March 2013, e-Newsletter

My e-Newsletter for March 2013 is out. 

If you missed it, send me an e-mail and I will forward you a copy.

Single Family Renters More Likely to Stay for 5 Years or Longer

Are you considering an investment in rental property but the concern of tenant turnover is holding you back? 

According to a study released on February 25, 2013, turnover in a single family property might not be as high as you think.

According to WSJ's Nick Timiraos, "Some 26% of single-family-home renters said they planned to live in their current rental for five years or more, compared with 22% for renters in multifamily buildings. Three out of every five single-family renters also said they planned to become a homeowner within five years, compared with just 44% of apartment renters."

This is information that most investors owning single family property already know, but it is great to see it solidified in the National Survey of Renters.

 

To read the entire article and see the study visit: http://blogs.wsj.com/developments/2013/02/25/survey-single-family-renters-more-likely-to-stay-longer/

 

 

 

 



1324 Bexley Street - PARK CIRCLE

This could be the best deal in town

Not to be missed in West Ashley. Extremely close to MUSC, College of Charleston, and Charleston School of Law. Located perfectly a few minutes from Historic Charleston and very close to I-25 and I-526. Perfect to live in or a great investment.

Tips to Keep in Mind If You’re Thinking about becoming a Real Estate Investor

RISMEDIA

RISMEDIA, February 7, 2011—With homeownership dropping and rental vacancy rates rising, it is clear many Americans are looking to make a change to renting instead of owning their home. Currently, homeownership levels are at 66.5%, the lowest they’ve been since 1998, reported recently by the Department of Commerce, and the rental vacancy rate at 9.3%, the highest its been since 2003. Many prospective investors could take this information and apply it to a very lucrative decision for future investment property purchases.

Nancy Braun, owner and broker-in-charge of Showcase Realty has been a real estate broker for over 14 years. Her expertise lies in REOs, short sales, distressed properties and she recently became a Neighborhood HUD Listing Broker. A large amount of her listings are being sold to real estate investors and she is sharing a few questions and tips to keep in mind if you are thinking about becoming a real estate investor.

What is real estate investing?
Real estate can be a great long-term investment. It is a tangible, cash-generating asset and appreciates in value. Real estate investment has proven to be a powerful method of accumulating wealth over time and investors are getting a return on their investment (ROI) in three ways: cash flow, return on taxes and appreciation.

What are the benefits of real estate investing?
The main benefit of real estate investing is the profit that you can make if you handle your investment correctly. Having a rental property provides a source of regular income, but other than that, investment properties qualify for numerous tax deductions which may include cost of building maintenance and repairs and interest paid on loans related to the property.

Are you looking to rent or flip?
Before you start looking at properties, you should decide on what you are going to do with the property once you attain it.

If you choose to buy, hold and rent it, take into consideration the responsibility it takes to be a landlord. You will need a lease agreement specifying what you will be responsible for maintaining, fixing, etc. and what the tenants will be responsible for like amount of rent, date of payments, leasing length, etc.

Becoming a landlord can turn into a very profitable venture if you make sure you are well-versed in property management, including fair housing laws and eviction and collection procedures. While you can self-manage, it may be wise to outsource this to a local experienced and qualified property management company. Either way, you must maintain the property to best preserve its value so it can eventually be sold at a significant profit.

If you choose to flip the property, you must take into account any and all property updates and repairs that need to be made. The term “flipping” means that you purchase a home, repair it and resell for profit. Both renting and flipping can be substantial financial investments, so make sure you have a reasonable budget in mind for the possible updates that will need to be made. Flipping a home can be considered less of a responsibility than becoming a landlord, but you must keep in mind that someone will be living in the home you are flipping and you want to make sure they will find it worth their money to purchase and move into. Consult your attorney and lender for restrictions on flipping. Keep in mind that flipping may not be the wise choice in a down housing economy.

How are your finances?
The better your credit, the more likely you will be able to get a decent loan. Since lenders know people are more likely to default on investment property, they usually require bigger down payments, higher interest rates and stronger finances for rental property investors. It will also be prudent to have a cash reserve left over after buying the property to put toward unexpected vacancies, maintenance and repairs. Typically the lender will require 20-25% down on an investor loan. In some instances a 10% down payment may suffice.

Additional considerations
-Location, location, location. If you decide on renting your investment property, make sure it is in an area where you can attract tenants. The same rules apply for finding a home to flip. When trying to sell a home, if it is located in a strong resale area, not only will you have a shorter hold time, but you will likely benefit from a greater return. Be sure to seek out a real estate agent that has experience advising investors not just owner-occupants.

-Timeline and budget. Having a reasonable, realistic timeline and budget for repairs will prepare you for success in your investment venture. Make sure to stick to the guidelines you set for yourself so you can end up with as much profit as possible and not overpay for your investment. Do not over-improve. This is not your personal residence. Only make improvements that will either make it more attractive to sell/rent, and/or will reduce your hold or vacancy time and ultimately show a return on your investment. There will always be unforeseen issues that may hold up construction or unexpected costs, but make allowances for such problems and you will stay on track.

Where can I find an affordable home to invest in?
With home prices at an all-time low, we are currently in a buyer’s market. There are many houses on the market being sold well below tax value that are just waiting to have a little TLC given to them to make them shine again. Seek out a real estate professional that specializes in real estate owned (REO), short sale and distressed properties and who also has experience working with investors.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Copyright© 2011 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

Mortgages Can Help, Rather than Hinder, Finances

RISMEDIA, June 28, 2010--(MCT)--While most financial-savvy consumers do their best to avoid debt, one debt that is unavoidable to many families is a mortgage. Because many of us feel more in control of our home and expenses without a mortgage, a common question is whether to pay it off as quickly as possible.

The answer depends on each person's financial situation. A mortgage can actually be a blessing to some.

For example, mortgage interest is tax-deductible. This deduction saves taxpayers about $103 billion a year, according to the U.S. Treasury. The benefit is less to owners of low- to moderate-valued homes who may not have much interest or enough to claim it by itemizing deductions. But for families with a higher net worth, it allows a tax savings and may encourage them to buy larger homes.

With tax brackets for the wealthy rising next year, this tax break becomes more valuable. When the break is included, a 6 percent mortgage could have a rate closer to 4 percent in reality. Calculate your mortgage's effective rate by subtracting your tax rate from 100 and multiplying that number by the interest rate. For example, a 28 percent tax bracket with a 6 percent mortgage would result in (.06 x 72) to equal the equivalent of a 4.32 percent mortgage rate after considering tax savings if itemized. That helps the interest look less daunting.

In addition, with the possibility of investing with a goal of a 5 or 6 percent return, instead of putting that money into a mortgage the homeowner could get a return higher than the effective rate, which could help grow net worth. On the other hand, if the effective rate is higher, it may make sense to pay down the mortgage.

Another situation that makes paying off a mortgage attractive is for someone at risk of bankruptcy. Many states offer protection from creditors seizing a home to pay debts. If a home is paid in full, it is more likely the owner could stay in it if he goes broke, providing he can pay for the upkeep.

Money taken out for a mortgage also could reduce net worth later in life. The potential for higher investment returns are gone; that money will not be able to grow if investments grow over the long term. Not to mention having too much invested in a house. That could be detrimental at retirement. While we can get a loan for a house, there are no loans to finance retirement.

(c) 2010, McClatchy-Tribune Information Services.

Fannie Mae Guideline Changes on the Way

Hopefully the new Fannie Mae changes will bring investors back to the real estate market.

Many investors have been stopped in their tracks with current Fannie Mae requirements that do not allow a purchaser of investment/income producing properties to have more than 4 financed properties.

Multiple Mortgages to the Same Borrower and Reserve Requirements Changes

Fannie Mae has issued Announcement 09-02, Updates to Multiple Mortgages to the Same Borrower Policy, Reserve Requirements, Reserves Definition, and Form 3170.

Multiple Mortgages to the Same Borrower

To help support housing recovery, we are introducing an expanded policy regarding multiple mortgages to the same borrower. Fannie Mae is committed to providing financing opportunities for high-credit quality, bona fide investors. Experienced investors play a key role in the housing recovery and Fannie Mae’s continued support for investor borrowers is consistent with our mission to provide stability, liquidity, and affordability to the nation’s housing system.

To support prudent lending for housing investment, Fannie Mae is changing our current limit of four financed properties per borrower when the mortgage being delivered to Fannie Mae is secured by an investment property or second home. We will allow five to ten financed properties per borrower, with certain eligibility and underwriting requirements, including a 720 minimum credit score and 70–75% maximum LTV/CLTV/HCLTV (depending on the transaction and property type). The requirements apply to any investment property or second home loan being delivered to Fannie Mae, regardless of whether Fannie Mae is the investor on the borrower’s other mortgages.

Second home and investment property loans to borrowers with five to ten financed properties will be accepted for whole loan purchase or delivery into MBS with purchase dates on or after March 1, 2009, and new Special Feature Code 150 will be required at delivery.

Desktop Underwriter® (DU®) will be updated in the DU Version 7.1 April Update release to issue a message on all second home and investment property transactions reminding lenders of the requirements for borrowers with multiple financed properties. A Supplement to the Release Notes for the April update has been issued to provide details (link below).

Reserves Definition and Policy Requirements

We also are updating our definition of liquid financial reserves to include all components of the monthly housing expense – which will now be known as PITIA – including homeowners’ association dues, special assessments, ground rents, and subordinate financing payments.

For loans on second homes and borrowers with multiple financed properties, we are implementing new reserve requirements (refer to Announcement 09-02 for details).

Assignment of Rents

Investment property borrowers are required to execute a Multistate 1–4 Family Rider (Assignment of Rents) (Form 3170, or 3170.53 for Puerto Rico) to authorize transfer of rental revenues to the lender. We are reiterating this existing requirement, and have updated the Summary documents for the Riders to delete the requirement for rent loss insurance.

If you have any questions regarding the Fannie Mae change or want to explore purchasing an investment property or second home, please feel free to call or e-mail, 843-224-5398 or Owen@OwenTyler.com.