Is now a good time to become a landlord?

Q: Your column and radio show are fast becoming mandatory for me, especially as they relate to real estate.

I have a question. Is this a good market for landlords? I am specifically thinking about trying to generate rental income. I own rental property in the Smyrna, Ga., area, about a half mile from the village green. This is a good neighborhood filled with older houses.

Do you know if that area has held its own as far as value of residential real estate? It's hard to get to the truth with all the ads for agents on the Internet.

A: While there are areas of the country I know better than others, it's hard to stay on top of everything as a syndicated columnist -- even if I do spend quite a lot of time in the Atlanta area. But it's even hard to stay on top of all the neighborhoods in the metro area in which I live, which happens to be Chicago.

So I don't know specifically what is going on in your neighborhood, but I can tell you exactly what to do to find out how things are going.

Start by taking a look at all of the properties that are on the market now and that are competitive with the types of rental properties you already own. Visit the open houses so you know what your competition for sale or rentals looks like. Find a great real estate agent who has been working in the area for a long enough time to have seen at least one other down-market cycle, or someone new enough who is so starving for business that he or she will work harder than anyone else to get you the information you need to make a smart investment decision.

If the area is filled with foreclosures, then you'll need someone on your investment team to help you track how much these properties are selling for and how long the timetable for those foreclosure sales is taking.

Once you start to visit these properties, look at the sales data and pull some rental information so you'll know whether these properties will meet your investment needs.

In general, I can tell you that if you don't mind being a landlord, and you have the cash and available credit to purchase properties, it's starting to be an excellent time to buy. There have been twice as many foreclosures this year as last, and if this pace continues, more than 1 million properties will fall into foreclosure in 2008.

Lenders have started to unload some of these properties at advantageous prices, which usually bodes well as a long-term hold. The big-time residential property investors I know are buying up good properties for good prices.

As far as renting out these properties goes, it's tough to command a high price at the moment. But if you can afford to carry them through the tough times, I think you'll enjoy long-term appreciation. Also, as fewer people can afford to buy, they'll look to rent, and landlords will once again prosper.

As a general rule, some real estate investments may be better than others. In some areas, you may be able to buy single-family homes but may not find a market for buyers or renters. You need to gauge the market conditions to see whether people are interested in rentals in a particular area and what those conditions are. If you buy a single-family home in an area with many foreclosures and vacancies and few rentals, you may not be able to rent the home even if you buy it at a low price.

I wouldn't plan on making a killing in the short run and please remember there are risks involved in investing in real estate. It's just about what you feel you can comfortably carry for the next few years.

Q: When I was going through bankruptcy about five years ago, I quitclaimed my name off of my property with my husband to avoid having the house taken. Now some years later, I want my name back on the property, but my husband and I don't know how to do it. Can you help?

A: You would do it exactly the same way as when you quitclaimed your name off of the property before. Your spouse would sign a quitclaim deed transferring ownership of the property to you and your spouse. You'd get that document notarized and file it at your local recorder of deeds. You may have other forms to fill out, particularly in states that have taxes on the transfer of deeds and you may have to pay a fee to your local municipality to transfer title of the home.

But in general, a deed transferring title from your husband to you and your husband along with the other required forms should be enough to get title of the home back in both your names.

I have a lot of information about quitclaim deeds on my Web site; you might want to read more about them here and learn what other people have done in the past when they have transferred title to their homes.

Q: My sister is building a house and it will be finished soon. She plans on closing in mid-August. Can you tell me the name of a release form from the supplier that she should use?

A: I think the form you're looking for is a lien waiver, which is a legal form that builders and suppliers fill out indicating that they have been paid in full from a job and that they waive any right against the property they worked on or delivered materials to.

The key thing is that you have to make sure you get the lien waiver from the supplier before you pay him or her, or in exchange for the check, so you have some protection from a disreputable tradesperson who will take your cash and then put a lien against your property anyway.

Typically, you'll need more than one lien waiver. But if you're working with a builder, the contract with the builder should require the builder to deliver the property free of liens. That means the builder should be the one to get the lien waivers from all of the suppliers and subcontractors -- not your sister.

So, as a condition to any payment, or the final payment, to the builder, the builder will need to deliver a package to your sister to show that all subcontractors and all suppliers have been paid in full and have waived their lien rights against your sister's property.

If your sister is buying a house from a builder, rather than having the house built on land that she owns, she should make sure that she receives title insurance at the closing of the home that would cover her against any lien that could arise from the work done on the property by the builder. The title company would then have to work with the seller/builder to make sure they are satisfied with all of the documentation.

A real estate attorney will be able to shed more light on the subject. I hope your sister is using one. If not, she should probably invest in an hour or two of a good attorney's time to go over her contract and make sure that the builder delivers the house he has promised.

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

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