Back to School Investment Opportunities

As the summer comes to an end and back to school season is in full swing, shopping is on the minds of students and parents everywhere.  For many this means purchasing school supplies, uniforms and backpacks; however, parents of college-bound students might be thinking of a more substantial purchase – a rental property.  Purchasing rental properties in college towns has become a greater consideration for parents whose children are heading off on their own.

Parents are opting to purchase condos, townhomes or smaller homes for their children to live in during their college years.  A portion of the mortgage is paid for by roommates, and upon graduation they can choose to retain this investment by renting to other college students or sell the home sometimes earning a notable return.

“I had one client who bought an investment condo in Arlington, VA. She wanted an investment property and she also wanted a nice place at a reasonable cost for her daughter who was attending Georgetown University,” says Nancy Alert, a local agent. “Her daughter got a roommate and the roommate paid half of the mortgage. After her daughter graduated from Georgetown University the property was sold at a substantial gain.”

Investing in college towns has also become a growing option for new alumni interested in purchasing their first home, as well as seasoned investors looking to purchase in localities where the demand for rentals is high.  There is a strong, stable market for those who would like to target the college and graduate student renters.

“Local markets with universities or colleges can be an attractive option for many local real estate investors,” says Move, Inc., Chief Executive Officer, Steve Berkowitz. “Housing demand in college towns is generally high and vacancy rates are usually low. Combine the supply and demand ratio with rising admissions and the five percent rise in rental rates expected by the end of the year, and rental property in college towns can be a smart option for the right investor.”

According to a national survey conducted by Move, Inc., real estate investors are expected to outnumber traditional home buyers in local markets by three to one within the next two years.  Additionally, 56.5 percent of those buyers intend to put their investments to work as rental properties.

Recently Move, Inc., also released a list of the ten college towns for those investors exploring their purchasing options.  This list is based on the leading universities featured in US News Rankings and Reviews list of best colleges in 2011.

Washington DC made it into the list of the featured top five.  The top five college towns featured by Move, Inc. in this 2011 / 2012 back to school investors review include:

Boston, MA

Nashville, TN

Chicago, IL

Washington, D.C

Houston, TX

As always, consult with an experienced real estate professional that can help you to identify and explore options that will help you meet your purchasing goals.

An Ironic Twist

For Sale By Owner’ founder sells his home… using a real estate broker

By David Gardner

Colby Sambrotto, who founded a website for DIY-real estate, just sold his Chelsea apartment for $2.15million

The founder of a website helping people to sell their own homes has found a buyer for his own apartment – with the help of a traditional real estate broker.

ForSaleByOwner.com creator Colby Sambrotto even paid the standard 6% commission after selling his two-bedroom New York condo for $2.15 million.

According to the Wall Street Journal, Mr Sambrotto spent six months trying to sell the apartment in trendy Chelsea through online listings and classified adverts.

But the DIY home selling guru eventually decided to turn the sale over to a professional.

Not only did broker Jesse Buckler set the price $150,000 higher than the  original asking price, he went on to lure the elusive buyer Mr Sambrotto’s self-help methods had failed to attract.

The Journal said the 2,000-square-foot apartment at The Lion’s Head building near Sixth Avenue is now under contract.

The apartment in question: Colby Sambrotto, founder of ‘For Sale by Owner’ sold his Lion’s Head Building home via a real estate broker

Practice what you preach? Mr Sambrotto couldn’t sell his house by himself – despite making a fortune by advocating for the method

Mr Buckler claimed the owner wasn’t asking enough for the apartment and was consequently attracting the right buyers.

Broker Jesse Buckler encouraged Mr Sambrotto to increase the asking price of the apartment as a sales strategy

‘At first he wouldn’t let me increase the price,’ said Mr. Buckler. ‘I told him I know what I am doing—the market is picking up.’

Mr Sambrotto bought the apartment for $2 million in 2007, a year after he sold his ForSaleByOwner.com website at the height of the real estate boom.

He told the Journal that he still believed in owner sales and discounted commissions, but added: ‘The apartment market in Manhattan was tightly controlled by agents.’

‘So many buyers don’t even bother to do a search online.’

Undeterred, he is now planning to launch a new sale by owner website, called USRealty.com.

Fans of the DIY method point to past successes, even in broker-controlled Manhattan.

Edgar Bronfman Jr., chief executive of the Warner Music Group, sold an East 64th Street town house four years ago for $50 million without paying any commission.

Last month, a 69th Street town house was sold by its owner for $48 million.

Aggressive Down Payment Requirements Being Considered for Mortgages

As measures are being taken to correct and stabilize the distressed housing market, Federal regulators are proposing a new qualified residential mortgage (QRM) rule that would greatly impact the qualifying power of prospective home buyers.  The new rule proposes to impose a minimum 20 percent down payment, rigid debt-to-income ratio requirements and strict credit standards in an effort to restrict mortgage loans to “qualified” homebuyers.  The National Association of Realtors (NAR) has asserted that this rule would harm the economy and deny millions of Americans access to secure, low-cost mortgages.

This proposed definition of qualified residential mortgages (QRM) would impose higher interest rates and fees on mortgages that are consider non-QRM.  NAR states that this will lead to making home ownership more expensive or unattainable for many prospective home owners.  For this reason, NAR has urged regulators to withdraw the proposed risk retention rule and consider alternative options.  NAR submitted a comment letter to regulators offering a host of suggestions.  Since non-QRM loans generally consist of higher mortgage rates and fees, NAR recommends that regulators define QRM as including secure mortgages, with sound underwriting and complete documentation of income and assets, and require risk retention only for mortgages with risky product features such as teaser rates and balloon payments, or with weak underwriting.

“As the leading advocate for home ownership, NAR firmly believes Congress intended to create a broad QRM exemption—strong evidence shows that responsible lending standards and ensuring a borrower’s ability to repay have the greatest impact on reducing lender risk,” said NAR President Ron Phipps. “The proposed rule should be withdrawn, revised and republished for public comment. If not, then millions of hard-working, creditworthy consumers will not be able to achieve their dreams of owning a home.”

NAR opposes the proposed 20 percent minimum down payment rule, asserting that it ignores evidence that responsible lending standards and assuring that a borrower is qualified to repay the loan have the most decisive impact on reducing lender risk.  As a comparison they reference the low foreclosure rates among Federal Housing Administration and Veterans Administration loans, which offer the lowest down payment requirements and maintain relatively low default rates, to further reiterate that safe lending can be established through sound underwriting and documentation rather than high down payments.

If the proposed rule were to be approved, NAR estimates that it would take more than a decade for a family with a median income to save enough money to meet the 20 percent down payment requirement.  Even at a 10 percent down payment requirement, it would take a family more than eight years to save enough money.  This could severely impact the buying power of minority and first-time home buyers.

Overall there is widespread opposition to the regulators’ proposed QRM rule.  Banking, housing and consumer advocacy groups have joined forces to create the “Coalition for Sensible Housing Policy”, which includes 46 organizations and is focused on drawing attention to the proposed regulation.

If you feel strongly that this new rule could negatively impact the economy, please write a letter to your Congressional representative.

Washington, D.C. Housing Market Continues to be a Stand Out

As the health of the overall U.S. economy is still at question, some sectors of the housing market are starting to show optimistic signs of recovery and the Washington DC housing market is one of them.  The Washington, D.C., metro area, shown in many house price indices as one of the few markets where values are growing, is continuing its upward and onward trend, according to one forward looking benchmark.

Numbers show that people are buying homes.  Some 5,500 new purchase contracts were signed in May, a 7% increase from the 5,170 deals that were inked in April and a whopping 43% jump from May 2010, according to figures compiled by the Metropolitan Regional Information System, the D.C. area’s multiple listing service.

The contracts signed in May are the most since May 2005.

In another positive sign, the region’s median sales price edged higher for the third consecutive month, according to the RBI Pending Sales Index produced by Real Estate Intelligence Business, a MRIS subsidiary. The median for May was $353,600, up 6% from $334,000 in April and 4% from 341,750 in the previous May.

Also, the average number of days on the market in May were the fewest in seven months. And in another key benchmark measure, properties also were absorbed at a quicker rate.

On average, it took 68 days from the listing date to the day a sale closed. That’s 10 days quicker than in April.  At the same time, the monthly absorption rate – the time it would take to sell all active listings at the current sales pace – slipped to 2.8 months from 3 months in April and 4.1 months a year earlier.

The RBI is a two-year moving window index that covers Washington, D.C., Montgomery County, Prince George’s County, Alexandria City, Arlington County, Fairfax County, Fairfax City, and Falls Church City.

Simple Tips to Prepare Your Home For Sale

Preparing your home for sale can seem overwhelming.  Ideally, you will want to prepare your home so it appealing to as many types of buyers as possible, and also so it is move-in ready for a new owner.  When a buyer is looking at pre-owned homes they are generally hoping it will look and feel “new”, and it is has the potential to be personalized to suit their tastes.  If a buyer walks into a home that is cluttered, looks lived in and boldly contrasts their personal style, chances are they will scratch that home off their list.  Properly preparing your home can provide a great return on your time, as most likely it will increase its value and shorten the time it takes for your home to sell.

Review these few simple steps to ensuring that your home is ready to hit the market.

1.       Get a home inspection

A home inspection is a simple way to feel confident there are no hidden issues that might discourage a potential buyer.  If the home inspection reveals issues, you should immediately make repairs before putting your home on the market.  Some states do require that you disclose the results of an inspection, but this isn’t a concern if you’ve taken steps to remedy any problems.  On average an inspector will cost between $250 to $400, but it is a wise investment if it speeds up the sale of your home.

2.      Acquire repair or replacement estimates

If the home inspection does reveal repairs that you cannot afford, hold on to the estimate for prospective buyers.  Disclosing these costs will give a buyer the opportunity to properly determine whether they can afford the home along with the costs of repairs.  Providing this information will work in your favor, as you will avoid any post-contract issues.  It is also important that you provide warranties, guarantees, user manuals for your furnace, washer and dryer, dishwasher, and any other large appliances that will remain in the house.

3.      Perform minor repairs

There are many repairs that are not costly, but worth the time.  Take the time to fix minor issues – such as sticky doors, torn screens, aged caulk, dripping faucets, touchup paint where needed.  Although these may seem like small issues, a buyer may interpret them as signs that the house has not been properly maintained.  Remember you want your house to “feel” brand new.

4.      Get rid of clutter

When selling your house, a complete purge is ideal.  Clutter can make a home feel disorganized, unclean and small.  To give your home a spacious, tidy feel, start by clearing your kitchen counters of just about everything.  Clean out closets by removing all unused or rarely used items such as out of season clothing or old toys.  You may want to invest in closet organizers that will maximize space and make your closets feel even larger. Consider putting most of your furniture in storage, especially large pieces such as entertainment centers and large televisions.  Remove family photos, knick-knacks, collections, and wall hangings to give your home a more neutral feel and depersonalize it.

5.      Paint

Painting serves many positive purposes.  You will want your home to feel as neutral as possible, so the buyer can easily envision bringing their own style and décor.  You may love the bold, bright colors that highlight the walls of your home, but a buyer could have a difficult time figuring out how to work with such a color scheme.  Make it easier for more buyers to visualize this as their home, by painting the walls with neutral colors that might compliment anyone’s taste.  If your walls are already fairly neutral, it is always a good idea to give them a fresh coat of paint, again making the home feel clean.  Ideally, you could hire a professional painter; however, if you don’t want to spend the money, this is definitely something you can handle on your own.

6.      Thoroughly clean your home

If you can afford it, is well worth the investment to hire a cleaning service to thoroughly clean your home.  A clean house gives the impression that a home is well cared for and feels new.  This will go a long way in making a buyer feel comfortable in your home.  If you do not want to pay for a cleaning service, be sure to perform a few critical tasks yourself – wash windows and air out all of the rooms, clean carpets, wash drapery to eliminate any lingering odors from cooking, smoke, or pets, wash light fixtures and baseboards, mop floors, and thoroughly clean your refrigerator, stove and microwave.  Don’t forget small details such as cleaning fingerprints from light switch plates and the knobs on cabinets and doors.  Also it is very important to make sure your bathrooms are spic and span.

Taking the time to perform these simple tasks will go a long way in decreasing the stress of selling your home.  You will find that your home appeals to more buyers; in turn, your home could potentially sell faster than you would have ever imagined.  Good luck!