Just about any investor on the lookout for a promising 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 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 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 an 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 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 Realtor^®. That’s actually key factor #6—and (I hope) where I come in! You can call me on my cell phone 812-499-9234 or email: Rolando@RolandoTrentini.com so we can discuss your real estate needs.

Despite the improving economic outlook, for many families, finding an affordable house can still be a challenge. According to a study by the Joint Center for Housing Studies at Harvard University, more than a third of today’s families have had to devote at least 30% of their combined household income to the monthly mortgage payment—and that figure exceeds the generally accepted standard. In other words, even though mortgage interest rates remain pegged at historically low levels, landing an “affordable” house (just as in the rest of the country) can take some doing. Here is one five-step approach that has rewarded house-hunters in the past:

1. Define Affordable House in dollars   

The first step to finding an affordable house should be to work out a target budget. The Wall Street Journal currently recommends spending no more than 28% of monthly income on your house). Make sure to include additional fees such as legal fees, repairs, maintenance, and closing costs in your calculation. The bottom line you come up with isn’t one set in stone, but it’s a reasonable goal to have in mind.

2. Set space requirements

Space will be a prime consideration for the entire time you'll be living in your home. If you are planning on expanding the family in the near future, having a spare room is close to a necessity. If it's just something that would be nice to have, it’s not a requirement—and recognizing the distinction can be all-important.

3. Balance travel time against housing costs

Often you can offset the purchase price of a home by expanding your search radius to include a reasonable commute. Get out your pencil: you'll need to compare the savings in the house payment against the additional cost of an extended commute.  

4. Include properties that need some TLC

One of the best ways to zero in on an affordable house is to keep an eye out for otherwise-eligible "fixer-uppers." You can avoid any serious structural problems, such as plumbing, electrical, and roof issues, yet still focus on properties that just need a little cosmetic revamp can put you across the affordability finish line.

5. Investigate home buying programs

In a limited number of instances, there are some generally underpublicized home buying programs that might be available. For instance, there is the Good Neighbor Next Door program. For teachers, medical professionals, firefighters, and law enforcement officers looking in revitalization areas, as much as a 50% discount from a HUD-listed property can make a house more than affordable!  

            Most observers believe residential prices are likely to continue to rise—so it’s not outlandish to suspect that today’s affordable houses may become less so as time passes. Give me a call if you are thinking of taking advantage of this winter’s bargains in our area.  You can reach me on my cell phone 812-499-9234 or email: Rolando@RolandoTrentini.com

Good investors tend to be cautious souls. For those who prior to 2007 had never ventured into the realm of real estate investments, the ensuing downturn might have been enough to discourage any curiosity about that direction (even if their other investments had also suffered during the global financial crisis).

Nonetheless, at this juncture those same cautious investors might well assume that the value of real estate investments have rebounded so substantially that it’s now too late to bother looking into them. But as National Public Radio has just pointed out, there's an excellent argument to be made that conditions are now highly conducive for real estate—with real estate investments being no exception. I could tick off three solid reasons that immediately leap to mind, but stand corrected: NPR points to four:

1. Employment. Employers are hiring anew, and “when companies are hiring, would-be homebuyers feel more confident about taking on mortgage debt.” Unemployment rates have (finally!) come down to 5.6%, and with employers having added 252,000 jobs in December, consumer confidence is up nearly 20% over a year ago.

2. Prices seem more rational. NPR points out that from January to October, prices rose 4.5% nationally; a “subdued” gain compared with the 11% burst of the year before. They project that the slower price appreciation may have set the stage for a “buying surge in 2015.” From a local real estate investments standpoint, too, gains from last year’s run-up in equities markets combined with mortgage rates still holding below 4% would seem to create the key elements many investors would consider favorably.    

3. Demand for rentals is high. There is a healthy demand for rental accommodation across the country due to a tight supply of quality accommodations. USA Today tells us that between 2009 and 2013, the national vacancy rate for apartments dropped from 8% to 4.1%. Over the same period, the effective rent increased by 12% to $1,083. As one potential consequence vis-à-vis real estate investments, new landlords might expect to be more selective about the tenants that they choose. That would mean fewer headaches for landlords with troublesome and slow paying tenants. It is might also portend that investment properties will stand vacant for briefer periods.  

4. Millennials are sick of Mom’s basement. NPR points to a Census Bureau report that says only 36% of Americans under age 35 own a home, down from 42% just seven years ago. The recovering employment picture might not enable young people to save up for a down payment for a while yet, but renting quality digs should soon be more doable than was previously the case. That could set the table for a continuing robust rental environment, with real estate investments benefitting proportionately.

NPR’s four reasons for optimism in 2015 are actually only the tip of the iceberg. If you have ever had the thought that it could be worthwhile to take a look at real estate investments, this is a great time of year to give me a call! You can reach me on my cell phone 812-499-9234 or email:Rolando@RolandoTrentini.com

Market Watch December 2014

I realize that Thanksgiving has passed us this year but I wanted to mention several real estate specific results and other factors for which we should all be thankful.

Although 2014 is not yet finished, our local market is certain to close more real estate volume than we did in 2013 and that is on top of the huge recovery we made in 2012.  In fact, our multiple listing service will close more dollar volume in sales than the previous year for the 4th consecutive year and sales volume will be 36% higher than it was in 2010.  In addition, our average sales price has increased 6.2% this year and will be a whopping 15% higher than it was in 2010.

I believe that this slow, but steady, recovery is a result of both increased consumer confidence and a similar slow, but gradually improving job environment.  The housing market is tied directly to qualified homeowners.  A job is the first step in qualification and with over 300,000 net new jobs created last month, I’m confident that some will soon be first time buyers.

Another positive development is that the Federal Housing Finance Authority recently issued new more clear rules which will allow lenders to be more confident about the types of residential mortgage loans they make.  I expect more buyers will qualify for loans in the future than the recent past.  Clearly this helps the housing market.

From a strictly local perspective, I’m very excited about the new convention hotel and the Medical Center coming to Southwest Indiana.  Both of these projects will provide a significant economic boost to our area for years to come.  All of these give me plenty of reasons to be thankful and optimistic about real estate.

Finally, I can’t wait to give you a taste of what’s coming in January!  Although FCTuckerEmge.com is already the area’s dominant real estate website we are launching a newer upgraded FCTuckerEmge.com next month.  The enhanced site will have bigger, brighter pictures, a really cool mapping function and lots of other features I’m sure you will like.

Kathy and I extend our best wishes for a joyous holiday season.

You’re at home watching TV and trying to unwind, when all of a sudden here comes another baby boomer celebrity, looking into the camera, giving you his most sincere, trustworthy look, then assuring you that a “Reverse Mortgage” really isn’t too good to be true (even though it sounds like it is).

What could be better? Any homeowner 62 or older can apply: then the bank pays you instead of the other way around! You could even use part of the tax-free proceeds to pay off the other mortgage! Or go to Monte Carlo and break the bank! (The trustworthy celebrity only hints at that one). You don’t have to pay back the loan until blah blah blah, the property remains yours, etc. etc. etc. What could go wrong?

Short answer: quite a lot, actually.

Long answer: if you don’t plan for the long term consequences, this can be a potentially disastrous maneuver. As a quick and painless way to raise cash, it often is too good to be true.

For openers, the actual name of this loan is not ‘reverse mortgage’— it’s an HECM, Home Equity Conversion Mortgage—a much more descriptive name. It allows 62+-year-olds to ‘cash out’ the equity they’ve built in their home. Not all of the equity; just some.  As soon as they no longer live in the home, the loan must be repaid in full. The problems are all in the details.

Detail 1: Payback

Suppose a husband and wife live in a house owned by the husband. He applies for reverse mortgage, dies 11 years later, leaving the house to his wife. Because the reverse mortgage becomes payable when the mortgagee (the husband) “leaves” the property, the loan becomes due and payable. So the spouse may be forced to sell the home in order to repay the loan. But it’s also possible that the same thing occurs when the mortgagee is permanently relocated to a nursing home.  

Detail 2 (and it’s one you really have to take into account): Interest

Most often, no payments are made on reverse mortgages. Unless the trip to Monte Carlo ended well, it’s likely that the balance owed remains. However, interest accrues on the loan at the “prevailing rate”—which may be a misnomer, because reverse mortgage interest rates are often high. Over the long run, the amount owed could eat up most of the value of the house. The spouse could be left with very little to live on.

While the fees charged for a reverse mortgage are capped by the government, they’re still much higher than those for traditional loans (possibly why the trustworthy boomer celebrity got involved in the first place). Because credit scores aren’t used to determine eligibility, higher fees are charged to help cover lender risk. Then there are requirements for keeping up the property (what if illness causes a temporary lack of attention?), paying taxes on time…and other circumstances that could cause the loan to be called in, forcing sale of the home.

Yes, a reverse mortgage can be a valuable resource for some retirees on limited incomes. However, before even thinking about committing, it’s vital to sit down with a trusted financial adviser. If it turns out that selling or downsizing makes a lot more sense, calling me is the next step!  You can reach me on my cell phone: 812-499-9234 or email: Rolando@RolandoTrentini.com

If you had to come up with a single characteristic that the most effective home listings have in common, there are several good candidates:

 A really well-crafted listing catches your eye with superior photography, for sure. But that’s not possible with every property. Good photographers know how to select the best angles, use light effectively, and eliminate distracting details (or at least downplay them). But since all homes aren’t equally photogenic, there are built-in limits to how even the most skillful listing creator can count on visuals to make a listing stand out.

Careful attention to detail is common in superior listings. The best listings don’t skimp on the details, or on brief adjectives that further enhance them—especially when they serve to differentiate a home from the pack. You can test this for yourself by scanning through some of today’s listings in Evansville. The best ones often have one or two relatively insignificant details that give a property character; that make it memorable. “Spacious walk-in closet” may not be nearly as important as “completely remodeled kitchen,” but for a certain number of prospective buyers, that can turn out to be the one detail that strikes a responsive chord (and creates a mental note to check this one out!).

Descriptions that employ proven advertising principles almost always make superior listings. One standby: arouse curiosity (headline writers are experts at this). An example might be “Brick barbecue center.” ‘What the heck is that?’ prospective buyers will ask themselves. Even if outdoor cooking isn’t even on their list of priorities, they might not be able to resist scheduling a home tour to find out…and sometimes a buyer is created!

But if I had to pick the one single characteristic most likely to be found in truly effective local listings, it would be this: The best listings in some way tell a story—add character to the cold facts. They stand out from other listings by engaging more of the reader’s imagination than others which are merely an illustrated bunch of data.

The ‘story’ may be a phrase that hints at a property’s interesting past: its historical origin or that of the neighborhood; a prominent previous owner; or an unusual construction history. For a fixer-upper, the story might be an expansive invitation to imagine how a creative Do-It-Yourselfer will be able to transform the property. For a luxury listing, the story might be an appeal to experience the full array of lavish trappings as the suitable reward for the accomplishments of a lifetime. The story may be fleshed out or merely hinted at by a well-worded phrase—but when listings contain the elements of a story, they add memorability.

Creating a stand-out listing is only one of the many elements that go into a successful home-selling campaign. I hope you will give me a call when it comes time to get your own home into the hands of a new owner! You can reach me on my cell phone: 812-499-9234 or  email: Rolando@RolandoTrentini.com

For anyone who has looked into to buying a home several times—but kept getting discouraged every time because of a negative credit report—read on!

You probably already know that you are not alone—but so what?—it’s small consolation, especially when you consider how much financial ground you lose every year you continue to pay rent (the entire amount of which has zero tax deductibility). Many people mishandle credit in their teens and 20s, not knowing how it can come back to bite them when credit reports determine their credit worthiness. We see the fallout in the form of mortgage application turndowns or discouraging interest rate proposals.

But that just makes it all the more important that you stop letting past errors continue to keep you from getting the loans and rates you want. You can choose to take action now to clean up that credit score. Not only will it speed the moment when you become eligible for the significant benefits of home ownership—the actions you take now will serve to set you in the driver seat when it comes to credit management. You will become aware of any apparently minor oversights that can depress your credit score for years to come. It will put you ‘in the game’ of credit report management, instead of continuing to be a passive outsider.

Steps consumers can take now:  

Review your credit file for accurate information

The credit reporting bureaus’ job is to report the most accurate information possible, but in the past the Federal Trade Commission has found that 5% of reports have at least one mistake. Get your current credit report from any number of services (start with a free one: you can always subscribe to a paid service later). Check all the accounts and verify that the amounts reported and the account statuses are correct. If a creditor reported your information incorrectly, file a dispute through the credit bureaus’ online sites to get the inaccuracy fixed. The same FTC report says that 13% of consumers who reported an error saw a boost in their credit score.

Get old negative accounts removed

Credit reports carry negative information like missed payments or a collection account for seven years, but are required to delete it after that. If an account is lingering past the seven year mark, use the dispute tools available on credit bureaus’ websites to mark the account as too old for reporting. Note that the seven-year time period is calculated from the date of first delinquency, not the date the account was first opened.

Talk to collection companies about their input

Even when you pay off collection accounts, that history continues to hurt your credit score. Some lenders look solely at those details when starting the process, so even paid collections can disqualify you for a loan. Instead of dealing with this frustrating problem, while you are negotiating with collection agencies to pay off a debt, ask that they put in writing that they will remove their report as part of their part of the bargain for your satisfaction of the debt. Some agencies will and some won’t (but it can’t hurt to ask).

Once you have acted, and begun to see the negatives dropping off your current credit report, your path to local home ownership will open up markedly. Then it’s time to give me a call!  You can reach me on my cell phone: 812-499-9234 or email:Rolando@RolandoTrentini.com 

You’re about to close a deal to become a tenant. The landlord seems like a straight shooter and the place is a joy: immaculate and welcoming. Now all that’s left is to wait for the landlord’s okay after an evaluation of you as the new tenant, right?

Well, not quite. Just as the landlord should check financial or job references as part of their due diligence, you have some to perform for your own benefit. It’s up to you to assess the landlord’s system to determine whether this rental arrangement is the good fit you hope it is. Only by asking pertinent questions can you decide whether the landlord’s management style and expectations align with your needs.

1. Do you offer emergency maintenance services?

When a plumbing leak becomes uncontrollable or the heater goes out on a cold winter night, you need maintenance assistance quickly. Find out how quickly your landlord can respond—and how readily he or she answers. An experienced landlord is familiar with the inevitability of maintenance emergencies—and isn’t surprised (or put off) by the question. A great landlord is confident of the system he or she has put in place!

2. What are my maintenance responsibilities?

Lease language can be less than precise about the tenant’s responsibilities—most often when it comes to outdoor areas. A lease might vaguely state that the tenant is responsible for general lawn maintenance. Ask your landlord to pinpoint the specifics, and jot down notes that you can refer to later. Some landlords might expect mowing the lawn and weeding planted areas; others might expect you to attend to more, such as lawn treatments. Finding out your landlord’s specific expectations will give you a sense of the upkeep requirements for your end. It can’t help but minimize the possibility of any future conflict.

3. Is there a homeowners association?

As a rental tenant, most likely you won’t be responsible for any homeowners association dues. However, you might be subject to its rules and regulations. For example, if the association has strict lawn care requirements and you are responsible for garden maintenance, you should know about those details. If your landlord answers yes to this question, ask for a copy of the association rules.

4. What are my responsibilities before I vacate the property?

It’s not being overly negative to bring up the subject of the end of your tenancy. When you move out of a rental home, you want to leave the property in good condition so that you are not hit with any charges—or see your security deposit disappear without good reason. Find out if your landlord has any specific requirements, such as professional carpet cleaning or filling the holes in the wall.

5. How do I contact you on nights and weekends?

Problems with your rental unit do not always occur Monday to Friday, 9 to 5. By asking your landlord for contact information during non-business hours, you get a sense of how accessible he or she is. If he or she willingly gives you a cellphone number, you’ve probably found a landlord who will be easy to work with— and easy to track down should problems arise!

My work as a Realtor^® lets me help set the stage for tenants and landlords to create a mutually beneficial relationship. If you are looking to purchase an income property taking advantage of this fall’s very favorable terms, don’t hesitate to give me a call!  You can reach me on my cell phone 812-499-9234 or email: Rolando@RolandoTrentini.com

Despite what just feels like the right answer, buying a home in Evansville can be significantly cheaper than renting one. It’s one of those rare cases where, if you stop and make common sense judgments about the factors at play, the ‘just feels like’ conclusion is the opposite of the one common sense leads you to. Much of the reason has to do with short-term versus long-term considerations (buying a home starts with paying a sizeable down payment, after all); but over the long haul, the amount of cash at stake is so great it’s worth taking a hard look at this fundamental housing choice.

Four leading factors that currently come into play:

·       Increased Demand Has Made Rentals More Expensive

After the subprime mortgage mess-between 2007 and 2013—something like 6,200,000 people were added to the number of tenants. That boost created enough extra demand for rental units that owners had no trouble increasing monthly rates. It’s a simple case of too little supply chased by too much demand.

·       Low Interest Rates Make Homes Cheaper in the Long-Run

The current unusually low interest rates makes the tradeoff with renting an easier call. This fall, home buyers can expect to find 30 year mortgage packages at rates in the low 4% range. If interest rates rise considerably—which just about everyone expects—rental rates can be expected to rise proportionately as landlords cover the added expense. But those who buy a home lock in the lower interest rate: the ‘price of money!’  

• Buying a Home Yields Predictable Cash Flow

When you buy a home, your mortgage comes with a repayment schedule that shows you exactly how much you are required to pay each month until the end of the loan’s term. With a fixed rate mortgage, the monthly payment amount is an iron-clad guarantee of what you will need to budget. With a fixed rate loan, the dollar amount will usually stay the same (or even fall as the mortgage nears its end). Conversely, unless a major change occurs in the rental market, rental prices will continue going up. And the common sense of consumers knows what to expect, reflected in last month’s Mortgage Reports headline:

“Consumers Expect Rents to Rise 2x Faster Than Home Prices in 2015”

·       Buying is a Long-Term Investment for Stability

In addition to the price rise factor, renters will have to keep paying rent for a lifetime—while homeowners eventually get to stop making mortgage payments. Anyone buying a home in their 30’s can expect to have paid for it before they reach retirement. That’s very good news, because their living expenses will go down around the same time they start making less money. In contrast, renting just keeps getting more expensive…which can put extra financial pressure on retirees.

If you find yourself on the cusp of renting or buying a home in Evansville, today’s rates should weigh heavily in your decision. If you find that it makes financial sense to buy, the next step is easy: give me a call! You can reach me on my cell phone 812-499-9234 or email: Rolando@RolandoTrentini.com

Market Watch October 2014

     I have a lot of interesting information and statistics for this month’s Market Watch, but before I start that discussion I think I should share some basic real estate concepts.  First, basic economic concepts apply to real estate.  For example, increased supply results in decreased demand, which lowers prices.  Conversely decreased supply results in increased demand, which increases prices.  The catch to this basic principle is that other factors such as the general state of the economy, the job market, interest rates and consumer optimism also affect prices as well as buyers and sellers desire to buy or sell homes.  With this most basic background let’s now explore some interesting trends in the market.

     First, according to The Wall Street Journal, new home sales (as opposed to previously owned homes) were at their highest level in August since May of 2008.  These sales were up 33% compared to August of last year.  Although this is clearly good news, I think we should view this in context of very low new home construction over the past few years.  Good numbers in August suggest full year totals of between 400,000 and 450,000 new home sales for all of 2014.  Although this is clearly an improvement from less than 250,000 sales a few years ago, it still falls far short of the 1 million new homes that sold at the height of the real estate boom.  Increased new home sales have left only a 4.8 month supply of new homes on the market.

     A second fact, according to RIS Media, is that prices increased for the 30^th consecutive month when compared to the previous year.  This statistic seems pretty clear.  Home prices continue to rise at what has remained a pretty steady pace.  The median price of a home nationwide is now $219,000.

   My third fact, again according to RIS Media is that in the 2^nd quarter of 2014, 950,000 homes returned to a positive equity situation, meaning that these homes are now worth more than the outstanding mortgage balance on those homes.  As you may recall, when the real estate market was adversely affected by the last recession many homes nationwide lost value and owners owed more in mortgage loans that their homes were worth.  RIS claims that as of today, 14.9% of homes nationwide are still in a negative equity situation but that represents 2 million fewer homes underwater than just a year ago.

     I think we can draw several conclusions from this data.  First, the real estate market is on sound ground and continues to improve.  Second, new home construction continues to recover.  Third, prices continue to rise slowly.  And finally inventory levels are still lower than normal and there is demand for more listings.

    All of the information in this month’s Market Watch is national data although I believe that the same trends I’ve just discussed apply locally.  As is always the case with real estate, demand and price for homes is always specific to one individual home.  Please give me a call if you would like to discuss the value of your house or the home you are considering buying. You can reach me on my cell phone 812-499-9234 or email: Rolando@RolandoTrentini.com 

If you want to do some research before we talk, the most accurate information on our local real estate market is always at FCTuckerEmge.com.