Buy a Real Estate

I cannot keep track of how many times people tell me that they were thrilled to sell a property at a handsome profit, and then a few years later recoiled with total remorse when they realized that the property had doubled or trebled in value yet again. That doubling or trebling in value, if they had kept the property, would
have come at the expense of very little marginal effort. There would have been no contracts to study, no due diligence to perform, no finance applications to make—none of the activities normally associated with buying a property. In fact, by not selling the property, they would have saved all the contractual work associated with a sale.

There are, to be sure, extenuating circumstances when there may be some legitimate reasons to sell. For instance, with the restaurant premises that I bought for $120,000 discussed earlier, I had a succession of tenants, and then the building ended up being vacant. After many months of applying all my techniques to attract a tenant, I finally got a call from a couple in Switzerland who were keen to sign up as tenants. I was all excited at the prospect of having the premises leased once more. Then, just before they were going to sign the lease, they contacted me to say that after a lot of thinking, they decided that they would only proceed with their dream of opening their own restaurant if they could own the freehold of the property. I was faced with two options: Hold out for the gamble of a new tenant (which could take a long time), or sell the entire property to the Swiss couple at a handsome profit. It was an easy decision.

At public events I cajole the audience into coming up with valid reasons to sell a property. Few of the reasons proffered are truly valid. The most common reason given is to take the profit out of an existing investment, and then to use this profit to invest in another property. There are two arguments against this.

First, when you sell, as we have seen, you will pay capital gains tax and depreciation recapture tax. Second, while you may release the equity in a property by selling, you could release that same equity by refinancing the property and still retaining it.

For example, imagine you bought a property for $500,000 with a mortgage for $500,000 (you bought it vacant, but with a tenant in place it went up in value and the bank was willing to fund the entire purchase price). Assume it is now worth $2 million. You do not need to sell it to release the $1.5 million of equity. You could achieve the same result by simply refinancing with your existing bank or a new bank. You simply get a new appraisal and submit a new proposal for finance. Now admittedly, if the bank will only go up to a 70 percent loan to value (LTV), then they will only lend you $1.4 million, which is only $900,000 more than your present loan.

However, if you sold the property, you would lose perhaps 6 percent in selling commission ($120,000) and at least 15 percent of the capital gain to tax ($225,000), more to depreciation recapture tax, and even more to selling costs, leaving you with perhaps barely a million in net, after-tax profit. Which would you rather have, a million dollars in cash, or equity of $1.5 million (from which you could easily borrow another $900,000), secured against an asset worth $2 million, and rental income for life? The property only has to go up by 5 percent for you to make yet another $100,000 (which would be tax-free so long as you continue not to sell).

Since the Great Depression, history has been supporting the Fed in making the economy stable during a monetary crises such as the 1987 stock market crash, the 1997 Asian currency crisis, or the 9/11 terrorist attacks. In December 1930 the Fed was given a hard lesson as it failed to bail out the official-sounding Bank of the United States. Its failure to act properly precipitated the Great Depression. Ever since that time, the Fed has stepped in quickly and acted as the true last resort lender.
Working out the current real estate credit crunch may take longer, but I’m a quite confident that the Fed will be able to stabilize the economy and the financial markets once more. Nevertheless, it is still possible that history might repeat itself. Considering the fact that the Fed is a source of significant instability (easy money – tight money cycle), it is beneficial to hedge one’s bets.

One of the major reasons for payday loan appeal is the fact that such loans are frequently the only possibility that people with bad or insubstantial credit are able to resort to. In cases when a credit is shot, one will most likely don’t have the possibility of using a credit card for a quick cash fix. That’s where a payday loan can becomes a useful feature.
The majority of payday loan firms claim that they are able to help you regardless of your credit status. Even if you are a person with the worst credit in the world, you will most probably find help. Rarely a payday loan company performs a credit check on people applying for such loans. Instead, they rely on your employment data as a means of justifying the loan. Some of these companies demand that you a person has been employed in the same position for six months or more, so you should be prepared to provide information concerning your current job status. Also, get ready to provide phone numbers and check stubs from your workplace. As long as you have a steady job and a checking account, you can easily get around not having any credit.

Investing in real estate during a time of crisis surely can be a risky thing. However, it you follow some basic rules and do careful research, crisis may turn out to be a great period for investing your money and a financial success will actually be more likely to achieve in times of economic turmoil. If you consider investing in real estate now, bear in mind the following points:
1.    Remember about the basics: carry out your research considering supply vs demand, invest rather than speculate, let the numbers guide you, and be certain that you have a foundation of cashflow to support your investments (now more than ever).
2.    The question of when it is a best time to invest will depend, at least partially, on your strategy. For example, now is a good time for buy and hold investing rather than flipping.
3.    Foreclosures indicate a higher rental demand. To put it simply, people that have lost their homes recently are going to need to rent from somebody.
4.    An economic crash of this size occurs very rarely which indicates it is a unique opportunity. There is a lot of speculation in the discussions about this matter. To gain more knowledge you should tune into what a few respected experts are saying.
5.    Prices may not recover at once, but if you invest so that cashflow will enable you to hold an under-valued property it may be a great form of a long term investment. Finding wholesale priced property is obviously easier today than during a seller’s market.
6.    It takes a very smart investor to time the bottom of the market perfectly – do not let that hold you down; allow yourself to act on both sides of the bottom. You should invest basing on strategy, numbers and fundamentals rather than perfect timing.
7.    Do not treat all markets as one huge market with exactly the same dynamics. There are still some good places to invest your money and, of course, other places which are now bad for investors.
8.    Do not think that all houses are undervalued. Do your research carefully.
9.    Do not lose your head – FUNDAMENTALS!

What is a Real Estate Auction?

A real estate auction is a modern and efficient method of selling your real estate. It is an intensive, and fast real estate marketing process that deals with the public sale of any kind of property  (obviously involving those that are nondistressed) by means of an open cry, competitive bidding.

How can I benefit from an auction?

The real estate auctions are a win-win propositions for everybody involved.

BENEFITS TO THE SELLER:

• Buyers come willing and prepared to purchase
• Fast disposal decreases long-term carrying costs, such as taxes and maintenance
• You are certain that property will be sold at its real market value
• Your property is exposed to a wide range of pre-qualified prospects
• The sale is accelerated
• Competition among buyers is created – auction price can exceed the price of a negotiated sale
• Potential buyers are required to pre-qualify for financing
• You know exactly when the property will sell
• Numerous and unscheduled showings are eliminated
• Takes the seller out of the negotiation process
• An aggressive marketing program that increases interest and visibility is ensured

You should always take care about preventive maintenance. Bear in mind that a homeowners insurance policy is prepared to repair or replace your property should an unexpected major loss occur, and people who continuously report claims for minor issues may be forced to witness higher premiums and even put their insurability at risk. Carrying out preventive maintenance on your home and fixing small problems fast can help prevent more substantial losses in future. Many providers offer home warranty coverages more suitable for maintenance needs that involve appliances, plumbing or the like.

Remember to keep your records current. If the unexpected should occur and you will be forced to file a major insurance claim, having current records of your personal property and structural condition of your house can be priceless during the claims process. First of all, if you have carried out any significant renovations to your home after moving in, make sure to inform your insurance company about this, because it may influence the replacement cost of the house. Next, prepare an inventory list of your belongings, containing information on how much you paid for each object and its current value. Prepare a record of your possessions, with pictures or a video camera, and keep the records outside of your home so they are less prone to be destroyed in a disaster. Such records can help you estimate your coverage needs, and it also can be used as your proof of ownership if a loss occurs, allowing the insurance company to estimate your payment more easily.

You must gain as much information as you possibly can about the foreclosed property and the circumstances that influences its status as a distressed property. Your major sources for this kind of information on real estate foreclosures should be county assessors and recorders offices, title companies, your agent and the owner himself. Looking for information from unexpected sources may prove useful as well. There are some situations when curious buyers have gleaned a wealth of knowledge from a neighbor who just happened to be outside while the buyer is visiting the area to look at the property.

To examine whether a foreclosed property is a good buy or investment, you need the proper tools to research sales comps, property history, title status and other information that will most likely influence the value of the property. Obviously, before you close the deal on any real estate, you are strongly advised to do a full title search through a title company.

It is a common belief that you should estimate your cost and then triple it. However, that is not really necessary in case of every real estate investment. Itemize every piece of material in your calculations, including also mundane items like the cost of nails, staples, fiberglass tape or joint compound. Remember, they all add up in the end. Next you should anticipate for at least a 15% overage of materials for waste. Add another 30% for price increases, especially when you are not buying all your materials at the same time.

People who are afraid of heights or feel uneasy in high places should not install a roof. Life is short and then you die. Instead, think about hiring someone else to do it for you. Before you deal with a job, consider it from its beginning all the way through to its completion. You certainly don’t want to find yourself at the halfway mark discovering that you are unable to finish.

Certain works require more than a single person. It is difficult to hang drywall on a ceiling all by yourself, even with a deadman prop. Finally, you should be careful about the weight you lift; it may cause some serious damage to your back or throw you off balance.

People seldom stay in a home for as long as 30 years, so a thirty year mortgage may seem to be forever to today’s borrower. Obviously no one is willing to pay a mortgage forever, so blow you can find are a few tricks allowing to save a lot of money!

1. Remember to use home mortgage calculators to see just how much of a difference one or two additional payments towards your mortgage can create on your total amortization plan. Usually people never benefit from the fact that you may shorten your 30 year mortgage term by up to 10 years by making just one additional payment a year.
2. You also may be acting under a false conception that by making double payments you are only able to cut your mortgage in half. Due to the fact that any additional money you pay goes towards the principle of your loan, and not towards the interest, you are virtually making a much higher principle payment and you may shorten your mortgage by as much as 20 years by making double payments.

You are advised to use free mortgage repayment calculators and see how much of a difference those extra payments can actually make!