Searching for your first home: Rent or buy?

MANILA - Choosing your first home is likely to be one of the biggest financial decisions that you will make. As with all purchases, you can either feel you made the right choice, or regret the investment.

This is why some prefer to initially rent or lease, and then decide whether the neighborhood is right for them. But they could also miss out on the opportunity to buy when the price is more affordable.

So should you rent or buy your first home? The quick answer to this question is it depends. The decision to buy or rent depends on so many factors that varies per individual: your lifestyle, finances, future plans, and even the current real estate market.

What is right for one person may not be suitable for another. For instance, a newly married couple whose career plans include moving abroad would be in a totally different position from a large family with an entrenched business in a specific location.

There are pros and cons for each option. Here’s a run-down of the upsides and downside of buying and renting.

Buying a house means being able to hold on to a hard asset that almost always appreciates in value.

It also lets you and your family establish roots in the community.

Plus it allows you to plan out your life--where your kids will study, where you will work--for the long term.

But expect this to put a dent on your cash flow, since you will need to put in equity, which could go anywhere from 20-60% of the property value.

It also means paying real estate taxes and maintenance costs.

Should you need to dispose of it at some point, you will find this may not always be easy, and you could be at the mercy of market conditions.

Renting is easier on the pocket--you only need to worry about a downpayment and security deposit.

It also gives you a measure of flexibility. If you’re unhappy with the place or your landlord, you can simply end your contract.

 It also means not having to worry about taxes and maintenance costs, which are the landlord’s concerns.

However, property rentals rise, and it means you have to be ready to deal with increasing rental fees, depending on market conditions.

Rent is an outright monthly expense, and does not enhance your asset base.

You have to live with the terms set by the landlord. For instance, the landlord may prohibit you from keeping pets, or may not allow you to drill holes for your pictures on walls.

Still not decided? Look at each of these five factors for more help:

1. Your current life stage and lifestyle. How old are you? The younger you are, it’s more likely that your options are wide open. Career-wise, there’s a possibility of finding a new job, within or outside the city you are now in, which means renting might be better for you. Are you single or do you have a growing family that needs more space? If it’s the latter, consider how owning or renting a home affects their lifestyle.

2. Your future plans. Do you have any plans of moving abroad? If so, then you might be better off renting a starter home. Otherwise, you will have to deal with selling off your home when you leave the country. This may not come easy when you’re about to migrate, and this may not even be at a price acceptable to you. Don’t forget your significant other, if you have one. If you purchase that starter home, do you think your prospective spouse, whose parents live far away, would be happy to move there?

3. Your financial status. Can you afford to pay the down payment for the starter home that you want? If you are thinking of taking out a loan for this home, do you have enough income to support the monthly payments? Note that your expenses as a homeowner will not be limited to just the mortgage payments, but will also include maintenance costs, real estate taxes, and in some cases, condominium dues and homeowner’s fees.

4. The neighborhood where the property is located. It’s been said that there are three things to consider when you buy property, that’s location, location and location. Let’s say you have identified the neighborhood where you intend to stay for the medium term. Evaluate the neighborhood and determine if it has good potential to become a growth center. What are planned developments being undertaken by the government and other private companies in the area? If the area’s potentials look promising, and if your finances permit, then it may be worth purchasing your starter home here. On the other hand, if the neighborhood is riddled with problems such as flooding, security issues, and urban blight, you may wish to simply rent a place for the time being.

5. The current real estate market. Don’t forget to consider the current real estate market before deciding if you would purchase or just rent a property. It is always better to buy when it is a buyer’s market than a seller’s market. Plus, look at interest rates if you intend to take out a loan for this purpose. The lower the rates, the cheaper it is to buy a starter home.

source: www.abs-cbnnews.com

Are Single Family Rentals Still a Good Investment?

With discount-priced foreclosures drying up, are single family rentals still such a good investment?

The foreclosure floods over past four years created unprecedented opportunities for investors to buy homes for a song, rehab them, and either resell or rent them out. Some four million homes switched from owner-occupancy to rentals during that period—that’s nearly homes as many as total sold in America each year.


The market is changing

Those days are clearly over. The flow of foreclosures and short sales has dried up, accounting for only 10 percent of the market. Today investors are buying only about 14 percent of residential sales, down from 25 percent in 2009. Yet new investors are still entering the single family rental market and about 14 million homes are now rentals.

The reason can be summed up in two words, “cash flow.” Few investments deliver two ways to profit, but the attraction of single family rentals is that they deliver monthly rent while they appreciate in value like other residential properties.

Today’s market dynamics are a good example of why millions of investors are sticking with their rentals despite the changing market. Though the days of quick profits from flipping are over, the appreciation side of the equation is still strong. Those investors who bought in during the housing crash have done very well, realizing 20 to 30 percent appreciation. Their profits are being augmented by the nationwide shortage of affordable starter homes, which is pushing prices in lower tiers up faster than any other segment of the market. Most rentals are two bedrooms or smaller.

The best news for investors is on the rental side

Rents are soaring and vacancy rates declining, making it easy for landlords to keep their properties rented, and their rental income is even outpacing inflation. In the nation’s hottest real estate markets—Denver, Dallas, San Francisco, San Jose—rents are rising fastest, keeping pace with home price appreciation. Thus, there’s little incentive for renters to buy. Even in moderate markets, Millennials are creating extraordinary demand for rentals.

It’s easier than ever for investors to add a rental property to their portfolio. Companies like Memphis Invest and HomeUnion provide turn-key service to investors, locating and buying properties, arranging financing, and managing.

“There are an increasing number of renters in the U.S. We believe this increasing demand for residential rental space will enable SFR investments to continue producing high yields,” says HomeUnion CEO Don Ganguly.

What does the future hold?

The rental boom’s days may be numbered, though. A corresponding boom in apartment construction is underway, adding 300,000 to 400,000 new units to the rental inventory each year, most in markets popular with Millennials. The flood of new apartments is expected to slow rent growth to 2 or 3 percent per annum in the next two years, but as long as occupancy rates remain favorable, investors in single family rentals should continue to do well.

source: totalmortgage.com

5 Things Every Renter Should Know Before Buying

Buying a home can be financially rewarding, but it also has its challenges. Many renters can’t wait for the day when they’re able to get the keys to their own house. Ownership can provide a sense of stability, giving you full control to decorate and remodel as you like. But before buying, it’s important to know exactly what you’re getting into. Some people start the homebuying process with rose-colored glasses, or they feel the experience will be far better than renting—and sometimes, it is. At the same time, you need to be realistic and understand that buying might be more expensive and time-consuming than renting.

1. Profits aren’t guaranteed

Some people buy a home because they’re tired of wasting money on rent. Rather than put money in a landlord’s hand each month, they purchase a home to build their own net worth. Unfortunately, there’s no guarantee that buying a home will be financially beneficial.

If you purchase at the right time, your property may appreciate a little each year, which increases your equity, and you can earn a profit when you’re ready to sell. But sometimes, home prices go backwards. Rather than appreciate, property values depreciate. In a bad market, you could end up owing more than you paid for the house. And if you sell before home prices recover, you can lose money and pay out-of-pocket to sell the property.

2. Maintaining a yard takes time and money

If you lived in an apartment before buying a house, your landlord’s maintenance department likely handled the landscaping. As a homeowner, you’re responsible for your exterior, which involves mowing your lawn, pulling weeds, seeding, and fertilizing. Maybe you always dreamed of having a beautifully landscaped yard, but it takes money to maintain an outdoor masterpiece. You’ll also sacrifice your free time. According to the Bureau of Labor Statistics, the average American spends about 1 1/2 hours a week maintaining their lawns and gardens — but as a newbie, it might take you longer.

3. You might pay more for utilities

If you’re moving from an apartment to a single-family home, anticipate an increase in monthly utilities. The amount you pay for electricity depends largely on the size of the property. And if your apartment was smaller than your new home, you can realistically pay an extra $20-$30 every month. You’ll also pay more for utilities if your new home has natural gas, whereas your apartment was electric. Plus, homeownership means paying your own water and sanitation bills.

4. Your mortgage may slightly increase from year to year

Some people purchase a home because they’re tired of yearly rent increases. However, just because you buy a home with a fixed-rate mortgage doesn’t mean your mortgage payment will never change. Your property taxes can increase, which can increase the monthly payment a little each year, and if you file a claim with your homeowner’s insurance, your agency may raise your rate. Since both of these expenses are included in your mortgage payment, any increase or decrease affects your monthly payment.

5. Homeownership can slow your savings efforts

Saving money might be a priority, just know that buying a house can slow your efforts. Ownership can be financially beneficial in the long run, but in the beginning, you’ll drain your savings account buying the property, plus there’s ongoing repairs and maintenance which can cut into your disposable income.

If you’re ready to own your own place, buying can be rewarding and satisfying, but there are things you should know before you even think about starting the process. If you know what you’re getting into, you won’t have unrealistic expectations or be caught off guard.

source: totalmortgage.com

Do's and don'ts when renting a home

MANILA, Philippines - At one point in your life, you might find yourself renting a home. Whether it’s for a three-bedroom house in a residential subdivision or a 20-square meter unit in a high-rise near your place of work, renting should be done with careful attention as it almost always involves a substantial part of your income.

To be sure, renting a home comes with many advantages. It allows you a measure of flexibility, in that you can easily give up the property should your personal circumstances change. If your work location changes, or your children will be enrolling in a different school in another side of town, you might find it more economical to rent some other dwelling closer to your new daily destinations. This is not something you would have when you own a house, since disposing off a property involves time, money, and considerable documentary work.

Renting a home, though, still requires you to be vigilant. In renting a home, you will be dealing extensively with your landlord. Some unit owners engage the services of a property services management company, which will deal with you on your rental concerns. The terms and conditions of your rental contract is something that you and your landlord both have to be comfortable with. Should changes arise in these terms during the course of your stay, you have to discuss this with the owner to come up with a mutually acceptable arrangement.

So before you take out your pen and sign off the dotted line on that rent, here are some points to consider:

Do your research.

Make sure you know as much as you can about the area and the property itself. Ask some pertinent questions: does the area get flooded during the rainy season? Is security a cause for concern? Does the ceiling leak and do the drainage systems work? Who are your neighbors going to be? Are they too rowdy and too noisy for your family? Who was the former tenant and what was his experience in the area? Is your landlord fair and agreeable?

Are services like water going to be offered to you straight by the utility company or will these be coursed through the homeowners’ association? If so, how will this affect your utility bills? If you are dealing with a property management services company, what do people have to say about their services? Visit the area several times and explore it on foot to have a better feel of the property.

Stay within your limits.

It may be tempting to rent that nice home with the jacuzzi and the gym, but make sure you have the financial capacity to do so. Most finance experts recommend that you spend no more than a third of your income on housing expenses.

Haggle over price.

There is nothing wrong with haggling over the price for the unit that you want to rent. You might not get a positive answer, but if you do, you can definitely put the savings to good use.

Parking.

If you have a car, is there a safe place for you to park in? How much will it cost? Finding a secure place for your car every night can be stressful so best to make sure there are arrangements in place.

Discuss the terms and conditions of the rent thoroughly before signing the contract.

You would like to be very clear on the terms of the rental contract. Make sure there are no hidden costs. If there is a deposit and an advance payment, discuss how these will be accounted for and when or how you will get these back. Find out if the deposit is refundable, and when. Ask if the advance payment will be given back to you in cash, or if you will be allowed to use it up towards the end of your contract.

Discuss the mode of payment.

Agree on a mutually convenient payment system. You may wish you make payments through post-dated cheques or through bank deposits, on a set date. Make sure both parties are clear on this.

Check escalation clauses.

Make sure you are clear about possible automatic increases in your rental payment when you renew your contract. Also discuss with your landlord how often he expects to raise prices, so that you may be better able to anticipate your cash needs.

Make an inventory of the property.

Before moving in, go through everything in the property. Check out for broken plumbing, electrical or other fixtures that need attention and point these out to the landlord. If the unit is fully furnished, go through each and every appliance and furniture to make sure these are in working order. Discuss all these with the landlord. Don't be afraid to take pictures of walls, rooms, carpets and so on to record the state of them as you move in. If you do this make sure you email them to the agent so they can be kept on file.

Discuss maintenance of the property.
Make sure you know what your landlord expects you to cover in terms of maintenance. In general, the property owner is in charge of maintenance costs, but there are other items you might want to discuss. For instance, who will pay for a pipe that gets clogged? Also look at utilities and services. Payment of electricity and water will most likely be to your account, but ask about meter deposits, subdivision or homeowners’ association dues, and other related fees.

Don’t forget insurance.

Do ask your landlord about fire and property insurance, and what this covers.

source: www.abs-cbnnews.com

Real Estate Law – How to Avoid Being Evicted from your Home

Being evicted can be a complete nightmare. What do you do when you have a house full of possessions, work on Monday, and nowhere to go? If you have a particularly evil landlord, he or she may even attempt to bleed you dry on your way out by claiming that you’re not entitled to your deposit back or that you will have to continue paying rent until a new tenant is found.

Another kick in the teeth is that an eviction stays on your record. This black spot can create a serious hurdle for you renting a property in the future. Even new employees will be able to see this.

And if that wasn’t bad enough, your credit score could take a serious blow. This could mean that you struggle getting a loan or a mortgage.

Steps for Avoiding Eviction

The best thing you can do for your landlord is to pay your rent on time, with no excuses. Keep a separate bank account for your rent and bills, if you have spent the money in the past, and as soon as you get your pay cheque, make sure you have these funds locked safely away. Your rent should be your priority. This may mean cutbacks in your lifestyle – sorry.

Know your rental agreement. You need to understand all of the rules and all the courtesies your landlord owes to you. If you get the feeling that your landlord is unhappy with you for some reason, make sure that you try to appease him or her and rectify any problems.

Keep secure documents of rent paid and other contractual files. If your landlord sends you a letter containing his or her intention to evict you, take it very seriously and get in touch with your landlord to see if you can stop this from happening. That may mean quieting down or paying any missed rent immediately.

In the event that your landlord is serious about evicting you, try and come to a mutually beneficial move-out date instead. This will mean that no-one needs to go to court and you can part on almost friendly terms.

If this fails, seek legal advice and aid. Employ a commercial lawyer to negotiate with your landlord. A solicitor could stop your landlord from evicting you and can help you understand your rights, as a tenant.

You may have to go to court after all. This should be a complete last resort and it will look like eviction is imminent. Show up to court on-time and well presented. Even if your landlord wins the case against you, the judge may allow you more time to find yourself a new property and move out. There’s nothing worse than finding you on the streets with no home to go to. Make sure that it doesn’t come to that and make the best case you can.

source: everythingfinanceblog.com

Rents soar as foreclosure victims, young workers seek housing

Few new units and tight standards for home loans add to the pressure. The average monthly U.S. rent is at an all-time high, and a 10% jump in Los Angeles County over the next two years is forecast.

A nation still struggling to clear up one housing debacle has run smack into another — soaring rents.

The foreclosure mess has pushed millions of former homeowners with tarnished credit into a competitive apartment market across the U.S. Add fresh demand from young workers, few new units and tight standards for home loans, and the result is rental sticker shock not seen in years.

Rents are surging from New York to Los Angeles. The average monthly U.S. rent for apartments hit $1,008 in the first quarter, pushing past the all-time high set in the third quarter of 2008, according to the data firm RealFacts. USC's Lusk Center for Real Estate forecasts a 10% jump in Los Angeles County rents over the next two years. In certain markets, it is now cheaper to own a home than rent.

Menachem Krinsky of Hancock Park recalls how in late 2008 every street seemed ornamented with "for rent" signs when he first moved to Los Angeles from the East Coast. Back then, his landlord was so desperate to keep him as a tenant that he slashed his rent of about $2,000 by $800 after Krinsky's first roommate bailed on the lease.

These days, however, Krinsky's search for a one-bedroom apartment costing around $1,500 is shaping up to be a major headache.

"I am looking for something clean and new, and unless you want to spend a fortune, it's hard," said Krinsky, a 22-year-old art director and graphic designer.

Units that years ago would have languished for weeks are snapped up in days. The Santa Monica-based listing service Westsiderentals.com is operating 14 hours a day to meet demand from renters. The company has even seen a bump in interest for its "platinum" relocation service, which offers to chauffeur clients to various Southern California listings.

Ellie Balderrama, who lists properties in Los Feliz, Silver Lake and Atwater Village for TheRenterGirl.com, said that as many as 20 people have showed up at some of her open houses. The ones who win arrive with completed rental applications and deposits in hand.

"In L.A., people have gotten so used to how relaxed it was, they are not aware how competitive it's become," Balderrama said. "Some people have got it, and some people don't, and the ones that don't suffer."

Rob Magnotta, a real estate agent, recently listed his two-bedroom Irvine condominium for rent on Craigslist for $2,300. He had six applicants within 24 hours, including one who wrote a poignant letter about losing a home to foreclosure.

"It was almost too easy," said Magnotta, who chose another renter. "I know the rental market was strong. But until you are actually renting the place, I think you are surprised it is that strong."

A big driver of rent increases has been demand from young workers who are striking out on their own after doubling up with family members during the worst of the economic downturn.

Alaia Williams, 27, recently moved out of her mother's Inglewood apartment to be nearer to her job at a Santa Monica tech start-up. She and a roommate are splitting the $1,400 rent on a two-bedroom apartment in Palms.

"We can't afford to live" closer to work, she said.

People who've lost their homes to foreclosure or short sales are also feeling the sting. Damaged credit means many must pay a premium or put down a bigger deposit to secure a place.

Robert Corlette pays about $1,700 a month for a two-bedroom town house in Anaheim Hills that he shares with his wife and five children. The family lost their home to foreclosure in 2009 after Corlette lost his $75,000-a-year job selling insurance. His current job, also in the insurance industry, pays about half that.

"There is a lot of pressure," said Corlette, 56. "It wears you down."

The crash has made owning a home more affordable than renting in some markets. An index by the research firm Green Street Advisors compares buying with renting in 79 metro markets; that index hit its most attractive point last year for buying since 1991, when the firm began tracking the data. Researchers calculate that the after-tax cost of a mortgage is only 10% higher than what it costs to rent nationally after taking into account mortgage rates, property taxes and other factors.

Orange and Los Angeles counties remain more expensive for buyers than renters, though that gap has narrowed, according to the index, while owning a home in the Inland Empire is now more affordable than renting.

Rising rents have converted some renters into buyers. Scott Matulis, 48, recently purchased a town home in Oak Park after enduring two consecutive years of rental increases. His mortgage, taxes and homeowner association fees now total $2,200, just $100 more than what he was paying his former landlord.

"I finally just pulled the trigger and figured I'd be throwing money away on rent," Matulis said.

Although rising rents may be motivating home purchases by people who are in good shape financially, those increases are walloping working class families and the poor — groups already hard hit by job losses, lost income and stagnant wages.

Marisela Alfaro has lived in the same one-bedroom Santa Ana apartment for 28 years. A large bed sits in her living room, where she and her husband sleep; their teenage daughters share the bedroom.

Modest religious art adorns her carefully kept home, but outside Alfaro's door the building is in disrepair, with tattered screens, broken lights and graffiti. Alfaro said the family pays $820 a month and feels lucky to have the apartment.

"There are other places that cost much more," she said in Spanish. "It's been difficult because my husband works in the fields, and that's the lowest salary that there is, and if there is no rain, there is no work."

Even for those with better jobs, paying rent can be difficult.

Virginia Villa of Brea, a single mother of four who works as a manager at Disneyland, has doubled up with her adult daughter, who contributes $400 to the monthly household budget. Still, Villa said, about half her take-home pay goes toward rent and utilities.

"I have a decent job and I would love to buy a house, but I don't think that's possible to do," Villa said. "In O.C., it's even difficult to find a substantial apartment or especially a house to rent — the rental cost for houses is really high."

source: latimes.com