Category: Investing

Information and tips on investing in real estate.

Real Estate Auction And Tax Lien Deals – Every Investors…. Dream?

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If you’re a savvy investor, you’ve noticed that now is the best time to invest in real estate. Home values have dropped tremendously and there are more and more short sales and foreclosures on the market every week.

But for even better deals, many real estate investors turn to real estate or tax lien auctions. And why wouldn’t they? The potential to buy property at half it’s assessed value is appealing to any smart investor. It’s like a dream come true!

Or is it?

Just when you think you got the deal of the century, but what if that “gold mine” became a money pit of endless liens? Were there second or third liens in place? What about mechanic’s liens? Try to take advantage of what little time is offered to preview the property and do your due diligence — research! Find out as much as you can so that you know what you’re bidding on.

Finding a great deal at an auction IS possible, but just remember that there are always risks involved in any investment transaction. Minimize that risk by preparing yourself for the worst, and if all is well, then that makes the deal even sweeter!

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Categories: Investing

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How Rising Oil Barrel Prices Affect Real Estate

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It’s bad enough that the mortgage crisis continues to linger, causing a negative impact on real estate market conditions. But now more than ever, the rising cost of oil is also contributing it’s share of the damage too.

Everyone knows that gas comes from refined oil, so the rising cost of oil causes rising gas prices as well. So what kind of impact is this making on real estate these days? Let’s take a look:

For Home Buyers:

  • Finding a home is a little more expensive when you have to spend a good chunk of money on gas just to look at potential homes. Talk with your real estate agent about specific details regarding your next home. Your agent can preview properties for you ahead of time, and even drive you to see them in their own car. Remember that they are able to include gas and mileage as part of their business expenses.
  • If the search for an affordable home takes you several miles away from your employment, that’s a big, additional expense you have to include in your budget. Look for homes closer to your job or ones that may be close to public transportation. It will save you gas, plus it’s good for the environment.

For Home Sellers:

  • Making improvements for a quick sale is a great idea, but do your homework and search for best prices. You might find that materials or overall cost is slightly higher from vendors passing on the gas expense to the consumer.
  • If your home is a few miles away from major cities where most people work, chances are, it takes some time and quite a bit of gas to commute. Highlighting any public transportation areas near your home is a good marketing idea. Ask your real estate agent to include a map to nearby public transportation spots in your sales brochure.

For Real Estate Investors:

  • Apart from the other buying and selling issues mentioned above, doing your due diligence on your next investment property is more important than ever before, especially if that investment property is located far away from you. Ask an agent to check the comps, every month if needed, so that you’ll get a good idea of how the market is going in particular neighborhoods.
  • Spend your money wisely when it comes to fixer-uppers. Everyone is paying the price at the pump, and construction companies may also have to pay extra for materials due to manufacturers adding a gas surcharge to the bottom line.

Take your time and make smart decisions. The high price of oil doesn’t have to have such a big impact on your home transaction, if you play your cards right. And remember to use your real estate agent’s knowledge and experience as much as possible. They’ll be able to help you make choices that benefit you.

Categories: Buying Investing Selling

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Don’t Make This Biggest DIY Home Improvement Project Mistake

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Most home owners know the value that home improvements can add to their home. Updates to kitchens and bathrooms can add thousands to your home’s worth, as can the addition of more square footage, landscaping, and various other improvements. Anything that you can do to make the space feel newer, bigger and expensive can help add lots of value to your home.

Planning and window shopping for your next improvement can be a fun and great way to organize your thoughts and ideas prior to starting your home improvement project, but one critical step is often overlooked by many do-it-yourself’ers trying to save money: failing to find out if your home improvement project requires a county or city building permit. Of course, if your DIY improvement project consists of painting a room or installing carpet, you probably won’t need a building permit, but if you’re looking to add square footage to your house by drywalling that unfinished basement, adding a new deck or replacing a deck, you should definitely check with the county or city offices in your area for any necessary building permits.

So what’s the big deal about getting a permit? DIY’ers probably plan to do a better job than any contractor coming into their homes, and most homeowners wouldn’t purposefully do anything to harm their home or the people living in it, but the fact is, there are building codes to adhere to when you live in a community of many homes. These codes can vary from state to state, or even city to city, not to mention the fact that building codes could change due to newer materials or methods.

But wait! There’s more!

Here’s an example. Let’s say you’ve already drywalled your basement and put in that rockin’ new media center– without getting a permit. There are two things that you could do:

  1. Check with your city to see if a building permit was needed. If so, the building inspector may require you remove some walls — yes, that’s right… REMOVE some walls, painted or not — so that they can inspect the wiring and insulation.
  2. Why bother mentioning it? What’s done is done and you promise to get a building permit the next time you do a major home improvement– if there IS a next time. Besides, you think you did a better job than any contractor would do, so your work probably exceeds any kind of building codes standards anyway.

Your first option may cause some headaches, maybe even a lot of headaches, but at least you’ll know that whether or not your work was done to code. Your second option may sound like an easy out, but you could be setting yourself up for an even worse headache than just ripping out new walls. Let’s say you went with the second option. What could go wrong, right? Well, let’s see some different scenarios:

  • Life has been good. It’s been several years after your home improvement and your family has enjoyed watching several hi-def movies in your DIY media room. But now the kids have grown and moved on so it’s time to downsize. You list your home for sale. If you listed with an experienced real estate agent, one of the first things your agent will do is generate a Comparables report to establish baseline pricing for your home. And then it happens. Questions start cropping up regarding the square footage of your home versus what is stated on the the city/county tax listing. This discrepancy could affect the value of your home or raise red flags to some potential home buyers as to whether or not the basement was finished to code. As Ricky Ricardo would say… “You got alotta ‘splaining to do, Lucy!”
  • Life has still been good, but in this scenario, you’ve decided to live out the rest of your retirement days at home. After all, you put a lot of sweat equity into it, right? By some unfortunate freak accident, your home catches on fire while you are luckily out of town on vacation, so no one was hurt. No problem, items are replaceable thanks to the home owner’s insurance you’ve been paying into all these years, you’re covered, right? Right? The insurance claim adjuster who has arrived to assess the damage and write up the claim finds out that the electrical fire started in the basement. Doing their due diligence, the adjuster does some research to find out exactly how much square footage was lost, so, they go to the county to confirm your statement of square feet lost. Uh-oh, there seems to be a problem. The county has no record of additional square footage from the finished basement. In such a case, your insurance company may only pay out for the loss based on the pre-existing square footage, so all that moola you spent on that fabulous media room could literally go up in smoke. But wait! You think you can appeal the decision, and in fact, are willing to take your insurance company to court over it. Well, let me tell you about a similar case a colleague of mine encountered, wherein the homeowner tried to sue their home insurance company for not covering the entire damage. They all went to court, each side made their claim, but ultimately, the judge ruled that because the basement was not built to code and because the electrical fire started in the basement, the home owner’s insurance company was not liable to pay out anything at all! OUCH! (Yes, that’s a true story.)
  • Let’s say that you successfully sold your house with no questions asked about the finished basement. A few years pass and an electrical fire started in the basement burns down part of the house. The new home owners file their claim with their insurance company, and their claim adjuster finds out the same thing– that the basement was not built to code and their insurance company won’t pay out. That’s a shame, but it’s not your problem anymore, right? Not so fast, Speed Racer. Who do you think the new home owner is going to blame? You may be facing legal issues over that basement, even if you don’t own the house anymore! Yikes!

The bottom line is that although it may cause some headaches in the beginning- going out of your way to obtain a building permit and schedule inspections, it could save you from an ugly legal situation and a lot of out-of-pocket expenses later on. Don’t make the biggest DIY mistake ever– get that permit!

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Categories: Investing Selling

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WHAT A DIFFERENCE A Month Makes!

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Economic Recovery Already Underway

By Donald Luskin

April 18, 2008

(Reposted by www.free-realestate-tips.com)

WHAT A DIFFERENCE a month makes!

Just a month ago yesterday, markets opened to the news that the firm Bear Stearns (BSC1) had been vaporized — and for no better reason than that investors had arbitrarily lost confidence in the venerable brokerage firm and all withdrawn their money from it at the same time. It was only the Federal Reserve stepping in with $30 billion in risk capital that prevented the Bear collapse from taking down world capital markets.

Everyone was already saying that the U.S. economy had fallen into recession. The Bear catastrophe could only make matters far worse.

And yet now, a month later, the economy has not gotten worse. Compared to the bleak expectations then, even just hanging in there would have been an upside surprise. But it’s more than that. Things actually are getting better.

Consider the key earnings reports coming out this earnings season. General Electric’s (GE2) miss was a shocker. But should it have been? Everyone knows its results are dominated by its capital markets subsidiary, so why the surprise when it — like every other bank and broker — took a big hit? The only true surprise was that GE’s management let it be a surprise — they should have warned.

Other than that, the news has been terrific. Look at what’s come out of the technology sector the last couple days. Intel (INTC3), IBM (IBM4) and Google (GOOG5) all surprised big time on the upside. No falloff in world-wide technology demand at Intel and IBM. And no falloff in the consumer sector for Google.

How about this week’s macroeconomic statistics? The Philadelphia Fed’s survey of regional manufacturing activity reported lower yesterday. But the day before, the New York Fed’s comparable survey defied bearish expectations and came in with a neutral reading.

Industrial production was reported as rising 0.3% last month, when it was expected to have declined. That’s a key recession indicator — and it’s just not indicating. The high-tech component of industrial production has been especially strong, currently at all-time highs.

And then there are the markets themselves. Since the panic bottom a month ago yesterday, the S&P 500 has returned 7.1%. The best-performing sectors have been financials, energy and materials, indicating that the credit crisis is mending and that fundamental forces of growth are strong.

The credit crisis is indeed mending. If you invested in safety-first Treasury bonds a month ago, you’ve lost 2.9%. But if you bought risky high-yield corporate bonds — also known disparagingly as “junk bonds” — you’d be up 3.8%. If you were really daring, and bought the supposedly toxic waste that’s been at the heart of the credit crisis — collateralized debt obligations (CDOs) based on subprime mortgages — you’d have done even better, making 6.7%.

The bears hang onto every little scrap of evidence coming out of the financial and housing sectors to bolster their case that we’re already in a recession and headed for a depression. Doesn’t any of this good news count for anything?

The worst is over. It’s more than over. Consider what’s happened in the banking sector. With Merrill Lynch’s big write-off yesterday, and Citigroup’s (C6) this morning, cumulative bank and broker losses from subprime lending and related credit craziness has come to something like $250 billion. That’s quite a trick. According to data reported by the New York Fed, the value of all the subprime and Alt-A mortgages currently in default is only $116 billion. What’s likely happened here is that the banks have taken mark-to-market losses on securities that anticipate much higher foreclosure rates which haven’t happened yet, and may in fact never happen.

And don’t tell me it’s all because the markets expect the Federal Reserve to lower interest rates to zero and keep them there forever, propping up the economy. That’s what markets were expecting a month ago, but not now.

We know precisely what markets are expecting the Fed to do, because we can observe the prices of futures contracts on the Fed funds rate. A month ago, roughly speaking, those futures were priced to expect the Fed to lower interest rates another 75 basis points, to 1.5%, at the FOMC meeting at the end of April — and leave them there for at least a year. Today those same futures are expecting only a 25-basis-point cut at the April FOMC. A year from now, they’re expecting that last cut to have been taken back — and another 25-basis-point rate hike added on for good measure.

When general sentiment is as bad as it is now, the good news kind of sneaks up on you. When it pops out, you tend to ignore it. You get used to the constant drum-beat of doom and gloom. But that’s a huge mistake.

The worst version of it is the kind of economic defeatism that seems to be permeating the primary election campaigns for the presidency. All the candidates are trying to outdo each other in painting a horrible picture of the economy — probably to scare you into voting for them, so they can supposedly fix it.

They’d like you to believe that America has no economic future, that our best years are behind us, that we’ve run out of tricks. But it’s not true. And Google’s big earnings report yesterday proves it.

Look at the billions of dollars being earned by a company that didn’t even exist 10 years ago. I see that money tangibly because I live in Silicon Valley, where Google is headquartered. To me, it’s not just an earnings report. It’s thousands of high-paying jobs. It’s dozens of new buildings being erected all over the landscape here, to house their headlong growth.

There’s no real estate crisis here in Silicon Valley. We’re not depending on subprime mortgages for our homes. We’re dependent on jobs, and salaries, and bonuses and stock options from companies like Google. In other words, we’re betting on good old-fashioned hard work, innovation and growth.

So what if there was some excess home building and home buying? So what if some stupid banks made some stupid loans, and some stupid home buyers took those stupid loans and now can’t pay them back? It’s a problem, I suppose. But in the end it’s a side show. The economy marches on.

And the stock market is going to keep marching right along with it.

Donald Luskin is chief investment officer of Trend Macrolytics, an economics consulting firm serving institutional investors. You may contact him at don@trendmacro.com.

Categories: Buying Investing

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It’s April 15th – If you don’t own a home, get one!

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It’s April 15th! Tax Day!

Most people dread this day with a passion.

The collection of receipts and other financial documents needed to file your tax return can be a daunting task. Ugggh!! Paperwork!

But it’s not all that bad. In some cases, it can be a good thing! (I know you know what I’m getting at, so I’ll just get to the point.)

Real Estate And Taxes 101

Homeowners paying a mortgage undoubtedly know the benefits of homeownership when tax time comes around. For those of you considering homeownership, this post is for you.

When you buy a home, your buying into one of the largest single investments of your life. Although the real estate market these days is down, the national average cost of a median-priced home is still in the $200,000 range. It might not seem like a lot for a house, but for most people, $200,000 is a lot of money! Because home prices are quite large, most buyers opt to get a home loan or a mortgage to buy their house. This type of loan consists of monthly installment payments over a given period of time. Soon after the buyer closes on the property, the monthly mortgage payments begin.

So let’s look at a simple break-down of your monthly mortgage payment:

  • A portion of your payment goes towards paying down the principal balance of the loan.
  • A portion goes towards paying for the interest assessed on the loan.
  • A portion may go towards an escrow account, which some lenders require in order to pay for things like local real estate taxes and home insurance.

Uncle Sam knows that buying a house is a big expense, so as a perk for buying a house (and stimulating the economy), Uncle Sam let’s homeowners deduct some expenses for buying and owning a home from your taxable income amount each year you own the property. Now buy “some expenses”, I don’t mean the cans of paint you purchased to update the living room or the garden gnome you bought to greet guests walking up to your front door. I’m talking about expenses like “points” you paid to buy down the interest rate on your loan and the interest amount you paid for the year.

Your home loan lender is supposed to send you a tax form (IRS form 1098) indicating the total amount of interest you paid for the year, and any points you may have paid on the loan. The amount of interest you paid can be included in your itemized deductions on your federal tax return! Yay!

Investors, not only can you deduct interest and points on your investment properties, you can deduct expenses associated with renting your house: marketing, repairs, etc.

So you see, homeownership can be the silver lining on a cloudy day when it comes to April 15th. Now if only you could find the time to file your tax returns early each year!

(This information is considered general information and you should consult a tax professional for details regarding tax deductions or other real estate tax concerns.)

Categories: Buying Investing

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Flipping For The Green

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When most people think of real estate investing, one of the first things that comes to mind is flipping houses. Flipping houses means you buy an investment property and immediately sell it for quick cash. The process has worked successfully for many, especially when various improvements have been made to the property prior to selling. But the ‘green’ I’m talking about isn’t referring to the money from the profit of the sale, the “green” I’m referring to is the Earth-friendly way of renovating a home.

The trend to being “green” these days is increasing dramatically. You see so many Earth-friendly changes popping up almost everywhere you look: hybrid cars, organic foods, and recycling, just to name a few.

So what does this have to do with flipping houses?

Well, if you think about it, buying older homes to renovate and flip is, in a way, recycling. I just saw a news bit on television earlier this evening which talked about how a 1.5 brand new homes are being constructed every day in the United States alone. With the life longevity increasing, the demand for housing is always constant, if not increasing. So, buying an old, run-down fixer-upper, renovating it and then reselling it is a good thing.

An investor can go even further than that, and move towards a more Earth-friendly way of renovating property as well. In fact, here are a few “green” renovations that could be done, although, the possibilities are endless:

  • using cork flooring instead of traditional hardwood flooring
  • using recycled building materials, like reclaimed wood or insulation from recycled denim jeans
  • installing energy efficient fixtures, like shower heads and toilets
  • buying florescent light bulbs in place of incandescent ones
  • installing recycled glass counter tops or other recycled material

It may seem like some Earth-friendly options are pricey, but factor the expenses into your budget (you savvy investor, you!) and your reward will not only be a unique and extremely attractive selling point for your flip, but you’ll feel better about yourself for doing your part to save the planet too!

Go Green!!

Categories: Investing Selling

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Is The Flipping Fad Over?

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If you are like most people interested in real estate investing, you must have seen one of those reality shows on house flipping on cable television at least once: “Property Ladder”, “Flip That House”, “Flip This House”, etc.

The concept of flipping, as I’m sure you know, didn’t start with these informative shows, but has been around for at least 30 years. It wasn’t until a few years ago, with the onset of reality television programming and the real estate boom, did flipping become more popular. More and more people began to see the potential earnings from buying a run-down house, fixing it up and flipping it as a quick sale. House values were rising, mortgage rates were low, and it seemed as if (thanks to many sub-prime lenders) you could get a loan at the drop of a hat.

Fast forward to 2008.

Things sure have changed in the real estate and mortgage lending industries! Lenders are more strict now than they ever have been and real estate market values have gone down tremendously. And even if you were able to get a loan with an incredible rate, is the house even worth it anymore? The answer is: YES…. and NO.

Let’s start with the ‘NO’ answer.

In recent years, when the real estate market was on the rise, you could have bought a fixer-upper, renovated, and flipped it with a net profit of $50k or more, all within a couple of months. Heck! You could have bought any house and it’s value would have gone up in a few months without even doing anything to it at all! But it doesn’t work like that any more. First, with the market values the way they are today, you would really have to get an exceptional deal on a property. Lenders are looking to minimize their risks, and so, for investment properties, you’re now going to have to cough up a hefty down payment. Factor in the rising cost of oil, which is passed onto consumers who indirectly pay for it in the rising cost of materials and lumber, those “little” renovations begin to add up quickly. Before you know it, your expenses in acquiring and renovating that property have become pretty big, and a quick flip won’t give you the return on investment you thought it would.

BUT WAIT! THERE’S MORE!

On the other hand, short sales are on the rise these days, and property values are at record lows so now IS a great time to find a bargain property. Yes, you’ll have to pony up a hefty down payment, and yes, inflation is creeping up on us, but if you have the cash, and more importantly, the patience, you can easily find a steal of a deal on a decent home that may not even need too many renovations. Play like farmer Joe and wait for harvesting time on your crops– it may take a couple years or more, but I promise, you’ll get nice return on your investment. In the meantime, practice your skills at property management on the investment, maybe even cash-flow from it, and quicker than you can say “You’re Fired!”, you could be the next Donald Trump!

So, is the fad to flipping over? I say no. It may have slowed down somewhat, and it may not be as glamorous or as exciting as television makes it appear sometimes, but flipping is definitely here to stay.

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Categories: Buying Investing

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Little Known Pool Of Potential Renters

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For those of you who are proud, new owners of rental properties, your now in a situation where your paying for multiple mortgages. You’ve got you primary residence mortgage(s), and now your rental mortgage(s). The sooner you can get your property ready to rent, the better off you’ll be financially. But even if you’re ready to be a landlord, you may not be getting the amount of response you thought you would from those advertisements in the local papers. What are you going to do? The clock is ticking and soon, the next mortgage payment will be due on your rental.

Enter the Federal Government.

There are numerous families in dire need of affordable housing in the United States, and our government recognizes this. The U.S. Department of Housing and Urban Development has created various housing vouchers that assist low-income families with the ability to afford safe, decent and sanitary housing in private-sector neighborhoods. Where does the government get these homes? From people like you!

It becomes a win-win situation for all when you realize the big picture: the government helps lower-income families, lower-income families get financial assistance to live in decent housing, landlords get paid. In a nutshell:

  1. You provide your home as a rental unit in the housing program — adhering to the standards for sanitary, safe and decent housing.
  2. A low-income family chooses to rent your home.
  3. The family pays you a portion of the rent and the government pays the rest.

There’s no guarantee that you’ll get a tenant (after all, the families still get to pick and choose), but you will have greater exposure to more potential renters, and if your house is chosen, you’re almost guaranteed that you’ll get paid each month.

Your house must comply with living standards outlined in the voucher program: running water, heat, air conditioning, etc. More details and information about the various voucher programs can be found by clicking HERE.

Categories: Investing Property Management

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Does Your Home Have Lead?

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Surprisingly, I often come across clients who have heard about lead poisoning, but aren’t really sure how it can affect them or their family, or what they should do if they suspect their home may have lead. The following is an excerpt from a publication provided by the EPA that real estate agents are to provide customers who plan to buy or sell a home built before 1978. Landlords also should know that it is your duty to provide similar information to potential tenants prior to ratifying the lease.

If you would like a copy of the full publication, email me and I’ll send you one.

Many houses and apartments built before 1978 have paint that contains high levels of lead (called leadbased paint). Lead from paint, chips, and dust can pose serious health hazards if not taken care of properly.

It is important to know that even exposure to low levels of lead can severely harm children.

In children, lead can cause:

  • Nervous system and kidney damage.
  • Learning disabilities, attention deficit disorder, and decreased intelligence.
  • Speech, language, and behavior problems.
  • Poor muscle coordination.
  • Decreased muscle and bone growth.
  • Hearing damage.

While low-lead exposure is most common, exposure to high levels of lead can have devastating effects on children, including seizures, unconsciousness, and, in some cases, death. Although children are especially susceptible to lead exposure, lead can be dangerous for adults too.

In adults, lead can cause:

  • Increased chance of illness during pregnancy.
  • Harm to a fetus, including brain damage or death.
  • Fertility problems (in men and women).
  • High blood pressure.
  • Digestive problems.
  • Nerve disorders.
  • Memory and concentration problems.
  • Muscle and joint pain.

You can get your home tested for lead in several different ways:

  • A paint inspection tells you whether your home has lead-based paint and where it is located. It won’t tell you whether or not your home currently has lead hazards.
  • A risk assessment tells you if your home currently has any lead hazards from leadin paint, dust, or soil. It also tells you what actions to take to address any hazards.
  • A combination risk assessment and inspection tells you if your home has any lead hazards and if your home has any lead-based paint, and where the lead-based paint is located.
  • Hire a trained and certified testing professional who will use a range of reliable methods when testing your home.
  • Visual inspection of paint condition and location.
  • A portable x-ray fluorescence (XRF) machine.
  • Lab tests of paint, dust, and soil samples.
  • Home test kits for lead are available, but may not always be accurate. Consumers should not rely on these kits before doing renovations or to assure safety.

There are state and federal programs in place to ensure that testing is done safely, reliably, and effectively. Contact your state or local agency for more information, or call 1-800-424-LEAD (5323) for a list of contacts in your area.

Categories: Buying Investing Property Management Selling

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Investing in Short Sales

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Okay, Mr./Mrs. Moneybucks, so you you have a little stash of cash set aside and you’ve been listening to market trends and keeping a keen eye on the real estate market. Now you’re thinking that today is the perfect time to buy real estate low and sell high later. Well, congratulations! You’re right!

Real estate market values are at a record low compared to what they were just a few short years ago, and with the mortgage mess going on thanks to the promises of adjustable rates, the short sale market is sadly becoming a growing trend. The potential to buy a property listed as a short sale at up to a 50% discount is becoming a reality, and for savvy investors looking towards real estate again as another way to diversify their portfolio, they’re in luck!

Most short sales can be purchased with a real estate agent, in fact, I highly recommend using a real estate agent because there is a ton of paperwork to contend with, not to mention the guidelines of dealing with real estate in general. However, there are ways to learn how to find short sales on your own and how to deal with lenders directly to purchase short sales.

Which ever way you decide to find and purchase your next investment, remember to take some time to plan out what you’re going to do once you have the property. Are you going to rent it out? Are you going to fix it up and flip it? Planning is the key to any successful investment– that includes planning for any unforeseen events. But I have faith in you. You’re smart and even smarter for reading Free-RealEstate-Tips.com!

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Categories: Buying Investing Short Sales and Foreclosures

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