Real Estate Investing 101

Welcome to Real Estate Investing 101

Welcome to a different kind of real estate investment site.  This is not a get-rich-quick site. We are not selling seminars, books, DVD's or webinars. You won't have some salesperson calling or emailing you. We don't even have a widget that will try to get into your wallet.

Our goal is to provide both new and experienced real estate investors with information and insights gained by our twenty-plus years in the acquisition, management and sale of rental property. We have pulled together a variety of essays, data and information designed to help you be a more intelligent and profitable real estate investor.

Greater Phoenix Rental Market Showing Strength

I was in a workshop with Cromford Report guru Mike Orr a couple days ago. He mentioned ARMLS data shows strength in the Greater Phoenix rental market. Specifically, he said the active rental listings during 2009 hovered between 8000 & 9500 rental listings. Today’s ARMLS numbers for all types of rentals popped up at 6339.

Mind you, not all rentals are on ARMLS. Many rentals are advertised using other media, yet I believe the ARMLS numbers show a trend. I have put called into AZCentral.com and Rent.com to see if they have similar figures. When I get them I’ll update this post.

In the meantime, let’s look at some ARMLS single family home rental numbers; The data is pretty telling. The table below shows the number of active rental listings as of this post,  as well as the number of signed contracts year-to-date in 2010.

NOTE: ALL DATA IS FOR SINGLE FAMILY HOMES ONLY.

City	# of Active SFH Rental Listings on 2/26/2010	Signed SFH Rental Contracts Jan/Feb 2010
Valley Wide	3352	3263
Phoenix	670	668
Chandler	142	266
Glendale	136	177
Peoria	143	156
Anthem	51	71
Scottsdale	623	280

As you can see,  the number of active listings is about 50% of the signed contracts numbers. This indicates the inventory is turning over approximately every 2 months.

Chandler and Anthem are showing great strength with the inventory turn over in the 1 month range while Scottsdale is relatively sluggish with a turnover rate of approximately 4 months.

Provided that the ARMLS numbers represent a general market trend, landlords are seeing good news for the future. Add to this the number of home owners being displaced by foreclosure or short sales and the 2010 rental market is looking good.

If you would like us to run this data report for you, we’d be delighted. We can provide results by city or zip code.

Best to you,

Gene Urban & Ron Urban
The Urban Team at Realty Executives
602-234-5777

Information is deemed reliable, but not guaranteed. Data provided by ARMLS.

How to Reduce and Deal With Criminal Acts By Tenants

Crime and criminal acts by tenants is a growing problem for landlords. Meth labs, distribution of drugs, and other unsavory activities cause damage and can create a myriad of problems for a landlord or property manager.

One of the full-time property managers in our brokerage, Martha Zabala, gave me a copy of an addendum she uses with her rental agreements. Martha has a reputation for being a tough, yet fair property manager who likes to cross all the "t's" and dot all the "i's". Thus, it comes as no surprise she is ahead of the curve on a problem that is likely to get worse until the economy heals a bit.

Martha says this document has helped execute quick evictions on tenants who violate its conditions and makes those who have evil plans think twice before renting your property.

Below is a link to the "Crime Free Addendum to the Rental Agreement" she uses. You'll want to run it by your attorney to adjust it to conform with laws and code in your state and city. This particular document was drawn up for use in Arizona and the language and references are those of Arizona.

Download CRIME FREE ADDENDUM TQ RENTAL AGREEMENT.doc (19.5K)

We hope this information helps keep your real estate investments safe and happy.

Ron Urban & Gene Urban
The Urban Team at Realty Executives
602-234-5777

Can I Buy A Home With An IRS Tax Lien, Maybe

We've seen a few deals come by where an IRS tax lien showed up during our due diligence.  Our mortgage friend, Ron Hall, from BNC National Bank just sent us this article that explores this subject. If you have more questions, give Ron a call at 623-293-6970 or pop him an email at rhall@bncnationalbank.com. Here is what Ron has to say:

Many home buyers and real estate professionals find out they are dealing with a tax lien and assume that this buyer is done and move on to the next client.

I am here to tell you that is a HUGE mistake. In FHA lending the rule of thumb is that if the collection can affect title it has to be paid off, well that’s a guideline not a rule.

A couple of things come into play that most people are not aware of: First, is there a payment arrangement? In this case can you show that you have set up a payment plan with the IRS and have made those payments in a timely manner? The gold standard here is 12 months of canceled checks as proof.  If the answer to that is yes the second and very little known tool is… Will the IRS subordinate the lien to the mortgage? We’ll most of the time that answer is YES. Think about it for a minute, you owe the tax guy some money, you want to buy a home, so you ask the IRS to subordinate the lien so that you can accumulate an asset that they can collect against in the future if you default. Is there really a downside for them?

Hope this info helps provide some options and clarity to those who face buying a home with an IRS tax lien.

Gene Urban
www.UrbanTeamAz.com
602-234-5777

Information is deemed accurate but not guaranteed.

Flipping Homes Just Got Easier With New FHA Guidelines

Good news for residential real estate investors who are flipping properties. Last Friday FHA issued a waiver on the 90 day flipping rule. In the past, a real estate investor had to let a property "season" for a minimum of 90 days before they could sell it to a buyer using an FHA loan product. Since many of the flips were in the under $150,000 range, FHA buyers were a big part of the market.Under the new FHA guidelines, the waiver of the 90 day rule allows an investor to put the property on the market immediately with the following restrictions.

1. Waiver takes effect February 1, 2010 and will last for one year unless extended.
2. Investors are now exempt from the 90 day seasoning rule.
3. All transactions must be arms-length.
4. No identity of interest can exist between the buyer and seller.

There are a few more considerations in the guidelines. We understand that homes marketed for more than 20% of purchase price will need to substantiate the increased value. So keep all your receipts for costs incurred in the renovation.

Investors should also understand that appraisers will still evaluate the price of the home based on current market value. We advise performing a detailed evaluation of the neighborhood you are investing in and plan your expenditures wisely. You don't want to do all this work only to find you have overbuilt for the neighborhood.

Best to you and thanks for following us on Real Estate Investing 101.

Gene Urban and Ron Urban
The Urban Team at Realty Executives
602-234-5777

our other sites:

www.SearchforHomesinPhoenix.com -- The best real estate search site for Greater Phoenix

www.UrbanLifeBlog.com -- Downtown and Central Phoenix Information

www.Short-Sale-Phoenix.com -- Everything you wanted to know about short sales.

Section 8 Housing and the Benefits to Landlords In Arizona

Section 8 Housing is one of the rental vehicles available to landlords. In our opinion, it has received an unwarranted bad reputation. Many feel the program will bring bad tenants and problems when in fact, most landlords who utilize the program are happy.

The city of Phoenix Housing Department, the largest provider of Section 8 housing in Arizona, have a web site dedicated to information about this program. Among the many topics are the benefits to landlords that we have summarized below.

There are several benefits to landlords who participate in the Section 8 Housing Choice Voucher (HCV) program, from free advertising for your unit to annual inspections of your property.  There are no fees or charges assessed to property owners for services provided under the Section 8 HCV program.  Also, there is no application process required for potential landlords.

The Housing Department does require that all owners joining the Section 8 HCV program register their property with the Maricopa County Assessor’s Office Residential Rental Registration program.  The Housing Department also encourages certification of properties in the Phoenix Police Department’s Crime Free Multi-Housing program.

 

How the Section 8 Housing Choice Voucher Program Works

The Section 8 Housing Choice Voucher (HCV) program provides assistance, in the form of a Voucher, to qualified families, seniors and persons with disabilities for rental units chosen by the tenant in the private market.

The city of Phoenix Housing Department provides monthly payments directly to participating property owners to offset the cost difference between tenant payments and unit rent.  Tenant rent payment amounts are determined based on their adjusted income.  Program applicants may choose from a variety of housing options including apartments, condos, duplexes, single-family homes and townhouses.

 

We encourage interested landlords to talk with the appropriate people in the City of their interest. If you have properties in the Phoenix area, you can visit the City's section 8 housing web site for more information.

 

We are planning a meetup.com group meeting in March that will focus on Section 8 housing in the Phoenix area. Visit our meetup.com group page for meeting announcements.

 

Best wishes for success

 

Ron Urban & Gene Urban
The Urban Team at Realty Executives
602-234-5777

Rent Concessions & Broken Leases

Many landlords offers rental concessions as a way to attract new tenants. The signs are everywhere… “Free Rent”, “1/2 Off First 3 Months” and even “Free Plasma TV with 1 Year Lease.” When the market is saturated, like the current Phoenix market, landlords get creative.

We gotten some emails asking what damages a landlord can ask the court to consider regarding concessions and evictions.

As with all things legal, we turn to people with the “JD” thing behind their name and that person is most often Phoenix landlord/tenant attorney Andy Hull.  Regarding concessions and evictions, Andy says:

The normal lease agreement usually will have a provision for rental concessions that were given to the tenant as an inducement in signing the lease. These rental concessions then would be repayable as unpaid rent in the event the tenant does not fulfill the lease agreement.

The courts have seemed to be consistent in allowing rental concessions in evictions. The lease must specifically state that the concessions must be repaid as additional rent if the contract is not fulfilled. Most of the courts will also prorate the concessions for those used as of the date of the eviction.

We hope this info has been of help. If you need a knowledgeable landlord/tenant attorney in the Greater Phoenix Market, Andy Hull is a well known quantity. Just go to his web site for contact info and such.

Best to you,

Gene Urban & Ron Urban
The Urban Team at Realty Executives
602-234-5777

November Rent Rates Fall Slightly In Phoenix Area

According to rentBits, a rental search engine for apartments and rental homes, the average rental rates for Phoenix have seen a slight decrease November over October. Collectively, across all bedrooms (3,541 listings), the average rental rates has decreased from $788 in October to $786 in November.

"Demand for rentals in Phoenix has not caught up with supply." says Dan Daugherty, CEO of rentBits. "This is putting slight downward pressure on the rental rates in this area."

In most other cities across the US, rental rates for apartments are seeing a slight decrease for the year. Much of this is due to a decrease in demand. Many renters for apartments are either moving into a single family home rental, moving back in with Family or sharing rooms with friends. This transitional period has put downward pressure on most apartment rental rates.

Source: http://rentbits.com/rb/t/rental-rates/phoenix-arizona

Hope you have a great weekend…

Gene Urban & Ron Urban
The Urban Team at Realty Executives
602-234-5777

Visit our other blogs and sites:

Search for Homes in Phoenix... an incredible property search site
Short-Sale-Phoenix.com… Info site for short sales in Phoenix
Urban Life … the downtown and central Phoenix real estate Blog

How Do I Determine Rent Rates For My Vacant Home?

The question of how to determine rent rates comes up often, especially in a market as saturated as the Greater Phoenix area. You could gaze into a crystal ball for the answer or read at few ideas we've collected over the years. Your choice.

Ask The Vacating Tenant:
Your current tenant can be a wealth of information. Tenants often know the market better than landlords. They often have friends who are renters in the area and probably monitor the rent rates in the neighborhood.

Knowledge is Afoot:
Walk the neighborhood. You'd be amazed how much you can learn by walking around the area your place is located. Rental signs on other properties often have amounts and certainly a phone number you can call. If people are outside working on cars, playing and such you can ask them what rents are like in the area... don't wear fine duds unless it is appropriate for the area.

Keep Your Comps Relevant:
Some people use apartment rates to determine single family home prices and visa versa. They are not the same animal. At the same time, it can help give you a sense of the competition.

Is Your  Phone Ringing:
A silent phone is often the sign of too high a price. Be proactive and lower the price in small increments often until you start getting calls.

Greedy Can Kill Over Time:
Turnover is one of the biggest causes of lost cash flow... unless you get the tenant from hell you Craig's Lists all your cabinets, appliances and such. If  a tenant feels he or she is paying way above market value they will not stay long. They'll shop around and find a better deal. Since loss of rent, turnover repairs and marketing are costly, you may want to balance those costs in our rental rates. In a competitive market you may not want to do annual rent increases. This may be tough for the old timers who are used to 3 - 5 percent increases each year but we're not in Kansas anymore Dorothy.

Check Online Comps:
Craig's List and Rent.com can give you insight into current market values. Stop at your local grocery store too and pick up  a few of the rent magazines. This is something you should do every 3-4 months so you keep your pulse on neighborhood values. If rents have dropped in your area substantially, you may want to lower the rate to encourage your tenant to stay another year or two. Remember to keep you eye on the long term value of renters who stay with you for many years.

Know Thy Neighborhood Property Managers:
Do you know any property managers in the area. sure they might be the competition and they also can be invaluable help. A cup of java or a happy hour toast can be just the right thing to nurture a relationship.

We hope these ideas are helpful to you. Keeping your investment rented with quality tenants is the name of the game and proper pricing plays a major role.

Best to you,