Real Estate Investors with Smaller Portfolios Tending to Buy and Hold

southwestern style homes with palm treesWith still plenty of distressed inventory out there, potential real estate investors are taking notice. Unlike the waves of investors in the past who bought and flipped properties at lightening speed, the majority of today’s investors are taking a slower approach. In a recent RealtyTrac survey, 100 respondents identified as real estate investors were queried on their views regarding the market. The group was comprised mainly of investors who’ve been active in the market from 2006 through 2012. Of the 100 respondents, over 48 percent noted that they had been involved in the process for over seven years. Another 35 percent of the individuals reported that their investment activity spanned between just two and seven years.

The RealtyTrac report also revealed that many of today’s investors were considered relatively small scale because they purchased five or fewer properties. Among those who participated in the survey, 55 percent that bought properties in 2012 fit the conservative buyer model. This type of private real estate investor is considered more of a small portfolio player than one who is backed by a hedge fund collective or other such large interest.

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What to Do if You Suspect Illegal Activity in Your Rental Property

man working on laptopSlumlord jokes aside, investing in rental property, fixing it up and finding a few good tenants is a goal that many individuals have. A market that has been flooded with short sales and distressed homes has made this plan a reality for many. What happens when the best laid plans fall apart because you discover that those charming people who signed your lease agreement turn out to be less than respectable? In fact, the neighbors have been calling constantly about suspicious activity and the police have even been by a few times.

The best way to protect yourself from troublesome tenants is through your lease agreement. Unfortunately, these days, it has to be spelled out specifically that anyone renting your place is prohibited from illegal activities including the manufacture or sale of drugs on the site. Do not assume that it is a given just because it’s against the law – be clear about what is and is not allowed on your property.

For example, one big red flag is excessive foot traffic and short-term drive-by traffic. Individuals quickly entering and leaving a residence or briefly parked cars waiting for visitors to go back and forth are all danger signs that something is not on the up and up. [Read more...]

Real Estate Crowdfunding

old key laying on top of dollar billsMax Raskin of Bloomberg BusinessWeek, reported in late January on the “crowdfunding” phenomenon in real estate. Thanks to the “Jumpstart Our Business Startup Act” or JOBS, which became a law last April, American investors may soon be allowed to buy equity in private properties. The legislation allows a larger group of small investors to participate by limiting monetary restrictions on the amount required to get into the game. 

Although the Securities Exchange Commission, or SEC, is still fine tuning the details, the new arrangement will allow an investor to put in as little as two thousand dollars or as much as five percent of their income or net worth. Employing a group effort to fund endeavors such as new inventions, films, disaster relief and political campaigns is not a new concept. The idea of group buying power evolved in the 17th century when subscriptions were sold for books. The funds paid for the printing of periodic installments of works by a number of famous authors including Charles Dickens, and Sir Arthur Conan Doyle.  [Read more...]

Repairs & Maintenance – What Is Your Responsibility As A Rental Property Owner?

fixing sink with wrench

Minor repairs like leaky faucets and burned out light bulbs are usually the tenants’ responsibility. However, some landlords prefer to handle these tasks themselves.

If you’ve decided to enter the world of rental real estate, be prepared to have a whole lot of extra responsibility heaped upon you. From dealing with difficult tenants to researching landlord laws and a lot more in between, owning a rental property requires a big commitment. Part of that commitment is being able to complete any necessary repairs, fix defects and create a habitable environment for your tenants. But how do you determine which repairs are your responsibility? Here are some helpful tips on determining where your responsibility begins and ends when it comes to repairs and maintenance:

Making the Home “Habitable”
Although laws can vary from state to state, most landlord-tenant law will require the property owner to make the home “habitable” before the tenant moves in. Of course, “habitable” is a very general term that could have different meanings to different people; however, most local housing codes will define it as the minimum standard for safe, sanitary housing. These minimum standards can be very specific when it comes to electricity, plumbing, paint, lighting, ventilation and structural integrity. Some cities even require landlords to provide additional home features such as deadbolts on every exterior door and fire extinguishers in every rental unit.

Complete and Pay for Repairs Due to Natural Wear and Tear.
Repairs and general upkeep will be required from time to time. Things will wear out or break no matter how great your tenants are. For example, let’s say a compressor in your property’s HVAC unit finally gives out. Unless the tenant opened up the HVAC system, reached in and broke it, it is not their responsibility to replace it. It is the owner’s responsibility to complete this kind of repair. Furthermore, it is also the owner’s responsibility to pay the bill. [Read more...]

Pros and Cons of Buying a Duplex

hand holding house keysAs the housing market makes small strides toward recovery, more and more people are choosing to invest in rental properties. With a lingering abundance of distressed and discounted homes, some markets are even seeing large financial firms buy homes in bulk, fix them up and offer them as rental properties. Even if you’re not an experienced investor, you may be considering jumping on the bandwagon by making an investment purchase on a smaller scale. One of the most popular ways to do this is by purchasing a duplex.

Duplexes are houses that are divided into two separate units, but essentially share the same building. A lot of buyers choose a duplex because they want to live in one unit and rent out the other. Others choose to buy a duplex and rent both units out. Though less common, some buyers choose to live in one unit and keep the other unit furnished and available for visitors or short-term rentals (someone traveling on a two-week business trip, for instance).

The possibilities of duplex ownership are pretty flexible, which is one of the reasons people choose to invest in them. However, owning a duplex does come with its own unique set of drawbacks. Before signing on the dotted line, make sure you carefully weigh the pros and cons of owning a duplex.

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Investors Make Up 18% of Residential Sales in August

old fashioned key on top of moneyGay Cororaton, a research economist for the National Association of Realtors, issued an October 1st press release regarding residential sales figures for August. The report was generated from the RCI, or Realtors Confidence Index, which provides a look at market conditions, buyer/seller traffic, home prices and sales volume. Typically, over 3,000 real estate professionals across the U.S. are surveyed for the monthly RCI.

It appears that the availability of affordable properties continued through the end of August. Accessible inventories combined with the favorable mortgage rate situation apparently brought investors out in full force. According to the NAR index, 18% of all residential sales in August were made to investors. [Read more...]

Rental Vacancies Down Slightly in Second Quarter 2012

large apartment building with multiple storiesThe rental market has been beefing up in 2012, as vacancy rates dip and average rental prices pick up. According to a July press release from the United States Census Bureau, national vacancy rates in the second quarter 2012 were 8.6 percent for rental housing, illustrating a drop of 0.6 percentage points from the second quarter 2011 and a drop of 0.2 percentage points from the previous quarter.

The homeowner vacancy rate of 2.1 percent also declined, seeing a 0.4 percentage point drop from the second quarter 2011 and a 0.1 percentage point drop from the previous quarter.

Here are a few other key points from the US Census press release:

  • In the second quarter 2012, the median asking rent for vacant units was $716.
  • In the second quarter 2012, the median asking sales price for vacant units was $134,600.
  • Among regions, the rental vacancy rate was highest in the South (11.0 percent) and lowest in the West (6.2 percent).
  • For the second quarter 2012, the homeowner vacancy rate was lowest in the Northeast (1.7 percent). The rates in the Midwest, South, and West were not statistically different from each other. [Read more...]

Good News for the Housing Industry

For Sale By Owner SignIn addition to the promising news that home prices are up and the market is on the road to recovery, many are suggesting that now is an excellent time for investors to get back in the game. A recent article in the Wall Street Journal detailed several directions for prospective investors to consider.

New Construction – Since the inventory of available homes is at an all time low, investing in new construction could be a profitable venture. Another point made by the Wall Street Journal article was that housing stocks are still 66% down from where they were in May 2006. Many feel that as existing homes are snapped up, new construction firms, and home building supply companies will begin a fast climb to the top and the time to invest is now.

REIT’s – Just like residential inventory, apartment, office and commercial space inventory is also at an all time low. Investing in a Real Estate Investment Trust that owns those types of properties could be a smart bet, especially when you consider that the average rent is running $23 a square foot. The properties that have shorter lease terms and can raise rental rates quickly should fare the best. According to the financial advisory firm, Duff and Phelps, those that invest in hotels, apartments, and storage units could see a positive return.
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Considerations When Buying a Vacation Home

The real estate market may still be an unpredictable place, but according to a CNN Money article by Sarah Max, lowered rates and prices on vacation properties may make it an ideal time to finally invest in a home away from home. Before committing to such a large investment, though, it’s important to consider a few important factors.

The Market
“SMountain log home. Things to looks at when buying a second home.ome vacation-home markets are on the cusp of recovery, which may not yet be reflected in sales prices,” according to Max. To find out if they are, consult with a realtor to determine the number of available homes now as compared to the number from six months ago. If the number has decreased, prices will probably be on the rise. It’s also important to consider that home prices in vacation hotspots rise and fall proportionately to those of its neighboring areas.

Your Prospects
Not all vacation homes rent as often as others. You should request a detailed history of rental dates and property rates from your real estate professional. Some key factors that can affect those rates are the property’s proximity to tourist attractions, its style and decor, and its general architectural layout. Jon Gray, a HomeAway vice president, recommends to “focus on newly built properties or ones that have been recently remodeled.”

Financing
Many top-shelf bargain properties, such as foreclosed homes or condos in struggling developments, can be difficult to finance. Because of this, approximately 40% of vacation investors pay in cash. However, financial planner Barbara Steinmetz suggests opting for a loan if you can, since low rates may likely to result in a higher returns by investing your hard-earned cash elsewhere.

Also, as Max points out, “Keep in mind that lenders often require as much as 25% down on investment property, and you’ll pay up to one percentage point more in interest than you would on a loan for your primary home.” NOTE: You can call us toll-free at 800-634-8616 and we’ll be happy to answer any vacation home related financing questions you may have.

Total Cost
Like all big investments, it’s a numbers game. Some expenses you’ll have to consider are mortgages, property taxes, insurance, utilities, and maintenance, as well as the cost of obtaining your vacation property to begin with. Furthermore, although you can deduct expenses related to the property if you rent it for more than two weeks a year, you’ll still pay income tax on any profit you make.

Harvard University Report on Housing Reveals Strong Demand for Rental Housing

Homes in fall. Information on increased demand for multi-family rentals.The demand for rental property has risen dramatically across the country, causing widespread rent increases. This information comes from a recently released housing report by Harvard University. The report, which examines several aspects of the U.S. housing market, also indicated that multifamily property values are beginning to stabilize, thanks to the rental market’s sudden boost.

Because the demand for rental property is rising sharply, the value of investment-grade multifamily rental buildings are pulling back up. With the increase in value, rental properties are also seeing some hefty price increases.

“Rental market tightening has stabilized multifamily property values after a sharp drop rivaling that in the single-family market. As measured by NCREIF’s Transaction Based Apartment Price Index, prices were up 10.0 percent in the fourth quarter of 2011 from a year earlier and 34.4 percent from the 2009 low,” the report stated.
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