When I was looking to buy my first home, I was of course super excited to pick something out that I loved. To live in my own home and have a proper investment instead of throwing money away each month on rent.
But a funny thing happened. I said no to myself and what I wanted. In a way.
Nashville at that time was blowing up. Tourism was rising and the prices on real estate were rising at an unusually high rate!
So, I realized I had a chance to do something different. Did I really want to just buy a home I could live in, or did I want to take advantage of the moment and buy something that would make me money?
So that’s why I decided to buy a home that could be a short term rental property. If it didn’t go well, and it didn’t make money I could just move in!
It was one of the best decisions I’ve ever made! I ended up making a ton of profit on the home and I was able to buy another home just a year later.
Here are 3 reasons you should buy your own vacation rental home!
1. It’s your chance to make money
Purchasing a home for yourself is the biggest investment you will ever make. So why not make it count? Buying a home for you means a big monthly payment you make with a small amount going to the principal and a large amount going to interest.
It is better than renting, but it doesn’t net you a whole lot. Whereas, purchasing a vacation rental property in a booming tourist destination could actually make you money.
So, each month on top of the mortgage payment being covered by other people, meaning you are purchasing that home for free, you also should be making a profit.
Passive income for yourself, that you can use to save up for another home! Which leads me to point #2.
2. You can buy second house
If you buy a house for yourself, that’s it. It’s done and you won’t have the loan-to-debt ratio to purchase another one.
BUT, if you first purchase a rental property, in two tax return years you can show income from the property that can be used to get you another loan approval. A regular rental home that isn’t AirBnb would require even less tax returns.
If the vacation rental property is bringing in twice the mortgage amount each month, then when you look to get a loan to purchase another home it is almost like that debt doesn’t exist.
Because the home is bringing in extra income, it cancels out the debt, leaving you room in your debt-to-income ratio to get approved for another mortgage loan.
But if you had just purchased a home for yourself that wouldn’t be an option.
3. It creates a passive income business
The best kind of business you could have for yourself is one that doesn’t require a lot of work. One that creates passive income, meaning the income just keeps coming without a lot of activity from you!
As long as you have a good cleaning crew in place and someone to work on maintenance, there isn’t a lot of heavy lifting on a vacation rental home once furnish it and get it listed.
So, it’s the perfect business to create that still allows you to work a full-time job, or run another business!
If you don’t have enough saved up yet for the down payment, keep saving, I promise it will be worth it!
Cara Berkeley is a blogger, investment property owner, and full-time marketing executive. She has learned that thinking outside the box can make all the difference and shares her tips and tricks on smart money management on her blog at www.pennypolly.com. Find new ways to save money, make money and have fun doing it!
Either way, whether you’re going to buy a Fort Collins or Loveland home or you’re refinancing or even thinking of either, you’re going to face the decision about not just which loan program is best but also which rate works better for you. One step further? When you’ve made those decisions, the final one is when to lock that rate in. Your loan officer won’t make that decision for you, or at least shouldn’t. Your loan officer can give suggestions and tell you where the market has been, where it is and where it might be. But your loan officer can only go too far. The ultimate decision will and should always be yours.
Loan officers, good ones, might close 20-30-40 loans per month, some even more. There’s literally not enough time for a loan officer to inform each and every applicant about rates on a daily basis. Even if the loan officer could, there are so many variables when quoting rates from credit scores to loan amounts to equity to occupancy…it’s a Herculean task. Again, the timing for a rate lock is up to you. Should you lock in now while you know exactly where rates are or should you exercise a little patience and wait to see where rates will move over the next few days or weeks?
That timetable of course must adhere to your sales contract. You don’t really have much of an option when buying a home as you must close on the specified date. Lenders need some time to prepare closing papers as well as get your final numbers in front of you three days before you sign. Refinancing on the other hand provides a little more flexibility. If you’re refinancing because of a balloon note coming due, again, time isn’t on your side. But if you’re wanting to get a lower rate or switch loan terms, the decision is entirely up to you.
The prudent decision would be to lock in a rate now if the numbers make sense. Loan officers will tell you that it takes a long time to move downward on the heels of negative economic data or Fed intervention. But it can take just a sneeze by some obscure economic report or offhand comment from a Fed Board Governor to make rates jump. The prudent approach might be something like asking yourself that if you made the decision to lock, you made the wrong one. If rates stay where they are or start moving back up, you decided well. If on the other hand if you locked in your rate and in the future rates continued to move down, you can always consider refinancing. Okay, which of these two would you rather be on the wrong end?
That’s where patience comes into play. But with interest rates, patience really means trying to time the markets. Even the best of economic wizards can’t do that. What’s that old saying, “Two economists can come up with a different projection using the very same data?” Trying to time the markets by being glued to business sites, hoping to glean some tidbit that provides some insight on where rates are headed, the odds are against you.
Prudence or patience? I’ll take prudence. But again, the final decision is in your hands.
Message me if your thinking about buying a Fort Collins or Loveland home at m.me/EdPowersRealEstate
Ed Powers Real Estate 970-690-3113 ed@EdPowersRealEstate.com www.EdPowersRealEstate.com
Once upon a time, less than two or three decades ago, buying a run-down Fort Collins or Loveland home, revamping the building, and reselling the property was a very lucrative business for tens of thousands of individuals across the United States. As more of the less-desirable homes have been purchased and flipped in the past 20 to 30 years, the market has become more restricted, and investors are often forced to buy homes that require significant work, rather than the easy face-lift properties. Here are a few ways home flippers can still make money on their investments.
Buy on a Budget
Any builder can give you an estimate of what it will cost to make the necessary renovations to a property. But they are only estimating what they can see. Within the budget, you must include the marketing costs, repair expenses, standing costs while you repair it, insurance prices, and selling commissions. On top of that, don’t forget to add a buffer for the unseen and unforeseeable, such as discovering mold or bringing wires and pipes up to standard building code.
Buying Without Borrowing
For those investors that can purchase a property without the extra pressure that a mortgage payment can bring, success is much easier. Although your hard-money lender may present you with a short-term loan, it can be a costly partnership – often more than 10 percent. Investors can also find themselves in a bind when a property tear-out discovers costly needed repairs, and an acquisition and repair loan is required. The extra $30,000 to $100,000 in repairs can easily put the investor into the red.
Buying the Right Property
When you purchase a home that is run down, and you expect to put $3,000 into the renovations with just two weeks turn-around time, it probably won’t happen that way. The problem is you never know what the foundation is hiding, what is behind the walls, and if there is hidden water damage.
Buying at the Right Price
One of the long-time experts in the field of real estate, Steven Taylor landlord was asked, “What are the most important factors that need to be assessed when becoming a real estate investor?” After a thoughtful pause, he replied, “There are several, but I would say access to deals is critical and access to capital of course, but understanding your market and recognizing opportunities are factors that create successful real estate investors.”
Buying in a Good Neighborhood
It’s no secret that homes in some neighborhoods are highly prized and can sell for thousands of dollars over asking price. Sometimes there may even be a bidding war in a selected neighborhood that brings in $25,000 to $50,000 over market price. If you are lucky enough to locate a home in one of those prized neighborhoods, your chances of having a successful flip are high. Knowing the area is safe, schools are excellent, and values are rising can mean the home is a great deal and will be an easy flip.
Buying When You Have a Great Contractor
It may sound trite, but your contractor can make or break your project. Finding a professional that has a crew of his or her own, takes responsibility for crew reliability, and brings in a project when saying it will be done, is priceless. You will not find many of them in your lifetime, so if you know one, treat them like gold – because they are valuable.
Getting the money you put into the home back out of it quickly is always the main goal of a flipper. Doing so with an eye on quality can give you a reputation that excels. So, do a quality job, get it done quickly, and sell it for a reasonable price. That is the secret to flipping homes and making money – in a nutshell.
Message me if your thinking about selling or buying a Fort Collins or Loveland home at m.me/EdPowersRealEstate
Ed Powers Real Estate 970-690-3113 ed@EdPowersRealEstate.com www.EdPowersRealEstate.com
A detailed property survey is essential to help you find out critical details about a piece of property. Many home buyers of Fort Collins and Loveland homes overlook this step or skip it altogether to save some money. But let’s face it, is a survey necessary when buying a home?
Is a Survey Necessary When Buying a Home – Reasons to Have one Done
In this article, we’ll consider whether a survey is necessary when buying a home. we’ll look at some of the benefits of getting a property survey before purchasing property. Something you should not do when buying a house, is skip out on a step that can potentially cost you more money later on.
It’s important to note that the protection and benefits a property survey offers a home buyer far outweigh the cost. As such, property surveys are critical to the home buying process. They provide a detailed description of the property, the lot size and the boundaries. If you’re planning to buy a plot of land or home, a home buying tip is to have property survey done, as it offers a wide range of benefits.
To Ensure You’re Paying for The Right Property
Buying a home is a big financial move, which is why you’ve likely been preparing to buy a house for some time. You want to be sure that the property described in the contract is the same one you’re paying for. A survey helps you to determine whether you’re purchasing the right home. Both the land and property are mapped out and assessed to eliminate any discrepancies.
Eliminate Disputes Over Boundary Lines and Corners
If you own property, it’s important to have accurate information about the boundaries and demarcations. This information is critical, especially before paving your driveway, add an extra room or build a fence. In cases where disputes may arise regarding boundary lines, a survey can help to provide details of the exact property dimensions.
Zoning Classification
Zoning classifications outline whether the property is zoned for residential or light industrial use. Most property owners are usually aware of their zoning classification, but you may not be aware of the restrictions. As such, you can count on a certified survey for details on any specific restrictions on how to use the property and ensure compliance with zoning requirements.
Whether You Can Subdivide
If you have future plans to subdivide the property, it’s important to familiarize yourself with the regulations first. It’s not uncommon for owners to invest in a property and later subdivide it to be sold for a profit or for family. Different jurisdictions have their own set of rules when it comes to subdividing restrictions. By investing in a property survey, you’ll be able to determine the existence of any of these regulations and their potential to affect your dividing plans.
Report on Underground Cables and Drains
Without a detailed property report, you probably won’t have a clue what’s underneath your property. Knowing what cables, wires, drains, telephone lines, gas and electricity are under your property is crucial for various reasons. For instance, you need to know the location of underground utilities before beginning any construction.
Bottom Line
As you start researching and prepare for home ownership, it’s important to make all boxes are checked before the house is officially yours. So, is a survey necessary when buying a house? The short answer is yes. The biggest benefit of a property survey is that it protects your investment. Ask your realtor about how to get a survey done. Without a qualified and extensive examination of your property, you could easily run into disputes and costly issues down the road.
Message me if your thinking about buying a Fort Collins or Loveland home at m.me/EdPowersRealEstate
Ed Powers Real Estate 970-690-3113 ed@EdPowersRealEstate.com www.EdPowersRealEstate.com
The new restrictions on short-term accommodations apply through May 31 and include:
A guest occupancy limit of 50 percent of units within multiple-unit lodging facilities.
Single-unit accommodations, such as vacation rental homes and bed and breakfast inns, must limit occupancy to no more than 8 individuals.
State and local lodging regulations, when more strict, must be followed.
No common amenities or areas can be accessible to guests except for check-in and check-out areas.
Restrictions may be extended or amended in response to the pandemic.
The US short term rental industry has been under constant attack in the past few years as more and more state, county, and city authorities have been applying different measures to control its spread. However, the Coronavirus pandemic is posing a challenge of a magnitude that Airbnb-style rentals have not faced ever before. As a result, many real estate investors and other experts are wondering if the current pandemic will constitute the end of the vacation rental industry. Or will Airbnb hosts be able to survive this temporary slowdown and come back as profitable and successful as before?
The Immediate Impact of COVID-19 on the Short Term Rentals Industry
Guests started cancelling their reservations on Airbnb and other home-sharing platforms as early as February, as soon as the first infected cases were reported in the US. By March, the impact of the pandemic was already sizeable. Naturally, the major cities with the highest concentration of Coronavirus infections have been most affected.
According to Airbnb data from Mashvisor, a real estate data analytics company, the occupancy rate for short term rentals dropped significantly in the vast majority of large cities. For example, the Airbnb occupancy rate in New York declined from 70.7% in March 2019 to 49.3% in March 2020. Similarly, over the same period Seattle experienced a drop from 74.3% to 54.0%. The decrease in Airbnb rental activities has been comparable in other top markets: 33.1 percentage points in Atlanta, 29.6 percentage points in Dallas, 29.3 percentage points in Boston, 28.5 percentage points in Miami, 25.8 percentage points in Austin, 25.3 percentage points in Chicago, and 23.5 percentage points in Los Angeles.
These negative trends are further accelerating in April as the situation gets worse and worse within the US. From short term rental hosts’ perspective, these considerable drops in Airbnb occupancy rate translate into lost income. Thus, many are starting to wonder how individual real estate investors will be able to cope with the crisis and keep their rental business. This, in turn, poses a question about the general sustainability of the vacation rental industry and whether it will be able to survive the Coronavirus pandemic.
Industry and Government Support for Airbnb Hosts
Despite the pandemic and the impending economic recession, there is some good news for investors in short term rental properties. By early April, the home-sharing platform had announced a $260 million relief package for Airbnb hosts and Superhosts. As much as $250 million will go towards helping hosts cover the costs associated with cancellations of reservations with a check-in date between 14 March and 31 May. This will definitely soften the negative impact which owners of vacation rentals across the nation are feeling. This move is of particular importance for full-time investors who rely heavily or even exceptionally on the rental income generated by their properties rented out on Airbnb.
The Airbnb relief package is not the only financial help which hosts will receive during the crisis. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) also provides support to Airbnb hosts who are losing income as a result of the pandemic. Under the provisions of the Act, depending on their particular situation, many Airbnb hosts can qualify for small business grants, small business loans, and unemployment assistance.
Yet another way in which some Airbnb hosts in a particularly detrimental situation might benefit from the CARES Act include the mortgage forbearance and foreclosure moratorium clauses. These apply to homeowners who have taken federally backed mortgage loans. The mortgage forbearance policy means that borrowers are allowed to reduce their monthly mortgage payments or even pause them for a limited amount of time. The foreclosure moratorium provision, meanwhile, prevents borrowers from foreclosing on properties because lenders failed to make the mortgage payments on time.
Government backed mortgage loans are not the only ones which benefit from such clauses. Many state governments have adopted similar measures to support both homeowners and real estate investors in precarious positions.
What Hosts Can Do
The above-listed policies and stimulus packages are definitely helping the short term rental industry survive the Coronavirus pandemic. However, the most significant indicator that vacation rentals will not simply go through the crisis but come out ready to continue flourishing is the steadfastness and resourcefulness of hosts themselves.
After all, operating in a challenging environment is something which vacation rental owners are used to. As mentioned at the beginning of this article, the last few years witnessed tightening short term rental regulations and laws in many US major cities as well as smaller towns. For example, non-owned occupied short term rentals are no longer legal in major tourist destinations such as Los Angeles, New York City, Miami, Las Vegas, San Francisco, Boston, Chicago, San Diego, and many others. This means that hosts are accustomed to being flexible and creative in order to retain their rental business and rental income without breaking any laws and rules.
Flexibility, creativity, and adaptivity are once again the qualities which will help investors in Airbnb rentals go through the crisis created by the Coronavirus outbreak.
For instance, many hosts have been quick to cater to the needs of a newly emerging group of hosts. Doctors and other medical personnel have been relocating to the areas that are most affected by the pandemic to help out their colleagues there. Many of them are willing to stay in short term rentals at the discounted rates which hosts are offering to them. It is a win-win situation for everyone as medical staff don’t have to share hotels with potentially infected people, and investors are able to regain some of their lost rental income.
Additionally, vacation rentals in small, secluded towns are attracting the elderly and other vulnerable groups who are looking for a safe haven amid the pandemic. Similarly, numerous people who are now working remotely choose to leave the big cities and relocate temporarily to more isolated, smaller towns. Airbnb hosts can employ different marketing techniques to attract this new segment of guests in order to bring back some of the demand and end up with a good rate of return even during these tough times.
The current COVID-19 pandemic is definitely challenging for short term rental hosts. Nevertheless, their willingness to adapt in order to retain their business is the sure sign that the Coronavirus will not defeat the Airbnb rental industry. To the contrary, as soon as things begin to come back to normal, Airbnb will once again emerge as the optimal rental strategy in the majority of US markets.
Daniela Andreevska is Marketing Director at Mashvisor, a real estate analytics tool which helps real estate investors quickly find traditional and Airbnb investment properties. A research process that’s usually 3 months now can take 15 minutes. We provide all the real estate information in easy to understand visualizations.
Message me if your thinking about buying a Fort Collins or Loveland home at m.me/EdPowersRealEstate
Ed Powers Real Estate 970-690-3113 ed@EdPowersRealEstate.com www.EdPowersRealEstate.com
