SO YOU WANT TO BUY AN INVESTMENT PROPERTY

My home buying guide is geared towards those buying a principal residence, but of course a good portion of our business are buyers who wish to buy an additional home or an investment property.  Here are some considerations unique to that scenario.

First, it’s important for us to know WHY you are buying another property.  Do you plan to renovate and flip it?  Or do you plan to rent it out for income?  The considerations are quite different for each – in this article we’ll address purchasing a rental.

If you are planning to RENT IT OUT for some period of time, be aware that it is probably NOT advisable to purchase a condo or townhome, because chances are you will NOT be able to rent it out.  The reason is this: virtually every condominium ownership complex in Atlanta has a 24% or more rule under which no more than 24% of the units can be rented out at any given time.  Since 2008 when the real estate market took a huge dive, that limit is reached in most complexes with a long, long waiting list of owners wishing to rent out their units.  While things are loosening up now that the market has gotten better, it can still be very difficult in most complexes.  In addition, many complexes have a rule that you must live in the condo or townhome for some period of time (typically a year or more) before you are even eligible to get a rental permit.

The purpose of the rental limits are to preserve future buyer’s ability to get a loan to purchase in the complex.  Underwriting guidelines usually specify that a certain percentage of units must be OWNER OCCUPIED in order for the lender to underwrite a loan for a purchaser.  If there are no rental limits, then, the units must be purchased with cash or alternative financing, making those units much less marketable and therefore less valuable.  Note that some townhomes are “fee simple” rather than condominium ownership, and you WOULD be able to rent out a fee simple townhome.  The difference is that in condominium ownership, you own everything within your walls but not the exterior of the home or the ground it sits on – those are owned in concert with everyone else who owns in the complex.  In fee simple townhome ownership, generally speaking you own your home, the roof, and the ground it sits on but you are simply attached to other homes.  With fee simple ownership, there is rarely any restrictions on the owner being able to rent out a unit.  But condominium ownership is much more common than fee simple.

Another important consideration is whether you are going to ACTIVELY MANAGE or hire a professional property management company to handle renting it out for you.  If you are serving as the direct landlord, you want a property that is CLOSE TO WHERE YOU LIVE.  But if you are hiring someone else to do that for you, where the property is in relation to where you live becomes less important.

Early on, narrow down the neighborhoods or areas you are interested in.  Be sure to consider convenience, schools, crime, and overall appreciation potential (this is where your Realtor comes in very handy).  We will pull homes like the homes you are looking out so you will know about what rent you’ll be able to command for a given property.  Compare the rent you’ll get with your monthly mortgage payment and expenses (a good rule of thumb is a 10% monthly management fee if a company is managing for you; and another 10% for repairs and other expenses).  Keep in mind that there may be gaps in between tenants when you will have no income from the property.

If you pick carefully and choose a home in an area that appreciates, you can make a great return on rental property.  Just be prepared for the risks involved.  No matter how careful your background checks, tenants can go “bad”.  They can tear up your house and refuse to pay rent.  Then you must pay to fix the house and pay legal fees to throw them out.  Rental properties are not for the faint of heart.  But they can also be a great way to diversify your portfolio and make a great return!

Mary Anne Walser is a licensed attorney and full-time REALTOR, serving buyers and sellers in all areas of Metro Atlanta. Her knowledge of residential real estate and her legal expertise allow her to offer great value to her clients. Mary Anne serves on the Committee that drafts and reviews the contracts utilized by all REALTORS in the State of Georgia. In addition, she is a member of the Atlanta Board of Realtors, the Georgia Association of Realtors, the State Bar of Georgia and the Georgia Association of Women Lawyers. Contact Mary Anne at 404-277-3527, or via email: maryannesellshomes@gmail.com.

The RIGHT WRONG Things

When my husband and I walked into our current home the first time, it was a sad sight to see.  Shag carpeting, dark wood paneling, old formica countertops.  And yet we knew it was “the” house for us.  How?  It was UGLY.  And yet the right things were wrong with it.  The carpeting we could tear out.  The dark wood paneling could be taken out or painted over.  Walls could be moved and removed.  Countertops could be replaced.  The home’s flaws allowed us to put our signature on the home and make it our own.  We loved the soaring ceilings, floor to ceiling glass, and huge acre lot with tons of trees.

But another home we looked at was much prettier.  Already renovated in a style we liked.  We could have moved right into that home.  But the WRONG things were wrong with that home.  The driveway was steep.  There was no garage, and due to the topography (steep drop-offs beside the home) no easy way to put one in.  Not enough guest parking – and guests would have to climb up that mountainous driveway.  So while it was beautiful – and we went back to it several times – it was *not* the home for a couple who love to entertain and really want a garage.

This was our experience in the doctrine of the “right wrong things”.

Now, the right wrong things for us would have been just the “wrong things” for some other buyer.  Say, one who didn’t want to have to do ANY renovation.  Or a buyer who couldn’t see past ALL the work that needed to be done (and there was a lot!)  The things that were “RIGHT” for us would have been wrong for someone else.  Not everyone wants a large lot to care for, and not everyone appreciates the 1970s aesthetic.

When YOU are looking for a home, don’t expect to find the house that is exactly right in every aspect.  It doesn’t exist!  Look for the home that has the “right things wrong with it.”

First, determine whether you are willing to do any renovation at all.  If so, the following might be the right wrong things:  old carpeting, Formica countertops, loud paint colors you don’t like.  These are things that are easily changed (of course, if you don’t want to do any work at all, these are just “wrong” things).

Other right wrong things might be a yard that is in disarray but with a little landscaping could be great; or a carport that  could be converted to a garage (if that’s a “right” thing for you).  It’s also important to know, however, the WRONG wrong things.  Maybe a quiet street is important to you.  If the home you’re seeing is on a BUSY street, that’s the “wrong” wrong thing – something that CANNOT be changed, no matter how hard you try.  Put together your list of the WRONG wrong things, and do NOT GO SEE A HOME that has those things.  You’ll save yourself a lot of time and frustration.  Other “wrong” wrong things might be: a home in the wrong school district.  A home without a fireplace if you’ve always dreamed of having one.  A home in a bad n’hood if safety is paramount to you.  You see – the “wrong” wrong thing is something that cannot be changed.

So, before you go to look at houses, put together a quick list.  What are the RIGHT WRONG THINGS?  And what are the “wrong” things that you cannot abide – let’s eliminate those houses before we start, but let’s NOT eliminate those that have the RIGHT wrong things.   Determining your right wrong things could be the way to get a deal on a house – and to have the flexibility to make it your own!

Mary Anne Walser is a licensed attorney and full-time REALTOR, serving buyers and sellers in all areas of Metro Atlanta. Her knowledge of residential real estate and her legal expertise allow her to offer great value to her clients. Mary Anne serves on the Committee that drafts and reviews the contracts utilized by all REALTORS in the State of Georgia. In addition, she is a member of the Atlanta Board of Realtors, the Georgia Association of Realtors, the State Bar of Georgia and the Georgia Association of Women Lawyers. Contact Mary Anne at 404-277-3527, or via email: maryannesellshomes@gmail.com.

WE HAVE AN OFFER! NOW WHAT?

Prices are rising rapidly in Metro Atlanta and we do not have enough homes to sell.  Buyers are frustrated by the lack of inventory and how quickly the good homes get snatched up. Let’s say we have put your home on the market (and I’d love to do that).  Say you’ve priced your home to sell.  You’ve painted the walls a pleasing neutral color and staged perfectly.  You’ve made it readily available for agents to show.  In this fast moving market, we should have an offer within days or a few weeks.  If there’s no offer within a few weeks, they we must re-evaluate why – a subject for another article.  But presuming we’ve gotten it right, offers should be coming in!  How do we respond?

If we get an offer immediately upon listing, we may have a very hot property (one indicator is that we also have a lot of showings right away).  This is happening a LOT currently.  If we’re getting multiple offers, lucky you!  We could have a bidding war.  One way to handle this is to say that we’ll be responding to all offers at some point in the near future.  It’s best to give a date certain.  Say we list on a Wednesday, and it’s clear we’re going to get more than one offer.  I can say “seller will respond to all offers by Tuesday at 5pm”.  This allows the weekend for showings to more potential buyers and allows the open house to pull in more potential buyers (if we’re holding open houses at your home).   If an offer comes in the first day and you respond to it, you don’t give other potential buyers the chance to bid up the price.  That said, if the first offer is excellent and solid and one you just can’t refuse, at times the best thing to do is to move quickly on that first offer and enter a solid contract.

But if we are soliciting multiple bids and get them, once they are all in we review them carefully, comparing all terms.  The “best” offer may not be the “highest” price.  You’re looking for a buyer who will not ask for excessive concessions during the inspection period and who will surely make it to the closing table with no financial difficulty.  Thus, a cash offer (with proof of funds, of course) is typically a better offer than an offer contingent on a loan.  An “as is” offer (indicating that the buyer will not be asking for repairs) is better than one with the right to ask for inspection repairs.  An offer contingent on the sale of another home is not as desirable as one that is not.  We take all of these things into account in deciding which offer is the “best” and the one you want to respond to.  Unless one bid is so strong you want to nail the contract down and sign it as it is written, you will have the opportunity in the counteroffer to counter any terms you do not like, including price.

Now, in contrast to the multiple bid situation, if yours is a home that is not receiving immediate multiple bids, then I typically recommend responding VERY quickly to a bid on the property.  Strike while the iron is hot!  Buyers who must wait a day or two for the seller to respond sometimes lose their enthusiasm and start having second thoughts.  It’s smart to respond quickly to a good offer to keep the momentum going if your home has been on the market for a while or we don’t believe that a bidding war is possible or probable.

We’ve been concentrating on good offers and how to respond – but it’s important to note that you should respond to every offer that comes in, good or bad.  Some inexperienced buyers and even some seasoned veteran buyers just feel that they have to “try” a lowball offer.  Don’t be offended.  Answer it anyway, unless it is just truly ridiculously outside the realm of possibility.  I’ve seen unreasonable buyers get very reasonable in the end and jump to a high number that made my seller very happy.  And everyone’s idea of what IS a “low” offer differs.  Even if you respond at list price, respond.  Play ball.  Having an offer , even if you only have one, is a wonderful thing.  If it’s not going to work out, you should know within very short order and it so it’s not a big time waster.  If fact, if the initial offer is too low, we can respond verbally until the buyer gets to a more reasonable number.

Our Atlanta market has been sizzling hot this summer; well priced properties sell quickly and with multiple bids.  If you price right and stage well, your home will be one of the “hot” properties.  How to respond to offers, single or multiple, is an art as well as a science; with a little forethought and help from a licensed Realtor, you will be SOLD in no time.  Call me today if you or someone you know has been thinking about selling!

Mary Anne Walser is a licensed attorney and full-time REALTOR, serving buyers and sellers in all areas of Metro Atlanta. Her knowledge of residential real estate and her legal expertise allow her to offer great value to her clients. Mary Anne serves on the Committee that drafts and reviews the contracts utilized by all REALTORS in the State of Georgia. In addition, she is a member of the Atlanta Board of Realtors, the Georgia Association of Realtors, the State Bar of Georgia and the Georgia Association of Women Lawyers. Contact Mary Anne at 404-277-3527, or via email: maryannesellshomes@gmail.com.