How to Make a Profit Investing in a Single Family Rental

Seattle prices are through the roof (again?) so how does one make a profit investing in single family rentals around here?  Well, you either have to get a heck-uf-a-deal on the house and have the cash to fix it up OR you just have to have a large enough down payment to get the monthly mortgage payment below the what you are charging for rent.

True, Seattle rents are also through the roof so plenty of people are putting up the cash to purchase single family homes as rentals, I think LONG TERM they can be wonderful investments… call me if you want more elaboration… but here is the reason I really posted this: Check out these investment opportunities!!! Sure, you will want a property management company since you are not in state and there are multitude other considerations, but for little money out of pocket one could get (relatively) big time profits! I just love this stuff… http://blogs.wsj.com/developments/2013/04/04/bang-for-the-buck-where-investing-in-rental-homes-is-most-profitable/

 

 

What is a Streamlined Refinance?

I received a call from Bank of America a little while ago asking me if I wanted to refinance my mortgage. Of course… but I am self employed, doesn’t that make it difficult for me to get a new loan these days?  Apparently not if I qualify for a B of A streamlined refinance.

What is a Streamlined Refinance?

If you have a Bank of America mortgage (Or any other company that offers this option – my experience is just with B of A) you may be able to refinance to a lower rate without having to pay for an appraisal or have your income verified. I paid $12 out of pocket, they will wrap the $2K in closing costs into my loan and voila! I have a new, much reduced monthly payment. It really is that easy and you don’t necessarily have to have equity in your home. Even if you owe more than the market would pay for your home right now, you may qualify.         Of course not all loans are eligible for a streamlined refinance but if you have an FHA loan, VA loan or Fannie Mae/Freddie Mac backed loan that qualifies for HARP (Making Homes Affordable Refinance Program) then you are in luck. There is so much more to know so read up on the details and contact your mortgage provider to see if you qualify.

Should I do a Streamlined Refinance?

Just as with any refinance you should look at your numbers before you jump into a ‘better deal.’ If you are planning on staying in the house for a long time, it likely makes sense to refinance. If you are planning on moving soon, then does the cost of the refinance outweigh the monthly savings?  How much are the closing costs? How long will it take for you to re-coop that money in your monthly savings with the new loan?  For me personally I calculated I would make up the $2K in closing costs in about 6 months, so that was a no brainer for me!  After that I can take the savings and put it towards the principal to pay my loan down faster. If you would like any help figuring out if a refinance might be right for you just call me and we can calculate it together.

 

 

Seattle is in a Seller’s Market and Expect it to Last

Looking Good Seattle!

I just attended an incredibly valuable class by Denise Lones, a real estate coach and admirably smart lady. The class was about pricing homes and the discussion was mostly around how to accurately track the real estate market and how to use this information to correctly price our clients’ homes. I have long used more oomph than just a plain CMA to arrive at pricing but this class really opened my eyes to improving the way I look at MLS statistics. With Denise’s method I will track the ups and downs in the real estate market for specific areas, or sets of criteria.  It is a close micro-analysis of what is happening with the market. After some time I can start to ‘predict’ where the area is headed – is it a buyer’s market, seller’s market or balanced. This of course does not calculate the price but it helps choose where on the price spectrum the home should be listed. Love it!

Denise also shared her thoughts for where the Seattle area market is headed.  Tides have turned and we are now (and have been for some time) in a Seller’s Market.  We have a very low inventory of homes and prices are going up. Why? Simple supply and demand. Way more buyers than listings and the listings are not catching up. There has not been hardly any new building in the several years after the bust and even banks are holding on to real estate because they ‘know’ prices are on a trend up. I recently heard that banks are prepping houses as rentals!  So, for couple / several years more we are likely to see low inventory and the multiple offers and frustrated buyers that come with them.

I believe every word of this. I experience this every day as I scour the neighborhoods for good homes for my buyer clients and as I write yet another offer on a multiple-offer house. Builders have started to buy massive amounts of land in the area. Previously forgotten housing tracks are filled with the sound of hammers again and many homes are selling pre-sale. These are good things for homeowners and the general economic morale. I just say to you, my buyer clients, “Hang in there,  I will work hard to make it happen for you!”

Why I Dig Zillow Digs

At some point, almost every one of my buyers asks me about remodeling costs for homes they are viewing. I can give you a pretty good range for what it will cost to replace all the windows in a home but don’t even ask me about remodeling a kitchen. Kitchens are as varied as the cooks who use them. For these types of questions,  introducing Zillow Digs to the rescue!

Zillow just announced it’s new home improvement service, Zillow Digs, which is a database of home photos that include the estimated cost to do a similar remodel in their area of the country. To add to the fun consumers can create boards, a la Pinterest, with photos of remodeling projects and share these photos with others.

But people… this is Zillow, so use your own brain. I like Zillow because it gives a good snapshot of area prices. I don’t like Zillow when people take it too literally. The home valuations are done by an automated algorithm. A robot brain. So what you see is not always what you get. Same goes for these remodeling estimates, they are also derived using robot brain so use them as a starting point for further exploration.

That said, I am sure I will be using Zillow Digs as a tool for those initial inquiries and allow me to call my contractor resources if you need a serious bid.

Bothell

The year started off grand… My first closing was a sweet event for my client Karen and her two daughters who are now are very happy in their beautiful home in Bothell!  Just like many buyers right now Karen had to experience disappointments by ‘losing’ in multiple offer situations. Since September we had toured many homes in Woodinville and Bothell and made several offers, finally the right home came on the market and after some suspenseful negotiations it all came together.

I am glad I got the opportunity to spend so much time in Bothell. I have many friends in that area and have sold homes there previously, but now I feel almost as comfortable there as I do my home ‘town’ of Ballard.

Bothell is cool. The feeling I get when I spend time there is that it is definitely it’s own little City versus being a suburb of Seattle. Bothell has an adorable little downtown centered around 100 year-old Main Street and flanked by the Sammamish River. The downtown area is in midst of a spectacular revitalization that has a very pedestrian friendly vision and will surely bring more business to the area, like the new McMenamins in the Anderson School Building.

Many of my clients with children specifically request the Northshore School District, which covers much of Bothell, Woodinville and Kenmore. Everyone seems to enjoy the fact that the homes in Bothell often come with generous lots that afford for some privacy and garden space. The median home price for Bothell, from NWMLS December statistics, is $399,990 (King County area) and $337,596 (Snohomish County area). On the higher end of the options for folks wanting to be on the North end and out of the City but worth it for the size of homes one can find and for what Bothell has to offer for it’s inhabitants.

The Penny Predicts a Very Shiny 2013

Looking far back, 2011 was a bummer of a year for real estate. Buyers were hesitant, sellers were anxious, listings languished on the market and many real estate agents left the business. Good thing I was pregnant for most of it and had other thoughts on my mind.

Things started looking up in 2012. The continued low prices and low interest rates created buyer confidence. Passage of time had something to do with it as well, buyers had a sense that we had ‘hit the bottom’ after much hesitancy in 2011. This past year saw more buyers enter the market and the competition for ‘good’ homes became commonplace. Unfortunately inventory of ‘good’ homes was slow.  Less supply and more demand usually makes prices go up, and they did! A very general look at King County price appreciation is from the NWMLS stats that December 2012 median home price was $342,000, up 17.53% from the 2011 median price of $291,000. If you would like specifics for your area I will gladly provide that for you. Just ask! (And yes, NWMLS stats can be questionable as the data is only what is provided to NWMLS on that specific month, but we are just looking at trends here, not for an exact number for appreciation).

So what is in store for 2013? 

I anticipate continual improvement in the general movement of home sales and in home prices. One thing that will help the recovery is continued low interest rates.  Also, new building starts are up, bringing more good inventory on the market and helping create couple jobs here and there for the unemployed.

One challenge we continue to face is the effect of short sales on home prices. For example, I have a listing in a housing development in West Seattle. We received an offer and two other buyers who would have gladly paid the price of our accepted offer. There are three other similar homes for sale on the block – all short sales and pending sale. If I look at recent CLOSED properties the value for my listing matches the offer price. But these darn short sales (which are all by the way can not be counted as SOLD until they are CLOSED) have been priced so low (seller doesn’t care, just wants an offer) that the appraiser may raise an eyebrow and shoot us down for the contract price my sellers and the buyer have negotiated. I wait eagerly to hear the result in the next couple of days. I’ll let you know how it goes.                                                                                                                                   Short Sales will continue to be a large part of listing inventory. Part of the Fiscal Cliff deal was extending Mortgage Forgiveness Debt Relief – Short Sellers get a break in the tax code from having to declare any reduction in principal (not having to pay the ‘short’ part of the loan) as income. Had that not been extended we probably would have seen more owners opting for foreclosure or bankruptcy. Not better than all the short sales, just different. Perhaps better to flush out these properties now, quickly, than see them come on as bank owned in years to come?

The way the market fares is largely due to consumer confidence. No buyers are buying homes if they think the sky will fall but as soon as the media turns to reports of price appreciation more buyers make the decision to enter the market. By listening to people coming to my open houses these days I get the feeling buyers are back for good.              That doesn’t mean I see all sunshine and rainbows. The US economy is far from recovery, as we all know we are in a big economic hole. If the dollar tanks who knows what mess we will be in. Until then…

I am looking forward to a prosperous year.  I found a shiny penny on the ground on my first run of the year so it can only mean a very magical 2013 for all of us!

Resolve to Run

Did you make any New Year’s resolutions?   I did, the ‘scariest’ of which is running that Seattle Rock n’ Roll Half Marathon in June. I say scary because although I have signed up for one before, I never was able to run it due to a hurt Achilles tendon. Oh yeah, there was the other time I signed up for Seattle half marathon and didn’t go because it was too cold… it was November and snowing guys!

This year, in between open houses and home showings, you will likely find me on the path at Greenlake. Do you have any favorite running trails? I would love to check out some other ones in or near the City. Anybody want to make a running date sometime? Keep in mind I am full-on beginner at this point, slow-as-molasses, run-walk-run-walk, you get it. But as with everything, I know it takes time. Happy New Year everyone and I hope your resolutions get resolved!