It’s not uncommon to be a property investor and be ‘unsure’ of what market rent is. Honestly, market rents can change as quickly as our housing market changes. I’ll let you process how crazy that could be….
When deciding how much to charge for rent, most investors are trying to weight out two (painfully obvious) concerns:
What is the most rent that I can get out of this property each month to maximize my cash flow?
What amount of rent will keep my property occupied with a good tenant that won’t leave for a ‘better deal’.
Yea, there are many other questions going through an investors mind. The main obstacle though is finding a happy medium between maximizing cash flow but also keeping the property rented out to a good tenant.
Where Can You Go?
Believe it or not, there are a lot of resources online where you can do your ’shopping’ for comparable rents. I’ve found one in specific I’ll recommend:
Rent-O-Meter - This is a website designed to collect information while you’re searching for information. It’s been a great resource for myself and other investors I work with. I’ve also found it to be extremely point on in my market (I can’t say anything for others.. because I don’t rent outside of my market).
You’ll need the following information to get the comparable rents:
Property Address
Property City & State or Zip Code
Current Monthly Rent (What You’re Charging/Thinking of Charging)
How Many Bedrooms?
Units in Building (In case it’s an apartment complex)
From there, you’ll get your results.
What Do You Get?
You’ll get a map of the rental properties being used to give you a comparable rent schedule.
You’ll see a scale of the rents. Low-Medium-High. The needle represents where you lie in that scale. Here are examples:
There Are Other Choices
Although I’ve come to really like Rent-O-Meter, I’ve also found success with other techniques. Here are a few other favorites:
Calling other property management companies in the neighborhood.
Looking on Craigslist.org to see what else is for rent and what they’re looking to rent places out for.
Newspaper advertisements.
Contacting local Realtors that have experience with investment real estate (I can connect you to someone on this one).
Contacting appraisers in town that may have experience inspecting investment properties (they have to do a comparable rent schedule on an investment property appraisal).
Join a local property investor association and ask around.
Make Educated Decisions
It’s not always easy to be an investor. However, with the right people and resources - it can be a pretty fun business to be a part of. Me and my team are always available for questions and if you need connected with someone, we can always help with that too!
As long as you take the time to examine what’s taking place in your local market, you’ll be able to make smart decisions and really avoid the ‘riskiness’ of real estate investment. At this point, hopefully it will be a simple calculated risk and you can move forward!
So, you remember that rule that capital gains exclusion rule that has become pretty much common knowledge?
Go ahead and get ready to change it.
The rule where if you sell a home after living in it for two years you could carry $250,000 (single person) or $500,000 (jointly filing) without getting hammered on capital gains. Well, throw that out the window. This new piece of legislation (694 pages) changes that tax code.
Sneaking It Under The Radar
The Housing and Economic Recovery Act of 2008 had a lot of great (highly publicized) components:
Increased funding for Fannie Mae and Freddie Mac.
Expanded loan limits in high cost areas.
Tax credit of $7,500 for first time home buyers (Haven’t owned a home in 3 years) - more on this later.
In a huge piece of legislation like this, it’s easy for things to roll under our radar.
This piece of legislation has a great example.
New Rules
So, the new rules are targeted at the savvy investors who were buying a property, living in it for two years, then moving on to the next property and keeping the old one as a rental.
As Dan Green put it, the new rule takes into consideration the actual usage as a primary residence over it’s qualified life.
An Example of Before Vs. After
Say you bought a home for $200,000 5 years ago. You moved out of it three years ago so you could buy your new home. You’re now selling the home you bought 5 years ago for $225,000.
Your Profit is $25,000.
Before:
You have no capital gains tax liability on this profit. It didn’t matter if you moved away from that property after two years and turned it into an investment property.
After:
Since you lived in the home 40% of the time, you’ll be responsible for capital gains on $15,000 of that profit. Big change huh?
Again….
That’s $0 considered capital gain vs. $15,000. Big change. This could cost a lot of investors some serious cash.
Now What?
Well, this new rule doesn’t mean that it’s no longer a great idea to buy a home and move every two years. What it does mean is that if you are planning on buying a home every two years, that when you sell it - you’re tax liability just increasedbig time.
When Does This Kick In?
If there is any good news in this post, it is that you’ll have until January 1st, 2009 until this comes into play. I can only suggest that if you’re falling into the large category of Americans that this effects, that you take action and implement a strategy that works for you. Is it the right time to sell? Only a real estate professional and tax professional can help you determine if now is the right time.
Wouldn’t you rather say you had the conversation and made a strategic decision instead of saying you had no idea?
Need Help?
If you need to connect with a professional for advice, I’d be happy to help!
Some of the advantages of being an active blogger is that I’ve accumulated connections not only in Iowa, but across the entire country!
Let me be candid, we are living scary times. I’m not refusing that. However, we ARE NOT facing anything like The Great Depression. I wish you’d get out of that line and realize that we’re in a different time.
Don’t believe me? Here are the facts.
Unemployment is currently 6.1% (source: US Department of Labor). I know, not sexy. Still….
During The Great Depression, unemployment peaked at 25%. Wow! Even towards the end of the 1930’s unemployment was about 15%.
Now, wouldn’t you agree that we have quite some way to go before things get to that point?
If you want my opinion (not like you have much of a choice, huh?).. I think things will get worse before they get better. In some sectors of the economy, much worse. However, this is not a Great Depression.
More interesting statistics to follow in the future… But seriously - Stop saying it’s The Great Depression. It’s not.
Mortgage Rate and Market Recap for the Week of October 20th - 27th, 2008
Big News for Bonds
As we’ve talked about in the past, mortgage rates are based directly off of mortgage backed securities. These are much like stocks, being traded throughout the day. This is also why mortgage rates change throughout the day. If you’re curious what mortgage rates are going to do, it helps to be tuned into what mortgage backed securities are doing.
Last week PIMCO (the worlds largest bond fund) announced that they were raising their stake in mortgage backed securites to be the largest they’ve had in seven years. Obviously when investors saw PIMCO take this stance, they quickly followed. Mortgage rates improved early last week on this news.
Volatility Continued
Honestly, I’m sick of the word. Volatility. It’s all I say anymore..so, I’m open to alternatives. With that out of the way, mortgage rates did see improvements earlier last week after PIMCO’s news. However, as other news was digested by traders, mortgage rates ended up trading back to where they’d opened. There was a two day window to capitalize on the improvements we’d seen before the gains were lost again.
What Did Those Reports Say?
Each week, I put up an economic calendar of news coming out that following week. Here’s the what actually happened with those reports last week:
What Impacts Mortgage Rates?
If you’re looking to purchase or refinance a home, it’s important to know what moves mortgage rates. There are normally two major things that impact the direction:
Economic News. (Like the calendar above).
International News. (major events, pending legislation, war related news, etc).
Stock Market. (Money flows from equities (stocks) to bonds when it seeks shelter).
What Are Rates Based On?
It’s been mentioned before, but as a common reminder - mortgage rates are only based on one thing.Mortgage Backed Securities (MBS). The only way you have access to these is through live bond quotes.
Mortgage Market and Rate Watch For Week of October 20th, 2008
What To Watch This Week?
The number one (and most obvious) thing to keep your eye on this week is the reactions to the Fed decision Wednesday. It is everyone’s expectation that the Fed will cut. I think the question is how much they will cut.
Remember, Fed Cuts Do NOT Equal Lower Mortgage Rates!
It’s commonly mistaken that mortgage rates move lower when the Fed cuts. Remember, the Fed Funds Rate (FFR) doesn’t directly correlate to mortgage rates. In fact, often times mortgage rates move higher upon Fed cuts because of fears of inflation. Wednesday is likely to be an extremely active day in the market. Expect big swings both ways in the market.
My ‘prediction’ is that on Wednesday, there may be an hour or so that you’ll be able to lock in a lower rate. However, long term rates will be moving higher.
Since there’s always a lot going on, I like to pick out the two most likely ‘market moving’ reports each week. If I had to pick a couple of reports to watch, they would likely be:
Fed Decision - Wednesday - Again, Fed cuts often mean higher mortgage rates. Perhaps more important than the impact in the Fed Funds Rate is the actual statement that will accompany it.
Core Personal Consumption Index - Friday - This always gives us a great explanation of where costs are headed for consumers. It also happens to be the Fed’s favorite way to measure inflation. Remember, higher inflation equals higher mortgage rates.
You Can Stay Updated!
I’ll be following things as they happen with live mortgage bond quotes and do what I can to keep everyone informed through Twitter. My clients always get the advice first, so I’ll try to filter though as quickly as I can.
Here’s this week’s economic calendar:
As a Consumer, How Do You Keep Posted on the News?
I’ll do my best to keep you posted throughout the week via Twitter. If you’re interested in finding out more about what effects mortgage rates and which direction they’re headed, feel free to follow me!
Work With Mortgage Professionals In The Advice Business
It’s important to recognize that advice is extremely valuable when looking for a mortgage. The right advice can literally save you thousands of dollars, while the wrong advice can cost you the same. Some mortgage professionals really don’t know what mortgage rates are based on, period. If you want to get the best deal, having a professional that can give you that type of advice is extremely important.
Why Am I Posting A Calendar?
I provide this weekly news update because too often when we’re shopping around, we ask the wrong questions. The first thing you’ve got to have your antenna up on is economic news if you want to have any idea what direction rates are moving.
So You Say, What Are Mortgage Rates Currently?
I get this question all too often. If I’m being fair.. and honest (which is my policy). I would be doing you a huge disservice to just quote a rate.
Truth be told, there are literally 27 different factors that go into a custom rate quote. There are also thousands of programs (constantly changing as well). It’s extremely important that you are educated on what is available and most importantly what is the best mortgage plan for you to personally implement.
It’s natural to have a list of questions. I’d love to help work through them with you and educate you on what you need to know about the mortgage process. I can help with everything from how to pre-qualified to what to do after closing (where I will continue working for you)!
It’s what we do, and it would be my honor to add you to our list of raving fan clients. If you’re currently looking for a mortgage loan or know someone that might have questions about one, please have them contact me. I’d be happy to assist them. It’s literally what I love doing! I promise to take great care.
The Fed does not control mortgage rates. Not at all. The Fed can do many things to influence the economy, but one of those things they control is NOT mortgage rates. Influence, yes. Control, no.
Let me explain.
What Does The Fed Control?
Now that I’ve established the Fed doesn’t control mortgage rates, it’s important to realize what the Fed does control.
Fed Funds Rate - This is the rate that banks are charged directly from the Fed for overnight funds. (More at Wikipeida).
Discount Rate - This is similar to the Fed Funds Rate (FFR), but often used to simply increase liquidity. (More at Wikipedia)
Since I’m not focusing on these two items, I’ll leave the extra reading to you.
What Does A Fed Movement Mean to Mortgage Rates?
Okay. Now what you came for. There are three moves the Fed can make in regards to the Fed Funds Rate each meeting.
Keep the FFR unchanged.
Decrease the FFR.
Increase the FFR.
Obvious, yes.
Now, let’s put our ‘Trader’ hat on and think about what these movements mean to the economy and markets in general. I promise this will all come together at the end…. PROMISE.
Unchanged means more of the same. If the Fed doesn’t see a need to step in and take action, you can expect the economy to do more of what it is currently doing.
Cutting rates means cheaper money. This also (often) implies that consumer spending will increase. When Americans spend more money, they also drive inflation higher. Remember that.
Hiking rates means more expensive money. Common sense would tell you this leads to decreased consumer spending. As the Fed makes money more expensive, the rules of supply and demand kick in and fears of inflation go away.
What’s Inflation Got To Do With It?
A valid question.
Now that we’ve established that mortgage rates are not based on the Fed Funds Rate, It’s important you know what they are connected to. The answer is mortgage backed securities. These are special bonds. If the value of a mortgage backed security increases one day, mortgage rates go down. If the value of a mortgage backed security decreases, mortgage rates go up. Make sense?
Remember, a bond is an investment that promises a certain return on your money each month. So, an investor puts their money in mortgage backed securities for that purpose. A certain return on their investment.
Now, the question Americans should be asking is “What does a Fed Cut mean to mortgage backed securities?” Well, I’m glad you asked!
If an investor knows that inflation will be a concern in the future, they’ll want more return on their money. Because after all, they want to continue getting the equivalent return on their investment. So, they actually push down the value of a mortgage backed security (by trading them in the market) and that results in higher mortgage rates.
Don’t Believe Me? Here’s a History!
I tell this to every client when we’re looking at locking an interest rate around a Fed meeting. It’s always the same conversation. “Yes Tyler, this makes sense, but I still don’t believe it.”
Well, here’s what I show them next. If this doesn’t prove my point, I’m not sure what will.
So, as the value of mortgage backed securities (MBS) go down, mortgage rates go up.
Roughly, every 25bps is equivalent to .125% in rate. Roughly.
So, you can see there have been some pretty big swings in mortgage rates shortly after the Fed’s actions.
Now You Know
No surprises any more. Fed cuts lead to inflation. Inflation leads to higher mortgage rates. If history has a way of predicting the future (which it normally does), you can expect a Fed cut to lead to higher mortgage rates.
It’s not something we often think about, but when unemployment is climbing in the US (currenlty 5.7%, nationally) we start thinking about the possibilities. Recent lay-offs locally have this weighing heavy on my heart, so I wanted to post on it.
Let’s face it, there is no such thing as a ’safe job’. Everyone is replaceable (at least that’s what my old employers used to tell me), and unless you’re an owner, things tend to fall down hill. So, what can you do to recession-proof your job? Well, let’s dig a little deeper and see what comes up.
Survey Says
According to JobFox, a leading job research company - there is a short list of jobs that seem to remain in high demand even though the economy hits some turbulance. These jobs included:
Sales Representatives (Specifically, salespeople who can actually sell)
Software Developers
Nurses
Accountants
Accounting Staff
Finance Executives
Administration Assistants
Okay, with that said - don’t go leaving your job to get one of these. It would be silly and probably not necessary.
How Do You Stay Off The Chopping Block Then?
Since I don’t think changing your job to one of the seven listed above, I figured I’d give a little advice on how to secure your current position. Here we go:
Make Yourself Invaluable - Go above and beyond your basic job responsibilities. You’ve got to do more than just show up for work on time and meet deadlines. Volunteer yourself for more responsibility. Be an asset to your company. Find ways to be more efficient and create more income for your company. Bring a more positive attitude to work, it will increase production. Just remember, it’s a lot easier to lay off people that are whiners.
Step Into the Limelight - A great way to be valuable is to be visible. Distinguish yourself in a positive way! Some people try to stay ‘under the radar’ when it comes to getting the job done. The problem here is your work can go unnoticed and you’ll be overlooked as a stellar employee. Get involved and show your company that you’re more valuable now than ever.
Improve Your Skills - Employers like people with great skills. Numb chucking skills, computer hacking skills, you get it. No seriously though, take a few classes. Depending on your line of work, you could also get additional certifications or an advanced degree. It’s easy to loose your job to someone that is more qualified or more educated.Honestly, ’sharpening the saw’ is always a great idea. If you are highly qualified, you might be leaving your current employer to go to someone that will pay you more for your hightly valued skills.
Network vs. Not Working - The cool part of becoming a student of your business is the opportunity to meet others. You’ll be able to meet other professionals at different points in their careers. Listen to these professionals, they will teach you things! Take time to join networking groups, get out and meet people (not at bars, but professional development opportunities). If headhunters are calling you, listen to them - you never want to close doors to opportunities like these. Creating these relationships NOW will make a job search much easier in the future, god forbid you have to.
Everything is Cyclical - It’s funny (in a sick way) that everything happens in patterns. Real estate markets are cyclical, job markets are cyclical and financial markets. Don’t worry when things get rough, that means things are about to get a whole lot better!
Take the Advice from the Mortgage Guy That’s Still In Business
Seriously. Think about it. Since 2005, 65% of the professionals in my industry have left the business. Most of these individuals left before lay-offs forced them out. It’s crazy to think about it.
I don’t want this blog post to be about me, but i pulled these suggestions from what I’ve been doing in the past year. By creating a different type of mortgage experience, we’ve created an easy way to stay in business. People dig it.
Need to Network?
If you’re personally looking to network, but don’t know where to start - please contact me. I’d love to help you out. I don’t want anyone to be scared of what’s happening in the market, I want Iowans to thrive in this market.
I'm an advice guy. I've always enjoyed short, and to the point conversations (thanks Dad). Every once in a while I hear something that is such a powerful (yet, extremely obvious comment) and it's worth repeating.
Here It Is!
Are you ready for it? The quote I heard today was:
"To do as little as possible in the long run, Tyler, do as much as possible in the short run."
Go get it...
The Universe
Why Is The Universe Talking To You?
It's a valid question and one I have to cover before I make my point here. I subscribe to a super cool *FREE* daily e-mail called "TUT..A Note from the Universe". I don't get paid to mention them.. I'm probably not even on their radar, however, this is a very unique service and I thought I'd share it.
Each day I get a note from The Universe (or some really smart and sassy guy in a cubicle) and It's always motivational and makes you think.
Back to the Point
Yea, I did have one.
Financially, everyone wants to retire. They often want to retire sooner than later.
But guess what?... They want to buy the Escalade and throw it up on 30s (that's a big, big wheel..). They're ballin' right now. But what happens when they have to buy a Fiesta when they retire?....at 80. Not so sexy huh?
I'm not against living life and enjoying it at the same time. But live within your means. You may not live the super sexy lifestyle that gets you on the front of a magazine cover, but you'll be laughing all the way to the bank.
Application of this Information
If you haven't already considered what your long term plans are, you really should.
I'm not a financial planner (nor did I ever play one on television).... But I can connect you with someone who can help. If you don't start working hard now, you're much more likely to live a fruitful life long-term.
I'm Not a Motivational Speaker
As I'm writing this, I'm quickly realizing this is a little dorky.
The big 'takeaway' from this could be applied to many parts of your life, such as:
Financial
Significant Other
Work / Career
Reading?
Physical Health...
Ok, I've got to get back to work - but if you have any great examples of where you could apply this quote, post 'em in the comments.
Either way, this is great advice no matter how old you are. If you don't start today, you'll only have to work harder in the future!
Mortgage Market and Rate Watch For Week of August 25th, 2008
What To Watch This Week?
It’s going to be an extremely busy news week. It’s not often that a ‘big’ report comes out each day, but this week is one of those weeks! Besides all of the ‘economic news’ coming out this week, don’t discount what international news can do to the market. Last week’s Georgia and Russia news was a great example of this. If you’re not tuned into this news, feel free to follow me on Twitter. I’m always updating a few times throughout the day.
Besides all of the day to day market activity, there are also a bunch of economic reports coming out. If I had to pick two reports that would likely move the market this week, they would likely be:
Fed Minutes - Monday - The minutes from the FOMC meeting are released on Monday. This will give traders an opportunity to hear what really happens behind closed doors. This often is a market mover. Look for conversation on the Fed’s stance on inflation and how quickly they plan on taking action on it.
Core Personal Consumption Expenditures (CPE) - Friday - Not only is the monthly CPE report coming out, but so is the annual (year over year) report. CPE is one of the Fed’s favorite ways to measure inflation. This could be a big market moving report. You can also look into Thursday’s movement in the market to ‘price in’ trader’s opinions on where things will go.
You Can Stay Updated!
I’ll be following things as they happen with live mortgage bond quotes and do what I can to keep everyone informed through Twitter. My clients always get the advice first, so I’ll try to filter though as quickly as I can.
Here’s this week’s economic calendar:
As a Consumer, How Do You Keep Posted on the News?
I’ll do my best to keep you posted throughout the week via Twitter. If you’re interested in finding out more about what effects mortgage rates and which direction they’re headed, feel free to follow me!
Work With Mortgage Professionals In The Advice Business
It’s important to recognize that advice is extremely valuable when looking for a mortgage. The right advice can literally save you thousands of dollars, while the wrong advice can cost you the same. Some mortgage professionals really don’t know what mortgage rates are based on, period. If you want to get the best deal, having a professional that can give you that type of advice is extremely important.
Why Am I Posting A Calendar?
I provide this weekly news update because too often when we’re shopping around, we ask the wrong questions. The first thing you’ve got to have your antenna up on is economic news if you want to have any idea what direction rates are moving.
So You Say, What Are Mortgage Rates Currently?
I get this question all too often. If I’m being fair.. and honest (which is my policy). I would be doing you a huge disservice to just quote a rate.
Truth be told, there are literally 27 different factors that go into a custom rate quote. There are also thousands of programs (constantly changing as well). It’s extremely important that you are educated on what is available and most importantly what is the best mortgage plan for you to personally implement.
It’s natural to have a list of questions. I’d love to help work through them with you and educate you on what you need to know about the mortgage process. I can help with everything from how to pre-qualified to what to do after closing (where I will continue working for you)!
It’s what we do, and it would be my honor to add you to our list of raving fan clients. If you’re currently looking for a mortgage loan or know someone that might have questions about one, please have them contact me. I’d be happy to assist them. It’s literally what I love doing! I promise to take great care.
Do you ever wonder how our real estate market is here in Des Moines? Unfortunately, we spend a lot of time listening to how rough things are in other cities around the country, but too often we don’t really consider what our real estate climate is like.
I’m a fan of having as much information available before I take action on any big decisions. I don’t know about you, but I think buying or selling a home is a pretty big deal.
As a blogger and mortgage professional, when I receive good information - I pass it on. Home listings and sales are an interesting set of information most of us don’t have super easy access to. Thankfully, I have a Realtor that hammers me with e-mails (Just kidding, I don’t mind them) on market updates and her opinion on where things are at.
Do YOU Need Help?
As a mortgage professional, I cannot sell real estate. I can however help you connect with a Realtor. If you are looking for some answers, I’d be happy to introduce you to someone who can help! No question is silly or too off the wall.
I can also reach out to my connections throughout the country if you’re looking for real estate outside of Iowa. So please, feel free to contact us, we’d love to help!
Why Should You Care About Statistics?
Whether you’re looking to purchase, sell or refinance a home - this stuff matters. These statistics are compiled from the Multiple Listing Service and cover the Des Moines, Iowa residential real estate market.
With her permission, I post the facts here so you can come up with your very own market opinion. Here’s this week’s market commentary:
“I have decided to start including numbers to show how the new construction market is performing. I’m working on getting these numbers as accurate as possible, but it can be difficult if all agents aren’t reporting their listings as “new construction.” Our sale pending numbers and solds last week have increased over our 2 month weekly average, but days on market is holding steady in that 90+ day range. You can also see that our total active listings has decreased below 6400 which is the first time in many weeks, last year at this time we had almost 6900 listings on the market!” - Heather Barglof, RE/MAX Real Estate Concepts
(Click to Hugisize)
What Does This Report Cover?
I really enjoy this chart because it gives a breakdown of:
Days on the Market
Price Per Square Foot
Number of New Listings
Number of Expired Listings
Number of Price Reductions
Pending Home Sales (by price)
New Home Sales (by price)
All Active Home Sales (by price)
Best of all, it compares this week vs. last week and last year!
This is a great chart. I’m not a Realtor and would never try to take the place of one. If you’re looking for statistics in your specific neighborhood (because your neighborhood is the only one that matters when you’re selling), I can help connect you with the right Realtor for the job!
We Love Great Information and Love to Give Great Information!
If you’re a super cool person and have any market statistics you think our readers would find valuable, please feel free to contact me.If it’s relevant, It’ll show up here!
If you’re looking for my professional opinion or looking for a comment (press related), please contact me here.
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A blog updated daily educating you on how to do more with your money. Topics range from basic tips and tricks with personal finance to mortgage terms and market news.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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