Ten Tips for First-time Real Estate Investors

It’s a great time to invest in real estate. Every investor has personal goals in mind, but in my experience as a Palm Beach County Realtor I’ve learned there are certain things every investor should know.

1. Compare
The actual sale price of comparable properties in the same neighborhood is one of the best indicators of a property’s actual market value. Similarly, area rents dictate how much you can charge tenants. Tenants will move or even purchase their own space if your rents aren’t competitive.

2. Tax Laws Change
Look for an investment that doesn’t depend on current tax laws for profitability. Tax laws change all the time. A sound property with good financing is your best bet.

3. Stick to Familiar Ground
The more you know about your chosen investment niche, the better. For example, if you are a contractor with experience working with banks, start with fixer-uppers or foreclosures.

4. Don’t Buy a Pig in a Poke
Analyze the financial statements. Know the actual costs and returns for this property.

5. Assess Your Market
A landlord’s customers are the tenants. Recent rent increases or poor service on the part of the current owner may have your tenants planning a move. Tenants with short-term leases may be warm bodies lured into place to attract buyers.

6. Know the Tax Situation
Taxes can make or break your investment. A tax advisor can help you turn the tax situation to your advantage.

7. Get an Insurance Quote
Your insurance will be based on the value of the property, which is based on how much you pay for it. The seller’s coverage may be based on a lower estimate, so try to get an idea of how much you will pay.

8. Verify Utility Cost
Contact local utilities to find out the actual average utility usage. This is especially important if any utilities are included in the rent.

9. Call Your Accountant
Make sure your accountant is up to the task of making the most of your legal tax deductions.

10. Get an Inspection
Thoroughly inspect the property. A professional inspector can identify expensive defects in the structure or the mechanics before you buy.

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Buying and Selling A House Simultaneously In Today’s Market

Buying and selling a home used to be an easy proposition. The interested party contacted an agent and listed their house on the market. They began to look for a new home. When they received an acceptable offer on their home they proceeded to make an offer on the new home they wished to purchase. If they wanted to lock up a home until their home sold they wrote a contingency clause into their contract that voided the contract if their home did not sell in a certain period of time. This rarely occurred. Financing was easy to come by, and the real estate market was hot.

Today the real estate market is much different. Pitfalls that were once cleared with ease now cause deals to fall apart at the worst possible moment. To successfully execute a simultaneous buy-and-sell there are several tips that savvy buyers/sellers need to know and should keep in mind.

1. Meeting with the agent who will be negotiating on the buyer’s/seller’s behalf is absolutely vital. Your agent is knowledgeable about current market conditions and will be able to apply this knowledge to pricing your home appropriately for the current market. They will also give advice on improvements that can be made to help the home sell. The expected sell time of a home will be important in the next step.

2. Meeting with the mortgage officer very early in the selling/buying process is also important. They will have information about any possible problems that could come up. They are capable of working financing magic if given time. They also will be able to tell the buyer exactly what they will be able to afford. That way no time is wasted looking at properties that they cannot afford. The mortgage officer is essential to making sure the timing of the buying and selling process is doable.

3. It should be determined when move in and move out will occur and if it is feasible for both to occur on the same day. Putting together a rent back agreement or early move in agreement is a good idea. Sometimes closings do not occur on time, and it is nobody’s fault.

4. Gaps will occur. It is important to have a back-up plan in the event that escrow does not close in a timely manner. The buyer/seller might find themselves making double payments for a few months. Having a cash cushion is very important. If it is not possible for the buyer/seller to build up a cash cushion, simultaneous closing might not be a good idea. It might be best that they sell their house and then rent while looking for a new home.

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Getting the Elephant Off of Your Chest: Short Sales and Foreclosures

The current economic crisis in the US stemming from the crash in the housing market and rising unemployment has left many homeowners facing tough decisions about their homes. If they are fortunate, they owe less than the house is worth and can sell (if they need to) the property through traditional channels, pay off their loan and move on with their lives. However, if you are one of the millions of Americans facing foreclosure or even bankruptcy, you certainly have many questions about your options and the possible impact of those options.

Foreclosure-Short Sale image

What Is A Short-Sale and What Does It Mean?

A Short Sale is the process by which the borrower convinces the lender that due to economic hardship they cannot make payment on the mortgage and the lender is willing to accept a sale price of less than what is owed on the property. The length of time to complete a Short Sale varies widely, but is usually less than that for a foreclosure.

There is no cost to a Short Sale. Realtor commissions and fees are paid by the lender. A Short Sale is much less damaging to the homeowner’s credit than a foreclosure and the terms of the Short Sale can vary depending on the lender. There is a 2 year wait after a Short Sale before you can qualify for a new mortgage.

What Is A Foreclosure and What Does It Mean?

A foreclosure is a legal process that results in the lender regaining title to the property due to nonpayment by the borrower. In a foreclosure, the Court can award a “deficiency judgment” to the lender that is determined by the difference between what the property sells for (minus expenses related to the sale) and what the borrower still owes on the mortgage. The length of time required to process a foreclosure can vary widely, but recently has been averaging 6-18 months.

Foreclosure comes with some heavy penalties to your credit. The foreclosure itself remains on your credit history for 7 years. The judgment’s statute of limitations is generally 20 years. You must wait to qualify for a new mortgage for 5 years AND the judgment must be satisfied before you can qualify.

How Do I Find Out What My Options Are for My Specific Situation?

You will want to work with a Realtor who is experienced with Short Sales and Foreclosures and who can help to evaluate your options given your specific circumstances. You will also need to discuss your options with your lender.

If you have questions, please feel free to contact me anytime by phone (561-707-7960) or by email at palmbeachagent@yahoo.com.

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