Estero

Buying a new home and renting out the old one

I picked up this article from an email that was sent to me, and thought it was very applicable to the Naples, Estero, Bonita Springs, and Fort Myers Markets.  It talks about what a lot of people are doing right now…Buying a new property and renting out the old one.  It even goes into the property management element.  Enjoy…

Buying a new home and renting out the old one

Plus, reverse mortgages and why they need to be FHA-approved

By Lew Sichelman Market Watch

Realty Q&A is a weekly column in which Lew Sichelman, a nationally syndicated columnist who has been covering the housing market for more than 35 years, responds to readers’ questions on real estate.

WASHINGTON (MarketWatch) — Question: I’m having trouble understanding the conventional wisdom that says you shouldn’t turn your existing home into a rental property when you buy a new house. The “experts” say if you want a rental, you should sell your house and buy the one next door. I understand the benefits of tax-free capital gains, but what about transaction costs and the ability to lock in a primary residence mortgage rate before you rent it?

My situation is that I have a house worth $260,000 and we owe $140,000 but would take about $50,000 of equity out for part of our down payment on the new home. The house is in a “hip” neighborhood and we could rent out for $1,500 to $1,700 and probably see appreciation. So the property would be cash-flow positive. Wouldn’t it make sense to keep our house as a rental? — Matt.

Answer: Sounds like a plan to me. The scenario you describe makes absolute sense. But the only way you can pull $50,000 out of your present abode is to refinance. And to do that, you’ll have to certify that you will occupy the place. So don’t let anyone in on your plan, especially your loan officer. And don’t buy your next house until the you have the money from the refi in hand.

By the way, I haven’t heard what you call “conventional wisdom” about selling your house and buying the one next door. But I assume that is someone’s answer to escaping places in which the owner owes more to the lender than the joint is worth. The tactic would be to buy the house next door at its sharply deflated value, and then send in the keys with a nice “see ya later” letter to the lender who holds the mortgage on your current house. The ploy will kill your credit, but at least you’ll be in your new, cheaper digs next door before that occurs.

I suppose it also would work in your case. Since you are not upside down on your loan and the house continues to appreciate in value, you could sell at a profit, use some of the proceeds to buy a new house and the rest to buy the place across the street. But if your house is appreciating, you’ve got to figure the one you have your eyes on for a rental is appreciating, too. So where’s the bargain, especially, as you rightfully point out, when you consider transaction costs, taxes and a somewhat higher mortgage rate on the new rental?

Question: Thank you so much for your response. Two different reverse-mortgage lenders told us that they would not be able to process an HECM because of the “condo” issue. If you have the name of a person or business that will help us with this, I would most appreciate the referral. —A.A.

Answer: I spoke with the folks at Generation Mortgage, another major home-equity conversion mortgage lender, and I think I know what the problem may be. The condominium in question probably isn’t on the Federal Housing Administration’s approved list. “Before an application can be taken for a reverse mortgage on a condominium project, a borrower must first find out if the project is on FHA’s approved list,” a Generation spokesperson reminded me. “A borrower can find out this information by contacting an-FHA approved lender or asking their homeowners association.”

If the project is on the list, I was assured there should be no problem. But even if it’s not, my source said, lenders “have approval processing options [that] they can exercise to gain FHA approval.”

Feedback

I like your column and read it regularly. However, you are wrong on the percentage that an agent charges for property management for rental property (residential). In your recent article “When renting out a home is the best option,” you made the following statement in answer to a question: “Hopefully, the house will throw off enough income, even after the agent’s 15% to 17% commission, to cover the mortgage payment. I’ve owned rental properties for 20 years, and have paid agents 10% to 15% to manage my property. You may want to make a comment to this effect to correct this error because the figures are way out of wack. —K.L.

Response: You’re right, sorta. I just threw those percentages out there because no one has any hard numbers on the typical commission. In truth, rental fees are all over the ballpark, and are usually whatever the traffic will bear.

Typically, ma and pa landlords pay agents a fee equal to one month’s rent to sign a tenant to a one-year lease. However, in many resort areas, rental agents ask for — and receive —something on the order of 17% to 20% or more if they have to watch the place when it is empty or have it cleaned and perform other management chores.

Estero Walmart, Here we go…

Villagio at Estero

Villagio is a gated community on 70 acres, with 10 acres of natural preserve and 12 acres of lakes and waterways. The Town Center offers a state-of-the-art fitness center, clubhouse, cafe, movie theater, business center, and sports bar. Outdoor amenities include tennis courts, two resort style swimming pools, spa, bocce ball courts, paved nature trails, and more! Less than 20 minutes to the SWFL International airport, Miromar Outlets, Gulfcoast Town Center, and Coconut Point Mall.

Click Here to View Properties for Sale in Villagio

Mediterranean architecture and details such as beautiful piazzas, bridges and walkways create a wonderful ambiance reminescent of a quaint Mediterranean village. Villagio is a 70 acre village that presents residents with the most amazing of amenities in a private setting. A town center with cafe, cinema, sports bar and state of the art cardio and fitness center are just some of the exclusive amenities. 514 coach homes with attached garages make up the offering of home choices in this Estero community and residents are certain to enjoy the scenic natural setting offering 10 acres of nature preserves and 12 acres of shimmering lakes and waterways.

I have lived in Villagio since the first units got certificates of occupancy back in 2004.  I have sold many properties in here, and currently have listings at this time.  In case you didn’t know, I also manage over 250 units, approximately 35 of them are in Villagio.  I don’t plan on going anywhere.  Actually, my in-laws just bought a place in here, so if I was going to move it would be now…lol.  Just kidding, I love you Sue and Jerry.

Villagio is located on three oaks parkway in Estero , FL just north of the new post office and library.

Market Report 2010, Bonita Springs/Estero

OK…..I want everyone to know, I am not very good at making graphs.  I have been working in this for a while, wanting to get the best data in chart form, post it to my blog, and have everyone amazed at my skills…  This is not going as planned.  BUT.  I have a back up plan while I keep working to get a chart, graph, statistical data to you.  I will just copy and paste the data given to me by my local board of realtors.  Now, you can look all over the web and find fancy charts and graphs, but for the time being, all I can give you is the statistical data, and explain to you what it means. 

Maybe this is the best case scenario for everyone.  When you look at a graph it can be misleading, but by looking at the number…well…they don’t lie. 

Now please see below…This info is from sunshinemls.  Note that the info provided are the

 2010 Home Sales in Bonita Springs and Estero thru Nov. 

Price Class	2 Beds or less	3 Beds	4 Beds	5 Beds	6 Beds or more	Total Units	Active / Active w/Contract
$0 – $49,999	102	10	2	0	0	114	43
$50,000 – $99,999	186	66	8	0	0	260	233
$100,000 – $149,999	156	122	13	0	0	291	272
$150,000 – $199,999	190	174	11	1	0	376	386
$200,000 – $249,999	100	127	31	10	1	269	268
$250,000 – $299,999	66	124	13	5	0	208	248
$300,000 – $399,999	45	139	21	9	0	214	312
$400,000 – $499,999	28	91	15	2	1	137	204
$500,000 – $599,999	7	57	9	0	0	73	141
$600,000 – $699,999	5	32	11	1	0	49	92
$700,000 – $799,999	1	22	15	1	0	39	58
$800,000 – $899,999	0	17	2	0	0	19	37
$900,000 – $999,999	0	12	8	0	0	20	55
$1,000,000 – $1,999,999	2	28	31	4	1	66	143
$2,000,000 – $2,999,999	0	1	2	4	0	7	34
$3,000,000 – $3,999,999	0	0	1	0	0	1	13
$4,000,000 – $4,999,999	0	1	2	0	0	3	7
$5,000,000 – $5,999,999	0	0	0	0	0	0	1
$6,000,000 – $6,999,999	0	0	0	0	0	0	0
$7,000,000 – $7,999,999	0	0	0	0	0	0	0
$8,000,000 – $8,999,999	0	0	0	0	0	0	0
$9,000,000 – $9,999,999	0	0	0	0	0	0	0
$10,000,000 or more	0	0	0	0	0	0	0
Totals	888	1,023	195	37	3	2,146	2,547
Average Price	$167,494	$331,246	$616,342	$663,843	$775,000	$295,761

DOM # Sold 1-30 Days 175 31-60 Days 324 61-90 Days 341 91-120 Days 250 121 Days or More 1,056

Type of Financing # Sold Assumption 0 Cash 1,489 Conventional 521 FHA 72 Other 36 Owner 15 VA 13

• As you can see, under $200k is selling the best… 

• More info to follow soon.  Stay tuned….

Florida’s existing condo sales up in 3Q 2010

Interseting article written by Florida Association of Realtors.  Good News is coming….

ORLANDO, Fla. – Nov. 11, 2010 – Sales of existing condominiums in Florida rose 15 percent in third quarter 2010 compared to the same period a year earlier, according to the latest housing statistics from Florida Realtors®. A total of 16,938 existing condos sold statewide in 3Q 2010; during the same period the year before, a total of 14,793 units changed hands.

Fourteen of Florida’s metropolitan statistical areas (MSAs) reported higher existing condo sales in the third quarter, according to Florida Realtors. The statewide existing-condo median sales price was $84,000 for the three-month period; in 3Q 2009, it was $106,000 for a decrease of 21 percent.

“A healthy housing market is built on the foundation of a robust economy,” said Dr. Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness. “As the economic recovery continues in Florida – and in particular as the labor market improves – the housing market will follow suit. The price decline in the condo market continues to attract domestic and foreign buyers to Florida to take advantage of this buying opportunity.

“The third-quarter single-family and condo Florida resales data reflect a slowdown relative to second-quarter data as the expiration of the first-time homebuyer’s tax credit in April pulled future demand into the second quarter,” Snaith said, adding that the drop-off was expected.

Meanwhile, in the year-to-year quarterly comparison for existing single-family home sales, 41,122 homes sold statewide for the quarter compared to 44,451 homes in 3Q 2009 for a 7 percent decrease. The statewide existing-home median sales price was $135,200 in 3Q 2010; a year earlier, it was $145,300 for a decrease of 7 percent. Sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes, according to the National Association of Realtors® (NAR). The median is a typical market price where half the homes sold for more, half for less.

The University of Florida’s Bergstrom Center for Real Estate Studies’ latest quarterly survey of real estate trends reports that the jobless rate remains a top concern for the future outlook of the state’s real estate industry. The survey polls market research economists, industry executives, real estate scholars and other experts.

Timothy Becker, the center’s director, noted that investment in real estate continues to flow into Florida, though investors are wary about the economy. “The apartment sector is the stellar performer,” he said, adding that conditions continue to improve in the commercial sector. “We’re starting to see stabilization across property types in occupancy, with respondents saying they feel better about what rents are going to look like in the near future.”

Low mortgage rates continued to be available during the third quarter of the year. According to Freddie Mac, the national commitment rate for a 30-year conventional fixed-rate mortgage averaged 4.45 percent in 3Q 2010; one year earlier, it averaged 5.16 percent.

© 2010 Florida Realtors®