If you’re an owner of rental properties, you need to know the latest real estate terms. Big changes are happening in the real estate market. Knowing about these changes can help you protect your investments and grow your portfolio. When negotiating with potential buyers or renters, being smart about what you know can help you make informed decisions. In a competitive market, it is important to know the following six terms. Let’s look at each one more closely.
iBuyer
iBuyers are real estate companies that use technology to provide quick and easy home-selling solutions. They provide an innovative and reliable way of selling residential properties in a matter of days with minimal effort from the homeowners. iBuyers use complex formulas to look at real estate market data. This lets them make quick and competitive offers based on the current market conditions.
Homeowners usually start the iBuying process by putting their property details on an iBuyer’s website. The iBuyer then assesses the property and, within 24-48 hours, makes an instant cash offer. If the offer is accepted, the homeowner can set a closing date and get paid in a few days.
One of the best things about iBuyers is that they make selling your home easy by eliminating things like staging, open houses, and negotiations. Homeowners don’t have to worry about getting their houses ready for showings and waiting months to sell their properties.
Days on Market (DOM)
When looking for a new property, it’s important to know some essential real estate terms. One of these is “DOM,” which stands for “days on the market.” This metric tracks the number of days a property has been listed for sale.
A high DOM can be an indication of trouble because it means the property has been on the market for a long time without any offers. It’s important to note, though, that seasonal changes in the real estate market can affect the DOM. As an example, houses tend to sell faster in the spring than in the winter.
By reviewing the average DOM for a specific area, you can determine 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 often favors buyers, who may find it easier to negotiate a better deal.
Real Estate Owned (REO)
An REO property, short for “Real Estate Owned,” refers to a type of property that a lender owns after the former owner has not made mortgage payments and the property has been foreclosed on. This usually takes place when the house doesn’t sell at a foreclosure auction.
For investors, REO properties can be a good investment opportunity because they can be bought for below market value. There are, however, risks that come with these kinds of sales because the property is sold “as-is.” The buyer will be responsible for making any necessary repairs or renovations that are needed, and it can be hard to get funding.
FHA 203k rehab loan
The FHA 203k rehab loan is a loan program backed by the federal government. Its purpose is to help homebuyers to finance the purchase of a property that needs significant repair or renovation.
The loan can fund repairs and renovations, such as adding to the structure, fixing plumbing and electrical problems, and setting up new heating and cooling systems. It can also be used to make energy-efficient upgrades to older homes, such as installing new windows, doors, and insulation.
One great thing about the FHA 203k rehab loan is that it allows buyers to finance the cost of the repairs and renovations into the mortgage. This way, they don’t have to pay for them out of their cash. The loan can also be used to purchase a property needing repair and refinance an existing property.
And it’s important to remember that the loan isn’t for “luxury” improvements like adding a swimming pool or other non-essential amenities. The loan is meant to help homeowners make the 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 use to figure out how much of your monthly income you spend on paying debts. To find your DTI, add up your monthly mortgage or rent and other debt payments, divide the total by your gross monthly income, and multiply by 100. Lenders can use this number to figure out how much of your income is already committed to paying off debts and how much mortgage you can afford.
It can be hard to qualify for a loan if your DTI is high, so keep this number low. Lenders usually want borrowers to spend no more than 28% of their monthly income on housing payments and 36% or less on monthly debt payments. It is more likely that you will be accepted for a loan or a mortgage if your DTI is low.
It’s essential to keep in mind that you may look at DTI ratios in slightly different ways based on the type of loan or mortgage you’re applying for. One example is that lenders may let borrowers with excellent credit scores have a higher DTI ratio.
No matter what, keeping your DTI ratio low is important for maintaining good financial health and making it easier to obtain financing when you need it. If you have a high DTI and are having trouble, you might want to pay off your debts, make more money, or talk to 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 called a “good faith deposit.” This deposit shows that the buyer is serious about purchasing the property, which may make the seller more likely to accept the offer. In general, the amount of EMD given is between 1% and 5%, but this can alter depending on the market and the case. The EMD is held in escrow and will be used to purchase the price of the home if the deal goes through.
If you’re a rental property owner, you need to know a lot of different real estate terms. Keeping up with the latest changes in your field can help you make smart choices when negotiating with buyers or renters and protect your investments. Remember, in a competitive market, knowledge is power.
Real Property Management Silverstone is ready to help you get financial freedom and make passive income by investing in real estate in Shelby Township and the nearby areas. Our experts can give you good, easy-to-reach help on managing properties and investing in real estate. Contact us online or call us at 586-992-6419.
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