Archive for June, 2011
June 27th, 2011 -- Posted in Real Estate |
The most important part of dealing with real estate is being able to tell what a property is worth. This value will tell you whether a given investment will be ultimately profitable, or it will fail. Therefore, you should establish a way to estimate the value of a property. It should be a flexible system that can apply to multiple properties, and it should take many different factors into account. If you stick with properties in the same area, you will figure out a basic formula that you can use. Here are some of the things you need to consider.
First you have to look at the location. If it’s a residential area, you should look for statistics about home sales in the area. See what the rate of sale has been in recent years, and find out if sales have slowed down or sped up recently. Then, of course, look at average sale prices. If you compare these houses to the house you’re considering, then you will have a basic starting point for the price. If you find the most similar house possible, you’ll be even better off. Otherwise you’ll have to compare relatively based on features and locations.
Next you should consider additions that have been made to your property that make it stand out from the rest. Is the basement finished? That will add to the final value of the house. The same applies if the yard has had professional landscaping, or the home has features installed such as a security system. Make a list of all of the features that are present in the house you are considering, and add their value to your estimation. At the same time, you need to consider the negative aspects of the property, such as poor plumbing or peeling paint.
If you don’t feel like estimating all of these factors by yourself, then you can use the appraisal services of various realtor groups. Usually the cost is very reasonable, and you can get a close estimation of what exactly the property will be worth. However, if you’re analyzing dozens of prospective investments per day, it isn’t reasonable to pay for every appraisal. So, practice a bit on your own, and use appraisal services when necessary, and eventually you’ll figure out how the system works. It can be difficult for beginners, but once you figure things out it is a rewarding and exciting industry to be involved with.
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June 25th, 2011 -- Posted in Real Estate |
When you decide to build a home rather than to buy a home or when you make the decision to remodel the home that you already have, you most likely intend to get the job done with the help of contractor. Unfortunately, contractors have earned a somewhat bad reputation as some have failed to live up to their contracts or provide the quality of work homeowners expect when they buy their services. In order to keep yourself from being disappointed by your contractor, it is important that you follow these simple tips.
Tip #1: Ask Your Friends and Family
The single best way to select a contractor is to ask around. If your friends or family members have worked with a contractor that did a good job for them, you should put that contractor high on your list. The more recently the friend or family member hired a contract to work on their real estate the better. After all, if a contractor just did a great job a few months ago, he or she is likely to still be able to provide the same level of service.
Tip #2: Check References
Of course, you may not know anyone that has recently purchased real estate or that did any remodeling to their homes. If this is the case, you won’t have much of a starting point when choosing a contractor. Therefore, it is essential that you check the references provided by the contractor. Ideally, you should check into references for jobs that are completed as well as for jobs that are in progress. This way, you can check out the real estate in varying levels of completion in order to determine the quality of the work.
Before you buy the services of a contractor, you should also talk with some of the references. Ask the references important questions, such as:
- How well did the contractor stay on schedule?
- How happy were you with your real estate when the job was completed?
- Did you feel as if the contractor listened to you when you ran into a problem?
- Were your concerns easily resolved?
Talking with past clients is an excellent way to get an idea of the type of work the contractor does as well as his level of commitment to customer satisfaction.
Tip #3: Check the Contractor’s License
If you are going to buy the services of a contractor, you certainly want someone that is properly educated in the craft. Before you sign a contract and buy the materials for the job, check with your Contractors State License Board in your state. By checking with the board, you can confirm that the contractor is licensed and you can also find out the areas of specialty in which the contractor is licensed.
When checking on licensing, ask the contractor for his or her pocket license as well as another form of identification. Then, check the license against the other form of identification in order to make sure the names match up. Since it is illegal for a contractor to use another contractor’s license, a reputable contractor will have matching identification.
Tip #4: Make Sure the Contractor is Insured
As the buyer, you shouldn’t be expected to buy insurance to cover the job. Rather, the contractor should have insurance in place. Check to make sure the contractor is insured against property damage, worker’s compensation, and personal liability. Ask for a copy of the certificate of insurance to verify coverage as this will protect you if something goes wrong while on the job.
Deciding to buy real estate in order to build your own home or to remodel your current home is an exciting time in your life. Make sure you do your homework before selecting a contractor in order to prevent your dream from turning into a nightmare.
Eric Bramlett is the broker & co-owner of One Source Realty in Austin, Texas. Eric currently manages his Austin Real Estate Guide, his Westlake Real Estate company’s website, & his Lakeway Real Estate Guide.
June 21st, 2011 -- Posted in Apartment |
When you rent an apartment, you will most likely be asked to pay a security deposit. In many cases, the deposit is equivalent to one month’s worth of rent, though it might be more. Your landlord is within his or her rights to request that you pay a security deposit, but there are several things you should know about the deposit before you sign a lease agreement and move into your apartment.
What is the Security Deposit For?
When you rent an apartment, you will likely be asked to pay a deposit in order to protect the landlord. If you fail to make your monthly payment or if you break your lease, the landlord may be able to keep your deposit in order to recoup the loses he or she experiences. Similarly, if you cause damage to the apartment before moving out, your landlord can keep the money or a portion of the money in order to make repairs to the apartment.
If the landlord does keep all or a portion of your security deposit when you move out, he or she must provide you with a detailed account of why the money was retained. For example, if you caused damage to the apartment, the landlord must detail that expense and demonstrate why the money was retained.
What is a Security Deposit NOT For?
Some unscrupulous landlords will attempt to keep a security deposit when a person moves out of the apartment, and some get away with it because their former tenants simply do not know their rights.
One thing that a security deposit is not for is wear and tear. If the dishwasher in the apartment needs to be replaced because it has worn out or the walls need to be repainted because the paint is getting dull or discolored, you are not expected to pay for these expenses.
In most states, landlords are required to return a deposit within 30 days after the tenant moves out of the apartment. It is a good idea to check with your state if you are uncertain about the time frame your landlord has.
Preparing for Disputes
If your 30 days has come and gone since you moved out of the apartment and your landlord still has not returned your security deposit, it may be time to file a claim in small claims court. In order to prepare for this possibility, you should always document the condition of the apartment before you move in as well as at the time you move out. Taking photographs is also a good idea as this will give the judge a visual idea of the condition of the apartment both before you moved in and after you moved out.
Although no one anticipates having difficult with getting their security deposit back when moving out of an apartment, it is always a good idea to plan for the worse situation. That way, you will be protected regardless of the situation.
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June 19th, 2011 -- Posted in Real Estate |
I have read a lot about how you have rule with an iron fist to keep your tenants in line. Our philosophy is much more laid back, and it has worked out well for us. Every property is different, but this was our experience.
Our first real estate investment property was somewhere we would move into ourselves, and in retrospect, that was an aspect more important than I would have guessed. There’s many decisions along the way, and being a potential tenant yourself makes those decisions much clearer.
First off, when it comes time to market your place, you are part of the target audience, so it is easy to find the right place to advertise. Just ask yourself… how would we go about looking for a place? We actually mistakenly put costly ads in the real estate section of the newspaper out initially, bringing in the completely wrong renters who were completely not interested. Once we switched to advertising in places we would look, 90% of the people who came were actually interested, the place would rent faster, and the tenants were happy to be in our place.
That leads to the next reason why buying something you would live in as your first rental property makes the landlord learning process so much easier. The tenants! These will be people that you basically get along with because they like what you like, and if you meet them, they will most likely like you, or they would not be renting it. You will make sense to them, and they will make sense to you. When you are at odds with your tenants, the whole interaction and experience can be painful, so getting along helps tremendously.
Why, you say, should I care if my tenants are happy? Because everything is easier. They will more likely pay rent on time, respect & keep your place in shape, and stay longer. Believe me, there is nothing like a completely wrecked apartment by a short-term tenant. Sure you can charge money for damages, but it will still take time and be a hassle to get it back up to a rent-able state. And dealing the whole time with bitter, angry tenants is no fun either.
How do you make your tenants happy? There’s a couple things we do. One is that we allow tenants some flexibility with painting and decorating. 95% of the time, our tenants actually do wonders with our apartments and leave them with a better style than we could have done ourselves. Many times, we even get good ideas to carry over to the other apartments to make them more marketable, like some basic drapes & mounted wine racks. We even had a tenant call us to ask if she could plant some flowers by her porch. We welcomed it. It was an indication that she felt invested in the place and felt at home. Of course, I am not advising you let someone remodel your kitchens… I am talking small things that are easily undone, but make the tenant feel invested and at home.
Another thing to do to have happy tenants is to give them a sizable re-signing bonus when their leases end. And unless it is painfully needed, do not raise the rent, especially if the tenant is someone who pays on time and is easy to deal with. We offer a $500 re-signing bonus each year with rents at $800. It is almost a free month but the cost of a tenant turnover between lost rent and the make ready is usually around $1200, so it is good for us and them.
Also, we do not rent our places at the maximum. We make them a somewhat good deal so that many people will inquire, and so we have a better chance of a good fit that will be happy and stay long. We also do not overcharge because feeling ripped off is one main reason a tenant will leave.
We also treat our tenants with a lot of respect. We call them every time we enter their units, and if repairs take an extensive amount of time or hassle on their behalf, we give them some rent back. We also maintain the property and do pest control. And we always answer their issues within a day, at least with a phone call.
Becoming a landlord was definitely a learning experience. Everyone has their own style, and even different properties may prescribe a different style. Just be open to handling your rental property business (which is basically your tenants) with respect rather than the stereotypical overbearing attitude.
June 16th, 2011 -- Posted in Real Estate |
The real estate market is not merely an open one, but also an experimental ground for many experienced as well as freshers. However, there are some real dumb mistakes that many investors make when it comes to investing. Primarily, the main reason for these errors is the fact that this particular market gives investors little or no time at all to learn how to know to make good and profitable decisions.
The irony of the situation is that invariably your dumb mistake ends up with somebody else’s pockets being filled! The path is not easy and establishing yourself in this very experimental market is not easy at all; demanding timely action and the right moves. Research reveals that to earn from this industry, you need to network and diversify extensively.
Some of the real dumb real estate investment mistakes include the following:
Inspite of knowing the importance of diversification within the industry, many choose to ignore this market essential. It is often observed that investors prefer the paradigms of a particular market only, especially the one they are associated with. They end up with contained and very ‘closed-in’ investments. The investments that should be considered could be along the set limitations set by numerous statistical calculations within graduate finance textbooks.
Many people, who have been long time players, do disagree on the suggestion that it is viable to hold limited stocks. However, these people are usually geniuses who in time, end up underestimating their intellect. They rigidly disagree with diversification, but at the same time utilize power-packed analytical skills to calculate the desired stock picking.
Investors need to arm themselves with strong and updated accounting knowledge. This enables them to accurately read and analyze the quarterly and annual financial statements made available to the public by companies. It is dangerous to invest blindly, without considering the instability that lurks within the garb of partial information.
Another very important virtue that real estate investors should try to cultivate is patience. The market is full of ups and downs. There are bound to be the bad and good years, sometimes alternatively and sometimes even successively! However, big time players with years of experience will vouch safe for the fact that the good years certainly outlive and compensate for the bad years.
Investors in the real estate marketing should make every attempt to master the art of dollar-average investing. This implies that instead of investing in a set number of shares, you should plan investments around a pre-set and agreed upon dollar amount. One major advantage of dollar-average investing is that you are at a lower risk of getting carried away on a high-roll of optimism, which usually culminates in the purchase of stock when the market is high.
It is very natural to ignore the small differences in expense ratios. Ignored investment expenses spring from costly newsletter subscriptions and other related online and offline financial services. These ignored expenses end up amounting to thousands of dollars negated from your net worth.
It is human tendency to err in the face of avarice. Way out investments and ‘immediate-returns’ investment strategies are a sure-shot way to investment downfall. It is very important to keep these common and dumb errors made within the real estate investment market in mind before investing further or for the first time.
June 12th, 2011 -- Posted in Real Estate Investment, Real Estate Marketing |
Most likely the last thing on a real estate investor’s mind these days is flipping a house. The housing market is soft and inventory homes are at a national high. MSNBC recently reported that if all homebuilding were to stop in the U.S., it would take more than 10 months for the nation’s inventory homes to sell out. Times are tough for sure, but that doesn’t mean there is not money to be made.
Flipping houses is a money-making strategy investors have been using for decades. It generally involves purchasing a home and reselling it for more then the purchase price. During the housing boom in past years, flipping was exceptionally easy. Investors could pick up a new or used home and flip it in a matter of weeks for a substantial profit. At that time, the market was sky rocketing. Houses were easy to sell and profits were even easier to make. Now that reality has set back in and the market is trying to straighten itself out, this type of flipping doesn’t hold as many as promises as it did in the past.
Investors, however, can still make a profit flipping houses. Now more then ever there is an opportunity to pick up homes for a bargain and make a return on them. Real estate that has a tax lien or is in foreclosure can be picked up way below cost. Homes can also be purchases at estate auctions and resold for a profit.
Along with purchasing a bargain home to flip, investors can also go the fix it up route. This technique requires the investor to purchase a home in need of repairs. The investor then hires someone to make the repairs or makes the repairs on his or her own. By fixing up the home, equity is added thus increasing the value of the property. In turn, the home can be sold for a profit. The main downfall to this method is it takes more time then if you were to purchase a home at discount and simply resell it at market price.
Now there is a nasty little rumor out there that “flipping” houses is illegal. Fact is that simply isn’t true. Although there is such thing as illegally flipping houses which in translation boils down to loan fraud, investors are well within their rights to purchase a home and resell it for a profit. Loan or mortgage fraud occurs when an investor purchases a home usually dilapidated and makes some superficial repairs. The home is then sold to naive buyers at an inflated price. These types of schemes rely on the collaboration of an investor, appraiser and mortgage broker.
In 2006, the Department of Housing and Urban Development addressed loan fraud by creating new regulations to detour flipping within the Federal Housing Authority. Now, the seller must own the property for more then 90 days in order for buyers with FHA backed loans to qualify for the purchase.
In short, house flipping isn’t the money maker it once was. The good news is, when done right, you can still make money doing it.
June 5th, 2011 -- Posted in Real Estate Investment |
There are many questions that you should ask yourself before embarking upon a career of real estate investment. The first and most important question should be whether or not you are truly committed to making real estate work for you. Real Estate is not a business for the lazy or faint of heart. In order to truly turn a profit you must always be ethical but also not give they baby away with the bath water. You at times must be ruthless when dealing with buyers and sellers to ensure you will have a profit when the whole deal is said and done.
The number one reason you must make a serious commitment in order to make real estate work for you is simple. There will be ups and downs throughout your real estate career. The stock market experiences rises and falls on a regular basis. You would not dump all of your stock over one bad day, the same holds true even more so in the realm of real estate investing. Property values in general rise gradually over time. Over the course of ten years, you will statistically see real estate double in value. This means that even if the values in a community tend to regress chances are that they will eventually recover.
The investors that invest with the philosophy of focusing on the slow and steady growth in value are referred to as buy and hold investors. These investors are truly committed to their investment. Some of these investors elect to hold the property as a vacation property. Others, I believe the smarter, opt to earn an income on the property by renting it out to other families or vacationers, this is where you get cash flow along with long term growth.
Those who own rental properties must also be committed to making their investments work for them. True rental properties are not a hands off type of investment. You must keep them maintained in order to remain in demand by tenants. You must also make constant efforts to keep these properties managed and filled along with remaining certain that you are collecting your rent each month. It is important that you ensure the properties are not falling into a state of disrepair or abuse by tenants.
Many investors retain the services of property management agencies in order to handle the day to day operation and the month-to-month details and collections. This is a great idea whether you have just one rental property or a large portfolio of rental properties. What is great about rental property is the fact that if you keep your rental properties in reasonable repair throughout the years they can become liquid assets in time. In other words, they may actually pay for themselves a few times over if you invest for the long-term rather than focusing on the moment.
It is important that you are prepared to make the commitment to profit or profitability that is necessary in order for your venture to be deemed a success no matter what type of real estate investment you intend to have.
June 2nd, 2011 -- Posted in Real Estate |
There are many things to consider in choosing the building you are going to invest in. The most important permits of not the slightest deviation. It will be fatal to compromise on the point of location. Let us see how we test for this requirement.
Let us say you have been offered a building located on Elm Street. You go to see it. The time of day when you see it is even important. Many a street presents quite a different picture at 10 a.m. than it does at 4 p.m.
Drive along the street, at 4 p.m. and look about as you approach the building. Remember not to decide this on the basis of whether YOU would like to live here. Just ask yourself this, “If you were going to pay $50 per month for a flat, would you consider this location satisfactory?” In the answer you will find the yes or no to location. But see to it that all the factors are considered. If there is a noisy or smelly factory nearby, or a dump or railroad, make sure you see the place, hear the place and even smell the place at its worst. Only thus can you get the full picture.
Hence we peremptorily pass up the buildings that do not pass the first test, that of location. Notice that we do not ask that the location be “beautiful” or “lovely” for all buildings. Not at all. We use the yardstick that is clearly indicated by the rental rate itself. That determines the attitude and measuring eye with which we judge location.
We try to see this location through the eyes of a prospective tenant who has come to the building to see a flat. We try to see it as he will see it, and judge it as he will judge it. This is NOT difficult. We certainly can quickly dismiss the locations that are obviously so bad that even the $50 tenant will certainly not find the location to his liking. These really give us no problem nor do those that are obviously good. It is the class of location that is “borderline” that may puzzle us.
I have taught hundreds of people this principle and many have expressed doubt about their future ability to determine the fitness of those locations which were not quite bad enough to reject at a glance, and not quite good enough to approve immediately. I have learned over the years that they were worrying without cause. It just does not work out that way. We have all seen that in some principles of practice, the theory is easy to understand but the practice is difficult or even impossible. Here it is reversed. The theory may be hazy, but the practice invariably turns out comparatively simple.
There are a few simple things that will give you your answer. I speak now only of those locations that are doubtful. The first step is to ask yourself whether in your opinion, the location would be satisfactory to a prospective tenant who was considering a flat in this building at $50 (if that is the rent rate).
The next step is to ask the tenants themselves, but this step must be approached with one reservation. In those cases where you are considering a building that has been “over-milked”, that is, everything taken out by the landlord without putting anything back unless forced, you should approach the tenants with the mental reservation that they will probably be discontented with everything about their flats.
Thus any dissatisfaction on the part of such tenants must be weighed in the light of the general conditions which they have been forced to accept under greedy or neglectful ownership. If such a tenant were to indicate to you that he is unhappy with the LOCATION of the building, you should press him for the specific points that he finds undesirable.
He may come up with some very significant answers that will bear and guide investigation before buying. But if his complaint is very general, with no specification, you may discount it, as merely a baseless item in a general group comprising unhappiness.