If you’re fond of apartment living but want to own your home, a condo offers the best of both worlds. While buying a condo is similar to purchasing a home in many ways, the process differs in one major way. Your approval for a home loan depends on much more than just your income, down payment and credit record; it also depends on the characteristics of the condo building itself. Here are three things that can affect whether or not a bank will finance your condo purchase.
Owners vs. Investors
Condos are good investments because of the lower maintenance responsibilities, which is why many people purchase them in the first place. However, if a condo building has too many rental units owned by one investor and/or not enough owner-occupied units, Fannie Mae, Freddy Mac, and the Federal Housing Authority (FHA) won’t back loans for property in that facility. This means you won’t be approved by banks that use their guidelines to qualify buyers.
Fanny Mae and Freddy Mac stipulate at least 50 percent of the condos in a building must be occupied by the owners, and no more than 10 percent of the rental units can be owned by one investor. To be approved by the FHA, a condo must have 50 percent owner-occupied units but up to 50 percent of the units can be owned by one investor.
When shopping for a condo, check to see if the building is approved by one of these entities to ensure you’ll be able to secure a home loan when the time comes.
Another thing that can hurt your chances of getting financing for the condo of your dreams is the number of owners who are delinquent on their condo fees. This monthly fee is used to pay for maintenance and other services (e.g. pest control) the condo building may need. When a large number of owners don’t pay their fees as agreed, many problems can result.
First, the three government agencies mentioned previously won’t approve the building if the delinquency rate is over 15 percent, which means you’ll have a hard time getting a loan to finance your purchase.
Second, a high default rate may mean more special assessment fees charged by the condo association so it can pay for required maintenance and repairs, which means higher out-of-pocket costs for you. If the default rate is high and the condo is not requiring owners to pay special assessments to compensate, the property may not be receiving the care it needs to maintain its value, which can hurt you when it comes time to sell or refinance.
When talking to a representative from the condo association about condos for sale, inquire about the delinquency rate and what the association is doing to bring it in line if the rate is too high. It’s also a good idea to ask how many special assessments were issued during the previous year to get an idea of how often you’ll be expected to fork out extra money to help maintain the building.
Banks and the three loan guarantee agencies want to ensure they’ll still get their money if something happens to the condo building. Therefore, they all typically require the condo association to carry some type of insurance that covers the community in case disaster strikes. For example, the FHA requires the condo association carry master insurance that covers 100 percent of the replacement cost of the building.
Unfortunately, some condo associations have begun reducing coverage or eliminating the insurance policy altogether. Not only can this make it difficult for you to get approved for a loan, you may end up losing your investment altogether if something happens to the building that makes it unlivable and the associations doesn’t have enough insurance to cover losses.
In addition to asking if the condo is insured, ask to see a copy of the policy. Take this copy to your insurance broker to determine if the association has purchased enough coverage for the building.
For more information about things that can affect your approval for a condo loan or to purchase a place to live, contact a real estate agent.
It’s no surprise that you want to get as much for your home as you can when it comes time to put it up for sale. However, it’s not out of the ordinary for homeowners to lose out on thousands of dollars simply because of a few things they overlooked during the sale. Here are a few tips that can help you get top dollar for your home.
Don’t Get Too Personal
The same personal effects that give your home its personality may wind up turning off some buyers. After all, you want them to visual themselves living there – having your own personal stuff lying around can easily shatter that illusion.
Personal effects such as family photos, keepsakes and memorabilia should be put away on open house day. In the meantime, you can maximize your chances of a successful sale through home staging, which involves arranging your furniture so that it accentuates all of the positive attributes of your home.
Maximize Your Home’s Lighting
Brightening up your home by manipulating your home’s lighting can help draw in prospective buyers. In addition to upping the wattage of the light bulbs in your home, you should also ditch those dark-colored drapes, swap your darker lampshades for lighter-colored ones and trim nearby bushes, branches and hedges so that more light filters into your home.
No Pets, Please
You might love Fido or Fifi, but there’s no guarantee that prospective buyers will share that love. Pets can be a turn-off for some home buyers who equate energetic furballs with clutter and uncleanliness. So when it comes time for the open house tour, you may want to leave your pets with a friend or send them to a pet hotel for the day.
Resist the Urge for a Mammoth Makeover
Completely overhauling your bathroom or kitchen might seem like a good idea at first, but taking on such a major home improvement project prior to putting your home on the market could prove costly in the long run. After all, there’s no guarantee that you’ll recoup the costs of your major makeover from any sales proceeds you get.
Instead, focus on smaller and easier-to-handle modifications that can be done cheaply and quickly. These include giving your walls a fresh coat of paint, buying new curtains, cleaning up bathroom tile grout and replacing aging cabinet hardware, for instance.
Know Thy Agents
Your real estate agent can play a major role in a successful sale, so it’s important to consider who you hire to help sell your home. An ideal agent is one who knows his or her way around the multiple listing services (MLS), has a deep understanding of the neighborhood, and knows what it takes to make your home stand out to prospective buyers.
You should also make sure your agent uses online listings (with pictures and video footage) and other innovative tools to best market your home. Hiring an agent who isn’t on the ball when it comes to selling your home can easily leave your home to languish in the listings.
Always Keep Up Appearances
When selling your home, it’s important to keep it spotless at all times, since a buyer could want a tour of your home on short notice. With this in mind, make sure not to leave dirty dishes and linens lying around. Don’t neglect other cleaning tasks like vacuuming and dusting, since doing so could leave you off guard when a buyer shows up unexpectedly.
Keep Your Closets Half-Empty
If a prospective buyer decides to look inside your closets, what they’ll want to see is the potential for adequate storage. A packed closet suggests clutter, while a half-empty and neatly organized one not only demonstrates how the storage space works but also invites potential for how they’ll be able to use it.
If you live in a destination city for a major sporting event, you may be wondering how the influx of tourists will affect your daily life. You may also be wondering whether there’s any way you can profit from this event while avoiding the crowds yourself. If you’d rather not stick around for the hubbub and are willing to open your home to excited sports fans, you may want to consider putting your house into rental service for the duration of the event. Read on to learn more about how these types of lease arrangements are structured, as well as some factors you may want to consider if pursuing this option.
What types of homes are eligible for a temporary lease?
You don’t need to have a palatial property in order to lease your home for a sporting event — most spectators are just interested in a place to sleep, watch television, and perhaps cook dinner or breakfast. However, the size and location of your home will impact the price you’re able to fetch. Factors like off-street parking (or secure garage parking), a larger number of bedrooms and bathrooms, and close proximity of your home to the sporting event (or transportation to the sporting event) will increase its value as a rental.
If you’d like to rent out your home for the week of the event, your first task should be to check your state and city laws governing temporary rentals. Some jurisdictions may prohibit this, or have specific requirements you’ll need to fulfill (like obtaining a rental permit) before you’re legally permitted to rent out your home. You may also want to carefully look over your mortgage documents to ensure that there aren’t any clauses that could accelerate your mortgage if you use your home as a rental without notifying your lender.
What will you need to do to pursue this option?
Once you’ve determined that it’s legal for you to rent out your home temporarily, your best bet is to contact a commercial leasing company, such as Sunworld Group Inc. Although you can price and market your property yourself without paying any third-party management fees, these leasing companies have significantly more experience and market exposure at their disposal, and are generally able to better screen and select your tenants. When you utilize a third-party leasing company rather than directly renting to your tenants, your only interactions will be with this leasing company — you’ll likely never even meet your tenants.
The leasing company will ask you a number of questions about your home and may require you to supply photographs they can use to market your home to potential renters. When it comes to pricing, you may have a bit of room for negotiation — however, it’s unlikely you’ll be able to talk the leasing company into asking either substantially more or substantially less than the rate they charge for similar properties. The leasing company will keep a portion of this rent to help cover their costs incurred in marketing the property, screening renters, executing the lease agreement, and collecting payment.
You’ll also need to talk to your insurance agent. Because even the most staid renters may inadvertently damage your home or belongings, you’ll want to ensure that your homeowner’s insurance policy covers rental use. If this policy does not cover rental claims, you may be able to purchase a low-cost rider or temporary insurance policy that will help you pay for any needed repairs.
Finally, you’ll want to clean and stage your home. Any sensitive items — like personal or financial papers, valuables, guns, narcotic medications, or other items you don’t want guests or tenants pawing through — should go in a safe. If you don’t have a safe, or if all the objects you’d like to keep in it won’t fit, you may want to purchase a keyed door lock and deadbolt so that you can securely keep these items in a spare room.
When it comes to starting up a property portfolio, many budding investors have trouble getting off the mark. While their ideas and ambition may be great, they have trouble ensuring their first buy is the right one to act as a backbone for further investments. As such, what should you look for when making your first real estate purchase?
Choose an Area with Investment Potential
When choosing a neighborhood to invest in, it’s important that you don’t make a decision based on money alone. Many property investors aim for a specific end of the market and purchase either luxury properties or low-end, cheap apartments. However, landlords who adopt this approach run the risk of miscalculating value for money and don’t take additional factors into consideration that influence rent prices.
The attractiveness of a property does not rely entirely on the attractiveness of the home itself. Rather, you have to consider what local amenities are available and what your target tenant will be looking for in a property. To help you along, consider asking the questions below to get a feel for a neighborhood:
By answering the above questions, you’ll build up a good idea of the neighborhood you’re investing in and where the best properties are located.
Focus on Potential Rental Yield
The success stories of multi-millionaires and their massive investment portfolios can be enough to persuade start-up landlords that they can become rich overnight. Unfortunately, this isn’t the case, and you have to start off low before you can begin to build your property portfolio.
The best way to make profit when it comes to property development is to aim for properties with a high rental yield. This means properties that generate a large amount of rent compared to their purchase price, rather than hoping for a short-term boost in the price of the property. Rental yield is generally discussed in terms of annual percentage – a $300,000 property that rakes in $22,500 per year in rent would have a 7.5% yield.
When you purchase a property on a buy-to-let basis, you will usually take this on an interest-only agreement. This means that you will only pay off the interest that accrues on the house rather than paying off the entire mortgage. As such, the money that you generate from rental yield can be put into other investments, or saved towards a deposit on another property. This is how most investors work their way up the ladder, so by following this principal you’ll be in great company.
Practice Your Negotiation Skills
One of the major advantages of purchasing a property with the intention of letting it out is that you don’t have to wait on your current property selling before you have a deposit ready. This helps you enormously, as you will be seen as a buyer with much less risk than someone who is buying their property after selling their current home.
As such, you should use this to negotiate a discount in price. The majority of sellers will be looking for as quick a sale as possible, so that they themselves can move into another house. Your low risk, immediate sale can help you secure a property discount that may otherwise have been unattainable.
When it comes to real estate, it’s important you have professional support moving forward. As such, you should take time to choose a fully qualified broker with the experience and skills necessary to get your portfolio off to a great start.