Updated: Thursday, October 30, 2014

Is Airbnb The Goldmine Youve Been Waiting For?

Your tenants are moving out when their lease is up and you arent sure its the right time to sell.

Youve been increasingly staying at your girlfriend or boyfriends place, leaving yours mostly empty. You thought about renting it but dont know if you want to tie it up for a whole year.

You live in an area favored by tourists - or at least one that hosts an event or two every so often that brings in a big crowd.

What do these three scenarios have in common? They may each offer a great opportunity to use Airbnb.

What is Airbnb anyway?

Airbnb describes itself as "a community marketplace where guests can book spaces from hosts, connecting people who have space to spare with those who are looking for a place to stay."

With Airbnb, you can list your home, or even just a room if youre so inclined, for travelers from all over the world. They stay, you get paid. Its a growing alternative to hotels and works particularly well for those places that are located in a desirable travel spot or one that attracts large sporting or entertainment events or conventions. But the exciting news for those with a property "to spare" is the potential income generated.

How much income are we talking?

Well, a lot, depending on how well - and how much - you use it. Consider this Fast Company story that profiled an entrepreneurial Airbnb host who expects to make a six-figure income just from renting out his spaces.

Or this account from Business Insider that details how one man made enough money through Airbnb to buy a house. "He was charging 200/night and paying 1,900/mo. in rent, staying with his girlfriend whenever the apartment was rented out," they said.

And dont forget to check out their inside look at Super Bowl Airbnb rentals -- a way to make a serious buck and something that has us thinking very seriously about how to use the NFL connection in our city. Hmmmmm

What kind of responsibilities are involved

Not unlike being a landlord, being an Airbnb host comes with a list of have-tos for basic care and maintenance. You are responsible for providing bedding, dishes and other items for daily living, as well as cleaning and replacing them as needed.

Easy tip 1: Shop at IKEA Mr. Six Figures referenced above reportedly outfitted his one-bedroom apartments for 8,000 each including all the furniture. Easy tip 2: Get a cleaning crew.

If youre thinking of taking the Airbnb plunge, these additional tips from Huffington Post should help, as should these nine hospitality tips from the Airbnb blog.

Beware the legal issues

As Airbnb has grown Wikipedia reports the company founded in 2008 now has more than 800,000 spaces around the world and a valuation of 10 billion, so has its critics. Not surprisingly, that is led by the hotel industry that is losing business to Airbnb.

A few cities around the world have raised the question of hotel taxes, while the company and the New York State attorney general have also famously tangled over subletting laws. If you are planning to Airbnb your place, be sure to check your state and local regulations to make sure you stay on the right side of the law.

You can read more about pending legal issues and how Airbnb has responded to them here.

You can also calculate how much your space is worth on their site. But, you probably want to use it as a starting point. Their estimation proved to be low when we did further research. For the best idea of what you can charge, estimate on their site and Google other Airbnb listings in your area.


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MBA, One of Many Knowledge Resources

Buyers and sellers dealing one-on-one with mortgage lenders and real estate professionals can forget the full force of industry knowledge available to these front-line financial workers. Problems can arise if these professionals also forget.

In our "just Google it" society, consumers still need the professionals they hire to possess a depth of working knowledge that is continuously refreshed and strengthened by research and education. Band-Aid searches are not enough to achieve the best possible results for real estate buyers and sellers.

Do the professionals who help you bring the full power and impact of their industry to support you in achieving your short- and long-term real estate goals?

How are you sure that the professionals helping you buy or sell real estate take full advantage of the information, knowledge, and professional development education made available through the trade associations and regulatory organizations they and their organizations belong to?

For instance, The Mortgage Bankers Association MBA, a national association representing the real estate finance industry, which employs more than 280,000 people in virtually every community in the country, represents more than 2,200 real estate finance companies from Main Street to Wall Street: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. Headquartered in Washington, D.C., the MBA strives "to ensure the continued strength of the nations residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans."

On October 21, 2014, The Mortgage Bankers Association announced that it expected to see 1.19 trillion in mortgage originations during 2015, a seven percent increase from 2014. While MBA anticipates purchase originations will increase 15 percent, it expects refinance originations to decrease three percent.

MBAs forecasts purchase originations will increase from 635 billion in 2014 to 731 billion in 2015. In contrast, refinances are predicted to drop from 471 billion in 2014 to 457 billion next year.

In 2016, MBA is forecasting purchase originations will increase to 791 billion while refinance originations drop to 379 billion, to a total of 1.17 trillion.

"We are projecting that home purchase originations will increase in 2015 as the US economy continues on its current path of stronger growth, job gains and declining unemployment. The job market has shown sustained improvement this year; with robust monthly increases in both payroll jobs and job openings," said Michael Fratantoni , MBAs Chief Economist and Senior Vice President for Research and Industry Technology. "We are forecasting that strong job growth, coupled with still low mortgage rates, should translate to an increase in home sales and purchase originations.

"Our projection for overall economic growth is 2.9 percent in 2015 and 2.4 in 2016, which will be driven mainly by strong consumer spending and business fixed investment, as households continue to spend on durable goods, such as cars and appliances, and as businesses invest in new plant and equipment. Moreover, after several years of contraction, the rate of government spending should no longer be a drag on the economy."

On October 20, during MBAs 101st Annual Convention amp; Expo in Las Vegas, MBA Chairman Bill Cosgrove publicly >

While every year we lead our corporate planning retreats to strategize for the success of our companies futures, its no longer enough. Im here to tell you the largest planning retreat is happening to us in Washington and the state houses. And its imperative to the success of your business and our industry that you are fully engaged in both By working with the national MBA, I came to realize that what was happening in Washington was affecting my company inside our four walls just as much as it was outside the four walls. The future of my business was being determined by strangers - political leaders and regulators, well intended, but they dont know our [mortgage banking] business.With policy proposals stuck in Washingtons political gridlock and regulations affecting our ability to best serve our customers, we all need to be in the game and we all need to stay in the game.

Growth in the housing market is limping along because the new generations of home buyers wont or cant jump in. They have seen firsthand the devastation of the recent economic crisishigh unemployment and record levels of foreclosures. Scarred by that experience, facing growing levels of student debt, and a soft job market, they are hesitant to go "all in" on homeownership. Others who are ready to buy simply cant, because the complicated web of federal regulations prevents us from providing them full access to credit.

The next year [2015] will be about access to credit and the collective impact of the new rules and enforcement regimes on consumers. Access to credit for qualified borrowers, especially first-time home buyers, is

imperative to market growth and stability. And its the main thing that is affecting todays housing market. Today first-time buyers represent only 29 percent of the market, when traditionally this has been closer to 40 percent. The real estate market will not be healthy until first time buyer numbers start to substantially recoverI never thought I would see the day that young Americans question the value of homeownership. Each and every one of you [MBA members] should take this personally. I know I do

One of the greatest factors limiting these potential homeowners is rising student debt. A recent study from TransUnion found that student loans have left the greatest imprint on consumers in their 20s. Student loan debt, as a percentage of their overall debt, has tripled in the last 8 years, from 12.9 percent in 2005, skyrocketing to 36.8 percent today. And heres what shocks me the most For the first time in my careerstudent debt is having a profound downward effect on homeownership. Until we find a solution to that problem, homeownership among recent college grads will continue to flounder ffecting everyone in this [MBA Conference] room.

I believe policy education is a two-way street. We have to learn how to comply with the rules, but federal officials also need to learn of the impacts of their decisions and actions on consumers, the housing market, and access to credit. Right now, there are too many cooks in the kitchen. Regulators who oversee the mortgage market arent coordinating, and its driving up the cost of homeownership. Or worse, taking homeownership out of reach for too many Americans.For example, in the first quarter of 2009, it cost lenders about 3,700 to produce a loan. By the first quarter of this year, those costs had more than doubled to about 8,000 per loancosts that are ultimately paid by borrowers. We need smart, effective regulation that promotes responsible lending but doesnt impede the recovering housing market.

Real estate and mortgage professionals benefit from information, knowledge, and education provided by their trade associations and regulatory organizations. For instance, The Mortgage Bankers Associations NewsLink Publication Series provides weekly >
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Swimming Pool Increases Landlords Duties of Care

Might a landlord have extra liability if he rents out a property that includes a swimming pool? Most of us would probably answer yes, and we would be right. But just how far do the landlords duties extend? Well, how about a duty of care to protect the minor children of the tenants guests? The point is clearly made in a California case filed earlier this year. Johnson v. Prasad, Third Appellate District, Feb. 25, 2014

The Prasads purchased a home with a backyard swimming pool in 2000. The pool was built in 1976 or 1977. It complied with state and local ordinances at the time. Subsequently, California adopted the Swimming Pool Safety Act which requires a variety of pool safety measures; but it only applies to pools built or remodeled after January 1, 2007 The Prasads did nothing to change the pool. A six-foot fence prevented entry into the backyard. The only access from the house to the pool was through the kitchen. There was a sliding glass door with a security gate over it. The gate did not have a self-closing mechanism.

The property was managed by a Century 21 firm since 2009. In June of 2009 the property was rented. The lease called for the landlords to maintain the pool. The lease provided that the landlords or their service provider would have access for such maintenance purposes.

The tenants had a party on June 28, 2009. Among the guests were Andre Soucy, his four-year old son, Allen, and Allens grandmother and grandfather. There were a number of other people, including children.

According to the court record, "They all went in the pool. Eventually, everyone got out. The grandmother went inside the house and did not close the security gate or the sliding glass door behind her because others were still coming in. At some point, the grandmother lost track of Allen. As it turns out, Allen had gone outside the house to the backyard. When he was discovered, he was at the bottom of the pool."

Allen died. It was a tragic situation, indeed, and one that ultimately turned into a lawsuit. Allens mother filed a wrongful death suit alleging the grandmother and father were negligent in supervising Allen, the homeowners the Prasads were negligent in failing to properly fence the pool or otherwise protect a child from accidentally falling into the pool, and Century 21 was negligent in failing to ensure that the property met safety code. She did not sue the tenants.

The Prasads and Century 21 moved for summary judgment -- essentially, dismissal -- which the trial court granted. Among the things the court said, "the pool was not a nuisance or an unreasonably dangerous condition of the property"; "nothing these defendants did or failed to do created any type of dangerous condition or in any way contributed to this accident"; there was no evidence that it was more likely than not that the conduct of the [Prasads] and Century 21 was a cause in fact of the drowning; and "even the security gate and sliding door could not have been involved in this action since they were left open on purpose."

Case decided? No, the plaintiff appealed. And the Appellate Court disagreed with the trial court as to whether or not the landlords owed a duty of care to the child. The court noted that "In determining a dutys existence and scope" consideration of several factors is called for. The foreseeability of harm and the extent of the burden [to prevent it] "are ordinarily the crucial considerations.

The court reasoned that it was foreseeable to the landlords that children would be on the property and that "children would approach the pool, regardless of their capacity to swim, thus exposing themselves to the danger of drowning." The foreseeability of harm factor was there.

The Appellate Court also noted that the defendants did not violate the Swimming Pool Safety Act. Nonetheless, the Court also said, "the existence of this statute informs the extent of burden to the homeowners [Prasads] and consequences to the community of imposing a duty to exercise care with resulting liability for breach." Hence, the court seemed to reason, even though the law did not require that the landlords comply with the act i.e. adding safety features, its very existence suggests that they might have a duty to do so.

Having established in its own mind that the landlords did have a duty of care to the child, the court then turned to the question of whether that duty was breached. That, the Appellate Court said, was a matter for a jury to decide. "A jury could conclude a reasonably prudent homeowner should have taken further precautions because it was foreseeable that a child could still access the pool and could drown or be injured. Or it could decide the opposite. Where reasonable minds could differ, it was error for the trial court to decide that question as a matter of law."

So, the case against the landlords has been sent back to trial.

As to Century 21, the Appellate Court upheld the trial courts ruling. Century 21 could not have been negligent in failing to determine that the premises met safety code, because the only safety code at issue exempted those premises. At least that part of the Appellate ruling made sense.

Bob Hunt is a director of the California Association of Realtors. He is the author of Real Estate the Ethical Way.


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Understand Your Credit Scores

Lenders want to give you a mortgage, but they also want to minimize their own risk. The easiest way to retard risk is for them to use your credit scores to make their lending decisions.

Credit scores are compiled separately by three consumer reporting agencies -- Equifax, Experian, and Trans Union. These credit reporting bureaus calculate scores differently, based on formulas and criterias of their own devices.

Equifax Beacon 5.0 Facta: scores range from 334 to 818.
Experian Fair Isaac V2: scores range from 320 to 844.
Trans Union FICO Risk score >

Your credit score is a number that reflects the information in your credit report based on whether you pay your bills on time, how much you owe creditors, accounts youve paid off, and derogatory information such as unpaid bills, late payments, judgments and liens. It also includes inquiries into your accounts from lenders, landlords, and employers.

When you apply for a home loan, your application includes giving your lender permission to "pull your credit" and decide whether to lend to you and the rate of interest on the information contained in your credit scores. The higher the score, the better terms youll receive from the lender.

Once your credit scores are reviewed by your mortgage lender, youll receive a computer-generated report of the findings, but it wont have a copy of your entire credit report. It may include key factors that adversely affected your scores. Some examples might include:

Too many inquiries in the last 12 months
Time since most recent account opening is too short
Proportion of loan balances to loan amounts is too high
Too many accounts with balances
Amount owed on revolving accounts is too high

What if youre declined for the loan, or your lender wants to charge a higher interest rate than you were expecting? Is there anything you can do?

Yes, talk to your lender and ask for help repairing or correcting your scores. For example, you may have innocently done something that resulted in a negative score, such as closing a line of credit. Or, you may not have realized that a late payment would bring your score down as much as it has. The lender will tell you exactly what you need to do to raise your scores.

Under federal law, you have the right to obtain a free copy of your credit report from each of the national consumer credit reporting agencies. Go to FreeAnnualReport.com.

If you find an error -- derogatory data that doesnt belong to you, or an account that shows the wrong balance, simply show the lender your canceled check, >

Youll also have to correct the information yourself separately and in writing with each agency. It may take a few weeks for the agencies to record the updated information.

In the meantime, work with your lender and do what he/she tells you to do to get the best rate, including paying more than the minimums, paying on time, and making sure that your debt-to-income ratios are well within your ability to repay all your loans.


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Tapping Your Retirement To Help Your Kids

Question: My wife and I want to buy a condominium now, especially since interest rates are so low. We need approximately 40,000 for the earnest money deposit, which is ten percent of the purchase price. My parents are prepared to lend us this money, but they will have to take it out of their Individual Retirement Account. Mom is 54 and Dad is 56. Can they do this?

Answer: Yes, with a large number of restrictions. The general rule is that if you have not reached the age of 59 , you must pay a ten percent penalty on any distribution from your IRA. This is in addition to the regular income tax you have to pay on that amount. This is referred to as "early distributions".

However, there are a number of exceptions, such as if you are disabled, you have unreimbursed medical expenses that are more than 7.5 percent of your adjusted gross income, or the distribution is used to buy, build or rebuild a first home.

Lets look at this last exception carefully. First, the buyers must be "first-time" homebuyers. According to the IRS, you cannot have a "present interest in a main home during the 2-year period ending on the date of acquisition of the home which the distribution is being used to buy, build or rebuild." Since your son is married, his wife must also meet this no-ownership requirement. And the home to be purchased cannot be for investment purposes; it must be the principal home -- which the IRS calls "the main home".

When is the "date of acquisition"? It is either the date of which you enter into a legally binding real estate contract to buy the property or the date on which the building or rebuilding begins.

You can use your parents money for the deposit on the contract, or for any usual and reasonable settlement, financing or other closing costs. However, any moneys your parents take out above 10,000 will be taxed twice -- first as ordinary income and second with the 10 percent penalty.

There are more restrictions: the moneys must be used by you no more than 120 days after the funds are withdrawn from the IRA. Your parents can agree to lend you these funds at any time, but once the funds are withdrawn, you must sign that sales contract and use the funds within the 120-day time limit.

And if you have brothers or sisters, they should understand that once your parents have used up the 10,000, any additional funds withdrawn from the IRA will generate the 10 percent tax. This is a lifetime cap. However, if both of your parents have separate IRAs, they can each give you up to 10,000 without having the pay the penalty. They will, however, have to pay ordinary income tax on these withdrawals.

What if your parents have a ROTH IRA? If that IRA has been in existence for at least five years, and meets the requirements spelled out above for regular IRAs, there will be no 10 percent penalty and no income tax due on the first 10,000. Above that, there is a complicated "Ordering Rules", and you should consult your own pension plan trustee or advisor for specifics.

This discussion involved parents assisting their children. But the law is not limited exclusively to parents. According to the IRS, to qualify for treatment as a first-time homebuyer distribution, the funds can be used to pay the costs for a main home for any of the following: "yourself, your spouse, your or your spouses child, your or your spouses grandchild, your or your spouses parents or other ancestor."

For additional information, the IRS has Publication 590, "Individual Retirement Arrangements IRAs", available on the web by Clicking Here.

But before you pursue the IRA route, you should discuss this with your mortgage lender. In todays economy, even though interest rates are at an all-time low, it is very difficult to get loan approval. Your lender may want your parents to gift you the deposit moneys, instead of lending it to you. Your lender may also want to make sure that some of your own money is being used for the purchase.

According to Craig Strent, CEO of Apex Home Loans in Rockville, Maryland, "at 90 with none of the buyers own money into the transaction, FHA would be the best option for the kids. If they were getting an 80 percent loan to value, with all funds gifted, they could go conventional."

"Its important for the kids to document where the earnest money deposit came from," Strent added. "The parents will have to show a copy of their bank statement along with proof of the funds leaving their account and going into the buyers account. Many people find this intrusive, but it is a required step to verify that the funds were indeed a gift, and not some internal arrangement to circumvent the underwriting requirements."


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Hosting an Open House: 3 Reasons to Bring Your Tablet

From marketing the event to staging the home, hosting a successful open house can be tricky. Be too specific like targeting only first-time home buyers and you risk missing a whole slew of potential leads. But be too broad like not doing anything to set the property or yourself apart might prove disastrous as well. One thing thats a safe bet is making the entire experience as smooth and simple for each guest as possible. If being tech savvy is part of your selling strategy and it should be, use these tips to integrate an iPad into your property showing:

Streamline the Sign-in Process

Having guests sign in at an open house not only makes follow up easier, but its also a great way to collect leads. Even if buyers arent interested in the property youre showing, they might be interested in something else nearby. But just setting out a paper and pen near the front door wont do. Guests may either only include ir>

Limit Equipment

Instead of lugging around a camera and juggling it with your smartphone in one hand and a folder full of pamphlets in the other, leave it all behind. You can upgrade your photography skills while downsizing on equipment. Before the open house, use an app like Camera to control the exposure, digitally zoom and experiment with effects in order to improve your listing photos. While showing the home, snap a few shots to post to social media and create some buzz around the event. This works especially well if youre hosting a two-part open house as you can use photos to advertise for your next showing.

Have Resources at Your Fingertips

It may be easy enough to whip out your phone and do a quick Google search when guests have a specific questions, but why not up your game and plan ahead? At the open house, prospective buyers will likely want to know more about the neighborhood, nearby schools, crime stats and more. With a bit of planning, you can have this information pulled up and easy to access with just the touch of the screen. Consider using a map app to highlight noteworthy areas of the neighborhood. Use Pinterest to display information about specific homes. Not only will this help you connect with tech-savvy buyers, but itll make your listings more interactive. Consider gathering websites and resources visitors asked about and including them in the listing follow-up or an upcoming newsletter. Or, with the photos and videos youve taken and resources youve gathered, you could centralize the information and use it to host a virtual open house for prospects who are out of state or otherwise unable to attend.


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Five Home Improvements To Avoid For Resale

Its only natural to make the home you bought more comfortable and functional for your household. But before you put in a hot tub or convert the garage into a bedroom, think about whether or not these improvements will add or subtract perceived value from your home someday.

Even though selling your home could be years away, keep in mind that not all home improvements are welcome to buyers. When buyers are ready to buy, they tour multiple homes which can be confusing. So, they distinguish what theyve seen by features like "the one with the gorgeous kitchen," or "the one with the ugly pink tiled bathroom." You dont want your home to be the one they make fun of.

Here are just a few items that buyers dont appreciate:

1. Outdated finishes. It doesnt matter if you paint your walls the most fashionable colors if buyers look up and see popcorn ceilings and wobbly ceiling fans. If youre going to improve a room, update everything, even the light switches. Be particularly careful with wallpaper which is very personal and can be polarizing to buyers. And carpet? Most buyers want wood floors today.

2. Awkward spaces. Youve seen the commercial where the family remodels the kitchen and borrows space from the college-age sons bedroom, turning his room into little more than a closet. Knock out or move walls where you need to, but not at the expense of other rooms.

3. Conversions. Beware of changing the original function of a room. Decking out the dining room as a media room may make sense for your family, but where will your buyers serve dinner? And while were on the subject, converting studies into bedrooms doesnt work. Without closets and adjoining baths, they arent really bedrooms.

4. Bad add-ons. If theres anything worse than not having enough space, its adding on space that looks stuck to the original house with glue. If youre going to add on to your home, make sure it looks as seamless as possible, with the same quality finishes and floors.

5. Expensive-to-maintain luxuries. Swimming pools, koi ponds, fountains and putting greens can make backyards a paradise, but theyre costly to keep up. Installing lush landscaping that has to be pruned constantly to keep its shape is a great hobby, but for future buyers, less is more. Its great to have hobbies, but make sure you can take them with you when you move.

So go ahead and paint your den after your favorite football teams colors like orange and purple, but when it comes time to sell, prepare your home for the next buyer. Put it in pristine clean condition, and restore paints and finishes to attractive neutral shades. And keep this mantra in mind: If its expensive to add or install, the buyer could see it as expensive to remove.


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Copyright©2014 Realty Times®.All Rights Reserved



Updated: Thursday, October 30, 2014

Understand Your Credit Scores...
Lenders want to give you a mortgage, but they also want to minimize their own risk. The easi...

Tapping Your Retirement To Hel...
Question: My wife and I want to buy a condominium now, especially since int...

Hosting an Open House: 3 Reaso...
From marketing the event to staging the home, hosting a successful open house can be tricky....

Copyright ©2014Realty Times®.
All Rights Reserved