Thinking of Buying a Home or Investment Property, Now Could be the Time

A Strong Rental Market Makes It A Good Time to Buy

The cost of renting is going up in markets across the country, as the number of available rental units shrinks. According to investment research firm Marcus & Millichap, apartment vacancies fell 0.8 percentage points to a national vacancy rate of 4.4 percent in 2012, almost half that of the recession high, which saw vacancy rates of around 8 percent. Effective rental prices increased nearly 5 percent in 2012 and are expected to increase at similar rates in 2013. Prices may rise even faster than average in major markets with low vacancy rates like New York, Chicago and Los Angeles.

Fueling Factors
The rising cost of rent is fueled by several key factors that make the trend likely to continue for the foreseeable future. During the recession, construction of many new rental developments was put on hold, causing the number of completed units to fall by over 50 percent. While rental unit completions are on track to match pre-recession levels in 2013, the dip translates to fewer units available now. The recession hit young people especially hard, to the point where 31 percent of households had young adults aged 20 to 34 living with parents. As those young adults find jobs and seek independence, and since financial companies tightened up their lending practices, demand for apartments should remain strong.

 

A Good Time to Buy
While the rental market is on a clear upswing, housing is still in recovery mode. Home prices and sales have stabilized since they hit bottom, but median sale prices remain almost $50,000 below pre-recession highs. Relatively inexpensive homes, low interest rates and increasing rents make it a good time to buy—especially because landlords can increase rent price each year according to the direction of the rental market. When home prices increase, homeowners build home equity that becomes profit if they decide to sell.

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.

Vacation Rentals Poised to Make a Strong Return in 2011

Rental Resurgence: Vacation Homeowners Optimistic About Business in 2011

RISMEDIA, January 13, 2011

As leisure travel continues to rebound, owners of vacation rentals are expressing optimism about their bookings in 2011.

In fact, HomeAway, a leading online vacation rental marketplace, finds in its latest "HomeAway Vacation Rental Marketplace Report" that eight of 10 vacation rental owners anticipate their rental business this year will be stronger or about the same as it was in 2010.

The year is already off to a good start for some owners. According to HomeAway's seventh quarterly report, about 60 percent of vacation rental owners say their bookings for the first quarter of the year (January through March) are about the same or higher than the same time period last year.

The HomeAway report also found that a majority (59 percent) of vacation rental owners will keep their 2010 rental rates in place this year – good news for travelers looking to stretch their travel dollar in 2011. About 10 percent will decrease their rental rates from last year, and approximately 31 percent expect to increase their rates.

While rates look to be consistent in 2011, vacation rental inventory continues to grow. For the sixth consecutive quarter, Austin makes the list of the top 10 fastest-growing cities for vacation rental listings. Last year's list, comprised of three markets in California (Carnelian Bay, Santa Monica and Beverly Hills), three ski towns (Estes, Colo.; Truckee and Carnelian Bay, Calif.) and two lake destinations (Canyon Lake, Texas; Lake Norman, Illinois) is a change from this year's list that featured beaches and less traditional vacation rental destinations.

In addition to a greater selection of vacation rentals, travelers also will benefit from owners' efforts to improve their properties and the experience that travelers have while staying in them. The report found that 59 percent of vacation rental owners are planning an upgrade to their homes in 2011.

Of those owners who say they'll embark on an improvement project:
• 41 percent plan to paint the interior of their vacation home
• 29 percent will add new bedding
• 23 percent will update the home's exterior (landscaping, roofing, painting, etc.)
• 21 percent will add new electronics
• 17 percent will add new furniture
• 11 percent will upgrade the appliances
• 9 percent will make their vacation rental more energy efficient

ISLE OF PALMS IS "SEXY"

Surprise greets IOP 'sexy' rating

Publication says beach one of 6 sexiest in U.S.

By Elizabeth Maybank
The Post and Courier
Thursday, June 18, 2009

Could a beach, not Justin Timberlake, actually be bringing sexy back?

Is Isle of Palms, the beach where they turn out the lights at night to protect nesting sea turtles and tried to ban sand castles as a public hazard, the definition of sexy?

Vacationers on the Isle of Palms. Of Maxim's rating of the beach as one of the country's six sexiest, Mayor Dick Cronin said, 'Good golly.'

According to the men at Maxim magazine, it is. They recently voted Isle of Palms one of America's six sexiest beaches.

Huh? Isle of Palms? The place where SpongeBob arm floaties are the latest trend, and there are one-piece bathing suits, not bikinis, as far as the eye can see.

According to Maxim, "This seven-mile-long and one-mile-wide barrier island has pristine beaches littered with smoking-hot rich ladies lured in by high-end shops all over the island. It's like chum for sharks. (Sharks who are into really expensive handbags.)"

Are they talking about the same beach that has drawn families for decades? The place where women are more likely to carry diaper bags than Gucci ones.

Anyone who has visited the island can assert that the shopping is best at the Red & White Grocery Store. And unless oversized T-shirts decorated with palm trees or cheap plastic platform flip-flops are now considered high fashion, there seems to be something odd about this assessment.

No one was more surprised about the rating than Isle of Palms Mayor Dick Cronin.

"Good golly. This is totally unexpected. Well, I guess they must have been doing their rating when the City Council squared off against the Charleston Police Department in a volleyball game at the Windjammer."

The serene, kid-friendly beach more than makes up for the lack of shopping, but it leaves one wondering why Maxim, the trendy magazine targeted at men in their 20s and 30s, chose to highlight shopping as the sexiest part of Isle of Palms instead of the Windjammer's ocean-side volleyball court. There, fit shirtless guys serve aces while girls lounge on the sidelines cheering.

Rex Porter, a bartender at the Windjammer, said, "Isle of Palms definitely is sexy because there are always beautiful girls coming in and out of the Windjammer, and there are volleyball players constantly enjoying the court outside."

When Dan Bova, executive editor of Maxim, was asked what high-end shops the magazine referred to, he had the good grace to reply, "Our editorial GPS may seem to be broken, but the gift shop at the Holiday Inn Express ... where else can you buy a $9 tube of toothpaste?" Bova also said that they meant Charleston's shops when referring to "the high-end shops all over the island."

Hmm. In this case, "Isle" means island, and Charleston's shops are 15 miles away.

Maxim needs to check its GPS. Maybe it's aimed at the wrong satellite.