Monday, December 8, 2014

What you should know about being a landlord

Rental real estate ownership is considered one of the best ways to cultivate passive income. If you can get together the capital needed to purchase a property, and then rent out, you have the potential to make a significant amount of money passively. On top of that, there is the chance that real estate appreciation will lead to the ability to sell the property later at an increase, further improving your return on investment.

Being a landlord isn't for everyone, though. Larry Ludwig owns a hosting business, runs the site InvestorJunkie, and has owned rental property for several years. While he, in general, has been satisfied with his experience, he also acknowledges that it can be a lot of work, expense, and inconvenience, depending on your situation.

Before you decide to take the plunge, here are a few things you should know about being a landlord:

It’s essential to screen your potential tenants

“The key to a good experience is a good tenant,” says Ludwig. “The key to getting a good tenant is the screening process.”

This is especially important if you are renting out a single property. It’s true that there are real estate moguls and development companies that own large, multi-family buildings, and that don’t worry too much about screening. However, if you only have one or two properties, it’s especially important to screen tenants so that you reduce the chances for difficulties in terms of payment, as well as how the property is cared for.

“Don’t rent to the first person that comes to your door,” says Ludwig. He suggests that you set up systems for credit checks and background checks. If you are interested in tenants you don’t have to worry about, those with good credit, and who have good references, are more likely to fit your needs. A good tenant, with whom you can build a good landlord-tenant relationship, can provide you with years of passive income.

Keep your property maintained

One of the best things you can do is keep your property maintained. If you maintain your property, you can reduce the chance for large repairs down the road. When issues do come up, have them repaired in a timely manner. Keeping your property maintained can help ensure that your repair retains its value (or appreciates over time), and it is much easier to spread maintenance and repair costs out over the years, rather than to try and take care of it when it becomes absolutely necessary.

Plus, keeping your property maintained will also help you increase the chances that you can keep your property rented out. High quality tenants (who are likely to pass rigorous screening) want high quality rentals. If you maintain your property, you will be able to command top rates from reliable tenants.

A landlord also has to be responsive to requests from tenants. If a tenant is locked out, or there is a leak under the sink, it’s up to you to take care of it. Unless you hire a property manager to handle these items, you need to be prepared to be on call, even when you are on vacation or in the middle of the night.

Be ready for disaster

Ludwig’s rental property was located in an area devastated by Hurricane Sandy in 2012. While Ludwig had insurance for his property, he didn't have flood insurance, so a large portion of the damage to the property didn't qualify for coverage. “I don’t want to experience that again,” he says. “I’m getting flood insurance now, even though that was a 100-year storm.”

He also points out that rental property owners might not qualify for FEMA assistance, since it’s an investment property. While Ludwig’s displaced tenant qualified for assistance, he, as a business owner, did not. He was directed to the Small Business Administration, which provided him with access to a short-term loan with a below-market interest rate. However, the loan was for less than $10,000, and the total work he needed to fix up his rental amounted to about $25,000. In the end, he spent close to $40,000 to upgrade the rental, since he had to redo everything anyway.

If Ludwig had flood insurance, he would have received greater assistance in paying to remodel the rental. Other types of insurance should be considered as well. As a landlord, it makes sense to be ready for a disaster, whether it’s in the form of a destructive tenant, or whether Mother Nature goes to work.

Make sure you have the liability and property insurance coverages you need to ensure that your assets are protected in the event of a disaster. Losing your rental can be a big blow to your finances.

Know the restrictions on your rental

Finally, understand what’s allowed in your area. You might not be able to rent a home to more than one family if your city doesn't zone for multi-family residences. Another consideration is what’s available if you have a condo, like Ludwig has.

“With a condo, you have by-laws,” he says. “Sometimes, depending on the building and the rules, you have to get approval to get a tenant, and the condo board might need to approve the tenant.”

Understanding the restrictions on rentals ahead of time is vital so you don’t run into penalties and other difficulties later.

As long as you are prepared to be a landlord, and acknowledge some of the work involved, it’s possible to make a good income from a rental property. Just be careful about how you go about it, and make it a point to understand the drawbacks before you commit your capital.

Friday, November 21, 2014

Title Source Team Members in our Pennsylvania Community

Title Source is proud to partner with Moon Parks & Recreation Department in Pennsylvania, whose mission is to advance the quality of life for their residents. This is done through the advancement of parks, recreation and environmental conservation efforts in Moon Township. Title Source team members volunteered time with Moon Parks at Robin Hill Park on October 24, 2014, which was the first of many opportunities. We hope to sustain a monthly volunteering commitment with the Department, and volunteer additional time on an as-needed basis.

Thanks to Moon Parks & Recreation Department, we can leave the communities around us a little safer and cleaner for area residents.
For more information about Moon Parks & Recreation, Click Here.

Tuesday, November 11, 2014

Why Aren't Millennials Buying Homes?

Homeownership is often considered a major financial milestone. Owning a home is considered a part of the “American Dream,” and it’s something that many have aspired to for decades. All that might be changing with millennials, however.

Last year, a report from the New York Federal Reserve indicated that homeownership had fallen across the board for younger people. Many in the housing industry wring their hands at the data, and wonder what can be done to improve millennial interest in homeownership.

The problem, though, may not be that millennials are giving up on the “American Dream.” Many of them acknowledge that homeownership is still a goal. So, if homeownership is a goal for millennials, what’s holding them back?

Changing family structures

A recent survey conducted by Zillow indicates that one of the main reasons for declining homeownership among millennials is a change in family structures.

Daren Blomquist, the Vice President at RealtyTrac, agrees that, to some degree, changing family structures probably impact millennial desire to buy a home. “Culturally, millennials tend to be making milestone decisions later in life,” he points out. “Marriage and having kids are coming later in life to millennials, and those are decisions that often lead to homeownership.”

The Zillow data indicates that, among married couples with two incomes, homeownership remains above historic levels, but the question of when those marriages take place is at issue. “With these types of life decisions being pushed to later, it only makes sense that homeownership would be pushed to later as well,” says Blomquist.

Worries about home ownership as an investment

Blomquist also thinks that many millennials are concerned about the investment potential of homeownership. “During millennials’ formative years, we say the first real decrease in home prices in several generations,” he points out. “They’ve watched as parents and other relatives see declines in value, and maybe even foreclosure. The mantra that home value will always rise has been debunked.”

While many millennials see homeownership as an essential part of life in the future, they are also wary of committing to buying before they are settled. “Homeownership can be beneficial if you stay in one place for a long time,” Blomquist says. “But for many millennials, who are still figuring out where they will land for the long term, it may not make sense because they could have to sell at a loss if home prices drop in five or six years, right when they might have to move for a new job.”

Blomquist says that there has been a paradigm shift in millennials, and now they are looking at homeownership differently, and considering what might happen if buying a home didn’t turn out to be a good investment decision. “For some millennials, it can work out if they have a Plan B to rent out the property if they have to move. Even so, millennials don’t view homeownership as a no-brainer like many in the generations before saw it when they came of age to buy.”
Student loan debt and homeownership

Another reason that millennials might be delaying homeownership has to do with the growing amount of student debt that they have. The New York Fed report indicates that homeownership among those aged 30 with student loan debt has been declining.

“That student debt is a weight, at least psychologically, for many millennials,” says Blomquist. “Before taking on additional debt, many want to clear out, or at least take a big bite out of, that student loan debt they have.”

RealtyTrac has its own data about how student loans impact the ability to buy a home. A recent analysis indicates that, in most places, homeownership is still a possibility, even with student loans. Blomquist says that millennials might have the perception that student loans are holding them back, but, at this point, the reality is that student debt doesn’t have to preclude homeownership.

Even so, Blomquist concedes that student loan debt does impact how much home a typical millennial buyer can afford. “Even though the data shows that affordability isn’t truly an issue for college grads, student loans can affect buying power,” he says.

According to Blomquist, a college grad with student loan debt would have to make adjustments amounting to 34 percent of the home’s purchase price. “Either the grad with student loans would need to earn 34 percent more to buy the same amount of house as someone without student debt, or he or she would have to buy a home that is 34 percent less expensive.”

Bottom line

Much has changed in the years since the Great Recession. Millennials are approaching the age that generations before have traditionally bought homes, but aren’t quite ready to take the plunge. That doesn’t mean that they won’t eventually become homeowners, though. As soon as millennials feel comfortable with their lives and their finances, they are likely to start house hunting.


Wednesday, October 29, 2014

Title Topics: Who are Fannie and Freddie?

Who are these well-known names and why are they important? Fannie and Freddie have a huge role in the mortgage industry, so, let’s meet them!

Fannie Mae
The Federal National Mortgage Association is officially known as Fannie Mae and is a United States Government-sponsored corporation insured by the Federal Housing Administration (FHA). Fannie Mae was created prior to Freddie Mac and is a competitor to the similar corporation. Fannie Mae’s role in the mortgage lending process is to buy mortgages from lenders and sell them to investors on the open market. This process is essential in replenishing the supply of lend-able money available for new home purchases.
Freddie Mac
The Federal Home Loan Mortgage Corporation (FHLMC), known as Freddie Mac, is a government sponsored enterprise of the United States federal government. Freddie Mac was created in 1970 to expand the secondary market for mortgages in the US. Freddie Mac buys mortgages on the secondary market, pools them, and sells them as a mortgage-backed security to investors on the open market. This secondary mortgage market increases the supply of money available for mortgage lending and increases the money available for new home purchases.

Now that you are introduced …
Now that you know more about these corporations, you understand that Fannie and Freddie do not issue mortgages but buy them from banks. Then, they guarantee the securities and bundle them for resale on the secondary mortgage market. 

Any Questions or Comments?  Let us know!

Thursday, October 16, 2014

Title Source Dunks and Slams for Making Strides

Raising money for charity can be a tedious deed, but recently a brave bunch of Title Source team leaders in Detroit took it to a whole new level. On Friday, September 5th, leaders rallied team members to support them while sitting in a dunk tank or wrestling in a sumo match. For a one dollar donation to Making Strides, team members received a Sumo sticker that featured their favorite sumo wrestler and a throw for the dunk tanks. The proceeds from the sales were donated to the American Cancer Society’s Making Strides Against Breast Cancer.

According to The American Cancer Society, nearly 300 Making Strides walks take place each year. Making Strides Against Breast Cancer invites participants to register, collect donations and walk in a movement to end breast cancer. Funds that are collected go towards cancer research, providing free services and information to people who are dealing with breast cancer, and making certain women who need mammograms have access to them.

The American Cancer Society  hosted their Making Strides Against Breast Cancer walk in Detroit on Saturday, October 11th, 2014. Title Source team members huddled together prior to the walk to enjoy all of the exciting activities and to take some group pictures. The 5K walk began at the corner of Brush Street in between Comerica Park and Ford Field. The beautiful fall day was the perfect set-up to raise awareness, make a difference, to celebrate the women who have survived breast cancer, honor those who have lost their battles to it, and thank the families that supported them. A huge thank you to Title Source team members who came out to walk in the Making Strides Against Breast cancer event. There was a total of 17,000 participants who came together to raise over 1 million dollars!

For more information about how our donations help create a world with more birthdays, click here.

To visit Title Source’s team page, click here.

Friday, September 19, 2014

Title Topics: Who pays for Title Insurance?

Title insurance is necessary in any mortgage transaction, but who is responsible for paying for it?
First, you should get to know the basics of title insurance. There are two types; a Mortgage Policy and an Owner’s Policy. To understand the difference, click here.

Purchase Transactions

In a purchase transaction, a homeowner needs both a Mortgage Policy of title insurance and an Owner’s Policy of title insurance. With most title procedures, it depends on the state and local customs. In the state of Michigan, for example, the seller will pay for the new homeowner’s title insurance policy. However, in Georgia, the buyer of the home will usually pay for both the mortgage policy and the owner’s policy of title insurance. Who pays for the owner’s policy insurance in a purchase transaction can always be negotiated. And that’s typically done by your realtor, real estate agent, or through the contractual obligation of the purchase agreement. 

Refinance Transactions

For a refinance transaction, the homeowner only needs to acquire a Mortgage Policy. An Owner’s Policy of title insurance insures the homeowner for the entire time that they own the property, therefore, the homeowner does not need a new one while refinancing.  The homeowner usually always pays for the mortgage policy during a refinance transaction.

So, to answer our initial question, our response is that it always works in your favor to have title insurance, no matter who’s paying for it! To learn more about how title insurance protects homeowners from potential losses, click here.
Any questions or comments? Please let us know!

Tuesday, August 26, 2014

Title Topics: How to transfer Real Estate

Transferring title in real estate can be a simple process. It is most commonly accomplished by the execution and recording of a deed. Depending on your situation, you need to decide on the deed that can be used to convey title.

Warranty or Quit Claim Deed?
Although each state has its differences, the deeds most commonly used are warranty and quit claim. A warranty deed is one where the grantor conveys good and clear title to the real property. A quit claim deed conveys whatever interest, if any, the grantor has in the property. For example, as part of an estate plan and in order to avoid probate, parents might use a quit claim deed to add their children to the title of their home. Always seek the advice of an experienced estate planning attorney before adding additional parties to title.

Can Title Insurance be transferred?
A title insurance owner’s policy is only valid as long the insured party owns the property, therefore, the policy cannot be transferred to a subsequent buyer or owner. If the property is sold or transferred, the new owner would need to purchase their own individual owner’s policy.

If you are thinking about transferring the title to your real estate, make sure to speak with a real estate attorney before making any decisions.

Any Questions or Comments? Please let us know!