Tag Archives: rental

One Solution for Selling a Tenant-Occupied Highlands Property

8-11-15-tenantIn a perfect world, before you set about selling your Highlands property you would have emptied it of all evidence of human habitation, called in the best staging pros on the planet, and set off to vacation in a Caribbean island spa-hotel so you could sift through the dozens of offers in comfort.

“Let’s see,” you would soon be musing to no one in particular, sipping your first mimosa of the afternoon as you thumbed through the sheaf of faxes from your Highlands agent; “should I accept this all-cash offer for 150% of comparable value—or hold out for this one for 200% of comp that came in with only 50% earnest money…?”

It is here where we might best depart from this reverie to point out that in this less than perfect world—the one that we actually live in—the more probable situation is one where your Highlands property is fully occupied, either by your own family or a tenant.

How do you make the most of that mimosaless situation? If you and your family are the occupants, your Highlands property fits the most common profile, so the standard to-do’s apply: you will want to clear the clutter and store any non-essential furnishings; de-personalize as much as practical; deep clean; and work with your agent to make showings as routine as possible.

But what if you have a tenant? It’s going to be a true balancing act that affects four parties: seller, listing agent, tenant, and buyer. Of these, the one with the least to gain is the tenant, who is paying for the privilege of tenancy while being asked to keep the property clean and showable on the others’ schedules.

Let’s face it: this could be a minefield. Almost any tenant’s interests lie elsewhere. In fact, they may very well like your Highlands property so much they would just as soon discourage prospective buyers—and there are subtle (and less-subtle) ways to go about that!

One solution that is sometimes offered involves this creative procedure:

Compensate the tenant for their cooperation by offering a significant bounty (say, 20% of the monthly rent) to be placed in an escrow account. It’s a meaningful award for the tenant’s full cooperation—one that will grow with the payment of each month’s rent. It will be turned over upon the completion of the sale. This ingenious plan has the effect of reversing the natural order of things. Since the amount in escrow grows with each passing month, rather than becoming increasingly annoyed with each ensuing showing, the tenant is increasingly incentivized to make the property ever more appealing. There’s cash on the line! In fact, as the escrow account builds, who’s to say the tenant won’t start doing some arithmetic…and start considering becoming the buyer himself…???

In any case, the best results for selling your Highlands property happen when there is rock-solid communication between the listing agent and owner—and when a tenant is involved, that’s another party who should be included as well. It’s the best way to insure that everyone can go about their business with a minimum of disruption and inconvenience.

If you are sizing up the coming fall market, whether your Highlands property is occupied by a tenant or your own tribe, I hope you will give me a call to discuss how I can get the results you’re after!

Highlands Rental Home Appeal Might Have Three Explanations

7-30-rentalFor an increasing number of Highlands residents, what used to be a slam dunk assumption—that owning your home is preferable to opting for a Highlands rental home—is no longer so self-evident. The powerful reasons for owning are still there: ownership still means that you are building equity over time; it still means you are free from a landlord’s control; and it still means you have the psychological benefits of being the possessor of the place where you live, and the standing in the community that accrues to the permanence that implies.

Those are powerful inducements to forego a rental home in favor of ownership, for sure—yet according to the numbers, the number of Americans who own their homes has been declining since the advent of the housing crisis (at the moment, fewer than 2/3 of households now own their homes).

You might assume that the reasons for the increase in popularity for rental homes are simply financial, and to some extent, that’s the case. The economy, while improving, is doing so painfully slowly, wages are not rising as has been the norm in prior recoveries, and mortgage loans, while still at attractively low interest rates, can still be difficult for some Highlands borrowers to obtain.

Yet those dollars-and-cents arguments don’t paint the whole picture. Some of the reason why rental homes in Highlands are being chosen are due to changes in American lifestyles. Forbes contributor Beth Braverman offered some insights in last week’s article entitled “When Renting is More Expensive, But It’s Still the Right Move.”

Her first reason is not a new one: rental homes offer more flexibility. What is new is how Americans—particularly the group we call Millennials—increasingly value that freedom. Some of that has to do with the difficult labor market—and the premium breadwinners are placing on being able to ‘go where the work is.’

Next reason had to do with the relative illiquidity of the asset value a home represents. This looks like the first cousin to Reason #1: for someone who needs to move for professional reasons, being able to just pick up and move from a Highlands rental home can de-complicate the situation. For those who are reasonably sure they will be in town for long enough to offset the costs of acquiring and selling a home, the financial benefits may outweigh this one.

Last reason given was, “You’re not financially ready”—which is certainly the most longstanding one of all. Even if a current rental home occupant qualifies for one of the new programs (some can make the down payment as minute as 3%), it’s still possible that the ‘all in’ costs will strain resources. You have to agree with Braverman that in those circumstances, it’s probably best to build up savings, even if it means remaining in a rental home for an extra year or two.

All in all, any increase in the popularity of Highlands rental homes is good news for area investors who are (or soon will be) landlords. It’s also a great reason to give me a call this summer!

Sapphire Renters Face Trend toward Continuing Rent Hikes

6-30-rent“WHY YOUR RENT CHECK JUST KEEPS GOING UP” was the headline in CNN Money’s real estate special report last month, which could have explained to Sapphire renters why it is that U.S. rents keep rising faster than home values. After all, that doesn’t seem to make sense!

The list of reasons was long, and taken all together, fairly convincing:

  • Millennials are renting longer
  • Housing inventory is tight and getting tighter
  • The housing crash scared those who would otherwise have become homeowners
  • Baby Boomers are downsizing
  • Rental construction slowed when confidence sank after the housing crisis

It all comes down to demand and supply—less of the latter, more of the former. Although the author may have exaggerated a detail or two (“…there just aren’t enough ‘For Rent’ signs to keep up with the demand”), more than one Sapphire renter will probably agree with the gist of the piece: rents have been on the rise long enough that it makes you want to think about the alternative: buying.

Some of the more extreme cases are urban: in San Francisco and Denver, for instance, renters have seen yearly increases of 15% and 11.6%, respectively, according to Zillow. Sapphire renters can find themselves in something of a bind, though—since those higher rent bills make saving for a down payment more difficult. It’s just one reason. Per CNN, “There are a bunch of things keeping renters on the sidelines, meaning “the folks that would be normally making the switch to become homeowners are still taking up the rental units.”

The result: more units remain occupied, vacancies go down; rentable units remain scarce…so prices renters pay continue to go up.

Will this Catch-22 situation persist forever? Most likely not: the broad economic news is that this year’s steady job growth coupled with the pronounced turnaround in builder confidence is likely to loosen the supply stranglehold. Last Tuesday, there was also the kind of news that can prompt builders to really get going: government data showed purchases of new U.S. homes surged (particularly in the Northeast and West), with sales of new homes soaring 24% so far in 2015. That’s the best showing since 2007.

Of course, before supply outstrips demand, the situation puts landlords in an advantageous position. Sapphire investors who bought rentable properties during the downturn can now enjoy steady returns from their properties, or decide to sell in a robust market. If you are leaning in that direction, it’s the perfect time to give me a call!

Highlands Parents Consider Home Rental for College-Bound Kids

3-25-reentalFor many Highlands parents of high school seniors, these are hold-your-breath days—the time of year when college acceptance letters begin showing up in Highlands mailboxes. If all goes well, after settling on a school, next comes tackling the array of decisions that follow. Chief among them: where he or she will live. Many parents tend to take the common course, assuming that a college dorm is automatically the best answer—but a college’s room-and-board plan is actually only one of the possibilities. In fact, it may not be the best financial, social or developmental choice for parent or student. Renting a house can be an intriguing alternative. Here are three of the reasons why some Highlands parents decide a home rental makes more sense:

1. Cost

Sharing a home rental is often significantly less expensive than renting an apartment—or even a dorm room. Prices vary, but it’s more than possible to end up paying as much as $4,500 per semester for student housing. If your student lives on campus during the summer, fall and spring terms, that would create a $13,500 bill for the year’s housing (the equivalent of paying more than $1,000 in rent per month). Considering that most dorm rooms are tiny, that translates into a much higher cost per square foot than does a shared home rental.

Renting even a one-bedroom home near campus can give your child more space and quiet time to study without interference from fire alarm-pulling pranksters or noisy roommates. Every student is different, and having a place to escape the hustle and bustle of campus life can provide some kids with the extra focus they’ll need for success.

2. Safety

When students live in crowded dorms, many parents worry that they are more likely to catch colds or other communicable diseases. Being packed into a dorm with hundreds of people who may or may not behave responsibly is a dire way to view dorm life, but that is some parents’ view. When their child lives on his or her own or teams with a select group of roommates, some parents breathe easier.

3. Responsibility

With a home rental, any student will learn more about responsible adulthood than when campus authorities assume parental-like responsibility for day-to-day living. Students who are on their own may be wholly or partially enrolled in school cafeteria programs, or may learn to shop for and prepare their own meals. Household and maintenance chores will be theirs to handle, rather than being the province of college employees. In that way, a college home rental can serve almost as a youngster’s “starter home.” They will graduate from college with a rental history, self-sufficiency skills, and home stewardship experience that will prepare him or her to better care for their own home later in life.

Of course, it’s not universally the best answer to the student housing problem: every institution and child combination are different, and different youngsters respond to independence and responsibility in differing ways. But if you haven’t thought about the possibility, it could be worth looking into.

If I can help with a referral to a rental agency—or if you’d like to consider buying—do give me a call!

Highlands Rental Property Choice Involves 6 Key Factors

2-20-rentalJust about any investor on the lookout for a promising Highlands rental property has a number of assumed criteria in mind—often arrived at without bothering to sit down to list them. Remember, this is already a successful individual, usually with ample business experience—and always with the financial acumen to be able to make a substantial investment. For them, creating a written decision matrix really isn’t necessary.

Still, there’s a lot of literature on the web offering opinions on what are the most commonly agreed-upon factors for choosing a rental property. Quite a few “Top 10”s. Going over them, it turns out that some are only slight variations on a single theme, so I’ve boiled them down to a “Top Six.”

The first one is barely ever mentioned. It’s this:

1. Most investors have predetermined the price range that his or her Highlands rental property must fall into, but that can turn out to be a false step. If the goal is to garner the maximum return, it’s possible that some humbly-priced Highlands rental properties can actually turn a greater annual profit—even in absolute dollars—than some higher-end homes (particularly those that suffer extended periods without suitable higher-end tenants). So Number 1 is SET YOUR INVESTMENT GOAL. Cash flow return can be a very different goal than long term property appreciation.

2. LOCATION LOCATION LOCATION. This is the one that combines a half dozen factors, variously listed as Neighborhood, Proximity to Jobs, Amenities (parks, malls, gyms, movie theaters, public transportation hubs, etc.), Crime, Schools, and even Property Taxes. This factor might be chosen for convenience, as when a rental property investor wishes to be able to supervise the property; or for an expectation of value appreciation in a Highlands area which is gaining popularity. As everyone has had heard from time immemorial, L.L.L. is always important!

3. HEALTH OF THE PROPERTY. If the underlying structure and mechanicals have been intelligently designed and well maintained, this one is of no importance. If not, a thorough inspection with top-grade recommendations and cost projections is a must.

4. VACANCY RATES. The number of rental homes listed and the number of vacancies should be considered highly important for determining a promising rental property in Highlands. In newly expanding communities, sometimes you can spot a man parked near an intersection, clicking away on a counter as the autos pass by. He’s measuring traffic to see if the volume is great enough to support a gas station, or market, or mini-mall. The turnover of rental listings—how long rental properties stay vacant from week to week—can provide guidance about the same kind of information.

5. COMPETITIVE MARKET. The average rent amounts advertised for comparable properties can be the decisive factor for whether a rental home investment makes financial sense.

Of course, another factor that can make a big difference is the experience level of your Highlands Realtor®. That’s actually key factor #6—and (I hope) where I come in!

Highlands Rental vs. Purchase Choice Involves Multiple Factors

1-21-rentbuyWhen your primary residence is one of our Highlands rentals, from time to time you may find yourself pausing, pen hovering over checkbook, thinking, “What if this check were going to buy this place, instead…?”

It’s a nearly unavoidable thought because common wisdom has it that buying a Highlands home usually makes more financial sense than renting it. That sounds sensible simply because at the end of the day (or, more accurately, at the end of a 15- or 30-year mortgage term), ownership means you no longer have to write those checks: you own that Highlands rental. It could be true—but there’s a lot more involved in the purchase-or-rental decision. If you make it a point from time to time to recalculate your situation, should it turn out that you aren’t any better off exiting the rental ranks, writing those checks to the landlord will become a less stressful activity.

The first consideration is location, location, location—but not in the usual sense. The question is how permanently you are likely to stay where you are. What are the odds that your job or family issues will take you away? If it’s likely that you will be moving out of Highlands within five years or less, a rental could well be a better choice. Buying and selling expenses—plus the time and effort involved—are factors that often make it wiser to delay buying until you are situated more permanently.

Then there is the real monthly outlay comparison between the two. Realistic calculations for owning take into account all of the monthly expenses involved. They include property taxes, homeowner or condo fees, insurance, gardening expenses, utility costs, and maintenance costs (they tend to be more than you first estimate). If your Highlands rental check is significantly smaller than the monthly home owning total, your financial ship might float higher if you put the difference into a savings account. You should consider whether your money might be put to better use elsewhere.

That last item points to the overriding issue: whether your current savings are able to support a purchase without incurring too much financial strain. That monthly home ownership calculation did not include the initial cost—the down payment. This part may have become less of a hurdle recently: the Federal Housing Administration has reduced its requirements. In fact, it may be possible to buy a house with an FHA mortgage with as little as a 3.5% down payment…although a higher down payment means a lower mortgage payment and no private mortgage insurance.

The last part of your calculation is one that can be a very positive financial benefit of ownership vs. rental: the mortgage interest tax deduction. Especially for those in higher income tax brackets with hefty mortgages, it can tilt the scales toward ownership.

I’m here to offer help and advice about any Highlands rental and ownership questions—in fact, about any of your real estate questions. I hope you won’t hesitate to give me a call!

Selecting Good Sapphire Tenants While Heeding Housing Rules

12-24-tenantEvery landlord has had the feeling at one time or another that a prospective Sapphire tenant may not be a good choice. Call it a hunch, or intuition—but something tells you that this tenant may be trouble down the road. There is more than enough riding on the decision to make you want to pay attention to your instincts, but that’s where being aware of the dos and don’ts of tenant management comes into play. You need to protect your business and property, but in so doing, you also need to heed outside factors.

Chief among those factors is the housing laws and regulations. This is a realm where there’s no shortage of fine print—and since I don’t offer legal advice, we needn’t wade into the technical weeds. But there are some common sense concepts that should shed light on the subject.

One of the key things to remember is that it is frowned upon to arbitrarily accept or reject tenants based on personal preferences or whims. Of course, a landlord does own the property whose use the tenant is asking to borrow, but nevertheless, most people understand why anti-discrimination laws have been created. Some feel they go too far—some, that they don’t go far enough—but at any rate, one fact is indisputable: ignoring the rules can have bad consequences.

One easy-to-follow idea is to prepare your own written standards for accepting prospective Sapphire tenants (standards that are certain to not contravene discrimination guidelines). Another that is universally considered good practice is to require every applicant to fill out an application form with the kind of information that state and federal guidelines allow. When everyone is required to complete an application in full, failing to do so becomes grounds for rejection. The kinds of information should be relevant to the landlord’s business needs; and the standards may be high or low, as long as they are evaluated evenly for every applicant. Some common criteria:

  • Prospective tenants should never have been evicted from a property.
  • Prospective tenants should have a credit score above a certain level
  • They should have no record of any judgments having been levied against them for failure to pay utilities.
  • They should have proof of employment and enough income to reliably pay rent (the national average income level is 3 times rent).
  • Prospective tenants should supply references from previous landlords—references that can be verified over the phone.

Of course, none of this means a landlord is required to rent to just anyone who comes by. The key is to define the ideal tenant, make sure that ideal isn’t based on random discriminatory criteria (like race or sex or religion)—and then to adhere to a consistent evaluation process. And the fact is, the potential financial rewards should more than compensate for heeding the basic ground rules.

If you will be taking a look at the inviting opportunities that Sapphire income properties currently offer, I’d like to show you some of the best ones. Give me a call!