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Do You Want to Become a Landlord?
Making the decision to buy rental property and becoming a landlord is very appealing in this market. With record low home prices and record low interest rates the purchase of rental property seems very appealing.
However, If this is the first time you will be purchasing a rental property you must get over the hurdle of obtaining mortgage financing in a tight credit environment.
This can be difficult for the first time investor who does not have decent credit and sufficient income to qualify for rental property financing, or better known as non-owner occupant (NOO) financing. Even if you will have no difficulty with credit or income issues….non-owner occupant financing does not come cheaply.
If you plan on buying an investment property, be prepared to put some serious money down. Lenders have the typical tendency of expecting down payments’ of around 20-25% or more, depending on your credit profile and the value of the property. The interest rate for NOO property will be higher than what you would pay for owner-occupied property.
A good way to get into the rental income business and avoid paying extra for a NOO loan is to buy a home in which you will live in for a year or more. In this way you need only to qualify for an owner-occupied loan (traditional financing for a home you will live in).
As an owner occupant, you can take advantage of the affordable financing terms and interest rates available in today’s market, and you may be able to put down as little as 3.5% with FHA financing. The loan stays in place with the original terms when you move out and make it a rental. It makes sense to get into the rental business this way, if you are willing to sell your current home (if you own one), and be willing to live in the rental property home for at least 12 months.
While living in the rental property you have purchased you can upgrade and/or renovate the home and therefore increase the value of the property and be able to ask for a higher rent.
However, do your due diligence before you purchase and spend money to fix up the rental property.
Here’s what to look for in a rental property;
- What are the average home prices and the rental rates for the area?
- Is the home located in a good zip code that commands higher rents?
- Is the home located in a good school district?
- What is the proximity to stores, public transportation and freeways?
- What amenities do the neighborhood offers?
All of the above can help or hinder your chances of renting a home out.
Once you have lived in your rental home for a year or more, buy your next owner-occupant property and rent out the original one. Then repeat once every one to three years. You will be able to obtain financing in this way generally for up to 4 loans, after that, the underwriting criteria may get much tougher, and the loan costs, interest rates, and terms will be less appealing.
In summary, if you are willing to make a move every couple of years and deal with the headaches that often times come with owning rental property, you can set yourself up for a nice second stream of income. This can be so very important in your retirement.
How Much is My Home Worth?
Everyone has heard about the housing crisis. However, it may not affect you personally until you try to sell your home or refinance. The lender will insist that you get an appraisal on your home. The low appraisal value that comes in for your home may be an eye-opener for many homeowners.
Almost every housing market in the Nation has been affected by unprecedented numbers of foreclosures which drove down home prices and values across the board. Your home was no exception.
How is the appraisal value of your home obtained?
Banks, homeowners and home buyers all depend upon a licensed home appraiser to supply them with an unbiased report of the value of a particular piece of property.
When appraisers evaluate a home’s value, they’re giving their best opinion based on how the home’s features measure up against those of similar homes recently sold nearby.
Factors appraisers consider in determining the homes value are:
- The quality of structure
- Level of maintenance
- Overall appeal of the property
Appraisers are trained professionals. First, they derive a base for your home’s value based on the recent sales prices of homes that are comparable to yours in terms of bedrooms, bathrooms, style, and square footage.
Then, accounting for features and amenities that make your home different, the appraiser applies “adjustments” to that base value.
This methodology is called the “Sales Comparison” approach and the result is your home’s appraised value.
It’s the most common appraisal method used by lenders.
What to do if the appraisal comes in too low?
Appraisers have the last word, but they will consider input from homeowners who are refinancing or from real estate agents when a home is being sold.
As a homeowner you can’t affect the sales prices of your home’s comparable properties, but you can help your appraiser understand how your home stands apart from these homes. This, in turn, can affect your home’s adjustments, resulting in a higher appraised value.
With home appraisals, every valuation dollar can matter. With that in mind, here are a few tips for maximizing your home’s appraised value:
- Be home for your appraisal so you can answer the appraiser’s question, if there are any.
- Mention any new roofing, flooring, HVAC, plumbing, or windows you’ve installed since purchase.
- Don’t mention projects or repairs you’re “about to undertake”. Appraisers don’t credit for unfinished projects.
- Make minor household fixes prior to the appraisal (e.g.; leaky sink, running toilet, peeling paint).
- Present a tidy home. This can contribute to a higher “overall condition” adjustment.
Lastly, schedule the appraisal for a time that is convenient for your entire household. An appraiser needs to see, measure, and take photos of every room in your home. For example, if a room’s door is closed because of a resting family member, the appraiser may need to schedule a second appointment to complete the appraisal, and that can raise your appraisal costs.
Remember appraisers will not consider adjusting home values based on your personal issues. Even if your reason for selling is due to a job loss, or job transfer, or your inability to keep up the mortgage payments’ an appraiser will not consider any personal factors.
You can ask for a second opinion.
If your home appraisal comes back at a value you believe is too low, you can request that a second appraisal be performed by a different appraiser. You will have to pay for the second appraisal. Keep in mind that the appraisal you received may be accurate, and it may be an indication that you need to adjust your pricing or the size of the loan you’re refinancing.
Call us today at: (520) 219-1024 to get Your Personalized Market Analysis
It’s Spring and It’s The Best Time to Sell Your Home
It’s Spring and It’s The Best Time to Sell Your Home. The spring selling season is here and the market has finally turned in favor of sellers. Buyers are gearing up to find the perfect home.
It’s well known in the real estate industry that, if you plan to sell a home, the spring season is the best time to do it. Buyers come out in droves and the market bares more rewards for those sellers who are ready. Here are some quick ways you can get your home in top shape for maximum return.
First Impressions….
First impressions are key to a quick sell, and nothing gives a better first impression than curb appeal. Buyers want to walk up to a home and feel this is the one. Taking advantage of a buyer’s first impression is as simple as cleaning up the front yard and getting rid of the clutter.
Add some fresh potted plants in the entrance way, or plant some new flowering plants in the front yard, and if needed, touch up chipped or faded paint.
Now, walk across the street and take a good hard look at your entire front yard. Does your home say welcome when you look at it? Does your front yard need some touch up, shrubs or trees need to be trimmed, flowerbeds and gardens need some gardeners love? Are your windows in need of cleaning? Make sure your home sparkles from the outside before you move to the inside.
How to Impress the Buyer From Inside Your Home…
When a buyer sees a home for the first time it has to be perfect. They want to envision themselves living there and it’s up to you to make that happen. Give every room in the house a thorough cleaning, remove all personal items including family photos, clean out closets and pantries, and touch up paint where necessary.
If you have carpets get them cleaned by a professional, especially if you have pets. During showings, if you do have pets, ask the neighbors or a family member if they will take care of them while you’re showing the home. The whole idea here is to appeal to as many potential buyers as possible. Pets will eliminate half of your buyer pool due to allergens and pet dander.
Enhance Your Homes Main Selling Features….
Kitchens and bathrooms are your main selling features in a home so they have to look their best. In the kitchen, keep the counter tops spotless and remove unnecessary appliances and cookware. You can spruce up your kitchen by replacing old cabinet knobs, adding new blinds or draperies, and giving it a fresh coat of neutral paint.
Bathrooms should have fresh-clean towels, new shower curtains, and replace worn or defective faucets. Bathrooms can easily be transformed with a new mirror and new light fixtures. Buyers are looking for updated kitchens and bathrooms, so if yours is in need of some updating, get it done now.
Selling a home for top dollar is all about enhancing your best selling features and creating an inviting atmosphere. These are quick, easy and low-cost ways to prepare your home for the spring selling season. Check with a Realtor if you have any questions and good luck!
The Housing Market in Tucson Has Turned!
The market in Tucson has turned! We have been waiting over 6 years to say this, but the data and trends point to a recent shift in the market.
Inventory is down, sales are up – resulting in only 4.1 months of inventory.
Even pricing is showing some early positive signs, with median price increasing to $133,500 in March.
We are watching closely for any emerging trends across other local markets in southern Arizona, including the Green Valley and Sierra Vista areas. Just as Tucson tends to follow Phoenix, some of these other markets may follow Tucson’s uptick.
As of March 2012 active inventory was 5,486, an 18% decrease from March 2011.
There were 1,347 closings in March 2012, 15% above March 2011.
Months of Inventory was 4.1, down from 5.7 in March 2011. Months of Inventory (MOI) is a good indicator of market health, taking into account both current inventory and sales rates. As a rule of thumb, a market is considered “balanced” when Months of Inventory is around 6.
Median price of sold homes was $133,500 for the month of March 2012, up 7% from March 2011.
The Tucson Market had 1,928 new properties under contract in March 2012, up 24% from March 2011.
Good News at last for Sellers.
Find Out What Your Home is Worth in Today’s Market, Call Us Today: (520) 219-1024.
RE/MAX Reports March home prices up 5.8% from last year
Home prices in the 53 largest cities increased 5.8% in March from the same month last year, according to a report from real estate association RE/MAX.
The homes sold in March had a median sales price of $184,525. It was the second-straight month prices rose higher than the year-ago period. Before February, home prices landed below year-ago levels for 18 consecutive months. But home sales steadily picked up over the last nine months.
In March, home sales climbed 1.5% from last year and jumped more than 25% from February, according to the report.
“With buyers starting to jump into this market, this year’s selling season is shaping up to be the strongest we’ve seen in years,” said Margaret Kelly, CEO of RE/MAX. “Although we don’t expect home prices to rise in every market at the same rate, the worst is definitely behind us, and a slow, steady recovery is taking hold.”
Detroit showed the largest increase in prices from last year, increasing 22.8%, followed by Miami (21.8%), St. Louis (18.5%) and Phoenix (18.2%).
The homes sold in March spent an average 101 days on the market, down from 104 last year.
Inventory also dropped to a 5.3-month supply, a roughly 2% dip from February and the 21st consecutive monthly decline. The shadow inventory of foreclosed homes or those on the verge of repossession spans into the millions, and is anticipated to begin growing again as the robo-signing freeze thaws.
But RE/MAX anticipates housing to rebound through the selling season.
“Following these trends, the spring and summer months should experience increased activity. With falling inventory and many markets witnessing multiple offers with bidding competitions, prices are likely to continue to rise in many areas,” according to the report.
Source: john Prior, Housingwire
