Real estate investment – do’s and don’ts



Real estate investment does not exactly happen when you are desperately in need of a home. Many people who buy homes do it because they expect their investment to grow in the years to come. As you can see, there’s a clear investment angle to the whole thing. So, if your interest in real estate investment is profits and returns rather than a place to stay, you need to be clear in your mind of certain things.

First, be perfectly clear about your reason for investment. Are you investing in a home because you have no other place to stay or are you looking for a way to diversify your investment portfolio? If you are a home buyer who desperately needs a place of your own, then, your focus has to be on getting a house that is livable and suitable for YOUR particular needs. On the other hand, if you want to make profits from your investment in real estate, you must take particular care in selecting prime property. Premium location, high quality construction, good neighbors and useful facilities drive up the price value of your real estate investment.

Every investor wants to buy low and sell high. However, this dream seldom translates into reality. In a good majority of cases, people often miscalculate the timing when they buy or sell. But, if you are a buyer in this market, you have a lot going for you because rates have bottomed out in most places. So, you ARE realizing one end of the transaction. To make your real estate investment even more price effective, choose a structure that needs minimal repair and maintenance. Any expense on the house adds to your cost. If you keep your investment low and are successful in selling high, you can make a good profit.

Since the housing market went up like a pot of firecrackers, investors have been somewhat wary of real estate investment. This is only natural. Many fingers have been badly burnt. To keep yourself from making this mistake, make inquiries into the state of the housing market in your area. If the sale value has been beaten to a pulp by the economy, it makes sense to buy as soon as you can. But, if you buy in an area with a poor sale value (due to reasons like crime, poor sanitation, slums etc), then you cannot expect high returns.

Real estate is a huge investment and the volume of money going out is substantial. Buying a home and paying a high monthly mortgage does not make financial sense because you end up paying much more than the market value of the house. Make your investment only when you have the finance to back you up. Remember that you may have to hang on to your investment until the market bounces back. And no one can say when that will happen.

From the outside, real estate investment may seem to be the easiest way of making money. You buy a rundown house, renovate it and sell it at a profit of 20-25%. What could be easier? Real estate investment can give you huge returns provided you play the game with a complete awareness of the risks involved and make informed decisions regarding your purchase.

Choosing a Real Estate Agent: Five Things to Remember



Choosing a real estate agent is like choosing a spouse. Make the right choice, and you’ll end up a very happy person when you buy or sell a home. Make the wrong choice, and you’ll end up with a lifelong commitment of financial difficulties, among other things. If you are one of the people who have experienced troubles with agents in the past, or are simply new at the business of finding and hiring one, then here are five things to remember when selecting such an agent:

Remember to ask people you know

Experience is the best teacher, and choosing a real estate agent is no exception. You can ask friends and family about their experiences in buying or selling a house, and you can get firsthand feedback about how their agent performed in this time. This information is a lot more reliable than depending on advertisements, especially since that person will have an unbiased opinion about the performance of the agent.

Remember to keep your cool

When you do meet face-to-face with a prospective agent, remember to play it cool. Don’t look desperate or ignorant, otherwise the agent will take full advantage of your situation to manipulate things to go his or her way. Study up, set your price limits and maintain a poker mentality during interviews. Smile a little, be friendly, but remember to keep your goals in mind at all times.

Remember to counter-interview the agent

When choosing a real estate agent, it is important to have a voice in the discussion. Agents are akin to salespersons, who will attempt to maneuver you into a position where the only answer you can reply is a ‘yes.’ In order to prevent this from happening, you have to ‘intimidate’ the agent by asking for his or her credentials, past clients, successful sales or buys and other information. This will force the agent to think twice about tricking you, since you are not an easy ‘mark,’ and will give you a level of professional respect.

Remember to find a ‘good’ agent

Choosing a real estate agent that is ‘good’ does not mean evaluating professional competence alone, but adding in your ability to connect with him or her on workable level as well. Squabbles and frequent arguments can turn the professional relationship sour, and you may find yourself with the short end of the stick if and when your agent decides to get some payback with you.

Remember the agent’s motive

Choosing a real estate agent does not mean you are choosing a friend. If there is one last thing that you must remember, it is that a real estate agent’s primary concern is to get a commission. While he or she may claim to work in your best interest, do not place too much trust to the point where you expose yourself to unnecessary financial and personal risk.

And there you have it, five essential things to remember when choosing a real estate agent. Keep them in mind, and you’ll be able to find the right agent without finding yourself getting conned into buying or selling when you don’t want to.

Art Shows – Selling Condo’s

artcondoCondo’s are moving slowly in today’s slowing real estate market and with that comes innovation such as the best selling strategies say like an art show. The condo unit is first designed and laid out as if were an art gallery, loaded with furnishings ans of course, art work. They can be anything from prints of originals or some wisely selected ones that highlights the features of the home. Condo’s are the preferred living space for urban dwellers due to their close proximity to the companies they work for. Read the rest of this entry »

Home Improvement Fraud – Radon Scams

Radon, an invisible radioactive gas that is a product of decaying uranium found in rocks and soil, caused quite a scare in the real estate industry several years past. Some scientists say this gas is linked to lung cancer. It can leak into your home by way of your basement. During that time people claiming that they can remove this gas approach homeowners and offer to take care of the problem in consideration for a large sum of money. The Environmental Protection Agency provides sources where you can get information on safe radon levels, guidance with radon measurement kits, and a list of licensed companies who can help reduce the presence of radon in your home.

Tips on Buying a New Home

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Now that youve decided to invest your savings in buying a new home, here are some tips that would help you thru the entire process:

Define your budget. This will keep you away from frustrations on houses that you cant afford. Save money for taxes and insurance. Consult a mortgage company to give you the rates.
When visiting a house, write down the pros and cons. In this way you can compare the houses that you will visit.
Hunt until you drop. Look as many houses as you can then compare.
One key for negotiation is to inspect the house before buying it. You can negotiate with the price if you know the potential problems of the house.
Schedule for relocation. Make sure you have plenty of time to settle in your new home.

Source of pic: http://www.starting-real-estate-investing.com/images/moneyhouse.jpg

Baby Boomers Will Drive Real Estate Growth



Baby boomers, baby boomers, baby boomers; we all hear this term over and over again. So who are the baby boomers? Baby boomers are people in the United States who were born between 1946 and 1964. Approximately 78.2 million people fall into this category.

As a group, baby boomers comprise the largest population cohort in the history of the United States. The size of the group gives it vast influence over American politics, popular cultural, and of course, real estate. To evaluate the influence of the baby boomers on the future of real estate, the National Association of Realtors (NAR) conducted a study in 2006. The findings of the research were published in report entitled Baby Boomers and Real Estate: Today and Tomorrow. Below are some highlights from the NAR study.

AGE DISTRBUTION

According to the NAR report, baby boomers now range in age from 42 to 60 years old. The typical baby boomer is 50 years old, and the oldest of the baby boomers turned 60 in 2006. About 46% of baby boomers are in their 40s, and about 25% are at least 55 years old.

HOUSEHOLD INCOME

As a group, baby boomers are in their peak earning years. In 2005, baby boomers had a household income of $64,700, and about 25% them had a household income of at least $100,000 per year.

HOME OWNERSHIP

About 78% of baby boomers own a home, which is higher than the national ownership rate of 69%. About 96% of baby boomers believe that home ownership is a good financial investment.

FUTURE REAL ESTATE PURCHASES

About 10%, or 7.8 million of all baby boomers, said they were likely to purchase additional real estate in the next 12 months. Of these potential buyers, two-thirds were planning on buying a primary residence, 26% want to buy land, 19% want rental property, 15% want a vacation home or seasonal home, and 14% want a commercial property.

WHAT FEATURES ATTRACT BOOMERS

When baby boomers were asked about what features are most important to them, 38% wanted a lower cost of living, 38% wanted to be near family, 38% wanted easy access to quality health care, 37% wanted a better climate, and 36% wanted to be near a body of water.

PREFERRED COMMUNITY AMENITIES

When baby boomers were asked about the type of community amenities that interest them most, about 18% wanted to be near cultural offerings, 9% wanted to be closer to their family, 4% wanted to be on a golf course, and 3% wanted easy access to educational facilities.

WHERE DO BOOMERS WANT TO RETIRE

When baby boomers were asked about where they want to retire, 33% of them want to retire in a rural area, 30% in a small town, 25% in a suburban area, and only 12% in an urban community.

BOOMERS AND THEIR REAL ESTATE AGENTS

Baby boomers consistently use the services of a real estate agent. Approximately 60% of homebuyers and 79% of home sellers used a real estate agent in their last transaction.

SUMMARY

The baby boomers have had and will continue to have a significant impact on the real estate market. As the boomers near retirement, they continue to value real estate and will continue to invest in properties and land. Real estate agents would be well served to understand what baby boomers want in terms of their real estate investments, and design strategies that target the needs of this enormous population cohort. For more information, read the NAR report entitled, Baby Boomers and Real Estate: Today and Tomorrow

Green in Your Condo

If you live in a condominium will no doubt have encountered something a lot of condo dwellers think is a problem- the incorporating of a but of green in the home. Having a garden all to yourself is something you give up when you decide to live in a condo. The common areas are designed to make up for the fact that condo owners cannot have their own patches of land to tend to. But, you can still get some green in the home in spite of this.

Choose spots around the house where you would like a planter or two and do the research on plants that need little sunlight and water to survive. These are the plants best suited for condo living. If you have a balcony, you have more freedom in choosing these plants. Depending on size and location, you can even grow veggies in pots.

It is entirely possible to have plants in your home. You just have to research on the ones that are indoor friendly and then be a bit creative about placement.

How Real Estate Net Present Value Works

Net present value (or NPV) is a real estate investing measure widely used by investors for investment real estate analysis for a specific purpose: Net present value tells the investor whether his or her target rate of return will be achieved by a property and in turn, whether the property should attract the investor’s capital into that investment.

Here’s the technical interpretation.

The net present value model is based on a decision rule that states if the discounted present value of future benefits is equal to or greater than the cost of those benefits it is a profitable opportunity. Whereas, if the present value of the future benefits is less than the cost for those benefits, the rate of return will not be achieved and chances are good that the investor should take another look.

Okay, let’s frame the idea with a simple illustration.

When you place your money into a savings account (i.e., invest your capital) you expect it to earn interest (i.e., provide future benefits). The bank dictates the return and you are either willing or unwilling to tie up your capital based upon your acceptance of that return. For example, whereas you might deposit $10,000 to earn 3.8% interest, you might not make the investment to earn 1.2% interest.

Now suppose a bank doesn’t quote an interest rate. Let’s say you are only quoted what amount of money you’ll collect in the future. That next year you will collect $10,300 with a deposit of $10,000 today and there’s no mention of interest rate. How would you know what yield your investment is earning?

That’s the dilemma real estate investors face when analyzing income property. Whereas there’s a projection for an investment amount and future benefit, there’s no mention of yield. The individual investor has no idea what rate of return is achieved based upon that data alone and therefore has no way to compare it to other potential investment opportunities adequately.

This is where net present value comes in to play.

The NPV approach to investment value takes your desired rate of return and essentially tells you if the future cash flows (benefits) from a property achieve that yield on your capital investment or not. In other words, you state the yield you want, and NPV will inform you whether that target yield is achieved.

How It Works

NPV discounts all future cash flows by the desired rate of return to arrive at a present value of those future cash flows, and then it deducts that amount from the initial equity, or initial capital invested. The result is a dollar amount that will always be either negative, zero, or positive.

How to Interpret

1) Negative dollar amount – This means that the present value of future benefits is less than the amount invested and that the specified rate of return is not met. In other words, you might want find another property to make your investment.

2) Zero dollar amount – This signifies that the present value of future benefits equals the amount of the investment and that the desired yield is perfectly met. In other words, the property will achieve the return you want with nothing to spare.

3) Positive dollar amount – This reveals that the desired rate of return is met with room to spare. In other words, you might have come across a keeper.

Net present value is certainly worth knowing, and when properly used can help you evaluate your next real estate investment opportunity. Just bear in mind that it is only one small aspect of real estate investing analysis, should never dictate an investment decision, and is certainly not without its shortcomings.

Yes, NPV will provide you the opportunity to evaluate projects using the same rate of return requirements, but it will not provide any useful information concerning one project over another from a risk standpoint.

Finally, I should add that it’s impractical to calculate NPV without a financial calculator or quality real estate investment software. If you are serious about real estate investing then by all means make the investment in a good real estate software solution that computes net present value and provides other real estate analysis features that will benefit you as well.

Here’s to your real estate investing success.

Real Estate Finance Overseas



After the technology bubble burst back in 2000 the stock markets suffered a bleak period of decline and investors chose to place their focus on bricks and mortar rather than falling share prices and they began investing heavily into real estate.

As a result the second home and the buy-to-let real estate markets in many countries around the world such as in the UK, US and Australia boomed. However, as the real estate affordability gap continues to widen in these nations and fewer first time buyers can even get onto the first rung of the real estate ladder, property price increases have begun to cool off and the ability to generate impressive rental yields and strong capital appreciation has slowed right down for at least the short term.

At the same time the stock markets around the world remain volatile and so now many more investors are looking overseas for alternatives to cooling domestic housing markets and bumpy rides on the stock market. Many are finding that there’s an abundance of real estate opportunity in emerging countries around the world which has created a strong demand for real estate finance overseas.

For those considering joining the jet-to-let real estate investment set here are the three main options available when it comes to raising real estate finance, loans or mortgages to buy property abroad.

1) In many of the nations that were the first to boom the property markets are now stagnant and because lenders have fewer customers to provide finance for they are actively targeting those who have yet to upsize, release equity or take out a second mortgage and offering them increasingly favourable terms, conditions and interest rates.

For anyone thinking about buying real estate overseas in a country where they believe it will be difficult for them to secure local finance or where interest rates are unattractive, the option may exist for them to re-mortgage their existing property or take out a loan secured against the equity in their primary residence.

The negative side of this option to raise real estate finance to buy overseas property is that the purchaser’s primary residence will be the security against the loan and naturally this introduces an element of risk.

2) The second option available to buyers looking for real estate finance overseas is getting a mortgage locally in the country in which they want to buy. Some countries such as Spain, Germany and France for example offer attractive interest rates and payment schedules to buyers from other European nations and many countries offer mortgages to international purchasers who can provide a decent sized deposit.

Anyone thinking about buying abroad would do well to also research which banks and lending institutions exist in that country, whether they are allowed to lend to foreign buyers and if so, are the criteria for getting a loan and the terms and conditions of the loan favourable?

3) The final option available to the majority of real estate investors looking to finance the purchase of a property abroad is an international mortgage provided by an international lender who usually has experience in the country from which the borrower heralds and also in the country in which they wish to invest which can make the whole finance process so much simpler…but the downside is that arranging such mortgages can be far more expensive than the first two options available to those contemplating their real estate finance options.

The availability or applicability of any type of mortgage or finance raising scheme discussed in this article is something that needs to be determined on an individual basis therefore this article does not constitute advice. Anyone hoping to raise finance to purchase real estate overseas should seek expert financial advice.

Mortgage

real3.jpgA mortgage loan is a loan secured by real property through the use of a mortgage (a legal instrument). A home buyer or builder can obtain financing (a loan) either to purchase or secured against the property from a financial institution, such as a bank, either directly or indirectly through intermediaries. Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably. Mortgage occurs when an owner (usually of a fee simple interest in realty) pledges his interest as security or collateral for a loan. Therefore, a mortgage is an encumbrance on property just as an easement would be, but because most mortgages occur as a condition for new loan money, the word mortgage has become the generic term for a loan secured by such real property.