Should You Require Renter’s Insurance?

Renters often believe the landlord is liable for everything that happens on the property–including any damage to their personal belongings. But this is not always the case.

More likely, the landlord’s insurance will only cover damage to the building, while an uninsured tenant will have to pay to replace their belongings.

The majority of tenants take a pass on renter’s insurance. Some are not aware of it. Others don’t think it is worth the cost.

Renter’s insurance provides valuable protection, and is not expensive compared to the value of the tenant’s possessions. Moreover, a renter’s policy may cover more than just belongings. It may protect a tenant from having to pay out damages if they–or their guests–cause an accident or damage the building.

Renter’s insurance can be valuable to landlords, too.

In fact, a number of property managers now require renter’s insurance in their lease agreements–so that the tenant is protected in the case of fire, theft, or negligence.

If you decide to require renter’s insurance, you can include a renter’s insurance provision in your lease. It is a good idea to demand that the tenant provide you a certificate of insurance. This proves that the tenant has complied with the requirement, and you will have the contact information for the insurance company.

Even if you are not prepared to make renter’s insurance mandatory in your leases, you still may want to encourage tenants to purchase it. In your policy statement or acceptance letter, include a warning to the tenant that your insurance does not cover replacement of their personal belongings in most cases. If the tenant causes damages, like a kitchen fire, it is possible that the tenant could wind up owing the landlord for repairs. Renter’s insurance may be their only source of compensation for losses, like fire, theft or negligence of the tenant or a guest.

In order to obtain renter’s insurance, the tenant will need to complete an inventory of their personal belongings. While this can be time-intensive, it is time well-spent. Without the inventory, the tenant has little chance of remembering all they lost. And, by completing the inventory, they will see just how much they have to gain by taking out a renter’s insurance policy.

*God Speed*
TLD Investments LLC
www.tldinvestmentproperties.com

Lease Renewal Tips

Streamlining your lease renewal process helps you avoid problems, and makes it easy for a good tenant to choose to stay in your rental property.

Here are a few tips to keep in mind when it comes time to extend your current lease:

Inspect and repair the property going into the next lease term. Otherwise, minor repairs may worsen, or damage may go undetected over the next several months.

Make the lease extension official. Depending upon the language of your existing lease agreement, you may be able to offer a simple lease extension form for the tenant’s signature. This short form will indicate that all the terms of the existing lease will continue in effect for another specified term, or spell out any changes in those terms, like a rent increase or new policy.

Without a written lease extension or new lease, the tenancy becomes a month-to-month. That may not be a bad thing, especially if you weren’t planning to increase rent, but it can cause problems. For instance, the tenant now has control of when you will be filling the next vacancy. Month-to-month leases may require only 30 days notice if the tenant wants to move on. The tenant may find a great deal on a vacant unit in November, but then you may struggle to fill your vacancy in December.

Avoid auto-renewal provisions, where the lease is renewed unless the tenant serves some sort of notice on the landlord. Often, tenants simply forget these provisions are in the lease and miss the deadline for giving notice. As a result, auto-renewals are prohibited under many states’ consumer protection laws, and otherwise may not stand up in court as valid contracts.

Ask the tenant to update the rental application with any new information, like emergency contacts, employer or a new bank, or new pets.

Find out if “guests” are actually living in the property, and if so, add them to the new lease, after they fill out a rental application and your conduct a tenant background check.

Use this time to make upgrades or update items like older appliances. This allows you to reward your good tenant for their lease renewal, and at the same time improve your rental property.

*God Speed*
TLD Investments LLC
www.tldinvestmentproperties.com

How to Sign on Behalf of a Limited Liability Company

When a real estate investor thinks of asset protection the LLC is the first entity that typically comes to mind. As it should because the LLC is the primary defense for investors from lawsuits stemming from harm associated with real estate. State LLC Acts routinely provide that a member in a LLC is not labile for the debts or obligations of the LLC solely by reason of being a member. This liability shield is fairly strong unless a member gives it up either intentionally in a contract or by mistake.

An easy way to mistakenly give up your protection is by not properly signing agreements with the appropriate signature block that designates your representative capacity. When signing a LLC the signature block should contain the LLC’s name and the title of the signing member, or manager. Mishandle this important step and the courts may not be so forgiving

Here are some common errors I have come across:

John Doe on behalf of ABC, LLC — (John has not indicated his position)
John Doe, ABC LLC — (John has not indicated his position or representative capacity)
John Doe Manager — (John has indicated his position but not his representative capacity)
John Doe President — (LLCs do not typically appoint officers)

When signing on behalf of you LLC you should sign as follow:
John Doe on behalf of ABC, LLC as its Manager (in the case of a member managed LLC you would use Member/Manager) or in the case of a Corporate Manager – John Doe, President of XYZ, Inc, on behalf of ABC, LLC as its Manager.

*God Speed*
TLD Investments LLC
www.tldinvestmentproperties.com

3 Changes that Can Add Value to a Home in Almost Any Market

When it comes to adding equity to an existing property, making major structural changes is always a gamble. Particularly in today’s real estate market, most investors recommend only making changes that will yield instant or near-instant value since appreciation is unpredictable and the “rules” of the market are changing constantly. Of course, if you are dealing with your own home, then you may opt to make changes to your home that will enhance your own living experience. When it comes to investment properties, however, you might consider these fast, easy alterations that can make a property instantly more attractive and add to its potential value without costing you big bucks and lots of time in the process.
1.Update the home office
In today’s jobs market, more and more people are opting to work from home out of necessity. If a home has a home office already, update it with a fresh coat of paint, some great built-in shelves and a few easy amenities like an office chair and some organizational items. If there is not an existing home office, consider staging a spare bedroom as a home office or even installing an office workspace or nook in a kitchen or living area.
2.Modernize the Master Suite
Once considered a luxury, now a master suite (bedroom and bath, minimum) is often considered a necessity in a home – even if homebuyers are cutting corners in other areas. Since most newer houses have a master-suite layout, try modernizing the room to give it the feel of a recent renovation. About a third of all homebuyers report that they are more likely to buy a home that has recently been renovated than one that has not. Redo closet shelves to maximize storage, brighten up the paint, replace lighting and/or bathroom hardware, and stage the area carefully to make it feel cozy without being cramped.
3.Replace Energy-Wasting Windows
In older homes, some experts estimate that nearly a third of all energy costs are due to energy lost through windows. Replacing old windows with new, energy-efficient ones makes a home more aesthetically pleasing and cuts a homeowner’s future budget, giving them more purchasing power up front.

What changes do you like to make when sprucing up an investment property? How about your own home?

*God Speed*
TLD Investments LLC
www.tldinvestmentproperties.com

Real Estate Scam?? The New and Different Way Major Lenders May have Ripped Off Homeowners

Once again Bank of America, JPMorgan Chase, Citigroup and Wells Fargo are in prosecutors’ crosshairs. This time, they stand accused by New York State’s Department of Financial Services (NYDFS) of steering homeowners toward overpriced insurance policies on their homes. The concern stems from an investigation into the pricing on forced-place insurance policies, which are policies placed on properties when homeowners allow their own insurance on the properties to lapse. The idea behind forced-place insurance is that if something happens to the home while it is uninsured, the lender will ultimately take the loss because the home is the collateral for the loan. These policies generally do little more than pay off the mortgage in the event of a total loss. However, the lenders also are suspected of “steering” distressed homeowners into costly policies, sometimes that were as much as 10 times more expensive than their original insurance plans.

Forced-place insurance tends to be more expensive than other types of homeowners insurance because homeowners who have missed payments are riskier bets than those that have kept up with their payments and, in addition, generally these policies are incorporated into the monthly mortgage payments rather than being handled separately, which can add maintenance and administration costs as well. However, Benjamin Lawsky, superintendent of NYDFS, believes that the increases in cost may have been “exorbitant” in at least some cases. For example, one homeowner’s policy jumped from $2,000 to $6,000 a year. Lawsky fears that lenders may have pushed hyper-expensive policies in order to maximize the amount of money that they could recover on distressed properties for investors. This would represent a conflict of interest since the banks were assigning the insurance coverage or pushing already-distressed homeowners to agree to it. Lawsky suspects that lenders might also have received kickbacks from insurance companies for sending them clients.

*God Speed*
TLD Investments LLC
tldinvestmentproperties.com

7 Tips to Get Started Buying Bank Owned REO Properties

Please note that these tips are only for real estate investors that want to close on a property and NOT wholesale the property. These tips are for rehabbers that want to beat out the competition on an REO property and purchase the property.

Tip # 1 Obtain a Proof of Funds Letter

All offers submitted on bank owned properties are going to need to be cash offers. While some banks might agree to mortgage contingencies most will not. All offers on bank owned properties should be submitted as CASH OFFERS ONLY.

In order to submit a cash offer you are going to need to have a proof of funds letter. This letter lets the bank know that you have the ability to close for cash. A proof of funds letter can be a recent bank statement, brokerage account statement or mutual fund statement. You can also print an account summary from your online bank account or brokerage account showing available funds. Or you can ask your Title Company, Escrow Company or attorney to issue a letter stating that you have funds in escrow.

If you have absolutely no money anywhere, then you are going to need to find someone that does. You will need a statement showing that you have money available or that someone else has money available. Either way, you will have to produce something showing that there is money somewhere. A proof of funds letter is usually good for about three months before they will ask you for an updated one.

Tip # 2 Use the Same Name on Proof of Funds and the Contract

Make sure that the name on the purchase contract matches the name on the proof of funds letter. For example if the purchase contract is in the name Joe Smith then the bank statement should say Joe Smith. If you use online printouts from a bank account summary or brokerage account summary then many times there is no name other than your user name on the printout.

However, this will usually suffice as a proof of funds letter since the date and time is usually stamped on these printouts. If you have a bank statement that says Joe Smith and your name is not Joe Smith then you will probably be questioned by the realtor. You can use land trusts and other entities to get creative. For example if you offer a purchase contract with the buyer as Joe Smith Trustee then you might have a little more flexibility in the name on your proof of funds letter.

Tip # 3 Offer To Close In 7 Days

Banks just want to get rid of these REO properties as fast as possible. If you offer to close in 7 days then you are letting them know that you are a serious cash buyer that can close quickly. Banks like that and will prefer your offer above other offers that are ready to close much later. Reality is that in most cases the bank would never be able to close anywhere near as quickly as that but the offer looks good and it looks serious.. My experience has been that banks are often quite delayed in getting all their title paperwork in order. If have offered 7 day closings that have taken as long as two months to close. Just because you offer to close in 7 days does not mean that the bank will be ready to. But they will like your offer much more than someone else offering them 60 days.

Tip # 4 Offer a Large Deposit of At Least 10%

Offer the bank at least a 10% deposit. Keep in mind that many wholesalers are offering as little as $1,000 deposit so a larger deposit will have more likelihood of getting your offer accepted. I put down a deposit of $5,000 on a $40,000 house that I plan on closing on. The bigger the deposit the better off your offer will be. Banks like to see big deposits because it indicates a serious cash buyer. If you have already inspected the house and are certain that you want to buy the house at that price then you should have no problem putting down large cash deposits. If you have the cash available it doesn’t really make that much difference but I find that 10% is a nice number that indicates a serious buyer. A typical real estate contract has a 3% deposit so 10% is big enough to get their attention. If you put down small deposits of $10 and $100 or $1,000 you will find that your offers are constantly being rejected.

Tip # 5 Waive All Inspections On Your Offers

Banks are used to seeing REO deals not close. Usually the reason is because the property did not pass inspection and the buyer backs out or changes their mind. The other reason is because wholesalers use the inspection period to market the property and then back out at the last minute and cancel their purchase contract. Banks know this and one of the easiest ways to beat out the competition is to “waive inspections”.

In order to waive inspections you will need to physically inspect the property yourself or hire a professional property inspector to do the inspection. A word of caution – please hire a professional if you don’t know how to do this yourself. Banks love to see inspections waived because this indicates that the buyer will lose their deposit if they do not close. This means that the buyer is a sure thing and the banks want to make sure that the buyer closes. If you are going to do your own inspections please make sure that you know what you are doing.

Otherwise hire a competent professional to do the inspection for you. Also always build in a margin of error in your offer prices. I usually add $3,000 or 10% (whichever is greater) to my rehab estimate for events that are unexpected and might come up. Make sure that you understand what “waiving inspections” means before you do this. What it means is that if there is a major problem the day after you close with the house (think plumbing, electrical, roof) then it is not the banks problem it is YOUR PROBLEM. That is why you need to know what you are doing when you inspect the property or hire someone that does.

Tip # 6 Give Short Deadlines

When you submit a purchase contract, there is a deadline after which the contract is considered null and void. You need to give the bank your offer and you need to give them as little time as possible to respond. For example, if your offer to purchase is submitted on Monday morning, then you should have a Wednesday 5pm deadline. If you do this, then one of two things will happen. Either the bank will not see it in time – in which case your offer is now null and void or the bank will come back quickly with a counter offer.

If the bank comes back quickly with a counter offer you should usually be able to counter them back and close the deal. If they don’t respond on time, then eventually they will respond. If it takes them two weeks to respond then when they do respond you will know two things. Firstly, you don’t have to buy the property since the contract is null and void and secondly there are no other buyers (unless they come back with highest and best). If this happens you should always say that you can’t close at that price anymore and see if the bank comes back to you. If they do, you will usually be able to buy the property cheaper (if you still want to). Do not give the bank lots of time to mull your offer. You will also run the risk of having your offer “shopped around’.

Tip #7 Never Offer Your Maximum Offer Price

Banks will always counter your offer. Whatever your offer is they will usually counter it unless it is a full price offer or very close to or over list price. Also, the realtor might indicate that there is another buyer or buyers and will often come back and ask you for a highest and best offer. For this reason, you don’t want to submit your maximum offer price right away.

If you are planning on offering $40,000 for a house start with an offer of $35,000 and then when the bank counters you can go up to $37,500. If the bank counters again asking for a highest and best then you can say $40,000 final offer. Beginning investors always start too high. Don’t fall in love with the property. I usually drop out of the bidding if there are multiple buyers. There are many properties to choose from. Be selective and wait for the right house to come along. If you really want the house badly decide what the highest amount you are willing to pay is and then start your offer process 10% below that price. If you cannot get the house for the price that you want then walk away. Do not overpay. You make your money when you buy.

And the final tip………………………….

Invest in your education. If you are a beginner and do not know what you are doing, please find someone that can be your mentor and teach you.

*God Speed*
TLD Investments LLC
www.tldinvestmentproperties.com

5 Actions you can Take right now!

Here are 5 action steps you can take right now that can help you turn your knowledge into Power!

1-Like a Fox mentality: People thought Paul Allen was crazy when he left his secure job to go and work for a “fly-by-night” company that later became Microsoft. Whats your fly-by-night idea that everyone thinks is crazy? Write out a mission statement for your venture that states where you wnat to be in 10 years.

2-Face the Fear: Everyone has that one or two item that they are scared to face. Being scared is a challenge, embrace it and take control of your life! Write down two things you’ve been putting off because they scare you. Pick one to take action on today, and embrace the adventure!

3-Helping Hand: Establishing a mentor relationship is rewarding for both the mentor and mentoree. Craft a framework that includes how often you’ll meet, how long the mentorship will last and what you both expect to receive at each meeting. But first things first; Call you would-be mentor!

4-Start your Day Over: Happiness and positive Attitude is a state of mind and a decission only you can make. Its just according to the way you look at things. Take a moment each morning to remind yourself of the good things in your life with a gratitude list, then get your day going with a positive attitude and productive activity!

5-Find Time: Work/Life balance on a daily basis is an unattainable goal for most, but if you look at your month or year, you’ll see it’s possible. Take out a calander and mark the days this month you’ll devote to your family, then call to make plans and ink in for some memory-making.

*God Speed*
TLD Investments LLC
www.tldinvestmentproperties.com

The High Cost of Gutter Neglect…Is it worth it?

Cleaning out the gutters is never fun. The leaves are gooey and slimy; the ladder is often wobbly, and you end up filthy no matter how careful you are. Fail to clean the gutters of your home and investment properties, however, and you will have a far more serious problem than a little mud on your shirt. Poor gutter maintenance leads to water damage, and if you think that a little water won’t do much harm, think again. Clogged and leaking gutters are the source of water-related problems including everything from flooded
basements to cracked foundations to rotten wood in every corner of the house. So instead of waiting until you have a real, certifiable disaster on your hands, take a few minutes to consider the myriad options you have for keeping your gutters clean.

For starters, you can just scoop them out the old-fashioned way. We’ve already talked about why this is not a popular option. However, there are many companies that will charge minimal amounts to do this unpleasant chore for you, and you may wish to hire them, particularly if you have multiple properties to maintain. Should you decide to hire someone to clean your gutters out for you, however, make sure that the company is licensed and insured. This will protect you in the event that any individual cleaning the gutters is injured while working on your house. If the company is not licensed and insured, you may actually be liable for injuries sustained while working on your property.

If you don’t want to deal with seasonal cleaning on your gutters, gutter guards may be a good option. When properly installed, these guards can not only prevent debris from entering your gutters but may also add value to your property. Some gutter guards are made of screens which catch debris. These still need to be cleaned as often as several times a year to prevent buildup on top of the screens. Other guards are solid and work like small roofs over your gutters, channeling debris over the gutters and off the roof of the house. However, even these may sometimes garner buildup and need to be swept or blown off every year or so. Some homeowners actually shy away from gutter guards because when gutters do become clogged it is much more complicated to isolate and fix the problem because the guards must be removed in order to do so.

Remember, every time that your gutters function ineffectively, you are essentially wearing away the foundation of your home. When gutters clog and water must find alternate routes off your roof, down the sides of your home and away from the actual house, that water will carry pieces of your house away with it. Over time, the erosion can become severe and even create foundational problems and sinkholes. Don’t let a simple – albeit unpleasant – task result in the eventual destruction of your home! Figure out the best way for you to deal with the gutters on your home and investment properties today.

*God Speed*
TLD Investments LLC
www.tldinvestmentproperties.com

Fannie Mae Extends Mortgage Relief for the Unemployed

Following the example set by Freddie Mac last week, Fannie Mae issued new guidelines to its servicers this week that allow lenders to suspend or reduce monthly payments for borrowers who are unemployed. Servicers can approve six months of unemployment forbearance without obtaining GSE approval and an additional six months after obtaining GSE approval[1]. The program is designed to help homeowners in danger of default and can be implemented in cases where homeowners have already missed payments[2]. However, not more than 12 payments total may be missed, and homeowners must pay back lower or skipped payments over a longer loan period. Both Fannie Mae and Freddie Mac have said that it is up to lenders to implement these new guidelines but they are requiring lenders to begin including consideration of a forbearance plan among other foreclosure prevention options.

Analysts remain largely skeptical of the new guidelines, with individuals like Joseph Gyourko, a professor of real estate at the University of Pennsylvania’s Wharton School, saying that although “this will save some of them [distressed homes],” some of the homeowners should never have been able to purchase their homes in the first place and will never be able to afford them. Gyourko calls the policy “humane and not at all unreasonable” but does not believe it will affect the housing problem much one way or the other.

Do you think that the GSEs’ forbearance programs are a good thing? Will they help in the long run?

*God Speed*
TLD Investments LLC
www.tldinvestmentproperties.com

ATTENTION BUYERS!!! Tips to prepare you for a smooth closing

Closing costs -
There are various fees and costs required at the time the property closes. Closing costs usually range from 2 percent to 6 percent of the sale price. As you are planning out your offer, its important to distribute your cash available for the transaction between the down payment and the closing costs (also note: if you are having a home inspection done, this expense is paid for by the buyer and will cost a few hundred dollars). A part of the lending processes, you lender MUST provide you with a “Good Faith Estimate” which will breakdown all costs so that you know what to expect at closing.

Negotiate problems prior to closing-
It’s common for a problem to arise before closing. You want to address those issues as soon as possible so they are resolved prior to the day of closing. For instance, if the seller had agreed to make a repair prior to closing, and the repair that has been done is not acceptable to you, discuss a solution prior to closing. This will give both parties time to analyze the options and come to a mutually acceptable resolution.

Close at the end of the month– When determining to closing date you request/accept in your offer, keep in mind how the closing date will affect your costs due at the closing table. Upon closing, your lender will charge you prepaid interest for the date the loan is recorded through the end of that month. So here’s a tip…schedule the closing for the latter part of the month and you will lower your closings costs by paying a lower amount of prepaid interest!

What you will get at the closing –
 Settlement Statement, HUD-1 Form (itemizes services provided and the fees charged; it is filled out by the closing agent and must be given to you at or before closing)
 Truth-in-Lending Statement
 Mortgage Note
 Mortgage or Deed of Trust
 Binding Sales Contract (prepared by the seller; your lawyer should review it)
 Keys to your new home

If you would like more detail on the content of this report don’t hesitate to contact us, we are here for all of your real estate needs.

*God Speed*
TLD Investments LLC
www.tldinvestmentproperties.com