1.) If the vacating tenant has been a long-term tenant, and you had a good relationship, simply ask him. I bet over the years he’s followed the neighborhood and knows from friends and fellow renters. He can tell you if he thinks you should charge more or less. Feedback from your vacating residents should be ONE piece of the info you assemble to determine.

2.) The quickest way to figure out the market rent is to put your tenant "shopping" hat on and start looking. I observe area rentals (signs, newspaper, etc.), see how they are priced, and watch to see how long they stay vacant. Many times, I’ll even stop by to get up close to see the condition of the investment property. In every case, one that is priced right and sits for very long has "issues".

3.) Another resource is a property manager with local rentals (and a website) who knows what they’re doing. They make the most money by pricing at the top of the market and usually have little interest in discounting unless a property sits vacant for too long.  I usually price mine 2% to 5% below their prices.

The caveat with property managers is that some have owners that force them to overprice. That happens fairly often, but it is usually pretty obvious.

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It is well known that income producing real estate is one of the best investments you can make. What is less well known is that income producing real estate allows you to get paid to borrow money. At least that’s been the case historically.

The reason for this has to do with the reality of inflation. In times of inflation, your best protection against the declining value of the dollar is high quality, long-term, investment-grade, fixed-rate debt attached to a piece of income producing property. In a nutshell, the right kind of debt is good.

Here’s how it works:

Assume that you purchased a property back in 1979 and that a dollar was actually worth a full dollar ($1.00). Then, thirty years later you find that same dollar worth only $0.24 because of continued inflation (driven by the government’s absurd economic policy).

Although the overall purchasing power of the dollar has decreased over those thirty years due to inflation, the principal balance on your long-term debt is never adjusted in step with that inflation. By paying down your fixed-rate debt with continually CHEAPER DOLLARS than those you originally borrowed with, you are effectively saving yourself a lot of money each and every year.

Now, think about it another way:

Assume you purchased $1 million worth of income producing property with a combined mortgage balance of $800,000. And let’s assume that over the course of one year you didn’t pay down any principal and there was a 4 percent rate of inflation. Your loan of $800,000 would now be worth only $768,000 in terms of real dollars. That’s a reduction of $32,000 in one year!

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Is the U.S. housing market truly at a turning point, as real estate investors seem to increasingly believe? Or is this actually a false dawn, meaning that there are problems ahead for those who turned bullish too soon?

New home sales jumped almost 10% in July, while the Case-Shiller home price index rose for the second successive month. Yet luxury homebuilder Toll Brothers lost $493 million in the quarter ending July 31, considerably worse than analysts had expected.

Housing stocks are certainly acting as if a recovery must be on the way. Pulte Homes Inc. has more than doubled from its low. Toll Brothers Inc. is up around 70% from its bottom. D.R. Horton Enterprises is up almost four times from its bottom. Lennar Corp. is up about 4.5 times from its low. Finally, Hovnanian Enterprises Inc. is up almost tenfold from its low after a flirtation with bankruptcy. Yet all of these companies are still racking up quarterly losses, according to their most recent earnings reports.

In terms of house prices, it would seem unlikely that a bear market bottom has been reached. Yes, the average house price is now back down around its long-term average of about 3.2 times average earnings, or only a little above it. But history suggests that markets don’t bottom at their average valuation: In fact, after such a huge excess to the upside, they overshoot on the downside.

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I’m sure you know by now that it was the first wave of defaults in “subprime” mortgages that helped spark today’s economic meltdown.  What you might NOT know is that there’s a whole second wave of mortgages in the pipeline that are just as toxic and just as large as the first.  This second wave may be just as far reaching.

You can see that the first peak in subprime loan “resets” arrived smack dab in the middle of 2008. And many billions in bank write-downs, along with trillions of dollars in market losses, immediately followed.

This second wave of toxic property loans, made up of so-called “option ARM” or “Alt-A” loans, won’t hit peak resets until 2011.

What are these toxic loans? They are the fancy mortgages snapped up by middle Americans to buy homes nobody imagined would be worth only a fraction of their selling price  just two years later.

And just like in the subprime wave, these loan contracts also carry a “reset” risk in the fine print, when already high monthly mortgage payments could as much as double — right at the height of the second biggest market meltdown since the Great Depression.

Millions of additional consumers will freeze up as their finances go over a cliff.  More bank losses will drag down even more so-called “blue chip” retirement portfolios, and the impact of the consumer bust will get “multiplied” yet again. Millions of additional Americans could lose everything.

Will this present us with new real estate investment opportunities?  Very likely.  In addition to the large number of foreclosures and bank REOs, most real estate markets around the country will continue to offer investors with low-priced real estate due to an ongoing buyer’s market sustained by excess inventory.

What do you think the upcoming second wave of mortgage “resets” will bring us?

The FHA is a big reason that home prices haven’t fallen even further. The FHA’s aggressive lending programs have continued throughout the housing downturn, causing its market share of the mortgage industry to grow from 2% in 2005 to 23% today. The FHA is an even larger percentage of the new home mortgage industry – nearly 25% according to HUD.

The FHA insurance fund, however, is likely running dry. According to a report from mortgage finance experts, the FHA will not meet its minimum requirement as of its fiscal year-end, which is only 26 days from now. For months, we have been investigating this and reporting our findings to our clients.

While almost all of the experts believe that Congress would support the FHA if necessary (it’s currently self-funded), we wonder if FHA officials will be under pressure to continue tightening their lending policies, which currently allow 96.5% mortgages to people with 600 FICO scores. Already, FHA has contracted its own standards to require a 10% down payment for those with credit scores below 500.

Claims against the insurance fund have climbed, with roughly 7% of all FHA-insured loans now delinquent.

Given the FHA’s September 30 fiscal year-end, this financial reality will come to light about the same time that other market forces run out of steam:

• Just as the $8,000 tax credit expires.
• Just as more of the stalled REO currently held on banks’ balance sheets will be coming to market.

The culmination of all these factors means housing could see another leg down by early next year. 

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Texas is a state that we highly favor these days due to it’s growing economy, growing population, and excellent real estate markets.  Currently we offer two real estate investment opportunities in Dallas:

* Single Family Homes:  Dallas Single Family Investment Property

* 3-Bedroom Duplexes:  Dallas Duplex Investment Property

A total of 22,511 existing homes were sold in Texas last month, a 4.8 percent decline from July 2008, according to MLS data compiled by the Real Estate Center at Texas A&M University. The median price increased 0.6 percent to $153,800 during the same period, and the state finished the month with a 7.4-month inventory of existing homes.

Here is how select Texas cities fared in July (data current as of August 28, 2009):

This is a great time to be investing in prudent Texas income property.  Call us for more information on markets and opportunities available today.  What are your favorite Texas markets?  (comment below)

There seem to be signs that the real estate housing market is beginning to recover, leading some to think that income property investment is still profitable. In the southern part of the United States, a 7.1% increase in home purchases occurred during the month of June. Several of the federal government’s 12 regions, including New York and San Francisco, have been showing signs of returning stability and even California and Florida, the States most devastated by the mortgage crisis, are starting to bottom out. However, not every region is experiencing the same growth.

In general, the western half of the United States has not seen the same recovery rate as the rest of the country, and in places like Minneapolis, the situation might actually be getting worse. Nevertheless, the rising rate of unemployment may be preventing many Americans from feeling the recovery. Overall, the economy grew towards the end of 2008. That gave many people hope for the future. However, unemployment has been growing even faster and may reach 11.2% by February of 2010. With numbers like that, many investors are beginning to wonder if an income property investment would be an acceptable way to augment their finances given the fact that income properties are becoming a catch 22 situation. Many investors don’t have enough money to buy investment property, and if they did, they probably wouldn’t need to buy them in the first place.

A catch 22 is a very grim assessment, but one that needs to be factored into any discussion about the income property investment or the market’s. The sad part about all of this is that no one seems willing to broach the topic of bailouts for the individual. In fact, Congress is steadily trying to cut down the length of time that people can file for unemployment benefits. It would be much more reasonable to work on cutting down the unemployment rate. If that was reduced, then it’s reasonable to believe that people wouldn’t need to file for unemployment at all.

At this time, the real estate market is deceptive. Mortgage rates are very low, and it’s clearly a buyer’s market. However, buyers are losing jobs at an astounding rate, and that usually makes it difficult to own a home. The bright side to all of this is that, for the people who already own an income property investment, it is also a landlord’s market. Investors may be faring better than almost everyone else in the country right now.