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Archive for the ‘Money & Finances’ Category

Determining What to Charge for Rent

Monday, July 27th, 2009

If you?re a landlord and want to set a price for a rental unit or to adjust the current price you can?t simply pick a number out of the air. Well, you can but it?s doubtful that you?ll get renters at that price or that you?ll make ends meet. It?s a little more complicated than that and requires a little work.

The first thing you should do is determine your expenses. Is there a mortgage? Are there additional fees related to maintenance or other items that you pay regularly. Figure out any depreciation and appreciation. Remember to add in your regular upkeep fees. This gives you an idea of what you need to survive and what would give you a nice profit. But this is not necessarily what you?ll be able to get from the market.

The next step is to review your local rental market and see what people are paying for similar properties. This is really the best indicator of what you can charge for your rental units. By pricing yourself too high for your local market you may risk having too many open units. By pricing your units too low you may not break even and you risk getting undesirable tenants.

If you find that you need much more than your local market accepts then you?re probably not going to be financially successful and it may be time to consider a different line of business or make some drastic changes to your business model.

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Becoming a Landlord

Friday, July 24th, 2009

Becoming a landlord for some people is an easy decision, it?s something they?ve always contemplated and researched thoroughly. For others it?s not such a snap decision but it may economically be the best solution.

In our current economic climate many people are finding themselves stuck with a home that is worth a lot less than what they paid or the current mortgage. In some situations the residents can?t afford their mortgage payments and are being forced to move into a much cheaper rental. In both of these situations renting your home may be the best decision as you can recoup some money while waiting for the market to turn.

If you think that becoming a landlord is for you there are some things you have to weigh carefully before jumping in. One of them is can you accept someone else living in a place you once thought of as home. When you sell a house this is a consideration but the feeling goes away after you?ve separated from the home. When you rent your home this feeling lingers and is very difficult for some people to overcome.

The other consideration is can you treat this as a business venture with all of the implications associated with it. There are legal implications involved in being a landlord and decisions should be made without emotion. You?ll also need to know the basics of being a landlord or you?ll want to hire a property management company.

And then you?ll have to recalculate the financial implications to make sure it?s a feasible choice for you and won?t cause you any more financial hardships.

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Raising or Lowering the Rent

Wednesday, July 15th, 2009

Reasonable rent is determined by what people are willing to pay to live in your rental units. During the current financial crisis some landlords have found that their current tenants cannot or will not pay the previously established rent while others are finding that former homeowners who have lost their homes can pay a bit more than their tenants previously. So it?s time to reevaluate your rent prices and determine what better suits the financial environment.

Begin by evaluating your current tenants and the rent they pay. Are they having a hard time making the payments or do they seem to be handling them just fine? If you have open units look at what is driving people away, do they think the price is too high or do they see a low price and assume the property isn?t up to their standards. Carefully examine your neighborhood and the prices comparable units are charging for rent.

Then, when it comes to making a change in the rent make, small incremental changes regularly. If you?re raising the rent regularly on an annual basis you?ll keep your property in line with the current economy in most situations. If you have to drop the rent to keep tenants then you may want to work out a temporary situation where the rent will decrease for a set period of time and then bounce back up to the previous rate. Remember to look at individual rental agreements so you?re not breaking a lease with your price change. If you have to change it during the lease term you?ll have to have an amendment created and agreed upon and signed by all tenants.

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What?s Involved in Being a Landlord

Wednesday, June 10th, 2009

Almost everyone has considered being a landlord at one time or another, whether it was a financial thought that led to dreams of riches or frustration with a current landlord that had you thinking you could do it better. So if you decide to actually take the plunge, what’s really involved in being a landlord?

Legal Knowledge?

There are a lot of laws, both state and local, that deal with the landlord/tenant relationship and as a landlord you’ll need to know and understand these laws so you’re in compliance and can protect yourself against lawsuits.

Business First?

Adopting the mindset that you are running a business is key, no favors, no exceptions. Sometimes this rule is hard or almost impossible to live by but by holding to it you’re more likely to be successful. But it’s also your business so you can set the rules for your business and make your own decisions.

Get the Best Tenants?

Having the best experiences possible really circle around the tenants so you absolutely need to make sure you’ve done all that you can to screen each and every potential tenant.

Be Responsive

Be available to your tenants 24 hours a day to deal with legitimate complaints and emergencies and do whatever you can to remedy any problems as soon as possible. ?Your tenants should know you’re a professional and this is a working relationship.

Posted in Investment Property, Money & Finances, Property Management | No Comments »

Job Transfer and Ending your Lease

Wednesday, June 3rd, 2009

If you’ve got a new job offer and have to leave the city in which you live you may find yourself in the difficult situation of having a lease that you’re unable to complete or that you don’t want to complete.

Now some larger rental agencies may have a clause in your lease that lets you break a lease in the case of a job transfer or a move for any reason as long as you give a specified amount of notice.? This is the ideal situation as you simply have to follow the outlined procedure.

If your lease doesn’t have a clause that lets you terminate because of a move you’ll have to see if your landlord is willing to let you out of your lease. A lot of landlords understand that moves happen and if you’re up front and give them as much notice as possible they may be very willing to let you end your lease.

Some landlords aren’t nearly as flexible and they aren’t about to let go of a paying tenant while they have one. If this is your situation you can ask if the landlord will let you sublease the apartment, at least this way you can find a tenant yourself and recoup part of the expenses.

If you’ve got a great new employer and you can’t break the lease, see if the employer is willing to pay any of your moving expenses, this money can be used to pay part of your lease.

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5 Musts of Every Lease or Rental Agreement

Monday, May 25th, 2009

Learn the 5 things that every lease must contain. Without these items your lease or rental agreement will be missing important elements which could cause your problems in the future including possible lawsuits.

Names?

Including the names of your tenants seems obvious but many landlords only include the name of one tenant. Rather than single out one tenant, make sure every tenant signs the lease or has their own lease which they’re required to sign.

Occupancy Expectations?

Spell out occupancy expectations in writing. If you only allow two tenants per unit then let the tenants know that they cannot invite others to move in. Also if you do not allow pets then this must also be stated in the lease.

Financial Expectations?

Not only should you state how much rent will be but you should include any security deposits and other deposits, you need to state if the tenant is responsible for their own utilities and additional expenses.

Term of Tenancy

Is your lease a rental agreement or a fixed term lease? Rental agreements are a month to month agreement and tend to self renew. Fixed term leases typically last a year and then are renewed or terminated. This needs to be clear to all parties.

Access to Property

Most states or local areas have laws about when a landlord can enter a tenant’s apartment and how much notice must be given. This should be stated in the lease, but you should also include information on emergency entrance or notice necessary to make repairs or perform routine maintenance.?

By including these five points in your lease you’re protecting yourself from some problems in the future or legal actions against you. These are by no means the only information that is necessary in your rental contract but it’s a great starting point.

Posted in Money & Finances, Property Management, Rental Property Management, Tenants | No Comments »

Home Appraisals

Monday, May 4th, 2009

This is a great time to dive into the home ownership pool if you’ve never owned a home and have a steady income. One big part of the home purchase process is the appraisal. A home appraisal is required to get your loan and typically the lender will only loan you somewhere between 80 to 90% of the appraised value of the home.

Lenders have their own licensed real estate appraisers who will come to the property and do the assessment. The appraisal is actually an arbitrary opinion but it is based on a complex set of criteria.?

If your property appraises for less than the purchase price then you may not qualify for the loan amount that you need and you’ll have to come up with the balance on your own. If the appraisal comes in where you need it to or even higher then you’re in the clear and the purchase should go through as planned.

Sometimes you will get an appraisal that seems too low, in this situation you can ask your lender if there is another licensed real estate appraiser that they would be willing to have look at the property. In some cases this can solve the problem and the second appraisal may come in in the price range you need it to so you can get your loan.

Posted in Money & Finances, Real Estate Market | No Comments »

Debunking the Myth Renting is Throwing Money Away

Friday, April 24th, 2009

Too often you hear that renting an apartment is just throwing money away, whereas owning a home is an investment in your future. Harvard University has done a study that has shown that there are times, places and situations where renting makes more economical sense than buying.

Some of the most prominent myths are listed below with additional information which may change your mind about renting versus owning.

Is renting throwing away money while home ownership is building equity? Actually, for the first five years of your mortgage most of the money you are paying for your mortgage goes to pay interest only. You’re not actually creating equity until after five years and a third of all people move within those five years, meaning they never actually begin accumulating equity.

Are mortgage payments less than rent? It depends on what you decide to spend on rent or a mortgage, but keep in mind that there are a lot of hidden costs involved with homeownership and when there is a big expense or repair it is entirely your responsibility.

The third myth is that purchasing a home is a safe investment and the current U.S. housing market proves that this is simply a myth and nothing more.

So, if you’re not planning on staying in one place for a long time and you don’t have a good cushion for emergencies then renting may be a smarter move, especially until the housing market picks up.

Posted in Money & Finances, Real Estate Market, Rental Market | No Comments »

Tax Deductions for Landlords

Wednesday, March 11th, 2009

Once that tax time rolls around most people are scraping the barrel looking for deductions so they can save just a little bit of money. Landlords are lucky in a way because they have? a lot of built in deductions with their rental properties, the problem is a lot of landlords and property managers forget to take some of their most basic tax deductions.

Interest

Interest can add up to a huge tax deduction if you keep good records. Interest doesn’t only mean the interest you’re paying on your mortgages, but it also refers to any interest on loans you’ve taken to improve the property. Interest can even go a bit further to include interest charged on credit cards for items purchased for your rental properties.

Depreciation

The cost of your rental unit(s) are not deductible in the year in which you pay for it, instead you deduct a portion of the cost of the property over several years. This is how you recoup the cost of your property through real estate.

Repairs

Not only is the interest charged on repairs deductible, but the repair costs themselves are as long as the repair is warranted. Keep careful track of these expenses as you can only use them in the year that the repair occurs.

If you’re still trying to find some deductions for your rental property, contact a tax specialist as there are many of them out there just ready to help you cut your tax bill.

Posted in Money & Finances, Taxes & Finances | No Comments »

Buying Your First Home

Monday, March 9th, 2009

If you’re thinking about purchasing your first home there are a few things you can do to make the process go a little more smoothly and to help you purchase a bit more home.First, evaluate your long term plan and decide whether you’re actually planning on being in the area long enough to justify your home purchase. If you’re thinking about an investment purchase, look at the housing market where you live and evaluate how long you would have to hold the property to make it financially beneficial.

Months before you plan on buying, study your credit and learn what you can do to improve your credit rating. The better your rating the more likely you are to get a good loan at a low percentage rate.

Then only look at homes you can actually afford, there’s no reason to tempt yourself with something that is simply out of your reach.

Because you’re making your first home purchase you probably won’t need to come up with 20% to pay down. Many organizations offer first time buyers a deal and in some cases the down payment can be as low as 3%.

Then, get preapproved so you know your loan amount and you’re ready to start bidding. Only bid on homes you are sure you want to buy and only bid informed prices that are based not based on heart or gut feelings.

Posted in Investment Property, Money & Finances | No Comments »