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A frequent topic of lunch and dinner conversations these days is whether or not it is a good time to invest in real estate.    And, the answer to that question is “It Depends”.

“It depends”… on what time and investment mean.    

If you are attempting to time the market, you are actually speculating that price levels have reached a bottom and  that they will go higher in the near future.   While buying on price speculation is fine and can be highly profitable, smart speculator’s realize it is also risky.   Since no one truly knows the exact time that property values will reach their lowest level, smart speculators should gamble only with money they can afford to lose.

Investment, on the other hand, is analyzing each situation or property on its own merit to determine a good value.   And, while no one wants to pay too much money for a property, timing the exact lowest price point isn’t what the investor is focused on. 

So, what is the investor looking for??  What determines a good real estate investment??   

Many people believe that their home is an investment.   It can be, but it is probably not.  Unless you plan to rent out rooms, or use your house in a way that generates more income than expenses, it is not an investment.  It is where you live.

The only way to determine investment versus speculation, is to look what the property would rent for versus the cost to own it.   If the property would easily rent for more than the monthly mortgage, taxes, insurance and expenses, it qualifies as an investment.    If the monthly costs exceed the rental income, then the buyer is speculating and paying a premium to own the home.

Bottom Line:  Rent equals Value. 

If you’re a value shopper looking to purchase a home as an investment, don’t buy a property, if you could rent it for less money.   While buying a home from the heart is fine, remember that anything you pay above the market rent is not an investment.  It is speculation or self-indulgence.

The next time the dinner conversation turns to real estate investment, impress your friends and explain the difference between investment and speculation… 

Will they understand….it depends.

Thank you for visiting InfoTube.net.   If your dinner conversation happens to turn to real estate, please tell your friends about us.  We really appreciate it.

    Finding and keeping good tenants is top priority for any property manager and landlord.   A good tenant is money in the bank.  They pay on time and you don’t hear from them for another 30 days.  On the other hand, a bad tenant can be nightmare that you can’t wake up from.

As a real estate professional, I have managed my own properties and those of my clients.  During that time, I learned a lot about the value of fostering good relationships and the importance of a well thought out lease agreement.  

 A good lease recognizes potential problems or events where misunderstandings can occur.  It spells out in pure language what the remedies and expectations are for both parties.  Remember that a good lease can make life a lot easier for landlord and tenant.  If you do not have a lease agreement, you can get a free copy of a residential lease by clicking here.

Please review the following idea’s and topics for successful landlord/tenant relations.  Consider adding any clauses to your lease that clarify confusion about expectations or address situations that may leave room for interuptation.

1. Get Paid on Time:   Obviously, leasing property is a business and the landlord needs to be paid.   A positive way to encourage on time payment is to offer a discount of $25-$35 for rent paid on or by the 1st.   Also, include a $25-$35 late penalty clause for rents received after the 5th.
2. Cut Repair Expense and Calls:   Charge a $50 deductible for all repair calls.    I have found this invaluable in getting small things done by the tenant versus having to call a repair man to fix a minor item.
3. Repair and Maintenance Clause:  Specify that the landlord is not responsible for damage or repairs caused by the tenant.   (This clause saved me $100 last month for a garbage disposal failure that resulted from woody flower stems that clogged my disposer.)  In addition, spell out expectations for lawn and shrub care, trash removal, etc that the tenant is responsible for.  Include all remedies and charges for non-compliance in writing.  (If your home has central heat and air, provide the appropriate number of filters for the rental term and advise the tenant in writing about the schedule for changing the filters.)
4. Occupancy Clause:  State the number of tenants that can live at the property.   Insert a $50 per month charge for each occupant over the maximum number agreed to in the lease.   The number of people on your property affect the wear and tear, utilities, etc.   Make the tenant understand that if you rent to 2 people and 3 live there, then the rent goes up.
5. Pets:   If you agree to accept pets, describe and specify the pets you are allowing on the property.  Include a $50 per month rent increase for any additional pets that were not a part of the original lease agreement.   (Note:  If you rent to people with pets, always get a separate, additional deposit for the pet.  Pet deposits are not a part of the property security deposit.
6. Security Deposit:   Ask for a security deposit amount that is higher or lower than the monthly rent.   This will eliminate confusion by the tenant that the security deposit is the last months rent.
7. Expenses:   List all expenses that each party is responsible for.   Tenant shall pay electric and gas.  Landlord shall pay water and trash pickup.  Etc.
8. Applicances:  Attach a list of all appliances that are provided with the property.   A list can be essential at checkout, if your microwave is missing.
9. Tenant Insurance:  Advise the tenant in writing that they need to obtain insurance protection for their contents.  Further, add that the landlord bears no responsibility for personal possessions or losses of personal property.
10. Nuisance, Noise and Illegal Activity:   Most leases have boiler plate clauses for these items, but add any clause that is applicable to you, your property or your homeowners association to the lease agreement.
11. Move In/Out Inspection:  Have a Move In Checklist and photo’s of the property condition at the time the tenant took possession.    Have the tenant acknowledge in writing that they agree with the content list and the condition of the property at the time of inspection.   Use this move in checklist when you perform a checkout walk-thru.   This step can eliminate a lot of battles about security deposit refunds.
12. Smoke Detectors:   Address the number, location and inspection date for all smoke detectors.   Instruct the tenant that damaging or removing smoke detectors is a violation of the lease.  The tenant also has a duty to report any problem that arise with the smoke detectors during their occupancy.
13. Safety Issues:  At the walk-thru, show the tenant where water and gas cut off valves are.  Also, point out cut off’s at sink and toilet faucets.   Advise the tenant about any water penetration or flooding concerns.  Explain the electric fuse panel.  Instruct the tenant about lighting pilot lights for fireplaces, water heaters and furnaces.   Safety is job 1, so make sure everyone knows what needs to happen in the case of an emergency.

Landlording is a business that moves along much more smoothly if everyone understands what is expected of them.  For more information about landlording responsibilities and rights visit the law center at Nolo Press.

Thank you for visiting InfoTube. net and email any questions or responses to tommi@infotube.net

I have received a lot of questions about property management, lately.   Yesterday, we addressed what it is that a property management company does, along with a list of criteria to help you determine if you need a property manager at all.

For those of you who need or want a professional property manager, today we offer up some good interview questions designed to give you insight and help you identify what  it is that you need to know before you sign a contract.

Questions to Ask When Interviewing a Property Manager:

1.  Monthly Cost:   Most managers charge a monthly fee to maintain, watch and care for your property.  Fee’s can vary widely, but generally you should expect to pay 5%-10% of the monthly rental for the management fee. 
2. Vacancies and Leasing Fee:  Most managers charge a fee for procurring a tenant for a vacant property.  This fee offsets the managers costs for advertising, showing the property and the time spent with paperwork.   The leasing fee can vary, but generally agents charge 1/2 of the first months rent for a signed lease with an approved tenant.  
3. Contact Information:   This is a big issue for me, as reaching my manager, if necessary, is essential.   I require that my manager uses email (my preference for non-emergencies) and also has a cell and office phone with voice mail. 
4. Accounting:   State laws dictate the rules of procedure for mailing checks to you and how security deposits are handled.  Verify that the company is licensed and fully compliant with your state association of Realtors.  Check with reporting bureau’s, such as the BBB, to see if any compliants have been filed against the management company and the status of resolution.   Get a committment in writing about the mailing schedule for rent checks and monthly expense statements before you sign.
5. Repairs and Maintenance:  Determine who handles maintenance and repairs for your property.  Does the management have in house service or do they subcontract the work?   Ask what services they can provide and which do they need to hire out?    You will also need to know the billing rate or how the repair charges will be based.   I usually allow my managers to make repairs up to $100 without contacting me beforehand.  This is up to you, but note that you can set a maximum with your manager.
6. Reserves:  What is the required cash reserve for anything that comes up?  Most managers will charge a reserve that is refundable if unused.
7. You’re Fired:  What is the termination policy, in case you discover that the relationship isn’t working out?  Find out what it will take to terminate, before the trouble starts.  Many companies charge a fee for early termination of the management agreement.
8. Statements:   Does the company provide monthly or quarterly accounting statements?  I personally don’t do business with companies that don’t provide a monthly accounting.
9. Yard Work:   Does the company have a lawn service that tenants can use?   Do they handle leaf and snow removal?  Landscaping or removing trash or debris?  If so, how much do they charge and how is it billed?  This type of service is a real plus for single family homes, especially those with treed lots, locations in storm areas or others with cold winters.
10. Property Checks:  Does the company have a drive by schedule for the property it manages?   Do they verify that the property is in good condition and leasing terms are adhered to during the lease term?
11. Advertising:  You want your property advertised.  Ask where they advertise the property?  They should use yard signs with an InfoTube or InfoBox, have a good website with a lot of photo’s of the property, upload your listing to free rental websites and make use of local classifieds.
12. Evictions:  Sad, but something landlords have to address upfront.  Does the company handle all evictions?  They should.   If so, what are the costs to evict a tenant?
13. Section 8:  Properties that qualify for affordable housing assistance should have a manager that is qualified to handle all the rules and regulations, so ask.  You never know when you might buy a piece of property that requires knowledge of the laws.

When interviewing property managers, these are the questions you will want written answers to before you sign any agreement.  

Tomorrow, we will look at little clauses and common sense items you can add to leases to protect yourself and your property.   They are also tools that your property manager will appreciate, should you decide to hire one.

An InfoTube customer writes:
Q: “My boyfriend bought a house a few months ago and I agreed to be the co-buyer. We broke up last month and I moved out. He called yesterday to tell me that he had lost his job and that he could not make the payments on the house any longer.
I didn’t want the house in the first place and only agreed to be a co-buyer because we planned to marry. Now that the relationship is over, how do I get my name off the title? I don’t want to pay for something that I never wanted and I don’t live in.
A: First, you are not a co-buyer… you are a home owner. If you are listed on the mortgage, you are legally liable for the payments and the lender will come after you for the money. Also, be aware that your ex’s failure to pay as promised can damage your credit history.
What options do you have now? Put the house up for sale immediately. Make the mortgage payments or the lender will foreclose and your credit will be destroyed. If you can’t afford the mortgage payments, I suggest that you ask the ex to move out and find a renter to help lower the costs until you can sell the home.
Unfortunately, you’ve discovered the primary danger of co-signing on any type of loan, both borrowers are fully liable for repayment. If the ex can’t afford to make the payments, it is you on the hook, whether you wanted the property or not.
If you need more help, please consult a good real estate attorney. In the future, always consult an attorney before signing legally binding documents.

At a Superbowl party this weekend, a “desperate to sell” homeowner ask if there were any tricks to help him sell his home in a down housing market. He said he had tried all the regular ideas like cleaning the house, organizing it and pricing it right, but nothing was working. He ask, “What else might we do to attract a buyer?”

If you’ve tried all the traditional home selling tips, it may be time to consider a creative incentive to get the ball rolling.

1. Buy the Buyer an Attractive Mortgage Rate: Pay “points” upfront to the lender to permanently or temporarily buy down the borrowers interest rate. Buying the rate down is smart for a number of reasons. First, a lower interest rate will reduce the buyers monthly payment making your home more affordable. Secondly, since the buyer must qualify for a loan, a lower payment means people who earn less money can qualify to buy your home. Thirdly, “Below Market Financing” sets you apart, when advertising your property.
2. Pay the Buyers Closing Costs:
With housing prices at record highs, many buyers find themselves coming up short on the cash needed for closing. Make your home more attractive to cash strapped home shoppers by offering to pay their closing costs. A little cash savings may make all the difference between a buyers ability to buy your home or not.
3. Offer Seller Financing:
Seller financing is very attractive because it is cheaper, quicker and more convenient than borrowing from a traditional lender. There are risks, such as loan default, but if you need to sell, owner financing is a powerful tool. Note that you can cut your risk of default by insisting the buyer make a larger down payment, which they forfeit if they default. And, always hire a real estate attorney to draft the loan documents.
4. Give Aways and Freebies:
Home sellers, take a marketing clue from home builders and developers. Use freebies during market downturns to lure buyers with things they can’t live without. The real estate pro’s offer buyers everything from free appliances, trips, gift certificates, decorating allowances, club or golf memberships, cars, swimming pools, etc. to entice them to buy today. While freebies cost money, they do draw attention, which may be just to ticket in getting your home noticed.
5. Overcome an Objection or Problem:
While it may be impossible to solve all problems or objections permanently, offering to buy your way out of a few of them may help you sell your home. For example, if parking is a problem, offer a year of free parking for the new homeowner. If your homeowner association dues are high or if special assessments are blocking your sale, eliminate the problem by paying the dues yourself for a time or split the assessment costs. If your home is dated or in need of repairs, give the buyer an allowance for home improvements that they can make after they move in. If your area is suffering from insurance shock, offer to reimburse the first year premium. When marketing a home, buying your way out of trouble can often times help you more than reducing your sales price by the same amount of money.
6. Last Ditch Effort—Offer a Bonus to the Broker who brings you the Buyer.
While I personally hate this option, consider offering a bonus to any agent who gets a buyer to the closing table. It is not a secret that sales people are money motivated, like most of us. Offer the broker more money to sell your home, than he could earn by selling someone else’s, and see for yourself which home sells first.