With the VA Vendee™ Loan program, borrowers are given the option to take out on a loan for a house they love without the headache.
VRM Lending’s Go-To Home Loan Tips
When it comes to purchasing a home, there’s a vital step that needs to be touched on: taking out the home loan itself. The loan process can be a long (and stressful) one if you choose the wrong servicer, which is why it’s so important to find first-hand knowledge that makes taking out your home loan as painless of a process as possible.
What Does Covid-19 Mean for the Housing Industry?
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When It Comes to Real Estate Investments… What’s a good deal?
Real estate investments are a good way to build wealth and have financial freedom. A key part of successful real estate investing is finding the best real estate deals on the market. When purchasing an investment property, clever investors ensure that they are getting a great deal. However, getting a good real estate deal is usually not easy, particularly for first-time investors. So, how do you know if a real estate deal is a good one? In this article, we discuss what makes a good deal in real estate. Read on to find out.
What Is a Great Real Estate Deal? Things to Look For
1. Low listing price
An investment property’s listing price is critical when looking for a good real estate deal, depending on your financial capacity. As a real estate investor, you should never purchase what you can’t afford. An expensive real estate investment property will usually have high operating costs too. Purchasing an investment property below market value could provide you with a higher return on investment.
To know whether the purchase price of an investment property for sale is reasonable, you need to compare it with its fair market value. If the listing price is lower than the fair market value of the property, it would probably be a good real estate investment deal. Consider doing a real estate appraisal to estimate the value of the rental property for sale.
2. A profitable location
Location is one of the most important factors when it comes to investing in real estate. A rental property’s location will determine the rental income and occupancy rate. When looking for a good real estate venture, you first have to research the real estate market at both city and neighborhood levels. A great location can make up for some of the limitations of a rental property. However, there is little you can do if you invest in a poor location.
Here are some general features of a good investment location:
- Job opportunities
- Low crime rates
- High population growth
- Nearby amenities like hospitals, restaurants, etc.
- No zoning issues
- Public transportation
- Future developments
- Booming tourism industry
- Safe from natural disasters like earthquakes and floods
3. High rental income
The main purpose of purchasing an investment property is to generate income. As a real estate investor, it’s best to find an investment property with a high monthly rental income. If your monthly rental income is high enough to cover your monthly rental costs, you will be able to create positive cash flow. And as you know, cash flow is a top priority! Before making an offer on a property, research the average rental rates of comparable rental properties in the area, and estimate its rental income.
A good way to find a great real estate deal based on the rental income is to follow the 1% rule in real estate. The 1% percent rule measures the ability of the rental property to generate rental property cash flow. This rule of thumb states that the monthly rent should be equal to or higher than 1% of the total purchase price of a real estate investment property. This rule is used to determine whether or not the monthly rent from a rental property will be enough to cover its monthly mortgage payments. Worst-case scenario, you should break even on the rental property.
4. Low rental expenses
Rental expenses are also essential in finding a good real estate deal since they will also affect rental property cash flow. Before purchasing an investment property, you should find out all costs associated with purchasing and operating it. Expenses may be in the form of repair and maintenance costs, insurance, property taxes, HOA fees, and mortgage payment.
If rental expenses are too high, they will eat into your rental income and likely lead to negative cash flow. If you are wondering how to determine a good rental property, rental expenses are something that you should unquestionably take into consideration.
5. Low repair cost
While purchasing below market value rental properties has its benefits, a beginner real estate investor should be cautious about buying a fixer-upper. If a rental property needs a lot of repair work before it can be rented out, it can wash out any profit you may have made from rental income.
Therefore, when looking for a good real estate deal, you should do a home inspection to know the repairs required and how much they will cost. A rental property that is in excellent condition can be rented out right after purchasing. You don’t have to wait long before you start earning rental income.
Nevertheless, you can also buy an income property that needs repairs. Just make sure you account for those costs when determining your return on investment. This will help you understand if purchasing the property is a good deal or a bad real estate deal.
6. Real estate appreciation
Aside from the profitability of an investment property now, an investor should also consider its potential to grow in value over time. Real estate appreciation is normally realized when one is selling a property after an increase in the selling price. To get a good estimate of whether an investment property will appreciate, check local real estate market trends.
How to Find Good Real Estate Deals
Now that you have the answer to the question “what is a good real estate deal”, the next thing is to know how to find real estate deals. With many people getting into real estate investing, it’s becoming even more challenging to find a good real estate deal. As a real estate investor, what can make the difference is using the right tools to do your due diligence in real estate. If you are thinking of how to analyze real estate deals in the best way, consider working with VRM Lending LLC.
The best way for investors to find good real estate deals in the United States housing market is by using the Listing Portal (vrmproperties.com). With this tool, you can search for the best performing investment properties in your market of choice that meets your search criteria. The portal allows you to set your search criteria using filters like budget, the number of bedrooms, location, and property type.
The Bottom Line
Successful real estate investing starts with understanding how to manage a good rental property. The above features provide the solution to the question “what is a good real estate deal?” So, next time you are looking for a real estate investment property to buy, be sure to consider the above features.
5 Common Mistakes Short Sale Buyers Make
5 Common Mistakes Short-Sale Buyers Make
- Skipping the home inspection.
- Ignoring property problems.
- Ignoring legal and insurance information.
- Leaving too little time for closing.
- Falling hard for a bad home.
Know what you’re getting into before you buy a short sale or foreclosure property, and be watchful of these five common mistakes.
1. Skipping the home inspection process
Tag along when your home inspector shows up at the property. You might be surprised what you can learn.
- Ask for repair estimates when an inspector notes a problem, or do some research on your own later. Many homeowners underestimate how much renovations can cost.
- You may want to use specialized inspectors to look for expensive problems such as mold, structural damage, and termites, especially if it’s a common problem in your area.
- Be sure to hire an inspector that’s highly rated. Get recommendations from friends, or weigh online user reviews carefully. Like with all industries, there are excellent, marginal, and bad property inspectors.
- You are granted a certain window of time to inspect the home, known as the inspection period. Reducing an inspection period may give you leverage in a regular real estate situation when you’re placing a bid, but don’t skip or skimp on the inspection period when you’re looking to buy a foreclosed or short-sale home. Utilize this time to make an informed decision.
2. Ignoring property problems
Homeowners who face foreclosure can become angry and take their anger out on the house they’re about to lose.
Vacated houses in foreclosure may sit empty for months or years before they’re bought. As a result, problems occur, such as mold, leaks, termites, thieves, filth, and squatters.
There are a couple of little-known loan programs, the FHA 203(k) and Fannie Mae HomeStyle, which offer solutions for homebuyers who want to renovate.
Learn about the Vendee™ Program and apply today.
3. Ignoring legal and insurance information
A standard disclosure statement will usually reveal whether a house is in a flood plain or had any unpermitted renovation. But REO properties often sell as is, without disclosure, so buyers need to do extra research on the home.
Ensure that all renovations have been permitted and approved. If not, and there is an issue, the city can cite you.
4. Not leaving enough time for closing
Short sale and foreclosure home buyers need to be cognizant that the sale won’t necessarily close as soon as it would for a regular home purchase. The short seller’s lender must approve the foreclosure terms or short-sale price, which will be less than what the seller owes. Banks may also be slow to respond.
It’s not always possible or even advisable to get a home loan from the bank that has a mortgage on the short sale you’re buying. In fact, it’s best if you show the lender a preapproval letter that you received from your own lender inside the last 30 days.
5. Falling hard for a bad home
Never just assume you’re getting a great deal.
Ask yourself these common-sense questions:
- If you were to buy this property, could you afford to rent it out for as much as, or less than, your mortgage payment? Use the VRM Lending payment calculator to estimate your mortgage payment.
- If the home’s value falls 20 percent, will you still feel satisfied with your purchase?
- How much money will you have to spend on the property to make it livable?
As long as you completely understand how foreclosures and short sales work, nothing should stop you from getting a great deal and finding the house of your dreams. Just be sure to fully consider the home inspector’s advice and report before making your final purchasing decision.
What the Fed’s Emergency Rate Cut REALLY Means for Mortgage Rates and Borrowers
What the Fed’s Emergency Rate Cut REALLY Means for Mortgage Rates and Borrowers
The world has been launched into an unprecedented time of global uneasiness, scrambling for new information, and historic decisions with the spread of the new coronavirus. In the midst of all this craziness, it is not only the spread of the virus we should be worried about, but also the spread of misinformation. One overlooked way misinformation is creeping in, is when it comes to the ways the virus is affecting the economy, especially the housing market.
On March 15th, The U.S. Federal Reserve implemented further emergency measures to help limit the economic harm from the coronavirus. As part of the newest measures, they announced another emergency benchmark interest rate cut. This is the second emergency rate cut in two weeks and brings the federal funds rate to between 0% and 0.25%. As during the ’07-’09 financial crisis, the Fed is working to combat the growing number of shutdowns and cancellations by pumping the financial system with cash to ensure markets keep functioning and banks maintain sufficient funds to keep needed credit flowing to businesses and consumers. But what do these cuts ACTUALLY mean for the consumer and for the industry as a whole? It’s a complicated issue and is changing every day, but we will do our best to break it down.
#1 Mortgage rates were already near record lows. The most recent fed cuts may indirectly push mortgage rates lower, but will not necessarily directly impact the mortgage industry as a whole.
The most common misconception is that a zero percent benchmark interest rate means mortgage rates will drop to zero percent. However, this next part is very important: do not expect those kind of mortgage rates anytime soon. The Federal rates that were cut apply to ‘short-term’ interest rates. This rate cut affects home equity lines of credit, credit card rates, and any other similar short term rate (typically a loan that is less than 10 years).
Because mortgages are long-term loans, their interest rates tend to follow long-term bond yields rather than short-term interest rates like the federal reserve benchmark rate. There are multiple other factors that also come into play as it relates to mortgage rates, such as the strength of the economy and inflation. The bonds that dictate mortgage rates trade thousands of times a day. Mortgage rates themselves can change many times throughout the day. The Fed, however, only meets to decide rate changes eight times a year, with the exception of emergencies like this. This is not to say that the virus has not had a significant impact on mortgage rates, however. It has caused already low rates to drop even lower and may lead to record low averages. It just doesn’t mean rates are going to drop to zero.
We can see this in the trends of the mortgage industry during the time following the 2008 recession. The fed held a benchmark rate of zero until 2015 to bolster the economy. But even through all that, the average mortgage rate was 4.2% during that period. According to Realtor.com’s Chief Economist, Danielle Hale, “Because mortgage bonds are considered riskier than government bonds, they tend to be slightly higher than 10-year rates. Even if the market spread were to return to normal, given where 10-year rates have been in the last week or so, we’re looking at mortgage rates around 2.5%.”
“Even the government can’t borrow at zero percent,” said Greg McBride, chief financial analyst at Bankrate. “The most creditworthy consumer carries a higher risk than the US Treasury, so you are going to pay at least a couple percentage points more than that.”
#2 All actions taken by the Fed are to not only keep banks afloat, but to indirectly maintain consumer spending.
The Fed’s decision is part of their emergency action plan to protect the economy from the impact of coronavirus. This is following the fastest 20% plunge in U.S stock market history. That decline impacts not only the market but the way the average consumer spends money. U.S. consumer spending drives the world’s biggest economy. Reversely, consumer spending is influenced by the strength of the economy and market.
In addition to the rate cuts, the Fed announced the reimplementation of the crisis-era program of bond purchases known as “quantitative easing,” in which the central bank buys hundreds of billions of dollars in bonds to further decrease rates and keep markets flowing freely. These moves by the Fed make interest rates extremely low for banks to ensure they are able to keep loans available for businesses and consumers hardest hit by an economic downturn. As the Fed purchases more bonds as part of quantitative easing, some will be mortgage-backed securities as they aim to stabilize home loans.
Jerome H. Powell, Chair of the Fed, emphasized that their goal is to do all they can to help the nation “weather this difficult period” and “foster a more vigorous return to normal once the disruptions from the coronavirus abate.” The low rates are expected to remain until the economy recovers from the coronavirus downturn.
#3 Should you rush to get a mortgage or refinance your existing mortgage?
Mortgage companies are flushed with mortgage applications as a result of the low interest rates. Experts say you shouldn’t be rushing to the banks. The lowest rates aren’t widely available right now because banks are marking up rates to give them a chance to work through the initial wave of demand. There are many factors to consider and of course nothing is set in stone, but the conditions are set for mortgage rates to stay low throughout the rest of 2020. McBride says “Once lenders ease the backlog of applications, rates should normalize and that will make for an opportune time to get in. “
It is also important to emphasize that there isn’t a general piece of advice that applies to everyone when it comes to mortgage lending. Every borrower is in a different scenario with different levels of risk tolerance, especially when the future impact is so widely unknown. The best advice we can give to current borrowers is to have open communication with your loan originator. Let them know what rate you want to lock in so they can keep an eye on rates and lock yours in when the time is right.
Bottom Line:
The Fed interest rate cut does not mean you can get a near zero percent mortgage rate. It may however lead to lower mortgage rates as the impacts are felt in the mortgage industry. Monetary policy changes like those enacted by the Federal Reserve are not quick-acting tools. It will be a while before we know the long-term impact of these changes.
*We are not financial advisors and any decisions should be made by each individual themselves, based on their own economic situation. *
Tips for First-Time Home Buyers
For first time homebuyers, the entire process of purchasing a house can seem intimidating. In order to make the process less confusing, we have assembled some tips concentrated on two main areas; searching for a property and the down payment. With these tips, first time home buyers will be armed with more complete information to make more informed decision.
How Long Does it Take to Close on Home
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Pre-Approval vs. Pre-Qualification
For first-time homebuyers, getting pre-qualified and getting pre-approved for a mortgage may seem like the same thing. Both terms relate to an amount a lender would be willing to loan you. Both take into consideration your financial background to determine how credit worty you are. Nevertheless, there are key distinctions between the two concepts that may affect your preparation to buy a home.
10 Tips to Increase Real Estate Investment Income
There are so many possibilities in how to make money as a real estate investor. You can increase income without raising the rent or having long-term tenants. The money-making possibilities are endless and exciting when it comes to investment properties.
TOP 10 TIPS TO INCREASE REAL ESTATE INVESTMENT INCOME WITHOUT UPPING THE RENT
1. Charge pet rent
In the United States, over 65% of households own a pet. While not allowing pets in your rentals is understandable, you may be cutting out a large portion of potential renters. By allowing pets and catering to pets and pet owners, you are essentially opening a floodgate of opportunities. You can charge a monthly pet fee or a pet rent. Renters will happily pay a little extra to allow for their pet. As an added bonus, you can have a dog park for your tenants.
2. Provide furnished rentals
Furnished rentals can bring a higher rental price per month than unfurnished rentals. Corporate, cross-county, and short term renters are more likely to rent a furnished apartment and pay a higher monthly price for it. Another bonus is that during tenant vacancies the unit can be rented on Airbnb. The rent will increase, on average, more than 25% for a furnished unit.
3. Use Airbnb during vacancies
Do you have a unit that is vacant? Don’t worry. Rent it out by the day instead. You can have flexibility with showings, and make more per night than with a long-term renter. Obviously, you won’t be able to show the property or unit when you have guests, but you can schedule around the guest calendar. A unit with rent at $1,600 per month might bring in $180/night as a vacation rental. It would only take about nine nights to make up the lost rent.
4. Rent out the garage
If you own a garage in an area where parking is limited, take advantge of it by charging a fee for garage space. The amount you can charge per month depends largely on the area. In metropolitan areas, it isn’t unheard of to charge over $100 a month for garage space. Uncovered parking spots can be rented out for an extra $50-$100 a month.
5. Charge for shed storage
Storage is desired by most renters. So why let your shed go to waste? Even small storage sheds can bring in an additional $35-$50 a month, while larger sheds can bring in as much as $200 a month. Take advantage of the extra income, and move that lawnmower somewhere else.
6. Add a vending machine
Adding a vending machine to the common area or laundry area of your property could add significant income. For instance, adding an automated vending machine to one apartment building can generate more than $2,000 a week in revenue. People are willing to pay for convenience. A vending machine with food, Chapstick, toiletries, and detergens saves people time, and if they run out of something they need right away, the vending machine is a convenient option.
New vending machines can be pricey, but smaller properties can purchase one used for a few hundred dollars and start generating a new income stream instantly.
7. Lease a cell phone tower
Are you interested in earning a passive six figures? It’s very possible to do so when leasing out space to a cell phone tower. Leasing out space to a cell tower averages $1,300 per month in rent. In San Francisco, California, you can earn as much as $2,500 a month for leasing out space for a cell tower.
8. Offer upgrades
Make life a little more manageable for your residents by offering upgrades. Consider offering services similar to hotels like dry cleaning, laundry, maid service, or lawn care. People are willing to pay extra for things that make their lives easier. If people were going to be outsourcing those services anyway, it’s a huge bonus to have those available through their property management company or landlord.
9. Lease a billboard
If you own a larger building, leasing a billboard can be very profitable. Apartment buildings can charge $3,000 a month or more for billboard space on the side of the building. Imagine over $3,000 extra income a month for no extra work.
10. Add solar panels
By attaching solar panels to your rental property, you can essentially become the utility company. Adding solar panels can generate income in three distinct ways: 1) increase rent to incorporate energy, 2) sell excess energy to utility companies, or 3) charge an electricity bill to renters for using the solar energy.
In conclusion
Rental income is not the only way to generate money with your investment property. There are several opportunities for adding passive (or not so passive) income to your monthly revenue stream. Why not take your rental business to the next level by adding a few new streams of income?
Interested in purchasing an investment property? Search thousands of available properties here at vrmproperties.com