasons why 2016 will be a great year to consider investing in investment properties. Another point that helps make timing great for an investment purchase in 2016 is the fact that rental costs are expected to skyrocket, which means even more return on your investment.

For some time now, rents have been increasing at a faster pace than home prices. This means that for the majority of Americans, it is cheaper to rent than own. However, for many people, factors prevent them from purchasing a home, including lower credit scores, lack of stable income and not enough savings.

A stable rental market, low rental vacancy rates, and steady demand will keep pushing the price of rental units up in 2016. If you’ve been considering joining the real estate investment market, now is the perfect time to jump in.

Conclusion

All in all, the prospects for the real estate market in 2016 all look positive, whether you are planning to buy, sell or invest. For everyone that has been standing by and waiting through the economic roller coaster of the past few years to end, the long wait is over and 2016 will be a great year to finally get off the fence and make your move.

Source: nuwireinvestor.com

Renters are looking a little older these days.

Middle aged couple packing.

Rental applicants tend to conjure up images of recent college grads looking to start their life in the real world. But Millennials are facing increased competition from people who have already spent decades in adulthood, and may have better credit and higher income.

Since 2005, there has been an uptick in renters, with people in their 50s and 60s making up the largest chunk of the increase, according to a recent report from the Harvard Joint Center for Housing Studies.

In fact, the majority of all renters are currently 40 or older.

There are many reasons that the renter population includes a growing number of Gen-Xers and Baby Boomers.

The 2008 housing collapse that led to a wave of foreclosures has turned some people off to homeownership, according to Jon Spader, senior research associate at the Joint Center for Housing Studies. He added that the tight credit market can also hinder renters from securing a home loan.

Plus, not everyone wants to be a homeowner in their golden years, and the decision to trade a mortgage for a lease is about a new lifestyle, especially for empty-nesters.

“They are leaving their homes and renting in a much more urban-type settings from the suburbs to be part of the activities and be mixed in with people of all ages,” said Tiffany Curry, a real estate agent in Houston. “It gives them something to do if the kids are gone, or their spouses.”

The amenities that come in new rental buildings and their units are appealing to older renters. “They have everything they need in their building,” she said.

Renting also gets rid of the responsibilities that comes with home ownership, which can become burdensome as owners age.

“It’s about portability. They want to travel and don’t want to be burdened by house payments and expenses and upkeep,” said Cara Ameer, a real estate agent based in northeast Florida who in the past few years has seen a roughly 15% increase in boomer-aged clients looking to sell their home to become renters.

Some older homeowners are also cashing in on the recent rise in home prices.

“They want to take advantage of getting equity out of their home now, and not wait until they actually retire to move into the city and get a cool apartment,” said Curry.

But it’s expensive to be a renter right now. Rents have been on a tear recently as inventory remains tight and demand grows.

That reality that has hit home for Sharon Curry, 68, who sold her home in 2013 and started to rent. She accepted an unsolicited offer on her home near Orange County, California, thinking the $200,000 profit she walked away with would beef up her nest egg. Instead, rising rent is eating up her budget.

The rent for her one-bedroom apartment started at $1,670 in 2013. She’s now paying $1,962, and she’s worried it’s going to continue to go up.

While she is currently working, she knows she can’t count on having that income forever.

“I don’t know how much longer I am going to be working, it’s a conundrum.”

9 Time-Wasting Real-Estate Myths to Avoid

Home-for-SaleIf you’ve been sitting on the fence about real estate investment, it’s time to jump into the game. And, once you do, your first hill to climb will involve getting your facts straight.

Here are the top nine myths I see spouted almost daily:

1. Investing in real estate is too risky.

Investing in anything can be risky. However, in real estate you have a tangible, hard asset to fall back on, unlike what occurs with the stock market. With the right skills and even just an average housing market, you can do well. But diminishing risk starts with having a viable investment plan and sticking to it.

2. You need a higher education to succeed as an investor.

You don’t have to have a college degree to invest in real estate. In fact, many real estate investors don’t. With the power of the Internet and data, such as pricing history and housing market summaries, researching the state of the market in your area is easier than ever. Reliable real estate investment books and webinars are also plentiful, and are available at a fraction of the cost of a college degree.

You can supplement your basic knowledge with your own research, and the rest will come with experience.

3. You have to be rich to invest in real estate.

Rome wasn’t built in a day and neither were most fortunes. Start with small ventures and find investment partners with similar goals. In real estate, there are also funding options that can help you get started. You can then use the return on smaller investments to fund your next, bigger venture.

4. Investing takes too much time.

You don’t have to be a full-time investor to make money! When starting out, most investors keep their full-time jobs in order to maintain income until they get rolling.

Be forewarned, however, that real-estate investment  tests your time-management skills. You will still have plenty of time to remain at your full-time job, but the reality is that you will say “bye, bye” to your weekends.

5. That late-night TV infomercial real-estate stuff is your only option.

You don’t need to buy-in to a late-night infomercial. We’ve all seen the “Start investing with only $100” ads. But get-rich quick schemes set you up to fail. Instead, by doing your own research and creating your own investment plan, you’ll establish a viable path that will have you investing within weeks.

6. You need outstanding credit to invest.

Those with outstanding credit are few and far between. You don’t need the best credit to begin investing, but if your investment requires that you take out a loan (and most likely it will), you do need average or stable credit.

7. You can do just fine investing in the stock market.

“Just fine” isn’t a phrase investors should like to hear. Investing in the stock market is a viable option, but in real estate you have a tangible asset at the end of the day, no matter the outcome of the market. There’s also something to be said for taking something, making it yours and making it better.

8. Only institutions and full-time pros make it in real estate.

As previously mentioned, you don’t need to work in the market full time to make a return on your investment. Most of the investments made in your city’s low-to-medium income neighborhoods came from small-time investors. So, yes, it’s okay to start small! Even the smallest property investments can yield the most desirable return.

9. There is too much competition to be successful.

Never be afraid of a little competition. This will vary by city and neighborhood, but there’s no harm in competition if you can find a property within your budget. There are constantly new properties available on the market, meaning new opportunities for investment. If one area is slow to have properties available, don’t be afraid to look outside the area you originally intended to invest in.

These nine myths have kept many potentially great investors from succeeding, so don’t let that happen to you. It’s time to get in the game now!

Source: entrepreneur.com

The Top Rental Scams and How to Avoid Them

scam alert

While Christina and I have focused our business on flipping houses, we know that a lot of real estate investors enjoy getting passive income on a regular basis from rental properties. Unfortunately, there are a lot of rental scams out there that you really need to be aware of if you’re going to hold rental properties.

When you think of rental scams, you probably think of the ones that target tenants, but they also affect landlords, too. If you’re interested in fixing and holding properties for rent, you should be aware of both of these kinds of scams and how to avoid them. This way, as you list your properties, you can avoid looking like a scammer to good tenants, and you can avoid falling victim to a scam, yourself.

The Out-of-Town Landlord

The most common of those is probably the out-of-town landlord scam. The listing for the rental will be a gorgeous local property, usually with a lot of really great pictures, but the rental rate will be really low, especially for the property and the neighborhood. When you try to contact the landlord or property manager about the house, though, they’ll tell you that they live somewhere else and that you just need to send them a security deposit and the first month’s rent to secure the place for yourself.

What’s really going on? The “landlord” doesn’t own the house. They’ve just found pictures of it online, and they’re running a scam to get as many people to send them those “deposits” as possible. To avoid this kind of scam, you should always insist on seeing the property first and getting a lease in writing before you offer any money. To avoid looking like one of these scams, offer open houses and viewing appointments and always partner with a reputable property management company that will take care of everything for you ethically.

The “Really, Really Popular” Property

Similarly, the scammer will list a property at a really good rental rate. You’ll contact them, thinking that someone else has probably already snatched the property up but you might as well try… Surprisingly enough, you’ll be the first person to respond to their ad! You’ll go look at the property, and everything will look good. You’ll hand over a security deposit and the first month’s rent, but when moving day comes, you’ll see a lot of other people trying to move in to your house, too. And your “landlord” will have left town with everyone’s money.

If you’re ever a tenant searching for a place to live, do some research on the person or company you’re renting from, and always be suspicious of really low rental rates, especially in really nice neighborhoods. If you’re a landlord, again, always do business with a good property management company so your tenants can check you out and know that you’re not running a rental scam.

“Oops! I Paid Too Much!”

Like I said earlier, these scammers don’t just go after tenants, either. In this scam, you’ll list your property for rent, and you’ll get a response from a tenant who’s moving into town and wants to secure a place as soon as possible. Without even meeting you or looking at your house, they’ll send you a check for the deposit and first month’s rent.

After they send you the check, though, they’ll “suddenly realize” that they wrote it for too much money and that they’re about to be in real financial trouble. They’ll ask you to wire the difference back to them ASAP. Seems innocent enough, right? Well, that check they sent you might as well be made of rubber because after you transfer them the difference, you’re going to find out that the check bounced. Then you’ll never hear from your “tenant” again.

You can avoid this rental scam by refusing to send any money back to them until the check clears your bank, or you can ask them to just bring you a check for the correct amount when they get into town and meet you instead of mailing one ahead. Or you could opt to keep flipping houses like Christina and I do and avoid all of these scams entirely.

About Tarek El Moussa

Tarek El Moussa is an experienced real estate investor and the co-star of a popular real estate reality TV show along with his wife and business partner Christina El Moussa. The couple started Success Path Education to teach real estate investment education to students from all over the country. Please visit www.SuccessPathEducation.com for more details.

Source: RealtyTrac