Rentals in Condos Communities?

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If you are looking to add to your portfolio, town homes and condos are a likely target. Most non-single family homes that are newer (1980 or younger) will be in a town home community.

Many investors buy older housing stock, and avoid this issue. Older housing is not subject to HOA’s the way newer housing is. However, the the older stock takes a great deal more upkeep. They also may not attract high quality tenants.

If you go looking for newer attached housing, navigating the issue of where rentals are allowed in these communities can take a lot of time.

Home owner associations must follow guidelines from Fannie Mae and Freddie Mac if they desire to keep up the ability for owners to obtain traditional financing.

Their guidelines include

-No more than 10% can be owned by the same entity

-More than 50% must be owner occupied

-The Homeowners Association is not involved in a lawsuit

-No more than 25% can be commercial space

Communities that meet these guidelines are called ‘Warrantable’, and ones that do not are ‘Non-warrantable’.

Because of these guidelines, the Associations will limit these factors to ensure their owners have access to financing.

It is in the best interest of a Landlord to buy in a community that is warrantable, and meets these guidelines. The property values take a significant nosedive if conventional financing cannot be secured on the homes.

While the rental rate may be the same, the future value is inhibited by the lack of financing options. This may provide a attractive price up front to an investor, but it is important to think about your exit strategy when you buy.

If the community does not have access to traditional financing, there will likely be many more foreclosures and distressed sales. Coupled with the downward pressure from lack of financing options, it keeps appreciation temped down, and may result in depreciation.

For these factors, it is generally better to look for warrantable condos or town homes where the fees are reasonable.

The exception to this is if the investor intends to purchase a large chunk of all the homes in a non-warrantable community. This allows you as the owner to monitor upkeep and help to uphold the integrity of the community for all the owners.

If you are looking to add to your portfolio with a keen eye on value, contact us for local information on communities on both sides of this spectrum.

Naomi Brown 717-819-2825

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3 Reasons to Build Rentals in Central PA

What is the hardest part of being a Landlord? If you have good tenants, the hardest part is staying on top of maintenance and dealing with the calls of a broken toilet late at night.

If you could avoid that headache, buying more rental property would be an easy choice, right? The best solution is to purchase newer rentals, to minimize the cost and frequency of repairs.

Just one problem: finding good newer property to purchase! Most newer single family homes sell at a price that is not cost effective for rentals. Individual townhomes are not an easy solution, as many condos and townhomes restrict rentals. If you do find townhomes that are not restricted in rentals, then the condo/HOA fee can make it less efficient of a rental.

Solution? Find a community and build some rentals yourself. This is easier than you think. If you have a good builder partner, they can handle the work, while the investor handles the capital.

If you are interested in working on a development project, the time to build that stock is now. During the recession, building almost ceased, so now there is pent up demand for new housing stock in rentals and sales. This provides the investor the opportunity to enter a hot market and build future appreciation.

The reasons Central PA makes the ideal place for an multi-family development right now:

  1. Cap rates are higher in smaller markets. Contrast a CAP Rate of 6.36% (10 Year average) in Philadelphia with 6.91% in Lancaster and 7.34% in York County

2. The demand for rentals are strong. With many manufacturing and supply chains       housed in the area, jobs are plentiful which boosts the housing demand.

3. A low inventory of newer units means the developer will be rewarded when time comes to sell with a healthy investor demand.

For a list of options to build rentals in Central PA, and builder partners,  contact us for further details. Call Naomi at 717-819-2825 or email naomibrownhomes@gmail.com

Comparing CAP rates in Central PA

As investors, we are always looking to make a smart purchase. You have heard the saying: ‘The money is made when you buy, not when you sell’.

Weighting the CAP rates on an investment is an art. As the ‘Artist’ for your painting, the decision of what CAP rate to apply takes into account the factors of the area around it. Considering the CAP rates of the different Counties in Central PA is a useful tool to use as you paint your future.

Here is a look at the prevailing economics for Multi-Family Investments.

Dauphin County

-Currently at 8.16% average. The 10 year range is 8.99%.

Cumberland County

-Currently at 7.70% average. The 10 year range is 7.83%.

York County

-Currently at 10.04% average. The 10 year range is 11.04%.

Lancaster County

-Currently at 9.60% average. The 10 Year range is 10.48%.

Interesting to note, both York and Lancaster County are at the lowest point of their 10 year average range. This reflects the rising prices in the market and improving economy.

All counties show a lower than average CAP rate, which means that the deals are harder to find and in higher demand than ever before.

If you are looking to maximize your profit and find better than average returns, call for a consultation. Together we can create a masterpiece for your future.

Naomi Brown 717-819-2825

Hit me: Investments 101

Just starting out as an investor?  Have no fear, it is simple.

Why choose real estate as your investment? Here are a couple reasons:

  • -It is inflation protected, and grows in value as the inflation rate increases.
  • -Once a loan is paid off, you enjoy ongoing cash flow for years to come.
  • -Costs to operate and own the real estate are all deductible.
  • -‘Passive Income’ from investments are subject to less tax.

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So you are ready to go find a property? Here a a few things to know first:

  • -Loans will require a 25-30% down payment, plus closing costs, and funds needed to fix the home up when needed. If you have cash, a discount can be expected.

 

  • -It is a wise idea to have your property in an LLC, so plan ahead. They are easy to create, but it will take a little time.

 

  • -Consider your strategy first: will you manage it yourself? Hire a property manager? If you will manage yourself, being close by makes it much easier.

 

  • -Research what rental rates are, so you know how much you will make on your investment.

 

  • -Learn to figure a CAP rate. This is a simple calculation where the money made after expenses is divided by the sale price. The ratio is your CAP rate. Rates vary in this area from 6-12%.

Make THIS YEAR the time you take action to ensure your future financial freedom.

Call or text with questions and get started making money!

 

When the call comes

“I need your help”

My friend’s words came through the phone with a high level of anxiety.  “My husband just had a stroke, and we need to move. I can’t bring him home because we have all these stairs.”

My heart goes out to them, and I go immediately to help. But now, their lives have been stressed to the breaking point, trying to move while he is recovering from a stroke.

I have encountered this as a Realtor more times than I want to count. Every time, seeing the struggle I wish we could prevent this from happening again.

If you are in a place where you wonder, “Is now a good time for me to make a move, before we are in a stressful situation?”  I can answer yes, please take action now to prevent the anxiety and stress later.

As a Realtor intimately familiar with the market, we can save you many hours of time by matching you with the best options for your needs and budget. Call for a no obligation consultation to make an easy move, before it becomes a call for help.

New Home: Development Options and Choices

This is part 3 of a series: New Home: Part 1, Luxury, Part 2, On Your Own Land,

Part 3, Development options and choices.

Many builders offer homes in developments where they are the exclusive builder.

A new home in a matter of months! Yes it is possible. Here is what you need to know.

  • Pricing: When looking through options, it may seem some builders have much better prices. The real question to ask is: What is included? ‘Pricing strategy’ varies from builder to builder.

Some will have very low ‘Base’ prices, but practically everything is an ‘Upgrade’ which adds $100,000 to the price.

Other builders will offer a higher ‘base price’, but include features that may the home attractive and comfortable even with no ‘upgrades’.

To compare apples to apples, ask them to price the same features in the same size home, so you can compare the bottom line.

Many communities have ‘Lot Premiums’ for the best lots, so make sure you select a lot you like before asking for a price.

  • Incentive: An incentive may be offered to entice you to buy. Sales strategy makes them ‘Limited time offers’ to get you to buy sooner rather than later. These may be reasonable, or it could be a bate and switch. Having a Realtor who knows the builders and their pricing strategy is helpful to ensure you get the best deal possible.

Many builders employ new home salespeople to sit in the model homes and sell. These folks are not Realtors, just salespeople for the builder. Keep this in mind before disclosing information that may hurt your negotiation.

Many Builders tie any incentive to using their preferred title company and lender. This can be fine for a buyer, but compare interest rate and terms with preferred lenders before committing to ensure you are getting a reasonable rate and terms.

  • Locations: When looking for a new home, you may be set on a certain school district or area.

Think about your taxes and resale value before settling on a location. Having a local Realtor pro can ensure you know all your options within your target area. We may be able to suggest options you may not have entertained on your own.

On a new home, taxes have not been established, so make sure you know what property taxes will reasonably be, before committing to a mortgage.

  • Quality: Not every home is created equal!

No one wants to buy an inferior home. Do you know what features to look for in a new home? Many higher standards can be easily achieved by minimal costs. Selecting a builder who gives a higher level of quality will be well worth it in the end.

  • Resale value and stability: Protect your investment!

Make sure the builder you are purchasing from is established and has a history of satisfied customers. Nothing can be worse than buying a new home, only to see the builder slide into bankruptcy or chaos. Financial stability is essential to honor the new home warranty you will receive and provide a quality product.

  • Time: If you are not familiar with the market, you can spend many hours figuring out all the above items. Our new home experts know the market, know the lots, and know how to match you with the best options based on your needs. The best part? It does not cost you anything. As a buyer, the compensation your Realtor receives comes from the seller, but their duty is to represent your interest and serve you.

If you want to get started on the fast track to your new home- contact us today for a free consultation. Save time and fast track to your dream home!

 

New Home: On Your Own Lot

This is part two of a three part series: New Home, what you need to know. Click here for part one.

Want to buy land and build a home? How hard can it be?

If you have looked into this option, you may know there are many details of which you need to be informed. Have no fear, your new home experts are here to help.

Building on your own land does not need to be scary and hairy, but should be approached with an understanding of the details involved. Here are key details to fit your plan.

Understand that the cost is more than House + Land.   In our day of regulation, complying with the details of constructing a new building has become increasingly burdensome.  A builder with experience will understand how to break down these cost for you. They include:

  • Costs for Well and septic if applicable.
  • Costs and availability to connect to public utilities if available
  • The requirements for a ‘Storm Water Mitigation Plan’. Every new home must have a way to control water runoff during a storm.
  • Driveway requirements: if on a hill, state road or other limiting factors, a driveway permit may not be granted, which can shut you down before you get started. The length of driveway may also have a huge impact on your budget.
  • Costs to remove trees, rocks and prepare the site. These can be staggering if you have not prepared for them.
  • Heat source: is natural gas available? If not, will you bury a propane tank or use a high efficiency heat pump?

Given all these questions, costs and requirements how do you proceed?

Do not buy land without doing your homework! Many regrets have formed from this mistake.

Our new construction experts can help you through the process to arrive at your dream home on your own land.

Not every builder will build on your own property. You will want and need a builder who builds many homes ‘On your own lot’ and is intimately familiar with costs and requirements to do so.

Working with many of the local builders, we can match you with a builder who shares your vision and can make it a reality WITHIN your budget and time frame.

Call us for a free no-obligation consultation  to start the process of taking your dream home from a dream to a reality!