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How To Stage Your Home For Sale

2008-12-12T13:48:00.000+08:00

Staging a home can end up being a valuable tool in selling the house. Not only can it assist in selling a house, but it can also help the seller get top dollar.

The amount of staging needed varies wildly from a small scale de-cluttering of a home to hiring staging professionals to the tune of several thousand dollars, but the goal is the same- creating a pleasant mood by making a house appear bigger, brighter and warmer while neutralizing the area so prospective buyers can visualize how their own furniture and belongings can be incorporated into the home.

In a good or bad housing market, some studies have shown that staged homes can add between 10 and 15 percent to the sale price of many homes. Sellers who don't take the time to properly stage may end up with their house on the market for longer periods of time, and agreeing to a lower selling price to a buyer who can see the potential the home has that other viewers did not.

Though professional home stagers may be needed if a home is completely empty, the majority of staging can be accomplished by the seller. A quick visit to some newly built model homes can help a seller get an idea of how interior designers and stagers prepare a home. There's a delicate balance between keeping the home sparse enough to appear as spacious as possible, and picking the right pieces to maintain a warm and livable space.

The first impression a potential home buyer will have of a house will be of the exterior, so nice curb appeal is important. A fresh coat of paint on the front door, a nicely trimmed lawn, and fresh flowers in a garden or on the front porch are easy and effective staging techniques. A brightly colored patio set in the backyard can help the home's exterior appearance when the buyer steps out the back door.

Kitchens and bathrooms are two of the most important rooms in buyers' eyes. Kitchen counters should be clear of all small appliances and other items that tend to gather on them. When counter tops are cleared of clutter, the amount of working surface increases. A splash of color, such as a bowl of fruit is acceptable, but a refrigerator, covered in personal pictures and comic strip cutouts, is not.

Bathrooms should look as open and airy as possible, and above all clean. A new white toilet or tub, or a new set of sink faucets could be a worthy investment during the staging process. Personal toiletries, like toothbrushes, should be removed from sight, while the addition of scented soaps, lotions and clean white towels could give the room more of a spa type feeling.

For bedrooms, remove as much unnecessary furniture as possible, and keep it in the garage or in storage if need be. For smaller rooms, hang curtains high on the wall, and do not cover the actual window with them. Doing so will increase the apparent height and width of the room. Neutralize the rooms by removing all personal pictures and keeping wall colors a nice warm, clean color.

By following a few simple and effective staging guidelines, a home seller can increase his or her chance to sell the home quickly, and the time and effort will pay off by netting the highest offer as well.

As A Real Estate Investor You Must Continue Your Real Estate Education

2008-11-20T10:26:00.000+08:00

With all things that are done intentionally as a real estate investor your education comes first. A real estate investing education is primary to your success in business, and in all circumstances there is an identifiable pattern of learning that leads from thought to action. When experiencing something new, first you hear about it or learn of its existence. Next you learn what it is. Then you learn how it works. And finally, you practice it, which is where experiential learning begins. This article is intended to discuss education, separate from experiential learning (but a little more on that below).

Your real estate education should not be looked at as a phase you go through, but rather as an ongoing process. This is a requirement to stay in the real estate business and to excel. There are at least three very good reasons why your real estate investing education should be continuous and ongoing.

One is that having new information can allow you to improve the process of what you're already doing, so that you can do it better. Another is that having new information can allow you to do new things that you're not already doing, such as implementing new profit centers in your real estate business. A third is that the world is always changing so that knowledge needs to be continually updated to be useful.

The fastest way to develop yourself educationally is to actively seek out as many sources of education as possible on a continuing basis. There are three common modes of education to be aware of that can help inform your search.

One is private education that you digest on your own, which can include books, audio recordings, video recordings, websites, and online and offline real estate investing newsletters. Another is participatory education, which involves some sort of interaction with an educator, and can include seminars or boot camps, conference calls, and webcasts. Yet one more is hands on education, which can be gotten by working with others already in the business.

This could take the form of a mentorship or an apprenticeship with another investor. You could also take advantages of all the resources of a local real estate club, either online or offline, which is dedicated to helping investors further their education in all sorts of ways.

As an ongoing business activity, your real estate education deserves management and balancing against the other ongoing activities of your business as well as all of the other demands on your time. You should work it out however is best so as to ensure that a dedicated portion of your time and resources on a regular basis go to furthering your real estate and business education.

A final word on education from experience, or experiential learning, comes last. Education can be overrated by beginning real estate investors. While it does have a large role to play in your overall progress and success, the amount you actually learn from studying educational materials is negligible compared to the amount you learn from actually performing an action or having an experience. Keep this in perspective if you feel paralyzed by an insufficient real estate investing education.

How To Raise The Rent At Your Investment Property

2008-11-13T15:11:00.000+08:00

Being a landlord requires management skills, sales skills, and negotiation skills as you are constantly working with people (your tenants). One sensitive subject for both the landlord and tenant can be "How much is the rent going to be?" Once the tenant is living there, raising the rent is important but can be a delicate decision.

Keep in mind that you must keep your investment real estate business growing. To that end, you must keep your rents increasing at pace with the market and your rising costs. Raising the rent is simply part of managing your business smartly. Done correctly, it can be an easy and stress-free process.

Although every rental situation and each tenant/landlord relationship is different, I think raising the rent depends upon a couple items:

1. Is the tenant paying a fair market rent? If the rent is currently lower than market, it may be easy to raise it slightly as most tenants will realize they are getting a good deal where they are currently living. Plus they will not want to take on the added expense and time of moving.

2. When making your decision, ask yourself: "If the tenant decides to move because you are increasing the rent, can you re-rent the apartment for minimal cost and minimal or no vacant months?" If you increase the rent by $50 and the tenant decides to leave and you are left with a vacant $1200 per month apartment, was the increase worth it?

3. Consider that if you are increasing the rent in the spring, generally you can be more aggressive because it will be easier to re-rent that apartment in May than in December (at lease in colder climates).

4. If you are actively managing your lease renewals, you must be talking with the tenant 60-90 days prior to the lease renewal about their plans and any rent increases. This will give you time to re-rent the unit if the tenant chooses not not to renew.

5. Have the rent increase conversation with them verbally or in person. This will give you the opportunity to read their reaction to the increase. It is also more difficult for them to say no to your face.

6. If the tenant is hesitant about the increase, immediately see if they will accept the increase if you set the lease renewal to 18 months (locking their rent for that time) in exchange for the rent increase. This is actually an even better win for you as the landlord, as you have just locked them in as tenant for 6 extra months (and you got your rent increase).

7. When talking with your tenant, Use your best sales techniques to show them why they should both stay and accept the rent increase. At the end of the day, be honest. If the increase is related to increases in your costs, explain how your costs have changed. Most tenants can understand that taxes, insurance, or utilities do go up.

8. Lastly, if they are a great tenant consider simply leaving the rent at the same amount for another year. I would, however, let them know that you thought about a rent increase but "because they are such great tenants, you have decided to not change the rent for another year". This will set up the idea in their minds that you did them a favor and will get them to expect a rent increase next year.

Having your rents keep pace with your expenses and market rents is an critical part of running investment real estate business. Although it can seem intimidating at first, if you just take your time and think through the process with each tenant, it can be a simple process when lease renewal time comes around.

Insulate Your Home and Save Energy

2008-08-19T14:44:00.000+08:00

Energy is being wasted in your home as you read this. Where is it going? Right through the walls! Even in well-insulated homes, heat escapes through the walls when it's cold out, and heats comes in when it's hot out.

A great way to experience this is by going from an insulated part of the home into a non-insulated part (the garage or attic perhaps?) during a hot summer month. Better yet, try it in California's Death Valley where temperatures can soar into the 120's. You'll gain a rapid appreciation for California insulation technology.

When you're done being cooked, take a look at your energy bills and your home's insulation and see if there is some money that might be saved there. The more you can prevent your home's heater or air conditioner from fighting against outdoor conditions, the more money you'll save.

Help Me Conserve Energy in My Home!

As mention earlier, the less your home climate control systems have to fight the weather outside, the less they'll work and the less energy they'll use. In the next few paragraphs, we'll discuss what you can do to ensure that warm air stays in the house during the winter months and hot air stays out during the summer months.

The first thing you want to do is make sure that your house isn't "leaking." Just like a car tire, having a hole in the house is bad. But unlike a car tire, instead of leaking air out, it's going to let air in -- and that's exactly what we want to prevent.

Leaks occur most commonly around doors and windows. On a windy day, the large leaks can be easily found by simply running your hand around the frames of your doors and windows. For windows, you can often use silicone to seal around the frame. However, if your window has a hole in it, it's time to replace it.

Single-pane windows are also very inefficient at keeping unwanted heat or cold outside where it belongs. If you have single-pane windows, consider replacing them with the double-pane variety.

Leaky doors can often be temporarily fixed with wads of insulation or by stuffing folded up newspapers in the cracks. The only problem with the latter solution is what to do when somebody knocks on the door or you need to get out and do some shopping.

Generally, replacing a leaky door is the best option for maximum efficiency.

And finally, to stop warm air from getting out (or vice versa depending on the time of year) make sure that your walls and ceiling are insulated.

Some residents that live in the warm (but not too warm) climate of Southern California might feel like there's no need for insulating their home. However, even San Diego gets snow sometimes, so be sure to be ready with plenty of insulation for your California home.

7 Things to Consider Before Renting Out Your Real Estate Investment

2008-08-04T22:13:00.000+08:00

At a time when the real estate market is down, it's easier to buy property than it is to sell it. That leaves investors wondering if they should make the leap and become a landlord. Opening your real estate investment up to tenants and making it a rental property can be just as lucrative as flipping houses. There is just as much risk, however.

The Benefits of Renting Out Real Estate Investments
The nice thing about renting out your properties is the tax break you'll get. Landlords are allowed extra deductions for expenses and depreciation of the home and appliances. You can deduct the interest on your mortgage, your property taxes, the cost of repairs, any cleaning services you use for the house and the utilities.

Consider These Tips Before Renting Out Your Property
There are some things to think about before renting out your property. Landlords have a huge responsibility and a certain level of liability. Knowing what you are signing up for upfront will save you a lot of hassle down the road. Consider these seven points before you make any decisions.

* Is renting out your real estate investment a financially feasible option? Can you get enough in rent to cover your mortgage, property taxes, insurance and repairs? Carefully calculate how much money will be needed on a monthly basis to cover your expenses and make a profit.

* Is there a demand for rental homes in the area? Some areas are filled with rental homes, while others hardly ever have them. Every neighborhood is different. Do your research and find out which other homes in the area are being rented out.

* Remember that you will be responsible for all repairs on the house. This goes beyond sprucing it up for the next renters. Renters will call all hours of the day and night with various problems they want you to fix. If you aren't handy around the house, it will cost you more to hire someone to handle these kinds of repairs.

* Are you willing to be a landlord and handle issues with tenants? Are you firm enough so they won't walk all over you? Do you have what it takes to kick out tenants who aren't paying? Being a landlord takes patience and people skills.

* Make sure you have your real estate investment thoroughly inspected before you rent it out. Also have your tenants sign a checklist before they move in so you have documentation of what minor things were wrong and what things the tenants caused.

* Take the time to familiarize yourself with tenant's rights. Know your responsibility as a landlord and what rights you have as far as enforcing the rules, evictions and more.

* Be prepared that there may be times when there are no tenants in your property. Ideally when one tenant moves out, another one moves in, but there is the possibility that you have several months in between when the property is vacant and not bringing in any rent.

Protecting your real estate investment is the most important thing. With a few tips and some basic research, you can find out exactly what you need to know about leasing your property, becoming a landlord and making money in the process.

The Best Kept Secret in Real Estate Investing – Note Buying

2008-04-28T18:02:00.000+08:00

One of the best kept secrets in real estate investing is clearly the practice of note buying. While purchasing notes, otherwise known as home mortgages, may seem like a complained process, it really isn’t once you take the time to understand how it works. And, the best part is that you can set yourself up to be a note broker and make money simply for brokering the sale of a note from one person to another without ever having to tap into your own savings and investments to do so.

What is a Note?

A note is simply a mortgage loan which is secured by a piece of property. A note can represent a first mortgage, a second mortgage, a land contract, or even a contract for sale.

Why are Notes Sold?

Have you ever borrowed money on a home, in the form of a mortgage? If so, then you have been the borrower on a note. Generally, if you borrow from a bank or lender you are soon informed that your mortgage note is now held by another lender. So, while your payments are the same, and the terms of the contract is the same, you now send your mortgage payments to another lender instead of the one you originally borrowed from. When this happens your lender has sold your note.

Suppose for a moment that you take out a mortgage with Bank A for $100,000. That bank processes your mortgage and you start making your payments on it. Soon you are told that Bank B now holds your note and you should start making your payments to them. What has happened is that Bank A loaned you $100,000 to be repaid over 30 years. Bank B stepped in and paid Bank A $80,000 to purchase your note today and have the rights to collect your payments. So, Bank A takes the $80,000 today and then Bank B in exchange collects your payments over the life of the rest of your loan. This gives Bank A another $80,000 to loan to other people right away rather than wait for your monthly payments to come in to them.

Private Mortgage Investor Notes

In addition to the big banks making mortgages and then selling them to other lenders, often people who carry back mortgages on their paid for properties will sell their notes as well. In this instance they make you as a buyer a note for a portion of the purchase price and then choose to sell the note all at once rather than hold on to it and collect payments over time.

Brokering Notes

In addition to the banks buying and selling notes, you as a note broker can do the same thing. However, you can also simply broker the transaction between the lender and the buyer. If you know about a note which is for $100,000 to be repaid over the next 25 years at 6% interest, you can purchase that note many times for say $80,000 all at one time. You then sell that note to an investor for $85,000. This nets you as the broker a payday of $5,000 and you never used any of your own money in the process!

Starting your own property business

2008-04-23T23:02:00.000+08:00

You can start your own property business from your home with a little bit of capital. From this humble start you can go on to make some serious money as well as build your reputation as a master property dealer. You can quickly become quite successful and wealthy if you go about doing things the right way. It does not matter if you do not own any property yourself because in the beginning you will be working on letting property than belongs to others.

The first thing to do is to create a professional sounding name for your business and also formulating a sound business plan. Then you must make a thorough market research. These initial steps are going to decide the first few months of your business. Get them right and you are ready to taste success. The main thing to avoid is to rush things. Since you have never done anything of this sort before take your time to learn the ropes. The market is not going to disappear overnight while you are looking the other way.

Market research helps you to understand the environment you are working in. For example you must know your competitors and what they charge landowners and tenants? How do they go about advertising their services and what marketing techniques do they use? Is most of their campaigning done on the internet, offline, or both? What sort of properties are they mainly dealing in and what is being charged based on what factors? All this will help you to know your competitors' strengths and weaknesses. The ideal way to figure all this out is to become a mystery shopper.

You can find the list of other property dealers in your area by searching the internet or browsing a business directory. That part is easy. Next to each competitor write down their charges. Note that you cannot charge clients for registration but only for processing their tenancy application. Charging for registration is against the law. Next write down what the others are charging landlords. In the next column you should note down their website URL along with other contact information. At this point some people start to feel queasy because it seems to them that they are prying a little too much into the personal lives of their competitors. This feeling is normal so do not hesitate from the task at hand. Every new business simply has to study its competitors or it will not survive long. Once you pop on the radar you too will be subjected to similar activities from your competitors.

Now you need to build your portfolio. Your portfolio is the best way of showing your customers what you can do for them if they retain your services. It also serves as an experience benchmark and can include the terms and conditions of your business along with its goals, mission, and so on. A Real Estate portfolio helps people to understand why they should work with you and no one else. Go for multiple format portfolios to cater to different customers. Remember to keep updating it to keep it fresh.

Short Sales: A Real Estate Investor's Goldmine

2008-04-14T17:06:00.000+08:00

I'm sure you heard about the real estate bubble burst you can't escape it. It's everywhere the newspapers, T.V., radio and the internet. The number one question that is being asked by the aspiring real estate investor is "How do I make money as a real estate investor in a "down" market? The answer to this question is simple one by doing short sales.

What is a short sale?

A short sale is a sale of a mortgaged property where the lender accepts less than the balance of the loan. This happens when the loan is in default and the property is scheduled for foreclosure. Accepting a discount to sell right away can be cheaper than foreclosing.

Foreclosure is a costly process. In foreclosing on a property with a defaulted loan a lender incurs legal fees. If the property is sold as a foreclosure it will almost certainly be for a discount.

The chances are the property may not sell right away, in which case the lender will become responsible for the maintenance, property taxes, and insurance of the property, often for months, as well as incur a real estate commission if and when it sells. To a lender, therefore, selling a property before foreclosure, even at a discount, makes a lot of sense. Part of your job as a real estate investor is to convince them of this.

Profiting from short sales

The quickest way to use short sales to your advantage is by negotiating as low a price as possible to purchase the property from the lender and selling the property for as much as possible to an end buyer, sometimes wholesale but more commonly retail.

While it is possible in some circumstances to get the minimum 30% discount from ARV (after repair value) usually necessary for selling to an investor, often lenders will not allow more than a 10% to 20% discount, meaning that your end buyer will often be someone who wants to live in the property.

Short sales the ultimate goldmine

In 2007 there were 1 trillion dollars worth of adjustable rate mortgages scheduled to adjust. In 2008, another 1.8 trillion dollars will adjust. So there are and will be plenty of opportunities for the short sale investor to make a ton of money and at the same time help people out who can't afford their loans anymore.

Here is a typical short sale deal. A homeowner owes $95,000 on a $100,000 mortgage and is three months behind in their mortgage payment. The property is valued at $120,000. You make a short sale offer of $65,000 to the lender to pay off the loan. You've just created $55,000 in profit for yourself ($120,000 market value less $65,000 payoff equals $55,000 profit after short sale.)

In conclusion, it's easy to see that doing short sales is a great way to make money in a "down" market.

Top 5 Reasons to Buy a Second Home

2008-04-11T18:46:00.000+08:00

Owning more than one home can be part of a sound financial strategy, a long term plan for retirement and can provide you with lifestyle options that are priceless. Here are the top five reasons people like you buy a second home:

1. Sound Investment:
Sure, the market bumps along: up a little, down a little, but in the long run it always appreciates. As cities become more and more crowded, beautiful homes in bucolic settings will become increasingly rare - and valuable.

2. Retirement
A second home purchase can be part of a sound retirement strategy. When home buyers purchase a home in an idyllic spot of their choice, they can utilize the property for their own pleasure during their working lives or as an additional income generator. When it comes time to retire, they have the option to kick off their shoes and permanently relocate to their second home or even sell it and upgrade to another home in the same town.

3. Vacation Rental
Pick a home you love and others will love it too. Mountain homes, golf homes, waterfront, deep forest, wildlife retreat...these are the places we all need to escape to when too many days of crowded subways and dusty traffic jams are getting us down. When you own a home in an out-of-the-way spot, you open up the possiblility of renting it out to others and paying down the mortgage at the same time.

4. Fun Times
It's only natural...perhaps the best way to use a second property is recreationally. If you love to ski, a home in the mountains can be just the thing. Miss the fresh air? Less cars and more trees are just the thing. Even when you love where you are, being able to get away for a while makes it so much sweeter.

5. Live in your Vacation Home and Rent out your City Home!
Just looking for change? Why not swap your life in the city for a life by the lake? Technology has made it possible for many of us to work wherever we want, why not take advantage of it and live where you want? A move to a less populated area doesn't have to be costly and it doesn't have to be forever. Instead of renting out your vacation home and living in the city, you can do the reverse. One of the main benefits of this strategy is that urban homes are easier to rent out no matter what time of year it is. That, and you can feel like you're on vacation everyday.

Where to, Brave Traveler?

How far are you willing to go? America is full of beautiful undiscovered towns and vacation get aways. Forget about expensive florida beaches and the like. Americans these days are looking for wilderness...and bargains. There are plenty of US towns you may never have considered that offer lots of get up and go.

The Rookies Guide to Real Estate Investing

2008-02-26T11:06:00.000+08:00

After a lot of thinking when you decide on some real estate investment and you want to earn money out of it, you need to also think about how to go about it! Stop thinking and start acting! Remember, you will always remain a rookie until you close your first real estate deal.

The best way to learn is from an expert. So hire the services of a good and recommended real estate broker. It might be a bit costly to pay him but think of it as the learning and earning experience together in one package. Observe him and learn from him about the dos and don'ts while dealing in real estate. His experience and contacts can build a strong base for your future deals. Check out how he identifies potential good deals. You can use that knowledge in future.

Once you have identified the house or commercial property, which you intend to buy, conduct some research about that neighborhood. Check out the current rates and the past rates in that neighborhood. Enquire about other properties in that neighborhood to get a feel of the property market. Since the first deal is always the trickiest- mentally, do not burn your fingers by going in for the biggest. Instead, buy up a small apartment or a small home. If the appreciation is good then flip it [i.e. sell it] and book your profits or give it out on rent so that your installments get paid through them.

You can always sell if off once it appreciates to your liking. Also hire an efficient attorney to check out all the paperwork of your deals. Do not put your hand into badly maintained and old properties. Leave those properties alone until you have good contacts with contractors and architects, and have gained some experience in dealing in properties. Your new deals should be in well-maintained properties where you only have to buy and sell.

Also, while negotiating with buyers and sellers, try getting into their minds. Imagine yourself in their place and understand their needs and their weak points. Understand that price negotiation is part of business life. Do not take it personally but keep a cheerful and calm posture while dealing with buyers and sellers. You can also create your own Website. Make it informative and precise. You can list your property requirements and availabilities on your site. Also keep in touch with the mailmen, and packers and movers in your neighborhood. They are a rich source of information regarding people shifting out. Follow up on all leads aggressively. You never know when a small tip could turn out to be a big hit.

In future you can also explore buying from auctions and going in for foreclosure properties. These will fetch you better profit margins but the paperwork involved is more challenging and timing is even more important in these deals. In foreclosure properties watch out for any attached liens on the property and stay aware of the local state laws, which could vary from state to state.

So, patience, persistence and performance can easily turn you from a rookie to a master in real estate investing. Do not stand on the sidelines. Use these above tips and watch your investments rise to new heights.

All the Basic Info on Buy-to-Let Mortgages

2008-02-08T11:52:00.000+08:00

A growing trend in the real estate world is purchasing property with the intention of letting it, or renting it, to others. There are special mortgages that one can take advantage of for this type of business transaction.

If you want to buy a property as a long-term investment and you plan to rent it out to cover the costs of ownership, a buy to let mortgage is probably what you will need to look at.

Understanding Buy to Let Mortgages

Buy to let mortgages are more commonly known as investment mortgages and their purpose is to provide the borrower with the funds to buy a property that will be rented out to tenants.

The nice thing about these mortgages is that the mortgage payment is often low enough that any rent collected will be more than the mortgage, making it possible to actually profit from the purchase of the profit sooner than you would if you had to pay up front for the cost of the home.

More and more people are looking into investment or buy to let mortgages because real estate has proven to be a safe investment time and time again all over the world. While stock markets rise and fall and the value of currency rises and falls with it, real estate is generally an investment where you can get your money back.

To make the deal even sweeter, there are some really great buy to let mortgage offers out there to take advantage of that includes decent interest rates and even fixed interest rates. When searching for the right buy to let mortgage you really should shop around and compare all of the different offers to make sure that you are getting what you want. Also, depending on what you find you may or may not be able to afford the buy to let mortgage at all, so be sure to check out all of the options.

Some of the features that make this type of loan really popular are they let regular people invest in property, perhaps making it the borrowers first time long term investment. In addition, these loans offer low interest rates, which is always a good thing when you are investing in something long term.

In addition, there is a high demand for rental homes right now all over the world, so when you get into this you know that you are getting into something that really can change your life and even provide a source of income for you.

Wondering what the differences are between a normal mortgage and a buy to let mortgage? First, the interest rates are just a bit higher in these loans than in traditional mortgages, but not so much more but they aren't affordable. In addition, you may be required to make a larger deposit or down payment.

Then the upside of this is that your income may not be considered when you are applying for the loan, so you may be able to get a great rate and even create a second income stream through the purchase of a buy to let property.

Property Rental Requires Research

2008-01-31T10:54:00.000+08:00

Various kinds of properties can be rented out. You will need it for residential or official purposes. Then you have other rentals such as for storages and so on. No matter what kind of rental you are looking at, you will need to do some research. Some of the property owners will be away and there will be caretakers who are looking after the needful.

You will have to cultivate a knowledge of the current property rates. They will differ from area to area. Thus, you will have to do a great deal of looking around. You will need to keep all the rates in mind at all times. In this way, you will know best and will not need to look to someone else for advice.

The rentals will naturally differ with the types of properties that are available. This will be the most important factor, especially for residential purposes.

Now, if you want to find a good property, you need to find an agent. There will be plenty of agents in the area. But there will also be the need to choose the right agent. You will have to use the ones who do not hike up the prices according to their whims and fancies. But look out for agents who charge reasonable amounts.

Some real estate agents may not be very reasonable with what they charge. They may try to con you into paying them more on the pretext of signing up good property for you. Stay away from such agents. Try and make use of only the more reputed ones. You can get one through your friends as well as family members, as they will know trustworthy ones.

Remember to also plan out your budget in great detail. You should not be too extravagant if you have some savings. You should try and ensure that you will be able to shell out only so much as rent every month. You should insist on meeting the property owner. I am sure you would not want to end up with a fake deal.

Reading every clause of the agreement will be important, when you are signing up any property for rent. If you do not do so, you may be in trouble if you are not pleased with some of the terms during the duration of the lease.

Remember that finding the perfect place will also be rather time consuming. This is unless you know someone who can help you personally. These days, more and more people have taken to looking for property on the Internet. The Internet offers you plenty of options. You will be able to get all the latest updates. You will have all the categories online. So you need not look anywhere else either. This will be ideal for people who do not have time to look around.

Searching through the Internet will also be very easy. After all, everybody is net-savvy these days. Moreover, you will have listings with pictures. Thus, in a way, you will be looking through a range of options from the comforts of your home.

Why Does Investing In Real Estate Create Wealth

2008-01-24T10:04:00.000+08:00

Investing in real estate is just like doing any other business. The main goal is to earn money. By buying and selling properties or even renting it out you are creating wealth. The aim is to create a regular positive cash flow.

The trick here is to use as less of your own money as possible. Pay only the down payment when buying a property. Take a long-term loan with the least amount of interest. Once you have purchased a property, then you can put it up on rent. Now your cash flow begins. Once you deduct your maintenance charges, your taxes and the interest payments on your loan and your other running costs from the rentals you have received, you can reach a conclusion as to exactly how much you are earning. If the earning is substantial, then you have made a good decision and you can now replicate it again. This is wealth being created and multiplied.

Once you have started receiving regular income from your property, then you could also think about getting a re-finance on it. This will give you an additional loan to purchase a new property and put it again on rent. This method will also be helpful in avoiding any payment of capital gains tax since you have not sold any property.

When you decide to buy any property, you should also conduct proper research before buying it. Consult an experienced real estate broker if you are new in this field. His experience and contacts can be useful in getting a wide range of properties to choose from. Also hire the services of a good real estate attorney who can read between the lines before signing up any documents. All these services cost money but these are necessary expenses, which will help you stay out of trouble and save you even more money in the future. Also, learn to identify properties, which have good potential and sellers who are serious about doing business with you. This can save a lot of time and effort while hunting for a good deal.

You could also go in for an interest only loan, where the loan period is only between 5 to 10 years. In this type of loan you only have to pay interest, but you will have to sell the property after the loan period or re-finance it. This is also a good way to build up wealth in a short period. Anyway, in theory, your property would also have appreciated within the loan period. The important thing to remember is that some activity should be taken up once you have purchased a property. If it is lying idle, then it is not creating wealth. If you are not getting good rental offers, then it is better to sell it or re-finance it and move elsewhere. A cash flow has to be maintained for wealth to be created.

It is these dim times of foreclosures, which are ideal for you to jump in and make some good real estate investments. You can get properties at very low prices, and by using the above tips you could start creating real wealth in real estate.

The Top 5 Ways To Save Money When You Use A Moving Company For Relocation

2008-01-22T10:58:00.000+08:00

Moving and relocating from one area to another can be very expensive, but there are some ways to cut the costs associated with moving and protect yourself and your belongings in the meantime. Here are the top five ways that you can save money when using a household moving company.

1. While you are still getting estimates from various companies, be absolutely sure that each company comes out to your home and gives you a written estimate on moving your belongings after making a physical inspection. This one simple act can save you lots of money as moving companies are prevented by law from outrageously jacking up the bill at delivery when they have already given you a written estimate at the point of origin with a physical inspection.

2. If you want to save money on packing your belongings, and yet still get the benefit of the experience that a professional mover brings to the job, you can decide to pack only a portion of the items yourself and let the movers pack the rest. Typically, a good strategy is to pack the items that are less fragile like books, clothes, etc. yourself, and let the moving company pack the more delicate and fragile items instead. This can also benefit you in other ways, as any items that are packed by the moving company and are damaged within the box during transit will be covered by insurance since the movers packed those items themselves.

3. You can also save money on moving expenses if you have a flexible schedule for both pickup and delivery of your items and possessions. Most often, professional movers will have the items from several families in their truck at the same time. If you happen to have a narrow time frame for pickup and delivery, expect to pay more for that privilege. But the more freedom and flexibility you give the moving company regarding your move dates, the less you will often pay.

4. You can also save money with many moving companies if you schedule your move at the right time of year. Most movers are busiest during the summer season and at the end of the month. So if you can choose an off peak time period for your move, you can often get a discounted rate.

5. A very important way to save money and protect yourself and your belongings is to choose the correct insurance option when making your move, and then doing a thorough inspection of your belongings both at the point of origin and the destination to be sure that there was no damage in transit. If you have items that could be difficult and expensive to replace, you may want to choose the full replacement coverage insurance option for your move. This ensures that if any item is damaged in transit it will be replaced with a new one regardless of cost. But whatever insurance option you choose, make sure that you are completely familiar with all of the items that you have shipped and their condition at both the point of origin and destination in order to get reimbursed for any shipping damage that may occur.

These five simple tips to help make sure that your moving experience goes smoothly and that you protect both yourself and your belongings as you relocate to another area.

Real Estate Auctions

2007-12-30T17:50:00.000+08:00

One of the best ways to find deals in the world of real estate is to attend local auctions. Auctions usually deal in properties in foreclosure, and can sell for a reduced rate. However, it takes patience and timing to find the deals at auctions. Many people think that they can simply do the auctions by their lonesome, but it is a really good idea to take your realtor along with you as they can help identify the best deals and properties to bid on while informing you on properties that you may want to avoid. Finding a realtor who is well acquainted with the auctions process and the locations where these sales are held will increase your chances of finding that gem of a home .

When attending an auction be ready to test your patience. The process is not usually short and involves a number of things before the business of bidding actually starts. One of the most trying of these is the kill process. This involves properties being taken off the auction block shortly before the auction begins. Waiting out the kill announcements can be nerve-racking, especially if the property you are interested in ends up on the kill list. Many real estate investors have attended these auctions only to find that many or all of their desired properties have been killed off before the auction began.

Auctions are a great place to find deals but keep in mind that if you are looking for a really low priced home then you will likely have a lot of bidding competition. Really nice homes or homes that are priced far below their market value are popular items and they are priced low with the expectation that bidding will be fierce. If you spend some time with your realtor before hand you should be able to figure out your plan of action regarding the bidding process. Who knows, you may even be able to make an offer before the home goes onto the auction block.

Property Investing Through Options : A Comparing

2007-12-24T12:34:00.000+08:00

When trying to convince yourself that property investments are the best way to go to build wealth for your life, realize that one of the best ways to do so is through property options. Many people know that investing in real estate is a solid way to go. The problem is that many do not feel qualified to do so. The fact is, you can easily invest in real estate and see the results that you want, once you understand all of your options. if you are unsure about the benefit of investing in the traditional real estate market but want to find another way to do so, you may want to consider the benefit of property options. In fact, for many this is one of the best ways for you to invest without the risks and concerns that traditionally come from property investments.

Compare Them To See

One of the best ways to see the benefits in property options is to compare them to the traditional real estate market. Side by side, you can clearly see which the better choice for you is. For some, it may be the traditional investment market, while for others, it should be property options. Here's a closer look.

The Need For Money
In a traditional real estate transaction, you will need funds to make a purchase of a piece of property. Unless you have the funds readily available to outright buy the property (something that you really shouldn't consider anyway) you will need to borrow to make the purchase. With property options, this is not necessary. In fact, you are purchasing the property option, which means that you do not need any funding to make the purchase.

The Need For Tenants And Repairs
One of the dreaded things that real estate investors have to deal with is purchasing a piece of property, sight unseen, and hoping that the repairs will not be costly. The only thing that is worse than this is having to find well selected tenants for the property. With property options, you do not need to worry about any of these things. In fact, you do not have to deal with managing the property at all. This really frees up your time and energies in the long run, not to mention your money.

The Profit Potential
There is no doubt that you can make a considerable amount of money in a traditional real estate transaction. Purchasing property well is the key, of course. The same is true for property option investing. In this case, a well selected piece of property can really fund your long term profit well. Of course, it does take some time to determine how to do this effectively in either scenario.

Property investment can help you to make money. Depending on your situation currently, and your long term goals and needs, you can and should consider property options as an alternative to investing in the most traditional sense. For many people, the lower risk, the lower requirement for an investment and the long term outlook make property options worth investing in

What a Foreclosure Eviction Means

2007-12-19T10:49:00.000+08:00

You can expect an eviction if your home is sold because of a foreclosure sale. Whether the sale is by auction, or by a trustee's sale, the eviction is the legal process by which a property owner physically removes a tenant or trespasser.

Evictions for renters are handled by strict contract law standards and the tenant often has more rights than the landlord. In many states, tenants can sue their landlord for breach of contract, possibly harassment and receive many times their monthly rent if they win the law suit. Some cities make it extremely difficult to evict tenants for any reason. This is not the case with foreclosure evictions because the former homeowners are not tenants. Well-meaning people often tell foreclosure victims about experiences they know about where tenant/landlord law was involved. Again, this is not the situation where foreclosures are involved.

Foreclosure evictions are handled slightly differently in most cities so it is important that you contact the court issuing the eviction notice to determine what to expect. The person who serves the eviction notice, or posts it on the front door usually is not the same person who will enforce the eviction. The eviction will be enforced by a representative of the court, often a county sheriff or policeman. Occasionally, the person giving the notice will tell you that you "actually" have an extra 24 hours, BUT DON'T expect this extra time. Plan on being completely moved out before the actual deadline.

If you are looking at being homeless, contact your local Red Cross or county housing agency for a place to stay temporarily and for cash if necessary. If you have the ability to rent a storage unit for your furniture, store it until you find a place to stay so you aren't driving a rental truck around town looking for a place to rent. A little preparation is useful in avoiding tons of aggravation later.

The actual eviction may be handled differently, but often an officer of the court (sheriff or policeman) accompanies the new owner or his representative, to the property and alerts anyone in the premises that the eviction will start in a few minutes. In this case, the owner's representative is responsible for removing everything they don't want from the premises. The people in the premises are being evicted, not the contents of the property! If the contents are junk or the owner doesn't want any of it, it usually will be thrown into the swale or the street for sanitation to pick up. If the former owners are not in the premises (at work), the contents could still be thrown out or kept by the new owner. The items put in the street sometimes start a feeding frenzy among the neighbors. Don't let this happen to you. Take action to resolve your foreclosure early or get moved out before the actual eviction occurs.

Strategies You Must Use For Safe Real Estate Investments

2007-11-26T11:14:00.000+08:00

Real estate investments come along with the risk factor, as they are prone to fluctuation. Investing without adequate knowledge about the realty market can lead to loss. However, an investor with thorough knowledge can profit despite fluctuations. It is important for a realty investor to implement appropriate strategies to be successful in this highly risky business.

Following are some of the basic strategies that need to be considered while investing in the real estate market:

Study the local market: It is essential to study the local market and understand the prevalent trends. Understanding the local market serves as an indicator of the national or international market. The local, national and international trends are often inter connected and have a good influence on each other. You can consult an experienced real estate investor, who can guide you with significant information on the real estate investment market trends. The basic idea behind studying market trends is to keep oneself updated with the kind of changes in the market. Besides it also gives you a clear view on the realty investment.

Economy or Financial Structure: Finance or economy plays a significant role in identifying the real value of the property. Economy and value of the property are directly proportional to each other, as the value of the property drops as soon as the economy falls. Whereas when the economy is high, the value of the property also increases. It serves as a good indicator of various changes in the real estate market, when many properties are available for a good price. In case the properties listed in the realty market are less, the prices increase because of the increase in the demand of property. The rise in price proves to be highly profitable for the sellers, as they earn more profit. Seasons play a major role in the fluctuation of property values. The property listing fluctuates with the change in the economy.

Fluctuation: A real estate investor should be acquainted with every change in the realty market. It is important for an investor to be aware that the market may change to include some excellent deals or transactions. It is observed that when the real estate market indicates depreciation in the rate of the property then it also affects the value of the property and may bring it down.

Property Decision: A real estate investor needs to be very careful while making any decision on the sale or purchase of property. It is essential to analyze the property thoroughly before making decisions to buy the property. Investors should be aware of the price range for properties according to the location and access to major utilities. Make sure the prices are in place, in case any appreciation or depreciation value of the property occurs.

Uncertainty: Since impermanence is the only permanent thing in the realty market, real estate investors should be ready to understand and cope up with the frequent unpredictable changes in the market. Changes in the market trend can be a result of the rising interest rate, demand and supply, tax rate, appreciation or depreciation in the value of the property as well as the unemployment and the standard of living. These factors play a significant role in determining the value of the property.

Real Estate Investment - A Guide On Buy To Let

2007-11-19T16:48:00.000+08:00

The process of purchasing an investment property is very different to that of buying a home for example, for you and your family to live in. There are many other considerations that must be taken into account before making this big step.

The buy-to-let boom of recent times has seen many more competitive mortgage deals become available, adding fuel to an already blazing fire. Many borrowers have found that they have come unstuck whilst jumping on the bandwagon without properly researching the proposed venture.

Thorough research of the market is essential. Even if you decide to borrow a substantial segment of the purchase price of the house, it will usually cost you a considerable amount to set yourself up as a landlord.

The location and the type of property you are going to purchase are the two most important factors to consider - for example, demand might not match the number of rental properties in certain areas and one bedroom flats may be easier to rent out than two bedrooms.

It is always a good idea to approach a number of letting agents in the proposed area you wish to buy, in order to gain an insight into rental demand - this is also a good way of finding out how much rental income you can expect.

When you look to purchase your own home, a lender will look at your income in order to assess how much they would be prepared to lend. With a buy-to-let mortgage however, mortgage lenders calculate how much they are willing to lend in a different way.

Many lenders will expect rental income to cover at least 130 percent of your monthly mortgage repayments - so make sure that you calculate your sums correctly. Once you have made your calculations and found a suitable area you wish to buy in, you can start shopping around for mortgages.

Many lenders offer mortgage advances on buy to let purchases of up to 75 percent of the property value. On certain buy to let schemes however, it is possible to borrow as much as 85 percent of the value of the property.

There are many different buy-to-let mortgage deals that can be arranged - You can choose between fixed, discounted and variable rates.

Some lenders may insist that you use an agent to manage the property. If this is the case then you could expect to pay up to 15 percent of the gross rental income on management fees. By using the services of an agent you can expect them to source tenants on your behalf, check references and collect the rent.

As with other types of mortgages, it will be a condition of the lender that you have in place a buildings insurance policy at the very least. Contents cover is also highly recommended however it is not usually obligatory.

Buy To Let Action Plan

1. Stay clear of areas that are already saturated with buy-to-let properties - supply can often outweigh demand, which could make finding tenants a difficult task.

2. It pays to negotiate! It may seem as though competition is fierce for property although if you are prepared to be patient then you could land yourself a bargain at well below market value.

3. When decorating, it is a good idea to invest that little bit extra. Ask yourself, could you see yourself living there? If not then you may wish to review your decor.

4. Join a landlords association. For about 100.00 a year you will have access to help and assistance on matters such as tax issues and legislation.

Before You Sell Your Home, Know the Law

2007-11-13T10:29:00.000+08:00

There's more to selling a home than putting up a "For Sale" sign and waiting for people to make offers. If want to sell your home, you need to be aware of the many local and state laws and various regulations attached to selling property. You have be knowledgeable about real estate contracts and know every step involved with regards to inspection, financial considerations, and legal paperwork.

For a real estate contract between two parties to be legal, for example, it must have the following elements:

1) At least TWO parties of sound mind in agreement of the contract - the buyer and the seller

2) Legal identification to verify legal signatures on all paperwork

3) The correct address of the property for sale

4) All agreements with regards to the sale and promises of payment made in writing and signed

5) Unqualified understanding between the buyer and seller so each is aware of payment schedules and other considerations

Coming to an understanding with a potential home buyer is one thing. When you consider going the For Sale By Owner route, you also need to be aware of the many laws attached to selling a house. Local and county laws may vary according to where you live, but there are at least twelve worth researching before you put up your sign:

Seller Disclosure Laws - By law, you are required to inform any potential buyers of damage or other problems with the home that may impact its value in the future. If the house will be in need of a new roof in a year, or if there are cracks in the foundation that need repair, you are obliged to let buyers know.

Lead Base Paint Disclosure - Similar to the Seller Disclosure, if lead-based paint has been used in your home, you are required to inform all potential buyers of this.

Federal Fair Housing Laws - In accordance with Title VIII of the Civil Rights Act, it is illegal to discriminate against a potential home buyer based upon race or color, gender, creed, nationality or handicap. These laws prevent refusal of a sale or price adjustment of a home based upon these factors.

State and Local Housing Laws - Your particular region may have specific laws relating to the sale of homes in the area. It is highly recommend to research any possible regulations that may affect your ability to sell on your own.

Advertising and Marketing Laws - If you plan to take on the advertising of your home sale by yourself, you may need to be aware of certain regulations applicable to your area. If you are placing a newspaper or magazine ad, you may be required to disclose specific information about your home. Do your homework!

Real Estate Contract Law - Is the contract you have with your potential buyer valid? Are there any hidden clauses that may come back to haunt you later? Know what your sale contract says and means before it is signed.

Zoning and Local Ordinance Laws - The sale of your home may be subject to various zoning laws and ordinances in your area. For example, a buyer may want your house for a home-based business or for charity purposes, but the laws in your town may not permit that. Research what regulations are applicable to your property before you sell.

Occupancy Laws - Is your home subject to occupancy laws? Can you legally sell your house to more than one family unit? Before you put your house up for sale, make sure you research any occupancy limits and restrictions.

Building Code Laws - Is your home "up to code"? In other words, is the house compliant to all safety and health codes? Have any repairs and remodeling work been done to the house, and if so were they done with the required materials? It is not legal to sell an unsafe home, so make sure any construction done before the sale is completed safely and correctly.

Environmental Rules and Regulations - Is there anything in your home that poses a potential environmental hazard? Is the construction of your home sound and free of asbestos and other harmful elements? Make sure you know what is considered toxic in your area, and that it's not in your home!

Stigmatized Property Laws - Was your home the scene of a murder or other disastrous crime? Is your home a local legend in that people believe it's haunted or cursed? It may sound amusing, but sometimes it can be difficult to sell property that has been "stigmatized" by gossip and legend. If your house has such a legacy, it is best to research any disclosure laws that apply to the sale. If somebody was murdered in your home, for example, you may have to disclose that to a buyer.

Governmental Rights and Real Property Laws - Each state has its own laws with regards to the definition of "real property." It is suggested all potential sellers know how their states interpret what is real property as opposed to "personal property." This may affect certain appliances in the house to convey with the sale, or property lines. Governmental rights laws may be put into effect if the government is interested in acquiring property for various purposes (i.e. you own a parcel of land where an interstate is to be built). Read up on these laws before you sell.

Selling a home can be a daunting process, made all the more difficult if you are not aware of the many laws in your area that bind you to certain obligations. So before you hang that sign, make certain you are knowledgeable about the implications behind it. Having the law on your side will make for a smoother sell.

Mortgage at Garage Sale Prices

2007-11-05T11:12:00.000+08:00

Buying a house is certainly in vogue nowadays. And rightly so. After all, property prices will not be falling in the near future and there is little risk involved. If one owns a house, one also has security for the future. One does eliminate the stresses of shifting from one rented apartment to another. Buying a house is safe and sensible. Unless one is planning to invest in a home in a less respectable part of the town, one's investment will be safe and secure. However, houses do not come for cheap, and putting together the funds to buy one might not be as simple. Most of us have to turn to the device of mortgages to help us pay for our dream homes.

Now, mortgages these days can be procured by everybody. However, this does not mean that each one is necessarily the best one. Anybody who is applying for a mortgage should be aware that this will be a long-term expense. Unless one is expecting to win on some game show in the near future, one is not going to be able to get rid of the mortgage installments in a jiffy. That is why we should take care to keep our eyes peeled for the best deals. This would require a good deal of research and study of the markets. This would also necessitate that the loan seeker keep at this task.

Do not go into the personal finance markets hoping to come home with the first of the mortgage loan deals that come your way. Instead, you should keep on searching for the cheapest mortgages available. Only after you compare these mortgages will you end up with the mortgages that best suit your needs. Remember that it is not just the rates of interest and monthly installments that have to affect your final choice. There are a number of other fees associated with most mortgages that increase the amount you are paying.

There may be arrangement fees that have to be paid to the loan provider for setting up the mortgage. Some lenders will require you to pay an application fee. However, the latter is slowly being waived by most lenders on account of the intense rivalry among lenders. There might also be several penalties for early repayment of the mortgage. If there is a likelihood that you might end up paying the mortgage before the end of the term, try looking out for a deal that charges a negligible penalty. Thus, there are many aspects that should be guiding your decision.

Real Estate Financing - What You Should Know About Home Mortgages

2007-11-01T17:54:00.000+08:00

As the nation's real estate market continues to grow and new technology gains more ground, many widely accepted beliefs that were true just a few years ago may not be true today. Before you go after a home mortgage or home loan or any real estate financing, if you have a lot of bad credit because of consumer debt such as credit card or personal loans, try to eliminate or reduce this debt as soon as possible because it'll affect your ability to qualify for a home mortgage and the estimated monthly payment.

Some tips to know: whether you're financing or refinancing. most people move or refinance within a seven year period. And loan programs for down payments of 20% or less require you to purchase Private Mortgage Insurance (PMI).

If you're going to buy a second home or second property, you'll need to identify the source or sources of your down payment, since you won't be selling your current house and using the proceeds, and you'll need to expect a larger monthly payment for housing and other related expenses too.

If you have a problem getting a home mortgage and the seller still owes money on the home you can check with your lender and see if you can get a wraparound mortgage. Although it's not legal in all states, it will allow you to pay the monthly payment on the existing mortgage and an additional payment to pay the difference; make sure that a wraparound mortgage will not trigger a due-on-sale clause ask the lender in advance.

Many people are not aware that they may be able to customize the length of their loans. Ask the mortgage broker or lender you're working with. Although lenders usually advertise 15-year loans and 30-year fixed rate mortgages, applicants can ask for 20 years, 25 years or any other number of years that would work better. This may allow borrowers to build up their equity faster and keep their monthly payments in a range they can afford. Some lenders may impose strict limits on how much of the down payment can come from borrowing from other sources.

Some of the advantages of adjustable rate mortgages that are touted include: lower costs - because they are usually priced lower than fixed-rate mortgages so you can increase your buying power and lower your initial monthly payments then if the interest rates go down, you'll have lower payments. However in all the years I was in the real estate business I never advised anyone to get this type of loan. With the changing market trends one can find themselves in a heap of trouble just like that. This would be a last resort loan and one would have to be sure they were not going to be unemployed in the next few years.

If you're working with a local builder within a sub-division or housing development and you're just making carpeting, lighting and appliance selections for a brand new home, you'll likely be able to get a standard mortgage loan. But if you're planning to hire the contractors, electricians, plumbers, and painters, you'll probably need a construction loan, which provides the funds to pay the subcontractors as the work goes along.

You will want to work with your mortgage broker or lender closely to develop an individual home loan or home mortgage program based on your credit worthiness. If you have or think you have a less-than-perfect or 'bad credit' credit report don't worry too much about it. When financing real estate it's important to know that a low FICO credit score doesn't mean you won't qualify for a home loan or home mortgage. There is much ado about the FICO score these days but there are many instances in which it isn't going to interfere with getting a home loan or mortgage.

If you do borrow money for a down payment it must be disclosed to the lender or if any of the money for your down payment was a gift, be ready to provide proof of it.

The 20-year fixed-rate mortgages allow you to make a consistent higher monthly payment throughout all of the 20 years you have the mortgage; the shorter term means you pay the loan off quicker and therefore pay less interest and importantly, build equity faster than you would with a 30 year loan. You'll also need to take into consideration what the closing costs will be. Ask about the escrow account for taxes and insurance.

Make sure to ask other homeowners how they're doing and what real estate financing and home mortgage or loan pitfalls to avoid. And whatever you do don't get yourself into a situation where you are unable to make the mortgage payments; make sure to think far ahead. Try not to get too overwhelmed with all the different home loan and mortgage choices available.

Make a list of questions and get the answers from any real estate agents, real estate brokers, mortgage lenders and any other real estate professionals you know or meet. Ask them about real estate financing, home mortgages, home loans, refinancing and current mortgage rates. Go online and get home mortgage quotes. Online quotes can often be cheaper because of the elimination of middlemen for example. And compare the quotes with other quotes you get locally to find the best rates for you.

How to Pay Less Tax on the Sale of Real Estate

2007-10-30T10:54:00.000+08:00

"It's not how much you make that counts," my father told me many years ago, "but how much you keep of what you make." I did not really understand that old adage at the time, but he was passing on some wisdom that his father had given him. It's just common sense, but it is amazing how blind most of us, including me, are to the significance of that sentence.

Let's look at an example involving real estate. Lets say you own a commercial building that will sell for $1,000,000.00. The broker brings a signed contract. Your basis, or cost in the property after $400,000 in depreciation recapture, is $300,000. Eureka, a $700,000 profit! Then, as realization sets in, the income tax on that amount in the top bracket of 39% would be $273,000.

However, since the you owned the property for more than a year, the transaction will qualify for capital gains taxation at 25% for the depreciation recapture and 20% for the balance of the gain so the tax would be reduced to just $160,000. Uncle Sam will not get the $273,000, but will only receive $160,000. Still too much tax, though.

By employing a strategy that is set out in the Internal Revenue Tax Code, you can defer those taxes until ultimate sale or even longer. Section 1031 of the Code provides for the exchange of property for like property. 26 USC Section 1031. Any gain that would have been recognized on the sale or exchange of the property can be deferred and can be utilized to acquire the like property. The tax is not eliminated.

If the new "like" property which is now owned is sold at a future date, the gain from the exchange as well as any additional gain must be recognized for tax purposes. However, by exchanging again, that tax can again be deferred for as long as the taxpayer desires. If the taxpayer is an individual and dies, the heirs receive a "stepped up" basis in the property and can sell the property without recognizing the gain, which was deferred during the taxpayer's lifetime.

This strategy is extremely effective to maximize "what you keep". Preservation of principal is the key to amassing wealth. Paying more tax than necessary is certainly not the best use of principal. The $160,000 that would have been paid as taxes when re-invested at 10% would be worth $320,000 in seven years.

The Internal Revenue Code provides for a way to defer the payment of that tax, perhaps indefinitely. There are a number of requirements to be met and types of property that cannot qualify so a review of the statute is appropriate.

First, the properties to be exchanged must be held for productive use in a trade or business or for investment. What does that mean? Any real estate property used in business can qualify: land, commercial properties, office buildings, farms, ranches and rent houses all fit the category.

The properties must be in the United States and not be held primarily for sale as inventory. The U.S. Virgin Islands are considered real estate in the United States. Any property that meets the definition can be exchanged for another property; for example, a ranch could be exchanged for an office building, unimproved for improved, etc.

The statute provides for certain properties that cannot qualify: (A) stock in trade or other property held primarily for sale, (B) stocks, bonds, or notes, (C) other securities or evidences of indebtedness or interest, (D) interests in a partnership, (E) certificates of trust or beneficial interests, or (F) choses in action (lawsuit claims, etc.). So one cannot exchange Berkshire Hathaway shares of stock for Microsoft stock to defer the capital gain.

One does not need to exchange a personal residence because there are other ways to eliminate the gain on sale of those properties. There are ways to deal with partnership interests that involve changing the form of the business structure. However, those issues are involved and beyond the scope of this article.

Second, there must be an actual exchange. You cannot sell property for cash and call it an exchange. The exchange does not have to be simultaneous. You can sell property for cash today and exchange the cash for a property you find later. To qualify for what is known as a deferred exchange you must meet the time requirements that are listed below and you must use a "qualified intermediary".

A Qualified Intermediary is defined in the regulations to the Code Section. 26 CFR 1.1031(k). The intermediary must be unrelated as to family, employee, or agent relationship. An agent is further defined as "the taxpayer's employee, attorney, accountant, investment banker or broker, or real estate agent or broker within the 2-year period ending on the date of the transfer of the first of the relinquished properties." Thus, an independent intermediary such as a member of the American Federation of Qualified Intermediaries is essential to successful tax treatment of the exchange.

The Qualified Intermediary acts as the middleman in the transaction so that the taxpayer does not have actual or constructive receipt of the sale proceeds. The Intermediary can handle financing, construction if necessary, or other tasks in order to complete the exchange. The Intermediary can also provide counsel in structuring the transaction and advising as to the technical requirements. A party to an exchange should also consult both their certified public accountant and their attorney before consummating either end of an exchange. Exchanges are difficult to clean up if the first part was not structured properly.

Third, there are two time deadlines that must be met to preserve the tax-free exchange. Forty-five (45) days after the front end of the exchange (the first property) is closed, the second or replacement property must be identified to the Intermediary in writing. This deadline expires at midnight on the forty-fifth (45th) day and must specifically identify the property by legal description, street address, or some other unambiguous description. Do not risk using "some other unambiguous description" unless it cannot be avoided.

The exchanger no later than one hundred eighty (180) days from the date of the first closing must receive the second, or replacement property. The exchange must be fully closed by that deadline. There are no extensions available. Miss the date and pay the tax.

The last issue in minimizing tax is the replacement property must have an equal or greater value than the relinquished property to avoid all taxes. A property worth $1,000,000 must be exchanged for property worth the same amount or more. If the property received is worth $800,000, then there would be a taxable gain, or "boot", of $200,000.

The tax on the value of the replacement property in excess of the original basis is still deferred but the excess over the value of the replacement property is taxable at the capital gains rate. Another way to look at it would be, if there is cash or personal property received with the real estate, which means that the cash proceeds from the first part of the exchange were not fully reinvested in the replacement property, gain or "cash boot" will be recognized.

Furthermore, any mortgages on the replacement property must be equal or greater than on the relinquished property. If the mortgage on the first property was for $750,000, then the mortgage on the replacement property must be at least $750,000 or "mortgage boot" must be recognized. If the replacement property mortgage were only $600,000, then the gain would be the difference in the two mortgages or $150,000 unless the exchanger put additional cash boot into the exchange.

Fortunately, the advance planning that goes into the structuring of an exchange can easily avoid or minimize these types of consequences. Coordination with the advisers in the transaction, qualified intermediary, attorney, and accountant, is essential.

The tax-free exchange under Section 1031 of the Tax Code is an extremely important tool in maximizing the return from investments, particularly in the real estate arena, for the property owner. It is likewise a very important tool for those who structure such transactions, such as the real estate broker.

Lowering Your Monthly Mortgage Payments

2007-10-19T09:55:00.000+08:00

When you decide to buy a home, getting the best possible loan is important. It can save you thousands of dollars. How you can keep your monthly mortgage payments down? These are the different components of the loan that can affect your monthly mortgage payments.

1. Down Payment:
The down payment is how much cash you will put down up front. The rest of the price is how much you will finance with the lender. For example, if the purchase price is $300,000, and you are putting 20% down, that means you will be putting down $60,000, and the loan amount will then be $240,000. The more money you can put down, the lower your monthly payment will be. Basically, the less you finance, the less will be amortized over the life of your loan. Also, you usually get a better interest rate when you put down at least 20%, so that helps out as well.

2. Loan Life:
The number of years the loan will be amortized over affects the monthly payments. The longer the life of the loan, the less you pay each month because it is spread out over a longer term. Typically, the longest term is 30 years. Of course, the longer the term, the more total interest you will pay, so be sure to weigh that in as well.

3. Interest Rate:
One major variable that will differ between lenders is the interest rate. This is the rate they are charging you for borrowing the money. The interest rate will change your mortgage interest payment each month. The higher the rate, the more your payment. For a $240,000 loan, the payment including just principal and interest at 6.5% would be $1,517. At 7.0%, it is $1,597. A $80 difference per month does not sound like a lot, but over 30 years, that is $28,800.

4. Property Taxes:
Property taxes are added into your monthly cost of owning a home either by escrowing it with the lender or by you saving to pay it at the end of the year. The area where your property is located will influence this more than anything. The higher the tax rate and higher the appraisal values, the more dollar amount you will pay each month.

5. Insurance Rate:
Similarly, the higher the insurance rate, the more you will pay per month. This is mostly affects houses that are in special insurance areas that need more coverage, like flood zones or hurricane areas.

6. Points:
Points are paid by the Borrower in order to buy down the interest rate. If you get some insanely low interest rate from one lender that seems completely out of whack from the other quotes, this might be because they are quoting you a rate with points. A point is equal to 1% of the loan amount, and you pay this point as part of your closing costs. So for example, with a loan for $240,000, one point would be $2,400 and that point might buy your interest rate of 6.5% down to 6.25%. Buying down your rate will lower your monthly payment.

Learning the ways to Invest in Real Estate

2007-10-16T17:19:00.000+08:00

There are many benefits of investing in Real Estate.

Your investments in Real Estate can give you a monthly cash flow or at least be paid for by your tenants. You may save some taxes and the property can possibly increase its value.

You are free to select the type of property, location, status and price that you want to pay. If you want more cash flow, you can buy more units and stretch the length of the repayment.

Or if you if you want to decrease your taxes, you can use a technique called depreciation to offset your income. You can also focus on appreciation by buying undervalued properties and selling them for a profit or you could buy properties, repair them up and sell them for a higher price.

Let me touch on on the several ways that you can make money in real estate.

1. Creating a Monthly Income

You buy properties and rent them out. You arrange the deal such that the replayment plus expenses are less than the rent that you receive. You have positive cash flow and an income! (If you do not wish to deal directly with tenants you can use the services of management companies for a nominal fee).

Besides the net income, you get tax benefits and potential of appreciation when you do decide to sell the property later.

2. Flipping

You make money by buying properties for less and selling them for more. You can look at older properties that need improvement, or buy newer properties from owners who are willing to let go at a lower price.

When you buy property that needs improvement, you will need to figure out your cost to improve the property, as well as your holding costs. These include taxes, any mortgage interest payments, utilities, and normal maintenance such as cutting grass and removing snow.

Often when you buy a property from a distressed owner, the property is in good condition. They owner may have fallen behind with payment, need to relocate etc.

3. Leasing

With leasing option, you do not buy the property. You simply take temporary control and sell or rent it to another tenant.

4. Purchasing Tax Liens Property

For Tax Liens property, you simply make a deposit as designated and hang around. You get the property if the taxes are not paid in time. Meanwhile, the deposit is guaranteed by the government and you can even earn an interest!

5. Before Construction

Here, you work out an arrangement with the builders to buy at wholesale price and sell them when completed at market price. In this method there is no need to agonize about mortgage payment or tenants during the building period.

I hope you now understand the many ways to make money in real estate.