Purchasing a home is a major emotional and financial decision. Often times, people want to buy a home; however, emotionally cannot afford to commit to the home-buying process. They are, in fact, afraid. "My payment will be too high" or "What if I lose my job," are some of the "excuses" which I often hear. People do not realize that they are able to meet all the commitments over their life span.
In any event, when everything is said and done, here are some of the major advantages of buying a home:
1. Quality of Life. Home-buying and living in your home affects the quality of life. It adds to your confidence, giving you a sense of pride and satisfaction. You have a sense of emotional well-being as well as peace of mind.
2. Tax Deductibility of Mortgage Interest. The entire mortgage interest payment is tax-deductible and the "net" cost of the mortgage payment actually puts money in your pocket.
3. Tax Deductibility of Property Taxes. Similarly, the property taxes are due and payable twice a year and may seem like a lot of waste of money. Typically, property taxes are $1.10/$1,000 of your purchase price. However, the property taxes are also tax deductible and you get it back in the form of tax savings.
4. Appreciation Potential. Typically and historically, nationwide property values have gone up in value at 7% per year. In California and some other states, properties have, in certain good economic times, appreciated at the rate of over 20% per year. At 7% conservative rate, the property doubles up in value in 10 years. So, a property worth $500,000 will be worth $1,000,000, equaling a gain of $50,000 on a yearly basis. For an average person, it is difficult to save that kind of money.
5. Deferred Capital Gain Treatment. Real estate investment capital gains can be deferred by exchanging the property for like-kind property. So, when the property appreciates and you decide to sell it and do no want to pay the capital gains tax, you can buy another property of like-kind and avoid capital gains tax. This allows you to switch properties when required, for example, an area might be facing downturn or you might be moving, etc.
6. Once in a Lifetime Exclusion. Upon the sale of a personal residence, the IRS allows an exemption and one does not have to pay taxes on a gain of $250,000, if single and up to a gain of $500,000, if married. For example, if you're single and buy a property and live there for five years and the property appreciates by $250,000, you can sell the property and not pay any taxes at all.
7. Principal Accumulation. This is strongly tied to appreciation in the property value. Payments made toward the mortgage payment help you accumulate principal which essentially helps you establish a reserve savings account which you can later tap into by obtaining an equity line of credit or getting an equity loan, if needed.
8. Pride in Your Home. It is fun to invite people to "your" home and feel good about it. It also instills confidence in your family, your children and makes them more confident individuals.
9. No Landlord. You are in-charge and do not have to deal with a landlord who might not make repairs or maintain the property as you would like.
10. Leverage. Where else can you buy this size of an investment with 0-5-10% down. You can buy a property for a personal residence for as low as zero down or an investment property with 5-10% down, if your credit is good, and watch the investment grow. This, in turn, allows the net investment return to be much higher (than the actual appreciation rate on the value of the property). To follow up on the example earlier, if the property grows at 7% and doubles in value, since the amount invested in buying the property might be only $50,000 (at 10% down payment), the actual return is much higher on $50,000 investment.
11. The Real Cost of Renting! At $700 per month, with a 6% rental increase per year, you will pay $110,719 over a 10 year period. If the rent is higher, you can count on paying much more and not getting any return or tax benefits at all.
About the Author
Madan "Raja" Ahluwalia is an Attorney at Law and Realtor. Raja possesses a thorough understanding of the real estate market and trends, based on years of involvement in real estate, both for his clients and for his own investment purposes. Contact Raja via e-mail at raja@kw.com and at 650.430.4023.
Thursday, September 22, 2005
How to make money from Buy To Let in a property crash by Peter Parsons
Over the last few years, most investors who have tried 'buy to let' (buying additional properties in order to rent them out) have profited spectacularly as the property market in most of the world boomed like never before. Historically unprecedented property prices in the USA, UK, Australia and most of Europe have made the concept of becoming a landlord look like an easy route to riches.
Of course, there really isn't any 'free lunch', and the situation now, as property markets start to crumble around the globe, isn't looking quite so good for amateur property speculators. Historically, booms of this magnitude are followed rather predictably by equally large crashes, and the smart property landlords evacuated the market over a year ago, selling at the peak to amateurs lured in by the prospect of easy money. These amateurs have typically paid way over the odds for their rental investments, and are in many cases having to subsidize their tenants (i.e. the rent doesn't cover the interest-only payments on the mortgage!). They did this on the promise that future property price appreciation would justify the monthly losses they make by subsidizing the tenant (Ed's note - a pro landlord would NEVER subsidize a tenant in ANY circumstance - yield is everything).
So what's a newbie Landlord to do? Paid too much for a property, tenant's rent not even covering the interest on the mortgage and property prices likely to slip a dismal 30% or so over the next 5 years... is it harakiri time? No! There IS a way out, a way so obvious you have probably overlooked it.
Sell the property. Simple, huh? In theory yes, but not in practice. Right now, NOTHING is selling. Solution? DROP THE PRICE. You may have to take a 15% or 20% loss on the property now in order to get rid of it. Why on earth would you do this, I hear you ask, after all, aren't you in it for the long term? of course you are. But you must also treat it as a business, so let's look at the business case for the justification.
The property market has begun the downswing. Like an ocean going tanker, the market is slow to change direction, but when it does, it's going the opposite way, and for some time. The market ALWAYS punishes 'irrational exuberance' - that's almost a definition of a market. It could be anywhere between 3 and 5 years before this downswing bottoms out, and over that time, a 30% correction is probably the 'best-case' fall one can expect (this would take prices back to the long term mean. In reality they may even undershoot and fall further). After that, it may be another 3 to 5 years before prices once more claw their way back up to the highs of 2004.
Now let's be optimistic, let's hope it takes only 3 years down, and 3 years back up. Over that 6 years, you will be subsidizing your tenant each and every month, will be responsible for repairs, taxes, finding new occupiers, and all the hassle that a person would normally expect to get paid for. And you will be doing it for nothing. Nada. Zilch. If you are subsidizing your tenant to the tune of 20% or so (a common figure at present according to industry figures) this means you will effectively have lost about 9% of your investment anyway as the 6 years unfold in all their predictability. Add on the lost opportunity cost of using your money more effective over the 6 years, and you can realistically double that figure BEORE you look at all the hassle and heartache of being a landlord. In other words, pretty much the same cost to you as selling now at what looks like a bad loss.
The alternative? You are free to get on with life, and try to find some other way to make money. Additionally, if you manage to sell now, even at a 20% loss, it will probably fall at least another 10%. This means that you can buy again in 3 years time at the lowest point of the crash, and recover your losses in the 3 years that would follow, making a healthy 10% or so whereas as things stand you will only be clawing back to break-even by 2011. And the icing? Buying at the low in 3 years time means a smaller mortgage, which means lower interest payments, which means a respectable yield!. The calculations are quite complicated, but put simply, taking your medicine now in the form a of a 20% hit could mean that in 6 years time you are up perhaps 40%. The choice of course, is yours. And even if you decide to hang on for grim life, there is always a chance that you might make it out the other side with a small profit some time in the next 10 years or so. Best of luck, Landlords!
About the Author
Peter Parsons writes property articles for www.mortgagedown.com , the place to get advice on how to reduce your mortgage
Of course, there really isn't any 'free lunch', and the situation now, as property markets start to crumble around the globe, isn't looking quite so good for amateur property speculators. Historically, booms of this magnitude are followed rather predictably by equally large crashes, and the smart property landlords evacuated the market over a year ago, selling at the peak to amateurs lured in by the prospect of easy money. These amateurs have typically paid way over the odds for their rental investments, and are in many cases having to subsidize their tenants (i.e. the rent doesn't cover the interest-only payments on the mortgage!). They did this on the promise that future property price appreciation would justify the monthly losses they make by subsidizing the tenant (Ed's note - a pro landlord would NEVER subsidize a tenant in ANY circumstance - yield is everything).
So what's a newbie Landlord to do? Paid too much for a property, tenant's rent not even covering the interest on the mortgage and property prices likely to slip a dismal 30% or so over the next 5 years... is it harakiri time? No! There IS a way out, a way so obvious you have probably overlooked it.
Sell the property. Simple, huh? In theory yes, but not in practice. Right now, NOTHING is selling. Solution? DROP THE PRICE. You may have to take a 15% or 20% loss on the property now in order to get rid of it. Why on earth would you do this, I hear you ask, after all, aren't you in it for the long term? of course you are. But you must also treat it as a business, so let's look at the business case for the justification.
The property market has begun the downswing. Like an ocean going tanker, the market is slow to change direction, but when it does, it's going the opposite way, and for some time. The market ALWAYS punishes 'irrational exuberance' - that's almost a definition of a market. It could be anywhere between 3 and 5 years before this downswing bottoms out, and over that time, a 30% correction is probably the 'best-case' fall one can expect (this would take prices back to the long term mean. In reality they may even undershoot and fall further). After that, it may be another 3 to 5 years before prices once more claw their way back up to the highs of 2004.
Now let's be optimistic, let's hope it takes only 3 years down, and 3 years back up. Over that 6 years, you will be subsidizing your tenant each and every month, will be responsible for repairs, taxes, finding new occupiers, and all the hassle that a person would normally expect to get paid for. And you will be doing it for nothing. Nada. Zilch. If you are subsidizing your tenant to the tune of 20% or so (a common figure at present according to industry figures) this means you will effectively have lost about 9% of your investment anyway as the 6 years unfold in all their predictability. Add on the lost opportunity cost of using your money more effective over the 6 years, and you can realistically double that figure BEORE you look at all the hassle and heartache of being a landlord. In other words, pretty much the same cost to you as selling now at what looks like a bad loss.
The alternative? You are free to get on with life, and try to find some other way to make money. Additionally, if you manage to sell now, even at a 20% loss, it will probably fall at least another 10%. This means that you can buy again in 3 years time at the lowest point of the crash, and recover your losses in the 3 years that would follow, making a healthy 10% or so whereas as things stand you will only be clawing back to break-even by 2011. And the icing? Buying at the low in 3 years time means a smaller mortgage, which means lower interest payments, which means a respectable yield!. The calculations are quite complicated, but put simply, taking your medicine now in the form a of a 20% hit could mean that in 6 years time you are up perhaps 40%. The choice of course, is yours. And even if you decide to hang on for grim life, there is always a chance that you might make it out the other side with a small profit some time in the next 10 years or so. Best of luck, Landlords!
About the Author
Peter Parsons writes property articles for www.mortgagedown.com , the place to get advice on how to reduce your mortgage
Nobody Loves A Landlord by Mark Walters
The typical landlord starts off life as a light hearted real estate investor. The investor is brimming with enthusiasm and is determined to acquire some single family homes that will be attractive to renters... and start down the road to financial independence.
Then... Wham! Reality smacks them right in the face! The investor-landlord is fair game for almost everyone.
Why? Because nobody loves a landlord.
It's bad enough that many renters don't quite understand that without their monthly rent payments the landlord can't make the mortgage payments on the property.
A few renters are surprised to learn that the family room of a rental home was just not designed as the place to rebuild motorcycles.
Nobody loves a landlord.
And then... how many legal hoops must the landlord jump through? In most states tenant/landlord law favors the tenant in many ways
For example:
A tenant signs a one year lease. Six months later the tenant breaks the lease and moves. Now the law demands that the landlord find a new tenant for that unit as quickly as possible.
Yes, the tenant only has to pay rent until the new tenant is found... but the burden falls on the landlord. Why shouldn't the tenant... the one who broke a contractual promise have to find the replacement tenant?
Why? Because nobody loves a landlord!
Here's the first paragraph of a story in my morning newspaper
"A huge marijuana garden of 212 plants nurtured by an intricate irrigation and lighting system worth ten of thousands of dollars was uncovered inside a West Valley rental house Saturday."
The house was vacant except for the cash crop and I can't help but wonder if the growers were getting government farm subsidy payments?
The home has an out-of-state owner. Some poor investor who thought he would cash in on the fast-rising Arizona home values.
Here's the kicker. That investor could be held responsible, because he did not properly supervise the use of the property! Many areas have such laws.
Why? Because nobody loves a landlord!
This should be a reminder to all of us that a rental house or unit is not a set-it-and-forget-it investment. Every good lease or rental agreement has an inspection clause that allows the landlord or his representative to periodically enter and take a look at the condition of the premises.
Are you doing that? You should be, because...
Nobody loves a landlord!
About the Author
About The Author: Mark Walters is a third generation real estate investor who shares his experience from his Web pages: http://www.lease-option-sub2.com http://www.CashFlowInstitute.com
Then... Wham! Reality smacks them right in the face! The investor-landlord is fair game for almost everyone.
Why? Because nobody loves a landlord.
It's bad enough that many renters don't quite understand that without their monthly rent payments the landlord can't make the mortgage payments on the property.
A few renters are surprised to learn that the family room of a rental home was just not designed as the place to rebuild motorcycles.
Nobody loves a landlord.
And then... how many legal hoops must the landlord jump through? In most states tenant/landlord law favors the tenant in many ways
For example:
A tenant signs a one year lease. Six months later the tenant breaks the lease and moves. Now the law demands that the landlord find a new tenant for that unit as quickly as possible.
Yes, the tenant only has to pay rent until the new tenant is found... but the burden falls on the landlord. Why shouldn't the tenant... the one who broke a contractual promise have to find the replacement tenant?
Why? Because nobody loves a landlord!
Here's the first paragraph of a story in my morning newspaper
"A huge marijuana garden of 212 plants nurtured by an intricate irrigation and lighting system worth ten of thousands of dollars was uncovered inside a West Valley rental house Saturday."
The house was vacant except for the cash crop and I can't help but wonder if the growers were getting government farm subsidy payments?
The home has an out-of-state owner. Some poor investor who thought he would cash in on the fast-rising Arizona home values.
Here's the kicker. That investor could be held responsible, because he did not properly supervise the use of the property! Many areas have such laws.
Why? Because nobody loves a landlord!
This should be a reminder to all of us that a rental house or unit is not a set-it-and-forget-it investment. Every good lease or rental agreement has an inspection clause that allows the landlord or his representative to periodically enter and take a look at the condition of the premises.
Are you doing that? You should be, because...
Nobody loves a landlord!
About the Author
About The Author: Mark Walters is a third generation real estate investor who shares his experience from his Web pages: http://www.lease-option-sub2.com http://www.CashFlowInstitute.com
Investment Property Part I: How Not to Become a Slumlord by Cameron Brown
Welcome to the first part of a two part series about getting into the investment property business.
After riding the ups and downs of the stock market roller coaster for a while, an increasing number of investors are looking into property investment as a more stable alternative. With hot markets in many parts of the United States, the time may be ripe for you to get into this potentially lucrative trade. I would suggest, however, that you keep reading before you jump on the first property you find. You just might find something in this article that will keep you from breaking the bank and your back.
The hope of any investor is to build long-term wealth; this is a fairly straightforward principle and probably the reason you're reading this article. There are however, some rules to play by in the property investment game if you don't want to end up taking a shotgun with you every time rent needs to be collected. I'm talking about how to avoid becoming a 'slumlord'.
In order to best relate the rules of being a successful landlord, let me share a story experienced by some extended family members. It's a great example of what NOT to do if you want to get the most out of your investment property. After the story we'll see what rules and lessons we can learn. Names have been changed to protect the identity of the innocent.
Ben bought a beater single-family investment property in a very bad area and he his two sons, Josh and Nathan, all got busy. They put in hardwood floors-don't want to have to replace carpet every time you have turn over, right? And then they thought they'd use really good paint-don't want have to repaint every time, right? And then they decided to splurge on good cabinetry and bathroom fixtures-a happy renter is a good renter, right? And to top it off, they put in nice towels on nice racks that said, "We are Family." Renters would appreciate that, right?
Right.
The first family to move in removed the bedroom and cupboard doors for firewood, tore out the nice bathroom fixtures and sold them at the swap meet, and fired small caliber rounds through the new hardwood floors. Ben discovered this when he received a call that the roof was leaking and he should, "Get your *** down here and fix it!" He patiently tried to explain that roofs do that when you pull shingles for kindling. Other wonderful visits ensued, prompted by similar calls.
It only took eight months to get them out of the house; turns out that tenant rights as outlined by the county enumerate more rights than the rest of us enjoy collectively. As the family moved out he noticed that mom and the two older boys all sported matching shirts stitched with "We are Family." The rest carried various pieces of the house.
Ben, Josh, and Nathan began to rebuild the house, finding all sorts of interesting changes to its structure. Nothing really serious other than a supporting beam was chain-sawed out (apparently more firewood), tile pried up in one bathroom-no clear reason why, gang signs scratched into all the glass and mirrors that weren't broken and other little surprises.
While helping restring some crawl space electrical wire-later found strung in the closet for hangers-Josh found a rusted out .32 caliber handgun. Somehow the tenants had managed to pry bricks out of the chimney, which Ben needed to replace in order to meet code. Apparently someone had driven an M1A1 Abrams up the driveway; there was no other way to explain the huge cracks in a driveway that had remained perfect for 20 years.
What can we learn from this horrific, yet unfortunately true story?
Rule #1
Location, Location, Location. Ok, so this might seem a little cliché, but it's a fact that the location of your investment property will determine the kinds of tenants you will attract, and how much rent you can fairly charge. Remember, at some point in time in the future it may become necessary for you and your family to live there; what kind of neighborhood do you want to be in?
Rule #2
Don't go overboard when you're fixing up an investment property. You ought to expect reasonable wear and tear. Keep in mind that 'reasonable wear and tear' means something entirely different to a person whose renting than it does to an owner. And for goodness sake forget the, "We are Family" hand towels!
Rule #3
Know how to make basic repairs. Luckily for Ben and sons they had quite a bit of experience in various construction trades. Otherwise they may have lost even more money than they did through hiring out help. Knowing how to fix electrical wiring, repair drains, and replace windows will save you quite a bit of money down the road.
Rule #4
Screen your tenants as if they were moving in to live with you. This may be the most important step to avoid becoming a slumlord. Ask for and check references. Call previous landlords and ask questions like, "Did they pay rent on time? How was the condition of the house/apartment when they left? Did they ever disturb neighbors with loud music or yelling matches? How often would you have to make special trips for untimely repairs?" Being as informed as possible about who you rent to will make a huge difference in the profitability of your investment property.
Rule #5
Know your rights as a landlord. Be familiar with the eviction process in order to avoid long, drawn out disputes with tenants. Most states and counties provide online information about tenant and landlord rights.
Don't repeat the mistakes made by Ben and his sons. Granted, getting into the investment property business takes hard work and you'll have to put up with things you normally wouldn't put up with. At the same time there are steps you can take to limit your liability while preventing yourself from becoming a 'slumlord'.
In the next portion of this two-part article we will be discussing some of the financial aspects you should be familiar with in order to find the best deal possible on your first investment property.
About the Author
Cameron Brown is an internet marketer specializing in ranking automation . For information on Investment Property, visit Security National Capital.
After riding the ups and downs of the stock market roller coaster for a while, an increasing number of investors are looking into property investment as a more stable alternative. With hot markets in many parts of the United States, the time may be ripe for you to get into this potentially lucrative trade. I would suggest, however, that you keep reading before you jump on the first property you find. You just might find something in this article that will keep you from breaking the bank and your back.
The hope of any investor is to build long-term wealth; this is a fairly straightforward principle and probably the reason you're reading this article. There are however, some rules to play by in the property investment game if you don't want to end up taking a shotgun with you every time rent needs to be collected. I'm talking about how to avoid becoming a 'slumlord'.
In order to best relate the rules of being a successful landlord, let me share a story experienced by some extended family members. It's a great example of what NOT to do if you want to get the most out of your investment property. After the story we'll see what rules and lessons we can learn. Names have been changed to protect the identity of the innocent.
Ben bought a beater single-family investment property in a very bad area and he his two sons, Josh and Nathan, all got busy. They put in hardwood floors-don't want to have to replace carpet every time you have turn over, right? And then they thought they'd use really good paint-don't want have to repaint every time, right? And then they decided to splurge on good cabinetry and bathroom fixtures-a happy renter is a good renter, right? And to top it off, they put in nice towels on nice racks that said, "We are Family." Renters would appreciate that, right?
Right.
The first family to move in removed the bedroom and cupboard doors for firewood, tore out the nice bathroom fixtures and sold them at the swap meet, and fired small caliber rounds through the new hardwood floors. Ben discovered this when he received a call that the roof was leaking and he should, "Get your *** down here and fix it!" He patiently tried to explain that roofs do that when you pull shingles for kindling. Other wonderful visits ensued, prompted by similar calls.
It only took eight months to get them out of the house; turns out that tenant rights as outlined by the county enumerate more rights than the rest of us enjoy collectively. As the family moved out he noticed that mom and the two older boys all sported matching shirts stitched with "We are Family." The rest carried various pieces of the house.
Ben, Josh, and Nathan began to rebuild the house, finding all sorts of interesting changes to its structure. Nothing really serious other than a supporting beam was chain-sawed out (apparently more firewood), tile pried up in one bathroom-no clear reason why, gang signs scratched into all the glass and mirrors that weren't broken and other little surprises.
While helping restring some crawl space electrical wire-later found strung in the closet for hangers-Josh found a rusted out .32 caliber handgun. Somehow the tenants had managed to pry bricks out of the chimney, which Ben needed to replace in order to meet code. Apparently someone had driven an M1A1 Abrams up the driveway; there was no other way to explain the huge cracks in a driveway that had remained perfect for 20 years.
What can we learn from this horrific, yet unfortunately true story?
Rule #1
Location, Location, Location. Ok, so this might seem a little cliché, but it's a fact that the location of your investment property will determine the kinds of tenants you will attract, and how much rent you can fairly charge. Remember, at some point in time in the future it may become necessary for you and your family to live there; what kind of neighborhood do you want to be in?
Rule #2
Don't go overboard when you're fixing up an investment property. You ought to expect reasonable wear and tear. Keep in mind that 'reasonable wear and tear' means something entirely different to a person whose renting than it does to an owner. And for goodness sake forget the, "We are Family" hand towels!
Rule #3
Know how to make basic repairs. Luckily for Ben and sons they had quite a bit of experience in various construction trades. Otherwise they may have lost even more money than they did through hiring out help. Knowing how to fix electrical wiring, repair drains, and replace windows will save you quite a bit of money down the road.
Rule #4
Screen your tenants as if they were moving in to live with you. This may be the most important step to avoid becoming a slumlord. Ask for and check references. Call previous landlords and ask questions like, "Did they pay rent on time? How was the condition of the house/apartment when they left? Did they ever disturb neighbors with loud music or yelling matches? How often would you have to make special trips for untimely repairs?" Being as informed as possible about who you rent to will make a huge difference in the profitability of your investment property.
Rule #5
Know your rights as a landlord. Be familiar with the eviction process in order to avoid long, drawn out disputes with tenants. Most states and counties provide online information about tenant and landlord rights.
Don't repeat the mistakes made by Ben and his sons. Granted, getting into the investment property business takes hard work and you'll have to put up with things you normally wouldn't put up with. At the same time there are steps you can take to limit your liability while preventing yourself from becoming a 'slumlord'.
In the next portion of this two-part article we will be discussing some of the financial aspects you should be familiar with in order to find the best deal possible on your first investment property.
About the Author
Cameron Brown is an internet marketer specializing in ranking automation . For information on Investment Property, visit Security National Capital.
Investment Property Part 2 of 2: What You Need to Know Before You Buy by Cameron Brown
Investment Property Part 2 of 2: What You Need to Know Before You Buy
Welcome to the second portion of a two-part series on investment property. In the first installment, "How Not to Become a Slumlord", we discussed a little of what it takes to own and operate a property as well as some of the do's and don'ts of the property management trade. In this second segment, we will be discussing some pre-investment principles that will help you maximize your ROI.
There are three basic principles of investment property that you should know before you buy an investment property in order to avoid overpaying:
Time
How long do you plan on owning the investment property? As with stocks and bonds, the value of your investment may change significantly during the time you own it. While most real estate will appreciate in value over time, there are frequent fluctuations in the short-term market. If you plan on selling your investment property after less than five years, be prepared to accept the investment risk inherent in a shorter time horizon. This is especially true if you bought your property in an overheated real estate market. If this is the case, you could find yourself losing money if the market has taken a temporary downturn, especially if you've had to make major repairs to the property.
If you plan on owning the property for the next twenty to twenty-five years, it's almost certain that your investment property will appreciate in value. There's also a good chance, however, that you'll have to make major repairs like replacing the roof, wiring system, or major appliances like a water heater or refrigerator. Of course, these repairs will be offset by the fact that you've had/will have twenty plus years to recoup the cost. If on the other hand, you're only planning on owning an investment property for the next five years, buying a "fixer up'er" can eat up all the profits you would have made during your shorter investment horizon.
Networking
If you want the best deal possible on an investment property, than there are some people you'll want to be friends with. City hall clerks and bank employees may know what properties will be available on foreclosure and when they will go on the market. Real estate agents usually know everything real estate related within their respective territory. Some prospective landlords even run ads in local newspapers.
Many individuals interested in entering the investment property market may even join local landlord or investment property owners organizations. These types of organizations hold regular meetings where you can get the inside scoop on what's for sale in your area. The National Real Estate Investors Association is an online organization that provides a wealth of information and resources to potential investment property owners.
Financial Preparation
Get your finances in order. The less debt you have when you walk into your local lending institution, the better loan you'll get. This is common sense, but it's even more true for those seeking financing for an investment property. This is because lenders know that people are much more likely to default on a rental property than on their own homes. This means that the bank will demand a larger down payment and higher interest rates that you may have expected. It's also a good idea to have some extra cash left over to make unforeseen repairs should they arise.
By wisely choosing an investment property time horizon, making contacts in the investment property community, and preparing proper financial means, your investment may become a significant means of supplementing retirement and other savings accounts.
About the Author
Cameron Brown is an internet marketer specializing in ranking automation. For information on Investment Property, visit Security National Capital.
Welcome to the second portion of a two-part series on investment property. In the first installment, "How Not to Become a Slumlord", we discussed a little of what it takes to own and operate a property as well as some of the do's and don'ts of the property management trade. In this second segment, we will be discussing some pre-investment principles that will help you maximize your ROI.
There are three basic principles of investment property that you should know before you buy an investment property in order to avoid overpaying:
Time
How long do you plan on owning the investment property? As with stocks and bonds, the value of your investment may change significantly during the time you own it. While most real estate will appreciate in value over time, there are frequent fluctuations in the short-term market. If you plan on selling your investment property after less than five years, be prepared to accept the investment risk inherent in a shorter time horizon. This is especially true if you bought your property in an overheated real estate market. If this is the case, you could find yourself losing money if the market has taken a temporary downturn, especially if you've had to make major repairs to the property.
If you plan on owning the property for the next twenty to twenty-five years, it's almost certain that your investment property will appreciate in value. There's also a good chance, however, that you'll have to make major repairs like replacing the roof, wiring system, or major appliances like a water heater or refrigerator. Of course, these repairs will be offset by the fact that you've had/will have twenty plus years to recoup the cost. If on the other hand, you're only planning on owning an investment property for the next five years, buying a "fixer up'er" can eat up all the profits you would have made during your shorter investment horizon.
Networking
If you want the best deal possible on an investment property, than there are some people you'll want to be friends with. City hall clerks and bank employees may know what properties will be available on foreclosure and when they will go on the market. Real estate agents usually know everything real estate related within their respective territory. Some prospective landlords even run ads in local newspapers.
Many individuals interested in entering the investment property market may even join local landlord or investment property owners organizations. These types of organizations hold regular meetings where you can get the inside scoop on what's for sale in your area. The National Real Estate Investors Association is an online organization that provides a wealth of information and resources to potential investment property owners.
Financial Preparation
Get your finances in order. The less debt you have when you walk into your local lending institution, the better loan you'll get. This is common sense, but it's even more true for those seeking financing for an investment property. This is because lenders know that people are much more likely to default on a rental property than on their own homes. This means that the bank will demand a larger down payment and higher interest rates that you may have expected. It's also a good idea to have some extra cash left over to make unforeseen repairs should they arise.
By wisely choosing an investment property time horizon, making contacts in the investment property community, and preparing proper financial means, your investment may become a significant means of supplementing retirement and other savings accounts.
About the Author
Cameron Brown is an internet marketer specializing in ranking automation. For information on Investment Property, visit Security National Capital.
Property Management: The Good, the Bad, and the Ugly by Elaine VonCannon
Property Management: The Good, the Bad, and the Ugly
Being a landlord is not all it's cracked up to be. Think carefully of all the responsibilities that follow the purchase of an investment property for rental use. Screen your clients, run credit checks and, if you are both landlord and owner of the property, learn to deal with problems objectively, fairly and legally. Many clients will try to talk their way out of serious issues like late rent payments. Some will even present a dramatic sob story - be sure to stand firm and take care of your property the best way you know how. Any renter can and should be held accountable for rent they have agreed to pay. Tenants can be like children and will give you gray hairs. You may have to start coloring twice a month!
Make Sure You Have Time For DIY
Do-it-yourself (DIY) property management can be difficult if you have a career and a family. The responsibility of the landlord position can be incredibly time consuming. As the owner or manager of the property you will receive all tenant phone calls to report items that need to be fixed or complaints that need to be mentioned. Tenants can be very high maintenance. Be prepared for them to call often and for minor reasons. Also, take the time to complete quarterly checks every three months. Especially if you are a DIY property manager/owner, keeping an eye on the condition of the property is essential to maintaining your investment.
Ask Questions And Read The Fine Print
To find a property manager you must know what questions to ask. Write a list of the reasons you want to hire a property manager and be clear about what you will expect from the person or business that represents you. When you hire a property manager read the property management agreement thoroughly. Many property management agreements renew annually, unless you cancel the agreement sixty days in advance. Most property managers continue their management while tenants they have procured are still living on the property. The management agreement will hold in place until the tenant vacates regardless, of your desire to terminate the current relationship. Always, be fully aware of what kind of commitment you are making in these agreements.
Don't Let Management Companies Take Advantage Of You
If you decide to work with a property management company educate yourself about possible hidden fees that may be added to take advantage of less knowledgeable property owners. Extra fees like charges for acquiring work or cleaning estimates, procurement fees for finding new tenants and commission fees added to tenant sales are just a few examples of things to look for. Commission charges that are added to tenant sales are negotiable within the property management agreement. These types of concealed charges are typical in agreements created by larger companies that have a property management division. In general, the cost to hire a property management company should be a percentage of the monthly rent.
Tips To make Your Property Management Search More Successful
Always research and read your property management agreement from beginning to end. Don't sign anything until you feel comfortable. Take all the time you need to make a decision. Research and compare property managers. Ask them about their marketing strategy for the property. Find out how long the manager has been licensed and how many properties they have worked with. Ask for and contact references. The best property managers are found by referral through a trusted friend or business colleague.
Living By Example
As a property manager I try to exemplify the highest qualities in the business. I charge a percentage of the rent for my fee and promise not to add any hidden fees or undisclosed costs. I also require all potential tenants to allow me to do a credit check. I work to create the best situation for everyone involved. Since many rental properties eventually go up for sale, you are always building relationships with tenants who may be potential buyers. It is worth it to be smart, fair and reasonable in your property dealings.
About the Author
Elaine VonCannon is a REALTOR with RE/Max Capital in Williamsburg, Virginia, and she specializes in retirement and relocation in the Williamsburg area. She is an Accredited Buyer's Representative as well as a Senior Real Estate Specialist. Elaine VonCannon also works with real estate investors and home sellers.
Being a landlord is not all it's cracked up to be. Think carefully of all the responsibilities that follow the purchase of an investment property for rental use. Screen your clients, run credit checks and, if you are both landlord and owner of the property, learn to deal with problems objectively, fairly and legally. Many clients will try to talk their way out of serious issues like late rent payments. Some will even present a dramatic sob story - be sure to stand firm and take care of your property the best way you know how. Any renter can and should be held accountable for rent they have agreed to pay. Tenants can be like children and will give you gray hairs. You may have to start coloring twice a month!
Make Sure You Have Time For DIY
Do-it-yourself (DIY) property management can be difficult if you have a career and a family. The responsibility of the landlord position can be incredibly time consuming. As the owner or manager of the property you will receive all tenant phone calls to report items that need to be fixed or complaints that need to be mentioned. Tenants can be very high maintenance. Be prepared for them to call often and for minor reasons. Also, take the time to complete quarterly checks every three months. Especially if you are a DIY property manager/owner, keeping an eye on the condition of the property is essential to maintaining your investment.
Ask Questions And Read The Fine Print
To find a property manager you must know what questions to ask. Write a list of the reasons you want to hire a property manager and be clear about what you will expect from the person or business that represents you. When you hire a property manager read the property management agreement thoroughly. Many property management agreements renew annually, unless you cancel the agreement sixty days in advance. Most property managers continue their management while tenants they have procured are still living on the property. The management agreement will hold in place until the tenant vacates regardless, of your desire to terminate the current relationship. Always, be fully aware of what kind of commitment you are making in these agreements.
Don't Let Management Companies Take Advantage Of You
If you decide to work with a property management company educate yourself about possible hidden fees that may be added to take advantage of less knowledgeable property owners. Extra fees like charges for acquiring work or cleaning estimates, procurement fees for finding new tenants and commission fees added to tenant sales are just a few examples of things to look for. Commission charges that are added to tenant sales are negotiable within the property management agreement. These types of concealed charges are typical in agreements created by larger companies that have a property management division. In general, the cost to hire a property management company should be a percentage of the monthly rent.
Tips To make Your Property Management Search More Successful
Always research and read your property management agreement from beginning to end. Don't sign anything until you feel comfortable. Take all the time you need to make a decision. Research and compare property managers. Ask them about their marketing strategy for the property. Find out how long the manager has been licensed and how many properties they have worked with. Ask for and contact references. The best property managers are found by referral through a trusted friend or business colleague.
Living By Example
As a property manager I try to exemplify the highest qualities in the business. I charge a percentage of the rent for my fee and promise not to add any hidden fees or undisclosed costs. I also require all potential tenants to allow me to do a credit check. I work to create the best situation for everyone involved. Since many rental properties eventually go up for sale, you are always building relationships with tenants who may be potential buyers. It is worth it to be smart, fair and reasonable in your property dealings.
About the Author
Elaine VonCannon is a REALTOR with RE/Max Capital in Williamsburg, Virginia, and she specializes in retirement and relocation in the Williamsburg area. She is an Accredited Buyer's Representative as well as a Senior Real Estate Specialist. Elaine VonCannon also works with real estate investors and home sellers.
Monday, September 19, 2005
How To Become A Savvy Real Estate Investor by Jamie Madison
If you've turned on the television lately, at some point you'll hear the experts praising the virtues of diversification. Real estate has long been considered a conservative, long-term strategy to growing wealth. While some seasoned real estate investors make it look easy, to be successful, beginners should follow some basic principles.
Learn all you can. Consider attending a seminar or talking with individuals who are experienced in real estate investing. Look for people in your area or search for investor information on your favorite search engine.
Before committing your cash, you should have a fundamental understanding of real estate. For example, be aware that, in general, investment properties are not liquid investments. Barring exceptional circumstances, real estate does not sell at a moment's notice. It could take days or months to sell a property, depending on the strength of your local market conditions.
Consider your financial goals. It is possible to make a lot of money. However, you need to determine how hard you are going to work to do it, and how long you intend to keep each property. With each investment unit, you'll need to take into account cash flow, appreciation, equity, and depreciation. Talk with your accountant about tax liabilities and benefits.
Consider cash flow. You'll need to have enough capital on hand to cover any short-term losses due to vacancies between tenants, repairs, property management, taxes, mortgage, etc.
Start small. Look into buying a single family home or a duplex. Leave large apartment buildings and commercial properties to the professionals.
Inquire at your local Chamber of Commerce about companies relocating into or out of the area. Company movement is one indicator of demand for rental and/or office space.
Find a property that will be in demand when you are ready to resell. Look for a moderately priced home on a quiet street with three or four bedrooms, two bathrooms, and a garage.
Research the property. The most common way first-time investors lose is by failing to investigate a property thoroughly. Look beyond the front door. Investigate the reputation of the school district, the crime rate, and plans for expanding a nearby highway or developing vacant land. Check out Ask a local real estate professional about the area, its history, and how fast (or slowly) properties are moving. Find out the tenant demand in that market.
Inspect the home you're considering for signs of water damage, such as stains on the ceiling and crinkling or gathering wallpaper; open and close every door and window; and check all electrical sockets by plugging in an appliance. Get an independent home inspection, roof inspection and termite inspection. Unexpected repair costs can eat away resale profit. Because even the best inspection can't always predict problems, try to set aside some of the rental income for unexpected repairs.
Spend time driving the streets of the community noting the condition of other properties. Are lawns maintained? Are roofs in good shape? Are homes kept up?
Be ready to make fixes quickly and respond to the renter's needs. If you're not prepared to be a hands-on landlord, consider hiring a property management firm.
Find a real estate professional who has experience in investment properties in your market. They can pass on valuable information about rental prices in your market and the sale prices of other rental properties in the community.
Remember, investing in a property is much different than living in one, and while emotion and attachment can be prime motivators when it comes to homes, it is return on investment that counts when investing in real estate.
About the Author
Jamie Madison is a former Realtor® who provides valuable advice for prospective homeowners. Get insider information when searching for a new home or applying online for mortgage loans. Claim your *FREE* Report - "99 Home-Buying Tips" at http://www.freehomebuyingresources.com
Learn all you can. Consider attending a seminar or talking with individuals who are experienced in real estate investing. Look for people in your area or search for investor information on your favorite search engine.
Before committing your cash, you should have a fundamental understanding of real estate. For example, be aware that, in general, investment properties are not liquid investments. Barring exceptional circumstances, real estate does not sell at a moment's notice. It could take days or months to sell a property, depending on the strength of your local market conditions.
Consider your financial goals. It is possible to make a lot of money. However, you need to determine how hard you are going to work to do it, and how long you intend to keep each property. With each investment unit, you'll need to take into account cash flow, appreciation, equity, and depreciation. Talk with your accountant about tax liabilities and benefits.
Consider cash flow. You'll need to have enough capital on hand to cover any short-term losses due to vacancies between tenants, repairs, property management, taxes, mortgage, etc.
Start small. Look into buying a single family home or a duplex. Leave large apartment buildings and commercial properties to the professionals.
Inquire at your local Chamber of Commerce about companies relocating into or out of the area. Company movement is one indicator of demand for rental and/or office space.
Find a property that will be in demand when you are ready to resell. Look for a moderately priced home on a quiet street with three or four bedrooms, two bathrooms, and a garage.
Research the property. The most common way first-time investors lose is by failing to investigate a property thoroughly. Look beyond the front door. Investigate the reputation of the school district, the crime rate, and plans for expanding a nearby highway or developing vacant land. Check out Ask a local real estate professional about the area, its history, and how fast (or slowly) properties are moving. Find out the tenant demand in that market.
Inspect the home you're considering for signs of water damage, such as stains on the ceiling and crinkling or gathering wallpaper; open and close every door and window; and check all electrical sockets by plugging in an appliance. Get an independent home inspection, roof inspection and termite inspection. Unexpected repair costs can eat away resale profit. Because even the best inspection can't always predict problems, try to set aside some of the rental income for unexpected repairs.
Spend time driving the streets of the community noting the condition of other properties. Are lawns maintained? Are roofs in good shape? Are homes kept up?
Be ready to make fixes quickly and respond to the renter's needs. If you're not prepared to be a hands-on landlord, consider hiring a property management firm.
Find a real estate professional who has experience in investment properties in your market. They can pass on valuable information about rental prices in your market and the sale prices of other rental properties in the community.
Remember, investing in a property is much different than living in one, and while emotion and attachment can be prime motivators when it comes to homes, it is return on investment that counts when investing in real estate.
About the Author
Jamie Madison is a former Realtor® who provides valuable advice for prospective homeowners. Get insider information when searching for a new home or applying online for mortgage loans. Claim your *FREE* Report - "99 Home-Buying Tips" at http://www.freehomebuyingresources.com
Easy ways to get Loans, Leases and Mortgages by ReliefLoans.com
There's an old saying "a bank won't lend you money if you really need it," and it's really almost completely true. Banks prefer to lend money or extend credit to people who already have lots of money, and carry the top credit cards. If you've got bread, no problem for you. But if you haven't, what do you do? Well, the main idea is to look as if you're loaded, to appear as if you have it, and that's often almost as good as having it.
Don't admit you're desperate, even if you are! Look like you couldn't care less whether they'll lend you the money, like you haven't got a care in the world. Dress really well, in your most impressive clothes, when you go to the bank. Allow plenty of time, so you don't have to rush in at the last minute, but can afford to saunter in, as if you're doing them a favor just considering borrowing money from their lousy institution. If it's a country bank, where you can be seen as approach the bank, drive up and park, be sure to arrive in a good car, squeaky-clean and highly-polished, even if you have to borrow your Aunt Martha's Cadillac just for the day.
Arrive primed with all the information the bank wants to know in order to approve a loan (lease or mortgage) for you. If you know that you've got some points in your history over the last five years that will hurt your application (such as not long enough in your present job, not long enough in your present residence, inadequate salary, etc.) try to figure out how you can improve those areas before you go to see the loan officer (to find out what questions may give you trouble, try and get a blank form ahead of time...even from another bank, if you don't want to let your bank know what you're considering).
If you've only been a few months on the job, but your company small and closely-knit, see if you can get the boss to agree to a little white lie, such as that you've been employed for two years. If you've only lived where you are now for a month, see if your mother's willing to have you list her address and telephone as the address where you've been living for the last three years.
If your salary's not high enough, but you get paid overtime quite regularly, see if your company bookkeeper will allow you to list your salary at what it averages out to, including the overtime.
If you've got an unexplained break in your job history, where you were actually out of work, don't list it that way--say you were working for yourself running a small business from your home (give it an impressive-sounding name, and list your best friend's name, address and phone number if they want to check with your employer at that time).
In short, to get credit it isn't so important to have financial stability as it is to appear to have it. Follow this rule, and getting credit should be easy.
Here are a few tips that may be of great help to you, it they fit your situation.
*If you're getting a lease, normally only a landlord is involved, and most landlords who want to rent our their property will go along with you, even if your credit rating's not so hot, providing you look O.K., speak in a decent and reasonable manner with them, and have at least the first month's rent and the security deposit.
*If a bank won't give you a loan, don't despair! Their standards for credit are very fussy. But commercial finance companies aren't so particular. They charge more interest, but they may come through with the loan.
*If the finance company won't help you, there's always the last resort, your friendly pawnbroker. He'll loan cash on watches, jewelry, furs, musical instruments, guns and everything else of value, Doesn't matter what your credit rating is!
*If you want a loan to start a new business, or increase the capitalization of an existing one, and the bank doesn't want to do it, try one of the companies that offer to lend venture capital for just these purposes. You can get a good list of a large number of these companies in this book: Venture Capital, The Source-book of Small Business Financing, edited by Leroy W. Sinclair, published by Technimetrics, Inc., 919 Third Avenue, New York, NY 10022.
Mortages-the ins and outs
Let's say you've decided it's time you got more space for your family. You don't have a lot of cash saved up, and you don't know your way around the housing market and complicated mortgage terms. What to do?
You're probably already friendly with a banker who knows you from your previous loans. Start with him. Ask him questions. Get his best guess about the amount of money you would have to put down as a down payment on a conventional mortgage. If you can't meet that, you may be willing to put up with some red tape and get an FHA or VA mortgage if you qualify-lower down payments, lower closing costs (which have to be all cash, and can run over $1,000!), and a longer time to pay the loan off (30 years, compared with 15 or 20, or sometimes 25 years, on a conventional mortgage). For more information on these Government-guaranteed mortgages, write to:
Further Reading
FHA Mortgages: Federal Housing Administration, Department of Housing and Urban Development, 451 7th Street S.W., Washington, D.C. 20410. VA Mortgages: Veterans Administration, Washington, D.C. 20420 (or your local VA Office).
When Faster is better
If you've just seen your dream house, and three other couples are also trying to buy it, you may want to get the fastest possible mortgage. But don't rush! You can make a bid for the house even if all you have is the down payment, for then you have generally 60 to 90 days before the closing date in which to come up with the rest. (If you can't get a mortgage anywhere, you still get your down payment back, so you have nothing to lose!)
Most people get their mortgages from banks, which we'll tell you about too, but don't overlook another, faster possibility-the real estate broker himself! Brokers often have friendly bankers or other mortgage lenders lined up just waiting for them to find buyers of the properties the brokers are selling. It's easier for a broker to close a sale if he can help you, the potential borrower, get the mortgage you need. So he'll help you.
Aside from broker-arranged mortgages, "conventional" mortgages, (i.e., not backed by the Government: are usually the fastest kind to get. These are available from both commercial and savings banks and from savings and loan associations. Try the savings and loan associations first-savings institutions usually require lower down payments than commercial banks, for example, 20% down at an S&L, compared with 25%-40% down at a commercial bank. The rule of thumb for the amount of money that banks will lend toward a mortgage is usually the capital amount that would result in monthly payments which will not exceed about 25-30% of your before-tax income. If you're trying to buy a house that's too expensive for you, the bank will know that, by using their rule of thumb for what they will think you can afford: one month's housing costs (principal, interest, real estate taxes, and insurance) should not be more than one week's salary (after you deduct any other debt payments from your weekly salary figure). Know what the figures look like before you walk in asking for a mortgage-if you look like you know what you're doing, the bankers will be much more cooperative, and maybe stretch their requirements, especially if they know you as a person who has been a responsible borrower of theirs before!
Further "points" about mortgages
Sellers sometimes help out potential housebuyers, even when the mortgage is financed by a bank. This can occur in two ways, first, if the mortgage lender (bank, S&L, other) adds "points" to the cost of the mortgage. Technically, these points are percentage points that the lender charges the seller, to make the interest rate higher. (Most States have usury laws, which make it illegal for mortgage and other interest rates to go above a certain level, like 81/2%. If interest rates in unregulated areas are higher, the bank is going to get that higher rate one way or another!). So the lender deducts, for example, five points or five percent from the amount he is really willing to lend to the borrower. Either the seller has to take a lower price for his property than he expected, or the buyer has to pay 5% more than he expected. Depending on how anxious the seller is to sell, and how many buyers there are for his property, he may take the lower price (pay the points himself) or split the cost with the person who wants to buy his house, or else insist that the buyer pay the points all by himself.
In numbers, points work like this: 5 points charged on a $20,000 mortgage means that the lender is not really going to lend $20,000, but only 95% or $19,000. Since the seller wants $20,000 (in addition to the down payment) as his price, the buyer must pay the extra $1,000, which is about the same as adding an extra 1/2% to the rate of interest he is paying.
More help from the seller!
Sometimes sellers are anxious to sell their houses, but find it difficult to do so-either the banks aren't making many mortgages at that time, or the seller's price is too high, or the neighborhood is "transitional" and potential buyers are reluctant to invest. So the seller may offer a mortgage of his own to a buyer! This can be either a first or a second mortgage, (the second is in addition to and subordinate to the first that you got from the bank) especially if the bank won't lend you what you need. If your dream house costs $40,000, with a $10,000 down payment, but the bank will only lend you $20,000 to put with your ready $5,000 cash, don't despair. The seller might be willing to give you a so-called "Purchase Money" mortgage (money with which to purchase his house) for the missing $15,000, to be paid back to him over the next ten years in monthly installments. (Sellers sometimes like to do this as a way of getting an annuity, or annual income, for themselves or to reduce the taxes they would have to pay if they received all the cash in one year.) Real estate brokers won't always tell you about this angle, so you may have to do the footwork yourself, following up the ads that list owner or principal, not broker. But it could pay off!
About the Author
For a wide range of personal finance articles, loans, credit cards, and debt reduction resources, visit http://www.ReliefLoans.com.
Don't admit you're desperate, even if you are! Look like you couldn't care less whether they'll lend you the money, like you haven't got a care in the world. Dress really well, in your most impressive clothes, when you go to the bank. Allow plenty of time, so you don't have to rush in at the last minute, but can afford to saunter in, as if you're doing them a favor just considering borrowing money from their lousy institution. If it's a country bank, where you can be seen as approach the bank, drive up and park, be sure to arrive in a good car, squeaky-clean and highly-polished, even if you have to borrow your Aunt Martha's Cadillac just for the day.
Arrive primed with all the information the bank wants to know in order to approve a loan (lease or mortgage) for you. If you know that you've got some points in your history over the last five years that will hurt your application (such as not long enough in your present job, not long enough in your present residence, inadequate salary, etc.) try to figure out how you can improve those areas before you go to see the loan officer (to find out what questions may give you trouble, try and get a blank form ahead of time...even from another bank, if you don't want to let your bank know what you're considering).
If you've only been a few months on the job, but your company small and closely-knit, see if you can get the boss to agree to a little white lie, such as that you've been employed for two years. If you've only lived where you are now for a month, see if your mother's willing to have you list her address and telephone as the address where you've been living for the last three years.
If your salary's not high enough, but you get paid overtime quite regularly, see if your company bookkeeper will allow you to list your salary at what it averages out to, including the overtime.
If you've got an unexplained break in your job history, where you were actually out of work, don't list it that way--say you were working for yourself running a small business from your home (give it an impressive-sounding name, and list your best friend's name, address and phone number if they want to check with your employer at that time).
In short, to get credit it isn't so important to have financial stability as it is to appear to have it. Follow this rule, and getting credit should be easy.
Here are a few tips that may be of great help to you, it they fit your situation.
*If you're getting a lease, normally only a landlord is involved, and most landlords who want to rent our their property will go along with you, even if your credit rating's not so hot, providing you look O.K., speak in a decent and reasonable manner with them, and have at least the first month's rent and the security deposit.
*If a bank won't give you a loan, don't despair! Their standards for credit are very fussy. But commercial finance companies aren't so particular. They charge more interest, but they may come through with the loan.
*If the finance company won't help you, there's always the last resort, your friendly pawnbroker. He'll loan cash on watches, jewelry, furs, musical instruments, guns and everything else of value, Doesn't matter what your credit rating is!
*If you want a loan to start a new business, or increase the capitalization of an existing one, and the bank doesn't want to do it, try one of the companies that offer to lend venture capital for just these purposes. You can get a good list of a large number of these companies in this book: Venture Capital, The Source-book of Small Business Financing, edited by Leroy W. Sinclair, published by Technimetrics, Inc., 919 Third Avenue, New York, NY 10022.
Mortages-the ins and outs
Let's say you've decided it's time you got more space for your family. You don't have a lot of cash saved up, and you don't know your way around the housing market and complicated mortgage terms. What to do?
You're probably already friendly with a banker who knows you from your previous loans. Start with him. Ask him questions. Get his best guess about the amount of money you would have to put down as a down payment on a conventional mortgage. If you can't meet that, you may be willing to put up with some red tape and get an FHA or VA mortgage if you qualify-lower down payments, lower closing costs (which have to be all cash, and can run over $1,000!), and a longer time to pay the loan off (30 years, compared with 15 or 20, or sometimes 25 years, on a conventional mortgage). For more information on these Government-guaranteed mortgages, write to:
Further Reading
FHA Mortgages: Federal Housing Administration, Department of Housing and Urban Development, 451 7th Street S.W., Washington, D.C. 20410. VA Mortgages: Veterans Administration, Washington, D.C. 20420 (or your local VA Office).
When Faster is better
If you've just seen your dream house, and three other couples are also trying to buy it, you may want to get the fastest possible mortgage. But don't rush! You can make a bid for the house even if all you have is the down payment, for then you have generally 60 to 90 days before the closing date in which to come up with the rest. (If you can't get a mortgage anywhere, you still get your down payment back, so you have nothing to lose!)
Most people get their mortgages from banks, which we'll tell you about too, but don't overlook another, faster possibility-the real estate broker himself! Brokers often have friendly bankers or other mortgage lenders lined up just waiting for them to find buyers of the properties the brokers are selling. It's easier for a broker to close a sale if he can help you, the potential borrower, get the mortgage you need. So he'll help you.
Aside from broker-arranged mortgages, "conventional" mortgages, (i.e., not backed by the Government: are usually the fastest kind to get. These are available from both commercial and savings banks and from savings and loan associations. Try the savings and loan associations first-savings institutions usually require lower down payments than commercial banks, for example, 20% down at an S&L, compared with 25%-40% down at a commercial bank. The rule of thumb for the amount of money that banks will lend toward a mortgage is usually the capital amount that would result in monthly payments which will not exceed about 25-30% of your before-tax income. If you're trying to buy a house that's too expensive for you, the bank will know that, by using their rule of thumb for what they will think you can afford: one month's housing costs (principal, interest, real estate taxes, and insurance) should not be more than one week's salary (after you deduct any other debt payments from your weekly salary figure). Know what the figures look like before you walk in asking for a mortgage-if you look like you know what you're doing, the bankers will be much more cooperative, and maybe stretch their requirements, especially if they know you as a person who has been a responsible borrower of theirs before!
Further "points" about mortgages
Sellers sometimes help out potential housebuyers, even when the mortgage is financed by a bank. This can occur in two ways, first, if the mortgage lender (bank, S&L, other) adds "points" to the cost of the mortgage. Technically, these points are percentage points that the lender charges the seller, to make the interest rate higher. (Most States have usury laws, which make it illegal for mortgage and other interest rates to go above a certain level, like 81/2%. If interest rates in unregulated areas are higher, the bank is going to get that higher rate one way or another!). So the lender deducts, for example, five points or five percent from the amount he is really willing to lend to the borrower. Either the seller has to take a lower price for his property than he expected, or the buyer has to pay 5% more than he expected. Depending on how anxious the seller is to sell, and how many buyers there are for his property, he may take the lower price (pay the points himself) or split the cost with the person who wants to buy his house, or else insist that the buyer pay the points all by himself.
In numbers, points work like this: 5 points charged on a $20,000 mortgage means that the lender is not really going to lend $20,000, but only 95% or $19,000. Since the seller wants $20,000 (in addition to the down payment) as his price, the buyer must pay the extra $1,000, which is about the same as adding an extra 1/2% to the rate of interest he is paying.
More help from the seller!
Sometimes sellers are anxious to sell their houses, but find it difficult to do so-either the banks aren't making many mortgages at that time, or the seller's price is too high, or the neighborhood is "transitional" and potential buyers are reluctant to invest. So the seller may offer a mortgage of his own to a buyer! This can be either a first or a second mortgage, (the second is in addition to and subordinate to the first that you got from the bank) especially if the bank won't lend you what you need. If your dream house costs $40,000, with a $10,000 down payment, but the bank will only lend you $20,000 to put with your ready $5,000 cash, don't despair. The seller might be willing to give you a so-called "Purchase Money" mortgage (money with which to purchase his house) for the missing $15,000, to be paid back to him over the next ten years in monthly installments. (Sellers sometimes like to do this as a way of getting an annuity, or annual income, for themselves or to reduce the taxes they would have to pay if they received all the cash in one year.) Real estate brokers won't always tell you about this angle, so you may have to do the footwork yourself, following up the ads that list owner or principal, not broker. But it could pay off!
About the Author
For a wide range of personal finance articles, loans, credit cards, and debt reduction resources, visit http://www.ReliefLoans.com.
Ten Steps to Avoid Mold Problems and Lawsuits in the Rental of Residential and Commercial Real Estate by Phillip Fry
Real estate residential and commercial landlords, tenants, and rental agents in the USA, Canada, and worldwide should take ten steps to avoid mold problems and lawsuits in the rental of real estate properties, according to Phillip Fry, Certified Mold Inspector and author of the books Mold Legal Guide and Mold Health Guide.
Living or working in rental units that contain elevated levels of airborne mold spores and/or substantial mold growth infestation can cause very severe (and sometimes permanent) health problems to the tenants.
Landlords have ethical and legal obligations to tenants to provide an environmentally safe, habitable living space (residential rentals) or workplace (office and commercial rentals). Those obligations go unmet when a rental unit is mold-infested.
Landlords may have potential and substantial legal liability to tenants for such compensatory damages as: expenses for medical mold diagnostic and treatment procedures, loss of earnings, mold damage to tenants' clothing and personal property, higher rent differential if the tenants need to move to a mold-safe place, moving expenses, any tenant-paid expenses (such as mold inspection, testing, and remediation of the rental unit and tenant possessions), and punitive damages (jury-awarded).
A Hayward, California, jury in 2004 awarded $4 million dollars in damages because of mold infestation and other substandard living conditions on behalf of 124 past and present tenants of an apartment building whose owner failed to do proper mold remediation and maintenance of the mold-infested apartments. Take these ten steps for the mutual well-being of both the landlord and the tenants---
1. A property owner or manager should not even offer the property for rent until after a thorough mold inspection and mold testing of the entire rental building or of individual rental units (prior to rental) determines that the property is mold-safe for tenants to live or work in.
2. Hire a Certified Mold Inspector (USA and Canada) for an annual property mold inspection and mold testing, or at least use a do-it-yourself mold inspection checklist and mold test kits for a thorough mold examination and evaluation of the rental building.
3. If there has been a plumbing line break or leak, roof or siding leaks, flooding, storm damage, or other water intrusion problems, the building should be thoroughly and promptly mold inspected, tested, and remediated as part of the water damage repairs and restoration.
4. If mold inspection and testing uncovers visible or hidden mold problems, the property owner or manager should immediately do safe and effective mold removal and remediation. Hire a Certified Mold Remediator (USA and Canada), or follow the recommended steps for safe and effective do-it-yourself mold remediation. Re-inspect and re-test ("clearance testing") the building after remediation.
5. The building owner or manager should avoid hiding or camouflaging mold problems by deceptions such as painting over mold growth; concealing mold growth behind stored items, furniture, furnishings, and decorations; and masking the distinctive smell of mold growth with air fresheners and deodorizers. The smell of mold is from the digestive gases of the mold eating the building materials.
6. A prospective tenant should inspect and mold test the proposed rental unit (prior to the signing of a rental lease) with a Certified Mold Inspector, or by using a do-it-yourself mold inspection checklist, his sense of smell, a good flashlight, and mold test kits to determine the mold status of the rental unit.
7. In doing such inspection and testing, the mold inspector (or the tenant himself) should do an all-around physical examination of the building for both visible and hidden signs of water damage and mold growth. In addition, the inspector or the tenant should mold test the air and visible mold growths in all rooms, the basement, crawl space, attic, garage, plus the outward airflow from each heating/cooling duct register.
8. Mold testing requires mold laboratory analysis and mold species identification of the collected mold and air samples. In building locations with previous floods or leaks, the examination should also include fiber optics inspection to look inside water-penetrated ceilings, walls, and floors for hidden mold infestations.
9. The landlord or rental manager should disclose in writing to all prospective tenants any previous or present building water and mold problems, and what the owner or manager has done, if anything, to correct such problems. Attach these water damage and mold disclosures to the rental lease agreement so that the tenant acknowledges receipt thereof.
10. In consideration of, and based upon, the landlord's accurate and complete mold disclosure, and the tenant's full and unrestricted opportunity to inspect and test the rental unit thoroughly and carefully prior to signing the lease, the lease agreement may include a clause that releases the landlord, rental manager, and the rental real estate agent/broker from all mold liability to the tenant.
For more mold inspection, mold testing, and mold remediation information, please visit:
http://www.certifiedmoldinspectors.com http://www.moldinspection.com http://www.moldinspector.com/mold_removal.htm http://www.bleach-mold-myth.com
About the Author
Phillip Fry is a Certified Mold Inspector, Certified Mold Remediator, and author of the books Mold Legal Guide and Mold Health Guide
Living or working in rental units that contain elevated levels of airborne mold spores and/or substantial mold growth infestation can cause very severe (and sometimes permanent) health problems to the tenants.
Landlords have ethical and legal obligations to tenants to provide an environmentally safe, habitable living space (residential rentals) or workplace (office and commercial rentals). Those obligations go unmet when a rental unit is mold-infested.
Landlords may have potential and substantial legal liability to tenants for such compensatory damages as: expenses for medical mold diagnostic and treatment procedures, loss of earnings, mold damage to tenants' clothing and personal property, higher rent differential if the tenants need to move to a mold-safe place, moving expenses, any tenant-paid expenses (such as mold inspection, testing, and remediation of the rental unit and tenant possessions), and punitive damages (jury-awarded).
A Hayward, California, jury in 2004 awarded $4 million dollars in damages because of mold infestation and other substandard living conditions on behalf of 124 past and present tenants of an apartment building whose owner failed to do proper mold remediation and maintenance of the mold-infested apartments. Take these ten steps for the mutual well-being of both the landlord and the tenants---
1. A property owner or manager should not even offer the property for rent until after a thorough mold inspection and mold testing of the entire rental building or of individual rental units (prior to rental) determines that the property is mold-safe for tenants to live or work in.
2. Hire a Certified Mold Inspector (USA and Canada) for an annual property mold inspection and mold testing, or at least use a do-it-yourself mold inspection checklist and mold test kits for a thorough mold examination and evaluation of the rental building.
3. If there has been a plumbing line break or leak, roof or siding leaks, flooding, storm damage, or other water intrusion problems, the building should be thoroughly and promptly mold inspected, tested, and remediated as part of the water damage repairs and restoration.
4. If mold inspection and testing uncovers visible or hidden mold problems, the property owner or manager should immediately do safe and effective mold removal and remediation. Hire a Certified Mold Remediator (USA and Canada), or follow the recommended steps for safe and effective do-it-yourself mold remediation. Re-inspect and re-test ("clearance testing") the building after remediation.
5. The building owner or manager should avoid hiding or camouflaging mold problems by deceptions such as painting over mold growth; concealing mold growth behind stored items, furniture, furnishings, and decorations; and masking the distinctive smell of mold growth with air fresheners and deodorizers. The smell of mold is from the digestive gases of the mold eating the building materials.
6. A prospective tenant should inspect and mold test the proposed rental unit (prior to the signing of a rental lease) with a Certified Mold Inspector, or by using a do-it-yourself mold inspection checklist, his sense of smell, a good flashlight, and mold test kits to determine the mold status of the rental unit.
7. In doing such inspection and testing, the mold inspector (or the tenant himself) should do an all-around physical examination of the building for both visible and hidden signs of water damage and mold growth. In addition, the inspector or the tenant should mold test the air and visible mold growths in all rooms, the basement, crawl space, attic, garage, plus the outward airflow from each heating/cooling duct register.
8. Mold testing requires mold laboratory analysis and mold species identification of the collected mold and air samples. In building locations with previous floods or leaks, the examination should also include fiber optics inspection to look inside water-penetrated ceilings, walls, and floors for hidden mold infestations.
9. The landlord or rental manager should disclose in writing to all prospective tenants any previous or present building water and mold problems, and what the owner or manager has done, if anything, to correct such problems. Attach these water damage and mold disclosures to the rental lease agreement so that the tenant acknowledges receipt thereof.
10. In consideration of, and based upon, the landlord's accurate and complete mold disclosure, and the tenant's full and unrestricted opportunity to inspect and test the rental unit thoroughly and carefully prior to signing the lease, the lease agreement may include a clause that releases the landlord, rental manager, and the rental real estate agent/broker from all mold liability to the tenant.
For more mold inspection, mold testing, and mold remediation information, please visit:
http://www.certifiedmoldinspectors.com http://www.moldinspection.com http://www.moldinspector.com/mold_removal.htm http://www.bleach-mold-myth.com
About the Author
Phillip Fry is a Certified Mold Inspector, Certified Mold Remediator, and author of the books Mold Legal Guide and Mold Health Guide
Filing a Case Against Canine Bite Injuries by Paul Hood
Man's best friend can be man's worst enemy. Statistics show dog attacks have accounted for more than 300 dog-bite related deaths in the United States from the period of 1979 through 1996. Most of these victims were children. And someone seeks medical attention every forty seconds because of this bites.
There are 800,000 approximate bites encountered every year in the US that needs medical treatment and again most of the victims are children. Almost $165 million is spent treating dog bites and 70% of dog bites occur on the owner's property.
In most cases like this, the dog's owner is required to pay for the damages caused by his pet's attack. However, there may be times when the dog's "keeper" may be held liable at the time of the attack. The landlord too may have culpability for an attack of his tenant's dog in limited circumstances.
The medical expenses that will be incurred due to dog bites is very high particularly with regards to scarring injuries. Scars can be a serious, life-long result of a dog bite. Children, because of their size, are particularly susceptible to bites around the head and face. Scarring injuries not only cause physical problems, but can also cause long term emotional trauma, requiring a significant amount of psychological counseling.
The liabilities that are to be shouldered by owner (or in some cases, the keeper or landlord) due to the animal's bite will include all past and future medical expenses. All past lost wages as well as future loss of earning capacity. Also, past and future pain and mental suffering of the victim will have to be compensated by the animal's owner. Property damages and damages for all scarring are also included.
Dog bites are a common form of injury which can have serious outcomes that include permanent disfigurement and psychological trauma. It may even result to death. Precautions need to be undertaken since even the gentlest of dogs are known to bite without warning.
A dog bite victim may incur many different kinds of damages and losses, from medical bills and emotional damage, to loss of the opportunity to earn income in the future because of disfigurement. A victim may be entitled to recover these losses from another person and that person's insurance company, provided that the victim presents the necessary proof, first to the insurance company and then possibly in a court of law.
About the Author
For additional legal information and inquiries about the article log on to http://www.attorneyservicesetc.com
There are 800,000 approximate bites encountered every year in the US that needs medical treatment and again most of the victims are children. Almost $165 million is spent treating dog bites and 70% of dog bites occur on the owner's property.
In most cases like this, the dog's owner is required to pay for the damages caused by his pet's attack. However, there may be times when the dog's "keeper" may be held liable at the time of the attack. The landlord too may have culpability for an attack of his tenant's dog in limited circumstances.
The medical expenses that will be incurred due to dog bites is very high particularly with regards to scarring injuries. Scars can be a serious, life-long result of a dog bite. Children, because of their size, are particularly susceptible to bites around the head and face. Scarring injuries not only cause physical problems, but can also cause long term emotional trauma, requiring a significant amount of psychological counseling.
The liabilities that are to be shouldered by owner (or in some cases, the keeper or landlord) due to the animal's bite will include all past and future medical expenses. All past lost wages as well as future loss of earning capacity. Also, past and future pain and mental suffering of the victim will have to be compensated by the animal's owner. Property damages and damages for all scarring are also included.
Dog bites are a common form of injury which can have serious outcomes that include permanent disfigurement and psychological trauma. It may even result to death. Precautions need to be undertaken since even the gentlest of dogs are known to bite without warning.
A dog bite victim may incur many different kinds of damages and losses, from medical bills and emotional damage, to loss of the opportunity to earn income in the future because of disfigurement. A victim may be entitled to recover these losses from another person and that person's insurance company, provided that the victim presents the necessary proof, first to the insurance company and then possibly in a court of law.
About the Author
For additional legal information and inquiries about the article log on to http://www.attorneyservicesetc.com
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