Don’t become an “Accidental Landlord”
I thought I’d share this article that I discovered on www.calculatedriskblog.com. I believe it is extremely relevant subject to ponder. I’d rather you become a landlord on purpose, after much thought and investigation. All successful landlords have a proven system in place! Too many regretful landlords “fly by the seat of their pants”. Choose carefully.
Friday, January 23, 2009
The Accidental Landlord
by CalculatedRisk on 1/23/2009 04:20:00 PM
I’ve joked about “accidental landlords” before, and how these owners are just more shadow housing inventory.
Here is a UK story from the Financial Times: ‘Accidental landlords’ face shrinking rents
Letting agents saw a rush of so-called “accidental landlords” into the market last year, as falling house prices convinced property vendors to delay their sales. But the sheer volume of properties that have become available to potential tenants in recent months has brought stiff competition for landlords and put pressure on rents.
…
Many landlords have had to slash rents by around 20 per cent, according to agents. In the most oversupplied parts of London, falls in rental income have been as sharp as 30 per cent.
Ouch.
In the U.S. if an owner decides to rent, the mortgage rate doesn’t change (although many areas have a property tax exemption for homeowners that no longer applies). But in the UK:
Homeowners who let their property are obliged to tell their lender and may have to move on to a more expensive buy-to-let mortgage.
Falling rents, more vacancies, and a higher mortgage payment - and falling property values - the joys of the accidental landlord. They probably would have been better off just selling at a loss.
Spacious 4bd 2ba Pike County GA 3.5% CC
Tour of Autumn Ridge Dr Griffin, GA
Action Required Before Dec 31st!
7 Reasons to Invest in Real Estate Right Now
1) Historically LOW Prices–This is why the market is so “BAD”; it still can be good for U
2) Great Financing Opportunities still Abound: FHA, USDA Rural, GA Dream Program, VA
3) The $7,500 IRS tax credit on purchases (interest free loan until…)
3a) Regular Homeowner tax deductions
4) Glut of Foreclosed, Bank-owned homes that MUST be sold
5) Motivated Bank-owners who want to sell before the year’s end (They can be penalized by IRS for having it inventoried into 2009
6) Lack of competition w/ other buyers during the ’slow season’
7) UNBELIEVABLE PRICES! I wouldn’t believe it if I didn’t see it with my own eyes–and I’m the Professional.
It has been my experience that this is the absolute BEST TIME of year to shop for absolute BARGAIN-priced homes! Banks are perhaps more motivated than they’ve EVER been in history!
Let me share with you a story that will explain why I feel so strongly about this… Just last December (2007) BEFORE all of the fallout within the lending industry and the massive price reductions. I discovered a bank-owned home in my area. I observed that it had just returned to the market following about a year’s worth of marketing with no sale. The home needed considerable repairs that I was willing to tackle (I’ve done many rehabs). The bank-owner was asking $59,000 at the time I found the listing. I offered $39,000. The bank countered at $49,000. My final, accepted offer was $43,000. I put in about $25,000 in repairs. So, I had approx. $68,000 in it after everything was said&done. The property appraised for $95,000. I also now own a 1.0 Ac building lot worth $15,000 free and clear. Not anything like the deals available today, but, hopefully you get the idea.
This is NOT the time to sit on the sidelines waiting for “the economy to improve”. And I’m not saying that home prices aren’t going to decline any further, overall. They very well may, depending ultimately on the area. However, it is silly to try to “time the market” either when it bottoms or tops out. The markets are always a…changing, so simply do your best to get connected with a professional who can show you how it IS possible for you to exploit it to your advantage.
If you are one of many who DO have adequate income, a small 3.5% downpayment set aside, steady employment for the past 2-yrs, middle credit score of 580-620 min., haven’t filed for bankruptcy within the past 3 yrs (no lates on repayment), and haven’t had a foreclosure within the past 2 yrs–you are a loan candidate!
Admit to yourself that you’ve got to have a roof over your head anyway; why shouldn’t it be your roof. On top of that, how about shaving $100-200 off of your housing expense while your at it? I’m sure you would appreciate a little more $$ in “Hip Pocket National Bank”. Am I right?(-: Contact me for assistance or advice in/around metro Atlanta, GA. I am here for YOU!
Is Land Always in Demand?
I just finished reading an article found in Invest Magazine whose author pointed out the undeniable truth that “land has historically never gone down in value”. I find it interesting that during a market where in many areas homes are declining in value at such unprecedented rates, the parcel value underneath has been stable or even increasing in value. But, how can this be?
Well, as a Realtor it’s been difficult to ignore how homes on acreage in my service area tend to have much more stable pricing and demand at any given time. When compared to their subdivision counterparts, the sales data doesn’t lie–in a down market, homes with acreage have a tremendous advantage. You may pick any price range in a variety of subdivisions and discover the sad truth that home prices in the neighborhood have fallen 30% or more on average.
Now, there are exceptions thankfully. Some subdivisions are much more stable in price due to favorable demand and lack of foreclosures. What I’d like to convey in this article is the effect land has on stabilizing home values. For example, let me provide a real life example.
I recently viewed a bank-owned property with one of my clients that fit this bill perfectly. It was an older home on over 5 Acres in a desirable location. The asking price was ~$105k. All of the neighboring homes were larger, almost new on similar lots and the county was known to be in-demand.
Although, prices have generally fallen in this area due to the number of foreclosures, the list price of the home was much higher than it would have been if in a subdivision. For example, that same home in a subdvision probably would only be priced at $80k. But, we are very much in a “buyer’s market” October 2008, and even tight buyers see significant value in the land.
-Shane Huey
Housing Market Looking Up?
Is there good news on the horizon for real estate sales, in the midst of a stock market that has slipped into a coma-like state? I don’t know about you, but, I’m ready for some positive news that has nothing to do with the next presidential election.
As it turns out, according to the National Assoication of Realtors “pending home sales” have jumped 7.4% during the month of September, 2008. Could this point to evidence of buyers now waking from their slumber amidst the sustained foreclosure fallout? Well, sales are at least improving on a national level, anyway.
We must never neglect that “all real estate is local,” however. Remember, “location, location, location”? It’s the aggregate of the many smaller markets that make up the larger statewide & national markets. There are always small local markets whose sales statistics move in opposition to one another. Supply and demand are a strong force to be reckoned with…
This is why there are such huge variations in “price discounts” from area to area, even in extreme buyers markets. For example, some areas where demand has fallen off for reasons such as, say…a plant closing nearby will see steeper price declines than the next city over which has stable employment and great schools to boot.
Although, I’m excited to hear of increased sales, nationally. I know to take it with a grain of salt. Generally, I only pay careful attention to statistics that are statewide or smaller. Remember, the more local the report is, the more accurately it portrays “market reality” where you live.
-Shane Huey