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Think You’re A Real Estate Pro? Take the Quiz and Find Out!

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When it comes to real estate knowledge, are you as seasoned as an agent or still renting a studio? See how you stack up with our real estate quiz!

1. What does a buyer do FIRST when they find a house they want?

A. Hand over cash to the seller.
B. Set a closing date.
C. Write an offer.
D. Sell their current house.

2. True or False: A house can’t fail a home inspection.

3. What happens when a real estate agent refers you to another agent?

A. You pay both agents separately.
B. The referral agent gets a cut from the selling agent’s commission.
C. The agent who is referred gets their entire commission.
D. The referral agent automatically gets the next closing.

4. Which of the following is NOT a downside to FSBO (For Sale By Owner)?

A. It’s a lot of work.
B. A property could sit on the market for a longer period of time than normal.
C. A property could sell for less than if the sellers had an agent.
D. Sellers won’t have to pay agent commissions.

5. What can a non-recourse loan be used for?

A. Purchasing a home.
B. Purchasing just a vacation rental property.
C. Purchasing just a long-term tenant rental.
D. Purchasing properties that are turned into rentals (regardless of type).

6. Why is “We Buy Houses For Cash” a bad idea? Choose all that apply.

A. It’s a scheme that only offers cash for sales.
B. It’s a scheme that preys on the vulnerable.
C. Sellers tend to massively lose out on their home’s actual value.
D. It’s a scheme that takes any property, which hurts future buyers.

7. True or False: It’s a bad idea to list your home in the fall.

Friendly neighborhood with porches and sidewalk.

8. What is an escalation clause?

A. An addendum that sellers include in their home listing.
B. An addendum that buyers can add to their offer.
C. An addendum that real estate agents write up at closing.
D. An addendum that lawyers add in at closing.

9. Which of the following is NOT an advantage to building a house?

A. Getting to customize the design.
B. Having more control in a house’s structure/overall look.
C. Typically more expensive than buying.
D. Can add in features that are more expensive to install on an existing house.

10. What’s the difference between a vacation rental and long-term tenant rental?

A. Long-term tenant rentals are for people living in the property for a longer amount of time (usually on a lease), vacation rentals are for guests to rent during travel.
B. Vacation rentals are only in tropical locations, long-term tenant rentals are in cities.
C. A vacation rental has to be listed on Airbnb and a long-term tenant rental is listed with VRBO.
D. Long-term tenant rentals are exclusive properties that people rent first, then buy.

Answers

1. What does a buyer do FIRST when they find a house they want? 

A. Write an offer. The sellers have to accept the offer in order for the sale and eventual closing to go through.

2. True or False: A house can’t fail a home inspection.
True. Home inspections solely look at the conditions of a house. Even if your house has major repairs needed, you won’t “fail” an inspection.

3. What happens when a real estate agent refers you to another agent?

B. The referral agent gets a cut from the selling agent’s commission. Referral agents traditionally get 25% of a closing agent’s commission.

4. Which of the following is NOT a downside to FSBO (For Sale By Owner)?

D. A property could sell for less than if the sellers had an agent. Real estate agents have more of a pulse on listings and pricings and can get sellers the best deal.

5. What is a non-recourse loan used for?

D. Purchasing properties that are turned into rentals (regardless of type). As long as the home was built after the ‘40s and is not the owner’s primary residence, a property will qualify.

6. Why is “We Buy Houses For Cash” a bad idea? Choose all that apply.

B. It’s a scheme that preys on the vulnerable.
C. Sellers tend to massively lose out on their home’s actual value.

7. True or False: It’s a bad idea to list your home in the fall.

False. That myth might have once had more truth to it, but in this day and age you can still list your home in the fall (or winter, for that matter).

8. What is an escalation clause?

B. An addendum that buyers can add to their offer. Escalation clauses give a buyer’s offer a boost. If there are other interested buyers, this clause allows buyers to say “I’ll increase my offer by [x incremental dollars].”

9. Which of the following is NOT an advantage to building a house?

C. Typically more expensive than buying.

10. What’s the difference between a vacation rental and long-term tenant rental?

A. Long-term tenant rentals are exclusive properties that people rent first, then buy.

If you got all 10 right…

You are a seasoned real estate pro! Are you sure you’re not a real estate agent?

If you got 7 to 9 right…

You are at least a second-time homeowner! You have tons of insights that you’ve gained over the years.

If you got 4 to 6 right…

You’re a first-time homebuyer! You’re learning lots and it’s starting to show.

If you got 3 or less right…

You’re a renter! Good for you for building your real estate knowledge — keep going!

Long-Term Tenant or Vacation Rental Property: Which Is Best?

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Before buying an investment property, you need to know the type of rental you’ll turn it into. While both types have their pros and cons, vacation rentals and long-term tenant rentals are drastically different.

Even if you think you have your mind made up, some further review and reflection won’t hurt. Take a look at the benefits and drawbacks of buying a vacation rental property or a long-term rental.

Long-Term Tenant RentalVacation Rental
PROS
– More consistent income
– Won’t have to worry about constantly finding renters
– Only have to pay for cleaning in between renters (about once a year)		PROS
– “Bad” renters only stay for a few days
– Not allowing pets won’t hurt your potential for renters
– Can have some downtime if there’s an off-season
CONS
– Could be a smaller profit margin
– Some cities require rent control
– Defects/issues may take longer to find out about (since you’re not in the property as often)		CONS
– Not allowed in all areas
– Downtime/off-season means no profit
– Will pay more for maintenance and cleaning
– Have to furnish

Long-Term Tenant Rentals

A long-term tenant rental is a property you lease out for a person or people to live in. Your property becomes their primary residence and they pay you to rent.

Pros

Consistent income: When successful, you’ll have very little downtime (unlike a vacation rental property that might have an off season). It’s nice knowing you can count on the same amount of rent each month.

Less turnover: Once you have tenants with a lease, you won’t have to worry about finding a new renter for months (if not a year or longer). Having to constantly find or market for renters is stressful — the less you have to deal with this, the better.

Spend less on cleaning: You really only have to hire professional cleaners between renters, or maybe annually if your renters are staying longer than a year. The renters are primarily responsible for keeping your place clean, which is not the case in a vacation rental.

Cons

(Potentially) smaller profit margin: Charging per month instead of per day significantly lowers how much you’re making each day with a long-term rental. For example, a vacation rental might cost $150 a night, but a long-term rental might be $900 a month — $30/day.

However, we say “potentially” because vacation rentals often won’t have visitors for months when there’s an off season. Depending on your circumstances, a long-term rental could still net an equal (or even greater) profit.

Dealing with rent control: Some cities put a cap on the amount you can charge for rent (New York is famous for this). If that’s the case, you can’t raise your rates, even if they keep up with the rising cost of living.

Issues take longer to find out about: Vacation rentals require more frequent attention. Things like a leaky faucet or a broken tile become apparent much faster when you’re around the property more often (which means they can be fixed much faster, too).

Vacation Rentals

A vacation rental property is an investment property that you use solely for (you guessed it) vacationing guests — picture Airbnb and VRBO rentals. While some rentals are available all year round, many vacation properties have an “on” season and an off season — they’re often only rented out for part of the year.

Pros

Bad renters are temporary: Problematic renters only stay in your property for a short amount of time, likely never to return. With a long-term rental, you run the risk of having awful tenants for an entire lease. Even if you get bad renters, most companies offer coverage that protects you, the property owner.

Downtime: Some people enjoy having several months off the clock. This, however, is also a drawback, as your property won’t make money in the off season.

Don’t have to worry about pets: Not allowing pets can hurt property owners with long-term rentals by limiting the tenant pool. As most people don’t bring pets on vacation, you won’t have to worry about this.

Cons

Not allowed in all areas: Some condos and cities prohibit turning your property into a vacation rental or have strict restrictions on how you can rent it out.

Higher maintenance cost: Much of your profit will turn over to cleaning and maintenance companies.

Furnish: Expect to pay thousands more for setting up and designing your vacation rental property than a long-term rental. Furniture, appliances, and decor are all expected upon guest’s arrival.

Between a long-term and vacation rental property, which is the better investment? That’s up to you to decide. But the great news is that no matter what type of investment property you’re looking for, you can find it on RealtyHive! Search through our listings and begin growing your investment real estate portfolio today.

What Is a Non-Recourse Loan?

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Owning a rental property can be a great investment and added source of income. A non-recourse loan is a specific type of loan that’s used to finance a rental property. With a non-recourse loan and rental property in mind, you could be well on your way to building your financial portfolio.

What’s the difference between a recourse and non-recourse loan?

If you fail to pay your mortgage and have a recourse loan, the lender will take your property and you’ll still have to pay the difference on your loan.

A non-recourse loan is a safer option for borrowers. In the event you can’t pay your mortgage, the lender will still take your property but you won’t pay what’s left on the loan.

How does a non-recourse loan work?

Non-recourse loans are unique in that they work with self-directed IRAs or Solo 401ks (individual retirement accounts). In order to qualify for a non-recourse loan, you have to have enough in your IRA to put down at least 40 percent of the property down, plus reserves.

What can a non-recourse loan be used for?

Non-recourse loans can be used to purchase the following types of property:

  • Residential: We’ll list the specifics of residential properties that qualify below.
  • Agricultural: You can buy agricultural land and lease it out, generally for crops or livestock.
  • Commercial: From commercial office buildings to smaller spaces that will be used as businesses, a non-recourse loan can finance this endeavor.
  • Multi-Unit: Apartment buildings or houses that have multiple units available also qualify.

It should be noted that a non-recourse loan can not be used towards renovation. If you see a fixer upper you like, know that this type of loan will not finance that project.

Residential Qualifications

There are some very specific guidelines to whether a home qualifies for a non-recourse loan or not. While this may vary slightly from lender to lender, this serves as a good rule of thumb:

Year

Houses need to be built after 1940. If you find a great pre-1940s home with a solid foundation and little need for renovation, you may still qualify.

Location

The property needs to be in the US (Hawaii and Alaska included). International properties don’t qualify.

Price

Houses need to be at least $70,000.

Residence

You cannot live in this property, nor let anyone in your family or friends live there. You have to use it as an investment/rental property. It cannot be your primary residence.

Roof

A single unit in an apartment likely won’t work, because houses only qualify for a non-recourse if they have their own roof. Terraced (row) homes or any type of residence where you aren’t responsible for your roof won’t work.

What kind of rental property can I turn the house into?

The property can become a regular rental, such as for long-term tenants, or a vacation rental! Choosing the right avenue for renting should be based on the property’s location and the area’s needs. For example, a house near a college town is a great rental property for students; a cottage in the mountains would be better as a vacation rental.

Are there any other financial qualifications?

Yes, though these will vary by lender. You will need:

  • A good credit score (aim for at least 700, preferably higher)
  • Proof of your self-directed IRA and a letter from your IRA account holder
  • Income/expense statements, generally from the past two years
  • A solid DSCR (debt service coverage ratio — it indicates how likely you are to profit from this investment), usually about 1.25

Again, these requirements aren’t the same for every lender, but they serve as a general idea.

Whether you’re breaking into the real estate investment world for the first time or are a seasoned vet, look through RealtyHive’s database to find your perfect property. From owning homes to owning rental properties, our time-limited events can help you find what you’re looking for.