Pensacola Realty Masters Blog
Realty Masters is happy to present the following Pensacola area community and Pensacola real estate information!
There's a lot of talk about Mortgage Forbearance since the passing of the CARES Act on March 27, 2020. The CARES Act requires lenders to allow mortgage forbearance options for 90-180 days with an option to extend another 180 days. Mortgage forbearance can allow you to defer, not waive, mortgage payments. Additionally, this option may be available to you without negative consequences to your credit. The CARES Act does not allow your lender to report negatively to the credit bureau during this time.
While this sounds very enticing, we've heard of lot of negative chatter from mortgage and financial professionals on the mortgage forbearance options being offered. Because of this, we are advising against mortgage forbearance unless it is absolutely needed.
Here's some of what we've heard:
A lot of forbearance agreements contain provisions that call the missed mortgage payments due as a balloon payment at the end of the forbearance period, called "reinstatement" to bring your account current.
Some forbearance agreements call for a repayment plan to repay the deferred mortgage payments for a period of up to 12 months. Keep in mind, you would need to pay your mortgage payment plus the additional amount under the repayment plan each month in order to keep this agreement.
Some forbearance agreements are offering deferment, where they allow you add the missed payments on the end of your loan. This is best case scenario, but make sure the language is guaranteed. For example, if it is says "at the end of the loan period, you may apply to have these payments added on..." does not guarantee this.
We've heard that some of these agreements may call for loan modification and can actually change the terms of the loan or call the loan due if you are unable to pay the amount back within a specified amount of time.
Obviously, each mortgage company has different policies, which is why it is so important to read the details of an agreement before signing it. I've not heard if these details can be negotiated, but we would recommend trying.
If you find yourself worrying about making your mortgage payment(s), we recommend you reach out to your mortgage company immediately. First, ask them if you fall under the covered category for the CARES Act. Second, ask them about your options for forbearance or any deferred payment plans or options. We strongly advise you to read the fine print of any agreement the mortgage company sends you before agreeing to a plan. In some instances, it makes more sense to investigate alternative options including home equity, personal loans,refinancing, or even selling your property.
While we advise using mortgage forbearance only as a last resort option, it may turn out to be the best option for some, especially if your bank is more lenient than some of the others. Should you decide to do a mortgage forbearance, it's best to pay as much toward the amount due as possible at this time and defer only what is necessary.
If you are a landlord and considering a forbearance on an investment property, we do recommend that you make a plan that you can adhere to even without your tenant's payment. We are working very hard to ensure tenant's understand their requirements under their lease agreement has not changed and there will be repercussions should they fail to adhere to these responsibilities. We cannot assure you that your tenant will not use this as an opportunity not to pay their rent. Please consider this when making plans.
Here's a few recent articles to read with more information about these issues.
- Consumer Financial Protection Bureau- A guide to Coronavirus Mortgage Relief Options from the U.S. Government.
- Coronavirus Mortgage Relief Confusing Struggling Homeowners- An article by USA Today that summarizes a lot of concerns in regards to the mortgage forbearance options being offered by mortgage companies.
- Many Struggling Homeowners Not Getting the Mortgage Relief Promised- An article by NPR outlining some of the issues with mortgage forbearance.
We're happy to help and advise in whatever way we can during this time; however, do keep in mind that we are not attorneys, accountants, or mortgage professionals. We remind you to consult these experts with your specific questions.
The Realty Masters of FL Team
#1 in Pensacola Property Management and Leasing!
Rental Office 4400 Bayou Blvd. #58B, Pensacola, FL 32503 (850) 473-3983 www.PensacolaRealtyMasters.com
Sales Office 4400 Bayou Blvd. #52B, Pensacola, FL 32503 (850) 453-9220 www.RealtyMastersofFlorida.com
Our broker and fellow real estate investor recently appeared on The Rental Income Podcast! Listen to her 20 minute episode "The Formula for Buying the Perfect Rental with Pam Brantley" as she discusses real estate investments.
Pam discusses her preferences for real estate investments in Northwest Florida, preferably newer, lower maintenance single-family homes.
If you are interested in purchasing a Pensacola area rental property or real estate investment, reach out to Pam and her sales team at (850) 453-9220 or via email. For additional real estate investment information, head on over to our Real Estate Investors page.
Realty Masters of Florida
#1 in Pensacola Property Management and Leasing!
Rental Office 4400 Bayou Blvd. #58B, Pensacola, FL 32503 (850) 473-3983 www.PensacolaRealtyMasters.com
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As we head into a 60-day session of the Florida legislature, both the Florida Realtors and Florida State Chapter of the National Association of Property Managers are keeping us informed of possible new legislation. Here's a few of the 2020 Legislative Bills we are watching concerning Florida real estate.
HB 6069 Landlords & Tenants
"Removes requirement that certain money can be paid into registry of court."
HB 6013 Rent Control Measures
"Deletes provision prohibiting specified local governments from adopting ordinances or rules imposing price controls upon certain business activities."
SB 1852 Landlords & Tenants
"Revising the definition of the term “tenant”; providing requirements for rental agreements; requiring landlords to provide certain information with rental agreements; prohibiting a landlord from evicting a tenant or terminating a rental agreement because the tenant or the tenant’s minor child is a victim of actual or threatened domestic violence, dating violence, sexual violence, or stalking, etc."
HB 321 Declared State of Emergency
"Prohibits specified service of process during declared state of emergency; provides immunity from liability for certain persons; tolls specified time periods for certain evictions; requires court to stay certain eviction proceedings."
HB 1449 Residential Tenancies
"Revises & provides requirements for rental agreements & landlords; removes option for landlord to deposit money into specified account; removes requirement money be paid into registry of court; authorizes filing of civil action & award of damages, court costs, & attorney fees; provides requirements for certain evictions; specifies what constitutes unreasonable rent increase; prohibits park owner from taking certain actions during pendency of dispute; increases payment homeowner may collect from Florida Mobile Home Relocation Corporation in certain situations; revises provisions relating to sale of mobile home park."
HB 209- Emotional Support Animals
"Prohibits discrimination in rental of dwelling to person with disability who has emotional support animal; prohibits landlord from requiring such person to pay extra compensation; authorizes landlord to request certain written documentation; prohibits falsification of written documentation or other misrepresentation; specifies person with disability is liable for damage done by emotional support animal; prohibits health care practitioner, as exclusive service to patient, from providing documentation for emotional support animal for fee."
SB 1128 / HB 1011- Vacation Rentals
"Preempts regulation of vacation rentals to the state; prohibits local law, ordinance, or regulation from allowing or requiring inspections or licensing of vacation rentals; requires licenses issued by the Division of Hotels and Restaurants of DBPR to be displayed conspicuously inside licensed establishment; preempts regulation of advertising platforms for vacation rentals to the state; provides requirements for advertising platforms."
HB 469 Real Estate Conveyances
"Provides that subscribing witnesses are not required to validate certain instruments conveying leasehold interest in real property."
HB 229 Swimming Pool Safety
"Requires home inspector to include certain information relating to swimming pools in his or her report; requires that new residential swimming pools meet additional requirement in order to pass final inspection & receive certificate of completion; requires that certain pool safety features meet specified standards; prohibits property owner from transferring ownership of parcel that includes swimming pool unless certain requirements are met; provides civil penalties rather than criminal penalties."
Want to follow along? The Florida Realtors Legislative Tracker allows us to review proposed bills and follow the status with in-depth information here. With nearly 200 proposed bills that home some tie to real estate, we will surely see some results from this year's legislative session. Of course, we will keep you posted with legislation that passes as the year progresses.
As a landlord, you may sometimes find yourself in undesirable positions. An example of when this can happen is when it’s time to renew a tenant’s lease, and you are unsure if you should raise the rent. It may have been hard getting a qualified tenant in the home and you want to avoid a vacancy, especially if they have been properly maintaining the home. You may also hesitate to raise the rent because you don’t want to risk losing your tenants. But there are many factors that come into play when making this decision. For example, if the maintenance expenses, taxes, or insurance for the investment property have increased you may need to make this raise. Additionally, the rental market has been strong and rents have been rising. It is important to remember that although you want to do well by the tenants and keep your good relationship, you are technically running a business and you need to make a wise decision so you are not losing money and they are not overpaying. So, what do you do?
The way a landlord or property manager delivers the news of a rental increase can have a significant impact on the tenant’s reaction. We suggest you begin by making some positive comments and maybe mention how well they have kept the home up. Then you can move on to explain if there has been an increase in your expenses which will need to result in an increase in rent. You must be sure that you allow them enough notice for them to consider the renewal offer and decide whether or not they want to stay and pay the increased rent or vacate at lease expiration. If your expenses haven’t really increased and you have great tenants, you may want to keep the rent the same for the renewal and then consider raising it the next time around.
Below are some tips on incentives to help make an increase less scary for your tenants:
1.Offer a small rent reduction for the first month after they renew. This will allow them a little break to help adjust to the new rental rate the next month.
2.Buy them something for their home. As you review the evaluation pictures, you will notice the décor so you can pick something out that they may like- a cute welcome mat, for example. This will offer a nice personal touch.
3.Ask them if there are any suggestions they may have for updates around the house. (this may be a more reasonable offer after they’ve occupied the property for a couple of years)
4.Send them a thank you note along with a gift card. This will be a big hit because the tenant will be able to buy whatever they like.
5.You can offer a one-time service like lawn clean up, carpet cleaning, or pressure washing.
Please be sure to communicate well with your tenants so everyone has ample time to prepare for the next step, whatever the decision may be. Remember, if your tenant decides to move and you need a quality property management company to help you rent the property, we are here to help, so don’t hesitate to contact Realty Masters of FL. You can find more information about our Pensacola property management services here and information for real estate investors here.
With any measurement based on a future predictions or hypotheticals, we know that many parameters, and events can change the results,but that shouldn't stop us from doing our due diligence on the front end of investment properties.
Let's take a look at the kinds of properties I focus on, which are single family homes that are easy to finance with 20% down for investors.
Below is an example of a home purchased for $100,000 with a $20,000 down payment and an $80,000 mortgage at 5% interest. I used a 2% property appreciation rate and 2% annual increase for rents and expenses, and a 10 year holding period.
Annual Rental Income: $1000 per month rents less 2% vacancy = $980 * 12 = $11,760 per year.
Basic view: Invested $20,000 (down payment) for 10 years and then cashed out.
See the chart that shows the growth. (Chart is courtesy of Chris Bird with CRS and came from his investment analysis course which I attended).
Feel free to utilize this formula and information when analyzing your own real estate investments. Reach out if you have any questions about analyzing real estate investments in the Pensacola area.
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