The Rent To Value Ratio – Another Way to Evaluate Rental Homes

August 17, 2017

The Rent To Value ratio is a simple calculation. It is the value of a home divided by 12 months of rent. EXAMPLE: $ 175,000
Dean Graziosi

Foreclosure Hurting Your Neighborhood and Home’s Value? — Buy It!

October 22, 2014


We’ve all heard many times the “making lemonade from lemons” quote. When life throws a negative at you, turn it around and make something good out of it. Of course, this isn’t possible in many cases, but it’s a nice thought and course of action if it works.

Recent news and data tells us that there are far fewer homes for sale in foreclosure than in recent months. In August 2014, foreclosure inventory plummeted 33 percent year over year. This marks the 34th consecutive month that this inventory has declined, and 19 straight months of 20 percent or greater declines. Home prices are improving, in part due to fewer price-depressing foreclosure sales.

All of this information is nice, unless you own a home in a neighborhood with a foreclosure in poor condition sitting there dragging down neighborhood home values. Actually, there is some lemonade to be made here. Of course, if there are a half-dozen of these foreclosures within a few blocks, this isn’t going to be a great opportunity. But, if there is one or maybe two, you can do your neighborhood a favor, help your home’s value, and generate some great cash flow in the process. You can help yourself and your neighbors as well, and make some money in the process.

Invest in Your Neighborhood for Profit

Why not buy that foreclosure and convert it to a rental? You’ll take it off the market as a deep discount property. You’ll improve the neighborhood when you fix it up. And, you can control not only its ownership but occupancy as well. After all, if an investor buys it, they may be less picky about renters, or discount the rent to keep it occupied. You, on the other hand, can control the rent, marketing for better quality tenants who can afford the home and will hopefully take better care of it.

Single family rental home investors will tell you that one of the things they must be disciplined about is checking their properties, at least with a drive-by, regularly. Making sure that your tenants aren’t violating exterior HOA rules and getting early warnings of problems are the goals. If the home is right there in your neighborhood, it’s almost a daily thing without any planning required. You may be driving by it every day to and from work.

There May be Help Out There

Some areas are aggressively working to avoid neighborhood blight by offering government-backed financing for distressed homes and/or repairs. Check your local tax assessor and city and county housing offices to see if there are programs to take foreclosures off the discount market and fill them with owners or tenants who will maintain the homes.

It’s a Great Investment

If you’re not upset with the tiny returns on your savings and certificate of deposit returns, that’s OK. But, with today’s miniscule savings rates and risky stock market investments, it’s nice to be able to generate double-digit ROI with special tax advantages as well. In most cases, you can deduct all expenses related to ownership of a rental property, as well as depreciation. You can wipe out a chunk of the tax liability, even while you’re enjoying depositing the rent income every month.

If your lemon these days is a foreclosure in the next block that’s vacant and losing ground on the curb appeal front, take action, squeeze that lemon, and sweeten the lemonade with some cash flow sugar.

Dean Graziosi

What Are the Differences between a Typical Mortgage and a Harp Loan?

December 3, 2013

155562224Dean Graziosi states that the primary reason why homeowners choose to refinance their existing mortgages is to obtain a lower interest rate and reduce their monthly payments.  With the introduction of the new HARP financing program many homeowners are confused as to how it is different and what, if any benefits are associated with a HARP loan.  If you’re like the majority of homeowners you have more than likely heard of the HARP refinance program.  To help you better understand the differences between a traditional refinance and a HARP refinance we have put together some information that we hope will help you understand the differences.

When a homeowner chooses to refinance their existing loan using a traditional refinance method they have the option of choosing from two typical types of loan, states Mr. Graziosi.  The first is a standard loan that is designed to refinance the current balance a homeowner owes on their mortgage.  The second option is a “cash out” mortgage that is taken out in an amount that exceeds the existing mortgage.  In order for a homeowner to qualify for this type of loan, their finances must be in excellent shape and their home’s loan-to-value ratio must meet certain requirements set forth by lenders.

Because of the recent housing crisis many homes are valued at a price lower today than they were five years ago.  Because of this many homeowners may find themselves underwater on their loan, which means that they now owe more on their home than it is currently worth.  Because of this many lenders are not confident in approving loans to homeowners who are in this situation.  This may make obtaining a traditional refinance much more difficult for homeowners even if their current financial state is in excellent condition.

With so many homeowners currently underwater on their existing loans, the government developed the Home Affordable Refinance Program, also known as HARP.  Under this program many homeowners will find it much easier to qualify and refinance their homes even if they are underwater.  A HARP refinance differs from a traditional refinance in that many of the requirements have been lowered.  With a traditional refinance you often have to meet certain financial requirements and your home must be appraised, this process is very similar to what you had to go through to get approved for your existing mortgage explains Mr. Graziosi.

Dean Graziosi explains that with a HARP loan the process is more efficient and there is less paperwork required.  There is also no appraisal required to be approved for a HARP loan.  If you or someone you know is currently trying to refinance their existing mortgage but are underwater on their loan, you may want to consider a HARP loan.  They are designed to help homeowners who have lost value in their home still refinance and keep from losing their home altogether.

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