Job Edge

As a professional property manager, we are experts in our field and speak to prospective investors every day about our local rental market, vacancy levels, and rental price trends. We are highly knowledgeable and successfully sell our services every day. Yet many of us don’t take the opportunity to practice what we are already experts in: leasing and managing rental property.

Have any of you had properties you manage go into foreclosure, because the owner was delinquent in making their mortgage payment? Have you received a call from a tenant who just had a Realtor knock on their door informing them the home they are renting is scheduled to be foreclosed next month? Has an investor contacted you about selling his home only to find out he can only sell to an investor, because they are obligated to lease the property and cannot breach the lease agreement?

My personal favorite is the investor who purchased a rental property on speculation of appreciation with an ARM mortgage.  The owner had a $200 monthly negative cash flow year one. Now, he has a $400 monthly negative cash flow and cannot afford to cover the shortage. Secondly, the new house they purchased is worth less than what they paid for it three years ago. Worse, they tried unsuccessfully to sell the home with the tenant occupying the property only to find out now they can’t even refinance the mortgage. Many lenders will not refinance a home that was recently listed for sale in the MLS system.

Rents are increasing in some markets, because many tenants can no longer qualify for a mortgage to purchase a home.  I can’t think of a better opportunity to purchase a property than from your own client. The investor is highly motivated, needs to sell asap, and cannot afford to have a home stay vacant on the market without collecting rent.

As a licensed real estate professional, you must disclose fair market value to the owner. You cannot take advantage of a consumer or owner. Interest rates are still very low even for investors. Most lenders require proof of down payment, closing costs, and six months reserves (monthly mortgage payment x 6) to qualify for a non-owner occupant mortgage.  Lenders will allow the seller to pay a 2% seller concession towards your closing costs, and all commissions are negotiable.

Sound too difficult to qualify? Not at all. You can still purchase your property with little to no money down, but most have the down payment and reserve funds in the bank to qualify for the mortgage. A retirement or IRA account can be considered for the six months reserves.

Here’s how to do it. In my last transaction, I negotiated a 4% commission and a 2% seller concession to pay the majority of my closing costs.  I walked away at closing with a 4% commission and used my business line of credit to pay back my actual out of pocket expenses.  I even received the tenant’s pro-rated rent and security deposit after closing.  It was better than playing Monopoly!

I purchased the property just below market. My investor received his sales proceeds within 30 days and avoided thousands of dollars in vacancy and repair costs. He is very happy to get rid of the property without paying thousands of dollars, and I now have a rental property with a paying tenant!

In my next article, I will discuss how you can leverage your rental property to generate additional business and tax savings.

Kris Colquette
http://www.articlesbase.com/real-estate-articles/property-managers-buy-your-first-rental-property-699410.html