A new problem is appearing in the real estate business. Renters that have been living in or are moving into rental homes are finding out that their landlords have not been making the mortgage payments.

You may find your family unexpectedly being evicted through no fault of your own—your only mistake was renting a house that was in default.

I recently took over management of a house from a REO asset management company. I was asked to verify if it was occupied. I stopped by one evening and saw a young couple carrying an infant in a baby carrier up to the door. They were renting the house and had just moved in a couple of months before. I had the unfortunate experience of telling them that the house was in default and they were going to be evicted.

If there is an answer to this problem, it must be that you before you rent a house, check public records to see if a lis pendens has been filed. Even that is no guarantee because that document could be filed the day after you move in. And no one has permission to discuss a person’s mortgage without having the owner’s authority in writing.

Eventually renters are going to have to check out landlords to the same extent as the landlords go to for renters. I see an opportunity here for an entrepreneur to set up a service to help renters in this situation. Somehow the rights of the renters need to be protected.

Janet Montano
Remax Realty Associates
813-956-3563

www.TampaHomesBestBuys.com
www.HomeandIncomeRealty.com

The state of Mississippi is forgiving up to $40,000 per unit for providing newly constructed homes for rent in 4 southern counties of the state. They are located primarily in the Ocean Springs to Gulfport areas. This area took a direct hit from hurricane Katrina in 2005. They still have 10,000 FEMA trailers in use. The state would like to get rid of them as soon as possible.

If you agree to 5 years of rent control, the state will forgive up to $40,000 per unit on your loan. ½ of the money is given when your building permit is issued. The other ½ is given when you get your certificate of occupancy. There is a bonus given if your property is built in six months or less. The program is called the Small Rental Assistance Program (SRAP). There is a document you can get on the state’s website that has charts for the dollar amounts by number of units you build and number of bedrooms per unit, plus it has the application form at www.mississippi.org

I’ve been asked to discuss the pros and cons of the program. I’ll start with the cons first.

Cons
1. The property that cash flow’s the best is located about 2 miles from the Gulf. If you’re a “hurricane-phobic”, this is not for you. If you can’t sleep at night knowing you own investment property in an area that could be hit again, don’t buy there. Although all homeowner’s insurance includes hurricane coverage, any of these areas could be hit. Most policies include six month’s of rental loss coverage. You can discuss with your insurance company what deductible you feel comfortable with. You can add on wind and flood coverage if you like. Some lenders require it. The homes are in compliance with the FEMA flood zone guidelines. Most are being built by companies from south Florida and meet Florida hurricane codes.

2. Some investors don’t like the elevated, modular product. The advantages of this product are that it can be built quickly and therefore get rented more quickly. The elevation is high enough so your tenants can park underneath the house. This type of construction is the same as the “Key West Style” homes you see in the keys. When the house is a higher end product, the bottom floor is closed in and made into garages and storage. That’s really the only difference. The tenants like having it. If you don’t like that type of construction, there are builders making “stick built” homes on the ground.

3. Bay St. Louis – This area has mostly blue collar workers who have lived there for generations. The area had aprox 70% renters before the storm. Most of the residents lost everything in the storm, their jobs and good credit records included. The majority are hard working people who need a fresh start. The lots are in an area called Bay Side Park which was subdivided many years ago. The builders selected this because it is in the correct county for the loan forgiveness program and the lots were only $1500 last May. Now they are selling for up to $15,000. Outside of Bayside Park, you’ll see lots selling for $30K to $45K which makes the numbers not work nearly as well.

4. Will there be too many investors in the area? There probably will be many investors in the area. The state started the program to attract them. With 10,000 FEMA trailers to eliminate, personally I don’t feel that you have too much to worry about in regards to a shortage of potential tenants.

5. Will you be able to resell the property after 5 years? If everyone tries to sell at the same time, I would imagine so. Investors should plan on keeping it as a long term investment. The area has been appreciating well and jobs continue to move into the area, so I would hang on to it as long as possible. It’s possible to do a lease option to your tenants on a house. You could take title to each side of a duplex separately and resell them as “villas”, which is half of a duplex. You would have to take out two loans for this.

PROs
1. Short Rental Time – most of the houses and duplexes built have been rented within a couple of weeks from certificate of occupancy. The property managers have lists of hundreds of people waiting for a place.

2. Money from the state – This is one of the best deals around in terms of incentives for investors. Getting up to $40,000 per unit is not a small amount of money. That means $80,000 per duplex!
3. Feel Good about helping someone – although it’s not something I usually stress as a reason to invest, there really are so many people who need a place to live. I have seen FEMA trailer tenants interviewed on CNN and seen the trailer farms myself. Believe me, these people do not want to be living there.

4. With jobs moving back into the area and major employers close by, this should be a great investment. I look for areas to invest in that have businesses moving in and a low cost of living. The Gulfport area has it all. The money from the state is just the icing on the investment cake!

My clients and I have been looking for deals on rental homes in the Tampa Bay area.  After wasting too much time on short sales, we decided to pick up the pace on bank REO’s.  I’m happy to report the banks are willing to deal on these now.  Most interesting was the number of deals we were beaten out on.  Over the last few months I had gotten lazy thinking we had plenty of time to look at new listings and to get my clients to see the property and our rehab teams there to give us estimated repairs costs. 

But this week 3 of the 4 properties we liked were already sold by the time I sat down to write offers on them.  So the market is heating up now.  It’s time to get back into the action especially with the FHA loan situation providing a good alternative to subprime loans.  For people who want to flip houses or do lease options to their tenants, FHA will allow the sellers to pay their down payments and up to 6% of the purchase price towards their closing costs and prepaids.

The contract we are negotiating had a listed price of $149,900.  It was a 3/2/2 with 1550 SF.  Nice area, little work needed.  We offered $114K, the bank came back at $140K, and we countered at $125K and are still waiting to hear.  At the asking price, the house already had about $20,000 in equity.  The good news was that the bank responded in a couple of hours instead of days like short sales are taking or just automatically rejecting our offer.   Maybe the banks are finally realizing it’s time to take some of these deals instead of keeping hoards of inventory on the books while they try to get top dollar.  As a broker who’s been taking investor buyers out of Florida for the last 2 years, I feel it’s definitely time to look to Tampa Bay for cash flow and for ease of management in your own back yard. 

If you don’t want to manage the property yourself, I provide property management to my clients who buy in Tampa Bay.  We treat each property just like we owned it ourselves in terms of screening potential renters and the quality of the repairs we insist upon. 

If you’re looking to get a deal on a foreclosed property, give me a call today at 813-956-3563.  You’ll be pleased with the deals we find, the turnkey service we provide and our professionalism and experience.  We appreciate your referrals to owner/occupied buyers and to investors.

I’m taking a poll on what my clients and readers feel is the biggest problem they have with their properties.  Feel free to email me at jmontano@homeandincomerealty.com and let me know what you think.

This week we heard some encouraging statistics on the market.  The amount of traffic in model homes across the nation was up for the second consecutive month.  The National Association of Realtors said the drop in the average sales price of homes nationally has slowed down.  Locally, the “experts” are expecting our bottom for prices in 3^rd quarter this year. 

So how can you optimize this situation?  Take advantage of what I think is the tail-end of the deals and incentives builders are giving right now!   If you are a long term investor, the goal is basically the same as the stock market.  Buy when you can get a good price, get the property paid off, and use the rental income as retirement income, just as you would use the dividends from stocks for income.  I have found that within a couple of years of buying a property, I can’t remember the exact price of it or if I haggled over the builder paying $1,000 of my closing costs.  As long as the property is in an appreciating market and paying for itself right now, that’s all I care about.  What disturbs me is when some of my clients think they are going to time the real estate market like the stock market.  They think they know exactly when the market has bottomed out, and then they will buy.  I wish we were all that smart! 

This is the best time of year to buy real estate because by the time you find a deal and get it closed, we will be coming into the best rental time of year.  Each year my Go Zone buyers call me on November 15^th and want the deals and property I have available right now.  Believe me– it will be gone!  Then they have vacancies for 2 to 3 months in the dead of winter around the holidays.  I have gone through this two years in a row now. 

In Mobile, Al I have a builder that I have been after for years who has finally given me some inventory.  His prices start at $127,500 for a 3/2/0.  If you want a 3/2/2 they start at $139,900.  This is a big name builder with an excellent warranty and the subdivisions are in some of the best areas in Mobile and Baldwin counties.  We have an excellent property manager named Aiveen Kahalley.  (251) 533-9445.  Call her to check out the rental market.

In Mississippi, the Loan Forgiveness Program is alive and well.  The state has about $132 million for round two.  We’re having webinars about this program with the builder and property manager Thursday, Feb. 28^th at 6:00 pm Eastern and 9:00 pm Eastern.  If you want to attend, just email me and I’ll send you the link. 

jmontano@homeandincomerealty.com

I have a couple of listings I’d like to promote to you.  One is a multifamily building we have listed at $3.4MM in Tampa.  There’s a pretty good return on this one. There is a new listing for a short sale for $259,000.  This house is worth about $300K, so lots of equity in this one.  I updated property on both of our websites:  www.BuyGoZoneRealEstate.com and www.HomeAndIncomeRealty.com  It’s also a great time to be looking at waterfront property in Florida.

If you know anyone who runs a real estate investment group and needs a speaker for their club, please let me know.  813-956-3563

If you want a list of our upcoming webinars and in-person presentations, call or email me.  We have topics such as Tampa builder close outs, Tampa bank REO’s, cash flow multi family property, Go Zone property under $150K, $40K loan forgiveness program. 

In my constant search for Go Zone property, I visited 8 builders Tuesday through Thursday this week. I’ve seen a large increase in the number of builders in the Go Zone areas with product at the right price for rentals. Many are moving into Gulfport due to the fact that the Go Zone is extended there until December 31, 2010.

We went to see a subdivision of houses in Gulfport north of Interstate 10. This builder was visited by the mayor recently. They said he was very pleased with the subdivision. Some of the builders are slapping together houses as quickly as possible so it’s important to find a quality builder in the area. We found some really nice houses for $169,900. The builder will pay 6 months worth of rent. I also found 42 duplexes in Gulfport north of I10. They are full brick, 3 bed, 2 bath each side. $269,900. Should rent for $1200 each side with a property manager on site.

Every time I visit I’m amazed at how much progress is made at rebuilding. The KFC restaurant just reopened. We had lunch at a new Arby’s and stopped at a brand new Starbucks.

There was a new report posted last week that ranked large and smaller cities by growth projections. 3 of my favorite markets were in the top 10. Mobile was number 1 for smaller cities. Huntsville was #4 and Gulfport was #9. A link to the report is attached.

Mobil Report

Huntsville Report

Gulfport Report

Our next tours:

Tampa, FL Bank REO’s March 1^st, March 8^th and March 9^th. (Same property each day, just pick the one that works for your schedule.) $49 per person.

Huntsville, AL Single Family Houses Tour March 15^th and March 29^th. $99 per person.

See photos next page.

Downtown Mobile Photo:

Pebble Creek Subdivision, Gulfport Rents for $1350

www.HomeAndIncomeRealty.com

We specialize in investment property in Alabama, Mississippi and Florida.