1. I s su e 12 , Vo lu me 3 7 / Se p te m be r 16, 20 11
Reallocating from Equities to Real Estate The Week Ahead -> The “Keys”
Tim McLaughlin - Housing Data and the Fed Announcement highlight
Equities and Fixed Income investments are delivering low
(negative) returns, and home prices are at bargain levels. That has Date Economic Release Prediction Last
prompted a lot of would be investors to contemplate if the time is
right consider buying investment properties for rental housing
9/19 NAHB Housing Index 15 15
As you would imagine, investing in real estate right now can be
surprisingly profitable, if everything goes right. Rents are climbing 9/20 Housing Starts 590K 604K
in many areas, and more properties may be coming on the market.
Last month, the Obama administration asked for proposals on how 9/20 Housing Starts (MoM) -2.3% -
to convert some of Fannie Mae's and Freddie Mac's bulging
inventories of foreclosed homes into affordable rentals. 9/20 Building Permits 585K 601K
Investors used to aim for rents that were 1% of the purchase 9/20 Building Permits (MoM) -2.7% -3.2%
price, or $1,000 a month for a $100,000 home, which equates to
an annual gross return of 12%. Today in many areas, that has 9/21 MBA Mortgage Applications - -
increased to 1.5% to 2%. However, average returns after taxes
and expenses are more like 5% to 6% of the property value. But 9/21 Existing Home Sales 475M 4.67M
that is still well above what many other investments yield.
9/21 Existing Home Sales (MoM) 1.7% -3.5%
When investigating potential investment property purchases,
avoid the following pitfalls: 9/21 FOMC Rate Decision - -
Confusing a cheap deal for a good deal - It is true that you can 9/22 Initial Jobless Claims - -
buy some homes for ridiculously low prices, but that doesn't mean
you can rent them out. Homes in deserted subdivisions aren't 9/22 Continuing Claims - -
appealing to renters or buyers in many cases. The same is true for
less attractive properties or those in less desirable school districts. 9/22 BB Consumer Comfort - -
Forgetting that time is money - In real estate, time is not always 9/22 Leading Indicators 0.2% 0.5%
on your side. You lose money when your property is empty,
whether you are painting it or between tenants. Many times, you 9/22 House Price Index (MoM) - 0.9%
may be better off accepting a lower rent than waiting for a higher
paying tenant.
Secondary Marketing Takeaways: A few weeks
Assuming you will sit back and watch the rent roll in - When you back, we outlined some of the bullet points that were
become a landlord, you also become a rent collector. Just like making the financial markets jittery. This week, the
homeowners who can't pay the mortgage, tenants lose their jobs focus appears to be Europe, and in particular, Greece.
and stop paying the rent. Evicting them can sometimes take The projected odds are 95% that Greece will default on
several weeks. There are extra steps such as upfront screening
its debt and its restructuring packages.
and pulling credit reports to see who is the “best credit risk” to rent
your property, much like in mortgage lending.
Why is that a big deal in the US? If Greece
Knowing the area you are investing in – Is the town ripe for defaults (and Germany just may let them do that), then
renters? Is it a commuter town that is more apt to have a high all the European (and global) banks and institutions
renter’s population? Does the town lend to a conducive renting who have lent money to Greece take major losses.
environment. Don’t guess if it is or isn’t. Your knowledgeable That, in turns, restricts global profits, tightens lending in
Weichert Realtor can help with those questions and provide Europe, and perhaps triggers a start of a downturn
valuable insight to find the right investment.
(recession?) in Europe. And it feels like every time
Financing your investment property… is often different then Europe sneezes, the US catches a cold. Thus the flight
financing your own home. Weichert Financial can help you analyze to safety of Fixed Income, and the continued low rates.
the differences and make an educated decision. Ask us how!
Mortgage Access Corp. d/b/a Weichert Financial Services, Executive Offices, 225 Littleton Road, Morris Plains, NJ 07950. 1-800-829-CASH. NMLS Company ID: 2731. Licensed by the NJ Dept of Banking and Insurance. Licensed Mortgage
Banker with the State Dept of Banking in NY and CT. Licensed by the Pennsylvania Department of Banking, Mortgage Lender 21042. Licensed Lender in AK, AR, DE, MD, D.C., GA, ME, MI, MN, WI, IA, IL, IN, LA, VT, FL, WV, RI, KY, NC,
ID, MS, NE, WY, OK,TN, WA. Licensed by the Virginia State Corporation Commission, License #ML105. Licensed Mortgage Lender in the Commonwealth of Massachusetts. License #ML1713, Certificate #43155. Certificate of Authority to
transact business in CO, SC. Registered Mortgage Lender in TX. Licensed with the Financial Institutions Division in New Mexico, License # 01297. Licensed by the Department of Corporations under the California Residential Mortgage
Lending Act. Licensed Mortgage Broker and Lender Ohio. Licensed Loan Broker and Lender Rhode Island. Kansas Licensed Mortgage Company, License #MC.0001229. Licensed by the New Hampshire Banking Department, License #
8714-MB. Licensed Oregon Mortgage Lender License #ML2528. Weichert Financial Services arranges loans with third-party providers. Equal Housing Lender.
