Author Archives: Holly Rabits

Why buy vs. rent?

By: Holly Rabits

This past week, I was charged with shopping the downtown Orlando condo rental and for sale market in an effort to see for myself if there are advantages to buying verses renting. It was an exercise that I needed to do to better understand today’s potential homebuyer’s mentality. Further, it would hopefully give me better insight for our potential clients when assisting them in selling their condos throughout Florida.

My first observation: Wow! Rents are very expensive, ranging from approximately $1,000 +/- a month for a 500-600 sq. ft. efficiency!!  Two–bedroom units averaged $1,700 per month with rental incentives for a 13-month lease. Plus, if I want to paint walls to my liking, I have to put them back to beige when I leave, and my two dogs (being a friendly breed of Black Lab) are too heavy to be approved.

At this point I began to seriously think ….maybe buying might be an easier choice and almost as cost effective for potential buyers in the market place?

I scanned the MLS and found literally hundreds of deals. Foreclosures are plentiful; some are priced form the high $90’s and low $100’s for the smaller units. Thinking that financing would be tricky with new developer and HOA rules, I inquired and found that FNMA and Freddie Mac had special conventional loan programs in place on their REO properties and for a minimal amount down for owner occupied residences.

“So how much is the payment including the HOA and how close to rent would it actually be?” I wondered.  To my surprise the numbers were very close and, in some cases, actually overlapped directly with the rental market. So why not take advantage of today’s great prices that we may never see again in the years to come?

Why buy vs. rent?

  1. Rates are incredibly low for a 30-year, owner occupied, fixed rate loan.
  2. Prices may drop slightly more, but MLS is showing signs of the market increasing in value. Now is the time!
  3. I can paint my home with my colors with a free conscience!
  4. As an owner, I will have a voice in the HOA to protect my investment.
  5. Okay, the price may not appreciate substantially in the immediate future, but by purchasing I have, in effect, set up a savings account that would not happen with rent. Historically, according to the National Association of Realtors, values have modestly appreciated.
  6. I will have a great year end tax deduction for interest paid on the loan, which will help compensate for the difference, if any, in the rent vs. the mortgage payment.
  7. My dogs? Well, they each weigh 100 lbs. But, most condos downtown allow 2 pets if they are a friendly breed.

Long and short…it’s time to buy. Check with your REALTOR on the various loan programs and do your own comparison. There is something gratifying in going to bed each night thinking this is MY home vs. living in someone else’s and letting them capture the rewards.

Buying Bulk and REO Provides Opportunity and Risk for the Investor

By: Holly Rabits

David Fletcher, a columnist with Realty Times, stated in a recent article, “Purchasing units in fractured condominiums in bulk may prove to be a smart investor ‘play’ in today’s market, especially if the asset has a multiple number of lenders selling individual units in the same property.” The strategy according to Fletcher is to purchase a large number of units from the developer, then purchase other bank-owned units in the same community to lower the total price per unit.

This idea works well in today’s market especially if the investor plans to re-sell the units because it gives flexibility in pricing and allows the investor to offer the units at below market pricing and have control of the units for sale in the property.

I am in agreement with Mr. Fletcher on this idea and also agree that an investor does not have to wait for the market to bottom out because the average cost of the bulk sale and REO is close enough.

Of course the investor also has to be careful about the laws pertaining to successor developers and the financial ramifications that can result when purchasing more than seven units in any single property.

With this said, it’s still a great opportunity as the cash flow often works for a ‘buy and hold pattern’ or selling to first time buyers, if financing is available, or to second home owners who want to have an inexpensive place in Florida.

We are beginning to see this happen in fractured condominiums in Florida whereby an investor wants to buy bulk and has already purchased REO units. From NRTDA’s point of view, it also works because it allows us to come in and staff a property and develop a re-launch program that is deemed to be more successful because we are not competing with REO or other bank assets. The sales process and pricing becomes more stable allowing for better buyer perception.

Still, with this all said, the association fees need to be in tact and the property purchased should always have a thorough inspection. Look before you leap! With any opportunity there is almost always risk. When will we ever see these prices again? A thoroughly calculated risk with thorough due diligence can most probably prove to be very successful for investors.

To Buy or Not to Buy

By: Holly Rabits

The pendulum continues to swing back and forth with regard to today’s real estate market and economy. One month sales are up, prices are down. The next month, the prices are up and sales are down. Still, based on an overall year to date comparison, according to the National Association of Realtors, things are beginning to improve and hopefully employment will follow suit.

Florida which ranks in the top 3 of distressed markets in the United States is also beginning to see a shift. One would hope so, as in my 30 years in real estate, I have never seen prices or mortgage rates at this level. Opportunity knocks and then there is the proverbial “BUT” in the equation.

While mortgages are being offered at wonderful rates, the qualification process both for the buyer and the property are getting more stringent. Changes are happening literally every day. A buyer can purchase an entry level home or condominium in areas of Florida for as little as $20 to $30,000 dollars. Higher end homes have slashed prices 50% or more to try to generate interest.

The tax incentive which expires in April has been a key component to driving entry level, owner occupied sales. There are now opportunities for existing owners to receive a tax credit as well, once they sell their home, at a below market price. Still, the opportunity is great to purchase more for less.

With this said, inventory is lower and absorption is gaining BUT there are still more foreclosures coming to market which will affect pricing.

Hopefully loan modifications will become more effective and people can hang on to their homes which will help in terms of stabilizing and improving the Florida market.  This will take many of the foreclosures and short sales out of play which will reduce inventory and strengthen demand, as well as raise prices!

It’s a slow boat but the ship has definitely left the dock and if you are considering a primary residence or second home in Florida. Now is the time to get serious.

Ask lots of questions, inquire about condo HOA’s and percent of developer rentals as well as the percent of investor owners. Make sure the HOA is not more than 15% in arrears. These are part of the perimeters that qualify a condominium for financing. Be prepared to have your financing in order before you purchase or have verifiable cash. Always inspect the property with a licensed inspector before closing. Check out national real estate websites. They offer great information.

Last but not least, contact a REALTOR to guide you through the buying process. We at CBNRTDA are here to help and know the rules to make your purchase easy and worry free.