This week we were joined by Deb Newell from Real-Time Leasing and Jeff Winship from First Option Mortgage. First up, we talked to Deb about what property owners need to be aware could happen with their renters and how to respond. One of the most important aspects of having a renter, is that they pay rent and pay it on time. If a renter says they are going to be late one month because their job didn’t pay them yet, a homeowner would probably let it slide a bit because they want to pay their mortgage so they are usually a little more lenient. The big problem with that is if they allow it once, it will most likely become a habit and when you encourage a habit it continues to be a problem. When a renter comes to a property management company, the company will figure out the situation by first finding out when they can pay the rent and maybe work out a payment plan. Sometimes it is easier to do that than go through an eviction, but if it becomes a habit then the company will take the necessary measures to fix the problem. Property management companies do background checks to make sure a potential renter’s income qualifies in order to know that they are able to afford the place, but life does happen and people lose jobs so a certain amount of empathy does come up in these situations.
Another issue that may occur is that a tenant says their refrigerator died and the food spoiled so they will be sending a bill for all of their groceries. These are unfortunate circumstances that are not done on purpose so the owner is not responsible for the food spoilage as long as it is written in the lease. Acts of God and unfortunate situations like this should all be detailed in a lease and specific to the state that you live in. For this reason, it is important to have a property management company such as Real-Time Leasing, who knows what the statutes and rules are in order to protect yourself as well as the renter’s rights.
Sometimes a renter will have a situation, such as their air conditioning going out, and take it upon themselves to discount their rent because they didn’t have air conditioning. Tenants cannot arbitrarily discount their rent, so if that happens, they have to come to the owner first, or if it’s really bad and the owner is not being compliant and fixing it, there are options to put rent in escrow. There’s a whole process to go to court with that, depending on the temperatures you are not obligated to give a rent discount.
When a rental unit doesn’t allow pets and a little dog shows up but the renter claims they are just babysitting it, is another common problem with tenants. If the landlord goes by the property and see’s the animal, but they say they’re just watching it for a friend, then they have to be firm and say that the dog needs to be gone. The landlord also needs to put it in writing, to reaffirm the terms of the lease, send it to them, and then if the next time you go by there and the animal is still there, you have grounds for eviction. If you acknowledge that the pet is there and you do nothing and then rent comes, you then accept the new terms for the lease and are allowing the pet to be there. If you are dealing with issues such as these with your tenants you must remember as a homeowner/landlord that you have to give reasonable notice before entering the unit, typically 24 hours. If there is a health or imminent risk, or they request maintenance, then you don’t have to give the 24 hour notice.
Jeff Winship who is a senior loan officer with First Option Mortgage talked with us about how it is a good idea to look at homeownership versus renting in today’s market because rates are very low. Not only for rates, but also a lot of people are not aware that they could replace a rental payment with home ownership and with that comes a lot of advantages. There is a big difference between mortgage interest deduction and the allowable income rent credit. With the rent credit there is a maximum allowable income of $57,169, so the maximum rent credit is $2,000. If you’re over that $57,000 threshold, you’re not going to see anything on your taxes. If you contrast that with home ownership purchase of a home of $150,000, that’s a $6,750 write-off that next year at this time you could be looking at that you don’t have. The median price of homes is $183,000, that’s about a $7,500 write-off that you don’t have available through renting.
We asked Jeff if you are in the income range of about $57,000, is a median home of $183,000 in reach for qualifying for a mortgage? It is in reach but will depend on a couple of factors. You have to look at what the proposed payment will be for the new home as well as any additional obligations, such as credit cards, installment loans, car payments, and student loans so anything that would show up on the credit report. Those debts along with the proposed payments are looked at and as long as they are in the ratios, they qualify.
What is the market looking like today? From a general consensus, the inventory is very low right now, so it is a sellers market. That’s the importance of working with a loan officer to make sure you are pre-qualified or pre-approved, because then it puts you in a position of strength. The seller will require the pre-approval letter and agents will require that letter as well so as long as you get this done right away, being a buyer in a sellers market is not as bad as it sounds. This market is entirely different than what we’ve gone through the last 3 or 4 years. The notion that you can go out and discount a house should be thrown out the window. As a buyer, you are going to need to figure out what the sellers wants to net and get as close as you can to that number in order to stay competitive in this market.
Text question: There’s a house by ours that has been vacant for 3 years with holes in the siding, plywood over the windows, and the yard is solid weeds. Who do we call to take care of the house?
Andy Prasky: Go to the county and look at the website and you can find the tax-owner. You can also go to the city for code enforcement and a lot of the times the city won’t do anything unless you call and complain.