Do you realize that you might be prevented from renting your investment home? Prohibiting property owners from leasing their properties is a trend that is growing increasingly popular with some developers and many Homeowners’ Associations (HOA).
It’s rare that you can buy a new home in a development that does have a HOA. As a homeowner you are bound by the HOA restrictions found in the Covenants, Conditions and Restrictions (CC&Rs).
The CC&Rs regulate your use of your property, restricting everything from the color of the house, window coverings, holiday decorations, sports courts, pets, to landscaping and etc.
One of the most recent restrictions that builders are including in their CC&Rs is a restriction that prohibits the homeowner from leasing their property. Builders have a provision in their sales contracts stating that the home will be a primary or secondary residence and that the purchaser will occupy the home. The owner is strictly prohibited from renting the home.
Why this trend? The idea is to limit the number of rentals in a subdivision because lenders believe that a high number of rentals in a community affects the value of the property and can erode the security of their loans.
Existing HOAs like the idea of no rentals and there seems to be a growing movement to amend their CC&Rs to add the “no leasing” provision.
Investors Beware!
The new homebuyer should be made aware of the no leasing restriction when they buy. But what about the investor who buys a home a few years later? If the investor fails to read and understand the CC&Rs he or she may end up owning a property that they cannot rent.
You can’t count on the home seller alerting you to the restriction. They may be the third or fourth owner of the home and not even be aware of the restriction.
Oh sure, you could buy the home, rent it and hope you are not discovered violating the CC&Rs.
However, anyone who has ever dealt with a HOA soon discovers that there are always a few other homeowners with an eagle eye out for the slightest infraction of the CC&Rs. They delight in notifying the HOA management company,,, and the management company is bound to investigate and enforce the rules. For you the investor is no appeal… and there is no recourse.
This is a strong reminder that every investor should have a clause in every purchase contract that says the purchase agreement is contingent upon you receiving, reading and approving a copy of the CC&Rs.
This is a potential ulcer-creating situation that no investor can afford to ignore.
Mark Walters is a third generation real estate investor and he shares his experience from his Web site at: http://www.cashflowinstitute.com
A down-turned market is not the time to quit marketing yourself and your listings. It’s also not the time to spend your days latched to your office’s front desk, complaining to the receptionists and listing coordinators how bad business is lately. Truly successful REALTORS® are always successful, even in a bad real estate market. The key to their success is learning how to drive qualified buyers to their listings.
Savvy REALTORS® know that GlobalPropertyDirectory.com is the way to find new buyers for your old listings. Have you been sitting on a palace fit for a queen? Then you should be marketing to queens looking for palaces. Do you really think your local newspaper’s real estate section taps in to the palace-seeking queen market? GlobalPropertyDirectory.com markets your listings through a cutting-edge technology platform with a global audience.
What happens when there just aren’t any buyers out there for your listings? First, stop lying to yourself. There are always buyers out there for your listings. If a listing is priced right, staged to wow buyers during a showing, and you’ve done your part, there will be a buyer for your listing. Have you missed something? Have you failed to think of potential relocation buyers who are searching the Internet desperately for a house you already have in your inventory? Logon to GlobalPropertyDirectory.com and post your listings today! It’s FREE! It’s easy! It works!
Looking at Homes and Estates and Planned Unit Developments for 2005 in Carpinteria versus 2004 it was a combination of the best of times and the not so good times. The real questions are, was 2004 a particularly good year and 2005 a not so great year, or what? Well let’s look at some of the numbers and see.
In 2004 71 single family dwellings changed hands. Compare that to 2005 when only 55 properties moved. This translates to a decrease of about -24% in the number of properties sold.
So what about the List price of these properties? In 2004 the Median List price which is the one right in the middle of those 71 properties went on the market for $949,000. In 2005 the Median List price was $1,275,000 for a 34% increase in one year. An even more amazing number was the increase in Average List price. For 2004 the Average price was $1,852,268 but in 2005 it went to $2,479,555 also a 34% increase. Now that’s a pretty high average!!!
Okay, the list prices were way up in 2005 but as someone once said, “how’d ya’ come out?” The only thing that truly matters is what the houses eventually sold for. Well the Median Sold price for 2004 was $922,500 and in 2005 it went to $1,278,500 for a 38% increase even above the number of the Median List price. In the words of Mel Allen “How About That?” The average price also increased greatly with 2004 coming in at $1,764,522 and 2005 showing up at $2,374,601 for another 34% increase.
So for the first part of our questions about the best of times and the not so good times the answer is that there were fewer properties that sold in 2005 but the selling price of those properties that did sell increased substantially.
Digging deeper into the numbers we find a few more, uh’ differences. In 2004 82 properties came on the market but in 2005 95 came on. Ummmm, so more came on the market in 2005, but fewer sold. So what happened to all of those properties that didn’t sell?
Well, in ‘05 14 got withdrawn as opposed to 7 for ‘04. 13 Cancelled in ‘05 vs. 6 for ‘04, and 14 expired in ‘05 as opposed to 19 in ‘04. Basically at this time in the Carpinteria Real Estate market we’ve got an increased expectation on the part of sellers that their house is going to sell for a lot of money. And when it doesn’t they take their ball and go home.
Alright that’s Homes and Estates and PUDs. What happened in the Condo market? Just like single family homes the number of sales in the Condo market was down in 2005. In ‘04 there were 94 properties that sold and in ‘05 there were 67. That translates to a -29% decrease in homes that sold, an even greater number than single family dwellings. This was interesting because in the rest of the Santa Barbara area Condo sales from ‘04 to ‘05 were pretty much flat.
So what about the list prices? In 2004 the Median List price was $549,000, but in 2005 it went to $659,000 for a 20% increase. And the Average List price went from $625,660 to $673,018 for a 7.5% increase.
Okay, so the List Price went up. What about the sales price? In 2004 the Median Sales price was $549,000 and in 2005 it was $658,500 for a 20% increase. Not a bad return on your investment. And the Average Sales price went from $616,751 in 2004 to $665,848 in 2004 for an 8% increase.
Again, let’s look a little deeper at the numbers. 118 Condos came on the market in Carpinteria in ‘05 vs. only 99 for ‘04. 19 got withdraw in ‘05 as opposed to 8 in ‘04. 17 cancelled in ‘05 vs. 9 in ‘04 and 15 expired in ‘05 vs. 8 in ‘04.
So just like single family homes the number of sales was down ‘05 vs.’04 but the sales price was up about 20%. I guess the real question is what does that mean for the future? Well, all the economic blocks are still in a line. We’ve got a pretty low inventory of homes to sell, but there are a substantial number of people looking to get into the market. Combine that will still very low interest rates and things look pretty good. If you’ve got a piece of paradise I’d hold on to it, if you’re looking to buy in the Carpinteria area I’d recommend sooner rather than later.
Well that’s about it for Carpinteria Real Estate…
Gary Woods is a Real Estate Broker in Santa Barbara California and is the Computer Trainer for the Santa Barbara Association of Realtors. You can hear him on Radio 1290 AM Mondays from 9-10AM in Santa Barbara
Online brokers negotiate financing deals with several lenders. This may mean that you can find a better deal through their site than by working with the lender. Not all mortgage brokers guarantee the lowest refinancing rates, so you should also compare brokers.
Understanding Mortgage Brokers
Mortgage brokers specialize in finding financing. They work with many lenders to offer you several financing choices. They partner with traditional banks as well as thrift institutions, credit unions, and mortgage companies. They can even connect you with subprime lenders if you have poor credit.
Not all brokers call themselves “mortgage brokers.” But any site that offers bids from more than one lending company is a broker. Make sure you know if you are dealing with a broker, since this will affect your closing costs.
Brokers collect a fee for each loan they refer to a lender. Sometimes you will pay this fee as part of the closing costs, other times it will come out of the mortgage company’s fees. Even with the additional expense of a fee, brokers can usually find you better deals than if you shop alone.
Working With Broker Sites
Online broker sites enable you to make quick comparisons from basic financial information that you provide. Usually, you will need a general idea of your credit score, loan amount, and down payment. The quote you receive gives you a rough idea of rates and closing costs.
Take the time to check with a couple of broker sites to find the best deal. Each broker works with different lenders and negotiates unique deals. Spending a few extra minutes analyzing quotes can save you thousands in interest costs.
Taking The Next Step
Once you have narrowed your choices down for refinancing, request a detailed quote from the lender. This will require the financing company to look at your credit score. You don’t want to request too many detailed quotes, since your credit score is temporarily lowered every time a lender makes a credit inquiry.
The detailed quotes will list rate along with terms, such as required points. Even with this accurate quote, it can change hourly based on market indexes and bank rates. If you find a good deal, it is best to act on it quickly to lock in rates.
View our recommended mortgage refi lenders.
A new survey reveals that in the last five years, the equity in the California real estate market has increased by more than one trillion dollars. A trillion dollars is a large number to ponder, but put in concrete terms, it can be represented by a stack of one hundred dollar bills that is six hundred thirty one miles high! This astronomical increase in California home values isn’t all that unique, however. Prices on the East Coast, particularly in the Washington, D.C. area, are increasing just as rapidly. There are areas on both coasts where home prices have tripled during the last five years. This, along with the dramatic increase in interest-only mortgages among homebuyers, suggests that home prices may be peaking.
In California, 35% of all mortgages written are interest-only mortgages. In Washington, the figure is a whopping 48%. With an interest-only mortgage, the homeowner pays only the interest on the home loan for the first few years of mortgage payments. After the agreed-upon period of time ends, the amount of the payment is adjusted to include a portion of the principal. This typically increases the amount of the payment by about one-third. Interest-only mortgages have gained in popularity as home prices have increased, mostly because buyers otherwise would not be able to afford to buy homes. The problem with these mortgages is that for the first few years of payments, the buyers aren’t actually paying anything for the home itself!
What these statistics tell us is that in California, more than one third of buyers cannot afford a mortgage that allows them to actually contribute to paying for the home when they move in, and in Washington, the figure is nearly one half. Experts disagree on exactly when the hot real estate market will collapse, but it would seem to the casual observer that when half of all buyers can’t actually afford to make payments on the home they’ve just purchased, the collapse may be near.
What does this mean for potential buyers? Anyone considering purchasing a home in the red-hot markets in California or on the East Coast should carefully consider whether or not they can actually afford to purchase a home. Qualifying for a loan isn’t good enough if you can’t actually make payments that will reduce your principal. If may be wiser to buy in a cheaper outlying area and commute. Others may wish to rent in the short term in hopes that the prices will soon decline. It is always difficult to predict which way the real estate market will go, but a market where one-third to one-half of buyers can’t actually reduce their principal should set off an alarm for anyone considering a real estate purchase.
©Copyright 2005 by Retro Marketing.
Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a Website devoted to debt consolidation information and HomeEquityHelp.net, a site devoted to information on home equity loans.
