rentals - Blog - REO Pro Network

Renting to Students in Santa Cruz, Ca: Pro's and Cons

Posted by Marcy Moyer on October 1, 2017 at 8:09am

I am a realtor and a Santa Cruz rental property investor since 2000. There are many reasons to invest in Santa Cruz rental properties, some of which I have discussed in this article. Today I want to talk about what the pros and cons are in renting to UCSC students.

Here are the pros that I have experienced.

1. Vacancies are virtually non existent: There are almost $18,000 UCSC students and in any given year there is only room to house about 8,000 of them on campus. There are always many thousands of students looking for a place to rent, so the potential pool leaves no vacancies in your Santa Cruz investment rental properties.

2. Students pay more money: They frequently will pay more per bedroom and sleep 2-3 in a room just to have a place to stay. Here is a link to what students expect to pay from the UCSC community housing page. https://communityrentals.ucsc.edu/cost/index.html

3. The rent money is very secure: The students get financial aid and/or are supported by their parents. In 17 years and 4 rental properties as a Santa Cruz rental home investor I have only had a problem getting paid once.

4. UCSC makes the rental process very easy for a Santa Cruz rental investor: They give workshops to the students on what they need to do to look attractive to a Santa Cruz rental investor. They come to you with complete rental applications, credit reports, references, and certificates saying they understand what it takes to be a good renter. The university posts your rental for free so you have a large pool of possible renters.

5. Students replicate themselves making the rental process even easier: My experience has been when one student moves out they have another take their place making the process seamless for the Santa Cruz rental investor.

6. Santa Cruz students are often long term renter: If you get the students early, in their sophomore or junior year they often stay for 3-4 years or more. making the cost of turnover very low.

7. Santa Cruz students can vacate in the summer if you want a summer beach home that is rented for 9 or 10 months: If you are a Santa Cruz rental property investor who wants a place in the summer for yourself you can rent to students during the school year and keep it for yourself in the summers. Many students go home in the summers, and the ones who don't can always find a sublet from another student who is going home. It is a way to have a vacation home that more than pays for itself.

Cons of renting to UCSC students:

1. Insurance on the house can be tricky: Recently many insurance companies, including the one I have always used, State Farm have decided they do not want to insure homes that are filled to the brim with students in college towns. They see them as Frat houses and won't write new policies. You can get commercial insurance, which is more expensive than residential or find the rare insurer who will do it. I found that CIG insurance out of Monterrey was willing to write a residential policy at competitive prices.

2. Large homes can be a hot bed of petty emotional issues for the Santa Cruz rental property investor.: If you are the owner of a large home with 6-10 students they may turn to you when there is a spat between the tenants. It is a time and emotional drain. I put one person in charge and have that person deal with issues like who is going to clean the house, noise complaints, bullying, etc. They have the final say. It works pretty well.

3. Students are often unaware of what it takes to take care of a house: Students do not always understand what it takes to care of a home and things can be damaged by mistake, even without large parties or Frat behavior. The way to ameliorate this is to buy a house that does not have delicate finishes and educate the students on basic home maintenance. My tenants know they need to call me right away if something is wrong and not let a small problem get out of hand. I would rather be over called than under called, and they know it.

So as a long time owner of Santa Cruz rental property I can enthusiastically say that renting to Santa Cruz students is a good thing from an investor perspective and not something to be afraid of.

If you have any questions about becoming a Santa Cruz rental property investor please feel free to contact me.

Marcy Moyer

eXp Realty of California

650-619-9285

marcy@marcymoyer.com

www.marcymoyer.com

Specializing in Probate, Trust, and Investment Properties

Santa Cruz, Ca. Is A Great Place For Real Estate Investors

Posted by Marcy Moyer on October 1, 2017 at 8:07am

Property Management, Rentals and Short Sale: The New Niche

Posted by Jesus (Jesse) Gonzalez on June 27, 2013 at 4:14am

Property Management, Rentals and Short Sale: The New Niche

From the time we sign up for real estate school, to the most experienced agents with 30+ years under their belt, we have all heard that to be successful in real estate, we need to find our niche. Well, I am here to say that’s a bunch of hog wash. I would go as far to say that by “finding your niche” you’re a signing, your own business’s death certificate. Many of our colleagues found out in 2007 – 2008, when the real estate bubble burst, having a niche meant you didn’t know how to work in a shifting market place. I understand that for most all of us, real estate was steady and predictable so, this niche thinking was rampant, accepted and promoted amongst our ranks however, now we have learned that being a niche Realtor means certain death as real estate become more and more volatile each day.

Now, I say all this but, let’s be honest, REO is definitely a niche, I like to think of it as being the undertaker of the real estate world. Yes, by extension, that means I am a housing mortician. As such, we see highs and lows and we are extremely sensitive to fluctuations in the market place. For some, that’s just fine, we have learned to work with these convulsions and have shielded our lives and business from times of drought however, a vast majority of us ended up in the foreclosure lines ourselves when the real estate market heard those fateful sounds, snap, crackle and finally….POP!

As a Realtor and full time Broker, I have found that taking a more diversified approach to my business offers me and my family a more stable outlook to my career. This means, I have done away with the niche and expanded my income streams to include things like; Property Management, Rentals and yes, Short Sales. I do have some other things I do in real estate like, investing however, that is another conversation for another time. Let’s stay focused on the whole “niche” thing.

True, you can say that each of those three I just wrote about are niches amongst themselves and, you would get no argument out of me here however, all together as a part of your service portfolio, they become more, much more. All together they become an inoculation of sorts, from the market place unpredictability. By adding more services you can offer, you are riding out the waves of instability in the market place by being able to quickly and effectively shift your business to more profitable ventures. Ok…yes, you are still working the “distressed property” niche so…..yeah, it’s still a niche but, it’s a niche with diversification.

Right now, many markets are seeing short sales take over and even outpace REOs however, we don’t see a flood of agents clamoring to do short sales like we did with agents clamoring to get REO assignments and, why is that? Have you thought about that? If not, why not? My argument is, the skills you learned to be a kick ass REO agent are really the same skills you need to be a kick ass Short Sale Professional. I would go as far to say, no real difference exist between the two required skill set that would stop any outstanding short sale agent from being a outstanding REO agent and vice versa.

Granted, short sales are much more time consuming and require much more paperwork but, these things shouldn’t scare you away but, should entice you to add short sales to your service portfolio. Let’s face it, if you can close a complicated short sale, you can close any REO. My bigger point is, due to the complex nature of a short sale, becoming a Short Sale Professional will build on skills you already have or at least, develop skills you don’t have and therefore, making you better in the long run.

Don’t be afraid of short sales, they are fast becoming the new REO. As REO agents, you already have the basic and even advanced skills to be a great Short Sale Professional so, grow a pair and get to work. Your area has hundreds or even thousands of homeowners who need the help of an experienced distressed property agent who knows the front and back of the foreclosure process so that they can avoid the foreclosure if at all possible.

As an idol of mine says, “You beda weeerk!”

How to invest in real estate using an IRA

Posted by Michael Collins, CDPE, SFR on June 6, 2013 at 4:13am

How to invest in real estate using an Individual Retirement Account, IRA (Part 3 of 4)

Traditional retirement accounts, like a 401(k) or an IRA, can be powerful when the economy is strong and businesses are experiencing growth. This is due to the stocks and bonds that are typically bought and sold through these typical investment strategies. However, what happens when the economy is not so strong and stocks are struggling? This is when a self-directed IRA can come into play.

More Flexibility

: photo credit: Neil Kremer via photopin cc

A self-directed IRA gives individuals a chance to buy other assets such as gold and even real estate. These accounts charge an annual fee that can reach up to $300 per year. The ability to buy and sell real estate has led to the growth in popularity of these accounts in the past few years.

The real estate decline from the last several years has led to many homes being rented out instead of selling at top prices as the owners had hoped. This is a great environment for investors to come in and make a fair offer on a property and add the home to their portfolio.

Ignorance of Tax Law Can Be Costly

This is not to say that a self-directed IRA is just a large checking account to be used to buy assets. The complexity of these accounts makes any financial mistake quite costly in the form of penalties assessed by the IRS.

A person cannot receive any type of benefit from the account prior to age 59 ½. This sounds vague, and it actually covers quite a bit of territory.

For instance, the owner of the self-directed IRA cannot live in a property owned by the account nor can they receive rent payments from the property. If the rental property is in need of a repair or property tax payment that money must come from the IRA.

Self-directed IRA’s also prevent the use of a mortgage to purchase a home.

Cash is King

Because of these restrictions most transactions that occur through a self-directed IRA are handled with cash. The majority of individuals will have a small number of properties in their portfolio. It is quite common for people to purchase either a duplex or a four-plex in order to maximize the rent payments coming to the account.

This is advantageous in two ways. First, a cash deal makes the whole process much quicker. There is no waiting on a mortgage approval from a lender. The person buying the home can choose the appraiser and title company and make their own decision based on the information provided. Secondly, buyers are in a very strong position when they can offer all-cash payment, right now, to an interested seller. Many sellers are willing to offer a discount for the promise of cash.

This is Part 3 of a 4 Part Series.

Part 1: How a Realtor® can help you invest in your IRA

Part 2: Purchasing Investment Properties for your IRA

Part 3: How to invest in real estate using an IRA

Part 4: Step by Step Guide to Buying Homes with your IRA

Rent Vs Buy Today

Posted by Howard Bell on December 29, 2010 at 2:10pm

NAR Existing Home Sales

Existing home sales which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 5.6% to a seasonally adjusted annual rate of 4.68 million in November, but are 27.9% below the cyclical peak of 6.49 million in November 2009, which was the initial deadline for the first-time buyer tax credit. Median existing single-family home prices rose year-over-year in 77 of 155 metropolitan areas and fell in 76 metro areas.

NAR Pending Sales

A forward-looking indicator, rose 10.4% based on contracts signed in October from in September. The index remains 20.5% below a surge to a cyclical peak in October 2009, which was the highest level since May 2006.

Rent Vs Buy

The argument for affordability has a few key components. Price, cost of money and a comparison to a similar property rental.

Price
Home prices are running about 22% less than five years ago. Its hard to know when price has reached a point where willing buyers step up, but pending sales clearly point to a slowing trend. The Commerce Dept. report showed that new home sales rose 5.5 percent to an annual rate of 290,000 in November from the revised October rate of 275,000.

Price will continue to decline and increase affordability. There are some that think a double dip is in progress and we will see continuede price declines through 2011 or 2012.

Cost of Money
Lower tax rates just extended for another two years may boost growth. Mortgage rates responded by increasing to a six month high with rates up more than half a point in just the past month. NAR President Vicki Golder, points out: A decade ago, mortgage rates were almost double what they are today, and they’re about 1.5% lower than the peak of the housing boom....So still historically low.

Rates remain low and are still well below where they began the year. Low mortgage rates are an important factor affordability, which in October was the highest on record

Rent Comps
Rents increased for the second quarter in a row. Asking and effective rents increased by 0.5% and 0.6% respectively in the third quarter and vacancy rates dropped from 7.8% to 7.1% nationally.To summarize, price is dropping but cost of money is rising and so are rents. Most areas havent reached a balance between the cost of renting and the cost of buyi ng, probably the main arguement for home prices continuing to descend to meet a willing buyer.

Rule of thumb: Homes are probably fairly valued at about 15 times a year's rent. So, for example, if you're paying $15,000 a year to rent a place, think twice about buying a home that costs more than $225,000. Fifteen times is the historic average.

Your home is not a growth stock. You should look to justify multiples higher than 15 to 20 by considering personal needs, proximity to schools and transportation, your own cash flow situation and job security.

It would also be advisable to get a sense of what the property would likely rent for and see how far that rent would go towards paying the mortgage should you have to move. Home sales are slowing and if you find yourself a reluctant landlord, be sure you can carry the mortgage.

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Apartment Sector: The First One Out

Posted by Howard Bell on December 8, 2010 at 1:27pm

This is the one real estate area that seems to be looking up. There is no question that apartments really scream when it comes to actual performance and renewed investment confidence, says Hessam Nadji, managing director of research and advisory services at Marcus & Millichap. The apartments sector is leading the recovery. Nationally, apartment vacancies declined 20 basis points during the first half to reach 7.8%, setting the stage for rent growth.

Demographics: The rental sector is the one area that that is looking like its in a recovery. Residential housing was t was over built and overbought, while rental properties barely kept up with the demographics. Harvard studies indicate that if you couple the under 30 age group to new immigrants and retirees looking to move back to the city for convenience, as a whole they are a potential renter pool larger than the the boomer generation. That is huge!

Supply: Over 4.3 million loans are 90 days or more delinquent or in foreclosure. Moreover, the shadow inventory (chart) of REO properties, as well as distressed mortgages facing foreclosure, will take nearly three years to clear at the current sales rate, according to an S&P report. S&P analysts concluded that \many servicers will likely shift from mortgage modification to loan liquidation. Hopefully, the banks will distribute supply onto the market with an eye to price stability or at least an orderly decline. With that in mind expect supply to continue to increase and prices to continue to decline.

Jobs: The average number of days delinquent for loans in foreclosure is a record 492 days. Its pretty obvious that jobs are the main culprit now and the expectation is that unemployment will remain more or less constant for the next year. Apartments look better partly because they never participated in the building boom that homes experienced and supply to renter pool favors lower vacancy rates and higher rents.

Investor Psychology: The Census Bureau releases a Housing Tenure, which measures the balance between owner occupied and renter occupied housing units. Owner occupied units have been on the decline and the number of renter occupied units has soared to 34.% in 2009. Of course, jobs are highly correlated to rent and vacancy rates, so this should be seen as fragile and early recovery. Yet rent rates have been increasing and vacancy rates have been declining, even in this weak job market. I think there has been a shift in the investor psychology that benefits the rental property.

Politics of Housing: Congress had mandated that the GSE emphasize home purchases at the expense of rental property. The Congressional Budget Office reported, the government in 2009, devoted nearly four times as much to support homeownership.$230 billion for homes and about $60 billion for multi family property, helping fuel the bubble. It was a primary cause for so many bad decisions…..loose money always is. My guess is that GSE money flow will now favor rental property and affordable housing in particular. The new real estate opportunity is in rentals, they will be the first to recover.

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National Apartment Survey: Rental Property The Better Investment

Apartment Renter Demographics and What They Mean to You.

National Apartment Survey: Rental Property The Better Investment

Posted by Howard Bell on November 3, 2010 at 11:39am

A Recent Survey

National Real Estate Investor and Marcus & Millichap

55% of all respondents to the survey believe that now is the time to buy apartments. Owners are beginning to see improvements in vacancy rates and rent rates are rising. We are coming off a low low bottom, but there is improvement. The study shows that 41% (31% in 2009) of owners responding to the survey think rent rates will improve over the next year and 70% feel that this is the time to buy.

Financing
Looking up

34% believe that institutional lenders are increasing their lending volume, 28% see an improvement in Commercial bank lenders and 19% in FHA. I wrote piece on how the FHA funding of single family homes has skewed the market. I think when reform comes to the FHA, the money allotted to rentals will be significantly higher than it has been. SEE LINK

Mixed Use Space
Risky bet

Rental property with commercial or storefront space remain risky. A two unit building with a store down is a liability in a recession. And in this one, with consumers paying down credit cards, we are seeing a spike in empty retail space. I would undervalue the benefits of storefront retail space until we see a pick up in job growth. Vacancy rates in retail spaces rose 10% in 2010, according to the survey

Rental Property
A Better bet

Morgan Stanley analysts expect housing prices to continue to slide, reaching new depths in 2012.Morgan Stanley expects 2011 home prices to fall 5% to 10% from this year with four years of flat prices after that, although the risk of slight additional downside in prices and extension of the trough to 2012, has increased. Via Housingwire

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Apartment Renter Demographics and What They Mean to You.

Filling The Vacancy

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The Rental Sector Is Looking Up

Posted by Howard Bell on August 11, 2010 at 1:53pm

June vacancy rates in the largest 64 markets in the country averaged 6.6%, down from 8.2% at the end of 2009, according to MPF Research. We certainly see the increase in rental demand in 2010, and it's been a little more, frankly, than most apartment experts had anticipated," said Mark Obrinsky, chief economist for the National Multi Housing Council.

This may be the brightest sector and only strong story in a dismal market. There is a real sense of confidence building in the rental sector based on a few strong factors not present in the rest of the housing market. see chart Apartments never had the build out boom that homes did. High unemployment among echo boomers will keep a lid on rentals catering to the 25-34 year olds in the short term. The echo-boom generation, almost 80 million strong, along with a large immigration trend and retirees coming into the city, coupled with a drastic pullback in housing construction, points to strong rent growth starting in 2011, notes Marcus and Millichap. Quite a rental pool indeed!

Reis reports a widespread consensus that there will be a supply shortage of multifamily rentals as early as next year. This constrained supply may lead to robust rent growth. The leading indicator for housing has to be jobs. A lack of job creation will keep echo boomers at home longer or doubling up in roommate situations. Retirees coming to the city from the burbs, may no be able to sell or rent and so will have to remain in large homes. The optimists would see this as a staging area for real growth in 2011-2012. However, for the long haul investor/owner its simply a matter of time before an expanding economy unleashes the powerful demographic trio waiting in the wings.

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Jobs Recovery and Rent

Posted by Howard Bell on June 16, 2010 at 10:44am

If history is a guide, what happens with jobs will matter the most to the strength of the housing rebound," said Eric S. Belsky, executive director of Harvard's Joint Center for Housing Studies. Jobs keep homeowners out of foreclosure and help others feel confident enough to buy. see chart

Monthly employment gains in May were the highest in a decade but point to a still weak private sector. Most hiring was due to the census project and like the tax credits and support for the secondary markets, the transition back to the public is key.

Defaults Cycle Through The Economy
Morgan Stanley report that 12% of mortgage defaults in February were strategic, other estimate an even higher These strategic defaults do put money back in the hands of home owners who are paying down credit card and other consumer debt. But more housing supply added to the marketplace only drives prices further down and further reduces confidence as buyers hold back and seek the bottom. This negative feedback loop only creates more uncertainty and weakness and more price declines.

Who Wins
Apartment owners will benefit from defaults as former owners become renters. Vacancy rates for all apartment buildings with 5 units or more declined to 12.1% from 12.5% in the previous quarter, according a National Multi Housing Council (NMHC). The national vacancy rate dropped to 7.2% from the prior quarters 8.2%, the lowest level for first quarter vacancy rates since late 2008.

According to a recent Marcus Milliahap study, by 2012 or 2013, the apartment sector will benefit from echo boomers which should contribute to rent growth. A Harvard study indicates that immigration combined with the echo boomers will create a young market equal in size to the boomer generation., creating a new market potential and certainly a greatly expanded renter pool. Now thats huge!

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NAR and The Commerce Dept Feb Figures

Posted by Howard Bell on March 24, 2010 at 1:10pm

Maximizing The Rent Selling your property is harder know and likely to be that way for quite a while longer. If you relocate or just want to move you may find yourself a reluctant landlord. Consider the carrying costs, not just the resale value of your property when you buy.

Look at the price to rent ratio. Your property is a cash flow asset. Do a rent comparison as well as a price comparison when buying and factor in the cost of carrying the mortgage less the rental value of your property.

Are you comfortable carrying the difference? Dont make the assumption that rents will rise soon, it could be years before we see a strong rental market. When evaluating the rent range, be realistic. It can take time to rent and you may have to carry the whole payment until you find a qualified applicant.

Getting The Highest Rent

Location: Commands the higher rental value, but owners dont realize that its harder to rent a unit located in a beautiful, but more remote location. A beautiful unit just five minutes away from another, but up a hill and needing a car, will take longer to rent and often for less.

Maintain It: Proper upkeep will help maintain good rental cash flow. Sharper, well maintained units will get the better price and rent sooner.

Go Green: Install water and energy saving devices such as low flow toilets or programmable thermostats to lower operating costs and appeal to tenants.

Comps: Compare your units to rentals nearby. Factor in parking, washer/dryers, paint hardwood floors etc. If you price right, you will rent sooner.

Cost of waiting: Waiting to get the higher price may cost you a months rent. That means your unit has drawn 11 months of income rather than 12.

Security: Tenants prefer safety features such as cameras and alarms.

Offer Services: Contract with dry cleaners and other services to offer discounts. Washer Dryers, Microwaves and laundry facilities appeal to tenants and command a higher rent rate.

Staging: Paint and hardwood floors will pay for themselves as tenants look for bright and easier to clean attractive places to live.

There are two kinds of appreciation in property, there is property appreciation and rental appreciation. Be sure to evaluate both before buying.

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Research Your Market
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Maximizing The Rent

Posted by Howard Bell on March 24, 2010 at 1:09pm

Maximizing The Rent Selling your property is harder know and likely to be that way for quite a while longer. If you relocate or just want to move you may find yourself a reluctant landlord. Consider the carrying costs, not just the resale value of your property when you buy.

Look at the price to rent ratio. Your property is a cash flow asset. Do a rent comparison as well as a price comparison when buying and factor in the cost of carrying the mortgage less the rental value of your property.

Are you comfortable carrying the difference? Dont make the assumption that rents will rise soon, it could be years before we see a strong rental market. When evaluating the rent range, be realistic. It can take time to rent and you may have to carry the whole payment until you find a qualified applicant.

Getting The Highest Rent

Location: Commands the higher rental value, but owners dont realize that its harder to rent a unit located in a beautiful, but more remote location. A beautiful unit just five minutes away from another, but up a hill and needing a car, will take longer to rent and often for less.

Maintain It: Proper upkeep will help maintain good rental cash flow. Sharper, well maintained units will get the better price and rent sooner.

Go Green: Install water and energy saving devices such as low flow toilets or programmable thermostats to lower operating costs and appeal to tenants.

Comps: Compare your units to rentals nearby. Factor in parking, washer/dryers, paint hardwood floors etc. If you price right, you will rent sooner.

Cost of waiting: Waiting to get the higher price may cost you a months rent. That means your unit has drawn 11 months of income rather than 12.

Security: Tenants prefer safety features such as cameras and alarms.

Offer Services: Contract with dry cleaners and other services to offer discounts. Washer Dryers, Microwaves and laundry facilities appeal to tenants and command a higher rent rate.

Staging: Paint and hardwood floors will pay for themselves as tenants look for bright and easier to clean attractive places to live.

There are two kinds of appreciation in property, there is property appreciation and rental appreciation. Be sure to evaluate both before buying.

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Research Your Market
Filling The Vacancy
What renters Look For

rentals (11)

Renting to Students in Santa Cruz, Ca: Pro's and Cons

Santa Cruz, Ca. Is A Great Place For Real Estate Investors

Property Management, Rentals and Short Sale: The New Niche

How to invest in real estate using an IRA

Rent Vs Buy Today

Apartment Sector: The First One Out

National Apartment Survey: Rental Property The Better Investment

The Rental Sector Is Looking Up

Jobs Recovery and Rent

NAR and The Commerce Dept Feb Figures

Maximizing The Rent

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