Real Estate Daily Guide

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.

No matter where you live, state taxes are a part of life. States use the taxes collected from homeowners to pay for vital community infrastructure. In Florida, the state collects approximately $36 billion per year in general tax revenue, which is used for schools, health care assistance, environmental protection, and numerous other state-funded programs. Taxes on businesses, large corporations and merchandise, rentals and services make up the majority of this revenue, but Florida homeowners also make a significant contribution.

A clear understanding of Florida property taxes is an asset to any Florida home buyer. If you are considering a new home purchase in Florida, knowing the amount of tax you will need to pay, both at closing and on an annual basis, is an integral step in establishing a realistic housing budget. Certain taxes are assessed at the time of closing on your new home, while most annual taxes are deducted from your initial escrow account. An additional tax payment added to your monthly mortgage is used to replenish this escrow account each year.

Taxes due at closing

Whenever real estate is transferred in Florida, either by quit-claim deed, warranty deed, or a written obligation to pay (such as a mortgage) is filed, a Florida document tax must be paid to the County Clerk’s Office if the document is files, and directly to the Florida Department of Revenue if the document is not filed.

The Florida home buyer will be assessed a Florida mortgage tax, which is typically $0.35 per every $100 of the home’s value. A Florida State Mortgage Intangible Tax may also be assessed at an average rate of $0.35 per every $100 of the home’s value. Taxable home value is calculated by using a fair market price estimate.

Ad Valorem (property) taxes

All Florida residents are required to pay an annual Ad Valorem, or property, tax. The amount of tax due each year depends on the taxable value of your home, and on your county of residence. A comprehensive list of property tax rates among Florida counties can be obtained from the Florida Department of Revenue.

Tax exemptions

For many Florida residents, tax exemptions help to lower their annual property tax bills. The primary exemption available in the state of Florida is the Homestead Exemption, but there are many others available. The Widow’s and Widower’s Exemption, The $500 Disability Exemption, and the $5,000 Disability Exemption, to name a few. Tax exempt amounts are deducted from the fair market value of the home.

Homestead Exemption

The largest tax exemption for Florida home owners is the Homestead Exemption. A Homestead Exemption allows you to deduct $25,000 from the fair market value of your Florida home. To qualify, you must be a Florida resident, the home in question must be your primary residence as of January 1st.

Applying for this exemption is relatively simple. First, you must obtain a Homestead Exemption from your local property appraiser’s office. Standard application questions include: Name on property’s recorded title, street address of the property, length of time title holder has been a Florida resident, confirmation that title holder has a Florida license plate and driver’s license, and whether title holder resided at the property address as of January 1st.

Tax exemptions for disabled persons

The state of Florida offers several tax exemptions for those with permanent disabilities. Any Florida resident who is totally and permanently disabled may qualify for at $500 exemption. Residents who are ex-service members and who sustained at least a 10% disability in war or service-connected injury may apply for a $5,000 exemption on any property they own.

If you are an ex-service member who sustained an injury in wartime or service-related activities which let to a total and complete disability, you may be entitled to a complete tax exemption on your primary residence.

Property tax exemptions in the amount of $500 are available to blind persons residing in Florida.

Additional exemptions

Finally, property tax exemptions are available to widowed residents and residents over the age of 65. Florida Residents over the age of 65 who have an annual income of less than $20,000 may be entitled to an additional $25,000 Homestead Exemption.

Any widow or widower who can show permanent Florida residency is entitled to an additional $500 tax exemption. This exemption is revoked upon re-marriage.

For additional information on tax exemptions, qualifications, residency requirements and application forms, Florida residents can contact the county property appraiser, tax collector, or Florida Department of Revenue.

Investors typically choose real estate for a number of reasons: cash flow, appreciation, tax benefits, and leverage.  A real estate investor holds property for personal or commercial investment reasons.  This differs from real estate dealer who holds property primarily for resale to potential clients.  An active investor typically buys a property and then makes repairs or improvements with the intention of selling the property for a profit.  A passive investor usually hires an investing firm to find and manage potential profitable opportunities, and is not actively involved in any improvements or negotiations related to the property.  Unlike a professional realtor who has to pass a series of exams and be licensed by local and state agencies, an investor simply needs capital and confidence. 

By putting down payments on a real estate transaction, an investor can significantly increase his profit percent and better the terms of the financing loans.  By bettering the terms of the loan, an investor can increase his available cash for other transactions, thus increasing potential earnings exponentially.  This process creates a strong cash flow.  This cash flow is very enticing to real estate investors.

Barring any unforeseen declinations in quality, real estate, unlike a car, generally appreciates in value.  This means that once a property is purchased, the value of that property steadily increases over time.  Residential real estate is especially prone to this process.  This is so because residences are comparatively priced.  This means that the value of a property is largely dependent on the value of the surrounding properties.  Therefore, if one house appreciates in value, then the surrounding properties also increase in worth.  An investor can force appreciation by investing in repairs or improvements.

A somewhat lesser known reason that so many people are learning how to become a real estate investor is the beneficial tax rules governing such transactions.  State and federal governments try to encourage investment by writing financial rewards into the tax code.  There are two main rewards built in.  First, an investor can claim monthly mortgage payments as a tax deduction.  Secondly, tax deductions can be made through a process called depreciation.  Though a property may appreciate in value, an investor is allowed to make the assumption that it will actually depreciate over the projected useful lifespan of the unit.  He or she is then allowed to claim this theoretical loss as a tax deduction.

Another strong reason for becoming an investor is called leverage.  Leverage can best be explained through an example.  Say you bought a house for ten thousand dollars and then sold it for eleven thousand dollars.  Your profit margin would be ten percent.  However, if you get an initial loan for the purchase and make a down payment of only one thousand dollars, then your profit margin would be one hundred percent.  This method is called leverage and is a great way to maximize profits.

For all these reasons real estate investing is both an easy and very profitable business to get into.

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.

On any given day, people can easily find articles and news stories describing an impending bust of the so-called real estate bubble. Despite this gloomy prediction, many experts believe that the recent slowdown in housing will be a gradual and modest readjustment rather than sharp bust or decline. These experts believe that factors that lead to a sharp decline in the real estate market are just not present in the current economic outlook. In fact, a recent study by the Joint Center for Housing Studies at Harvard University noted that “despite the current cool-down, the long-term outlook for housing is bright.”

The rise and fall of the real estate market is subject to the forces of supply and demand, and these factors point to stable and positive growth in the real estate segment.

SUPPLY FACTORS

Limited supply of real estate makes it scarce and usually pushes home prices up. In contrast, an oversupply of real estate tends to put downward pressure on home prices. Despite the current slow down in the real estate market, factors that impact limited supply favor continued growth in the real estate market. Some of these factors include:

1. Builders have readjusted growth plans in regions that have an oversupply of new housing. Over time, any excess inventory is likely to be depleted and equilibrium achieved between supply and demand.

2. The availability of land in certain regions, as well land use regulations and associated compliance costs will continue to restrict the supply of new homes.

DEMAND FACTORS:

Housing located in regions with high demand tend to be more expensive than homes in regions with low demand. Factors that impact the demand for housing suggests a favorable long-term housing outlook. Some of these factors include:

1. No current evidence of significant and across-the-board job losses; forecasts of relatively low unemployment rates.

2. Long-term increased demand for second homes, vacation homes and senior housing by baby boomers.

3. Long-term increased demand for entry-level homes by the children of baby boomers.

4. Long-term increased demand for entry-level homes by immigrants.

5. Long-term increased demand for entry-level homes by second-generation Americans.

6. Forecasts that the outflows and inflows of the U.S. population in and out different regions will not significantly impact the overall U.S. real estate housing market.

7. Relative stability in interest rates.

8. Continued stability in long-term home appreciation rates.

9. Overall, rising rate of wealth across all age groups.

SUMMARY

In summary, strong household growth, overall rising incomes and wealth, and a stable economy all bode well for continued long-term growth in the real estate market. While the overall housing outlook is favorable, affordability will continue to be a challenge, as wages, especially in the lower income levels, have not kept up with housing costs.

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.

A real estate commission is a specified charge, which is paid to the agent or the broker hired for the purpose of selling a house. To avoid being duped by paying unreasonable amounts of money as commission, it is advisable for sellers to study the market themselves and get to know the general range of commission rates first. In reality, the commission rates are never fixed and most of the states forbid the Real Estate Commissions from doing so. This means that the agents can quote any price they like as long as the customers are willing to comply with the demands. However, this does not imply that the customers are compelled to pay the stated rates; they have the option of negotiating as much as their negotiation skills allow them to. The competition factor between agents also helps keep the commission rates from soaring too high.

The rules of estate commissions

Usually the Realty companies set the minimum and maximum rates of commission and leave the finalization of the rate to the brokers. The agents however, are not allowed to discuss their company commission rates with agents of different realty companies. No realty company is allowed to advertise its rates to attract customers. The commission to be paid to the seller’s agent is decided when the listing contract is being drawn and the commission payable to the buyer’s agent is determined when the contract for the sale of the estate is being written. Usually, the total commission is divided equally between both the agents.

Tips to negotiate

Here are certain pointers for you to keep in mind when you try and negotiate the commission payable to you real estate agent:

Study and calculate the value of your home and draw an estimate of how much would be the ideal commission charge for that value.

Enquire about other homes in your area that have been put up on sale and find out how much those owners are paying their agents.

Keep a track on the market trends, whether it is favoring the sellers or the buyers. In case it is supporting the sellers, then the negotiation power lies more with the sellers.

Make a precise budget before negotiating the commission rate.

Before hiring an agent, make a background check to see if he is adequately qualified to carry out the job. Carefully observing the agents’ weaknesses and use them to your benefit.

Discuss payment options other than straight commissions such as a flat fee or a dual fee. The dual fee states that a certain percentage will be paid if the house is sold for more than a specified rate.

Alternatives

In the situation where you do not manage to find an appropriate agent or broker, you can always sign yourself with a real estate firm that charges a flat rate instead of any percentage. Moreover, if your house is in a good condition and well maintained, you will not only pay a nominal fee for the sale procedure but also get a good value for your house.

Caution

It is advisable that individuals wanting to sell their house do not fall for tempting offers made by certain agents who promise to sell the house at a higher price, and in turn, charge a higher commission. The customers should also be wary of the agent who says that the value of the house is very low and would require a lot of effort and time to sell. These are just tactics to extract as much money as possible from the client.

 

 

Apparently, there is no shortage of mortgage refinance lenders in the market. However, which of them provides the best service? How is the process of loan application facilitated? Take a closer look at the way refinancing home loans work.

 

In reality, many homeowners aim for refinancing home loans. However, they are held back because they do not know more about such loan products and they have no idea where to find and get them. Some just do not like the tediousness of having to deal with mountain-high document and paper requirements that come with loan applications.

 

Experts always assert that refinancing an existing mortgage surely is a practical and wise option despite the pressing times in the overall financial sector. You could possibly find lower-rate refinancing home loans that would logically help you generate significant costs.

 

As always, it is best to be very careful before taking any loan product from any lender. Do not grab the seemingly attractive refinancing home loans that come along first. For sure, there are still many products that are much better and are implementing much lower interest rates. All you need to do is to patiently and resourcefully look for them. Doing a comparison shop would be suitable for you. Get quotes from four or more refinance lenders, compare the terms and conditions, and choose the best lender and product to suit your requirement.

 

Lower interest rates might not always be advantageous and recommendable. It is because many refinance mortgage products with lower rates come with higher costs and fees. The savings to be generated from the reduced rates could be exceeded by the total expenses spent on loan costs. Study your options carefully before deciding whether to refinance a home loan or not.

 

Find out about all the small and minor fees that your lender would collect. At the first view, such costs may be insignificant. However, if there are too many of those costs, you could end up shouldering greater expenses after the numerous small fees are summed up. Take note of charges imposed for document preparation and for getting credit reports as they could be hefty.

 

Lastly, always remember that refinancing home loans is actually getting new loans. Your previous mortgage would be cancelled to give way for the refinance home loan. Thus, you should be aware that the final loan maturity would be adjusted and would start from the day you secured your mortgage refinance loan. Your existing home loan could be provided by a different lender that has nothing to do with your refinance lender. Even if they are affiliated, the loan maturity would then follow the count of the refinance facility.

 

Do not apply for and take a home loan refinance loan unless there is a truly pressing need for one. You should not refinance just because you want to lower your payments or you want to extend your maturity. Take into consideration all the adjustments to be done on the rates, terms, and conditions.

 

 

 

 

 

Real estate investment business is basically a profit oriented venture but only if it is done skillfully. There is thus a need for proper real estate investment business plan. This plan actually includes ways of setting, marketing, developing, and running the business. Therefore, the growth of the business and the financial success depends largely on a strategic real estate investing business plan.

However, the first real estate investing business plan focuses on creating a powerful team of agents. It is the real estate agents who not only help by lending good credit ratings, money, expertise, and professionalism but also provide information about mortgage rates. Mortgage and contracts generally add to the profit.

The next real estate investing business plan includes deciding over the property that is to be bought. It is of basic importance that one should have a clear idea about the property. The property may be a ‘fixer’ to be transformed into a new one for the new buyer. The idea behind this is to increase the value of the property, which will again add to the profit. This is a kind of business quite popular among the investors.

One of the key aspects of a real estate investing business plan is to ensure that there are multiple possibilities of properties and investment choices. This is because the selection should be based on the rating point given to the properties. This will enable the investor to choose a property that promises great income potential.

Real estate investing business plan is not just a simple deal. But it is a business that needs proper marketing, which will helps more people in finding and discover new opportunities. Therefore, the real estate investing business plan also includes ways and means of promoting the business. For this, an online real estate investing business plan is the best option. This may be achieved by blogs, feeder sites, newsletters, and even through search engines.

However, if the real estate investing business plan is done with a professional attitude, it is bound to be successful.

Making money in real estate is a dream that millions of people have. Few will actually see that dream become a reality. Why is that? Well the fact is that it takes a person with a strong will and a stiff upper lip to make it in this cutthroat business. You cannot be the kind of person that is given to allowing others to take what you have or want. To make the money that you need you have to be willing to stand up and make it happen.

The profitability of investing in real estate depends on the market as much as it does the person doing the investing. The general rule is that you have to be smart and lucky at the same time. Knowing what to buy, when to buy it and how much to pay for it all have to ring in your ears at every potential investment. Lacking even one of these components can put you at risk for serious losses in the financial department.

This is key when you are looking to get a better grasp on real estate value and what affect it can have on your profit margin. Basically you are having to do a risk assessment before you make every deal. This can be time consuming if you are not knowledgeable in this area. However, with a few key tips and a bit of advice you can make the right choice. So below we have provided a few of these tips.

The Value and Price Gap

Learning to bridge the gap between value and price is vital to your success. You can sit there all day long and read appraisals and still not come away with any better idea as to how much you should pay for a property. This is due to the fact that appraisals are based on more factors then you need. They are giving a value that is used by the mortgage companies to determine how much can be loaned. The price is actually what a person or company would pay. Knowing how to fall in between those when buying is how you make a profit.

Risk

There is also the idea of risk that has to be considered. Any real estate deal is going to be risky but some more than others. You have to learn how to properly assess the risk and determine whether it is too high for you to make the investment. While high risk ventures do tend to be more valuable in the long run, there is the chance that you could fail. As such you have to be sure that you are prepared when establishing real estate value and the risk involved.

Long Term

As a person that is looking to make an investment in your future you have to see that true real estate value is based on the long term. Short term factors do exist but in most cases you have to assess the value on a term that is far longer. The more that you have to sit on the property the more the value could change, either for the better or for the worse.