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How to Invest in Real Estate During the Pandemic

There has been a surge of renter households in the US. As a result, the economic shock waves set off by the coronavirus pandemic will reverberate not only for tenants but the owners of those properties as well. Whether you are an accidental landlord that has enjoyed income from your old primary residence or are depending on your multi-family real estate portfolio to provide the majority of your income in retirement, here is a summary of the obstacles and opportunities you need to consider. 

Financing

Obstacle – The current economic downturn has drawn several comparisons to the most recent recession. While the causes are significantly different, lenders have tightened their criteria again for home purchases for both home buyers and real estate investors. Recently, the FHA has significantly tightened their credit scoring criteria for qualifying for a loan. In addition non-qualified (NQ) lending has reportedly taken a hit as well. This is a significant concern for some real estate investors that need short-term lending to purchase and renovate if they do not meet income standards.

Opportunity – While credit has tightened on several fronts, financing may offer significant upside for property owners that qualify. Today’s rates are relatively low. If you meet mortgage lending guidelines, you may be able to refinance a property at lower rates. Additionally, if you were planning to expand or improve your real estate portfolio, you can borrow against the equity in your existing properties at historically low rates.

Single Family Housing

Obstacle – With unemployment increasing as a result of this pandemic, anyone owning rental property is likely concerned about their tenants’ ability to pay. Because of the passage of the CARES Act, evictions are frozen for 120 days starting March 27, 2020 for renters who live in properties that receive federal subsidies such as Section 8 vouchers or for renters whose landlords have government-guaranteed loans, including loans backed by Fannie Mae, Freddie Mac, the FHA, or the USDA. If the rental unit is not covered by the CARES Act, many individual states have issued similar suspensions on evictions. 

Opportunity – While the CARES Act gives some tenants a means to avoid eviction, homeowners with government-guaranteed loans may be able to request forbearance for up to 360 days if their income is reduced as a result of COVID. In order to determine if your mortgage is backed by a government agency, start with the two largest entities: FannieMae and FreddieMac. If your loans are not backed by a government agency, speak with your loan servicer and ask about what options would be available in your situation. 

If your tenant is struggling to pay but they are an otherwise good tenant, consider using the mortgage reprieve to temporarily reduce or suspend rent for a predetermined period. You should also help make your tenant aware of the stimulus support and temporary unemployment benefit increase. These resources will not only help them pay you but help get them get back on their feet faster once the economic downturn subsides. 

Multi-Family Housing 

Obstacle – Just like smaller properties, multi-unit apartment complexes are going to face problems with tenants who have lost their job or taken a steep pay cut. Anything larger than 4 housing units cannot be financed with a mortgage, so the loan forbearance options through Freddie Mac or Fannie Mae don’t apply. 

Opportunity – That doesn’t mean that you are without options. If you have a larger rental property, follow much of the same guidance as earlier. Work with your tenants if they are good tenants to help them access relief so that they can pay you at least in part and stay in your unit long-term. 

You also want to reach out to your bank right away to see how they can work with you. Just like you don’t want to lose a good tenant, they don’t want your loan to go into foreclosure. Ask them if they can work with you by skipping some payments and adding them to the end of your loan or temporarily making interest-only payments on your loan. That way, if your tenants can pay enough rent to cover this lower payment, taxes, insurance, and other fixed costs, you should be in a much better spot to navigate the COVID outbreak.

Commercial Property

Obstacle – Similarly, many small businesses have been forced to close by state and local stay-at-home orders, which limit their ability to bring in the revenue to pay their rent. Commercial property cannot be financed with a mortgage, so the loan forbearance options through Freddie Mac or Fannie Mae do not apply.

Opportunity – If your property is leased out to a small business(es), then you may want to work with your tenant to make sure that they have applied for the Payroll Protection Program if they are eligible. If your tenants qualify for the PPP, then they can use a portion of those funds to pay their rent, which is a huge relief to you. Similarly, if you currently pay yourself a smaller salary but get more of your income from the rent your business pays to you, the PPP can help your business not only protect your paycheck but also the rent you pay to yourself as long as it is reasonable for the local market.

Staying Prepared For Future Uncertainty

By now, you have noticed that if you have cash and a good credit score, it gives you more flexibility in terms of dealing with this crisis. Here are a few best practices to live by to keep your real estate portfolio in good standing in this and the next crisis:

  • Maintain little or no credit card and other high interest debt
  • Maintain a credit score of 740 or higher
  • Maintain enough cash to cover vacancies and maintenance on the target property for a year
  • Maintain enough income to pay the rental property mortgage if there’s a sustained period of vacancy

There is a decent chance that if you make good moves in this market, you can possibly walk out of this with a better real estate portfolio.

Source: https://www.forbes.com/sites/financialfinesse/2020/05/18/how-to-invest-in-real-estate-during-the-pandemic/#115159a8264c

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San Diego Housing Supply Overview

In April, the stock market pared some of its March losses while overall economic activity nationally continued to slow. With more than 20 million initial unemployment claims filed nationwide in April on top of more than 10 million initial claims in the last two weeks of March, suddenly much of the country is out of work, at least temporarily. This dramatic economic slowdown is reflected in this month’s real estate activity, which is down significantly. For the 12-month period spanning May 2019 through April 2020, Pending Sales in the San Diego were down 1.2 percent overall. The price range with the largest gain in sales was the $1,250,001 to $2,000,000 range, where they increased 7.3 percent.

The overall Median Sales Price was up 3.3 percent to $590,000. The property type with the largest price gain was the Single-Family Homes segment, where prices increased 3.7 percent to $665,000. The price range that tended to sell the quickest was the $250,001 to $500,000 range at 26 days; the price range that tended to sell the slowest was the $5,000,001 and Above range at 114 days.

Market-wide, inventory levels were down 31.8 percent. The property type with the smallest decline was the Condos – Townhomes segment, where they decreased 18.0 percent. That amounts to 1.6 months supply for Single-Family homes and 1.9 months supply for Condos.

Quick Facts: Residential real estate activity in San Diego County, comprised of single family properties, townhomes and condominiums. Percent changes are calculated using rounded figures:

  • Pending Sales 2
  • Closed Sales 3
  • Median Sales Price 4
  • Percent of Original List Price Received 5
  • Days on Market Until Sale 6
  • Inventory of Homes for Sale 7
  • Months Supply of Inventory 8
  • + 7.3% – Price Range With Strongest Pending Sales: $1,250,001 – $2,000,000
  • + 2.5% – Home Size With Strongest Pending Sales: 3,001 – 4,000 Sq Ft
  • – 0.3% – Property Type With Strongest Pending Sales: Condos – Townhomes

If you are interested in buying or selling, please reach out to Garrett Trainor at First Line Realty!

Source: https://www.sdar.com/fast-stats.html

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Recent Home Sales in Ramona, California, 92065

Since February 1, 2020 there have been 124 detached homes that have sold in Ramona, California, 92065.

No one-bedroom detached homes have sold in Ramona. One-bedrooms are more commonly condominiums rather than detached homes.

Two-Bedroom: 5 two-bedroom detached homes have sold in Ramona in the past 3 months. Square footage ranged from 976 to 1,492. Average sold price was $375,880, ranging from $307,000 to $460,000. Average days on the market was 65.

Three-Bedroom: There are many more three-bedrooms in the market since 63 three-bedrooms have sold in Ramona in the past 3 months. Square footage ranged from 1,134 to 4,300. Average sold price was $555,427, ranging from $405,000 to $860,000. Average days on the market was 23. As you know, the purchase price of the home takes into account the lot square footage and not just the home square footage. The lot sizes vary greatly in Ramona, from .25 acres to over 20 acres. This is something to keep in mind when looking at market data.

Four + Bedroom: 47 four-bedroom and 9 five-bedroom detached homes have sold in Ramona in the past 3 months. Square footage ranged from 1,500 to 5,193. Median sold price was $574,000, ranging from $450,000 to $1,800,000. Average days on the market was 57.

If you are interested in a market analysis for a certain zip code or area in San Diego please let Garrett Trainor at First Line Realty know and he will be happy to help!

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Current Homes for Sale in Ramona, California, 92065

Interested in living in Ramona, California? As of today, May 7, 2020 there are currently 65 detached homes for sale in Ramona, California, 92065.

One-Bedroom: There is only 1 one-bedroom for sale in Ramona listed at $795,000. It has been on the market since November 2019 and is located at 925 E Old Julian Hwy. This new build is 1,672 Sq Ft on 9.85 acres of land.

Two-Bedroom: There are actually no two-bedroom detached homes for sale in Ramona!

Three-Bedroom: Unlike two-bedrooms in Ramona there are plenty of three-bedrooms for sale, over 31 for sale! Asking prices range from $499,000 – $995,000. There are two listed in the millions at $3,750,000 and $4,500,000. The median lot size is a little over 30,000 Sq Ft. Average days on the market is 39 days. The average square footage is 2,375, ranging from 1,200 Sq Ft – 4,560 Sq Ft.

Four + Bedroom: There are 33 four plus+ bedroom homes for sale in Ramona. List price ranges from $449,900 – $995,000. There are an additional three homes listed in the millions: $1,100,000, $1,200,000, and $7,495,000! The latter is 8,000 Sq Ft custom home with 360 degree mountain views, built in 2009, and is on 352 acres! It is a four-bedroom / 5-bath home that has been listed for 16 days. This Equestrian Estate and Arabian Horse Ranch includes amenities such as several other historical homes dating back to 1890, a 35 Stall State of the Art Barn with covered riding Arena, an additional 12 Stall barn, a Breeding facility, a 12 Stall Mare Hotel, a Presentation Office, a covered Bullpen, numerous dry turnout pastures and irrigated pastures, two wells and much more. Wow!

The average days on the market for four + bedrooms is 33 days and the average square footage is 3,034 Sq Ft, ranging from 1,950 Sq Ft to that massive 8,000 Sq Ft.

If you are interested in a market analysis for a certain zip code or area in San Diego please let Garrett Trainor at First Line Realty know and he will be happy to help! Stay tuned for Just Sold data for Ramona, California!

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First Line Realty – Just SOLD – 5310 Rex Ave #1, San Diego, CA 92105

Congratulations to my buyer of 5310 Rex Ave #1, San Diego, CA! We were able to sell her home and find her this beautiful home closer to her work! We were also able to purchase this property below appraisal price! If you are interested in purchasing a home please reach out to Garrett Trainor at First Line Realty. Property With A Purpose! 

  • Just Sold May 2020
  • Selling Agent
  • Sale Price $236,500
  • 1 Bed / 1 Bath
  • Year Built: 1973
  • Home Size: 630 Sq Ft
  • Community: City Heights
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Five Possible Electric Home Dangers

The leading cause of home fires is due to electrical mishaps. Learn about the most dangerous things electricians see homeowners do most often that could be putting your home at risk.

  • Using Adaptors on Two-Prong Outlets: Some older homes may have old two-prong outlets, but many of today’s appliances are three-prong. Instead of using adaptors, upgrade your outlet to a three-prong version.
  • Using Loose Electrical Outlets: Plugging into loose electrical outlets can lead to fires. Replace loose electrical outlets ASAP.
  • Using the Wrong Extension Cords Outside: Make sure the extension cord is rated for outdoor use. Otherwise, it could overhead and potentially cause a fire.
  • Overloading the Circuit: Look for signs that you may be overloading the circuit. If you suspect an overloaded circuit, contact a licensed electrician to inquire about upgrading your panel.
  • Overlooking the Importance of Ground Fault Circuits: All outlets in the kitchen and bathrooms should be equipped with ground fault circuit interruptors which will shut off power then they sense water near.

Source: https://www.car.org/marketing/clients/infographics/Electric%20Dangers

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First Line Realty Explains Different Types of Home Loans

Are you interested in purchasing a new home and not sure which type of home loan to apply for or what different options there are out there? See which one makes the most sense for you!

There are various types of regulations, guidelines, and fees out there for the home buying process. Not every mortgage is right for everyone. That is why there are a variety of home loans available. Let’s look at the various options out there.

1. Conventional Loan:

  • What Is It? A conventional loan is a loan that isn’t backed by a government agency. These are the most common type of loan. Conventional loan terms come in 10-, 15-, 20- and 30-year terms, with 30-year terms being the most popular option.
  • What Do You Need? You can get a conventional loan with as little as 3% down payment and a 620 credit score. But the lower your credit score, the more money you might need for a down payment.
  • Who Is It Good For? The majority of home loans — around 75% — are conventional loans, so it’s good for most people. You can use it for your first home, second home and even investment properties.
  • Who Should Skip It? Borrowers who don’t have the minimum credit score requirements or need payment assistance.

2. FHA Loan:

  • What Is It? An FHA loan is backed by the Federal Housing Administration, which provides mortgage insurance to lenders who provide FHA loans. It’s the largest mortgage insurer in the world. Loans are administered by FHA-approved lenders. This can be local banks, credit unions and online lenders. Loans come in 15- and 30-year terms.
  • What Do You Need? To secure a 3.5% down payment rate, your credit score will need to be 580 or above. If it’s below 580, you can still qualify, but you’ll need at least a 10% down payment. For down payments of less than 20%, your loan will require private mortgage insurance. PMI protects the lender just in case you default on your loan. PMI will get removed from your mortgage payments once you have at least 20% equity in your home.
  • Who Is It Good For? Borrowers who don’t have strong enough credit to qualify for a conventional loan. FHA loans also offer down payment loans and grants through federal, state and local programs whereas conventional loans don’t.
  • Who Should Skip It? If you have good or excellent credit that would qualify you for a conventional loan.

3. VA Loans

  • What Is It? VA loans are offered through the US Department of Veterans Affairs. Military veterans, those in active duty or in the reserves qualify for VA loans.
  • What Do You Need? There’s no down payment or minimum credit score requirement to get a VA loan.
  • Who Is It Good For? Those who serve or have served in the military.
  • Who Should Skip It? Borrowers who aren’t in the military, obviously. VA loans are only good on primary residences so if you need funding for a second home or investment property, you’ll need to look at other options.

4. USDA Loans

  • What Is It? USDA loans are funded by the US Department of Agriculture. They’re available in specific regions across the country. They’re made for borrowers in mostly rural areas who might not otherwise qualify for a traditional loan. Loans are backed by USDA-approved lenders (similar to FHA-backed loans).
  • What Do You Need? There’s no down payment required for a USDA loan. Most lenders require at least a fair credit score.
  • Who Is It Good For? Families in rural areas as long as you meet income and location limits.
  • Who Should Skip It? Those who don’t meet the location and income requirements. If you qualify for one and not the other, you also might want to look into alternative loan options.

Source: https://www.cnet.com/personal-finance/all-the-different-types-of-home-loans-you-should-know-about/

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First Line Realty – Just SOLD – 6750 Beadnell Way #20 San Diego, CA 92117

Congratulations to my seller of 6750 Beadnell Way #20! We were able to sell for full list price and purchase a new home for her as well! If you are interested in selling your home please reach out to Garrett Trainor at First Line Realty. Property With A Purpose!

  • Just Sold April 2020
  • Listing Agent
  • Sale Price $289,900
  • 1 Bed / 1 Bath
  • Year Built: 1994
  • Home Size: 609 Sq Ft
  • Community: Clairemont
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First Line Realty – What is an Earnest Money Deposit in a Real Estate Transaction?

What is an earnest money deposit in a real estate transaction? Many buyers know they need to spend money to purchase a home, but many do not know when they need to put a deposit down or how much that typically can be. The earnest money deposit is the initial deposit that a buyer would put towards purchasing a home to show good faith. This usually happens within a day or two of submitting the residential purchase agreement, or “offer.”

The earnest money deposit is considered a good faith deposit because it shows the seller of the home that you are willing to put money on the line and you are serious about the purchase. This deposit is typically held by the listing agent and can be cashed and put into an escrow account. If the offer is accepted and a contract is finalized the deposit will be treated as part of the down payment. However, if the buyer breaks the contract there is a chance that the earnest money deposit can be lost and kept by the seller.

The seller may be able to keep this deposit if the buyer breaks terms of the contract. That being said, the buyer has rights set forth in contingencies that will allow the buyer to walk away from the contract and have the earnest money deposit returned. These contingency periods are determined by the buyer in the offer so it is important to make sure the buyer is working with an educated Realtor to make sure they are aware of these time periods so they know when they can cancel the contract without losing their deposit.

There is no definitive amount for an earnest money deposit. It is simply up to the buyer to decide how much they would like to put down. Typically, it can be anywhere between 1-5% of the home’s sale price. A buyer may want to put more money down to show the seller that they are very serious about the purchase which could make your offer stronger when comparing with others.

In summary, it is important for the buyer to know the contingencies and what obligations and responsibilities they have during these times periods. It is essential to pay close attention to what needs done when so the buyer does not lose the earnest money deposit. If you are unsure of this ask your Realtor for guidance. A good Realtor will keep track of these time periods for you so you can rest assured knowing there is an extra set of eyes on these time frames.