Posts Tagged ‘National Association of Realtors’

Why Investing in Rentals Could Be a Good Move Now?

As home prices fall and rents rise, some investors are plunking their money into real estate, chasing the cash flow that comes along with becoming a landlord.

“For the first time in a long time, you can buy that home and can get a cash-on-cash return immediately,” said William King, director of valuation services for Veros Real Estate Solutions, a supplier of housing data to the country’s largest banks, as well as government organizations. “There are a lot of places in the country where an investor can buy a single-family home, rent it, and get a positive cash flow.”

In fact, investors bought 20% of all the homes sold in April, according to the National Association of Realtors. Some of them are buying with cash.

But even if they do finance part of the purchase, they’re able to turn around a profit much quicker than they would have been able to in the past, King said. And the return on rentals can be much better than returns on other investments these days, he added.

In the past, investors would subsidize their monthly payments on a property with the rent they were able to collect, and the big payoff was the price appreciation he or she would accumulate, he said. Now, investors can come in with a 25% or 30% down payment, finance the rest, and the rent they collect often can cover the mortgage payment, taxes and insurance — with additional cash left over, he said.

“Investors are looking at these properties on a monthly income generating basis,” said Alex Villacorta, director of research & analytics at Clear Capital, a firm that provides data for real-estate asset valuation and risk assessment to financial services companies. “They can start to realize instant profit margins, even as the market goes down more.”

“There’s a turning point where the cost of owning a home is less than the cost of renting,” he said. “When that disparity grows … we will see a push from investors to pick up investment properties.”

In general, that investors are beginning to snap up rental properties is a good thing for the stabilization of housing markets, King said. It’s also one of the ways that a floor on real-estate prices can be established; as more investors spot opportunities in residential markets, prices could bottom.

“Once investors come into a community, you’re seeing the beginning of the end of the decline,” King said.

What to look for

Before investing in a rental, make sure you’ve considered the harsh realities of becoming a landlord, said Mike Litzner, broker and owner of Century 21 American Homes, which has locations in Long Island, Queens, Nassau and Suffolk Counties. He’s also a landlord.

“There are some people who think it’s glamorous, but when you get the wrong tenants, it can be a nightmare,” he said. That said, when you get the right tenants and the properties perform as expected, it can be a “tremendous” way to make a buck — and he believes the “smart money” is now working its way into the marketplace.

Before considering any purchase, decide if you have it in you to be a landlord. You have to be willing to set expectations and consequences to ensure rents are paid on time, and you have to ready for the possibility of evicting non-paying tenants, he said. Plus, you’re responsible for the upkeep of the property, no matter how your tenants treat it.

From there, it’s a numbers game. Get a sense of what rents are in the area you’re considering, the vacancy rate, and consider your costs of financing, Villacorta said. Don’t forget the other costs of owning a property, including taxes and upkeep. Some investors may want to enlist the help of a real-estate agent to assist with analyzing the market.

Remember, often the best investment is a home you wouldn’t necessarily buy to live in yourself, Litzner said. These days, foreclosures can be snapped up at bargain prices, and as long as you have the means to make required repairs, they can represent good opportunities.

Don’t buy the most expensive house in the neighborhood,” King said, “and look at the broader community. Where are the renters going to come from, and what do they do?” Areas near colleges and military installations can be good places to invest; and think about what renters typically look for, including access to public transportation, he said.

Some of the houses bought in the worst conditions ended up being the best investments for Litzner, who was able to put some sweat equity into the homes before renting them out. It’s also important that investors have multiyear plans for the properties they buy, planning the financials at least 5 years into the future, he said.

Best markets

Many investors sink their money into properties not far from where they live. Those are likely the communities they’re most familiar with, and from a management perspective, you’re never far from the tenants you’re dealing with.

But some markets are better than others to invest in right now.

A recent report from Inman News, an online real-estate industry publication, named the 10 best markets for home investors. These are markets with traits including high affordability, low prices, high share of foreclosure sales, high population growth, improving unemployment rate, and high return on investment in the next 10 years.

The following are their top 10 markets:

  1. Indianapolis-Carmel, Ind.
  2. Winchester, Va.-W.Va.
  3. Gainesville, Fla.
  4. Tucson, Ariz.
  5. Tallahassee, Fla.
  6. Hagerstown-Martinsburg, Md.-W.Va.
  7. Salt Lake City
  8. Richmond, Va.
  9. Gainesville, Ga.
  10. Winston-Salem, N.C.

Source:  Amy Hoak, Wall Street Journal

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Should You Rent or Buy?

Consider these factors before you make a big move in 2011.

Downsizing is a big part of many baby boomers’ retirement plans, but the flat housing market and still-shaky economy have put many moving plans on hold.

2011 isn’t expected to bring higher home prices, so now may be a good buying opportunity, housing experts say. Still, renting may be an attractive option if money is tight or if you’re not sure where you’d like to plant your retirement roots. A third of respondents in a recent Fannie Mae housing survey said they would be more likely to rent their next home if they moved.

Here are some factors to consider as you weigh whether renting or buying is best for you.

Four Reasons to Rent

An easy trial: Renting a home or apartment is an ideal way to test-drive a new community. You get the flavor of a new location without the financial commitment of home ownership — and you can always buy later. Vacationing where you may want to retire is another smart way to audition an area.

Flexibility: If something changes in your life, such as an unexpected job relocation or family needs, or if you just plain don’t like your new neighborhood, it’s a lot easier to walk away from a short-term lease than a home you own.

Less maintenance: Renting means you relinquish many of the responsibilities of home ownership. If something breaks, you can call your landlord instead of hiring a costly repairman.

More to invest: If you sell your current home and rent instead, you can invest the sale proceeds to boost your retirement nest egg.

Four Reasons to Buy

It’s a buyer’s market: While the sluggish housing market is painful for many sellers, lower prices in many areas make it a good time to buy. The NAR (National Association of Realtors) expects prices to stay flat in 2011.

Low mortgage rates: If you need to borrow to buy a home, mortgage rates are at historic lows.

Tax advantages: Under current law, most homeowners can deduct property taxes and mortgage interest, which lowers your overall tax bill.

Build equity: The housing market may not move much in 2011, but many properties can be snapped up for bargain prices. If you plan to stay put, you have time to build equity as the housing market rebounds. Historically, home prices rise over time, so a purchase at today’s lower prices can be a great investment if you plan to stay in the home for many years.

National Association of Realtors spokesman Walter Molony says a recent survey by his group found “a preponderance of baby boomers buying single-family homes.”

You also can borrow against the equity in your home using a home equity loan or line of credit, and the interest paid may be tax-deductible, too.

Other Considerations: Before moving to your next home, you may need to sell your current property. Depending on current prices in your area and when you first bought the home, you may have to sell at a loss.

“We’ve seen three years of declining prices, and it’s flat this year, so for some people who purchased, especially if they did so during the housing boom, it will take longer to get back where they started from,” Molony says.

For a ballpark estimate of your home’s value, try online services such as Zillow.com or Yahoo! Real Estate. For a more accurate assessment, contact a local real estate agent for an analysis of your home and the most recent sales in your neighborhood.

If you lost your job or had credit troubles during the recession, be prepared to face stricter lending retirements when you shop for a mortgage. Before you start looking, make sure you understand your credit standing. If it lacks gusto, make some improvements before you approach lenders for a mortgage.

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Could the Mortgage Deduction Get Chopped?

As the U.S. government looks under every rock for more spending cuts, here’s an intriguing thought: What happens if Washington takes this opportunity to take down the tax break on mortgage interest?

 “We believe there is a growing risk that the mortgage interest deduction could fall victim to the deficit reduction mantra,” MF Global said in a research note.

We know fiscal asceticism is the new black, but Congress doesn’t have the guts to take on the popular mortgage tax break, which defenders say makes the cost of homes within reach for Americans. The real-estate and mortgage industries also would fight tooth or nail if the deduction moves to the chopping block.

“At this point, we view this more as a headline risk than a real threat,” MF Global said in its note. “Yet curtailing the mortgage interest deduction has been part of President Obama’s budget proposal and it was one of the bi-partisan deficit reduction commission’s recommendations. So we cannot rule out these threats.”

True, everyone from the International Monetary Fund to the Tax Policy Center to the White House fiscal commission have called for the U.S. to cap, redesign or simply get rid of the deduction. The IMF called the mortgage tax break  “expensive and regressive.” But this comes up every few years or so, before everyone realizes it’s impossible to hack away at a cherished part of the tax code.

Critics of the mortgage tax break says the country simply can’t afford to turn down billions of dollars a year for federal and state coffers. The mortgage deduction also may push people to take on risky mortgage they can’t afford, say critics, and isn’t equitable because the deduction applies to taxpayers who itemize their deductions – and benefits higher-income households more.

The National Association of Realtors (NAR) has shown increasing alarm over the possibility of eliminating the deduction over the past months. Last year, the NAR declared eliminating the deduction would decrease home values by as much as 15 percent. The NAR also asked its 1.1 million members to contact their senators and congressmen and voice their concerns over the potential of eliminating or altering the deduction.

As a Homeowner and a Member of the NAR I sent the following letter to my congressmen asking for his support to urge Congress to preserve, protect and defend the mortgage interest deduction before they whittle it down at the expense of other more expedient budget cuts.

Consider the consequences if homeowners and buyers lose the time-honored and cherished mortgage interest deduction. This tax deduction built the dream of homeownership in America. The bottom line is you may well lose personally, and for certain so will your business if it is eliminated or significantly reduced in any way.

We must speak loudly and clearly with one voice to ensure the further recovery of our economy and the housing market and educate every legislator about how much the mortgage interest deduction matters to us.  Therefore, I urge everyone to take action to Preserve, Protect and Defend the mortgage interest deduction.  No economic recovery is possible without a vibrant housing market.

Please Take Action Today!

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Is NOW a good time to become a Real Estate Agent?

New Real Estate AgentsIf you are an individual who has considered getting into the Real Estate business, you have probably asked yourself a hundred times, if NOW is a good time to become a licensed Realtor. Everyone around you is probably telling you NO, but if you asked any successful Realtors, they would probably tell you different.

If you asked any successful Realtors they would tell you that NOW is in fact the perfect time to become an agent. How is this possible you might ask? Upon asking many successful Realtors if NOW would be a good time to become a Realtor, they would presumably tell you that if you can survive and make money in this market, when the market takes a turn for the better, you will reap the benefits of all the hard work you put in during the not so easy market.

Keep in mind, if you are considering getting into the market now, you will have to work much harder than you would, and you will have to affiliate yourself with a Company that can offer you the Management support, the training, and the high tech products and services that the Consumers want these days. As a new Agent, training and Broker Manager Support should be at the top of your list because this will be the key to your success.

Many of the agents, who have been in the Market since it was at its peak will most likely tell you to reconsider Real Estate and not get involved at this time. The truth is this market has taken a toll on these agents, causing a lot of them to give up, finding new careers or an easier ways of making money. Back in the 1990’s, it seemed like properties sold themselves, and agents just got buyers in the door, people would come to them. Now days, the agent has to seek out the client, put in actual work, so to speak. Most of them are not used to this, and just don’t put in the effort they should and consequently they end up out of the Business.

Being an agent takes a certain type of person. You have to keep a positive attitude no matter what kind of market it is. I know that becoming a Realtor in this Market can work for a new agent. Being educated on the market conditions and the high tech products and services that the Consumers want will help you to become a successful agent, if not now than when the Market picks up again. Hard work in this business really pays off, no matter how rocky the real estate market may be. Just like in a good market, you only get what you put into it.

Therefore, if you are considering becoming an agent, simply because you think it’s a lot of money, for so little work then now is not a good market for you. You have to be willing to put in the hard work in order for it to payoff the way you expect. Even in a good market, the harder you work, the more successful you will be. I often remind my Fellow Agents and Broker that Real Estate is the highest paying hard work and the lowest paying easy work.

The “Market” should never determine how successful you will be in any given market. Don’t let the media and all these news reports on the Market scare you. Take all the necessary training classes and speak with your Broker or Manager anytime you start to feel frustrated. If you work with the right Company you always have the support that you need right at your finger tips.

So the next time you ask yourself , if NOW is a good time to become a licensed Realtor, the answer to this question is YES! Take a chance and reap the benefits of this lucrative Business that we call Real Estate. I did!

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