Finding the Perfect Real Estate Agent for Your Investment Property

 finding-perfect-real-estate-agent-investment-property-marylandFinding a reliable real estate agent is essential to anyone looking to purchase a piece of real estate. Whether you are a real estate professional looking to expand your portfolio or a casual home buyer, picking a real estate agent you can trust is a must when it comes to buying or selling homes.

But how do you go about finding the right agent for you?

The best agent for you is not always going to be the most familiar real estate name in the biz, the one who has sold the most homes in the area you are interested in or the one working for the largest brokerage. In fact, many times those things will not matter at all.

What will matter is that you find someone that acts in a professional and ethical way, is willing to listen to your needs and knows the market you are looking to enter.

Today we will take a look at what role a real estate agent plays in the home purchasing process and provide you with some helpful tips for finding the right real estate agent for you.


What is a Real Estate Agent?

real-estate-agent-maryland-rental-propertyReal estate agents are licensed professionals that represent buyers and sellers in real estate transactions. Many times a real estate agent will work under one of the following:

  • Real Estate Broker: A professional or firm in the real estate business that charges a fee or commission for conducting buy and sell transactions of real estate initiatives. They also handle the earnest money deposit and escrow account. A real estate agent that works under a broker is licensed to help people buy and sell property.
  • Realtor: A real estate professional that is a member of the National Association of Realtors. They are considered expert real estate agents and are more educated than your typical real estate agent.

A real estate agent’s duties will depend on whether they are representing a buyer or seller in the purchase process.

If representing the seller, a real estate agent will advise the client on how to price the property, how to prepare the property for sale and what improvements can be made to boost the value of the home. They also promote the property through things such as listing services, networking platforms and traditional advertisements via online or newspaper ads.

If representing the buyer, a real estate agent will search for available properties that match the buyer’s needs and price range and arrange for the purchase of the property.


How to Find the Perfect Real Estate Agent

 find-perfect-real-estate-agent-maryland-rental-propertyNow that you know what a real estate agent is responsible for, let’s look at some things that can help guide you to an agent that works best for you.

Get Referrals

Satisfied customers of exceptional real estate agents will not hesitate to refer them to family, friends and co-workers. In fact, word-of-mouth is one of the best ways to find out if meeting with a potential real estate agent is a good idea. Here are some things you should discuss with those that have had experience with a real estate agent:

  • What was the experience like from start to finish?
  • How satisfied were you at the end of the process?
  • Did the agent truly listen to your wants and needs?
  • Did the agent give you exactly what you wanted?
  • What did the agent do that exceeded you expectations?
  • How likely are you to refer them to others and why?

Visit Open Houses on Your Ownopen-house-rental-property-marylandOne way to see an agent in their element is to visit an open house in the market you are interested in. This is an informal way for you to meet the agent and get a first impression that may encourage you to pursue them as your agent.

Observe how prepared and knowledgeable the agent seems. Notice how the open house is set up (should you be in the market to sell your home) and decide if the setup is something you would want for your home. In addition, notice the energy you get from your interactions with the agent. Although not always right initially, your feelings about someone upon a first meeting are usually right.

Lastly, make sure you know who the listing agent is on the open house. Experience is a must when it comes to choosing a real estate agent. Just because an agent has attended an open house does not mean the property is theirs to sell.


Check Their Experience Level

The goal of finding a great real estate agent is to find someone experienced in doing deals that are similar to the one you are interested in conducting. For example, if you are looking to buy a starter home that will fit your family’s needs, finding a real estate agent that has experience only in luxury condo sales is probably not going to be a good fit.

You need an agent that understands the market, whether you are looking to buy or sell. Additionally, an experienced agent will have many connections, will know of properties that are considered off-market that may suit your taste and have the negotiation skills to help get your offers accepted.


Match These Qualities

There are plenty of different personalities, experience levels and success rates floating around the real estate industry that can confuse anyone when it comes to choosing a good real estate agent. Make a list of the personality traits you are looking for in an agent and look for someone that matches the majority of them prior to hiring them to help you buy or sell your property:

  • Make sure they are licensed. Being a real estate broker or Realtor is not required. However, your real estate agent’s license should be in good standing. In addition, they should have zero complaints against them. This information can easily be Googled.
  • Knowledge is key. You want to find an agent that excels in the type of real estate transaction you are interested in. Residential and commercial properties are very different. Short sales or foreclosures have their own individual issues to contend with. Buying versus selling makes all the difference.
  • Communication is also key. This seems like an obvious point but unfortunately with many real estate agents, communication is not a strong point. It is your right to know what is going on with your real estate transaction at all times. Make sure you are receiving regular updates in your preferred method (email, phone, text). Also, make sure you can easily get in touch with your agent should you have any questions or concerns.

In addition to these important qualities you want to make sure you find a real estate agent that is truthful, has integrity and performs their job with pride. Investing in a property is a big deal and is one that does not come cheap. Someone who does not understand this is not worthy of your time or money.


If you are looking for a real estate agent to represent you in your real estate endeavors, take note of the above-mentioned tips. They will go a long way when it comes to choosing the right agent to represent you and get you the best deal possible, no matter which side of the bargain you are on.

Your Go-To Checklist for Investing in a Rental Property

go-checklist-investing-rental-propertyInvesting in an Anne Arundel County rental property is on many people’s minds these days. Located near major industries, the shore of Chesapeake Bay, and larger cities such as Baltimore, Anne Arundel County is a great location to live in.

However, if you are just starting out in the rental property business, it can feel quite daunting; there is so much to think about all at once. Chances are you have a lot to learn about investing in property if you have no prior experience and if you don’t have someone guiding you through the process.

Thus, we have composed a helpful checklist you can reference when it comes time for you to purchase your first Anne Arundel County rental property. This checklist will provide you a basic understanding of what it takes to be successful in your rental property investments.


Anne Arundel Rental Property Investment Checklist

Expediting the purchase of an investment property in the Anne Arundel County area will help you get tenants in your property and begin the process of collecting rent quickly. That, of course, means the money will start rolling in right away. So in order to not waste time, look at this valuable list of things you should do when investing in rental property.


1. Research the Location

research-location-rental-property-investmentSure, Anne Arundel County is a prime rental home location. However, before jumping in and making an investment decision, research the surrounding area of the properties you are interested in. This means scoping out things such as:

  • Schools
  • Shopping centers
  • Sports arenas
  • Restaurants
  • Nearby housing options
  • Major freeways
  • Entertainment halls

Investing in a property that is near a booming section of the city will help attract tenants because it means more jobs and amenities for residents. Additionally, a booming location will likely allow you to raise your monthly rental rates in the nearby future, as well as allow you to increase the value of your property should you choose to sell.


2. Check with the Competition

Before investing your hard-earned cash into a property in hopes of making a large amount of positive cash flow, make sure you research your competition. When it comes to property investments, competition can mean one of two things:

  • Local competition. It is crucial you check the surrounding area and comparable properties to make sure of two things. The first is that you are getting a fair deal when it comes to purchase price. The second is that other rentals similar to your property are leasing for enough to cover your rental property’s future mortgage and make you a profit as well.
  • National competition. In addition to local prices, it is a good idea to check the national averages for comparable properties. This will give you a good idea as to whether your investment choice is a sound one compared to what the national market is experiencing.

In the end, you want to aim for getting the best deal possible on any property you purchase, while making sure there is room for a high rental yield and capital growth over time. The point is to find the perfect balance between getting a great deal and having room for value growth.


3. Have a Plan

 plan-rental-property-investment-anne-arundel-countyInvesting in a rental property is going to take a lot of time and money. It is important you get everyone that can help you onboard from the beginning. This includes your financial advisor, banker, accountant, and/or mortgage broker. These professionals are experts at handling your money, have a full understanding of your overall wealth, and can help you decide which price range is going to be the responsible range for you.


4. Learn the Purchasing Process

Buyers of rental property should always understand each step that is involved in the purchasing process. And, while the steps may not always be the same for everyone looking to invest in rental property, Zillow real estate experts state that the purchasing process should always generally follow these seven steps:

  • Offer and Contract. Once you find a property that interests you, assuming it is within your budget, you need to sign a written contract telling the seller you want to move forward with the purchasing process. Make sure this legally binding contract is drawn up professionally and you read every line carefully. You will want to know what provisions allow you to back out of the sale and what your responsibilities as the buyer are.
  • Receive Disclosure Documents. Anyone selling a property must provide you with disclosure documents, a title report, and any city reports that will reveal specific information that could persuade you to stop moving forward with the property purchase. These documents will disclose any issues the property has that may affect its value.
  • Appraisal Process. In order to receive a loan from the bank to purchase something as large as an investment property, the bank will have a professional appraiser inspect the home and make sure the agreed upon purchase price is correct, according to the property’s value. If the property is found to be overpriced, the bank may choose to deny your loan approval or place extra provisions into the loan agreement that you must follow.
  • Conduct Inspections. As a buyer, you will want to inspect the property you are about to invest in to make sure everything is in working order. For example, the property’s foundation, plumbing and electrical systems, HVAC system, and more are checked for flaws and reported back to you.
  • Full Loan Approval. After the appraisal process has been completed, the bank will want to run your credit history, verify your income, and inspect your debt-to-income ratio before finalizing the loan. Additionally, the bank will ensure the property you want to invest in has no prior liens placed on it because that will affect the property’s value.
  • Perform a Final Walk-Through. Right before the closing process completes, make sure you conduct a final walk-through of your property for any last minute discrepancies. You should also ensure any issues found during the inspection process have been fixed.
  • Closing Process. This process typically takes place with an escrow officer. During closing, the purchase papers are signed by both the buyer and seller and finalized as complete. Your Anne Arundel County rental property will now officially be yours.

Understanding the purchase process will allow you to feel more comfortable in your investment decision. You want to make sure you know exactly what is happening and why so that you aren’t pressured into making any decisions you are not 100% comfortable making.


Investing in rental property can be a complicated and drawn out process. However, by understanding what you are getting yourself into and by being as prepared as possible with professionals to help you along the way, investing in rental property can be a very lucrative thing.


In the event you find yourself wanting or needing help managing your rental property in Anne Arundel County, contact Bay Management Group today. With extensive knowledge of the rental property business, and specialized services to help manage everything from tenant placement to rent collection, maintenance calls to regular inspections, this Anne Arundel County property management company has everything required to keep your property occupied, maintained, and appealing at all times.

Bay Management Group has what it takes to make sure your investment property is being well cared for by the high quality tenants we help place in your property. So contact us today to see how we can help you with your newly acquired rental property.

Why Rental Property Investments May Help You Retire Quicker than a Pension

rental-property-investments-help-retire-quicker-than-pensionIf you are a Baltimore County resident who is teetering on whether to invest in a rental property rather than relying solely on a pension plan for retirement, you are in the right place.

Though the debate between property investments and pension plans oftentimes leans more towards pension plans as the better choice, the truth is that more than half of 30-64 year-old Americans fear outliving their money after they retire. And it is this fear of not having enough money to retire on that is driving many people to begin looking for additional ways to pad their retirement fund and even boost income long after retiring.

If you are debating whether to invest in Baltimore County rental property even though you have a solid pension plan in place, keep reading.

Today we will discuss what a pension plan is, the hidden risks involved in relying solely upon a pension plan, and the appeal that owning rental property can have on potential property owners when it comes to supplementing your monthly income before retirement, and keeping you afloat during all of your golden years.


What is a Pension Plan?

In short, a pension plan is a retirement account maintained by your employer that pays out a fixed sum of money to you upon your retiring. The length of time you worked for your company and your annual salary will largely determine how much of a pension you will receive when you have officially retired.

Your employer manages your pension during your working years by regularly investing sums of money and placing that money into a pension fund. This means when you retire, you are paid your entitled pension amount from the reserved pension fund your company has set up. None of the pension money paid out to you for your retirement will come from the company’s payroll. Rather, it comes directly from the pension fund your company has been building while you worked for them.


The Pitfalls of Pension Plans

pitfalls-pension-planSure, pensions come with lots of great benefits. For instance, they protect you from the risks associated with investing your own money. This is because it is your employer and company that take a loss if the investments they place pension fund money into go sour.

Additionally, the security that comes with a pension plan easily outranks many other retirement fund options. This is because with a pension plan, you will always know upon retirement exactly how much money you will receive on a monthly basis. It doesn’t matter what the market looks like at the time of your retirement because your payment will always remain the same.

That said, there are several pitfalls associated with pensions that may cause you to reconsider your reliability upon them as your sole source of retirement income:

  • Inappropriately used funds. Some employers allow, or even require, their employees to contribute a specific sum of money into their own pension plan. Unfortunately, this money is then invested as the company sees fit, regardless of how you feel. This means some of your hard-earned cash may be invested in ways that do not directly benefit you or your pension fund.
  • Possible pension reductions. Though pensions are supposed to be guaranteed at the time of retirement in terms of monthly payouts, if your company goes under, declares bankruptcy, or faces other serious legal troubles, there is the possibility your agreed upon payouts will be reduced.
  • It is taxable income. Despite what many people think they know about pensions, the money you start receiving from your company upon retirement is taxable income. In addition, be aware that receiving a pension check each month during retirement may disqualify you from other governmental benefits, such as Social Security.
  • Long employment requirements. If you are lucky enough to stay with one employer the length of your career, good for you! However, for many people this is simply unrealistic. Many pension plans require you work for the same company for a decade or longer before becoming vested with the company. This creates a battle between a guaranteed retirement payout and better career opportunities elsewhere. In the end, if you leave a company that was offering you a pension plan, you lose out on all of those benefits and must start your retirement savings over.
  • Loss of control. Many people seek to have full control over their retirement funds. This cannot be achieved with a pension plan since you have zero control over how your money, or the company’s money that is added in on behalf of you, is invested.

In the end, pension plans come with many restrictions and hidden risks that you may not want to deal with come retirement time. This is especially true if you are relying solely on your pension for retirement. Though pension plans are generally a wonderful benefit given to many American workers, there are ways to offset these risks and help better guarantee a successful retirement.


Investing in Baltimore County Rental Property


If you are worried that your company’s pension plan will fail to suffice come retirement time, this is the perfect opportunity for you to consider investing in rental property. There are many ways investing in a rental property can supplement, provide for, and exceed your goals when it comes to padding your retirement fund.


Steady Income

Rental properties provide steady income for years to come if done properly and managed by an experienced Baltimore County property management company. This income not only funds your retirement needs before hitting retirement age, it also carries over and continues to provide you income well into retirement. And, if a property management company manages your property while you are retired, this mostly passive income will serve you well as you enjoy life after work.


There is No End

There will always be people leasing homes, whether they are leasing because they prefer it over buying or whether they are leasing because that is their only option. Knowing that the market for leasing will always exist, you can rely upon the fact that you will always have some sort of cash flow coming in on a rental property in Baltimore County so long as the home doesn’t go vacant for long periods of time.

With pension plans, there is always the risk that your company will go under, you will quit or get fired, or that the amount given will not be enough to suit your retirement needs. With a rental property investment, you can rest assured that everyone needs a place to live. This means that with the right advertisement, tenant screening, and lease drafting compliance, you can have high quality tenants placed in your properties at all times. This equates to regular rent collection and money in the bank for you to enjoy both pre- and post-retirement.

In the end, the best way to fulfill your retirement dreams is to diversify. There are many ways you can fund your retirement, including a pension plan and investing in rental property. And while we do not think you should entirely forgo having a pension, we do believe that investing in rental property under the management of a knowledgeable property management company is a more secure route to retiring in peace.


If you are close to retirement age, or are just looking to plan ahead and want to get into the rental property business in Baltimore County, contact Bay Management Group today. Working solely in property management, Bay Management Group has what it takes to bring your retirement plans to the next level financially. Call today and watch your golden years unfold with the peace of mind that you will have plenty of money to enjoy the next major chapter of your life.

5 Tips to Create Income From a Rental Property

how-create-income-from-rental-propertyAs rent prices continue to grow upwards of 1.0% in Maryland, those in Prince George’s County that are interested in becoming rental property owners, or better yet already are in the rental property business, should take notice.

Many property owners enter the rental market in hopes of creating a passive income to fund their vacations, allow them to quit their corporate jobs, or even pad their retirement accounts.  And, while the ability to create a completely passive income in the rental property business is highly debatable, the truth is that there is a lot of money to make as a rental property owner.

Today we are going to discuss some of the best ways you can create a passive income from your Prince George’s County rental property so that no matter what your financial dreams are, they can become a reality more quickly than not.


Turning Your Rental Property into Income


1. Lower Your Vacancy Rates

One of the best long-term methods for creating a consistent income from your rental property is to keep vacancy rates as low as possible.  After all, no tenant means no rent.  And, no rent means you are paying the mortgage out of pocket.

Finding a high quality long-term tenant is going to be your best bet for keeping low vacancy rates.  If you have an experienced property management company working for you, finding good tenants should be a breeze.  In fact, as Maryland’s leading property management company, we at Bay Management Company pride ourselves on our property advertisement, tenant screening, and lease drafting procedures.  Our number one goal is to get your vacant Prince George’s County property leased as quickly as possible with the highest rent payment and highest quality tenants possible.  This way, should you find yourself with a vacant property at any time, the turnaround is minimal and income loss lessened.

Here are some additional tips for keeping your vacancy rates low in your rental property:


2. Keep Track of All Rental Property Income and Expenses

keep-track-all-income-all-expenses-rental-propertyThere is no way for you to garner a solid income from a rental property if your bookkeeping skills are left by the wayside.  This is another reason why employing property management in Prince George’s County is so crucial to your financial success as a property owner.

All important documents related to the purchase of your property, expense reports, rent payment receipts, and any trouble you run into with your tenant that must be documented in print, email, or as photographs should be managed in an organized way at all times.  This paperwork should be easily accessible and separated by property if you own more than one rental.

Luckily, our staff at Bay Management Group has expert bookkeeping skills and can do all of this for you.  In addition, we are always transparent about any expenses or profits as they relate to your property and you can rest assured you will receive all of the necessary paperwork come tax time.

In the end, by staying organized you will be able to see where you can save money, where you are doing well, and exactly how to make more money from your income.


3. Renovate, Remodel, and Fix When Appropriate

There is much debate as to how much you should renovate your Prince George’s County rental property, especially once tenants are already residing in the property.  However, there are some excellent things you can do to increase the value of your property fairly easily before placing a tenant (which will garner you higher rent amounts and secure more income) or even after a tenant has been placed (used as an incentive to encourage longer stays, less turnaround, and decreased vacancy rates).

Here are some of the greatest ways to improve your property to make it more valuable and worthy of higher rent amounts:

  • Upgrade all plumbing fixtures to match the modern housing designs
  • Increase storage areas – closest, bathrooms, and garages
  • Add architectural design such as baseboards or crown moldings
  • Change windows and doors
  • Wash your property’s exterior
  • Change the floorplan to expand on the property’s structure
  • Re-caulk all pipe fittings
  • Upgrade countertops, kitchen appliances, and entire bathroom

Some of these property improvements will come with a hefty price tag attached to them.  However, by investing in your property to make it more appealing, the overall value will increase significantly and you will more than make up for your initial investment over the course of time in rent payments.


4. Do Not Skimp on Late Fees

Even though your tenant has been ideal up until this one time they were late on their rent payment, make sure you charge the late payment fee immediately.  If you allow your tenant to get away with even one late payment, the precedent is set for future late payments and the expectation that there will be no consequence for doing so.  This cycle is something that all property owners want to avoid.

One of the best ways to implement this zero late payment tolerance strategy into your rental property business is to have your Prince George’s County property management company include a very detailed late payment provision in the official lease agreement signed by both parties.  In addition, this policy should be clearly explained to the tenant upon move-in so that everyone has a full understanding that the responsibility of paying on time is a serious matter.

Bay Management Group excels at the rent collect process when it comes to the properties we manage.  We have no problem enforcing late payments or starting the eviction process immediately should the grace period pass.  These kind of financial problems can be a headache for property owners.  No one wants to enforce late fees or worse, start evicting tenants, especially if they have never caused problems before.  But, if you want to ensure your income is steady, you have to do it or employ a property manager to do it for you.


5. Increase Revenue Streams

Sometimes being creative as a property owner is just the thing needed to boost annual income.  During the lease drafting process, chances are your property manager is going to delegate certain responsibilities to your tenant such as maintaining the landscaping, cleaning the pool, or caring for the major appliances in the home.

One great way to ensure these tasks are being performed, take some of the load off of your tenant, and make additional income from your rental property, is to offer your tenant these services for an additional monthly cost.  By inflating the price slightly, both you and your tenant can benefit.  As an added bonus, you know everything is being handled according to your standards because you have hired people you trust to maintain your property.

In the end, it is every property owner’s dream to make as much passive income off their rental properties as possible.  And while this may not always be reasonable, it is reasonable to expect that some additional income can be squeezed out by doing simple things such as making improvements or properly screening tenants.

If you are in the Prince George’s County area and own a rental property, call Bay Management Group today.  Not only will we be able to help you manage everything as it relates to your property, we will also be able to help you boost your income using some of the strategies mentioned above.  Your property will always be in good hands if you decide on Bay Management Group.

The Benefits and Risks of Buying an Off-the-Plan Property


Would you invest in a Harford County rental property without first seeing it?

If so, you are one of the many property owners that might enjoy the idea of purchasing a not-yet-constructed, brand spanking new rental home.

While being the first to purchase a property that has never been lived in can be exciting and offers plenty of benefits, there are also risks that come along with investing hard-earned cash into something that is not yet complete.

If you are considering buying an off-the-plan property in the Harford County area, read on to see some of the most common benefits and risks of buying this type of property.


What Does Investing Off the Plan Mean?

Essentially, investing in a rental property that is off-the-plan means purchasing it before it has been built.  Typically, you enter into a contract with the housing developer to buy a property that may not be completed for some time.  This may mean months or even years, depending on the status of the community the property is located in.

The overall process of buying an off-the-plan property is simple.  Oftentimes you will receive digitalized imagery of the property, view scaled models, or even enter real life showrooms to gain insight into what your off-the-plan property will look like upon completion.  From there, you make your decision based on the property’s plans, location, and expected finishing touches.


The Benefits of Buying an Off-the-Plan Harford County Property


There are many perks to investing in an off-the-plan property, especially in the growing Harford County region.


Price Locks

One of the biggest advantages to buying an off-the-plan property is the price lock you will enjoy.  Though your property will not be finished until a future date (when appreciation and market growth may call for higher housing prices), you are locked into the current market price at the time of purchase.  This equals the potential for large savings down the road and of course, higher positive cash flow when you lease your rental to tenants.


Discounted Purchase Prices

In addition to reveling in current market prices, you may enjoy the fact that developers often propose off-the-plan properties at discounted rates with additional incentives in order to make the status quo and secure the finances needed to finish building the community.  It is important to note, however, that this is not always the case and that you should always research your investment decisions before finalizing them to make sure you get a great deal.


Buy Now and Pay Later

The process for investing in an off-the-plan property is usually the same regardless of where you are buying.  When the property is under construction, you will usually pay a 10% deposit to the developer, thus securing your purchase.  The remaining balance is not typically due until the development is complete, which can vary anywhere between 12 months and 5 years.


Customization Options

When you decide to invest in a Harford County rental property that has yet to be built, chances are you will have more flexibility when it comes to your choice of flooring, fittings, and finishes.  And, while all of these extras do cost more, they ensure your rental will have the exact appeal you want it to have in order to secure top-notch tenants come completion time.


The Risks of Buying an Off-the-Plan Harford County Property


As thrilling as landing a great deal, outfitting your investment property to match your exact design needs, and not having to pay the full purchase amount until sometime in the near future is, there are definitive risks that come with buying an off-the-plan rental home.


A Falling Market

If anyone could have foreseen that in the mid-2000s the American housing bubble would burst wide open, leaving even some of the strongest banks in the nation to collapse thanks to mortgage defaults, no one would have risked purchasing an off-the-plan property.

Why, you ask?

Because the purchase price you conveniently locked in the at the time of purchase, the one you had high hopes of appreciating over time as the housing market thrived, would have been a major overpayment by the time the development of your investment property was complete – if it was even finished.

Overpaying is a major risk you face when buying an off-the-plan property.  More so, you may find it more difficult to secure financing for the rest of the amount you owe come completion time if the housing market has gone down.


Failed Expectations

Many developers will not let property owners view their purchased properties until the entire project is completed.  This increases the risk that what you envision the final product to look like will not meet your expectations.  And unfortunately, since you have already invested in the property, you are stuck.  In addition, you may be disappointed with the quality of the workmanship.  Again, except for investing more of your hard-earned cash into the property to fix these failed expectations, you are simply out of luck.


Financing Issues

Home loan pre-approvals are usually only valid for 3-6 months.  That’s why it is a good idea to renew your pre-approval periodically during construction.  If not, you may be ready to pay the remainder of the purchase price for your Harford County rental property at completion time and find yourself unable to qualify for a home loan.


In addition, keep in mind that lender policies frequently change which may hinder your pre-approval being renewed throughout your property’s construction period.  In the end, meeting with your lender regularly will help offset some of the financial risks of purchasing an off-the-plan property, but will not guarantee complete protection against a loss of financing.


Builder Bust

Though unlikely to happen, investing in an off-the-plan property always makes you vulnerable to the stability of the developer.  There are plenty of horror stories circling around that involve developers going broke before the completion of a development and halting construction altogether.

In order to protect yourself from financial ruin that leaves you with no property to lease, it is vital you discuss what measures will be taken should the developers go into bankruptcy or halt construction for any reason.  This may include what type of guarantees the developer will offer you and whether you will get your deposit back should the project fail.


In the end, there are many pros and cons to buying a Harford County rental property off-the-plan.  And, while the notion of purchasing a never lived-in property can be exciting, you should really weigh the risks when it comes to paying for a property that is not even built yet.

If you do find yourself in the Harford County area with a completed off-the-plan property that works perfectly for your rental property business, consider contacting Bay Management Group to help you manage your property.  With lots of experience in the rental property industry, Bay Management Group provides property owners with exceptional property management services.  For instance, property managers on staff handle all tenant screening, lease drafting, regular inspections, and much more.

If you want to purchase a property off-the-plan and then let someone else handle everything property management related, contact Bay Management Group today.

Investing Tips for Single-Income Couples in Howard County

There are many reasons why your family might be living off a single income.  Maybe one of you is taking some time off because you have children to care for.  Or, one of you may be attending school.  Regardless of the reason, many single-income couples still want to invest in Howard County rental properties.
After all, investing in rental property is a great way to supplement your monthly income.  And, if you and your partner are currently living off one income, any extra positive cash flow is most likely welcome.

Today we will share some property investing tips for single-income couples in the Howard County area looking to get into the rental property business.


Investment Tips for Single-Income Couples


Purchase in Strategic Names

For those couples that have an above-average income (despite it being a single-income household), consider taking advantage of one of the most common strategies used in property investments – purchasing in strategic names.

By negatively gearing your investment and having the higher-income earning spouse (or only income earning spouse) make the purchase, you will be able to offset the full value of the tax deductions against your income tax.

Not sure what that means? 

Here are some facts about negative gearing and how it may affect single-income couples looking to invest in rental property:

  • Negative gearing occurs when the cost of owning a rental property outweighs the income it generates each year. This creates a taxable loss that can offset against other sources of income to provide a tax savings.
  • This only becomes profitable when the property is eventually sold in a housing market where property values are rising not falling.
  • In this situation, the investor must have the income to cover the shortfall between income earned and interest due until the property is sold.
  • The property’s interest rate must be locked in at a low rate as well because a variable interest rate will create more of a shortfall between income earned and interest due that the investor must cover.

Negative gearing an investment property is not a quick and easy investment tip for single-income couples.  This type of financial decision is very complex and needs careful consideration.


Invest in a Family Trust

Setting up a family trust and investing in assets such as rental properties through it instead of your individual name may save you a large amount of money in household tax fees.  Since the trust is tax-free, distributions can apply to lower-income families (such as a single-income couple).  However, keep in mind that the beneficiary of this family trust will need to pay the taxes.

This investment strategy will not work for negatively geared investments since you cannot distribute a loss when using a family trust.  It will, however, give the single-income couple control over the property despite not having legal ownership of it.


Purchase Property Using a Land Trust

Another type of trust that may be beneficial for investing in a Howard County rental property is the land trust.  Since a trust is simply an arrangement in which someone holds something of value for the benefit of another party, a land trust can be explained as an arrangement in which someone holds the title to a piece of real estate (e.g. your rental property) for the benefit of another party (e.g. the single-income couple).

Here are some of the top reasons you might consider using a land trust to invest in rental property:

  • The beneficiary of the trust remains private
  • Easily transfer interests of the property
  • Avoid the costly and time consuming probate process
  • Purchase price privacy
  • Possibly avoid transfer taxes

Again, consulting with an accountant or financial advisor before investing in rental property using a trust of any kind is your best option for protecting you and your family.


Get Life Insurance and Other Income Safeguards

If you are the sole income-earner, having income safeguards in place is essential to you and your partner’s financial security and stability.  Should anything happen to the sole breadwinner in a single-income couple such as an injury, illness, or death, financial disaster can creep in quickly.

Having life insurance will secure the financial well being of the non-income earner and other family members should the sole income earner pass away.  After all, if you invest in rental property and pass away leaving your partner without a job, and with bills to pay, food to purchase, shelter to pay for, possibly kids to care for, and a rental property to handle, they are going to need some sort of lump financial sum to help.

In addition, having other income safeguards such as short-term disability helps protect all of your assets, including the rental property you invested in.  Short-term disability is great for times when the sole earner becomes too injured or ill to work, but has not passed away.  Sometimes covering up to 60% of an employee’s weekly gross income, short-term disability can help with life’s daily expenses and the maintenance of a rental property.

Altogether, having financial safety nets in place is even more crucial when a single-income couple decides to invest in something as large as a rental property.


Tips for Investing as a Low-Income Earner


Just because there is one income earner in a couple does not mean that earner makes enough money to purchase investment properties left and right.  However, it is possible to invest in Howard County rentals as a low-income earner by following some of these exceptional tips:

  • Understand how much you can realistically afford
  • Come prepared with a large down payment
  • Reduce your current debt as much as possible before applying for a loan
  • Compare different loan types
  • Use equity in any existing properties you may own
  • Research the market and purchase prices for properties
  • Have an emergency fund for rental property maintenance


Though many of these tips are similar to what any property owner should do before investing in a rental home, as a single-income couple, these tasks are more vital than ever before.  When relying on one person’s lower-than-average income to pay for everyday life, in addition to a rental property, there is a lot of preparation that should take place before jumping in and purchasing a property.

There are plenty of options available for those single-income couples looking to invest in a Howard County rental property.  And, if the proper precautions are taken, becoming a property owner may not be as difficult as you might have originally thought.

If you find yourself a property owner that also works to provide for your family and you want a break from managing your property on your own, contact Howard County’s top property management company, Bay Management Group.  We have experienced staff on hand to take the burden of managing the day-to-day tasks of your rental property off your hands.

By employing Bay Management Group you can concentrate on spending what little time you have free from work with your partner and family.  The peace of mind that Bay Management Group offers, in addition to the full spectrum of property management services we provide, is priceless.

Setting 2017 Goals for Your Rental Property Business

setting-2017-goals-rental-property-businessAs we readily welcome 2017, the importance of setting goals rather than resolutions cannot be underestimated.

But how are goals different?

Whereas resolutions are the hope that you will achieve something, goals are the plan that will garner your success.

Today we will explore the importance of setting 2017 goals for your rental property business and some top goals you may be interested in setting for yourself so that you can have the most successful year yet.


Why Set Montgomery County Rental Business Goals for 2017?

Setting goals for your Montgomery County rental property business will do several things, so long as you follow through on them:

  • They propel you forward. Goals are solid ways to achieve what you want.  They provide you a starting place, help you visualize a concrete endpoint, and fill in the middle with how you are going to get there.
  • They break it down. Oftentimes dreams seem impossible to accomplish.  Even though you want to hit that end result and call yourself a success, your dreams can appear complex and daunting.  Goals help break your end result into easier-to-maintain milestones.  This makes moving forward with progress much easier.
  • They fuel ambition. As you begin to hit each milestone (or goal) that you have set up for yourself, you become more confident in your abilities to obtain your end result.  Not only do goals hold you accountable for your actions, they provide the necessary inspiration to push forward even when things get tough and you want to give up.
  • They help you understand you failures. If you fail to set a goal for yourself, and you experience failure, how can you measure that failure and truly learn from it?  Goals will show you what is working and what is not.  They will teach you where your weaknesses lie, and where your strengths shine.  They will allow you to re-evaluate your plan so that you achieve the ultimate end result.

In the end, setting goals will give you a solid path to follow on your way to accomplishing your dreams.  Whether your goal is to quit your corporate job and manage your properties full-time, fund your retirement, or simply have extra cash on-hand for extra vacations, setting property goals for 2017 will clear the way for you to achieve things you never thought possible.


Top Goals Any Property Owner Would Love to Achieve

Whether you self-manage your rental properties or enlist the help of Montgomery County’s best property management company, all property owners aiming for success in the rental property business should set the following goals for this upcoming year:


1. Befriend Those in the Real Estate Industry

 befriend-others-real-estate-businessNetworking with those that are in the real estate, rental property, or even property management industries can be valuable to your overall success.  They have the knowledge and resources that come with experience and can teach you a thing a two about being successful in the rental property business.  What’s better, they can share with you their past failures, teach you what they learned in the process, and help you avoid making the same mistakes.

In addition, you can meet many like-minded people by joining your local landlord association.  By helping property owners with a multitude of property management related problems, you will learn from other members how to be a better property owner and how to handle your tenants more efficiently.


2. Get Organized

There is nothing more harmful to a business than poor organization.  Ultimately, it is your responsibility to maintain proper bookkeeping practices when it comes to your rental properties.  And, if you fail to do so efficiently, you may lose your rental property business altogether.

Legal documents relating to your Montgomery County rental properties, tenants, and expenses must be saved in a secure place.  And you must be able to access them at any given time.

Staying organized from the start will cut down on any missed paper trails, prevent loss of important documents, and will be especially helpful if you plan on building your investment property portfolio in the near future.  Every property you lease should have its own separate filing.

If this sounds like too much work for you, don’t worry.  Property management companies like Bay Management Group can handle all of your bookkeeping so you never have to worry that something is missing.


3. Make Tenant Screening a Priority

prioritize-tenant-screeningUnless you are lucky enough to have perfect tenants that don’t plan on leaving anytime this year, a great goal to set for yourself is to work towards achieving just that – perfect tenants.

The way to meet this goal is to make tenant screening a priority.  If you do not already have a Montgomery County property management company handling tenant screening for you, make sure to update yourself on everything related to proper screening procedures.

For instance, in addition to checking for red flags such as low income, poor references, prior evictions, and any past criminal behavior, it is crucial you do not violate any of the housing discrimination laws that are in place to protect tenants.

Here are some great tips to add into your 2017 goal of better tenant screening:

  • Set high standards. Do not accept any tenant (no matter what) unless they meet standards such as earning three times the monthly rent, have solid references, zero evictions, and a clean criminal record.
  • Pre-screen before a showing. Never show your rental to anyone that has not already met your initial standards.  This will help weed out the bad tenants and save you time.
  • Create a thorough application. This is essential to making sure you are choosing the right tenant for your property.  It should include a multitude of questions so that you can understand what kind of tenant they are likely to be while residing in your rental.

Having a concrete tenant screening procedure in place is one of the most important foundations of your rental property business success.  And, even if you already have one, there is always room for improvement, so set out this upcoming year to make it better.


4. Create a Tenant Retention Plan

Besides landing the perfect tenant and placing them in your Montgomery County rental home, the next best thing is keeping them in your property long-term.  This is where a retention plan comes into play.

Sometimes, the best way to retain a good tenant is to offer them incentives such as cash, gifts, rent discounts, utility payments, and property upgrades.  In addition, fostering sincere relationships with your tenants and addressing their needs (such as maintenance requests) will help to encourage them to want to stay.

The important takeaway here is that you should have a list of ways in which you plan to keep your tenants in your property for the duration of their lease agreement, and beyond.


5. Employ a Property Management Company

employ-property-management-companyIf you have not already done so, one of the biggest goals you should set out to achieve in 2017 is the employment of a high quality Montgomery County property management company such as Bay Management Group.  Here are just some of the reasons why:

  • Experience and knowledge about the rental property industry
  • Bookkeeping services that are transparent and legally compliant
  • Strict and thorough tenant screening procedures
  • Exceptional customer service for property owners and tenants

With a property management company on-hand to help you with all things property-related, not only can you achieve success with little effort thanks to their experience, but your time is also freed up to pursue other goals you have set out for yourself.


So, contact Bay Management Group today and share your 2017 rental property goals with us.  We will be able to answer all of your questions and get you on your way to the most successful year you have ever had.

When to Consider a Rent Increase

Did you know that the country’s rent index increased this past year at an annualized rate of 3.6%?
That is a pretty significant increase. And, if you own a Howard County rental property, this valuable statistical information may cause you to consider a rent increase come lease renewal time—and rightfully so.

In all honesty, you are in the rental property business to garner as much positive cash flow as possible.

And if the market is going up, why not include yourself in the mix?

However, maintaining your rental property’s annual profits (or better yet increasing them), without experiencing any significant tenant loss is a delicate thing to balance.  That’s why today we will share with you some things to consider before raising your Howard County rental property’s rent.


When to Raise Rent on Your Howard County Rentals

Raising the rent on your rental property involves a lot more than just a notice to your tenant that the price will increase come renewal time.  In fact, many say it takes good business skills, in-depth marketing research, solid landlord/tenant relationships, and even legal knowledge when it comes to raising the rent on an investment property successfully.

Here are some of the biggest considerations to weigh before deciding to raise the rent on your quality Howard County tenants:


1. Assess the Current Rental Market

assess-howard-county-md-rental-property-marketSure, the Bureau of Labor and Statistics Report states that the rent index has risen over the past 12 months at a solid rate of 3.6%.  However, that does not necessarily mean that a rent increase of that magnitude is a good idea for all regions that have rental properties—Howard County included.

Before jumping on the bandwagon and raising the rent on all of your tenants, you should research the current rental market in your area.  Here are some things you should address in your research:

By answering questions such as these, you will get a true idea of the current rental market rate for rentals similar to your own.  And, if your rental stacks up, there will be room for a rent increase.


2. Evaluate Current Tenants and Understand the Law

If your Howard County rental is currently occupied, you should thoroughly evaluate the tenant that resides there before justifying a rent increase.  In addition, you must look carefully into your state laws regarding how much time is required to notify a tenant before a rent increase occurs in order to avoid any legal trouble.


Increasing your rental rates will net you more profit than anything else with your rental.  However, sometimes the assurance of having a quality tenant that pays on time, causes zero trouble, and cares for your property as though it was their own, is enough of a reason not to raise the rent every chance you get.  Consider things such as:

  • The last time you raised the rent on each property and which tenants felt the increase
  • How valuable your tenant is to your rental property business
  • Whether you would be willing to lose such a tenant in the case they refuse to renew due to a rent increase
  • Whether you would be willing to negotiate if your tenant contacts you about the increase
  • What the legitimate reasons are for raising the rent that you can explain to existing tenants

The Laws

If the lease agreement expiration for your Howard County rental is approaching, and you are serious about raising the rent upon a lease renewal, make sure to follow these important steps:

  • Ensure the rent increase complies with Maryland law and you provide your current tenant proper notice.
  • Make the notice official and in writing so that both you and your tenant understand that a rent increase will be in effect come lease renewal. Include information such as the current rent amount, the new lease amount, the actual increase amount, and a place for both you and the tenant to sign in agreement.
  • Maintain a copy of the official notice for your records.
  • Send the notice to your tenant via certified mail or hand deliver it to ensure proper delivery.
  • Consider a courtesy reminder via email, letter, or phone to remind your tenant the lease renewal deadline is approaching.


3. Factor in the Surrounding Area

consider-neighborhood-growth-rent-increase-howard-countyIs your rental property in a location that is experiencing a lot of growth?  Are there new shopping markets, entertainment venues, school, and parks popping up?  Are employment opportunities booming?

If the answer is “yes” to any of these questions, this is a good sign that you will be successful in raising your Howard County rental rates.  Though you may lose your current tenant in the process, with such growth in the surrounding area, someone else is sure to want in on your property.

And, if you utilize Maryland’s best property management company, Bay Management Group, to help you advertise your new vacancy at its higher rate, you can trust your property will have great exposure, that all potential tenants will be thoroughly screened, and that only the highest quality tenants will be placed in your valuable property.


4. Take a Look at Your Overall Goals

Raising rent on a rental property is every property owner’s dream.  Higher rents mean more money and more positive cash flow.  However, sometimes increasing your rent rates brings unforeseen problems that you may not be prepared to deal with.

For example, there is always the risk that you raise the rent on a tenant that has been loyal to you for some time and decides that the increase is too much.  While this opens your property up to new tenants that may be willing to pay the increased rent amount, there is no guarantee this will happen right away, even if the market, location, and economy states differently.

And the truth is, rent that is paid at a lower rent amount each month is more than rent that is not being paid due to vacancy.  If you are not willing to risk losing a good thing, try holding off on a rent increase.

In the end, being a Howard County property owner can be difficult.  Finding the balance between having a profitable rental property business and increasing your cash flow can be hard to do, especially if you do not think things through all the way.


Every property owner wants more money.  However, it is wise to know that quality tenants can be hard to come by.  You know—the ones that don’t have to be evicted, sued, babied, cleaned-up after, or chastised for breaking the rules.  In addition, quality tenants pay their rent each month, without complaint, thus filling your pocketbook.  Increase the rent and you may risk losing all of that.

If you are unsure as to whether you should increase your Howard County rental rates, talk to the most knowledgeable property management company in town – Bay Management Group.  With expertise in all things property-related, including the current market trends, the legalities behind rent increases, and the likelihood of a successful rent increase, Bay Management Group can help you with this trying decision.

So, contact Bay Management Group today and see how we can help you with your Howard County property needs today to make sure you receive the highest monthly rate possible.

Is it a Good Idea to Invest in a Fixer-Upper Rental Property?

Deciding which Howard County rental property to invest in takes a lot of consideration. The purchase price, location, nearby amenities, and curb appeal are just some of the things to think about.

But have you ever considered purchasing a fixer-upper rental property?
People love to buy fixer-upper rental properties in Howard County and there are plenty of advantages to doing so. However, many property owners fail to weigh both the pros and cons of investing in a property that needs a little extra TLC.

Thus, today we will show you both sides of buying a fixer-upper property so you can better decide whether to take on a project home or invest in one that is move-in ready.


What is a Howard County Fixer-Upper?

A fixer-upper property is a property that needs some rehab before it can be leased to the high-quality tenants your Howard County property management company finds to reside in your property.

The repairs a fixer-upper might need include:

  • Light cosmetic work such as a fresh paint job or new carpet
  • Roof and wall work
  • Landscaping in both the front and back yards
  • Foundational work
  • Plumbing or electrical work

While some of this repair work may seem trivial at first, it is crucial to look at the bigger picture before making the final decision to purchase a fixer-upper.


Pros of Buying a Howard County Fixer-Upper Property

Discounted Prices

discounted-prices-fixer-upper-rental-property-howard-county-mdOne of the biggest advantages of purchasing a fixer-upper property is the purchase price. For those that want to get into the rental property business but cannot afford move-in ready homes or for those just looking for a great deal, a property that needs work is often a great solution.

In addition, buying a rental home at a lower purchase price, putting in some hard work to make it look great, and leasing it to high-quality tenants that will take care of your property will add value to the home over time. Called appreciation, this concept is great for those who wish to increase the monthly rent at some point. It also helps if you are planning to sell the home sometime in the future.

Less Competition

In a popular location such as Howard County, it can be tough to grab a nice, move-in ready home for a reasonable purchase price. This is especially true because many property owners don’t want to invest in fixer-uppers because they do not want to invest the time and money to make the property move-in ready.

However, by investing in a property that needs some upgrades or repair work, you avoid a lot of the competition. Even in a competitive real estate market, purchasing a rental that needs work significantly increases your chance of finding a deal.


Increased Positive Cash Flow

Buying a Howard County fixer-upper property at a lower purchase price than that of neighboring properties has the potential to generate more positive cash flow. For instance, buying a rental home below full value price means lower monthly mortgage payments. It also means more money in your pocket when you charge competitive monthly rent rates.


Property Tax and Loan Savings

Since property taxes are based on a home’s sale price, your biannual property taxes will be significantly less if you buy a fixer-upper as opposed to a move-in ready home. In addition, some fixer-uppers in Howard County will qualify for an investment tax credit for rehabilitation costs, meaning you may actually make money off the repairs you put into your fixer-upper.

Lastly, the great thing about this type of investment purchase is that you may also be able to finance the property using a 203(k) loan. This means that your loan amount can be used to purchase the property and make the improvements needed to make the property livable.


Cons of Buying a Howard County Fixer Upper


Hidden Expenses

howard-county-rental-property-fixer-upper-hidden-costsAlthough you may be able to save money on a fixer-upper thanks to a discounted purchase price, property tax savings, and even a creative financing solution such as the 203(k) loan, there are possible hidden costs you may run into once the rehab work begins.

For example, you might start remodeling your property’s kitchen cabinets and then realize your entire kitchen actually needs electrical work. Or, maybe you will discover your antique fixer-upper home is covered in lead-based paint. Maybe you’ll find rotten wood in the roof structure, mold in the bathroom, or leaking pipes in your backyard sprinkler system. In the end, this means more money, more work, and more headaches.


Extra Work

Buying a move-in ready house means that you have the luxury of leasing the home to Howard County tenants right away. And that is one of the reasons they cost so much more. However, if you buy a fixer-upper, whether it needs minor repairs or an entire rehabilitation, there will be lots of work involved.

Oftentimes the remodeling process can take months. Even if you only project it to take a few weeks, it is easy to fall off schedule. Dealing with unexpected problems, multiple contractors, and the reality that fixer-uppers take time to fix can be a tough pill to swallow.


Unexpected Costs May Outweigh the Savings

Sometimes purchasing a fixer-upper will cost you more in the long run than if you had just bought a move-in ready home. It is critical you do your research before making a final decision on a fixer-upper property. This includes listing the necessary repairs and upgrades you will be making, investigating costs associated with such repairs, and comparing that to the purchase price of a move-in ready home. Although rare, your remodel could end up costing you more than your initial savings, thus defeating the purpose of investing in a home that needs work done.

In the end, fixer-uppers pave the way for you to be creative, likely save money, and maintain a slight edge in the rental property business when it comes to positive cash flow. That being said, they are not easy to deal with and present numerous increased risks. If you are looking to buy a fixer-upper in the Howard County area, make sure you do your due diligence before making such a large investment decision.


In addition, if you are looking for some help managing your fixer-upper rental once it is complete, get in touch with Maryland’s finest property management company, Bay Management Group. Understanding all things property related, Bay Management has the knowledge, experience, and staff to manage your Howard County rentals so you don’t have to. Though the stress a fixer-upper may cause can only be dealt with by you, rest assured that Bay Management Group will relieve all other stresses related to your fixer-upper once it is move-in ready.

The Investment Property Owner’s Guide to a 203(k) Loan

203k-loan-montgomery-county-rental-propertyIf you are looking to purchase a Montgomery County rental property that needs a little extra TLC, and have noticed that the lenders have become very strict with loan approvals, you are not alone.

And, in light of this tight-fisted approach, investing in a fixer-upper rental property becomes problematic, even for a seasoned property owner.  In addition to a large down payment, exceptional credit, and all of the other hoops you must pass through for a loan approval, you must have enough cash left over to make home improvements in order to make a fixer-upper appealing.

So what is an investor to do when he needs to purchase a home that requires extensive remodeling?

Though there are plenty of creative ways to finance a rental property in the Montgomery County area, if you are looking to purchase a residential rental property that requires renovation, you may benefit from getting a 203(k) loan.


What is a 203(k) Loan?

An FHA 203(k) loan allows you to borrow money for a property purchase and home improvements.  In other words, this type of loan finances both the cost of the property and the amount needed to fix it up, all in one mortgage.

Guaranteed by the FHA, this loan is less of a risk to lenders than other types of loans.  With the lower risk level, you are more likely to be approved and with a lower interest rate than a traditional bank loan.  In fact, some 203(k) loan interest rates can be as low as 3.5%.

In addition, using a 203(k) loan will give you quick and efficient access to the much-needed cash you will need to pay for repairs, renovations, and improvements on your less than perfect Montgomery County rental.


What Improvements Can You Make?renovating-rental-property-montgomery-county

Since this loan helps investors improve their properties for occupancy, it is important to understand the eligible repairs you can make on your property with the loan money you receive.

Here is an overview of the types of home improvements covered by a 203(k) loan:

  • Roof replacement or repair
  • Replacement, repair, or upgrade of HVAC system
  • Repair or replacement of plumbing
  • Full interior or exterior painting
  • Replacement of old windows
  • Appliance replacement
  • Attic finishing
  • Replacement or repair of deck, patio, or porch
  • Bathroom remodeling
  • Landscaping such as: tree removal, driveway/sidewalk repair, or grading correction

Keep in mind, luxury items that do not become a part of the real property—such as BBQ pits, exterior hot tubs, swimming pools, tennis courts, and satellite dishes—are ineligible for repair under a 203(k) loan.


Types of 203(k) Loan Programs

Two loan types fall under an FHA 203(k) loan program.  Which one you need will depend on the cost to purchase the property and the estimated cost to repair your Montgomery County rental.

Standard 203(k) Program

This loan is for properties that need extensive repairs, including major additions and structural changes to the property.  Take a look at the stipulations for the standard loan:

  • Allows for a loan amounting to 110% of the after-improvement value determined by appraisal
  • A thorough property inspection must be conducted by a 203(k) consultant
  • A minimum of $5,000 must be borrowed for repairs
  • All other guidelines are similar to FHA standards

Streamline 203(k) Program

This loan is for properties that require repairs that will cost less than $35,000.  This includes cosmetic improvements that will not affect the structure of the property or do not include an addition.  Furthermore, you will finance your property using a streamline loan, meaning your property will not require an appraisal and the approval process is finished quickly.


The Rules of a 203(k) Loan


Since 203(k) loans are a unique kind of loan, there are specific regulations you must follow upon loan approval.

Here are some of the things you can do with a 203(k) loan:

  • Purchase a fixer-upper. 203(k) loans are for those properties that need improvements or remodeling.  Since banks will not typically finance a house that is run-down, a 203(k) loan is a great way to invest in that rental property you know is a diamond in the rough.
  • Do the work yourself. If you can prove you have the ability to do your own remodeling, and can finish within the 6-month timeframe, you can use your 203(k) loan money to do so.  However, you can only use the money on supplies.  Since you are performing the work yourself, you cannot pay yourself as a hired contractor.
  • Expect multiple inspections. An inspector will inspect your property’s progress throughout the 6-month time period.  This is why your contractor must be reliable—he must start working on the home within 30 days and cannot stop work for longer than 30 days.  In addition, there is that ever-looming 6-month timeline.
  • Use the loan money to make the mortgage. You are able to do this even if you cannot yet occupy the property; you can use the loan to pay for up to 6 months of principle, interest, insurance, and taxes.  This is the beauty of having a two-for-one loan.
  • Upgrade your property to be energy efficient. You can get approval for a 203(k) loan to upgrade your rental home to be energy efficient.  An added bonus is that these improvements do not require appraisal.
  • Make mini-renovations. If you invest in a Montgomery County rental that needs a minor renovation such as a new kitchen, bathroom, or room addition, you may quality for the streamlined 203(k) loan mentioned above.  This is assuming the improvements fall within the eligible repair limitations and cost under $35,000.
  • Start over. With a 203(k) loan, you can tear down the entire property and build up again, so long as you keep the foundation in place, and again, make the deadline.


Here are some of the things you cannot do with a 203(k) loan:

  • Invest in a new-construction home. The home you are looking to remodel with 203(k) loan money must be at least one year old.
  • Make repairs under the $5,000 minimum. You must spend at least $5,000 of your 203(k) loan on renovations.  This means you cannot replace one or two appliances and pocket the rest for mortgage payments.
  • Break any 203(k) loan rules. You can trust that your 203(k) loan lender will hold you accountable to all of the stipulations such a unique loan has.  He will be involved in every step of your property’s renovations and in the end, you can bet to find yourself in a lot of trouble if you violate any of the loan provisions.

The One Major Downside of a 203(k) Loan

Now that you have a clear idea what a 203(k) loan is all about, there is one major downside to using the 203(k) loan as an investment opportunity that needs to be addressed.

In order to prevent rental property investors from using 203(k) loans to build their portfolios quickly and efficiently, and thus avoiding the hardships many lenders pose as portfolios grow, investors are not allowed to use 203(k) loans to finance their rental properties.

Those looking to utilize a 203(k) loan must occupy the property themselves for a minimum of 12 months, unless you are a qualified non-profit organization.

However, a 203(k) loan can still be an excellent opportunity to buy a property, enjoy it for a while, and then turn it into a rental property after the 12-month minimum residency.

If you are looking to turn your primary residence into an investment property, you should definitely look into the pros and cons in using a 203(k) loan.  Though there are some restrictions in place, this type of loan can be a great way to get quick financing, remodel your property for additional value, and get it into the rental property market looking great.


In addition, property owners that need a highly experienced Montgomery County property management company should contact Bay Management Group today.  Bay Management Group can help you keep your remodeled rental home in shape with a 24-hour maintenance staff ready to fix any issue, regular inspections to ensure your improvements are not going to waste, and managers to help you set the highest rent rates possible for your new and improved property.

So get in touch with Bay Management Group now to get started with your rental property business.  You will not regret the peace of mind this exceptional property management company provides its Montgomery County property owners.