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Check the Rental Market Daily! Decide Quickly!

This is no surprise to many of us in the property management field.  When I read  Rental Market Still Tightening: Moody’s 06/12/2012 BY: ESTHER CHO, it became quite clear why the rental inventory has dwindled to a point where potential tenants are scrambling to find a house.  Shopping, and taking days to make a decision, is no longer a good choice if you are pressed to find a new rental. 

With vacancies declining and rental prices rising, the climate in the housing industry is clearly warming up to rental properties. According to Moody’s Analytics, “weak income gains, favorable demographics, and the foreclosure crises” are all causing people to choose renting over buying, and demand for rent will remain solid over the next two years.

Between 2000 and 2008, real per capita income grew at an annualized rate of 2 percent compared to 0.8 percent in 2010 and 2011, according to the report. In addition, many households simply don’t have enough for a down payment, and until households gain more in terms of finances or confidence in the economy, fears of homeownership won’t be put aside.

A survey released by Integra Realty Resources reported 31 percent of respondents said a lack of a down payment was the main reason holding them back from making a purchase, 24 percent said it was the fear of making a bad investment, and 21 percent said the uncertainty of the economy was the main reason.

Another reason the rental market is booming is because of the emergence of a younger age group heading households. The younger age group are the least likely to own a home and more likely to rent, according to Moody’s.

While the overall rental rate is 35 percent, the renter rate for those between the ages of 25-29 is nearly 65 percent, and for those under 24 years old, it is 77 percent, according to the Census Bureau.

And, growth for those between the ages of 20-29 is not likely to slow down, either. The report stated that this group has been growing at an average pace of 0.9 percent from 2007-2011 and grew only 0.3 percent between 1990 and 2006.

Another factor helping to strengthen demand for rent is the foreclosure crises. As many former homeowners who were foreclosed on search for a new residence, single-family rentals have become the next best thing to owning a home since a previous foreclosure makes it difficult to obtain a mortgage. Foreclosures stay on one’s credit for 7 years, and some lenders do not approve of a loan within that period.

While rent is strengthening, Moody’s stated new construction is being developed that will keep rent prices from escalating. According to the report, developments with five or more multifamily units have increased from an average of 67,000 at the end of 2009 to 221,000 in the three months ending in April.

On the other hand, Moody’s waved away concerns for the increasing pace of multifamily construction and said apartment construction has actually fallen short of its normal pace. All the while single family rentals are also tightening as shown through the declining single-family vacancy rates.

So, with all the facts right here before you, if you are looking to rent, CHECK THE MARKET DAILY and make a decision quickly.

 

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NOT ONLY IMPORTANT….IT’S THE LAW!

NOT ONLY IMPORTANT….IT’S THE LAW!

Two years ago, we had earthquake swarms in the Reno/Sparks area.  Some of them were strong enough to shake file boxes off of shelves and spread documents all over the garage floor.  Along with the files were bottles containing all kinds of messy liquids.  Now, mix all that together and you have my dilemma.  Do I try and save all this or take a chance and destroy this mess?  Although it was a tedious and messy job, I had to do it.  The files were not only important…it is the law that I retain these records.

I looked at every piece of paper.  Keep or destroy?  Finally, it was complete.  There was a learning experience for me while sitting in the middle of all of that. Electronic storage.  I still keep hard copies of some documents along with my electronic storage for quick reference; but if they end up in a sticky mess on my garage floor…..out they go!

This guide for keeping records was sent to me by The First American Exchange Company with an invitation to share it.  I hope you find it useful.

Tax Record Keeping – What and How Long?

How much interest was paid on the mortgage?  Where are the receipts for our medical expenses?  Taxpayers ask questions like these every year as the tax filing deadline approaches (April 17th this year).

In addition to making it easier to prepare your tax return, good record keeping will help you manage your §1031 exchange transactions.  Proper records will help you support the items reported on your return, including the expenses incurred and how the basis was determined.

Record Storage – Whether you store records electronically or simply rely on your checkbook, keep your records in an orderly fashion and in a safe place.  In Revenue Procedure 97-22 the IRS requires that an electronic storage system ensure an accurate and complete transfer of the hardcopy records to an electronic storage media that will index, store, preserve, retrieve, and reproduce the electronically stored records.  Once you are in compliance with these procedures you may then destroy the original records.

What to Keep – In Publication 552, the IRS sets forth the basic records that everyone should keep for proof of income and expenses.  For items concerning your income you should keep:  Form(s) W-2, 1099, 2439 and K-1, as well as bank, brokerage and mutual fund statements.  With regard to expenses, keep: sales slips; invoices; receipts; canceled checks or other proof of payment; and written communications from qualified charities.  For your home, keep: closing statements; purchase and sale invoices; proofs of payment; insurance records; and receipts for improvement costs.

How Long? – Once you determine what records to keep, the next question is:  How long should you keep them?  In general, you must keep the records until the statutory limitations period runs out for that return.  The period of limitations is the time during which you can amend your return to claim a credit or refund or the IRS can assess additional tax.  In most cases the limitation period is three years.  There is no limit in the event you file a fraudulent return.

§1031 Exchanges – When you defer taxes through a §1031 exchange your basis in the property you receive is the same as the basis of the property you gave up, subject to some adjustments. You must keep the records on both the old and the new property until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition.

Non-Tax Purposes – Think twice before disposing of your records.  Even though you may not need them for tax purposes, you may need them for other reasons, such as insurance or medical care.

 

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YOUR CREDIT SCORE OPENS THE DOOR TO YOUR NEW HOME

Although lenders will offer suggestions regarding increasing your credit score and your loan to value ratios,  when you don’t know where your need to be, how do you know when you get there?  This is especially the case now when your destination keeps changing.

Capital Economics, an analytics firm, expects the housing crisis to end this year, according to a report released March 16, 2012. One of the reasons: loosening credit.

They note the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings. Along with this, banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”  In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.

While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.

We realize how specialized this information is and how it differs by lender and type of mortgage.  Give us a call and we will share current conditions with you and assist you through the process.   That is our expertise.  We look forward to meeting you.

 

 

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ARE WE AT THE BOTTOM YET?

Boy if I had the answer, I would be making a lot more money some place else than trying to give you my best thoughts below.  The one thing I do know is that it will be real clear when we see it in the rear view mirror.

The answer will vary considerably in price range and areas of the community you live in. Starting last fall the decline leveled off and today we are pretty stable.  For the last few months the number of sales increased and definitely above last year at the same time.  Prices continue to slip a little but not at the rate we have seen in the last couple years. But then again we have seen a month or two where the average price has gone up.

In a recent article, “Clear Capital sees signs of market stability as we move into the coming months.

Further they said, “the median price paid for distressed properties has started to rise, indicating the REO market is seeing increased activity toward the upper end of the price range and helping to rein in the depreciating trend of the past several months.”

In Nevada the number of REO homes coming on the market has dried up based on a recent NV Supreme Court decision regarding how the big banks handled foreclosures.  When this is resolved, we could see a flood on the market or based on some new proposed government programs, the banks might have to step back and provide better financing programs to the distressed home owners to prevent foreclosure. Only time will sort this mess out.

At the moment, I feel we are wallowing at or near the bottom, so I hope you do not see it in the rear view mirror. Call us and let’s review your specific needs and objective to see if the time is right for you.

 

Aloha,

Pete Sanborn

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Property Management ALERT!

How does your property management company show your property???

Don’t assume!  Most property management companies will give anyone with a drivers license and a $20.00 deposit the keys to your home.  They simply ask to see the house, and off they go alone…..to do whatever!

 

We ALWAYS show your home personally.  We ALWAYS watch out for you!

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Reputation or Relationship

Is it Reputation or simply Relationship that counts most when you choose a Realtor?

Very seldom does someone call me and say, “I’ve checked many realtors’ reputations and their accomplishments and have decided to give you my business.”   No, more likely it is, “You worked with my friend Mario and he said I should give you a call.”

What is happening here is, I have a good relationship with Mario, you have a good relationship with Mario, we will have a good relationship with each other based on that.  OK.

Why do I have a good relationship with Mario?  It isn’t because we both like rock climbing!  I seriously doubt it.  I’m pretty sure it is because I marketed and sold his house and helped him find a house that thrilled his growing family.  I did all this “with” Mario.   He was part of it all.

So the question still remains:  Reputation or Relationship?  Feels like both to me.

Best,