Have you found yourself staring at a Notice of Default? In its simplest terms, a Notice of Default is the first step a bank or lender will take toward the process of a non-judicial or judicial foreclosure on a property, most likely due to an outstanding loan. No one wants to deal with the tiresome foreclosure process, but by understanding what a NOD is, borrowers can better identify a route to resolving this official legal complaint. A NOD should be taken seriously to avoid jeopardizing one’s financial health and future
In this article, 180 Homes will explore what a Notice of Default is in full detail, cover how a Notice of Default works once a borrower receives the complaint, and discuss how 180 Homes can help!
What Is A Notice of Default?
A Notice of Default is a public notice filed with a state court that legally kickstarts the process of foreclosure. NOD requirements and procedures will vary based on the specific state regarding whether or not they impose a non-judicial or judicial foreclosure process. They are generally posted on the property (on a front door or window) to notify the borrower of a mortgage that they are in default on a loan. Borrowers might default on a loan because they’ve fallen behind on mortgage payments, requiring the bank to take legal steps to receive those payments or see their investments resolved. A NOD is filed by lenders once their investments go into default status, and is recorded against the property itself.
After a NOD is filed and foreclosure actions are documented and taken, credit bureaus are notified. Foreclosure proceedings and actions may impact a borrower’s credit score negatively, which is bad news for any future mortgage or loan applications. The NOD will include many crucial details, most importantly, the time the borrower has to pay the outstanding balance before the lender seizes the property. Every NOD will include applicable information surrounding the property, typically such as:
How Does a Notice of Default Work?
If borrowers wish to avoid experiencing their lender activate the lien and potentially seize collateral for foreclosure, they must understand how NODs work to take the appropriate steps. NODs need to be taken seriously, as your lender is already taking the situation seriously by issuing one. The lender will specify what actions have breached the original mortgage contract, detailing the number of delinquent payments permitted in the contract before a NOD is filed. Typical mortgage contracts will permit a window, usually 180 days, of missed payments before they will take action to file a NOD.
Realistically, if a borrower has received a NOD, it’s not a sudden surprise. There has been a pattern of missed payments that would signal a NOD to be filed. In terms of the chain of events, after the NOD is filed, a lender will activate the perfected lien recorded with the mortgage closing, later seizing collateral for foreclosure. Once this happens, the lender can take legal action to ask the borrower to vacate the home or property. Each NOD is unique, so occasionally, the lender will allow the borrower to negotiate by paying off the debt or settling. Each case varies.
What Does a Foreclosure Notice of Default Mean for Borrowers?
While many NODs will result in foreclosure, there are exceptions. Lenders are financial institutions that are simply trying to minimize investment risk, which results in the automation of many NODs to be filed with the state. For those that have been working with their lender or bank for a long time, the lender may be simply filing the NOD to follow protocol but is willing to be flexible in accommodating the borrower with choices for avoiding foreclosure. The lender might be willing to negotiate the repayment window, help identify ways to get the account up to date, etc. Some NODs may include a negotiation grace period before the next foreclosure steps are taken, which is when a borrower should jump on an opportunity to discuss their option. In some cases, a lender may serve a delinquent borrower with a Notice of Intention instead of a NOD to give the borrower more time to negotiate a solution. The lender may be simply filing the NOD to begin the discussion of bringing the mortgage up to date instead of taking foreclosure steps, which can be financially worrisome.
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Borrowers faced with a looming NOD should begin by carefully examining the official complaint, taking note of payment windows and breaches of the mortgage contract. Contact your lender to begin a potential negotiation, as no one wants to deal with the consequences a foreclosure could create. If you think the best option is to sell your home, you’re in luck. 180 Homes specialize in CASH AS-IS offers and can close in as soon as 7 days! Contact 180 Homes today to learn more!
Selling a House without a realtor
Can New York homeowners and investors sell their homes without using a real estate agent? More importantly, if they can, should they? Property owners and investors make these decisions every day. While there are certainly advantages to neglecting the assistance of a real estate agent, those trying to save money will find that it could end up costing them a lot more than they anticipated.
While selling a house without a realtor can be a valuable option for some, a DIY approach can result in costly mistakes and a lot of time wasted for others. In this article, 180 Homes will explore the pros and cons of selling a house without a realtor so that homeowners can choose how they’d prefer to navigate the real estate market.
How to Sell a House Without a Realtor
Many seriously underestimate the cost of a reliable real estate agent. The price of an agent includes marketing, showings, negotiating, paperwork, and managing the closing process. These items cost money and take up a lot of time. Sometimes real estate agents have entire teams that work underneath them to perform these tasks. Those who may own multiple properties or make a living in property investment typically prefer a realtor to expedite the real estate process as they handle other components of property management. Taking on these obligations can be pretty overwhelming for those interested in selling a house without a realtor, but isn’t impossible.
When homeowners wish to sell a house without a realtor, they list their home as a “For Sale By Owner” listing. The seller will then prepare their home to be market-ready for touring potential buyers. Independent sellers are responsible for promoting their listing, scheduling open houses, identifying and qualifying potential buyers, and handling the real estate transaction. Perhaps you are fully capable of selling a home yourself. Those with extensive real estate education should have a solid foundation to start, but that doesn’t mean it’s best or saves money at the end of the day.
Pros and Cons of Selling a House Without a Realtor
Advantages of Selling a House Without a Realtor
While selling a house without a realtor has its fair share of challenges, the task is not impossible. If the homeowner can take the time and expend the resources needed to get the property sold legally, then it’s an option worth exploring. Let’s review some of the most obvious benefits of selling a house without a realtor.
When selling a house without a realtor, sellers can guarantee that the final price for the property is the value they want. Realtors will always suggest a price they feel is fair, which might be different than what the homeowner feels is adequate. Sellers can negotiate a price on their terms and have direct communication with prospective buyers without a realtor.
Skip Real Estate Commissions
Every real estate investor or seller looks for ways to save money throughout the real estate experience. One of the most common areas to save on a real estate transaction is closing costs. Reducing, or eliminating, some of the fees will have a sizable impact on your bottom line if you choose to sell a house without a realtor.
When selling anything, having a firm knowledge of the product is critical for success. Who knows more about a home than the person living in it? When selling a house without a realtor, homeowners can spruce and improve the space in ways they know would help. Additionally, homeowners are the individuals best equipped for answering any questions buyers might have about the property, neighborhood, and surrounding areas.
Disadvantages of Selling a House Without a Realtor
For every easy sale completed without a real estate agent, nine others are an issue. If you can’t generate interest or don’t know the specific language on a real estate contract, you will create larger and avoidable problems. Issues are preventable by hiring a professional. Here are five reasons you may not want to sell a house without a realtor.
Some properties will almost sell themselves, and a real estate agent doesn’t have to do too much. However, if you can’t generate interest in your property, it is difficult to get desired selling price. One of the biggest roles a good agent performs is getting eyeballs to the home. They leverage the MLS and instantly get the word out to thousands of agents in real-time. Every good agent has a defined marketing strategy that generates interest and creates a buzz with their extensive experience in the field.
You can have the best pictures and descriptions of the property, but it is not enough to get it sold. At the showing, you need to find a balance between being a salesperson and being the owner. If you sell too hard, buyers become hesitant to move forward. A professional agent understands the rhythm of a showing and knows how to provide information appealingly while still helping. A good agent can attract buyers on the fence and get them eager to move forward.
There is a lot that can go wrong in any real estate transaction. The glue that holds everything together is the contract. If you sell your property on your own, you had better be an expert in every line of it to prevent anything going wrong. Experienced real estate agents can pick the contract apart, ask for credits and addendums and finalize it cleanly. You can argue that the largest benefit of using a real estate agent is their knowledge of the contract and real estate law.
As much as you think you know the market, your real estate agent likely knows more. If you find a quality local agent, they understand every recent sale and current listing. They can use the MLS to find information and rationale behind every transaction and use that to price your property. As the owner, you are probably biased and think your property is superior to others on the market. This leads you to price higher than you should, decreasing buyer interest which eventually results in a price drop. You are always better off listening to a professional and price properly, right from the start.
Everything from marketing to showings to negotiation is time-consuming. If you choose the wrong offer you are forced to start the process from the beginning and additional time is wasted. Whatever perceived savings you think you gain by not using an agent your time is almost always better spent on other areas. Since you are not an expert you will be forced to find answers to most questions, wasting even more time. Your time is the precious commodity you have. Spend it in areas that give you the biggest return.
180 Homes Can Help Sell Rental Properties!
While it’s normal to ask, “Should I sell my house without a realtor?” using a real estate agent is an important area for investment. There are other places where you can cut corners and lower your expense sheet. At the end of the day, getting your home some within the desired timeline for the right price is what matters most. 180 Homes has what you need to maximize your real estate experience with our cash as-if offers for your property. Contact 180 Homes today to learn more!
Working with cash buyers!
At face value, working with cash buyers should be easy and simple. Cash, As-Is, no appraisals….easy peasy! Unfortunately this is not always the case and working with cash buyers can be difficult. The good news is, knowing what to look out for when working with cash buyers BEFORE opening escrow can prepare you to save you time, frustration, and hair-pulling! Over the years, we’ve seen competing cash buyers include certain terms in their offers that should be seen as red flags and/or warning signs. Whether you’re thinking of selling your own property to a cash buyer or you’re listing a property for a client that is attracting cash buyers, keeping a keen eye out for the Red Flags below could help avoid choosing the wrong buyer!
Knowing why investors include these terms in their offers and how to counter them will put you in a much stronger position in the transaction and simplify the process of selling your home for cash.
1. The “Non-Contingent” Offer
What exactly is a non-contingent offer? When a buyer submits a “Non-Contingent” offer, they are essentially forfeiting any and all of their privileges to perform due diligence on a property they’re interested in. I.e. they’re giving up the right to….
We see it in competing offers all the time. Companies that buy houses for cash say they’re non-contingent and that they “don’t need an inspection period”. Often times their goal here is to make their offer appear as strong as possible and get their offer accepted. Unless you’ve seen the tactic before and know how to prevent it, buyers may take advantage of their Earnest Money period to complete their due diligence. They know that once their offer is accepted, they likely have the industry standard 72 hours to submit their Earnest Money Deposit and can use this 72 hours to do their initial walkthrough of the property, perform inspections, etc. If they find something they don’t like or realize the numbers don’t make sense after physically walking through the property they can cancel their offer or try and re-negotiate by asking for a price reduction. All this happens before any of their money has been submitted to escrow!
Pro tip: Write up a Seller counter! Shorten the earnest money period to 24 hours or sooner and make it clear that no further inspections will be allowed until escrow receives buyer’s nonrefundable Earnest Money!
2. Long (Unnecessary) Inspection Periods
While a typical financed buyer typically gets about 17 days to perform their due diligence on a property, cash buyers should be writing in a much shorter time period into their contracts. How much time does a cash buyer need to perform inspections? It’s a loaded question, and depends on a couple things….
PRO TIP: Write up a Seller counter! You can always counter inspection days to whatever timeline you feel fair!
3. Low Earnest Money Deposit
Any savvy seller should want their buyer to have “Skin in the game” i.e. something to lose if the buyer does not perform to the contract. This typically comes in Earnest Money Deposit which is usually expected to be submitted to Escrow within 72 hours of offer acceptance. Should the buyer cancel their offer or not perform per the contract after removing their contingencies, escrow may be obligated to disburse those funds to the seller. The LOWER the earnest money amount, the LESS SKIN a buyer has in the game, and the LESS incentive a buyer has to perform to the contract! It’s important that the amount of the earnest money is significant enough to motivate the buyer to perform.
Things to Keep in Mind
4. Unusually High Offers
If you’re selling a fixer property for cash in Long Island, it’s likely that it will get a lot of attention from local investors if exposed to the local market. If the property you’re selling has multiple offers on the table, be wary of investors that are significantly higher than the average offer price of others you have in hand. Some investors knowingly come in higher than what they can actually pay for the property to tie the property up and use the contingency period to negotiate the price back down to a number they can buy it. Keep in mind that most fix and flip investors have similar way and method for running numbers and determining their offer price. If one fix and flip buyer is significantly higher than the others, something may be amiss! Dig deeper!
Pro tip: Use logic, ask questions, and see HOW an investor plans on using the property once completed. If a buyer is doing so to renovate and re-sell themselves for a profit, how do they plan on making money by paying significantly more than other competitors?
5. Out of Area Buyer
If you catch wind that a certain buyer submitting on your listing/property is from out of your area, proceed with caution! While by no means are all out of area investors “bad” it’s likely a safe bet that these buyers don’t know the local neighborhoods of Long Island (or your area) as well as a local buyer would. Investor-buyers that are not from Long Island likely aren’t as familiar with the market as a local buyer who has an established track record of flipping homes in the area. These types of buyers usually need to do MORE market due diligence during their contingency period to confirm their numbers and that they’re comfortable with the purchase. More due diligence means more uncertainty for you, and puts the transaction at a higher risk of changing their numbers mid-escrow and asking potentially leading to a price re-negotiation.
We hope that by knowing these tips in what to look out for when working with cash buyers, you’ll be better equipped and more prepared to facilitate an EASY escrow for top dollar!
Understanding Closing Costs
When buying or selling a home, the topic of who pays closing costs is bound to come up eventually. Any real estate transaction will host numerous costs and fees that will be factored into the purchasing process on top of the property’s value. Understanding who is responsible for paying these fees is crucial for properly valuing the sale as the buyer or seller. Especially for those looking to budget their real estate experience carefully, closing costs can be an important factor when determining if a home is the best investment for your needs.
In this article, we’ll explore real estate closing costs to help homeowners and potential buyers better understand the process of finalizing a real estate transaction. We’ll also settle once and for all who usually pays closing costs: the buyer or the seller?
What are Closing Costs?
Closing costs are fees and expenses outside of a down payment that is paid once the buyer closes on a property. Closing costs can be a substantial portion of the real estate investment and can be as high as 3 to 5 percent of the down payment. These fees are calculated from numerous sources, from attorney fees to insurance costs. Each transaction’s closing costs will vary based on the property itself as well as the nature of how the transaction was arranged. The buyer and seller need to be aware of closing costs so that the point of escrow can run efficiently and according to the original listing agreement.
Does the Buyer or Seller Pay Closing Costs?
Now that we understand closing costs and their role in a real estate transaction, it’s time to dive into the logistics of buyer and seller responsibility. Buying a home is a huge investment and when selling a home it’s important to optimize profits during the transaction to get the most value out of the home. Closing costs allow the transition of ownership to go smoothly and guarantee that all parties involved, from the real estate listing service to the insurance companies, are properly compensated for the transaction. Generally speaking, the buyer is the party responsible for paying closing costs. However, the closing costs can look different for each transaction and the seller may be liable for other costs unrelated to the transaction itself.
Seller Closing Costs
So do sellers usually pay closing costs? Typically not. While the buyer of a property will generally have more items that require payment than the seller, this doesn’t indicate a complete lack of responsibility on the seller’s part. Especially for sellers who choose to leverage the payment of closing costs to quicken or simplify a sale, it can’t be assumed that the seller is getting off free within a successful transaction. The majority of individuals who sell their homes will do so with the assistance of a real estate agency, and the seller is responsible for paying the sales commissions to any real estate agents that helped the deal take place. This can be a significant portion of the sales price, so those selling their property need to factor this in when listing their home. Some other potential seller closing costs that may come up include:
Buyer Closing Costs
As we briefly stated, those looking to purchase a new home or property should anticipate financial liability for the majority of the costs associated with closing the deal. This is mainly due to the many steps that are taken to secure a loan for a home’s down payment, as well as the process of properly valuing a property. It’s important to note that these closing costs are not usually paid to one party but rather a collection of individuals that played a significant role in the purchase of the home and transfer of ownership. Some closing costs that buyers can anticipate during a real estate transaction include, but are not limited to:
Who Can Pay Closing Costs?
While the majority of financial items that fall under the umbrella of “closing costs” tend to lean to the buyer’s side, each real estate transaction is different and closing costs can be easily adjusted. Many sellers will assume responsibility for a portion of the closing costs as an incentive for interest or to expedite the sale of their property. Negotiation of closing costs is fairly common but should always be calculated towards the beginning of the real estate transaction to ensure no one gets blindsided down the line.
Closing costs can be leveraged by both sides of the transaction to make the process of paying them a bit less overwhelming for the buyer. Some buyers will even make their initial offers with buyer closing costs factored within a purchase price which could lead to the seller negotiating an alternate deal. Closing costs can be an incredibly expensive stage of the real estate transaction, and buyers might be surprised by how many sellers are willing to negotiate these figures for the sake of a simple and streamlined real estate experience.
Sell Your Home Fast with Help from 180 Homes!
Whether you’re a first-time homebuyer or you’re simply looking to maximize an investment’s value, understanding who usually pays closing costs is a major part of conducting any successful real estate transaction. By properly anticipating what costs will be incurred and delegating these as negotiated, the process of buying and selling a home can become much simpler. 180 Homes can help sellers list their property and have a care-free real estate experience. With cash offers that help sellers move on to the next great investment quickly, 180 Homes can expedite the process of selling your home. Contact 180 Homes today to learn more.
Who PAys the Real EState Commissions?
When buying or selling a home, the logistics can get complicated pretty quickly. Tiny yet crucial details and extensive payment processes result in most individuals entering the real estate market with the help of a specialist or real estate agent. When selling a home or commercial real estate space, it’s especially important to have all of the correct details to guarantee you’ll make a profit from the transaction. While there are many ways sellers can get overwhelmed along the way, real estate agents take on the burden and implement their expertise to assist sellers in confidently navigating the market. Their work is appreciated and is typically compensated at the end of the selling process through an arranged commission structure. The most common question people have when finalizing the process is, “Who pays the real estate commission?”
In this article, we’ll explore how these real estate commissions are paid, and how the manner the property is sold often dictates how these professionals are compensated. By understanding who pays the commission on a real estate sale, sellers can more confidently dictate how they’d like their real estate experience to look.
How Do Real Estate Commissions Work?
To understand how real estate commissions work we must first understand how real estate transactions work. In a typical listing agreement, instructions are defined in writing for how both the listing agent and buyer’s agent receive their commission at the close of escrow. The close of escrow occurs when both the buyer and seller have honored all responsibilities to one another. The question of who pays the real estate commission and how much the agent is compensated is decided upon when first beginning the process of buying or selling a property. The real estate industry standards suggest that the listing agent receives around 3.5% of a normal transaction with the buyer’s agent receiving 2.5%, so an approximate total of 5-6% of the sale. Where exactly the total commission falls within that range is negotiated upfront between Seller and Listing Agent. At the end of the transaction when the escrow has finally closed, who pays the commission?
Who Pays the Commission on a Real Estate Sale?
This can be a topic of debate because in some sense, the buyer is the one bringing the cash to the table to close and the seller is taking the cash away from the table. There’s a convincing argument to be made that it’s the buyer’s funds that are paying the commissions for both real estate agents. On the flip side, Escrow companies will traditionally allocate real estate commissions as a cost to the seller on their final closing statement. In fact, buyers will not see anything related to real estate commissions on their final closing statement!
The answer isn’t black and white, but on paper, it would appear that the real estate commissions are paid by the seller. That being said, there are numerous real estate scenarios in which the party who pays the real estate agent commission might work differently, or there is no commission to worry about at all. Let’s explore a few of these unique scenarios and examples.
“For Sale by Owner” Real Estate Commissions
For owners looking to represent themselves within a For Sale By Owner (FSBO) listing arrangement, it’s smart to consider who pays real estate commissions and whether or not they will be something you’ll be responsible for handling. This will vary on a case-by-case basis, but it ultimately comes down to the buyer of a property and how they discovered the property was for sale. If there is an agent that provided the avenues toward a real estate transaction and introduced the buyer and seller, it’s reasonable for a buyer’s agent to receive compensation in some form. This is often referred to as “Procuring Cause” among real estate agents. I.e. If an agent’s efforts resulted in the closing of a sale, they will expect a commission.
On the other hand, if a buyer discovers an owner’s property on their own accord and doesn’t have a pre-existing contract in place with a buyer’s agent, there is no reason to assume that a commission would require payment. The question of whether or not an agent deserves real estate commission is determined by “procuring cause”, which is whether or not “the efforts of outreach and actions resulted in the sale or lease of property. The broker who is in the procuring cause of the transaction is entitled to a commission.”
Selling to an Investor Commissions
In another real estate scenario, it’s common for sellers to experience investors and cash buyers marketing directly to the owners with cash “As-Is” offers that provide an incentive to sell quickly if necessary. In these cases, buyers will connect with sellers without the involvement of a real estate agent and it wouldn’t be expected for either party to pay commission to anyone.
This is a common tactic by investors to provide a great opportunity for sellers to save money on paying out commissions and listing costs that are procured during the process of marketing and selling a home through a real estate service. Additionally, many real estate investors and cash buyers are licensed real estate agents or brokers themselves, but will not operate as an agent within the translation process. These investors avoid using their license and charging commission to maximize their offer price and subsequent net to the seller but can still provide valuable insight into the real estate experience.
The simplest way to save money on commissions is to avoid them entirely.
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Should I Sell My Rental Property?
People invest in rental properties for countless reasons and each rental property is different. Whether it’s a condominium in a city with numerous tenants or a vacation home that’s rented for only a few months of the year, owning rental property has its fair share of exciting advantages and unique challenges. At some point or another, it’s natural for rental property owners to ask themselves, “Should I sell my rental property?” Especially if the responsibility of maintaining the property has become too cumbersome, it’s a natural part of owning a rental property to one day consider selling it.
In this article, we’ll explore what makes a good rental property, as well as some of the signs that you should sell your property (or consider continuing to hold on to it). By understanding the market and evaluating the property with a focused lens, rental property owners can make sure they’re maximizing their investment.
What Makes a Good Rental Property?
To be able to properly determine if it’s best to sell or keep a rental property, you must first be able to identify how a successful rental property operates. Especially for those that are considering buying a rental property for the first time, there are many qualities of a good rental property that investors should look out for during the search. While the real estate market is constantly fluctuating, a rental property that is operating as it should will usually display a few of these common traits.
Should I Sell my Rental Property?
There are many benefits to investing in rental properties. But regardless of the many perks and the passive income it generates, there will come a time in any rental property owner’s life where they might consider selling the property. Especially in times of economic uncertainty, owning and managing a rental property can become very overwhelming and the return on the investment may not be immediately evident. This is why it’s suggested for rental property owners to keep a solid record of their investments, maintenance costs, and income generation to properly determine if the rental is still a worthwhile expenditure.
The hardest part about contemplating if you should sell or keep a rental property is choosing the right time to list the property on the market. Here are a few signs that it might be time to sell your rental property.
Maintenance Costs are Too High
Whether you’re managing a large apartment building or a small home, maintenance is a natural part of any property owner’s responsibilities. While some maintenance costs may be factored into a tenant’s monthly rent (lobby cleaning, snow shoveling, etc.), the majority of maintenance costs fall on the landlord to cover. Paying for contractors, turnover costs, and expensive repairs can all add up very quickly, and if the state of the property is degrading it’s easy for profits to be lost in the long run. Selling a run-down property is much harder than selling a well-maintained one, so understanding when maintenance costs are getting too high is important for determining when you should sell instead of holding on to the property.
Location Has Worsened
Many investors will purchase rental properties largely due to their location, perhaps within an up-and-coming neighborhood or near a popular vacation locale. Location is a huge part of any real estate transaction, and if you’ve noticed a rental property’s location has worsened it might be time to look elsewhere. Whether it’s crime rate, lack of popularity, or even sudden congestion of other rental properties in the area that are stealing potential profits, a rental property’s location should only serve to benefit the owner. Increases in local rental property regulations are another common reason why rental property owners may choose to sell. For example, some areas of the country have strict regulations on short-term vacation rentals such as Airbnb. Being forced to sell due to increased regulations or a bad location is never a good position to be in, so make sure to always be aware of the state of a property’s surrounding location.
One of the biggest benefits of owning a rental property is the passive income that it can generate, but if the tenants create more issues than the investment is worth it could be a bad sign for the property’s profits and growth. Tenants play a huge role in the success of a rental property, mainly because without tenancy the property is at risk of stagnating on the market and potentially losing value. Whether it’s excessive damage caused by tenants, difficulty filling vacancies, or simply issues with tenants paying their rent, the profit gained from managing difficult tenants will eventually dwindle. If tenants are a huge issue among others, it might be best to consider selling the property.
Property’s Value Has Fluctuated
Anyone looking to make a smart investment in a rental property will understand the importance of getting the most value out of the purchase. A rental property’s value will fluctuate frequently throughout owning it, and evaluating these peaks and valleys is crucial for making an educated choice in owning a rental property. It might be that a rental’s location has suddenly boomed and the property is now valued at a much higher value, allowing the owner to sell the rental property at a much higher price than their initial investment to cash out their equity. It could also be the case that the property has massively depreciated and the owner should sell to avoid tanking their profits. A rental property’s value will always be a reflection of current real estate market trends, location, and specific property needs, and understanding the value of the property is a natural part of owning it.
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Should I Keep my Rental Property?
While it’s natural to eventually sell a rental property, timing is often the most important factor when contemplating if you should sell or keep a rental property. Selling prematurely can be a very bad decision. Especially if a rental property is running successfully with reliable tenants and low upkeep, it might be best to simply leave a good thing alone for the time being. If you haven’t been forced to consider if you should sell a rental property, it’s likely still a lucrative and worthwhile investment. Let’s explore some of the major reasons you should keep a rental property and consider holding out for the long-term benefits.
Long-Term Equity and Profit
The housing market and state of the property’s mortgage are what will ultimately determine a property’s selling price, and the housing market continues to grow. This has caused rent prices to increase, which has led to larger returns and extra cash flow for rental property owners in recent years. This can generate long-term profits, especially for those that rent out their property for a price that fully covers the mortgage payment and operating costs.
If tenants are consistently making their rent payments and operational costs are minimal, rental property owners can benefit from passive cash flow that can help them make additional investments outside of the one rental property. Landlords are also able to rely on annualized tax benefits, potential appreciations, and refinancing options that can help maximize profits and combat occasional shortfalls.
Avoid Losses in Poor Market Conditions
If the real estate market conditions are poor, it might not be the most lucrative time to sell. A huge benefit of owning a rental property is the protection it provides against inflation. Rental properties are an incredibly valuable asset and investment during times of high inflation and typically gain value at this time. Renting during any economically difficult period is a nice form of cash flow because housing and real estate is a 24/7 industry. While there may be challenges in managing the property during times of poor market conditions, selling during this time could potentially result in a hefty loss of potential profits and appreciation.
Sell or Keep Rental Property Calculator
When wondering if it’s the best choice to sell or keep a rental property, it’s helpful to have a general guideline of what you should be looking for in a return on investment. As we’ve covered, a rental property needs to generate positive profits from the investment of purchasing and maintaining the property. Being able to accurately determine the financial performance of the property can be a bit more complicated, so having a general rental property formula for calculating profitability is helpful.
Cap rate is a simple calculation used by rental property investors to learn a property’s profitability. It’s calculated by taking the net operating income, or gross rental income minus property expenses, divided by the property’s purchase price. To get this percentage, landlords need to have a firm understanding of their property’s annual expenses to get an accurate snapshot of a property’s performance. These expenses include everything from property taxes and insurance fees to maintenance and management costs, but all play a huge role in calculating the cap rate of a rental property. Subtract these expenses from the annual income collected from renters to get the net operating income.
Cap Rate = Net Operating Income / Purchase Price
Ex: Susan purchases a rental property for $200,000. The gross annual rental income is $24,000 with $10,000 in annual expenses, creating a net operating income of $14,000. By dividing $14,000 by $200,000, Susan will end up with a cap rate of 7% for her investment.
The higher the cap rate, the better the property is performing. Keep in mind, the cap rate for any property will constantly fluctuate based on the property’s needs and market conditions. Buying a property for a low price and renting it out for a high one or gradually increasing rent prices over time can increase a property’s cap rate. Cap rates will vary largely based on location, but if the cap rate is lower than usual for the area and neighboring competition, it might be time to sell for renters looking to maximize their investment.
180 Homes & Properties Specializes in Selling Rental Properties
Whether your rental property is underperforming or you simply wish to move on to something different, it’s normal to occasionally ask yourself, “Should I sell my rental property?” By knowing how to properly calculate a property’s performance and identify the signs of a successful and care-free rental property, owners can more easily gauge if they should sell or keep a rental property and make the choice that will support their long-term goals.
When it comes to determining if you should sell or keep the rental property, it helps to have a simple option for selling that won’t demand an overwhelming amount of time, stress, and energy. 180 Homes can help sell your rental property with a streamlined process that gets your property sold and owners paid quickly. From handling tenant affairs to taking on maintenance needs, 180 Homes experts have the skills and expertise to help. Learn more about how 180 Homes can help rental property owners sell their property and move on to the next great investment.
does it make sense to refinance
Mortgage interest rates have been all over the place in the past 30 days. One day they drop significantly and the next they are on the rise. If you lock in rates at just the right time, you may be able to time the market perfectly. Before you celebrate your interest rate reduction there are a few things to consider. A lower interest rate may not mean a lower monthly payment. While this sounds hard to believe it is often the case when you refinance. Getting the lowest possible interest rate is great but there are a few other items to consider. Before you start your refinance application here are some things you need to keep in mind.
5 Tips to help secure financing
One of the biggest hurdles for investors old and new alike is securing financing. You can have everything else with your business in place but without financing you won’t get very far. How and where you find financing has changed dramatically over the past ten years. It wasn’t that long ago when lender financing was the only realistic source of funding. Today between hard money lenders, private money lenders and silent capital partners there are more financing options than ever before. While finding financing is easier it doesn’t mean it will simply fall on your lap. You still need to dazzle your capital source and make a solid presentation regardless of who you are talking to. Here are five tips to help establish and secure the financial backing you are looking for.
In this article, we’ll explore how the eviction moratorium has affected landlords and rental property owners, how the pandemic has reshaped the current real estate market, and some strategies for selling your home during COVID-19. By being adaptable and understanding regulations related to rental investments, people can navigate the current real estate market more efficiently.
How Has the Pandemic Affected the Real Estate Market?
The coronavirus pandemic undoubtedly had a tremendous impact on the real estate market, and the duration of its consequences is hard to determine. The span of COVID’s effects has influenced the entire span of real estate. Stay-at-home orders have resulted in fewer houses on the market, increasing their demand among those looking to buy homes. Interest rates have lowered, so there has been an increase in individuals looking to purchase homes or rental properties as their purchasing power has effectively increased. Due to widespread economic hardship, many renters have been unable to make their monthly rent, which resulted in the CDC imposing a federal eviction moratorium invoked in March of 2020 under the CARES Act.
All things considered, people still need a place to call their home and real estate is a never-ending industry. Homeowners and rental property owners need to adapt to the current market to sell their homes, manage their tenants, and ensure they make educated choices during this hectic period. Let’s explore what the eviction moratorium means for landlords, tenants, and homeowners protected under the CARES Act.
What is an Eviction Moratorium?
The eviction moratorium was imposed by the CDC to assist those that have suffered from financial trauma due to COVID-19, whether it might be a loss of employment or medical bills that have resulted in non-payment of rent. The order doesn’t remove the possibility of late fees or penalties charged by the rental property owner or landlord, nor does the eviction moratorium allow tenants to break their lease outside of nonpayment scenarios. As of July of 2021, the eviction moratorium was extended for parts of the country that are still struggling in their case numbers of COVID-19. The eviction moratorium has very specific requirements for eligibility. It’s not as if any tenant who wishes to skip rent can use it to their advantage. Tenants need to apply to government assistance programs and qualify under the CDC’s requirements.
To qualify for protection, tenants need to:
While meeting these requirements may deem a tenant eligible, there are serious ramifications if application info is falsified. After ensuring they have verified eligibility, tenants must fill out and send the CDC’s declaration form to their landlords or rental property owners to indicate they are covered under the moratorium. Once the tenant has followed all required steps and provided this documentation, renters are unable to evict the tenant due to nonpayment of rent.
What the Eviction Moratorium Means for Landlords and Rental Owners
One of the biggest takeaways from understanding how the eviction moratorium affects landlords is that legal advice is valuable. Each state is different in how its eviction process works, and knowing the correct steps to take as a home or property owner renting their space is crucial for success. Often times, reverting to a local expert could be the best decision if things point towards an eviction. Real estate lawyers are a great resource for understanding what to do if tenants are not paying their rent. Here are some of the biggest points for landlords and rental owners to consider during these unprecedented times.
Evictions Are Still Possible
The eviction moratorium was put in place to assist individuals who have suffered a substantial financial loss that has resulted in failure to pay rent. That being said, tenants are not only evicted due to non-payment of rent. If the tenant needs to be evicted for reasons non stated in the moratorium, such as smoking in a non-smoking building or otherwise violating their lease, an eviction can still be pursued. It’s just important for landlords and property owners to verify all necessary information before moving forward with an eviction toward a potentially covered individual. Additionally, it’s also possible to sue people for rent rather than eviction, which effectively sidesteps the eviction moratorium. Most tenants will want to avoid legal complications and small claims court.
Explore Month-to-Month LeasesSomething that’s become increasingly common during the pandemic has been month-to-month leases. Typically, renters are accustomed to year-long leases but having a month-to-month option can be an appealing selling point for renters as well as an advantage for landlords and property renters. Month-to-month leases allow tenants to have a bit more flexibility in their living situation which can be helpful during a time of economic uncertainty. On the flip side, renters and landlords can replace current tenants easier by not renewing to tenants who have not paid their rent. Non-renewal is not an eviction but still allows landlords to save some of their sunken profits in situations of month-to-month renters not paying rent.
Communication is KeyAs any landlord or rental property owner is well aware, healthy communication is the only way to have an accurate snapshot of your tenants’ needs. Communication is especially important for both renters and tenants during this time. Covered tenants are required to accurately follow the steps of the moratorium and communicate with their landlords of complications paying rent, and landlords should be responsive and document all correspondence. The eviction moratorium is put in place as a temporary halt on evictions, but tenants are still expected to pay their rent in the future. Keeping track of all tenant communication is highly suggested, not only to be able to guide them through the moratorium requirements but also to provide evidence if needed down the line.
Renters Have Assistance, TooFor homeowners choosing to rent out their space, it’s important to understand that housing qualified individuals under the eviction moratorium may result in financial losses and the inability to pay their own mortgages down the line. Similar to the eviction moratorium, the foreclosure moratorium was put in place to help homeowners place a pause on federally-backed mortgages. Despite this ending in August of 2021, if a home or rental property owner applied for forbearance under the Cares Act and is still struggling financially due to pandemic-related hardship, they may be eligible for an extension.
It Might Be Time to SellAs with any major investment, rental properties are all about generating positive cash flow. When it comes to how the eviction moratorium affects landlords, it’s certainly adapted the way they have to view their rental property investments. Especially for those renting out a home, selling your house during COVID-19 could prove to be an intelligent decision due to the current demand within the housing market. If a rental property is not generating revenue from its tenants, sunken profits can be highly anticipated. The eviction moratorium has provided landlords challenges, but the pandemic as a whole has provided insight into the success of a rental property and how much revenue the property is truly bringing in. If landlords are only projected to lose profit, it might be the best time to sell.
Leave your tenant worries behind. Get a Cash Offer for your property today!
Strategies for Selling a Home or Rental Property During COVID-19
Even with the backdrop of a pandemic extremely present, the real estate world does not stop. In terms of how the eviction moratorium affects landlords and rental property owners, it’s provided an opportunity to move forward, and in many cases sell. Many rental property owners and home sellers are simply waiting for the right time to list their homes and find a buyer. As difficult as it may appear for rental property owners to consider marketing their investment within a pandemic, you can still sell your home in today’s market.
From a buyer’s perspective, now could be seen as a great time to buy. Interest rates have once again dropped to all-time lows and many lenders have loosened some of their most restrictive guidelines. With states and individual companies embracing remote work schedules, buyers have more time than ever to investigate and research their dream home. While COVID-19 is changing the way you may go about it, selling your home or rental property is still very possible. If you’re wondering how to sell your house during COVID-19, here are a few strategies for selling your home during COVID-19 as we continue to fight against the coronavirus and its variants.
Leveraging Technology to Sell Faster
Over the past year, many real estate agents have shifted how they preview and show their listings. To maximize their time, they have started producing property virtual materials for websites or public viewings. Homeowners or rental property owners can easily take videos of their property for agents to share with prospective buyers who can view these materials and quickly decide if they’d like to move forward. The benefits of these virtual materials will outlive the pandemic as an appealing option for non-local buyers to view properties that they might have struggled to view or gain interest in originally. Virtual staging, 3-D tours, and video tools such as FaceTime and Zoom have completely transformed the way buyers can get the first impression of a property, and utilizing these technologies to perform real estate tasks is a smart decision.
Utilize Modern Marketing
In a traditional real estate transaction, initial interest is usually derived from an alert through a multiple listing service (MLS), a database utilized by real estate brokers for information regarding properties for sale. In modern markets, sellers and real estate agents have become more creative. The most common starting point nowadays is social media and online marketing. With an uptick in remote work, there has been a subsequent increase in online traffic. Sellers can use this to their advantage for organic interest in the listing through virtual tours, video tours, sponsored posts, linked websites, etc. This allows buyers to access facts and data regarding a property more often, with many of these online resources also providing alerts to agents, investors, and brokers to see new listings. By adapting to modern marketing techniques, exposure shouldn’t be an issue when selling a home during the coronavirus pandemic.
Showing Your Property (Carefully)
As much as a virtual property tour or dedicated online marketing campaigns can provide valuable property information to potential buyers, nothing can replace the confirmation a buyer receives from physically walking through the property. Especially with the increase of vaccinations, if there is true interest in the property it’s likely that the buyer will want to see it in person. It’s important to note that not all prospective buyers or sellers are vaccinated, so it’s important to still follow county and individual state regulations regarding COVID-19. The bottom line is that if a buyer needs to put eyes on the property, they are still allowed to, so sellers should be aware of local guidelines when selling their home during COVID-19.
Contact 180 Homes for Help Selling Your House or Rental Property During COVID-19
The coronavirus pandemic has caused changes in local real estate practices and procedures that will become the new normal in a few years. While it has altered the way homeowners and landlords have conducted their business, COVID-19 doesn’t have to be a major roadblock in your real estate experience. At 180 Homes, we’re passionate about helping homeowners sell their homes with cash offers that can speed up the entire transaction. Additionally, 180 Homes has valuable insight into selling rental properties for landlords and rental property owners looking to make a change.
The first step of any real estate deal is securing financing. Any grand real estate plans you have are based on your available capital. It will directly impact the market you choose, the purchase price, repair budget and everything about your transaction. One of the most common complaints in the investing business is the inability to find financing. What savvy investors know is that with a little digging there are multiple options available in almost every market. Depending your investing style and goals some of these work better than others. Never let a lack of capital stop you from pursuing a deal. Here are five popular sources of capital for your next deal.
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