HUD News ….

Elizabeth Gibson at EZ Landlord Forms contacted me with this somewhat alarming news from HUD, so thought I’d share her article with other landlords who might be impacted by the effects of what’s written/implied in this proposed rule change:

proposedfederalrulechangehaslandlordsfeelinganxious

Every quality rental property owner upholds the fair housing and anti-discrimination guidelines espoused by HUD, and makes those clear to tenants who rent from them. But making discriminatory actions (by tenants) the responsibility of the landlord seems unfair and unrealistic …

Definitely an issue that needs to be followed!

 

Surprising Trend

When everything collapsed in the housing market here in 2008, US investors took advantage, knowing the situation wouldn’t last forever. But foreign investors also took note and jumped in.

The surprising player was China, however. Prior to 2010, investment from there was negligible but between 2010 and 2015, Chinese buyers spent around $93 billion on homes, condos and other investment properties! And finally, in 2015, those buyers surpassed Canadians as the predominant purchasers of investment properties here. I was astounded by this fact. (Springer, R. (2016, Sept-Oct.) Staying Power, Think Realty, pp. 12-14).

Interestingly, they tend to buy in our more expensive markets like New York City and California, although Texas and Florida are also high on the radar. And the trend is expected to continue. Why China?

  • I didn’t realize this, but the government there doesn’t allow their people to own homes — they can only “lease” them from the government. (Ugh!)
  • People there with extra monies see our dollar as more stable than their yuan, and also see our social and political landscape as much more stable than theirs.
  • They like the rebound our real estate market has made in the past few years and expect that to continue.

China now has the highest number of billionaires in the world, and is second only to the US in the number of millionaires. They’re sending their children to universities here because they feel the education is superior, and there’s a federal program available (EB-5 Program) whereby a number foreign investors  can immigrate here if they’ve bought real estate. Some of them purchase homes and have their children live in them while attending school.

So, it all makes sense on a number of levels. If you’re a Chinese national, have the extra cash and want to improve your investment portfolio … the US market holds a lot of opportunity.

(P.S. This isn’t a commentary on immigration! I don’t do political stuff on this blog, just real estate related content. Politics drives me crazy, especially right now … )

Welcome, Felons?

In a recent phone call from a prospective tenant, Robert’s last question of me was, “So, do you rent to felons?” When I asked what his felony was, he replied, “Strangulation.” I told him I’d have to talk to my owner, and suggested he call me back in a couple days. (I’m the owner, of course, but keeping that fact private has saved me time, stress and hassle through the years.)

HUD Secretary Julian Castro recently released a 10-page statement, warning property managers, agents and landlords they can be held liable for discrimination if they deny tenancy because of criminal records.

He wants to protect the fair housing rights of people who are re-entering the housing market after leaving prison. He claims that colorblind policies — like screening all applicants for criminal background checks — have a discriminatory disparate impact on minorities that are arrested at rates higher than their proportion of the general population.

So, even though barring tenancy to felons serves a nondiscriminatory, legitimate purpose for our neighborhoods, we may be putting ourselves at risk to do so!

And although Robert never called me back, let’s assume I had rented to him, and three months later, he fought with and strangled my tenant on the other side of the double. Was it my responsibility to protect the neighbors? Would that tenant have the right to sue me for negligence?

Although I’ve given second chances to some who’ve had run-ins with the law, I’ve always had a policy of not renting to people with felonies. I’m a single woman, I work alone much of the time, and I care deeply about my neighborhoods and tenants. With this new missive from HUD, maybe a conversation with my real estate attorney is in order …

Rents Are Up …

Across the nation, rent prices took their highest jump (over the past year) since before the recession that started easing up somewhere around 2009. According to a recent Wall Street Journal report, they went up 4.6% last year, to an average of $1,179/month. But — good news for renters — apartment construction is way up, so this may create an oversupply in some urban areas, and those rent prices may even out a bit.

And as you might imagine, given the above statistic, homeownership is down. As of the third quarter of 2015, it was at 63.7% — a 30-year low.  The percentage of first-time buyers is also at a 30-year low.

So, what accounts for the shift? I think there are a couple major factors at work here:

  • The collapse of the housing market in 2008 scared the crap out of everyone. Many potential homeowners are still scared, and expect this may happen again. They imagine buying a home, having the market tank, and finding they owe more than the home is worth.
  • People are much more transient now than ever before. They change jobs frequently, and are transferred with their work more often. They don’t want to be “tied down” by homeownership when they know there’s a good chance they’ll be moving in a year or two.

Personally, I still feel real estate is a good investment. I don’t believe we’ll see another 2008 debacle, and owning real estate — whether you live in it or use it as a rental property — is a great addition to other assets in a balanced portfolio.

 

Another Facelift

This is a duplex I bought in the late 90s … it was aluminum siding — still is — but was looking a little tired, to say the least. I recently sold it on a land contract to a wonderful family, who started making improvements immediately. FSCN0518IMG_2874

Take a look at this exterior before and after! They’re not quite done, but they’ve replaced some windows, made it into a single family home by opening up the downstairs living area, replaced the front door, and repaired and painted the siding and brick front porch. They also tore out the old shrubbery and put in new plants. They put a big vegetable garden in back.

This home is over 100 years old, but is built better than many of our newer homes today.

These people wouldn’t have been able to purchase a home the traditional way, as they have no credit and the banks have tightened the purse strings so much.

They gave me a large down payment and I didn’t charge them much for the home … they’ll own it within the next couple of years. They’re enjoying the pride of home ownership, and I’m so happy to have helped them achieve this dream … we’ll definitely maintain a relationship going forward. 🙂

Indy Rental Market Staying Strong

Indianapolis touts one of the most stable real estate markets in the country, in both sales and rental markets. While many of our nation’s cities suffered a 30-50% decline, our real estate market dipped a modest 7% throughout the last recession.

Our rental prices have soared 11+% over the past year. Indeed, real estate is a solid choice in rounding out an investment portfolio. Buying and holding for income and appreciation has been my goal from the start … flipping has always been a popular topic of conversation but is no guarantee of immediate or long-term return.

I like Larry Arth’s explanation of the value in real estate investment. He wholesales properties in several locations, and Indianapolis is one of his favorites. Here’s his take on the concept, as stated in Personal Real Estate Investor Magazine:

“IDEAL is the acronym for the 5 wealth building principles

I (INCOME) positive cash flow

D (DEDUCTIONS) interest, depreciation, repairs, all expense are tax deductible

E (EQUITY) as tenants pay down the mortgage the principle builds up is equity for you

A (APPRECIATION) annual property value growth

L (LEVERAGE) O.P.M. (other people’s money) you gain all the above from borrowed money

There is no other investment available that can fulfill all 5 of these wealth building principles. Most investments will return 1 or 2 of these wealth building principles and only real estate has the ability to return all 5.”

Nice!  🙂

 

 

Rent to Own?

Seller financing, rent to own, land contracts … these are creative ways to achieve homeownership if you can’t qualify for a mortgage. As a real estate investor here in Indy, I’ve sold a few of my rentals this way. It can be a positive route for both the seller and buyer. Laura Agadoni included me as one of her sources in the following Trulia article about seller financing. If you — or someone you know — is in the market for this type of financing, her piece is a good way to get familiar with the process:

http://www.trulia.com/blog/pros-cons-seller-financing/

Personally, I enjoyed giving people the opportunity to become homeowners when they wouldn’t otherwise be able to do so. For the most part, they took excellent care of the properties, knowing the home was “theirs.” I even had one family make multiple repairs and updates as they moved through their contract.

The downside was that occasionally, tragedy strikes. People get sick, lose their jobs, split with their spouses, etc. But as I stated in the article above, they usually just “bow out” gracefully and apologetically, pack up, clean up, and leave. The seller keeps the down payment, and moves on.

Bottom line? As Laura states, seller financing can work well for everyone. The seller earns good interest on the loan, and the buyer achieves the American Dream … home ownership. It’s a win/win. 🙂

 

 

 

Good Ol’ Midwest

American housing is some of the most affordable in the world.  Although many homeowners and investors took a huge hit in the ’08 (and beyond) collapse of our housing market, it’s been slowly creeping back.

Not only have foreign investors been scooping up US foreclosures over the past several years … individuals and hedge funds on both coasts and throughout the country have also been on the bandwagon and are reaping nice profits throughout the land.

Foreclosures aside, housing in the US is hugely affordable, with a median cost of a home at 3.5 times the median income.  Check out this chart I found in the latest issue of Personal Real Estate Investor magazine, detailing the least and most affordable major markets across the world … interesting stuff:

HousingHopefully, you can discern what it says.  Four of our west coast cities made the “least affordable” list.  But in the “most affordable” list, you’ll find six of the ten on that list are right here in the good ol’ Midwest!  Impressive, yeah?

And of course, Indianapolis is one of them.  With our vibrant downtown area that attracts large groups/conventions with its wonderful walking/biking paths, the canal, zoo, convention center, museums, symphony, fantastic cuisine and hotels, sports venues, etc., it has become a destination in and of itself.

No wonder I’m having to be more creative in finding great deals … Indianapolis isn’t “flying under the radar” any more.  It’s been getting its share of great publicity.

Well deserved.

 

Retire in Indianapolis? What?

Retire in Indianapolis?  Crazy, right?

Well, crazy smart, according to a recent Market Watch article titled “Retire Here, Not There.”  Hoosier hospitality is alive and well, and along with affordability, activities and amenities, we’re attracting retirees who are deciding they can handle the harsh weather because the plusses outweigh the minuses.

The cost of living in Indiana is close to 11% below the national average, and with home prices averaging around $111,000 and income tax at a flat 3.4%, this is a very affordable state … easy on the nest egg.  And while Indianapolis used to be called “IndiaNO-place” the downtown area is now a bustling, vibrant place to be … arts and culture, the symphony, opera, fine restaurants and fun pubs, Pacers and Colts, walking and biking trails … I personally know several people who have downsized after their kids graduated from college and are now living in upscale condos downtown.

The other Indiana cities mentioned in the article are Columbus, Evansville and Bloomington.  If you’d like to check out the full article, here’s the link:

http://www.marketwatch.com/story/retire-here-not-there-indiana-2014-05-05?pagenumber=1

Personally, I’ll be staying here for a long, long time.  I love this city.  But I can assure you, when the cold weather hits, I’ll be heading south for a week here and there, whenever I get the chance!

 

Minimum Wage, Minimal Housing

In an interesting study reported in the Washington Post, the National Low Income Housing Coalition looked at fair market rents across the country and calculated how much a worker would have to make per hour to live in a decent one-bedroom apartment.  The study included rent plus utilities, and was based on a 40-hour work week, 52 weeks/year.

They came up with amounts — per county — a person would have to earn per hour to be able to afford a decent one-bedroom apartment in that county.  This is called the “housing wage.”

The minimum wage is currently $7.25/hr.  Not surprisingly, there is no single county in America that has a housing wage under the minimum wage.  (There are a few counties in Arkansas that come close, at around $7.98/hr.)  When you look at these numbers, you can understand why single parents often try to rent one-bedroom places, and give the children the bedroom while they sleep on the couch.  They work minimum wage jobs and just cannot afford a bigger space.

Here in metro Indianapolis, that “housing wage” is about $12/hr., which is fairly attractive.  I’d definitely take a pass on San Francisco, however … you’d have to earn about $30/hr. (i.e., $62,000/yr!) to afford a one-bedroom decent apartment there.

If you’d like to check out the entire article, here’s the link:

http://m.washingtonpost.com/blogs/wonkblog/wp/2014/04/22/what-youd-need-to-make-in-every-county-in-america-to-afford-a-decent-one-bedroom/?tid=pm_business_pop

Every county in American is included, so if you’re planning a move, you may want to read this before you pack your bags!