(MONEY Magazine) -- Most of the news lately about real estate has been dismal: Home prices are swooning, foreclosures ballooning.

There is, however, one bright spot: the rental market, where demand is up and rents are rising. That's partly because those foreclosures have turned more than 4 million former homeowners into renters, but also because many other prospective homeowners, worried about losing their jobs or housing prices falling a lot further still, are reluctant to buy now.
As with many investments, the best time to get in is when most others are sitting on the sidelines. To figure out whether you can benefit by investing in rental property, here's what you need to know.
THE CASE FOR BUYING NOW

Many factors make this a great time to invest. Mortgage rates are at a 40-year low, and homes in many areas are ultra-cheap. Meanwhile, demand for rentals has risen in more than 500 cities, according to recent Census data. That, in turn, has enabled landlords to charge more.Hotpads.com, a real estate research firm, reports that rents nationwide jumped 11.6% in 2010, to $1,320 a month.

You'll need that rental income to tide you over until home prices bounce back; in fact, the typical investor today plans to hold for 10 years, according to a survey by the National Association of Realtors.

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If you can hang on that long, you've got a good shot at solid gains, especially if you're financing the home purchase. "Whereas leverage is dangerous when buying stocks, it can be a good long-term strategy with real estate," notes real estate investor and Columbia University adjunct finance professor Marshall Sonenshine.

The big catch: "Can you afford to hold the property that long and not need the equity for your kid's college fund?" says Sonenshine. Or whatever other pressing need might crop up.
You'll also face some tough financing rules. Most banks now require a down payment of at least 20% to 25% and evidence you have enough cash to cover six months' worth of mortgage, tax, and insurance payments.

HOW TO FIND A GOOD DEAL
Investment real estate is like produce: It's best bought locally. "Buy something you can get to in 10 minutes," says Seattle real estate investor Bill Snyder.
Familiarity with the neighborhood also limits nasty surprises like a noisy bar or a nearby development competing for renters.
Work with a local realtor who has experience with rentals and can help you assess how attractive a given home will be to tenants.
10 Best cities to buy a rental property
And while prices on multifamily dwellings haven't dropped as much as they have on single-family homes, don't ignore plexes: Intake from a few rents instead of just one will boost your cash flow; a single vacancy won't hurt as much; and you could benefit from economies of scale for things like appliances and painting. But stick to buildings with four units or fewer to avoid stricter financing requirements, such as a bigger down payment and higher mortgage rates.
Once you've identified candidates, crunch the numbers. The goal: to make sure your rental income will at least cover your loan payments, plus a 20% cushion to handle repairs, vacancies, and property management.

To figure out what you'll garner in rent, ask sellers for recent leases, says Snyder, and double-check their numbers by perusing sites like Rentometer and Craigslist for similar rentals in the neighborhood.

Assume your mortgage rate will be at least a half-point higher than rates on owner-occupied properties. Factor in insurance and property taxes, and bank on a 5% vacancy rate. Otherwise, "one empty month can kill you," says Ellie Berlin, a broker with Houlihan Lawrence in Larchmont, N.Y.
KNOW WHAT YOU'RE IN FOR

Brush up on your people skills: Owning rentals also means responding to tenant complaints, like the 2 a.m. phone call about a broken toilet. Want to palm off the grunt work? You can hire a handyman (around $45 an hour) or a management company (8% to 10% of monthly income plus a half-month's rent for filling vacancies), but the luxury will eat into cash flow.
To find your own tenants, creative ads on Craigslist are your best bet. Run credit and reference checks (National Tenant Network, at ntnonline.com, can help). And invest in small touches to make your place stand out, such as cool lighting fixtures or antique door hardware. Those will pay off when it's time to sell too.

By Jeff Wallach
Published September 2, 2011


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The multifamily housing market continued to show improvement in the second quarter of 2011, as the Multifamily Production Index (MPI) compiled by the National Association of Home Builders (NAHB) increased for the fourth consecutive quarter.

The MPI rose from 41.7 in the first quarter of the year to 44.4 in the second quarter. It is the highest quarterly reading since 2006, and continues the trend of generally improving conditions in the market for new multifamily housing that has emerged since the MPI dropped to a record low of 16.0 in the third quarter of 2008.

The index provides a composite measure of three key elements of the multifamily housing market: construction of low-rent units, construction of market-rate-rent units, and construction of “for sale” units. The index and all of its components are scaled so that any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse. In the second quarter of 2011, a majority of developers saw improvements in the production of low-rent and market-rate units.

“Multifamily rental construction is trending upward, and it is definitely the brightest sector in the broader housing market,” says NAHB Chief Economist David Crowe. “However, the entire housing market continues to be very fragile and subject to many external pressures, including an ongoing shortage of financing for new projects.”

Looking forward, developers’ expectations about multifamily construction for the next six months improved in the second quarter in all three market components: low-rent, market-rate-rent and for-sale multifamily. However, Crowe cautions that the current climate of overall economic uncertainty is making builders and consumers cautious and having a dampening effect on expectations.
The Multifamily Vacancy Index (MVI), which measures the multifamily housing industry’s perception of vacancies, increased slightly from 35.0 in the first quarter of 2011 to 36.1 in the second quarter. With the MVI, lower numbers indicate fewer vacancies. Crowe notes that recent small increases in the MVI follow an extended period of improvement, and over the past three quarters the MVI has been lower than at any time since the second quarter of 2007. Crowe also notes that multifamily developers and property owners expect vacancy rates to decline over the next six months.

“Even though multifamily is trending upward, production is still very low in a historic context and in the context of what we project is necessary to meet long-term demand,” Crowe says.
He adds that the Multifamily Production Index and the Multifamily Vacancy Index have emerged as leading indicators for the multifamily market, providing information about potential movement in Census Bureau tabulations in advance of their release.


Posted By susanne On September 13, 2011 In Consumer News and Advice,Finance and Economy,Real Estate News,Real Estate Trends,Today's Marketplace,Today's Top Story

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What sells a home? Is it the price, location, or condition? The truth is that it takes a combination of all of these factors to make a sale in today's market. Unlike boom era transactions, the seller is now in the passenger seat. Buyers today have a great advantage. A glut of homes in many markets means that supply far outweighs demand. Buyers are able to be choosy and to negotiate sweet deals.

When your home is on the market you want to be noticed and for the right reasons. It's a competitive advantage that could mean the difference between making the sale or not. Let's look at five top ways to increase your home's appeal when it's on the market.

1. Stage for Photos: We are a visual society. Webcasts, virtual tours, and the Internet have made staging for photos and showings an integral part of any marketing plan. Pictures amplify problems. It's a moment frozen in time, available for a viewers deepest inspections. This means you must create a perfect moment in time. Remove any clutter or excess furniture. Rearrange furniture with looks taking rank over functionality. If your furniture has seen better days, consider budgeting for furniture rental. Add detailed touches, such as cut flowers, throw pillows, and lit fireplaces.

2. Clean: While smells and grime don't always translate in pictures, they will definitely be a buyer deterrent during showings. If your home needs a lot of scrubbing, either hire a maid service or work on one room at a time until they all shine. Buyers are especially turned off by dirty bathrooms, kitchens, and odors. Scrubs these rooms and burn candles or spray room fresheners.

3. Enhance Curb Appeal: Curb appeal is the first impression of the real estate market. Yes, buyers do judge a house by it's "cover." The outside must create a desire to see the inside. To accomplish this you may need to spend money to make money. Cosmetic enhancements go a long ways. Start small and work your way up. Powerwash the deck or sidewalk. Fix broken stones and plant new landscaping. Clean and mulch existing landscaping. Add new shutters, house paint, an accent color on the front door, an updated exterior light, and new patio furniture. Staging doesn't stop at the front door. It goes from property line to property line.

4. Price Competitively: Buyers are more dollar conscious than ever. Fears of a renewed recession and a high unemployment rate have them wanting the best deal for their money. Buying in today's market means low interest rates and high levels of affordability. Buyers aren't willing to pay more for an image or an idea. Be sure to be realistic about what your home is worth in today's market. Prices have changed, dramatically in some areas. If you price too high you run the risk of scaring away would be buyers. Price correctly from the beginning.

5. Hire an Agent: Perhaps this should have been number one. Many sellers may be considering doing a For Sale By Owner in an attempt to save money on closing costs in these tough times. That could be a big mistake. Buyers have the upper-hand in negotiations these days and without an experienced professional by their side, they could get taken advantage of. Agents also have access to a larger pool of potential buyers. Buyers seek them out when they want a home.
Selling today is possible. In fact, many areas are seeing increases in existing-home sales. Buyers know now is a great time to buy, you just have to convince them that they should be buying your home.

by Carla Hill
Published: September 9, 2011

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From April to June, foreclosures constituted about one-third of all home sales during the spring quarter and were "six times the percentage of foreclosures in a healthy housing market", according to The Washington Post.

RealtyTrac Inc. released figures on foreclosures, distressed, and bank-owned properties in August. These included homes (31 percent of the spring market) that were bought after a notice of default had been issued or were lender repossessed. The company reported that bank-owned homes which make up about 19 percent of all sales and are sold after being repossessed, sold for 40 percent less than the average price of other homes. That figure is slightly up from previous quarters including the same time period one year ago.

The figure drops for sales of homes in the foreclosure or short sale process. They sold for 21 percent less than the average home, according to RealtyTrac Inc. That figure is also up slightly from 17 percent in the first quarter.

The firm reports on its website that the average sales price of a foreclosure is $173,450 (at the time of writing). That price is just slightly down (1 percent) from the first quarter.
Where are most of the foreclosures these days? Head west to Nevada, Arizona, and California. These states' foreclosures accounted for 65 percent, 57 percent, and 51 percent, respectively, of all home sales. For Arizona, the percentage increased 16 percent from a year ago.

Other states such as Colorado, Florida, Oregon, Michigan, and Illinois had foreclosure sales that made up about one-third or more of their home sales in this year's first quarter."

"With average prices on distressed real estate trending down and average discounts trending up, this report is clearly good news for well-positioned buyers and investors looking for bargain real estate that will build them wealth in the long term and often cash flow as rental real estate in the short term," said James Saccacio chief executive officer of RealtyTrac Inc.

The firm also reports that 102,407 homes in default or scheduled for auction–pre-foreclosures–increased 19 percent from the previous quarter. Many of these homes are sold via short sale, and despite this jump, the figure is still down 12 percent from the second quarter of last year.
The states with the most significant quarterly increase in pre-foreclosure home sales included: Nevada (43 percent increase), California (38 percent increase), and Texas (34 percent increase).
Nationwide, the pre-foreclosures had an average sale price of $192,129, which is 21 percent lower than the average sales price of non-foreclosure homes.

While foreclosures and distressed properties are selling for, in some cases, up to 40 percent less than the average price of non-foreclosures, it's important to understand exactly what you're getting. Some people think of this as a discount. But often that implies that you'll be getting the same or similar type of property as others on the market except for a lot less. However with foreclosures and distressed properties, what you're actually buying may also be significantly lower in price for a reason.

Many of these homes are sold "as is" and may need substantial work to get the home in livable condition. Of course, that's not always the case; there are foreclosures that might be in pretty good condition–just do your homework before you buy.

Learn how much you'll need to put into the property to get it the way you want it or you may find that, even though you seem to be getting a bargain, you may have to put out more money than you originally thought. If you know from the start how much is needed then you can plan for it and come out ahead by purchasing a foreclosure/distressed property at a reduced market rate.

by Phoebe Chongchua
Published: September 2, 2011

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