Thinking of Becoming a Landlord? Here are Some Tips
With homes appreciating for 13 straight months (according to the Case-Shiller Home Price Index), many home owner’s are considering renting out their current home or purchasing a home to rent out. Here are some simple tips to help you on your way:
- · Purchase rental properties in attractive upcoming neighborhoods and know what your exit strategy is going to be, no matter how far out in time. Even if the price seems right, don’t buy rental properties in declining neighborhoods. If you own a rental in moderately priced neighborhoods, consider making the property available to section 8 tenants. Section 8 is a federal rental voucher system coordinated through local housing authorities. You can arrange to do this with the county, and if accepted, the section 8 program will subsidize your tenant’s rent.
- · Use an application form that gathers as much information as possible about your prospective tenants. Get a credit report or ask the applicant to provide one that is less than three months old. Contact personal references and previous landlords. Hold an open house to meet prospective tenants. Prepare an information book for the property that answers questions about the home and the neighborhood.
Deposits and Rent
- · Collect a damage deposit that is equal to or greater than the monthly rent amount. Inspect the house with your tenant and take pictures to record the existing condition of the home. The landlord and tenant should sign off on the inspection report. Use a lease that addresses a comprehensive range of issues and spells out the tenant and landlord responsibilities. Include specific information on how much the rent is, when it is due, penalties for late payment and what will happen and when if the rent is not paid. Know your local landlord-tenant laws, including eviction procedures, and make sure your lease is in compliance with local regulations. Always act in accordance to the lease, using the prescribed penalties when necessary.
Buy a Home Warranty
- · Purchasing a home warranty could save you a lot of money and time. Home warranties cost $275 and up, depending on the coverage, but for the price of a service call, usually around $55 to $75, certain problems can be fixed. Compensation for replacing appliances covered in the warranty is prorated based on their age. Depending upon the age and condition of your furnace, water heater and appliances, you can save a lot of money on repairs.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) gained +42 basis points (BPS) from last Friday’s close which caused 30 year fixed rates to move lower for the week. We saw our best rates on Friday and our worst rates on Wednesday.
We had a slew of “Talking Feds” which included many district Federal Reserve Bank Presidents as well as Ben Bernanke. They pretty much carried the same message: The economy is growing at a moderate pace and the labor market is slowly improving and if the economy continues along the path that they have forecasted, then further reductions in their monthly Treasury and agency mortgage backed securities should be expected. If that does occur, then naturally fixed rates will continue to rise at a very slow but consistent pace.
We had some very tame inflationary data with both the headline Producer Price Index (PPI) and Consumer Price Index (CPI), 0.4% and 0.3% respectively. Retail Sales beat estimates and Initial Jobless Claims were better than expected. We even had some improvement in manufacturing data out of NY and Philly. But offsetting that positive economic data was a dismal reading for Continuing Jobless Claims, and a weaker than expected preliminary reading of the Consumer Sentiment Index. Housing Starts were stronger than expected but offsetting that was Building Permits being weaker than expected.
Overall, we had some decent economic news but nothing to cause our benchmark FNMA February coupon to break above our 100 day moving average.
|Date||Time (ET)||Economic Release||Actual||Market Expects||Prior|
|22-Jan||7:00 AM||MBA Mortgage Index||–||NA||11.90%|
|23-Jan||8:30 AM||Continuing Claims||–||NA||3030K|
|23-Jan||8:30 AM||Initial Claims||–||327K||326K|
|23-Jan||8:30 AM||Continuing Claims||–||2900K||3030K|
|23-Jan||9:00 AM||FHFA Housing Price Index||–||NA||0.50%|
|23-Jan||10:00 AM||Existing Home Sales||–||4.90M||4.90M|
|23-Jan||10:00 AM||Leading Indicators||–||0.20%||0.80%|
|23-Jan||10:30 AM||Natural Gas Inventories||–||NA||-287 bcf|
|23-Jan||11:00 AM||Crude Inventories||–||NA||-7.658M|
I will be watching these reports closely for you and let you know if there are any big surprises:
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.