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Rent Record
Records continue to be broken in real estate, including the rental market.
Rents just rose another $2 per month to $1,594, a new record.
The annual rent growth of 13.5% nationally in 2021 was more than double any previous year, and apartment absorption counted nearly 600,000 units, which is roughly 50 percent more than the previous annual high, set in 2015.
The single-family rental market continues to outperform the multifamily sector.
Throughout 2021, the average U.S. asking rent gained $190 and 2022 is forecasted to increase by another 5%.
Source: Multi-Housing News
Five Reasons You Need Renters Insurance
It might be tempting as a renter to think that you don’t need an insurance policy if you’re renting an apartment or home, but not having one could cost you more than you think. A 2016 poll by the Insurance Information Institute found that only 41 percent of renters have their own renters insurance policy. Here are a few reasons why it’s important to have your own insurance policy as a renter.
- To cover your belongings.
In the event that a fire, break-in or other incident occurs that results in the damage or loss of your personal belongings, your landlord’s insurance policy will not pay for their replacement. Consider how much it could cost to replace your clothes, furniture, electronics and other household items. In order to make sure you have the coverage to replace your lost items, it’s critical to have your own renters insurance policy.
- To cover people who come to your residence.
If someone were to visit your home and become injured, you could be held liable for their injury and any related medical bills and costs. Having renters insurance helps protect you against this liability, and can help pay for legal expenses in addition to medical bills.
- To cover things that might be stolen outside of your home.
Your renters insurance may actually help cover you in incidents that happen away from your home. For example, if some of your personal belongings are stolen from your vehicle, it is unlikely that your auto insurance will cover the theft. However, it’s much more likely that your renters insurance will cover it.
- Your landlord might require it.
Agreeing to purchase a rental policy might be a requirement of your landlord. But even if it isn’t, having renter insurance may help your rental application get accepted and it helps show your landlord that you’re a responsible renter.
- It won’t break the bank.
Rental policies are usually pretty inexpensive. According to the National Association of Insurance Commissioners, the average rental insurance policy costs $190 per year. That amounts to less than $16 per month.
If you’re wondering whether or not you need a rental insurance policy, talk to your insurance representative or reach out to the professionals at Long & Foster Insurance. They can help guide you to the right policy for your needs so you get the right amount of coverage at the right price for your budget.
This blog was re-posted with the permission of Long & Foster.
For more information on Windermere Evergreen please contact us here.
Investing in Real Estate Rentals
Real estate investments are a large percentage of all home sales, accounting for 24 percent of real estate transactions in 2012, according to the National Association of REALTORS®. If you are looking to feather your retirement nest, rental properties can provide an additional source of monthly income. They’re also a good way to diversify you investment portfolio if your 401(k) or other retirement plans are primarily held in stocks and bonds.
To determine if investing in a rental property is the right choice for you, here are a few things to consider.
Figuring out the dollars and sense
The first step is to calculate the potential cash flow; this is the amount of money a property brings in and the amount you need to pay out to cover expenses. It’s not uncommon for rental properties to start out having a negative cash flow which means that the amount you collect for rent does not cover the mortgage payment. If that is the case, you need to determine whether you feel comfortable making this additional cash outlay each month. Here’s how to estimate what your monthly cash flow will be.
1.Estimate your income
The first step is to determine the amount of rent you can charge for the property. Look at what comparable homes (same size, location, amenities) are renting for in your area. You can get a good idea by browsing craigslist, Zillow or Trulia for rental properties. When estimating your income, allow for the amount of time that your property may be vacant. Most landlords factor in about five percent per year; however, figures vary depending on the current rental market in your area.
2.Tally up your expenses
Your monthly mortgage payment and property taxes are your largest expenses. You may also end up picking up the tab for utilities, such as garbage, water, or gas. Again, check what comparable rental properties are offering in your market. If you do plan on paying utilities, use your own usage as a ballpark estimate.
Property insurance is another cost. Your insurance company can tell you what the premium will be if you utilize the property as a rental.
Rental properties need repairs and maintenance just like any other home. Appliances break, plumbing leaks, fixtures wear out. Figure on spending about one percent of the property’s value per year on maintenance, repairs, and cleaning.
Finding a good tenant always pays in the long run, but it does take time and money to conduct and effective search. If you use a property management company or rental broker, include those fees. If you are conducting the tenant search yourself, add in any advertising expenses and a nominal cost, about $30, for running credit checks on prospective tenants.
The good news about all these operating and maintenance expenses is that they may be deducted from your rental income on your taxes. If you’re thinking about upgrading the property, keep in mind that expenses related to improvements to the property must be depreciated over time, rather than deducted in the year paid. Improvements are designed as actions that add to the value of the property or substantially prolong its life. Examples include adding a new bathroom, remodeling a kitchen, installing insulation or building a deck.
3.Calculate the cash flow
Now total all the monthly expenses and subtract that number from your estimated monthly income to determine your cash flow. To fully evaluate the investment, you also want to factor in the tax write-off benefits of depreciation. Depreciation is an accounting deduction that the IRS allows you to take for the overall wear and tear that occurs on the home over time. Only the building can be depreciated, not that land. The value of a residential structure is depreciated over 27 ½ years at a rate of 3.64 percent of the building value per year. For example, if you buy a residential rental property for $300,000, and the building is worth $200,000, you can take $7,280 each year as a depreciation deduction ($200,000 x .0364)
In addition, if your rental property shows a loss for the year, you may be able to deduct the loss on your tax return. It’s a good idea to consult with your tax advisor to help determine which deductions you qualify for and other tax implications for your situation.
For more information on Windermere Evergreen please contact us here.
Investing in Rental Property: The Risks, Rewards, and Benefits of Owning Rental Property
One area of the real estate market that is thriving right now is rental property.All indications suggest that the rental market will continue to improve because of low vacancy rates and rising rents. In fact, the demand for rentals is predicted to far exceed supply through 2016, with 4.5 million new renters expected to enter the market in the next five years.
What to consider before buying a rental
Being a landlord has its challenges. The recession took a toll on rental prices for a few years and any future economic downturns could do the same. Once the job market returns to normal, there’s a strong possibility that more people will choose to move from rentals into homes of their own. And the demand for rental properties could become oversaturated at some point, resulting in an investment bubble of its own.
What’s more, while the income from a rental property can be significant, it can take at least five years before you’re making much more than what you need just to cover the mortgage and expenses. In other words, the return on your investment doesn’t happen overnight.
However, in the long run, if you select the right property, it could turn out to be one of your best investment decisions ever—especially since rental real estate provides more tax benefits than almost any other investment.
Tax deductions for the taking
One of the greatest things about owning rental properties is the fact that you’re able to deduct so many of the associated expenses, including a sizeable portion of your monthly mortgage payment.
The commissions and fees paid to obtain your mortgage are not deductable, but the mortgage interest you pay each month is, including any money you pay into an escrow account to cover taxes and insurance. Whatever your mortgage company reports as interest on your 1098 form at the end of each year can likely be deducted.
For example, you may be eligible to deduct credit card interest for goods and services used in a rental activity, repairs made to the building, travel related to your rental (local or long distance), expenses related to home office or workshop devoted to your rental, the wages of anyone you hire to work on the building, damages to your rental property, associated insurance premiums, and fees you pay for legal and professional services. However, as is the case with any transaction of this type, be sure to consult your attorney or accountant for detailed tax information.
What to look for
As with any real estate investment, the location of the property and its overall condition are both key. But with rental properties, there are some other, unique factors you’ll also want to consider.
Utilities
Look for a building with separate utilities (water, electric, and gas, etc.) for each rental unit. This will make it far easier to legally charge for the fair use of what can be a very costly monthly expense.
Competition
If your property is one of the few rentals in the neighborhood, there will be less competition for interested renters.
Transportation
Rentals that are near popular public transportation options and/or major freeways (without being so close that noise is an issue) are usually easier to rent—and demand more money.
Landscaping
Properties with small yards and fewer plantings are far easier and less expensive to manage.
Off-street parking
Not only is off-street parking a desirable feature (people with nice cars usually don’t like to park on the street), it’s also a requirement for rental properties in some communities.
How to start your search
Unlike homes, rental properties do not typically have a visible ‘for-sale’ sign standing out front (as landlords don’t want to irritate, bring attention to their current renters, or turn off any prospective renters). Therefore, if you are interested in a rental property, your best option is to schedule an appointment with your real estate agent/broker to discuss your investment goals and identify what opportunities currently exist in the market place.
