Entries by Eryn

Remember when you learned how to swim? Investing in real estate is similar in many ways. Everybody has theories on the best way to accomplish this rite of passage but each individual has to decide what is right for them. Those who believe in the "just jump in" method will probably want to skip this article and learn things on a need-to-know basis. However, if "learn to doggy-paddle first" is more your mantra, this may be a good place to start.

One of the most intimidating things about real-estate investing, in my opinion, is learning all the terminology. You don't have to be embarrassed about a lack of experience. ROI, NOI, GRM … it's enough to make your head swim. But you won't drown in the alphabet soup of investing. Take a deep breath and relax. Let's see how these terms can keep an investor afloat.

CAP Rate (Capitalization rate) -- CAP Rate is a figure that shows the percentage of return on an investment. It's based on the income approach, which is the most popular method used by investors for valuing a property. The formula for CAP Rate is the net operating income (NOI) divided by market value, then multiplied by 100:

(NOI / Market Value) x 100 = CAP Rate
Continue reading "Swimming Lessons: Terms Used to Determine Value"

Using Government and Private Programs to Achieve Your Goals

One of the biggest stumbling blocks in renovating an older home is finding the funds to make the improvements. It comes with the territory. Older homes tend to have a mixed bag of renovation problems from lead paint and asbestos to plumbing, electrical, and foundation issues. Many people don’t have the time or the pocketbook to be able to invest in properties with these "special needs." It’s easy enough for you to find a loan to purchase the property, but what about the additional money needed to make repairs to the foundation or the roof … not to mention updating the existing wood paneling or the 1960s kitchen?

FHA 203(k) Loans

A lender typically won't give you a conventional loan until specific repairs are made. But if neither party has money to make the repairs, the FHA 203(k) loan may be a godsend. You can even use this loan if you decide to refinance a property you already own, if you intend to make repairs or renovations.

Additionally, if your intentions are to be an owner-occupant, this loan can allow for a measly 3 percent down payment. The interest rates and discount points have to be worked out between you and your lender, but this loan can be the vehicle for financing those projects that once seemed out of reach.
Continue reading "Secret Funds for Investors and Rehabbers"

Radon is a colorless, odorless gas that occurs naturally in the earth from the decay of radioactive uranium in the soil. However, radon exposure in a domestic setting is actually a dangerous threat to your health and your real-estate business.

What are the risks?

Radon gas has been found to be an extremely toxic carcinogen. Studies on the effects of radon gas on the human community are considered conclusive since they use human test subjects instead of animals. A definitive link has been found between radon exposure and lung cancer in humans. Smokers are at a higher risk for developing lung cancer due to radon exposure than nonsmokers. According to the latest EPA studies, radon accounts for approximately 21,000 lung cancer deaths in the United States each year.

Where is radon found?

Radon gas is found naturally in the soil and in groundwater. Unfortunately, it can seep up through the earth and leak into your home or property. The construction of contemporary houses to be relatively airtight for air conditioning efficiency also allows for the accumulation of radon gas within the structure. To put it in perspective, outside air typically has traces of radon that measure .4 pCI/L. According to the EPA, the average level of radon gas our homes is 1.3 pCI/L. This doesn't mean that you're safe if you have a radon level of 1.3 in your home. It does mean that two non-smokers in a thousand who are exposed to this level could develop lung cancer as a result. For smokers, 20 out of 1,000 could develop lung cancer from radon exposure. As you can see, this is not a laughing matter.
Continue reading "Radon Gas: An Invisible Threat to Your Real-Estate Business"

Although your local housing authority is responsible for facilitating the Section 8 program, as a participating landlord you still must take many responsibilities upon yourself to ensure your personal success with the program.

Tenant Screening

When a tenant qualifies for the Section 8 program, the housing authority is not responsible for screening the tenant's previous rental history or background. The Section 8 information packet makes it clear that admittance into the program in no way indicates the reliability of a tenant. Housing authorities strongly advise that all landlords conduct their own tenant screening process before accepting a Section 8 tenant. However, you must remember to comply with all fair housing laws and equal opportunity requirements.

Rent and Deposits

As the landlord, you're responsible for collecting security deposits and the tenant's monthly rent portion. It is not the responsibility of the housing authority to enforce tenant payments. You can initiate normal eviction procedures if a tenant refuses to pay the rent. In addition, it is your responsibility to inform the housing authority if a Section 8 tenant refuses payment.
Continue reading "Section 8 Series: Landlord Responsibilities"

By now you've probably heard about the Section 8 program. For more information on your local Section 8 program, contact the local housing authority and ask for an information packet. The packet is a valuable tool that provides a general overview of the program and outlines the processes involved. It also lists various incentives for landlord participation. Before you make the final decision about your involvement, you should consider several points. I'm not advocating a particular course of action, but want to clarify these points to help you make an informed decision about program participation.

The Section 8 program is a federally funded initiative to give disadvantaged families a chance to find affordable housing in the neighborhoods of their choice. The idea behind the program is a solid one with advantages for both landlords and tenants. While the incentives for tenants may be obvious, landlords may have to examine the program a little more closely to see if it's best for their business.

Section 8 participation is strictly voluntary and can be a symbiotic relationship for all parties involved. The advantages for landlord participation in the program are listed in the information packet provided by the Housing Authority and include:

• Guaranteed/market rent
• Owner control
• Free advertising
• Free yearly inspections
• Community impact

Continue reading "Section 8 Series: A Look Inside Landlord Incentives"