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By Mike Rains, Mar 15 2019 01:44PM

Do you own property for investment and manage it yourself? Are you thinking of buying investment property and want to save money by managing it yourself? While I think it is true that no one will care for your property like you do, I still believe there is tremendous value in having a property manager, and this article will explore those reasons.

What are the biggest concerns that an investor has when it comes to their properties? Being an investor myself, I think that most people want to have the BEST Tenants, earning the HIGHEST market rents, staying compliant with all of the tenant laws and regulations that exist, and finally, being PROTECTED and SEPARATED from tenant issues that arise by having the right contracts and agreements in place.

The #1 killer of good investment property is VACANCY. When a unit sits empty, the owner is losing money every day that it sits there. Vacancy happens, but there are distinct reasons for prolonged vacancy. The first and most important reason is poor tenant screening. The pressure to fill that property with a tenant can be tremendous for an owner, and they might cut corners on having proper screening, only to find out later, that the applicant looked great on paper, but had issues in the past rentals. The second is also important, and that is having poor property condition, which leads to tenant dissatisfaction, which can lead to chronic vacancy as tenants constantly switch out at the end of the lease. By the way, poor property condition can also be detrimental to the long term value of the asset as well, especially in areas where market appreciation is big like in California. Many properties are evaluated by investors by CAP rates; which is your rate of return on the investment, and when used with what the actual rents less the expenses in a formula, turns out a number that determines the value. So you can see if the property condition isn't as good, you get less in rents, therefore less in value of the asset.

The KEY to a good investment for an owner, in my estimation, is having good property management! Whether you do it yourself or hire one. The property manager screens tenants thoroughly; collects rents so you get paid on time; handles the tenant issue that arise at a moment’s notice; periodic inspections; monthly and annual reporting; uses proper contracts and helps you make the right disclosures to keep you compliant with tenant laws; does rental analysis to keep you apprised of current market rent trends.

Other benefits include simple things like being able to take vacations without worry of tenant issues or collecting of rents. It also assures that even long term tenants are not paying "under-market" rents. I have met owners who have had the same tenant for years and years, and have had a great friendship develop, so much so that the owner doesn't feel like they should raise the rents when it is time, and thus after a number of years find themselves significantly lower than they should be. Now I will grant you, that there is tremendous value in having a long term tenant, as it addresses the "vacancy" issue raised above, but that being said when ten years goes by and your $500 lower in monthly rent than you should be, that is VERY costly indeed.

One of the biggest advantages of having a professional property manager is that liability. The property management company is licensed, insured, and stands in the gap to mitigate your liability, shielding you from potential tenant issues that can often lead to lawsuits. The costs of a property manager are easily made up with this protection as well as addressing issues quickly to maintain the property, and having current market rents.

Find yourself a good one, who has good problem solving skills, great communication skills and cares about your investment like you would care for it. Should you ever have any questions about property management or investment properties in general, please email me at mike@mikerains.com or visit my website at www.MikeRains.com #askMikeRains #mikerainsrealtor

By Mike Rains, Nov 29 2018 09:39PM

There are voices from many corners saying many things regarding what will happen in 2019 in the housing market. Time will tell who is correct, but then again hindsight is always twenty-twenty. In this article we will explore some of what can be expected. As an agent, I offer boots on the ground, "what it feels like" perspective, but since real estate is local, it is imperative to look at all sides.

The Remax Housing report came out this month for October's numbers and demonstrated, nationally, that for the third consecutive month of year over year lower home sales has now led to the first year over year inventory increase in ten years’ time. The RE/MAX National Housing Report for October saw sales decline 4.6% from a year ago – compared to sales drops of 11.6% in September and 1.1% in August – and was the eighth month of 2018 to record lower sales than 2017.

As a result, inventory is slowly being replenished, with the number of homes for sale in October increasing 1.0% over October 2017. October 2018 was the first month to show a year-over-year increase in inventory since October 2008 when two and a half times as many homes were for sale. The Month’s Supply of Inventory is now 3.5, compared to 3.3 a year ago.

“The market continues to move toward equilibrium. The modest inventory increase is a much welcome sign for buyers,” said RE/MAX CEO Adam Contos. “Although home sales were down year-over-year, it’s encouraging to see the magnitude of the decline decrease from the sharp drop we witnessed in September. The trend of easing price increases remains and that’s also a positive.”

California Association of REALTORS® Senior Vice President and Chief Economist, Leslie Appleton-Young, presented the 2019 Housing Forecast on November 27, 2018 to Orange County REALTORS® members. In this report for California forecasts the most likely case to be that homes sales of homes will decrease by a -6.9% with the average homes sale price to also decline by a -.2%. This is obviously the first time in a while that Californians have seen homes values decline, albeit it is a very small amount.

As a Realtor in Southern California, Orange County, I have personally seen that many agents like myself have seen a slowdown in sales numbers, and in many cases, it is due to lack of inventory from new sellers to the market, or a traffic jam of sorts from sellers who would like to sell their home and move, but have not had the confidence that they too would find a suitable replacement. The phenomenon at the very least has contributed to the lower inventory numbers. Also as agent, with fewer sales, and more agents in the marketplace, there has been less to go around. This will cause many agents in the near future to exit the real estate business.

What does all this mean? Well with interest rates due to continue a gradual rise, I believe that this represents a great time to be a buyer in the market place and not experience the frenzy and multiple offer situation. Sellers too can continue to reap a really great rise that has taken place and make the move that they have been wanting to make to other areas or upsize or downsize their current living space. There are contingencies that we as Realtors can put in place to protect both buyer and seller to give the time needed to find another home. It is a win-win for all sides. As usual I am available to talk with anyone considering making a move in or to the Orange County, CA. market. Call me anytime at (714) 293-4786. #askMikeRains #mikerainsrealtor

By Mike Rains, Aug 15 2018 07:12PM

Who doesn’t want to get the best deal in buying a home or investing in real estate? What are the factors that make up getting a great deal, especially in the market we have today, August 2018? Is it the price? Location? Style of the home? Yes, Yes and Yes are the answer to those things, but there is one more thing that has a huge impact on what is paid for a home. Want to know what the secret is?

Before I tell you that, let me first say that if you are paying cash, then the price you pay and condition for a property in the best location available will matter the most. I am addressing the rest of us that will likely have to take out a loan. In Orange County California where I live, the Median Sales price across all property types is $560,000.

With 20% down on that median price gives you a loan amount of $448,000. As of this writing, if you had good credit and you are going to live in the home and put a 20% down payment, the interest rate would be at 4.375% for a no point 30 year fixed loan. The APR for this by the way is 4.411% (which includes the cost of the loan- aka APR)

Now I am going to mathematically show you the answer to what is the secret to a great deal in today’s real estate. The answer of course is INTEREST RATE. We have enjoyed an historic drop in interest rates over the last 7 plus years as the government stepped in and drove the interest rates to below market rates. At one point that rates bottomed at about 3.5% for a 30 year fixed loan. It has already gone up almost 1% so far from then and experts agree that now that the government is no longer a buyer of those bonds, but a seller of them, the interest rates are predicted to go up to the mid to upper 5-6% range in the next year or so. This of course is a return to the mean, as they say, as historic rate averages show that the average rate of about 6%.

Just ten years ago in 2008 the interest rate averaged 6.03% according to Freddie Mac. Twenty years ago in 1998 the average interest rate for 30 year fixed mortgages were 6.94% and even thirty years ago in 1988, the average rate for a 30-year mortgage rate was 10.34%

Now let me demonstrate why the secret to a good deal in real estate has everything to do with interest rate. Let’s take the same purchase price as above at the median sales price of $560,000 with 20% down giving you a loan amount of $448,000. If the interest rate were to rise just 1% from where it is today, you would now pay $4480 more each year for the interest you pay and a total of $134,400 over the life of the loan more. If the rates got back to the historical average of 6%, which is still a great rate by the way, then you about pay 1.625% more in interest of the loan amount, or $7280 each year and $218,400 over the life of the loan. Can you now see why INTEREST RATE MATTERS in buying real estate?

You might say, hey I am just going to wait for the market to pull back because it has gone up and up and up for ten years and the market is due for a pull back and I can get the house I want for a lower price! I agree that real estate values rise and come down in cycles. That is a fact. However, you would have to buy that same $560,000 house for $425,600 and interest rates only go up 1% from here or at $341,600 if interest rates go back to 6%. I would humbly submit to you that when the market does pull back, it will not be as extreme as this would need to be. You will still pay more for the home that what you would pay for it today with lower interest rates; The math doesn't lie.

So what should you do? I would say that if you have been thinking of purchasing a home, then talk to your mortgage professional and get with a pro realtor that can lay out your options for your individual scenario. Even if you don't have a full 20% down payment, you can still buy a home and take advantage of the low rates today! If you are in the Orange County California market, you can reach out to me for help and I can refer you some great lenders and answer any questions you might have. #mikerainsrealtor

It's a Good Life,

Mike Rains





By Mike Rains, Jun 20 2018 06:44PM

As a real Estate Agent since 2001 I get asked questions about what's happening in the market and how it is being affected by rates, economy, cycles and so forth. This week I interviewed the President of Dave Financial, David Averell to see what is going on with mortgage rates and how it's affecting the real estate market.

See the interview here: Interview with Dave Averell

If you have questions about the market, call me at (714) 293-4786 or email me at mike@mikerains.com and I'd be happy to answer them.

Mike Rains Remax TerraSol, #mikerainsrealtor

By Mike Rains, Mar 9 2018 08:53PM

Hey do you want to live 4 blocks from the ocean in beautiful downtown Huntington Beach? This is a great opportunity with a completely remodeled home on a three car width lot with the most sought after model offered. Call me today to set up a private showing before anyone else can see it. Call me on my personal cell number (714) 293-4786 cell.

Mike Rains

Re/Max TerraSol

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