Invest in REITs or become a landlord?

By Dr. Don Taylor, Ph.D., CFA, CFP, CASL • Bankrate.com

Q: Dear Dr. Don,
My wife and I own a small business that earned about $150,000 this year (after taxes). We’ve never had this kind of cash before, and we’re trying to figure out what to do with it. We live in Arizona and it appears home values are on the rise, so we’re wondering: Should we refinance our home, buy a rental property or both?

Our home is worth about $230,000, though we owe about $260,000. If we refinance, we would need to put down at least $70,000 to get rid of our private mortgage insurance payments. We could then use the remaining $80,000 as a down payment on a rental property.

Is it better to do this or to just put it all toward the primary residence and forget the rental idea? We really appreciate any advice!

Best regards,
– Brandon Bungalow

A: Dear Brandon,
Is that $150,000 a one-time gain, or do you expect an even greater return as your business grows? If you expect it to continue, I’d suggest using part of your profits to set up a retirement plan for your business — that is, if it doesn’t have one in place already.

Accumulating rental property may not be your best move. As a busy small-business owner, you may not have the time, energy or inclination to be a successful landlord. You already have more than $260,000 invested in your local real estate market. Do you really want to double down? I wouldn’t.

As an alternative, you could invest in REITs, or real estate investment trusts. Those are professionally managed, and they could become part of a diversified investment portfolio.

It’s true that a conventional first mortgage will require private mortgage insurance, or PMI, if the loan-to-value is more than 80 percent of the home’s value. However, you may be eligible to refinance using the federal government’s Home Affordable Refinance Program, or HARP, without bringing $70,000 in cash to closing.

Read more: http://www.bankrate.com/system/util/print.aspx?p=/finance/real-estate/invest-in-reits-become-landlord.aspx&s=br3&c=real estate&t=story&e=1&v=1#ixzz2SW81dp9d

Follow us: @Bankrate on Twitter | Bankrate on Facebook

By Lisa Gibbs @MoneyJuly 20, 2012: 8:35 AM ET

Make $1 million with 3 properties. Assumes the following for each property: a purchase price of $182,600, annual rent of $26,400 and annual expenses of $17,780.

real estate, real estate investing, reit, rental properties, real estate investment groups, flipping, leverage,

Exploring Real Estate Investments: Advantages And Disadvantages

By Ian Woychuk, CFA

Basics of Renting New York City Apartments

New York City is one of the most exciting and fast moving cities in the world. It’s no surprise that one of the most important factors in finding a Manhattan apartment, is staying on top of a fast-moving market. An experienced broker will help you keep up with the ever-changing New York City real estate market. Our agents will also lead you to the most desirable Manhattan apartmentsthat are available for rent.

Cost of Brokerage Services

When using the service, convenience, and advice of a real estate broker in your apartment search, there will be a commission fee paid. The standard fee is approximately 12-17% of the annual rent of New York apartments. Make sure you are comfortable with your broker and the broker serves your interests. Brokers have access to the best and most apartments, this is just a reality.

Know What You Want Before You Start Your Search

How much can I afford? It is important to figure out how much your budget will allow you to pay towards each month for rent. New York City is one of the most expensive cities to pay rent, with a modest studio apartment averaging at about $1800 – $2500 per month. The rental price of Manhattan apartments vary according to various factors such as size, Manhattan Neighborhood location, features and the condition of the apartment. Keep in mind as you figure out your rental budget that as great as your new apartment will be, you will still want money left over to take advantage of all that New York City has to offer.

Which Manhattan Neighborhood Should I Look To Rent In? With so many unique areas within a small geographical region, you need to know which area of Manhattan will best meet your individual needs and tastes. This will ensure that in the weeks after you move in you still have the same great feeling you did the day you signed the lease. Build a plan to research the different areas of NYC, and explore the different New York City neighborhoods before you sign.

What Type Of New York City Apartment Will Meet Your Needs? There are many styles of apartments to choose from within New York City, including ones that you won’t find anywhere else. This is sometimes a great thing, as it allows you to express your individuality. But you also need to be sure that it meets some of your other needs. Do you like to cook? If so, is the kitchen big enough? Do you often have visitors? Do they need their own bedroom while they stay over? Make sure you know what you like and need, and be sure to ask these questions as you look for your next dwelling.

How Soon Should I Start Looking for an Apartment? It is suggested that you begin your New York City apartment search approximately 30-40 days prior to when you wish to move in. On account of the market turnover, apartments you may see before this time will most likely not be available at the time you’d like to move in.

Finding and Securing Your Next New York City Apartment

When you’re out looking at apartments with your real estate broker, it’s important for you to be prepared to rent the apartment you would like on the spot. Due to the nature of the market, most New York apartments are not available for much longer than a couple of days at most after they are shown. You don’t want to lose out on the New York apartment rentalyou want, so follow the below guidelines for preparation before you set out for the day:

• Make sure to have pay stubs, bank statements, a check book and letter(s) from previous landlords on hand.
• Be prepared to write a check for a deposit of one month’s rent.
• Be prepared to spend $50 – $100 for Application Fee.
• Carefully inspect the layout of the New York apartment rental, paying attention to the quality, space and feel of the interior.

Requirements for Prospective New York City Renters

In order to rent one of the many New York City apartments, renters need to have the following:

• An income of at least 40-50 times the monthly rental price of the apartment
• Good credit history. For free credit reports visit AnnualCreditReport.com
• A social security number
• Stable employment history
• Students must have a guarantor or co-signer

Signing of the Lease

When you’ve found an ideal New York City apartment, you’ll want to be ready by having the following prepared:

• Have at least one month’s rent in the form of a check in addition to pay stubs, employment verification, tax returns and stock portfolios ready.
• Fill out the application thoroughly knowing all the specific requirements that your landlord is looking for in terms of income and employment.
• In most cases, you will be asked to secure the Manhattan apartment with a deposit equal to one month’s rent; this amount is refundable in case your application is rejected.
• Request and obtain a receipt stating your deposit money will be refunded if you are rejected.
• Understand what type of lease you are signing. There are many kinds of New York City apartment rental leases such as rent stabilized, short-term, standard and self extending.

[ Recent Manhattan Rental Listings: http://dompascual.postlets.com/ ]

Rental Guide for New York City apartments

Dominador Pascual III, Esq. gives an unparalleled level of service to my rental customer base by offering in-depth needs analysis prior to selecting one of our specialists to guide you through the process. My goal is to make your rental process as seamless as possible and to give the most aggressive and highly negotiable rates available.

Typical lease types and riders:

New York Real Estate lease types vary depending on the type of NYC apartment being leased. They vary from Manhattan Co-op to Condominium to the standard rental apartment leases. On case-by-case bases, riders or addendum’s are added by landlords. These supersede or effectively change the language in the lease and hence change the lease term. We strongly advise you to read the riders carefully as they can nullify any clause in the lease agreement. Both parties must sign any riders added to a lease. You should also contact your attorney.

REBNY Standard lease Agreement:

This lease is primarily used for New York City rental buildings and has both a stabilized and non-stabilized variation. It is seldom used when renting a Manhattan condominium or a Manhattan co-operative. A rent stabilization rider must be attached to the lease when used for a rent-stabilized apartment. Under the Rent Stabilization laws, the State of New York sets the annual rent increases and the lease is automatically offered for renewal each year

Condominium Lease Agreement (Blumberg Form A101):

This is a very common lease that may require the lessee to pay any increases in condo charges in addition to rent. It may also contain a cancellation clause. Most landlords will allow tenants to remove these two items from the lease. Contact your attorney.

Sublease Agreement (Blumberg form P193):

This is a one-page legal document that usually has a variety of riders attached. It is used in virtually all sublet situations and is most often used when renting in a co-operative apartment. Contact your attorney.

Lease Agreement (Blumberg Form A55):

Predominately used for leasing Manhattan Brownstones, Townhouses, and Single Family Structures. The language in the lease is quite easy to understand and various riders could be attached to the lease. Again, we strongly advise you read and review the riders thoroughly prior to the execution of the lease. Contact your attorney

Landlord Requirements of Prospective Tenants:

Most Landlords are extremely diligent with regards to qualifying a prospective tenant. Prospects may be required to submit numerous items to prove financial ability and credit worthiness. In the event of a less than stellar credit rating, additional security deposit may be required to secure a deal. As a general rule, landlords require that the prospective tenant make approximately 40-50 times the monthly rent in their annual salary (combined income is often used for couples and roommates).

General Required Information for Landlords and Management Boards:

The following is a succinct list of documents required by most landlords and building management Companies:

• Good Credit. If your credit is NOT in good standing, you may require a guarantor.
• Personal Identification – a Passport or Driver’s License will suffice
• Letter of Employment: usually a brief statement on employer’s letterhead of annual salary, bonuses, position held, and employment start date.
• Copies of Recent Pay stubs
• Tax Returns: typically for two most recent years
• Two Business Letters of Reference
• Letter from Current Landlord: reference as to Tenancy history and Rent paying history
• Financial Statement: a standard statement of Assets and Liabilities should be acceptable
• Broker fee (if applicable), and required security deposit (Funds should be Certified check, traveler’s checks, Money orders or Wire transferred)

You should also bring enough funds to cover a Credit Check fee of $25-100 dollars and building application fees that may range from $150 – $500 which in most cases goes towards either the security deposit or the broker fee. These may be paid by personal check or cash to secure the apartment. If you are working with us under a corporate relocation program, it is imperative that you further discuss broker’s commission with your Green Homes Relocation Specialist regarding your company’s affiliation with us.

Presenting this information in a timely manner can qualify you as a potentially strong applicant and hopefully give you the advantage in multiple bid situations for the same apartment.

A Guarantor is an individual that is qualified to guarantee the performance of the tenant. Some landlords may request a lease Guarantor if the prospective tenant does not meet all financial or credit requirements. The Guarantor should earn enough income to satisfy the lease in case of default. Such income requirement is usually in the range of 80-100 times monthly rent. Landlords usually request that the guarantor be a family member living in or around the TRI-STATE area. Guarantors are usually asked to disclose detailed financial information and fill out a credit application as part of the approval process.

Negotiations – In the present New York City rental market, it is quite difficult for tenants to have much room for negotiations due to the strong current demand for housing in New York City. However, here at Green Homes NYC we lend a listening ear to offers the prospective tenants may have. It is advisable that a tenant receives all promises of repairs and improvements in writing. This may be used as a rent negotiation tool if the tenant decides to pay for some of the costs of improvements. Lease renewal increases can be negotiated prior to signing the lease. It is advisable to consult with a rental agent regarding current market trends.

Short Term Rental Apartments – There is a limited supply of short-term furnished New York City rentals. Prices tend to be relatively higher than a one-year lease and the supply is limited to the higher end of the market. For unfurnished Manhattan apartments, tenants may rent furniture for a monthly fee. With basic furniture, the monthly cost of a rental package is about $400.00 per month for a one-bedroom apartment. As a general rule of thumb, one can estimate furniture rental costs as approximately 20% of the apartment rent. Your agent can supply you with a list of reputable furniture rental companies.

5 Reasons to Save for a Large Downpayment

When purchasing a house, most buyers have to finance the majority of the purchase price with a mortgage. The amount of money you put down upfront determines the size of the mortgage. Knowing how much of a down payment to save up for can be a tough decision. The larger the down payment, the longer you’ll have to wait to own a home. However, there are several benefits to waiting to purchase until you have a substantial down payment.

1. Reduced Mortgage Payments

The more you put down on your home upfront, the smaller the monthly mortgage payments will be. That will help out with your monthly budget but, more importantly, you will save thousands of dollars of interest over the life of the mortgage. For example, on a 30-year mortgage at 5% interest, putting an extra $10,000 into the down payment will save you a total of $9,325 in interest payments. (Exotic mortgages allow you to decide how much to pay. For more see, Choose Your Monthly Mortgage Payments.)

2. Lower Interest Rate

Banks and other mortgage lenders often offer better interest rates when your loan-to-value ratio is lower. An increase in your down payment lowers the ratio and also lowers the risk to the lender. Lower interest rates can also save you significant amounts of money over the life of the mortgage. The interest savings from going from 6.0% to 4.5% on a $200,000 mortgage over five years is $66,863.

3. No Mortgage Insurance Fees

A conventional mortgage usually requires a down payment of 20% of the purchase price of the house. If you want to contribute a smaller down payment, most lenders require that you take out mortgage insurance. This insurance protects the lender in case you become unable to pay your mortgage. There are federal insurance programs available to qualified purchasers and there are also private insurance options. Mortgage insurance can be expensive, ranging from 0.5 to 1% of the house value annually to several thousand dollars per year. The insurance premiums are an extra cost of the mortgage and are not applied to the mortgage balance. (For more, see 6 Reasons To Void Private Mortgage Insurance.)

4. Less Risk When Selling

The real estate market can move up or down after you purchase your house. If the market is in a downswing and you have to sell your house, you may find that your mortgage balance is higher than the value of your home (known as being “upside down” on your mortgage). This situation gives you less flexibility in accepting offers and may make it difficult to sell your home and pay out your mortgage. If you made a substantial down payment when you bought your house, you are less likely to be upside down on the mortgage.

5. Ability to Ride out Financial Crises

No one can ever predict with certainty what can happen in the future. You may encounter a personal financial crisis such as job loss or illness that can impair your ability to pay your bills, including your mortgage. If you have equity in your home due to making a large down payment, you can better weather a financial storm. The mortgage payment will be smaller and you may be able to borrow against the equity if you need to. If you borrowed the maximum possible based on two incomes, you leave yourself open for financial stress and perhaps even foreclosure. (For more, see Too Much Debt For A Mortgage?)

The Bottom Line

Taking the time to save up money to use as a down payment on your home is a solid investment. It can save you thousands of dollars over the course of the mortgage and can put you on more solid financial footing. (For more, see Mortgages: How Much Can You Afford?)
Read more: http://financialedge.investopedia.com/financial-edge/0511/Home-Down-Payment-Minimum-Or-More.aspx#ixzz1iMzAN2P2