Businessweek Article: “A Solution to the Housing Crisis Could Be At Hand”

Great article explaining solutions to the short sale and foreclosure glut, turning around the housing market, and why the recent programs have not worked.

http://www.businessweek.com/magazine/a-solution-to-the-housing-crisis-could-be-at-hand-02082012.html

How Landlords Save the World

The title of this entry is over-the-top, I admit, but I am just here to stick up for the landlords out there who are trying to do some good.  The word “landlord” in itself has some negativity associated with it, and the use of “lord” in this context is distasteful in our American sensibility.  In media, landlords are portrayed as misers ready to make a buck on the poor and take advantage of families.

Please!

Let me tell you about the landlords, the real estate investors, I know.

First and foremost, there is a commitment to maintain the property and keeping the tenant happy and comfortable, even with the high occupancy rate and the increasing rents.  I am not suggesting any altruism here, but it is cheaper to keep than replace tenants.  It only makes sense that tenants stay for a long-run, and take care of the property, as it is their home. Fostering that environment is essential for positive tenant-landlord relations, which is the relationship you want in between any consumer and supplier.

A rental property is a huge financial commitment and a landlord idiot enough to not take care of it and ensure it’s livability is ill suited for the job.

Yes, there are many terrible landlords out there.  The worse of them are the ones who neglect their properties, fail to keep up with safety codes, and don’t treat their tenants with the respect they deserve.  Just like in any occupation, in any aspect of humanity, there are some bad apples.

For more on tenant-landlord rights in Massachusetts, go to http://www.mass.gov/ago/docs/consumer/landlordtenant073007.pdf

Find A Buyer for Your House in Two Weeks

Is your house sitting on the market for a while now?  Sick of it, yet?

Maybe you are getting ready to go on market, and you are dreading all the naysayer’s advice about trying to sell a home these days.

Sitting around waiting for a buyer is not the best strategy to find one.  Along with your agent, you have to review and revise your marketing strategy regularly and be pro-active about the process.

In my area outside of Boston, I hear stories about how properties are getting multiple offers first days on market, real estate is selling like hotcakes and buyers are fighting over houses.

Oh, really?  Tell that to the house sellers on market now for six months with nothing to show for it.

Sure, some markets are much better than others, but there are some things you need to do to get the house attracting a buyer and quick – how about in two weeks!

Step 1. What has your agent been up to?  A good agent should regularly review with you the marketing that he or she is doing.  Where is the house posted on the internet?  In what papers is the home advertised?  Know what is going on and don’t just assume that your house has ample visibility.  One way to learn how well your house is exposed in the media is to do a search as if you are a buyer.

Step 2. Learn what houses have sold while you’ve been on market.  If nothing else has sold in your house’s price range, then there is a slow market to contend with.  If other houses have sold, then there is a market in which to compete.  That’s good news.

Step 3. Review your price.  I’m sure if you’ve been on market long enough your agent has discussed this with you.  The price is extremely important.  Don’t fall into the line of thought of “we’ll price it high so we can negotiate later.”  The price is set by the market, and buyers will often shy away from an over priced house.  Either the right buyers don’t want to do business with you, or the right buyers aren’t even coming to see the house.  Home searches are done in price ranges so you need to look good on the screen or paper before the buyer chooses to see your home.

Step 4. Speaking of looking good, how are your pictures?  I suggest getting new photographs or rotating the photos of the house every few months.  This freshens things up and perhaps the picture that is on there is not attractive enough, or not speaking to the right buyer.  Changing pictures has always elicited a response from the market for me.  This is especially important with changing seasons.  I always find it funny to see pictures of a house covered with snow in mid June.  Give me a break!

Step 5. How does your home look inside and out?  If you didn’t get it staged, it may help.  Have you decluttered enough?  Is there curb appeal?  Are your (scarce) decorations fitting the season?

Some fresh pictures, a better price, and a nice looking home, you should be excited to open your doors to some ready, willing and able buyers.

Have you seen the “competing” houses sell?

Creative Ways to Save for a Down Payment

Now is a great time to buy. Homes are affordable and interest rates are at historical lows. Lending is tight, however. You need a stellar credit score and a clean credit report to even get your foot in the door.

And long gone are the days of zero-down down payments. You need money down to venture into the housing market. Some financial experts recommend at least a 20 percent down payment.

Here are some creative ways to curb spending so you can save up for the house of your dreams.

The first rule of saving is to be patient. Large nest eggs are built up over time. We live in a society that thrives on instant gratification. This is partially responsible for the housing crisis we now find ourselves in. Buyers who should have waited until they could truly afford their dream house took advantage of a flawed system that allowed them to instantly gratify their desires. So, be patient. It may take months or years before you have saved enough.

The next key is to cut out unnecessary spending. It can be easy to give into our wants, or to confuse them with needs. For example, you need food to survive. What you don’t need is to go out to lunch or dinner multiple times a week. It may be time to change habits and learn to pack a lunch for work and to cook meals at home. The same goes for the morning coffee. A home brewed cup can be just as satisfying as a $4 cup from a coffee house. And you just might save yourself $500 a year.

Don’t use credit cards. Credit cards charge exorbitant interest rates. It can take decades to pay off balances when you only make minimum payments.
A great way to avoid overspending is to avoid going to stores. It sounds extreme, but if you go to a store, you’ll buy something. Find fun things to do at home, instead of using shopping as a hobby. Even $20 a week can add up to $1,000 a year.

Substitute spending is another tactic for saving. Let’s say, for example, that you have a gym membership charging $40 a month. That translates to $480 a year. You can buy a simple elliptical, recumbent bike, or treadmill for less than that. Add in a few workout DVD’s and weights and you have a home gym for a fraction of the cost.

Lastly, automatic savings transfers can help procrastinators save. You have to remember to transfer money to savings to build up your account! Most banks allow for automatic savings amounts to be set. You can choose what amount works best for you. $100 a month will translate to $1,200 a year!

With just a few of these scenarios we discussed today, our example saver could save at least $3,000 a year!

Stick to your plans and budget and the dream of homeownership can become a reality.

So You Want to Be a Landlord?

Today I rented out my condo in Brighton. Every time I visit a great investment property it makes me want to own more and more. The way I feel about real estate is the way I feel about books – you can’t have too many.

But unlike books, investment properties can be demanding in way and at times which are inconvenient, and they can’t be ignored. They can sap your energy and money, and this illiquid asset can sometimes feel more like a liability.

Are you thinking of becoming a landlord? For some years I’ve advised so many people to hold on to their property if they can afford it. Selling often made for a loss sellers were not ready to take. But before potential sellers make this decision, I would have them really consider the responsibilities of being a landlord.

Lets start with finding a tenant. The best way is to work with local agencies specializing in renting, and hope the timing is good enough to find someone who will be a good tenant.

Next, you need to be realistic about the rent. My recommendation is to go just below what all the other ads advertise for a similar home, and find a better tenant. It will cost less than the risk of having an unreliable or destructive tenant.

So you found a tenant, signed a lease, paid the agent who found this tenant. Now what? Be ready to let your home go, and start thinking of it as an investment, rather than your home. For me, this meant painting my very beautiful turquoise kitchen a boring off-white, and I had to get used to the idea that the woodwork will not be the same next time I see it.

Your wonderful new tenant moves in, you’re getting paid monthly, and it is all bliss until something needs to be fixed, something else falls apart, the building has issues, and there is a special assessment in the condo complex. But you take care of it all and you are happy to be covering the mortgage with the rent you receive. Then you get a 30 day notice to vacancy. Get ready to go through it all again…

You start to show the investment property again to all these prospective tenants, only to find out how your former home is not treated the way you would have treated it. Some things are broken, some are scratched, and the appliances are not as new as you remembered.

Once a tenant moves out, you need to repaint, fix and scrub before the new ones moves in. No big deal? Maybe sounds like fun? Well, often there is just a few hours to do it. This year I was extremely lucky with two days.

This scenario is the best you can hope for. The bad things that happen include real serious damage to the property and not getting the rent. In some States this means immediate eviction, in Massachusetts it means losing a lot of money.

All this being said, I love it! Owning investment property is one of my favorite aspects of the real estate world. Although I only break even on this condo, it is worth holding on to it. But I know this is not for everyone.

It is imperative to be a good landlord if you are to find good tenants. For this you need to be okay with all the hassles and the risks, the inconveniences, and the demands. Just know what you are getting into.