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Good morning, Memphis! Welcome to the Real Estate Mortgage Shoppe program with me, Jo Garner Mortgage Loan Officer with Evolve Bank and Trust. Today we have seated around the coffee table, Kevin Perk, investor with Kevron Properties and blogger with www.smarterlandlording.com
Kevin, tell our listeners a little about yourself and what you do for real estate professionals and for people getting started in real estate.
Holly Swogger is at the coffee table with us this morning. Holly is president of our local esteemed real estate investment club, Memphis Investors Group. Holly and her husband own a franchise for Homevestors. Holly tell us a little more about what you do
Our topic today? “Living The Good Life By Landlording and Lowering Your Mortgage Debt.” Grab your cup of coffee and join us around the coffee table by dialing (901) 535 WREC. That number again is (901) 535-9732.
What’s good for the economy is not necessarily good for the mortgage rates. Happily for people buying houses right now and refinancing, there are a number of factors keeping rates down right now, but the good economic news this week is not one of them.
Here’s the highlights this week:
1. The Fed’s Beige Book report shows the economy expanded slightly in July and part of August.
2. The Fed reported, “Retail activity, including auto sales, had increased since the last Beige Book report.”
3. Recent improvements in the housing market showed home pending sales index rose from 99.3 in June to a measurement of 101.7 in July–the highest level since April 2010.
Two factors driving the mortgage rates DOWN are the European crisis and our Federal Reserve continuing to buy bonds that are used for mortgage-backed securities.
The European debt crisis still lingers and our Federal Reserve announced they are going to continue to buy the bonds used for mortgage backed-securities–SO our mortgage rates eased down a little yesterday afternoon.
The 30-year fixed rate mortgage fell to 3.8% from 3.91%. The 15 year fixed rate mortgage fell to 3.03 from 3.12 percent. The 5/1 adjustable rate mortgage fell to 2.8 percent from 2.9 percent.
The mortgage rates going down are keeping most people complacent, but don’t procrastinate if you need to buy a house or refinance one. While the rates are going down, the fees are being added onto the Freddie Mac and Fannie Mae loans by our government keep INCREASING every time you turn around. Earlier they added about .1 points to every loan closed by Fannie and Freddie. On November 1st of this year they plan to add another 10 basis points per loan. Not to mention the regulations keep getting tighter.
Word to the Wise: If you are thinking about refinancing your home or buying one–do it now before the tighter regulations prevent you from doing it at all. My very capable assistant, Susan Belew and I would like very much to work with you on your financing. Give us a call directly OFF the air at 901 482 0354. That number again is (901) 482 0354.
The real estate mortgage products in most demand this week are :
#1. The Home Affordable Refinance Program or HARP. That is the government program that does not require an appraisal. If you meet the guidelines for this program, you can refinance to loan rates in the 2’s and 3’s whether you are underwater with your financing or not. On the HARP program you can roll your costs into the loan.
#2 The FHA Streamline refinance without an appraisal. This is for people refinancing an existing FHA loan to another one. Costs cannot be rolled in on this one.
#3. First-time homebuyer loans with down payment assistance.
#4. People buying homes on a regular conventional loan with no required mortgage insurance.
We have been talking about how to save money by lowering your interest on an existing loan or purchasing houses on these same low rates. Any time you can save some money by lowering your interest costs or shortening the term on a loan, you stuffed quite a bit of extra money in our pocket. But when you buy real estate and lease it out, you can build a more permanent wealth that keeps paying you back year after year.
Today our topic is “Living The Good Life By Lowering Your Mortgage Rate and By Landlording.” Kevin and Holly , you guys have had YEARS of experience landlording and building your wealth. Please share with our listeners some of your landlording wisdom.
Questions for Holly and Kevin to answer:
1. The Tennessee Landlord-Tenant laws are very specific on what landlords can and cannot do to collect rent. What are some specific items you need to include in your lease to avoid lengthy court battles?
2. What are the laws on security deposits and how they are to be handled?
3. What are some tips on good tenant screening?
Questions for Jo Garner to answer:
1. For those landlords who are refinancing their rental houses to lower their mortgage rates, what kind of money can you save them?
A. Going back to the 30 year loan from a 30 yr loan or from a 30 yr loan to a 20 yr loan. In most cases, depending on the loan amount and how much has been paid down from the original balance and the rate differential, investment property owners today save from a small $100/mo to $500 to $600 per month. That is giving yourself a substantial raise just by refinancing your house. (And the HARP program with no appraisal works for rental properties too.)
B. Shortening the term but keeping their payments the same will save 10’s of thousands. A number of property owners are currently refinancing from 30 and 20 year loans to 15 and 10 yr terms because they can still keep the payments relatively low due to the ultra low mortgage rates and yet get the properties paid off by the time they retire.
2. What are some financing programs you use for people buying investment property?
A. The 203K FHA loan for investors if the property needs repairs totaling over $5000.
B. Standard conventional loan to purchase a single-family home if you own 4 or less financed properties, you will only need about 20% down payment. If you own 5 to 10 financed properties you will need to put down 25%. 10 financed properties is the absolute limit for Fannie and Freddie unless you are going to finance a primary residence.
Real Estate Tip Of The Week (Kevin and Holly) How to use the “cash for keys” exit strategy for problem tenants.
Talk Shoppe seminar Wednesday September 5th 9a to 10a at the Better Business Bureau. The topic is “Is Your Business Hitting Your Target Market?” with Jason Sullivan of Launch Memphis. For more information about these free seminars, go to www.TalkShoppe.BIZ.
Next week’s Real Estate Mortgage Shoppe program. Tom King, our certified Shelby County tax appeal expert, will be talking with you about how to lower your property taxes right here on the Real Estate Mortgage Shoppe program next Saturday 9a to 10a on News Radio AM 600.
Below are tips covered by Kevin Perk and Holly Swogger on being an effective landlord:
Radio Show – 9/1/2012 – Landlording 101
A lot of people today are becoming landlords, many by default because they cannot sell their properties. Today we want to go over some basics and try to answer any of your questions about being a landlord.
First thing you need is a written lease. Don’t take anyone’s word, write everything down. Make sure everything is spelled out. Put the rent amount in bold. State clearly when rent is due and late fees. Note the security deposit. State the term of the lease such as yearly, month-to-month etc.
Here in Shelby County you need a clause that states the tenant waives notice of default. Basically, if you do not have that clause and your tenant does not pay, you have to serve notice to pay before you can evict. They already know they have not paid right!
What if they do not pay?
Cash for keys – Explain this process. Used if someone gets in a bind, say loses a job, etc.
Evict through the courts. Explain process. Tennessee Landlord Tenant Act – TCA 66-28-101 ect. – Applies to all counties over 66,000 people – Learn it and follow it. What if someone just up and leaves in the middle of the night, what do you do? – TCA Process.
Want to try to avoid non-paying tenants by screening them.
You need to set up written criteria for prospective tenants. There are 7 protected classes -race, color, religion, national origin, sex, disability, and familial status. You cannot use these criteria to rent or not rent a property. Anything else is fair game.
Minimum credit score, no bankruptcies, no evictions, no big dogs, no lawyers, no motorcycles. Write your criteria down and rank applicants. There are federal testers out there.
What do you have to provide?
A habitable building, with water, sewer, electricity and working heat. You need to keep those things working at a minimum. Other than that it is up to you and your market. Some markets will require appliances. Others tenants bring their own, even their own air conditioners.
You need to keep on top of your properties, even if you hire a management company. You need to go by and take a look every once in a while. We like to try and get by every quarter or so. Believe it or not tenants will not call about problems. They do not want to rock the boat. So you need to go and find those little problems before they become big ones.
MIG this month will be on September 13 at the Memphis Hilton at Poplar and I-240. we will be talking with two of Memphis best apartment realtors Jeff Moore and Steve Woodyard about the Memphis Apartment and Commercial market. What are they seeing? Is there improvement in the real estate market and how to go about buying them.
We also be hosting some early bird sessions on screening tenants and title insurance. It all starts at 6 PM and first time visitors are free. Saturday 9/15 deals tour -Join two of our wholesalers as they take you to actual properties on the market. Learn about estimating values, repairs and comps.
Jo Garner, Mortgage Loan Officer Evolve Bank and Trust (901) 482 0354 www.MoneyShoppe.NET
Kevin Perk, investor with Kevron Properties and blogger on www.smarterlandlording.com
Holly Swogger, president of Memphis Investors Group and owner of the franchise Homevestors. (901) 258-3486
If you are looking for tips for landlording and managing rental property especially in Memphis and Shelby county, check out this podcast from 9-1-2012. Jo Garner offers up-to-date real estate financing news and how to take advantage of purchase and refinancing opportunities.