You’ve poured a great deal of time, energy and money into your investment home. The carpet is new, the bathroom has been redone and the yard is immaculate. So how do you begin identifying tenants who will be a good fit for your property?
Be clear up front. If you’ve got specific requirements—for example, the tenant can only have one pet or must be willing to sign a one-year lease—make sure those are clear in ads and Internet listings. This will save you time of showing the property to unqualified candidates. In the event that you must deny an application, you must make sure you’re comply with the federal Fair Housing Act.
Ask questions. Among the best questions to ask prospective tenants are “How did you find out about this property?”, “When are you moving?” and “How many cars do you have?” These kinds of questions gauge the person’s level of interest in the property; signal times when you’ll need to educate prospective tenants about property rules and responsibilities; and help you identify flaws in the property that need to be overcome before others take the official tour.
Verify income and employment. Assuming that first visit goes well, you want to be sure that the prospective tenant is able to compensate you for your investment with a timely rent check. In general, tenants should have a combined gross income of three times the monthly rent, though you can set your own formula as needed. Also determine whether you’ll permit co-signers on an as-needed basis.
Moreover, request documentation to ensure the prospective tenant has a reliable income, and verify that he or she can pay security deposits and other advance payments such as one or two months’ rent in order to move in.
Check out references. It’s always a good ideas to get landlord references, and in many cases it’s also helpful to get an alternative tenant contact form—a document with information such as the prospective tenant’s name, current address, email, some form of ID and a handful of other details.
The bottom line is that landlords must treat prospective tenants with the utmost respect, be knowledgeable of laws prohibiting discrimination and ask the right questions to find the best tenants for a particular investment property. When all of those factors come together, the process is rewarding for everyone.
Whether you’re a first-time rental property owner or a veteran real estate investor, there’s a lot to remember about tenant management. While it’s easy to get bogged down in the details, here are two areas of owning a rental property that you won’t want to neglect:
The rules. Don’t skip any of your responsibilities as a landlord. Take the time to make sure that you have up-to-date lease agreements and that you’re following all city, state and federal guidelines for landlords. Make sure you’re following all laws regarding the screening of potential tenants. Landlord organizations and real estate attorneys can help keep you on the right track. Making sure you’re following all landlord rules and laws can help prevent costly problems and lawsuits.
Repair and maintenance costs. It’s always a good idea to set aside money for the repair and maintenance of the properties you own. Neglecting the upkeep of your investment properties is never a good idea. Well-maintained properties often attract better tenants.
The busiest home buying seasons are spring and summer. Summer is an ideal for many people and families to make a move and settle in before fall, the start of school and the holidays. But there can be some advantages to shopping for a home in the winter.
In the winter, you’ll typically have less competition from other buyers. That means you may be able to avoid the multiple-offer situations and bidding wars many buyers have experienced in the spring and summer months. The selection of available properties probably will not be as large as it is in spring and summer, but the owners of the homes that are on the market in winter are often more serious and motivated to sell.
No matter what time of year you decide to look for your new home, a real estate agent can be a valuable partner in the home buying process, helping you understand what to expect and guiding you through the home-buying process.
Congratulations! You are using your VA loan benefit to buy a home.
Once you are under contract on a home, the lender will tell you that there needs to be a VA appraisal ordered. People usually have many questions about appraisals. The following are some of the most common ones we receive along with their answers.
Are appraisals inspections?
No, an appraisal by Veteran Affairs (VA) is not an inspection of the home. It is simply an assessment of the value of it.
Yes, to use a VA loan, you must have a VA appraisal performed.
The VA appraiser will consider the construction, condition, age of the home and the property values of neighboring homes. The appraiser will look at three homes in the area that are similar in size and age. For some locations, it can be difficult to find three comparables, so there are instances where they will only use one.
There are some options if the VA appraisal comes back lower than the home’s purchase price stated on the contract.
1. The buyer can pay the difference between the amount the appraiser has valued the home and purchase price.
2. The buyer can negotiate with the seller to lower the purchase price.
3. The buyer can request switching the loan to a conventional one and have another appraisal performed.
No, the VA will only do one appraisal even if the value of the home is less than what the buyer believes is accurate.
The appraiser assesses the home to make sure it meets VA and lender guidelines. These guidelines include the property being safe, which means it is safe structurally and free from health hazards.
Some other guidelines include:
Keep this in mind: A VA appraisal is for the buyer’s benefit. It protects the buyer (that’s YOU!) from overpaying for a home or purchasing one that may have serious issues that could end up costing thousands of dollars to repair. The information from the appraiser can be used to decide if you would like to continue with the purchase of the home or if you would be better off finding another home. Have more questions? Allied Mortgage Group can help.
Ever hear the terms REO, bank-owned, short sale or HUD home? And have you even wondered what the heck all those terms mean? Here are some definitions used to describe common types of distressed properties:
Foreclosure: This refers to the process of a lender taking possession of a property from an owner who isn’t paying their mortgage as promised. After the process of foreclosure is completed and the homeowner has left, the property is offered for sale at auction.
REO or bank owned: The terms REO – short for the term “real-estate owned” – and “bank-owned” both refer to properties that are owned by banks. Properties gain that distinction after they go through foreclosure and fail to sell at auction. Adding to the confusion is that REOs and bank-owned properties are often called foreclosures. REOs, or bank-owned properties typically are offered for sale by real-estate agents and sold in “as-is” condition, meaning any repairs will be up to the buyer.
Short sale: This term refers to a property being offered for sale by a homeowner who owes more on their mortgage than their home is worth. Because the seller is asking a bank to accept less than they are owed, the bank is involved in the sale process and ultimately must give final approval to the selling price. That makes short sales some of the most complex and time-consuming real estate transactions.
HUD home: Still with me? This term refers to a home that was originally purchased with a loan insured by the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development, or HUD. The FHA guarantees loans made by private lenders, so if a borrower defaults on an FHA loan, the agency will pay off the lender and take responsibility for the property. At that point, the property becomes a “HUD” home and is offered for sale in much the same way as a bank sells an REO.