expenses - Blog

Subleasing: Pros And Cons For Landlords

by Lilly Miller | Feb 21, 2020 | CRESTICO

Is Subleasing Worth It?

As a landlord, there is much to manage, and much to think about. Property must be maintained, taxes must be handled, tenants must be evicted, and tenants must be acquired. Many landlords are strategic: they’ll allow one of their tenants to live in the property rent-free provided they help manage the premises. This isn’t feasible if you’re a landlord of a smaller property; it’s something more common to larger rental arrangements. However, the value such a tenant can bring is actually quite considerable. Rent in many parts of the country is around $800 a month—barring places like Los Angeles, where a shack in a basement is well over a thousand dollars for a single renter. In a thirty-one day month, you’re looking at $25.81 a day. For $25.81 a day, someone who pays their rent by working for you can get a lot done. If they just spent two hours a day changing light bulbs, weeding, taking out trash, or cleaning minor messes, you’re saving money as a landlord. $12.91 an hour isn’t a rate most maintenance people will take; especially if you’re only paying them $800 a month. However, someone who lives for free on the premises provided they do two hours of chores five days a week will be more than happy to do so. You might even get more work out of them, depending. It’s a win-win for everyone. Similarly, as regards subleasing, you can find a win-win—but there are pros and cons. This writing will explore them.

Pros Of Subleasing

If you approach subleasing right, you can be more sure you’ll get rent on time from tenants. Consider the scenario where rent is around $800 a month. At this website, https://www.umovefree.com/City/frisco-apartments-tx/, you can find rental units that start at only $796 a month. Now imagine that’s divided two or three times between people in one unit. You’re looking at between $265.33 and $398 a month for a $796 single, depending on if the unit is sublet two or three times. That’s pretty darn affordable. At the $265 rate, it’s just a little under $9 a day. At the $398 rate, it’s a little under $13 a day per person. That’s cheaper than lunch. It’s quite affordable. You’ve just got to approve those in a sublet scenario. Something else that can be done is a slight rent hike. Say your unit was generally $800 a month for a single tenant. Pop that up to $1,000 if there are two living there, and you make an extra $2,400 a year, while the tenant subletting the property gets an even better deal.

Cons Of Subleasing

If you don’t vet those your tenants are dividing up their unit with, there could be some real trouble. Sometimes a tenant starts subletting their unit because they themselves are low on resources. Now you’ve got two people who are broke on your premises, compounding wear and tear while making late payments. There can also be some legal considerations. What if the person seeking a sublet opportunity is a fugitive from another state? You’ve got to have an apparatus in place which will allow you to vet whoever is on your premises. If you don’t, and that individual is found out, there could be a legal case to be made that you aided and abetted a fugitive. Certainly this wasn’t your intention or expectation, but the right lawyer can do a number on an honest man. When you’ve got disorganized subletting solutions, you increase such risks substantially—by a factor of two, if you allow subletting across your premises. Even good tenants who open up their units to those who can be trusted will still increase normal wear-and-tear. Also, sometimes pets show up when you’re not intending them to in such situations. That’s also quite bad for your building’s longevity.

Making The Right Choice

To sublet, or not to sublet? It’s quite a question! The truth is this: provided you put an apparatus in place which vets those who are paying your tenant rent, you should be okay. Just assure you’re not letting any fugitives in, and that those renting from one of your renters aren’t destroying the premises. If you play your cards right, such options can allow you to make more money from a single unit, and assure that payment maintains regularity over the long-run. If you don’t, you’ll see more wear and tear, as well as the possibility of legal issues. At the end of the day, whether or not these things are a deal-breaker is your call.

3 Big Expenses New Home Buyers Are Often Unprepared For

by David Glenn | Jun 9, 2017 | CRESTICO

There is no doubt that buying a home is an expensive venture, but like so many other purchases, there are also a number of “hidden” costs that home buyers may not be prepared for. While they may have saved up 20% of the projected cost of the home they want to purchase, the additional costs may quickly eat up their savings or increase their loan amount to well beyond 80% of the cost of the home. They may also be unprepared for the much higher costs of maintaining a home in relationship to an apartment or townhouse. Here is a list of 3 expenses new home buyers regularly do not expect.

Fees

There are a wide range of fees associated with buying a house that range from inspection fees to closing costs. In many cases, it’s important to get a survey so you know exactly where your property ends and your neighbor’s begins. If your lender wants a credit report, you have to cover the costs. You may have figured taxes into the monthly amount you will need to pay, but may be unaware that you actually have to pay those costs at closing. Probably the heftiest fee, however is the loan origination fee, which can run in the thousands of dollars, particularly if you are buying points on the loan. There are also a wide range of smaller fees you will have to pay, but can cumulatively add up to several hundred dollars. Some of these smaller fees include recording fees for deed, loan and mortgage documents, tax service fees to ensure previous taxed are up to date, title services and title insurance.

Insurance

While renters may have had renter’s insurance and be used to paying that insurance, they may not be prepared for the significantly higher coverage they will need to carry as home owners, at a significantly higher price. Renter’s insurance only needs to cover your personal belongings, since the property owner carries the coverage on the building itself. Home owner’s insurance, however, covers not only your possessions, but the building itself and even the lot it sits on. Your rate will be determined by a number of factors such as the age of the home and the quality of the materials that were used to build it with. In addition, if you are putting less than 20% down on a mortgage, you will most likely also be required by your lender to carry mortgage insurance. You can of course shop for the cheapest insurance rates, but ultimately insurance will eat a much larger chunk of your monthly budget.

Bills and maintenance expenses

When you rent a home or apartment, there are generally a number of expenses folded into your rent, which you will now be responsible for paying. These include water, sewage and trash collection, but can also include homeowner’s fees and even expenses related to the care, upkeep and maintenance of your home that you hadn’t counted on. In an apartment or rental, if the toilet breaks, you call your landlord. Now, if the toilet breaks, you call a plumber and you get to pay for it. And it might surprise you just how much a single service call will run you. You now also get to keep your own lawn watered and mow it once a week in the summer, or more often depending on where you live. Of course you can always pay someone to mow it, but that’s also one more expensive fee new homeowners actually factor into the cost of owning a home.

While few, if any, of the costs of owning a home are actually hidden, they are also not generally factored in by many new home buyers. This is why it’s important to be sure when buying a home that you don’t overextend yourself just on the house payment itself. Make sure you work out a mortgage payment you can comfortably afford and don’t blow your entire savings on your down payment. With a little careful research, planning and budgeting, you can have the house of your dreams and not a financial nightmare.

How To Save For A Home Downpayment

by David Glenn | Feb 17, 2017 | CRESTICO

One of the more common ways to build wealth over time is owning a home. As owners pay down the mortgage, they are able to build up equity. Should they decide to sell the home, they can then tap this equity. The homeownership rate in the US was 63.8 percent in October 2016. While this was down from what it was a few years ago, this statistic shows that owning a home is still a popular way to build wealth.

It’s recommended that prospective buyers save up 20 percent of the home’s value as a down payment. This will allow the buyer to avoid private mortgage insurance, which can be quite expensive and only protects the lender. FHA loans only require a 3.5 percent down payment, and loans via the USDA or the VA require no money down. If you’re not in a rural area or a veteran, here are some ways to build up the down payment that’s necessary to buy a new home.

Live In Affordable Accommodations

When it comes to the biggest expenses that most people will have on a monthly basis, the cost of lodging will usually come up near the top of the list. The average cost of rent in the United States is $1,231 a month. That’s more than a quarter of the median family income. The best way to save money on rent is to find a place to live that’s on the low side of the local market rate. While there won’t be as many amenities in cheap apartments or homes, the money that’s not spent in the way of housing can go toward savings.

Just getting a cheap apartment is not the only way to save money toward a down payment. Getting a roommate can also help cut the cost of rent and free up even more cash flow for savings. For example, a three-bedroom apartment or house that costs the median of $1,200 could cost only $400 a month if one person rented out each bedroom. Put in some twin beds, and the cost could be lower. Even a married couple could rent out a room or two to save on costs. Every dollar saved on rent can then go toward saving up for a future down payment.

Cut Other Expenses

Americans are notorious for spending more money than they need to. Whether it’s a daily latte or cable television, people in the US confuse wants and needs. Basic food, lodging, clothing and transportation are necessary to live and have a job. Most everything else is a want, and there are ways to cut down on these expenses. For example, it’s not necessary to have a super expensive cell plan with unlimited data. There are prepaid options that are pretty cheap. Additionally, it’s possible to cut down on eating out or save some money by opting for Netflix or Hulu rather than an expensive cable package with every pay channel known to man. Every dollar saved from cutting out unnecessary expenses can then go toward a down payment.

Get A Side Hustle

Sometimes, one job just doesn’t pay enough to save much. This is where a side hustle can come in quite handy. There are entire online communities that are dedicated to helping people find side hustles that can bring in extra income. Every dollar earned in excess of basic living expenses can go toward the down payment. Those who can keep up the side hustle after signing off on a mortgage can even accelerate the time needed to pay off the loan.

Regardless of whether a person thinks a down payment for a new home is in the cards, there are steps that he or she can take to build up some savings. It will take time, and it’s a good idea to save up for closing costs and a deductible for home insurance claims. However, over time, building up savings for a down payment can be done by taking positive steps toward the goal.