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Tips For First Time Home Sellers

Much like buying your first home, selling it can be an intimidating process. Whether you are relocating or trying to find a property that will better accommodate your family’s needs, you probably have a lot on your mind. For most people, selling their home is also a time sensitive matter since they need to at least have an offer on it before buying their next one.

The good news is that the months of spring and summer are the best ones to list your property! With the kids out of school and the yards looking their best, most people want to move before the end of the summer. However, it is also the moment when your property will have more competition on the market, which is why you should have a strategic plan in mind.Selling your home

Since internet seemingly makes everything so easy and accessible, you might be tempted to skip the realtor fee and go the For Sale By Owner (FSBO) route. As a first-time home seller, it is a risky choice. Selling your house is a time-consuming process: you will need to market the property, stage it, and be present for all the showings and appointments. It also requires an in-depth knowledge of the real estate selling procedure, of the local market, and the legal implications and obligations as a homeowner. Finally, if the buyer uses a real estate agent, he or she will usually require a closing fee anyway.

Although real estate agents charge on average 6% of the selling price, you can often recoup that money since agent listings sell on average 20 days faster and for 20% more than a FSBO listing according to a study by the National Association of Realtors. Your real estate agent can save you a tremendous amount of time by taking care of the paperwork and organizing showings. He/she also has access to marketing tools FSBO sellers don’t to show off your listing to the largest number of potential buyers. Real estate agents are seasoned negotiators and are familiar with the local market so you can get the most bang for your buck. Finally, the sellers’ agent usually split his or her fee with the buyers’ agent.

Finding a trusted real estate partner can make or break a transaction, especially for a first-time home seller. It is always a good idea to interview several real estate agents before picking one that might the right fit for you. Don’t forget to ask them some key questions such as:

  • How long have you been working as a real estate agent? Is it your full-time job?
  • Are you familiar with the area? Have you helped sell or buy houses in my neighborhood?
  • Which marketing tools do you use? How often and how do you communicate with your clients?

You can also save a significant amount of time and money by taking care of some of the steps to sell your home yourself before hiring a real estate agent. Staging and decluttering to make your home as appealing as possible is crucial. Better Homes and Gardens also recommends giving as much attention to the outside curb appeal to indoor staging: some low-cost improvements such as “sweeping the front stoop, cleaning windows, covering rocks with fresh mulch, or painting your front door a striking color” can improve your value.

Listing your home to sell can be a nerve-wracking process, but the right partner and a little elbow grease can go a long way. Spring is a great time to sell your home. Best of luck!

How To Finance A Distressed Property

Distressed properties like bank-owned houses can make excellent real estate investments since they are often priced below market value. It could be the perfect occasion to acquire “the worst house in the best neighborhood,” in other words the real estate investment Holy Grail. However, financing an investment property can be tricky, and financing a distressed property comes with its own set of difficulties. You are not typically dealing with a homeowner, but with a bank which has its individual requirements and agenda. Besides, distressed properties are often in bad condition which is great if you are planning on flipping the house, but not so great if you want to finance it.

Between relatively low prices and complicated financing, it is no surprise that many investors offer cash when purchasing an REO or a foreclosed property: it is quick, and many banks are willing to accept an offer below asking price if you can pay cash for the property. You will often see the mention “cash only” on the listings. It is something to keep in mind if you are planning to put an offer. However, financing a distressed home is possible and here is how to do it.

Conventional mortgages

Conventional mortgages are reasonably straightforward. However, they come with many requirements, both regarding yourself and the property you are planning on purchasing.

If you are planning to obtain a conventional mortgage to purchase a short sale or a bank-owned property as an investment, you must be able to prove to the bank that you are trustworthy. Many lenders will require you not only to have a excellent credit score, credit history and a low debt-to-income ratio, but also to be able to put out significant amount of cash towards a down payment (up to 30% of the purchase price) and cover any expenses for the first six months of the life of the loan.

Besides, the house must be in livable condition to be financeable. It is not always the case for distressed properties which have often suffered significant damages from being empty for sometimes years at the time, and have issues linked to neglect and delayed maintenance. Many bank-owned properties are sold “as-is.”

Finally, conventional mortgages take time. If you are competing with cash offers or a bidding war where time is of the essence, the property might sell before you are approved for the loan.

Hard money loans

Hard money loans, sometimes also called “fix-and-flip” loans, are a great option if you have a good track record as a real estate investor and if you are planning on selling the property quickly. Unlike conventional loans, which have a term of up to 30 years, hard money loans are short-term loans and must be paid usually before three years.

Their requirements in terms of credit score and down payments are lower than that of a conventional mortgage. They can be funded within days, which allows the borrower to move quickly. Besides, hard money mortgages issued based on the expected value after the property is rehabbed if it is in bad condition which gives the borrower access to larger loans.

However, these advantages come with a price. The interest rates are significantly higher, and the lenders will require proof of your experience as a real estate investor, such as a list of past projects, contractor estimates, and scope of work, in order to mitigate the risks.

Using the equity on your primary residence

If you do not have the real estate experience necessary to qualify for a hard money loan or the cash and credit history for a conventional loan, you may be able to use the equity that you built in your primary residence to put in a cash offer and purchase a distressed property.

If you have built equity into your primary residence (you will usually need at least 20% or more to qualify), there are two different ways you can tap into it without selling it:

  • Cash-out refinancing: Refinancing consist in taking on a new loan to pay off your mortgage. With a cash-out refi, you can borrow more than what you currently owe on your property and use the extra money as you please. You can usually borrow up to 80$ of the value of the house, depending on your lender’s requirements and your personal credit history.
  • Home Equity Line of Credit (HELOC): Unlike a cash-out refinancing, where you receive a lump sum of money, a HELOC lets you borrow money as needed using your home as collateral, like a credit card. Rates are usually higher than a cash-out refinancing, but closing costs might be lower.

Non-traditional lenders

Finally, non-traditional lenders may be more kin to finance a distressed property than traditional ones. However, you will need to do your homework before approaching them to present a viable business plan and all the estimates you may need to convince them.

The National Real Estate Investors Association (REIA) may be able to direct you towards private groups and clubs interested in investing in real estate. Networking is key to identify potential lenders and establish your reputation.

Your friends and family may be willing to lend you money in exchange for a share of the profits. If you have time before your retirement, you might be able to pull funds from your IRA or 401k account

In conclusion, financing a distressed property can be a challenge. However, it is possible and gets easier as you establish your reputation as a real estate investor. An excellent real estate management company can not only help you find properties with business potential, but also supervise the rehabilitation process.

How To Finance An Investment Property

Buying an investment property may be one of the best financial moves you could make with your hard-earned money. Real estate, in general, has a proven track record of being an excellent investment in the long run, but single-family homes and condos can also be a financial burden. On the other hand, an investment property is a great way to generate passive income.

However, financing an investment property is a very different ballgame than funding a primary or even a secondary residence. Lenders are in general a lot stricter when it comes to offering mortgages to investors than they would be for someone financing their primary residence: after all, you are a lot more likely to default on your investment property mortgage than to put yourself at risk to lose the roof over your head.

This does not necessarily mean that you need to be a real estate tycoon with bottomless pockets to buy an investment property. Here are some ways you can finance your investment property.

Cash is king

In any real estate transaction, the person who can put the most money on the table is the most likely to win. It is even more the case with real estate investment. Since lenders consider investment property mortgages to be riskier than an owner-occupied one, they often require hefty cash amounts upfront.

For the average homebuyers, lenders require a down payment equivalent to 20% of the property at most. However, for an investment property you are not planning to occupy, lenders may require a higher down payment, especially if it is the first time you are investing in real estate. The more cash you can put aside, the lower your interest rate will be and the most likely you are to qualify for a mortgage.

In addition, lenders will often require that you have at least six months of cash reserve available per property (not only the investment property but also your primary residence and any other real estate investment you may own) to ensure that you will be able to pay for your mortgage even if the property stands empty.

For many distressed properties, cash is often the only option, and the majority of competitors will be willing to put an all-cash offer. It is something to keep in mind if you are considering investing in that market.

Be prepared

Any mortgage will require you to be ready to show the lender that you are trustworthy – even more so when it comes to investment loans. You should be prepared to show your lender that you have not only an excellent credit score (720 or higher is preferable) but also a good credit history and a low debt-to-income ratio.

If your credit score is below 740, you will need to take into account that you will be dealing with higher interest rates, higher lender fees, and a lower loan-to-value ratio. If your credit is mediocre, it is often wiser to wait before investing in real estate and take steps to improve your credit.

You should also be prepared to show that you can support the property independently. The lender will not take into account the potential income produced by the property when calculating your income. Prepare all the necessary documents to prove your income and financial situations, including bank statements, investment account, and retirement account statements, tax returns, etc.

Know your loan investment options

There are many different options when it comes to financing an investment property.

  • Conventional mortgages: Conventional mortgages for investment properties are relatively straight forward and similar to the ones you would use for a primary residence. The lender will consider your credit score and credit history to determine your mortgage. The main difference is that they will more likely require a higher down payment (between 25% and 30%) than what you would get for a primary residence.
  • Hard-money or fix-and-flip loans: Also known as “commercial real estate loans,” they are designed primarily for house flippers and professional real estate investors. The interest rates are higher than a conventional loan, they must be repaid a lot more quickly (between one and five years) and also carry higher upfront fees. However, they are also easier to qualify for as long as you have cash available and are quicker to obtain than a conventional loan.
  • Government-backed loans: Although VA, FHA, and USDA loans are not designed to be used by investors, first-time investors may still be able to finance a rental with up to four units as long as they occupy one of the units and the property is in satisfactory condition. The upside is a much lower down payment and more leniency regarding credit scores.

Find a flexible lender

Big banks tend to be less flexible than smaller lending institutions, such as neighborhood banks. Shop around to get the best rates and see what each lender offers to investors.

Dealing directly with the lender instead of using a mortgage broker will also help you make a stronger case for yourself. However, it can be a time-consuming process. If you choose to use a mortgage broker, make sure that he or she is familiar with the specificities of real estate investment financing. Some good questions to ask when interviewing a potential broker include “do you currently work with other investors?” “How many loans do you offer to investors?”

Think outside of the box

Financing an investment property may require some creative thinking on your part, especially if you don’t have large amounts of cash or if your credit score is less-than-ideal.

  • Get a Home Equity Line of Credit (HELOC): it is a popular option for investors, especially if you have built equity on your primary residence. A HELOC allows you to borrow against the value of your house like you would for a credit card. You can borrow as much or as little as you need up to 80% of the equity you have in your house. The monthly payments are often lower and more flexible than conventional mortgages.
  • Ask for seller financing: although it is not typical, the seller may be willing to offer you a private mortgage. To provide this type of funding, the seller must own the property free and clear. These loans are often short term (five to ten years) and often result in high monthly payments.
  • Look into peer-to-peer lending: if you have a history of successful real estate investments and a good credit history, you might want to check out lending sites like Prosper and LendingClub, which connect investors with individual lenders.
  • Bring in a co-investor: if you don’t qualify by yourself, it can be a good idea to find a business partner and pool your resources together to be eligible for a better mortgage and mitigate the risks.

In conclusion, financing an investment property might be tricky, but it can also be rewarding. A good investment property management can help direct you toward the best options for you.

How To Get A Down Payment For An Investment Property

Buying an investment property is a great way to put your money to work and generate passive income. However, there is one major obstacle that stops many would-be investors in their track: cash. and convincing a lender to give a mortgage for a property that may have a lot of potential but is not in the best of shapes is even trickier. Most investments properties do not qualify for down payment assistance programs unless you are planning to use it as your primary residence and do not accept gifts from friends or family members as a way to fund the down payment.

Not only most lenders will require a hefty down payment (usually between 25% and 30% for an investment property), but they may also require proof that you can support your investment property for at least six months even if it stands empty. If you are like most people and do not have tens of thousands of dollars in cash ready to invest, getting the down payment to buy an investment property might seem too great of an obstacle to overcome.

However, there are some ways you can get access to cash to invest in a real estate property and realize your dream of becoming a landlord.

Use the equity on your primary residence

If you have built a reasonable amount of equity on your house (at least 20%, 30% or more being preferable), you might be able to use that money without having to sell it. Taping into the equity another property is a very popular way to get considerable amounts of cash. There are two different ways to access this equity:

  • Do a cash-out refinance: this secondary mortgage allows you to borrow more on your home than what you currently owe and to receive the remaining amount as a lump sum of cash you can use as you see fit. They typically have relatively low-interest rates and a fixed interest rate for the life of the loan.
  • Get a Home Equity Line of Credit (HELOC): a HELOC essentially allows you to use your home as a credit card. You can borrow as little or as much as you need over a draw period (usually five to ten years) while paying interest only in a first time, then repay both interests and principal during a repayment period which lasts ten to 20 years. The interest rate is typically adjustable.

For both loans, you will have to pay closing costs – higher on a cash-out refi than on a HELOC. The amount of money you will have access to depends on how much equity you have on your home.

Purchasing a new home

Use your retirement fund.

If you are not planning to retire within a short time, you can use the funds of your 401(k) plan or IRA account as a source for a down payment. There are usually penalties for doing so, and you will need to pay interest on the money you borrow, but as you repay the loan with interest, that interest typically goes back into your retirement account.

Use your life insurance.

Using your life insurance to put money as a down payment for an investment property is another way to get cash without involving a third party. There are several options, some riskier than others, that allow you to withdraw money from your life insurance policy

You can withdraw limited sums of cash, which are non-taxable as long as you stay within the amount of premiums you’ve paid into the policy. However, your death benefit will be reduced based on the amount you withdraw.

You can also borrow from your life insurance issuer using your policy as collateral. The loan is typically subject to interest, which is added to your loan balance unless you pay out of pocket.

Bring in a partner

If you do not have enough cash by yourself, it can be a good idea to bring in a business partner in a joint venture to share the cash burden and the risks. The parties usually all contribute a set amount of cash for the down payment and get a bank loan together for the remainder.

Contract a private loan

Finally, you can contract a private loan from a friend, a family member, or an acquaintance based on your established relationship. The interest rate and terms of the loan must be negotiated directly with them, and they assume a position similar to a hard money lender.

Raising money for a down payment is a necessary first step when planning on purchasing an investment property. Establishing a trustworthy team, from a lenders to real estate agents and property management company, will determine the success of your venture.

Why Hiring A Property Management Company Is A Good Idea

Buying real estate properties can be a great way to invest your money. Tangible assets that can be leveraged and provide residual income? Score! However, the landlord game can also be intimidating and time-consuming. Although some real estate investors choose to manage their properties themselves, many prefer to hire a property management company instead.

The advantages are clear. Most investors do not have the time and knowledge to deal with the daily ins-and-outs of dealing with tenants and general maintenance. Besides, property management companies have invaluable local knowledge. They can help you not only find additional investment properties but also price your building right if you were to sell it.

Your Property Management Partner

On the downside, property management companies can be pricey. Depending on the company and the area you are planning to invest in, expect to spend on average 8% to 12% of the monthly rent for a general management fee. In addition, the property management company may charge you a leasing fee to find a new tenant, a set-up fee for each new account, an eviction fee, etc.

Nevertheless, although the cost might affect your profit margin, hiring a good property management is worth it in the long run. Look for a company with an in-depth local knowledge of the market you are planning to invest in. When interviewing potential candidates, ask them which other properties they are managing in the area, whether or not they offer emergency services, provide in-house maintenance, and oversee monthly accounting.

To build a fruitful long-term relationship with a property management company that will be an asset to your real estate portfolio, prefer businesses that offer a one-stop shop for all your needs. An excellent property management should not only take care of daily maintenance and tenant business but also provide insight on building your real estate investment portfolio and assist with buying, selling and flipping properties.

Thanks to low-interest rates and millennials postponing home ownership, it is a great time to invest in a long-term real-estate portfolio. A property management company can not only alleviate the hassle of daily obligations that come with being a landlord but also help expand your portfolio and build wealth for years to come.

Looking to invest in North Alabama?

Property investors from around the country are flocking towards Huntsville, AL and Northern Alabama. With notoriously landlord-friendly laws, relatively low home prices, and a constant flow of quality tenants thanks to the presence of the NASA’s Marshall Space Flight Center, many textile mills and the U.S. Army Aviation and Missile Command, the area has much to offer to potential investors. The third largest city in Alabama – nicknamed “Rocket City” – and its region, are the perfect place for those who are considering investing their hard-earned cash into real estate.

Whether you are interested in expanding your portfolio or saving for retirement, real estate is a long-proven alternative to volatile stock markets to get the most bang for your buck. It is a tangible asset that can be leveraged and provides predictable income. However, that is not to say that investing in real estate should be taken lightly.

Before buying an investment property, one should be familiar with the underlying mechanisms of this venture. Unlike buying a house you are planning to live and create memories in, a real estate investment should first and foremost make you money. It requires an extensive knowledge not only of real estate in general but also of the local market you are contemplating investing in.

A local property management is a crucial partner for the investor who does not live locally or may not have the time or qualifications to do extensive research on the available properties in terms of necessary repairs and potential ROI.

Being a landlord can be financially rewarding, but it can also be a time-consuming process. If you are not handy or are not interested in being on call to serve your tenants’ needs, from unclogging the toilets to collecting rent and potentially proceeding to evictions, a partnership with a property management company with a proven track record is your best bet.

Contact the experts at RCPM to help you in your investment strategy.  Our licensed team is backed with years of experience in this market and will find exactly what you’re looking for, and will expand your portfolio for long-term, financial growth.

Spring Home Maintenance Checklist

Spring has sprung! Now is the perfect time to get on your home maintenance to-do list, estimate the damages done to your property by the harsh winter weather, and prepare the season ahead. A thorough exam is essential to maintain the structural integrity and the longevity of your home.

Inspect your property from top to bottom

Wind, rain, and changing temperatures have likely taken their toll on your property. Inspect the building from the roof to the foundation, including spaces that are not usually lived-in like attics and basements.

On the outside, look for signs of damages, like chipping paint, holes, rotting wood or cracks in the concrete. Give particular attention to any sign of deterioration on the window and door sills and apply a layer of caulk if needed. Look for signs of dampness or mold indoors.

Clean out the gutters

Leaves and other debris tens to accumulate in your gutters in winter and can be a breeding ground for pests and insects. If not cleaned regularly, they could be prone to overflowing during heavy spring rains, causing damage to the siding. Reattach the gutters where they may have pulled away from the house and check that the downspouts have been installed correctly.

Look for signs of pest presence

Unwelcome guests may have taken their winter quarters into your property. Check the storage areas, especially attics and basements, for telltale signs of pests or rodents like droppings. Termites are particularly prone to make their appearance in spring, so call on to a professional immediately if you notice winged insects flying out of a hole in the woodwork.

Clean and service the AC units and the furnace

The furnace has been particularly solicited in the past few months and may need a thorough cleaning and tune-up. It is also time to get ready for the fast-approaching hot summer days by servicing the air conditioning system and cleaning up debris around the cooling units.

Check for leaks

Outside faucets are prone to freezing in the winter and should be winterized to keep the pipes from bursting. Make sure everything is in working order by turning on the water and placing a finger over the opening. If the water stops, the pipe may be damaged.

Spruce up the landscaping

Spring is a great time to add some curb appeal to your property. Clean up the lawn of any debris and check your sprinkler and irrigation systems. Now Is also the time to trim trees and bushes. Not only your yard will look better, but it will also prevent the moisture from accumulating along the foundation of your home, leading to mold and mildew. Neglected vegetation also provides easy access for outdoor spring bugs to move indoors.

Inspect the vents

Lint buildup in dryer vents can be a serious fire hazard. In addition, a clogged vent can eat up more of your utility bill as it will take longer to dry clothes. Make sure to flush out all the systems regularly.

Repair the decks

Rain and frost take a toll on the outdoor living spaces. Look for signs of discoloration and warping as well as rusty or loose nails. Replace the boards that are past their prime and treat them every 4 to 6 years.

Perform routine home safety checks

Finally, spring is a great time to ensure that all the home safety features, including your smoke and carbon monoxide detectors as well as the fire extinguishers, are all in working order.

As you embark on the spring weather this season, keep in mind that RCPM’s Total Maintenance team is here to help. Pest Control is left up to the tenant – however if you’re proactive about keeping things cleaned up around your home you should enjoy a pest-free environment.