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Flipping Houses: Tips In A Slow Market

flipping houses

The following is a guest post on flipping houses by Avky Inc co-founder Kyle Uchitel.

Flipping houses used to be pretty simple. Slap on some paint, toss some pansies in the yard and throw up a sale sign. With the slowing housing market, it isn’t that easy any more. People want more for their money and if the house has more, they want to pay less. Can people still make money flipping houses when the market is down? Yes, but they have to try a lot harder.

Flipping Houses: Reasons Houses Aren’t Selling

People who are sitting on a flip flop while other houses in the area are selling should take a hard look at why their houses are still on the market.

  • Are other houses in the area selling for less? Do they have added conveniences that the house being flipped can’t offer? The seller may need to drop the asking price or offer some sort of bonus, like a landscaping allowance, at settlement to give added value to the buyers.
  • Is the house ugly? While it is hard to see the fault in something that has been loved and slaved over, a hot pink house with lime green shutters will not warm the hearts of most potential buyers. Ask for opinions from realtors or that honest friend who is not afraid to say that a favorite dress makes the wearer look 10 years older. Then, be prepared to act on the advice that was given.
  • Is the flip a two bedroom home that is located in a family neighborhood? If the flippers can’t add a third bedroom, they will have to be prepared to wait and wait some more before they find a buyer.

If there doesn’t seem to be a reason the house isn’t selling and the sellers can afford to wait, they may want to talk to a realtor about other options. Some flippers are offering buyers a lease with option to buy until the market picks back up. Others are simply renting. There are even a few who are moving into their newly renovated flip and trying to sell the family home instead.

Flipping Houses: Additional Help for House Flippers

Investors who are right in the middle of a flip may be panicking as they look at the slow housing market. Some of them are cutting quite a few corners as they try to get out of the flip as quickly as possible. However, this could be an even bigger mistake, as potential buyers are frequently lost when their inspectors give them a laundry list of problems. Flippers who are trying to get a house renovated on a budget should:

  • Update electrical and plumbing systems.
  • Reroof leaky homes.
  • Tidy up landscaping.
  • Apply a fresh, neutral coat of paint.
  • Refinish or clean flooring.
  • Replace dirty or missing outlet covers.
  • Clean and maintain heating and cooling systems.
  • Update kitchen and baths. (If the budget does not allow for a complete overhaul, consider refacing cabinets and replacing the most outdated fixtures and appliances.)
  • Finish any renovations that have been started (or put the pieces that were taken apart back together.)

Kyle Uchitel can best be reached on Twitter at @kyleuchitel.

Real Estate Careers: Home Inspection, Home Staging, Photography

real estate careers

Real Estate Careers: Home Inspection

Home inspectors are an integral part of the Real Estate process. They require in depth knowledge of the home you are considering. An inspector can often make or break a real estate transaction based on the report that they provide. A home inspector is a solid option for real estate careers.

The requirements for inspectors vary from state to state and American Home Inspection Institute can link you to the various requirements in each state as well as in Canada. You will likely notice that many states including Canada currently have no guidelines for becoming an inspector. I am certain this will change in the future as the reliance on a home inspector becomes more and more commonplace.

Be aware that the American Society of Home inspectors is a fantastic resource and there site can direct you to the education training and resources that you require to become an inspector.

Real Estate Careers: Home Stager

The Home Staging profession has exploded quite rapidly onto the Real Estate scene. Its exposure on television has pushed it to forefront rapidly and the field seems continually growing. With this rapid expansion many design schools have sprung up focused on staging a property to its fullest.

Staging Diva, and Decorating Solutions are just a few of the training systems that have been set up.

A solid understanding of design will allow you to enter into this highly publicized field. Again there are no state or Canadian laws that regulate home stagers so anyone can technically become a stager.

Real Estate Careers: Real Estate Photographer

A Real Estate Photographer does exactly what you would think. They take pictures of your home. Obviously with some photographic training anyone can specialize in home photography.

Most agents take there own photographs so finding a niche in the market place can be difficult. Many photographers offer specialized packages for real estate.

These are just a few of the careers that professionals have taken advantage of in the Real Estate market place. Each career choice offers its own challenges and rewards. So good luck exploring your career options.

Rental Properties Paying For Themselves

rental properties

Investing in real estate rental properties is a dream many investors have, even if only to own their own home outright.

For those that wish to own rental properties, whether they be single family homes, office buildings, or land that tenants are welcome to build on, the process is often a slow one, starting with one home, renting it out, and working to pay down the mortgage as quickly as possible to fully capitalize on the money to be made.

Paying off debt and building a large base of equity is the key to establishing true wealth, and while the process can be slow, it slowly gets very fast.

Rental Properties: Before the Rich are Rich, They Acquire Assets

Assets are the key to wealth, but not just anything that can be listed as an asset, which is essentially any item that has value. When thinking of assets, think of income-producing property.

A $250 golf club is not an asset unless it’s helping Tiger Woods sink more putts from the fringe, and a car is not an asset in this sense unless it’s being used to create income, such as a taxi cab, limousine, or delivery van.

If it brings in money, or adds to one’s wealth, it falls into the asset category that will help investors grow their net worth.

Starting Small and Then Finishing Strong in Real Estate

There are some exceptions to investors starting small, such as those who have much guidance and a lot of money, allowing room for mistakes that someone investing with a middle class income cannot afford.

For the average investor, small, uncomplicated investments allow room for small, affordable mistakes, such as not having a 1,000 square foot home inspected again after repairs were supposedly done on the toilet. This mistake may cost some money, but it shouldn’t disrupt the entire event of growing serious wealth.

Over the course of time that it takes to pay down the mortgage on this home, many events will occur that will serve as a great education for a rental property owner, such as whether it’s worth it to allow small pets as a means of securing the non-refundable deposit and avoiding vacancies from shutting out a significant part of the market. After all, what does each vacant month cost compared to having carpets shampooed?

If an investor applies the rent to the mortgage in a strong rental market, such as a military town, and adds some money of his own to pay down the principle, it would not be hard to pay off the loan in 20 years.

Once this is done, it’s time to find another property.

Double Payments on a 30-Year Mortgage

Now that the first home is paid off, those looking to really become wealthy should buy a similar home in a similar neighborhood (in regards to rental properties).

Keep in mind that the renter of the new house will not be paying the mortgage alone. This time, both rents will be paying for one mortgage, resulting in the second home being paid off in under 10 years if there is a 15% vacancy rate.

When this process is repeated, the third home will be paid off in six years and the fourth in less than four.

At this point, the investments have accumulated over about 40 years. They can provide a comfortable retirement, but, also, they have formed a business that can be passed on, acquiring like properties to add to the holdings in just a few short years at a time.

This ample passive income can provide for some nice golden years. With the lessons that will be passed on to the heir of this fortune, a true empire can be established, and that is how the rich get richer with real estate.

Real Estate Agent Selection Process

real estate agent

When it comes to selling a home, it’s never wise to sell without professional assistance. A real estate agent understands the necessary procedures and have the proper knowledge to put the homeowner at ease while also making the most of the sell. Allow an agent to give the homeowner what he or she deserves. Sell the home at top-dollar price with help from an expert.

Real Estate Agent: Shop and Compare

When selecting a real estate agent, it pays to be a little inquisitive. Instead of making a random selection without a track record, homeowners are encouraged to “shake the tree” and ask around to gain more information. Consult with family members, friends in the neighborhood and friends in town.

It is very possible the people next door could provide a quality recommendation and even share a personal success story to reinforce the claim. It never hurts to ask if anyone has any positive recommendations or general suggestions.

Attend Real Estate Open Houses

If an agent is having an open house in the area where the homeowner’s house is located, then attend. Having an open house in the same area would logically mean the agent is familiar with the neighborhood or general location.

Those familiar with the houses in a given community already know the price tag for most homes. The homeowner can gain a wealth of knowledge by simply showing up and speaking with the agent on duty.

Choose a Respected Real Estate Office

Many times the generic brand provides the same ingredients at half the cost. Not the case when dealing with real estate agents. When it comes to looking for a quality agent, big offices and big names usually equal better resources and better deals. Homeowners are encouraged to “aim high” and consult with the most respected and well known agencies. Big offices equal more people and better service.

Interview Agents

One of the most critical steps in the consultation process is getting to know the actual agents. Homeowners are advised to set up interviews with the top candidates and simply ask them to sell his or her services.

Take important notes while allowing the agents to give the best sales pitch. Make sure everyone interviewed display proof that he or she is a licensed real estate agent. Sit back and let the agent describe his or her best plans for selling the residence.

When a homeowner is comfortable with the promises and money agreements, all roads are clear. The home selling process can commence.

Deed for Lease Program: Is this a Smart Move by Fannie Mae?

deed for lease

Fannie Mae created a Deed for Lease program that could allow homeowners, who default on their mortgage, to stay in their homes for a year as renters. This program does not allow the homeowner to reclaim any equity or ownership, they simply have the right to continue living in the home and paying a market rent. While the market rent issue will surely be debatable, there is a broader question- is this a smart move by Fannie Mae?

How does the Deed for Lease Program Affect the Homeowner?

Homeowners win in this situation. Their credit rating does not take the same hit as a pure foreclosure and they get to live in their home for a year, paying essentially what they can afford to pay. Homeowners also avoid the heavy stigma that comes with foreclosure. Besides the credit hit, going through a foreclosure is tremendously uncomfortable. Furthermore, with an adjustment to their monthly payment, they will not have to worry about putting down a large security deposit or moving to a less desirable area because they can no longer afford their current residence.

How does the Deed for Lease Program Affect Fannie Mae?

Fannie Mae should see more of a mixed bag with this program. On the positive side, they should experience less degradation of value than if the home simply sat idle. Vacant foreclosed homes experience a tremendous amount maintenance issues and vandalism. Additionally, Fannie Mae will avoid the foreclosure process, saving them significant dollars in court costs and eviction fees.

Conversely, Fannie Mae will lose the opportunity to quickly monetize their losses. Delaying the inevitable will not lessen the blow. While renters will certainly keep the house in better condition than if the house were to sit vacant, Fannie Mae can be sure that a foreclosed tenant will not be a good tenant. Furthermore, the asset management costs of managing individual houses will be astronomical. Perhaps to be part of the program renters will have to agree to maintain the house to a certain standard, but short of that, it will be a logistical and financial nightmare.

Lastly, what happens when the year is up? Fannie Mae could potentially need to spend similar costs to evict tenants and go through the same vacant home scenario. Does the tenant need to agree that Fannie Mae can market the house for sale while they continue to occupy it?

While this program seems like a great consumer opportunity on the surface, taxpayers should ask important questions about the ramifications. It is they who will need to pay for the asset management of these properties and subsidize the below market rents. While no one wants to see a family evicted from their home, the current process is in place for a reason.