Presidio Real Estate Blog
Are you tired of losing out on lost rent when a tenant vacates your property ? Now their is a solution. Tenant Default Coverage offered by AON. This is an excellent solution for the small investor. The marketplace has been in dire need of a product like this for a long time. It is great to see AON step up and take the lead.
With the risk for tenant rent default harder to predict in today’s economy, I am pleased to inform you about Aon Rent Protect. This new insurance plan is designed especially for residential investment property landlords to recoup lost incomes in the event of tenant rent defaults.Aon Rent Protect: Cash flow protection beyond the security depositAon Rent Protect offers replacement rental income so your cash flow is not interrupted while a new tenant is being secured. The plan also provides assistance with legal expenses, such as attorney fees to help you through the eviction process.For specific coverage details, eligibility, rates, and access to Aon Rent Protect’s online application, please use this web link: AON RENT PROTECT PROGRAM.
With the release of this new product, there’s no reason to worry about a financial nightmare from tenant rent defaults anymore.
I have mixed feelings about the proposed mortgage settlement announced recently. One key element I think will help, is the option for Homeowners who do not qualify for current refinance programs, sponsored by Fannie Mae/Freddie Mac the ability to refinance their loans even if they owe more than the property is worth. This option will help stimulate some economic activity. If borrowers are allowed to refinance, they will save anywhere from $100 to $1000 per month based on today’s interest rates. Some of this money undoubtably will make it’s way back into the economy.
The details have not been officially announced yet so it is hard to say who will qualify for help and how much. What we can say, the banks that agreed to this settlement will have 3 years to get this done.
Key Components on a National Level
1. $17 Billion to borrowers who intend to stay in their property and have the ability to repay the loan. $10.2 Billion of this must be allocated to reduce the principal balance of loan for borrowers who are in default or are in risk of default. Another 5.2 Billion will go to homeowver assistance. This includes short sales, deferring payments for homeowners who are unemployed, waving defieciency balances and other options.
2. Refinancing Underwater Homes- If you are current on your payments but can’t refinance because of negative equity there will be a $3 billion pool of funds available to help. To qualify you must have a loan to value ratio in excess of 100% and a current interest rate that exceeds 5.25%.
Analysis- What about homeowners who have a LTV of 90% ? If their loan isn’t owned by Fannie Mae or Freddie Mac they don’t have any options to refinance. I don’t think it is equitable to penalize someone who may have put down 20-30-40%, they may not have negative equity since they were financially responsible. However they won’t be able to refinance to lower rates ? This hardly makes sense.
What is in it for California Homeowners ?
On February 9, Attorney General Kamala D. Harris announced that California secured up to $18 billion for its distressed homeowners as part of a $25 billion national multistate settlement with the country’s five largest loan servicers. More than $12 billion will be used to offer short sales or write down loans over the next three years for about 250,000 underwater homeowners in California, according to the attorney general. Relief will go to areas hardest hit by the foreclosure crisis within the first year of the settlement.
Although the actual settlement has not yet been released, the attorney general has stated that other financial benefits for California include $849 million for refinancing 28,000 borrowers who are underwater but current on their payments; $279 million restitution for 140,000 homeowners who were foreclosed upon between 2008 and 2011; $1.1 billion for unemployed homeowners, transitional assistance, and repairing blight; $3.5 billion to extinguish unpaid loans that remain after foreclosure for 32,000 homeowners; and $430 million to the state attorney general’s office for costs and fees. As part of a California guarantee, if the lenders fail to reduce principal balances by a minimum of $12 billion, they will be required to pay fines up to $800 million to the state.
The loans involved in this settlement are those owned or serviced by Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial Inc. The settlement releases the five named lenders from certain federal and state claims pertaining to robo-signing and other foreclosure misconduct by the lenders. It does not affect any individual’s rights to bring legal action against a lender. It also does not apply to the majority of mortgage loans, which are those owned by Fannie Mae or Freddie Mac.
This mortgage settlement does not change any homeowner’s existing financial relationship with a settling lender. It does not relieve homeowners from any obligation. It does not require a settling lender to stop any foreclosure.1
Download a Copy of – National Mortgage Settlement Executive Summary
For More Information Visit the Following Websites
Source : California Association Of Realtors
Whether or not you are a home buyer looking for a new home or a tenant looking to rent a property you should understand what exactly an HOA is and how it will affect your rights. You should inspect the association documents carefully. Most Real Estate Brokers should be able to help you review the financials, by-laws, and restrictions that an HOA imposes on a property.
What is a Homeowners Association (HOA )?
In simple terms a HOA is a non-profit corporation comprised of all the property owners in a development(s). The owners typically higher a property management company to manage the association. The HOA elects a board of directors who works with the management company. The developer of the project typically creates the association documents, by-laws, and CC& R’s before the project is built and will manage and run the association until the development is a certain percent complete. The Board is the voice of the association and will work to follow the association governing documents. Often I hear people talk of the association in an adversarial way. Based on my experience, it seems a lot of property owners have an, us against them mentality. Where in reality all the homeowners are part of the association and can and should have a voice. In most cases people do not have the time to get involved they leave it up to the board to make all the decisions. Individuals on the board are elected volunteers and typically have other full time jobs. They will vote on key items and conduct the business of the HOA, typically acting on the advice of the management company. The key here is the management company. The board has a duty to its members to make the sure the management company is doing its job. HOA’s govern various types of developments and are not limited to condo and townhome developments.
What Does The HOA Pay For?
Typically the association provides some insurance coverage, maintenance of a property’s exterior, green areas, pool and community areas and more. It really depends on the type of community and amenities. Single Family Home Associations (PUD’s) may not provide any exterior maintenance but only maintaining the community common areas. A common area is a space that is shared by all owners. Some associations are very complex and it is important for homebuyers to understand these complexities when purchasing a property in a development with an HOA. It is not something that should be ignored. How well an association is run can and will affect the value of the property.
HOA dues can be as high as $400 per month is some communities. If you are considering buying a property with an HOA consider this. With today’s interest rates around 4% for 30 year fixed rate loan it costs about $477 per month for every $100,000 you borrow. If your HOA dues are $350 per month you could spend $70,0000 more to purchase a property without an HOA. This means the property in the community with an HOA needs to be priced about $50,000 lower than a property without an HOA assuming the HOA is paying for the Hazard Insurance on the property.
What would you do if a family member asked you to co-sign on a mortgage ? They need a little help qualifying and have always wanted to buy a home. They have a good jobs and the future is bright, they just need a little help to get over the hump. Sure I will help you you reply. It is important to understand the implications of your generosity.
Most loans today are underwritten to Fannie Mae/Freddie Mac guidelines. If you co-sign on a mortgage, this debt will show up on your credit report. Why does this matter? A key figure in the mortgage lending world is the Debt to Income Ratio (DTI), calculated by totaling all monthly debts/ gross monthly income. In the past, underwriting guidelines treated this scenario differently. If you were a co-signer, but someone else made the payments and they could show proof of this, this payment would be omitted in your DTI calculation. Most lenders today will add this payment regardless of who makes the payment. The rationale behind this, if one party did not make the payment, you as a co-signer would be obligated to make the payment. I have seen multiple scenarios where potential borrowers have been unable to refinance or purchase a property because their DTI ratio exceeds the 50% limit imposed by most lenders.
On another note most lenders will allow you to finance up to at least 4 properties before they will exclude you from conventional financing. You can also be on the loan, but not on title to the property and vice versa in many cases. Sometimes this is a good strategy to use. If you run into financial difficulties it doesn’t ruin both parties credit. Holding title via the DEED in California is more about how property is eventually transferred. This can be critical as I have seen many people run into costly probate issues simple because they did not fill out the vesting information correctly. I hope this helps.
Download a Guide to Understanding Vesting Click Here: Vesting_Descriptions_CA_LT1
As 2011 comes to a close it is a good time to start thinking about the litlle things that may help you as an investment property owner save a few extra tax dollars. If you own rental property and have the ability to deduct some of the expenses related to it. Here are a few things to think about. Please consult with your tax advisor on any tax related issues. We think owning rental property in 2012 is a great idea.
Rental Property Repairs
Is your property in need of some repairs that you have been putting off ? Get them done before the end of the year. Replace a water heater, install new windows, fix those nagging little problems. Repair expenses can help offset any rental income you may have. You can also purchase goods and services needed for the rental property business, and pay the bills early. Repairs and Improvements are different. Improvements are depreciated over the life of the property while repairs are treated as an expense.
Claim Your Automobile Expenses
Automobile expenses paid exclusively for your rental business can be fully deductible. You can select either the actual expenses method or take the standard mileage deduction. If you made 10 trips to the property and each trip was 100 miles, you can expense 1000 miles at .55 per mile.
Make an Extra Mortgage Payment
The additional interest you pay will help reduce your income. If you have an operating loss and are able to deduct this, you may save on the amount of income tax you pay on monies earned elsewhere. You may also be able to pay your property tax bill that is due in Feb 2012 early.
Rental Property Asset Depreciation Expense
What are your property’s short life assets ? They can be depreciated faster. Assets like air conditioners, refrigerator, carpets, clothes dryer, etc can be depreciated over a five year life while fences, patio, sidewalk, etc can be depreciated over 15 years. By separating assets and depreciating them separately, deductions are taken sooner.
Energy Saving Home Improvements
Replace old appliances, windows etc to qualify for tax rebates. To find out what applies to your property visit the Energy Star Website. Tax rebates that were offered in 2010 were changed in 2011. However there are some great rebates to take advantage of. Check the list of items here.
If you have any Tax related questions please consult our preferred tax advisors, Smith & Wooten CPA at (805) 585-3800 or visit their website