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The 9 Best Tips on How to Find a Property for Profitable Investing

Over the years real estate has proven to be one of the most profitable investing strategies. Unfortunately, this doesn’t mean that just any investment property will bring high return and success to its owner. The secret to making money in real estate is finding profitable rental properties. If you are a new real estate investor with no experience in the business, don’t worry because you’ve come to the right place. In this article we will provide you with the best tips on how to find a property for profitable investing.

Tip #1: Buy a Property in a Top Real Estate Market
Anyone in the real estate industry will tell you that location is the first and foremost factor for a profitable investment. Where your rental property is located will determine the price you have to pay for it, the rental demand, the best rental strategy, the type of tenants you can expect, the rental rate, the occupancy rate and vacancy rate, and ultimately the return on investment. Thus, the first thing which any investor preparing to buy a property should do is to read about and research the best places for real estate investing in the US housing market. Don’t make the mistake of many beginners who focus on large cities only. Sometimes small towns and even villages offer a much higher return than major cities. For example, according to data from Mashvisor, a real estate data analytics company, the census-designated area with a population of about 7,000 people, Joshua Tree, has been one of the top locations for Airbnb rentals in the past few years.

Tip #2: Don’t Spend More Than What You Can Afford
As a beginner investor, you should always start with a small, cheap, easy-to-manage property. After all, the best investment property is the one which you can afford and which you can manage. To find such a property, you should prepare a budget. On the one hand, factor in your savings, the income from your full-time job and other sources, and the money you expect to make from your rental property. On the other hand, make a list of all the one-time and recurrent costs associated with buying, owning, and managing an investment property such as the property price, appraisal cost, home inspection fee, closing fees, fixes and repairs, monthly mortgage payments, property tax, insurance, property management, maintenance, and others. In this way you will be able to figure out exactly how much you can afford to spend on a property without risking a foreclosure.

Tip #3: Find the Best Financing Method
One of the great things about real estate investing is that you have many financing options to choose from. You can go for a conventional mortgage, a hard money loan, a private money loan, a syndication, or a partnership, to mention a few possible choices. You should study each option carefully and decide on the best one for your particular case, based on their pros and cons and your specific situation.

Most probably, as a first-time investor, you will end up taking a mortgage loan. In this case, it is advisable to make the down payment as big as possible, without overspending on it of course. The higher your down payment is, the faster you will be able to repay your loan and the less money you will end up spending on repayment. Figuring out the best financing method is crucially important for profitable real estate investing.

Tip #4: Use Different Sources for Your Property Search
To find a property for profitable investing, you should put efforts into searching for properties for sale far and wide. Now that you know where you want to buy an investment property and how much you can afford to spend on it, start checking out local newspapers and real estate websites with both MLS listings and off market properties, talk to your friends and acquaintances, network with other investors in the area who might be selling a property, and connect with a local real estate agent. Each one of these sources will have access to a different kind of properties, and you should check them all out before deciding on the best type of investment property for you and narrowing down your choice.

Tip #5: Consider Investing in a Foreclosure
The most lucrative investments in real estate are those properties which you can buy below market value. Thus, you should consider investing in a foreclosed property. Forget the popular myth that foreclosures are always houses in a dire situation which makes them bad real estate investments. To the contrary, it is feasible to find a foreclosed property in a good shape which will bring you high return on investment. The reason is that you will most likely pay only a fraction of the fair market value of the property as the bank or other financial institution is trying to get rid of it quickly, while you can still charge full market value rental rate.

To find foreclosed properties to invest in, talk to the banks in the area, search for specialized real estate websites with foreclosed property listings (including government agencies’ websites), and look for agents who work with foreclosures.

Tip #6: Hire a Real Estate Agent
Avoid the mistake of many first-time real estate investors who think they can manage the whole process of finding and buying a property on their own. It is recommended to look for an agent who works mostly with property investors and hire him/her to help you along. Your agent will be able to help you find lucrative properties for sale, connect you with lenders, prepare the offer, negotiate the best price, and close the deal quickly and smoothly. Moreover, you don’t have to worry about inflating your budget as agent fees are usually covered by the property seller and not the property buyer.

Tip #7: Conduct Thorough Property Analysis
An indispensable step in the process of making the most profitable real estate investments is performing an investment property analysis. Once you have narrowed down your choice to a few top properties, you should study them in detail to calculate exactly how much return on investment you can expect from them, based on your preferred rental strategy. Find out the cash flow, the cash on cash return, and the capitalization rate which you can expect. To beat the competition in the local real estate market and find the best property for profitable investing, make sure to use real estate investment tools such as a rental property calculator. This will save you a lot of time in analyzing properties and allow you to make an offer before the other investors in the area.

Tip #8: Choose the Best Rental Strategy
You can rent out your investment property on short-term basis as an Airbnb rental or long-term basis as a traditional rental. The optimal strategy in each case depends on the location, the demand, the rental rates, and other factors. So, in your investment property analysis you should see which rental strategy will bring you a higher return on investment. If you decide to go for a short-term rental, don’t forget to study the local regulations carefully as many places have adopted major restrictions on this type of rentals in recent years. Ideally, you should look for a location where both owner-occupied and non-owner occupied properties can be rented out on short-term basis in all residential neighborhoods. For example, the Dallas real estate market is one of the major cities with the least Airbnb legal issues in the US at the moment.

Tip #9: Select the Best Property Management Strategy
Profitable investing in real estate doesn’t end with finding and buying a property with a high potential for return. Afterwards, you have to manage your rental property in the best possible way. If you invest in your local housing market, have some free time, and exhibit the right personality (welcoming and kind but also assertive), you can become a landlord and deal with a rental property and tenants on your own. However, before you decide to manage your property by yourself, you should know that this can take a lot of time and efforts and can turn into a real headache.

If, on the other hand, you invest out of state, have a busy job and a family to take care of, and/or are simply not fit to be a landlord, you can hire a property management company to deal with your investment property. You should be prepared to pay them a monthly rate, but it will be worth it as they will be able to maximize your profit while you can enjoy the positive cash flow in your free time.

How to find a profitable investment property is the first thing you have to learn as a real estate investor in order to make money. The good news is that it is absolutely feasible and doable if you follow our 9 tips above.

Position Realty
Office: 480-213-5251

5 Best Insurance Coverages for Your Rental Property

You’re probably familiar with getting homeowners’ insurance for your primary residence, but how are you covering your rental properties? Just because you got a great deal and paid cash doesn’t mean you should ignore the potential losses that could occur should something happen. These are the five coverages you need to make sure you have now.

Liability Coverage. The house itself isn’t the only thing you should be covering. You need to cover your liability for any accidents that occur on the premises. If someone trips and falls on that crack in the sidewalk that popped up this winter, you aren’t going to want to pay for a broken arm out of pocket. That’s only the beginning of things you could have happen on the property that you could be held accountable for.

Dwelling Coverage. This one is obvious. If you buy a house, you want to make sure you can pay to rebuild or repair it to the same like kind and quality. The perils that are covered in the policy typically depends on how much you’re willing to pay. You can choose to cover only major catastrophes, like fires and tornados, for a smaller price or you can opt for a more comprehensive coverage that covers many more issues.

Loss of Rental Income. Owning a rental property is a business, and hopefully, you’re making some money from that business. Coverage for the loss of rental income may help you if the home is damaged by a covered peril. If the home had enough damage from a tornado or fire that the tenant had to move out and rent stopped coming in, you could be reimbursed for your loss of rental income. If you depend on your rental income to maintain your lifestyle, it’s a handy coverage to have. Depending on the extent of damage, it could take months to make the property habitable again after a loss.

Landlord Personal Property Coverage. Did you agree to rent out your property furnished with some things from your grandma’s old house? Did you leave the refrigerator and washer/dryer combo since you’re renting to a friend? Even if the tenant has renter’s insurance, it’s not going to cover any personal property you may have left for their use inside of the home. You’ll want to make sure you have sufficient landlord personal property coverage for any items in the rental owned by you.

Vacancy Coverage. If you’re rental is going to be vacant for any period of time, it’s likely you’re going to need vacancy coverage. A vacant home presents many more unique risks than a home occupied by a tenant. Things to make sure you have coverage for when the property is vacant includes: vandalism, water damage, and burglary, in addition to the major perils like fire. If you already have a policy for your rental property, talk to your agent about limitations in your current policy and supplementing it with vacancy coverage until the home is occupied again.

Having a comprehensive landlord’s policy is key to protecting your investment. It can’t be replaced by a regular homeowner’s policy or the tenant’s insurance. (However, it’s still wise to require that your tenants provide proof of insurance for their personal contents and liability). Reading policy language can be difficult, but knowing the right coverages to look for and finding a great agent to service that policy can make all the difference.

Position Realty
Office: 480-213-5251

3 Things to Consider Before Investing in a Rental Property

Having a rental property can be a great investment. Not only can it appreciate, but many times the rent you receive from tenants will also cover most (or all) of the mortgage.

Of course, it’s not exactly passive income. You’ll probably be managing renters, hiring yard care and cleaning, and taking care of repairs. Even if you hire a management company, you still need to ensure that these responsibilities are covered.

It’s also important to make sure the investment property you choose sets you up for success. There are a lot of mistakes to avoid. With that in mind, here are three things to consider before investing in a rental property.

Understand the Numbers

Before you invest in any rental property, it’s vital to understand both your financial situation prior to the purchase, as well as, the financial results after the purchase. Let’s look at each one.

Your Starting Financial Status

Before you even think about property investment, make sure you have everything you need—personally and professionally. Are you paying your bills easily? Are you in trouble with debt? Do you have enough cash flow for emergencies, insurance, and retirement for your personal life?

If not, now is not the time to invest in a rental property. You can’t buy a home and expect renters to arrive and bail you out of a difficult situation. You want to invest from a position of strength, not an area of desperation.

Once your personal life is in order, take a look at your savings. Do you have money for a down payment? Can you afford homeowner’s insurance, taxes, fees, and repairs? Remember, the more you borrow, the less your property will return to you.

The Rental Property Itself

Once you’re in the right position to invest in a property, you want to understand the numbers behind each purchase option you evaluate. You need to choose one where the return on investment is strong, to ensure that you will actually have an investment and not a burden on your hands.

Consider the location and size of the property to determine how much rent it will command. Think about whether quality tenants want to live in that area. Don’t overlook the repairs you’ll need to make if it’s not a turnkey property.

Compare your return against your expected expenses to make sure you’re receiving positive cash flow from the property over time. Think about taxes, fees, periodic repairs, and anything you’re paying to a management company. Don’t forget to factor in the mortgage payments as well!

Look for a Desirable Location

High-quality renters are attracted to top-of-the-line spaces. It may seem like a great deal to invest in a run-down property or an undesirable part of town because you can get it for a low price. However, even if the expected (lower) rent is a good return, the truth is that you won’t get quality renters.

You need to find an area that people want to live in long-term. Otherwise, your property will be a revolving door, and you’ll always be looking for new tenants. Each month of vacancy is money out of your pocket and dramatically reduces your return on investment.

Think about the good schools and transit routes in your area and look for desirable properties near those amenities. If you can find something near great restaurants, parks, and entertainment, that’s even better.

Of course, these better properties will cost more. However, knowing that you have a desirable location with long-term tenants will make the financial outcome worthwhile. You will also have the added benefit of appreciation. In more desirable areas, the value of your investment will appreciate much faster than in undesirable areas.

Consider Your Risks

Any investment has a risk of loss. That’s why there’s the possibility of a return! When you’re considering an investment property, you need to think carefully about the risks of renting and be prepared to handle them.

Vacancy is probably the most significant risk. Having months of no tenants means having months of no income, but your expenses will remain the same. It’s important to limit this risk as much as possible by choosing a high-quality property in a desirable area. You should also budget to have some additional cash available in case you face lean times.

You also want to be prepared for major repairs. Sometimes these can be planned, and sometimes they pop up out of nowhere. Having proper insurance and a reserve fund is vital.

Finally, you need to be ready in case you have difficult tenants. Some may pay late, promise to pay but never do so, or even need to be evicted. Handling these issues is time-consuming, so be sure to have a plan in place ahead of time.

Be Prepared Before You Invest

Having a rental property can be highly profitable if you do it well. Once you’ve taken these considerations into account, you’ll be able to tell if you have the right opportunity in front of you.

When you go in with a clear vision, you’ll set yourself up for success.

Position Realty
Office: 480-213-5251

Should You Invest in Short-Term or Long-Term Rental Properties?

The benefits of real estate investing are numerous. That’s why millions of Americans decide to go down that road. However, for someone new to the property investment business, choosing the right strategy can be daunting. That’s why we’ve put together the advantages and disadvantages of both short-term rentals and long-term rentals to help beginner investors decide on the best approach for them.

What Are Short-Term and Long-Term Rentals?

If you are new to real estate investing, you might be wondering about the meaning of short-term rentals. This is a relatively recent type of investment properties which get rented on daily or weekly basis. They have become particularly popular after the emergence of Airbnb.com in 2008 and other similar platforms afterwards. They are also known as Airbnb rentals or vacation rentals.

On the other hand, long-term rentals are investment properties which landlords rent out on monthly basis. Most tenants tend to stay in the same property for years before they decide to move to a new city or before they can afford to buy their own home. Long-term rentals are also called traditional rentals as this is the oldest type of rental properties.

Investing in Short-Term Rental Properties: The Advantages

1. Higher Return on Investment

The first and foremost benefit of buying an investment property to rent out on Airbnb or a similar platform rather than the traditional way is that this brings a higher return on investment. Data from Mashvisor, a real estate data analytics company, shows that the capitalization rate for short-term rentals exceeds the cap rate for long-term ones in the majority of big and small US housing markets. This is a very important factor as investors get into real estate to make money from properties, and the more money they can make, the better.

2. Control Over the Pricing Strategy

Vacation rentals are usually marketed on platforms which allow the host – that is, the investor – to set up a unique rental rate for every day. This allows you to customize your pricing schedule to account for the weekend and holidays as well as for the peak season and the off season. In this way you can decrease the daily rate when demand is slower to push your occupancy rate up and increase the rent when the market is hot in order to make more money. Consequently, you can maximize your rental income and return on investment easily and effectively.

3. In Demand

Airbnb rentals are very much in demand right now. Looking for a more welcoming and less pricey alternative to hotels, many business and leisure travelers decide to stay at short-term rentals, pushing the demand for them up. That’s excellent news from the point of view of real estate investors as more demand means that they can raise the nightly rate and still not compromize the occupancy rate. This, in turn, means higher return.

4. For Personal Use

The last major advantage of investing in a short-term rental as opposed to a traditional one is that you can use it for your own purposes. Because vacation rentals’ availability is marked on daily basis, you can decide when you want to stay at your second home with your friends and family and make those days unavailable for guests. In this way, you not only get to spend your holidays in a home-resembling atmosphere in your favorite location but also save money from expensive hotels.

Investing in Vacation Rentals: The Disadvantages

1. Legal Issues

The main drawback of this rental strategy is that short-term rentals are becoming illegal or at least strictly regulated in more and more markets across the US. The local authorities in many major cities such as San Francisco, San Diego, Los Angeles, New York, Boston, and others have issued regulations which basically eliminated vacation rentals for investment purposes there. Moreover, even if you invest in a location where Airbnb is legal at the moment, there is no guarantee that the situation will not change for the worse in a few months or years.

2. High Turnover

Unlike traditional rentals, vacation homes experience a very high turnover. Guests change every couple of days, which means that you have to clean, tidy up, and restock all the time. This increases your running costs and requires a lot of time and efforts. Being an Airbnb host can be equivalent to a full-time job. However, professional vacation rental management companies offer an affordable solution to this problem. They would take care of all aspects of your short-term rental business in a cost-efficient way, maintaining your income or even increasing it.

Investing in Long-Term Rentals: The Advantages

1. Stability and Predictability

The most important pro of buying a traditional rental property is that it provides a sense of stability and predictability. You have to put efforts into screening tenants well to find good ones and then you should take good care of your property, of course. But as long as you do that, you can expect your tenants to stay for a few years. This means that you will receive your rental income month after month without worrying about vacancies and turnover. This is an important consideration for real estate investors.

2. Few Legal Restrictions

The laws governing the relations between landlords and tenants vary from state to state. Some locations favor the former, while others favor the latter. Nevertheless, there are no places in the US real estate market where long-term rentals are absolutely illegal or where the regulations are so tight or restricting that they become prohibitive for investors. So long as you maintain your property, respond to your tenants’ reasonable requests and concerns, don’t discriminate against them, and pay your taxes diligently, you should be out of trouble.

3. Smaller Initial Investment

If you decide to rent out your investment property on long-term basis, you can decide whether to to furnish it or not. Furnishing an entire house or apartment from scratch requires thousands of dollars, no matter how good you might be at finding deals. You have to provide a comfortable and pleasant environment to be able to compete with other investors in the neighborhood. Nonetheless, you save yourself both money and time when you leave your property unfurnished. You don’t have this option with vacation rentals.

4. Minimal Ongoing Expenses

Similarly, long-term rentals entail lower recurrent expenses than short-term ones. As an Airbnb host, you have to replace the toiletries and water, change the sheets, and clean the property between all guests. Moreover, you have to periodically change any broken pieces of furniture and deal with more frequent damages to your property. Meanwhile, long-term tenants see your rental as their home, so in most cases they cause less damage than short-term guests.

Investing in Traditional Rental Properties: The Disadvantages

1. Difficult Rent Increase

Most states tend to protect tenants and make rent increases very hard. As a landlord, you will most probably face limitations on the frequency of changes in the rental rate as well as the actual size of the increase. This means that you might miss on an opportunity to make more money if demand in your market starts going up.

2. Bad Tenants and Eviction

Even if you apply the most scrutinizing screening process when choosing your tenants, you might still make a mistake and end up with bad tenants. However, most states put significant restrictions on the tools you have at your disposal to deal with them. When your tenants don’t pay rent, you have to give them a notice before you can take any legal action. If you suspect your renters are causing too much damage to your property, you can’t just walk in to check on the property; once again you have to notify them. Not to mention that a supposedly simple eviction process can take months in which you cannot make money from your investment property.

3. Suboptimal Return on Investment

As mentioned above, short-term rentals tend to yield higher return on investment than traditional ones. Nevertheless, this doesn’t mean that you can’t make good money with long-term rentals. As long as you select your market carefully and analyze your investment property diligently, you can make doubled-digit return with this rental strategy.

One of the best things about real estate investing is the diversity of options including the two main rental strategies. While both short-term and long-term rental properties have clear, objective pros and cons, you have to take into consideration your personal preferences and your own personality as a real estate investor before you can decide which one to pursue.

Position Realty
Office: 480-213-5251

IRS gives rental owners clarity on 20% deduction

The IRS on gave owners of rental properties a better idea of how they can qualify for the 20 percent deduction on qualified business income from pass-through entities such as sole proprietorships, partnerships and S corporations.

This deduction is a big, complicated part of the sweeping Tax Cuts and Jobs Act that Congress passed in December 2017. It’s called the qualified business income deduction, or the 199A deduction after its section in the tax code.

The IRS published proposed regulations for this deduction in August, but the section on rental real estate left room for debate. It said that to qualify, a real estate activity must rise to the level of a “trade or business,” an ambiguous term that has no clear or consistent definition in the tax code. The IRS said it would look to its use under section 162(a) of the tax code, but that still left a lot of tax pros arguing about whether people who owned one or a few properties would qualify.

The IRS published final regulations on the overall deduction Friday, but clarified its position on rental real estate in a separate notice.

“The Treasury Department and the IRS are aware that whether a rental real estate enterprise is a trade or business is the subject of uncertainty for some taxpayers,” it said in the notice. “To help mitigate this uncertainty,” the notice contains a proposed revenue procedure that provides a “safe harbor” under which a rental real estate enterprise will be treated as a trade or business under Section 199A and thereby qualify for the 20 percent deduction starting with the 2018 tax year.

The notice outlines numerous requirements, but here’s the big one: Between 2018 and 2022, at least 250 hours of rental services must be performed each year for the business. Starting in 2023, at least 250 hours must be performed in three of the five past years.

Rental services under this definition include advertising the space for rent, negotiating and executing leases, screening tenants, collecting rent, maintenance and repairs, purchasing materials and supervising employees and independent contractors. “Rental services may be performed by owners or by employees, agents, and/or independent contractors,” the notice said.

It added that rental services do not include financial or investment management activities, such as arranging financing, procuring property, studying financial statements and hours spent traveling to and from the real estate.

Also, real estate used by the owner “as a residence for any part of the year” is not eligible for this safe harbor.

More information

To see the notice: https://www.irs.gov/pub/irs-drop/n-19-07.pdf

To see the final regulations on the deduction: https://www.irs.gov/pub/irs-drop/td-reg-107892-18.pdf

It also added that real estate rented under a triple net lease is not eligible. A triple net lease is one that requires the tenant to pay taxes, fees, and insurance, and to be responsible for maintenance in addition to rent and utilities.

How to Attract Renters Using Smart Tech

If you own or manage a rental property, you probably know how hard finding the perfect tenants can be. Attracting the right people to your space is key, and smart tech can help you grab their interest and show yourself to be a prepared and mindful landlord.

Make your space feel modern and updated
Fully updating older rentals is expensive and time-consuming, and it may not be a possibility for you based on your personal budget and time constraints. However, many prospective renters want to see a space that is updated and fresh, even if the building itself is a little older. One way to bring a modern edge to your space is adding in a dose of smart tech with a few well-integrated items.

Smart lightbulbs allow users to adjust lighting conditions to their own preferences. Some come with customizable colors, while others can be dimmed and have their light warmth fine-tuned using a mobile app. There are even smart bulbs which can be voice-controlled. Showing these features to prospective renters can be an impressive touch.

You can also show off things like smart thermostats, which allow for remote control and scheduling, and smart switches, which can help add even more control to existing devices and lights. Plugging items like lamps into smart outlets adds some smarts to even the most mundane appliances, and will create a cutting-edge feel in even a dated home. Best of all, these can save both you and your renters money over time.

Help prospective renters see the possibilities
Especially in short-term rental situations, it can be hard for prospective tenants to picture their lives in a rental space. As a property owner, you can use smart tech to help them get a clearer view of how personalized their stay in your space can be.

Smart speakers with virtual assistants bring some intelligence and control into a space in one compact package. Renters can voice-control other smart tech using the smart speaker as a hub, and they can ask for music, weather, search results, shopping, games, and a whole lot more. These virtual assistants, such as Alexa and Google Assistant, can help renters feel more at-home and control more of the space.

Create a secure environment
When moving to a new place, many renters may feel some anxiety about unfamiliar living situations and neighborhoods. Using tech like smart smoke alarms, leak sensors, and home security systems, you can create an environment that keeps you and the renters in the loop about any potential threats and get ahead of potential dangers with remote warnings. It’s important for potential renters to feel secure, and you can provide that by showing you’ve put time and effort into creating a safe place for your tenants.

The key to using smart tech to attract renters is to make sure you’re in-tune with potential tenants’ needs. Making a space feel up-to-dated, personal, and safe will attract high-quality renters to your property, and can be the beginning of a strong rental relationship.

Position Realty
Office: 480-213-5251

Freddie Mac Could Earn $3.4 Billion Profit From Expanded Repurchase Review

Freddie Mac could receive between $2.2 billion and $3.4 billion in more profits from forcing lenders to buy back “a significantly larger” number of soured mortgages, according to the Federal Housing Finance AgencyInspector General.

Up to $1.2 billion in new profits could go to the GSE this year alone. The FHFA IG said the estimates are based on a review of 350,000 more loans than before.

“Freddie Mac has been carefully monitoring its own activities, modifying its plans, and updating its estimates of results based on its month-to-month experience in reviewing nonperforming loans,” the inspector general said in a report released Thursday.

FHFA Deputy Inspector General for Evaluations George Grob said in a letter to the watchdog that the agency was developing plans to align how both Freddie and Fannie Maereview repurchase requests.

The “contract harmonization initiative” is expected to launch at the end of 2012, Grob wrote.
Lenders had to buy back $1.2 billion in problem home loans from Freddie in the second quarter. Another $2.9 billion in repurchase requests are still outstanding as of June 30, according to its financial filing.

The FHFA IG raised concerns one year ago about repurchase oversight at Freddie, when its regulator began monitoring how the GSE would manage repurchase claims in a $1.35 billion settlement struck with Bank of America in January 2011.

Up to 100,000 mortgages originated in just 2006 could have been reviewed under broader criteria, the watchdog found. Freddie was reviewing only loans that defaulted in the first two years after origination. One senior examiner said most loans sold to Freddie during the housing boom defaulted after this time period, leaving many loans overlooked.

In October 2011, less than a week after the report was released, Freddie senior management proposed going after more loans, and the FHFA gave the go-ahead. The GSE alerted its lenders in March.

The inspector general said the final results of the expanded review would not be realized until next year or even until 2014. Freddie has drawn more than $72 billion from taxpayers since entering conservatorship in 2008. The Treasury Department said in August it would end the 10% dividend payments and begin sweeping all future profits back to taxpayers.

On Tuesday, the FHFA released repurchase guidance on loans the GSEs buy starting Jan. 1. For mortgages financed after that date, the GSEs will release repurchase risk once the borrower makes three years of consecutive payments.

More Renters Are Finding It’s Cheaper to Buy

With rising rents, more renters are being swayed into home ownership.

For example, one Phoenix renter said he started looking into owning a home when his landlord tried to increase his rent by 13 percent when his lease was up for renewal. He found that he could buy a home and get the same amount of space for cheaper than continuing to rent, plus he’d be building equity.
Other renters are starting to see that buying may be a better option for them, too.

Rents are increasing at about the same pace that home values were dropping, says Stan Humphries, Zillow’s chief economist, who says, according to their surveys, home prices have dropped 3.1 percent year-over-year whereas rents have increased 2.5 percent.

“Herein lie the seeds to eventually more interest in buying on the part of consumers, which will help put a floor under home prices,” Humphries told Investors Business Daily. Recent housing surveys, including Zillow’s, are showing home prices are starting to rise in recent months.

Affordability in housing has been at record highs from the combination of falling home values and record-low mortgages. Humphries says that housing prices have rolled back to 2003 levels.

“That increased affordability in the face of rising rental prices will begin to get buyers off the fence this year,” Humphries says. “What’s been keeping buyers on the fence is a crisis of confidence. People who don’t have a job, or who are worried about losing their job, don’t buy homes. They also don’t want to buy an asset they think is rapidly depreciating.”

National Association of REALTORS®’ Chief Economist Lawrence Yun says the tighter restrictions from lenders are also preventing many potential buyers from securing financing in order to buy. But for those who are able to qualify, Yun says “it’s better to get in now” than wait.

Position Realty now offers buyers a 1% down programs for Phoenix Renters with limited cash reserves but they still want to buy. This is an excellent program because it could allow you to purchase a larger home or make improvements to the home. For the same price as a $1,000 security deposit you could purchase a $100,000 home. For additional information….CLICK HERE

Sean Heidemen, Broker ~ Office: 480-213-5251 ~ Sean.Heideman@PositionRealty.com

How To Rent Higher and Keep Tenants Longer

If you handle your rental business, like a business, it will make you money, like a business should. Your properties will bring in money instead of costing you money.

The following are some ideas that I use to keep tenant maintenance to a minimum and eliminate problems before they happen. Nothing is perfect, but following a good plan can cut problems in half or eliminate them all together.

Getting Tenants to PAY ON TIME …

Treat Tenants with Respect – This is the most important piece of information anyone can give to a landlord. If you respect your tenants and treat them well, they will be more likely to treat you and your property with the same respect. Their respect will not be limited to the property, but should extend to paying rent on time. You must demonstrate this respect by some of the following

1. Repairs – When something is broken, fix it and fix it fast. Yesterday afternoon a tenant called to say their water was not working. I got on my motorcycle and took time to find out what was wrong. I rode to the tenant’s apartment and checked. It turned out the city disconnected the water because the tenant hadn’t paid. They were very apologetic and offered to “Pay me for me gas.” My tenants like me because I go the extra mile.

Note: When was the last time a tenant offered to pay for YOUR Gas?

2. Communication – Keep your tenants informed on any changes with the property, including rent changes and maintenance. Don’t change the rent without asking the tenant what they can afford. Here are some good examples of notes I send to tenants

  • “You’ve been here a year and I have your One Year Tenant Appreciation Gift.” Also, I need to notify you of a rent increase, can you afford an additional $50 per month? (I only want $25, but will be happy with less) My tenant likes the gift and likes, even more, the fact that I am asking them what they can afford.
  • Perform regular maintenance checks on your houses. At least once per year, you should visit your property and do a Walk Through.
  • Write letters to your tenants once per quarter. Just say “Hello” and thank them for being your customer.

3. Respect – They are people just like you and me. They deserve all the respect that we do. In addition, they deserve all the respect we would give to any customer, if we had a retail business. Our tenant are the reason we are able to make a living.

Getting Tenants to PAY MORE In Rent …

Rent Comps – Realtors and Property Managers can give you rent comps and this will give you an accurate idea of what OTHER Landlord are charging; however, this does NOT HAVE TO BE WHAT YOU CHARGE.

Sell yourself to the tenant. Explain why they are better off renting from you.

1. What makes your property worth more than other people’s? YOU DO!!! It all goes back to respect and upkeep. If you are better than the average landlord, you are worth more. If you’re worth more, you should be paid more.

2. When they say your price is too high. Tell them what to look for and how to protect themselves. In doing this – sell yourself. Here are some things to say, that make you and your property worth more, in the tenant’s eyes.

  • Make sure the landlord compensates you if repairs are not made in a timely manor – I do. If your rent is late, you pay. Why shouldn’t the landlord pay if the repair is takes too long?
  • You are bringing business to your landlord, make sure they give you something for that – I do. I give my tenants a gift for moving in and then another gift every 12 months. In fact I just got a new computer system for one tenant.
  • Make your landlord treat you with respect – I do, because I used to be a tenant. I know what it’s like.

3. Don’t speak badly about other landlords. Build value in you and your property.

Getting Tenants to STAY LONGER …

Keep your Tenants – Your goal is to stand out from everyone else. You want to be different from all the other landlords in the area. Besides, if a tenant wants to leave, they will. Your goal should be to keep them from leaving without giving you a 30-Day Notice.

Instead, give them something, if they stay. If a tenant has already given you a deposit, they are not “losing” anything, if they leave. They just aren’t getting it back (from their viewpoint). They’ve already “lost” the deposit. However, if you promise them something, if they stay, they are less likely to leave, until they get their gift.

Free Gifts, Month-to-Month Leases, Paying tenants if repairs are not made, “In a timely manor”, Etc; make sure you promote yourself as different, let them know you’re not the ordinary landlord.

Move in Gift – Anything that is free is good. A free gift, worth fifty bucks means a lot to a tenant that is living paycheck to paycheck. My tenants get something

1. I give a DVD / VHS Player as a move in gift. My tenants are thrilled. Most have a DVD player, but now they have one for the bedroom, also. Then I tell them about the next gift they get.

2. The One Year Gift, which they get when I do my annual Walk Through, is a “Big Screen TV”. (23” Color TV from Wal-Mart for $149) Is it worth $149 to keep you tenant one year? What is it worth to keep them for two? That’s a small expense to keep from having to find a new tenant.

3. Three years is worth A New Computer System, which I pick up for $199 from www.TigerDirect.com. Again, this is a small price to pay to get someone to stay two years.

4. I have not been a landlord four years, so this gift has not rolled around yet, but I have one tenant that I am going to send on vacation, soon. For less than $300, I can send my tenant to the beach for a weekend, with accommodations and dinner for two. My tenant already knows he getting this, and has asked what he gets for 5 years.

In three years, I’ve spent $400 to keep a tenant. If I have one vacant month, it will cost more than that. My tenants are thinking about that next gift.

Repair Penalty – Most tenants have lived somewhere that the landlord neglected them and the property. That’s always a fear in the back of there mind. Let your tenant know that you will charge them, if they don’t pay their rent on time, but they can charge YOU if you don’t fix things in a timely manor. For example, Plumbing and appliance repairs should be 24-48 hours. Electrical and HVAC repairs could take 72 hours. Don’t get scared, if it takes longer, you’re covered.

IF the repairs are going to take longer than usual, I notify my tenant, in writing, with the reason and the expected completion date of the repair. As long as I do this, in writing, I am not going to be penalized; however, if I don’t make the call and I don’t write the letter, then the tenant gets a $10 per day discount on the rent for that month. This assures them, their needs will be attended to quickly.

Make Tenants feel some Responsibility …

Repairs – My tenant is responsible for the first $50 of any repair, no matter what the cause or who is at fault. HVAC goes out, they pay the first $50. If their child puts a toy car in the toilet, they pay the first $50 (they would be responsible for this whole bill). My lease covers repairs and who is to pay for what.

1. Plumbing – If the problem is above the floor, the tenant pays the whole bill. If the problem is below the floor (in the main drain line) the tenant pays the first $50 and the landlord pays the balance. However, in three years, I have never had a problem that has been below the floor of my houses or apartments.

  • Leaking sink – Tenant
  • Overflowing Toilet – Tenant
  • Shower or Bath Problems – Tenant
  • Clogged Drains (“P” Traps) – Tenant
  • Clogged Drain Lines – Landlord

2. Other Repairs – Some items in a house will wear out over time but if the tenant is wearing them out, they should be responsible for the repairs.

  • Storm Door Squeaks – Tenant
  • Doors or Windows Don’t Close Tight – Tenant
  • Appliances Break – TENANT (The appliances are in the property ar on “Loan” and “The rental payment specifically EXCLUDES all appliances of any kind…” If they don’t work, I’ll remove them, but not replace them.
  • d. Bugs Show Up – TENANT Pays Whole Bill
  • e. Hot Water Heat quits – Landlord (After the first $50)
  • f. HVAC Goes Out – Landlord (After the first $50)

Rent – One of the biggest concerns is getting rent paid on time. What is “On Time”? Your contract outlines what the rent is and when it’s due. It also outlines what happens when rent is late. Rent should be due on the first of each month, but … it’s not late on the 5th, it’s late at 5:01PM ON THE 1ST!!! If you give the tenant until the 5th, they will take it (that’s five extra days, they keep their money).

1. Due Date – MY rent is due on the 1st day of the month, by 5:00PM. If the first is a weekend or a holiday, the tenant is responsible for having the payment made early. If the payment is made on the following Monday, it’s late.

2. Late Date – Late is any time after 5:01PM on the due date. And, if it’s paid late, there is a late charge. My late charge is 10% after 5:01 PM and $10 per day until paid in full.

3. Eviction Date – I start eviction proceedings on the 2nd. A letter goes out that says, “You’re late and you’re going to be evicted, if you don’t pay.” Most of the time, this is enough to motivate the tenant to pay. If it doesn’t, I’m ready to file papers on the 5th, when most landlords are just getting started.

4. Rent Discount – My goal is NOT to evict. My goal is NOT to get a late payment fee. My goal is to get my money – ON TIME. I encourage them to pay early, by offering a discount. If I want to rent my apartment for $550 per month, I increase that to $600 and offer a discount for paying early. If they pay “on time”, I get $50 more.

Rents Continue to Climb, Make Buying Even Better

As demand increases, rents continue to rise, increasing 5 percent over the past 12 months. Meanwhile, the asking prices for homes fell 0.7 percent in that time, according to a new report released Thursday by Trulia Inc.

“Buying a home is more affordable than renting now in almost every part of the United States,” says Jed Kolko, Trulia’s chief economist.

The national vacancy rate for apartments during the first quarter fell to its lowest point since late 2001, according to a report by Reis Inc. Cities that have the lowest number of available rental units are seeing some of the largest increases in rents.

“A lot of people who were owners lost their homes in the bust in these places,” Kolko says. As such, many of these former home owners have turned to renting, which has been ramping up demand and driving up rents across the country.

Nationally, the median rent was $1,350 a month in March — up from $1,285 a year ago, according to Trulia.
Rents have risen the most the last year in markets such as Sarasota, Fla. (12.9 percent); Miami (12.1 percent), San Francisco (11.1 percent), Middlesex County, Mass. (10.6 percent), and Edison, N.J. (10.5 percent), according to Trulia.

The demand for Phoenix az rentals has increased substantially due to the number of people losing their homes to foreclosure. Phoenix rental rates are also increasing and makes purchasing a home a more affordable option to consider. If you are able to purchase, then now is the time to get out from under paying your landlords mortgage and start earning some equity.

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