Friday, April 19, 2013

Q: I have a savings account that is earning almost nothing.

Even a money market or CD is less than 1% interest.  I’m thinking I might buy a rental property but my friends all tell me they are too much trouble.  People trash the house or don’t pay the rent and the place can be empty for months, etc.  I’d like to know what you think about it.
A: 
I can’t think of a better time to buy rental property.  Our prices are going up but there are still good deals to be made.  Let’s do some simple math.  If you have $300,000 in various saving instruments you are not even keeping up with inflation.  A decent home at that price will usually get you $1,500.00 to $1,800.00 per month in rent.
The simple math works out to be $21,600 return per year which is better than 6% return.  That’s even taking out the taxes, insurance and a reserve for repairs.  It could even include management fees.  Not a bad return and you have something “real” that can be rented, sold, lived in by you or family, etc.  That’s instead of the volatile stock market or low interest savings.
You do not have to experience trashing of your property or non paying renters if you screen tightly on the front end.  A management company can do this and will interview potential renters and keep tabs on the property.  We used to do property management and handled a few commercial properties and over 40 homes.  We were very tough on the screening and never had a trashed property or non-payment problem.

Choose something with the eye of a renter, not owner.  Renters care about number of bedrooms and bathrooms, utility costs, location to town or ferry, closeness to the bus line and ease of maintenance. A good rental is seldom empty in our tight rental market. I’ve sold many rental properties on Vashon and the owners are all reaping the rewards of these investments.  Interview management people and locate someone you trust and then sit back and enjoy the return.

Wednesday, April 10, 2013

Q: You're always talking about landslide hazards so now I can't find a buyer for my house!

We have had a few small slides in this neighborhood but I've lived in this house for over 30 years and I'm still here.  Why do you keep scaring people away?

A:
Well, first I must say that I’m flattered that you think every potential buyer for Vashon Island property reads what I write.  But I don’t think so.  Slides do happen here, as they do throughout the Puget Sound region, and some of them have resulted in major damage and injury.  I always warn potential buyers to seriously consider the ramifications of being in a slide hazard area.
   I have not spoken to anyone concerning your specific house, so your lack of buyer interest may have more to do with the price than the location next to a slide prone cliff. Since you are currently off the market I’d like to offer you an idea that may be helpful. You might consider hiring a good geotechnical engineer to do an assessment of the property.  You can offer the results to potential buyers.  If the results are generally positive, you will ease their mind about buying your place.  If the report is very negative, you can get a bid for whatever work the engineer recommends to protect your home.

   There are some engineering ideas that can be very helpful.  Anchors, foundation reinforcements, retaining walls, etc. could ease a potential buyers mind.  These things are not cheap.  But they could make the difference between selling your home or not.  Even with no one specifically calling their attention to slide hazards, buyers have online resources that identify soil types and slide problems.
   I have a friend who had to do some major engineering work to reinforce the bank below her home.  It was costly, but when it was time for her to sell, that work went a long way toward getting her top dollar for her place. She felt that she wouldn’t have done that well if the slide area issues had not been solved.