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Avoid Rental Scams!

How Rental Scams Work There are a few patterns rental scams typically follow. Usually the perpetrator is outside of the U.S. and they use Facebook Marketplace and Craigslist to post fake listings. The goal is to manipulate desperate renters who can’t find housing in their price range. The scammers get renters to pay the application fee, then the security deposit and first/last month’s rent. We’ve even seen cases where renters have paid six months’ rent because it was such a great deal. The scam starts when a legitimate property gets published. The scammer finds property photos online, copies them, and uses them for their own fake ads on Craigslist or Facebook Marketplace. As people see the fake advertisement, they’re immediately drawn to it, because it’s posted for just a fraction of the cost of other listings. When someone inquires about the fraudulent ad, the bad actor then contacts the legitimate property manager. Posing as a prospective tenant, they arrange a self showing and receive the lockbox code. The scammer shares the lockbox code with the tenant, which gives the appearance of legitimacy and boosts the renter’s confidence. After viewing the property, the tenant submits a rental application and soon the scammer has collected the application fee, the security deposit, and first/last month’s rent. Sometimes the tenant even moves in. Any property can be used in a rental scam, but you’ll find a high concentration of scams in certain markets. These conditions are ideal for fraud: High competition among renters for properties High rent costs Desperate tenants For example, one heartbreaking rental scam happened after a tornado ripped through Nebraska a couple years ago. It devastated the area and many residents lost their homes. Scammers started targeting this region, because they knew there were a lot of displaced people and fewer housing opportunities. Rental Scams Hurt Your Business In the best-case scenario, every time you have to deal with a rental scam creates operational drag on your business. There’s cleanup work to be done, undesirable communication with tenants who have been scammed, and communicating with the property owner about the situation. One conversation you never want to have with the owner is to let them know someone got scammed using their property that you advertised through your unsecure software. You could even lose property owners as clients. If your property is used in a scam — whether it’s successful or not — it can hurt your reputation. Over time, scams can affect your ratings on Google and Yelp! You don’t want to be a housing provider with reviews that complain about scams. We’ve seen many examples of property managers whose reputations have taken a hit from rental scams. It’s one of the biggest reasons that customers switch to Tenant Turner from other property management systems. They’ve been taken through the ringer and they’re looking for relief. In the worst-case scenario, you have to deal with squatters. The scam has gone all the way through and a renter takes up residency with a fraudulent rental agreement. You only discover the scam when you stop by the property and discover someone living there. You might have to deal with squatters that aren’t willing to move. They’re angry, they’re desperate, and they have nowhere else to go. Depending on the situation, the police may need to get involved. In some states like California, it’s very difficult to evict the victim, even though there was never any agreement between you and the squatter. If the victim is agreeable to leaving, it could still take weeks or months before the property is vacant again. The squatter has probably been put in a situation where they can’t afford to move. They’ve already given the scammer their security deposit and first/last month’s rent, and they’ve paid movers. Both you and the victim are stuck.     List Your Properties with Confidence While rental scams may be increasing, you can reverse the trend for your own properties. True Property Management gives you peace of mind that your properties — and your reputation — are protected, …

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Landlords Can’t Discriminate Section 8

You may not know that California landlords cannot discriminate against an applicant just because they have a housing voucher (aka: Section 8). As always there are pros and cons to Section 8 applications.The pro is that many landlords appreciate because it’s a guaranteed source of income. They know that part of the rent will be paid because it’s coming from a government agency and not an individual. The cons are there are a number of hurdles, including a home inspection, verified habitability, compliance, approved residency and other tasks. The delay in getting approved and prepared could cost a lot of money in opportunity income due to extended vacancy periods.In the past, the Section 8 process simply wasn’t worth a landlord’s time. You are now required to allow Section 8 and other housing voucher applicants to participate just like everybody else, but this does not mean any of your other screening criteria has to be changed in any way. You can still have the same income and credit criteria as well as require the same qualification …

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Pros and Cons of Investing in Single-Family Homes

As an investor, you have to decide on many different things, and one of the first ones is what type of property you want to invest in. It’s not a secret that investors and renters are always interested in single-family homes. However, investing in single-family homes has its pros and cons. Whether or not it’s the correct type of investment for you depends on your goals, how much risk you’re willing to take, and how much responsibility you want. To help you decide, we’ve consulted real estate and property management experts and found out what are the benefits and disadvantages of investing in a single-family home. You’ll find them further in this article. Hopefully, they’ll help you wage if this is the right way to go for you. Is investing in single-family homes a good idea? To be completely honest – there is no correct answer to this question. Whether or not to invest in a single-family home is a very subjective decision and depends on different personal factors. As the stakes are high, you need to thoroughly consider the pros and cons before making such a significant investment. Caption: It’s much easier to rent a single-family home than a condo or an apartment. Alt-tag: A house for rent sign on the lawn in front of a single-family home Pros of investing in single-family homes Here are the benefits of investing in a single-family home. Single-family homes attract quality tenants A single-family home is always a good investment because it is easy to find qualified people to rent it to. Unlike apartments or condos, many people rent single-family homes for a year or more. Most people who choose this type of housing are saving up to buy a home. When you rent out a well-kept single-family home in a good area, you’ll likely get tenants who want stability and who will take care of the home like it’s their own. You can count on them to live there for more than a year, and they’ll take good care of the house. Of course, this doesn’t mean you shouldn’t take precautionary measures and be careless when choosing your tenants. We always recommend professional tenant screening. That way, you’ll be sure you’re letting reliable and trustworthy people into your rental. They’re easier to manage Another advantage of buying a single-family home is that it is considerably easier to operate it than a multi-family one. It’s usually easy to find licensed real estate professionals to help you with all aspects of managing your property. The fees are far lower than you’d pay for a larger structure and multiple units. You also won’t have to deal with the headaches of hiring and managing employees. Caption: It’s very easy to find a reputable and reliable property management company to take care of your investment property. Alt-tag: Person in a suit holding a model of a single-family home They bring high returns Single-family houses are a terrific option if you’re seeking a stable return on your investment. You can expect a 12% annual return on your investment in most cases – a substantial sum of money! Remember that real estate investing isn’t about getting rich immediately; it’s about investing for the long term. Single-family houses are an excellent choice if you plan to keep these properties indefinitely because they appreciate quickly over time. For example, if you buy a house today for $100,000 and sell it 20 years later for $200,000, you will have gained 12% every year. If you keep your investment property continuously, the value will continue to rise at this rate. Cons of investing in single-family homes Here are the downsides of investing in a single-family home. Single-family homes come with higher vacancy risks Unlike multi-family investing, which involves purchasing multiple units or “doors” to produce revenue, single-family investing entails purchasing only one apartment to rent. This means you’ll only have one source of rental income. You’ll be left without payment if the tenant falls behind on their rent or moves away unexpectedly. Bear in mind that, nowadays, moving is rather easy. You have many websites such as bestcrosscountrymovers.com that allow you to find a relocation professional quickly. So you shouldn’t be surprised by tenants going missing – there’s help waiting on every corner. This can be unsettling, particularly in a slow market where tenant competition is high. This may significantly cut into your ROI. Higher resale value Single-family homes usually have a good resale value no matter how old they are. Homes that have been fixed up before they are put on the market can sell for more than homes that need repairs when they are bought. It’s imperative to hire an experienced real estate agent to make the most of your purchase. They’ll help you understand the market and make a decision you won’t end up regretting. In fact, professional help is crucial in life-changing adventures such as this one. For instance, let’s say you’re about to have an interstate move to California from a completely different part of the US. You wouldn’t dare to go on this adventure before you look for reliable assistance and hire the best California interstate movers around, right? When you’re investing in a single-family home, the principle is the same, but the stakes are much higher. Investing in single-family homes doesn’t provide as much leverage Lastly, keep in mind that buying a single-family home usually doesn’t give you as much leverage as buying a larger property. Leverage in real estate investing refers to borrowing money from others to support your investment. In single-family investing, for example, you might only be able to acquire a loan for 50% or 60% of the acquisition price. Investing in a larger property, on the other hand, may allow you to obtain a loan of up to 80% or even 90%. Caption: Make sure to analyze your finances and determine if investing in single-family homes is a good way to go. Alt-tag: A person with a phone and a pile of papers with charts on them This is because investing in larger buildings entails spending more money, which entails taking on greater risk. And no bank wants to be held responsible for the entire risk if something goes wrong. As a result, they are more inclined to lend you money when you invest in a larger house. This means that if the value of your investment rises, you will make less money. Will you be investing in single-family homes? We hope this article helped you decide whether investing in single-family homes is something for you. It’s a big decision, so make sure to carefully consider all pros and cons before making a final decision. If you decide to invest in a single-family home, reach out to an experienced property management team who will help you deal with all aspects of renting out your new property. You can sit back and enjoy your profits while knowing your property is in great hands. Meta description: Is investing in single-family homes a good idea? To help you figure out if this is the right call for you, we’ve prepared some pros and cons. Article courtesy of: Betty White https://unsplash.com/photos/aren8nutd1Q https://www.pexels.com/photo/red-and-white-sign-board-on-the-lawn-grass-8962339/ https://unsplash.com/photos/05XcCfTOzN4 …

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Rent Climbs in SoCal

If your client is renting and they are thinking about “stepping up” to a better apartment; that may not be a good idea. This post below is bad news for renters relocating to new digs, as vacant units are in short supply. The only relief is that more vacant units become available after the eviction moratorium ends. SoCal Rents 17% Higher in 1st Quarter 2022 Landlords sought 17-18% increases for vacant units in O.C. and I.E. during the year’s first quarter.  New SoCal apartment figures show few “vacant” units available, and rent hikes for those units have skyrocketed into double digits across the region. During the first quarter of 2022, vacancy rates in the region lingered near two-decade lows, allowing landlords to boost their asking rents. Orange County’s average rent for a vacant unit jumped 18.2% from the year before, hitting a record-high average of $2,476 per month, The Southern California News Group composite of three leading apartment indexes shows: That’s up to $381 a month from the first three months of 2021 — and it’s $988 a month higher than in 2010. Inland Empire rents rose almost as fast, climbing 17.4% year over year from early 2021 to a record-high average of $1,941. After seeing rent drops during the pandemic, Los Angeles County landlords asked 12.8% more for a vacant unit in the first quarter, with a record-high average of $2,332. The reason is more tenants are moving out on their own. “It’s young adults moving out of a parent’s home or moving out of a roommate situation.” Meanwhile, vacancy rates averaged 2.4% in Orange County and the Inland Empire and 3.1% in L.A. County, the SCNG composite shows. “We’ve never seen occupancy this high,” said Chris Porter, chief Irvine-based John Burns Real Estate Consulting chief demographer. Porter noted rising employment, increased wages, and stimulus checks put money in people’s pockets, incentivizing them to move out. The composite figures are average first-quarter numbers from CoStar,Moody’s Analytics-Reis, and RealPage. Since their landlord surveys tend to focus on larger, professionally managed apartment complexes, their averages tend to be higher than smaller buildings operated by mom-and-pop landlords. SoCal isn’t alone in seeing such rent hikes amid a national housing shortage, a recent report by Yardi Matrix said. But the region’s pace of rent hikes is a tad faster than the national average of 14.3%, according to Yardi. Yardi’s data showed O.C.’s average rent was 19.7% in April, the sixth-highest percentage gain among the nation’s top 30 metro areas. The Inland Empire’s rent hikes ranked 13th in April at 16.8%, and L.A. County’s ranked 19th at 12.7%. “Explosive rent growth over the past year was driven by pent-up demand, growing household formations, and a large undersupply of new units,” Yardi’s April multifamily housing report said. Meanwhile, the demand for housing is evolving High-income and older households increasingly rent more compared to previous decades. Rising prices are squeezing out homebuyers, competition from investors for rentals, and people buying second homes.” ‘Increase Like No Other.’ Apartment tracker surveys tend to be higher than the overall market because they’re based on rents for newly available units and don’t include rent hikes for existing tenants who renew their leases. Porter said. Last quarter, SoCal rent hikes for new leases were two or three times greater than lease renewals. However, some existing tenants complained that they also see hefty rent hikes when renewing their leases. A new state law capping rent hikes at 5% plus inflation doesn’t apply to buildings built within the past 15 years. Smaller Hikes Ahead Porter said that the long-term outlook is for rent hikes to ease over the next few years, but rent drops aren’t expected. Yardi’s latest report forecasts O.C. rent hikes will moderate to 6.2% by next April, with hikes of 9.1% in the Inland Empire and 7% in L.A. County. During the pandemic, more people moved out of denser, urban areas of L.A. County to the Inland Empire, where they could rent larger homes for less while working remotely. Rents decreased year over year in L.A. County from the spring of 2020 through the winter of 2021. But they started rising last summer as the pandemic eased and more employees returned to their worksites. Rents were up 6.7% last summer, 10.2% last fall, and 12.9% this past winter. Meanwhile, rents are rising even faster in Orange County and the Inland Empire, with the biggest gains over the past year than in the previous 20 years, according to CoStar figures. Demographics may explain why rents are rising faster in the suburban counties rather than in L.A., with millennial tenants aging into their 30s and 40s, Porter said.  “Now, as they get into their 30s, they tend to go more suburban,” he said. I think Covid just accelerated that already occurring …

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Do City-Owned Golf Courses Need To Go?

  By Marc Joffe is a senior policy analyst at Reason Foundation. Golf is a widely popular sport in Calif., but many public golf courses operate at a loss at a taxpayer expense; while consuming vast amounts of potable drinking water. These public courses are now becoming under scrutiny by state and local governments.   Willowick development plans scrapped after Santa Ana says it wants the land for parks While golf courses have made great strides to store and use “grey water”supplies, others have continued to tap into wells that could otherwise provide drinking water for a thirty SoCal population. As the drought gets worse and the housing crisis deepens, more pressure is mounting to sell off “taxpayer-owned” city golf courses as cities also eye these courses as sites for affordable home construction. The Reason Foundation recently identified 221 local governments that reported running public golf courses in their 2020 financial reports. Of those 221 local governments, 155 lost money operating golf courses in the 2020 fiscal year. In the aggregate, these 155 local governments lost $61 million of taxpayers’ money managing golf courses in 2020. Among the 221 entities, 27 are local governments in California. And of those 27 local governments, 24 lost money operating muni golf courses in 2020 when an interest in golf peaked as Covid raged. These 24 local governments lost a total $20 million of taxpayers’ money on golf-related operations. The largest operating loss, over $4 million, was recorded by Indian Wells Golf Resort, owned by the city of Indian Wells. The course earned $11 million in revenue but had $15 million in expenses. The other California golf courses showing financial losses greater than $2 million in 2020 were in the cities of Carlsbad and Dinuba. Carlsbad’s facility, The Crossings Golf Course, roughly breaks even on a cash flow basis but does not cover its depreciation. Dinuba’s Ridge Creek Golf Club also reported revenues largely offsetting cash operating expenses but not covering depreciation. Three local governments; Mission Viejo, Pacific Grove, and Seaside turned an operating profit, making a combined $300k operating courses in 2020. Many other government-run golf courses could not be included in this examination due to how some governments report this information. Los Angeles, for example, owns 13 golf courses, but the city does not separately report the courses’ financial results. Instead, financial information about Los Angeles’ golf courses is included in the giant bucket of the city’s larger parks and recreation fund.  Based on the national and state data showing so many local governments are losing money, some taxpayer groups believe it is time to sell these municipal golf courses OR partner with the private sector to run them. Antioch, California, for example, contracts out the operation of its muni golf course to a private company. Antioch Public Golf Course, Inc. and has been operating the city’s Lone Tree Golf Course since 1982 and has the concessions contract through 2033. The city does not subsidize it, and its operating results are not reflected in the city’s financial statements. As Reason Foundation Vice President Adrian Moore put it, “Government-owned golf courses are a real head-scratcher. “They serve no public interest that the private sector is not already done well. Indeed, they are often a nice subsidy for relatively wealthy golfers, paid for by all the non-golfing taxpayers.” claims Moore. “Ideally, local governments should be looking to sell this valuable real estate they are sitting on to pay down unfunded public pension liabilities, fund needed infrastructure repairs and expansions, and maximize the value for taxpayers rather than losing money on golf. “ he added. Between home builders, companies looking for large swaths of land, and professional golf course management companies, many of California’s municipal golf courses would generate significant money in sales. Some state legislators are eyeing these money-losing public golf courses as a way to help reduce the state’s housing crisis. Calif.  Assemblymember Cristina Garcia, Bell Gardens, recently proposed a measure, AB 1910, to give local governments an incentive to convert their public golf courses into a mixture of housing and public open space. Under the proposal, state redevelopment grants would be provided only for projects that make at least 25% of new residential units affordable units limit non-residential units to one-third of the development’s square footage. While some of the restrictions are onerous and ideally would not be in the final bill, they are imposed as a condition for unlocking state grants and are necessary to build the coalition of support needed to advance the policy. “There are important debates about how to best proceed with golf courses and properties, but, ultimately, governments shouldn’t own and operate golf courses when they lose millions of taxpayer dollars. …

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Orange County Bound!

Photo via Pexels How to Move to Newport Beach: Your Relocation Guide Newport Beach is home to beautiful Pacific Coast shoreline, fine dining, world-class golfing, and friendly neighbors. The cost of living is low and there’s no shortage of shopping opportunities and green space for outdoor activities. This area has something for everyone! If you’re anticipating a move to the Newport Beach area, it’s time to start planning your relocation. To help you stay organized during your move, realtor Kurt Galitski has assembled some useful tips and resources for new residents. Before Your Move The trick to a quick and easy move is starting early. The sooner you can start tackling items on your moving checklist, the less you’ll have to rush to get everything done. Be well-prepared and your move will go smoothly! First things first: Hire movers. First read through customer reviews, then reach out to at least three companies for estimates. Planning a DIY move? Compare your moving truck rental options and book in advance. If you’re moving your business from out of state, learn about registering your corporation in California. Arrange to have your utilities turned off at your current home and hooked up at the new place. Submit a change of address form at your post office and have your mail forwarded. Get copies of your pet’s records and obtain a Certificate of Veterinary Inspection. After Your Move Your work isn’t done yet! Before you can put your feet up in your new home, you’ll have to tend to a few final moving tasks, like having your locks changed and obtaining a new driver’s license. Hire someone to help you unload your moving truck so you can get settled in more quickly. Research your neighborhood services, from trash pickup to school districts. Obtain a California driver’s license and register your vehicle with the state. Get familiar with your new community. Find information on things to do in the area. Navigating an interstate move isn’t easy. But like everything in life, research and planning will go a long way towards simplifying the process! Start preparing for your move in advance, learn about your new community, and you’re bound to enjoy a quick, safe, and stress-free move to the Newport Beach area. When you’re ready to purchase a one-of-a-kind home in Newport Beach, connect with realtor Kurt Galitski. Call (877) 957-6677 to set up an …

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6 Signs You’re Ready to Buy an Investment Property

Nowadays, investing in real estate to gain passive income piques the interest of many. And how would it not! With today’s competitive market and constantly rising prices, investors’ gain is indefinite. However, if you want to set yourself up for financial success, you have to make sure you’re ready to bite the bullet. You have to remember that buying an investment property is so much more than just having enough money to do it. You have to have proper knowledge about real estate, current market trends, and predictions for that market in the future. Only when you’re armed with both knowledge and money will you be able to do this investing the right way. Therefore, let’s talk about the six signs you’re ready to buy an investment property! You have clear investment goals There are several ways to invest in real estate: fix-and-flip, buy-and-hold, and wholesale. Therefore, investors should have a clear investment plan in mind before making a purchase. This means you need to do your research and pick the investment strategy that suits your budget and financial goals. So, let’s elaborate a little on the possibilities you have. A “fix-and-flip” method is purchasing a house, renovating it, and immediately selling it for a profit. A “buy-and-hold” approach would entail keeping the property in your portfolio for the long term and renting it out. In wholesaling, you would sign a contract with sellers to assist them in finding a buyer for their property. Finally, the investment plan you adopt will impact the type of investment property you intend to buy. This is why it’s critical to define your financial goals before you buy an investment property. You have equity  Homeowners can frequently leverage the equity in their primary property to acquire a loan or even cover the deposit. This implies you may not have to worry about a downpayment as you did for your primary home. Let’s elaborate, shall we? Suppose we know that the equity represents the value of your property minus the amount you own for it. In that case, we can easily find out how much of the equity we’ll be able to deposit towards the investment property. So, if your house is worth $700,000, for example, and you still have to pay $400,000, this means your equity is $300,000. When deciding whether to provide you access to your equity, your bank will consider several variables, including any other loans you may have, your age, income, and the number of children you may or may not have. If you’re approved, you will typically be able to borrow up to 80% of the value of your primary property, minus what you still owe. Therefore, using the preceding example, you will be able to deposit up to $160,000 of your entire equity towards an investment property you want to buy. Since you are effectively using your present property as security for your investment property, this can be risky. This implies that both houses will be on the line if things go wrong. Therefore, before making any decisions, make sure you are informed of the consequences and risks and thoroughly examine your alternatives with a professional. You have savings  Sadly, unlike with a primary house, there is no such thing as purchasing an investment property with little or no money down. This is because government-backed loan programs (such as FHA) aren’t often accessible for investment properties. Therefore, you’ll need to have some money saved up in your bank if you want to buy an investment property. In fact, experts recommend saving 30 to 35 percent of your anticipated buying price. Most banks need a 20% down payment and up to three months of spending in savings. You should also have enough money left for repairs to prepare the properties for occupancy. Whether you like it or not, lenders consider the number of liquid assets you’ll have after making your down payment and closing costs. They do this to ensure that you’ll be able to make your mortgage payments even if something unforeseen occurs to your regular salary. While lenders want their borrowers to have a particular number of months’ worth of reserves following each transaction, the criteria for investors are frequently harsher. Therefore, you need to be armed with serious money before buying anything. You know how to do the real estate math  Buying an investment property should be a mathematical calculation at its foundation. Therefore, before entering the market, prospective investors should get to know and understand the metrics they’ll need. Fortunately, there are many rules of thumb investors can rely on during the process of buying an investment property. So, here are some of the facts nobody will tell you about that will help you predict your profits: 50% of a single-family home’s total rental revenue is spent on running expenditures such as taxes, vacancy, insurance, turnover, and maintenance. You can get the time it takes to recuperate your investment if you divide 72 by a predetermined yearly rate of return. If you can rent out your home for 1% of the purchase price, you can meet your mortgage payments with the proceeds. You’re ready for extra responsibility  While equity is one of the best pros of investing in a rental property (or buy-and-hold investment property), added responsibility is definitely a big con of this type of investment. Being a landlord requires a significant time commitment. If you’re prepared to screen eligible renters and cope with the maintenance of your rental property, you’re ready to buy it. If not, then you should invest in something else. Of course, you can always contact a reliable property manager, but that doesn’t mean you don’t have to deal with your investment property. After all, it’s your property, not theirs.  Furthermore, even if your objective is to fix and flip a house, you’ll have additional duties. Your tasks will include budgeting, supervising contractors, and managing schedules in such a situation. However, in any case, it’s critical to realize that the passive income that comes with purchasing an investment property is accompanied by additional work. Therefore, before proceeding with your purchase, ensure that you are prepared to take on that work. You found a team of reliable professionals  As an investor, you must have a solid team that includes real estate, finance, maintenance, repair contractors, and property managers. In addition, you’ll need a team of experts to help you through the purchasing process. Buying an investment property is no joke. Therefore you need to secure yourself the best experts in town! As you start to put together your team, you’ll have to do your homework. Proper research will do the job. Thus, read online reviews, ask family and friends, meet three or more professionals in person, etc. Once you have gathered all the information you need, it’s time to hire all these experts! Conclusion Yes, if you want to buy an investment property, you’ll have to invest more than just your money. You’ll have to gain profound knowledge about real estate and finances, as well as invest your time and prepare for a lot of extra work. You need to understand one thing: buying an investment property isn’t the same as buying a primary home. The bank will treat you completely differently. Therefore, prepare for expensive costs and fewer benefits to make a passive income that can set you up for life. Photo: https://www.pexels.com/photo/a-person-holding-a-key-8292791/ Article Courtesy Of: Betty …

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True Property Management Named Best Property Management Co. in Costa Mesa

Thanks to Quality Business Awards for awarding True Property Management as The Best Property Management in Costa Mesa for 2022! It is with great pride and honor that we accept this recognition as we strive each and every day to bring the best in customer service in an industry severely lacking it. Our aim is full transparency and, in doing so, keeping everything TRUE! We’re thrilled to be recognized for …

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3 Signs You’re Ready To Buy An Investment Property

Investment Property Definition An investment property is real estate purchased to generate income (i.e., earn a return on the investment) through rental income or appreciation. Investment properties are typically purchased by a single investor or a pair or group of investors together.  3 Signs You’re Ready To Buy An Investment Property First, know that the buying process is different for an investment property compared to a primary home. Before you invest in property, make sure you meet the following qualifications. 1. You’re Financially Stable Investment properties require a much higher financial stability level than primary homes, especially if you plan to rent the home to tenants. Most mortgage lenders require borrowers to have at least a 15% down payment for investment properties, which is usually not required when you buy your first home. In addition to a higher down payment, investment property owners who move tenants in must also have their homes cleared by inspectors in many states. Make sure you have enough money in your budget to cover the initial home purchase costs (like your down payment, inspection and closing costs) as well as ongoing maintenance and repairs. As a landlord or rental property owner, you must complete essential repairs in a timely manner, which can mean expensive emergency plumbing and HVAC repairs. Some states allow tenants to withhold their rent payments if you don’t fix broken home utilities on time. Make sure you budget more money than you think you need for regular and emergency home repairs. Investment property expenses don’t just begin when tenants move in. You also need to budget money for advertising and credit checks to make sure you take in the best tenants possible. A great set of tenants are an asset for your property, while bad tenants can increase your expenses dramatically. 2. The Return On Investment (ROI) Is There Real estate investors often see positive cash flow with their investment properties in today’s market, but the savviest investors calculate their approximate return on investment (ROI) rates before they purchase a property. To calculate your ROI on potential property investments, follow these steps.  Estimate your annual rental income. Search for similar properties that are currently up for rent. Find an average monthly rent for the type of property that you’re interested in and multiply that rent price by 12 for a year’s worth of income.  Calculate your net operating income. After you estimate your annual potential rental income, calculate your net operating income. Your net operating income is equal to your annual rental estimate minus your annual operating expenses. Your operating expenses are the total amount of money that it takes to maintain your property every year. Some expenses include insurance, property taxes, maintenance and homeowners association Do not include your mortgage or interest in your net operating expense calculation. Subtract your operating expenses from your annual rent estimation to find your net operating income.  Find your ROI. Next, divide your net operating income by the total value of your mortgage to find your total return on investment (ROI). For example, let’s say you buy a property worth $200,000 that you can rent out for $1,000 a month. Your total potential income is $1,000 × 12 months for a total of $12,000. Let’s also assume that the property costs about $500 a month in maintenance fees and taxes. $500 × 12 = estimated operating expenses of $6,000. Subtract your operating expenses from your total rent potential: $12,000 − $6,000 = $6,000 of net operating income. Divide your net operating income by the total value of your mortgage: $6,000 ÷ $200,000 = 0.03, which makes this property’s ROI 3%. If you buy a property in a solid area and you know that you can rent to reliable tenants, a 3% ROI is great. However, if the property is in an area known for short-term tenants, a 3% ROI may not be worth your time and effort. 3. You Have Time To Manage It Investment property management still takes a lot of time. You have to put up advertisements for your space, interview potential tenants, run background checks on tenants, make sure that tenants pay their rent on time, perform maintenance on your property and make timely repairs if something in the home breaks down. You also must do all of this while working around your tenant’s “right to privacy,” a legal standard that prevents you from dropping by unannounced without at least 24 hours of warning in most states. Before you decide to buy an investment property, make sure you have plenty of time to maintain and monitor your space.  Take the first step toward buying a house. Get preapproved to see what you qualify for.Start My Preapproval Things To Consider Before Buying An Investment Property Time, down payments and returns are just a few pieces of the investment property puzzle. Here are some other considerations to think about before you invest. What Are The Housing Market Trends? You want to choose a property that rises in value over time. But how can you tell which areas will become the next best places to invest in real estate? The only way is to watch an area’s housing market indicators and rental trends over time and compare the direction of previous property prices and taxes to where they are now. A home purchase is a major investment, so don’t be afraid to take plenty of time to do your research and to analyze market trends to find the perfect area before you dive into a loan. Should You Buy With A Partner? A partner might seem like a great idea – you can pool your money, split maintenance costs and requirements and combine your home repair skills to save money on professional contracting costs. However, buying with a partner also splits your potential profits in half and puts you in the position of sharing legal liability with another person. For example, if your tenants tell your partner about a pest problem and your partner doesn’t fix the issue in a timely manner, your tenants may sue both of you because you are both landlords and you are both equally responsible for providing a habitable environment. You should also remember that if something goes wrong with your partner and you split the cost of the home equally, you’re both equally legal owners of a single property. Make sure that the person you choose is trustworthy, responsible and proactive when it comes to maintenance if you decide to go in on a rental property with someone else. How Much Will Property Taxes Be? Property taxes are taxes that homeowners pay to support their community and local government. Property taxes fund fire departments, public schools, libraries and other local projects. The amount you pay in property taxes is directly related to the value of your home. If your home is worth more money, you pay more, and vice versa. Local governments set their own property tax rates, so the specific amount you pay in property taxes depends on your house’s location. Speak with a local real estate agent or mortgage lender to calculate how much a certain house will require in property taxes. No estimate is going to be perfect because every homeowner qualifies for different levels of exemption as well. Should You Hire A Property Management Company? You need to decide whether you want to handle property repairs, tenant management and maintenance yourself or if you’ll hire a property management company to manage the daily maintenance on your behalf. Property management companies take both scheduled and emergency repair calls and check up on your property with both drive-bys and scheduled visits to make sure that tenants respect your space. They can also collect rent on your behalf. Some property management companies also offer tenant placement services and eviction processing for an additional fee. In exchange, the property management company takes a percentage of your monthly rent. If you live far away from your property or you don’t have the home repair skills to fix your own property, hiring a property management company may be a great choice. Applying For Investment Property Loans: How To Prepare Mortgages and loans for investment properties – such as a non-owner-occupied mortgage – work a little differently than those for personal homes. Investment Property Loan Requirements If you have a mortgage for your primary residence, you probably know that most mortgage lenders no longer require a 20% down payment to get a loan. Lenders are stingier with loans for investment properties, however, because the risks of foreclosure and default are higher. Most fixed-rate mortgages require at least a 15% down payment with a 680 qualifying credit score for a one-unit investment property. Your credit score should be at or above 620 if you’re applying through Rocket Mortgage®. Lenders want you to put down 25% with a 620 or higher interest rate on two- to four-unit investment properties. Pre-Approval It’s a good idea to get preapproved for a mortgage before you start searching for homes so you know how much home you can afford. You can apply online with Rocket Mortgage to get a preapproval. A preapproval is different from a prequalification. A prequalification only tells you how much money you might be eligible for – it’s not as strong. A preapproval requires your financial information so the mortgage company can provide a solution that’s customized for you. While prequalification only looks at your credit and your inputted estimate for income and assets, preapproval involves a hard credit pull and proof of income and assets. …

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