Mortgage and Real Estate Blog

The more that the economy is shrinking, the more that would be home buyers are having trouble getting financing and the more that home prices are falling while other costs are increasing more and more people are thinking about landlording. Specifically, more and more people who are nervous about being unable to sell their homes are thinking about finding someone who could rent their home (especially if they have relocated and purchased a new home but cannot get the other property off the market).

Landlording is an option, but in order to make it an option that’s good for meeting your needs, you’re going to want to be sure you’re thinking about the big picture. Do you want phone calls in the middle of the night when something goes wrong - especially if you’re in a different city, state or country? How long will it take you to find a tenant? What are the rules in your area about landlording? What will you do if the tenant you choose flakes, damages the property or otherwise is unable to live up to their end of the lease?

If you’re thinking about becoming a landlord, make sure that you answer all the tough questions and do your research first; landlording isn’t the best option for everyone.

Here’s a great article explaining the loan-to-value problem for many investor-landlords. If you are a new landlord or one with not a lot of capital then it may be getting more difficult for you to obtain a loan in order to keep doing business. Mortgage lenders are increasingly opting to fund business transactions on a 75% LTV as opposed to a 90% LTV. That means borrowers have to put more money down in order to secure a loan, but investors traditionally don’t like to put too much money down.

These policies will undoubtedly favor landlords who have cash reserves and capital from which to draw should things get difficult. Landlords who are having a tough go of it will continue to have a tough go of it. Landlords will additional money to invest will have the upper hand and the added edge to stay competitive. It is now officially difficult to obtain a loan for investment purposes.