John Beckett's Real Estate Blog

I just read this article sent to me from the REALTOR MAG which is from the National Association of Realtors. I wanted to pass on this great information.

The seemingly endless run of bad housing news is discouraging some potential home buyers from considering a purchase. But the truth is that the advantages of homeownership have very little to do with investment gains. The best things about owning a home have a lot more to do with personal comfort and satisfaction.

Here are five of them:

· Be your own landlord. The bank can only kick you out if you don’t pay; a landlord can be much less dependable – deciding to sell the property or choosing to live there themselves.

· Paying the principal is forced savings. Yes, it’s possible that home prices will fall further. It is also possible that your 401(k) will lose value. But over the long haul, both are likely to enjoy modest gains in value.

· Fixed-rate mortgages never rise – and eventually you pay them off. With mortgage rates at record lows, people who buy now are locking in real bargains.

· Good schools. Family-sized rentals are harder to come by in areas with excellent public schools.

· Spacious properties in pleasant neighborhoods. Sizable homes in attractive communities are almost always owned – not rented.

Source: The New York Times, Ron Lieber (08/27/2010)

If you’re thinking about investing in a rental property, experts say low home prices combined with low interest rates make this the best time in years to become a real-estate investor. What’s more, the real-estate market is starting to recover: U.S. houses lost $489 billion in value during the first 11 months of 2009, but that was significantly lower than the $3.6 trillion lost during 2008, according to real-estate website Zillow.com. We haven’t seen home prices this low in so many years, coupled with the rates being so low. When the money is cheap to borrow and the houses are cheap to buy, it’s absolutely the best time to invest. While the timing may be right, these five tips can help first-time investors take advantage of what might be the opportunity of a lifetime.

Know your options. Since not all investment properties are the same, it’s important to determine what type of property fits your strategy. Do you want to become a landlord, or would you rather restore and resell properties? Are you interested in apartment buildings and other commercial real estate, or in buying land that can be developed? First-time real-estate investors may want to start with residential housing, since commercial real estate and land development still face challenging market conditions.

Partner with experience. First-time investors should find a real-estate agent experienced in investment property deals who can help you locate promising properties. Look for relational brokers who expect to do business with you again and therefore are going to be much more careful with what they recommend. A second option is to collaborate with a more experienced real-estate investor and close a deal together. In this economy, an experienced real-estate investor may be willing to work with you in exchange for the capital you can provide, giving you the opportunity to glean investment knowledge and experience firsthand. Even if you don’t collaborate with other real-estate investors, talk to them about pitfalls they’ve experienced. Go down to the general district court in your area and listen to some landlord/tenant cases so you can get a sense of what kind of challenges landlords face.

Look for the right location. If you buy a property with hopes of renting it out, location is key. Homes in high-rent or highly populated areas are ideal; stay away from rural areas where there are fewer people and a small pool of potential renters. Also, look for homes with multiple bedrooms and bathrooms in neighborhoods that have a low crime rate. Renters gravitate to a safe neighborhood, and if they have kids, they will want a good school district. Also think about potential selling points for your property. If it’s near public transportation, shopping malls or other amenities, it will attract renters, as well as potential buyers if you decide to sell later. The more you have to offer, the more likely you are to please potential renters.

Have capital lined up. Speak to potential lenders or even a financial planner about whether you have enough assets to handle the ups and downs that could come with investing. Even if you plan to rent out the property, count on paying the mortgage whenever there’s a vacancy. If you can have about six months of mortgage payments saved up, it’s there if you need it, and you can use that money for repairs. Even if you’re planning to fix up a home and sell it, you may end up holding onto it for several months in the current market.

Build a supporting cast. Don’t wait until a rental property needs repairs to find someone to handle them. Line up maintenance individuals who can take care of the different challenges that occur so you can simply call the person when a particular issue comes up. Other sources you may want to have relationships with are an attorney to consult with on tenant issues, a property management firm to handle the day-to-day rental affairs and an accountant to help you understand the tax ramifications of investing. The more support you have, the better you will be able to handle the problems that come your way. Whatever you do, understand that buying investment property is an entirely different experience than buying your primary residence. When you go to buy your own home, you usually have emotions in it. When you go to buy an investment property, you need to put all that aside and ask, ‘What makes sense?’

Read at: http://realestate.msn.com/article.aspx?cp-documentid=23972039

Her we are back to Thursday which is Real Estate term day. If there is a term you do not understand please send me an email and I will get it answered for you. (john.beckett@sbcglobal.net)

Adjustable Rate Mortgage

An adjustable rate mortgage (ARM) loan that bears interest at a rate that is subject to change and therefore adjustable during the term of the loan on a specified financial index that has been predetermined.

Inclusionary Zoning

An ordinance that requires a builder of new housing to set aside a designated number of units for low and moderate-income people.

Lease With An Option To Purchase

A lease in which the lessee (tenant) has the right to purchase real property under certain conditions such as a stipulated price or within a stipulated time frame either during or at the end of the lease term.

Lease to own

Lease-to-own is a term that refers to renting the home now but including a contract to be able to purchase that specific home in the foreseeable future. This is also refered to as a rent-to-own purchase or a lease purchase. The purchase option, is an option at a option fee agreed to by the parties. This option fee, up to 5% of the current value of the property, is a cost to the borrower since he is getting the benefit of the option. The borrower pays rent, and an additional rent premium that is also credited to the purchase price. If the purchase option is not exercised, the buyer loses both the option fee and the rent premium.