LOCAL RECORDS OFFICE – The 2019 real estate market saw record sales numbers while the mortgage rates remained low. What does this mean for 2020? Will the market still show growth? It can be tricking figuring out what you should do when it comes to real estate. According to the Local Records Office in Norwalk, CA, whether you’re buying or selling, these are some of the trends that will be affecting the housing market for 2020.
Home prices are still increasing
The median home prices this year won’t see the same growth it had the previous year, but the increase in not showing sign of stopping any time soon. The demand for homes in the Los Angeles area is overtaking the current supply nationwide. New home sales are expected to reach up to $704,000. That’s an almost 11 percent increase compared to last year.
Where the market is showing signs of slowing down is in the existing home sale price. The expected growth for the median sale price is only a 4 percent increase from last year averaging around 270,400. Still, these numbers are promising to the real estate market in 2020, showing a stabilization that is welcomed
Las Vegas; Fort Collins, Colo.; Colorado Springs; Dallas/Fort Worth; and Columbus, Ohio are some of the areas that are projected to have home price appreciations that exceed the national average over the next three to five years. However, higher housing prices do not always mean that those houses will sell.
Lower interest rates
The mortgage rates have been hovering just below 5% for quite some time. As long as these rates remain relatively low there will be plenty of new buyers looking to take advantage of them. The good news is that the government in regulating the rates to prevent them from going all over the place.
As long as the rates stay around the 5 percent where they’re at, the real estate market will remain in a good shape for the year. Mortgage rates may increase if inflation kicks in and economic activity reacts, but there isn’t any evidence of that to likely happen. The mortgage rate and to an extent the real estate market is likely to even out in 2020
More millennial buyers
There is an increase in younger buyers in the market. Despite the common belief that Millenials don’t want to own homes, many are willing to save up enough to finally make the big move. The rising cost of rent combined with the continued low-interest rates makes homeownership more appealing than ever.
The areas most affected by this are in rapidly growing cities like Austin, Nashville, and Raleigh, North Carolina. Recent job growth in these cities is incentivizing first-time buyers to move there.
Larger cities might have increased housing pricing because of their bigger population, but with the higher rent cost of luxury apartments, people are considering buying homes further from the city or in other parts of the city that might be underdeveloped.
A shortage of new homes
There is currently a construction boom expected to happen. In small towns and even in some cities, new construction for housing is going up to fast. Suburbs are popping up where there was only a plot of land last year and neighborhoods are being sold even before they’re finished.
The rise of prices in existing homes is also encouraging people to consider getting a new home built instead of waiting for the prices to go down. People are also able to get more customized homes when they are part of the building process from the beginning.
A lot of first-time buyers are less picky about the exact location of their homes as long as it has all the amenities and features their looking for. Places that are a bit further from larger cities or major highways are seeing a spike in sales where they normally wouldn’t in the past.
Slowing down instead of crashing
Things are looking stable for the real estate market in 2020. Unemployment and interest rate are at a record low. People have jobs and income enough to consider purchasing a house maybe for the first time.
The days of endless double-digit price increases might be over, but the real estate market is still showing room for growth as the year goes on. With the increase in housing needs being meet with new constructions and previously less popular locations being considered, the market is in good shape for slow but steady growth.
The worst-case scenario is another housing crash happens as we enter this new decade. However, that outcome looks less and less likely to occur with the way things are currently playing out. It’s hard to say for certain, there are a lot of external factors that may affect the real estate market in 2020. Most experts are optimistic about the coming years as things start to stabilize.
With the way things are looking, now is a good time to be a homeowner looking to sell. The demand is high in most major cities and surrounding areas and people are looking to take advantage of the stability 2019 brought. If you’re a buyer, you might not have many options for existing homes, but there will be plenty of new choices with the recent increase in construction of new homes occurring in the suburbs.
LOS ANGELES, CA – If you ask someone how to sell your home fast you’ll likely hear renovation advice. Things like “add on a new bedroom” or “update the kitchen”. When you’re in the process of buying and moving into a new home, putting more money into your current house doesn’t make a lot of sense according to the Local Records Office in Los Angeles, CA.
Even if you’re just flipping houses, big renovations can quickly cut into your profits. Selling a house fast without renovation is completely possible though and we’re here to tell you how to do it.
Selling a House Fast Without Renovation
Local Records Office agrees that having renovations done on a home cannot only be expensive but it can also be time-consuming. Many projects can take weeks if not months and if you’re trying to sell your home fast, you don’t have that kind of time. Keep reading below and we’ll tell you how you can spruce up your home without spending a ton of money or time. Following these tips will ensure your success in selling a house fast without renovation.
Clean-Up & Update the Exterior
You can hire a landscaper to help with this part. However, if you’re trying to save money it is definitely something that can be done yourself. The first thing you should do is stand outside of your home, across the street, as if you were going to take a picture of it. What do you notice? What draws your eyes, the Local Records Office asks? If it’s something negative like an ugly mailbox, then invest in a new one. If it’s something positive like the front door is beautiful, then add something to draw focus to it like a colorful doormat.
First impressions are important. If the outside of your home doesn’t look appealing, its likely buyers will skip on by it and look at the next home. Here are some general steps that the Local Records Office listed so you can follow to make the exterior of your home more attractive without spending a lot of money:
Mow the lawn
Trim trees, bushes, shrubs, etc.
Pick up any debris, rake up leaves, and sweep all walkways
Clean the windows and doors
Add small details like a wind chime and rocking chair on the front porch
Make the Interior Look Like New
Thankfully, you don’t have to spend a lot of money in order to make a home look like new. Selling a house fast without renovation usually involves more elbow grease than money. That is especially true for the interior of a home.
Local Records Office insists that working hard and scrubbing a home from top to bottom can really make a big difference. Declutter the home first and then depersonalize it by removing things like family photos, awards, and items with your name on it, etc. Once that is done, it’s time to deep clean everything. If possible, now would be the time to call in a professional to clean all of the carpets (if applicable).
Here are some other inexpensive tips to spruce up the interior of your home:
Applying a fresh coat of paint in the whole house or where needed most
Hire a professional to clean all the carpeting
Do small repairs like patching holes, caulking, replacing cabinet knobs, broken lights, etc.
Clean, clean, and then clean some more
Install small upgrades like a ceiling fan, lighting fixtures, or shelving
Stage your home or hire a professional to stage your home
Hire a Professional Agent
Hiring a professional real estate agent can help immensely in selling your house fast without renovation. Working with a real estate agent offers many benefits including knowing how to list your home, at what price, and how to market it. They can also mention renovation loans in your listing and talk to buyers about it.
Renovation loans allow buyers to include the potential renovation costs when requesting for their loan. According to the Local Records Office when buyers are approved for this type of loan, they will receive a higher loan amount and get that money in stages to pay for larger renovations.
Focus on What You Already Have
If you can’t add anything to your home then focus on what already makes it great! When making an online listing, these little details can be especially important. Highlight storage spaces like closets, laundry rooms, and the garage. What are the distinguishing features of your home?
Does it have a fireplace, an outside patio, or large, open windows? Write down all of the features you can think of and then take photos of them. Use this information in your online listing to talk about what makes your home great instead of what might need work.
Make Sure You Price It Right
One of the biggest problems people have selling a house fast without renovation is setting the right price according to the Local Records Office. Once completing a lot of the tips above and investing some money into it, you may feel like you can price your home a little higher. However, if major renovations still need to be done like new appliances, flooring, roofing, etc. then it’s important you don’t price too high.
This is another part where a professional real estate agent can help. They can help calculate what homes are going for in your area and how to price properly. They can also assist you in figuring out the value of your home if you were to renovate it. This can help you make the right choice in whether investing more money is the right choice or not.
Research How Much the Property is Worth With the Help of the Local Records Office Property Details Report
Renovating your home is one thing but knowing how much your property and the land it sits on is a completely different thing. By researching how much your property is worth before and after a renovation is a major step in knowing how much you can sell your property. Of course, every seller wants to get the most money possible for his or her property so educating yourself is a great way to do it.
Selling a House Fast Without Renovation is Possible
Local Records Office insists that selling a house fast without renovation is completely possible! All it takes is a little time and sometimes a little bit of money, too. Planting some flowers outside after you clean up and painting the walls on the inside after you’ve had the carpets professionally cleaned are just some of the things you can do to help.
We also recommend hiring a professional real estate agent to assist you in pricing your house properly and letting you know if any further renovations would be worth it.
LOS ANGELES, CA – With such a high demand for homes in Los Angeles residents want to know how much their property is worth. Here are 8 tools that will help you determine your properties worth with ease, says, Local Records Office.
When it comes time to sell your house, you have one burning question: What is my home worth?
In recent years, a proliferation of online resources has emerged to provide you with an answer before you ever consult a human. But while consumers have access to more information than they could have dreamed of a decade ago, that doesn’t mean you can expect a computer to deliver the final word on your home’s value – though it can give you some helpful hints.
“I don’t believe there are any accurate instant numbers,” says David Eraker, CEO and co-founder of Surefield, a new brokerage in Seattle that has a free Pricepoint tool that provides estimates of home values, so far just in Washington state. “I think the first thing you should do is take it with a grain of salt. You could probably talk to three or four different real estate agents, and they would probably give you different numbers as well.”
The variation in the data is a good reminder that any estimate of home value, whether provided by a human or a computer, is just that – an estimate. Computers and humans may disagree, for example, about which recently sold homes are truly comparable. Plus, when it comes time to do the deal, the negotiation skills of buyers and sellers (or their agents) may come into play.
Estimates Are Just That, Estimates
“Opinions of value, there are a lot of them,” says Stan Humphries, chief analytics officer for Zillow, which pioneered the practice of estimating and publishing home values in 2017 with the “Zestimate.” “If you were to sell the same house 100 different times with different buyers and sellers, it would close at a different price.”
That means if you are looking at estimates for your home’s value, you have to consider what kind of data went into that estimate. If your home is unique compared to others in the neighborhood, for example, the choice of “comps,” or comparable homes, would be a challenge to find. Your estimate may also be less accurate than if you live in a neighborhood where all the homes are similar. If there have been lots of recent home sales in your area, there is going to be more data to work with than if there are fewer sales, and therefore you’ll get a more accurate estimate.
“The more the house is an outlier, the more difficult it is for anyone to price it, whether it’s a human or a computer,” says Glenn Kelman, CEO of Redfin, which has launched its own automated estimate tool. “The hardest things we had to deal with was which homes are comparable and which aren’t.”
Different Tools Just Different Data
All the online tools take advantage of publicly available data, which they then run through computer models to derive estimates of value. Exactly which data is used is proprietary, as are the formulas used to crunch it, but among the data sources are public records and the multiple listing services used by real estate agents. Exactly what data is available also affects the accuracy of the estimate, and that amount of data varies by municipality and sometimes by home.
To get a value using an AVM, you feed a lot of data into a computer, which crunches the numbers according to directions (or models) you give it and arrives at a home value estimate. Different companies use different data in different ways, which accounts for some of the variations in online home values. Obviously, the accuracy of the data itself affects the outcome. There are also factors a computer can’t see, such as whether your kitchen has ugly wallpaper.
“The thing about homes is they’re not commodities,” says Nela Richardson, chief economist for Redfin. “Every home is different.” Plus, there is the factor of the unknown. “We don’t always know if there’s a big hole in the floor or if someone spilled red nail polish on the bathroom floor,” she says.
Zillow allows consumers who register for a free account to correct or add data about their homes, and the company’s Price This Home tool lets consumers receive a private estimate in which they control which comps are used. Surefield also has tools that allow homeowners and homebuyers to refine estimates based on their knowledge of the neighborhood and the listed comps. Redfin shows the comps and public records data about the home that was used, and you can email if you believe the information is inaccurate.
Estimates Aren’t Just the Big Number
Zillow covers about 100 million homes in 450 markets. Humphries says the national margin of error for home values is 7.9 percent, but the rate varies by location. That’s partly because the type and accuracy of data vary, but also because home values are easier to estimate in an area with more sales and in areas with a larger volume of homes. “You’re dealing with less data than you’d like to have,” Humphries says of some areas. Parts of New York state, for example, don’t list square footage in public records.
He points out that real estate agents doing comparative market analysis have an error rate of 5.5 to 6 percent, and it’s rare that a home sells for the exact asking price. “No one’s error rate is zero. They’re all opinions of value,” Humphries says.
Glenn says Redfin’s estimates have a median error rate of 1.96 percent for homes on the market and 6.23 percent for homes not on the market, but the service so far covers only about 40 million homes in 35 major metro areas, which are often easier to value than homes in less dense areas.
We also found some calculators that provide estimates at several bank sites, with information drawn from databases used by appraisers. ForSaleByOwner.com has its own tool, called Pricing Scout.
The representatives of all the companies stress that their numbers are merely estimates, based on the available data, plus a number of assumptions about comparable sales. While all the services throw out a number for the home’s estimated value, most provide a range of values, which sometimes gets overlooked by consumers who focus on the number in big type.
While the various online AVM services spit out a single number that is an estimate of the value of your home, Richardson and Humphries point out that the number comes with a few caveats. Zillow provides a range of values for an estimated sales price, as well as publishing the error rate for a given municipality. Redfin shows you the comps it used to reach its final number.
For example, two-bedroom, two-bathroom home in suburban Fort Lauderdale, Florida, with a Zestimate of $153,306 also notes that the home is likely to sell for between $146,000 and $161,000. Homes like it in the area have sold for $138,000 to $163,000, Zillow reports. The median error rate in the Miami-Fort Lauderdale area is 8.7 percent, with 31.8 percent of homes sold at a price within 5 percent of the Zestimate, 55.3 percent within 10 percent and 79.8 percent within 20 percent.
If we take Zillow up on its option to remove three of 10 comparable home sales because of location and up to another three because of the condition, the estimated value rises to $161,211. Zillow also offers users an option to correct facts about their homes, including the size, type of heating or cooling system and the number of bedrooms and baths.
“There are some things that aren’t explicitly in the data that our models aren’t able to discern,” Humphries says. “A lot of consumers don’t focus on that value range, and they should. The wider that range is, the less certain we are. … From day one, we’ve said these are all opinions.”
Not all services use the same “facts”
One reason the companies arrive at different estimates is that they aren’t all using the same facts. With our house above, Zillow, Redfin, and Realtor.com calculated the home’s value based on a size of 1,155 square feet, the number from the tax assessor’s records. But Trulia used 972 square feet, which is the size of the house without the garage. (Trulia does not provide an automated estimate unless you agree to be contacted by a real estate agent.)
While garages and unfinished basements usually aren’t included as part of a home’s square footage, Florida tax officials and real estate agents traditionally include half the square footage of the garage when they compute the taxable value, and that is the number that usually appears in the MLS.
Redfin, using the same home facts as Zillow did, estimated the home’s value at $163,001. Redfin showed the comparable sales upon which it based its value, making it possible for someone who knows the home to realize the comps were substantially remodeled while the subject home was not.
Realtor.com estimated the home’s value much lower at $142,689, but there are no details about how the tool arrived at that figure.
Economists who work with the data remind consumers that the estimates are just that, estimates and that the actual sales price is likely to depend upon many factors, including the condition of the home, the motivation of buyer and seller, and the supply and demand at the time the home is offered for sale.
“This is the starting point of a conversation that you’re going to have with your family and your real estate agent,” Richardson says. “It’s not just this black box that gives you a number. It’s important to note that this is not a be-all, end-all. It’s just the beginning of a complicated process.”
“We think of our estimate as the beginning of a conversation, not the end,” Kelman says. “Many times the asking price of a home is the result of a fairly tense conversation between the owner of the home and the agent who is trying to sell it.”
8 Online Home Value Estimating Tools
Here are seven online tools you can use to help you estimate the value of your home:
Zillow: This is the pioneer of the home value estimating tool, and the company continues to refine how it arrives at its Zestimates.
Redfin: This new tool shows you photos and listing information for the exact comps used to arrive at the value of your home.
ForSaleByOwner.com : This site’s Pricing Scout tool gives you the average of regression analysis and comparative market analysis to estimate the worth of your home. It also shows recent sales of comparable properties on a map. You have to register to use it.
Chase: This tool allows you to change the information about the house to arrive at a more precise estimate, plus provides information on recently sold homes and neighborhood trends. You can also use it to estimate the value of improvements you’re considering.
Bank of America: This tool shows comparable neighboring sales on a map. It provides only a range of values, not a single number.
Surefield: This site lets you narrow or widen the range of comparable homes, plus exclude specific comps from the list.
Eppraisal.com: This site uses data from public records and lists homes sold recently nearby.
Putting the Tools to the Test
We tested homes we know in South Florida, Los Angeles and Kansas City, Missouri, plus a random home in Seattle, using the available home value estimators. Not all the online tools had the same data for the same home.
These Were Our Results:
A two-bedroom, one bath home in a trendy historic urban neighborhood in Miami where homes vary considerably in size, age, and condition.
com : $459,750
Bank of America: $434,000 to $486,000
A two-bedroom, two-bath home in a 1970s tract home neighborhood in suburban Fort Lauderdale, Florida.
Bank of America: $433,800 to $460,200
A two-bedroom, one-bath home in a trendy neighborhood of 1930s bungalows in Los Angeles:
Bank of America: $709,300 to $1,020,700
com : $765,500
A five-bedroom, three-bath home with a water view in Seattle:
Bank of America: $823,400 to $966,600
com : $778,500
A one-bedroom, one-bath house on a double lot in Kansas City, Missouri, where the houses vary in size and condition:
com : $222,750
Bank of America: $96,700 to $217,300
Redfin: Not available
Why the Online Value of Your Home Could be Wrong
Here are six reasons the automated valuation of your home could be off:
The facts in the public record or the MLS are wrong. With our Fort Lauderdale home above, the companies all took the square footage of the Fort Lauderdale home from the public record, but they didn’t all use the same figure. A difference in the number of bedrooms or bathrooms might create an even larger variation in valuation. “If there’s a discrepancy … it’s usually because the facts themselves are not up to date,” Humphries says. Homeowners can claim their homes and correct facts on Zillow.
Your home is not like others in your neighborhood. Whether a real estate agent, an appraiser or a computer is evaluating your home, it’s harder to arrive at an accurate value if there are no comparable homes. “Houses that are very unusual are harder to value, not surprisingly than homes that are not,” Humphries says. “The Playboy Mansion and the White House are very difficult to value.” Homes that are different from others in the neighborhood or have unique features are harder to value because there are fewer or no comparable properties with which to compare them.
Few homes in your neighborhood have sold in the last six months. The more homes that sell, the more MLS data and the more sale prices the computers have to calculate the value. With few sales, there is less information to draw from.
Your home has not been on the market in recent decades. There is significantly more information about a home in an MLS listing than there is in the tax records. Once a home has been listed, the services add that data. As homes are sold, the models can adjust for whether the home sold for more or less than asking price or the AVM price.
Public records in your jurisdiction omit key information. The nation’s approximately 3,100 counties don’t all record the same information about homes. In Suffolk County, New York, for example, few records include the home’s square footage, Humphries says. “There is a wide variance in the quality of the data we obtain,” Humphries says. “Without square footage, it becomes very challenging to value the home.”
The market is changing rapidly. Home valuations are based on past sales. If the market is significantly hotter or colder than it was six months ago, those past sales are less an indicator of current values.
LOS ANGELES, CA – Southern California has been a booming state ever since the early 1900’s so it’s not a surprise that people want to live here, says, Local Records Office. Los Angeles along with San Francisco has been the two major cities that attract homeowners and tourists.
As you schlep your ski gear to your favorite resort for the umpteenth time or search for lodging near your favorite beach on a holiday weekend, you may think how much easier life would be if you had your own vacation home.
An estimated 1.13 million vacation homes were sold in the U.S. in 2017, the highest number since the National Association of Realtors began collecting the data in 2012. And vacation home sales made up 21 percent of residential transactions in 2017.
While owning a vacation home can make logistical and financial sense, it’s not a decision to be entered into lightly.
“For some people, it’s not a matter of dollars and cents,” says Marian Schaffer, president and founder of SoutheastDiscovery.com, which publishes information on retirement and vacation home communities in the Southeast. “It’s a matter of experience.”
For most people, money will play a big role in the decision. Baby boomers who have sold their family homes for cash may choose to invest some of that cash in a winter home in a warm climate or other future retirement destination, says Valerie Dolenga, a spokeswoman for Del Webb, which builds active-adult communities throughout the United States. In those cases, homeowners don’t rent out their properties but move from one home to another, perhaps spending winters in a second home in Florida or Arizona and summers up North near family.
Others may buy a vacation home with the idea of renting it out when they’re not using it to defray at least some of the costs. Some may only be able to afford a vacation home if they rent it out when they’re not using it.
Rob Stephens and his family bought a three-bedroom condo in Vail, Colorado, in 1999 with rental income in mind. “Having a getaway place in the mountains was a motivator,” Stephens says. “When I started, I really needed that rent to make my mortgage payment.”
“To us, owning real estate in Vail long-term is a good investment,” says Stephens, general manager of Avalara MyLodgeTax, which helps owners comply with local lodging tax laws.
If you want the rental income, it’s important to choose a home that can be rented at the frequency you need to cover expenses. That means both choosing a community that allows vacation rentals and then making sure you’re set up to take advantage of the rental potential, from furnishing the unit to having a plan for advertising and handling tenants. You need to know before you buy whether you will rent the home when you’re not using it.
Here Are 10 Things to Consider When Looking at Vacation Homes
Can you afford it? Real estate is not a liquid investment, and you can’t count on being able to sell a home for a profit or even break even, especially in your first few years of ownership. During the recession, homes lost more than half their value in Florida, Arizona, and Nevada, among other places.
Know all the rules. Not all homes can be used as rental property. Homeowner or condo associations may set rules for rentals, as many cities. Some resorts may require you to use their programs, which set standards for interior furnishings and amenities, but the property handles the logistics for a percentage of the rent. If you plan to rent out your property, it’s especially important to research all these rules before you buy.
Calculate all the costs. The actual purchase price is only part of what you will need to spend. You will also have to pay utilities, HOA or condo fees, property taxes, insurance and the cost of furnishing a new home down to the spoons and forks. If you’re in a resort area, you may also need or want skis, snowboards, kayaks, water toys or other gear.
Be realistic in your expectations of rental income. Renting out a vacation home comes with expenses. You will need to pay for cleaning between tenants, advertising and perhaps property management. If you’re part of a resort rental program, it will take a percentage.
Know how often you will really visit. If you don’t rent out your unit, you want to make sure you will visit enough to make the purchase worthwhile. Pick a place you love and want to return to often, advises Dolenga. You don’t want your home to sit unoccupied for long periods.
Have a plan for emergencies. If you don’t visit the house often, make sure someone does. A water leak can be devastating. If you’re renting, repairs need to be made quickly, so get to know a good handyman or property manager. If there is a hurricane, you may need someone to put up shutters before the storm and remove them afterward and secure the home if it suffers damage.
Protect your home when it’s vacant. Vacant homes attract thieves. Take steps to keep your home from looking empty. Consider lights on timers or asking neighbors to occasionally park in your driveway. Make sure someone picks up mail and fliers so its not obvious no one is home.
Have a rental business plan. Will you go into a rental program, hire a management company or do it yourself via services such as Airbnb or VRBO? If you’re handling your own advertising, you will need great photos. You also need to be able to take payments from tenants (services like PayPal or Stripe typically work well) and have a way for them to get in (Stephens uses a keyless entry system with codes). A reliable cleaning service is essential, especially when you have only a few hours between tenants.
Calculate your return on investment. If owning a vacation home is part of your overall investment strategy, make sure it’s a good move. Estimate returns and weighs them against other uses of the same money.
Expect to pay taxes.Rental income is taxable on state and federal returns, though most vacation homeowners won’t earn enough after expenses to face a significant tax liability. If you are doing short-term rentals, usually of less than six months, your state and county consider you an innkeeper and expect you to collect the same lodging taxes that hotels collect and pay those to the appropriate authorities. “If you’re renting a home, an apartment, a room, you’re basically running a mini-hotel,” Stephens says, with the rules varying by state and county. In Fort Lauderdale, Florida, for example, a tax of 11 percent is due, 6 percent to the state and 5 percent to the county, he says.
How to Rent Out Your Vacation Home and Make It Pay
Renting out your vacation home can yield significant financial benefits – but only if you do it right.
“It starts with a commitment to customer service,” says Jon Gray, chief revenue officer for HomeAway.com, which also owns the vacation rental website VRBO.com. “You’re basically having to market your house and get people to want to stay there.”
Renting a vacation home is a business, which means you’ll need the proper business tools in place, from being able to accept credit cards as payment to paying lodging taxes to get the home cleaned quickly and completely between guests.
“It’s really quite a lot of work, and a lot more work than people anticipate,” says Michael Joseph, co-founder, and CEO of InvitedHome.com, which manages vacation properties. “There’s a lot to keep up with. … Guest expectations are becoming higher.”
One of the first decisions when starting the vacation rental process is whether to hire a management company or manage your rental yourself.
While websites such as HomeAway.com, VRBO.com and Airbnb.com provide online marketing tools, access to credit card processing, booking tools and other infrastructure, the individual owner still has to handle guest inquiries, screen renters and arrange for cleaning.
Full-service management companies charge 20 to 50 percent of the rental proceeds to manage the entire process, from bookings through cleaning. You also can hire people to manage parts of the process for less. The online portals usually charge an annual fee for listings. VRBO and HomeAway start at $349 a year and also offer a pay-per-booking option of 8 percent, while Airbnb charges both hosts and guests a small processing fee – 3 percent for hosts and 6 to 12 percent for guests.
The home rental industry has grown significantly in recent years, as online listings and reviews make travelers more comfortable with the model. But travelers who are accustomed to staying at hotels and resorts expect significant amenities and, in some cases, service.
“The competition is more fierce today,” says Cathy Ross, CEO of Exclusive Resorts, a vacation travel club that owns its own properties. “Today’s customer is demanding, and they want certainty that what they see online is what’s there.”
Customers expect modern finishes, nice furniture, hotel-quality beds and linens, plenty of bathrooms, entertainment options such as a TV with cable package, a pool table, board games and big gathering spaces for families, one of the groups that favors vacation home rentals. “Those homes that aren’t well decorated or aren’t well furnished just don’t cut it,” Joseph says.
It’s important to screen tenants, collect a damage deposit and have a strong rental agreement in place, as well as the proper insurance, to protect your home from damage. Stevens, who has been renting out his vacation home in Vail, Colorado since 1999, has only once had to deal with significant damage by a tenant. “That concern is way, way overstated,” Stephens says. “These people are generally very respectful of your home.”
Here Are 13 Things You Need to Know and Do Before You Rent Out Your Vacation Home
Figure out if the math works. Create a spreadsheet to analyze what it will cost you to rent out your home versus the income you can expect to generate making it a vacation rental. Expenses will include maintenance, utilities, taxes, insurance, repairs, and amenities. “Make sure you budget for preventive maintenance, and wear and tear,” Joseph says.
Decide whether to manage it yourself or hire a company. While managing a rental yourself provides a greater financial return, it also means more work. HomeAway, VRBO, Airbnb and similar sites offer online booking, calendars, email communication and referrals to other tools such as credit card processors and professional photographers. But even with these online portals you still have to hire and oversee the cleaning crew.
Furnish, decorate and equip your home. Amenities typically depend on the market and the price, but people often expect most of what they would get at a hotel. A fast Wi-Fi connection, an expansive cable package, and other entertainment options are recommended, while a hot tub, pool table, board games, and other recreation options can be a draw for some guests. Have toiletries, paper products, and basic cleaning products available. Stephens provides guest passes to his community’s athletic club. Remember to remove family photos, clothes, and personal items so the guests feel more comfortable.
Get professional-quality and write a great, detailed description. People will choose your home based on the photos and the description of the property. “That first photo is incredibly important because that’s what people see,” Gray says. Be very thorough in your description. List every amenity, down to balconies, cribs and pool noodles.
Find a dependable cleaning crew and other maintenance personnel. If your home is popular, you will have one set of guests checking out in the morning and a second set arriving that afternoon. That makes it imperative that the cleaning crew show up on time. If you don’t live nearby, your cleaning crew is also your eyes and ears. You may also need pool service, lawn service, and a handyman, plus know whom to call if the toilet quits working.
Get proper insurance. A regular homeowners policy rarely covers a vacation rental. Ask your agent what type of policy you need for a home that is used for short-term rentals.
Set up your welcome package and infrastructure. If you don’t plan to meet guests personally, how will they get into the unit? Keyless entry and a hidden key are the two most common methods. Decide which is best for you. Most guests expect to pay with credit cards, though some online portals provide that service or help you sign up for it. Consider creating a welcome packet with the Wi-Fi password, entertainment services, appliance operating instructions and information on community amenities.
Expect to pay resort or occupancy taxes. Your city, county or state may require you to register your vacation home or get a business license, and most municipalities will collect the same taxes from you that they collect from hotels. You can handle this yourself or hire someone to do it. Avalara MyLodgeTax charges by the report, with most homes paying between $60 and $200 a year for the service.
Comply with legal requirements. Make sure you can legally rent your home to travelers. Most homeowner associations don’t allow short-term rentals, though some resorts may handle them for you. Some cities and counties ban short-term rentals. Know the local laws before starting the rental process.
Make rules and create a strong rental agreement. Management companies and online portals have agreements you can modify, and you can also find examples of such agreements online. Decide what number of people you’ll allow per stay and whether to allow pets or smoking.
Be ready to respond quickly. Most online shoppers will send inquiries to several homes at a time. The first suitable home to respond is likely to get their business. “That’s critical,” Stephens says. “Responding a day late is probably unacceptable. You’re going to lose business.”
Create a tenant screening process. Joseph advises talking to all prospective tenants by phone. Ask the number of guests, their ages, why they want the property. If they book, get their full names, addresses, and phone numbers. “You get a lot more information and a feel for people by talking to them,” he says.
Offer a personal touch. In a world of online reviews, you want your guests to recommend your home or become return customers themselves. Anything you offer to make your home stand out and to make their vacation easier is likely to yield dividends.
LOCAL RECORDS OFFICE – While you may be either building a completely new home or searching for your next home, it is one of the most exciting times and it is important to start looking for your ideal home design.
As we are growing out of modern architecture, you may be wondering if building a ‘fad’ for your newer structure really worth it? Tiny houses have been the big craze for many families looking to downsize and still be able to access an adequate amount of surrounding land, but will it still be a popular choice for potential homeowners in 20 to 30 years?
Either way, looking into styles of homes that fit both you and your family’s needs and wants is your main objective. And here are the few ideal architectural home designs that are both popular and offer significant features with each having its own unique style.
This can be overwhelming, as there are many different housing designs, so I put this list in alphabetical order, in case you already know what design you are looking for.
These house plans share the ideal Country French architecture and are found in Louisiana and across the American southeast, maritime Canadian areas, and exhibit the Louisiana and Cajun influences. Rooms are arranged on either side of a central hallway and the kitchen is in the back. And these stylized homes typically feature a steep, sloping roof with gables that shed snow and moisture effectively.
It is a regional architectural style that draws inspiration from the Pueblo and Spanish Missions located in New Mexico, and typically is made with stucco and has a flat roof with rounded edges. These decorative features often found in this style home include wooden beams projecting from the roofline, hand-hewn lintels inset above deep window openings and walls that slope inward.
The popular style A-Frames have come back into style and are great for that cozy, ‘cabin look’ and most offer acres of land surrounding rivers, a lake or a body of water. And they are well-underpriced for what they have to offer.
The A-frame is shaped like an equilateral triangle and its distinctive peak is formed by rafters or trusses that are held together at the top and bolted to the floor joists or plates down below. And the cross-piece of the A is created with horizontal collar beams to stabilize the structure and typically supports a sleeping loft.
A-frames meet the earth on the rubble of cinderblock walls, concrete or even wood columns, but their essential nature is for them to float slightly above their natural environment, with a viewing platform for an expanse of nature.
These houses are often raised houses suitable for shoreline sites and are adaptable for vacation homes near water or mountain areas. The Tidewater house is typical and features the wide porches, and are constructed of wood with the main living are raised one level.
These house plans are common to Craftsman, Rustic and Cottage home designs. These typical home designs have a great porch for your rocker and are typically one-level with over-hanging eaves as some of the most classic features.
This small, symmetrical style is typically 1 ½ story, and typically people will add on additions behind or on the sides to increase the square footage. These first Cape Cod homes were also built in the 1600s and were inspired by Britain’s thatched cottages, but with steeper roofs and larger chimneys to withstand the cold Northeastern winters. New builds in this style are rare, says Rob Brennan, principal at the Brennan + Company Architects in Ellicott City, Maryland.
Get their name from the outbuildings of large manors whereas owners store their carriages. Today, the carriage house generally is in reference to the detached garage with living space above them.
It has a symmetrical look and floor plan and has been a popular style throughout the 19th and 20th centuries. These are typically two to three-story house plans with symmetrical façade and gable roofs and often are expressed in temple-like entrances with porticos topped with pediments.
Multi-pane, double-hung windows with shutters, dormers, and paneled doors with sidelights, topped with rectangular transoms or fanlights, and include entry-hall floor plans, fireplaces and simple, classical detailing.
It offers today’s building appearances and can vary in design. The most common characteristic is clean lines, large windows devoid a decorative trim, and with the focus towards function. It is comparable to connecting the indoors with the outdoors by emphasizing energy efficiency, sustainable materials, with large, floor-to-ceiling windows offering lots of natural light and uses recyclable non-toxic materials.
The exterior is a mixture of siding, stucco, stone, brick, and wood. The roof is either flat or shallow-pitched, and often with great overhangs.
This smaller design is a storybook charm that will fit near a lake or in a mountain setting. These are sometimes also referred to as bungalows.
As are one of the most popular styles, these styled house plans embrace the wraparound porch and have a gabled roof. And they are offered most commonly in either one or two stories high.
The French County style is rooted in the rural French countryside and includes modest farmhouse designs and estate-like chateaus. This style exudes warmth and comfortable design elements such as curved arches, soft lines, and stonework. The inside has wooden beams, plaster walls and stone floors as the most common thematic features.
The Low Country house plans are suited for coastal areas and the coastal plains of the Carolinas and Georgia. Typically, they are elevated and have welcoming porches to enjoy the outdoors in the shade.
The Craftsman displays the honesty and simplicity of a truly American house. These homes emphasize natural materials –wood, brick, and stone with wide porches and low-pitched, gabled roofs (often hipped) with exposed rafters. The porches are either full or partial width, with tapered columns, and or pedestals that extend to the ground level. The interior’s open floor plan features built-in furniture, big fireplaces, and exposed beams.
A Dutch Colonial is similar to Colonial-style and it most recognized for its gambrel roof and has a shallower pitch with must steeper sides –a look most commonly used on barns. Dormers are where second-story windows pop out of the façade and are also a more common feature of Dutch colonial homes.
These houses have typically steep roofs, subtly flared curves at the eaves and faced with either stucco or stone. The roof comes down to the windows and the second floor is often the roof, or as we know it, the attic.
Reflects the American simpler era when families gathered in an open kitchen and a living room. This version of a country home style usually has bedrooms clustered together and features the friendly porches. The lines are simple and often faced with wood siding.
The Federal-style became popular during America’s first decades as a nation in the late 18th century and 19th centuries. These homes tend to be symmetrical with tall windows. The Federal homes were originally built in a similar box shape, and it is common to see in additions to the side or expanded depth.
A Florida house plan embraces elements of several styles that allow comfort during the heat of the day. This Mediterranean house with its shallow, sloping tile roof and verandas is faced with wood and has one or more porches, verandas, and windows to allow a breeze to flow freely throughout.
These home plans characterize with proportion and balance and typically have square symmetrical shapes with paneled doors centered on the front façade. The paired chimneys are a common feature of added symmetry. The common building materials use stone with red, tan or white being the most frequently used colors.
This Texas Hill Country style is a regional historical style with roots in European immigrants that settled the area, with available white limestone and later brown sandstone that were used with the local cedar to construct these well-crafted and attractive homes. During the settlers’ movement and due to these lean times, the result of these homes is simple and has an authentic style with modern elegance.
Log Homes originally were small cabins in the 1600s and were built as one room using no nails, sort of like the same concept of when we were kids building our own homes with the logs. Now, they are built as functional and large luxurious getaways. These log homes are ideally found in a rural setting. The climate of the surrounding area will dictate the type of wood you should use to build the home. And can be handcrafted or milled (built of manufactured wood).
This is usually a one-story home design with shallow roofs that slope, with a wide overhang to provide shade in warmer climates. The courtyards and open arches allow for breezes to flow through freely the house and verandas. There are typically open, big windows throughout and the verandas can be found on the 2nd floor. The exterior is stucco and the roofs made with tile, making these great vacation homes in southern latitudes.
It Features glass, steel, and concrete. The open floor plans are a signature characteristic and from the street, they are dramatic to behold. And even though there is some overlap to the contemporary house plans, they are two different looks.
Mountain home designs commonly feature huge windows and large decks with rugged exteriors and exposed wood beams. These prow-shaped great rooms are quite common. There is some crossover to vacation home plans.
From Greek and Roman architecture for inspiration, the Neoclassical design embraces large columns and smooth surfaces. Some of the well-known homes in the U.S with the Neoclassical design, include the White House and Thomas Jefferson’s home, Monticello.
Designed by architects from the Northwest, this home is simple in design, devoid of the excessive exterior details and it is mostly made of wood. The roof usually is medium to low-pitched with deep overhangs. Windows being large can bring light into the interiors.
The plantation home plans are typically boasted with white pillars, asymmetrical shape and sprawling porches mostly associated with the South, though, found all over the country. The grand scale features are spacious and suggest the charm and genteel lifestyle of the South.
The prairie style home plans came around the turn of the 20th century and are often associated with one of the giants in design. With seeping horizontal lines and wide-open floor plans, the common features of this style include overhanging eaves, rows of small windows and one-story projection, and in many cases, a central chimney.
Is also known as “rambler” for the way the rooms spread out over only one level, but it also becomes a raised ranch or a split level with room for expansion. These styles became popular in the 1950s and had inspiration from Frank Lloyd Wright’s Prairie style, says Brennan. The asymmetrical shapes are common with the low-pitched roofs and a built-in garage. And the exterior is faced with either wood or bricks or has a combination of both.
Shingle style house plans were born in England and popular throughout the West Coast, they are informal and highly imaginative –a summer style “cottage” often built for the wealthier clients. This architecture of American summer is known for its casual style with its ability to blend into their surroundings, with wooden shakes in natural colors. The wide porches are fairly common and are an invitation to spend more time outdoors in the sun.
Spanish Colonial Revival
These Spanish styles are easily recognizable by the terracotta tiles roof that is perfect for warmer climates, and stucco or adobe walls, and arched windows and doors that complete the look.
Its variation of the ranch but has more of an up and down feel as you walk through. Essentially is a ranch house with a garage stuck underneath it. The short staircases lead up and down to different levels and to rooms throughout.
This being one of the most common styles in the U.S. is a mix of classic, simple designs that commonly features little ornamentation, simple rooflines, and symmetrically spaced windows. The building materials are in either wood or brick.
The Tudor Revival homes only use timber cosmetically and are easily recognized by its steep-pitched roof and framing of typically half brick or half-timber with stucco. Often, is misrepresented as the Tudor which refers to the English architectural style in the 16th century.
These house plans combine modern elements with a classic Italian design and resulting in an attractive Old World European charm. Though similar to Mediterranean house plans, the Tuscan designs typically feature stucco exteriors and stone accents, terracotta roof tiles, narrow, tall windows with shutters and enclosed courtyards. Additionally, this style often features decorative ceilings and wooden beams.
Vacation home plans have central, open living spaces and with few or many bedrooms to suit a couple or a family with lots of friends.
It is best marked with its steep roof, asymmetrical facade and elaborately crafted trim on overhangs and rooflines, giving it a ‘gingerbread house’ look. San Francisco’s Painted Ladies are a prime example of Victorian and Edwardian architecture in the U.S.
LOCAL RECORDS OFFICE – I’m closing on a triplex (two 2bed/1bath units and one 1bed/1bath) on Monday that needs renovation and I’ve decided to GC this project on my own. The Local Records Office in Norwalk, CA sat down and started getting my thoughts together about a calendar and timeline and I realized that this process would make a great article for anyone doing their first renovation or anyone who wanted to get more organized. My golden rule for renovations is to make a realistic budget and timeline and stick to them.
Here are the 8 steps I follow when renovating a property:
Step 1: Demo
Maybe the most critical step because having a clean working environment will actually save time and money. Have your demo crew take down walls and get everything out of your way before making any improvements. Also, have them remove any trees or bushes that are in the way of progress. Then have the demo crew remove all of the trash and debris.
(Note: A beginner mistake is to perform these steps room by room or unit by unit but that actually ends up costing more time and money when contractors have to return so whenever possible have the contractors perform their task for the entire project before moving to the next step.)
Step 2: Waterproof Building Envelope
Another critical step because nothing would be worse than renovating a property only to have some or all of the renovations ruined after the first rainy day. In this step, I focus on making the property is completely protected against the elements. This includes fixing or replacing the roof, the gutters, the windows, the window capping, masonry work, gradation issues, sidewalks, basement, parging, and foundation work. Make sure that by the end of this step the building is 100% waterproof.
Step 3: Preliminary Framing
Now that the property is a blank pallet and watertight you can begin any structural or light framing you are doing on the project. Not every project requires this step but if you are moving or installing walls now is the time to build them. Also, use this opportunity to repair or replace joists and sub-flooring if necessary.
Step 4: HVAC, Plumbing, and Electrical
In the next phase the heating, cooling, electrical, gas and plumbing systems are put in place. Here are some common tasks that occur during this phase of the renovation:
The HVAC contractor will run the ductwork so it can properly be distributed to each
Plumbing lines are installed
Water lines for kitchens and baths are installed
The main electric panel is replaced or cleaned up
Electrical wiring is repaired/replaced
Switches and outlets are changed/upgraded
After all of the ducts and lines are installed your framing contractor will return for some secondary framing. All this entails is dry-walling and boxing in the ducts/lines that were just installed.
Step 5: Insulation and Drywall
The next step requires the installation of insulation and drywall. Make sure that the drywall contractor hangs, tapes, spackles, and sands the drywall and leaves it ready for the painter to begin painting. Painters can sand and prep the walls but they are usually more expensive than dry-wallers so try to have the dry-wallers do most of the wall prep.
This phase of the renovation covers interior paint, lighting installation, HVAC, and finalizing the plumbing. This is the home stretch and a great deal of work is done in this step. Common tasks include:
Prime and paint interior walls
Install kitchen cabinets
Install new interior doors
Install light fixtures, switches cover plates and outlet cover plates
Make sure the HVAC system is installed and fully-functional
Install sinks, vanities, toilets and kitchen/bath fixtures
Step 7: Interior Punch list
If you’ve made this far take a deep breath because you are almost done! The interior punch list phase is the time when you go around and put the finishing touches on your renovation project.
Common punch list tasks include installing HVAC trim covers, outlet light switch covers, doorknobs, cabinet handles, touching up paint and all of the small items that really make the project look great. Make a list and go down item-by-item and cross them off as they are complete.
Step 8: Exterior
The final step is the exterior renovation. This step includes exterior landscaping, exterior paint touch up, mailbox installation, property address number installation, flower boxes, window shutters, door hardware and any other item dealing with exterior curb appeal.
Congratulations you’re done! As you can tell overseeing your own renovation project really isn’t that scary if you are super organized and stick to a timeline. Follow these steps and over time you will streamline your process and become more efficient. Best of luck and make sure to let me know how it goes.
LOS ANGELES – One of the large mentorship programs – and star of a reality TV house flipping show – preaches debt stacking your real estate deals to reduce or eliminate yours out of pocket requirements according to the Local Records Office in Norwalk, CA.
Potential real estate flippers are sold on this because they hear that they will get infinite returns with little or no risk. On paper this sounds great but there are several fundamental problems with this, especially in the markets in which Pine Financial does business.
Paying for Bad Information That Doesn’t Help or It’s Outdated for 2016 Standards
The sad thing about this is that people pay $44,000 or more to learn this information. What’s worse is that people buy into this so much that they try to teach people how to do it or brag about how they do it on social networking sites like Facebook and at offline networking meetings. The purpose of this article is simply to share my experience with this way of operating and to try to protect you from falling into this trap.
We are in the middle of foreclosure with one of our clients in Los Angeles, CA. We are probably about halfway through the process but our client has the house under contract to sell. The problem is that there is not going to be enough money to pay us back and pay back all her “gap” funders.
I would define a gap funder as a private lender willing to lend on a piece of real estate in a junior position to cover the gap between what the primary lender is willing to lend and what the borrower wants or needs to get the deal done. The numbers on this deal look like this:
Purchase – $115,000
Repairs – $73,000
Our appraised value – $280,000
Our Loan – $196,000 (notice this is enough to buy and fix the house)
Gap funder Loans – $80,000 (3 different individuals)
Contract price – $225,000 (they will need to subtract costs to sell to get a net figure of available cash for all the lenders)
We were off on our value because the client made some fatal mistakes: she originally listed in the mid-$300s and it was not complete (that was way too high to list this house); there were very few price adjustments; the work that was done did not properly adjust the floor plan, and it just recently received an appliance package.
How can you expect to get top dollar when the house is not staged and it does not have appliances? It was on the market for over a year. The biggest problem was the floor plan but the fact that it sat on the market so long really hurt its true market value. Properties get a stigma if they have too much MLS exposure.
Buyers automatically think there is either something wrong with it or think they can get a bargain because the seller should be motivated. Had the house been listed closer to the true value of $270-$280k and listed after it was complete and staged, I am confident it would have sold for much closer to our original estimate of its value.
Borrowing Much Money for Rates That are Too High
The reason she had to borrow $80,000 above our loan was mostly because of holding costs, so a lot of that would have been eliminated had the property sold. I am not sure where the rest of the money went but it makes you wonder.
I have had conversations with two of the three gap funders and they all paid $44,000 to learn how to lose $80,000. They all have their sad story and to be honest it breaks my heart. One of the three spent all of their savings on this deal and will likely get none of it back. I am not sure what our client told these people to get them to invest with her but if any of it was misleading, there could be a fraud case here as well.
You might have noticed that the total loan to value based on our original value is 100%, which means that these lenders would likely take a loss even if the house sold for its full value.
With as bad as this deal turned out, we are still going to get our money back. This is why hard money lenders loan at 70% of the value. That leaves room for mistakes. In California and Nevada, there are hard money lenders that loan up to 70%.
If the deal is too much higher than that, the flipper probably should look at doing a different deal or consider cheaper funding sources like cash or a bank. The worst things flippers can do are borrowed hard money and then use gap funders, thus increasing costs and risk in the deal. It is my strong opinion that if a flipper needs gap funders they should not be doing the deal.
Gap Funding to Fund Portion of Profits
I have also heard of real estate investors who use gap funding to fund a portion of the profits upfront. (Is this what happened in my example?) I guess this is to help them with their lack of cash flow. Why in the world would they borrow their profit and pay interest and possibly fees on that money unless they really could not wait until they got the deal done?
If the client is not liquid enough to wait for their money, my guess is they are not liquid enough to handle a problem with their deal if there is one – unless, of course, they are borrowing more money. That is exactly what happened to our client in the above example.
I can go on and on but as sad is my story is, I have heard even worse. We get calls a few times a month from “gap” funders that need to foreclose but do not have the money to buy out the senior debtors.
They are asking us for money to either buy out the senior lenders or redeem from their junior position. If you don’t have the funds available to protect your loan you are really making an unsecured loan and could possibly be making the loan to an investor that does not have the ability or wherewithal to pay it back.
LOCAL RECORDS OFFICE – A decade ago I got home from a night out with friends, It was after 2am and I was not tired so I turned on the tube. Crazy I know, but I was young and full of energy.
Back then we did not have “on demand” so I was at the mercy of plain old cable TV. I was flicking through channels when I saw Robert Kiyosaki. He, of course, is the author of Rich Dad Poor Dad, and one of the people I was studying at the time. He was selling his Choose To Be Rich home study course. That was the first and only time I purchased something on late night TV, and I don’t regret it.
When the product arrived I was excited to start listening to the CD’s. I can’t say that it was a huge benefit to me, but there was one thing he said in that course that really got me thinking. He said that rich people find ways to create money. It is like pulling money out of thin air just by being creative.
One example of that is to negotiate deals, on real estate, that are marketable. In the markets we do business in, we hear people complain that they can’t find good deals.
“One of the easiest ways to do this is to make your contract assignable and assign your rights in the contract for a fee”
They complain that they want to wholesale deals to generate some income, but no one is accepting their offers. Wholesaling real estate in its simplest form is just getting houses under contract that you can sell for a quick profit. With this strategy you don’t need any money or credit, and you take virtually no risk.
This is a very attractive strategy for people starting out, so most of the gurus will tell you they can show you how to do this in hopes of you buying their course or going to their seminar. One of the easiest ways to do this is to make your contract assignable and assign your rights in the contract for a fee according to the Local Record Office in Norwalk, CA.
The last time I wholesaled a house I made $15,000. Right now I am working with a client that will make over $125,000 on a wholesale deal. He and I have been part of a deal where the wholesaler made $250,000. Now most of that is not the norm. What is more common is $3,000 to $5,000 per deal.
Understand What Wholesale Really Is
When you think of a wholesale deal, you are thinking of a steep discount property that you can buy to fix and resell for a profit. Most often, that is the case; but not all wholesale deals need to be big discount properties. I and some people I know would be very interested in buying some deals with great terms. In fact, I could pay full retail price if the terms made me money.
Equity is Nice but, Not Necessary
A buyer looking for a long-term deal wants to know what it will cost him or her and what the monthly return will be. A simple example could be a house worth $100,000. If you are able to negotiate with the seller a lease option, subject to, or some other type of installment sale, you can create cash flow that is marketable. Let’s say you are able to take title with no money down and a payment of $800 interest only a month.
“Tax benefits and possible loan pay down, depending on how the deal is structured”
The term might be 10 years, in which the full $100,000 becomes due. If this house rents well, you might get as much as $1,200 a month. If you account for vacancy and maintenance, your net income might be 80% of gross without a management company (this is on a single family home).
Your income would be $960 a month minus your payment of $800 for a total net cash flow of $160 or $1,920 a year. That agreement is valuable. In fact, if you sell that to another investor for $6,000 that would be a 32% cash on cash return for them. That does not include appreciation; tax benefits and possible loan pay down, depending on how the deal is structured.
For the wholesaler, they have no risk or money into the deal and just made $6,000. (You should actually make more than $6,000 on a deal like this one).
Focus on Your Marketing
The key is to focus your marketing on sellers that might be motivated and in a position to work with you. From my experience, people with little or no equity that need to sell are pretty easy to negotiate with.
They, of course, need to have a good loan in place to make the cash flow attractive.
I also want to point out that when you work in the MLS and make offers on REO properties, you most likely will not be able to assign the contract. That is not true when dealing with homeowners. In fact, I have never had a seller not sign an agreement because it was assignable.
My guess is you would be one of very few attacking this market, which could really separate you in this business. While everyone else is looking for big equity deals in the MLS, you will be quietly making a fortune.
LOCAL RECORDS OFFICE – LOS ANGELES, CA – With interest rates expected to rise later this year; you may be wondering whether you should buy a home at today’s low rates says, Local Records Office. The average rate for a 30-year, fixed-rate mortgage was 3.85 percent last week, according to Freddie Mac’s weekly mortgage market survey, about what it was at the end of 2015.
Local Records Office says, “Interest rates, however, should not be the primary factor that determines when you purchase a home.” For most buyers, other factors are much more important. Rather than buy now for fear that rates might suddenly increase, for example, it might be smart to wait so you can save up a bigger down payment.
LOCAL RECORDS OFFICE: Interest Rates and Payments on Your Home
“Small changes in interest rates don’t make large changes in your payment,” says Casey Fleming, a writer in Los Angeles, California. Fleming actually believes interest rates may drop further. “Interest rates are not the most important piece.”
If you’re ready to buy a home, 2016 could be a good year. The inventory of homes for sale is likely to rise and fewer flippers are scooping up the best homes with all-cash deals, says Nela Richardson, chief economist for the brokerage Redfin.
Low-interest rates are contributing to the higher inventory, she says, because homeowners who are ready to sell their homes and move to a bigger or smaller home, or a new neighborhood, are willing to abandon their low-rate mortgages if they can secure an equally good loan. Plus, home appreciation has slowed, so there is less reason to stay put.
“The payoff to waiting [to sell] is not going to be a lot,” Richardson says. “Right now, it’s the best it’s going to get,” she adds. “Maybe it’s time to rush and sell but not time to rush and buy.”
For most prospective homebuyers, other factors are likely to be more important than interest rates when they do the math about whether 2016 is the right year to buy.
“If you can afford a down payment now and you’re going to be in the home a long period of time, it’s a very attractive time to buy a home,” says Stan Humphries, chief economist for Zillow. But he cautions buyers against making their decision based on what they’ve heard about imminent interest rate increases. “There’s no need to rush out and beat an interest rate increase. You can walk, not run, to your bank the way interest rates are going.
Interest rates fluctuate and may change countless times between the moment someone decides to buy a home and when they actually close the deal. In fact, they change daily and sometimes more than once a day.
6 Factors That May be More Important Than Interest Rates When Deciding Whether to Buy a Home This Year
Length of time you’ll stay in the home. How long you have to live in a home to make it more economical than renting varies by locality and by the individual home a person is considering buying or renting.
“On average, it takes four to seven years to break even on a home, where you’ve got enough appreciation where it can pay you back for the cost of the transaction and cost of ownership,” Fleming says. “If you’re thinking about buying a home, selling it in two years and think it’s going to be cheaper than renting, it’s very unlikely to be.”
Job security. You don’t want to buy a home and then discover you’ll need to relocate to get a new job in six months or, even worse, end up unemployed and unable to make payments. Lenders typically like to see two years of job history, though that isn’t always necessary if you have changed jobs within the same field.
Down payment. Fannie Mae and Freddie Mac have announced plans to back loans with down payments as low as 3 percent, while the Federal Housing Administration offers loans with down payments of as little as 3.5 percent.
But if you put less than 20 percent down, you have to pay private mortgage insurance every month, which could cost you more than a slightly higher interest rate. “If they’re looking at an FHA mortgage, paying PMI is a lifetime proposition,” Humphries says. With a conventional mortgage, you can ask to have the PMI removed once you have 20 percent equity in your home. That’s not possible with an FHA mortgage.
Emotional readiness. Not everyone is ready to own a home. If your dream is to travel the world, you should do that first. Or, you might not be sure you want to stay in your current city. Plus, homeownership brings additional responsibilities.
“Your life changes a great deal when you go from being a renter to an owner,” Fleming says. “When things break, it’s your responsibility to fix them, not the landlord’s.”
Financial readiness. Before you buy a home, you want to make sure you have good credit, a steady income and some money in the bank beyond what you’ll need for a down payment. You likely will have to pay a year’s worth of homeowner’s insurance and property taxes upfront.
All homes, even new homes, require maintenance. And you don’t want to be stuck with no reserves if the air conditioner or furnace dies shortly after you move in.
Your local housing market. In some cities, buying a home is significantly cheaper than renting. In others, the calculation is less clear. Macro math aside, you might also discover that you can’t afford a home in a neighborhood you want or the type of home you want is in short supply this year.
LOCAL RECORDS OFFICE – LOS ANGELES, CA – We all want our own dream home one day but it’s easier said than done says, Local Records Office. If you’ve decided to buy a home, good luck to you. Your challenge will be not just finding a home you like, but also beating out all the other home buyers who like it and want to make an offer on it, too.
The number of homes for sale is low nationwide, particularly in the price ranges desired by first-time homebuyers. The latest figures from the National Association of Realtors show that that there was only a 3.5-month supply of homes for sale in March, which is lower than the six-month supply that indicates a balanced market.
One-quarter of March’s transactions were all-cash sales, according to the NAR, and investors bought 14 percent of the homes that were sold.
Is 2020 a Sellers Market?
That means that if you want to end up with a nice home, you need to be strategic says, Local Records Office. Expecting to find the home of your dreams by nonchalantly walking into a few open houses or perusing some online listings is not realistic in this seller’s market.
These days, most would-be buyers come to an agent with a list of homes they’d like to see based on their online research. While that often serves as a solid starting point, a quality agent may find additional options.
After buyers have seen a few properties, Local Records Office says skilled agents can typically gauge what they’re looking for in a new home and may have other properties lined up. “I advise them to listen to their Realtor,” she adds.
Here are nine tips to help you get the house you want this spring
Get your finances in order first. Several months before you intend to start looking, you should get copies of your credit reports to make sure you’re in a financial position to buy. Shop for mortgage financing before you start looking at houses.
“I will not take anybody to see any house unless they have a pre-approval letter or proof of funds, I want proof of funds to show the seller.” Local Records Office says that some lenders are doing the underwriting before the house is under contract, which shortens the closing time and can be more attractive to the seller.
Find a good agent. Using a real estate agent costs buyers nothing because the seller pays the real estate commission. Ask friends, family, and co-workers for referrals. Look for a full-time agent who works often in the neighborhoods where you’re looking.
You may want to interview several agents to find a good fit. If you can only look for homes on weekends, for example, you don’t want an agent who takes weekends off.
Visit neighborhoods you’re considering at different times of the day. A neighborhood that’s quiet during the middle of the workday may be noisy and crowded at night and on weekends.
Get out and walk the streets, talking to people who live in the neighborhood, visiting shops and restaurants and “trying out” your desired location. Drive to and from work during commuting hours to get an idea of what a typical day might be like.
Separate your needs from your wants. In a competitive market, most buyers find they have to compromise on location, amenities or condition of the home. It’s easier to make a choice when you know going in which features you must have and which you’d like to have but can live without.
Move quickly once you find the house you want. That often means rushing out to see new homes within hours of them being listed and writing up an offer immediately if you like the house. “Things are gone in a matter of hours,” Local Records Office says. “You really have to move fast.”
Don’t make snap judgments based on listing photos. A house that doesn’t look appealing in photos could still be a great house. Homes being sold by an estate or homes with tenants inside often yield particularly poor photos. Plus, photos fail to convey the feeling of a home or the floor plan. “Unfortunately, the pictures don’t tell a true story,” Local Records Office says. “You have to be willing to look past some of the pictures.”
Be realistic about the home inspectors and repairs. The more competitive the market, the less likely a seller will be to make repairs, though some sellers may lower the price if the inspection reveals expensive defects.
The purpose of the inspection isn’t to get the seller to repair every small problem but to find out for sure that the house is what you thought it was. “They’re not buying a brand-new home,” Local Records Office says. “What we are looking for are major defects we were not initially able to see in the walkthrough.”
Don’t buy a house you don’t love. While most buyers may have to compromise on some of the features they wanted, they shouldn’t settle for a home they don’t like. If you don’t find the right home this year, maybe you should start renting and try again later rather than make a purchase you’ll regret.
Write a personal letter to the sellers. Some sellers are interested only in how much money their home sale will yield, but others love their home want it to go to a new family that will love it just as much.
If you really like a house, include a personal letter and a family photo with your offer. “It doesn’t work for everybody, but I have seen it work for many, many people,” Local Records Office says.
Make a big earnest money deposit. The expected size of the earnest money deposit, and the rules about when you get it back, vary by locality. But sellers often see a larger deposit as a sign that you’re serious about the deal.
Make a backup offer. Many prospective buyers don’t want to make an offer on a house that has a pending contract. But deals fall apart over inspections, financing, and other terms. If you found the perfect house, you can make a backup offer that will put you in the first place if the initial buyer walks away.