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Investors are seeing Red!
by Annie Christian
Aug 17, 2012 | 6677 views | 4 4 comments | 26 26 recommendations | email to a friend | print
Is the real estate market recovering or stabilizing for investors? That depends on who you are talking to today. Real estate investors who bought multiple properties during the real estate peak paid too much for their rental properties. Their monthly rents usually do not cover the high mortgage payments and some investors have signed up for variable rates loans. Investors are not able to refinance due to a lack of equity, low debt-to-income ratio, bad credit etc.

Q: Do most investors own more than one property?

A: Yes. Homeowners who re-financed and withdrew cash from their primary residence often bought more than one property during the real estate peak — when getting an income loan was very, very easy.

Q: Why are investors not breaking even on their rentals?

A: Investors who paid too much for their rental properties struggle with a much higher mortgage payment right from the start. Usually the rent does not cover the high mortgage payments. Investors often suffer from loss of income when renters become unemployed/underemployed, relocate due to job transfer, high maintenance/repairs costs, high vacancy costs etc.

Q: Should investors hire a property manager?

A: Yes. It is most advisable when the investor-owner lives out-of-the-area. However, it does add another cost to the annual budget of maintaining the property.

Q: Should investors renovate the rental property to get higher rents?

A: That depends on where the rental is located. If the property is closer to where there are jobs — higher paying jobs — it is a good idea. It would make sense to renovate to make it more attractive to renters because renters are able to pay more for the added value. For example, most renters will pay more for air conditioning if they can afford it.

Q: What type of renovation would add value to the rental unit?

A: Adding a laundry facility is very practical. Adding an air conditioning unit or window air conditioning unit is also practical for the long, hot summers we have in Reno/Sparks.

Q: What is the average cost to make a rental property attractive?

A: The larger the unit, the higher the costs. Landlord generally budget a month to two months of rent to get the unit ready for the next renter and another two months of vacancy to get a long-term renter.

Q: What is the average cost of hiring a handyman?

A: Licensed handymen may charge anywhere from $40-$55.

Q: How should I get ready to be a landlord?

A: First, talk to a few experienced local property managers. Get their advice on where the higher-rent districts are. Next, find out what are the average sale prices for various size homes.

Q: What should I pay for rental properties?

A: Real estate is about location, condition. You pay more money for newer properties. Newer properties may need less renovation, that is always an advantage.

Q: Are there any properties an investor should stay away from?

A: Most investors stay away from properties that charge high monthly homeowners dues. These properties usually are newer, such as condos/townhomes in a gated community that offers a club house, pool and spa, tennis court etc.

Q: Can investors add the high monthly homeowners association dues to the monthly rent?

A: Sometimes not. Looking at Craiglist postings, I see many rental properties starting out high and eventually having to reduce 10 percent or more to get rented.

In 2012, many investors are considering short selling all their rental properties so they can be financially fit. These investors are experiencing major financial losses due to longer months of vacancy, high costs of repairs and maintenance. Whenever a tenant vacates, landlords bear the costs of painting, recarpeting, hauling trash away and making a number of minor repairs to make the rental property attractive to the next renter. This takes time and money.

The best rental property is one that you can buy outright for cash, one you do not have a monthly payment to make. You bought it low and the rent will pay a mortgage in 10 years or less.

If you paid too much for your rental properties, you are in the red right from the start. You are house poor and broke every month.

The question you need to ask yourself, is … is it worth going into my savings to pay a renter to live at my property? The answer should be ‘No.’ Get out of a bad loan!

Annie Christian is a real estate broker and owner of The Annie Christian Real Estate Group. She helps with everything from buying and selling to foreclosure and short sale. To submit a question, call 351-5117. Her website is
Comments-icon Post a Comment
Gonzo shaff
April 10, 2013
"The best rental property is one that you can buy outright for cash, one you do not have a monthly payment to make. You bought it low and the rent will pay a mortgage in 10 years or less."

This doesn't make any sense. If you buy a place outright for cash then you don't have a mortgage.
Gonzo shaff
April 19, 2013
weeks later and she never responded to my comment OR email I sent her. Apparently the only reason she responded to you was because you said that..

Hey Annie, try writing stuff that actually makes sense.. thanks
August 25, 2012
Has this woman ever responded to a question from an actual reader? I see that her closing paragraph always encourages people to submit questions, but every time I read her articles, the questions seem too tidy and convenient. These articles are merely fluff pieces to pitch her short sale realtor services, and her writing is awful. I hope the Sparks Tribune isn't paying her any money for them.
Annie Christian
September 06, 2012

Thank you for your comment.

Actually many readers have contacted me.

These homeowners are struggling financially and have no choice but to short sale their homes - in order to be financially fit again.

We do not live in a perfect world.

Sometimes we have to get rid of bad investments that are sucking us dry financially month after month.

Annie Christian, Broker

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