Thinking About Becoming a Landlord?

The Weekly Recap

Good morning and happy Friday! A major tech outage is hitting business’ and cancelling flights worldwide, Trump survived an assassination attempt, mortgage rates fell for the fifth time in six weeks and to their lowest level since mid-March. Affordability challenges, including high upfront costs and rising rents are dampening renter demand in NYC. Biden is urging congress to pass a form of national rent control as calls for him mount to step aside as traders think the odds of a Fed rate cut by September is 100%. US office delinquencies ticked higher in June, evictions are booming in the Sunbelt, international buyers are slowly pulling back from the US market and US online sales hit a record $14.2 billion for Amazon Prime Day.

Thinking About Becoming a Landlord?

One of the quickest ways to develop generational wealth in real estate is through the procurement of multi-family homes and using those homes to create passive income through renters. There is nothing better than having someone else pay your mortgage, creating equity for you and allowing you to increase your investment ability. Whether your goal is to own one investment property that you rent to a single renter or to own an entire portfolio, if you’re thinking about becoming a landlord, here are a few things to keep in mind.

Tenant Screening- the laws governing landlord/tenant relationships, especially in NYC, skew so heavily in favor of the tenant that landlords need to be extra cautious about who they rent to. Through a thorough screening process and in working with an agent, you will be able to find reliable tenants. Some benchmarks for tenant screening include credit scores over 700, income that is 40x the monthly rent in annual salary as well as letters of recommendations from previous landlords.

Lease and Other Agreements- detailed lease agreements that clearly lay out the expectations for the relationship are paramount to protecting yourself as a homeowner and for your tenant as a renter. Where relationships sour, especially for landlords that may be renting out a single room, or a portion of a larger multi-family building that they reside in, is when things are communicated verbally but are never put into writing. Forgo the potential for misunderstandings and keep track of every verbal conversation with an email to the other party recapping the action points.

Insurance- not only should you make sure that you are properly insured and that you are covered in case of any unforeseen events, it’s also advised that you make sure that any potential tenants occupying your space also has renters insurance. Renters insurance protects you as an owner incase your tenant creates an expensive issue by accidentally leaving the stove on or by having an overflowing bathtub creating water damage on their floor and the ceiling of the apartment below, forcing you to make repairs. The renters insurance policy will help you recoup costs for expenses and fixes.

Taxes- in most cases, there will be tax implications so its smart to treat each residence as a business. Keep detailed records of costs and expenses as the IRS considers rental income as taxable income. Like any business expense, there are expenses related to renting out a room, house or apartment that can be tax deductible. It’s always a good idea to consult a tax professional who can answer more detailed questions about your rental income.

Market Performance

Here are how some other indexes and asset classes have performed as of Wednesday’s opening bell, markets were closed yesterday.

NYC Market Update

Here is a view of new inventory that has come onto the NYCmarket over the past week as well as newly signed contracts in Manhattan.

Mortgage Rate Update

Mortgage Rates continue to head in the right direction this week, dropping 12-basis points from last week. Homebuyers have yet to really respond to the lowering rates as purchase demand nationwide is still roughly 5% below Spring when rates were relatively similar. The delay in buyer activity can be attributed to buyers making sure rates don’t decline further before deciding to purchase.

News You Can Use

• Biden Calls for National Rent Caps on Corporate Landlords Bloomberg

• The Housing Market Will Tell the Fed How Much to Cut Rates Bloomberg

• Powell Signals Rate Cut Coming Into View but Declines to Say When Wall Street Journal

• Microsoft Said Underlying Issues of Outage Fixed, Some 365 Apps Still Affected Bloomberg

• Traders See the Odds of a Fed Rate Cut by September at 100% CNBC

• Fed Should Be Patient on Next Move, JP Morgan’s Dimon Says Reuters

• Waller Says Fed Getting ‘Closer’ to Cutting Rates, Not There Yet Bloomberg

• Here’s Why International Buyers Are Pulling Back from the US Market CNBC

• US Office Delinquencies Ticked Higher in June Reuters

• Trump Talks Fed, Tiktok, Crypto in Businessweek Interview Axios

• Amazon Prime Day Drives US Online Sales Record to $14.2 Billion CNBC

• Biden Faces Intensified Calls to Step Aside While Ill With Covid Bloomberg

• Traders Add to Bets on Three Fed Rate Cuts in 2024 Bloomberg

• Miami’s Fancy Wrap and Smoothie Chain is Opening 10 NYC Shops NY Eater

The Deep Insight

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