The experience of renting out a home can be both rewarding and challenging. If you’re pondering on the idea of renting out an existing residence or purchasing a property for the purpose of renting it out, there are a few things to know before you get started.

Choosing the right property

The popularity of investing in a home as a rental property has increased over the years. Right now is an ideal time to purchase a home for investment. With interest rates low and a multitude of homes on the market, many homeowners are choosing to purchase a home solely for the purpose of renting it out. Investors are looking to sell the home later to make a bigger profit.

If you are trying to make sense of the condition in the real estate and mortgage industries these days, don’t bother referring back to your old Economics 101 textbook where you first read about the laws of supply and demand. You’ll remember the side of the equation that says when the price of a product goes down, the demand for that product goes up.

According to The Wall Street Journal, the median U.S. home price was $201,000 in January of this year, down 4.6 percent from January 2007. The S&P/Case-Shiller National Home Price Index for the fourth quarter was down 8.9 percent from a year earlier, the biggest drop in 20 years. Furthermore, there was a 10-month supply of existing homes for sale in January, up from just under five months during boom times. The supply is up so prices are down.

In The Interest of Better Serving Our Readers, Real Estate Resourcebook Explored Two Sides of the Transfer Fee Issue; The Realtor Perspective and The Property Management View. We Welcome Your Feedback! 

TRANSFER FEES: REALTOR PERSPECTIVE

It seems there are several new fees cropping up (just like taxes), that affect the value of your real estate. You may not notice them until you sell, but they could lessen the value of the house you live in. The following explains why.

We have always had deed recording fees, one type of transfer fee. While most of these monies go to the state, some go to the county. Many people are familiar with the Town of Hilton Head Island’s transfer fee, which remains on the island. It’s hard to guess how much the former adds to the value of your property, but it’s easy to drive around the area, see the open spaces the Town has purchased, and realize the value added to all properties by our local transfer fee. 

Stories of post-Katrina insurance travails should be cautionary for coastal area homeowners. Misunderstanding your coverage and definitions of your coverage can be costly. There are, for example, major differences between “Wind and Hail” deductibles, and that of a “Named Storm,” states Bill Thomas, president of Carswell Insurance Services.

For example: say your home is insured for $300,000. Your roof is damaged by a thunderstorm. If your policy has a Wind and Hail deductible of 2 percent (the usual), your share of whatever the repair cost totals will be $6,000 (2 percent of $300,000).

The Good, the Bad, and the Ugly.

Spending on home remodeling projects in the United States hit $215 billion in 2005. (According to the CIA World Factbook, the GDP of the country of Argentina was $210 billion at the official exchange rate in 2006.) Home remodeling costs account for approximately 40% of all residential construction spending and makes up nearly 2% of the U.S. economy. That’s a serious amount of coin.

Numbers don’t lie; Americans love investing in their homes, and for good reason. Usually it’s a win-win situation. Not only are homeowners improving their residence, they are increasing the equity – the difference between the value and what is owed – on their home.

Yet, there are certain improvements homeowners can make which give a greater return on investment (ROI) than others. Sometimes narrowing down the good, the bad and the ugly can make all the difference in that showdown between sound investments with outstanding ROI’s, and feelings of skipping through a minefield with your wallet open to the breeze.

The seemingly never-ending battle to repeal or reduce the estate tax may continue to frustrate and stall your estate planning decision. How can you make an informed decision when the estate, gift, and generation-skipping tax laws change so frequently? Last year, each individual was entitled to exempt $1.5 million from estate taxation. This year, the exemption rose to $2 million and by 2009 the exemption equivalent amount will be $3.5 million. If all goes according to current plan, there will be an unlimited exemption by 2010. Bill Gates could die in 2010 and not pay a dime in estate tax! Yet, by 2011, under current law, the exemption equivalent amount reverts back to $1 million and untold numbers of families on Hilton Head Island, alone, will be affected.

If the 1970’s taught us anything it would have been that war in the Middle East was bad for oil prices, gas guzzling cars had a negative effect on the environment, and dropping interest rates to increase consumer spending, so a struggling stock market might be corrected, led to dire consequences. Maybe we didn’t learn these lessons as well as we thought.