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September 6, 2008

August was a great month for real estate sales, but when 40% of buyers are pushed off the playing field, home prices could plummet

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Sun City Real Estate Broker

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This is my column for this week from the Arizona Republic (permanent link).

 
August was a great month for real estate sales, but when 40% of buyers are pushed off the playing field, home prices could plummet

We won’t have reliable numbers for a few days,* but preliminary results leave no doubt that August was a huge month for real estate sales in the Valley of the Sun. Not for prices, alas, which continued to slide by around 1.5% last month. But, of the bread-and-butter suburban tract homes we track, around 200 will have sold, a two-year high.

September promises to be a banner month also, with nearly 280 homes currently under contract. Not all of those homes will make it through the escrow process, but most of them will.

What accounts for all this activity? The single greatest factor is seller-paid down-payment assistance programs like AmeriDream and Nehemiah. An FHA loan requires a 3% down-payment, and these grant programs permit the seller to fund the grant, along with up to 3% more for closing costs. The upshot is that buyers can take possession of the home for “nothing down.”

In recent months, down-payment assistance programs have accounted for as much as 40% of sales of resale homes, and as much as 90% of new-build sales.

Here’s the catch: Under the mortgage relief act recently signed into law, seller-paid down-payment assistance will be forbidden. The restriction takes effect on October 1st, but most lenders have already closed the window on new AmeriDream and Nehemiah loans.

It’s possible these programs will be reinstated by future legislation, but, even if they are not, it’s not the end of the world. It’s no great challenge to find a decent starter home for $100,000. And if buyers cannot manage to save up $3,000 for a down-payment ($3,500 after October 1st), acquiring a huge new debt may not be the best solution to their financial problems.

But the short-run prognosis seems pretty obvious: When 40% of resale buyers are forced onto the sidelines, the downward pressure on prices should accelerate.

The bottom line: If you’re prepared to buy a house in the Phoenix area, either as your residence or as an investment, prices could be very attractive.

 
*Final results for August 2008 are reported in the BloodhoundRealty.com Market Basket of Homes.

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September 2, 2008

More smokin’ deals on premium Phoenix-area rental homes

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Sun City Real Estate Broker

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Here are some more of the investment properties I’ve been shopping in the West Valley suburbs of Phoenix. These are all potentially premium rental homes. All but one faces North or South. All but one is lender-owned, a much easier way to buy than a short sale. All of them are in premium, high-demand subdivisions.

In other words, I eliminated everything that was less likely to appreciate and rent well. These homes should stay rented to premium tenants while you own them, then sell easily to owner-occupants on the way out.

The prices are all over the map, and they matter not at all. It’s reasonable to treat all of these homes as selling for $70 – $80 a square foot, with the smaller homes going for slightly more, the larger ones for less — this because plumbing is the big money in a house and smaller homes have proportionately more plumbing.

Some of these homes need work to make them rentable, but none of them needs very much — perhaps $5,000 at the most. If it’s possible to pick up one of these for $10,000 less than recent comparable sales, it is eminently profitable to do the repairs on the way in. Paying more for turn-key condition may not be the best strategy. In any case, we can arrange for any needed repairs to be done quickly and economically.

Take a look:

I’ll be writing about this in this week’s Arizona Republic: Seller-paid down-payment assistance is essentially gone from our marketplace. This had accounted for as much as 40% of recent sales, so there are going to be a whole lot fewer buyers chasing a large number of available homes. This should make sellers very interested in negotiating price. We are on the cusp of a perfect storm for investors to pick up premium rental homes at unbelievable bargain prices.

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August 31, 2008

With its new iPhone application, Trulia.com is taking on-line real estate search to the streets

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Sun City Real Estate Broker

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This is my column for this week from the Arizona Republic (permanent link). There is a fuller review of this new technology here.

 
With its new iPhone application, Trulia.com is taking on-line real estate search to the streets

So who is winning the Realty.bot race, Trulia.com or Zillow.com? Your guess is as good as anyone’s, but this week marks a decisive change in the game: Trulia just released an iPhone application.

Trulia Mobile will offer a limited set of location-based searches from Apple’s iPhone, from an array of other smartphones and from Dash Navigation GPS devices. The user-experience will differ by device, but the design premise is based on location-sensitivity: Your iPhone always knows where you are, so it can interact with Trulia’s file servers to show you a list of nearby listings or open houses. You can get a detailed summary for each home on your list, and you can then email the listing to a friend, contact the listing agent directly or map the home so that you can hop over for a quick peek.

It’s hard to argue with the design premise: If people are going to go out house-hunting on their own, whether they are really looking for a house or simply touring open houses for decorating ideas, why not use the location-sensing power of modern electronics to hook them into Trulia’s listings database?

The ability to contact the listing agent plausibly increases the likelihood of dual agency transactions, but the fact of life is that many, many people are at least starting their home search without the advice of a buyer’s agent.

But here’s the bonus that popped out at me when I heard about Trulia’s iPhone application: Listing agents who want to compete for mobile-empowered buyers need to get their listings into Trulia and they need to keep their open house schedules up to date. I like anything that makes listers more diligent in their duties to their clients.

The iPhone application is slick and useful as written, this because “data is the new Intel-inside” and Trulia has a rich store of data to draw upon. The usual caveats about opt-in versus MLS listings apply, along with concerns about decay among voluntarily-maintained listings. But, all that notwithstanding: Trulia’s mobile-computing initiative is cool.

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August 23, 2008

Buy low? Sell high? You can’t sell high for now, but prices are low enough that a buy-and-hold strategy could pay off handsomely

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Sun City Real Estate Broker

Author website

This is from my Arizona Republic column (permanent link):

Last week I met with a potential real estate investor. She’s an investor because she’s got the money, the credit and the will to dip her toe in the water. She’s a potential investor because she hasn’t yet been a landlord.

With new investors, I talk about premium suburban single-family rental homes. This is normally the safest, most economical way to start a real estate investment plan in Phoenix. That’s especially true right now, when the right rental home will be cash-flow positive from the outset.

But I also talk about other income opportunities in real estate, if only because land-lording is not for everyone. I would not advise a first-time investor to take the plunge in a large multi-family community or a strip mall, but there are plenty of other ways to take advantage of our current market conditions.

An example? Flipping. There never was heard a more discouraging word, but flipping has a horrible reputation because a horde of TV-educated tycoons bought at the top of the market and sold their refurbished masterpieces at auction. Now, when entry prices are low and trending lower, a slow flipping strategy promises nice rewards.

Here’s one slow strategy: Find a great flip candidate at a rock-bottom price. Buy it to own as a rental. Hold it in that state — with the monthly cash-flow covering your costs — until prices recover to your satisfaction. Then do the refurb and sell.

Here’s another one: Buy your cheap refurb candidate and move into it. Redo the home slowly, room by room, especially when the materials for doing a particular room are very cheap. Sell it after you’ve owned it for five years or more and take the capital gain tax free.

There is a common investment idea behind these strategies: Buy low. Sell high. You can’t predict when you’ll be able to sell high, but you know for sure you can buy low right now. If the investment property is either self-amortizing or your own residence, you can afford to wait for the market to turn.

August 16, 2008

Amazing bargains abound in the Phoenix-area real estate market — and here’s a web site full of photos to prove it

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Sun City Real Estate Broker

Author website

I wrote last week about the incredible bargains to be had in the Phoenix resale real estate market. Dumpy homes in bad neighborhoods are very, very cheap, but there are so many Short Sales and Lender-Owned homes on the market right now that you can buy choice homes in choice neighborhoods for amazingly low prices.

If the run-up in prices in 2005 was caused by “irrational exuberance,” then our current market is driven by “irrational despondency.” The question for people who are not irrational is this one: How low can these prices go?

I’ve been shopping for a getaway-home for an out-of-state buyer. I’ve built a web site to show off some of the homes I’ve been previewing. The winner so far? A newer three bedroom, two bath home with a pool — on a golf course — with custom tile mosaics — for $110,000.

It’s a sad thing for the folks who lost these homes — and their lenders are no doubt shedding salty tears, too. But if you have the means to buy a home in the Metropolitan Phoenix area right now, you can get incredible values for your money.

You can visit the web site or just click on one of these links to see these homes:

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August 16, 2008

What went wrong in the Phoenix real estate market? We told homeowners to treat their homes like investments — and they did…

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Sun City Real Estate Broker

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This is my column for this week from the Arizona Republic (permanent link).

 
What went wrong in the Phoenix real estate market? We told homeowners to treat their homes like investments — and they did…

If you were to turn back the clock on the Phoenix real estate market by four years — that would be just about right.

Judging by prices for bread-and-butter homes, it’s just as if the last four years didn’t happen. The average stucco and tile suburban dream home sold in July of 2008 for almost the same price you would have paid for it in July of 2004.

A lot has happened since then, of course. The 1,400 square foot single family home you could have had back then for $150,000 soared to $250,000 by December of 2005. That seemed like $100,000 in free money, and, regrettably, many people borrowed against that paper equity in their homes. Even if they did not, it has proved difficult to eradicate that entirely imaginary $100,000 from list prices.

The real estate market got hammered good and hard by two very bad ideas. The first is that homeownership is an unlimited good, that everyone should own a home regardless of their circumstances. Governments — and the National Association of Realtors — came up with program after program to induce more and more people to buy homes — regardless of their income, regardless of their credit, regardless of their debt load.

At the same time, lenders threw away all of their old, time-tested, flinty-eyed ideas about thrift, declaring that real estate investment was just like securities investment, the leveraged path to assured wealth.

By the old rules, a homeowner or rental property investor had worked and saved for years to accumulate a down payment. That down-payment was more than enough to cover the foreseeable losses of a foreclosure action, so the loan was secured by the property. Buyers and investors didn’t abandon homes when the market went down, dumping the investment like a declining stock in the face of a margin call.

The market is what it is, but it would be a boon for all of us if we could turn back the clock on those four years and play the game over — by the old rules.

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August 9, 2008

There’s more to the mortgage relief bill than just mortgage relief

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Sun City Real Estate Broker

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This is my column for this week from the Arizona Republic (permanent link).

 
There’s more to the mortgage relief bill than just mortgage relief

Having trouble making your mortgage payments? You might be able to make a change in your loan, thanks to the mortgage relief bill President Bush recently signed into law. Under the bill, you can convert your high-interest adjustable-rate loan to a lower-interest fixed-rate note if you meet what might, in a declining market, seem to be Catch-22-like guidelines: Your payment must be more than 31% of your income, and your new loan cannot exceed 90% of your home’s value. Help is available — provided you don’t need it.

Starting October 1st, seller-paid down-payment assistance grants will be outlawed for FHA loans. This is bad news for lower-priced neighborhoods in Metropolitan Phoenix, where as many as nine out of ten homes are being sold with down-payment assistance. Expect to see a flurry of this activity in the next two months.

But the left hand gives where the right hand takes away: Buyers who have not owned a home for three years can take a $7,500 “refundable” tax-credit if they buy between April 9, 2008 and July 1, 2009. The credit is to be repaid over the next 15 years.

Perhaps the biggest change introduced by the bill is a revision of the capital gains exclusion rules. Since 1997, sellers have been able to deduct up to $250,000 of the capital gain on the primary residence from their tax burden — up to $500,000 for married couples — if they lived in the home for at least 24 months out of the preceding 60. Under the new law, the deduction will be pro-rated over those 60 months. If you live in the home for the full five years, you will take the full deduction. If you live there for three years out of the five, you’ll deduct only 60%.

In the long run, this will slow down the level of residence-churning seen among monied home-owners. In the short run, expect a lot of pricey homes to sell between now and January 1st, when the old exclusion goes away.

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August 8, 2008

A hundred under a hundred: Right now, you can buy over 100 rental homes in Suburban Phoenix for less than $100,000

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Sun City Real Estate Broker

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This link is from our new MLS system, and there are still some kinks to be worked out. But, even so, the results are astounding.

What you’re seeing are newer (1995 and later) single-family suburban tract homes — 3 or 4 bedrooms, 2 baths, 2+ car garages, stucco walls, all tile roofs — all listed for $100,000 or less. Some will be short sales, so the prices might be fanciful. Many will be lender-owned, and so they could be in rough condition. But each one of these houses can lease for at least $750 a month, so they will be cash-flow positive from the first tenant.

The fact is, my preference is to ignore all of these houses. The next tier up — $100,000 to $125,000 — are the ones worth having. Premium locations, upgraded amenities, higher potential resale values. But still — the mind boggles.

Right now, as I write this, there are 731 of these homes available for $125,000 or less. Not in insane locations like Buckeye, Maricopa or Queen Creek, but in developed suburbs with easy access to schools, entertainment, retail and jobs. In other words, rental homes that will stay rented, that won’t sit vacant for month after month.

For goodness’ sakes, there are twelve homes available for $125,000 or less in Estrella Vista, the best little subdivision in Goodyear.

If you want, I can build you a custom searchbot that will show you premium rental homes as they become available. What’s a premium rental home? It’s one that will attract premium tenants at a premium rent, will stay rented while you own it, will occasion few if any eviction or repair nightmares, and will sell at a premium price to owner-occupants when you’re ready to move on. Any Realtor can sell you a cheap house. I have been very successful at identifying premium rental homes — profitable to buy, profitable to own and rent, profitable at resale.

This search will expire on September 7, 2008, but I think our inventory of sweet suburban rentals might last a little longer than that. Email me if you want to discuss your opportunities.

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August 2, 2008

New FlexMLS system is a bold stride into the twenty-first century for Phoenix-area Multiple Listings Service

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Sun City Real Estate Broker

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This is my column for this week from the Arizona Republic (permanent link).

 
New FlexMLS system is a bold stride into the twenty-first century for Phoenix-area Multiple Listings Service

Metropolitan Phoenix got a brand new MLS system this week. MLS is the Multiple Listings Service, the system by which Realtors share their listings with one another. Until this week, the Arizona Regional Multiple Listings Service had been using a computing system called Tempo to share listings. As of this Monday just past, we have switched to the FlexMLS system.

Had you guessed that something had changed? If your Realtor has been sending you listings from a saved search, or if you had been receiving updates to a Tempo Gateway, all that stopped on Monday morning. Chances are your agent has spent much of this week rewriting searches and reestablishing gateways. The FlexMLS system is more robust than anything we’ve had before, but it’s also quite a bit more complicated. It may take a while before things get back to normal.

So why make the switch? For one very good reason, to tap into that much more robust technology. Tempo permitted a crude kind of map-based search, but FlexMLS allows you to select houses from within multiple non-contiguous irregular polygons. So, as an example, I can search for homes that are either within walking distance of Apollo High School or within walking distance of Valley Metro bus lines servicing Apollo High School.

There’s more: The FlexMLS pricing software is comparable to the tools appraisers use. Realtors will have to stretch themselves to learn how to tap this power, but our Comparative Market Analyses are going to be painstakingly accurate.

But not without some growing pains. ARMLS is by far the largest MLS system FlexMLS has taken on so far. This first week has been a trial for the North Dakota company — a strain on their servers, and, no doubt, a strain on their tech support staff as well.

And workaday Realtors are sharing the pain. No doubt many are grumbling, “If it ain’t broke, don’t fix it.” But FlexMLS is a bold stride into the twenty-first century for ARMLS. This transition may not be fun, but it will be a boon to everyone in the long run.

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July 27, 2008

A real estate sign of the times: Our first custom yard sign printed in both English and Spanish

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Sun City Real Estate Broker

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This is my column for this week from the Arizona Republic (permanent link).

 
A real estate sign of the times: Our first custom yard sign printed in both English and Spanish

We do things that other brokers in the Phoenix area don’t do. We’re not the busiest listing brokerage — not by miles — but we’re among the most aggressively innovative in our marketing practices.

Our yard signs have always been very big, to try to grab as much attention as we can get for our listed homes, but for the past two years we have been building custom signs for our listings.

Working with Signs By Tomorrow in Peoria, we have been able to build huge, custom, four-color signs for our listed homes — featuring giant photographs of the interior and exterior of the house and custom descriptive copy about the property.

Our signs stop traffic. I know because I will often sit in my car a block or two away and watch passing cars as they slow down and stop to take in the sign, look over the house and grab a flyer.

We have a home listed in Peoria right now, and we took things one step further for this property. We know that a significant number of people in the surrounding area speak Spanish as their first language, so both the flyer and the custom sign are printed with one side in English and one side in Spanish.

Working from the English version of the Flyer, Enrique Lopez of YourPrintSource.com prepared the Spanish translation. This copy was typeset for both the flyer and the sign. If you approach the home — 7813 West Beryl Avenue — from the East, you’ll see the sign and flyer in English. From the West, you’ll see the sign and flyer in Spanish.

Just because there’s no reason not to, the photos on each side of the sign are unique. Instead of four pictures, we were able to use eight.

We also added a Spanish version of the flyer to the MLS listing so that Spanish-speaking buyers can read about the features of the home.

Regardless of our endlessly-debated border policies, as a matter of pure demographics, Phoenix is becoming a bilingual city. Doing real estate promotional material in both English and Spanish just makes sense.

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July 27, 2008

What’s the obstacle to a paperless, iPhone-able real estate transaction? The sclerotic real estate industry itself

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Sun City Real Estate Broker

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This is my column for last week from the Arizona Republic (permanent link).

 
What’s the obstacle to a paperless, iPhone-able real estate transaction? The sclerotic real estate industry itself

I carry my digital still camera and my Flip video camera with me wherever I go. I have belt-mounted camera cases, so they’re easy to carry, never in the way. I keep those two cameras with my car keys, along with everything else I take with me when I put my keys in my pocket: My wallet, my business cards, my watch, my phone, my Bluetooth headset and my MLS key.

All of these things are small and portable, either pocketable or belt-mounted, but I have almost all of the tools of my trade upon my person when I leave the house. I look like a cop — not always a bad thing — but I have my stuff with me so that I can work when I need to.

This is what I want for the iPhone or for some later iteration of the idea of a hand-held computer. A laptop or a notebook computer is luggable, not portable. Even rechargeable printers are luggable, not portable. I might have a laptop and printer in my trunk — absorbing damage from every bump in the road and cooking in the summer heat — but I don’t have that computing power on my person.

My dream is simple: Everything that I might do on a desktop or laptop computer, I want to be able to do from a hand-held computer. I’m perfectly happy to give up printed documents if I can shoot PDFs in all directions at will. This sounds almost implausible, but I think we might be down to the sclerotic real estate industry itself as the obstacle: Realtor associations, lenders, title companies, and all of the many branches of government.

It’s common, when discussing ideas like this, to throw up technical issues. The technical problems are truly trivial. The problem we face in real estate is the dinosaur mentality of our leadership. Properazzi.com has an iPhone interface, as do Zillow.com and Trulia.com. The National Association of Realtors doesn’t even have a clue, much less a plan, even though the importance of the iPhone has been undeniable since January 2007.

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July 15, 2008

Don’t learn all the wrong lessons about creative mortgages

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Sun City Real Estate Broker

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This is my column for last week from the Arizona Republic (permanent link).

 
Don’t learn all the wrong lessons about creative mortgages

Arguably, the Phoenix real estate market is in a state of incipient recovery. Will there be more bad news? Certainly. There are still thousands of homes stuck in the foreclosure process. But prices are low enough, by now, that our surplus inventory will be absorbed — by investors, new-comers and second-home bargain-hunters.

The bad news is that, at the end of all this, we will have learned all the wrong lessons from the real estate market downturn.

Are Adjustable Rate Mortgages a bad thing? People learned to hate the first generation of ARMs, so lenders built in guaranteed flat starter rates, fixed adjustment periods, maximum adjustment caps. But even with all that, ARMs came through the down market with a sullied reputation. With fixed rates still riding so low, ARMs don’t make a lot of sense right now, but that doesn’t mean they never make sense.

How about stated-income loans? Many of the foreclosed homes in the Valley were bought on stated income. But the problem wasn’t the loans, it was the buyers — who lied about their income — and the lenders — who let them get away with it.

Negative-amortization loans were another source of foreclosures, even though the idea behind the loan product itself is perfectly sound — in an appreciating real estate market.

The problem with all these loan products — and other “exotics” — was not the particular loan program. The problem was the profligacy of a surging real estate market — coupled with the securitization of mortgages.

Everyone acted as if the party would never end, that home prices would continue to rise indefinitely. Still worse, lenders had socialized the risk of their poorly-vetted loans to securities investors. Ultimately, lenders didn’t have to care if their loans were properly secured by good credit, steady income and valuable assets.

You can blame the people involved if you want, but don’t blame creative mortgage programs. Everything’s a trade-off, and it could make sense for you to get a stated neg-am ARM for your next home. But this time around there will be a hefty down payment.

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July 5, 2008

Musical chairs: You can buy a home on leased land for a bargain price, but you must be prepared to sell before the music stops

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Sun City Real Estate Broker

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This is my column for this week from the Arizona Republic (permanent link).

 
Musical chairs: You can buy a home on leased land for a bargain price, but you must be prepared to sell before the music stops

We’re preparing to list a condominium that sits on leased land. Land leases aren’t common in the Phoenix area, but they do exist.

The most common way to own real property in the Valley is in fee simple: You own the land and all the structures on it, plus any mineral, water and air rights that haven’t been alienated by legislation or previous sale.

A very distant second way of owning property is the condominium plat: You own the airspace described by your interior walls, and you and all of your neighbors own the land and structures in common. Most often you will also own the air conditioner, and possibly also the roof. These are expensive to replace, so crafty developers and their HOAs socialize the risk to you.

We have a few co-ops in the Phoenix area, but very few. In a cooperative, you and all of your neighbors own the land and the structures in common, and you have a right to occupy your living space.

In a land lease, the structures can be owned in any one of these three ways — by individuals, by a condominium HOA or by a cooperative corporation. The important difference is that the land is owned by a landlord, and the landlord will be taking that land back someday.

What happens to the structures? They revert to the landlord’s ownership, and the former owners of those structures are left owning nothing.

In essence, it’s a game of musical chairs. The structures on the leasehold pass from owner to owner, but, when the music stops, no one then on that land has a place to sit. This tends to depress property values on leased land.

But land leases are written for very long terms, and a lot can happen in that time. If the landlord gets a huge offer for the land, the people who own the structures could get bought out early at a huge premium.

In the mean time, in exchange for taking the downstream risk of a depressed resale price, buyers can purchase a home for a bargain price.

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June 28, 2008

You probably won’t sell your home for an above-market price, but even if you do, the home still has to appraise for that price

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Sun City Real Estate Broker

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This is my column for this week from the Arizona Republic (permanent link).

 
You probably won’t sell your home for an above-market price, but even if you do, the home still has to appraise for that price

So your house is finally under contract. Congratulations. It took longer than you thought it would to sell, and you had to go through three price reductions before you got regular showings. But now you’re under contract and in escrow. You’ve made it through the inspections and you’ve taken care of all of the repairs. Nothing but smooth sailing from here, right?

Not quite.

Here comes some bad news you hadn’t anticipated: Your house didn’t appraise.

A lender will only lend on the appraised value or the purchase price — whichever is lower. If the appraisal comes in lower than the purchase price, something has to give.

If there’s an appraisal contingency in the contract — and there almost always is — the buyers can cancel the contract unilaterally.

More likely, they’re going to want you to lower your price instead.

If you don’t, you’re almost certainly killing that contract. The lender will not underwrite the loan, so the buyers will be forced to cancel using the financing contingency.

You could end up waiting quite a while longer for another buyer. And that buyer could offer you quite a bit less for your home. And even then, your house will still have to appraise for the purchase price. If home values continue to decline, you could live through this same nightmare a second time.

So does that mean you should cave on the appraisal no matter what? Not necessarily — depending on your objectives. If you need to move now, take your punishment and move on. But if you can afford to wait long enough for the market to recover, that might be the better option.

Appraisers and loan underwriters are skittish right now. Lenders are taking back homes and selling them for fifty cents on the dollar. Appraisers are being fastidious to make sure they are not overestimating values.

And all of this is just another reason to price your home to the market. You probably won’t find a buyer willing to pay an above-market price. But even if you do, the home still has to appraise for that price.

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June 21, 2008

Investors are coming back to the Phoenix rental home market — and with the right business plan they’ll make money

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Sun City Real Estate Broker

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This is from my Arizona Republic column (permanent link):

Rental home investors are coming back into the Phoenix real estate market, and this is a good thing.

The last time we had a substantial run on rental housing, results were not so sweet. Investors came to Phoenix with the idea that price appreciation would make up for any monthly losses they might take on their rental homes. It’s plausible they were right — in the long run. In the short run, negative cash flow and declining values, coupled with adjustable-rate or negative-amortization loans, drove many of these homes into foreclosure.

And this accounts for much of the inventory the new wave of investors is drawing upon. The difference is, the prices for these homes have declined enough that they can be — at least potentially — cash-flow positive.

Why only potentially cash-flow positive?

Because too many investors adopt the worst of the cartoonish characterizations of capitalism when they resolve to become landlords. They pick the cheapest properties in the worst locations and rent to the least-qualified tenants, living through one eviction and repair nightmare after another.

Here’s a strategy for making more money from a rental home — much more peacefully.

There are dozens of costs associated with rental housing, and your business plan should take account of all of them. But your biggest potential losses are always going to be vacancy, tenant acquisition, repairs and resale value.

It makes much more sense to me to buy a property that can command premium rents and will sell at a premium price when you’re ready to move on. Location matters, as do the livability and lifestyle factors of the specific home. You want to pick a home that will stay rented.

I think it’s a good idea to charge something less than the market rent. This will give you a broader array of tenants to choose from, which will enable you to select tenants with good credit who will treat your property like their own.

With the right house and the right tenants, you should have very little vacancy, no evictions and no costly repairs between tenants.

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