Archive for the 'Investors/Landlords' Category
Another Bad Idea from From Fannie Mae - Tenants Can Stay in Foreclosed Properties
December 16th, 2008 categories: Investors/Landlords, Mortgages & Finance, Real Estate Industry
From the people who brought you the massive boom in subprime and Alt-A mortgages and the predictable crash that followed, comes one more equally bad idea:
Allow Fannie Mae (the government) to become a landlord to thousands of tenants and thereby delaying or preventing the sale of properties altogether. The size and scope of this decision won’t be as large or devastating as the aforementioned but it’s just as poorly thought-out.
Who will buy a foreclosed home with tenants in it?
Buying a home with tenants in place is a catch-22. While you may be getting paying tenants, you are also trusting the person who placed the tenants (the same person, by the way, who just got foreclosed on) to pick qualified, responsible people to live in your investment.
What if the landlord in buying to live in the property or wants to place their own tenants or raise rent? Will Fannie Mae agree to then evict tenants or does the new owner have to take on this additional financial burden?
Who will maintain the property while tenants are in it for months or possibly longer?
Who at Fannie Mae is going to be taking the inevitable 2 AM toilet is backed-up calls? Who is going to replace the smoke alarm batteries? Of course, they’ll hire a property management company but who at Fannie Mae knows anything about managing property management companies? Property management companies will be salivating at the opportunity to rip-off, I mean, work with Fannie Mae.
How will agents schedule showings?
Showing rental properties with tenants is hard enough, never mind when they’re mad. Setting up a typical showing for an occupied rental property goes like this: call the office 2-3 days prior to showing, the office calls tenants who almost never call back to confirm, the listing agent calls the owner to get them to call the tenants and then a showing is scheduled for one floor only. 50% of the time, the tenants still claim to not know about the showing and sometimes refuse to let agents in.
Now imagine that you have tenants who are disgruntled (Fannie Mae is now the landlord and probably not all that responsive) or who are nervous that the house may be sold to someone who can evict them (Fannie Mae may not call them back but at least they won’t evict). Who will agents call to get in? With so many homes on the market, I think investors will just pass these properties by knowing they’ll be a headache.
Will tenants trash the home and make it worth even less?
Bank-owned properties are targets of theft and vandalism when they’re vacant but does Fannie Mae actually think this will end when they allow tenants to remain? Tenants will know that no one is watching the store. Use your imagination.
The End Result
Investment properties owned and managed by Fannie Mae will be harder to sell and therefore, worth less, and will then negatively impact the value of surrounding properties. Fannie Mae will mismanage properties, tenants will not be happy with Fannie Mae as their landlord and some will purposely destroy or vandalize properties.
I want to be optimistic but I fear that this bad idea will sound like a good one to other lenders (or worse, legislators) which will only compound the problem.
What’s the alternative?
I think it’s unfair to demand that tenants leave their home with little notice. However, if Fannie Mae can find the tenants after the foreclosure to evict them, can’t they find them before the foreclosure and notify them at least 30 days before the actual foreclosure is to take place?
And if the tenants can’t find housing prior to the foreclosure, Fannie Mae would then give them an additional 30-day grace period before it begins the eviction process. The reality is that eviction, at least in CT, takes several months so the tenants would have that additional period to find housing.
Fannie Mae should pay for moving costs, any additional rent if tenants can’t find an apartment for the same rent, and should pay the new landlord directly for the security deposit (since the previous landlord isn’t going to give it back).
Fannie Mae should stick to the time honored and tested tradition of being in the business of real estate lending, not real estate investment.
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Updating a Rental Apartment’s Bathroom With Style
December 4th, 2008 categories: Investors/Landlords
When updating a rental apartment, you have to balance a few things: budget, quality, quick turnaround and marketability. Landlords have a hard time with this. The approach many take is to forget quality and focus on the budget. Personally, I think you can achieve all of the above - budget, quality, quick turnaround and marketability - with style.
Here’s how I did just that last month when I remodeled a bathroom in a rental. As you can see from the before pictures, it was definitely time.
Before the Bathroom Remodel
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Connecticut Cities Avoid List of Forbes Next Foreclosure Capitals
October 20th, 2008 categories: Home Buyers, Home Sellers, Investors/Landlords, Real Estate Market
Forbes.com just released their predictions for the next round of cities to be hardest hit by foreclosures. Move over Stockton - hello, Jacksonville.
The good news is that no city in Connecticut is on the list - the bad news is that such a list exists.
The cities named are:
1. Jacksonville, FL
2. Fresno, CA
3. Naples, FL
4. Miami, FL
5. Orlando, FL
6. Santa Cruz, CA
7. Merced, CA
8. Oxnard, CA
9. Deltona, FL
10. Santa Barbara, CA
RealtyTrac.com ranks the Top 100 metro areas for foreclosures in the 2nd quarter of 2008 as New Haven/Milford rank #57, Stamford/Norwalk/Bridgeport is #64 and Hartford is #74.
For August of 2008, CT ranks as the 17th top (worst) state for foreclosures.
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HUD Homes For Sale in Hartford County
August 28th, 2008 categories: Home Buyers, Investors/Landlords
There are a number of HUD properties for sale right now in Hartford County.
HUD owned homes are those that the Department of Housing and Urban Development foreclosed on after an owner defaulted on an FHA-insured loan.
Any HUD registered broker can show you a HUD listing (My office is a registered broker and therefore I have access to these listings). You do not have to contact the listing agent directly.
Here are some of the properties:
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Do You Trust Franklin to Choose Your Tenants For You?
July 30th, 2008 categories: Home Buyers, Investors/Landlords
This is based on a true story. The names have been changed to protect the guilty.
Meet Franklin
My client is looking to purchase a vacant two-family to live in.
Franklin is an “experienced” landlord with property for sale in Connecticut. Franklin has hired a reputable real estate firm to represent him in the sale of his two family, which he and the firm have advertised as being “vacant.”
I called to make an appointment to see the house and was told that there was a tenant in one of the units. I call the listing agent to verify this and to make sure that the tenant is month-to-month since my client is buying the house to live in it and rent out the other unit to tenants they’ve selected.
The listing agent assures me that the tenant is “family” and month-to-month.
My client writes up an offer. After some negotiation, everyone agrees on the terms but I was faxed back the contract with the most important clause of the contract scratched out - “Property to be vacant at closing time.”
Two weeks and 20 phone calls later, we slowly unravel that either Franklin lied to his agent or the listing agent lied to me. The property has a tenant with a lease - which won’t be up for 7 months. On top of it, the tenant is on some type of state assistance and has claimed an “attachment” to the apartment so the owner can’t force the tenant to leave now, soon or possibly ever.
All along, I advised my client that it’s not a good idea to inherit someone else’s tenants because you don’t know the previous owner’s standards.
For fun, I thought we could imagine Franklin’s tenant screening methodology.
Franklin’s Tenant Screening Process
Step One: Put Out a For Rent Sign
Qualified tenants are always just out walking around, looking for signs.
Step Two: Phone Interview with the Applicants to Pre-qualify
Forget employment status and credit history. Potential tenants score points if they have a sob story. See photo of my daughter who knows how to put on a sad face.
Franklin would rent her an apartment today.
Step Three: Show the Apartment
Hey, if they saw the ad on-line, who needs to see it in person. Congratulations! The lease is in the mail.
Step Four: Sign the Lease
Even if it’s on a napkin, it’s binding.
The Problem with Inheriting Tenants
It’s hard enough to choose qualified tenants without adding a middleman - the former owner who you don’t know. Before you buy a multi-family, make sure the tenants are on a month-to-month lease so you, not Franklin, can make the decision. Year leases must be honored by the new owner.
And in case you forgot about the problems tenants can cause, here are some good old fashioned tenant horror stories.
http://news14.com/content/top_stories/597845/man-charged-with-killing-landlord/Default.aspx
http://realestate.msn.com/Rentals/Article2.aspx?cp-documentid=4972876>1=35000
For related stories:
Deadbeat Tenants Win The Day in This Eviction Video
Really, Really, Really Bad Tenants
Even More Really, Really, Really Bad Tenants
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