Archive for Basics of Real Estate

The Easy Way to Assess Property Value

April 15, 2009 at 10:27 am · Filed under Basics of Real Estate, Buy a Property?, Buying Real Estate, Buying an Appartment, Buying and renting low priced homes, Key to Real Estate Success, buy sell home

The notion that assessing a property to arrive at good decisions is difficult is globally ubiquitous in the minds of property-investor starters. It’s not that hard actually if you just know how to compare logically and if you practice prudence in your judgment particularly in giving percentages in the process of rectifying/adjusting the differences of the comparables’ features.

Though there are a lot of books that teach how to assess and select a good property to invest to, these starters usually, after reading such books, still end up investing their money on the wrong property because of rush decisions and of not thinking that there might be more properties out there with the same or more superior features offered at much lower prices. I’m not saying that they should go from one state to another state just to look for such property but what I would advise them to do is to look around first in the neighborhood for other properties with same features and try to compare their prices before buying the said property. It’s that simple.

A lot of them tend to forget immediately what they have read and make some rush wrong decisions inadvertently. Why? Because instead of trying to look around first and give themselves more time to think before buying it, they let themselves fall in the pit holes prepared by agents just to be able to convince them and make a sale. Right there and then they will decide to buy it without even canvassing by just taking a look around in that area for other offers. As a result, they will just realize later that they have become a victim of overpricing after knowing that there are more properties in the neighborhood with superior features offered at much lower prices.

Now, let’s go to the basics of comparing properties and what are they. These are the price, location, physical attributes and of course, the improvements and land developments if there are any.

Location should be based on the kind and condition of its fronting road, potential of the whole property and the activity in the vicinity.

Physical attributes are characteristics of the land such as the lot’s dimensions, size, shape, elevation and topography.

Land developments are developments introduced on the land such as landscape, perimeter fence, driveways and pathways, and swimming pool. Improvements are buildings whether residential, commercial or industrial depending on the kind of property you’re considering but just make it sure that it conforms to the property’s HBU and the neighborhood’s prevailing structures as well.

When you compare properties, you have to make sure that you’re comparing the same types of properties that are located within the same neighborhood. It’s a rule that you compare only same classification/type of properties.

In comparing you have to assign percentages to the differences of the properties’ locations and physical attributes by evaluating which is more superior. If your subject property is inferior, you have to deduct a certain percentage of the price of the comparable but if it’s more superior then you have to add. How much percentage you will add or deduct will depend on your observation of the extent of superiority or inferiority of your subject property to that of the other property or comparable.

On improvements, you should determine the areas of each property’s building(s) and cost grades, and their corresponding ages for you to be able to get their depreciated building values. It’s the same thing with land developments but then you have to determine which property has developments that are more attractive to you and the others as well.

These are the nitty-gritty of direct comparison method. Simplified for you to easily imbibe and adopt if you want to avoid the pit hole. However, it’s your prudence in judgment that matters for you to make good decisions. Bear also in mind that if you don’t use your common sense even if you know how to compare properties, you are sure to fall in that pit. So, be meticulous and be cautious . . . and you’re sure you will end up with a good property to invest to.

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Staging Your Real Estate for Potential Buyers

April 15, 2009 at 8:43 am · Filed under Basics of Real Estate, Best Way to Find Deals, Best commercial real estate, Selling Houses Fast, Selling a home as is, buy sell home

An empty house is like a blank piece of paper that needs to be transformed into a book report. It can feel overwhelming to have to make a home out of an empty canvas. That’s where staging comes in. Staging helps potential buyers visualize how they can arrange the home to their liking.

While professionals can be hired to perfect your house’s appearance, there are plenty of simple ideas and tips that can help you increase your selling power on your own. Some of them are listed below.

Curb Appeal
The most obvious place to start your sprucing up is outside. The exterior of your home is what will entice buyers to enter. A fresh coat of paint, preferably in a neutral color, and a well-manicured lawn can make a huge impact. If you want to go a step further, break out your green-thumb and plant some colorful flowers that compliment the house paint and trim, and remember to keep your foliage within your property. Tree limbs that cut across lawns are not only unsightly, but a buyer does not want to worry about arguing with a neighbor over property lines.

Clean and Minimize
The first step to staging the inside of your home is, of course, making it as clean as humanly possible. Get the carpets steamed, corners scrubbed, and degrease the kitchen. Your house needs to sparkle.
Another way to keep your house looking fresh is to minimize clutter and get organized. Although you want buyers to be able to visualize how furniture can be arranged, they don’t need to see your stuffed animal collection showcased on the couch or know how you like to use old CDs as coasters.


A Wide Range
You are attempting to make the house enticing for as many people as possible. So ditch the sewing rooms, arcades, and exercise equipment. Most people aren’t looking for an extra bedroom to turn into a personal gym. Bedrooms should look like bedrooms. Don’t have an extra bed? Throw a box spring on some milk crates and cover with a comforter instant bed.
Keep in mind your location as well. If you live in a city full of young, single business men and women, consider making one of the rooms as an office. Regardless of how you decide to delegate extra rooms, be sure they have a clear purpose. A bed, computer desk, and mini-fridge all crammed into one room will only confuse buyers.

Details
Although it is better to keep your staging sparse, a few inviting touches can balance out any coldness. Open the curtains and let the natural light in so people can see how bright and airy the home can be. Use adequate lighting where necessary and put up a few pleasant wall decorations and some fresh flowers. Turn on some calming music and add a couple puffs of air freshener. You are having guests over, after all.

Staging can make a huge impact in the way potential buyers view your home, so spend the time and put in the effort. It might make the difference between a quick, profitable sale and a sluggish return.

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How to make big money with distressed properties

January 16, 2009 at 1:01 pm · Filed under Basics of Real Estate, Buying Real Estate, Real Estate Investing, buy sell home

The term, “distressed properties” has always seemed rather amusing to me. It makes me think of a property that is sad or somewhat out of sorts, even lonely. When you think about it, a property cannot really be distressed. A house can be rundown and in need of repair, but that doesn’t necessarily mean it’s distressed. I know a lot of people who live in run-down properties and they’re happy as can be to be living there.

When looking to make money in the fixer-upper type of properties, don’t look for distressed properties; look for properties that are owned by distressed people. Then no matter what shape the property is in; you may very well get yourself a real bargain.

People may be distressed for one of many reasons. They may be distressed about their family situation, some neighbor they may not like, or their house may need some repair that they don’t want to fix or pay to get fixed.

Maybe, you’ll find some wacky negative thinking person who always supposes he is going to get the worst end of any deal. So, he will sell his property accordingly. In any of these situations, these people may be unloading what might be a diamond in the rough!

Once you find a property owned by a distressed person, chances are you can make a big profit with this property, whether it needs a lot of work or not. In a hot real estate market, any property that goes up for sale at a price below the going market rate won’t last very long. The realtor himself may buy it and flip it in a hurry for a huge profit before you ever get to see it.

Finding a property for sale by owner is a better way to find a bargain. Here, the seller saves on realtor costs and may pass on this savings, at least in part, to you.

An even better situation would be if you could find a property through word-of-mouth. I know folks in the fix it up business that have fixed up and sold many properties. Many times, people who need to sell a property approach these professionals and ask them if they might want to make an offer for it. Many times these renovators do buy these properties, but other times they are just too busy to take on another house and the sellers end up listing the house with a realtor.

So, if you’re looking for bargain properties to turn over and sell at a profit, and you keep missing out on the good deals, try to get to work with someone who is in the business of buying, repairing and selling properties. Approach him about a service you can provide for him. This is the best way to get started in this business and it gives you an inside track. It gives you the opportunity to see what’s going on. You’ll find out what is selling and what they’re selling it for.

Once you’re an insider, leads will come to you. Sometimes more leads than you can handle. I tell you all this, because the bargain property business is a hard business to get started in. There’s a lot of competition, and with good reason. There’s a huge profit potential in fixing up bargain properties as well as buying properties that have distressed people living in them.

Many times great deals come from distressed investors, particularly distressed partnerships. Lots of times these people will sell a property under the market value just to get out of their situation. These people will worship anyone who can take the property off of their hands.

There is no way that a short article like this can tell you all the ins and outs of dealing in bargain properties. But the lesson to be learned is: Don’t go chasing after every property you see. Don’t go after properties that many other people are interested in. Start slowly, work with someone else, if possible, and get to know the business from the inside. This way, you will gain experience without taking risk.

Once you have the experience, you’ll be ahead of 98 percent of the people who are looking for bargain properties. This field is full of amateurs, but in a short time, you’ll be a pro. Good luck, you might just become a real estate mogul!

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It’s Back to the Future for Real Estate

January 13, 2009 at 4:15 am · Filed under Basics of Real Estate, Real Estate Bubble

The serious decline in housing sales in many parts of the country is well documented. This downturn was preceded by several years of rising home prices in many areas. In some cases, prices rose beyond levels that were supported by local salaries, and were clearly not sustainable. The driving force that fueled the rise in home prices was the availability of low interest money. Easy availability of home mortgage money, plus historically low interest rates, allowed the demand side of the market to build.



When buyers could expect 15% – 30% appreciation and get 6% interest rates, who would not be motivated to buy? It was a no-brainer! Of course, high demand leads to higher prices. And, high demand leads to more new homes, as builders respond to the demand.



The flow of money for mortgages came from new and unregulated sources. In the not too distant past, government regulated entities, such as Fannie Mae, were the main buyers of mortgages from lenders. More recently, Wall Street investors entered the market for buying real estate loans. Alternative loans, interest-only loans, 100% loans, creative ARM’s, no-documentation, and other high risk products became commonplace. Some of these loans began with a low interest rate that the borrower barely qualified for, and then switched to a higher rate after a short time. In many cases, the borrowers did not understand the risk that they were taking.



For most of my experience in real estate, buyers usually put 5% – 20% down, with 28% of their income allowed for mortgage payment, and their income was fully documented. When we began to see 100% financing on contracts, we were a little concerned by the shortage of personal investment, or skin in the game, as they say. The underlying expectation was that the market value of the home would increase quickly, and the buyers would be covered, if they needed to sell. Home ownership became speculative.



Sub-prime, alternative, no-doc, and other high risk loans are not limited to low income or poor credit buyers, and are not always predatory. Often, very sophisticated borrowers chose to keep their cash and leverage the purchase. In all price ranges, the easy availability of low interest money fueled the demand for home ownership, as well as investment in rental property. Inevitably, the demand for homes led to price increases, and elevated inventories, as builders produced more homes. Then the cycle was broken.



What caused the break? Foreclosures. Investors soon realized that mortgage backed securities contained more risk than expected, and stopped buying them. Suddenly, lenders did not have this new market for selling many of their loans. Without the flow of funds for easy mortgages, demand for homes slowed down. Prices began to fall in many parts of the country, and oversupply conditions prevailed. This has created challenging conditions for many homebuilders.



Of course, real estate markets are local, and some localities will fare better than others. Job growth, continued low interest rates, and reduced supply from builders are key factors that contribute to more balanced local real estate markets. But, in nearly all areas, the effects of the new tighter requirements for home mortgages will slow the market.



For the next year, sellers will have to consider the fundamentals to attract a buyer. They will need competitive pricing, excellent presentation, and top level marketing. Buyers will have to have a down payment, good credit, and proper income for their loan.



So, for the next few years, it’s back to the future for real estate.

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Facts To Know Before Becoming a Landlord

December 26, 2008 at 2:02 pm · Filed under Basics of Real Estate, buy sell home

Becoming a landlord is an extremely good way to make extra cash. However it all depends on the right research and planning by you. If you do not play your cards right, you could end up losing money.

First of all you have to ensure that rentals are allowed by your area’s homeowners association. If there is an option where you can rent out your property then you must set up a rent price. Newspaper classified ads are a good place to get an idea for the rent you should ask for. There are certain questions you might want to answer to determine the rental rate. You should see if the rent that you are going to ask for covers the cost of running and maintaining the house and after paying this, a profitable amount is left for your own disposal.

One thing has to be kept in mind; local laws may hinder rent increases and rent amounts hence you should check with the consumer affairs or housing services of your state. This should be done before you make the final decision to rent your property out.

It is a good idea to join a landlord association to help you stay abreast with latest landlord tenant issues. Becoming a member of an association will help you to interact with other landlords and understand state specific rental or lease agreements. These agreements have to uphold the state law. Features such as a rent increase or forms that deal with eviction etc vary according to policies unique to each state.

One thing you must know before becoming a landlord is that tenants have no rights to trash your property. However, as long as the tenants are paying the rent they can enjoy all the rights of ownership. But the right to sell the property is excluded from this clause.

Landlords must ensure that the property is in a condition that is habitable and that has working locks on the windows and doors, a roof that does not leak and adjustable thermostats. You must check the laws of your state regarding the maintenance and repair responsibilities of the landlord.

Another thing that you must know before becoming a landlord is that the Fair Housing Act of US Department of Housing and Urban Development prohibits any discrimination of tenants according to religion, color, race, national origin, familial status, sex, disability or handicap.

It is imperative that you do not rush through the entire process of tenant selection. You should see that you have compiled a set of standards or criteria to choose a good tenant. All applicants that you might want to consider should adhere to these standards.

These standards should include rules for the rent price, number of occupants, security deposits, pets, minimum income requirements, who pays utilities etc. Economically disadvantaged people are given vouchers or certificates by the housing authority. This guarantees that a portion of the rent will be paid by the government.

Carrying out the duties of a landlord will be easier if you understand the guidelines mentioned above.

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