Archive for Tips and Strategy
Advice On Selling A House
Maybe you’ve read lots of advice on selling a house. But do you know the biggest mistake many people make when selling a house? Not understanding real estate value.
You see, it doesn’t matter what you think your home is worth. It doesn’t matter what youdid to make in nicer for your family. The value of your home is determined by buyers. What you enjoyed about your house may be irrelevant when it’s time to sell. Think in terms of what buyers want, and use some of the following advice on selling a house.
1. Know the market. What other similar houses have sold for? Have those examples ready to show potential buyers.
2. Decide on a minimum price – the price below which you just won’t move. Don’t tell your agent what this minimum is, but negotiate with any buyers who make an offer near or above it.
3. Concentrate on the visible things first. A new mailbox is often a good idea. When buyers fall in love with the house before they even enter it, they forgive a lot of problems.
4. Clean the neighborhood. If a neighbor’s yard is a mess, give their kids $10 to pick up the yard. Spend $20 to put flowers in any common-areas, and buyers will have a better first impression of the neighborhood.
5. If you or your agent aren’t getting many calls, try something new. Is more advertising necessary? Is the price too high? If price is the problem, drop it fast. That perfect buyer might pass on by while the the home is still over-priced.
6. Listen to prospects. They’ll be more objective than you. If you hear several times that the kitchen is dark, get out the white paint.
7. Find the average sales time for your area. If your house is taking longer than average to sell, there’s a problem, and usually it’s the price.
8. Ask your real estate agent what she plans to do – before you sign a listing agreement. Write down what she says, and hold her to her promises.
9. If there are known problems, such as an old roof, get an estimate for repairs. The sellers may want a $7,000 allowance for a new roof – until you show them your $4,000 estimate.
10. Do improvements that can realisically get you at least a two-to-one return on investment. If $300 to seal the driveway is likely to add $600 to the sales price of the home, do it. Always consider first those things that are most visible.
There are dozens of things you can do to sell your house faster, and get a better price. Start with the ones that will get the most “bang for your buck.” Also, read and USE good advice on selling a house.
Commercial Real Estate – A Primer
So how exactly are commercial properties being bought, sold, being rented? What’s the best way to acquire commercial real estate, and who you need to help you in doing an acquisition?
Here are five key points to consider:
1. By far the most popular business entity for owning commercial real estate is now the limited liability company (LLC).
2. Commercial real estate is a much less popular subject, in part, because it isn’t as personal and doesn’t tug at our own financial purse strings.
3. Commercial real estate is a term to describe a property with 5 or more units. Commercial Real Estate is a critical component of any well-run business.
4. Investing in commercial real estate is riskier and more costly than investing in residential property – but ultimately it can be far more profitable.
5. Commercial real estate is a business investment driven by economic factors, not so much the property itself.
Investing in commercial real estate can be a good way to invest but you should make sure you are well represented by an attorney and accountant before moving forward since buying commercial real estate can have significant tax consequences and if you’re buying or developing commercial real estate, it’s important to protect your financial interests with legal support. It may sound redundant, but the axiom location, location, location, is an important factor in buying commercial real estate too. Here is the key to buying commercial real estate: the one with the most information wins.
The winners are the people that recognize that the world of commercial real estate is constantly changing and understanding the nature of commercial real estate is a precondition to the timing question. They also understand the data and realize that information is the most critical aspect of any transaction. In other words, the most valuable commodity you can have in the commercial real estate market is information.
Answering Phone Inquiries About The Home You Are Selling
When you are selling your home, expect a lot of people to “intrude” on your privacy. If your home is being handled by real estate agents, then most of the calls and inquires would be handled by them. If you are selling your home by yourself, then you’ve got a big job in your hands.
As an independent home seller, you may be flooded by a long line of emails and unending phone calls from potential buyers. Answering emails will not pose much of a problem since you have time to compose your thoughts and you can do those at your own convenience. Handling phoned inquiries is another matter altogether.
One thing you should remember about conducting your business through the phone is that, contrary to what you may think, you are not invisible. The person on the other end of the line can sense your mood at that particular time. If you’re angry, bored or irritated, although they can’t see your facial expressions, they can feel your emotions through the tremor of your voice. With this in mind, try to be warm and friendly. No matter how inane their questions are, do not show your irritation.
In addition to this, you have to know every little thing about your home. It would be safe to assume that you already know the basics (how many bedrooms, toilets, how many cars can the garage accommodate), but you should also be prepared to answer other unexpected questions (i.e. when was the last time you had the property treated for termites). Nothing will irk a buyer more than someone who does not know much about what they are selling.
It would be best if you could attend to all phoned-in inquires yourself. However, in the eventuality that you can’t stay at home, make sure that you leave specific instructions with someone who would be capable of taking these calls. If no one can do the job well, then make sure you can be reached through your cell phone.
Real Estate Investor Question – Fix and Flip vs Buy and Hold
Here’s another awesome question I received from my discussion board. The question; Why bother keeping property after it’s rehabbed? Why not sell it after the rehab and GET PAID!
Of course, the first questions that you must answer is how emergent is your need for quick cash? You can likely generate the most SHORT TERM cash by selling a freshly rehabbed house. But, you will give much of it away in taxes come next April.
If you keep it, you stand to make more! You will also enjoy some great benefits while you own it such as cash flow, a tax break, and MORE cash with the future appreciation. You can still pull some nice cash a few months after buying it when you refinance (post rehab) the property from your hard money (at 70% loan to value) to long term financing (at 85% or 90% loan to value).
The short answer is an investor is going to make considerably more money by hanging onto a property after it’s rehabbed. There is a downside to it. You have to be a landlord, and you have to decide if you want to do that. I don’t think it’s too bad as long the landlording is done correctly.
Let me illustrate the difference in overall money between rehab and sell, and rehab and rent investing with this example;
Let’s say appreciation rates are 5% in your town and the average price of a freshly rehabbed property in the neighborhoods investors buy in is $100,000. Let’s also say there is Bill and Fred.
Bill sells his properties after rehabbing and makes $15-18,000 per house. Good boy Bill!
Fred keeps his rehab projects and cash-out refinances, pulling out around $10,000 per house within 3-6 months of ownership. (Fred trades his 70% loan-to-value (LTV) ratio hard money for long term, 30-year mortgages at a lower interest rate with an 85-90% loan to value ratio. He pockets the difference between what it costs to pay off the hard money and the new mortgage less closing costs. This works out to about $10,000 per property.)
Bill (rehab and sell) makes a great living. Ten houses per year is $150,000-$180,000 per year…nice jingle! The downside is that Bill has to keep rehabbing to keep making that living year-after-year and pays taxes on all that money as regular income (ouch!). So his $150,000 per year is in reality somewhat less.
Fred (the rehabber) also makes a great living. Ten houses per year makes him $100,000 or so in tax free, spendable cash. But, Fred controls a million dollars in real estate and it’s going up in value year after year. Also, Fred pays no taxes on that money he gets from the cash-out refinances. It’s part of a mortgage, so must be paid back, therefore is not income! I love that part!
Let’s look at what Fred’s doing more closely.
Let’s say Fred bought 10 houses valued at $100,000 each, owes $90,000 on each one (after the 90% cash out refinance), so he controls $1,000,000 in property. If he keeps them 5 years (assuming a low appreciation rate…which is pretty conservative):
Purchase year – 10 houses x $100,000 = $1,000,000
Year 1 – Same 10 houses X $105,000 = $1,050,000
Year 2 – Same 10 houses X $110,250 = $1,102,500
Year 3 – Same 10 houses X $115,762 = $1,157,620
Year 4 – Same 10 houses X $121,550 = $1,215,500
Year 5 – Same 10 houses X $127,627 = $1,276,270
Essentially, Fred makes an extra $50,000 per year for keeping 10 properties. After owning them 5 years, if he sells, he puts $276,000 in his pocket.
Remember
- Some parts of the country will appreciate much faster than 5%. Heck some places properties will double in value in 5 years.
- No tax benefits of keeping the property is included here. That equates to thousands of dollars in real income.
- This is ONE ten-house year. Let’s say you want to “top out” at owning 30 houses. Well, in just a couple of years your buying will slow down to a trickle and you’ll start selling and cashing out of properties. I mean, how many ten-house years to you need to string together before you are set for life?
- What if you hold these houses 10 years? The numbers get pretty exciting.
If you’re like me and you don’t want to do this for too many years, then holding properties for a few years makes a lot of sense, especially if you don’t have much personal money invested in them.
So what of poor old Bill? Chances are, Bill will satisfy his need for short term cash, then start holding property. What do you think?