It’s critical to keep up with the latest real estate terms as an owner of rental properties. You can protect your investments and grow your portfolio by being informed of the major changes that the real estate market is going through. Having astute knowledge will enable you to bargain with potential buyers or renters and make well-informed decisions. In a competitive market, it is important to understand the following six terms. Let’s examine each one in more detail.
iBuyer
iBuyers are real estate companies that use technology to offer simple and hassle-free home-selling solutions. They provide an innovative and reliable way of selling residential properties in a couple of days, with a little work on the part of the homeowners. iBuyers evaluate real estate market data using advanced algorithms, enabling them to make quick, competitive offers based on the latest market conditions.
Typically, the iBuying procedure entails homeowners providing an iBuyer’s website with facts about their property details. After assessing the property, the iBuyer makes an instant cash offer within 24-48 hours. The homeowner can set a closing date and get money in a couple of days if the offer is approved.
A notable benefit of iBuyers is their hassle-free selling process, which does away with the need for staging, open houses, and negotiations. Homeowners don’t have to worry about stagging their houses for showings and waiting months to sell their properties.
Days on Market (DOM)
Acquiring knowledge of key real estate terms is crucial when searching for a new property. One such word is “DOM,” which is “days on the market.” This metric counts the number of days a property has been listed for sale.
A high DOM can be a red flag, indicating that the property has remained on the market for an extended period without any offers. However, it’s important to remember that seasonal changes in the real estate market can impact the DOM. For example, houses typically sell more quickly in spring than in winter.
By looking at the average DOM for a certain location, you can tell if the real estate market is strong (i.e., with a low average DOM) or weak (i.e., with a high average DOM). It is usually easier for buyers to negotiate a better deal in a weak market.
Real Estate Owned (REO)
An REO property, or “Real Estate Owned,” is also known as a type of property that a lender owns following a foreclosure on the property due to the previous owner‘s failure to make mortgage payments. This typically occurs when the property fails to sell at a foreclosure auction.
For investors, REO properties can be an alluring investment opportunity since they have the possibility of being acquired below market value. But it is important to remember that these sales are frequently risky because the property is sold “as-is.” Any necessary repairs or renovations will be the buyer’s accountability, and financing can be difficult to secure.
FHA 203k rehab loan
The federal government backs the FHA 203k rehab loan program. It is intended to make it possible for homebuyers to finance the purchase of a property that requires extensive remodeling or repair.
The loan can fund repairs and renovations, such as structural improvements, plumbing and electrical repairs, and the installation of new heating and cooling systems. Additionally, it can be used to make energy-efficient upgrades to older homes, like installing new windows, doors, and insulation.
One of the critical benefits of the FHA 203k rehab loan is that it allows buyers to finance the cost of the fixes and improvements into the mortgage, meaning they don’t have to pay for these expenses out of pocket. Furthermore, the loan can be used to purchase a property needing repair and refinance an existing one.
However, it is critical to remember that the loan is not meant for “luxury” improvements like installing a swimming pool or other non-essential amenities. The purpose of the loan is to assist homeowners in making the necessary repairs and renovations to their houses to 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 find out how much of your monthly income goes toward paying debts. DTI is calculated by including your monthly mortgage or rent and other debt payments, dividing the total by your gross monthly income, and multiplying by 100. Lenders can determine how much of your income is already dedicated to paying off debts and how much mortgage you can afford based on this computation.
It’s important to keep this figure low because a high DTI can make it difficult to qualify for a loan. Lenders typically prefer that borrowers spend no more than 28% of their monthly revenue on housing payments and 36% or less on monthly debt payments. Your chances of getting a loan or a mortgage approved increase with a lower DTI.
It’s important to keep in mind that, depending on the kind of loan or mortgage you’re applying for, lenders may use slightly different standards to assess DTI ratios. For example, borrowers with excellent credit scores may be eligible for a higher DTI ratio from certain lenders.
Either way, it’s important to keep your DTI ratio low to maintain good financial health and make it less complicated to obtain financing when necessary. If your DTI ratio is high, you might want to think about increasing your income, paying off debt, or consulting a financial professional.
Earnest Money Deposit (EMD)
Earnest Money Deposit (EMD) is a deposit a buyer must make when offering a property. It is referred to as a “good faith deposit.” This deposit shows the buyer’s sincerity and eagerness to purchase the property, which can convince the seller to accept the offer. The amount of EMD offered varies depending on the market circumstances, but it usually ranges from 1% to 5%. If the deal closes, the EMD is held in escrow and is applied to the purchase price of the home.
Knowing a variety of real estate terms is crucial for a rental property owner. Keeping abreast of the most recent developments in the industry will enable you to protect your investments and make informed decisions when negotiating with buyers or renters. Don’t forget that knowledge is an advantage in a competitive market.
With real estate investments in The Bronx and the nearby area, Real Property Management New York Gold is prepared to help you achieve financial freedom and a passive income. Our experts can offer competent and approachable advice on property management and real estate investment matters. Contact us online or call us at 347-905-5770.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
