Tag Archive for 'real estate investing'

Home Improvements Sellers Should Avoid

Published on May 23, 2011 in Selling Properties. 0 Comments Tags: , , , , , , .

It’s fairly obvious there are certain home features that can break or make a home being sold.  When selling a property, there are a few home-improvements projects that shouldn’t be on the agenda.  It’s important to know the difference, so money and time will not be wasted.

Before selling a property, take a look at some of these home improvement not-to-do tips:

Expand. A common mistake sellers make are creating extreme add-ons to the home.  Fixing the property up to where it’s larger and more expensive than the neighbors is superfluous.  Major additions can price the home out of the market, and increase property taxes for the future homeowner.

Home office. Many people tend to do work at home or work from home.  To build an entire office can be a waste of perfectly good square footage.  Custom made bookcases and big built-ins are extremely difficult and expensive to change or remove.  The homeowner can view this as a project they don’t want to deal with.

Landscape. Having a beautiful front or backyard will immediately attract the buyer.  If the garden is too elaborate, the buyer will start thinking about the time and maintenance it will foresee.  Keep the yard simple with easy maintainable plants that offer a lot of color.

Swimming pool. Surprising enough, one the most common project that can turn buyers away is a pool.  Families with young children view it as a safety risk.  Others don’t want to be bothered with the maintenance.  Also, pools take over valuable backyard space.

Unnecessary improvements. It’s not necessary for a roof to be replaced when it only needs a few fixes.  Also, upgrading a plumbing system is pricey, and the seller will not get that money back.  On the contrary, staying on top of routine repairs and home-maintenance responsibilities will inform the new owner on what important upgrades they will need to make.

Unfinished projects. If a project is not going to be complete for open house and/or a walk-through, then don’t start it.  Either hire a professional, or just don’t do the project.  If small fixes are feasible then stick to that.  The idea of rearranging or revamping a project that won’t be completed is not going to bring any extra value to the property.



Negotiating a Home Offer

Published on May 16, 2011 in Selling Properties. 0 Comments Tags: , , , , , , , , , , , .

It doesn’t happen very often the initial offer is accepted.  Almost always there is some sort of counter offer and that is where the negotiations begin.  The negotiations can vary from solely the price or to including particular appliances.  The key is to always be ready for haggling.

Here are a few tips when it comes to negotiating a home offer:

Fix it. Make sure to analyze the home carefully.  If there are obvious blemishes then correct it.  Start with improving minor fixes.  If the home needs to be painted or cleaned up, then do it.  The carpet or the landscape is also very crucial.  By fixing up anything the buyer can point out right away will help strengthen the seller’s negotiation.

Competition.  Always review the competition to know what is out there.  By knowing what other people are getting for their home will give a realistic idea of an asking price.  Setting the price too high will not attract buyers.  Setting the price too low will affect the possibility of getting the true value of the home.

Marketplace.  Once knowledge of the local market is set in place, begin researching the larger real estate market as a whole.  Having an understanding if the property is located in a buyers’ or sellers’ market, offers a better idea of how fast the home will sell.  It’s always a good idea to ask an agent for information on the home sales in the area.  If possible, try speaking with former neighbors to get an idea on their experiences selling a nearby home.

Negotiate. An important factor on selling the home is to look beyond the price.  Remember that everything is negotiable.  If the buyer will not match your price then discuss who will pay for upgrades, closing costs, warranties, appraisals or inspections.  By understanding the transaction can have many pieces; the agreement among both parties can be much more satisfying at the end.

Common Mistakes Made By Sellers

Published on April 26, 2011 in Selling Properties. 0 Comments Tags: , , , , , , , , , , , , , , , .

The seller should always look at the listing as if they were purchasing the property.  Would you purchase this home if you saw the listing?  What attracted you the most and what makes you want to pursue more information?  Was it the pictures?  How it was described?

Here are few tips on common mistakes that sellers make when listing a home.

No Photos. It should be a no-brainer that including photos can set one property above the rest.  Many sellers commonly list properties with no pictures.  They prefer their personal items and valuables not to be visible in the photos.  This could raise a red flag immediately for the buyer.  They may assume automatically there is something dissembling with the property that has no pictures available.

It’s always a good idea to have about dozen photos.  It will portray an idea of what the buyer could expect, and persuade them to physically visit the property.  If the listing talks about great views or spacious living areas, the photos can confirm what is being described.

Transaction Details. The past few years, it’s not a secret the economy has been doing poorly.  This allowed buyers to have a mini course in purchasing distressed properties—short sales and/or foreclosures.  The experience has not always been positive, and the red flag can arise again.  A distressed listing without any transaction specifics may be avoided immediately.   If the listing doesn’t mention whether the lender has been informed and a price has been agreed upon, most buyers will not want bother.

Owners of a distressed property that are upfront about the details have a better opportunity to attract the buyers that are ready to move forward.

Exaggerations. There is nothing wrong with using creative statements when listing a property, but outlandish claims is where the line is drawn.  When writing, “best home on the market” is not doing any favors for the seller.  When the buyer enters the home, they could be set up for disappointment if the claim doesn’t meet their expectations.

Sellers should avoid using hyperbolic claims.  Developing a more sensible strategy focusing on flattering adjectives leaves room for the other opinions.

Perfect Pricing. A low price is always a great idea to grab the attention of buyers.  However, going too low on the asking price may backfire.  Normally a property will attract multiple buyers at the low asking price.  The price will climb as the offers are coming in.  This is a good strategy, but it doesn’t come without risk.  Also, the low price could potentially attract unqualified buyers as well.  If this happens, the house will not sell, and the seller will have devalued the property with that low asking price.

If the seller wants to take the risk with the low listing price, make sure to have done the research and gained the knowledge of current market conditions.

Everything to Know About a Rent-To-Own

Published on April 18, 2011 in General. 0 Comments Tags: , , , , , , , , , , , , , .

 

When the housing market is being difficult to sell a home, one can consider Rent-To-Own as an option. For those that are not familiar, here is a quick run down on how it works.

The process normally begins where the owner of the home puts the property for sale because they may not be able to afford the payments anymore. The home has been on the market for months, and the finances are becoming too much. Now the owner is getting desperate to sell, but doesn’t want to lose any money. This would be the time to consider a rent-to-own option.

Before an agreement, the owner has to make a decision on the sale price and rent they are charging for the house. Both amounts are open to negotiation, similar to a regular sale. The owner must remember that once they sign an agreement, the sale price is locked in until the end of their rental term. The term can be between one and three years. Even if the housing market prices rise or fall during that time, the original agreed-upon sale price is final.

The renter will also pay rent premium and an option fee. The rent premium is an amount just above the typical rent. A part of that money goes towards a down payment. The option fee is a set amount the renter will pay the owner. If, at the end of the lease, the renter buys the home, the option fee converts as a portion of the down payment. If the renter decides not to buy the home, the option fee becomes income for the owner.

Some general tips when choosing a renter are:

  • Make sure to have a thorough contract. The contract should be reviewed by a real estate attorney or expert. A good contract will address any possible issues that may arise during the agreement. The contract should include who will be responsible for home repairs, maintenance and any missed payments.
  • Check the background of the renter. The owner should run a background check on the renter reviewing their credit, employment and salary history.

Advantages

  • If the value of the home is dropping, the owner can lock in the higher price at the beginning of the agreement.
  • The owner can ask for higher rent because of the flexible financing terms.
  • Renters that are looking to own treat a home and community better.
  • If a renter backs out of the agreement, the owner still has the option fee and rent premiums as income.
  • While the owner still owns the home, they can take advantage of tax benefits.

Disadvantages

  • If the value of the home is going up, the owner already locked in the lower price at the beginning of the agreement.
  • If a renter breaks the agreement, the owner is back to paying the mortgage.
  • If the renter doesn’t pay, then the owner needs to prepare for eviction.
  • The owner should regularly check the home to make sure the renter is treating the property well.
  • The seller is still responsible for the home.

Plan for Success in 2009

Published on December 11, 2008 in General. 1 Comment Tags: , , .

It’s the most wonderful time of the year – the holiday season is upon us and the year will come to a close before we know it. We have all tried to stick to those New Year’s resolutions, but how often do we fail? A few years ago, I decided to forego the negativity of New Year’s resolutions and start focusing my year on my goals. In this article we discuss realistic goal setting to format a plan for success in 2009.

Make sure you are setting a goal you truly want to accomplish – this sounds simple enough. In real estate, it is important to have a lot of knowledge about your local market and the type of investing you want to focus on (and make a living doing it!). If you set a goal this year to learn to close short sales quickly, make sure you have working knowledge of the short sale process. You should ask yourself whether you really want to pursue this or are you jumping on someone else’s bandwagon?

Aim high - Even if you do not reach the entire goal, if you are serious and work hard to attain your goal you will still accomplish a large portion of what you set out to do.

Write down your goals - they should be as detailed as possible without any negative connotations. For instance you write, “I want to make $250,000 income this year with real estate.” This is a general goal without much detail on how you will accomplish it. To be more concise you write, “I want to flip a minimum of 25 houses this year in Anytown, USA with a minimum profit on each transaction of $10,000.”

Keep your goals to yourself. You may encounter negative feedback from others (like fellow investors, family or friends) who do not share your philosophy. You should share your goals with your mentor or coach if you have one. They can steer you in the right direction and help you to achieve your goals and keep you in a positive frame of mind.

Are the decisions you are making helping to achieve your goals? – Before you make final decisions, you should always pose this question to yourself. If the decision is going to bring you further away from achieving your ultimate goal, you should rethink that decision. It sounds easy, but people often make decisions on the spur of the moment without thinking through the process.

Review your goals often. – It is important to review your goals on a regular basis so you can measure each small success. Making a few mistakes along the way is part of the process and will help you to hone your goal-setting skills.

Use Your IRA to Invest in Foreclosures: 5 Things You Need To Know

Published on September 24, 2008 in General. 0 Comments Tags: , , .

By Jeffrey A. Roth, Equity Trust Company

Investing in a foreclosure property with your IRA can be a great way to increase your available funds to make deals and possibly grow any earnings tax-free. Yeah, tax-free earnings. For those veteran investors (and learned newbies), tax-free earnings is exactly what you have been looking for. That is one of many benefits of investing with your self-directed IRA that can help build your wealth portfolio.

Here are a few points everyone needs to know to help get started:

1) Get that foreclosure.
Your IRA can purchase a foreclosure property which could free up other available funds for additional investments. Notice the ‘Your IRA’ part of that statement. Since your IRA owns the property, all expenses that go into the property must come from the IRA account. Because of this, your IRA can reap certain tax advantages (#4). If your IRA doesn’t have enough to own and maintain an investment property outright, you could always own a specified portion of a home through a partnership (undivided interest) or look into non-recourse loans.

2) Go ahead, sell it or rent it out!
If you decide to rent or sell a property, that decision is completely up to you. Either way, it will help you reach your investing goals if you’re using a self-directed IRA. The funds received from a sale or income from renters would go directly toward growing your IRA account, which in turn, will help you make more out of your investments.

3) Tax-Advantages!
The two types of IRAs, Traditional and Roth, have different tax advantages. With a Traditional IRA investment, you would not have to pay tax on any earnings until you started making qualified distributions at 59.5 years old. The idea is that you could possibly be in a lower tax bracket at that time and enjoy the fruits of your labor with less tax applied than you do today.

The Roth IRA allows you to grow all earnings tax free (meaning you never have to pay tax on it) since the money used to fund the account is ‘after-tax’. Paying tax later at a lower rate (Traditional) or not ever paying tax on earnings (Roth) makes that foreclosure investment look even better, doesn’t it?

4) Where’s your IRA at?
To invest in foreclosures with your IRA it must be a self-directed IRA. Unfortunately, most financial institutions will not allow you to self-direct your IRA investments because they want you to invest in their stocks, mutual funds, and bonds portfolio. To get out of that trap and start choosing where your money is invested (i.e. foreclosures), you need the assistance of a qualified and experienced self-directed IRA custodian. A custodian acts on your behalf to facilitate your self-directed investments through IRAs, 401ks and other small business retirement accounts.

5) Do your research.
Self-directing IRA investments in real estate is perfectly legal and has been since 1974. You should be aware of the guidelines the IRS has published about IRAs (IRS Publication 590. You wouldn’t invest in a home without knowing about the property, would you? Knowing your investment funding options should be treated the same way. Consult your financial team (custodian, CPA, and/or lawyer) to learn as much as you can to maximize your investment’s tax benefits.

Do some homework, find the right self-directed IRA custodian, and free up additional capital to start growing your foreclosure investments tax-free! Using a self-directed IRA is a great way to build out your investment portfolio and reach your financial goals.

Jeffrey A. Roth is the Real Estate Channel Manager at Equity Trust Company. Equity Trust Company is an experienced self-directed IRA custodian with 34 years of service and is recognized as an industry leader with over $3 billion in managed assets. Learn more about self-directed IRAs at http://www.trustetc.com.

Opposing Views on Fannie and Freddie

Published on July 17, 2008 in General. 0 Comments Tags: , , , .

The news on July 11th that Freddie Mac and Fannie Mae are in trouble sent the markets into a tizzy and stocks plummeted. Now that the government has decided to step in and help bail them out, there are a multitude of varying opinions on how this will affect lending practices and the different tactics that arise to accommodate these changes.

The NAR (National Association of Realtors) has the following statement on their website, “The National Association of Realtors® welcomes the strong response this weekend by the Treasury Department and the Federal Reserve Board in response to the market turmoil and apparent overreactions that began last week affecting Fannie Mae and Freddie Mac. The health of the American economy depends on Fannie Mae and Freddie Mac and the steps taken by the U.S. government make clear that the role of Fannie and Freddie, in making fair and affordable mortgage loans available for home owners and home buyers, must not and cannot be interrupted.

“We support the federal government’s actions and authorization to help ensure the ability of Fannie Mae and Freddie Mac to promote the availability of home mortgage credit during a period of stress in the financial markets. Fannie and Freddie play a central role in our housing finance system, and we agree that they must continue to do so as we work through the current housing correction.”

Lyndon Larouche is a top economist and former presidential candidate who has somewhat “predicted” the downfall of Fannie Mae and Freddie Mac. He issued a statement this past weekend, “The financial system is already dead. It cannot be saved.” LaRouche expanded: “If any of the reports of a planned bailout of the two big mortgage lenders, by the Treasury Department or the Federal Reserve are true, I say, ‘Forget it.’ Any such efforts to delay the funeral of the present global financial and monetary system will only make matters worse. A bailout will cause an accelerated hyperinflationary explosion, far worse than the hyperinflation that hit Weimar Germany in the autumn of 1923. Back then,” LaRouche continued, “Germany had a gun pointed to its head. The gun was called the Versailles Treaty, and Germany had no choice. Today, the United States has a choice. I spelled out the choice in numerous recent locations.” He goes on, but you get the point.

We have already seen a tightening in mortgage approval standards. Proof of income, higher credit scores and minimum deposits are now required. The tightening in lending practices will more than likely continue for the next couple of years.

Is this the “end of the world” as we know it? Certainly not! Buying and selling real estate is a permanent part of our existence. People will always have a need to buy/sell property. They change jobs and have to move, have more children and need more space, or a family member passes away. Economic shift may put a pothole (sometimes a deep one) in the middle of the road, but the road will never close on real estate.

Celebrity Foreclosure Justice

Published on June 18, 2008 in General. 0 Comments Tags: , , , .

There has been a lot of press lately about the amount of recent foreclosure filings across the country, with extra fuel being provided by some famous (and infamous) celebrity homes entering the foreclosure process. But is this sparking flames on a fire that has already been contained? And, is all the hoopla justified?

Michael Jackson, the self-proclaimed “King of Pop” almost lost his infamous Neverland Ranch in California to foreclosure. (An investment company stepped in at the 11th hour and took over the loan) Jose Canseco, Ed McMahon, Rep. Laura Richardson of California and Evander Holyfield have properties that are in the foreclosure process. Some are financially strapped and can no longer afford their homes, while others are throwing in the towel and simply walking away.

Some homeowners are walking away from their properties because they owe more than the property is currently worth. Most celebrities can probably afford to lose one property. More than likely, the property up for foreclosure is not their primary residence. Because of WHO they are, they are able to financially recover from a foreclosure loss a lot faster than the average homeowner losing their house to foreclosure.

99% of people go through varying degrees of financial strain in their lives (some more than others). Logically, these bumps in the road of life will hit the rich and famous on occasion. The media jumps on these stories because it sells papers, magazines and boosts TV ratings. The media intimates that if it happening to the rich and famous, we must really be in crisis.

The reality is that only about 2% of ALL mortgage loans are somewhere in the foreclosure process. A majority of homeowners who enter the foreclosure process work out a deal with the lender to save their home from being foreclosed. Some areas of the country are actually seeing an increase in property values and a decline in foreclosure filings. However, these statistics are conveniently left out of media reports – surprise, surprise.

Real estate has always been a reliable investment and will continue to be for a long time to come. In fact, smart and successful investors are buying up the bargains now because they know appreciation is a short time away. It is great time for “buy and hold” investors.

Lease Option real estate investing is becoming a more common strategy for smart investors in this market. A Lease Option investment strategy means signing a lease contract on the property “with an option” to buy with a potential buyer.

There are many details involved in this strategy. It is always a good idea to consult with a real estate attorney before signing any agreements.

A mentor or expert in this strategy can also be helpful in gaining insight into the Lease Option investing strategy. For additional information, see the GuReview.com experts, Andy Heller and James Gage who specialize in this niche.

Savvy Investors Find Great Opportunities

Published on June 9, 2008 in General. 0 Comments Tags: , , .

“The way you make money is not following the herd. Lower prices mean greater investment opportunities because there are more motivated sellers and more deals coming on the horizon. Now is definitely the time to buy … but to buy smart.”

That philosophy, spoken by Robert Shemin — Wall Street Journal best-selling author, nationally renowned speaker and major real estate investor — is at the root of successful foreclosure investing in the market today.

An increase in foreclosures translates to more available investment opportunities. And more available investment opportunities creates competition, driving down real estate sales prices across the board.

Here are five strong strategies that Shemin has put together:

1. Buy to hold — Historically, long-term investors almost always do well. A long-term investment strategy is five to seven years plus. Medium is six months to five years and short-term is less than six months.

2. Buy cash flow — Speculators take a chance on rapidly appreciating properties and risk a softening market; however, investors look for investments that produce cash flow from day one. Be an investor … go for cash flow.

3. Find secret appreciating markets — Look for areas that didn’t appreciate a lot in the past four years and are now steadily climbing or where there is strong job growth. These translate to housing demand and are the best-kept secrets in real estate.

4. Uncover “hidden” markets — There are exciting markets within markets that make strong investment opportunities. For example, the Las Vegas market is very soft right now, but in the low- to moderate-income there is a strong demand for new homes (starter homes) in the $200,000 to $250,000 range. So there is a strong market within a weaker one.

5. Buy international — Don’t be afraid to invest in other countries. Do your homework. Talk to other investors. Go to a seminar. Then make your choice.

He has been involved in more than 1,000 real estate transactions throughout his successful career. To find out more about Robert Shemin and his investment strategies, see his Bio Page.