| When considering getting involved in buying
real estate, either for a home or for an investment, the first thing you
have to evaluate is the bottom line:
How Much Can You Afford to Spend?
Pre-Approval
By contacting your bank, a mortgage lender, or looking online for a pre-approval,
you will be able to see a simple calculation that let's you compare the
amount you'll need to finance through a loan and what your monthly payment
will be to purchase the real estate.
* A Pre-approval will allow you to save time, by targeting a feasible
price-range before you shop. It is ludicrous to waste time bidding on
that dream real estate that is beyond your means. Besides, anything after
that will seem like 'settling' or compromising your dream.
* Taking into consideration all of your current financial responsibilities
and commitments is only logical. Having contingency funds is advisable,
so start your 'can i afford to buy real estate' calculations from these
premises.
* You will strengthen your bargaining position on any offer you make,
if you have that pre-approval. Your offer will be seen as more serious
and professional in the event you are competing with someone else for
a property.
In other words, you are a fully 'pre-qualified' buyer and the other person,
if they are not, is only 'looking'. If you were an agent, wouldn't you
give more attention to the one who was more likely to be a serious real
estate investor or potential home owner?
* The amount of mortgage you will qualify for is the maximum you could
pay. While the lender allows that this is the amount you can afford, you
may not necessarily want to over-extend yourself to that degree. You don't
want to be miserable having to change your lifestyle radically for what
may be a long time, or to have excessive worry about 'what ifs'.
* Keep in mind all of the new expenses a property may require to get
'up and running', and of course your moving costs, property taxes and
insurance, etc.; factor in those costly unforseen necessities such as
plumbing, roof, or electrical repairs. Leave some money for that eventuality.
You know Murphy.
* A pre-approval is generally good for 60-90 days. Beyond this, the lender
may require an update to the credit report and/or other documentation
to demonstrate your credit worthiness.
* The lender has issued a credit decision in advance, and will most likely
reconfirm the criteria that led to the initial decision.
* If your financial situation changes, it is critical to advise the lender,
so that your pre-approval can be adjusted.
How to pick the best Realtor or
Real Estate Agent
When you are ready to select a Realtor or Real Estate Agent, here are
a few questions you should ask. It is very important that you are very
clear on several issues.
Naturally, you will be able to tell if the person is someone you would
want to trust and to be able to work closely with.
If Buying or Selling
* Ask to be given a "listing presentation". This presentation
should answer many of these questions.
* How long have you been a Real Estate Agent?
* During this time, has this been their main occupation?
* What professional organizations do you belong to?
* Do you have a valid Department of Real Estate License?
* What does our actual relationship involve during this transaction?
* Do you represent both buyers and sellers at the same time?
* If so, explain both relationships and where your priorities lie.
* What does the listing agreement involve-
* Length of time of the agreement
* What are the fees?
* Is there a charge or contract?
* Ask for their complete marketing plan
* What can the Realtor's company do for you?
* What is their share of the local market?
* What types of things separate you from your competition?
* Do you have feedback or 'recommendations' from other clients you can
share?
* How effectively will you advertise? Be specific about what methods
you will use.
* Do you advertise on a 24-hour basis?
* What disclosure laws apply to me and what do I need to be aware of?
* How does the Realtor market to other Realtors?
* Are you a Realtor or a Real Estate agent?
* Explain the difference
* Does the Real Estate company advertise on the internet?
* If not, will your home have enough exposure?
* How will you keep me informed of new listings that I may be interested
in?
Do I Really Need a Realtor?
For Sale by Owner? (?FSBO?) Although in the past, many people have bought
or sold their home without the benefit of an agent, many more are doing
so today. However, you need to be well-informed and capable of handling
negotiations.
You need to have your home or your potential real estate investment appriased
professionally to be sure there are no mistakes. You need to know what
legal documents to exchange with your buyer.
Real Estate Market
The real estate market, which is very favorable in many areas, has made
realtors unnecessary in many parts of the country. What do you need but
supply and demand, you say? As long as you know all of the legal ramifications,
why pay an agent on average 6%, if you don't have to?
Real Estate on the Internet
The internet has become a primary source for listings for FSBO real estate
in the past few years. Like everything else, it is so much more convenient
and efficient to do your shopping virtually, rather than driving around
in traffic. You can list something on one of the FSBO sites for about
$25 in some cases. Big difference on the 6%!
Renovating Your Real Estate Investment
Property?
If you make any major improvements in your property, naturally your dollar
value appreciates. To sell it immediately after it has been renovated,
you do take the maximum benefit of your investment, and of course, generate
cash. However, you will give most of that back in taxes if you sell right
away after refurbishing your property.
If you hang on to the property, you will make even more. You can get
tax benefits by keeping it, keep your rental income, and the value of
the real estate will continue to appreciate.
You may want to just wait a few more months and then refinance your rehabilitated
property at 70% loan to value, or arrange long term financing at 85% or
90% loan to value.
So this seems an obvious choice ? to hang on to the property for as long
as you can, unless for some reason you need to generate cash. If it is
possible for you to be an effective and efficient landlord, and don't
mind the possible headaches, you will do well with this scenario.
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