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Friday, November 09 2012

Fifty percent of Americans recently surveyed say they expect home rental prices to rise in the next year, and it’s making them lean more toward home ownership, according to the Fannie Mae October National Housing Survey, which surveyed 1,000 Americans.

"This has been a year of steady growth in the percentage of consumers with positive home price expectations," says Doug Duncan, Fannie Mae’s senior vice president and chief economist. "Increasing household formation, encouraged by an improving labor market, is adding additional momentum to the housing recovery and putting upward pressure on rental price expectations. Expected increases in both owning and renting costs may encourage more consumers to buy and add further strength to the housing recovery already under way."

Rental price expectations continue to rise and are much higher than home price expectations, according to Fannie Mae.

More Americans say that with rising rents, home ownership is looking like a better option. Seventy-two percent of those surveyed say that now is a good time to purchase a home. Eighteen percent say it’s a good time to sell.

Still, the optimism over the direction of the housing market is met with some caution and predictions of a slow recovery--not a high speed one, according to Fannie.

Source: Fannie Mae

Posted by: Rolando Trentini AT 08:00 am   |  Permalink   |  0 Comments  |  Email
Thursday, January 19 2012

Financial experts insist that they don’t have a crystal ball, but they still have to predict the future anyway. That’s why they watch a number of different economic indicators to determine the direction they expect different segments of the economy to head. For the owners of Southwest Indiana rental homes and their tenants, one of the most important segments is the one dealing with rents – will they continue to rise in 2012? If, as many experts predict, rents do continue on an upward path, it will mark the third straight year that they have done so. Evansville area landlords needn’t ignore the trend.
 
While the year is still too young to have established many economic indicators, here are some to watch for to help you make your own prediction regarding rent price trends that may affect your own decision-making:
 
  • A quiet market in home purchasing. Americans remain anxious about the overall economy and have thus far refused to signal a clear end to the doldrums in home sales. Many Americans tend to remain in rental homes as they await clearer signals of a more robust economic recovery.
 
  • Continuing high foreclosure rates have the effect of forcing homeowners out of their homes and into the rental home market. This decreases vacancy rates, raises demand -- and therefore, rents.
 
  • Job growth fuels housing demand. As the population increases, at least some job growth is required to meet the resulting demand for goods and services – especially if growth in the supply of rental homes lags or remains flat.
 
To slightly balance those indicators, other signs could hint at a possible future stall in rental rates:
 
  • Rental unit construction starts were up 33.3% in the third quarter of 2011. Although such projects take time to reach completion, when they hit the market they will add to the supply of available rental homes -- and that absorbs some of the demand. 
 
  • Low mortgage rates make it more financially feasible to own rather than to rent. When rents have been rising for as long as they have, there is a growing likelihood that home sales will eventual rebound. When? That’s where the crystal ball would come in handy!

The big question is, if rental home rates do continue to rise in 2012, how much can owners and renters expect? While the majority of analysts agree that residential rents should continue to rise, they vary when asked how much – from 2.5% to 5.5%, depending on which one you ask.
 
 Please let us know if you are interested to receive emails with listings that are suitable for the rental market. We are working with many investors who take advantage of this and in case you do not want to be personally involved with the leasing process we can assist you with that as well. You can reach me by phone at 812-499-9234 or by email at RolandoTrentini@FCTE.com
Posted by: Rolando Trentini AT 08:00 am   |  Permalink   |  0 Comments  |  Email
Thursday, January 12 2012
Borrowers who have a history of paying rent on time may see a boost to their credit score.

Experian, a leading credit report company, added a section to its credit reports last year that reflected on-time rent payments, which helped give a boost in the credit scores to some on-time rent payers. Now the two other major credit reporting companies are following suit.

CoreLogic and FICO recently announced they are also adding a score that reflects payment histories from landlords, The New York Times reports.

“Evidence of positive rental payments could be a plus for consumers,” Joanne Gaskin, FICO’s director of product management global scoring, told The New York Times.

Nearly half of high-risk consumers saw an increase of 100 points or more after their rental history was added to their credit report, says Brannan Johnston, the managing director of Experian’s rent bureau. Consumers with average or higher credit scores, on the other hand, did not see any major difference to their scores.

For former home owners who lost their homes to foreclosure, they may be able to rebuild their credit histories more quickly now by showing they are “very responsible renters,” Tim Grace, senior vice president of CoreLogic, told The New York Times.

Source: “A Good Rental History Can Help Borrowers,” The New York Times (Jan. 5, 2012)

Posted by: Rolando Trentini AT 08:00 am   |  Permalink   |  0 Comments  |  Email
Wednesday, July 06 2011
A lease option is actually a lease with an option to buy. It refers to an agreement between a buyer and seller of property and is a contract valid for both residential and commercial property. Lease option is different from a lease purchase in which both parties are bound to the sale agreement. However, a lease option makes it binding only to the seller, with the buyer not bound to buy the property in question. However, the buyer does have to state an amount as valuation at which he will get the right to buy at a later date.

Features of a Lease Option

  • Buyer buys the option for a property at a price decided upon as the cost of the option.
  • A price is mutually agreed upon by the buyer and seller and this will be the price at which the option will be exercised.
  • For residential property the period of time during which the lease option has to be exercised ranges between one to three years.
  • The buyer may have to pay a monthly lease payment, which may or may not be adjusted against the purchase price of the property.
  • The two parties have to agree whether the buyer can further sell his option to a third party, whether he wishes to stay in the property or sub lease it.
  • Distressed properties are purchased by investors, renovated and upgraded and then offered as lease options to interested buyers.
  • Payment of maintenance, utilities, taxes etc have to be decided between the buyer and seller.

A lease option is similar to a lease, except that in a lease option, the buyer has the purchase option at a later date. This option is used by a buyer if he is relocating or setting up a business and does not have the resources at present to pay for the property. It is preferable to a mortgage since the risk element is far lower in this option. For the seller, it holds promise of higher returns and a definite chance of his property being sold. It also provides a price security to the seller in case the value of the property declines. These are therefore more popular in a slow market besieged by recession. Sellers may not agree to a lease option generally when the prices of real estate are increasing. Lease options are good for first time property buyers, since it gives them time to collect their resources to pay for the property they have selected, after 1-3 years. Such a situation arises when they do not have the savings for a down payment. They may even be able to come to an agreement to live in the house they plan to buy through the lease option.

Steps to complete before taking a lease option

  • Is lease option the best alternative financially? This involves verifying whether you can afford the monthly lease payments, and whether there is a certainty of managing to collect the money for the purchase eventually, so that buying the option is not just a waste of money.
  • Checking whether the property is the best available in the area
  • Get a valuation done of the property from a professional.
  • Negotiate the terms with the seller and draft a good contract.
  • Verify the insurance details.

Once all these are looked into, a lease option may bring you closer to your dream property

Source:

Posted by: Rolando Trentini AT 08:00 am   |  Permalink   |  Email
Monday, May 09 2011
To rent or to buy:  what used to be a given – that you would buy a home as soon as you could afford to – has become an agonizing conundrum for many a would-be homebuyer, in the face of the housing market’s big bust and super-slow recovery.  Low prices seem to create a wide-open window of opportunity, but they also create the concern that prices will keep falling after closing. And that Catch-22 has hundreds of thousands of buyers-to-be stuck on the fence.
Fortunately, there are handful of life, mortgage and local market signals which indicate that the time *might* be right to hop – scratch that – leap off the fence and into homeownership:
Mortgage rates are going up. Home prices have been low for the last several years, and in fact are currently looking like they’re heading back down to the same levels they were at the depths of the real estate recession. During this same time frame, interest rates have also been low – this one-two punch has created record-high affordability for the last four years running, causing buyers to believe that this window of opportunity won’t be closing anytime soon.
While prices don’t look like they’ll be skyrocketing anytime soon, interest rates are another story. Rates have been on a rollercoaster over the past few months, and with inflation and Fed rates set to spike later this year, today’s low interest rates might be as good as they’re going to get for a long time to come. And I mean a very long time – in the next few years, governmental intervention in the mortgage markets is likely to wind down, and that means higher mortgage interest rates are not only inevitable, they’ll probably be here for a long, long time. 
Mortgage rates on the rise are one signal that now might be the peak of home affordability, and the peak of the opportunity to buy.
Rents are going up. Rental rates in many areas are also on the rise – in fact, the foreclosure crisis has acted created additional demand on many markets’ rental housing inventory in several different ways. First, former homeowners who lost homes to foreclosure now need to rent; as well, buyers in foreclosure hot spots have been hesitant to buy, many electing to stay renters far beyond when they would have otherwise. On top of all that, super-tight lending guidelines have stopped even some who would like to buy homes from doing so. As a result, rental homes are in high demand – and rents are rising.

Rising rents at a time when the prices of homes for sale are low and, in some places, falling? One more signal that now might just be the time to buy. (Of course, where foreclosures are high, the chances of continued depreciation are, too – to offset this risk, have a long-term plan, to minimize the possibility that you’ll owe more than your home is worth when you need to sell. Read on for more on how to plan for the long term and minimize your homebuying risk.)

Your income and career are stable for the foreseeable future.
 The smartest homebuyers look to their lives, not just the market, for signals about when the time is right to buy. Homebuying is a long, long-term endeavor these days. The goal is to be able to commit to staying in the same place, geographically-speaking, for 7 to 10 years before you buy (more in a foreclosure-riddled market, less in an area that has been more recession-resistant). Most lenders will require that you’ve been at your job – or in the same general field of work – for at least two years before you buy. But that’s the bare minimum – beyond that, you don’t want to be barely beginning a career in which you think you may need to move sooner than that, nor do you want to buy when you’re advanced in your career, but in an industry which is dying or downsizing the workforce in your region (unless you have a strong Plan B).

 

When you get to the spot in your career where you can realistically project a stable income 7 to 10 years out, life might be giving you a green light to move forward on your homebuying dreams.
You can reasonably predict the home you’ll need in the years to come. Since successful homeownership requires that you be ready to be in the place for a good number of years, best practice is not just to buy a home with the space and number of rooms you need right now – rather, you should aim to buy the home you’ll need 5, 7 or even 10 years down the road (to the best of your ability to predict, of course). You might be a newlywed with no kids now, but you plan to have them in a few years. Or maybe you’re a newly minted empty nester right now, but can project that you’ll want to retire - and might not want to climb two flights of stairs to get to and from your bedroom - 10 years down the road. Before you buy, you should be in a position to buy the home that meets your future needs – not just your current ones; and that requires that you have a reasonable idea of your life vision and plan for the future.
If you’re able to predict – and afford, at today’s prices – a home with the space, amenity and geographic location you’ll need 7 to 10 years from now, you might be in a good phase of life to get off the rent vs. buy fence.
With that said. . . buying a home is a massive decision and includes multiple, long-term financial and lifestyle obligations, so if one or more of these signals are present for you, that doesn’t mean you have the green light to run out and buy a home tomorrow – rather, it’s a good sign you should begin down that path, if you’re so inclined. You’ll still need to do the work to make sure your personal finances and holistic life picture are also in alignment before you buy, as well of the work it takes to ensure that your real estate and mortgage decisions are sustainable and smart, over the long-term.
It’s not overkill to check in with a mortgage pro, a tax pro, a local real estate broker or agent and a financial planner to make sure all your ducks – not just one - are in a row before you make your move.
Posted by: Rolando Trentini AT 08:00 am   |  Permalink   |  Email
Wednesday, April 20 2011
Apartment bargains once dominated the housing market, but those bargains have slowly faded away. As vacancies decrease and rents rise, renters are finding fewer deals.

Analysts expect vacancies to decrease even more and rents to continue to rise through 2013, as the economy continues to improve.

Rental activity recorded its best start for the year since 1999, according to Reis Inc. Vacancy rates have fallen to mid-2008 levels and rents have increased for the past five quarters, now averaging $991 per month nationwide.

Renters are finding the fewest deals along the coasts, such as New York, Washington, D.C., Boston, Los Angeles, San Francisco, Seattle, and San Jose, Calif. These cities are experiencing low vacancy rates. Also, a boost in these cities’ economies is sending rents higher. New York City alone has seen double rent increases compared to the national average and has the lowest vacancy rate in the nation.

The best rental deals can be found in Las Vegas, Tucson, Ariz., Phoenix, and several cities in Florida--all cities where unemployment and foreclosures remain high. According to Reis, Las Vegas was the only city to see rents fall last year.

However, analysts say that bargains across the country are getting fewer, and renters should expect to see an increase in rents over the next three years.

View the Top 6 Cities Where Buying Is Better Than Renting.

Source: “Rental Market Swings Back in Favor of Landlords,” MSNBC.com (April 12, 2011)
Posted by: Rolando Trentini AT 08:00 am   |  Permalink   |  0 Comments  |  Email
Thursday, May 27 2010

While being a landlord certainly has its cons, tops among its pros are the tax deductions for rental homes enjoyed by owners.

From finding tenants to fixing faucets, renting out a home can be a lot of work. Yet perhaps the biggest reward for being a landlord isn’t the rent checks, but rather the considerable tax deductions for rental homes.

The tax code permits most owners of residential rental properties to offset income by writing off numerous rental home expenses. IRS Publication 527, “Residential Rental Property,” has all the details.

 

Writing off rental home expenses

Many rental home expenses are tax deductible. Save receipts and any other documentation, and take the deductions on Schedule E. Figure you’ll spend four hours a week, on average, maintaining a rental property, including recordkeeping.

Here are some of the most common deductible expenses for rental homes, according to the IRS. You can usually take these write-offs even if the rental home is vacant temporarily. In general, claim the deductions for the year in which the expenses are incurred:

  • Advertising
  • Cleaning and maintenance
  • Commissions paid to rental agents
  • Homeowner association/condo dues
  • Insurance premiums
  • Legal fees
  • Mortgage interest
  • Taxes
  • Utilities

Less obvious deductions include expenses to obtain a mortgage, and fees charged by an accountant to prepare your Schedule E. And don’t forget that a rental home can even be a houseboat or trailer, as long as there are sleeping, cooking, and bathroom facilities.

Limits on travel expenses

You can deduct expenses related to traveling locally to a rental home for such activities as showing it, collecting rent, or doing maintenance. If you use your own car, you can claim the standard mileage rate of 55 cents per mile (in 2009).

Traveling outside your local area to a rental home is another matter. You can write off the expenses if the purpose of the trip is to collect rent or, in the words of the IRS, “manage, conserve, or maintain” the property. If you mix business with pleasure during the trip, you can only deduct the portion of expenses that directly relates to rental activities.

Repairs vs. improvements

Another area that requires rental home owners to tread carefully is repairs vs. improvements. The tax code lets you write off repairs—any fixes that keep your property in working condition—immediately as you would other expenses. The costs of improvements that add value to a rental property or extend its life must instead be depreciated over several years. (More on depreciation below.)

Think of it this way: Simply replacing a broken window pane counts as a repair, but replacing all of the windows in your rental home counts as an improvement. Patching a roof leak is a repair; re-shingling the entire roof is an improvement. You get the picture.

Deciphering depreciation

Depreciation refers to the value of property that’s lost over time due to wear and tear. In the case of improvements to a rental home, you can deduct a portion of that lost value every year over a set number of years. Carpeting and appliances in a rental home, for example, are usually depreciated over five years.

You can begin depreciating the value of the entire rental property as soon as the rental home is ready for tenants, even if you don’t yet have any. In general, you depreciate the value of the home itself over 27.5 years. You’ll have to stop depreciating once you recover your cost or you stop renting out the home, whichever comes first.

Depreciation is a valuable tax break, but the calculations can be tricky and the exceptions many. Read IRS Publication 946, “How to Depreciate Property,” for additional information, and use Form 4562 come tax time. Consult a tax adviser.

Profits and losses on rental homes

The rent you collect from your tenant every month counts as income. You offset that income, and lower your tax bill, by deducting your rental home expenses including depreciation. If, for example, you received $9,600 rent during the year and had expenses of $4,200, then your taxable rental income would be $5,400 ($9,600 in rent minus $4,200 in expenses).

You can even write off a loss on a rental home as long as you meet income requirements, own at least 10% of the property, and actively participate in the rental of the home. Active participation in a rental is as simple as placing ads, setting rents, or screening prospective tenants.

If you’re married filing jointly and your modified adjusted gross income is $100,000 or less, you can deduct up to $25,000 in rental losses. The deduction for losses gradually phases out between income of $100,000 and $150,000. You may be able to carry forward excess losses to future years.

Let’s say you take in $12,000 in rental income for the year but your expenses total $15,000, resulting in a $3,000 loss. If your income is less than $100,000, you can take the full $3,000 loss. By deducting $3,000 from taxable income of $100,000, a married couple filing jointly would cut their tax bill by $750.

Tax rules for vacation homes

If you have a vacation home that’s mostly reserved for personal use but rented out for up to 14 days a year, you won’t have to pay taxes on the rental income. Some expenses are deductible, though the personal use of the home limits deductions.

The tax picture gets more complicated when in the same year you make personal use of your vacation home and rent it out for more than 14 days. Read our story about tax deductions for vacation homes for an explanation.

Donna Fuscaldo has written about personal finance for more than 10 years at the Wall Street Journal, Dow Jones Newswires, and Fox Business. She one day hopes to own a vacation home in the Catskills of New York.

Source: http://www.houselogic.com/articles/tax-deductions-rental-homes/

Posted by: Rolando Trentini AT 08:00 am   |  Permalink   |  0 Comments  |  Email
Wednesday, May 26 2010

Renting out your house can be a smart financial move, as long as you calculate your costs carefully.

 

You have a single-family house you’d like to rent out. Perhaps you’re temporarily relocating for work, or maybe you inherited your childhood home from your parents, and you’re not quite ready to part with it yet.

 

Renting can be a profitable choice, but it requires an investment of time, money, and organization to make it work. Here’s how to determine whether renting out your house is worth the cost.

Calculate your monthly expenses

You want to charge at least enough to cover your monthly outlay. So the first step is to use our free downloadable worksheet to calculate your costs. Start with regular expenses like mortgage, maintenance, and homeowners association dues.

You may also need to upgrade your insurance coverage. Your agent can advise you about adding landlord insurance, a special type of policy that covers rental properties. As a rule, landlord insurance costs about 25% more than standard homeowners insurance.

If you’re renting the house furnished, make sure you’re covered for the personal possessions you leave behind. Jane Cline, the insurance commissioner of West Virginia, tells owners to prepare a detailed inventory of household items. If you’re renting the house unfurnished, figure in the costs of moving and storing your items.

Check out prospective tenants

As a practical matter, you’ll have to formally check out your prospective renters. MrLandlord.com, an information and service site for landlords, suggests a variety of background checks: credit reports, eviction reports, and criminal background reports. None of these is expensive, but you must get your prospects’ permission.

MrLandlord.com charges $8.95 for an eviction report. A combined credit and eviction report is $14.95. If you want to be especially careful, a countywide criminal report costs $29.95.

Account for maintenance and upgrades

Even with the most scrupulous checks, you can’t be completely sure renters will take good care of your home. Eva Rosenberg, an enrolled agent in Northridge, Calif., advises that if you’re not within easy driving distance of your rental property, you’ll need to arrange for someone else to keep an eye on the place, even if it’s just to make sure the lawn is mowed. If the tenants are neglecting upkeep, you’ll want to know about it sooner rather than later, since it could be a warning sign of trouble down the line.

Of course, even if the renters are conscientious, problems can crop up: boilers will fail; roofs may leak; washing machine hoses can burst. If household systems or appliances need repair or replacement, you’re better off spending the money up front, before the fix becomes an expensive emergency.

You may also want to invest in some of the “extras” that Sue Peters, a broker in Wellfleet, Mass., recommends adding to attract a tenant willing to pay a higher fee. She suggests spending money on air conditioning, expanded-channel cable TV, and a Wi-Fi network.

Don’t want the headaches? Hire a property manager

You can save yourself a lot of time and effort if you engage a management company to oversee the property and take care of the details. Some firms charge a percentage of the rental fee, others a flat monthly fee, based on the extent of services. Joe Aimone of GoRenter in Phoenix, Ariz., says his firm offers a variety of services, starting at as little as $50 a month, including general maintenance, rent collection, and—if necessary—eviction.

A management company can help you figure out how much to charge, find and vet tenants, and prepare a lease. It will also pay the real estate taxes on your behalf and present you with an annual 1099 form. Many management companies maintain 24-hour emergency lines and a roster of approved service people, so they can take care of plumbing or electrical problems and bill you later. A property manager will also see that driveways and sidewalks are shoveled, so you don’t find yourself with an unpleasant claim against your liability insurance.

Expect to pay a management company 8% to 10% of the annual gross rent, on average, with a $50 to $85 monthly minimum.

Keep scrupulous records

Whether or not you use a management company, you’ll have to keep extensive business records. DeDe Jones, CFP, CPA, in Lakewood, Colo., advises owners to save receipts for any expenses and to file them carefully.

The IRS treats maintenance expenditures, like a new hot-water heater, differently from capital improvements, such as a new deck or patio, so you’ll want to consult a tax professional. Meanwhile, keep the two types of receipts separate to make tax prep easier. You’ll have to file Schedule E on Form 1040, which can also serve as a template for the kinds of records you’ll need.

Finally, because of the complex tax and liability issues involved, many financial experts suggest forming a corporation when you become a landlord. An attorney can advise you about whether incorporating makes sense in your situation.

Richard J. Koreto has been editor of several professional financial magazines and is the author of “Run It Like a Business,” a practice management book for financial planners. He and his wife own a pre-Civil War house in Rockland County, New York.

Source: http://www.houselogic.com/articles/costs-renting-out-your-house/

Posted by: Rolando Trentini AT 08:00 am   |  Permalink   |  0 Comments  |  Email
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The Trentini Team
F.C. Tucker EMGE REALTORS®
7820 Eagle Crest Bvd., Suite 200
Evansville, IN 47715
Office: (812) 479-0801
Cell: (812) 499-9234
Email: Rolando@RolandoTrentini.com


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