Month: August 2013

We know that a title company is the place we go to sign documents when we purchase, sell or refinance our property; but what exactly does that title company do?

In fact, title companies serve several purposes that are important to purchase transactions. Firstly, they provide a place to settle as well as to reconcile the transaction. What this means is that in a purchase transaction the title company merges the numbers that are given to them by both buyers and sellers and produces the settlement statement that both sides sign at closing.

This is very important in that the title company is considered an independent third party and offers a type of check-and-balance system that ensures all parties involved in the transaction, including the attorneys, see the numbers submitted by the other side before signing any paperwork.

Secondly, title companies collect monies from both sides and perform the service of paying off previous lenders as well as delivering documents to recording agencies, such as county assessors’ offices.

Thirdly, these companies provide title insurance, and if you are borrowing money against a property, your lender will require this. With title insurance, the company is providing an insurance policy against any type of lien that may have been placed on the property prior to closing. This could include any issues relating to the property, such as work that may have been completed but which has not yet been paid for.

Title companies are there for everyone’s protection. Be glad they are.

Most homeowners only dream of reducing their mortgage payments. But some are now living their dream, renting out part of their homes and taking those monthly rent checks to the bank.

A multi-unit property – where you live in one unit and rent out one or more additional units in the same building – provides rental income without the hassle of maintaining a separate property. Best of all, you can qualify for residential financing, as long as the property comprises no more than four units.

From a financing perspective, any property that is more than four units, and which has been purchased solely to rent out, is considered a commercial property and requires investment property financing, meaning you’d need a larger down payment and greater asset reserves than with a four-unit residential property.

You will require a single mortgage on the property. If you plan on a minimal down payment, and have no prior landlord experience, you’ll need to qualify for that mortgage without the use of projected rental income. The rate on a multi-unit property will be slightly higher than on a single family property.

After two years, if you decide to refinance the property, you’ll be able to use the rental income to qualify, provided it’s documented on your tax returns. Also, after two years, you may use this income to qualify for a new mortgage if you decide to move and rent out your current unit.

As for benefits: By purchasing a multi-unit building instead of a separate rental property, maintenance costs will be lower – you only have to maintain one property, not two – plus you can keep an eye on your investment.

And, of course, your tenant or tenants are paying a large portion of your mortgage and that gives you great flexibility to pay it off faster or save for other priorities. Maybe even to invest in another multi-unit property.

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