Possible ways to keep your interest rate lower when purchasing a new home or investment property

Call:  (301)943-4370

Email:  adambashein@gmail.com

www.basheinhomes.info

Most every time a person buys a home, one says to him or herself "the numbers have to work" or I can't go through with the purchase. 

Home buyers, whether looking at a place as their potential home or investment property look at the property condition, what work needs to be done, what work they would like to do, can they afford the work and with the help of their realtor, the home is priced correctly based on the property condition or if they need to get a lower price for the purchase to make sense for them.  (Yes, by all means, if you want, by all means try to negotiate on price, terms if the home is priced correctly, but also know the real estate market conditions in your neighborhood. But that is a for a different discussion.). 

When the buyers are investors, if they are looking to purchase the home and keep it as a rental, they also need to calculate whether they will be adding value with the repairs, improvements and be able to rent the property for more money than they would in the property's current condition.  If the property is move-in ready, than they don't have to calculate repairs and improvements.   On the other hand, when buyers are looking to flip houses, they need to make sure after the repairs and renovations that they will be able to sell for a good margin.

The starting point is getting a loan approval for the potential purchase, knowing up to what price range you are approved for, what the interest rate and payment is with a few different loan options, so you know up front your purchasing power and what you potentially need to rent out the property for (if it is to keep the home as a rental and not flip it) in order to have a positive cash flow on the rental.

Interest rates for investment properties tend to be higher than interest rates for primary residences.

There are a couple ways to possibly get a lower rate for a loan on an investment property.  These only apply for people who already own a home.  Use a home equity loan or line of credit.  Since rates on home equity may fluctuate, it might be safer to do this for a flip, because your intention is to repair and renovate the home as fast as possible and then sell it. So, fluctuating rates may not be as relevant to flippers since they, by definition aren't holding on to their homes.  

If you are planning to hold the property as a long term rental, a home equity loan or line of credit is a move to consider if you are planning to refinance at a certain point, which is trying to predict what the future market interest rates will be in the future.  Something else to consider if you are doing a home equity loan or line of credit is that you are using your current home as collateral.  Some people are comfortable with this and others aren't. The right decision for some is the wrong decision for others.

The simple, traditional route, if you don't like risk is simply apply for a mortgage on an investment property, knowing the interest rates may be higher and taking that into account especially if you are looking to purchase a long term investment property (considering your cash flow every month after collecting rent, paying the mortgage, if you pay a property manager, any expenses).

As I am sharing these ideas, I defer to your lender, financial advisor for guidance on what the rates for the different financing options are and what, in their opinion, is the most  are advantageous move for you.

Whether you or someone you know is thinking of buying/selling an investment property, a home, has a question about the real estate market or has a general question about real estate, please feel free to contact me.  I always have time for and greatly appreciate your referrals.

Life is good!

Adam

adambashein@gmail.com

www.basheinhomes.info

Cell:  (301)943-4370

Office:  (301)921-4500 - ask for Adam

RE/MAX Realty Group

Information deemed to be accurate but not guaranteed

When the rental situation at your investment property is going through potential changes

Call:  301.943.4370

Email:  adambashein@gmail.com 

www.basheinhomes.info

As the saying goes, the only constant in life is change.  Changes can be expected as well as surprises.  Whenever a possible change is about to come up, whether it is business or personal,  we must we the positives and negatives,  flesh out the implications and make sure these changes can be smoothly and legally implemented before going forward (or not going forward with the change).

Recently an investor who owns a rental property and discovered that there was a change in tenancy.   The rent check came in the mail and when the investor looked at the envelope, he saw an address label with the tenant's name and a second person's name with the property's address.   He opened the envelope and the rent check had both the tenant and this second person's name on it.  Sometimes the check comes in with a second person's name,  because the tenant and the tenant's parents have  a shared account.  This name wasn't familiar but the investor remembered that the tenant was dating someone.

So the next logical step was to ask the tenant if he now has a roommate because a second name was on the address label and on the rent check.

The answer was confirmed. They decided to move in , left for the holidays and forgot to tell me.  To say it was an unexpected change would be an understatement.

There are several things for the landlord/investor to consider:

1.  Does the lease between the landlord and renter allow a sublease,  adding to a lease and if so, what are the procedures for approval.

Legally speaking, the tenant didn't ask up front  permission  (even if we'll intended).

2.  Legally, with an additional tenant in the property, is the landlord's property in compliance with the jurisdiction's department of housing occupancy standards and regulations.

3.  If the property is in part of an association,  what rules and procedures need to be followed when someone moves in to the property....yes there can be community association rules and regulations,  fees for changes in tenancy. 

Assuming that the answers to 2 and 3 are yes and it is manageable from the investor's standpoint,  there are additional considerations:

4.  Has the tenant been responsible in paying rent on time, taking good care of the condo and is a fair and reasonable person who you get along with or if you have a property manager,  the property manager has had easy and pleasant dealings with.

5.  How will this impact utility bills?  Well, if that is a tenant responsibility, then is it really an issue?

6.   In relation to 5, how much additional wear and tear will be put on the property, appliances and is it worth it?

7.  Does the additional tenant smoke or have pets?  This is important particularly if you don't want smokers and/or you don't want pets/additional pets if the first tenant has pets.  In addition if in an association are there smoking and pet restrictions?

So these are several issues that a landlord has to consider and there are probably additional considerations.   If the landlord is OK with a second tenant moving in, then he and the tenant have to come to an agreement on any changes to the rental terms,  the tenant should agree to pay the association any fees associated with a new tenant and the new tenant has to agree to comply with all the terms of the lease and community rules.

If you add a tenant to a lease make sure to put all the terms and conditions into an addendum to the lease,  make the association...if you live in an association aware of the situation and give them a copy of the addendum. 

Mostly,  if you encounter this kind of situation,  bring in a real estate attorney to work things through if you don't have a professional property management company who deals with this as part of their job.  I am just giving you things to consider. 

Amazing how this situation came about because the landlord is old school and gets rent checks in the mail rather than getting paid via PayPal or the tenant directly placing/transferring money into the landlord's bank account.

Any time you or someone you know is looking to make a move, has a real estate question or just wants to know about the current real estate market, call or email me.  I always have time for and am grateful for your referrals.

Life is good!

Adam

Licensed in MD & DC

RE/MAX Realty Group

Adambashein@gmail.com 

www.basheinhomes.info 

Cell:  301.943.4370

Office:  301.921.4500-ask for Adam 

Information deemed to be accurate but not guaranteed.

7

How to minimize/avoid snow and ice build up by your front door

Cell:  (301)943-4370

adambashein@mris.com

www.basheinhomes,info

One of the frustrations I feel after shoveling is when the snow plow comes by and drops a load of snow in the front part of my driveway and on my sidewalk.  Something else that happens is the snow

'and ice build up by the front of my house.

I had an aha moment the other day when I saw the picture below.  

To avoid more snow and ice build up in the front entry of your home, remove the snow from the roof area above your front door/patio area.  If there a room with windows above the entry foyer, as in this

picture, this seems like the best approach.  If not, from the front of your home, reach up to this part of

the roof with your shovel. I am vertically challenged, so I did the best I can :-).  

It is a two step process, as you are pushing the snow to the front entry are your home before shoveling it onto the grass, but it is good for safety so neither you, nor your family members nor your friends slide or fall when leaving your home. And I am sure the mailperson, UPS and FedEx person will also appreciate this :-) 

By the way, if you are selling your home, you don't want buyers and their agents to be falling on there way in and out of your house. And you want it to be safe to go in the house for inspections and the appraisal.

Be safe.

Life is good!

Adam

adambashein@mris.com

Cell:  (301)943-4370

Office:  (301)469-4700 - ask for Adam

Licensed in MD & DC

Long & Foster Real Estate, Inc.

Information deemed to be accurate but not guaranteed

If you are thinking of relocating, your first move should be scheduling an appointment with me,

Enforcing lease terms and payment of rent

Many real estate investors/landlords rely on rental income to cover most if not all of their monthly mortgage payments and association fees. If they cannot command enough rent to cover these monthly expenses,they of course have to come out of the owner's(s') pocket(s).

Two issues I have been recently discussing with clients are the benefits of "oral leases" verses written leases and protecting yourself when your tenant(s)checks bounce.

I see very few upsides to oral leases. Everything is he said/she said,from what the tenant's rent is to how long the tenant's lease is. The benefit to a landlord might be that he/she can successfully kick a tenant out in a swifter manner than a written lease might say. But if a tenant wants to leave early,then he/she could probably leave quickly without recourse. Any arguments are he said she said.

Some landlords have told me that they do oral leases because their tenants tend to be month to month so the tenants will leave soon any way. They also argue that it takes too long/is too much of a hassle to do the paper work. I also hear,well the tenant is a friend/friend of a friend. Well,month to month tenants could end up renting longer than he/she/you anticipated. To beat the dead horse again an oral lease has no terms. Treat your investment like business and have things in writing whether you know your tenants or not. Don't let people take advantage of your kindness and being lax because of relationships.

Let's talk about rent. Most written leases drafted have a clause saying that if the rent check is late or if the rent check bounces,that the tenant owes X + the rent check. That is pretty basic and if your lease doesn't have that,make an addendum to your lease immediately. What many leases don't address are other potential consequences of rent check bouncing and/or being late. One bounced/late check can have several consequences. The landlord will pay a bounced check fee if the rent check doesn't clear...ok,that is covered by the lease clause on bounced checks.

What many leases don't address is if a tenant's bounced check/late check causes you to be late on paying your monthly expenses,such as mortgage (if there is one),HOA/condo fee (if there is one)and utility bills (if your tenant doesn't pay these),or if the bounced check causes any or all of these checks that you wrote to subsequentally bounce and you pay the fee for each of those bounced checks and the late fees charged by each company. You might want to talk with a real estate lawyer and/or property management company about adding such a clause to your leases.

So one remedy to avoid bounced checks is to require your tenant(s) to pay rent with a cashier's check/money order. I have never heard of a cashier's check/money order bouncing. Some people like to see their rent checks/touch the money. Ok. The downside is you still need to make a trip to the bank to deposit the check no matter how light or busy your schedule is. A negative about receiving rent checks in the mail...if you are out of town and your rent check comes in,you won't be able to deposit it until you get back to town and if your cash flow for making other monthly payments relies on the rent check,then you may fall behind on the other payments and that is nobody's fault but your own.

Another thing to consider is seting up a direct deposit/paypal for your tenants to pay your rent. Your tenant's(s')bank probably won't let him/her pay bills if there aren't sufficient funds in his/her account. This is certainly a good and efficient method of avoiding bounced checks,but you should still consider setting up a clause if their rent checking being late causes you to be late on other monthly expenses related to your property. The other benefit of having tenants make such a payment is that there is no argument on a late rent check that the mailman must have been slow on delivering my check to you because I mailed it out several days ago. You have online documentation of when the tenant(s) paid their rent. You just have to make sure your online account information is secure and you have to be careful about online identity theft and/or online hackers. But having online payments does save you time on going to the bank,depositing the check(s)if you are busy and/or out of town when the check arrives.

So,I suggest to all the landlords out there to always and forever use written leases,add terms to protect you in cases where a rent check is late or bounces where the terms go beyond one bounced check fee and determine the best/most efficient method for you to ensure that rent checks clear.

Make it a great day!

Adam
adambashein@mris.com
301-943-4370

Adam Bashein
Licensed in MD & DC

Weichert Realtors
7821 Tuckerman Lane
Potomac,MD 20854
301-718-4100 ext. 132