As an owner of rental properties, it is crucial to remain informed on the latest real estate terms. The real estate market is currently seeing substantial transformation, and possessing knowledge about these alterations can help you protect your investments and grow your portfolio. Developing a keen awareness will enable you to make informed decisions when discussing with potential buyers or renters. In a competitive market, it is imperative to be aware of the following six terms. Let’s do a more detailed examination of each item.
iBuyer
iBuyers are real estate companies that leverage technological advancements to offer expeditious and streamlined home-selling solutions. They offer an innovative and reliable way of selling residential properties in a matter of days, requiring minimal work from the homeowners. iBuyers employ advanced algorithms to examine real estate market data, enabling them to provide immediate and competitive offers that are grounded in the prevailing market conditions.
The iBuying procedure generally entails homeowners providing their property details to an iBuyer’s website. Subsequently, the iBuyer assesses the property and furnishes an instant cash offer within 24-48 hours. Upon acceptance of the offer, the homeowner can arrange a closing date and receive payment within a short span of time.
One notable benefit of iBuyers is their provision of a streamlined selling procedure, which eliminates the necessity for staging, open houses, and negotiations. Homeowners have the ability to alleviate the stress of preparing their homes for showings and waiting months to sell their properties.
Days on Market (DOM)
When you’re seeking a new property, comprehending fundamental real estate terms is essential. One such term is “DOM,” which is “days on the market.” This metric counts the number of days a property has been listed for sale.
A high DOM can be a red flag, suggesting that the property has endured an extended duration on the market without any offers. Nevertheless, it’s important to acknowledge that seasonal changes in the real estate market can affect the DOM. For example, homes commonly sell faster in spring than in winter.
By evaluating the average DOM for a certain region, you can ascertain whether the real estate market is strong (i.e., with a low average DOM) or weak (i.e., with a high average DOM). A weak market frequently benefits buyers, who may find it easier to negotiate a better deal.
Real Estate Owned (REO)
An REO property, often known as “Real Estate Owned,” pertains to a type of property that a lender owns after the previous owner has failed to maintain mortgage payments and the property has been foreclosed on. This scenario commonly occurs when the property cannot be sold during a foreclosure auction.
For investors, REO properties can be a compelling investment opportunity due to their possibility of being obtained below market value. Nevertheless, it is imperative to acknowledge that these types of sales are frequently associated with threats since the property is sold “as-is.” The buyer assumes responsibility for necessary repairs or renovations, while securing finance may provide challenges.
FHA 203k rehab loan
The FHA 203k rehab loan is a loan program assisted by the federal government. It is designed to allow homebuyers to finance the purchase of a property that requires substantial repair or remodeling.
The loan can fund repairs and renovations, encompassing structural enhancements, plumbing and electrical fixes, and the setting up of new heating and cooling systems. Furthermore, it can be used to make energy-efficient upgrades to older homes, such as installing new windows, doors, and insulation.
One notable advantage of the FHA 203k rehab loan is that it allows buyers to finance the cost of the repairs and remodeling into the mortgage, meaning they don’t have to pay for these expenses out of pocket. In addition, the loan can be used to purchase a property needing repair and refinance an existing property.
However, it is imperative to bear in mind that the loan is not meant for “luxury” enhancements such as the addition of a swimming pool or other non-essential amenities. The purpose of the loan is to assist homeowners in making essential repairs and improvements to their homes so they can live safely and comfortably in their properties.
Debt to Income (DTI)
The DTI, or debt-to-income ratio, is a financial metric that lenders employ to assess the proportion of your monthly income that goes toward paying debts. DTI is determined by adding your monthly mortgage or rent and other debt payments, dividing the total by your gross monthly income, and multiplying by 100. This computation provides lenders with an understanding of the proportion of your income that is already allocated to paying off debts and how much mortgage you can afford.
A high DTI might pose difficulties in qualifying for a loan, so it’s important to keep this number low. In general, lenders prefer that borrowers allocate no more than 28% of their monthly income on housing payments and 36% or less on monthly debt payments. A lower DTI increases the likelihood of a loan or a mortgage approval.
It’s important to acknowledge that lenders may employ varying criteria for assessing DTI ratios, contingent upon the specific loan or mortgage you’re seeking. For illustration, some lenders may grant borrowers with outstanding credit scores of a higher DTI ratio.
No matter what, keeping your DTI ratio low is imperative for maintaining good financial health and making it easier to obtain financing when necessary. If you are facing challenges due to a high DTI, it might be advisable to explore options such as debt reduction, income augmentation, or consulting with a financial professional.
Earnest Money Deposit (EMD)
Earnest Money Deposit (EMD) is a deposit a buyer must make when offering a property. It is also known as a “good faith deposit.” This deposit proves the buyer’s seriousness and eagerness to purchase the property, which can encourage the seller to accept the offer. Typically, the amount of EMD offered is between 1% and 5%, but it can vary based on the market and the situation. The EMD is held in escrow and is applied to the purchase price of the home if the deal is successful.
As a rental property owner, it is imperative to possess a comprehensive understanding of various real estate terms. Remaining current with the most recent developments can help you make informed judgments when negotiating with buyers or renters and safeguard your investments. In a competitive market, it’s crucial to acknowledge that possessing information confers a significant advantage.
Real Property Management Meridian is prepared to offer assistance in the generation of a passive income and attainment of financial independence through real estate investments in Keller and the surrounding area. Our experts can provide knowledgeable and accessible guidance on property management and real estate investment matters. Contact us online or call us at 817-678-8787.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
