5 Reasons Why FSBO Sales Fail

​For-Sale-by-Owner, or FSBO, transactions are commonly seen in seller’s markets or whenever homeowners want to maximize their profits by not having to pay commission.

However, statistics show that selling your home with the assistance of a professional real estate agent will garner you a higher profit, enough to cover the commission as well as put more money in your pocket. According to the National Association of Realtor®’s 2016 Profile of Home Buyers and Sellers, the average FSBO sales price was $185,000, while the average price for a home represented by an agent was $245,000. That’s a difference of $60,000!

If you choose to sell your home on your own, you’ll be negotiating and relying on your own skill to finalize a contract, leaving yourself open to potential legal problems and a smaller profit when all is said and done.

Here are some of the top reasons why FSBO home sales can go very wrong.

1. Marketing your home online isn’t as easy as you think

Buyers always start online, and FSBO sellers are unlikely to get the exposure they need on a number of listings websites to reach their audience, says Realtor® Wendy Hooper with Coast Realty Services in Newport Beach, CA. Sticking a sign in your yard or trying to pull off some DIY social media marketing hardly has the same effect.

How an agent can help: Using an agent automatically offers widespread exposure for your listing through the multiple listing service. Your real estate agent will also have the means to promote your house to fellow agents to share with their clients. FSBO sellers would have to shell out big bucks for advertising and still might not reach the most important audience.

2. You could price your home wrong

Those who put their homes on the market as FSBO tend to set a price based on an online assessment tool or the lofty sum that the neighbor down the street claims they were offered—two methods that are liable to put the listing price way off.

"Using a free online valuation tool is like bringing your doctor a printout of your Google search about symptoms and possible cures,” says Jon Sterling, a real estate consultant with Keller Williams Realty in San Francisco. “There’s no substitute for actual market knowledge.”

The danger in overpricing a home is that it will languish on the market, and buyers will wonder why, even if you lower the price later, says Mark Ferguson, a real estate agent with Pro Realty in Greeley, CO.

"The home becomes stigmatized, and buyers are likely to pay a lower price when the home has been on the market an extended period of time,” Ferguson says.

How an agent can help: A real estate agent will provide an accurate home value based on a comprehensive market analysis to help you arrive at the right listing price. The goal is to make sure you’re pricing your home in the sweet spot—not too high so that you are turning off potential buyers, and not too low so you are leaving money on the table.

3. You could underestimate (or overestimate) how much money to spend on curb appeal

“A novice home seller is unlikely to view their home objectively or know how to stage it to appeal to the broadest audience,” says Hooper. That means you might be turning off potential buyers with an amateur paint job, an overgrown yard, or even a broken doorbell.

On the flip side, you might end up investing far more money than is needed. Hooper had sellers who were convinced they had to totally overhaul their 35-year-old kitchen and floors to the tune of about $50,000. Instead, she advised a $10,000 investment for paint, staging, and minor repairs, which still netted $45,000 above their target price.

How an agent can help: Even if you’re not up for a full home makeover, your agent has an eye for detail and can recommend simple, budget-conscious swaps that can translate into real dollars when it comes negotiation time.

“We know how to spend the least amount of money to get the best outcome and home presentation possible,” Hooper says.

4. Showings are a drag

FSBO sellers don’t realize how draining it can be to set up showings. And on top of scheduling actual potential buyers, you also have to deal with both looky-loos (gawkers with no intention of buying the house) and “sharks,” (investors looking to flip your house for a profit).

"Sellers who advertise their FSBO will quickly be inundated with calls from real estate investors who are looking to save the same commission the seller hopes to save,” Sterling says. Unfortunately, typically these offers are very low and could likely lead to no sale.

How an agent can help: Your agent will handle all the scheduling and staff the tours for you, so all you have to do is quickly tidy up and vacate.

In fact, that is another key reason to have an agent: Buyers can get uncomfortable with a seller hanging around during the showing, says Ferguson. Agents also will weed out unsuitable offers and collect feedback that potential buyers might be unwilling to share directly with the seller, which can make subsequent showings even stronger.

5. Preparing your own paperwork can be tricky

Unless you have a background in contracts or law, you might want to leave the paperwork to the pros. The closing process can entail more than 20 pages of complicated paperwork, including the contract and addendums designed to cover all of the situations that could go wrong, says Ferguson.

For example, houses built before 1978 require an addendum regarding lead-based paint and some states need a release confirming the presence of carbon monoxide detectors.

How an agent can help: Your agent will take care of all property disclosures and corresponding documentation to avoid future liability.

“If the seller does not use an agent and doesn’t know every law and required paperwork specific to their community, they open themselves up to lawsuits,” warns Ferguson.

By Cathie Ericson, realtor.com

Want a Smart Home? 5 Reasons to Get Started Now—and How

You’ve probably heard the term "smart home" a lot lately. After all, almost half of Americans now own some type of smart home technology, according to a recent survey by Coldwell Banker. Nonetheless, most of us have barely scratched the surface of all the options out there for boosting our homes’ IQ. Frankly, some of us might find all that tech a tad intimidating, or maybe just don’t think it’s that useful. And for those on the fence, it’s hard to know where to get started. Well, we’re here to help!

Welcome to The Connected Home—a series of articles where we help you navigate this brave new world, from smart security systems to thermostats to kitchens and beyond. We’ll help you cut through the white noise and tell you in simple terms which gadgets are worth getting, why, and what it’ll cost to set them up in your home.

In this first installment, let’s take a step back and highlight all the ways smart products can make your home a better place—by saving money, time, headaches, and other hassles.

Reason No. 1: Smart homes are safer

Homes should be our safe space, and an array of smart home devices can help ensure that. In fact, one survey by August Home found that 63% of consumers cite home security as the biggest motivation to buy a smart home device.

The most obvious smart home security devices to use are cameras that detect break-ins; they can also be serviced by companies that can further assess the danger and send the police rushing to your door. But burglars aside, smart home devices can detect an array of other threats: smoke, fire, carbon monoxide, moisture levels (important if you’re concerned about leaks or flooding), radon, and so much more. Smart locks can also be locked or unlocked from afar, removing the hassles of lost keys and pricey locksmiths.

Even better, most smart home security products won’t drain your wallet as much as you might think. According to Houzz’s 2016 Smart Home Trends Survey, the majority of smart home security upgraders (76%) spend just $1,500 or less on these features.

Reason No. 2: Smart homes save money

Want to slash your home’s energy bills? That can easily be done with smart thermostats like those from Nest, Honeywell, and Ecobee, which can perceive how many people are in a room and adjust the temperature accordingly, and also allow you to make adjustments remotely, with your phone.

According to a Nest study, the company’s smart thermostat saved consumers on average 10% to 12% on heating and 15% on cooling. Based on typical energy costs, that translates to an average savings of $131 to $145 a year, which would mean this smart device (which costs $249) can pay for itself in less than two years.

Because smart thermostats are fairly cheap (Honeywell’s costs $159) and boast a clear payoff, they’re a great way to start smartening up your home. If you’re ready to broaden your home’s budget-friendly amenities, consider smart lighting, smart dishwashers or laundry machine. Sure, these items are more expensive—Kenmore’s Smart 5.2 cubic foot front-load washer costs $1,290 (on Amazon), more than double the same-sized model without smart features—but they’ll save you money down the road by conserving heat and water.

According to Consumer Reports, water-efficient laundry machines use about 13 gallons or less for an 8-pound load—half the 26 gallons sucked down by a regular washer.

Reason No. 3: Smart homes save you time and stress

It’s time for the fun part: Smart homes make life easier!

“A lot of people don’t want to have to lift a finger around the house,” says Tom Flanagan, founder of Real Estate Things, a blog about real estate technology. And many aspects of this Jetsons-style fantasy are actually within reach.

For instance, rather than needing to schlep across the room to turn on your stereo, you can just tell a smart speaker (like Amazon Echo or Google Home) to play your favorite tunes. And since these speakers also work as virtual assistants, you can ask them for the weather forecast, or how many teaspoons are in a cup in the midst of cooking, or to add toilet paper to your shopping list.

Granted, all these little tasks might not seem like much hassle individually, but they add up, and they’re just the beginning. These Wi-Fi-enabled smart speakers can also act as smart home hubs, enabling various smart gadgets to speak to one another (i.e., your smart alarm clock can wake you up and turn on your smart coffee maker, while your smart fridge can sense you’re out of eggs and add that to your grocery list). It’s no wonder, then, that according to the 2017 U.S. Houzz & Home Survey, one-third of Americans who’d recently purchased a home plan to add some form of automation.

Reason No. 4: Smart home gadgets aren’t as hard to install as you might think

You don’t have to be tech-savvy to install most smart home products.

“They’re made to be user-friendly,” says Austin-based home technology expert Stacey Higginbotham. Many offer online instruction videos, and you might not even have to pick up a drill, since many operate wirelessly (like Arlo Pro’s Security System with Siren below, $201.45 at Amazon).

Reason No. 5: Smart homes are easier to sell

When you eventually sell your home, smart devices can pay off in a number of ways. According to Consumer Reports, smart home features can boost your home’s resale value by up to 5%—that’s $15,000 on a $300,000 home. Research also shows that home appraisers are beginning to factor in the value of tech features.

Daniel Bortz is a Realtor in Maryland, Virginia, and Washington, DC, who has written for Money magazine, Entrepreneur magazine, CNNMoney, and more.


House-Hunting Secrets for New Parents, Empty Nesters, Job Seekers, and Others

Life is unpredictable, no matter how carefully you plan. And yet, when you buy a house, you are essentially committing to live in the same place for a certain period of time. The number of bedrooms, the layout, the school district, the yard size, the commute—you’re pretty much locking yourself into all of these factors.

But your stage in life can reveal a lot about where you are in your home-buying journey. Before you put down roots, it’s important to look at least five years into the future.

"I work with a lot of buyers, and my personal philosophy is that we are buying on a five-year plan," says Susan Little, a real estate agent in NY.

In real estate, the general rule of thumb is that you should live in your home (i.e., make mortgage payments on that house) for at least five years to make it worthwhile. You want to be able to live in the home long enough for it to increase in value and provide a return when the time comes to sell it.

You also want to make sure the house will suit your family and living situation. Are you getting ready to start a family? Is your youngest kid going off to college in a year? Assessing your life plans in the next handful of years is a crucial step in the home-buying process.

Let’s look at some of the most common significant life stages with insight on when it’s the right time to buy or sell your home, or just stay put.

The couple thinking about having kids

"If you’re thinking about starting a family in the next one to three years, go ahead and buy in a good school district and start establishing equity," says Dillar Schwartz, a Realtor® in TX.

If it’s in your budget to buy big enough for your future family, then do it, especially since trying to do the sell-buy-move shuffle isn’t much fun if you’re pregnant or caring for a newborn.

If your baby plans are further off in the future, "don’t buy a bunch of space you’re not going to use in the next three years."

The (almost) empty nesters

Sorry to say it, Mom and Dad, but you should hold off on downsizing. Even if your kids are college-bound in the next year or two, you’ll need a place to put them when they’re home on winter or summer break.

Furthermore, according to Pew research, college grads aged 18 to 34 are more likely to be living with their parents than a partner or roommates. Sure, selling the family home is a good way to discourage boomerang kids, but do you really want to risk sharing your hip little condo with an unemployed 20-something roommate?

The job seekers

If you live in an area where traffic is an issue and long commutes are common, living near your job is going to be a major plus. A study from Canada’s University of Waterloo found a direct correlation between commute time and happiness.

If there’s any way you can job hunt then house hunt, you have a better chance of scoring an awesome commute. Otherwise, you might be left making the choice between your dream job and your dream commute, at least until you’re ready to move again.

The person with aging parents

Nobody wants to think about their parents getting old, but not thinking about it doesn’t mean it won’t happen. A record number of Americans are living in multigenerational households.

If living with an elderly parent is a potential situation, "go ahead and buy the two-story with the master downstairs, in case Mom and Dad ever come to live with you," says Schwartz.

Obviously, location and budget are major factors—not many New Yorkers could afford an extra master suite just in case—but if you’re already looking at buying a house with a guest room, it makes sense to get something that could easily be reconfigured for aging parents.

The seniors aging in place

This is one time it makes definite sense to buy for the future. It’s impossible to know when you will lose your ability or desire to do things like climb stairs or use the combination tub-shower. A sudden disability or health problem will make it very difficult to house hunt and move, and you might feel pressure from family to transfer to a senior living facility.

If you’re retired and looking for a home to age in, shop for something with no stairs and accessible features.

By Audrey Ference, realtor.com

Home prices rise in May on persistent shortage of listings

​Home prices surged higher in May across South Florida as buyers face the familiar problem of limited listings.

The median price for existing, single-family homes last month was $335,000 for both Broward and Palm Beach counties, according to local Realtor board figures released Wednesday. In each case, the median rose about 8 percent from May 2016.

Miami-Dade County’s median price increased 11 percent to $325,000.

This is the highest median in Broward since late 2007 and the highest in Palm Beach County since early 2008.

Meanwhile, the National Association of Realtors said May’s median price for all housing types set a new peak at $252,800.

“Home prices keep chugging along at a pace that is not sustainable in the long run,” Lawrence Yun, chief economist for NAR, said in a statement. “Current demand levels indicate sales should be stronger, but it’s clear some would-be buyers are having to delay or postpone their home search because low supply is leading to worsening affordability conditions.”

Robust demand for low- and mid-priced homes has powered the housing recovery for the past five years, and it continues to raise prices across South Florida, real estate observers said.

Milly Taylor, an agent for Keyes Co. in Palm Beach County, said homes priced under $400,000 in Wellington and Lake Worth draw immediate interest after hitting the market.

“Sometimes it’s three and four showings in a day, one right after another,” Taylor said.

“We need more good, sellable inventory,” said Terry Story, a real estate agent with Coldwell Banker in Palm Beach and Broward. “That’s the bottom line.”

Broward has a four-month supply of single-family homes, meaning that’s how long it would take to sell all the properties if no more were listed for sale.

A six-month supply is considered the ideal balance between buyers and sellers.

Palm Beach County has a 4.9-month supply of homes.

Limited new construction and a shift in the housing stock toward more single-family rentals are among the reasons why listings remain low in many markets across the country, according to the Zillow real estate website.

In some cases, owners aren’t putting their homes on the market because they wouldn’t be able to find another place fast enough.

Single-family home sales in Palm Beach County rose 4 percent in May from a year ago. In Miami-Dade, sales increased 10 percent.

Broward sales dropped 9 percent, likely the result of the county’s unusually low number of properties for sale, agents say.

“I don’t think it has anything to do with demand,” said Jim Heidisch, broker at Campbell & Rosemurgy in Pompano Beach. “It’s more supply-side. Buyers are out there, but a lot of them aren’t settling. They know what they want, and they’ll wait.”

Sales and prices were up in the existing condominium market in May. Broward’s median price jumped 12 percent to $159,000, while Palm Beach County’s rose 9 percent to $179,500.

The median means half the properties sold for more and half for less.

Statewide, the median price for single-family homes last month was $239,000, 8 percent higher than a year earlier, according to Florida Realtors.

The trade group said statewide sales of 27,850 single-family homes and 11,538 condos were the most recorded in a single month.

Zillow Chief Economist Svenja Gudell said in a statement that the housing market appears likely to benefit sellers for the foreseeable future.

“As long as the economy continues to chug along as it has, I see no reason for this widespread demand to fall off — nor for the pendulum to meaningfully swing back in favor of buyers — any time soon,” she said.

Paul Owers, Contact Reporter

Copyright © 2017, Sun Sentinel

7 Ways to Choose the Best Neighborhood for You

If you’re starting a family, you might want to consider a neighborhood known for its good schools. Or if your children have graduated, you might want to move to a "hipper" neighborhood. Perhaps your company has moved, and you want to be closer to work. Any of your priorities may have changed over the years. Here are seven ways to evaluate a possible move.

#1: Time the Commute to Your Job

Perhaps you have been spending hours stuck in traffic to and from work and are looking for a much shorter commute. Just because one neighborhood is closer does not mean that you will get there faster. Time the commute from the different neighborhoods you are considering.

#2: Meet the Neighbors

You want to get a feel for the neighborhood? Talk to the neighbors. Just by walking around the neighborhood, you’ll get a vibe to let you know if it’s right for you. Are the people a little standoffish? Are they hesitant to make eye contact with you?

Are people friendly and neighborly? Maybe a little too friendly and neighborly…? Take a walk around and strike up a conversation with your potential future neighbors to get a good feel for the community.

#3: Go for a Walk Around the Neighborhood

One of the best ways to pick the best neighborhood is to look around it. Go for a walk and drive through the neighborhood on the weekend and on weekdays. Do the same thing at different times of day. Note where there are areas that look a little unsafe or dilapidated. How will that affect your quality of life there?

#4: Attend a Local Festival or Event

Kill several birds with one stone by attending a local event or festival. You’ll meet people in the neighborhood and get a sense of the type of community that it is; is it tight-knit? Young? Too old? A little too country? Local events can tell you a lot about the spirit of the neighborhood.

#5: Go Out to Eat at a Local Hot Spot

While you’re checking out houses, go to a popular eatery in the neighborhood. Check out the vibe and take note of people’s moods. Do they look at you suspiciously? Is the customer service lousy? Is it great and are the people great? You can glean a lot about a neighborhood by simply people-watching at a diner.

#6: See a Play or a Game at a Local School

If you have kids, the quality of the local schools in your neighborhood may be priority No. 1. Before you buy a house and enroll the kids, visit the school. Go to a school play or watch one of the local school’s sports teams to get a feel for the level of community support for the school and athletics.

#7: Read About the Local Job Market/Main Industries

Having a job today does not guarantee that you’ll have one tomorrow. And even if you do, it’s important to know if you are moving into a neighborhood that is growing and thriving or one that is crumbling. Get a local paper and read about the main industries in the area and the state of the local job market.

Top 9 Reasons Appraisals Come in Low

Unfortunately, it happens: A low appraisal can complicate an already bumpy home-buying process. Suddenly, you find yourself in a conundrum: Your bank will fund a loan only up to the appraised value. So do you walk away from the sale? Do you fork over more money to cover the difference? Do you crawl into the corner of the apartment you fear you’ll rent forever and cry your little eyes out?

We know you have home-buying agita—and we’re here to help. There are ways to deal with a low appraisal —but only if you know why it happened.

Beholdthe 9 most common reasons for a low appraisal, according to our expert sources.

1. The appraiser doesn’t do a neighborhood deep-dive

To appraise the value of a property, appraisers rely heavily on comps, which are prices paid for similar homes sold recently. But the appraiser could select comps of homes that sold for mysteriously low prices.

Appraisers don’t normally officially inspect the comps, says Peter Grabel, managing director of Luxury Mortgage in Stamford, CT. They wouldn’t know if there was a mold issue, asbestos, or a nasty divorce that led to a quick below-market sale of a comparable home, skewing the analysis.

2. The appraiser has to go outside the hood

Sometimes there isn’t enough data on sales of similar homes in the area, forcing the appraiser to use comps from a nearby—and possibly less desirable—community, Grabel says. Ideal comps should be similar in style, size, location, and view.

3. The importance of the view

Does your home have a knockout view—or, at least, one that’s better than the comp down the street that overlooks unsightly power lines? If so, make sure your appraiser knows it, too. If the difference in view is not obvious, your home could appraise for lower than expected.

4. A gorgeous basement

The house has a large, beautiful finished basement with a bedroom and a bathroom. You’ve doubled your square footage. Score! Unfortunately, appraisers are required to use much lower value per square foot for space below ground.

5. The extras that totally sold you aren’t selling the appraiser

Surprisingly, a pool, tennis court, and high-end landscaping are attractive features, but they frequently don’t lead to significantly higher valuation on appraisals. Here’s why: When an appraiser compares two otherwise identical homes, one with the amenities and one without, the difference in their selling price is typically not nearly as much as the cost of adding these features—especially when the amenities are of better quality than is standard for the area.

For example, if you spend $200,000 to install a pool, but other homes in neighborhood have $50,000 pools, the difference in quality is not likely to appraise well. So be prepared for a lower value than expected if the property has one or more of these types of features.

6. The condo is the best in the building

Upgrades and finishes might not always boost the value of your home. This is particularly true of co-ops and condos, where the square footage plays a major role in value.

“Let’s say you are buying Unit 15A, which has a brand-new, top-of-the-line kitchen, much nicer than is customary in this type of building,” Grabel explains. “Units 15B and 15C recently sold for less. They are exactly the same size and have new kitchens but were not done to the same quality. An appraiser can make adjustments, but it will be a challenge for your unit to get the valuation that you might think it is worth.”

7. The market is too hot to keep up with

Home prices in the area might be increasing so quickly that the comps that sold six months ago don’t yet reflect this improvement.

“In Brooklyn and in Harlem, for example, prices are soaring, properties are selling for a record price per foot,” Grabel says.

“If six months ago the top price was $1,000 per foot but you are paying $1,100 per foot, there are no recorded comps at that price for an appraiser to use.”

Appraisals, by their nature, are backward-looking. You can ask the appraiser to make a “market adjustment,” but they don’t have to do it.

8. You intentionally overpaid

There are many reasons you might overpay for a home: You might just fall in love with the place and want to make sure you get it—at any cost.

“During prime selling season, bidding wars erupt left and right,” Grabel says. “And the downside to winning one is the reality of getting financed on that final price.”

Remember, the bank is going to lend only the appraised fair market value, and not the higher price you might think it’s worth. So you’ll be left paying the difference yourself.

It’s an emotional choice, and we’re not here to judge. But your appraiser will, and just beware: What the appraiser says (usually) goes.

9. The appraiser is inexperienced—or just bad

Sometimes, it really does come down to a job not well done. The appraiser could be unfamiliar with the nuances of the local market or might simply rush through the job. Unfortunately, a home buyer obtaining a mortgage has no control over the appraisal selection process—your lender is the one who orders the appraisal, either directly from an appraiser or through an appraisal management company.

“We actually choose to pay for appraisals so that we can limit our pool to only the top appraisers,” Grabel says. “This is not a guarantee that the value will come in where we need it to, but it typically ensures a good quality report from an experienced appraiser.”

Worried about getting a dud? You can ask your lender how it selects appraisers or if there’s a particular company it uses—then do your homework.

Maureen Dempsey, Realtor.com

4 Signs a Property Is Worth Buying and Renting Out

Do you have fantasies of becoming a landlord? That is, do you dream that one day, you’ll purchase a promising piece of property, move in some reliable tenants, then kick back and collect rent well into retirement?

If you’ve got the cash and ambition to follow through, there are plenty of condos, homes, and buildings you could buy and rent out—but pinpointing the right one is tough. Don’t give up the dream! Insiders insist there are a few ways to separate the cash cows from the turkeys. Here are some signs a rental property is primed to gush big bucks.

It makes money for you immediately

While many mistakenly size up an investment property by the amount of money it could eventually make them later—once they’ve made a ton of renovations—that’s exactly the wrong approach. As the saying goes in real estate, you should “Make your profit when you buy." That means: Your income (in the form of rent checks) should cover your costs upfront.

Financial planner and real estate investor Jim Ludwick at MainStreet Financial Planning recommends looking for properties that will generate enough rent in 10 months to cover all costs, including mortgage payments, taxes, and insurance. Another popular rule of thumb is the “2% rule," which holds that your monthly rent should be at least 2% of the total purchase price of a property. Look at comparable rental listings online to get a sense of what you could reasonably charge for rent. Then, try punching in your numbers, from your rent to mortgage to maintenance costs, into an online investment calculator like this one from CalcXML, to see if you end up in the black.

A dwindling DOM

DOM stands for days on market—how long a property has been for sale. And if the DOM is plummeting across the board in a neighborhood, that’s a key harbinger that this particular housing market is heating up. And since this typically precedes price hikes, that means you can still score a deal on a property that could make you beaucoup bucks in rent (and if you resell down the road).

Another set of listings to check? Rentals in the area. If landlords are offering concessions to tenants, such as a free month of rent or a lower security deposit, those are signs that they’re having a hard time filling apartments, so you may want to steer clear.

Gourmet groceries nearby

Scouts for Whole Foods, Starbucks, and other high-end chains get paid a lot of money to research the up-and-coming neighborhoods with residents (aka your future tenants) who have the disposable income to support their stores. So, if you can buy heirloom tomatoes and a pour-over coffee in a five-block stretch, things are looking good. The presence of Trader Joe’s, Whole Foods, and Starbucks, in particular, bode well for real estate desirability.

“You can’t just look at the numbers,” ways Justin Cohen, chief marketing officer of Pangea Properties, a Chicago-based real estate investment and management company. “You’ve got to really look at the neighborhood and understand what’s happening there.” Get a sense of what type of tenant the neighborhood and property would attract. A property in a college town, for example, might have a high turnover, while one near a desirable elementary school (get stats at GreatSchools.org) might tend to draw families that want to put down roots for years.

And since many millennials favor “walkable" neighborhoods, areas near public transportation are bound to be a good bet. And we’re not just talking about buses and subways in urban jungles; transportation matters in the suburbs and small towns too, although in a different way: Look for towns near (but not right next to) major turnpikes or highways.

A squeaky-clean tenant

If you’re inheriting tenants with the property you’re considering, don’t just trust that current landlord’s word that they “always pay on time." Run a background check and a credit check (it’s worth paying for a service such as TransUnion SmartMove to do one for you) on any current or potential tenants to see if there are credit issues or a history of evictions, and ask to see pay stubs or a 1099 to show the tenant has the enough income to cover the cost of living there.

And if the tenant has a less than stellar payment history? There actually is a way to turn this into an opportunity to negotiate a lower price for the property, factoring in the cost (and hassle) of a potential eviction. “Whether you keep the tenant or not, by buying someone else’s problem, you’ve gained some equity," says Jorge Newbery, a real estate investor and the founder and CEO of American Homeowner Preservation.

By Beth Braverman, Realtor.com