Investing in Real Estate: Economists expect rents to continue to rise in 2012

Common Mistakes To Avoid

Investing in real estate can be rewarding- and profitable – if you have the right property in the right area at the right rental price. Make a single mistake in your investing plan and you can end up facing problems that will eat away at any profits you hoped to gain.
Contact me at any time with your property investing questions. I am here to help you to avoid these common investor mistakes.

Cheap Does Not Always Mean Good

Just because the property is inexpensive doesn’t make it a great investment. If the property does not fit the needs of your target renters, you’ll be unlikely to rent the property continuously and effectively and will likely lose money in the long term on the ‘cheap’ deal.

Empty Equals Lost Money

If your renters turn over quickly, leaving gaps of time the property unrented, you’ll likely not make your investment goals. Check on the rental history of a property before purchase and also examine the amenities around the home including proximity to transportation, shopping and workplaces as well as the quality of the schools. If the property is not in an attractive area, fewer renters will want to live there.

Know Your Costs


When you start investing in real estate, you need to know exactly how much money you can afford for closing costs, fix-up and maintenance, taxes and general holding costs. Be prepared for unexpected repair costs for problem tenants, remodeling that uncover more issues that need fixing, and big-ticket items that may need replacing on short notice. Ensure you have a suitable cushion of cash for these expenses.

It’s Complicated

Owning your own home is one thing. Owning an investment property is completely different. Besides having to adhere to local laws for landlords, you may eventually find it easier to hire a property manager, which could account for around 10%-15% of the monthly rental. If your profit margins are predicted to be thin, you may want to reconsider your investment and keep looking for different property.

Call Tatyana: 443-527-4375

What is FHA?

What is FHA?
The National Housing Act of 1934 established the Federal Housing Administration (FHA). In 1965, the FHA becomes part of the US Department of Housing and Urban Development(HUD). Since 1934, the FHA and HUD have insured over 34 million mortgages.

The FHA has also been active in financing the development of multi-family housing. The FHA loan process requires borrowers to have no foreclosures in the past three years and no bankruptcies in the past two years. FHA current down payment requirement is 3.5%. For many years FHA rules require every borrower to put down a minimum of 3.5 present to qualify for a loan. However, this year the organization raised that minimum that amount to 10% for borrowers who had a FICO score (credit score) lower then 580 in order to protect its financial reserves.

What is the limit for the amount of an FHA loan?
It depends on the market of the property being purchased. FHA limits are set on the basis of local area median home price. In low-cost areas, the limit is $271,050, but it could go as high as $729,750 in high cost areas. You can find the FHA's loan limits for your market at http://www.fha.com/lending_limits_state.cfm?state=MARYLAND

If you decide to seek an FHA loan there are certain guidelines that Agency loan counselors will want you to meet. Two of the most important are the relative amounts of your mortgage and your household income, and the monthly mortgage payment in relation to your total monthly debt obligations.

Generally, the FHA will want your mortgage payment (generally meaning principal, interest, property taxes and property insurance — PITI) to be no more than 31% of your gross monthly income. Further, your total monthly debt obligation including the mortgage; credit cards; auto loans; student loans; etc. should come to no more than 43% of your monthly income. These ratios are more generous than many that you will find for non-FHA loans being offered today. Even higher ratios are available if you are purchasing an energy-efficient home. The so-called “stretch” ratio is 33/45 — 33 percent for PITI and 45 percent for all ongoing monthly payments. The FHA requires an appraisal of the property. Beyond physical inspection, the applicant must disclose all “sales concessions” to the appraiser. Those may include loan discount points, origination fees, interest rate buy downs, closing cost assistance, payment of condominium fees, builder incentives, down payment assistance or monetary gifts. The FHA has a list of closing costs which it considers reasonable and customary. Those include:

•Lender’s origination fee (one percent maximum)
•Attorney’s fees
•Appraisal fee
•Inspection fee
•Title insurance and title examination fee
•Property survey
•Credit reports (actual cost)
•Transfer taxes and recording fees

If you are looking to buy condo from condo building - half of the units must be occupied by their owners. The condo must also be thre borrower's primary residence. Additionally, the building must meet FHA and HUD standards. To find out if the development has been approved, go to: https://entp.hud.gov/idapp/html/condlook.cfm

If you still have questions about FHA,
please call Tatyana: 443-527-4375