Plunging Rental Rates and Where They’re Happening in the U.S.

As the COVID-19 pandemic began to wreak havoc on the American economy and millions lost jobs while businesses closed, real estate industry observers expected rental rates to plummet in key cities across the country. So far, this prediction has come true, although not everywhere. The overall rental rate picture is somewhat complex.

In general, rental prices show just a slight fallback when looking at the country as a whole. According to Zillow, the median U.S. rent rate is down 0.03%. That doesn’t seem like much, but it is the largest decrees for a specific time period in two years. The average rental rate is $1,771 per month nationwide.

However, major cities that traditionally harbor the priciest rents are showing a steep decline. The hardest hit cities for landlords have been Washington D.C., San Francisco, Boston, Seattle and Manhattan. San Francisco leads the nation with a 31% drop in median rental rates. Furthermore, four counties in the Bay Area were among the top 10 in the nation for rental rate declines.

Those who have had their eye on a studio apartment in New York City may have an opportunity to finally afford one. Rates for these types of units have dropped by 15%. Overall, rents are down 4.6% in New York. The city of Honolulu has also seen studio apartment rates drop a significant 15%

Boston is the fifth-most expensive city in which to rent among the Top 50 highest-rent cities. Rates dropped by 2.8% making the average in Bean Town now about $2,490.

Some cities have actually seen rental rates rise dramatically in the COVID climate. Tulsa, Oklahoma, had rental rates for studio apartment rise by 36% over the summer months. That’s a dramatic rise, but Tulsa rental is still way more affordable than the highest-rent cities. The average studio apartment in Tulsa can be had for just $745 a month.

Experts point out that there are two distinct rental markets in America — inner-city and “all the rest.” The fact is that rents are only plummeting in major inner-city locations. Because many have been forced to flee their expensive apartments in cities, rental rates are rising prices outside the city as more people are seeking a new place to live.

Financing a Rental Property

Rental property carries with it the certainty of a continuous and stable income source for years to come. Like any other lucrative investment or business venture, the rental property requires funding to establish it. The advantage is that there are several viable financing options for you to choose from, depending on the terms and conditions provided. Here is a list of some of the alternatives you can take advantage of to finance your rental property.

Cash

Financing your rental property from your pocket is one of the best ways to get a rental property. This option does not come with any attachments such as inflated interest rates or the use of your property as collateral. If you have enough money to finance the investment, especially if your credit score with the banks is not favorable, pick this option.

The set back with this cash is that the returns on your investment diminish. However, it remains to be the best way to cover your rental property investment.

Conventional Bank Loan

A bank loan is a good property financing option if you have a good credit score and a good income. The amount of income you get is useful to calculate the amount of interest you will pay and the payment duration.

Owner-Occupant Purchase

This strategy of financing is one of the best ways to finance your rental property. It comes with very low down payment rates and a mortgage that takes up to 30 years. The benefit of this option is that the bank is responsible for paying your insurance fees and taxes. However, you have to adhere to conditions that include depositing money monthly into an account and living on the property for a year.

Seller Financing

Seller financing is a good option for individuals who do not have a good credit score with the banks. The buyer of the rental property gets a loan from the would-be seller to buy the property. For this option to be successful, the buyer should show commitment by signing a contract and loan terms in the agreement with the seller.

Private Funding

Several lenders provide buyers with private funding for the property. The funding comes with interests and terms that are negotiable and flexible.

This option of financing is much faster but carries a shorter repayment period and comes with high-interest rates. Private lending is similar to a mortgage as the lender’s finances remain secured in the home.

Investing in Real Estate without Home Buying

In the past, buying property was the only way to invest in real estate, but evolving technology has opened new methods that don’t require financing a property purchase. Today, there are many different ways to take advantage of lucrative real estate investing opportunities. Here are a few ways you can get started.

Buy Real Estate Stocks

There are many companies that work in the real estate field in one way or another, allowing you to invest in real estate with individual stock purchases. From construction companies to mortgage lenders, you can choose stocks that deal specifically with real estate. While this won’t allow you to diversify your portfolio, real estate is generally a continuously growing industry, and investing primarily in stocks related to this field may help you grow your wealth.

Real Estate Investment Trusts

Also known as REITs, these companies oversee the operation of multiple commercial properties, including shopping centers, office buildings, and manufacturing warehouses. You can buy shares in a REIT just as you would buy shares in any stock. Once invested, you’ll benefit from the gains each property generates. Many REITs focus on a specific field, such as investing in medical buildings or cellular phone towers, so you can diversify your portfolio with several different types of REITs.

Real Estate Mutual Funds

A mutual fund differs from an REIT in that it holds multiple investment types, including REITs, real estate stocks, and direct property investments. This helps provide each investor with a diverse range of investments, while allowing them to get started without a large amount of capital. For this reason, beginning investors find a real estate mutual fund to be the most beneficial.

Real Estate Crowdfunding

Another opportunity that provides easier access to real estate for beginners is crowdfunding. There are multiple platforms available online, although Fundrise and RealtyShares are among the most popular. Investors can get started with as little as $5,000 by researching and investing in individual projects. Since multiple investors can join each project, crowdfunding helps developers get the funding for their projects. In return, investors earn profits based on the size of their investment.

You can learn more about these opportunities by doing your own research or by consulting your financial advisor. Each option listed here provides you with an opportunity for growing your wealth without having to go through the process of buying property yourself. As this takes much of the work out of real estate investing, these options make it easier for anyone to get started quickly.

True Rent Vs. Buy Cost

When people start thinking about buying a home, one of their first questions is often, “is renting or buying a house cheaper?” There are several factors that go into this calculation. Understanding how the true cost of renting vs buying works will help people make the right choice for their family.

The True Costs Associated With Buying a Home

True costs cannot be calculated just by looking at the cost of a mortgage versus the cost of a rent payment. Buying a home often includes a lot of factors that result in higher payments than realized. First of all, there are all the closing fees involved with purchasing a home, which can result in thousands of extra dollars. Then homeowners need to pay property taxes and homeowner’s insurance, and unless they have an unusually high downpayment, they may need to pay mortgage insurance at first.

Renter’s Upfront Payments Are Cheaper At First

When all the costs of being a homeowner are included, it is usually cheaper to rent at first. An analysis shows that renters’ yearly costs are lower than a homeowner’s yearly costs for the first 22 years! This might seem like a shocking amount. However, it is important to also take into account what happens with all the money both people pay.

Owner’s Have More Savings

Keep in mind that a renter’s money goes straight to the landlord. They do save about $4,000 to $3,000 per year on average though, since they are paying slightly less than the homeowner. With a homeowner, much of their mortgage goes directly into the home itself. This allows homeowners to build equity which is essentially like a saving’s account that the homeowner can liquidate by selling the house. By year three, the homeowner has saved up more than the renter.

Who Saves More Eventually?

When the difference in savings is considered, owning a home ends up being the smarter decision financially. As long as the homeowner plans on keeping the property for at least a few years, they build up enough equity to offset the slightly higher mortgage payment. At the end of the typically 30 year mortgage, a homeowner has saved $11,448 more than a renter.

Handling Tenant & Owner Funds

One large task of a property manager is handling funds. This involves making informed decisions about all aspects of the property, which goes past physical assets. Property managers are in charge of things like rental income, security deposits, reserve funds, and writing checks on the owner’s behalf.

Payment Schedule

The property manager is in charge of picking the date that tenants will be responsible for paying their rent. They are also in charge of determining if the tenant pays for the current month or if the property will hold the check for a month. The property manager may also be responsible for setting up a direct deposit if the property wants to offer that feature to their tenants. It is recommended that the rental revenue is in the bank account collecting interest rather than in the bank manager’s account.

Taxes and Accounting

The property manager may make the decision if the company will provide an IRS-1099 and a summary profit and loss statement when tax time rolls around. The property manager may also be responsible for having a paper trail when it comes to accounting. This may include keeping detailed documentation and records. The goal is to make everything crystal clear if an audit were to occur. A desirable company keeps copies of all invoices and is happy to provide them upon request. This helps with legal issues and taxes.

Reporting

Income and expense statements should be reported each month. It is advisable to avoid working with companies who report any less than this. Something else to watch out for are income and expense statements that are viewable online. This makes the documents a lot more accessible than just a paper copy. Lastly, it is important to ask for a copy of the report beforehand because you are giving the company a chance to show if they are able to give you a report. The report can contain fake or “dummy” data because you are just inquiring to see if they are willing to share a report with you. If they are not willing to share a report, re-evaluate your options. If they are willing to share a report, make sure it is organized and easy to read.

Covering Your Property Insurance

High rise buildings provide a lifestyle that many seek because of the benefits. These benefits include a safe place to live, pools, great views, and an elite lifestyle. Just like the many reasons that people love to live in high rises, there are many requirements to insuring a high rise property as well.

Know Your Role

Insurance coverage for high rise is broken into two sections. Part of the responsibility falls on the property owner and the other part falls on the association. To clarify, the association is responsible for policies for certain areas of the high rise. These areas sometimes include the pool, gym, and the lobby The “structure” of the property applies to the “perimeter boundary walls out.”

The unit ownersare responsible for the “perimeter boundary walls in.” The requirements vary depending on the part of the country. Unit owners need to purchase insurance that covers upgrades beyond a standard unit and personal items.

Ask for Help

When insuring a property, it is important to do your research. A critical part of the research is finding a reliable insurance broker. It is recommended to find an expert to help you find the right broker. You need a broker with experience in the industry who will not cost you money on mistakes that are easily avoidable. A brokerage firm is equipped with the connections to find someone with the experience that you need for your property.

Think about the Value

It is tempting to think about savings when it comes to finding the appropriate insurance policy. However, it is important to think about the big picture, including potential gaps in the coverage and insane deductibles. Value, in this case, means the plan that offers the maximum amount of coverage at a reasonable price point. The point of an insurance policy is to give you peace of mind, so it is important that you are not constantly doubting the decision you made because you went with the cheapest insurance policy.

Review it Constantly

It is tempting to pick a plan and not think about it again until you need it. However, it is smart to review the plan at specific intervals to makes sure that the coverage is enough for the property.

The Basics of Property Management

Many real estate investors are looking for professional management companies to help them with the day to day operation of their properties. This is because there are time-consuming processes that are included in the management of rental companies and property owners may not have the time to deal with them. Here are a few things a property management company can do for you.

Find New Tenants

A vacant property will be costing you money, so it’s important to keep every unit occupied. However, a tenant who is destructive, or one who has difficulty paying their rent, can be worse than having a vacant unit. Property management teams will create attractive ads that will attract applicants to the property. Once they begin reviewing applications, they will use a thorough screening process to help find tenants that present a low risk.

Managing Each Tenant

Your management company will serve as a buffer between you and your tenants, so you can dedicate your time to other matters. They will begin by having new tenants sign leases and move into their apartments. They will also make sure repairs are made in a timely manner and take care of common areas of the property. Any concerns or questions the tenants have will also be met by the management team to ensure the continued smooth operation of the property.

Preparing Vacant Units

Whether a tenant vacates on their own or gets evicted, the management team will also tend to the new vacancy. This will start with processing a tenant’s notice that they’re vacating, or filing an eviction notice with the court. Once the tenant has moved out, they will send maintenance and cleaning personnel to update the vacant unit. This may include making minor repairs, repainting the unit, and cleaning the unit to meet with the approval of the next tenant.

As this overview suggests, there’s a great deal of work that goes into preparing and renting out the units on your investment property. A professional management company can handle these tasks for you at a reasonable rate, so your days won’t be bogged down with these administrative matters. This frees you up to pursue new investment opportunities, or to enjoy your free time with the peace of mind of knowing your property is well tended.

What to Consider as a Home-Based Worker When Renting

The pandemic has shut the doors of corporate buildings; people are working from home. This trend will continue either out of choice or as a necessity. Annually, 10% of people move from one house to another in the US. Most of these young people shift either for business or personal reasons.

Formal workplaces are not the safest environments for social distancing. People always share equipment; such as staplers, printers. Companies have relatively squeezed spaces for their staff. There is speculation that more people will decide to work from home long after the pandemic has passed.

Home-based workers will have to adjust their spaces at home to accommodate both their personal and office needs. Some of the considerations to bear in mind include;

1. Make Space

Most people assume that a person needs a large house to have a home office. A person has to create the workspace regardless of the size of their house. He/ she can turn a room meant for another purpose into his/her office. A committed home-based worker can work from anywhere in the house; even the kitchen counter.

2. Do Not Inconvenience Your Neighbors

A successful home-based business gets more clients as well as employees. Frequent clients to the house should not take up all shared space from your neighbours. Rented houses have clear regulations that a home-based worker should adhere to; evacuation might inconvenience your business.

3. Expect Change

Home-based work, just like formal offices, factors future needs to scale up. When a person starts working from home, he/she should not set up for permanence; especially in a rental.

4. Manage Your Family

Working from home presents a new challenge that needs management. Kids might become a distraction and lower your productivity. Home-based working parents should set their home offices far from any family interruptions. Renting should account for this adjustment; so those parents aren’t interrupted.

In summary, the above are not house hunting tips, just mere considerations for renters who work from home. These tips will be more suited for Post-Pandemic house hunting. Renting at the moment would not be wise. However, it is healthy to consider what the future holds. With the overwhelming loss of life at the moment, a distraction such as planning for the future is necessary.

Why Slashing Property Prices in California is the Solution for Making More Sales

Asking price for most home sellers is reducing at an alarming rate. Many sellers have to reduce their prices to ensure they remain in the market and the property off their hands. When companies are laying off workers and filing for bankruptcy, it is a no-brainer why the prices are plummeting.

San Francisco, California, has not been spared of the slash in home prices. Sellers have to lower their costs to remain relevant and competitive. San Francisco faces a 6% increase in home sales, totaling 1,360 unseen numbers for over a decade. The changes come as a result of people seeking homes in less dense areas.

The global pandemic is destabilizing the markets plus affecting the purchasing power of many. It was only in 2010 and 2011 that there were so many houses in the market as it is now. A majority of the houses for sale are single-family homes at 50% more than last year and condominiums at 130%. In the Bay Area, there was a jump of up to 70% in single-family homes after April and May, as per NBC Bay Area reports through the California Association of Realtors.

Working remotely, people losing jobs, and some cities being half shut down poses grave decisions for the property market. Other people feel that two, three, and four-unit houses in Old Victorians are safe enough during the pandemic times. The multi-unit homes provide safety because of little or no shared spaces, a factor that is making it hard to sell condominiums.

As much as property prices are plunging, it is a good idea for those who can afford to buy themselves. When the economy picks up, the costs will skyrocket to the point they were or even higher. Single-family homes and condominiums in high rise buildings are very plenty in the market, and it is up to the buyer to make a move.

The Covid-19 pandemic has adverse effects on the markets, and home sellers are feeling quite a pinch. Reducing market prices means fetching a lower amount of money than the actual value of the property. Sales are operating at a loss, and yet that is the only way for sellers to keep afloat. With the pandemic’s existence, it is not clear if seasonal trends will hold for the property market in 2020.

What is the Future of Corporate Building Investment

The year 2020 has recorded a decline in the value of the real estate industry for the first time in two decades. This drop is due to the shift towards remote working by various companies in the USA. These efforts towards curbing the spread of the Coronavirus, are predicted, to last for the whole year.

Does this mean that investors should give up on corporate building investment? Not really, since office-based work is bound to resume soon. Soon people will miss the convenience of face to face board meetings and brainstorming. Furthermore, the home environment is not appropriate for work for most people. There are plenty of distractions from children and other sources that would be non-existent at an office.

Off course, the above mentioned possible reasons for the resumption of working from the office are all hypotheses. There are indicators that the post-pandemic corporate building investment might experience a boom. Some of the possible reasons for these are:

1. Need for Expansion

The social distancing guidelines might force firms to expand their working spaces. Investors will benefit from issuing more leases to companies. For every company that will terminate its contract, another will buy. The tiny office spaces that people complain about will disappear.

2. New Investors

The real estate industry enjoys unfavourable advantages compared to other businesses. The most extraordinary benefit is the ability of the real estate to be involved in all enterprises. In the Post-Pandemic period, the industry will require more investors to satisfy space expansions in all sectors of the economy. The industry accommodated the top 1%in society; it will welcome all capable Individuals in the post-pandemic period. Increased investors will naturally translate to the increased value of the real estate industry in the stock market.

In summary, the most lucrative business of modern industry, real estate, has been dealt a blow due to the pandemic. Fortunately, there are indicators that the industry might, after all, enjoy a steady boom in the post-pandemic period.

The industry of real estate is going to be more valuable than ever before. On top of the pre-existing demands in real estate, the need for Expansion will propel the industry to uncharted heights. Investors should be on high alert for this golden opportunity. However, all of this is just speculation we will have to wait and see as events unfold.

Create your website with WordPress.com
Get started