Financial Planning Tips » Real Estate

Real Estate Investing: Finding The Right Property & Neighborhood

FPT Guy — Thu, 19 Aug 2010 16:31:59 +0000

What do you do if you wish to get incredible returns from your investment? Should you invest in savings bonds, CDs or go for buying a house? From all angles, property investment should be the obvious choice as the returns would be far higher than the other two forms of investment. Buying a single house would ensure you bring home profit on an average of forty percent. No other instrument of investment can match this figure. However, higher returns come with some element of risk associated with property investment. You can minimize the risks and make a favorable investment that will assure you high returns by proactive planning and thinking before taking the plunge.

Go for a house that should command a good price in future. Conduct a scrutiny of the interiors as well as the outside. The outside setting is as important as the interiors. The neighborhood and the general surroundings are vital determinants to whether the house will get you the high returns that you have dreamt of or not. Closely observe the homes nearby. Do they have proper, well-maintained appearances or are they clumsy and appalling? The homes in the immediate area speak volumes about the people residing in them. Remember, plush surroundings and decent neighbors will be pluses when you plan to sell off your property in some years. In addition to the overall look of the place, check out the level of security the locality offers. You do not want to reside in an infamous neighborhood and part with your mental peace. Moreover, if an area has a not so good reputation, chances are bleak that you will at all be able to sell your property in the future.

A perfect surrounding would be the one where the houses around typically have an external appeal which is slightly higher than yours. An appealing neighborhood is as important as having a beautiful house or something like a piece of attractive Phoenix real estate. If you consider this factor, definitely you will reap benefits. Since you will be fixing up your own house, prior to moving in, the neighbors would also be delighted as that would mean enhancing the overall look of the place, which in turn would be profitable for them too when they sell their houses.

From this discussion, it is clear that simply buying a great house for yourself does not amount to a profitable investment. Prior to making the purchase, consider the other factors – the look and feel of the place, general facilities available, neighbors and the security around. If you take care of these factors, certainly you can look forward to a huge return to your Phoenix property investment or wherever you choose to place your money.

Property Investment For The Next Decade

FPT Guy — Tue, 17 Aug 2010 23:38:58 +0000

Property investment in this next phase of the housing market will require a little thinking out of the box. The typical investor thinks of nothing more than simply buying whatever properties they can afford and holding on to them for as long as possible. There are so many other strategies to be taken advantage of that investing requires a little more savvy these days due to the volatility of the past housing implosion.

So if you are willing to open up to other strategies, then it is time to cover my favorite property investment strategy, the lease option. The reason I love this strategy so much is its versatility. The truth of the matter is that lease options are not really a strategy in and of themselves as much as they are the foundation to getting through many financial constraints and that still allow versatility and healthy profits.

The most basic form of the lease option simply states that you are leasing a property to a renter and giving them the option to purchase the property at a future date. Beyond that, there aren’t any true hard and fast rules but here are some suggestions.

One: Always get an option fee. The option fee is a non-refundable fee usually in the range of 500 to two thousand dollars although this varies a great deal. This is really in place of the deposit in a rental property except you get to keep this fee.

Two: Keep the range of the lease option around two years. This gives plenty of time for the people to decide if they want to buy the house through the option. To be honest, it actually benefits you if they don’t buy the property so you can just keep lease optioning the property over and over allowing you to get an option fee each time. If they do decide to buy, you still win.

Three: Make sure the selling price you agree to is a price reflective of the housing market in the future. The house will be going up in value and so should the purchase price since they won’t actually purchase the home until the option has expired.

Four: Stay flexible. The great thing about lease options is that it gives you the room to structure the deals however you see fit.

Additional tip: as an investor, know the IRS 1031 exchange rules to avoid capital gains penalties when selling one property and buying another.

There are many ways to incorporate lease options into other investment strategies. You could sell your interest in the property to another investor; you could buy a fixer-upper and fix it up, then lease option it and so many other techniques. The fact of the matter is that the more exotic wisdom you have about property investment, the more lucrative it can become.

The Easy Way To Qualify For A First Home Mortgage

FPT Guy — Wed, 21 Jul 2010 03:39:38 +0000

If you’re thinking of applying for your first home mortgage, there are some things you can do to help improve your chances of being approved. Buying your first home can be an exciting time, but the thrill will soon fade if your bank doesn’t let you borrow the money you need to close on your purchase.

Before you apply for your first home mortgage, prepare your finances so you have the best possible chance to impress your bank. Here are some quick tips to help you qualify for a home loan more easily.

Gross Monthly Income

Your lender will look carefully at the gross monthly income for all borrowers. This is the amount paid to you before taxes are deducted. If you’re applying on your own, provide pay stubs to verify your income amount. If you’re applying jointly with a partner or spouse, make sure you provide evidence of all income you each receive.

The bank will calculate your affordability based on the net income amount you receive, less any existing repayment obligations you have, less an amount allocated for living expenses.

The maximum amount you can borrow will reduce if you have credit card payments, personal loan commitments or other loans to repay. Conversely, the amount you can borrow can increase on your existing income by reducing your debts.

Credit Score

Your bank’s lending assessor will look at your credit score closely to determine what kind of customer you’ve been with your previous creditors. If you have a history of paying your bills on time and managing your debts well, you’ll have no problem.

However, if you have some blemishes on your credit report, spend some time catching up any past due bills. Reduce the balances on your credit cards and get your finances in order.

Employment History

Your lender will want to know the details of your employment. This will include how long you’ve been employed in the same industry or line of work. You can still apply for a first home mortgage if you’re fresh out of college or trade school, as long as your new job relates to the line of study from which you graduated.

Keep in mind that banks often view regular job changes to various different industries badly, as it could be a sign that you’re not able to hold down a long term job. While they’re negative towards frequent job changes, this doesn’t apply if you’ve been made redundant or if you’re changing positions within the same industry.

Down Payment

While it used to be possible to apply for a first home mortgage with no money down, these types of loans are becoming scarcer. If you know you’re going to buy your first home soon, work through your budget and begin putting money aside into a savings account.

The more money you can put towards your down payment, the more lenient your bank will be on your application. Your savings history can show your bank that you’re disciplined enough with your income to handle the responsibility of a mortgage.

Get the Best Deal

Before you apply for your first home mortgage, spend some time getting your finances and documentation in order. Then shop around to find the best deal to suit your needs. A mortgage broker can help you sort through the home loan options available.

You might find you qualify for one of the flexible credit solutions offered by many lenders, such as a FHA Loan or a VA Loan, or another such program that could help reduce the fees associated with buying a home and setting up your first home mortgage.

Watch out for loans like 125% home equity loans and 40 year mortgages – these can seem like a good idea, but generally aren’t due to many factors than can put you deeper in debt than you need to be.

You may want to consider some solid home insurance policies to protect your new home – it’s not always necessary to go for the cheapest homeowners insurance possible, you do want to have reliable coverage as well.

Creative Real Estate Financing: Lease Purchase, Lease Option, Subject To, Wrap-Around Mortgage

FPT Guy — Sat, 03 Jul 2010 22:01:04 +0000

Lease Purchase

Since the real estate market in the United States has collapsed, many people have looked to alternative means in order to sell properties and potentially avoid foreclosure. This has lead to many people using contract structures like a lease purchase or lease option.

Subject-To

Other structures to sell properties in non-conventional manners have also become popular. Two examples are assumptions and ‘subject to” deals. The problem is that most conventional mortgages contain acceleration clauses that allow the original lender to call in the entire amount due early if the property is transferred to a third party without its consent. In reality, as long as the regular mortgage payments are made on time and in full and sent in the name of the original buyer, “Subject To” agreements are never discovered by the original lender so there is no problem; nevertheless, the threat of the debt being called in overhangs most “Subject To” contracts.

Wrap-Around Mortgage

The Wrap-Around Mortgage is a compromise between these two methods of passing on an outstanding mortgage to a new buyer. In such an arrangement, the seller (the person that owns the property and is liable for the outstanding mortgage on it) accepts a secured promissory note from the new buyer for the balance due on the property’s original mortgage plus whatever profit the seller is receiving and in exchange extends a secondary mortgage to the new buyer. Since the entire arrangement is formalized, it amounts to a method of seller-financing that allows the seller full landlord rights over the property, including the right of foreclosure should the new buyer default on the secondary mortgage. The new buyer sends his monthly payments to the seller, who in turn sends the appropriate amount to the original lender that holds the primary mortgage on the property.

Wrap-Around mortgage agreements can allow the seller to find a buyer that might not qualify for original financing from the original lender, thereby expanding the pool of potential buyers. Further, if a Wrap-Around Mortgage is used in conjunction with a lease purchase agreement or an option, it can circumvent the threat of the original lender exercising the primary mortgage’s acceleration clause to call in the debt early. For the buyer, the primary advantage is that they get a much stronger right of residency and possession of the property than they have with a “Subject To” contract, while at the same time avoiding the qualification requirements of the original lender (the financial institution holding the primary mortgage).

The only real risk to such agreements is to the new buyer as there have been cases of the seller not sending in payments to the original lender. The result of such a situation is that the original lender forecloses, resulting in the new buyer being evicted while the seller disappears. Therefore new buyers should be prudent when exploring the possibility of entering into a Wrap-Around Mortgage Agreement with a seller and should check into the seller’s background and financial position. Any legitimate seller should be forthcoming about their financial position, so if the seller is reluctant to provide background information, the buyer should consider this a strong warning of potential problems.

Also if you’re not already familiar, it’s always good to keep your knowledge fresh about 1031 exchange rules and the 40 year mortgage.

15 Solid Reasons For Investing In Nicaragua Real Estate

FPT Guy — Sun, 27 Jun 2010 18:41:13 +0000

The word is getting out about Nicaragua and the opportunities on offer. In this article we provide a summary of the key reasons why people are investing in Nicaragua real estate. This includes investors looking both for short-term capital growth as well as lifestyle investments and vacation homes.

Property in Nicaragua is significantly cheaper than elsewhere in Central America. Analysis by RevealRealEstate covered by the International Property Journal indicates that asking prices are lower than in Costa Rica, Panama and Belize.
Nicaragua is only a short direct flight away from major US airport hubs such as Miami, Houston and Atlanta.
The majority of the property on offer is a available under fee-simple freehold title.
Title insurance is available from major US companies such as Stewart Title and First American.
There are no restrictions on foreigners purchasing real estate in the country (with the exception of property close to international borders). Foreigners can also own businesses with equal rights as Nicaraguan citizens.
The country has a very attractive retiree residency program. The recent revision, made in 2009, made it one of the most benefit-laden in the region. And “retirement age” in Nicaragua is considered to be just 45 years of age.
As a foreigner you are not taxed on any income that you earn outside the country.
Nicaragua has a very low cost of living. Talk to any expatriate and they’ll boast about having a full-time maid or gardener, an enormous house with a fantastic view and a lifestyle full of eating out, visiting tourism attractions and nightlife – often for under $1000 a month. Try and do that in the US!
Lonely Planet recently issued its top 10 best value destinations for 2011 and Nicaragua was one of the countries on the list.
AARP, the US Association for retirees has rated Nicaragua is one of the “best places to retire abroad”. They talk about the easy-going lifestyle as well as the affordability and breathtaking beauty of the country.
Nicaragua’s economy is doing well and beating many of its regional competitors. Exports are on the rise breaking the 1.9 billion barrier in 2010.
Another record-breaking number concerns tourism visitors to the country. In 2010 Nicaragua passed the 1 million mark. The growth trend seems set to continue.
Visit the country and you’ll notice a number of large-scale infrastructure projects underway. They are road upgrades going on across the country including in the paving of the coastal road between San Juan del Sur and the border with Costa Rica.
Nicaragua is one of the most beautiful countries in Central America. Period. Its beaches easily rival those of Costa Rica, it’s got world-class surf breaks, towering volcanoes (one of which you can surf down), the 10th largest freshwater lake in the world and the oldest continually inhabited colonial town in the Americas. See this article from the New York Times on Granada for example.
There’s world-class health-care available in the capital Managua. And prices for treatment are far less than in the US or Canada.
A piece of Nicaraguan property can be a great financial asset to leave behind for your loved ones in your will (check out these online wills if you don’t have one already) - as long as you choose wisely and strike a solid investment deal.

To recap:

In your financial planning & goal setting for international real estate investing – whether for retirement planning or a lifestyle vacation approach – you always want to think about the bottom line and your ROI.

Investing In Central American Real Estate

FPT Guy — Sun, 20 Jun 2010 06:47:03 +0000

As growing numbers of property investors seek out real estate in Central America, we thought it would be a good idea to gather together guidance on investing safely. The past decade has seen most interest in property in Costa Rica, but Nicaragua, Panama and Belize are following close behind.

1. Buy only what you can see and touch

Don’t purchase property in Central America based on what might exist in the future. It’s risky to base your capital appreciation goals on “ifs” such as if a bridge is widened, a new road built or if a big hotel were to come to the area. Although this form of investing in the “path of progress” is tempting, make sure you know what you are getting into and the risks involved – especially in this post-crisis era. The smart money is now trending towards completed property with ready infrastructure and away from pre-construction and speculative plays.

2. Don’t buy sight unseen

You never want to buy real estate sight unseen. It’s vital that you personally check the property options that interest you. It’s a good idea to visit during the off season, which in Central America means the rainy season running from June through November. That way you’ll be able to determine if the location still appeals to you in all seasons and if needed services are available throughout the year. If you want to be extra safe, check again during the peak tourist season which is December to February for tourists from North Americans.

3. Research the market using different viewpoint and sources

Your property research needs to go well beyond what is available through a sales pitch, a real estate brochure or a hot tip from a friend who just got back from a visit. You need perspective and information on many levels, from different sources. Some of the research can be done on the Internet by seeking out independent news sites, online property listing websites and specialist overseas property sites for Central America such as Reveal Real Estate.

4. Begin with your investment goals in mind

There is plenty of real estate on the market in Central America. It makes sense to clarify your investment goals upfront and concentrate on the type of investing that meet these criteria. Are you interested in investment, speculation or a lifestyle buy? Do you have the patience and nerve to wait for future development? Or do you need current access to utilities, services and want to be part of a community.

5. Take out title insurance

Title insurance is particularly important when you are buying property in Central America. Title insurance reassures you that your title has been researched and there are no ownership problems that could hinder your ability to develop or resell the property. Your legal counsel will be required to thoroughly investigate the ownership history of the potential purchase in order to comply with the insurance company’s criteria for issuing their insurance policies.

Above all, take your time. Don’t rush into a purchasing decision. The lure of affordable property in beautiful locations can carry people away on an emotional rollercoaster. Stop. Take a breath. And make sure you are using your head as well as your heart.

More Advice on Buy To Let Mortgage Investing Deals

FPT Guy — Thu, 27 May 2010 13:24:40 +0000

Buy-to-let property is not as hot as it used to be. Many investors who decided to purchase this type of property during the previous high economic period are now struggling because of rising rates. However, many investors are still tempted to buy now because of improved mortgage deals, lower housing prices, as well as rising rent costs. A large deposit is required and things are a little more difficult to handle now versus previous years.

The story on buy-to-let?

Existing investors should now benefit since most lenders have offered lower rates. This is usually when the investor relies on the standard variable rate that the lender has offered which is usually a discounted base rate as low as 0.5%. Since many cheap buy-to-let mortgages do not have the standard SVR but instead the bank rate, many investors have benefitted.

1. Do your research

For those who are trying buy-to-let for the first time, consider what you know and do not know about the market. It is important to know the benefits as well as the risks.

2. Select a prospecting area

When selecting a prospecting area, this does not mean where to find the most cheap or expensive property. It rather means an area where people enjoy living for several different reasons.

3.Crunch some numbers

Before stepping out to take a look at some properties, take some time to sit and write down the cost of various properties that you are interested in. Consider the rent that you will be likely to earn from the porperty.

4. Consider who you will rent to

Don’t consider whether you would live in the property but rather consider who your target tenant will likely be such as college students or company employees. They will often be looking for cheap buy to let mortgages, but don’t undercut yourself in the deal, and play it smart – even if you find those perfect tenants.

5. Don’t set your expectations too high

We have all heard stories about instant millionaires from cheap buy-to-let mortgages and how big their portfolios are. The good times when house prices went into the double digits are gone. The experts recommend investing for income and not short-term growth on your capital.

6. Consider looking into the future

Many buy-to-let investors try to locate properties close to where they live. Remember that your local area is not always the best area to invest in.

7. Negotiate prices

Buy-to-let investors have the same oppotunity as first-time buyers have when it comes to haggling for a discount.

8. Beware of pitfalls

Always investigate the negative impacts as well as the positive benefits before making any investment.

Best Choices Amongst High Return Investments

FPT Guy — Mon, 24 May 2010 17:29:06 +0000

Investing your money to earn extra income is serious business. Everything must be considered before a single cent is spent. If a single mistake is made, you can lose a lot of money in the process.

There are numerous options you can venture in and a lot of companies that can provide help with the process. A few ventures however are considered high return investments by many experts. These can get you money faster and in regular intervals.

Stocks can falls into the category of the high return investment and finding some good stocks to invest in is key to turning a great profit. However the risk potential is fairly high for stocks and you really have to know what you are doing and make up your own rule sets. Otherwise you could lose all of your money in a hurry.

Real estate has been monitored by many people even before the recession started. It is a very lucrative industry and with careful planning, can lead to high gains. With the decrease in mortgage rate in many countries, this is certainly a secure place to invest assets.

People have basic needs, and this must be met before higher level on need is considered. Shelter is one of them, and that is why there will always be a need for families to find a place they can call their own.

Investing on commercial and residential properties can give you security amidst the economic crisis. Land is a constant, stable commodity. It is now considered by experts to be more stable than buying stocks and bonds.

Property investments are easy to maintain, can be rented or leased in a hurry, and monthly payment can be assured. Unlike movable commodities, houses and other properties cannot be robbed or taken away from you in a blink of an eye. With proper insurance, you can make sure that everything will be secure and safe.

Real estate is indeed one of the high return investments in the market. If you invest on a property with a good location, surroundings, and by getting a great rate on your investment mortgage, it will surely serve as a wedge to stop the decline of your assets and provide you with a stable and substantial income.

Why Pay Property Management Fees?

FPT Guy — Mon, 24 May 2010 17:13:03 +0000

Property management is similar to management in any other business. Property managers provides management for real estate properties. Real estate involves the land and building which could include tenant’s, maintenance, and evictions. Once you start managing many properties, or if you invest in a property that is far from where you live, property managers become as essential as rental property insurance.

If you have a property, someone else is using it, paying rent for it and you do not live close to it, then you might want to hire a property management company. It serves as a bridge between yourself and renter/rent payer. The services, property management company, provide include; whether the renters are put through proper application process, are they paying their rent etc.

You have to pay the property manager fees for the services this company would provide you. The property management fees vary from company to company but there are some of the fees that you can expect while dealing with any company. Percentage based fees are most common. Percentage fee means the project management company asks for percentage of the rent that you charge the renters, standard is 10% but some will charge higher than 10% and some will charge lower than this.

Many companies ask for leasing commission. Leasing commission is charged just once and is equal to the half of the first month’s rent. This is not standard and it varies from company to company. Advertisement fee is the actual fee because it is charged when companies really spends money for the advertisement of your rental property. Some companies try to make their own profit on this charge, these companies are not trustworthy.

Material fee is charged only in case if there is something that needs to be fixed on your property. The property management company will ask you whether to fix it or not. If you permit the company then you will have to pay for it. Again make sure that company is not intending to make their own profit.

Few companies charge vacancy rent which is not required by the company. Companies expect their regular fees even if there is no renter and no rent is being received. Make sure that in the contract it is stated that management payment will be paid out of “collected rent” or “rent collected”.

Before signing the contract read it again and again, ask as many questions as you can before you are going to sign. You can take help from any legal advisor for discussing the terms and conditions stated in the contract that suit both the parties. Getting a property management company might be one of the best investments you’ll ever make, but always be wary until you have worked with them for a while, and know you can trust them.

Cheapest Homeowners Insurance For Your Home

FPT Guy — Sat, 15 May 2010 04:39:02 +0000

When you are trying to find the cheapest homeowners insurance to protect your home there are a few things that you will want to consider. There are a lot of different options that you can choose from, and coverage is different in every area that you are in. The reason that coverage varies is because of the different climates and hazards in every area. There are some things that you may read that do not apply to your area and will not help you to save the money that you thought they would. If you are a smart family you will want to make sure that you are able to get the cheapest rate on your homeowners insurance so that you will be able to use your money to do other things.

One thing that you may consider doing in order to be able to get the best rate when it comes to paying your monthly premium is raise the deductible that you have to pay to file a claim. By raising the deductible you will be able to lower your payment which will make your insurance cheap and affordable. The only downside to doing this is if you have to file a claim you will have to pay more than you would if you did not raise the deductible and paid a higher premium. If you do not file any claims then you will not have to worry about the extra cost.

There are a lot of ways that you will be able to get the cheapest homeowners insurance to for your home. A really great way is to use a home insurance broker – as it’s in their interest to find you a great deal, because they won’t get paid if you walk away and don’t use them. They also will know you are shopping with other brokers, and if they don’t, all you have to do is “mention” it casually. That will wake them up to helping you get the best plan and rate for your needs. You will want to make sure that you get some tips that will help you to get the lowest rate for the area that you are in. If you want to be able to have money left over to do other things with each month then finding the best rate on home insurance will help you tremendously.