Murfreesboro Information and Resources

Ten to 12 percent is normally considered a strong the rate of return in the stock market. Believe it or not, owning rental property has the potential to more than triple that 10 percent return on your money?

Here’s a realistic scenario that demonstrates the power of putting your money in rental properties. Imagine you buy a single family home in Rutherford County for $120,000 with a 20 percent down-payment of $24,000 out of your pocket.  On the remaining $96,000, you get a 30-year amortized loan at seven percent interest, which has a monthly payment of $640.  Add $1,500 per year to cover insurance and property taxes and your total payment comes to about $765 per month.

It is possible today in Rutherford County to pay about $120K for a home that rents for $900 or more per month.  If your purchase is in this category, it will produce a monthly cash flow (rent minus expenses) of $135 per month.  In many cases, this cash flow completely covers other non-regular expenses that occur, such as repairs, property management, etc.

Now let’s say that your rental property appreciates in value an average of three percent per year, which is less than the average annual home appreciation in Rutherford County over the past 10 years.  With this conservative estimate, in 10 years your home will be worth $161,270, or $41,270 more than you paid for it.  Additionally, your principle balance on your loan will have dropped to $82,380 — that’s $13,620 of your loan that has been paid down by your tenants through their rent.

Overall, you will be sitting on $78,890 in equity.  Remember, your original cash investment was only $24,000.  This means the value of your investment has more than tripled in just 10 years with an average annual return of 32.9 percent.  There is no other investment that allows you to leverage your money like real estate. 

Of course, being a landlord is not for everyone.  This investment is a little more involved than sending a check to your stockbroker.  However, you can take much of the stress of owning rental property off your own shoulders by hiring a skillful property manager and giving him the space he needs to do his job properly.  And there is something comforting about being able to see and touch your investment. 

There are many aspects of the lot and surrounding property that can have a huge impact on the desirability and value of a home.  A few things to examine before writing that offer:

Boundaries and Encroachments – Find out where your lot ends as well as any building setbacks.  Are all fences, sheds, and structures located far enough away from the property lines?  Is there room to add onto the house or build a deck in the future?  If necessary, consider getting a professional survey.

Easements – Electric, gas, water, and other utilities may have been granted permission to run their lines on your property.  Make sure any of these easements won’t negatively affect your ability to use or improve your property in the future.

Septic System – If the waste disposal system for the house is a septic tank, find out where the field lines are located.  You won’t be able to plant any trees, build outbuildings, or place a swimming pool in the septic field.  If sewer becomes available in the neighborhood, you may be forced to hook up to it before the house will qualify for a VA or FHA loan when you eventually sell the house.

Police & Fire – Neighborhood crime statistics and the proximity of fire hydrants and police and fire stations can have an impact on the cost of homeowner’s insurance as well as resale value.

You’re likely getting fooled by the “good” feedback on your house. Here’s the truth about feedback: unless there is something truly objectionable about the home, most agents who provide feedback will find something nice to say about the house. 

You need to learn how to interpret feedback.  Whenever a prospective buyer chooses not to make an offer on your listing, it means that he believes he can get a better value for his money by purchasing another house.  Once you’ve gotten enough feedback saying buyers believe they can get better value elsewhere, it becomes clear that in order to get an offer on your home, you must provide more value.  And the easiest way to give the buyer more value is to lower the price.

One of the biggest financial mysteries out there is how credit scores are calculated.  Here’s a breakdown of how the information on your credit report is used to generate your FICO score.

Payment History – 35%

Whether or not you’re making your payments on time is the single largest consideration that goes into your score.

Amounts Owed – 30%

In addition to the total amount owed, the credit bureaus also examine the total number of credit accounts with open balances and the proportion of what’s owed compared to the credit limit or original balance of each account.

Length of Credit History – 15%

How long has each of your credit accounts been open?

New Credit – 10%

The credit bureaus examine the total number of recently opened accounts; the proportion of total accounts that have been recently opened; and the number of recent credit inquiries.

Types of Credit – 10%

They also consider what types of accounts (i.e. credit cards, mortgages, installment loans, retail accounts, etc.) and how many of each you have open.

 Open houses DO sell houses.  It’s just that they rarely sell the home where the open house is held.  The statistics say that just one percent of all home purchasers actually buy the home they visited at an open house. 

The truth is that open houses are a great place for real estate agents to meet potential buyers.  In fact, a buyer is eight times more likely to buy some other house because of your open house than he is to buy yours.  That makes a lot of sense when you realize that for a buyer, visiting an open house is kind of like going on a blind date with a potential new home.  How many blind dates actually lead to marriage?  Fortunately for open house attendees, even if the house isn’t right, they may meet an agent who is equipped to match them with the right home.

I can’t speak for everyone, but I assure you that in our case all the homes in our print ads are actually for sale when the decision is made to include them.  It takes time to physically print homes magazines and newspaper ads, which makes it impossible to ensure that all the properties listed for sale in those venues are still available when the ad is put out for public consumption.

The best way to find the most current listings—because the most desirable houses sell quickly in any market—is to do your search online.  Any competent real estate agent or team will have a tool on their website that allows you to search all available MLS listings in real time.  Feel free to use ours anytime, just click on the menu bar above where it says Search Local Listings.

 There are certainly a number of things you can do to make your listing more attractive than the other homes it’s competing against for limited buyers.  Assuming you have already addressed price and condition—which we’ve covered in this space before—you may want to consider getting a pre-inspection of your home. 

When a property goes under contract, 75-80 percent of buyers hire a home inspector to give the house a thorough once-over to make sure there are no hidden problems.  If the inspector finds a major problem or even if he simply describes a minor issue in a way that seems major to the potential buyers, the inspection can quickly turn into a deal killer. 

As a seller, you can mitigate such dangers by ordering your own home inspection before putting your house on the market.  Here are some of the benefits of doing this:

·        Limit surprises after your home is under contract.  If your pre-inspection uncovers a problem, you have the opportunity to fix it before it can kill a deal or at least disclose it to potential buyers on the front end, taking away the surprise factor that can cause emotional reactions from buyers.

·        Both parties gain valuable peace of mind which makes for a smoother transaction.  You and the buyer can both relax knowing that the house has already been given a clean bill of health.

Nobody really knows right now.  So far the tax credit has played a significant role in stabilizing prices and revitalizing the housing market across the nation.  It’s now up to Congress and the President whether or not this shot in the arm for real estate will continue.

Many experts who watch the legislative process closely say there is about a 60 percent chance that some sort of tax credit extension will be passed.  Most believe that if it does pass, it will most likely be a six-month extension of the current version.  However, there are significant numbers of economists and real estate industry advocates pushing for a full year extension as well as a larger credit (some are arguing it should be as much as $15,000) that goes to anyone who buys a home – not just first-time homebuyers.

A few years ago when real estate was booming, the difference between agents was much less pronounced.  However, in today’s more difficult market, your choice of Realtor could save or cost you thousands of dollars in the sale of your home.  Here are just a few areas where your choice of real estate agent can make a huge difference:

Market Knowledge

Today it’s a different world when it comes to pricing a house to sell.  It used to be that you could just price yours a little higher than the last one that sold in your neighborhood and your selling worries were over.  In the current market, if you don’t look at home inventory absorption rates when pricing your house, it can easily stagnate on the market for months; and in most cases, homes that sit end up selling for less than those priced correctly on the front end.

Marketing

Few agents possess the unique combination of money and knowledge required to stay on the cutting edge of marketing homes.  In addition to all of the traditional advertising outlets, today’s top agents need expertise in such areas as IDX technology, search engine optimization (both organic and pay-per-click), web video, and listing syndication, as well as the necessary resources to pay for proper implementation that leads to maximum exposure of your home to potential buyers. Marketing is a full time job. Agents who try to sell your home using a yard sign, the MLS, and a prayer just don’t have the right tools to be effective in today’s market.

Support Staff

If your listing agent is out showing homes and a potential buyer calls with a question about your home, who answers the phone?  Employing a real estate team to sell your home is now more important than ever.  Having a well-trained, live person answering every buyer call provides the best opportunity to convert that prospect into the purchaser of your home.  Other support staff, such as Listing and Closing Coordinators, make sure important details are covered in a timely fashion and that little issues are discovered and dealt with long before they become deal-killing problems.

If you just have to buy that short sale, here are a few tips to help you survive the process and hopefully close the sale. 

Have Patience

Short sales rarely close in less than 90 days and some banks regularly take six months or more just to respond to your offer.  If you’re not prepared to wait at least 120 days to get an acceptance, rejection, or counter to your offer, you’re probably better off staying away from short sales.

Make Sure the Short Sale is actually a Good Deal

Many consumers have gotten it into their heads that all short sales are great deals.  Check the comparable sales to see if the value of the house truly outweighs the time and potential headaches that come with the short sale process.  Keep in mind that many banks require the property to sell in as-is condition.  Also, unless it has already been approved by the bank, the list price means little.  A full-price offer is no guarantee the sale will be approved.

Submit a ‘Clean’ Offer

Don’t ask for a bunch of seller concessions in your offer.  Many banks have guidelines in place that automatically reject offers asking for such things as seller-paid closing costs, home warranties, and repair allowances.  Often the terms of the contract are just as important to the bank as the purchase price.

The Listing Agent will Make or Break the Deal