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It’s increasingly common for people to live together but not be married. For example, in the past 20 years, the number of unmarried couples living together has almost tripled. You might be planning to wait to get married, or maybe you’re not going to at all, but what if you want to buy a home together?
It’s possible to buy a home as an unmarried couple, but it can be a little more complex than it is for a married couple.
The following are some considerations to proactively think about before you start the process.
When you aren’t married, but you want to buy a home together, one of the first things you’ll have to think about is who’s applying for the mortgage. The person in the relationship who has the strongest financial history is the one who needs to do it in almost all cases.
When you aren’t married, you have to apply as individuals typically.
Go over financial factors like credit scores, incomes, debt-to-income ratios, employment status, and assets to figure out who has the stronger financial standing. Not only will that person have a better likelihood of approval, but they’ll also qualify for better terms like lower interest rates.
Some lenders may let you apply for a mortgage together, although it’s not extremely common. If you apply together, it can help or hurt you. The benefit is that you may qualify for a larger mortgage since you have a combination of two incomes. The downside might be if your partner has a lower credit score, and the lender could base their decision on that.
The title of a home is proof of ownership. There are a few options here:
• Joint tenancy is one option in which both you and your partner will have equal shares of your property. This will include the right of survivorship, meaning that if one of you passes away, the survivor will receive the deceased’s half of the property.
• Another way to deal with the title is called tenants in common. Under this arrangement, you’re co-owners with equal rights to the property. It’s different from joint tenancy because you hold titles individually for your share of the property. You can dispose of your individual ownership. There isn’t a right of survivorship and the other partner doesn’t receive the decedent’s property share if they pass away. Instead, the property would go to the heirs of the person who passed away.
• A living trust of real property is a way to set up the arrangement also. The trustee holds the title for the beneficiary who has all of the management responsibilities and rights.
Whether you’re married or not, when you buy a property together, you’re going to accumulate equity. However, you’re not going to have the same level of property protection as a married couple, meaning you might want to go further to protect yourself.
One way to do this is to have an attorney create what’s called a cohabitation property agreement, outlining who owns what. This is something you’ll fall back on if you separate.
A cohabitation agreement should outline how you’ll share expenses related to the home you buy, buyout terms, an exit strategy if one of you wants to sell, and a process for how you’ll resolve any disputes. Your cohabitation agreement will also include the type of ownership on the title and deed.
There are a few other things to think about in addition to what’s above.
First, if your name is on a mortgage and your partner stops contributing to payments for any reason, you’re both equally liable. If you can’t make the payments without their financial contribution, you may be faced with foreclosure.
If you get a joint loan, your name will stay on the mortgage unless you refinance.
Finally, only one of you is eligible for the mortgage interest tax deduction since unmarried couples file taxes separately.
The best thing to do before buying a house as an unmarried couple is sit down and carefully go through your finances, and make sure you’re on the same page before you proceed with anything.
Since 2008, Airbnb has been an exciting innovator. Airbnb has changed how we vacation throughout the world, but it’s also created diversified opportunities to invest in real estate. With the online marketplace, property owners became able to rent out their spare rooms or entire homes, and now millions of people stay in an Airbnb on any given night.
Some real estate investors have entirely moved away from traditional leasing in favor of Airbnb, but there are risks, and it’s not right for everyone as with any investment.
While you can certainly rent out a home you already own, what if you want to buy a property for that specific purpose?
Previously, the only way you could make a reliable income stream off a residential investment property was to own it and then find long-term tenants. Those tenants needed to be trustworthy and dependable.
There are some serious downsides to long-term tenants. One is the fact that you have to find them. You run the risk of your property being vacant for long periods, during which you’re losing money daily.
You can pay a property management company or realtor to help you, but that’s going to chip away at your profit.
You’re also responsible for maintaining the property, and there’s always the potential of dealing with a client who doesn’t pay their rent for any number of reasons.
Some of the frustrations of traditional property investment are alleviated with Airbnb.
It can be much easier to find a renter for a few days or sometimes even a few months as compared to someone who’s going to sign a lease for a year or more.
You also have a unique way to market your property and get right in front of your targeted audience.
Airbnb takes care of some of the toughest parts of renting to long-term tenants. They vet the renters, accept payments for you, and on both sides of the transaction, the experience can be rated.
You can let renters know about additional charges and communicate with them solely through the platform.
If someone trashes your property or damages it, the host guarantee offers up to $1 million in property damage protection for property owners.
If you invest in a property that’s in an in-demand location, you’re not likely to have a hard time renting it out.
That’s a big if, though. Not every area is going to hold appeal for Airbnb renters. Traditional renters want somewhere quiet and safe in many cases. Airbnb renters want somewhere centrally located and close to the action of whatever the city is. If you’re thinking about buying a property exclusively for Airbnb, you’re likely going to pay a premium to secure a location that people on Airbnb will find appealing.
If your goal is to invest in a home and list it on Airbnb, along with location being paramount, there are other possible risks.
You or someone you hire needs to be available on-demand. If someone is on vacation and a pipe bursts in your home that they’re paying to stay in, it has to be fixed immediately.
There are also legal restrictions, particularly in certain locations. In some regions, you can’t list a property at all as an Airbnb rental. In others, you might need licenses and permits to do so.
You’re also at the mercy of your guests’ reviews. One bad review which could occur because of something totally out of control can make it extremely hard to book new guests, particularly if there’s a lot of other competition in your area.
Airbnb does have what’s known as a double-blind system so that both guests and hosts have to leave their reviews before they can see what the other said about them. If there is a dispute, the parties can communicate before reviews go public.
If you aren’t sure whether buying a property for Airbnb is right for you, think about trying things out with something you already own. For example, if you have a spare room and you’re comfortable doing so, maybe you rent it out for a while to get a feel for what it’s like.
One more note—since the start of the pandemic, people have been working remotely more than ever, and that may not change any time soon. That has led to an uptick in people wanting longer-term Airbnb stays for several weeks or even months, creating a new opportunity for investors that’s worth considering.
Real estate is being digitally transformed. Buyer behavior, driven by the current online shopping boom and its technology, is changing the real estate market—finally!
“It’s no secret, real estate is one of the largest assets, if not the largest asset globally—finance being right there behind it,” said Moderator and ULI Icon Sponsor John Cecilian, CEO and Co-Founder of Cecilian Partners, as he introduced the Urban Land Institute (ULI) Fall 2021 Meeting Session “Proptech Catchup: How Data, Technology, and People Are Changing the Face of Production Homes and Community Development,” simultaneously held virtually and in Chicago during early October.
“This notion of Fintech [financial technology]...and this concept of Proptech [property technology] coming together is why it has so much allure, so much excitement, and so much growth.”
Technology provides home buyers with access to more knowledge and information than are available to them during the traditional “buyer beware” sales process.
“The bottom line is—and Covid has only accelerated this—our industry, the real estate industry, is not trusted,” said Alan Klassen, Chief Experience Officer of Brookfield Properties, speaking to ULI-member real estate executives and professionals. “Customers are demanding to be trusted first, before they’ll trust us. That’s a paradigm shift….Our research is saying that you need to be able to be transparent...Authenticity—this is the top driver behind driving the customer.
“It was cloak and dagger. Hide it, build it, and they will come—those days are gone...being transparent online, providing that kind of trust, being vulnerable is what customers are looking for….I can’t wait for the [heated] market to go back down…this market, right now, is hiding what the [home-buying] consumer is actually demanding.”
Laura Cole, Senior Vice President, LWR Communities, stated that, even though we are all shopping online now, in the community development sector, the consumer shift to widespread online shopping has been ignored.
“We put so much emphasis on the human experience,” said Cole explaining the mindset buyers encounter when they visit a traditional sales center. “As a sales manager, I am going to give you the information I know you need to know and craft the message around what I think you need to know and not a whole lot more. Transparency was completely missing in the process.”
Cole heads the residential arm of Florida-based Lakewood Ranch, overseeing a 16,000-lot residential portfolio under active development by 20 builders with +2,000 annual sales.
Cole stated that the shift in buying involves customers adopting technology to make better real estate decisions.
“As a community developer, I see it as an opportunity to ask ‘how will this person live in our community’,” said Cole. “Our data sees into people and what they like. We look into this from a business perspective.”
In the past, Cole explained that developers left as soon as the people moved in. Now, Lakewood is involved long term. At 27 years in, Cole feels they are not finished yet. She says the community is more like an economic development model, continually changing and evolving with new revenue streams emerging.
Panelists Cole and Klassen, with moderator Cecilian, peeled back the traditional sales process for selling production homes and lifestyle communities to reveal to ULI members the potential of a technology-nurtured buyer experience.
Referring to a recent McKinsey study, Cecilian demonstrated the dramatic shift in consumer online behavior during the pandemic with a significant statistic: “75% of online shoppers in 2020 literally engaged new brands for the first time. They did not step foot in a grocery store...they did not step foot to buy a new car. They bought, they experienced...75% of those surveyed said they want to have those brands be part of their life in 2021 and beyond.”
New home buyers can expect to engage with increasing numbers of real estate companies with forward-thinkers who embrace the new transparency and control that consumers should experience as they buy—but are not sold—new homes.
“We don’t want the skeptics of new home construction, production home building, and community development,” said Cecilian. “We don’t want there to be any more laggards. Our worry, our fear, based on the very real market trend of how consumers engage with brands today across industry has to make us rethink about how we engage, how we talk to, how we create a sense of ‘place’ for all those aspiring home buyers or future residents.”
Home buyers are usually given attention as ‘customers’ once the sales process reaches the contractual stage. Now, when prospective home buyers visit a real estate website they become customers and enter the customer experience. As buyers, you have the attention of the builder or developer much earlier in the process. What are you going to do with it?
“The whole sales experience is being disrupted,” said Klassen. “It’s becoming ‘a buying experience’….The customer is coming through with so much more information and so much more knowledge. It’s really, really imperative—customers that are knowledgeable do not want to be sold. They want to be helped, to be supported, to be understood. They want advocacy right from the very beginning. Our industry is archaic….That’s the big shift!”
When you go to a sales center or shop online for a new home, ask yourself, “Am I in the right place?”
• How is my trust affected if there is an abrupt difference in communication between meeting the company online and actually visiting its model homes?
• Am I being sold instead of having my questions answered specifically and transparently?
• How do I balance construction quality with the buying experience I prefer?
• Will I be distracted from the quality of my new home by the online buying experience and what is promised post-move-in?
• Will I ignore a new home opportunity if I am forced to buy through a traditional sales process?
‘Buyer beware’ remains the buying directive no matter how much fun you are having or how special you feel during the buying experience!
“Emerging Trends in Real Estate® 2022" is a trends and forecast publication, now in its 43rd edition, produced jointly by PwC and the Urban Land Institute (ULI) to provide “an outlook on real estate investment and development trends, real estate finance and capital markets, property sectors, metropolitan areas, and other real estate issues throughout the United States and Canada.”
Question: One of our homeowner's kids would like to raise chickens in the backyard. Our governing documents restrict this activity. Any advice to head off this public relations issue?
Answer: Most HOA governing documents restrict raising poultry and other farm animals or local laws may do so. If this is something like a short term 4-H project, it's probably no big deal. If it is an ongoing production facility for eggs and meat, not a good idea. The main issues are sanitation and noise (particularly from roosters).
Question: I recently had a leak in my unit that damaged wall and flooring and I am in a battle with the HOA regarding who is responsible for the repair charges. My unit is in a mid-rise condominium. The leak was coming from a rooftop chiller pipe that feeds the air conditioning units for me and several neighbors. The plumber determined that the pipe was leaking because of improper soldering. The board says neither the plumbing repair or damage to my unit is the HOA's responsibility.
Answer: This is a classic example of why all HOAs (particularly the common wall kind) should have a clear Areas of Maintenance and Insurance Policy that defines who (owner or HOA) is responsible. This policy should identify all building and grounds components and where the dividing line is between common and non-common. Most governing documents are not precise in defining this so the board needs to adopt a policy that gets more specific. This policy not only helps avoid disputes but directs the various insurance companies concerning their responsibility to cover certain damage claims. The importance of this policy cannot be understated.
Typically, the HOA is responsible for repairing common plumbing lines. Since the plumbing line in question serves multiple units, it is considered common. Damage repair to units caused by the leaking pipe, however, is usually the unit owners' responsibility unless the HOA neglects to perform plumbing repairs in a timely manner when informed by a unit owner. For a sample Areas of Responsibility Policy, see www.Regenesis.net
Question: A homeowner is requesting a copy of a violation letter that was sent to another homeowner. Are we required to provide that?
Answer: Unless state law requires sharing this kind of information, a violation issue is a private matter between the board, management and offender. Such information should not be shared with other owners.
Question: What is the proper protocol for a special assessment? Should the board hold a special meeting to announce it with the homeowners, then follow up with a letter to all of them?
Answer: If the board has decided to move forward with a special assessment, it should definitely hold an informational meeting to discuss the reasons and to answer questions. It is possible that there will be people that take exception to the special assessment and want to express that opinion. They have a right to do that as long as they are civil.
The board should attempt to respond to all questions and concerns if possible. Trying to respond to "I don't have the money" is a waste of time even if true. Special assessments are never pleasant and there will always be some that have a problem paying them due to disability, unemployment, divorce, too cheap, etc. Going forward, the board should have a long range plan to avoid them in the future by setting aside adequate reserve funds to avoid special assessments. It would a good thing to point this out to the members now.
Only an estimated one-third of millennials in the U.S. own property, according to data from the U.S. Census Bureau. Would-be homeowners are continuing to have to fight against stagnant wages, rising home prices, and now soaring interest rates as well.
A whole segment of the younger population is now known as "generation rent." Still, they're taking some of the things working against them and turning them into a new approach to property ownership called rentvesting.
Rentvesting refers to buying an investment property and renting it out, typically in an affordable or up-and-coming area. Then, you continue to rent the primary place where you live in the location you prefer.
Investing in property isn't new, but more young people today are opting to hold off on buying their own home as a primary residence instead of investing in rentals.
The trend originated in Australia's major cities, but it's also become popular in the United States.
There are benefits to rentvesting. One is that you can live where you want. You may not be able to afford to buy a home in your desired neighborhood or even city right now, but when you stay a renter, you can potentially afford it. Then, you're also putting your money to work as an investment.
Eventually, depending on your financial goals, when you're a rentvester, you might sell the property you earned an income from and then use that money and savings to buy the home you want.
Rentvesting changes the traditional path to homeownership, but with the hurdles to buying a home, that may be needed for some.
Some real estate experts describe rentvesting as balancing a lifestyle choice and building long-term wealth.
If things go according to the plan, the house you buy while you're still a renter will go up enough in value to be your ultimate springboard to your own home.
You're starting to build equity even if you can't afford the home you want. Depending on your situation, you could also live in the house eventually. Still, even if you don't, there's a high probability the value will go up, so you might get the equity to borrow against the property, even if you don't sell it.
Rentvesting certainly isn't easy. You're dealing with multiple properties, and you have to keep your landlord happy while also being a landlord and keeping your tenants happy.
It's not simple to be a landlord, so you have to be realistic about the time you can dedicate to managing the house. You'll have to set aside money if there are unexpected expenses along the way, which is often the case.
Lenders usually charge higher interest rates on investment properties. They may require a larger down payment too, but it could give you more flexibility to gain entrance into the real estate market.
It's a big financial decision to rentvest. First, you have to ensure the investment makes financial sense. You have to factor in the down payment, closing costs, and monthly mortgage payments. In an ideal world, your monthly rental income covers the mortgage repayments, and you might even make a bit of a profit, but the world isn't ideal, so you have to make sure you have the income to cover any rough times.
Choosing the location is important with rentvesting. It may not be the neighborhood you'd personally love to live in, but it needs to hold appeal for some people.
Finally, as with any investment, think long-term. You want to make sure that you're at least going to be able to make back your upfront costs with the appreciation of the property. Consider at least a five-year timeline with this approach to investing and owning property; ideally, ten years is better.