What a past few years for home sales. I mean really, with interest rates this low, it’s shocking that more people are not buying homes. Right?

Partly. Many real estate agents out there will tell you that it’s a lack of credit and borrower funds that is keeping buyers from securing mortgages and buying homes. And they’re right. Partly.

Remember, there is a seller side to this whole equation – the person who is trying to sell their home at what they think is a fair price - but can’t.

Time for my opinion. You see, so many people who purchased homes in the last five years have gotten stuck. Meaning, as some of these people were put into the position that they needed to sell, they found that they can not sell the home at a price that would cover what was owed on the mortgage plus fees and taxes.

The solution for many people in this situation is to rent the house. They’ll wait for the market to improve and sell in a couple years so that the worst case scenario is that they do not have to bring money to closing. I can’t tell you how many clients Hometown Property Management took on in the last year in this exact situation, but I can tell you that it has been a lot.

Renting is a good alternative, even if the monthly rent comes short of the total monthly expenses (mortgage, taxes, insurance, fees and maintenance). What looks like a monthly loss on renting your house could really be disguised as a gain. Allow me to illustrate:

1)      Let’s say your house rents for $1200 per month and your total monthly bills are $1400. You’re losing money, right? Not exactly. First of all, it is likely, with each month’s mortgage payment that more than $200 is going toward principle. So, you’re breaking even. Not to mention likely tax advantages such as depreciation on the building, deductions for mortgage interest, taxes, insurance and fees – you may end up making a few bucks come tax season in a situation that originally looked like a loss. Of course, I urge you to discuss this with a qualified tax pro.

2)      Another scenario. Let’s say that after everything comes out in the wash (including equity gained), you are still losing $200 per month. What would happen if you instead sold the house at a $10,000 loss? It would take 50 months, losing $200 per month to equal that $10,000 loss. Plus, rental rates typically rise every year. If you are in this situation, sit down, do the math, put together a timeline and figure out what you’re able to stomach and for how long.

What do I do if I want to rent my home?

Consult with a licensed expert that specializes in residential leasing. Being a landlord is not easy. We can help guide you through the process and give you at least a starting point for how much you can rent your home and what your expenses will be. Do not evaluate a property manager only on how much their commission is and for how much they think they can rent your home. Understand extra fees that are charged and grill the company on how they evaluate prospective renters – the last thing you want is an unqualified tenant that doesn’t pay, or worse, causes damage to your investment. Your house will not rent based on how much a property manager thinks they can get for it – it will rent based on what qualified tenants are willing to pay for the size of your home, amenities and location.

Sam Gorgone

Pennsylvania Licensed Real Estate Agent

Hometown Property Management Services, LLC

Twitter: @hometown_props

Facebook: www.facebook.com/hometownpms

When I first started investing in real estate early in the last decade, it was a Seller’s market. Negotiating as a Buyer was difficult because Buyers were aplenty, borrowing was easy and houses flew on and off the market in a flash. Knowing this, Sellers often aggressively priced their properties. In this current Buyer’s market, now is the time to buy - on YOUR terms.

Don’t Just Negotiate List Price

I often see people negotiating a purchase on list price alone. The Buyer offers below the list price, the Seller counters, the two meet somewhere in the middle and eventually the deal is done. This is the most common way I see a real estate transaction happen. The Seller reaches that “magic number” and meanwhile the Buyer could have done much better. There are other tactics Buyers can use when negotiating.

Earnest Deposit

An Earnest Deposit is an amount that the Buyer is willing to put down in the case that they back out of the transaction. If the Buyer backs out, they forfeit this deposit. It’s also an indication to the Seller as to how serious the Buyer is. If you offer an aggressive price and put down a high Earnest Deposit, this will show the seller that you’re serious to buy and also give you negotiating room; the Seller may be urged to counter with a less aggressive price for the home. Fluctuate the amount of the Earnest Deposit as you are countering with the Seller.

Transfer Tax

While most closing costs rest with the Buyer, there are costs that the Seller incurs such as, in Pennsylvania, a transfer tax. While both the Buyer and Seller each must pay 1% of the final price as a transfer tax, a nice tool for you as negotiating gets deeper is to offer to pay THEIR transfer taxes. Using this tactic in tandem with an aggressive offer and the Earnest Deposit in the mix may get you into the house at an overall lower price.

Home Inspection

ALWAYS opt-in for a full home inspection. It will allow you to negotiate the price (or request for repairs to be made) and also predict future problems. Your home inspector will provide you with a detailed report consisting of urgent concerns and others that can wait. Either way, if you’re willing to take care of some of these items yourself, send a new offer to the Seller in the way of a reduced sales price. Put a dollar figure on ALL of the items the home inspector flags, take it to the Seller and you should either get most of the items remedied or get yourself into the home for less. In this market, many Sellers will not risk losing an interested Buyer by rejecting a reasonable counter offer due to home defects.

And Finally…

Don’t ever, ever, ever get emotionally attached to a property. You will lose money this way because you will settle for less and pay more. Detach your emotions, treat it as the business transaction that it is, keep engaged with your agent, allow the process to have consistent forward momentum and the transaction will eventually work itself out.

Sam Gorgone, Hometown Property Management Services, LLC

I bought stamps yesterday. Nearly nine bucks will get you a book these days and I bought two of them. I knew it had been a while, so I checked my records and found that it had been more than three months since I purchased my last two books. For some this might not be a big deal, but property management companies get a lot of bills. Hometown gets a stack of bills almost every day.

Whether you get a lot of bills or not, if you own a computer, you should be taking advantage of online bill pay for every bill. It is easy money saved.

1)      I have not encountered a bank that does not offer this service. I have three different bank accounts (to cleanly separate different parts of my working life and personal life) with banks that all have nice bill pay systems. I enroll for paperless statements where I can and have every bill setup so that my bank pays it for me directly. No stamps, no checks, no envelopes. It takes me more time to log the transactions in my checkbook register than it does to actually pay the bill. It’s that fast.

2)      The setup is easy too. Just log onto your bank website, follow the instructions and take the time to do it. And heck, if you get stuck, look up the bank’s contact information on the website and call them. As for setting up your bills for payment, most of the time all you need is your account number and address where you send the payment and the website sets up the rest. When you receive the bill, you just need to enter the amount to be paid and when to pay it and you’re done – fast and free. A nice feature is that you set the date for your bank to send funds to the payee; saving the angst of the “beat the bank” game where you put your bill in the mail and cross your fingers that it makes it on time. What’s fascinating now is that some banks are offering apps where you can manage and pay your bills right from your phone. I use PSECU’s app for paying my personal bills and it’s awesome.

3)      If you’re already paying bills online by going to each account’s website, logging in and paying each one individually by debit/credit card or checking account, STOP!!! This is an inefficient way to pay your bills. You have to keep track of every username and password and go to each individual website when you get bills. Instead, setup these accounts for paperless billing, have statements sent to your email and when you receive the bill, simply log into your bank account and set the date that you want it to be paid.

I hope that I’m making this sound easy because it really is. Take the time to get acquainted with your bank’s website and take the time to setup each bill. Online bill pay has arrived and deposits are next. You will save a ton of money on postage and save a ton of your own time.

More money and more time? Sounds like a pretty good deal to me.

Sam Gorgone, Hometown Property Management Services, LLC