TIME real estate

Here’s Why Your Landlord Keeps Raising the Rent

Views Of Austin And San Antonio As Cities Bear The State's Financial Burden
A building stands under construction Austin, Texas,. U.S., on Friday, June 6, 2014. Bloomberg—Bloomberg via Getty Images

Turns out the rent really is too damn high

If you dread writing your first-of-the-month check, you’re not alone.

Apartment rents are continuing to rise rapidly across the country as landlords pushed through big hikes over the past year, even as household income remain squeezed.

The average monthly rent for an apartment rose to $1,099 in the second quarter of 2014, up 3.4% over the 12-month period ended in June, according to data from the real-estate research firm Reis. The second quarter was the 18th consecutive quarter of rent increases.

The ever-spiraling rental prices are because tight mortgage-lending standards keep younger people in the rental market longer, particularly in urban areas. With vacancies at just 4.1%, rental supply is tight — and as a result, average rents have increased 14% since the end of 2009.

In San Francisco, San Jose, Calif. and Seattle, rent growth exceeded 6% in the past year, and even cities like Charleston, S.C. and Nashville, Tenn.—cities not associated with high rents—saw growth of about 5% over the same period.

New York City was the most expensive rent market with an average rent of $3,152/month, with San Francisco the second most expensive.

Meanwhile household income stagnated in 2012 at $50,017, well below 2007’s peak of $55,627, adjusting for inflation, the Wall Street Journal reports, making it harder for renters to afford their apartments.

Maybe it really is time to vote for the Rent Is Too Damn High Party, the mostly New York-based political party that’s as frustrated with landlords as you are.

MONEY home prices

WATCH: Foreign Buyers Push U.S. Home Prices Higher

From Russia, Canada, the Middle East and elsewhere, international buyers are moving in.

MONEY buying a home

7 Ways to Get Your Kid Out of Your Basement

College students slacking off and living in parents' basement
Adam Crowley—Getty Images

If your child is one of the 14% of millennials who have moved back in with their parents, here are some tips to nudge him (or her) out the door.

For most of us, leaving the nest was a rite of passage. We went to college, and then proudly headed out into the world to make our own way, while our parents turned our old room into another guest bedroom.

However, for a significant percentage of young adults, that rite of passage is now all about returning to the roost rather than flying solo. According to Gallup research, 14% of millennials (24-to-34-year-olds) have moved back in with their parents. The homeownership rate for those under age 35 was 36.2% in the first quarter of 2014, down from a historical high of 43.1% at the end of 2005, according to Census data. According to numerous economic reports on millennials, this is attributed to a weak job market, high cost of living, significant college debt, and other factors.

These kids, as well as any adult children who have decided to move back in with mom and pop are lovingly referred to as “boomerang kids.” Clearly the analogy is obvious.

For Mom and Dad, who would love to have the ‘kids across the hall’ become the ‘kids across town,’ here are seven pointers you might want to consider:

Start Charging Rent

Cut off the free ride. Yes, it sounds harsh, but you may be doing both you and your kid a favor. Managing money and a monthly budget is something that is not learned in school, and it is certainly not learned hanging out in your parent’s converted attic for free. Give your boomerang kids a real estate reality check. If the free ride comes to a screeching halt and they are paying rent, they will probably want to do it in their own apartment, closer to (or with) their friends, near downtown or a closer drive to their office. Charge rent and enforce it. Once they start getting that first-of-the-month monetary wake up call, it might shock their system enough to have them consider alternative arrangements. If they’re going to have a landlord no matter what, they’re likely to consider a new, more independent situation.

Collect Monthly Payments

Here’s another way to give them a foot out the door – but still a leg up. Start charging them monthly payments now. Let them know that they will have to come up with the monthly equivalent to local rents each month for the next six months. At the end of the six months, you will give them back all the money when they move out. That does three things: You teach them budgeting skills, you incentivize them to move, and you give them a financial helping hand on move-out day.

Be A Strict Landlord

No parties, no loud music, no guests after 10:00 pm. Keep the house rules strict. At some point, your kid is going to want to have a little independence, and some fun too. Living with a strict landlord may just be the incentive he or she needs to find a place of their own.

Set A Deadline…and Stick To It

If you can sense that your boomerang kid is riding out his or her free meal ticket under your roof as long as they can, help them visualize when that ride will end. Create a deadline for them to move out and stick to it, no matter what. It’s likely you never intended to have kids under your roof for more than two decades, so your children need to respect that…and they need to get on with their own lives. Even in a world where millennials are underemployed compared to their Gen X, Y and Baby Boomer counterparts, there are still plenty of ways for them to make a living that enables them to live with a roommate or two or three…elsewhere.

Help Them Get Organized and Overcome The Mental Hurdle

After all the financial aspects are considered, one of the biggest hurdles to making a big move is mental: it just feels overwhelming. So many things to do, buy and organize before it can actually happen. Your child may just need the expertise of someone who’s moved multiple times in their lives to talk them down off the “I’m too overwhelmed and can’t do this” ledge. Map out all the necessities and then make a list of the “nice to haves down the road” so they can see what’s an immediate need, and what can be done over the coming weeks and months.

Gift or Loan Them The Down Payment

Trulia’s latest survey showed that 50% of millennials surveyed plan go to their parents for help with the hefty down payment that’s required to purchase a home in today’s housing market. If you want your adult child up and out of your basement, consider giving them the financial head start now they need to form their own household and be independent.

Buy A Multi-Unit Investment Property

I am a huge proponent of purchasing multiunit properties, such as a duplex or triplex, because they are great investments. In the case of your “failure to launch” millennial, slot them into one of the units of your new property and rent out the others. The rental income is likely to cover much of the costs of ownership, and you’ll have a built-in property manager in the building to keep an eye on things. Plus, your boomerang kid is learning valuable management skills at the same time. It can be an investment property for you, and solve the “son or daughter is still in my basement” problem, all at the same time.

 

More on Financial Independence

4 Ways to Lighten Your Kid’s Debt Load

Is Living with Mom and Dad Starting to Cramp Your Style? Take These Steps to Independence

Taking Five Years to Earn a B.A. is Common—And Costly. Here’s How To Get Out in Four

MONEY Ask the Expert

Should I Pay Off Loans or Save for a Down Payment?

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Robert A. Di Ieso, Jr.

Q: Should I use savings to pay off car loans or make a down payment? — Carmella F., Pittsburgh

A: The first line of business is to make sure you have enough savings for an emergency fund, a minimum of four months if both spouses are working, six months if one isn’t, says Pittsburgh financial planner Diane Pearson.

Paying off the $30,000 in two car loans you told us you have would deplete your savings. Not only does that leave you vulnerable to unforeseen expenses, plowing money into assets that only lose value as they age doesn’t make sense, says Pearson. When applying for a mortgage, banks would prefer to see $30,000 in savings plus car loans over no savings and vehicles owned free and clear.

MONEY Shopping

Poll: What’s Your Next Big-Ticket Buy?

Is there a major purchase in your future? Tell us what you're most likely to spend the big bucks on.

 

 

 

 

 

 

MONEY

6 Acronyms Every Beginner Real Estate Investor Should Know

H-O-M-E letters in wooden blocks
Image Source—Getty Images

Pretty much every time you learn something new, you also learn a whole new vocabulary to go along with it. Real estate investing is no different. Real estate investors must understand the terms and investment vocabulary. Here are some definitions of common acronyms to get you started:

1. PITI

Principal (P), Interest (I), property Taxes (T) and Insurance (I). This is basically the “bottom line” or the minimum you need to calculate when thinking about purchasing an investment property with a loan. Usually it is calculated overall and on a month-to-month basis.

The overall number is what you would potentially spend on the property over the life of the loan. Month-to-month is the portion of PITI you have to pay each month to stay in good standing. This information will help determine how much rent you should charge.

Related: Trying to Choose The Right Loan? Stop Looking at Just The Rates!

2. LTV

Loan-to-Value, also important if you’re taking out a loan on your investment property, is calculated by dividing the loan by the property’s value, then expressing that as a percentage. For example, if the loan is $200,000 and the value of the property is $250,000, the LTV is 80%.

The lower the LTV, the more equity you have in the property, which means you have more room to negotiate should you decide to sell.

3. GOI

Gross Operating Income is the actual annual income collected from the property, which includes all sources of income (laundry, parking, storage, etc.) and takes into account any vacancies.

4. NOI

Net Operating Income is the income left over from your rents after paying all your monthly operating expenses. So, subtract your expenses from your GOI to get you the property’s NOI. For example, if you take in $10,000 in rents on all the units and spent $8,000 on maintenance, janitorial duties, supplies, accounting, insurance, taxes, and utilities, your NOI for the month was $2,000.

5. DCR

Debt Coverage Ratio is a term commonly used by lenders in underwriting loans for income-generating properties. It’s calculated by dividing the NOI by the total debt. Ratios of 1.20 and higher are considered average.

Related: Understanding Debt Service Coverage Ratio

6. CCR

Conditions, Covenants, and Restrictions are promises written into contracts where the parties agree to perform, or not perform, certain actions.

CCRs can occur in several contexts. There can be CCRs written into a deed when you purchase a property. Also, your tenants could sign a rental agreement in which they agree to certain conditions (such as “no pets allowed” and “you can live here as long as you pay rent, otherwise we can evict you”).

I’m sorry to disappoint you on that last one. CCR on the radio is much more exciting than the real estate investing version of CCR. But it’s an important term, so I hope I’m forgiven. Either way, I hope the acronyms listed above will help you in your quest to invest in real estate.

More from BiggerPockets:
10 Things I Hate About Working From Home
10 Rules For Investing in Real Estate Without Looking Like an Idiot
6 Tips to Turn Bad Tenants Into Amazing Tenants

This article originally appeared on BiggerPockets, the real estate investing social network. © 2014 BiggerPockets Inc.

TIME Economy

Millennial-Driven Housing Boom Could Be On The Way

A new study says as the economy improves many millennials could soon be leaving home — causing a housing boom within the next decade.

+ READ ARTICLE

Young adults, so-called “millennials,” have been pushed by the recession to live with their parents into adulthood–but they really want to move out, according to a study by Harvard’s Joint Center for Housing Studies. That study found that millennials could form 24 million new households by 2025.

Three main factors have been holding millennials back from moving out, said the Harvard study: A weak job market for recent graduates, high debt from student loans and tightened lending standards.

The report also found that the number of young people who buy homes increases as their incomes grow. As and the economy improves, millennials–which the study defined as those born between the years of 1985 and 2004–will make decisions about their living arrangements that will, by extension, affect the economy.

But don’t foresee a mass exodus from parents’ homes, the authors said. Millennials will probably just trickle out of their parents’ nest in what would look like a steady, slow recovery.

 

 

MONEY mortgages

30-year Mortgage Rates Edge Down For Second Straight Week

Mortgage rates declined slightly over the past week.

Average rates notched down slightly to 4.14% with an average of 0.5 points, down from last week’s 4.17%, according to Freddie Mac. A year ago, rates on 30-year mortgages were 4.46%.

The rate on an average 15-year mortgage was 3.22% with 0.5 points, down from 3.50% a year ago. For adjustable rate mortgages, a five-year ARM this week averaged 2.98% with 0.3 points and a one-year ARM averaged 2.40% with 0.4 points.

image (4)
Source: Freddie Mac survey.

 

MONEY buying a home

5 Reasons the Highest Offer Won’t Always Get You the House

140626_REA_5reasons_1
iStock—iStock

Conventional home buying wisdom says that whomever throws the most money at the seller will snag the house. That’s not always true! Here's why.

When it comes to buying a house, the highest priced offer gets the house…right? Not always! Sure, a hefty sum on an offer is the first thing that every seller wants to see, but any good real estate agent will advise their seller that each offer is a sum of its parts.

Here are five reasons why you may just beat that higher offer:

  1. Cash Is King

    If you can buy with all cash, you will likely win out over a higher-priced offer. According to RealtyTrac’s latest data, 43% of all home sales in 2014 have been all-cash deals. Savvy sellers know the benefits of an all-cash buyer: there is no issue involving mortgages and lenders, the escrow closes faster, and there is no appraisal to worry about.

  2. The Next Best Thing: A Pre-Approval Letter

    A pre-approval letter is the confirmation from your mortgage broker or bank that you’re ready to buy in a set price range and have been pre-approved for the loan. In essence, the pre-approval letter turns you into a virtual cash buyer, as mortgages are harder to come by these days. Someone may be offering to pay more, but if they are not pre-approved, you will have the leg up, even at a slightly lower price.

  3. Timeline Flexibility

    Closing is generally 30, 45, 60, or 90 days. Customizing the length to suit the seller’s needs can often seal the deal over a higher priced offer. A seller generally wants a fast closing. If you have all your ducks in a row, you may be able to pull off 30 days. But what if the house they are moving to won’t be ready for 60 days? They’ll need more time. Find out what they need, and then give it to them. I’ve seen many lower offers win using this tactic.

  4. The “Please Let Me Buy Your House” Letter

    I know, I know, you are thinking this is soooo cheesy. However, a friend of mine had three similar offers on the table when he was selling his house. Two of the offers came with very heartfelt letters.

    Related: Wanna Win a Bidding War? Write a Letter That’ll Crush the Competition

    He was actually put off by the buyer who didn’t send a letter because the others did and it made a huge impact—and he sold to one of the letter-writers, even though it was a slightly lower-priced offer than the non-letter writer. Writing a letter may not get you the deal, but if you are the one offer that doesn’t put pen to paper, it could lose it.

  5. Don’t Overload On Contingencies

    Contingencies are negotiating tools that give you an opportunity to walk away without consequence. The most common: the inspection, the financing, and the appraisal. However, every contingency you add makes your offer weaker, because it makes it that much harder to close the deal. Make sure you really need them before building them into your offer.

Here are’s some more details on specific contingencies and how to handle each:

    • Contingent Upon Inspection – I have heard other experts give you the “tip” to forgo the inspection contingency to make your offer more attractive. Here’s my advice: NEVER give up this one. After your inspection, you give the seller your list of problems, current and potential, along with the opportunity to fix them, adjust the price, or give you a credit back. If the seller does not agree to any of your requests, you can walk. You take a huge risk if you waive this. A much better option: offer to do the inspection in the first few days after opening escrow and to give a response to the inspection results within a few days.
    • Contingent Upon Financing – Don’t omit this one either, unless of course you are paying all cash. With most 30-to-45 day closings, you will usually have 17-to-21 days to get your mortgage approval. Having that pre-approval letter will make this finance contingency less of an issue for your seller.
    • Contingent Upon Appraisal – It’s very possible that the house may not appraise for what you have offered to pay. However, if you have done your homework, analyzed the comps of the neighborhood, and are comfortable with the price you have offered, then consider waiving this one. The risk is that you will have to come up with any difference between the appraised value and the negotiated sales price. Waiving this contingency really gives you a leg up over the competition, especially in a hot market where the seller is trying to get top dollar.

More from Trulia:
Style Your Vacation Home With Tips from Homepolish
8 Ways to Screw Up Your Home Sale
International House Hunters Shift to Urban Neighborhoods

Michael Corbett is Trulia‘s real estate and lifestyle expert. He hosts NBC’s EXTRA’s Mansions and Millionaires and has authored three books on real estate, including Before You Buy!

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