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June 8th, 2010
The Rentables Inc. (www.therentables.com) uses the latest web technology including “faceted navigation” to enhance user experience and rapidly gain market share.
Boston, MA (PRWEB) June 8, 2010 — The Rentables Inc. is one of many start-ups currently vying for market share as a provider of online rental listings. The company differentiates itself by having highly technical yet simple to use features which enhance the overall user experience. Such features include faceted navigation, side-by-side rental comparisons, and an emphasis on high quality data presented in an organized manner.
Faceted navigation is currently a popular discussion topic in the blogosphere. The Rentables uses this technology to allow users to filter listing data by criteria such as building type, unit type, number of bathrooms, etc. and each of these criteria are “facets”. The key word here is “filtering”, which is fundamentally different from a simple search.
The Rentables Inc. is able to integrate these innovative features into the website because they were taken into consideration from the initial planning stage. Schien Dong – partner and developer at The Rentables – explains: “It is challenging for large competitors to anticipate changes and make room for new features without compromising the website’s performance. The impact of a small change in either code or data could take weeks to be noticed because of the many moving parts of an intricate system.”
The Internet and overall web browsing experience have been built on innovation over time. From a programming standpoint today’s websites have become very complex, and depend on large databases and powerful servers to support high traffic volumes. With such complexity, it seems that most large websites are constantly playing catch-up rather than working to continuously innovate and improve their existing offerings.
The Rentables Inc. launched its new online rental listing service nationwide in August 2009 and currently attracts over 1,000 unique visitors per day, with expectations to increase this traffic to over 5,000 visitors per day by July 2010.
View the official press release on PRWeb at:
http://www.prweb.com/pingpr.php/RW1wdC1QaWdnLUxvdmUtSGFsZi1DcmFzLVBpZ2ctWmVybw==
Posted in Uncategorized | No Comments »
June 1st, 2010
 The adored season of summer is nearly here, and as the warmth, freedom and fun approaches, so do the fruit flies, stifling heat and expensive air conditioning bills. Here are some tips and tricks to help you get through the downsides of this amazing season.
The weather is what most of us love about summer, but it’s a catch-22 in the sense that it also has a way of getting on our nerves. From physical discomfort to pricey utility bills, there are a handful of pet peeves linked with the heat of the summer. Here are a few different ways of eliminating the negatives, and delighting in the positives of the upcoming hot and sunny days.
1. Light Reduction
- The root of heat is the sun, and so to turn down the thermostat on your summer, all you need is some sun-savvy ideas.
- Using scraps of fabric (which are cheap in bulk bundles at most fabric stores) and push pins, loosely drape thin fabrics over top of your windows. Not only can this add a very bohemian and stylish touch to your apartment, but it allows you to keep the bright and cheery ambiance within your living space, whilst still diffusing the sun and heat, keeping your home as cool as possible during the day. When nighttime rolls around, just pin up the drapes and allow the cool breeze to drift in.
2. Air Circulation
- With the prevalence of air conditioning systems, it seems that we have forgotten about the effectiveness of a good fan. Stagnant air should never be underestimated, and it can often amplify the humidity and feelings of near suffocation which can occur during the summer.
- Get your hands on a good electrical fan! Even if you have the A/C on, when coupled with a good fan you can turn the air conditioning way down and reduce the price of your bills greatly.
- At nighttime, perch the fan at a propped open door or window if possible. This will help circulate the cooler nighttime air into your apartment and your space will be prepared for the heat of the following day.
- If your windows are closed (especially at night) because they do not have screens and you are trying to keep the bugs out, fix it! If you can’t afford proper screening, just run down to the nearest fabric or sewing store and buy several yards of thin mesh. Using scotch tape, you can tape the screen over your window discretely and keep those windows open all summer long. After all, would you rather have your guests poke fun at your homemade window screens or be gasping for air in your sauna of an apartment?
- Also, keep as many interior doors open as you can.
3. Careful Cooking
- The heat generated from stoves and ovens is more extensive than most people think, and is awful for keeping your place cool in the summer.
- When you feel like a meal cooked in the oven, try and plan to cook multiple dishes at once, then refrigerate or freeze them and warm them up by individual serving in the microwave, or on a low oven setting. By doing this you’re maximizing the cooking you get done with one hot oven session, and minimizing the amount of heat you’re generating in your space.
- Opt for cooler food alternatives: a raw mixed vegetable salad instead of veggie stir-fry, toasted flatbread and chopped tomatoes with cheese instead of pizza, etc. Improvise! You might be surprised by the yummy cold recipes you come up with.
Instead of just turning up the air conditioning and draining your pockets with bills this summer, try making use of the other resources you have. Summer doesn’t have to be as expensive or as sweaty as you think!
Posted in Apartment Living, Rental Tips, Student Rentals | 2 Comments »
May 25th, 2010
The following is an article from The Globe & Mail published Monday, May 24th, 2010. This article was written by Dakshana Bascaramurty who interviewed Schien Dong, one of the founders of The Rentables. The original article can be viewed here: Landlords, you can’t hide from the Internet.
 Armed with an arsenal of websites detailing everything from area crime to health risks, home hunters can now easily find the truth behind dubious ads.
Sprawling 1,000 square feet, central air, laundry, private backyard and public transit at the door?
To those familiar with Craigslist’s Toronto listings, $990 a month for a two-bedroom apartment with that kind of description is a steal.
But before sending in an eager e-mail calling dibs, you may want to do some Internet research.
It turns out the transit service isn’t a subway station, but a bus stop. In the span of two weeks, there were four robberies within a six-block radius of the apartment. Only 9 per cent of Grade 9 students at the closest high school performed at or above the provincial average in applied math assessments. And the apartment sits on top of a crumbling hair salon. Still interested?
These days, potential renters and buyers can search everything from the number of break and enters on a block to detailed reviews of landlords written by current tenants. This month, the New York State Department of Health even launched an interactive map that shows types of cancer in each census area, as well as potentially hazardous sites nearby.
“I went to Street View and I turned around 180 degrees to see a huge cemetery in front of my face. At that point I was looking for a roommate and knew people would be turned off by that.”— Torontonian Schien Dong
While such resources certainly empower renters and buyers, they can also cause information overload, making the search an even more frustrating process. They also put pressure on those who compile listings to change their ways, since vague or misleading descriptions of properties can be easily debunked.
“Google Maps has become my new best friend,” says Laura Knapp, an Ottawa retail clerk who is planning to move to Whitby, Ont., with her husband in June.
With the free service, she can track the distance between a listed apartment and her husband’s future workplace, or test out an ad’s assertion that it’s “close to all amenities.”
At the same time, she worries that she has been too picky. Just two weeks away from the big move, she still hadn’t found a home – partly because of Whitby’s slim rental market, but also because she had a laundry list of requirements for the place (which she has since whittled down).
She religiously checks four websites each day for listings, and then spends more time doing background research on the ones that interest her.
Operators of such sites are clueing in to consumer behaviour.
When Torontonian Schien Dong created rental listing service TheRentables.com, he integrated snapshots of Google Street View to allow renters the chance to “walk through” prospective neighbourhoods. The idea came to him after previous experiences of seeing misleading apartment ads.
When checking out a house that was described as being in “a quiet neighbourhood” and “a walk to the bus stop,” he found a surprise that didn’t make it into the ad’s description.
“I went to Street View and I turned around 180 degrees to see a huge cemetery in front of my face,” he says. “At that point I was looking for a roommate and knew people would be turned off by that.”
While mapping tools are useful for checking out the aesthetics of a property, some address more vital information.
SpotCrime.com shows crime data for cities all over the world. Colin Drane, its creator, says many of the site’s visitors have consulted the crime maps when searching for apartments and houses.
The maps plot shootings, thefts, robberies, assaults and other crimes in major cities with little icons. When one moves the mouse over an icon, detailed information about the incident and when it occurred appear.
“I can’t imagine somebody who wouldn’t want to see crime data to help them in that decision process,” he says from his home in Baltimore, Md. “We periodically hear, ‘Thank you for this data … this was a useful tool to help me pick out a place.’ ”
Vancouverite Kye Grace, who worked as a real estate agent before recently taking on a job at a digital marketing firm, says he’s impressed with how much legwork buyers do before they consult an agent.
He’s seen clients turn to social networks to seek users’ opinions of properties and neighbourhoods that interest them. Websites such as myhood.ca collect detailed reviews of rental properties posted by tenants, in which some warn about lazy landlords and bed-bug infestations.
“The bottom line is that there’s little left that the person can’t do on their own if they look for it. A lot of it is from their own peers or people in their own shoes so it’s more trustworthy to them than from other professionals,” he says.
But Toronto real estate agent Julie Kinnear says her job can be frustrating when clients close their mind to properties based on non-contextualized data.
“It does have to be taken with a grain of salt,” she says.
She had a client dismiss a property upon realization – through Google Street View – that it was down the road from a police station. Another googled a property’s address and was spooked that a murder had occurred there a decade earlier.
“Realistically, there’s a lot of families in these neighbourhoods and good people. Bad things happen all over the place,” she says.
Still, Ms. Kinnear agrees with Mr. Drane that knowledge is power for house and apartment hunters. She includes all kinds of information gleaned from Internet resources in her listings to beat Internet-savvy clients to the punch. As a result, she’s been able to sell properties online to out-of-towners who have never stepped foot in the city, all through add-ons such as YouTube property tours.
“We just sold a place to people who live in Vietnam,” she says. “We can do a quick little video even from my camera and upload it to YouTube. It’s more [situations] like that that I’m dealing with: reassuring people that are not nearby.”
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May 18th, 2010
 The adored season of summer is nearly here, and as the warmth, freedom and fun approaches, so do the fruit flies, stifling heat and expensive air conditioning bills. Here are some tips and tricks to help you cope with the downsides of this amazing season.
When these annoying little creatures called fruit flies start invading your living space and compromising your sanity, don’t get frustrated and buy expensive (and toxic) pesticide traps. All you need to do is turn to earth’s natural occurring kryptonite…liquor. Here are 3 natural ways to take care of these tiny pests.
1. What you’ll need: brandy and a glass
- Pour a shot or two of brandy into the glass, and just let it sit.
- The flies are attracted to the scent of the brandy, and sit on the edge of the glass.
- The flies grow intoxicated by the alcoholic fumes and eventually fall into the brandy, and experience a drunken death by drowning.
2. What you’ll need: wine, a deep glass and plastic wrap
- Put a fair amount of wine in the bottom of the glass.
- Cover the top with plastic wrap and using a pin or pen, poke small holes in the plastic.
- The flies are drawn to the smell of wine, and enter through the holes but are not able to exit again.
3. What you’ll need: wine, a tapered bottle, a piece of paper and tape
- Leave wine in the bottom of bottle.
- Curve piece of paper into a cone, with the end being a very small hole.
- Tape the cone over top of the opening of the bottle (with the small end of the cone entering the bottle).
- The flies enter through the cone and then when it comes time to exiting the bottle, they have trouble navigating out of the small opening.
Now, place any of these homemade traps upon your window sill, in your kitchen, any spot where these pests like to gather, and enjoy a fruit fly free summer.
Posted in Apartment Living, Rental Tips, Student Rentals | 2 Comments »
May 10th, 2010
 Over the past few months we have been working hard to tweak our service based on user feedback. Here is a list of changes that have taken place so that the website can serve you better:
- Ability for landlords and property managers to post online rental listings with or without an account (using the dual-screen login)
- Updated account control panel for landlords and property managers making it easy to manage more than 1 listing
- Updated search engine friendly URLs for each post to ensure listings can be found on Google
- New footer menu with more relevant links
- New “Featured Advantage” page explaining the benefits of featuring your listing
- New “Advertise with Us” page to explain our new geo-targeted
- New Publisher API allowing other websites to embed The Rentables into their own site to display only their own units, or units meeting any user defined criteria
- Bug fixes to take care of compatibility issues or minor annoyances as reported by our users
Thank you for constantly providing us your feedback. We take your suggestions to heart, and work hard to ensure we provide the easiest classified website to use for all of our users.
Posted in Site Development, The Rentables News | No Comments »
May 6th, 2010
Today The Rentables was featured in an article in the Toronto Star. Also mentioned were co-founders Pavel Tchourliaev, Schien Dong and Andrew MacDonald as well as Toronto area real estate sales representative Elena Fort. To see a full size PDF version of this article, click the image below: SG2V9D2UMWF4
After working hard to develop The Rentables throughout 2009 and establish a foothold, the team has shifted its focus in 2010 to growing our user base. As more people are aware of the service we offer, we are confident our site will explode in popularity. Simply put, The Rentables offers a better online rental listing search experience for its tenant users, and a simpler more streamlined posting process for its landlords and property managers. The more users our site has, and the more postings our site has, the more useful the site becomes for all parties involved.
We are at a level where TheRentables.com is a great resource to advertise your unit for rent or search for a new rental unit as a tenant. Best of all, both tenants and landlords can use our service free of charge, so be sure to check it out next time you are in the housing rental market, and be sure to tell your friends!
Posted in The Rentables News | No Comments »
May 3rd, 2010
 When starting out in real estate investment, many investors opt to manage their properties themselves. Most commonly this is done to save the expense and improve cash flow. Another reason some investors take this approach is to learn as much as possible about what is required to manage a property before hiring this function out. In this part of our series on building your real estate investment team, we take a look at how to select a great property manager. With responsibility for such an important part of your real estate investing business it is crucial that you make a good decision when it comes to selecting property management before turning over a set of keys. Unfortunately, this decision is tougher than it may seem.
You’ll first want to make sure you have a property manager who is familiar working with the type of rental properties you deal with. If you are renting an executive suite in a luxury high-rise condo you may want a different manager than someone working with multi-family apartments, student rentals, or rooming houses. The process of finding and keeping the right tenants is a little different for each niche. In this article we’ll explore what services to look for, how to narrow down your candidates, and some potential pitfalls to be aware of.
Real Estate Investment Team selection criteria
Once again, here are the things you’ll want to look for when selecting any member of your team:
- Owns investment real estate themselves
- Cares about your goals
- Has the appropriate qualifications
- Has specific experience working with investment properties in the area
- Has reasonable fees
- Provides positive chemistry
Why Add a Property Manager to Your Team?
As a real estate investor, you make money by finding great deals, putting them together, getting them up to speed and then repeating this process as many times as possible. Property management is a very time intensive part of the real estate business, and if your goal is financial freedom, hiring out the day-to-day management of your properties to a trusted property manager can help you get there. Rather than dealing with tenants, maintenance and repairs, you can focus on finding more positive cash flow properties and growing your business. There is a cost for property management, but you must weigh that cost against the potential benefit.
Property managers will offer different capabilities, levels of service and expertise. Some of the things property management companies may be able to help you with include:
- Advertising
- Showing the property
- Interviewing tenants
- Tenant screening (including credit and background checks)
- Filling out leases
- Collecting rent
- Handling evictions and other tenant issues
- Managing trades for repairs and maintenance
- Coordinating lawn care and snow removal
- Regular property visits
Property Manager Compensation
Fees for property management are most commonly defined as a percentage of monthly rent or a flat monthly fee. Whatever the arrangement is, be sure to find out which items are included and which are extra.
You’ll also want to make sure the compensation structure aligns the PM’s interests with your own. If you pay a flat monthly fee and the manager is responsible for filling vacancies, do they really have much of an incentive to get that unit filled? If you are paying one month’s rent to find a tenant, do they really have an incentive to find a good tenant rather than moving in the first applicant that has a pulse?
Finding a Property Manager
As with any service you are looking for, you can check your local Yellow Pages, search online, or seek out referrals. Since a quality property manager is one of the most important members of your team, your best bet for finding a great manager is to ask for referrals from other investors or members of your real estate investment team. In the process you’ll be able to get some real life details on who offers good service in the area, and who you should avoid.
Qualifications
More so than with the other members of your team, the number one qualification when selecting a property manager is experience. There are courses and certifications that exist, but property management is a tough business which requires certain knowledge that can only come with experience. Look for someone who has been in the industry full-time for a few years, focuses on the type of properties you have, and has positive recommendations from other investors.
Investment specific experience
Most property managers work with either landlords or large property firms and have an idea of what their clients need, but finding someone who owns rental properties of their own is beneficial. A PM who owns and manages their own rental properties will share a similar mindset and understand your priorities best. Having a positive relationship with your property manager will make your real estate investment career far more pleasant, so be sure to choose wisely and keep the communication lines open.
Narrow down a few managers based on recommendations from other investors and team members (you should already have a few team members at this point) and then meet with each. Afterwards, consider whether they meet the 6 criteria above and whether your gut-check says you’d be happy working with them to build a long-term relationship. Once you’ve found a property manager you like, get your agreement in writing and be clear on what services are included, how you will communicate, and what each of your expectations are for working together.
Check back soon for Part 8 of Building Your Real Estate Investment Team where we’ll provide some tips on selecting an Accountant to help keep your finances healthy.
Building Your Real Estate Investment Team Series:
Building Your Real Estate Investment Team – Part 1: Introduction
Building Your Real Estate Investment Team – Part 2: Selecting a Mortgage Broker
Building Your Real Estate Investment Team – Part 3: Selecting a Realtor
Building Your Real Estate Investment Team – Part 4: Selecting a Lawyer
Building Your Real Estate Investment Team – Part 5: Selecting a Home Inspector
Building Your Real Estate Investment Team – Part 6: Selecting an Insurance Broker
Building Your Real Estate Investment Team – Part 7: Selecting a Property Manager
Building Your Real Estate Investment Team – Part 8: Selecting an Accountant
Building Your Real Estate Investment Team – Part 9: Conclusion
current condition of all the major systems in your home.
These include:
- Roofing
- Exterior
- Foundation and Structure
- Electrical
- Plumbing
- Interior
- Insulation and Ventilation
- Heating
- Cooling
Posted in Real Estate Investment Tips | 3 Comments »
April 23rd, 2010
 Moving on to the next part of our series on building your real estate investment team, we examine how to select an insurance broker or agent as part of your team. A broker will typically work with multiple insurers and can shop around for the best rate, while an agent will generally represent a single insurer. Before closing you’ll need to have insurance in place, and a good broker or agent can take care of all the details. For the remainder of this article, we will use the terms broker and agent interchangeably.
Having an insurance broker well versed in the type of rental properties you deal with is important to ensure you get the right coverage. As a landlord, your insurance needs are likely a little different from the typical homeowner. We’ll provide a couple examples where things may differ and give you the knowledge required to select a great insurance agent for your real estate investment team.
Real Estate Investment Team selection criteria
We realize by the 6th installment of this series, you have seen this list before and it is getting a little played out, but here are the things you’ll want to look for when selecting any member of your team, and an insurance agent is no different.
- Owns investment real estate themselves
- Cares about your goals
- Has the appropriate qualifications
- Has specific experience working with investment properties in the area
- Has reasonable fees
- Provides positive chemistry
Why Add an Insurance Broker or Agent to Your Team?
After passing off on the home inspection and waiving your conditions you’ll be headed toward closing your deal. Most lenders require the property to be insured as part of the mortgage conditions so you’ll need to arrange insurance on your property before closing. Better yet, working with a good broker, you’ll be able to confirm that your property is insurable before waiving your conditions. An insurance broker can help you by:
- Evaluating insurance needs
- Advising on appropriate coverage
- Obtaining premium quotes
- Answering any questions
Having a quality agent on your team will provide you with the confidence of knowing you have the right coverage at a reasonable rate.
Insurance Broker / Agent Compensation
When dealing with insurance for residential real estate you’ll rarely encounter any fees. Most agents are compensated by the insurers they work with, and your policy premiums will be your only out-of-pocket. Of course, if you have a claim you may need to cover a deductable, but there should be no need to pay your agent upfront.
Finding an Insurance Broker / Agent
Again, when looking for an insurance representative, you can flip through your local Yellow Pages, take your search online, or best of all seek referrals from other investors or members of your real estate investment team. Often your Realtor will be able to recommend a suitable insurance professional in your area.
Qualifications
As with most types of professional, there are usually regional or national associations which serve as governing bodies for insurance agents. Look for a professional that is licensed or affiliated with the appropriate organization in your area and for someone who specializes in property insurance.
Investment specific experience
Taking the time to find an insurance professional with investor specific experience is important. As an investor you will have unique insurance needs and it is best to have a representative who understands the coverage you need as a landlord. Selecting a broker or agent who owns investment real estate themselves is an even better choice since you’ll be on the same wavelength.
One example of an issue to be aware of is the length of vacancy allowable by your insurance policy. Many property insurance policies cover only 30 days of vacancy, and despite the best of intentions vacancies sometimes last more than 30 days. If your insurance lapses due to this technicality you could find yourself in trouble with the bank. An agent who understands the needs of a real estate investor will be able to arrange more appropriate coverage and ensure you are actually covered when you need it.
Narrow down a few insurance professionals and then consider whether they meet the 6 criteria above. Meet with a couple brokers to see who you think would be the best fit for your team and then start working together to test the waters. If you’re happy with your agents work on your first deal you are done, if not, keep looking.
Check back soon for Part 7 of Building Your Real Estate Investment Team where we’ll provide some tips on selecting a Property Manager.
Building Your Real Estate Investment Team Series:
Building Your Real Estate Investment Team – Part 1: Introduction
Building Your Real Estate Investment Team – Part 2: Selecting a Mortgage Broker
Building Your Real Estate Investment Team – Part 3: Selecting a Realtor
Building Your Real Estate Investment Team – Part 4: Selecting a Lawyer
Building Your Real Estate Investment Team – Part 5: Selecting a Home Inspector
Building Your Real Estate Investment Team – Part 6: Selecting an Insurance Broker
Building Your Real Estate Investment Team – Part 7: Selecting a Property Manager
Building Your Real Estate Investment Team – Part 8: Selecting an Accountant
Building Your Real Estate Investment Team – Part 9: Conclusion
current condition of all the major systems in your home.
These include:
- Roofing
- Exterior
- Foundation and Structure
- Electrical
- Plumbing
- Interior
- Insulation and Ventilation
- Heating
- Cooling
Posted in Real Estate Investment Tips | 2 Comments »
April 16th, 2010
 When you purchase a property, one of the simplest ways to make income from it is to rent it out. You’ll want this rent revenue to cover the mortgage payments and any of the maintenance on the property itself. Ideally, you’ll have some profit left over on top of that.
But what are other ways you can have your property work for you? What many folks don’t realize is that they can leverage the equity of their home to generate more income.
Now, there are some people who are completely against using home equity and their number one goal is to pay off their mortgage. They either find it too risky or don’t know where to start. Yes, it can be risky if you don’t know what you’re doing, but if you do, you can wisely wield the double edged sword known as leverage.
When you want to tap into the value of your house, you can use it as collateral and get a home equity line of credit (HELOC). A HELOC basically translates your home equity into funds you can use.
Now that you have funds that you can work with, how can you get that money to work for you? There are several things you may want to consider:
Other Real Estate Investments
If you’re an avid real estate investor, you can use the funds from your HELOC as a down payment on other properties. Wisely selected properties can generate more income and appreciation in return and can allow you to keep on expanding your property portfolio.
Stocks
Unless you’re knowledgeable in stocks, you’ll want to forego on this option because it’s too much of a gamble. While you can make an investment in a company like Apple and double your money in a few years, your stock picks may tank and your equity could vanish. The problem is – if you lose the money from you home equity line, it’ll take longer for you to finish paying down your mortgage (assuming that is even your goal).
Index Funds, ETFs and Mutual Funds
This option is less risky for those who are not familiar with investments and financial products. You can usually find an index or a mutual fund that averages a return of 3-8% a year. If you can beat the interest rate paid on your line of credit, your will end up ahead of the game. Your gain in this case may not be a lot, but it’s better than nothing and the interest on this loan, since it is for investment purposes, is tax deductable.
Life Insurance with Cash Growth Component
While a lot of life insurance products are scams, there are some decent ones out there. What you want to look for is a policy that has a cash growth component, meaning that the money you pay generates a return. There are also tax advantages to this option where you can defer taxes. With a good insurance company, you can generate a double digit annual return on your money (not including taxes), which could translate to about 7% including taxes.
How to calculate available equity:
Here’s how you can get a rough idea of how much equity you have available to you:
If you have a $100,000 house and $50,000 of it has been paid off, you have that $50,000 of equity to work with. A bank will typically lend you up to 80% of the value of your home. So with a home valued at $100,000 at 80% loan-to-value you’d be able to borrow $80,000. If your mortgage balance is only $50,000 you would be able to get a HELOC for the remaining $30,000. Some lenders also provide options to exceed 80% LTV allowing you to take out even more equity. With the basic scenario above, you’ve got $30,000 to work with.
How much will a line of equity cost you? The interest rate will depend on your credit history, for the most part as well as the loan to value ratio of the loan. The more equity you want to take out, the higher your rate. A 5% interest rate is a realistic number.
A word of CAUTION:
Remember, whatever you do, you’ll have to pay that money back to the bank. So make sure that your investments are either very safe or you really know what you’re doing. Otherwise, if you can’t make your mortgage and HELOC payments, the bank will come after you and your other assets.
Be smart and put your equity to work to earn a greater return.
Posted in Landlord Tips, Real Estate Investment Tips | No Comments »
April 12th, 2010
 I’ve been getting a lot of letters from my bank regarding their insurance offerings. I’m not interested in their products right now, but it got me thinking about banks and their way of running things, specifically predatory lending practices. Bank insurance can be one of them, so it’s a topic worth touching up on.
Predatory lending is a broad term. Usually it is defined as “imposing unfair and abusive loan terms on borrowers”. In simple words, it’s the lender trying to trick you into a loan you shouldn’t be in, or get more money out of you than you’d normally have to pay.
There are a few categories of predatory pricing you should be aware of. Here’s a quick list:
Unjustified risk-based pricing
When a lender gives you money, you present a risk to them. The lender must account for the risk that you won’t repay your loan. Some borrowers present a higher risk than others and there are many ways of determining this level of risk (credit scores, for example). The higher the risk, the higher the interest rate you’ll get and the worse the terms. The problem comes when a lender considers you and your loan to be more risky than you actually are, and therefore, charges you higher interest than you deserve.
Single-premium credit insurance
This is the insurance your lender may try to sell to you in case something happens and you’re unable to pay off the remainder of the loan. You do not want the lender to go after your family for money, so you may be inclined to consider this. However, this type of insurance is usually very expensive and very limited. More importantly, you can purchase life insurance policies from qualified brokers that will cover you and your family for the amount of the loan and you’ll pay a lot less for better coverage.
Failure to clearly disclose terms or pricing
Loans can get very complicated. There’s a lot of fine print that the lender knows about and you don’t. Therefore, it is easy for him to tell you the things he wants you to know and leave out those he doesn’t (commonly known as adverse selection).
That’s exactly what happened during the real estate and credit crisis a few years back. Lenders gave out these loans that looked wonderful to borrowers, however, these loans had a variable rate component built into them. So after a certain period of time, the low interest rate would turn into a much higher rate, causing the borrower to default on the  loan. All of that was in the fine print, but very few actually knew about it and banks just wanted to pad their lending portfolios so they kept pushing these products.
Others
There are also other predatory lending practices such as short term based loans with disproportionally high fees and securitization abuses.
Protecting your money
The best way to protect yourself in this case is knowledge. First off, be familiar with different types of predatory lending practices before you speak to a lender. Second, shop around and speak to more than one lender. Don’t put all your eggs in one basket. Make it clear that you’re speaking to several lenders. Get them to compete for your money. A great way to do this is to use a mortgage or loan broker you trust who can help you find the best terms for any type of loan you may need.
Sources:
Predatory Lending – Wikipedia
Posted in Real Estate Investment Tips | No Comments »
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