Is it a good idea to buy foreclosed homes?

The number of foreclosed homes on the market is quite staggering and the figure is only going to rise with more of fancy adjustable loans coming in. This impending crisis however provides an ideal opportunity for those buyers looking to make a killing in real estate shopping and getting a foothold into city neighborhoods they wouldn’t have been able to afford otherwise.

Foreclosure sales are very similar to traditional sales except that the buyer here has no prior information on the condition of the property he is going to put down his hard-earned money on. So basically, it’s a gamble that could go either way! Buying foreclosed homes at auctions can be the cheapest but could go either way as these could come with liens against taxes, etc, which could cost you a lot in the long run and eat away into your bargain. In such a case, buying from banks presents a safer bet as they are obliged to clear off any debts before selling the foreclosed property.

The buyer however has to be very careful when purchasing a foreclosed home as there are many pitfalls involved that could land the buyer in a quagmire. Since banks are the sellers, they seldom bother with any fix-up jobs and the homes are sold in ‘as is’ condition. The biggest drawback to foreclosed homes is that there are no disclosures from the owner about any potential issues with the property or its surroundings. The buyer is then stuck with whatever repairs are in his karma and there is no one around to blame! So the buyer needs to order an inspection done at the earliest to enable closing the deal on time. Another important perspective would be to chat up the neighbors to get a better idea of what he will be up against.  Also the time-frame for getting home inspections or loan appraisals is significantly short, which basically translates into your being ready to put 100% cash down within a week’s period as compared to 17 days in a normal transaction. So a smart move would be to get a pre-qualified home loan so you can move in quickly on your buy.

A conservative cost of your home buying should include the basic value of the property along with the cost of any repair works needed as well as cost of enhancements to bring it up to your standards. If the added-up value is still lower than the market value, you are onto a winner! You foreclosed home will then obviously make a savvy investment and with the right homework, you are going to be buying yourself a diamond in the rough!

Tax saving strategies for Real Estate Investors

You don’t have to have a Swiss bank account to escape from having to part with large chunks of your hard-earned savings in the form of taxes. There are plenty of tax loopholes available to formulate strategies to lower your tax outputs. And investing in real estate is one of the many lucrative ways of reducing your taxes.

Unknown to you, owning your own home provides you with tax relief; even the mortgage interest on your loan provides you with clear tax deductions. And yet better news is that when you sell your house, any profits you make are not liable to being taxed either. So flipping homes could be a great way of building up your savings- tax free! The only lien is that you have to stay in that house for a year or two before selling. Another tax loophole is the depreciating value of your house- a gleeful source of tax income!

Investing wisely in real estate can provide you with greater leverage and cash flow. Aside from being able to avail of depreciation strategies, you also get to pay only a fraction of the total cost of your investment, while taking a tax deduction for the full cost of your purchased property. Not bad at all!

Believe it or not, your real estate investment is a ‘business’ too that can be used as an advantage for tax benefits. One lax tax loophole is by using the ‘business’ as a source of tax freedom for the use of your ‘official’ car, phone, equipment or home office. You can even make repairs to your home and deduct it from taxes incurred on your ‘home office’ used for your business!

Another creative way to reduce your tax liability is by rolling the proceeds of your first property sale into the purchase of your second property…and then into a third property or more; so essentially your first tax liability turns into a tax-free loan. Basically, you will be swapping the taxes owned on your first property into a second property, and a third or fourth even. This is how the wealthy save on their taxes while becoming wealthier through their investments in real estate; ownership of rental properties are great investments too that allow the wealthy to earn while escaping from heavy tax liabilities.

So the question is how come the wealthiest people in the country get to pay the least percentage of taxes? It’s because their income doesn’t come from jobs, but from investments. Looks like it’s time for you to take your share of the cake and start earning from investments in real estate too!

Tips for Renovating your Home on a Budget

You have gone ahead and accomplished your dream of owning a house. Congrats! But don’t think that the story there; this is actually when the really hard part begins. Buying a home doesn’t come easy on the pocket and you would find that you have spent quite a large chunk of your savings in acquiring the house, so it makes sense when you realize you don’t have much leftover to start on the renovation of the house. Despite whatever assurances your estate agent would have given you, there will definitely be lots needed to be done to bring the house up to scratch and into the shape that you would be comfortable in.

So what do you do when you are on a budget and need to fix up your home? Here are a few tips…

One of the ways to keep a lid on your budget is by first making a list of things that ‘need to be done’ and another list of things that you would ‘like to be done’. Now start with the first list!

There are some jobs that can be DIY (do it yourself) and there are some things best left to the professionals – unless of course if you have had training in them.

For the DIY, get some friends to join you- a barbeque and beer work great in getting friends to chip in! Also, check out prices on online websites, flea markets and auction houses as there are chances of getting better deals there before looking at the handy stores. Auctions on eBay could come in handy with great deals on things ranging from original door fittings, fireplaces, to beautiful furniture. But take the time out to check it properly, as cheaper doesn’t always mean better.

Another way of controlling costs is by keeping things simple, like using standard-sized fittings and materials. You could also be innovative and mix and match by using expensive fittings on standard items.  An example would be brassware fittings and accessories on regular sanitary ware or dressing up regular doors with expensive doorknobs! Remember what your dad used to say about ‘buy cheap, buy twice’, well now is a good time as any to apply that thought as there is a time to save and a time to spend.

Finally, don’t be a snob and think that only expensive fittings can make your house look smart; you would be surprised at what neat finishing touches can do to do-it-yourself jobs using cheaper materials. You would get your rewards when your friends exclaim on it and that’s when you can be honest, or lie….. that you got it from an expensive branded shop!

5 Tips To Remember When Choosing A Real Estate Agent

It does not matter if you’re planning to sell your house, or are shopping for one, choosing a competent real estate agent is more important than you think. While the right person can help to make the process a breeze, the wrong one can leave your dreams in tatters. If you have plans to sell or buy property, here are five tips to remember:

  • Choose a local real estate agent:

It is crucial for the agent to know the real estate market in your neighbourhood. Long before the days of the internet, real estate was a local business. The agent knew almost everybody by name. They were involved with community activities, knew who’s selling and who’s interested in buying. Things haven’t changed much; agents are still required to know everything about the neighbourhood. They know the price range that houses are selling in the area, the number of deals that close, gossip about upcoming projects, etc.

  • Do they promptly reply to your questions:

You cannot expect the real estate agent to be always available to answer your questions. But it’s important for them to reply within a reasonable time frame. You don’t want to be chasing them for updates. Speak to the agent’s recent clients – they’re the best people to clear your doubts.

  • Do not hire an agent who’s too eager to please:

More often than not, you need a third person’s honest opinion to help you sell your house. For example, you may be very proud of the memorabilia and artefacts you’ve collected over the years, but it takes a forthright agent to tell that they’re not going to help you sell the house. Choose agents who tell you what you need to hear, and not what you want to hear. The people pleasers are either inexperienced or are incompetent and desperate for a sale.

  • Do not pick the agent who seems promising on advertisement:

Those glitzy advertisements on billboards, TV, and newspapers aren’t always the best resources when looking for real estate agent. If only they were as good as they claim to be, they wouldn’t need to advertise their business. Not to say, this applies to everyone who advertises but keep your options open.

How to calculate the land value of a property

The most important step in buying or selling a property is to decide its real estate value. Unlike apartments, villas or bungalows are assessed in a different manner. This is because a house that sits on a land parcel of its own has to be valued at two different levels; that is, the house has to be evaluated separately from the land. This evaluation affects your property taxes and you need to get it right. Since local records are usually not up to date, you need to find the separate values yourself.

For proper tax assessment, your county assessor’s office will have the values given separately and this can provide you with the basis for depreciating the building. Use only the value of the building to determine the depreciation figure, not the land value.

Sometimes the assessor’s values are so far off from the actual value that you need to do it yourself. Use the thumb rule of 20% for land value and 80% for house value. However, it would be better to visit nearby properties too to get a better idea of these values.

The prices of properties vary from location to location and it’s next to impossible to claim an exact value for a piece of land. The home seller is usually required to include the real estate price on the deed; this would indeed make the job easier for you when calculating the depreciation value of the building for tax reduction purposes.

These recorded deeds are supposed to be available in the public domain, so you can easily check the value of the property at the time of its sale to you. But do keep in mind that the values of properties is affected by the current economy status as well as some other factors; and remember that if the sale of the property was some time ago, then definitely the value wouldn’t be the same today.

Your local county determines property values for taxation purposes and taxes are based on its current market value. As this is public information, you can use this value to get an estimate of your property’s value too. However keep in mind that county assessments usually lag behind current market values. In such a scenario, it would be great to get help from a realtor who has all the latest information on his fingertips and can supply you with authentic values. He could be your best friend as he walks you through the process from beginning to end.

As property investment is a major decision, take your time to ask questions and learn everything about the property before signing on!

Step by step guide to buying a Home

There comes a day in every renters life when he’s had enough of throwing money away on rent and figures its time he bought a place of his own. But it’s a major decision and you feel overwhelmed when you start looking at the nitty-gritty of the whole buying process. It’s probably going to be the most complicated financial transaction of your entire life and you need to be properly educated before taking the first step!

  • Are you emotionally ready to become a home owner as no one wants to go through this complex procedure more than necessary! It’s better to make this decision after marriage as your spouse may also have ideas of his/her own. To buy a home, you need to employ the services of a team of professionals.
  • With so much information available online, you wonder whether it’s really necessary to appoint a realtor. But with the barrage of legal paper works, inspections, price negotiations and financing deals, it’s better to team up with professionals. It might cost a bit of a penny, but nothing compared to the grossly expensive mistake that could result without professional help!
  • Shop around for home loans and settle on one where the rates suit your pocket and you understand the deal. Find out how much you can afford before you apply for a pre-approved home loan. Another factor is that the larger the initial capital invested, the lower your monthly loan paybacks!
  • Ask your realtor to only show you homes that meet your specifications and are within your budget so you don’t get distracted.
  • Your home funder should explain to you that your new home is going to cost you more than the quoted price of the house- as there are other additional costs such as loan interests, closing costs and taxes. So plan your finances accordingly.
  • Another additional cost would be home insurance. As no car owner would be without insurance, so also with homes. In case of any natural catastrophe, at least you can be sure of not losing out totally on your investment.
  • The closing process on your home, also known as ‘settlement’ doesn’t take more than 30 days or so. This is the time when your team of professionals comes into play to make this a hitch-free transaction without any legal loopholes that could later backfire on you.

So what’s next? Book your home movers as most people shift homes at the end of the month and shift in! And now you are in debt beyond your wildest imagination, but that’s just ‘buyer’s remorse’ at work; think instead of your rent and tax savings instead!

Tips for success in Real Estate investments

As a successful real estate investor, you have to be constantly learning and listening; though the profession does not sit comfortably in the beginning, perseverance finally pays. A successful investor gives importance to leverage and understands that the less money invested in each property, the more the number of properties he can buy. The smaller the initial investment, the higher the percentage gains on it.

Keeping this in mind, here are some tips on successful investing:

Have a plan. Real estate investments should be regarded as a business with short-term and long-term goals. A business plan keeps the investor focused on the big picture rather than on minor fluctuations.

Market surveillance. A successful investor should have an in-depth knowledge of the market he is dealing in, including the changing trends in the local economy which could have an impact on the spending abilities of the population.

Honesty pays. No business concern has a bright future if it doesn’t maintain basic ethical standards. Successful investors should realize that maintaining a good reputation has far reaching impacts on the people they do business with.

Be a specialist. The investor should learn to focus on a particular market ranging from fixer-uppers, repossessed, apartments, condominiums, starter homes, etc. It’s better to develop an in-depth of one sector as the likelihood of success increases more this way; once one sector is mastered, he can move on to specialize in another sector.

Be a team. Investors should treat their colleagues with respect and encourage referrals amongst themselves; this could result in increased business as well as being a great learning process with business partners, fellow investors, clients as well as renters. A network also helps in creating opportunities and support for both the new and the experienced investor.

Stay up-to-date. Investors who get slack in staying up-to-date with laws, taxes and rules and regulations may lose momentum in their business, especially if laws are ignored. A successful investor always stays educated and adapts to changes in rules.

Never take risks. Investing in real estate is always made out to be a very easy business. Be warned that it’s not true and there are many risks involved. An effective investor understands the risks and legalities that go hand-in-hand with making estate deals, and adjusts his business accordingly.

Leave it to the professionals. There are some aspects of every business that are best left to the specialists. Since taxes form an important part of any business, it’s better to employ an accountant to take effective care of such parameters; the same goes for hiring lawyers and building supervisors.

For successful real estate investors, a lot of expertise, skill, planning and focus are required, and of course, the above tips!

5 Tips To Remember When Planning A Short Sale

A short sale is the only sensible way out to salvage your credit and avoid a foreclosure. To the uninitiated, a short sale occurs when homeowners sell their property for an amount that’s less than the mortgage they owe. The proceeds of the property go entirely to the lender who then either, forgives the remaining debt, or obtains a judgement requiring the homeowner to pay the deficiency.  If you are planning a short sale, here are some tips to help you:

Find agents specialising in short sales:

It’s worth the money to spend on a competent agent specialising in short sales. They’re experts at selling distressed properties and the best people to guide you about the process. But try not to look for agents beyond your neighbouring area. Also, look for experienced agents. Some realtors claim to be specialists in distressed sales after a short sales class. But it takes a lot of experience in closing short sales to be claiming expertise in the area.

Understand the consequences of a short sale:

Short sales are popular in the US, but lenders in the UK are not quite enthusiastic about the proposition. A short sale isn’t illegal per se, but homeowners will have to obtain consent from the lender. Also, the borrower has to arrange for the repayment of the shortfall. This could be done as an unsecured liability or as a full and final settlement. In most cases, owners make a short sale when they’re trapped in negative equity and are planning to move into a rental accommodation and obtain housing allowance to cover costs.

Look for ways other than the short sales:

Do not assume that the lender will automatically agree to waive off the remainder. You can negotiate with the lender to waive off a substantial portion of the deficiency, provided you pay a lump sum or sign a promissory note for the balance. And if you aren’t good at negotiating, try selling your house to the many cash for home companies that offer to buy your house for cash. They’re expert negotiators and can help you carve a substantial deal with the lender.

Consult a lawyer:

It is important for you to understand the legal complications of a short sale. While the real estate agent can help you fetch a good price for your house, a competent lawyer can ensure that you are discharged from all obligations of the sale.

Using Technology To Sell A House

Buying and selling a house is a lot different than what it was in the 1980s or the 1990’s. This was the pre-internet era when property ads were posted on newspapers. You did not have the luxury of watching videos of the places you’d chosen – you had to visit every single house to inspect it and rely on a miracle for everything to turn alright. Fast forward to the current scenario where almost 92% of home purchases are made through the internet. In fact, some real estate investors refuse to list your house unless you have uploaded images and provide a virtual tour of the property. If you are looking for some help in the technology aspect, here’s how technology can help to sell your house:

  • List your property on online websites:

With real estate commissions becoming unaffordable, people are now beginning to list their house on property websites. You have to login to your account to know about the people who’ve visited the page, the people who’d like to schedule a visit, etc. Homeowners don’t have to pay agent commission when prospective buyers choose to buy your property.

  • Professional photography and video:

Most real estate agents refuse to list homes without professional photographs. You don’t have to spend a ton on professional photographers; a good camera will do the trick. And for added effect, record a video of your house and upload it on YouTube. Send the link to the estate agent, or upload it to social media to share it with friends. A friend or family member can help you sell the house by sharing it on their profile.

  • Google Maps:

How about uploading your property on Google Maps? This allows prospective buyers search what’s around the property and look for facilities they require.

  • Online documentation:

Most brokers now allow people to view and sign online documents. You can either sign in to your account or view it through a phone app. Buyers and sellers no longer sit across the table discussing the documents they require for the next meet. You just have to open an app on your phone and get this done.

  • Syndicating your listings:

You don’t have to list your house on multiple listings. A single website that syndicates multiple listings will do the trick. For example, log on to Zillow, Trulia, or Realtor to allow multiple sites to be populated with images.

What’s better for Investment – Real Estate or Stock Market?

It becomes a major headache to get an answer for that very important question – where to invest your hard-earned money? Property or stock market? There are a lot of myths and facts involved in taking the right decision for investing your money. Let’s take a closer look:

When you buy a property, you have full control over it; you get to make the decision on how much to spend on repairs, how much to charge for rent, who your tenants should be and when to sell off the property. Owning stocks of a company would give you almost no powers to decide on what should happen with your investment.

A real estate investment is tangible, something you can physically touch, and for many investors, such tangible investing makes them feel psychologically more secure. Stocks, on the other hand, are something that you never get to see, it’s just some printed advice that you can never interact with.

The state of the economy touches on all aspects of businesses, but real estate gets less affected as compared to the stock market which is more volatile and sensitive to swings. For stability, real estate makes for a better investment as it’s more isolated from the global economy.

Also, as prices of properties tend to follow the inflation graph, it means that the value of your property has gone up as well as making it eligible for rent hikes; it also means that your loan payments remain the same, translating into greater gains. This isn’t true for stocks as they don’t necessarily follow the graph.

Buying into real estate is relatively easy as you only need to look into the realistic expenses and calculated rented income to check if it’s a feasible investment. With the stock market, analysing is complicated, as you need to factor in the underlying equity component aside from the cash flow. And then you have to depend on the figures the company puts out to know the actual value of your investment; needless to say, these values can be manipulated so easily to keep investors happy!

With real estate, you can start investing at a younger age as capital involved is less and the tenant can help in financing the remaining loan on your rental property. With stocks, the capital has to come from you. You will also avail of tax benefits which are something not possible with stocks.

The intention here is not to show you that property investment is the best, rather it’s to show you the benefits attached to it. So take the course best suited to your future plans!