Archive for May, 2010

Summary of New Tenant’s Bill of Rights

On May 11th, Governor Pawlenty signed a new bill into law.  Although the official name is HF2668, most are calling it the Tenant Bill of Rights.  It is the first change to landlord/tenant regulations and law in over a decade.  As a landlord, you should be aware of these changes as some will come as [...]

On May 11th, Governor Pawlenty signed a new bill into law.  Although the official name is HF2668, most are calling it the Tenant Bill of Rights.  It is the first change to landlord/tenant regulations and law in over a decade.  As a landlord, you should be aware of these changes as some will come as a surprise.  Some are tougher rules, more are neutral and others are simply clarifying unwritten rules and rumors we all assumed were true.  Most of these changes go into effect on August 1, 2010:

• Tenants living in homes in foreclosure will have the right to stay in the property until the end of the term of their lease or 90 days, which ever is longer.  This brings state law inline with current federal laws.
• Property left behind by a tenant had to be stored by the landlord for 60 days.  This has been changed to 28 days, but now a landlord can be held liable for disposing of the property early in the amount of triple the damages or $1000, which ever is greater.
• Not returning the proper amount of security deposit at the end of the lease has a penalty that is not at $500, up from $200 previously.
• Division of Utility Costs is not very common from what I have seen, but now if the tenant can prove that the landlord has improperly divided the utility costs, the landlord is liable to the tenant for triple the damages or $500, whichever is greater.
• If tenants can be forced to pay Attorney’s Fees if they lose a court case and your lease contains that language; now, if the tenant wins, they can force the landlord to pay the attorney’s fees also.
• Tenant Screening Fees and Criteria have changed. While I thought most of this was already law, it appears they have clarified it further:
  • The landlord must use a clear and consistent screening process for all applicants.
  • Landlords much provide the criteria in written form upon which they will screen applications, prior to accepting and screening fee.   It is thought that if they read the criteria and see something that will disqualify them, they may not then chose to pay the fee and apply.  [In my experience, they will apply anyway!]
  • You must process applicants in sequential order as you cash their check or take their money.  You may NOT take all the applicants money, process all of them and then compare the applicants choosing the best one (and keeping all the money).
  • If the tenant is reject for any reason other than what was specified on the written screening criteria form, the landlord must return the application fee.
• Tenants that knowingly provides materially false information on the application or omits information can be held liable to the landlord for damages plus a civil penalty of up to $500, court filing fees, and attorney fees.  Not sure how you prove this or get the civil penalty charged against them.
• Tenants must be given a receipt if they pay with cash.
• Late fees will now be capped at 8% of the rental amount. This provision begins on January 1, 2011.  You can not charge daily late fees either.

Make sure to start integrating these new changes into your leases and tenant screenings.  You do not want to be the first test case for this new law!

Using the Bank Required Title Company

For a while now I have been using our own title company when my customers are purchasing foreclosed properties.  This is all despite the contracts “requiring” that we use their title company, which is against the law.  Here is a great email that Charity at Trademark sent out:
Associates,
In the last couple of weeks it has [...]

For a while now I have been using our own title company when my customers are purchasing foreclosed properties.  This is all despite the contracts “requiring” that we use their title company, which is against the law.  Here is a great email that Charity at Trademark sent out:

Associates,

In the last couple of weeks it has been brought to my attention that the title companies representing the banks have taken it a step further now. They are not just trying to fairly compete for the buyers business they are actually calling the selling agent and using scare tactics on them.

Most recently, the title company called a Selling agent telling her that the Buyer HAS NO CHOICE and must use them to close because the contract was written that way.  PLEASE do not allow these title companies to bully you or your buyers into closing with them, THIS IS AGAINST MINNESOTA LAW!

Another instance, the same title company as above called the Selling agent and told him the Buyers would end up paying $900 more to close with Trademark than with them. NOT TRUE!  We offer special pricing for buyers of bank owned properties.

Last week a very reputable title company who has now started representing banks sent us multiple emails stating the Bank won’t send the deed back unless the Buyer uses this title company. Again, THIS IS AGAINST MINNESOTA LAW!

Please, don’t be fooled by the latest tactics, if in doubt CALL A TRADEMARK CLOSER!

What is the importance of PMI in real estate business?

Real estate business is a highly specialized field that has its own set of terminologies. People who are not interested in purchasing or selling properties may not be aware of the terminology. One such term is private mortgage insurance (PMI). This insurance provides protection to the lender against non-payment in case the borrower [...]

Real estate business is a highly specialized field that has its own set of terminologies. People who are not interested in purchasing or selling properties may not be aware of the terminology. One such term is private mortgage insurance (PMI). This insurance provides protection to the lender against non-payment in case the borrower defaults on a home loan.

How does PMI help lenders?

The main benefactor of private mortgage insurance is the lender. Borrowers have to purchase PMI when they are unable to make the required down payment. A borrower does not get the freedom to shop around and purchase this insurance. It is their lenders who will choose the insurance provider for the borrower. PMI enable lenders to offer home loans even with low down payments as it protects them against loss in case borrowers default on the mortgages. Though the lender becomes the beneficiary, the borrowers pay the premiums.

How does PMI help borrowers?

To purchase a house with a conventional home loan, borrowers will have to put down 20% of the purchase price of the property. If they do not have sufficient funds to make the required down payment, they can still purchase the house by obtaining private mortgage insurance. So, with the help of PMI, borrowers do not have to wait for years to accumulate the required down payment for fulfilling their dreams.

How much does PMI cost?

The cost of private mortgage insurance depends on the size of the home loan and the amount that borrower make as down payment. Typically, the cost of the insurance is about half of 1% of the home loan. Borrowers generally have to be pay the premiums on a monthly basis, included in the home loan payment. Private mortgage insurance is very lucrative for lenders and so they are often reluctant to end it on time. Hence, the Homeowners Protection Act (HPA) of 1998 was enacted to automatically terminate PMI when borrowers attain 22 % home equity and also gives the right to borrowers to request lenders for its cancellation when they reach 20% equity in home.

Telltale Signs of a Bad Tenant

I am sure with that headline and what I am about to say will get me some hate e-mail, but I just tell like I see it (even if it is not 100% politically correct or polite). So I stopped by one of my units in Northeast Minneapolis this weekend to find that the tenant [...]

I am sure with that headline and what I am about to say will get me some hate e-mail, but I just tell like I see it (even if it is not 100% politically correct or polite). So I stopped by one of my units in Northeast Minneapolis this weekend to find that the tenant moved out in the middle of the night, owing me May rent.  Nice!  On top of that they left a couple pieces of furniture in the house, 2 beds in the yard, and no cleaning (surprise).  How did this happen to me again?

As I was having a little pity party in my unit, I had an epiphany.  This tenant had some telltale signs that I should have picked up on when I showed her the unit the first time.  While none of these are 100% reliable and I am sure there are many exceptions, and while I am sure I will get hate mail for saying some of these things, just chalk this up to my gut feeling and experience over the years.  Here are some correlations that I have noticed with bad tenants:

• One of my big pet peeves is seeing window screens pushed out or damaged on rental properties.  I don’t think I have ever wrecked a screen at my house.  I see tenants push them out all the time.  In fact I had a tenant last summer simply push the window air conditioner through the screen instead of removing it!  Bad tenants seem to treat the screens on the house like the treat the rest of the house.  They abuse it.  By stopping by and checking out their current living situation, you should be able to notice this.
• When you are running the tenant’s application, if there are any credit issues, collection items, or evictions, that is going to continue to be a problem.  Now I understand if you got laid off, went through a divorce, got sick and had a period in your life well that is explainable, but most bad tenants just seem to have no regard for payment of bills.  Just like any bad habit, once they get used to doing it often, it gets easy.

While I could go on and on, these are some quick thoughts that come to mind (and help me vent my frustrations).

Deposit Bridging No Money Down Investment

Jakob Austin from the UK writes our guest post today about different types of financing.  This is very similar to our Rehab Financing that we use.
If deposits aren’t available as ready cash it is advisable to be able to borrow it. Bridging is of two types open bridging and closed bridging. In open bridging, lenders [...]

Jakob Austin from the UK writes our guest post today about different types of financing.  This is very similar to our Rehab Financing that we use.

If deposits aren’t available as ready cash it is advisable to be able to borrow it. Bridging is of two types open bridging and closed bridging. In open bridging, lenders don’t know when the money will be repaid while in closed bridging they know it.

Closed Bridging or Deposit Bridging

It is offered as a secured short-term loan against any residential property. It requires Market Value lending where  investment doesn’t come from a vendor but a third party. Deposit bridging, works well for individual resale properties. If the incentives are high enough it can result in a No Money Down investment but it is usually a Low Money Down.

Same Day Bridge and Refinance

Mortgage Express allows investors to buy a property at a net price, using short term bridging finance (24 hours). The investor immediately re-mortgage the property, based on the market valuation. It was an excellent product but has been withdrawn recently. You can still use the bridge and re-mortgage (http://en.wikipedia.org/wiki/Remortgage) system, but have to wait for 6-12 months to do the re-mortgage.

Open Bridging

In this Short and Medium Term Techniques are used for Low and No Money Down. Lenders fund short term finance up to 12 months. They will lend up to 70% of Open Market Value. Many lenders restrict the maximum borrowing to 85% of the cost, no matter what the open market value and the purchase price is. However if you pledge another property, you can borrow up to 100% including all costs. This would result in a true No Money Down deal.

Open Bridging is suitable for investment property with large discounts, new build and re-sales, auction property and distressed sales. However open bridging isn’t advisable as the cost of open bridging is high, obtaining discounts is difficult and the investor cannot commit on a mortgage 6-12 months ahead.

There are many sourcing companies in UK which advise investors on deposit bridging. Axis Property Investment (http://www.axispropertyinvestment.com/) is one of them and has built expertise over this domain. To know more about deposit bridging and other investment methods visit  http://www.axispropertyinvestment.com/learn.html.

Summary: Deposit Bridging is becoming an integral part in a No Money Down investment. There are two types of bridging Open Bridging and Close Bridging.

Back on Market-Rehabbed Saint Paul Duplex

I love working with investors.  Maybe one of my favorite parts of my job is seeing people take properties that were previously run down, neglected, ugly (and sometimes almost destroyed), and bring them back to life and restore them to their beauty.  This Saint Paul home is no exception.
Downstairs this duplex had no kitchen left [...]

I love working with investors.  Maybe one of my favorite parts of my job is seeing people take properties that were previously run down, neglected, ugly (and sometimes almost destroyed), and bring them back to life and restore them to their beauty.  This Saint Paul home is no exception.

Downstairs this duplex had no kitchen left and someone had tried to combine two of the three bedrooms to make a larger master suite (removing the hardwood floors in the process).  The upstairs tenants had destroyed the bathroom and the property did not have a working heating system.  Once my investor purchased it, they found that the entire plumbing system was incorrect installed.

Needless to say, they spent considerable time and money to restore this 1928 Crocus Hill duplex back to its original glory.  I love it (I was tempted to tell my wife to start packing as we are moving in!).  Here is just a partial list of the work they did:

• New kitchens including cabinets, counter tops, appliances, and tile floors
• New bathrooms with all new plumbing and tile throughout
• Refinished hardwood floors and restored woodwork
• New Bryant furnaces in each unit
• Upgraded plumbing (both waste and supply) including 2 new water heaters

Each unit is 3 bedrooms and 1 bath.  This property will work for either an investor or an owner occupant.  The seller is very comfortable that you could rent either apartment for $1250 per month each.

Check out the website for 728 Dayton Avenue.