Archive for May, 2011
The thought of a troublesome tenant is something that can scare any property owner. Some states that are considered tenant friendly like California or Arizona, and that makes it much more difficult for property owners to deal with unreasonable tenants. One of the best ways to curb an incident from a tenant, like lack of rent, or damage to the property, is to protect themselves through clearly defined lease terms. More often than not a lease is put together by a landlord or real estate professional, and the basic rental forms are used. These forms can be added to, so that there are additional regulations and stipulations present.
Some Tips for the Lease
One the biggest complaints by a property owner is that tenants are always late with the rent. Placing specific wording in the lease to affect of:
1. Eviction processes will begin on the first day after the grace period that rent has not been received. This is a great motivator to keep tenants on time.
2. Tenant shall pay (choose a percentage) of the total monthly rent in late fees after the grace period has ended for that month. This will remind them that the payment will begin to grow if not paid on time.
As a property owner, it is vital to not only protect yourself, but also to protect the investment interest. Rentals today are, more often than not, homes that could not sell, and owners could not afford to remain in the home. In fact, more homeowners are renting while they themselves rent out their own homes to tenants.
Constructing a Good Contract
If there is a stipulation listed within a lease agreement, and the tenants/renters agree and sign that agreement, then all that is listed within becomes binding. This is a great way to ensure that tenants will not take advantage of the property owner.
When the bubble burst in late 2008, the real estate market took a dive for the worst. As an effort to keep the market ?alive the government decided to lower interest rates, as well as back loans through FHA for high cost properties. The efforts of this move can be seen in many areas all throughout California, Florida, and other states that have many high end residential communities where the average property value is over $800,000.00.
Making Changes in FHA Loans
The adjustments made with FHA mortgages is that instead of the government backing loans up to $850,000.00, it will now only take care of loans in the high $400,000.00′s. This is a huge drop and many property owners are concerned that it will hurt what little value they have left in their properties. For buyers this means that loans will not be offered in what is considered bulk amounts through FHA. Without the government backing these high priced loans, buyers will need to put out more money on a down payment, somewhere around 35%.
The Results of Change
The final results in these changes essentially mean that buyers will be deterred from looking for properties in expensive areas because they cannot afford the 35% down payment, whereas FHA allowed for a 3% down payment. While there is a ripple moving across the real estate channels regarding the backlash of this new policy, it should be pointed out that before the bubble blew the government backed loans cap was in the low $400,000.00s.
Overall, this should not be a huge shock to buyers or sellers in today’s market. Rather this is a growing pain moment while the consumer market is weaned off government guarantees. Since the policy implementation in early 2011, there has not been a spike, nor decline, in high priced areas.
The school of thought for many investors was that a home is purchased that needs some TLC, or extremely low, then turn right around and sell it. In today’s market with pricing being so low, many investors are seeing deals that they just cannot pass up. The problem is that flipping and reselling right away are no longer an option. However, what is an option is sitting on the property, and allow the market to work its magic.
Making That Purchase Work
Holding onto a purchase is a great way to develop an overall net worth, have a series of income properties, and then begin to wait until the market begins its climb back. This is how many investors made their millions during times of economic strain. There are a couple of schools of thought on this type of strategy.
The first is that the rental market is at nearly full occupancy rates. This means that a home will not sit vacant for much time.?The sad reality is that people are losing their homes, so renting is their only option.
As far as investing is concerned, there is also a new trend where buyers can purchase the home that a family lives in, then allow the family to remain in the home as a rental. When the market comes back to life, the family can then have the option to re-purchase the home. This is another idea that has allowed people to stay in their homes, while allowing investors to capitalize on the slow market.
Good Timing for All
There is negativity surrounding the housing market today, and for good reason; it is slow, unproductive, and has a diminishing return. The idea of holding on to a purchase suggests that the high-risk reward factor is tamed. Taking advantage of, and maintaining, properties is something that will reward in years to come.