A rental property can be a great investment and has the potential for a solid return. Real estate should never be purchased frivolously and research should be done before going forward. You must make sure that you are financially able to deal with any surprises, whether human related, or basic property maintenance. There is an obvious possibility of a decent income from a rental property, and this can attract many people. It is important to look at all factors that come with being a landlord.
First of all, it will be your home. If the person you are renting to does not treat the house well, or if they suddenly lose their job, are you the type of person who can evict them. In regard to your finances, it does not matter if it is a single post college tenant, or a family of five. You still need to pay off the loan. Look at other houses in the area that interests you to decide what amount of loan you need and how much rent can be charged. The rent needs to pay the mortgage, plus whatever reasonable amount you want to come back to you. Normal maintenance will be necessary, but remember surprises do come up even in the best of circumstances. It is not a good situation if you would need another loan just for a maintenance issue, so do the math and be sure you can cover the what ifs. If you are able to successfully manage all of these factors, rental property investing could be a great way to financial stability.
Mortgage rates tumbled yesterday as a result of the Fed announcement that they will be buying mortgage-backed securities!
What does this mean to you? 30-yr fixed rates are now at about 5.25% with 1pt OR 5.5% with no points!!!
Compare this to average rates just from earlier this week – 5.75% with 1pt or 6.125% with no points. That’s almost a $100/mo payment savings in just two days!
And … if you compare this to Freddie Mac’s estimated average 30-yr rate of 6.3% for next year, that’s about a $230/mo savings.
Marie Funston | Senior Mortgage Advisor | 750-7270
The economy is heading for a recession. The housing market has slowed down considerably among bad loans and unemployment nationwide is on the rise. The country is definitely having some issues. The economic woes can be felt nationally, yet there are a few cities that have felt less of an effect than others. At the top of that list is Austin, Texas. Almost incredibly, this city’s housing market has remained steady. Unemployment remains low and there has even been an increase in jobs.
There are several factors that have helped push Austin above most of the crisis. First of all, businesses still love it here. The economic publication Site Selection has ranked Austin third on the list of best places to start a business. There is an ease here to getting started in regard to permits and regulations that encourages businesses to settle here. Austin is also listed third on the nation’s Recession-Proof cities, according to the Austin Business Journal. The housing market here has of course slowed down, but because Austin never experienced the soaring home prices of the last few years, it wasn’t a very long fall. The median home price in Austin is still a manageable $328,000. The important thing is that home prices here continue to match with salaries, meaning homes in Austin are still affordable.
Most important to a struggling economy, Austin has actually increased jobs here. With new companies heading here each year, and others expanding, about 20,000 jobs were added in the past year. Unemployment here is practically nonexistent. Austin is expected to continue growing and recover from the smaller economic impacts within the next year or so.
Living green these days is becoming the norm. Austin has been a city that has embraced the concept of conservation and living green. Many local builders now offer green alternatives for building materials as well as appliances. In keeping with this attitude, new Austin business resident FTL Solar has announced $15 million in investments for PowerMods, a 20×20 tent-like structure run strictly on solar power. The company has stated its goal for the year is $40 million in investments.
The PowerMod can be used in a variety of ways, including as disaster relief shelters and remote medical stations. The military has also found uses for these structures. Each module can be used alone, or combined with hundreds of others. The power generated can either be stored for future use, or can be used to run computers, lights and radios for varying times. Last week, the company also introduced the PromoMod, which has a secondary purpose of advertising. FTL is hoping these tents will be used at outdoor fairs and markets as a way for businesses to promote themselves while caring for the environment. Formerly headquartered in New York, the company moved to Austin last month.
FTL continues to receive grants from various sources. With a specific goal in sight, the company hopes to bring relief to many with these environmentally friendly modules. The company was formed two years ago as an offshoot of FTL Design Engineering Studio as a way of promoting green living. Austin is the perfect city for the company to reach its funding goal.
Overall, the state of Texas has done well during the national economic crisis that began last year. The housing market in many cities, such as Austin, has dipped a bit, but not nearly as bad as in other states. The unemployment rate is still lower than other states as well. Of course, Texas has not been immune to it all. A recent report shows a definite decline in commercial investments from last year.
The latest issue of Southwest Economy, a publication by the Federal Reserve Bank of Dallas, states that by the end of August this year, overall commercial sales stood at about $14 billion statewide. Last year during the same time frame, actual sales were above $31 billion. The report also states that commercial real estate, including office space and retail, are down by 54%. The credit crunch and recent Wall Street woes have been blamed for this decline. Due to the credit crisis, lending practices are changing. These days it is harder for everyone to achieve the credit necessary for buying a home, let alone invest in commercial real estate. Investors are seeking higher risk premiums which will also affect the economy in Texas.
It is a difficult time for our country, and Texas cannot remain unaffected by the national economic health. Remember, though, that throughout this ordeal, that there are many factors still keeping Texas above other states. The housing market and employment rates are still steady, even if declined. There are still many companies moving to Texas. Though it may be another year or two before most experts believe the economy will start to really steady itself, Texas remains a good investment state.
Austin Investors Interests LLC, a local group that monitors the market in Austin, has projected a slowdown in apartment rentals within the first two quarters of next year. There are more than 12,000 apartments expected to be built during that time. During this last quarter, more than 2,500 were added to the market. These complexes will be in and around downtown, making them convenient to work and shopping. Occupancy has declined, and with so many new options coming up, the study projects it will continue.
The previous quarter shows an occupancy drop of 94.1% to 91.4% from the same quarter last year. Since the quarter includes the months of August and September when many college students are returning to the area, the drop has caused some concern. Many property managers are adding incentives to rentals in the area, including free rent and possibly discounts. Some are offering extended leasing options to reduce the rate of move outs during the year. The average rental is currently $821 a month. With the housing market as it is, many homeowners are choosing to rent their home as opposed to selling, which has also helped add to the slowdown for apartments. Some feel that metro Austin is setting itself up for an immediate downturn in occupancy rate and predict an overall decrease in rent of 3-5%. The job market here has remained steady, but still slow, which will also affect the rates. The next twelve months will be tight in Austin as the city works to fill all the new apartments.
The mortgage industry is full of confusing terms and jargon. Many of the terms apply directly to the forms of loans. The Loans are often referred to by shortened acronyms, but not all. Some are simply put, but not clarified by eligibility. Two most common terms are Government Loans and Conventional Loans.
Government Loans - any mortgage insured by the FHA, or VA, or RHS constitutes a government mortgage. This includes loans to veterans, and home loans available through the rural housing service.
Conventional Loans - any mortgage financing that comes from the traditional lending institutions. This would include any loan made by a bank, mortgage company, or nontraditional owner financing.
So that sounds simple enough right? It should be, unfortunately many of the large mortgage brokerages and companies fail to explain this very simple point, which will lead to some confusion down the road. To further elaborate on some additional options and terms related to loans we have included the following terms:
Assumable Mortgage - A mortgage can be assumed by a buyer once they have qualified for all requirements made by the seller’s mortgage company. This is completed at the time of sale.
Balloon Mortgage - This is when a mortgage is written so the payments are steady for a specified period of time, and at a future date requires the remainder of the total paid in full. An example of this would be a 30 year amortization of a loan that comes due in 15 years. Payment until the 15th year may be around 500 a month, however on the date determined the remainder of a 100 thousand dollar loan becomes due in full.
VA mortgage aka VA Loan - a mortgage insured by the Veterans Administration. This applies to qualified veterans only, and encourages private mortgage lenders to write loans for military and former military personal.
The Federal Reserve has recently reduced interest rates to a new low of only 1%. While this was done with the obvious hope of slowing an economic crisis, many feel it may not be enough. Some think it may actually serve to further hurt the economy. The possibility was left open for even lower rates in the future. Does this reduction actually help the economy?
The rate is currently as low as it has ever been. Never before has it been lowered to .5%, which seems to be an option for the Reserve if it feels it is necessary. Certainly, there has never been a 0% rate. That would mean banks are loaning money for free. How could this help the economy? Why would banks loan money for homes or education if they would not see any return on that investment? At this point, Americans are as afraid of a recession as they are of losing their jobs. Paychecks have been smaller and many nest eggs have been depleted. Even if rates are lowered at this point, most Americans are saving every extra penny they have, not looking for more debt. Consumer spending has been reaching new lows for the last couple of years, and is expected to come out below the norm for the July to September quarter. Lowering rates will most likely not encourage more spending. House prices are still dropping; the unemployment rate is still rising. “The economic damage of the financial panic has already been done, and the Fed is trying to limit the damage as best it can” predicts Mark Zandi, chief economist at Moody’s Economy.com. At this point, only time and careful financial planning will lead us out of this recession.
Purchasing a home will most likely be the largest investment made in a lifetime. It is a large decision that requires a lot of research and care. The two most basic factors encompass pretty much all the smaller details that need to be considered when deciding on a home. Those factors are the neighborhood and, of course, the potential house itself. By focusing in these major choices, you will be able to narrow down the list to what is best for you.
The neighborhood includes things such as quality of schools, your morning commute, and the overall appearance. Remember the broken window theory? Drive through the neighborhood and see how your would-be neighbors treat their properties. If the houses unkempt, perhaps you should be looking elsewhere. Consider the type of education you want your children to have. How close will you be to the school you want them to attend? Take a drive from the neighborhood to your job to determine if it is a decent trip. When you find the perfect neighborhood, it is time to find your dream home. Searching can be fun, but only if the necessities are already there. Determine your house size (number of rooms and bathrooms) fit your lifestyle. Add in any features you can’t live without, such as a fenced in yard or a pool. Look only for the homes that match your specific criteria. This will lessen the time you find visiting homes that don’t fit what you need. Take all of these factors into consideration to make your home search smoother and your new home perfect.
A rental property can be a great investment and has the potential for a solid return. Real estate should never be purchased frivolously and research should be done before going forward. You must make sure that you are financially able to deal with any surprises, whether human related, or basic property maintenance. There is an obvious possibility of a decent income from a rental property, and this can attract many people. It is important to look at all factors that come with being a landlord.
