Top 6 Cities Where Buying Is Better Than Renting

Cities that had been hard-hit by the housing market crash now offer some of the best buys in real estate and where it makes much more sense to buy than rent, according to a new report from Deutsche Bank. The bank’s study measures affordability by the share of income that Americans are paying to own a home as well as the cost of owning vs. renting.

Here are six of the cities that topped Deutsche Bank’s list.

1. Atlanta
Rent as % of after tax mortgage payment: 151.2%
Median home price change, 2006-2010: -33.2%

In Atlanta, the average monthly rent is about 50 percent more than the average after-tax mortgage payment. Plus, home prices in Atlanta have dropped nearly 14 percent year-over-year in February, creating a great opportunity for buyers to cash in. 

2. Orlando
Rent as % of after tax mortgage payment: 137.2%
Median home price change, 2006-2010: -51.3%

Orlando saw a larger drop in home prices during the past year than any of Florida’s other metro areas, according to a Florida REALTORS® report cited by the Orlando Sentinel.

3. Rochester, N.Y.
Rent as % of after tax mortgage payment: 136%
Median home price change, 2006-2010: 3.6%

While housing prices in Rochester--the second-largest economy in the state--inched up slightly between 2006 and 2010, the city still favors home ownership over renting. 

4. Cleveland
Rent as % of after tax mortgage payment: 132.6%
Median home price change, 2006-2010: -14.8%

It costs about 24 percent less to buy a home in Cleveland than it does to rent.

5. Tampa-St. Petersburg
Rent as % of after tax mortgage payment: 131.6%
Median home price change, 2006-2010: -41.4%

Tampa-St. Petersburg was one of the most overbuilt states during the housing boom and it ranks ninth in the country for foreclosures. But it’s still an attractive spot for retirees, and with dropping home prices it’s now more affordable to own than rent here.

6. Las Vegas
Rent as % of after tax mortgage payment: 125.1%
Median home price change, 2006-2010: -56.5%

Empty homes and condos blanket Las Vegas, but a comeback is in sight. More than half of sales in Las Vegas are from cash buyers, signaling investors have re-emerged. A strong rental market also means renting out properties still offer a good return.

CNNMoney.com

A Closer Look at The National Apartment Market

How long will constrained supply last?

With an impending shortage in the supply of new projects coming online in 2011, the multifamily sector is expected to boast healthy gains in both occupancies and rent growth for at least the next four quarters.

We're forecasting a ramp-up in apartment deliveries starting in late 2012. This doesn't mean we expect rent growth to take a dive back into negative territory. It just means that we probably shouldn't expect rent growth above 10% for certain submarkets to last well past 2011 and 2012.

6 Reasons Why It's Smart to Buy a Vacation Rental Home

Lately, you've been thinking a lot about investing strategies. You have a small nest egg that needs to grow, but frankly you don't trust the stock market. (If you're like many investors, your 401(k) hasn't fared well in recent years.) And while real estate has been somewhat of a rocky road in recent years, it's still a solid long-term investment strategy—and clearly we're in a buyer's market. But you aren't really interested in being a landlord. What to do?

Christine Karpinski has a suggestion: Purchase a vacation home and rent it out to travelers.

"Vacation homes are almost always a good investment," says Karpinski, director of Owner Community for HomeAway—te the world's leading vacation rental marketplace—and author of How to Rent Vacation Properties by Owner, 2nd Edition: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment (Kinney Pollack Press, 2007, ISBN: 0-9748249-9-2, $26.00).

"First, if you're looking for a good long-term investment, real estate tends to be a good bet," she adds. "Second, vacation properties have the ability to pay for themselves, and owners often earn a profit in rental income. Third, the investment comes with the desirable perk of having a place at the beach or in the mountains to call your own. And finally, there has never been a better time to buy a vacation home—it's like the planets have all lined up perfectly."

Karpinski, who owns vacation homes in several parts of the country, says she herself is looking for new properties to invest in. Overall, she says, the vacation home rental market is a burgeoning segment of the economy.

Want to know more? Read on for a few reasons why there's never been a better time to go vacation rental house hunting: 

There have never been so many properties on the market. For potential home buyers, there is a silver lining to the slow economy and the housing crisis: Most vacation markets are chock-full of buying opportunities. Once you've pinpointed the vacation rental market that is right for you—The coast? The mountains? A ski resort area?—you will likely have a lot of properties to choose from.

"There are many properties available right now in many different areas," says Karpinski. "Once you start hunting, I think you'll be pleasantly surprised at what you find. But I must offer one caveat: Before you let yourself fall in love with a property, make sure it is legal to rent it out as a vacation home. Some areas and homeowners' associations do not allow short-term rentals."

Prices aren't going to get much better. In fact, they're the lowest they've been in five to ten years. If you're pretty sure you want to buy a vacation home "someday," you might want to quit procrastinating and pull the trigger, says Karpinski.

"Prices should increase eventually," she points out. "Now is the perfect opportunity to make a really sound investment. In fact, speaking from my own perspective, I'm afraid that if I don't take the plunge now, I'll look back ten years from now and say, 'Why the heck didn't I buy back in 2010?'"

Interest rates are very favorable for purchasing. Today, mortgage interest rates are low. Bottom line: Take advantage of them while they last. 

These days, you have access to the best real estate professionals. Anyone connected to the housing market who managed to survive the housing crash had to be at the top of his or her game. That means the agents left standing today—including the ones you'll be working with in your search for the perfect vacation home—are possibly the best of the best.

"Quite simply, the real estate professionals still working today are the top in the business," says Karpinski. "And because vacation home renting has become so popular, they are more knowledgeable than ever. Use their knowledge to your advantage. They are at your service when it comes to helping you hunt down the best property for you."

It's never been easier to rent your vacation home. As mentioned earlier, vacation home rentals have never been more popular. More and more consumers are choosing to stay in cozy condos, cabins, and chalets instead of cramped, impersonal hotel rooms when they travel. And as market demand has surged, organizations have sprung up to help connect vacation homeowners with these potential renters.

If you buy now, you can be ready for the 2011 peak season. It's true that the longer you wait to buy, the likelier it is that interest rates could rise. But there's another reason not to procrastinate: If you buy now, you'll have time to get your property ready for peak rental season. Experienced vacation homeowners often find that the rental fees generated during the twelve weeks between Memorial Day and Labor Day pay their mortgages for an entire year—and most inquiries come in between January and March.

"Even turnkey properties aren't really turnkey," notes Karpinski. "To get your property up to your standards, there will very likely be things that you will want to spruce up. Rooms might need repainting. Decorating will need to be done. And the yard might need some work. By buying now, you will have a cushion of time to get the home ready for your guests, take great photos for your property listing, and start marketing it to potential renters."

"Someone is going to be smart enough to take advantage of the great buying opportunities available today," says Karpinski. "That person might as well be you."


RISMEDIA

Owners Forced to Become Landlords + Tips for a New Landlord

A growing number of homeowners are finding out what it means to be a landlord after failing to sell their homes in one of the worst housing slumps in history.

With home prices down nationwide, many don't want to take a huge loss when they decide to move. They want to wait to see whether they can rebuild their equity. So they rent.

"People just really don't want to be landlords, and they really have no choice," said Dennis Dickstein, a Realtor at Real Estate One in Farmington Hills, Mich., who estimates that 20 percent of his deals are leases.

Mark and Rhonda LaVelle decided to buy a bigger home while the market was down. The couple had a 1,100-square-foot house in Royal Oak, Mich., to sell but decided to move when they found a 2,300-square-foot home about 2 miles away. They started renting their house in January after it had been on the market nine months.

"After paying two mortgages and the house wasn't moving, we were at a point where we would have to sell it at a substantial loss or get someone else in who could pay the mortgage," said Mark LaVelle, 38, a freelance cameraman.

He and Rhonda LaVelle, 37, a television-news producer, turned the leasing over to his real estate agent.

"It's been a great experience. We're getting the full mortgage payment from the tenants," Mark LaVelle said. "My wife just wanted to wash her hands of the whole thing. She looks at it like a liability. I look at it as an investment."

But it's not always moving up that sparks a home rental.

Sometimes it's a life change, such as marriage, college graduation, divorce or death in the family.

Many homeowners who decide to lease their homes use their real estate agents to handle the transaction, including background and credit checks.

The service generally will cost a landlord one month's rent, while property management could cost 10 percent-20 percent of the monthly rent. But with rent often set just high enough to cover the mortgage payment, some landlords do it themselves.

Dan Elsea, president of brokerage services for Real Estate One in Southfield, Mich., advises landlords not to be too turned off by potential tenants with bad credit.

"The people coming to them have gotten rid of their biggest expense, their mortgage, when they arrive at the door. They arrive with a reasonably clean income statement if they have a job," he said. "You should look at the credit report, but don't scrutinize it too closely. References are just as important."

Other real estate agents agree.

James Silver, an agent with Keller Williams in Troy, Mich., said there are many good tenants to choose from.

"As long as you get everything ... a credit report, the last few pay stubs, references. As long as you have everything in front of you, you're fine," Silver said.

And the beauty of the rental market is that prices there have not fallen by 40 percent, as many parts of the sales market have. The reason is there are a lot of renters to feed demand.

"So many people have lost their homes ... they are looking for a place to live," said Linda Hiller Novak, a Realtor with Max Broock Realtors in Birmingham, Mich.

There are horror stories, of course, for untested landlords. Some learn quickly that the old saying, "Possession is nine-tenths of the law," is true.

Steve Cole, an agent with Coldwell Banker Weir Manuel in Birmingham, said he knows a homeowner in Birmingham who rented his house to tenants who not only didn't pay rent, they trashed the home before the landlord could evict them.

"When times are tough, people look to scam," Cole said.

Tom Youngblood Jr., a 38-year-old human resources director, is renting his St. Clair Shores, Mich., home to a responsible tenant after having to evict the first one.

He was lucky. First off, a court clerk helped him figure out how legally to evict the tenant. He had to give the tenant seven days' notice to pay or face eviction. Then he filed eviction paperwork with the court.

Last December, a judge ordered the tenant to pay or be out in 10 days. She chose to leave and did not damage the home, he said. If the tenant had not moved out within 10 days, a court officer would have done it for her.

It can take from 27 to 57 days to evict a tenant, according to the Michigan State University College of Law's Rental Housing Clinic.

Youngblood's home is now being rented by Danette Trice, 30, an engineer design specialist at AT&T in Mt. Clemens. She had been living in Eastpointe, Mich., with her son, Ephraim Gibson Jr., 4.

Ephraim has bronchitis, and the two had to move because the air-conditioning wasn't working at their house. Her real estate agent helped her get a $100-a-month reduction in rent and made air-conditioning a requirement in the lease.

"I didn't have to do this or that to move in," Trice said. "There was new cabinetry in the kitchen, the appliances were nice and the tile was nice."

Dickstein helped Cyndee Pote, who works in advertising and marketing for Real Estate One's corporate offices, lease her home earlier this summer after Pote, her husband and three children moved to a 2,400-square-foot home in Bloomfield Hills.

Pote and her husband, Jason Pote, had their 980-square-foot house on the market for a year with no offers. Houses in the neighborhood were going for $50,000, and she had paid $94,000. Once it was put up for rent, the showings increased, and they had it rented within a week.

The young man who rented it lived just 10 houses down the street and was losing that rental because the owner let it go into foreclosure. Dickstein did a background check, a credit check and contacted the renter's employer before letting him rent the home.

"The rental market was strong. We were able to cover our mortgage and then some," Cyndee Pote said.

———

TIPS FOR A NEW LANDLORD:

Call a private investigator. For less than $50, you will find out whether the prospective tenant is a deadbeat right there and then instead of finding out after he or she owes you three months' rent and you have to evict. —Tom Youngblood Jr., landlord

Don't be scared by bad credit. Renters who lost their homes come to the landlord having gotten rid of their biggest expense — their mortgage. If they have a job, they are pretty good tenants. References are as important as the credit report. —Dan Elsea, Real Estate One

Use a standard lease contract, have a lawyer review it to avoid surprises. —Mike Balduf, landlord

Have the tenant provide a copy of his or her credit report, references and proof of employment. Contact the employer to ensure the potential tenant is working there. —Katie Hill, Realtor with Real Estate One in Troy, Mich.

Find out whether your city or township requires you to have a permit to rent out the house and pay the fee. Do everything by the book. —Mark LaVelle, landlord

Request wire transfers and automatic deposits for monthly rental payments to avoid being scammed by people who don't want to pay. Fraudulent checks and cashier's checks are easy to create on a personal computer. —Steve Cole, Realtor with Coldwell Banker Weir Manuel in Birmingham, Mich.

HOW TO KEEP IT LEGAL:Here are some tips from Brian Gilmore, director of Michigan State University College of Law's Rental Housing Clinic in East Lansing. Although the clinic primarily assists tenants, it also answers legal questions from landlords.

Key things to put in the lease include the duties of each party. For example, it would include the dates that the lease is active, the rental amount, deposit and how repairs and maintenance would be handled.

By law, the security deposit cannot exceed 1 1/2 month's rent. If the monthly rent is $600, the most that could be collected for the security deposit is $900.

The tenant has a right to put the rent in escrow instead of paying the landlord if the property is not up to code. Until fixes are made, the rent can be withheld to force the landlord to comply with codes.

Some communities charge rental permit fees. If those are not paid, that can invalidate the lease.

The landlord can evict a tenant for damaging the property. The landlord has to deal with normal wear and tear, but serious damage is a valid legal reason to evict.

(c) 2010, Detroit Free Press.

Renting Your Home in 5 Easy Steps

A homeowner who is able to sell a property at the asking price has the potential to reap a profit, but what happens when you are having trouble getting your home sold? In today’s difficult market, many homeowners are taking advantage of renting out their homes, or individual rooms, in order to cover the bills. 

According to Glenn Curtis, freelance financial writer and analyst, here are five easy steps that will help make the renting process easier and more profitable. 

Study the market: Check local newspapers and with local Realtors to see what comparable homes/properties are renting for in the neighborhood. This should help you establish a fair rental price.

Prep the home: Renters may not take care of the home or its furnishings; therefore, the owner might consider removing breakables and personal items in order to avoid damage and potential arguments.

Find a renter: Consider advertising in local newspapers, in the brochures and bulletins found in supermarkets and on website classifieds. The idea is to try to get as many people to view the rental details as possible, so that you are left choosing your renter, rather than having to go with the only renter who expresses interest in your place.

Interview: Consider meeting with the potential renter rather than simply dealing over the phone. Knowing who will inhabit your home may put your mind at ease and help you weed out unsuitable candidates.

Spell out the deal: You should consider contacting an attorney (particularly one that specializes in real estate) to help see you through the rental transaction. The lawyer should be able to provide or help draft a rental agreement/contract. Consider any stipulations you want in the paperwork (like late fees, lease terms, payment due dates, etc.) and make sure the attorney includes those items.


By Paige Tepping

Great Time to Invest in Rental Property

If you're thinking about investing in a rental property, experts say low home prices combined with low interest rates make this the best time in years to become a real estate investor.

What's more, the real estate market is starting to recover: U.S. houses lost $489 billion in value during the first 11 months of 2009, but that was significantly lower than the $3.6 trillion lost during 2008, according to real estate Web site Zillow.com,

"We haven't seen home prices this low in so many years -- coupled with the rates being so low," says Jill Sjolin, an agent with Windermere Real Estate in Woodinville, Wash., who specializes in investment properties.  "When the money is cheap to borrow and the houses are cheap to buy, it's absolutely the best time to invest."

While the timing may be right, the following five tips can help first-time investors take advantage of what might be the opportunity of a lifetime...

1) Know your options.  Since all investment properties are not the same, it's important to determine what type of property fits your strategy, says Harrison Merrill, chief executive officer of Merrill Trust Group, a real estate investment company based in Atlanta.  Do you want to become a landlord or would you rather restore and resell properties?  Are you interested in apartment buildings and other commercial real estate or buying land that can be developed?  First-time real estate investors may want to start with residential housing, since commercial real estate and land development still face challenging market conditions, Merrill says.

2) Partner with experience.  First-time investors should find a Realtor experienced with investment property deals who can help you locate promising properties.  "Look for relational brokers who expect to do business with you again and therefore are going to be much more careful with what they recommend," says Merrill. 

A second option is to collaborate with a more experienced real estate investor and close a deal together.  In this economy, an experienced real estate investor may be willing to work with you in exchange for the capital you can provide, giving you the opportunity to glean investment knowledge and experience firsthand, Merrill says.

Even if you don't collaborate with other real estate investors, talk to them about pitfalls they've experienced.  "Go down to the general district court in your area and listen to some landlord/tenant cases so you can get a sense of what kind of challenges landlords face," says Jeffrey Taylor, author of "The Landlord's Kit."

3) Look for the right location.  If you buy a property with hopes of renting it out, location is key.  Homes in high-rent or highly populated areas are ideal; stay away from rural areas where there are fewer people and a small pool of potential renters, suggests Sjolin.  Also, look for homes with multiple bedrooms and bathrooms in neighborhoods that have a low crime rate.  "Renters gravitate to a safe neighborhood, and if they have kids they will want a good school district," Sjolin says.

Think about potential selling points for your property.  If it's near public transportation, shopping malls or other amenities, it will attract renters, as well as potential buyers if you decide to sell later.  The more you have to offer, the more likely you are to please potential renters, says Sjolin.

4) Have capital lined up.  Speak to potential lenders or even a financial planner about whether you have enough assets to handle the ups and downs that could come with investing.  Even if you plan to rent out the property, count on paying the mortgage whenever there's a vacancy.  "If you can have about six months of mortgage payments saved up, it's there if you need it, and you can use that money for repairs," says Sjolin.  Even if you're planning to fix up a home and sell it, you may end up holding onto it for several months in the current market, Sjolin adds.

5) Build a supporting cast.  Don't wait until a rental property needs repairs to find someone to handle them.  "Line up maintenance individuals who can take care of the different challenges that occur so you can simply call the person when a particular issue comes up," says Taylor. 

Other sources you may want to have relationships with are an attorney to consult with on tenant issues, a property management firm to handle the day-to-day rental affairs and an accountant to help you understand the tax ramifications of investing.  The more support you have, the better you will be able to handle the problems that come your way.

Whatever you do, understand that buying investment property is an entirely different experience than buying your primary residence.  "When you go to buy your own home, you usually have emotions in it," says Sjolin.  "When you go to buy an investment property, you need to put all that aside and ask, 'What makes sense?'"

By: Tamara E. Holmes

Fannie Mae Announces REO Rental Policy

Qualified renters in Fannie Mae-owned foreclosed properties can stay in their homes under a national real estate owned (REO) rental policy the company released in mid-January. The policy applies to renters occupying a property at the time Fannie Mae acquires the foreclosure. Renters occupying any type of single-family property are eligible, including residents of two- to four-unit properties, condos, co-ops, single-family detached homes, and manufactured housing. Eligible renters are offered a new month-to-month lease with Fannie Mae or other assistance for their transition to new housing should they choose to vacate the property. The properties must meet state laws and local code. For more info contact Jeff Lischer, 202/383-1117.

Top 10 U.S. Rental Markets

Grubb & Ellis released its 2009 forecast this week. See what they say will be the top rental markets from 2009-2013 and what challenges are in store for commercial real estate. Read more >