Victor's Blog

Is real estate investing coming back?

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Mon, 05 May 2008 00:59:42 -0700

I have been on the lookout for some new real estate investments during the last few months. Most of the time, I have been met with unrealistic prices and expectations from the sellers. They still dream of the good ol days of 2005, where they could pick a number out of the sky and watch multiple bids come in. But now, things seem to be slowly coming back to earth. Whether it be a short-sale, or more favorably a seller that just needs to get out of a property, prices are starting to get to the levels where investors can consider coming back in and establishing sound rental properties. Based on the dynamics of the still depreciating market, rehabbing may be a little ways off, but rentals are starting to look attractive. I looked at a few houses this weekend in the D.C. metro area and after running the numbers, there are a couple that will receive offers. Of course, they will not be at asking price. I still believe that offers should be at about 80% of asking price, depending on the property, and especially as an investor. In a declining market, you do not want to be caught holding someone else's bag at an inflated price. I have a few friends that bought in early 2007, thinking that they were getting a "deal", only to see prices sharply fall after the so-called subprime meltdown around August 2007. Although, I believe the brunt of that meltdown is behind us, it is very important to still stick to the numbers and not compare anything to the levels of 2005 and 2006. This market is starting to look encouraging for the investor again. Just make sure the numbers work and you do not buy on emotion.

2008 Spring Real Estate Market

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Thu, 13 Mar 2008 06:01:12 -0700

For the past couple of Spring seasons, the real estate market has been in a slow, steady decline. Prices stopped rising at the breakneck pace that we have become accustomed to during 2001 - 2005. Based on that frame of reference, any reversal in appreciation started to look like the deal.But something seems different about the coming Spring of 2008. I am beginning to see price reductions unlike what has occurred in the past 2 years. It seems like the true reality of the real estate market is finally starting to sink in. I have witnessed price reductions of 25% to 50% of previous purchase prices, which was usually during 2005 - 2006. You may be wondering how a homeowner is able to take such a hit to unload a home. Well, it is not the homeowner directly taking the hit. These steep discounts have been due to what are called short sales. A short sale is when a lender agrees to sell a home at less than the mortgage balance, just to write-off the loss and avoid a costly foreclosure. The homeowner avoids going into foreclosure, but may have other tax implications connected to the sale of the home. These short sales are becoming more common as foreclosures rise and are offering significant discounts for buyers. Anyone in the market to buy a home should consider concentrating on these short sales in order to get the best value for their money. No one truly knows how low home prices will fall, but they are definitely hitting very attractive levels for the savvy buyer. [Your browser does not support frames, please enable frames to view this widget]

Jumbo Loan Rates Set to Fall

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Sat, 16 Feb 2008 04:49:58 -0800

Congress has just passed their economic stimulus plan that is supposed to put money in everyone's pocket so they can go out and boost the economy. This is the highlight of the plan, but it also covers another important provision that will be good news for homeowners and potential homebuyers. The conforming loan limit that is insured by Fannie Mae and Freddie Mac is $417,000. Fannie and Freddie are the government companies that buy and package mortgage backed securities from banks. Any loan amount over $417,000 is considered a jumbo loan and is not insured by these entities. Ever since the subprime fallout, these jumbo loans have become expensive and average about 1.25 percentage points higher than conforming loans. Wall Street is very reluctant to purchase these securities since Fannie Mae or Freddie Mac does not back them. The stimulus plan will instate a temporary increase in conforming loan limits to about $729,750, depending on your location. This means that these higher balance loans can now enjoy the same low rates as conforming loan amounts. But this increase will only last till the end of 2008, so interested parties must act quickly. In my opinion, this is the best part of the stimulus package. It will allow struggling homeowners to save from $200 - $400 every month by refinancing their high balance loans. Let's hope that Congress considers making this increase in the conforming loan amount a permanent fixture. [Your browser does not support frames, please enable frames to view this widget] www.HouseWealthy.comBuild Wealth Through Real Estate

Killer Widgets for Web Marketing

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Sat, 02 Feb 2008 09:48:59 -0800

I have developed a website for my real estate business and have seen some benefit from its use. I recently started implementing internet widgets to deliver real estate information quickly to users. Widgets can be embedded in blogs and webpages and usually offer some kind of useful function. What does the Active Rain community think would be some great widgets ideas that can drastically increase real estate professional's internet marketing? I have included a real estate widget that I have developed below: If you would like to add this widget to your activerain page 1. Go to my www.housewealthy.com and copy the javascript (for the Google format on the right) or html (for the format below). 2. Go to the My Settings section of your activerain page and paste the code into your Blog Description. The widget will now show up on your blog page, just like how it appears on my page to the right. 3.This widget is also now available on Facebook. [Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estate www.HouseWealthy.com

25% drop in real estate prices inevitable?

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Sat, 02 Feb 2008 04:00:29 -0800

I recently saw an interesting article that touched on the possibility that we may need ANOTHER 25% drop in home prices before the real estate market gets back to normal. It cited that every market (real estate, stock, etc) has corrections that usually put it back on its normal pace of appreciation. We saw this in the stock market after the dot-com bubble burst and are seeing it in the real estate market now. The article suggests that for us to get back to the year 2000 real estate prices plus the addition of normal appreciation, a 25% drop is needed.I have included the link to the article below. I would love to read everyone's thoughts on the points touched upon in this article. I think some of them may be valid, but it would be another devastating blow to the industry if it comes to fruition. The foreclosure rate will be absolutely astronomical, bank losses will skyrocket further, and the world economy would really be in for it. http://www.businessweek.com/magazine/content/08_06/b4070040767516.htm?chan=top+news_top+news+index_top+story [Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real EstateVictor Emeli

2008 Refinance Boom May Be Looming

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Fri, 01 Feb 2008 15:56:29 -0800

With the slowing economy, talks of recession, the tick up in unemployment, and the volatile stock market, the 30 year fixed rate mortgage has slowly continued to drop. A couple of weeks ago, the Feds finally took steps to combat the signs of recession by cutting the Fed rate by a combined 125 basis points. Usually the Fed funds rate has little to do with fixed rate mortgages, but it usually does not take long for fixed rates to follow the trend. Long-term mortgage rates are already low and may go lower. Usually when the economy faces a possible recession, these rates drop. We all remember what happened to rates from 2003 - 2005, after the 2001- 2003 recession. So, if history is any indication, there is a good possibility that rates can fall further. This is good news for potential buyers, but even better news for current homeowners with decent credit that want to refinance out of ARMs or higher rate fixed mortgages. Rates have not been this low in a long time, and it may be worth investigating whether you can benefit from this low rate environment. [Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estate Victor Emeli

Home Staging Helping Today's Home Sellers

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Sun, 06 Jan 2008 13:42:58 -0800

In order to sell a home in this market you must have a property that is in good condition and well priced. But one area that is often overlooked is presentation.Professional home stagers have been receiving more business and have helped increase the likeliness of a home selling. Prospective buyers want to be able to picture themselves in a home. A house with too many personal items or unique features will make it hard for a buyer to see themselves in the home. In order to cater to the variety of potential buyers, you should make your home as neutral as possible. This would include neutral furniture, paint, artwork, etc. You don't want to offend any prospective buyers.[Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estate

2008 Real Estate Outlook

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Sun, 06 Jan 2008 13:38:29 -0800

Another new year has come and we are all looking forward to what it may have in store for us. This is true if you believe in New Year's resolutions or not. This may be especially true for all of the potential homebuyers out there. As most waited out the market shifts of 2007, 2008 may be the most favorable time than ever to dive into the market. There are currently some really nice deals out there, which has been absent from the market for a long time. Current home sellers are a bit anxious and the usual slowdown in sales that the winter months bring will accentuate this fact. As always, no matter what the sale price may be, it is always best to negotiate within reason. This goes for owner-occupants as well as investors. You must also be looking to hold the property for at least the next 4 - 5 years. This is definitely not the time to consider rehab projects if you are an investor. Good, solid long-term rentals would be a better strategy. Normally, real estate cycles last for about 5 years. This would theoretically put us somewhere near the bottom of this current cycle. So 2008 may be the year for the homebuyer. As for lending, FHA is back in favor again and should be considered especially if you are a first-time buyer. Their website www.fha.gov lists the loan limits for different areas around the country. If 2008 brings better loan programs that will allow more buyers to afford homes, we may see better sales a little sooner. The subprime mortgage crunch was one of the major factors that contributed to the drop in home sales for most of 2007.[Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estate

Simple Tips for Controlling Mortgage Cashflow

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Sun, 06 Jan 2008 13:36:00 -0800

Since we are in the middle of rising mortgage rates and potential foreclosures, I want to suggest a few ways for folks having cash problems to avoid potential disaster. The number one rule is not to close your eyes and ignore the problem that you are having. It is best to read the signs and address problems that you see coming down the road. The biggest mistake would be to allow yourself to make late mortgage payments. That will virtual eliminate about 90% of the solutions you would otherwise be eligible to receive. If you have an adjustable rate mortgage that you know will reset soon, pull out the paperwork and find out what new rate is due to adjust. Refinance ahead of time, because mortgage rates are pretty low right now. Also, if you have consumer debt (e.g. car loans, credit card balances, etc) that has a high interest rate (8% - 20%), you can consider paying off those loans with a cashout refinance. This only works if you have enough equity in your home. This strategy will give you a fixed mortgage rate and reduce your total monthly obligations. The Federal Housing Administration (FHA) loan is also making a comeback. While most lenders require that you keep 20% equity in your home on a cash-out refinance, FHA will allow you to keep just 5% equity in your home. This results in a much larger cash-out refinance. With the squeeze in credit availability and the rise in consumer monthly payments, these suggestions should help you to manage your monthly cash flow.[Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estate

Basics of a Reverse Mortgage

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Sun, 06 Jan 2008 13:34:28 -0800

Reverse mortgages are starting to grow in popularity. In general the borrower must be over 62 years of age. This type of mortgage allows the borrower to receive monthly cash payments by tapping into their home's equity every month. The mortgage interest that the borrower will usually pay is added to the balance of the reverse mortgage. So the debt against the property increases each month. Most reverse mortgage programs do not have income qualifications. A retiree with no income can qualify. The interest varies and can fall between 6 percent and 9 percent. The closing costs for a reverse mortgage are generally higher than with a regular mortgage refinance $15,00 - $20,000). The lender may also may keep the appreciation accrued in the home once the borrower passes, even if this appreciation is more than necessary to cover the remaining mortgage balance.In my opinion, reverse mortgages are only good for individuals that do not have an income. If a retiree has some sort of income, a home equity line of credit (HELOC) may be a better choice. They have much lower closing costs and allow you to keep all of the remaining equity in your home, which allows you to pass it to your heirs.[Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estate

Buyer's leverage increases

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Sun, 06 Jan 2008 13:32:56 -0800

We have been in a buyer's market for more than a year now. Since the buyer's market began, buyers have gained leverage over sellers in negotiations. Over the past few months that leverage has grown even more substantial because sales have continued to decline while inventory has risen. The problem now is that as inventory rises, sellers have put a lot of "junk" houses on the market. These houses that are in poor shape are usually listed at or close to the price of homes that are updated. Many of these "junk" homes are unrenovated investor properties or foreclosures. Since most homebuyers look at the cheapest homes in a neighborhood first, they are forcing the owners of updated homes to list their properties at or close to the price of the homes in poor shape. This again plays to the advantage of buyers that are actively looking. In my opinion, this winter holiday season will be the most optimal time to buy this year. This should continue until about February of 2008. We may then see a slight bump in home sales as the spring season nears. For those in the market to acquire a home at a discount, the slow holiday season is the best time to make a deal.[Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estate

Sellers must disclose defects in "as-is" sale

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Sun, 06 Jan 2008 13:23:52 -0800

In this currrent market, there are a lot of properties listed as "as-is" sales. Many buyers are not clear on the meaning of "as-is" and what it may imply. Selling "as-is" does not protect a seller who lied about the condition of the property or who concealed huge faults that the buyer could not see. They must still disclose "known" defects in the property, they are just not obligated to make any repairs before the sale is finalized. When buyers take property in as-is condition, they acknowledge that they realize what repairs are needed and have offered below market pricing. But they have not agreed to accepting hidden defects in the condition of the property.[Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estate

Refi your Subprime ARM into an FHA Loan

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Sun, 06 Jan 2008 13:20:19 -0800

Last week, President Bush introduced a plan called the FHA Secure Initiative. This plan will enable homeowners to refinance various types of ARMs that have recently reset, and/or are delinquent into FHA loans. A Federal Housing Authority (FHA) mortgage is a government insured loan. Since it is backed by the government, the rates and terms are usually much more favorable than a regular conventional or subprime mortgage. These loan also have FIXED rate 30 year terms. This is important news for homeowners out there that have ARMs that are due to reset or are currently struggling to pay the higher interest rate on ARMs that have already reset.Here are the important points of the program:- The mortgage being refinanced must be a non-FHA ARM that has reset.- The mortgage payment history, during the 6 months PRIOR to the reset must show no late payments.- Late payments made after the loan has reset ARE acceptable.- In many cases homeowners may wrap late mortgage payments into the new loan.- There must be sufficient equity for FHA to insure the mortgages that include missing mortgage payments. This temporary initiative will expired on December 31st, 2008. Please contact me for more details if you feel you can benefit from this exciting initiative.[Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estate

Possible ARM Swapping????

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Sat, 21 Apr 2007 09:38:20 -0700

I recently read an article on Money Magazine's website that addressed the possibility of the government and lenders allowing some borrowers with ARMs to swap them out for fixed rate mortgages. Speakers at a Congressional hearing of the House Financial Services Committe called for restructuring ARM loans to help solve the subprime crisis. A Congresswoman from Ohio (which apparently leads the nation in the foreclosure rate) recommended the following three-prong approach:- Establish a rescue fund for short-term problems casued by illness, layoffs, or other one-time events.- Create a bond fund to pay for switching borrowers out of unaffordable ARMs.- Refinance loans for victims of predatory lending.These measures also calls for lenders to agree to modify the terms of existing loans to prevent the higher costs of foreclosing on properties. This suggestion may work because it costs more to foreclose on a property than to accept lower returns on existing investments. According to the article 10 to 15 percent of the value of a property may be eaten up by the foreclosure process.If it could be pulled off, this may be very helpful for the housing market as a whole as well as the economy.Here is the link to the original article Subprime solution: Swap ARMs for fixed-rates. [Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estatewww.HouseWealthy.com

Beware of the "Trigger List"

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Tue, 17 Apr 2007 14:51:00 -0700

Have you ever applied for a mortgage and all of a sudden get a swarm of calls from other lenders the next day promising to give you a better deal? This phenomenom occurs because the credit bureaus (Equifax, Experian, and Transunion) sell your information for a pretty penny and other lenders can buy this information on a daily basis. With the cooling of the hot real estate market, many lenders are investing heavily in this type of lead generation for business. It is very attractive to lenders because for the most part, all of the leads are currently in the market for a mortgage. The "lead" is generated when your current lender pulls your credit. This is one of the most sought after lead and the credit bureaus charge a premium for them. As a consumer, you are open to shop around as much as possible. Just be carefully of the "bait and switch". The competing lender can dangle falsely discounted rates and terms just to gain your business. After weeks of going through the process, they can change their tune and can either leave you with a higher cost loan or no loan at all. If you would like to opt out of any potential prescreened credit solicitations, which includes mortgages, credit cards, etc .... you can visit www.optoutprescreen.com. According to the Federal Trade Commission (FTC) your request should be processed within five days. However, it may take over 2 months for calls to stop completely. In addition, you can also register your phone number on the National Do Not Call Registry www.donotcall.gov. [Your browser does not support frames, please enable frames to view this widget] www.HouseWealthy.comBuild Wealth Through Real Estate

MyCommunity Mortgage: A Subprime Alternative

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Wed, 11 Apr 2007 07:40:01 -0700

MyCommunity Mortgages: which are sponsored by Fannie Mae and is designed to assist low and moderate income families, public service employees, and disabled people to realize their dream of owning an affordable home. This program allows for 100% financing and little to no money required into the transaction for those who qualify. I can't stress enough how great this Fannie Mae sponsored program is. It allows certain borrowers to qualify for a home with no money down and less than perfect credit. It is a great alternative to some of the subprime loans that are now disappearing from the marketplace. The best feature of this loan program is that it offers a low interest rate that is fixed over 30 or 40 years, not just 2 - 3 years like the average subprime mortgage. Most subprime borrowers aren't getting in trouble because of their initial interest rate. Most of the trouble comes when these short-term ARMs reset and payments skyrocket by $300-$500 per month. A sensible borrower can combine this loan with some of the techniques that I cover in my How To Afford a Home with Little Money blog and should be able to comfortably afford the home of their dreams. [Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estatewww.HouseWealthy.com

Subprime Woes Affect Us All

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Mon, 09 Apr 2007 07:19:18 -0700

We all know that the woes of the subprime market has now made it difficult for a good number of the population to obtain mortgages. Most of the 100%, no money down, no credit needed financing are now disappearing. Those of us with good credit may be thinking that "this won't affect me". Or maybe you are laughing at the people that took these loans and are now suffering the consequences of 2 year ARMs that are increasing by over 3% in interest rate. To make matters worse, these homeowners can't even refinance their homes because similar subprime loans are no longer available. In addition, their credit is not good enough to go "prime", so for many the only option is foreclosure. Well, the demise of the subprime market has some ripple effects on the rest of the market. For one, the tightening of the subprime standards has also resulted in tightening of prime standards. So even if you have a 720 credit score, most lenders are not offering 100% financing in any form. They are also padding interest rates to offer extra insurance in the event of a loan defaulting. The subprime market offered high margins and now with that profit going away the prime loans will begin to become more expensive.Even if you already have a 30-year fixed principal and interest mortgage your home value may be affected. Your neighborhood may contain a few homeowners that have subprime mortgages and may be facing foreclosure. Each foreclosure sale in a neighborhood inherently bring the total property value of the neighborhood down. Hopefully the casualties of the subprime meltdown will not be too bad. I guess the silver lining is that the buyers able to qualify for home mortgages will be in a much better position to negotiate prices.[Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estatewww.HouseWealthy.com

Professional Stagers Help Home Sales

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Mon, 09 Apr 2007 07:12:24 -0700

We have all seen the increase in business for the home inspector in this buyer's real estate market. The professional home stager is another real estate business that is seeing a resurgence in activity. This Spring will see an increase in homes on the market and each seller needs to get every competitive advantage available to them. The setup, look, feel, furniture, smell, and lighting of your home could have a more positive effect on a potential transaction than a lower sales price. Homes that are cluttered with children's toys and/or pet odors or hair may be hurting their chances of getting an interested buyer. With so much inventory on the market, it is easy for a buyer to move on to the next property. Sellers may consider hiring an accredited professional stager (ASP) who can help them direct a potential buyer's attention to the highlights of the home. For an average cost of less than $2,000, a home stager will make sure items that could be seen as objectionable to potential home buyers are noted and addressed. They are also able to stage your home based on your target audience. A large home with many bedrooms and bathroom should be staged for a buyer with a family. A smaller home or condo should be staged to appeal to a young professional or empty nesters. Homeowners with young children should try to neutralize the smell of diapers by utilizing effective deodorizers, don't just mask the smells, deodorize them. In addition to using a professional stager, hire a professional cleaning service to thoroughly clean the home to its optimal potential. Professional cleaning services have also seen a huge rise in business. In this new buyer's market the first impression will have a lasting effect and if it isn't good, it may take another few months to get another interested buyer.[Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estatewww.HouseWealthy.com

Seek an "Educational" Mortgage Broker

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Sun, 01 Apr 2007 13:06:17 -0700

There has been plenty of news on the demise of the subprime market and how certain unscrupulous loan officers/lenders preyed on the following individuals:1. Elderly2. African-American3. Low or Fixed Income4. WomenIn my opinion, these loan officers/lenders are a disgrace to the business and make it harder for the honest ones that truly have a passion for real estate and helping others. The best piece of advice that I can offer a consumer is too seek a mortgage broker, loan officer, or lender that is dedicated to educating you on the product that they are selling you. If it seems like they are too eager to close the deal quickly or have a sudden sense of urgency, then they may not have your best interest at heart. A good mortgage broker will take the time to thoroughly explain anything that you may not understand. They should also offer a solid contingency plan if you acquire a short-term ARM or other so-called "exotic" mortgage product. A mortgage can be key to systematically building your wealth if used properly, otherwise it can be an equity-stripping, wealth-reducing nightmare. I think this video from CNN sums up a lot of what has been going on during the last couple of years. Click here to view the video.[Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estatewww.HouseWealthy.com

How Much Did The Owner Pay?

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Mon, 26 Mar 2007 02:43:55 -0700

With spring upon us, there will be an increase real estate market activity. Sellers will definitely be selling ..... and hopefully buyers will be buying :). But what are the best strategies for getting the best deal out there. Well today, I am on the buyer's side ... sorry sellers ;). One technique that I use when negotiating an offer price is to find out what the current owner paid for their property. The days of $100,000 appreciation per year are gone, so owners are now more willing to negotiate. But what if the owner paid $500,000 for that great property in 2006 and now is selling it for $525,000 and it is really worth $475,000? Chances are he or she will not have much if any negotiation room. If a buyer offers less than that .... lets say $500,000, he or she may be wasting their time. But what if the owner paid $115,000 for that property in 1997 and now is selling it for $500,000 and it has been on the market for 6 months? In this instance, an offer of $425,000 has a greater chance of going over because either way the owner will make a lot of money at closing. This technique can improve your chances of having better success in getting a great deal in this new buyer's market. The best places to find out how much the current owner paid is either through your realtor or through online county records. [Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estatewww.HouseWealthy.com

Use The Home Inspection To Your Advantage

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Thu, 22 Mar 2007 02:36:33 -0700

While many real estate professionals have experienced a slowing in business, there is one group that has seen an upturn .... the home inspector. While we had the torrid pace of home sales during the 2000 - 2005 real estate boom, the home inspector was relatively left out in the cold. If you presented a contract with a home inspection in many markets, the seller would chuckle as he or she dropped your contract in the trash. Even buyers' agents would urged their clients not to attach home inspections to their contracts. Most of a home inspectors business was based on "information-only" purposes inspections. Fast forward a couple of years and now the home inspector is back. The new market has made the home inspection customary and they are becoming an excellent negotiating tool for buyers. Nowadays, buyers are using the home inspection to gain leverage. It is used to either reduce the seller's price after the contract is ratified or to get more seller concessions. For about $400 - $500, you can save up to an additional few thousand dollars. Sellers are more likely to give cash concessions as oppose to fixing the problem themselves, because they usually are just ready to get out of the home. In addition, most sellers are more likely to negotiate once a contract is ratified and they have already spent a week or two committing to your offer. As a buyer take a thorough look at the home inspector that you will use. Don't always just rely on the inspector recommended to you by your realtor. Get other references and referrals. An inspector that is a member of the National Association of Home Inspectors (www.nahi.org) or the American Society of Home Inspectors (www.ashi.org) is always a good option. Try to nail down an inspector before you have a contract accepted, it will make the process a little less hectic. Also, it is a good idea to attend the inspection to make sure of the work and learn a thing or two about your potential new home.[Your browser does not support frames, please enable frames to view this widget]

Importance of Rental Property Depreciation

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Tue, 20 Mar 2007 16:50:15 -0700

A common mistake among real estate investors (I am guilty of this too, when I first started investing) is that they often do not deduct depreciation on their investment properties when doing their taxes. The government allows you to take a depreciation deduction each year on your investment properties. There is a schedule that tells you how much your property has "gone down" in value each year. The idea is that property gradually degrades over time, so its value also decreases over time. In general this is true of furniture, television, vehicles, etc. But the same cannot be said for real estate. Real estate has a "perceived" value that usually gradually increases over time. But good old Uncle Sam has provided this nice perk for real estate investors. Even though we know property that is bought right and maintained can drastically increase in value, the government allows us to take a yearly tax deduction for a reduction in the property value. There are tables provided by the IRS that calculate how much the depreciation will be for your property. There is a specific procedure that must be followed to properly depreciate your real estate as well as the personal property within the property. You will need to consult your tax professional for those details :). But back to the mistake most investors make .... the problem with not claiming your depreciation every year is that when you sell the property, you must recapture that past depreciation, whether you took it or not. The IRS will assume that you took it anyway, so you will end up paying taxes on the recaptured depreciation even if there is nothing to recapture. If you have missed this important step, you can catch up by filing a Form 3115 and attaching a statement to accelerate your past depreciation.In general, depreciation is pretty much like reaping gains from the investment property when you own it and then paying it back after you sell the property. Depreciation is useful for getting a "net" cashflow from investment properties while you own them through increased tax breaks. Once again consult your tax professional to sort out the details and find the solution that is best for you.[Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estatewww.HouseWealthy.com

Invest in Real Estate Through Promissory Notes

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Tue, 20 Mar 2007 04:51:22 -0700

In this slowing real estate market a promissory note may be a good alternative for investing in properties and creating a steady stream of income. This is similar to offering someone a 2nd trust or "piggy-back" loan that accompanies a 1st trust or primary loan. This could also be a good option for sellers that may have a potential purchaser that needs a 2nd loan to complete the transaction. This scenario will only work with sellers that have a good amount of equity in their homes. The seller will need to pay off their own mortgage and have enough equity to offer a 2nd trust and maybe pocket some profits.The promissory note process is not very difficult and I have actually done it myself. You can get sample promissory notes on the web and then have a real estate attorney look it over and fine-tune it for your particular needs. If done right, this vehicle can provide you with years of constant monthly income. For those of you who currently have mortgages, do you often look at your statements and snarl as you notice that only $100 of your $1400 monthly payment is going to the principal balance? Well, as a promissory note holder, you will reap the benefits of this payment structure. For example, if you hold a $50,000 note at 10% interest rate over 30 years, you will receive a monthly payment of $438.79. Let say you hold this note for 7 years before the borrower pays off the remaining balance. At this point you would have collected 84 payments of $438.79, for a total of $36,858.36. After 7 years the remaining principal balance is $47,280.27. Your grand total after 7 years is $84,138.63. This equates to above market interest on your money. In addition, you have real estate as collateral that offers you additional protection. This is not a bad return as long as the property (and the individual) that you are creating the loan against is of high-quality and your Loan-to-Value is reasonable. So, how do you evaluate a good property and borrower? The first thing to do is to complete a financial background check on anyone to whom you would consider issuing a promissory note. It is important to analyze the individual's history in paying their bills, especially previous mortgages, rent, and other large bills like car notes. They should have relatively sound habits when it comes to these recurring payments. The next important detail is the Loan-to-Value; the lower the combined LTV, the lower the risk of the loan. This essentially tells you how much wiggle room you have equity-wise. For example, if the 1st trust is $400,000 and the appraised value is $500,000, you can offer a 2nd trust of $50,000. This will give you a total loan-to-value of ($450,000/$500,000) 90%. This is considered a good loan because you have $50,000 of cushion in potential value depreciation. As a rule of thumb, you never want to have a 100% total LTV because it does not afford you room for a potential decrease in the value of the property. If the property has to go to foreclosure for non-payment, you will need this additional equity to assure you get your money back and cover your expenses. The first trust or primary loan gets first crack at having their money and expenses covered, so the greater the equity, the greater the possibility you have of recouping your investment. Also, borrowers with a larger down payment invested in a property are less likely to default on their payments. The last important details are the terms of the loan, specifically the payback.1. Amortized - most loans are paid this way. It is a combination of principal and interest payments for the life of the loan. Usually the initial payments consist of a large chunk of interest and a minimal amount of principal. 2. Balloon Payment - these loans give you a smaller monthly payment with a shorter loan term. At the end of the shortened loan term, the remaining balance of the loan will be due. Generally, this type of loan is refinanced before the balloon payment is due.3. Interest Only - this is a popular loan that allows the borrower to only make interest payments for a portion of the loan term.Hopefully, this gives you a good introduction to mechanics of holding a promissory note. A good starting point for advertising your desire to offer real estate promissory notes is your local real estate investment club. During their meetings they often have announcements for people looking to acquire or offer second trust promissory notes. Consider reading more on the risks and benefits of this investment option, and if you decide to issue one, have a qualified real estate attorney or lawyer draw up the paperwork.[Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estatewww.HouseWealthy.com

Strategy for High Equity Rental Properties

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Mon, 19 Mar 2007 18:14:53 -0700

This is probably a tax law that many of you know already, but I feel compelled to state it just in case there are a few who are unaware of its benefits. We all know about the tax law that states if you live in your primary residence for two year out of the last five years, you can keep up to $250,000 from the profits from the sale as an individual or $500,000 for a married couple. The two years does not have to be consecutive. It could be one year in the beginning of the five years and one year at the end of the five years, does not matter. Well, if you have a investment home (single-family) that you have held for a while and has greatly appreciated, you can apply the same rule to the investment home. Normally, you would have to either pay tax on capital gains or roll the gain into another property through a 1031 exchange. This option would be to move into the investment property for two years and then take the gain out tax-free up to the applicable limits. Note, that you will still have to pay taxes on the recaptured depreciation that you benefited from during the investment period. This strategy works most effectively with single-family homes, because with a mulit-unit, only the part that is your principal residence will qualify.As always, consult your tax professional to see if this strategy will fit your needs.[Your browser does not support frames, please enable frames to view this widget] Build Wealth Through Real Estatewww.HouseWealthy.com

Mistake Buyers Make around Settlement Time (audio)

Victor Emeli, www.HouseWealthy.com (The Manor Enterprises) — Mon, 19 Mar 2007 08:34:53 -0700

Here is a link to part of an audio interview that I had with an owner of a reputable settlement company. We are discussing the mistakes people make before, during, and after settlement. This interview is part of an 8 question interview conducted in Maryland a few weeks ago. The full interview is available at my website www.HouseWealthy.com and run about 46 minutes in total. Listen to the audio of the Real Estate Attorney Interview. I ask the real estate attorney what mistakes does he commonly see before, during, and after settlement.Build Wealth Through Real Estatewww.HouseWealthy.com