Littleton Rental Property Choice Involves 6 Key Factors

2-20-rental-300x199Just about any investor on the lookout for a promising Littleton rental property has a number of assumed criteria in mind—often arrived at without bothering to sit down to list them. Remember, this is already a successful individual, usually with ample business experience—and always with the financial acumen to be able to make a substantial investment. For them, creating a written decision matrix really isn’t necessary.

Still, there’s a lot of literature on the web offering opinions on what are the most commonly agreed-upon factors for choosing a rental property. Quite a few “Top 10”s. Going over them, it turns out that some are only slight variations on a single theme, so I’ve boiled them down to a “Top Six.”

The first one is barely ever mentioned. It’s this:

1. Most investors have predetermined the price range that his or her Littleton rental property must fall into, but that can turn out to be a false step. If the goal is to garner the maximum return, it’s possible that some humbly-priced Littleton rental properties can actually turn a greater annual profit—even in absolute dollars—than some higher-end homes (particularly those that suffer extended periods without suitable higher-end tenants). So Number 1 is SET YOUR INVESTMENT GOAL. Cash flow return can be a very different goal than long term property appreciation.

2. LOCATION LOCATION LOCATION. This is the one that combines a half dozen factors, variously listed as Neighborhood, Proximity to Jobs, Amenities (parks, malls, gyms, movie theaters, public transportation hubs, etc.), Crime, Schools, and even Property Taxes. This factor might be chosen for convenience, as when a rental property investor wishes to be able to supervise the property; or for an expectation of value appreciation in a Littleton area which is gaining popularity. As everyone has had heard from time immemorial, L.L.L. is always important!

3. HEALTH OF THE PROPERTY. If the underlying structure and mechanicals have been intelligently designed and well maintained, this one is of no importance. If not, a thorough inspection with top-grade recommendations and cost projections is a must.

4. VACANCY RATES. The number of rental homes listed and the number of vacancies should be considered highly important for determining a promising rental property in Littleton. In newly expanding communities, sometimes you can spot a man parked near an intersection, clicking away on a counter as the autos pass by. He’s measuring traffic to see if the volume is great enough to support a gas station, or market, or mini-mall. The turnover of rental listings—how long rental properties stay vacant from week to week—can provide guidance about the same kind of information.

5. COMPETITIVE MARKET. The average rent amounts advertised for comparable properties can be the decisive factor for whether a rental home investment makes financial sense.

Of course, another factor that can make a big difference is the experience level of your Littleton Realtor®. That’s actually key factor #6—and (I hope) where I come in!

Littleton Rental vs. Purchase Choice Involves Multiple Factors

Littleton Rental vs. Purchase Choice Involves Multiple FactorsWhen your primary residence is one of our Littleton rentals, from time to time you may find yourself pausing, pen hovering over checkbook, thinking, “What if this check were going to buy this place, instead…?”

It’s a nearly unavoidable thought because common wisdom has it that buying a Littleton home usually makes more financial sense than renting it. That sounds sensible simply because at the end of the day (or, more accurately, at the end of a 15- or 30-year mortgage term), ownership means you no longer have to write those checks: you own that Littleton rental. It could be true—but there’s a lot more involved in the purchase-or-rental decision. If you make it a point from time to time to recalculate your situation, should it turn out that you aren’t any better off exiting the rental ranks, writing those checks to the landlord will become a less stressful activity.

The first consideration is location, location, location—but not in the usual sense. The question is how permanently you are likely to stay where you are. What are the odds that your job or family issues will take you away? If it’s likely that you will be moving out of Littleton within five years or less, a rental could well be a better choice. Buying and selling expenses—plus the time and effort involved—are factors that often make it wiser to delay buying until you are situated more permanently.

Then there is the real monthly outlay comparison between the two. Realistic calculations for owning take into account all of the monthly expenses involved. They include property taxes, homeowner or condo fees, insurance, gardening expenses, utility costs, and maintenance costs (they tend to be more than you first estimate). If your Littleton rental check is significantly smaller than the monthly home owning total, your financial ship might float higher if you put the difference into a savings account. You should consider whether your money might be put to better use elsewhere.

That last item points to the overriding issue: whether your current savings are able to support a purchase without incurring too much financial strain. That monthly home ownership calculation did not include the initial cost—the down payment. This part may have become less of a hurdle recently: the Federal Housing Administration has reduced its requirements. In fact, it may be possible to buy a house with an FHA mortgage with as little as a 3.5% down payment…although a higher down payment means a lower mortgage payment and no private mortgage insurance.

The last part of your calculation is one that can be a very positive financial benefit of ownership vs. rental: the mortgage interest tax deduction. Especially for those in higher income tax brackets with hefty mortgages, it can tilt the scales toward ownership.

I’m here to offer help and advice about any Littleton rental and ownership questions—in fact, about any of your real estate questions. I hope you won’t hesitate to give me a call!

What About Renting Your Littleton Home?

1-7-rentYou are a Littleton homeowner, but now your family has simply outgrown the place. You’re almost ready to start hunting for a new home—but hesitate. The fact is, you’re reluctant to give up your present property. It’s been a terrific home, and you suspect it’s only going to grow in value…

If your financial fortunes are on the upswing, you may be wise to consider the viability of renting your Littleton home. After all, using it as a profit-making venture even as you expand your Littleton real estate holdings might just be doable!

Many a successful landlord has begun that way, and find it every bit as rewarding as they’d hoped. Renting your Littleton home sounds like a straightforward proposition in the abstract, for sure: recruit a reliable tenant, then sit back and let any remaining mortgage payments take care of themselves. And it can be a fabulous plan—but like all successful enterprises, is most likely to reward those who prepare. If you are entertaining the prospect of renting your own area home, here are three questions you might ask yourself as you make that decision:

How’s Your Nest Egg?

The transition from residence to rentable home can take a fair amount of cash, even in a well-maintained property. You’ll want to capture top dollar anytime you rent your home, so any hint of potential roof leak or unsafe walkway needs to be eliminated. Realistically, this might be the time to upgrade the kitchen and re-tile the entryway floor. While you pencil in those costs, prudence dictates that you plan for fallow rental periods, too. While it’s possible you might find a suitable tenant as soon as you begin renting your Littleton home, you should budget for some months when that doesn’t happen.

How’s Your People-Meter?

Seasoned landlords all have war stories to tell: the presentable young couple who turned out to be non-stop party hosts for less-than-presentable friends, or the roommates who wound up playing host—or subleasing—to quite a few unauthorized friends. Before you begin renting your home, ask yourself if you’ve looked into exactly how you plan to recruit and screen tenants. You’ll want to highlight the features most likely to draw the best applicants, and advertise in outlets they visit most frequently. And while you’ll want to trust your gut instincts, you’ll need to do a bit of homework to be sure you stay in line with all fair housing laws—even if it all means your house might sit vacant a little longer.

How Much Time Can You Spare?

Late nights; vacations; rainy days—a rental can require attention on its own schedule, which doesn’t always match yours. When you start renting your Littleton home, you need to be able to invest a certain amount of your time. You will be adding the upkeep of another household, and as you already know, that does require diligence. If your spare time is already in short supply, the realistic answer will be to hire a Littleton professional property management company. If adding their fee means a bottom line that’s close to the break-even point, your decision will become one about whether expanding your Littleton real estate holdings (rather than profit-making) will be reward enough.

Whatever your decision, I’m here to help you further all aspects of your Littleton real estate endeavors!

Selecting Good Littleton Tenants While Heeding Housing Rules

12-24-tenant-300x300Every landlord has had the feeling at one time or another that a prospective Littleton tenant may not be a good choice. Call it a hunch, or intuition—but something tells you that this tenant may be trouble down the road. There is more than enough riding on the decision to make you want to pay attention to your instincts, but that’s where being aware of the dos and don’ts of tenant management comes into play. You need to protect your business and property, but in so doing, you also need to heed outside factors.

Chief among those factors is the housing laws and regulations. This is a realm where there’s no shortage of fine print—and since I don’t offer legal advice, we needn’t wade into the technical weeds. But there are some common sense concepts that should shed light on the subject.

One of the key things to remember is that it is frowned upon to arbitrarily accept or reject tenants based on personal preferences or whims. Of course, a landlord does own the property whose use the tenant is asking to borrow, but nevertheless, most people understand why anti-discrimination laws have been created. Some feel they go too far—some, that they don’t go far enough—but at any rate, one fact is indisputable: ignoring the rules can have bad consequences.

One easy-to-follow idea is to prepare your own written standards for accepting prospective Littleton tenants (standards that are certain to not contravene discrimination guidelines). Another that is universally considered good practice is to require every applicant to fill out an application form with the kind of information that state and federal guidelines allow. When everyone is required to complete an application in full, failing to do so becomes grounds for rejection. The kinds of information should be relevant to the landlord’s business needs; and the standards may be high or low, as long as they are evaluated evenly for every applicant. Some common criteria:

  • Prospective tenants should never have been evicted from a property.
  • Prospective tenants should have a credit score above a certain level
  • They should have no record of any judgments having been levied against them for failure to pay utilities.
  • They should have proof of employment and enough income to reliably pay rent (the national average income level is 3 times rent).
  • Prospective tenants should supply references from previous landlords—references that can be verified over the phone.

Of course, none of this means a landlord is required to rent to just anyone who comes by. The key is to define the ideal tenant, make sure that ideal isn’t based on random discriminatory criteria (like race or sex or religion)—and then to adhere to a consistent evaluation process. And the fact is, the potential financial rewards should more than compensate for heeding the basic ground rules.

If you will be taking a look at the inviting opportunities that Littleton income properties currently offer, I’d like to show you some of the best ones. Give me a call!

Lease-Option: a Littleton Rental Investment Owner’s Alternative

12-10-leaseSuppose your Realtor® helped you land a prime Littleton rental investment property—and you’ve been more than content with the result. Your longtime tenant proved to be conscientious and dependable, with resulting passive income that has been quietly building your bank account with very little oversight from you. In short, your Littleton rental investment has made you a very happy landlord.

But now, that smooth sailing may be nearing an end.

Your tenant rings you up with the news. Even though she loves the house, over Thanksgiving dinner her brother convinced her she should become a Littleton homeowner herself. Since she doesn’t have quite enough cash to qualify for a home loan, he told her she should go out and find a rent-to own property. But since she’s content with the house she’s been living in—your rental investment—she wonders if you’d like to discuss switching to a lease-option arrangement?

If you had ever contemplated cashing in on your rental investment, there are several reasons you might want to give it some thought. First, this would spare you the effort and expense of selling. You won’t have to wait for an interested buyer—and you know from experience that your tenant is a solid citizen. Furthermore, whenever you put a rental investment property up for sale, there can be complications if you want to continue to rent it—sometimes a tenant resents having to accommodate strangers tramping through their home. Worse, they may even subtly sabotage showings.

Although there is no single formula for how a lease-option (aka ‘rent-to-own’) agreement is constructed, some basic underpinnings are common. The landlord retains ownership and the tenant pays rent until the option to buy is exercised. Both agree on the sale price and on the specified period of time by which the sale must be completed (usually the time the tenant estimates will be needed to qualify for a mortgage). As compensation for your agreement to refrain from selling the property to anyone else during this option period, the tenant usually pays either an up-front fee or agrees to a higher-than-market rent. Some of that overage may be set aside to be applied to the ultimate purchase. Property maintenance is often made the responsibility of the tenant, along with provisions in case he or she fails to maintain it properly. And a number of other issues may be addressed.

But if the tenant does not exercise the option to buy within the specified timeframe, typically no refund is owed—the option lapses, and since the deed has always remained with the investment property owner, it becomes free to be rented or sold to another party…that is, if all local and state laws have been scrupulously observed—and all other conditions met. In other words, if ever there were an agreement that cried out for a trusted lawyer’s oversight, this is it!

Offering a lease option on your rental investment in Littleton is just one possibility when you’ve landed a choice property (which is where I come in). If you’re considering selling your Littleton investment property and would prefer a more traditional route, call me today!

Wise Littleton Tenants Ask Pertinent Questions before Signing

10-29-landlord-questions-300x63You’re about to close a deal to become a tenant in Littleton. The landlord seems like a straight shooter and the place is a joy: immaculate and welcoming. Now all that’s left is to wait for the landlord’s okay after an evaluation of you as the new Littleton tenant, right?

Well, not quite. Just as the landlord should check financial or job references as part of their due diligence, you have some to perform for your own benefit. It’s up to you to assess the landlord’s system to determine whether this rental arrangement is the good fit you hope it is. Only by asking pertinent questions can you decide whether the landlord’s management style and expectations align with your needs.

1. Do you offer emergency maintenance services?

When a plumbing leak becomes uncontrollable or the heater goes out on a cold winter night, you need maintenance assistance quickly. Find out how quickly your landlord can respond—and how readily he or she answers. An experienced landlord is familiar with the inevitability of maintenance emergencies—and isn’t surprised (or put off) by the question. A great landlord is confident of the system he or she has put in place!

2. What are my maintenance responsibilities?

Lease language can be less than precise about the tenant’s responsibilities—most often when it comes to outdoor areas. A lease might vaguely state that the tenant is responsible for general lawn maintenance. Ask your landlord to pinpoint the specifics, and jot down notes that you can refer to later. Some Littleton landlords might expect mowing the lawn and weeding planted areas; others might expect you to attend to more, such as lawn treatments. Finding out your landlord’s specific expectations will give you a sense of the upkeep requirements for your end. It can’t help but minimize the possibility of any future conflict.

3. Is there a homeowners association?

As a rental tenant, most likely you won’t be responsible for any homeowners association dues. However, you might be subject to its rules and regulations. For example, if the association has strict lawn care requirements and you are responsible for garden maintenance, you should know about those details. If your landlord answers yes to this question, ask for a copy of the association rules.

4. What are my responsibilities before I vacate the property?

It’s not being overly negative to bring up the subject of the end of your Littleton tenancy. When you move out of a rental home, you want to leave the property in good condition so that you are not hit with any charges—or see your security deposit disappear without good reason. Find out if your landlord has any specific requirements, such as professional carpet cleaning or filling the holes in the wall.

5. How do I contact you on nights and weekends?

Problems with your rental unit do not always occur Monday to Friday, 9 to 5. By asking your landlord for contact information during non-business hours, you get a sense of how accessible he or she is. If he or she willingly gives you a cellphone number, you’ve probably found a landlord who will be easy to work with— and easy to track down should problems arise!

My work as a Realtor® lets me help set the stage for Littleton tenants and landlords to create a mutually beneficial relationship. If you are looking to purchase a Littleton income property taking advantage of this fall’s very favorable terms, don’t hesitate to give me a call!

Common Sense Points to Buying a Home over Renting

10-22-4-rentbuy-300x200Despite what just feels like the right answer, buying a home in Englewood can be significantly cheaper than renting one. It’s one of those rare cases where, if you stop and make common sense judgments about the factors at play, the ‘just feels like’ conclusion is the opposite of the one common sense leads you to. Much of the reason has to do with short-term versus long-term considerations (buying a home starts with paying a sizeable down payment, after all); but over the long haul, the amount of cash at stake is so great it’s worth taking a hard look at this fundamental housing choice.

Four leading factors that currently come into play:

Increased Demand Has Made Rentals More Expensive

After the subprime mortgage mess-between 2007 and 2013—something like 6,200,000 people were added to the number of tenants. That boost created enough extra demand for rental units that owners had no trouble increasing monthly rates. It’s a simple case of too little supply chased by too much demand.

Low Interest Rates Make Homes Cheaper in the Long-Run

The current unusually low interest rates makes the tradeoff with renting an easier call. This fall, Englewood home buyers can expect to find 30 year mortgage packages at rates in the low 4% range. If interest rates rise considerably—which just about everyone expects—rental rates can be expected to rise proportionately as landlords cover the added expense. But those who buy a Englewood home lock in the lower interest rate: the ‘price of money!’

Buying a Home Yields Predictable Cash Flow

When you buy a Englewood home, your mortgage comes with a repayment schedule that shows you exactly how much you are required to pay each month until the end of the loan’s term. With a fixed rate mortgage, the monthly payment amount is an iron-clad guarantee of what you will need to budget. With a fixed rate loan, the dollar amount will usually stay the same (or even fall as the mortgage nears its end). Conversely, unless a major change occurs in the rental market, rental prices will continue going up. And the common sense of consumers knows what to expect, reflected in last month’s Mortgage Reports headline:

“Consumers Expect Rents to Rise 2x Faster Than Home Prices in 2015”

Buying is a Long-Term Investment for Stability

In addition to the price rise factor, renters will have to keep paying rent for a lifetime—while homeowners eventually get to stop making mortgage payments. Anyone buying a Englewood home in their 30’s can expect to have paid for it before they reach retirement. That’s very good news, because their living expenses will go down around the same time they start making less money. In contrast, renting just keeps getting more expensive…which can put extra financial pressure on retirees.

If you find yourself on the cusp of renting or buying a home in Englewood, today’s rates should weigh heavily in your decision. If you find that it makes financial sense to buy, the next step is easy: give me a call!