Tuesday, March 27, 2007

Tiny bubbles

I'm sure you have heard about the rumble in the "sub-prime" lending market. The effect of this upset has been to cut off a number of potential buyers with 100% financing. There are still "nothing down" loans available but, unlike the wild and crazy days, the borrowers have to prove that they have enough income to pay the loan every month, and that the income they claim to have is really there. One of my preferred lenders sent me an e-mail pointing out that the very low quality borrowers, people who basically inflated or even lied about their income, accounted for 12% of the home loans last year but they are also turning out to make up 77% of the people defaulting on their mortgages. Its a garbage in = garbage out equation. There is no monolithic bubble, but instead a wide range of personal little bubbles of people who get over-extended with the encouragement sometimes of loan brokers and lenders who just want to get their origination fees from the bank and get out.
That's why I have a select group of ethical lenders I work with. I am not primarily interested in the sales hype of "I can get your client a loan", but rather in the professionals who will counsel my client about their best loan options given their financial situation.

Monday, March 19, 2007

First time landlord?

Investment is an important aspect of real estate that sometimes stands alone or can be combined with home ownership. The idea of having a multi-unit building to help with the payments is a common goal and one that can work well in the right circumstances. But be sure you know what you are getting in to. It's important to have reliable resources, especially when entering a new venture.

One very important recommendation is that you contact the Rental Housing Association of Northern Alameda County. For a fairly small membership fee you will have access to lots of resources including the necessary forms and disclosures. This is particlarly important to avoid running afoul of local rent control ordinances. Tenants have rights that must be respected. A good tenant is an important asset to you if you have rental property. But remember, this is a business relationship. Treat it that way by knowing the relative rights and responsibilities of both parties. Failing to maintain your property and good relations with your tenants is like not changing your oil or letting your tires go bald. But it's worse because it seriously affects other people and their day to day living.

To get my income property clients off to a good start I give them their first year's membership as a closing gift from me. Treating this like a business will help you just in case things go wrong. Their web site is http://www.rhanac.org/ . I have a client who joined so that she could rent out her little condo while in Europe. It has been a big help to her.

Friday, March 16, 2007

Color me sold!

A client of mine needs to sell her studio condo. She is disabled with limited resources and the place shows a lot of the usual wear and tear of every day living. She had only a few hundred dollars to spend and wanted to know whether to make some repairs or paint the interior. Here is how I advised her:

Despite the fact that paint is one of the easiest things to change, it always makes an immediate impression. I have been working with a buyer for several weeks trying to figure out what he likes and what he does not. Color, I realized is very important to him even though he never mentioned it. The house has one strike against it if he does not like the color when he drives up and another when he enters the house and does not like the interior color. Even when I find a house that's well suited to most of his needs, he just can't seem to get past the pastels.

A word about painting. Choose neutral colors, a little on the warm side. Don't just get a frosty white. Prep the walls by dusting, washing, and patching all the little holes. Use plastic tarps and proper masking tape to keep the paint off the places where you don't want it. It's easier to keep it off than to get it off. And now here is the good part: ask for help and have some fun. Tell all your friends that you need a couple of hours of their time to get this done. Ask them to help with any of the tasks, including moving the furniture away from the walls, even choosing the color if they have good taste in those matters. Call it a painting party. There are probably lots of articles on the net about "how to paint your home". Approach this systematically and with some extra hands.

Paint, clean, de-clutter, and wash the windows are the best cheap fixes anyone can do to make a home more presentable. After painting, you can address the other issues. You can just disclose them or make selective repairs if you still have some money.

Monday, March 5, 2007

Fence sitter: buy, sell, or rent?

Fence sitter Fairmount near Harrison.