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
How long does it take to close on a home? This is a common question in the mortgage industry. Many home buyers are searching for answers on what they can expect during the home loan process. The answer to this question, however, depends on a few factors.
Consider where you are in the home buying process, what might cause delays, and how you can take action to get to closing on time.
Shopping and Making an Offer: How long does it take to close on a house?
If you are at the beginning and searching for the right place to get started, get pre approved. A pre-approval will save you time later down the line in the mortgage process. VRM Lending has a short pre-approval process that takes less than 48 hours in some cases, once your application and documentation is submitted. You can read more about the benefits of our loan process, by clicking here.
Once you are pre-approved, discovering the right home and getting an offer accepted can take time. In a competitive market, it could take a few weeks or months to find your home. Hopefully this article can help you build a strategy for submitting an attractive offer without having to go over budget.
The Purchase Contract: How long does it take to close on a house?
With an accepted offer, you have an official purchase agreement. Your contract should be sent to your loan officer as soon as possible to begin the mortgage application. Nevertheless, the purchase contract its self can cause delays in closing on time.
If your contract contains contingencies that involve extensive home repairs, this major delay could cost weeks or even months in some cases. The seller may also ask for extra time in the home or ask for a quick closing. Issues with the documentation of the property like the appraisal, inspection report, survey, or title have the potential to cause delays as well.
The Mortgage Process: How long does it take to close on a house?
A good rule is to estimate 30-35 days from application to closing. At VRM Lending we have the ability to close in less than a month, when there are no delays. Our aim is to help you meet your closing date and make the process as simple as possible.
The information in this article will give you some basics in understanding the question; How long does it take to close on a house? We would love to speak to you about your homeownership goals and help you close on time. Contact us today to start the conversation.
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.
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
7 Tips for Real Estate Investors in a Seller’s Market
Similar to other industries, the US housing market is influenced by supply and demand in real estate. Whether it is a buyer’s market or seller’s market depends on these real estate market trends.
A common question that real estate investors ask is whether they should purchase an investment property in a seller’s market or wait for a buyer’s market to come around. Before we answer this question, it’s important to understand what a seller’s market is.
The Definition of a Seller’s Market
A seller’s market in real estate occurs when the demand for investment properties for sale exceeds the housing inventory. This means that buyers that are looking to buy a real estate investment or a primary residence outnumber the homes for sale available in the market. Multiple offers on a single home is a common characteristic in a seller’s market, which ultimately leads to bidding wars.
On the other hand, a buyer’s market occurs when the properties available for sale exceed the number of people that are looking to buy. With such low demand, real estate investors and buyers can end up negotiating for property prices below the market value.
How Do You Know If It’s a Seller’s Market
A good way to classify and measure the real estate market is to consider the sales-to-new listings ratio. This ratio compares the number of sales in the market to the number of listings, revealing how much demand there is for property in any specific area. In a seller’s market, this ratio is normally 60% or more, which means six or more sales for every ten new listings.
Another way of determining whether it is a seller’s market is by looking at the number of months of inventory (MOI). The MOI is essentially the rate at which homes are selling in the market. So, how many months of inventory is a seller’s market? A seller’s market occurs when the MOI is four months or less.
Should I Buy Real Estate in a Seller’s Market?
So, you have decided that the real estate market of your choice is a seller’s market and now you’re curious “Is it a good idea for me to buy in a seller’s market?” Buying an investment property in a seller’s market can be a very intimidating thought, particularly for new real estate investors. Nevertheless, this should not stop any investor from understanding how to buy in a seller’s market. Even if the prices are high and there is a lot of competition in a seller’s market, you can still find a great real estate deal.
Also, some housing markets are not likely to slow down in the near future. Therefore, buying in a seller’s market would be smarter than hoping for a miracle. If you wait too long, the prices might be even higher than they currently are.
7 Tips for Buying a House in a Seller’s Market
Instead of sitting on the sidelines and letting real estate deals pass you by, figure out the best way for you to buy in a seller’s market. Here are our 7 tips for buying an investment property in a seller’s market:
1. Understand how to find the best investment properties for sale
Locating the right property in a seller’s market is not easy. However, platforms such as vrmproperties.com will make your property search faster and stress-free. Using the Property Finder, you can locate foreclosed and VA REO properties within minutes. Investment properties can be assessed by looking at listing price, cap rate, occupancy rate, rental income, and cash on cash return. You can find rental properties that meet your expectations in terms of return on investment, property type, and optimal rental strategy. With our real estate investment tool, you will be able to easily find the best real estate deals, even in a seller’s market. vrmproperties.com.
2. Get pre-approval for financing
When it comes to purchasing a rental property in a seller’s market, speed is imperative. In the most competitive real estate markets, you may not have more than a couple of days to submit your offer after seeing the property. To improve your chances of closing the deal, you need to get pre-approved for financing well in advance. Getting a pre-approval means the lender determines your ability to buy a property for a particular amount. Approval for a mortgage is determined by factors like your credit score, debt-to-income ratio, and income. Having proof of funds will show the seller that you are qualified and serious about investing in real estate. This will help you come out on top in a situation where there are multiple offers on the table for a property.
3. Choose an experienced real estate agent to work with
Although you don’t necessarily need a real estate agent to buy a home, working with one gives you an advantage when looking in a seller’s market for the most profitable investments. Work with a realtor that is familiar with your desired neighborhood and has a proven record of winning offers. Your real estate agent should also have the following skills:
- Honesty and integrity
- Negotiation skills
- Communication skills
- Knowledge of how to navigate a seller’s market
You can find the appropriate agent by searching online or asking for referrals from friends and family. Working with a good realtor agent will save you lots of time and stress.
4. Keep your offer simple
Many offers can come with contingencies that need to be taken care of before the real estate deal closes. This could include things like the home inspection, appraisal, title search, and mortgage contingency. When considering offers, sellers view contingencies as potential opportunities for the deal to fall through. As a result, they are more likely to go for an offer that has a lower risk of potential hang-ups. In a seller’s market, buyers should make their offer more competitive by reducing or removing contingencies altogether. Nevertheless, consider the level of risk you are prepared to take on when putting together your offer. For instance, eliminating an inspection contingency means that you are ready to buy the property regardless of the state it is currently in.
5. Make an offer they can’t refuse
In addition to eliminating or reducing contingencies, buyers can make their offer more attractive in the following ways:
- Be flexible on the closing date – Being considerate of the seller’s schedule will make you stand out from other potential buyers
- Put down a larger down payment – This will show the seller that you are serious about the deal
- Agree to the seller’s terms – This makes the transaction more hassle-free for the seller. For example, if they have a temporary structure in the back yard they would rather leave behind, allow them to. You can always have it removed yourself later.
6. Offer a solid sales price
In a competitive real estate market, money talks. Therefore, you need to know how much to offer in a seller’s market. Sellers are likely to be more attracted to a high offer price or a cash offer. Since you are competing with numerous buyers, be sure to put your best foot forward. The first thing you need to do is consider as a buyer is the asking price. If the house you’re looking to purchase meets your requirements and is within your budget, skip the negotiation. You could even offer a little more than the asking price to get the seller’s attention. However, make sure your offer isn’t more than the amount indicated in your pre-approval letter.
7. Write a compelling offer letter to the seller
When there is more than one offer on the table, a personal letter to the seller can set you apart from everyone else looking to buy the property. In a few words, explain why you love the house and compliment the seller(s) on how they have maintained it. Tell them what you plan to do to take care of it. Connecting emotionally with the owner through an offer letter will improve the chances of your offer being chosen.
The Bottom Line
Whether you buy an investment property in a buyer’s market or seller’s market, you can still find a good deal. Properties don’t remain on the market for too long in a seller’s market. This is why it’s important to move as fast as possible. With the proper amount of preparation and due diligence, you can boost your chances of acquiring the most profitable investment property on the market.
Use VRM Lending LLC’s Property Finder to find lucrative investment properties that meet your criteria in a matter of minutes, even in a seller’s market!
Investors in Multifamily Properties Are Investing More in Secondary and Tertiary Markets
Expanding economies and higher yields are driving multifamily investors to look into and invest in smaller cities.
As of December 2019, Multifamily investors are now more likely to spend their money on properties in secondary and tertiary markets as opposed to investing in primary markets.
After decades of expansion, investors are starting to run out of attractive places to invest their capital, especially when it comes to multifamily properties. In secondary and tertiary markets, the yields are usually only slightly better than in primary markets; however, what makes these markets more attractive is the local economies are strong enough to keep bringing more investors.
The majority (more than half) of the apartment properties bought in 2019 were located in secondary and tertiary markets, according to DLP Capital Partners data. That’s up from 43 percent a decade ago.
Consistent demand for apartments has helped make investors looking into multifamily properties feel secure enough to spend the majority of their money on properties in smaller cities and towns.
Although the apartment vacancy rate in prime markets has shrunk to just 3.4 percent in 2019 (which is down from 5.4% back in 2010), the change has been even significant in secondary markets, where the vacancy rate fell to 3.8 percent from 6.6 percent over that same time period. The most pronounced change has been in tertiary markets, where the vacancy rate has fallen to 4.8 percent from 7.2 percent, according to DLP Capital Partners.
Many smaller markets have become more effective in attracting millenials. These secondary markets often have ample job opportunities and the cost of housing is relatively affordable compared to more prime markets.
When investors buy properties in prime markets the average cap rate is around 4.1%, but in tertiary markets, the cap rates average 7.0 percent, which is higher than the 5.3 percent average achieved in secondary markets.
However, there is still some risk when investing in smaller markets. New construction projects can have a negative effect. Also, smaller markets are easier to enter so there is likely more room for competition from a variety of players.
10 Steps to Buying a Home Owned by the Bank
Many potential homebuyers and investors overlook properties owned by the bank, but for buyers who take the time to understand the REO process, these homes can be a great investment opportunity.
Some homebuyers are intimidated by bank-owned and foreclosed homes because they usually require more renovations than other options on the market. Nevertheless, some REO properties come at a major discount and, if buyers are okay with working through some of the nuances of the post-foreclosure market, they can set themselves up for a great deal.
What is a Real Estate Owned (REO) Property?
REO, stands for “Real Estate Owned,” and is a term used for foreclosed properties where ownership has transferred to the bank or lender.
In order to become an REO property, the following general steps must occur:
- Loan Default – The homeowner/borrower defaults on (fails to make) their required mortgage payments specified in the mortgage terms.
- Foreclosure – The lender begins legal proceedings against the borrower to foreclose on the property.
- Auction – The property is offered to the public through a foreclosure auction and typically sold to the highest bidder. If the property sells to a third party at the auction, the bank or lender recovers some of the cost of the outstanding loan balance, interest and fees from the sale of the property.
- REO Status – If the home fails to sell at auction to a third party, possession typically moves to the lender and it becomes a Real Estate Owned (REO) property. The lender prepares to sell it themselves, which may involve evicting occupants and removing outstanding liens attached to the property.
REO properties are attractive to homebuyers or real estate investors for many reasons. In several cases, lenders are motivated sellers who do not want to sit on their REO properties, which means these particular homes may be priced at a discount. However, other circumstances, like the home being sold “as is”, might change the final price, so it’s crucial to work through the process prepared to make sure you account for every variable.
10 First Steps to Buying REO Properties
The method for buying an REO home is similar to the general home buying process but there are a few key exceptions to keep in mind. Whether you’re buying the home to live in or as an investment, these 10 steps should help set you up for success with bank-owned properties.
Step 1: Browse Available REO Properties
Before you get too far into the process, take a look at the properties available in your target market or price range. There are several ways for prospective homebuyers to browse available REO properties:
- Bank and lender listings:Lender-specific listings, such as VRM VA listings, show all available bank-owned properties from a certain lender.
- Multiple Listing Service: Lenders and Realtors® often use a multiple listing service to list REO properties, making it easy to find options from multiple lenders in one place.
- Real estate agent: A real estate agent will be able to find REO offerings from multiple lenders in your desired area.
- Online services: Other online services, such as Zillow, offer tools to look up foreclosures by certain characteristics or in certain areas. Some of these tools are free to use, while others may charge a fee.
Step 2: Find a Lender and Discuss REO Financing
Once you’ve found a property you are interested in, talk to a lender about your financing options. This is particularly important because of the timing of the REO home buying process; lenders are motivated to sell and want to get this home off of their books, so the more prepared you are with financing, the better.
One thing that can speed up the REO home buying process is getting pre-qualified by the lender that owns the home. With this pre-qualification, the lender that owns the REO property will know that you are financially qualified to purchase the property, making them more likely to accept your offer.
Step 3: Find a Real Estate Buyer’s Agent Who Knows REO Homes
A buyer’s agent is a great partner to have while you navigate the home buying process. Your buyer’s agent helps make sure you are finding the best properties at the best possible prices, and they will use their experience to guide you through every stage of the process. Your agent should also be able to tell you if you need to hire anyone else, such as an attorney or an inspection service, depending on your state and situation.
If you are specifically interested in REO properties, try to find a buyer’s agent who works with REO properties frequently. This way, your real estate agent knows the ins and outs of negotiating with a lender, how to calculate the cost of necessary repairs, how to work within the lender’s timeline and how to prepare you for what comes next.
Step 4: Refine Your List of Lender-Owned Properties
Once you are working with a buyer’s agent, you can start narrowing down your list of REO properties. Some major characteristics that should be taken into account, include:
- Listing price
- Significant repairs needed (and the overall impact on price)
- Location (and proximity to a school, workplace, or other desired area)
- Number of bedrooms and bathrooms
- Quality of neighborhood and surrounding areas
- Community resources in the area, such as parks, gyms, places of worship, etc.
- Lender-specific contingencies or requirements
Once you have taken your “must have” features into account, if you are left with multiple properties, refine your list based on “nice to have” features like a large yard, a finished basement or an in-ground pool. Share your favorite homes with your agent, who can set up tours for properties at the top of your list.
Step 5: Get an Appraisal on Your Ideal Property
Some REO homes go for a great price, but buying a bank-owned home is not an automatic bargain. An REO property may be discounted based on an undesirable location or severe damage, or it can be overpriced based on comparable sales in the area or the lender’s desire to recoup the money spent. Either way, it’s a good idea to consider getting an appraisal so you know how the true value compares to the asking price.
An appraisal will help you get an objective estimated value, which you can compare to the bank’s asking price to see if the price is fair. During the appraisal, a licensed appraiser will take inventory of major systems (i.e. HVAC, plumbing) and the structural integrity of the home, and they will check the prices of comparable homes in the area.
Note: An appraisal, which tries to estimate true home value, is different from a home inspection, which tries to take inventory of current and potential issues. An appraisal will help you decide whether or not the asking price is fair; an inspection will help you understand the repairs and renovations needed, which is critical for a bank-owned home.
Step 6: Make an Offer
Once you’ve found a property that is right for you, it’s time to make an offer.
Your agent will help you decide what kind of offer is likely to be accepted, put together the offer and submit it to the lender. Depending on the lender, you may need to submit special contract forms or paperwork. It is also common to attach an earnest money deposit check to your offer. This check (commonly 1-2% of the purchase price) is usually held in an escrow account until the purchase is finalized.
Make sure to consider the inspection process as you are making your offer. You may choose to make the offer contingent on inspection so you are protected if the inspection uncovers significant (and potentially dangerous) issues. If necessary repairs are well-documented, you can use this documentation to make your case for a low offer. Talk to your agent to understand your options when it comes to inspection contingencies.
Step 7: Have the Property Inspected
An inspection should be part of buying any home, but it is crucial for bank-owned homes. Real estate owned properties are typically sold “as is,” meaning the homebuyer is on the hook for any repairs — including major structural issues — that need to be fixed. An REO home may have been vacant for weeks or months, it may be neglected due to the homeowner’s financial trouble, or the previous owners may have removed items or damaged the property before vacating. Additionally, it’s possible that the property has gone through non-permitted renovations.
With that in mind, you need to be 100% sure you know what needs to be fixed before finalizing the loan. Having a home inspection done is the best way to take a thorough inventory of what repairs need to be made. The cost of these repairs should be added to the asking price so you have a better idea of what the home will cost you (and whether it is still a good deal after repair costs are factored in).
In some cases, the lender may conduct an inspection when the home becomes bank-owned. If so, make sure you get a copy of the inspection report and review it thoroughly to decide if it is comprehensive enough to help make your decision.
Step 8: Negotiate Details
For better or worse, negotiating with a lender for a bank-owned home is different from negotiating with a homeowner.
On one hand, dealing with a bank instead of a homeowner means you don’t have to worry about emotional attachments to the home influencing the decision. You are also usually dealing with a very motivated lender who wants to get rid of this property (especially if it’s been on the market more than 30 days).
On the other hand, banks typically take longer to respond to an offer (or a question) than a homeowner because the offer must be reviewed by several individuals or companies. When the lender does respond, they will expect you to respond quickly to keep the process moving.
Working with a lender also means jumping through more corporate hoops. Banks are also more likely to present a counter offer because they must demonstrate they tried to get the best possible price for the property. In addition, the lender may ask you to sign a purchase addendum (which you should thoroughly review with your real estate agent or lawyer) and your final offer may be contingent on corporate approval.
Step 9: Finalize Your Loan
Now that you have submitted an offer, several things will be going on at once: the home inspection, negotiations with the bank, and the finalizing of your loan. During this time, you will be filling out paperwork and sharing information with your lender to ensure your loan is the right fit for the offer you have submitted.
Now is also the time to verify the status of the title. The bank typically clears the title before selling a bank-owned home but you can never assume this is the case. Contact the lender to see if the title has been cleared. If not, the lender may have a title company standing by to perform these services. If you are expected to do so yourself, hire a title company to run a full, insured title search before closing the deal.
Step 10: Closing
Once all of the paperwork is in place, you’ve wired in your down payment and your loan funds are in place, it’s time to close.
Closing on an REO property is similar to any other closing, with a few notable exceptions. If you are unable to close by a predetermined closing date, the lender may charge a penalty for each day beyond the deadline. (You can try to avoid these delays by getting pre-qualified for a loan and getting assurance that your financing will come through by a given date.)
At the closing, you and the lender representative will sign the documents necessary to transfer the house into your name and to finish your mortgage. After you’ve signed everything and the money goes to the right place, you’ll get the keys and a new title: homeowner.
Is an REO Home the Right Fit For You?
A bank-owned home can be a great opportunity for homebuyers or investors to find a good deal — but only if you’re willing to be patient and thorough. Dealing with a lender, rather than a usual homeowner, may mean slower response times and a more difficult negotiation, but it can lead to a potentially lower price from a motivated seller that has already handled outstanding taxes.
Browse VRM VA listings to see available REO properties from VRM, or call VRM to discuss your options today.