Hedging, Client Retention Tools; STRATMOR on the ICE 24 Event; MBA on the NAR Settlement; Dual Compensation
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Hedging, Client Retention Tools; STRATMOR on the ICE 24 Event; MBA on the NAR Settlement; Dual Compensation
By: Rob Chrisman
7 Hours, 19 Min ago
I saw a sign recently: “Psychic Fair Cancelled Due to Unforeseen Circumstances.” No one can see into the future, or can read minds, and communication is always a good thing. But if I had to predict something, mortgage-related fees (what is disclosed, and how, at closing) will be something in which the CFPB would become increasingly interested. The CFPB believes that “junk” fees are driving up housing costs, and wants to hear from you. Regarding costs, many lenders are wondering about the proposed NAR settlement, its costs, and even dual licensing. Will we see an increase in the number of dual licenses with the recent NAR settlement, and what about the states that do not allow a person to maintain both NMLS licenses and Realtor Licenses simultaneously? Attorney Brian Levy addressed dual compensation in one of his Musings. (Found here, this week’s podcast is sponsored by Visio Lending. Visio is the nation’s premier lender for buy and hold investors with over 2.5 billion closed loans for single-family rental properties, including vacation rentals. Today’s has a roundtable discussion from the ICE conference in Vegas with Brett Brumley, Matt Kovac, Justin Demola, and Rob Chrisman on automation and its benefits to lenders and vendors.)
Lender and Broker Services, Products, and Software
Truv Teams Up with Fannie Mae to Revolutionize Borrower Verifications! We’re thrilled to announce that Truv is now a conditionally authorized report supplier for mortgage lenders using Fannie Mae’s Desktop Underwriter® (DU®) validation service. With Truv’s Day 1 Certainty support lenders can reduce risk of fraud and buybacks by leveraging real-time data directly from the source, lower costs by reverifying a borrower’s income and employment data at no additional expense, accelerate growth by increasing pull-through rates and closing loans faster and improve productivity by reducing time spent collecting data to underwrite loans. Learn more here!
With the recent commissions’ settlement, loan officers must now reevaluate their engagement strategies with their agent network. The key ingredient in long-term success boils down to something so simple, yet very impactful: building closer relationships with homeowners. That’s why loan officers are turning to the Milestones “Super App,” a powerful platform that delivers white-labeled portals to manage the home, build wealth, and everything in between. The value loan officers can bring to homeowners NOW, in close partnership with their agent network, can help them build profitable, long-term relationships for years. Want to start serving your homeowners better? Talk to Sales.
STRATMOR on Customer Experience
When it comes to customer experience, STRATMOR Group covered all angles this week at ICE Experience 24 in Las Vegas. STRATMOR advisors were a common sight on the conference stages, with Brett McCracken sharing his characteristic bombshell secret shopping insights, Mike Seminari revealing some eye-opening truths about the critical importance of having a clean and simple loan process, Sue Woodard challenging tech vendors to look for ways to add value not only to the lender, but the borrower as well, and Garth Graham encouraging lenders to take a hard look at their compensation models to make sure they “get what they pay for.” Looking to refine your organization’s strategies? Contact STRATMOR today.
MBA’s Role in NAR Settlement
No one wants to harm the fragile first-time home buyer, or further dampen the activity in real estate sales and inventory. The Mortgage Bankers Association weighed in on last week’s announced proposed National Association of Realtors’ settlement. Remember that, despite the furor of news and conjecture, the Settlement is subject to court approval although the MBA states we’re likely see changes to go into effect mid-July 2024. “There is also a possibility that the Department of Justice may weigh in on whether the settlement goes far enough, which could result in changes, delays, or abandonment of the settlement. NAR will continue to update its site with the latest information.
“The MBA will work with NAR and other trade associations to limit possible disruption from the settlement and ensure that its provisions are not overly disruptive to home financing. It is important to understand how a change to buyer paid commissions might impact seller contribution limits and we have already advocated for the Department of Veterans Affairs (VA) to lift its prohibition on veterans’ payment for the buyer side agent.
“The proposed nationwide class of home sellers has reached a $418 million joint settlement with NAR that will resolve claims in some of the antitrust class actions against NAR. The Settlement with NAR is in addition to prior settlements (totaling $208.5 million) reached with defendants Anywhere Real Estate, RE/MAX, and Keller Williams.
“Under the terms of the Settlement, NAR will be responsible for paying $418 million in four annual installments along with interest, for the benefit of home sellers across the United States, as well as $3 million toward settlement notices. It also provides for far-reaching changes to NAR’s rules governing real estate broker compensation and the MLS system.
“NAR’s release does not cover agents affiliated with HomeServices of America and its related companies as they are still litigating. And firms that have a total transaction volume of $2 billion or above are not covered by the Settlement. However, the Settlement creates a framework for these larger firms to opt-in to the Settlement to resolve actual or potential claims against them. A firm that wishes to opt-in to the settlement route must deposit into an escrow account an amount equal to 0.0025 multiplied by its average annual ‘Total Transaction Volume’ over the most recent four calendar years and agree to not to engage in the certain prohibited practices. It is unclear at this stage whether the larger firms will in fact opt-in to the Settlement. A similar opt- in provision exists for independent MLS, with the payment being 100 multiplied by their 2023 subscribers.
“In the Settlement, NAR has agreed to various practice changes which are to begin 120 days after the plaintiffs seek preliminary approval of the Settlement. It will eliminate and prohibit any requirement by NAR and NAR MLSs that listing brokers or sellers must make offers of compensation to cooperating brokers or other buyer representatives, and prohibit and eliminate any requirement that such offers, if made, must be blanket, unconditional or unilateral (effectively, eliminating its rules requiring “cooperative” commissions as a condition of listing a home on the MLS).
“It requires MLS participants working with a buyer enter into a written agreement before the buyer tours a home with the following: (a) specify and conspicuously disclose the amount or rate of compensation to be received or how the amount will be determined, (b) the amount of compensation must be objectively ascertainable… It cannot be open-ended such as ‘buyer broker compensation shall be whatever amount the seller is offering to the buyer,’ (c) MLS participants may not receive compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer.”
The language, “Prohibits NAR MLS participants, subscribers, other real estate brokers, other real estate agents, and sellers from making offers of compensation on the multiple listing service to cooperating brokers or other buyer representatives (either directly or through buyers) or disclosing on the multiple listing service listing broker compensation or total brokerage compensation. It eliminates and prohibits any requirements conditioning participation or membership in a NAR MLS on offering or accepting offers of cooperative compensation.
“Agree not to create, facilitate, or support any non-MLS mechanism for listing brokers or sellers to make offers of compensation to cooperating brokers or other buyer representatives. Require NAR MLS participants acting for sellers to conspicuously disclose to sellers and obtain seller approval for any payment or offer of payment that the listing broker or seller will make to another broker, agent, or other representative acting for buyers. And require MLS participants to disclose to prospective sellers and buyers in conspicuous language that broker commissions are not set by law and are fully negotiable.”
The MBA warned that cooperative commission is not banned; listing brokers and sellers can continue to offer compensation for buyer broker services, just not through the MLS. And the Settlement does not prevent sellers from offering seller concessions through the MLS (e.g., for general buyer closing costs), so long as such concessions are not limited to or conditioned on the use of or payment to a buyer broker.”
The settlement does nothing, unfortunately, to address incompetent, inexperienced real estate agents that do little to promote professionalism, often a complaint from the agent representing the opposite side of the transaction.
Capital Markets
As we mark four years since the big shake-ups caused by the COVID-19 pandemic, the mortgage industry continues to navigate its aftermath, especially in the MBS market. Despite the challenges, there’s been remarkable progress and resilience shown. Vice Capital Markets is one company that has stood firm in the face of adversity, consistently providing steadfast support and innovative strategies to its clients throughout these uncertain times. The company recently shared this video reflecting on the tremendous impact of the pandemic on our industry. If, like me, you’ll be on-site next week at TMC’s The Mane Event in Louisville, Vice Capital President Troy Baars will be on hand to chat about all things capital markets. Drop him a line if you’d like to meet.
Yesterday granted market participants more time to digest the results of this week’s Federal Open Market Committee meeting. As a reminder, the Fed maintained the fed funds rate at current levels and signaled that it would begin cutting this year, which kicked off a post-meeting rally in markets. There’s now more confidence that rate cuts are coming in the second half of the year than there was prior to the meeting. The revised “dot-plot” continues to show the majority of the committee believes that three 25 basis point cuts is the most likely outcome before we close the books on 2024. That said, there were more votes for two 2024 cuts than there were in December.
As far as economic releases, yesterday’s release of flash Manufacturing and Services PMI reading from major economies showed that most pointing to a continued contraction in both sectors. The U.S. was an outlier as both Manufacturing and Services PMI readings indicated an ongoing expansion. Those reports contributed to the early pressure, as did another solid jobless claims reading and a strong existing home sales report.
But existing home sales easily beat expectations and rose 9.5 percent during February. Although historically slow, the 4.38-million-unit pace marks the strongest pace since February 2023, and is likely due to the dip in mortgage rates that occurred at the beginning of the year. Inventory remains tight, but a small swell of new supply hitting the market was another factor driving the faster sales pace.
There is no notable data scheduled for release today but plenty of Fed speakers no doubt reinforcing the message from earlier this week: Chair Powell, Governor Bowman, Fed Vice Chair Jefferson, Fed Vice Chair for Supervision Barr, and Atlanta Fed President Bostic are all scheduled to deliver remarks. We begin the day with Agency MBS prices better .125-.250 than Thursday night, the 10-year yielding 4.22 after closing yesterday at 4.27 percent, and the 2-year at 4.60.
Jobs
“At Evergreen Home Loans, we’re proud of our strong female leadership, with 68 percent of our team being women, including 11 branch managers. We’re on a mission to expand our team with talented Loan Officers who are eager to work in an empowering, supportive environment. Here, you’ll join a group of industry-leading professionals who thrive under the guidance of skilled women leaders. We offer a nurturing space for growth, innovation, and success. If you’re a Loan Officer aspiring to excel in a company that values diversity and leadership, Evergreen Home Loans is your destination. Join us and shape a brighter future in the mortgage industry. To view all job listings, visit Mortgage Jobs.”
“Looking to thrive in the mortgage game? Northpointe Bank has been crushing it for 25 years, leading the charge with a robust product line of traditional, non-QM, and portfolio loans. We’re looking for loan officers and sales teams to join our retail lending team nationwide. Why us? Because we’re not just any bank! Northpointe is like finding a unicorn in the mortgage world: a bank with home lending at its core. Plus, since we’re a bank, there’s no need for loan officers to deal with pesky state licensing. You can originate in all 50 states on day one! Ready to join our winning team? Contact Cody Archer today to hear why Northpointe Bank should be your home.”
As mentioned in yesterday’s Commentary, AmeriHome’s Chief Operating Officer John Hedlund is leaving the company. Also effective April 7, Chief Risk Officer Mark Miller, and Chief Information Officer Dave Andersen, will also be leaving AmeriHome. AmeriHome (the nation’s largest bank-owned correspondent investor) has promoted the following, effective today: Anthony Ho, Managing Director, Chief Credit Officer, Greg McElroy, Managing Director, Chief Operations Officer, Steve Kolker, Managing Director, Correspondent Sales, and Peter Roeske, Managing Director, Retail Lending. AmeriHome Mortgage is a Western Alliance Bank company.
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Mandatory Execution, Accounting, Warehouse, TPO Products; STRATMOR on Comp; Upcoming Events and Training
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Mandatory Execution, Accounting, Warehouse, TPO Products; STRATMOR on Comp; Upcoming Events and Training
By: Rob Chrisman
1 Hour, 35 Min ago
“90 percent of bald people still own a comb; they just can’t part with it.” Many companies that retained servicing in 2020 and 2021, complete with low interest rates and borrowers with large amounts of equity & abilities to repay, have made the decision to part with that servicing. Packages of servicing rights continue to hit the market. In a free market, for every seller there’s a buyer for these packages. And in a free market, where most loans from different lenders are often put into the same securities or at least sold at roughly the same price in the secondary markets with approximately the same servicing value, companies that manufacture those loans at the lowest cost stand a better chance of surviving than those that don’t. Turning to borrowers, consumer costs are certainly in the news, especially with any implications from the proposed NAR lawsuit settlement, specifically if the agreement leads to borrowers paying for their real estate commission when they previously did not. (Readers should know that the CFPB does not regulate real estate agents, and the TRID forms already allow disclosure of the fee to be disclosed on either the buyer’s or seller’s side.) Found here, this week’s podcast is sponsored by Visio Lending. Visio is the nation’s premier lender for buy and hold investors with over 2.5 billion closed loans for single-family rental properties, including vacation rentals. Today’s has an interview with attorney Marty Green on the implications of the recent NAR settlement.)
Lender and Broker Services, Products, and Software
“Discover the power of partnership with Planet Home Lending Correspondent. Our continually refined product lineup spans vanilla to niche products all tailored to your unique needs: Best effort, mandatory AOT, delegated, or non-delegated. Connect with Planet at the Great River Conference in Memphis, TN, April 16-18. To schedule your meeting, reach out to Regional Sales Managers Joe Griffin 859-806-3323 and Gary Strohwig 262-224-4435, or Renovation Account Executive Margie Walsh 732-673-6228. Not going to Great River this year? Click here to download the latest version of our Product Highlights, then put Planet to work for you in 2024.”
PlainsCapital Bank National Warehouse Lending, a subsidiary of Hilltop Holdings (NYSE: HTH), understands the importance of efficiency when it comes to meeting mortgage lenders funding requests. “Express Funding” is how we help our customers reduce the time needed to get loans funded quickly. Express Funding allows our customers to submit multiple loans for funding in one simple data upload, whether it is one loan or 100 loans. We have a growing list of 5,000+ approved closing agents, No Doc funding requirements and funding turn times averaging under 20 minutes! As a well-capitalized financially strong banking partner we give our customers confidence in an uncertain market. If you are interested in learning more about PlainsCapital Bank National Warehouse Lending please contact Deric Barnett, (469)955-6786.
Make your general ledger profitable and run your business more efficiently with Loan Vision and LV-PAM. Instead of “staying alive until ‘25”, with Loan Vision, a software built BY the mortgage industry FOR the mortgage industry, you can “produce more in 24!” Customers on Loan Vision see improvements of 30 percent+ decrease in days to close the books, 20 percent+ reduction in accounting headcount, complete LOS to G/L automation, and improved reporting and visibility. Interested in learning how Loan Vision can help you run a more efficient and profitable company? Contact Carl Wooloff to schedule a call today.
For independent mortgage banks coping with shrinking production volumes and rising costs per loan, outsourcing accounting is an elegant solution to what’s become a very common challenge. Whether you have no accounting expertise in-house or you have a new team with no mortgage experience, you can tap the Richey May Client Accounting and Advisory Services (CAAS) team for the support you need. This team is stacked with mortgage industry experts who can tailor your solution to meet your most pressing needs in a volatile time, with no training needed. Need help transitioning to loan level accounting? Need a fully outsourced function? You got it! Need industry training for your controller? We can do that. In this article, Richey May’s expert Kim Dittmer answers all your most frequently asked questions around outsourced accounting as a mortgage bank.
STRATMOR Comp Survey
Lenders, how have rising rates and shrinking margins impacted your 2024 compensation plans? STRATMOR Group’s Spring 2024 Compensation Connection® Study provides valuable comparisons on compensation components, incentive plan structure, compensation percentiles, and more. Three-year trailing data is also included with most data points. Find out how you compare to your peers by participating. Results will only be available to participants, so register today! Questions? Email [email protected].
Webinars, Events, and Training into April
(A good place for longer term conference planning is to start is here, and click on “Conference List” for in-person events in the future.)
How lenders can save money: Most lenders are painfully aware of rising loan origination costs, which is a common trend in a down market. Yet some lenders are fighting back… Like Lower, which has found a way to save as much as 80 percent on these operational line items and win more loans. Sign up for this exclusive webinar taking place today at 11AM PT, featuring James Duncan and Donielle Geiser (Lower), and Richard Grieser (Truv), and yours truly where they’ll share their take on today’s market and how they’ve reduced costs on operational line items previously thought to be beyond a lender’s control.
Texas Mortgage Bankers Association monthly education webinar: “Guardians of Security.” Join Texas Mortgage Bankers Association for an insightful presentation on navigating cyber risks in the mortgage lending marketplace, Guardians of Security – Navigating Cyber Risks in the Mortgage Industry, today, 11:30 am – 12:30 pm.
Tomorrow, March 22, is this week’s episode of The Mortgage Collaborative’s Rundown covering current events in the mortgage market for 30-45 minutes starting at noon PT, 3PM ET, in “The Rundown”. Tomorrow’s will be co-hosted by TMC CEO David Kittle.
Looking for more in-depth commentary on weekly mortgage news? Register here for “Mortgage Matters: The Weekly Roundup” presented by Lenders One. Every Wednesday at 2:00 PM EST/11:00 AM PT is a dive into a range of mortgage-related topics, including market trends, interest rate fluctuations, innovative mortgage products, and industry advancements. Next week, watch MBA President Bob Broeksmit discuss the industry!
FHA Servicing Quality Assurance Update, Virtual Webinar on March 27, 2– 3:30 PM (Eastern) will provide FHA quality assurance results for calendar year 2023 focusing on top findings from loan-level servicing and lender-level operational reviews. The webinar concludes with a live question and answer session.
On Thursday, March 28th from 2:00-3:00 PM, join CoAMP and Michael Flynn, Of Counsel, w/Buchalter for an informative session moving forward in the current mortgage market could look like, including: What are the areas of increased regulatory activity and likely new rules? The impact on brokers of likely foreclosure increases (increased attacks on whether loans meet the ATR and QM requirements. And increased repurchase and indemnity demands from lenders to brokers). The cost is $10 for CoAMP Member and Member Guests/$25 for Future Members (which can be credited towards an annual CoAMP membership). A virtual link will be sent prior to the event.
Want to hear how top producers are thriving in today’s market? Don’t miss the Modern Mortgage Summit on March 28th, hosted by industry leaders Dave Savage and Todd Bookspan. Tune in virtually to hear from 12+ of the nation’s top mortgage professionals, including Jeremy Forcier, Shayla Gifford, and Dan Keller, as they share their best strategies for success in a TED-talk style format. Virtual tickets are only $100, and a portion of your ticket purchase supports the financial literacy nonprofit, FirstHome IQ. Secure your ticket today at modernmortgagesummit.com.
During a virtual press conference on March 28, ABA Economic Advisory Committee Chair Simona Mocuta, managing director and chief economist at State Street Global Advisors, will present the latest consensus economic forecast from this panel of top economists at some of North America’s largest banks. The Committee’s updated outlook comes as inflation gradually abates, economic uncertainty persists, and the Federal Reserve considers a less restrictive policy. The committee’s forecast will include the group’s latest assessment of GDP growth, unemployment, inflation, interest rates and credit conditions. RSVP required: Please contact Ava Castelli to RSVP and receive login/dial-in information.
FHA is offering In-Person, Free Underwriting Training in Denver, CO., April 10, 9:00 AM – 12:00 PM MST. Training will provide an overview of FHA underwriting procedures as outlined in FHA’s Single Family Housing Policy Handbook 4000.1 and addresses several industry-related frequently asked questions (FAQs). This training will also take an in-depth look at a variety of topics including credit, income, and asset (CIA) documentation; manual underwriting; automated underwriting systems (AUS); closing; and more.
FHA is offering In-Person, Free FHA Appraisal Training in Denver, CO., April 10, 1– 4 PM MST. Training will provide an overview of FHA appraisal protocol and updates to FHA appraisal policy as outlined in FHA’s Single Family Housing Policy Handbook 4000.1. This training will also take an in-depth look at a variety of appraisal-related topics including property acceptability criteria; minimum property requirements; property defects; appraiser responsibilities and requirements; and more.
Join the MBA of NJ, in partnership with HUD for the 2024 HUD Housing Counseling Session, April 11th, 2:00PM – 4:00PM at the Federal Reserve Bank of NY., Keys to Homeownership: Building Strategic Partnerships.
Acquire a greater perspective from industry experts at American Mortgage Conference from April 15 – 17. Held in a new location this year at the Marriott Savannah Riverfront in Georgia. Co-hosted by ABA and the North Carolina Bankers Association, this premier conference is the only mortgage event that blends business and regulation to assure you are fully up to date and fully connected to crucial professional networks.
AmeriCatalyst explores the operational impact of climate change and its profound industry-wide implications for the US housing and finance market. The event brings together senior representatives and CEOs from government entities including the White House, The Fed, Treasury and the FDIC; government housing entities; insurance companies; institutional investors; investment banks; banks; mortgage originators and servicers; homebuilders; Single Family Rental Operators and REITs; the leading data providers; economists; academic institutions; climate tech providers and world renowned climatologists. The purpose of the event is to recognize, prioritize, mobilize, and prepare for an increasingly volatile, unpredictable, and potentially uninsurable future due to extreme and catastrophic weather-related events due to climate change. AmeriCatalyst’s GOING TO EXTREMES: The Climate, Housing and Finance Summit is being held at the Gaylord National Harbor (in the Washington DC area) on April 18 and 19. Contact Toni Moss (512-461-6340) with questions.
Capital Markets
AC/DC released its masterpiece, “Back in Black,” 44 years ago. The album was a rebirth after its original lead singer’s death. After challenging times, mortgage lenders seek to get back in the black on their income statements. One solution is moving back to mandatory delivery, and Optimal Blue can help you do it. For nearly 20 years, Optimal Blue has advised and guided originators to transition from best efforts to mandatory successfully. With recent data showing the best efforts to mandatory premium above 40 basis points (bps) for conventional 30-year loans, the return on investment provides a clear path to a return to the black. Whether you are approaching or expecting a volume boost or looking to put fewer agency-eligible loans on your balance sheet, now is the time to learn how Optimal Blue can help. To learn more, connect with Mark Teteris, CMB, Optimal Blue’s director of solutions specialists.
Interested in learning more about moving from best efforts to mandatory loan sales? Maybe you’ve already moved to mandatory and are looking for even more pickup and ways to mitigate risk? Join MCT’s Moving to Mandatory Loan Sales webinar on April 4th at 11am PT to learn how mandatory loan sales is helping lenders improve profitability while reducing risk. In this webinar, MCT’s Scott Holtz, Vice President of South Regional Sales, will discuss how to leverage mandatory loan sales to improve profitability, manage risk with pipeline hedging, and operational changes needed for the transition. Register for the webinar or join MCT’s newsletter to receive the latest educational content.
In interest rate news, as was widely expected, the Fed held the federal funds target steady at a range of 5.25 percent to 5.50 percent yesterday, extending the pause on rate changes that followed their most recent hike last July. This decision was unanimous as the Fed believes that employment and inflation goals are moving into better balance. However, the committee also repeated from their prior statement made January 31st, that it “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”
Meanwhile, the latest summary of economic projections showed no change in the Fed’s median fed funds rate projection for this year (4.6 percent) while the forecast for 2025 was raised to 3.9 percent from 3.6 percent. The Core PCE forecast for 2024 was raised to slightly while the GDP growth forecast increased slightly as well from the last estimate in December. During his press conference, Fed Chairman Powell said that it will be appropriate to slow the pace of asset runoff fairly soon. Rate cut expectations increased by yesterday’s close with the implied likelihood of a June cut rising to 74 percent from 59 percent on Tuesday.
Following yesterday’s Fed events, today brings the latest decisions from the Swiss National Bank, Norges Banks, and Bank of England. The U.S. calendar has already kicked off with the Q4 current account deficit, weekly jobless claims (210k, down slightly; continuing claims 1.807 million), and Philadelphia Fed manufacturing (3.2, down but not negative).
Later today brings S&P Global flash PMIs for March, existing home sales for February, leading indicators, Treasury announcing the auction sizes for next week’s month-end supply auctions before auctioning off $16 billion reopened 10-year TIPS, Freddie Mac’s Primary Mortgage Market Survey, and remarks from Fed Vice Chair for Supervision Barr. We begin the day with Agency MBS prices a tough better than Wednesday, the 10-year yielding 4.24 after closing yesterday at 4.27, and the 2-year yield down to 4.58.
Jobs
“It’s 1999: Californication and Slim Shady dominate the charts, the iconic films Fight Club and The Matrix are released, Serena Williams wins her first Grand Slam to kick off an outrageous career and with inspiring greatness being born all around Seth Fass founds East Coast Capital. Celebrating its 25th anniversary, East Coast Capital has scored incredible victories for clients to achieve their homeownership goals. Once a small broker, NY-Based East Coast Capital is now a licensed bank across the nation, approved with Fannie, Freddie, and FHA and also specializes in underwriting Non-QM loans. Committed to providing homeowners access to capital and supporting loan officers with a diverse range of products and common-sense approach to underwriting, the movies and songs may have fallen off the playlist and Serena has retired from the courts, but born among the best, East Coast Capital still remains! Ready to Join? Email us here.”
Congratulations to John Hedlund, the Chief Operating Officer and Managing Director of AmeriHome, who has announced his retirement from the company.
Calling all applicants for Flagstar’s MortgageTech Accelerator, a highly acclaimed incubator for young fintech companies with fresh solutions for the mortgage sector, now in its fifth edition. Flagstar is looking for applicants who are making breakthroughs in all facets of the mortgage business including origination, processing, marketing, servicing, compliance, sales, underwriting, credit, and quality assessment. The program comes packed with perks like access to Flagstar senior executive mentors and a wide network of potential customers, as well as the opportunity to test solutions in a real-world controlled environment. Ranking high among the selection criteria are the potential for technological innovation, prospects for growth, and CRA impact. Past alums Greenline, Calque Inc., and Housetable, give the program a resounding thumbs-up. Check it all out here and email your pitch deck to [email protected] by April 15.
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One never knows what one will learn at a mortgage event, like yesterday learning from Lender Toolkit’s Alex K. that Collinsville, Illinois has the largest catsup bottle in the world. (The Collinsville area produces 60 percent of the world’s horseradish root, but I’ll save that tale for another time.) Later today I’ll be leaving Las Vegas, flying from Las Vegas north to Reno while President Joe Biden flies south from Reno to Las Vegas. (I imagine the chow on Air Force One beats whatever Southwest will serve up.) Nevada or nationwide, politics are certainly intertwined with housing, and vice versa. There’s the “Lock-in Effect” produced by government-induced rates. ICE reported that first-time homebuyers made up 55 percent of agency purchase mortgages in 2023, the highest for many years. Meanwhile, heard in the hallways: increasing the pool of qualified first-time home buyers without a corresponding increase in homes they’d buy is pointless… it just jacks up the starter home prices.” From someone else: “Affordable housing initiatives are not really moving the needle. Instead of eligibility at 80 percent of the AMI (area median income), why don’t they make it 50 percent?” (Found here, this week’s podcast is sponsored by Visio Lending. Visio is the nation’s premier lender for buy and hold investors with over 2.5 billion closed loans for single-family rental properties, including vacation rentals. Today’s has an interview with Experian’s Joy Mina on the income and employment verification landscape and the Experian Verify solution.)
Lender and Broker Services, Products, and Software
LoanCare®, a top U.S. mortgage subservicer, has made it easier than ever for homeowners to manage their mortgages with a newly launched, proprietary mobile app: My LoanCare Go. Offering expanded private label branding options, account-based marketing, and tailored communications, My LoanCare Go helps clients enhance their homeowners’ mortgage experience to build lasting relationships. The app is part of LoanCare’s award-winning consumer digital platform, and is available in both English and Spanish for personalized support. Reach out to learn more today!
Horse racing fans know the Kentucky Derby always takes place the first Saturday in May at Churchill Downs in Louisville. While that main event (Derby 150!) is still weeks away, Down Payment Resource (DPR) hopes to see you at The Mortgage Collaborative’s The Mane Event next week in Louisville where its co-sponsoring a Derby-themed opening reception on March 24 and will demonstrate the benefits of down payment assistance for lenders during a partner showcase. Grab your mint julep, jodhpurs, and a festive hat for this always fun “family” affair, and schedule a meeting with the DPR team.
Make your general ledger profitable and run your business more efficiently with Loan Vision and LV-PAM. Instead of “staying alive until ‘25”, with Loan Vision, a software built by the mortgage industry for the mortgage industry, you can “produce more in 24!” Customers on Loan Vision see improvements of 30 percent+ decrease in days to close the books, 20 percent+ reduction in accounting headcount, complete LOS to G/L automation, and improved reporting and visibility. Interested in learning how Loan Vision can help you run a more efficient and profitable company? Contact Carl Wooloff to schedule a call today.
“As spring blooms around us, American Financial Resources, LLC (AFR) is thrilled to announce fresh pricing enhancements that will elevate your experience with us! Our world class capital markets team has been hard at work, crafting innovative strategies to bring you pricing enhancements that will have your originators buzzing. With these changes, we’re paving the way for smoother transactions and more competitive offerings, ensuring that you receive the best possible pricing options tailored to your needs. Visit AFR’s Quick Pricer tool to witness the impact now. The new AFR provides TPOs with top-notch service and exceptional value every step of the way. So, as you revel in the beauty of this vibrant season, take a moment to celebrate the exciting improvements we’re bringing to the table. Here’s to a season filled with growth, prosperity, and flourishing opportunities! Contact us at [email protected], 1-800- 375-6071, visit www.afrwholesale.com or partner with AFR today!”
Mortgage Technology Offerings
There’s no such thing as a “one-size-fits-all” technology solution. Every financial institution is different. And modern banks, credit unions, lenders, and insurance brokers need options that make sense for their businesses, their goals, and their customers or members. The Total Expert Partner Ecosystem is a curated collection of industry-leading partners, thought leaders, and technology providers designed to help you address market challenges, drive growth, and create customers and members for life. Leverage 70+ integrations, strategic relationships with Salesforce and AWS, and a rich library of shared industry knowledge and best practices to develop the strategies that support your business goals and build the tech stack you need to put it in motion. Learn more!
Fully Customize Point-of-Sale Workflows with Maxwell’s New Blueprint Builder. Maxwell is thrilled to introduce an industry-first: the Blueprint Builder, a feature in Maxwell Point of Sale that allows lenders to drive a differentiated mortgage experience, helping them to stand out from the competition. With the Blueprint Builder, mortgage lenders can connect to over 60 third-party integrations to create a tailored workflow suited for their unique needs. Plus, lenders can adapt their digital experiences to the operations processes that work best across their products and channels, without the cost of hiring developers. To learn more about the Blueprint Builder, click here or schedule a call with the Maxwell team.
FHA, VA, Ginnie, USDA, and HECM News
Ginnie Mae’s February issuance included $30 billion of Ginnie Mae II MBS and nearly $894 million of Ginnie Mae I MBS, including nearly $816 million in loans for multifamily housing.
For the 2024 calendar year to date, Ginnie Mae has supported the pooling and securitization of more than 91,000 first-time homebuyer loans!
In the Ginnie Mae All Participants Memorandum (APM) 24-02, Ginnie Mae announced the implementation of new Cybersecurity Incident reporting requirements. These requirements are part of Ginnie Mae’s continued commitment to the security and integrity of all operational systems and critical technology infrastructure related to the issuance and servicing of Ginnie Mae Mortgage-Backed Securities (MBS). Effective immediately, Issuers must notify Ginnie Mae of a cyber security incident within 48 hours of detection.
Yes, Ginnie Mae established cybersecurity reporting requirements for program participants on Monday. Effective immediately, Ginnie issuers must notify the agency of any cybersecurity incident within 48 hours after the issue is detected. “Once the notification is received, representatives from Ginnie Mae will contact the designated point of contact to obtain additional information and establish the level of engagement needed depending on the scope and nature of the incident.”
USDA Rural Development SFHD Program posted, effective March 8th, the Fiscal Year (FY) 2024 area loan limits (based on the guidance in Handbook-1-3550, Chapter 5, Paragraph 5.6 A) are available at https://www.rd.usda.gov/files/RD-SFHAreaLoanLimitMap.pdf.
On March 4th, USDA Rural Development SFHD Program posted Advance Notice: Revisions to HB-1-3555, Chapter 15. Copies of the upcoming revisions are available for review on the Loan Origination page of the USDA LINC Training and Resource Library, under the sub-heading “New”.
USDA Rural Development Single-Family Housing Guaranteed Loan Program (SFHGLP) announced a reference sheet for obtaining a payoff and/or release of lien for a USDA Guaranteed Loan Mortgage Recovery Advance (MRA). This reference sheet includes a centralized email address for MRA inquiries and instructions on obtaining a payoff and/or a release of lien for an MRA.
In HECM news, with the Plaza Home Mortgage® Reverse Mortgage, borrowers can enjoy a multitude of benefits, including: No mortgage payment required. No Pre-Pay: Make payments as desired. Non-Recourse Loan: never owe more than the home’s value. Borrowers will maintain title to the home. Borrower’s estate retains all equity. No equity sharing: homeowners keep all future appreciation. Funds are tax free, but always consult your tax advisor. No limitations as to how the money can be used. Younger spouses (under 62) are protected. Closing costs are typically financed in the loan.
Capital Markets
A week that will be rife with central bank policy announcements (see below for some international decisions today) began with a slow retreat in the bond markets and traders paring back their expectations that the Fed will start cutting rates by June. Expectedly, this week will be dominated by the Federal Open Market Committee (FOMC) decision tomorrow where no change in the fed funds rate (range of 5.25 percent to 5.50 percent) is expected. But we will get a fresh set of economic forecasts along with a new dot plot. The first Fed rate cut is now forecast to come in mid-summer, and fed funds futures are now roughly in-line with the December dot plot, which forecasts three rate cuts this year. Thank goodness. As recently as the end of January, investors were counting on six cuts in 2024.
The Fed has made it clear that policy is restrained and that the Fed presidents don’t want to become too restrictive, but there is a risk that the Fed will sound too hawkish during this meeting which could push bond yields higher. While inflation sits above the Fed’s 2 percent target, it has been trending positively. However, mortgage rates have remained high, currently above 7 percent. With the unemployment rate rising and average hourly earnings growth decelerating, the Fed still believes inflation is likely to cool further in coming months.
Remember that aside from the FOMC, this week is packed with lots of mortgage-related economic data, including the NAHB housing market index yesterday (homebuilder sentiment jumped to an eight-month high in March, fueled by limited resale inventory and lower mortgage rates. A measure of expected sales in the next six months rose to the highest since June), building permits and housing starts today, and existing home sales on Friday.
Overnight and ahead of tomorrow’s FOMC decision and updated Summary of Economic Projections, markets will digest the latest monetary policy decisions from the BoJ (it raised rates!) and the Royal Bank of Australia (it’s done hiking rates). Today’s domestic economic calendar is under way with February housing starts and building permits (+10.7 percent, 1.521 million annualized; +1.9 percent, 1.518 million respectively). Expectations were for 1.450 million starts and 1.500 million permits versus 1.331 million starts and 1.489 million permits previously in January. Next up brings Redbook same store sales for the week ending March 16. The U.S. Treasury then announces the auction sizes for short-duration bills before auctioning $75 billion 42-day CMBs, $46 billion 1-year bills, and $13 billion reopened 20-year bonds. We begin the day with Agency MBS prices slightly improved from Monday evening, the 10-year yielding 4.32 after closing yesterday at 4.34 percent, and the 2-year at 4.71.
Jobs
Weichert Financial Services, a leading nationwide Real Estate Affiliated Mortgage Company, is seeking to bring on a VP of Mortgage Servicing. The candidate would oversee the subserving relationship with Dovenmuehle and the technical day to day of the firm’s $2+ Billion servicing portfolio, thus a prior working relationship with DMI and their internal systems would be viewed as a plus. Both Hybrid and Remote candidates for the position would be considered, with headquarters being in New Jersey. If you’re a seasoned mortgage professional with a passion for taking a long standing, well capitalized Mortgage company established in 1980 to the next level, and you’re looking for a great work/life balance, we want to hear from you. Competitive compensation including Health, Dental, 401K, and PTO. Please contact Tim McLaughlin for more details.
While today marks the arrival of Spring, Spring EQ has proudly served as the industry pioneer in home equity solutions for nearly 8 years! Whether you’re a correspondent seller looking for a new partner, or a wholesale broker in search of an expansive suite of home equity products, Spring EQ can help. The need for home equity solutions is surging among borrowers, so make sure your business is prepared to meet this demand by partnering with the experts in home equity at Spring EQ. Interested in a correspondent partnership? Click here. Interested in a wholesale partnership? Click here. Looking for new opportunities in the mortgage industry? Explore Spring EQ job postings and come join a growing team of fun and experienced mortgage professionals! At Spring EQ our primary focus is second mortgages. So, think of us first for all your seconds.
PrimeLending’s One More Sales Coaching Program is transforming LO careers! LOs are discovering their best selves thanks to our exclusive peer-to-peer coaching program. The One More Sales Coaching Program is designed by PrimeLending’s top producers who’ve proven they know what it takes to excel in today’s market. LOs connect, collaborate, and learn from each other in a dynamic small group environment. Graduates walk away having mastered high-impact skills and habits they need to drive better results, such as personal branding, networking, and leveraging technology. The best part? It’s completely free! We’re investing in our LOs and empowering them to take their careers to the next level. Contact Nic Hartke today and join our winning team!
The Mortgage Bankers Association (MBA) announced that Madisyn Rhone joined the association today as VP of Legislative Affairs responsible for advocating on behalf of MBA’s legislative and policy priorities on Capitol Hill, with a primary focus on Democratic members of the U.S. House of Representatives.
Download our mobile app to get alerts for Rob Chrisman’s Commentary.
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In the ever-evolving landscape of real estate, each generation brings its own set of preferences and priorities to the table. As millennials gradually step aside, Gen Z is stepping up, reshaping the way we think about homeownership and the places we call home. Born between the mid-1990s and early 2010s, Gen Z is a generation marked by digital fluency, environmental consciousness, and a penchant for experiences over possessions. So, what does this mean for the real estate market?
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Embracing Urbanity with a Twist
Unlike their predecessors who favoured suburban sprawls, Gen Z is showing a distinct preference for urban living – but with a twist. They seek vibrant, walkable neighbourhoods that offer a plethora of amenities within arm’s reach. Think mixed-use developments where residential spaces seamlessly blend with retail, dining, and entertainment options. For Gen Z, the ideal neighbourhood isn’t just a place to live; it’s a hub of activity and connection.
Flexibility Reigns Supreme
In a world characterized by rapid change and uncertainty, flexibility is paramount. Gen Z values the freedom to adapt and evolve, and this extends to their housing preferences. The traditional model of homeownership may not hold the same allure for Gen Z as it did for previous generations. Instead, many are opting for rental properties or co-living arrangements that offer flexibility without the long-term commitment.
Sustainability as a Non-Negotiable
Environmental consciousness is ingrained in the DNA of Gen Z. They’re acutely aware of the impact of climate change and are committed to making eco-friendly choices – including when it comes to housing. From energy-efficient appliances to Leadership in Energy and Environmental Design (LEED) or Energy Star certified buildings, sustainability is a non-negotiable for many Gen Z homebuyers. They’re drawn to eco-conscious developments that prioritize green spaces, renewable energy, and sustainable building practices.
Tech-Savvy Living
Having grown up in the digital age, Gen Z has an insatiable appetite for technology. Smart homes equipped with cutting-edge automation features are not just a luxury – they’re a necessity. Gen Z homebuyers expect seamless technology integration into every aspect of their living space, from smart thermostats and lighting systems to voice-controlled assistants and security cameras. For Gen Z, a home isn’t truly modern unless it’s smart.
Community and Connection
Despite their digital prowess, Gen Z craves authentic human connection. They value community and seek out spaces that foster social interaction and collaboration. Co-living spaces, communal amenities, and shared workspaces are all appealing to Gen Z homebuyers who prioritize relationships and networking. They’re drawn to neighbourhoods that feel like tight-knit communities, where neighbours are friends and every interaction is an opportunity to connect.
Are you ready to own your first property? Give us a call today! Our experienced real estate agents are more than happy to guide you through this exciting process!
The VA home loan: Unbeatable benefits for veterans
For many who qualify, VA home loans are some of the best mortgages available.
Verify your VA loan eligibility. Start here
Backed by the U.S. Department of Veterans Affairs, VA loans are designed to help active-duty military personnel, veterans and certain other groups become homeowners at an affordable cost.
The VA loan asks for no down payment, requires no mortgage insurance, and has lenient rules about qualifying, among many other advantages.
Here’s everything you need to know about qualifying for and using a VA loan.
In this article (Skip to…)
Top 10 VA loan benefits
1. No down payment on a VA loan
Most home loan programs require you to make at least a small down payment to buy a home. The VA home loan is an exception.
Verify your VA loan eligibility. Start here
Rather than paying 5%, 10%, 20% or more of the home’s purchase price upfront in cash, with a VA loan you can finance up to 100% of the purchase price.
The VA loan is a true no-money-down home mortgage opportunity.
2. No mortgage insurance for VA loans
Typically, lenders require you to pay for mortgage insurance if you make a down payment that’s less than 20%.
This insurance — which is known as private mortgage insurance (PMI) for a conventional loan and a mortgage insurance premium (MIP) for an FHA loan — would protect the lender if you defaulted on your loan.
VA loans require neither a down payment nor mortgage insurance. That makes a VA-backed mortgage very affordable upfront and over time.
3. VA loans have a government guarantee
There’s a reason why the VA loan comes with such favorable terms.
The federal government guarantees these loans — meaning a portion of the loan amount will be repaid to the lender even if you’re unable to make monthly payments for whatever reason.
This guarantee encourages and enables private lenders to offer VA loans with exceptionally attractive terms.
4. You can shop for the best VA loan rates
VA loans are neither originated nor funded by the VA. They are not direct loans from the government. Furthermore, mortgage rates for VA loans are not set by the VA itself.
Instead, VA loans are offered by U.S. banks, savings-and-loans institutions, credit unions, and mortgage lenders — each of which sets its own VA loan rates and fees.
This means you can shop around and compare loan offers and still choose the VA loan that works best for your budget.
5. VA loans don’t allow a prepayment penalty
A VA loan won’t restrict your right to sell the property partway through your loan term.
There’s no prepayment penalty or early-exit fee no matter within what time frame you decide to sell your home.
Furthermore, there are no restrictions regarding a refinance of your VA loan.
You can refinance your existing VA loan into another VA loan via the agency’s Interest Rate Reduction Refinance Loan (IRRRL) program, or switch into a non-VA loan at any time.
6. VA mortgages come in many varieties
A VA loan can have a fixed rate or an adjustable rate. In addition, you can use a VA loan to buy a house, condo, new-built home, manufactured home, duplex, or other types of properties.
Or, it can be used for refinancing your existing mortgage, making repairs or improvements to your home, or making your home more energy-efficient.
The choice is yours. A VA-approved lender can help you decide.
Verify your VA loan eligibility. Start here
7. It’s easier to qualify for VA loans
Like all mortgage types, VA loans require specific documentation, an acceptable credit history, and sufficient income to make your monthly payments.
But, compared to other loan programs, VA loan guidelines tend to be more flexible. This is made possible because of the VA loan guarantee.
The Department of Veterans Affairs genuinely wants to make the loan process easier for military members, veterans, and qualifying military spouses to buy or refinance a home.
8. VA loan closing costs are lower
The VA limits the closing costs lenders can charge to VA loan applicants. This is another way that a VA loan can be more affordable than other types of loans.
Money saved on closing costs can be used for furniture, moving costs, home improvements, or anything else.
9. The VA offers funding fee flexibility
VA loans require a “funding fee,” an upfront cost based on your loan amount, your type of eligible service, your down payment size, and other factors.
Funding fees don’t need to be paid in cash, though. The VA allows the fee to be financed with the loan, so nothing is due at closing.
And, not all VA borrowers will pay it. VA funding fees are normally waived for veterans who receive VA disability compensation and for unmarried surviving spouses of veterans who died in service or as a result of a service-connected disability.
10. VA loans are assumable
Most VA loans are “assumable,” which means you can transfer your VA loan to a future home buyer if that person is also VA-eligible.
Assumable loans can be a huge benefit when you sell your home — especially in a rising mortgage rate environment.
If your home loan has today’s low rate and market rates rise in the future, the assumption features of your VA become even more valuable.
VA loan rates
The VA loan is viewed as one of the lowest-risk mortgage types available on the market.
Verify your VA loan eligibility. Start here
This safety allows banks to lend to veteran borrowers at lower interest rates.
Today’s VA loan rates*
Loan Type
Current Mortgage Rate
VA 30-year FRM
% (% APR)
Conventional 30-year FRM
% (% APR)
VA 15-year FRM
% (% APR)
Conventional 15-year FRM
% (% APR)
*Current rates provided daily by partners of the Mortgage Reports. See our loan assumptions here.
VA rates are more than 25 basis points (0.25%) lower than conventional rates on average, according to data collected by mortgage software company Ellie Mae.
Most loan programs require higher down payment and credit scores than the VA home loan. In the open market, a VA loan should carry a higher rate due to more lenient lending guidelines and higher perceived risk.
Yet the result of the Veterans Affairs efforts to keep veterans in their homes means lower risk for banks and lower borrowing costs for eligible veterans.
VA mortgage calculator
Eligibility
Am I eligible for a VA home loan?
Contrary to popular belief, VA loans are available not only to veterans, but also to other classes of military members.
Find and lock a low VA loan rate today. Start here
The list of eligible VA borrowers includes:
Active-duty service members
Members of the National Guard
Reservists
Surviving spouses of veterans
Cadets at the U.S. Military, Air Force or Coast Guard Academy
Midshipmen at the U.S. Naval Academy
Officers at the National Oceanic & Atmospheric Administration.
A minimum term of service is typically required.
Minimum service required for a VA mortgage
VA home loans are available to active-duty service members, veterans (unless dishonorably discharged), and in some cases, surviving family members.
To be eligible, you need to meet one of these service requirements:
You’ve served 181 days of active duty during peacetime
You’ve served 90 days of active duty during wartime
You’ve served six years in the Reserves or National Guard
Your spouse was killed in the line of duty and you have not remarried
Your eligibility for the VA home loan program never expires.
Veterans who earned their VA entitlement long ago are still using their benefit to buy homes.
The VA loan Certificate of Eligibility (COE)
What is a COE?
In order to show a mortgage company you are VA-eligible, you’ll need a Certificate of Eligibility (COE). Your lender can acquire one for you online, usually in a matter of seconds.
Verify your VA home loan eligibility. Start here
How to get your COE (Certificate of Eligibility)
Getting a Certificate of Eligibility (COE) is very easy in most cases. Simply have your lender order the COE through the VA’s automated system. Any VA-approved lender can do this.
Alternatively, you can order your certificate yourself through the VA benefits portal.
If the online system is unable to issue your COE, you’ll need to provide your DD-214 form to your lender or the VA.
Does a COE mean you are guaranteed a VA loan?
No, having a Certificate of Eligibility (COE) doesn’t guarantee a VA loan approval.
Your COE shows the lender you’re eligible for a VA loan, but no one is guaranteed VA loan approval.
You must still qualify for the loan based on VA mortgage guidelines. The guarantee part of the VA loan refers to the VA’s promise to the lender of repayment if the borrower defaults.
Qualifying for a VA mortgage
VA loan eligibility vs. qualification
Being eligible for VA home loan benefits based on your military status or affiliation doesn’t necessarily mean you’ll qualify for a VA loan.
You still have to qualify for a VA mortgage based on your credit, debt, and income.
Verify your VA loan eligibility. Start here
Minimum credit score for a VA loan
The VA has established no minimum credit score for a VA mortgage.
However, many VA mortgage lenders require minimum FICO scores of 620 or higher — so apply with many lenders if your credit score might be an issue.
Even VA lenders that allow lower credit scores don’t accept subprime credit.
VA underwriting guidelines state that applicants must have paid their obligations on time for at least the most recent 12 months to be considered satisfactory credit risks.
In addition, the VA usually requires a two-year waiting period following a Chapter 7 bankruptcy or foreclosure before it will insure a loan.
Borrowers in Chapter 13 must have made at least 12 on-time payments and secure the approval of the bankruptcy court.
Verify your VA loan home buying eligibility. Start here
VA loan debt-to-income ratios
The relationship of your debts and your income is called your debt-to-income ratio, or DTI.
VA underwriters divide your monthly debts (car payments, credit cards, and other accounts, plus your proposed housing expense) by your gross (before-tax) income to come up with your debt-to-income ratio.
For instance:
If your gross income is $4,000 per month
And your total monthly debt is $1,500 (including the new mortgage, property taxes and homeowners insurance, plus other debt payments)
Then your DTI is 37.5% (1500/4000=0.375)
A DTI over 41% means the lender has to apply additional formulas to see if you qualify under residual income guidelines.
VA residual income rules
VA underwriters perform additional calculations that can affect your mortgage approval.
Factoring in your estimated monthly utilities, your estimated taxes on income, and the area of the country in which you live, the VA arrives at a figure which represents your “true” costs of living.
It then subtracts that figure from your income to find your residual income (e.g. your money “left over” each month).
Think of the residual income calculation as a real-world simulation of your living expenses.
It is the VA’s best effort to ensure that military families have a stress-free homeownership experience.
Here is an example of how residual income works, assuming a family of four which is purchasing a 2,000 square-foot home on a $5,000 monthly income.
Future house payment, plus other debt payments: $2,500
Monthly estimated income taxes: $1,000
Monthly estimated utilities at $0.14 per square foot: $280
This leaves a residual income calculation of $1,220.
Now, compare that residual income to for a family of four:
Northeast Region: $1,025
Midwest Region: $1,003
South Region: $1,003
West Region: $1,117
The borrower in our example exceeds VA’s residual income standards in all parts of the country.
Therefore, despite the borrower’s debt-to-income ratio of 50%, the borrower could get approved for a VA loan.
Verify your VA loan eligibility. Start here
Qualifying for a VA loan with part-time income
You can qualify for this type of financing even if you have a part-time job or multiple jobs.
You must show a 2-year history of making consistent part-time income, and stability in the number of hours worked. The lender will make sure any income received appears stable. See our complete guide to getting a mortgage when you’re self-employed or work part-time.
VA funding fees and loan limits
About the VA funding fee
The VA charges an upfront fee to defray the costs of the program and make it sustainable for the future.
Veterans pay a lump sum that varies depending on the loan purpose and down payment amount.
The fee is normally wrapped into the loan. It does not add to the cash needed to close the loan.
Find out if you qualify for a VA loan. Start here
VA home purchase funding fees
Type of Military Service
Down Payment
Fee for First-Time Use
Fee for Subsequent Use
Active Duty, Reserves, and National Guard
None
2.3%
3.6%
5% or more
1.65%
1.65%
10% or more
1.4%
1.4%
VA cash-out refinance funding fees
Type of Military Service
Fee for First-Time Use
Fee for Subsequent Uses
Active Duty, Reserves, and National Guard
2.3%
3.6%
VA streamline refinances (IRRRL) & assumptions
Type of Military Service
Fee for First-Time Use
Fee for Subsequent Uses
Active Duty, Reserves, and National Guard
0.5%
0.5%
Manufactured home loans not permanently affixed
Type of Military Service
Fee for First-Time Use
Fee for Subsequent Uses
Active Duty, Reserves, and National Guard
1.0%
1.0%
VA loan limits in 2024
VA loan limits have been repealed, thanks to the Blue Water Navy Vietnam Veterans Act of 2019.
There is no maximum amount for which a home buyer can receive a VA loan, at least as far as the VA is concerned.
However, private lenders may set their own limits. So check with your lender if you are looking for a VA loan above local conforming loan limits.
Verify your VA loan eligibility. Start here
Eligible property types
Houses you can buy with a VA loan
VA mortgages are flexible about what types of property you can and can’t purchase. A VA loan can be used to buy a:
Detached house
Condo
New-built home
Manufactured home
Duplex, triplex or four-unit property
Find out if you qualify for a VA loan. Start here
You can also use a VA mortgage to refinance an existing loan for any of those types of properties.
VA loans and second homes
Federal regulations limit loans guaranteed by the Department of Veterans Affairs to “primary residences” only.
However, “primary residence” is defined as the home in which you live “most of the year.”
Therefore, if you own an out-of-state residence in which you live for more than six months of the year, this other home, whether it’s your vacation home or retirement property, becomes your official “primary residence.”
For this reason, VA loans are popular among aging military borrowers.
Buying a multi-unit home with a VA loan
VA loans allow you to buy a duplex, triplex, or four-plex with 100% financing. You must live in one of the units.
Buying a home with more than one unit can be challenging.
Mortgage lenders consider these properties riskier to finance than traditional, single-family residences, so you’ll need to be a stronger borrower.
VA underwriters must make sure you will have enough emergency savings, or cash reserves, after closing on your house. That’s to ensure you’ll have money to pay your mortgage even if a tenant fails to pay rent or moves out.
The minimum cash reserves needed after closing is six months of mortgage payments (covering principal, interest, taxes, and insurance – PITI).
Your lender will also want to know about previous landlord experience you’ve had, or any experience with property maintenance or renting.
If you don’t have any, you may be able to sidestep that issue by hiring a property management company. But that’s up to the individual lender.
Your lender will look at the income (or potential income) of the rental units, using either existing rental agreements or an appraiser’s opinion of what the units should fetch.
They’ll usually take 75% of that amount to offset your mortgage payment when calculating your monthly expenses.
VA loans and rental properties
You cannot use a VA loan to buy a rental property. You can, however, use a VA loan to refinance an existing rental home you once occupied as a primary home.
For home purchases, in order to obtain a VA loan, you must certify that you intend to occupy the home as your principal residence.
If the property is a duplex, triplex, or four-unit apartment building, you must occupy one of the units yourself. Then you can rent out the other units.
The exception to this rule is the VA’s Interest Rate Reduction Refinance Loan (IRRRL).
This loan, also known as the VA Streamline Refinance, can be used for refinancing an existing VA loan on a home where you currently live or where you used to live, but no longer do.
Check your VA IRRRL eligibility. Start here
Buying a condo with a VA loan
The VA maintains a list of approved condo projects within which you may purchase a unit with a VA loan.
At VA’s website, you can search for the thousands of approved condominium complexes across the U.S.
If you are VA-eligible and in the market for a condo, make sure the unit you’re interested in is approved.
As a buyer, you are probably not able to get the complex VA-approved. That’s up to the management company or homeowner’s association.
If a condo you like is not approved, you must use other financing like an FHA or conventional loan or find another property.
Note that the condo must meet FHA or conventional guidelines if you want to use those types of financing.
Veteran mortgage relief with the VA loan
The U.S. Department of Veterans Affairs, or VA, provides home retention assistance. The VA intervenes when a veteran is having trouble making home loan payments.
The VA works with loan servicers to offer loan options to the veteran, other than foreclosure.
Find out if you qualify for a VA loan. Start here
In fiscal year 2019, the VA made over 400,000 contact actions to reach borrowers and loan servicers. The intent was to work out a mutually agreeable repayment option for both parties.
More than 100,000 veteran homeowners avoided foreclosure in 2019 alone thanks to this effort.
The initiative has saved the taxpayer an estimated $2.6 billion. More importantly, vast numbers of veterans and military families got another chance at homeownership.
When NOT to use a VA loan
If you have good credit and 20% down
A primary advantage to VA home loans is the lack of mortgage insurance.
However, the VA guarantee does not come free of charge. Borrowers pay an upfront funding fee, which they usually choose to add to their loan amount.
The fee ranges from 1.4% to 3.6%, depending on the down payment percentage and whether the home buyer has previously used his or her VA mortgage eligibility. The most common fee is 2.3%.
Find out if you qualify for a VA loan. Start here
On a $200,000 purchase, a 2.3% fee equals $4,600.
However, buyers who choose a conventional mortgage and put 20% down get to avoid mortgage insurance and the upfront fee. For these military home buyers, the VA funding fee might be an unnecessary expense.
The exception: Mortgage applicants whose credit rating or income meets VA guidelines but not those of conventional mortgages may still opt for VA.
If you’re on the “CAIVRS” list
To qualify for a VA loan, you must prove you have made good on previous government-backed debts and that you have paid taxes.
The Credit Alert Verification Reporting System, or “CAIVRS,” is a database of consumers who have defaulted on government obligations. These individuals are not eligible for the VA home loan program.
If you have a non-veteran co-borrower
Veterans often apply to buy a home with a non-veteran who is not their spouse.
This is okay. However, it might not be their best choice.
As the veteran, your income must cover your half of the loan payment. The non-veteran’s income cannot be used to compensate for the veteran’s insufficient income.
Plus, when a non-veteran owns half the loan, the VA guarantees only half that amount. The lender will require a 12.5% down payment for the non-guaranteed portion.
The Conventional 97 mortgage, on the other hand, allows down payments as low as 3%.
Another low-down-payment mortgage option is the FHA home loan, for which 3.5% down is acceptable.
The USDA home loan also requires zero down payment and offers similar rates to VA loans. However, the property must be within USDA-eligible areas.
If you plan to borrow with a non-veteran, one of these loan types might be your better choice.
Explore your mortgage options. Start here
If you apply with a credit-challenged spouse
In states with community property laws, VA lenders must consider the credit rating and financial obligations of your spouse. This rule applies even if he or she will not be on the home’s title or even on the mortgage.
Such states are as follows.
Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin
A spouse with less-than-perfect credit or who owes alimony, child support, or other maintenance can make your VA approval more challenging.
Apply for a conventional loan if you qualify for the mortgage by yourself. The spouse’s financial history and status need not be considered if he or she is not on the loan application.
Verify your VA loan home buying eligibility. Start here
If you want to buy a vacation home or investment property
The purpose of VA financing is to help veterans and active-duty service members buy and live in their own home. This loan is not meant to build real estate portfolios.
These loans are for primary residences only, so if you want a ski cabin or rental, you’ll have to get a conventional loan.
If you want to purchase a high-end home
Starting January 2020, there are no limits to the size of mortgage a lender can approve.
However, lenders may establish their own limits for VA loans, so check with your lender before applying for a large VA loan.
Spouses and the VA mortgage program
What spouses are eligible for a VA loan?
What if the service member passes away before he or she uses the benefit? Eligibility passes to an unremarried spouse, in many cases.
Find and lock a low VA loan rate today. Start here
For the surviving spouse to be eligible, the deceased service member must have:
Died in the line of duty
Passed away as a result of a service-connected disability
Been missing in action, or a prisoner of war, for at least 90 days
Been a totally disabled veteran for at least 10 years prior to death, and died from any cause
Also eligible are remarried spouses who married after the age of 57, on or after December 16, 2003.
In these cases, the surviving spouse can use VA loan eligibility to buy a home with zero down payment, just as the veteran would have.
VA loan benefits for surviving spouses
Surviving spouses have an additional VA loan benefit, however. They are exempt from the VA funding fee. As a result, their loan balance and monthly payment will be lower.
Surviving spouses are also eligible for a VA streamline refinance when they meet the following guidelines.
The surviving spouse was married to the veteran at the time of death
The surviving spouse was on the original VA loan
VA streamline refinancing is typically not available when the deceased veteran was the only applicant on the original VA loan, even if he or she got married after buying the home.
In this case, the surviving spouse would need to qualify for a non-VA refinance, or a VA cash-out loan.
A cash-out mortgage through VA requires the military spouse to meet home purchase eligibility requirements.
If this is the case, the surviving spouse can tap into the home’s equity to raise cash for any purpose, or even pay off an FHA or conventional loan to eliminate mortgage insurance.
Qualifying if you receive (or pay) child support or alimony
Buying a home after a divorce is no easy task.
If, prior to your divorce, you lived in a two-income household, you now have less spending power and a reduced monthly income for purposes of your VA home loan application.
With less income, it can be harder to meet both the VA Home Loan Guaranty’s debt-to-income (DTI) guidelines and the VA residual income requirement for your area.
Receiving alimony or child support can counteract a loss of income.
Mortgage lenders will not require you to provide information about your divorce agreement’s alimony or child support terms, but if you’re willing to disclose, it can count toward qualifying for a home loan.
Different VA-approved lenders will treat alimony and child support income differently.
Typically, you will be asked to provide a copy of your divorce settlement or other court paperwork to support the alimony and child support payments.
Lenders will then want to see that the payments are stable, reliable, and likely to continue for another 36 months, at least.
You may also be asked to show proof that alimony and child support payments have been made in the past reliably, so that the lender may use the income as part of your VA loan application.
If you are the payor of alimony and child support payments, your debt-to-income ratio can be harmed.
Not only might you be losing the second income of your dual-income households, but you’re making additional payments that count against your outflows.
VA mortgage lenders make careful calculations with respect to such payments.
You can still get approved for a VA loan while making such payments — it’s just more difficult to show sufficient monthly income.
VA loan assumption
What is VA loan assumption?
One benefit for home buyers is that VA loans are assumable. When you assume a mortgage loan, you take over the current homeowner’s monthly payment.
Verify your VA loan home buying eligibility. Start here
That could be a big advantage if mortgage rates have risen since the original owner purchased the home. The buyer would be able to acquire a low-rate, affordable loan — and it could make it easier for the seller to find a willing buyer in a tough market.
VA loan assumption savings
Buying a home via an assumable mortgage loan is even more appealing when interest rates are on the rise.
For example:
Say a seller-financed $200,000 for their home in 2013 at an interest rate of 3.25% on a 30-year fixed loan
Using this scenario, their principal and interest payment would be $898 per month
Let’s assume current 30-year fixed rates averaged 4.10%
If you financed $200,000 at 4.10% for a 30-year loan term, your monthly principal and interest payment would be $966 per month
Additionally, because the seller has already paid four years into the loan term, they’ve already paid nearly $25,000 in interest on the loan.
By assuming the loan, you would save $34,560 over the 30-year loan due to the difference in interest rates. You would also save roughly $25,000 thanks to the interest already paid by the sellers.
That comes out to a total savings of almost $60,000!
How to assume (take on) a VA loan
There are currently two ways to assume a VA loan.
The new buyer is a qualified veteran who “substitutes” his or her VA eligibility for the eligibility of the seller
The new home buyer qualifies through VA standards for the mortgage payment. This is the safest method for the seller as it allows the loan to be assumed knowing that the new buyer is responsible for the loan, and the seller is no longer responsible for the loan
The lender and/or the VA needs to approve a loan assumption.
Loans serviced by a lender with automatic authority may process assumptions without sending them to a VA Regional Loan Center.
For lenders without automatic authority, the loan must be sent to the appropriate VA Regional Loan Center for approval. This loan process will typically take several weeks.
When VA loans are assumed, it’s the servicer’s responsibility to make sure the homeowner who assumes the property meets both VA and lender requirements.
VA loan assumption requirements
For a VA mortgage assumption to take place, the following conditions must be met:
The existing loan must be current. If not, any past due amounts must be paid at or before closing
The buyer must qualify based on VA credit and income standards
The buyer must assume all mortgage obligations, including repayment to the VA if the loan goes into default
The original owner or new owner must pay a funding fee of 0.5% of the existing principal loan balance
A processing fee must be paid in advance, including a reasonable estimate for the cost of the credit report
Find out if you qualify for a VA loan. Start here
Finding assumable VA loans
There are several ways for home buyers to find an assumable VA loan.
Believe it or not, print media is still alive and well. Some home sellers advertise their assumable home for sale in the newspaper, or in a local real estate publication.
There are a number of online resources for finding assumable mortgage loans.
Websites like TakeList.com and Zumption.com give homeowners a way to showcase their properties to home buyers looking to assume a loan.
With the help of the Multiple Listing Service (MLS), real estate agents remain a great resource for home buyers.
This applies to home buyers specifically searching for assumable VA loans as well.
How do I apply for a VA loan?
You can easily and quickly have a lender pull your certificate of eligibility (COE) to make sure you’re able to get a VA loan.
Most mortgage lenders offer VA home loans. So you’re free to shop and compare rates with just about any company that catches your eye.
Getting a VA loan for your new home is similar in many ways to securing any other purchase loan. Once you find an ideal home in your price range, you make a purchase offer, and then undergo VA appraisal and underwriting.
VA appraisal ensures that the home meets its minimum property requirements (MPRs) and is structurally sound and safe for occupancy.
What’s more, VA-specific mortgage lenders are actually some of the highest-rated (and lowest-priced) on the market. Here are a few we’d recommend checking out.
Time to make a move? Let us find the right mortgage for you
If you had $20,000, how would you spend it? One of the smartest things you could do if you suddenly came into an extra $20,000 – or managed to save that much money over time – would be to invest it. But where? And how?
The right answer differs for everyone and depends on your financial objectives, comfort level with risk, and time horizon. This guide illuminates 10 ideal ways to invest $20,000 and maximize your returns.
Set Your Investment Goals and Assess Your Risk Tolerance
Establishing clear financial objectives and measuring your tolerance for risk should serve as the cornerstone of your investment decisions. For instance, if you’re eyeing retirement, long-term investments like stocks or real estate might be right up your alley. Conversely, if your goal is to accumulate funds for a house down payment in five years, safer options like a high yield savings account may be more appealing.
Risk tolerance plays an equally critical role. If the thought of market volatility unsettles you, safer options with lower returns might suit you better. But if you can handle a higher level of risk for the prospect of higher returns, you might explore riskier ventures like individual stocks or even cryptocurrencies. A consultation with an in-person financial advisor can help you decipher your financial goals and risk tolerance.
10 Best Ways to Invest $20K
As you prepare to grow your $20k investment, an array of options awaits. Your financial goals, risk tolerance, and timeline will guide you to the ideal choice. Here are 10 ways to strategically invest your $20k:
1: High-Yield Savings Accounts
High-yield savings accounts are a low-risk, steady-growth choice for those looking to invest $20k. They offer more competitive interest rates than traditional savings accounts, meaning your money works harder for you. The Federal Deposit Insurance Corporation (FDIC) protects these accounts, offering an additional layer of security and peace of mind.
This investment route is particularly beneficial if you prefer having your emergency fund accessible, or if you’re saving for near-term goals. Despite the returns being lower than riskier investment options, the safety and stability they provide make high-yield savings accounts an attractive option for many investors.
2: Bitcoin
Bitcoin has emerged as a prominent player in the investment world, offering a high-risk, high-reward dynamic that appeals to some investors. The value of Bitcoin is notoriously volatile, yet its remarkable growth cannot be ignored.
Over the past decade, Bitcoin has experienced gains exceeding 5,700%, significantly outpacing traditional markets like the NASDAQ, which had a gain of 336% over the same period. Even within a five-year timeframe, Bitcoin still came out ahead with a 96% increase compared to the NASDAQ’s 69%.
Given its digital nature and decentralized structure, investing in Bitcoin can be complex and fraught with unique risks. Unlike traditional currencies, Bitcoin operates independently of a central bank. Furthermore, its value is susceptible to sharp fluctuations influenced by a variety of factors, including market demand, investor sentiments, regulatory news, and macroeconomic trends.
Ready to dive into Bitcoin investing? Consider Swan Bitcoin, where you can easily set up recurring buys or make instant purchases right from your bank account.
3: Stock Market Investing
Stock market investing is a viable path for those seeking to grow their $20k investment, especially for long-term financial goals. Today’s investing apps make it easy to start investing with as little as $1 and to diversify your investments with fractional shares if you desire.
When considering individual stocks, potential returns can be substantial, but they often come with a higher level of risk. By holding a variety of stocks across different sectors and regions, a diversified portfolio can help mitigate these risks, providing a buffer against market volatility.
As an investor, it’s important to remember that past performance doesn’t guarantee future results. The stock market has demonstrated remarkable growth over time, but it’s not immune to periods of downturn. Staying resilient and maintaining a long-term perspective can help you deal with these fluctuations.
4: Mutual Funds and Exchange-Traded Funds (ETFs)
Mutual funds and ETFs offer investors an easy way to diversify their portfolios. These funds allow investors to buy a stake in a wide range of stocks and bonds, spreading the risk and potentially improving the returns over time.
Financial institutions manage mutual funds and ETFs, charging management fees for the expertise they provide in managing and selecting the assets within the funds. While mutual funds often require a significant initial investment, ETFs are more accessible for investors, as most brokerage firms offer a wide variety of ETFs with no minimum investment requirements.
Index funds, a subtype of mutual funds or ETFs, aim to replicate the performance of a specific market index, such as the S&P 500. These types of funds are a popular choice among passive investors due to their typically lower management fees compared to actively managed funds. The strategy of mimicking the market rather than attempting to outperform it allows investors to enjoy broad market returns while keeping costs low.
5: Bonds and Treasury Securities
For more conservative investors, bonds and Treasury securities offer a safer, lower-yield alternative. When you purchase a bond, you’re essentially loaning money to a corporation or government entity. In return, you receive interest payments over a specified period and the return of the principal amount at the bond’s maturity.
Treasury securities are a type of bond issued by the U.S. government, widely regarded as one of the safest investment vehicles. For broader exposure, bond ETFs and bond mutual funds allow you to diversify across different types of bonds, reducing the impact of any single bond defaulting.
6: Robo-Advisors
For those who prefer a hands-off approach to investing, robo-advisors can be an excellent option. These digital platforms create and manage your investment portfolio using sophisticated algorithms, taking into account factors such as your risk tolerance, investment goals, and time horizon.
Robo-advisors typically charge lower fees than traditional financial advisors, making them a cost-effective choice, especially for beginners or those with simpler financial situations. They offer a straightforward path to diversification and automatic portfolio rebalancing, reducing the need for constant monitoring and manual adjustments. It’s an appealing solution for those looking to invest $20k while minimizing time and effort spent on investment management.
Most robo-advisor platforms offer exposure to stocks, bonds, ETFs, and mutual funds.
7: Real Estate Investing
Real estate has proven to be a lucrative asset class for many investors. Income-producing real estate, like rental properties, can generate a steady flow of rental income, with potential property appreciation over time. However, property management can be time-intensive and comes with additional costs such as maintenance and property taxes.
If the idea of becoming a landlord doesn’t appeal to you, you might want to consider investing in real estate investment trusts (REITs). These publicly-traded companies own, operate, or finance income-producing real estate, allowing you to dip your toes into real estate without the hassle of managing properties.
8: Peer-to-Peer Lending
Peer-to-peer lending, an alternative form of investing, involves lending money to individuals or small businesses through online platforms that match lenders with borrowers. As an investor, you can potentially enjoy higher returns than those offered by traditional savings or money market accounts. However, this approach comes with its own set of risks, including the risk of borrower default.
To safeguard against potential losses from defaults, it’s wise to diversify your lending across different borrowers. This practice, similar to diversification in a stock portfolio, can help spread the risk, increasing your chances of overall success.
9: Investing in a Small Business or Start-up
Investing in a small business or a start-up offers an opportunity to potentially reap significant returns. However, it is a high-risk venture and typically requires becoming an accredited investor. As an accredited investor, you’ll need to meet specific income and net worth criteria, emphasizing the fact that this investment option is not for everyone.
Due to the inherent risk, this investment path should only be considered if you’re financially secure enough to withstand potential losses. Remember, while investing in a burgeoning business can be lucrative, it could also result in losing your entire investment.
10: Education and Skill-Building
Often overlooked in investment discussions, investing in yourself through education and skill-building can offer meaningful long-term returns. Whether it’s advancing your current job skills, earning a new certification, or exploring a new field, enhancing your knowledge base and skills can lead to increased earning potential and greater job satisfaction.
While the returns may not be immediate or easily quantifiable like other investments, investing in your personal and professional growth can open doors to new opportunities and provide long-lasting benefits. This is a valuable investment that you can make, regardless of market conditions.
What to Consider Before Investing
Before you venture into investing, it’s crucial to have an emergency fund, ideally three to six months’ worth of living expenses, set aside. Additionally, paying off high-interest debt, like credit card debt, should be a priority. The average credit card account interest rates often outpace the returns you’d earn from investments.
Consider the tax implications of your investments. Some investments, like taxable brokerage accounts, are subject to capital gains tax, while others, like Roth IRAs, offer tax-free income in retirement.
Finally, diversification is a key strategy to manage risk. By spreading your money across different types of investments (stocks, bonds, real estate), you can better weather market fluctuations.
Conclusion
Wisely investing 20k requires careful consideration of your financial goals, comfort level with risk, and investment timeline. Whether you choose high-yield savings accounts, the stock market, real estate, or another option, the goal is to grow your wealth over time and move closer to achieving financial freedom.
Regardless of your chosen path, remember that investing involves risks, including potential loss of principal. So, it’s crucial to review any investment strategy periodically to ensure it still aligns with your financial objectives. Consider seeking advice from a financial planner or other professionals to help guide your investment journey.
Looking for a real estate side hustle? Whether you are looking for passive income ideas or if you are looking for a part-time job (or more!), there are many different real estate side hustles. I have done a few different real estate side gigs, and I know many people who have side hustles in this…
Looking for a real estate side hustle?
Whether you are looking for passive income ideas or if you are looking for a part-time job (or more!), there are many different real estate side hustles.
I have done a few different real estate side gigs, and I know many people who have side hustles in this area as well. To get started in real estate, you don’t have to spend a lot of money – there are several real estate side gigs that can be started even if you are brand new or are on a budget.
Key Takeaways
Real estate side hustles have a range of options from income generating assets to freelance opportunities to office jobs.
You can supplement your income with both short-term and long-term real estate strategies.
Finding the right fit depends on your availability, investment capacity, and financial goals.
Best Real Estate Side Hustles
Here’s a quick summary of some of the different best real estate side hustles:
House hacking: Buy a property, live in one unit, and rent out the rest.
REIT investing: An easy way to start investing in real estate with less capital.
Airbnb rentals: Rent out a spare room or an entire property on a short-term basis.
Property management: If you’re organized and good with people, managing properties for others could be a perfect fit.
Long-term rentals: Becoming a landlord can generate steady cash flow.
Fix and flip: Buy properties that need work, renovate them, and sell them for a profit.
Below, you will read the full list and learn more about each one.
1. House flipping
Flipping houses can be a good real estate side hustle if you like real estate and enjoy fixing things up.
When you flip houses, you’re basically buying homes, making them better with repairs and upgrades, and then selling them to make more money.
The first thing to do for a successful house flip is to find a property that can be made better, such as by looking for homes in neighborhoods that are getting better or have room to grow. Think about things like where it is, what the market is like, and the condition of the property.
Before putting money into anything, it’s important to carefully look at the finances. You’ll want to figure out how much it will cost to buy, fix, and keep the property, and think about things like the cost of materials, paying workers, getting a loan, and the costs while you’re fixing things.
To flip a house well, you need to make smart changes that make the property better, without spending too much, by concentrating on important areas like the kitchen and bathrooms, and fixing any big problems with the structure or safety.
Recommended reading: 10 Best Books on Flipping Houses To Make Money
2. Investing in REITs
Real Estate Investment Trusts (REITs) are companies that own, operate, or finance income-generating real estate. They are a way for you to invest in real estate without directly managing or owning properties.
An REIT is like a company that owns and takes care of real estate that makes money. They sell shares of this company to people, kind of like how stocks work.
When you invest in REITs, you can earn money from the real estate world without actually owning any property. So, if you don’t want to deal with being a landlord, this could be a good option. It’s way less work than owning property and handling it yourself.
You can even spread out your money and invest in different kinds of properties with REITs, like houses, offices, factories, and stores.
3. Getting a roommate
Getting a roommate in your home, whether that be a full-time roommate or renting out an extra room in your home short-term on Airbnb, can be a great real estate side hustle that doesn’t require very much work from you.
The earnings you can make from having a roommate depend on things like:
Where your home is (an expensive area? rural?)
The space you are renting to a roommate (for example, do they get their own bathroom? private entrance available?)
To find a roommate, you can share about it on your own Facebook page, put up an ad on sites like Craigslist, or make a rental listing on Airbnb. There are lots of places where you can let people know you’re looking for a roommate.
I have had many roommates in the past when I was younger and had a home with spare bedrooms. I would rent them out to long-term renters and people that we personally knew (such as friends and my sister).
Recommended reading: Tips For Renting A Room In Your House.
4. Airbnbs and vacation rentals
Turning your property into an Airbnb or other short-term rental can be a way to generate extra income. This is when you rent out your space, whether a full house, an apartment, or just a room, to travelers for short stays.
Before starting your Airbnb side hustle, be sure to:
Check local laws: Make sure short-term rentals are permitted in your area. There are many areas nowadays that are more strict when it comes to short-term rentals.
Understand the financials: Calculate potential earnings against expenses like mortgage, utilities, and maintenance.
Set up your space: Furnish and decorate to create a welcoming environment.
Market your rental: Use high-quality photos and create listings on rental platforms like Airbnb and Vrbo.
The amount you can earn can vary, with some hosts making around $5,000 to $10,000 a month or more, but this depends on factors such as location, rental type, and occupancy rates. Always plan for occupancy ebbs and flows – it’s part of the short-term rental business.
5. Real estate photography
If you’ve ever looked at a house listing and thought that the pictures looked awful, then this may be the real estate side hustle for you.
Real estate agents many times hire out for the photography side of selling a house, as they know and understand how important good pictures are.
Real estate photography is all about taking pictures of houses and spaces to grab the attention of people who might want to buy them. Real estate photographers might take pictures of the outside of a house, the backyard, the living room, attic, bathroom, and more.
You can start with the equipment you likely already have, like your smartphone, which can work well because phones these days have great cameras.
How you show a property can really impact a client’s chance of selling it. Your photos are not just pictures; they’re an important part of how the property gets advertised.
As you continue with this real estate side hustle, you might think about getting better equipment (like a real camera!), but for now, practice paying attention to details and getting better at taking pictures.
If you’re thinking about doing something extra to earn money in real estate, photography could be a great choice.
Recommended reading: 18 Ways You Can Get Paid To Take Pictures
6. Real estate drone photography
Drone pilots sell real estate photography services to help real estate agents showcase the properties they are selling.
When property listings include pictures from various angles and heights, it gives a different perspective compared to regular photos. This helps show aspects of real estate that traditional pictures might miss.
When you sell property photography services using your drone, you’re providing a valuable service to real estate companies that want to stand out in a crowded housing market.
Homes are increasingly being sold using drone photos, and it’s understandable because they can showcase the surroundings of a home. Also, potential home buyers can see the entire property and house through a drone picture, giving them a better understanding of what the home includes.
Recommended reading: How To Make Money With A Drone
7. Long-term rentals
A long-term rental is when you rent out a property for a long amount of time, usually six months to a year or even longer. An example would be renting out an apartment or house to a family to live in full-time.
Long-term rentals are different from short-term rentals like vacation homes or Airbnb listings. They are meant for people or families looking for a longer place to live.
A benefit of long-term rentals is the reliable and steady income they can give you. When you rent your property to tenants for an extended period, you set up a regular cash flow of rental payments. This stability can be especially nice for people who are looking for a dependable source of passive income.
Plus, it’s usually less work than a short-term rental, because you don’t have to clean the home every few days or find new people to rent out to.
Recommended reading: How This 34 Year Old Owns 7 Rental Homes
8. Buy and hold for long-term wealth
If you want to grow wealth through real estate, the buy-and-hold strategy is a way to achieve lasting growth. This means buying a property and keeping it for an extended period, benefiting from both its increasing value over time and the rental income it makes you over the years.
Some positives to think about with a buy-and-hold real estate side hustle include:
Appreciation: Over time, real estate often increases in value.
Rental income: It can provide a steady cash flow each month.
Tax advantages: Possible deductions can reduce your taxable income.
The buy-and-hold strategy requires patience and a willingness to handle market changes. It’s a long-term approach, not a quick one, but if you stay persistent, you can create an investment portfolio for future financial stability.
9. Notary services for real estate
If you want to get more into the real estate world without becoming an agent or broker, becoming a notary public can be a way to make extra money.
Many documents, including deeds, mortgages, and power of attorney, require notarization to be legally binding.
With a notarization license, you can provide an important service required for different real estate transactions.
Notaries are important because they help make sure that the people signing documents are who they claim to be to prevent fraud.
10. Rental arbitrage
Rental arbitrage is a way to make extra money in real estate without owning a property. You rent a place for a long time and then sublease it as a short-term rental using platforms like Airbnb.
Here’s how to get started:
Check local laws: You’ll want to make sure your city or state allows for short-term rentals.
Make sure the rental allows for you to do this: Not every rental will be okay with you renting it out. You will want to read your rental contract carefully.
Do market research: Understand the demand for short-term rentals in your target area, such as by looking for locations with high tourist traffic or business conferences.
Potential Benefits
Considerations
+ Strong cash flow potential
– Initial setup and furnishing cost
+ Low startup costs compared to buying
– Dependence on short-term rental market stability
Making money in rental arbitrage comes from the difference between the cost of the long-term lease and the income from short-term rentals. The bigger the gap, the more potential for profit. But remember to factor in the expenses of running the rentals, like cleaning and maintenance costs.
11. House hacking
House hacking is a strategic approach to real estate where you purchase a property with multiple units and live in one unit while renting out the others. This is a side hustle because it can help offset your living expenses through the rental income.
House hacking can be an easy starting point if you want to dip your toes into real estate investing with the added perk of reducing your personal living expenses.
Back when we were living in a traditional house, we house hacked for a little while and had a few different roommates live with us. The monthly rent we collected allowed us to lower our house payments and put more money in savings.
We house hacked with our first house, and it was really great for us. Being able to set more money aside even helped me get ready to quit my job to become a full-time blogger.
If you are looking for a good book on the subject of house hacking, then I recommend reading The House Hacking Strategy: How to Use Your Home to Achieve Financial Freedom by Craig Curelop.
Recommended reading: What Is House Hacking & How To Live For Free
12. Real estate agent
A real estate agent is a person who helps people, like you and me, find real estate to buy or sell. They usually earn their income through a commission, which is a percentage of the property’s sale price.
To become a real estate agent and start this real estate career, you only need a high school diploma and a professional license. As of 2021, the median pay, according to the U.S. Bureau of Labor Statistics, is $23.45 per hour, or $48,770 per year.
And, there are tons of real estate agents who make a lot more money than this.
13. Crowdfunding and peer-to-peer lending
If you want to learn how to make extra money in real estate, then crowdfunding and peer-to-peer lending are areas to look into.
Crowdfunding platforms allow you to invest in real estate deals with a smaller amount of money compared to purchasing property outright. This can provide you with passive income through rental returns or potential property value appreciation.
Peer-to-peer lending platforms enable you to lend money directly to borrowers. You can potentially earn higher returns compared to traditional savings accounts, but there is always the risk of a borrower not repaying the loan.
Both crowdfunding and peer-to-peer lending utilize technology to connect investors with individuals seeking funding.
14. Bird dogging
Bird dogging in real estate can be a side hustle where you help find potentially profitable properties for investors. Your skill in spotting undervalued or distressed properties is important.
Here’s what you usually need to do:
Conduct market research to locate properties that are flying under the radar.
Build a network with local real estate investors who are looking for deals.
Learn to use the Multiple Listing Service (MLS) to spot opportunities.
Typically, you’ll be on the lookout for foreclosures, bank-owned properties, and distressed homes due for a quick sale.
As a bird dog, your compensation usually comes from a referral fee after the investor decides to move forward with your find. Importantly, to perform this role, you don’t necessarily need any initial capital, just the time and skill to identify promising investment opportunities.
15. General contractor
General contractors handle the day-to-day activities on construction sites, overseeing tasks from residential remodels to constructing new homes.
This is typically more of a full-time job, but this can sometimes be done as a real estate side hustle.
As a general contractor, you can choose projects that match your schedule and interests, providing flexibility. Despite the responsibilities, this role allows you to play a central role in turning plans into actual buildings, giving you the potential to make extra money.
16. Flip raw land
Getting involved in raw land flipping is when a person finds and buys undeveloped land to sell later at a profit.
The main benefits include a lower initial investment and less complexity compared to traditional real estate investments, as it doesn’t involve renovation or improvements. There are no buildings, instead it may be a lot or acres of land.
Here’s a step-by-step guide on how to start:
Find raw land – Research areas with potential growth or upcoming developments that could boost land value.
Due diligence – Perform thorough checks on land titles, zoning laws, and road access to avoid legal issues.
Pricing strategy – Your selling price should be attractive enough for buyers yet ensure you make a reasonable profit margin.
Sell and negotiate – Use online platforms to reach potential buyers and negotiate the best deal.
17. Rent out your storage space
If you have unused land or space in your home, renting it out for storage space can be an easy way to make passive income.
People have a lot of stuff, and they will pay you to store their stuff in your unused spaces.
You can sell storage solutions for vehicles, boats, personal belongings, and more. You can rent out your parking space, closet, basement, attic storage, and more.
A site where you can list your storage space is called Neighbor and you can earn $100 to $400+ each month. This depends on the demand in your area and the type of storage space you are renting out.
Recommended reading: Neighbor Review: Make Money Renting Your Storage Space
18. Property manager
A property manager side hustle can be a great way to make extra money.
A property manager is a real estate professional who finds and oversees tenants, collects rent, and handles repairs and maintenance activities. It’s a side hustle that property owners pay for because they may not have the time or skills to effectively manage their own property.
Property managers can manage long-term rentals like apartments, short-term rentals like Airbnbs, and even commercial spaces as well.
I have a friend who is a property manager on the side of his full-time construction job – he manages many different types of properties, from second homes to vacation rentals to someone simply being out of town. He checks on their properties to make sure that everything is running smoothly.
19. Home stager
If you’re passionate about real estate and design, starting a side hustle as a home stager could be profitable for you. As a home stager, your job is to improve the appearance of a home before it’s listed for sale.
This often results in faster sales and higher prices, making your service valuable to sellers.
You can start by staging homes for friends or family, if possible, to build a portfolio. Before and after photos are powerful tools to showcase your work.
You can even provide consultations to homeowners who prefer to do the actual staging themselves. In such cases, your design style can be a more budget-friendly option for a do-it-yourself homeowner.
20. Home inspector
We recently bought a house, and our home inspector was actually a home inspector on the side – this was his real estate side hustle! I think he was a city inspector (or something similar) full-time, so he was very knowledgeable in the area.
Home inspection as a side job can be a strategic move if you’re interested in real estate. This job allows for flexibility since you can set your hours, such as by completing home inspections on the weekends or before or after your day job.
You’ll need to invest in proper training and get licensed, which is a process that can be completed relatively quickly.
The responsibilities of a home inspector include:
Inspecting homes for possible problems, like a leak or bad wiring.
Creating and delivering reports based on what you find during the inspection.
21. Real estate appraiser
Real estate appraisers determine the fair market value of a property, and this process is important in transactions, such as home sales and refinances.
Appraisers assess property values by taking notes on unique characteristics and comparing them with similar properties that have sold recently.
They then prepare reports, detailing findings and providing a valuation that banks and other institutions depend on for loans.
22. Real estate wholesaler
Real estate wholesalers are middlemen who find properties under market value, contract them with the seller, and then sell the contract to a buyer, often an investor. Their profit comes from the difference between the contracted price with the seller and the amount the buyer pays.
Here is a quick summary of what a wholesale real estate side hustle is:
Find a distressed property – Search for properties that can be bought below market value.
Evaluate the property – Determine the After Repair Value (ARV) and estimate repair costs.
Secure under contract – Enter into a contract with the seller, giving you the right to purchase.
Find a buyer – Locate an investor interested in buying the contract.
Assign the contract – Transfer your purchasing rights to the investor for a fee.
By becoming skilled at finding good deals and building connections with trustworthy investors, real estate wholesaling can become a profitable real estate side hustle.
23. Start a real estate blog
Starting a real estate blog (or even a real estate YouTube channel or social media account!) can be a good way to make extra money without having to spend a lot of money.
With a real estate blog, you can write about local market insights, home buying and home selling tips, property investment strategies, home improvement and DIY projects, and more.
I have been a blogger for years, and I really love it. I am able to create my own schedule, decide how I make money online, travel whenever I want, and more. And, it all started on the side of my day job – so I definitely think that a real estate blog can be started as a side hustle.
Learn more at How To Start A Blog FREE Course.
Frequently Asked Questions
Below are answers to common questions about real estate side hustles.
Can real estate be a side hustle? Is real estate a good side hustle?
Yes, real estate can be a lucrative side hustle. Many people do real estate activities on a part-time basis, which can include short-term rentals, getting a roommate, and more, with lower time commitments.
Is real estate worth it as a side hustle?
Real estate as a side hustle can be worth it if you are looking for more income streams and have an interest in the housing market or real estate. As you probably noticed above, there are many different kinds of side hustles, so the amount of money you can earn or the amount of time you will spend will just depend on the gig you choose.
How can realtors make extra money?
Realtors can make extra money by managing rental properties, taking part in real estate crowdfunding, selling real estate photography services, and more.
Is real estate a good side hustle for teachers?
Yes, real estate can be a good side hustle for teachers. There are many options that may work for a teacher.
For example, some teachers work as real estate agents on the side. This is possible because you can handle listing and selling homes during weekends, breaks, evenings, and over the summer. However, keep in mind that selling homes might pose challenges, as clients may require your full attention during the day, which could clash with your teaching commitments.
You can find more ideas at 36 Best Side Jobs for Teachers To Make Extra Money.
Which licenses might be required to pursue a side hustle in the real estate field?
Depending on the side hustle, certain licenses like a real estate license may be required. For example, to become a real estate agent or home inspector, you’ll need a specific license. However, if you’re looking into just getting a roommate, then you may not need a license. It all just depends on the real estate side gig you are interested in.
How to make money in real estate without ever buying any property?
As you learned above, you don’t need to personally buy or own real estate in order to make money in real estate. You can invest in REITs, become a notary for real estate transactions, include affiliate marketing for real estate products on a blog, and more.
Real Estate Side Hustles – Summary
I hope you enjoyed this article about real estate side hustles.
Picking the right side hustle gig in real estate might feel overwhelming because there are many choices.
Some people might like jobs where you have to do more, like fixing up houses or taking care of Airbnb rentals. Others might prefer making money without doing much, like through REITs or renting out a spare room.
Whatever you’re into or however much money you have to invest, there are probably real estate side business ideas that fit with what you have and what you want to achieve.
What do you think is the best real estate side hustle?
Investing can feel like a steep learning curve. In addition to having a clear grasp of types of investment vehicles available and the role investments play in overall financial strategy, it’s a good idea to understand how taxes may affect your investments. Knowing tax implications of various investment vehicles and investment decisions may help an investor tailor their strategy and end up with fewer headaches at tax time.
What Is Investment Income?
Tax requirements for investments can be complicated, and it may be helpful for investors to work with a professional to see how taxes might impact a return on their investment. Doing so might also help ensure that investors aren’t overlooking anything important when it comes to their investments and taxes.
That said, it’s beneficial to enter into any discussion with some solid background information on when and how investments are taxed. Typically, investments are taxed at one or more of these three times:
When you sell an asset for a profit. This profit is called capital gains—the difference between what you bought an investment for and what you sold it for. Capital gains taxes are typically only triggered when you sell an asset; otherwise, any gain is an “unrealized gain” and is not taxed. When you receive money from your investments. This may be in the form of dividends or interest. When you have investment income that includes such things as royalties, income from rental properties, certain annuities, or from an estate or trust. This may incur a tax called the Net Investment Income Tax (NIIT).
In the following sections, we delve deeper into each of these situations that can lead to taxes on investments.
💡 Quick Tip: Investment fees are assessed in different ways, including trading costs, account management fees, and possibly broker commissions. When you set up an investment account, be sure to get the exact breakdown of your “all-in costs” so you know what you’re paying.
Tax Rules for Different Investment Income Types
Capital Gains Taxes on Assets Sold
Capital gains are the profits an investor makes from the purchase price to the sale price of an asset. Capital gains taxes are triggered when an asset is sold (or in the case of qualified dividends, which is explained further in the next section). Any growth or loss before a sale is called an unrealized gain or loss, and is not taxed.
The opposite of a capital gain is a capital loss. This occurs when an investor sells an asset at a lower price than purchased. Why would this happen? That depends on the investor. Sometimes, an investor needs to sell an asset at a suboptimal time because they need the cash, for instance.
At other times, an investor may sell “losing” assets at the same time they sell assets that have gained as a way to minimize their overall tax bill, by using a strategy called tax-loss harvesting. This strategy allows investors to “balance” any gains by selling profits at a loss, which, according to IRS rules, may be carried over through subsequent tax years.
There are two types of capital gains, depending on how long you have held an asset:
• Short-term capital gains. This is a tax on assets held less than a year, taxed at the investor’s ordinary income tax rate. • Long-term capital gains. This is a tax on assets held longer than a year, taxed at the capital-gains tax rate. This rate is lower than ordinary income tax. For the 2023 tax year, the long-term capital gains tax is $0 for individuals married and filing jointly with taxable income less than $89,250, and no more than 15% for those with taxable income up to $553,850. The long-term capital gains tax rate is 20% for those whose taxable income is more than that.
For the 2024 tax year, individuals may qualify for a 0% tax rate on long-term capital gains if their taxable income is $94,050 or less for those married and filing jointly, and no more than 15% if their taxable income is up to $583,750. Beyond that, the tax rate is 20%.
Dividend And Interest Taxes
Dividends are distributions that a corporation, S-corp, trust or other entity taxable as a corporation may pay to investors. Not all companies pay dividends, but those that do typically pay investors in cash, out of the corporation’s profits or earnings. In some cases, dividends are paid in stock or other assets.
Dividends that are part of tax-advantaged investment vehicles are not taxed. Generally, taxpayers will receive a form 1099-DIV from a corporation that paid dividends if they receive more than $10 in dividends over a tax year. All other dividends are either ordinary or qualified:
• Ordinary dividends are taxed at the investor’s income tax rate. • Qualified dividends are taxed at the lower capital-gains rate.
In order for a dividend to be considered “qualified” and taxed at the capital gains rate, an investor must have held the stock for more than 60 days in the 121-day period that begins 60 days before the ex-dividend date. (Additionally, said dividends must be paid by a U.S. corporation or qualified foreign corporation, and must be an ordinary dividend, as opposed to capital gains distributions or dividends from tax-exempt organizations.)
Both ordinary dividends and interest income on investments are taxed at the investors regular income rate. Interest may come from brokerage accounts, or assets such as mutual funds and bonds. There are exceptions to interest taxes based on type of asset. For example, municipal bonds may be exempt from taxes on interest if they come from the state in which you reside.
Total Investment Income and Net Investment Income Tax (NIIT)
Net investment income tax (NIIT) is a flat 3.8% surtax levied on investment income for taxpayers above a certain income threshold. The NIIT is also called the “Medicare tax” and applies to all investment income including, but not limited to: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, and income from businesses involved in trading of financial instruments or commodities.
NIIT applies to individuals with a modified adjusted gross income (MAGI) over $200,000 for single filers and $250,000 for married couples filing jointly. For taxpayers over the threshold, NIIT is applied to the lesser of the amount the taxpayer’s MAGI exceeds the threshold or their total net investment income.
For example, consider a couple filing jointly who makes $200,000 in wages and has a NIIT of $60,000 across all investments in a single tax year. This brings their MAGI to $260,000—$10,000 over the AGI threshold. This would mean the taxpayer would owe tax on $10,000. To calculate the exact amount of tax, the couple would take 3.8% of $10,000, or $380.
💡 Quick Tip: Did you know that a traditional Individual Retirement Account, or IRA, is a tax-deferred account? That means you don’t pay taxes on the money you put in it (up to an annual limit) or the gains you earn, until you retire and start making withdrawals.
Cases of Investment Tax Exemption
Certain types of investments may be exempt from tax implications if the money is used for certain purposes. These investment vehicles are called “tax-sheltered” vehicles and apply to certain types of investments that are earmarked for certain uses, such as retirement or education.
There are two types of tax-sheltered accounts:
• Tax-deferred accounts. These are accounts in which money is contributed pre-tax and grows tax-free, but taxes are taken out when money is withdrawn. For example, a 401(k) retirement account grows tax-free until you withdraw money, at which point it is taxed. • Tax-exempt accounts. These are accounts—such as a Roth 401(k) or Roth IRA, or a 529 plan—in which money can be withdrawn tax-free if the funds are taken out according to qualifications. For example, money in a Roth account is not taxed upon withdrawal in retirement.
Beyond investing in tax-sheltered accounts, investors may also choose to research or speak with a professional about tax-efficient investing strategies. These are ways to calibrate a portfolio that might help minimize taxes, build wealth, and reach key portfolio goals—such as ample savings for retirement.
The Takeaway
Dividends, interest, and gains can add up, which is why it’s important for a taxpayer to be mindful of investment taxes not only at tax time, but throughout the year. Understanding the implications of sales and keeping capital gains taxes in mind when planning sales can help investors make tax-smart decisions.
Because there are so many different rules regarding taxes, some investors find it helpful to work with a tax professional. Tax law also varies by state, and a tax professional should be able to help an investor with those taxes as well.
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January has emerged as a prime month for renters to secure deals on apartments, and recent data from RentCafe.com revealed which cities were the hottest markets for apartment hunters. Minneapolis claimed the title of January’s most sought-after city for renters, with a 159% increase in page views from locals and renters from cities like Chicago, … [Read more…]
I’ve been in the real estate world since 2002 as an investor, agent, broker, and even author. Real estate has changed over the years but I still love it and still invest today. Over the years, I have learned many things and evolved from trying to rent and screen tenants based on gut feelings to developing systems that work much better!
Being a landlord can be rewarding, but navigating the world of rentals also comes with its share of challenges. To be successful and avoid unnecessary headaches, it’s crucial to avoid these common pitfalls.
Table of Contents – Top 5 Mistakes Landlords Make
1. Skipping Thorough Tenant Screening
Rushing to fill a vacancy almost always backfires. A proper screening process, including checking references, credit reports, and employment history, helps identify responsible tenants who are likely to pay rent on time and respect your property. Gut feelings are not the best way to choose tenants, even if they are friends or family, especially if they are friends or family! Don’t rush to rent a place to the first people who apply because you don’t have the time. If you don’t have the time, you should not be the one leasing the property.
I use DoorLoop for all of my tenant applications and screening. It makes managing background checks very easy.
You can read more about how I screen for tenants.
2. Neglecting the Lease Agreement
A clear, detailed lease agreement is what protects you when a dispute arises, including evictions. If you don’t have a lease or the right lease, it can make eviction take much longer and cost much more money. We try to avoid evictions but that is not always possible even with proper screening.
It must outline expectations, responsibilities, and procedures for rent payment, repairs, maintenance, and dispute resolution. Vague agreements lead to confusion and potential legal issues.
Either get a lease from a local attorney or use a high-quality online legal document generation tool. I use Legaltemplates.com. Using a local real estate attorney will be helpful in case a dispute arises later.
See my tips for the best ways to manage rental properties.
3. Ignoring Maintenance Issues
Ignoring leaky faucets, malfunctioning appliances, or minor repairs can snowball into bigger problems down the line. Prompt maintenance not only keeps tenants happy but also prevents costly damage and potential legal action. You cannot rely on your tenants to tell you about every issue. It is also important to schedule regular inspections to see if there are any major issues in the property and that the tenants are taking care of it.
See my article on how to find contractors for house flips and rentals.
4. Setting Unrealistic Rent Prices
Overpricing your property can lead to long vacancies and lost income. Research fair market rents in your area and consider factors like amenities, location, and condition before setting a price. Remember that asking price for other rentals is not always the best way to gauge market value. Those properties could be for rent for months and overpriced. Pay attention to the market to see which ones are being rented and which ones are sitting.
Zillow provides fairly accurate rent estimates (rent is easier to estimate than value).
Once you have an idea of market rent, you can use my Rental Property Cash Flow Calculator to understand your financials.
5. Failing to Communicate Effectively
Communication is key to a healthy landlord-tenant relationship. Be professional, responsive, and address concerns promptly. Ignoring tenant issues or being dismissive can create frustration and escalate into bigger problems. Ignoring tenants can also get you in trouble with the city or county where you reside.
I don’t personally deal directly with issues. I instead chose a great property manager to ensure communication is open and issues are handled promptly. They typically charge a percentage fee, which I simply build into my expenses.
Read my article on how to find a great property manager.
Conclusion
By avoiding these common mistakes, you can create a positive rental experience for both yourself and your tenants, leading to a smoother, more profitable investment.