Category Archives for "Buying investment property"

Help! I’ve been transferred out of state but can’t sell my home

Is a short sale the best option for you?

I hear from a lot of people that are underwater on their home, and they don’t know what to do. This happens when the house value drops below what is owed on the house.

As long as you plan to stay in your home, this may not be a problem because eventually the market goes back up. However, people run into problems when they have to sell their house. This typically happens when someone is transferred out of the area with their job, but owe more than they can sell their house for.

If this is the case, you have a few options, but only you can decide what is best for you.

  1. Write a big check. If you have to sell and you can afford it, you can simply write a check for the difference. This is an ideal situation, but it may be the best option if you want the house gone and you don’t want to sacrifice your credit.
  2. Short sale. A lot of people ask me about short sales and if they are eligible. I have a lot of experience with short sales. Here is the problem. Technically, yes, you can sell your house on a short sale, but the bank has to agree to it, and typically the bank will not agree to a short sale if they think they can get the full amount. If you are up to date on your payments and always pay on time, the bank will say no because they are getting their money from you. The only time a bank will agree to a short sale is if the payments are months behind and the rick of foreclosure becomes an option. If you have good credit and protecting your credit is important to you, then short sale will not be an option. If you don’t care about your credit and you are willing to not pay the mortgage for a few months, you can probably talk the bank into a short sale.
  3. Let it foreclose. You can stop making payments and walk away. This will all but destroy your credit, but it is an option if you are desperate to get rid of the property.
  4. Rent the house. By renting out the house, you can leave your job and have someone else make the payments for you. This will allow you to wait until the mortgage is LOW enough to sell or the market improves. Many people may be nervous about renting their home while they are living out of the area, but it is far more widespread than you probably realize, and it may be your best option. If you decide to rent your property, you will want to find a property manager that will take care of all the day-to-day stuff including maintenance, showings, collecting the rent, and handling emergencies.

The house value is dependent on several factors that are completely out of your control. You just have to focus on what you can control, which includes what you do to recoup your money.

Our experienced investment property management team can relieve you of the burden of managing your rental property while saving you some serious money! Call us today at (440) 220-7300 to see how we can help you!

 

 

5 considerations before jumping in with the sharks to buy a rental property

Buy a home in Lorain Ohio

Lorain County Investment Property can feel a bit like swimming with sharks! Yes even at these great prices you can lose an arm!

If you are seeing all the great deals out there and want to get a great rental property before all the deals disapear, my advice is not so fast. The waters here are great for surfing but they are infested with SHARKS.

For instance it is not entirely unheard of to purchase a rental in Lorain County for $10,000 put $10,000 into it and be able to rent out the property for $700 per month. At first glance that means you will get your original investment back in 2.3 years.  Not bad.  We have seen better deals than that come across our desk and lesser deals (See our web form below join our investor list. ). However if you don’t know the area you might be in for some 30% plus vacancy that could significantly effect your profits. Or maybe you thought you could get 700 but after 6 months of trying you have to lower it to $450. Still not a terrible deal compared to many investments today but maybe not as good as you could have gotten.

1. Location, location, location.
Carefully consider exactly where you are buying. There are many out of town investors that look only at the numbers. However if you don’t know location you need to make sure you have someone who does helping you understand the benefits and drawbacks of a specific location. Some areas look great but simply are not desirable for a whole lot of reasons. Other areas don’t look good but actually are in demand.

One strategy for evaluating location is to consider the target market you think a home will be for. Is this home likely going to attract a you family based on the lay out and size? If this is the case then proximity to good local schools will be something for you to evaluate.

Other factors for your consideration are:

  • are crime rates
  • percentage of owner occupants on the street
  • vacancy rates in the area
  • are neighboring properties well maintained
  • availability of parking
  • is there any good public transit nearby
  • what are the local amenities (shopping, recreation centers, parks, golf courses, restaurants, banks)
  • how nearby are public service hubs like fire stations and the police station

Also consider location in the cost of landlord insurance. Your zip code effects your insurance rate big time.

2. Get on the knowledge train…
Make sure you understand the processes and legal obligations involved in renting out a property. One small slip up in how you advertise can mean a fair housing violation for you. Fair housing violations are very very expensive. There are also numerous requirements for paperwork to cover your tail and make sure you you have expectations properly set with your tenant. Do you know what lead based paint disclosure is? Ohio law requires it in properties built before 1978.

Make sure you understand the true costs when purchasing a rental property. They can bite your arm off. One benefit of the current market is that the low prices of homes are making cash purchases a reality for many potential investors so the risk of jumping in is much lower. Even if costs eat you alive your return on investment will likely be better than than the stock market or a CD.  Still it is very possible to lose money with an investment property and it is important that you do your research (hint- an investment property specialist can really help here- see below).

The following should be factored in:

  • Vacancy rates for the area
  • Security system while renting
  • Eviction costs
  • Cost of getting property ready for rent
  • Marketing cost
  • Maintenance cost
  • Management cost (You can do it or someone else can do it but it is still cost to factor in either way.  Keep in mind the cost you incur when you hire someone who isn’t a professional or do it yourself.  It dwarfs the cost of professional management which we believe will pay for itself many times over.)
  • Landlord insurance
  • Money cost- If you are getting financing (which we don’t recomend) then you will have your interest cost as well as payments on principal (which eat into cash flow).  If you use cash then you have to consider the oppurtunity cost of tying up your money in a property.
One excellent place for landlord knowledge locally here is LELA, however

3. Insurance

Rental property insurance is an absolute must.  If you are renting your property out then you certainly will not qualify for a standard home insurance policy.  Vacant homes that are not rented are even a bigger insurance hassle and you want to make sure that you are on board with a good insurance agent.  Email us for a referral (pm@rtserve.com).

Also you want to make sure that you are properly insured to protect your assets.  Although there are many other asset protection strategies in the form of separate entities like trusts, LLC’s etc (contact us if you want an attorney referral for this at pm@rtserve.com).  Our company has a $1,000,000 E & O policy and our Investment Property Management Company has $1,000,000 in insurance for repairs made to our clients properties as well.  For a Landlord an inexpensive umbrella policy would help protect against the freak lawsuit that could otherwise wipe away all the assets you have worked so hard to acquire.

4. Maintenance and upkeep
You’ll need to inspect your property at specific intervals and make sure that the tenant is not destroying property faster than what you might expect from normal wear and tear.  It is vital to make sure that a property is inspected reasonably soon after a tenant first moves in just to make sure they aren’t quickly destroying it.

Failing to maintain a property can result in injury to the occupants and then a lawsuit.  Also an unmaintained property is difficult to rent out to good paying renters.  It helps to have a reliable contractor on hand who can quickly do any work necessary (hint, hint… we can help with that- this is one benefit of professional maintenance.  and you won’t have 1AM calls for help).  For instance plumbing repairs and furnace repairs must be done immediately in order to avoid a certain and expensive vacancy.

5. Finding GREAT tenants
Promoting your property is an art in it self.  Different areas need different marketing techniques to find the best tenant for the area.  Also some areas will simply attract a different kind of tenant than other areas.  It is important to understand various areas and the best marketing for each area as well as how to screen tenants(see our tenant marketing strategies article here).

Find a great investment property

Let us know your investment property needs. Our specialist will contact you to assist you.
  • Let us know any questions you have or special requirements. Do you need a specific return?

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With more than 45 years of investment property management experience our expert team can relieve you of the burden of managing your rental property while saving you some serious money! Call us today at (440) 220-7300 to see how we can help you!

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