In this market, there are tons of folks with money who want to entrust it to someone with your real estate investing experience to increase their return.
by Sharon Restrepo
Tons of folks are having credit issues today as a consequence of the real estate bust aftermath. As investors with multiple mortgages, those credit issues are multiplied. It’s tough to see your good credit turn sour. To get through it, we must press on and know that our score will rise again one day. Heck, I even speculate that the “new” good credit score will become 300.
It’s in these tough times that relationships score higher than credit scores.
Although the market has turned around for investors in most markets, their credit has already taken its beating during the bust. How do you recover and still continue investing? The answer is “relationships.”
Folks who know how you do business (for example, professional, timely, honest) rely on your character as their point of reference, not your credit score. Remember that you reap what you sow. That being said, if you ran from your responsibilities and ducked out on your commitments, chances are your relationships and your credit are both ruined. But if you faced your circumstances and honored your commitments (whether you could pay them or not), then your character was built and you will now be rewarded.
Relationships bring introductions you wouldn’t necessarily be able to make for yourself. Your character can score much higher than any credit score so take advantage of that and stop hindering yourself by focusing on your own credit score and allowing it to stop you from advancing.
In this market, there are tons of folks with money who want to entrust it to someone with your real estate investing experience to increase their return. You probably wouldn’t have the experience you have today if your credit score was still at 700.
We learn more from our mistakes than from what we did right. Take those lessons and go make a fortune. Conventional methods are out the window – it’s relationships you must focus on.
Stop now and make a list of all of the relationships in your life. Next to each person, write down what they do; next to that, write down how that benefits you; next to that, write down who they know and next to that, write down how that person can benefit you. In addition to writing down how these folks can benefit you, you must include how you can benefit them. Win-win relationships are the most rewarding. If someone has money to invest, then you can offer them a better return on investment than any conventional method out there.
Do your best to package your opportunity and present these folks with the ability to work with you. Begin making telephone calls and having meetings. It only takes one person to say yes to get you going. Don’t be discouraged by the “no” responses – simply be thankful that another “no” is out of the way, which means you are that much closer to a “yes.” After you make that one “yes” happy, the door opens to the next, and the next, and so on.
Before you know it, your business will be doing better than it ever did simply based on a good credit score.
San Jose is one of the metro areas that Forbes deems ripe for a real estate rebound. The folks at Local Market Monitor, a Cary, NC-based real estate research firm, helped us compile this list, sorting through housing and economic data for the 100 most populous cities and their surrounding suburbs. LMM assessed the change in home prices over the past 12 months and three years (on the latter, our reasoning is that markets that lost less value in the housing bust have the potential to recover faster), unemployment rates, 12-month job-growth projections, the change in population from 2006 through 2009 (the most recent data available from the U.S. Census) and new-home construction rates for the third quarter of 2011 as compared with the same quarter in 2010.
All of the cities that made our list share one common factor: a relatively strong job market. “For real estate to do well you want to see two things: that incomes are growing rapidly like they are in a market like San Jose … and that the growth in jobs attracts other people to that market,” says Ingo Winzer, founder and president of Local Market Monitor. However, job growth should be looked at as a bullish housing indicator only if the unemployment rate is already relatively low – that suggests local companies are creating new jobs rather than rehiring for positions they cut during the recession.
Oil doesn’t just heat homes, it also heats up a housing market. Cities where oil and natural gas are key components of the local economy have not only fared well in the downturn, they’ve thrived. InHouston, where the heavy concentration of energy companies has earned it the nickname “Baghdad on the Bayou,” home prices shot up 21% from 2002 to 2007 and rather than falling, have stayed close to those 2007 levels since. The population has grown at nearly triple the national rate and median income is above average. Houston and other Lone Star cities also didn’t succumb to the levels of overbuilding that cities in neighboring Sun Belt states did, either.
One of the things to remember when looking at home price data for these recovery-ready markets is that price drops or increases of one, two, or 3% are a pittance compared with the double-digit percentage drops common in recent years. Real estate experts like Winzer agree that price fluctuations of 3% or less generally indicate that a market is stabilizing. If a city hovers within that range for several quarters or a year, it’s probably safe to say that market has found its bottom. All of the metro areas on our list have almost undoubtedly found their bottoms. New home construction, which remains depressed for nearly every market across the country, should take off in these markets later in the year. “Once these markets are truly recovering, you will see a doubling in activity,” asserts Winzer. “It’s the last thing that happens.”
Here are five of those markets:
San Jose, CA
M.S.A.: San Jose-Sunnyvale–Santa Clara, CA
Home Prices, past 12 months: 2% decrease
Home Prices, past 3 years: 10% decrease
New Construction: 97% increase
Population Growth: 5%
Job Growth: 3.3%
|San Jose, CA
Craig Lovell / Eagle Visions P/Newscom
M.S.A.D.: Boston-Quincy, MA
Home Prices, past 12 months: 1% decrease
Home Prices, past 3 years: 4% decrease
New Construction: 1% increase
Population Growth: 3%
Job Growth: 2.1%
AP Photo/Bill Sikes
M.S.A.: Houston-Sugar Land–Baytown, TX
Home Prices, past 12 months: 2% decrease
Home Prices, past 3 years: 2% decrease
New Construction: 38% increase
Population Growth: 7%
Job Growth: 3%
Mark Gibson /Danita Delimont Photography/Newscom
Home Prices, past 12 months: 0% change
Home Prices, past 3 years: 3% increase
New Construction: 2% decrease
Population Growth: 0%
Job Growth: 1.8%
Bruce Bennett/Getty Images
New Orleans, LA
M.S.A.: New Orleans-Metairie–Kenner, LA
Home Prices, past 12 months: 2% decrease
Home Prices, past 3 years: 6% decrease
New Construction: 24% decrease
Population Growth: 20%
Job Growth: 1.9%
|New Orleans, LA
User move-ins to single-family residences climbed to 1,230 in South Florida in the last quarter of 2011, from 767 in the prior quarter, according to a new Metrostudy report.
The activity coincided with a drop market-wide in total housing inventory and finished vacant inventory.
“South Florida experienced a great deal of pre-construction sales during 3Q11, and during 4Q11 those homes became occupied in large numbers,” said Brad Hunter, director of Metrostudy’s South Florida division.
The data suggests the housing market is on the mend, a trend bolstered by data from McGraw-Hill Construction, which shows residential projects contributed to a 9 percent increase in 2011 construction contracts for future work compared to the prior year.
Highlights of the Metrostudy data by county:
- In Miami-Dade, single-family home starts shrank to 121 for the fourth quarter compared to 271 in the third. Move-ins grew to 247 from 238 in the third quarter. Total inventory – which includes finished vacant, under construction and decorated models – have dropped for the last two quarters. Finished vacant new home supply fell to 362 by year-end, compared with 642 a year earlier.
- In Broward, housing starts rocketed up to 324 in the fourth quarter compared to 232 in the third, which is the most since the second quarter of 2007. The inventory of under-construction units is now at its highest level since the third quarter of 2008.
- Palm Beach also had an increase in housing starts, reaching 406 in the fourth quarter compared to 318 in the third quarter, which is the busiest pace since 2008, Hunter said. Total new home inventory in Palm Beach was at 1,037 units at the end of the year.
The data supports the optimism of real estate experts who spoke at the recent Greater Miami Chamber of Commerce economic summit on Jan. 13.
At the event, Carlos Gonzalez, division president of Lennar Homes Southeast Florida, said that the three consecutive quarters of growth in orders signaled that the market had finally bottomed out. He said the increase was partly due to those who lost their homes through foreclosure in 2007 finally returning to the market.
Use a clear, understandable pet addendum and explain it clearly before the new tenant initials and signs it. by Billl Gray
The way in which you explain, or donï¿½t explain pet deposits can cost you profit. If landlords could spend just one day as a professional collector attempting to collect tenant debt, one of the top objections they would hear from previous tenants is about pets and pet deposits.
ï¿½The urine spots on the carpet are covered by my pet depositï¿½ is one example of a tenant either intentionally or unintentionally misunderstanding the pet deposit. Many pet deposits are non-refundable. If this is not fully explained at lease signing, most likely the tenant will believe that the pet deposit is no different than the standard deposit he placed on the rental unit.
Most tenants understand that when they pay a rental deposit any damage they cause to the unit will be deducted at move out from their deposit. If the non-refundable pet deposit is not fully explained, the tenant considers it the same as the rental deposit.
So when Fido has several accidents and soils the carpet, the tenant often will guesstimate that his pet deposit will cover the cost of cleaning it. In reality the cleaning cost is deducted from his refundable deposit.
Imagine the difficulty a professional collector has on the telephone trying to explain the difference between a non-refundable pet deposit and refundable rental deposit.
This is not to say that a certain percentage of previous tenants have a convenient memory when it comes to the terms of the lease. But I do believe that a good share of landlords do not take the time to fully explain the terms. An initialed and signed pet addendum will go a long way in settling disputes after move out.
Use a clear, understandable pet addendum and explain it clearly before the new tenant initials and signs it. Doing so will save you profit by reducing tenant debt when the tenant moves out.
Several times a year, the Council for Community and Economic Research (C2ER) gathers data from 309 urban areas to rank them in their Cost of Living Index (COLI).
The team looks at pricing data covering 60 consumer goods and services that represent a larger cluster of goods and services — especially within the groceries category, which lists staples including bread, coffee, sugar, ground beef and potatoes. The other categories are housing, utilities, transportation, health care and miscellaneous goods and services.
The average cost of these goods is then compared to the average annual income for professional and managerial households in the top fifth income level.
The resulting standard of living in the most expensive urban area, Manhattan, was more than twice the national average at 223.9 percent, whereas the cost of living in the least expensive urban area is 20 percent below the national average.
Dean Frutiger of C2ER emphasizes these are not absolute values and the rankings are all relative to the total submitted data. The data are collected by volunteers, and they couldn’t get the information for every city.
With that in mind, let’s count down the top 5 least-expensive cities, as culled from the latest available version of the COLI from the third quarter of 2011.
5) Waco, TX
|Photo: Walter Bibikow | Getty Images|
Waco is midway between Dallas and Austin and is the birthplace of Dr Pepper. While Waco is also at the midway point on this list, it dominates the list in terms of low prices in many categories.
Waco has the cheapest average prices for:
4) McAllen, TX
|Photo: Creative Commons|
McAllen is in the lower extremity of Texas, abutting Mexico in the Rio Grande Valley. The average cost of a house is $206,600 and the cost of living is 84.5 percent of the national average.
McAllen has the cheapest average prices for:
Boys’ jeans $11.99
3) Ardmore, OK
|Photo: Matthew Rutledge | Flickr|
Ardmore has the cheapest average prices for:
Apartment rental $500
2) Memphis, TN
|Photo: Scott Olson | Getty Images|
Memphis has a rich musical heritage and is the city Elvis Presley called home. But you don’t have to be rich to live there — the average cost to buy your own Graceland (albeit a more modest one and probably with less carpeting on the walls) is the lowest of all these top 5 urban areas.
Memphis has the cheapest average prices for:
Harlingen is designated a Certified Retirement Community and is a year-round destination for birders. It’s in the southernmost part of Texas (not far from the no. 3 least-expensive urban area, McAllen). It’s also the southern-most urban area in the country’s cost of living ranking, with the standard being 81.7 percent of the national average.
Harlingen has the cheapest average prices in this top 5 for:
2-pc chicken $1.98
Tire balance $7.50
Sweet Peas 0.67
You’re shopping for a mortgage and you’ve received four offers from four lenders. How do you choose? The first factor most people consider is the interest rate and other costs, but that’s only the beginning. You’ll also want to think about the lenders themselves, not simply the numbers they’re tossing your way.
Here are five steps to follow when determining which lender is right for you:
1. Compare fees as well as interest rates
Comparing loans based on their annual percentage rate (APR) is a good place to start, but it’s not enough. In the case of a mortgage, to get a more accurate breakdown of costs, ask the various lenders for a formal “good faith estimate” of all the fees you’ll incur with your loan — this is a standard form lenders must provide you that is more detailed than the overview you’ll get with an offer. Also, ask about potential charges that may not appear on that list, such as prepayment penalties. You’re not just comparing numbers here: determine how honest and upfront you feel the lender is being, and don’t use a lender that you feel is evading your questions.
2. Consider your individual circumstances
Bigger lenders aren’t necessarily better than smaller ones, especially if you have unusual circumstances. For example, some lenders specialize in loans for people with poor credit, while others may have more options for those with small down payments. If you have special borrowing needs, look for a lender with experience working with people in similar situations.
3. Look at the range of loan types available
There are more loan options available than ever before, so take advantage of all that choice. Look for a lender who offers a wide variety of loan types, from conventional fixed-rate and adjustable-rate to newer ones such as hybrid ARMs and option ARMs. Your lender should be able to match you with a mortgage that’s right for your financial situation and risk tolerance.
4. Evaluate the level of customer service
When you’re comparing offers, ask each lender about their policy regarding locking in their quoted rates and see whether there is a fee. Also, ask them to amend one of the terms (such as a payment cap) and see how willingly they agree. You’re looking for flexibility and responsiveness. And also note how well they listen to you. If you ask for a 30-year fixed-rate mortgage, they ought to present that as an option, not push you toward something different, such as an interest-only loan. If you’re not getting good service from a lender who is competing for your business, you’re not likely to get it after you’ve agreed to work with them.
5. Check out the lender’s reputation
Word of mouth is important in every business, including the loan market. If you’ve never worked with a particular lender, you’ll want to find out the opinion of people who have.
Admit it: Whether you’re 35 or 65, the prospect of retiring without a mortgage is an attractive one. No more monthly checks to your lender means extra money to spend on having fun once you exit the workforce. After years of punctual principal-and-interest payments, it’s the least you deserve, right?
There are several smart ways to retire without a mortgage. We’ve come up with six that fit a variety of retirement scenarios. Some approaches benefit from an early start — so if you are able, try to plan ahead. Other mortgage-free-retirement options can be put into effect even if you’re close to collecting Social Security.
Some retirees don’t mind a mortgage, be it for the tax write-off or to prevent too much money being tied up in home equity. But if your goal is the peace of mind that comes with paying off your loan before you reach retirement, check out these six ways to retire without a mortgage.
Make Extra Mortgage Payments
Over time, a few bucks here and there tacked on to your mortgage payment can translate into thousands of dollars saved on interest and years shaved off the repayment period. The trick is to find small ways to cut corners on other household expenses so that you can apply those modest savings toward your mortgage. Simply swapping out traditional incandescent light bulbs for CFLs, for example, can save you $50 a year in energy costs. A programmable thermostat can save you up to $180 annually.
A little extra goes a long way. A $200,000 mortgage at 6% over 30 years works out to a monthly payment of about $1,200 (excluding taxes and insurance). You’ll pay just over $231,000 in interest alone. But put an extra $100 a month toward the same mortgage and you’ll save nearly $50,000 in interest and retire the loan five and a half years early.
Refinance Your Mortgage
A surefire way to trim the bill for your home loan is to refinance your mortgage to a lower rate for an equal or greater period of time. You’ll enjoy reduced payments and less strain on your bank account. Not a bad idea if money is tight. What you won’t enjoy is a mortgage-free retirement.
[Also see: Urban Mansions Rich With History]
To pay off your mortgage early via refinancing, you’ll need to switch to a shorter-term loan. In 2011, a popular refi option for homeowners who weren’t underwater was going from a 30-year mortgage to a 15-year loan. Let’s say you have 25 years left on a 30-year mortgage at 6% and still owe $175,000. You’d pay about $163,000 in interest over the remaining quarter century. For just $167 more per month, plus one-time closing costs, you could refinance to a 15-year mortgage at 4% and save $105,000 in interest. And, of course, you’d be mortgage-free a decade earlier.
Downsize Your Home
Think about it: At a time when you’re supposed to be enjoying the simple life, do you really need a formal living room, separate dining room and two spare bedrooms that you never set foot in? If your answer is no, think about downsizing your home.
The beauty of downsizing to a smaller home in the same area is that you don’t need to say goodbye to your friends, family and community. Of course, beauty can also be found in the fact that you might be able to pay cash for your new abode. That means no mortgage.
And don’t limit your notion of downsizing. Just because you spent the past 30 years in a traditional ranch doesn’t mean you need to purchase another ranch with less square footage. Check out conventional alternatives (condos, townhouses) as well as unconventional options (houseboats, RVs and even tiny homes).
Relocate to a Cheaper City
Can’t find the right place at the right price to retire in your hometown? Move somewhere cheaper. Sure, there will be sacrifices, but what you’ll give up in familiarity you’ll make up for financially. The best places to retire combine ample activities with affordable real estate. And moving to an affordable locale will boost the odds that you won’t have to take out a new mortgage.
Home prices aren’t the only factor. Consider property taxes and homeowners insurance premiums as well. Both affect the overall affordability of a home. In New Jersey, for example, property taxesand insurance premiums combined average $7,270. You’d pay just $1,444 in, say, Kentucky, one of the ten most tax-friendly states for retirees. Some state and local governments reduce or even waive property taxes for residents 65 and older.
Feeling adventurous? You might be able to pay even less for a home and enjoy lower living expenses if you retire overseas. Look into bargain-priced and retiree-welcoming countries such as Belize, Mexico, Panama and Vietnam.
Get a Roommate
Don’t discount the financial advantages of taking on a roommate. By letting out a spare bedroom and applying the rent you collect to your mortgage, you can knock years off the time it’ll take to repay the loan. An extra $250 a month toward a $150,000, 30-year mortgage at 6% will erase the debt more than 13 years early. An extra $100 a month retires the mortgage seven years early.
The benefits to your bottom line extend beyond the mortgage. Rental income can help defray the cost of utilities — gas, electricity, phone, cable, Internet — and maintenance. Annual upkeep on a typical three-bedroom, two-bath detached home runs $7,910, on average, according to Homewyse.com, a homeownership Web site. As a bonus, a roommate can help with chores, providing a welcome respite for any homeowner weary of doing dishes and dusting bookshelves alone.
Rent Instead of Owning
A guaranteed way to retire without a mortgage is to sell your current home, pay off the loan in full, pocket the profits, and use the proceeds to rent a place to live instead. Although it might seem as if you’d just be writing a check to a landlord instead of a lender, the differences between renting and owning are considerable.
Among the advantages of renting in retirement: no lawn to mow; no leaky roof to replace; no property taxes to pay; no assets tied up in illiquid real estate; and no residential albatross around your neck preventing you from moving around as you wish. You can even save on little things, such as insurance. The average annual premium for renters insurance is $176, compared with $791 for homeowners insurance. As for losing the ability to deduct the interest you pay on your mortgage — a popular argument in favor of homeownership — keep in mind that the amount of interest due declines over time, so later in the life of a mortgage there is less and less interest to write off.
The single biggest risk of renting in retirement instead of owning is that you might run out of money to pay the rent. If you own a home, by contrast, you could probably resort to a reverse mortgage when savings dry up. This is a legitimate concern, and one that you should address with your financial adviser. A well-structured portfolio can provide a reliable income stream deep intoretirement. A part-time job can also stretch your nest egg.
By Maya Pope-Chappell
- Real-estate photographers use staging, lighting, wide-angle lenses and editing software to make homes look their best. See the differences between a reporter’s efforts and those of top photographer. Click to launch graphic.
A bit of advice from one of New York City’s top real-estate photographers: Think of a property listing like a profile on dating website. The pictures should be as flattering as possible without tipping into outright deception.
“It’s like online dating,” said David Paler, 44 years old, who has spent more than a decade shooting tiny studios, sprawling penthouses and everything in between. “If you take a picture and make this small place look huge, people come in to the apartment and they become disappointed.”
Paler and his competitors are hired to craft pixel-perfect images that will lure prospective buyers in the door, making high-end homes stand out from the crowd and finding creative ways to present the best side of cramped properties. The process involves careful staging and lighting — and no small amount of help from image-editing software.
“The majority of the time, you’re going into apartments that weren’t designed to be photographed,” Paler said. “And you have to make them look really appealing, which is a skill.”
With fewer people buying residential real estate in the city — Manhattan sales fell sharply at the end of 2011 — agents are increasingly reliant on the photographers’ subtle craft as a way to attract attention.
“How it appears online has become the single most important element on the road to a successful sell,” said Scott Allison, a Prudential Douglas Elliman broker in Manhattan and a client of Paler’s. Another agent, Stribling’s Jennifer Bowden, credits Paler’s “unconventional shots” of an Upper East Side condo for a sale that surpassed the $1.275 million asking price.
In total, Paler estimated that he has photographed about 10,000 properties across the city over the course of his career. He typically works 50 to 60 hours a week and shoots roughly three properties a day. He declined to detail his prices but said generally that the cost for premium photography covering four rooms runs between $250 and $325.
On a recent shoot for a $3.295 million listing held by Allison — a former carriage house in Manhattan’s East Village — Paler set up his tripod inside the shower of a small bathroom in search of the perfect angle.
The photographer removed clutter from the countertop and wiped down the mirror. Allison added a miniature candle and a fern to “jazz it up a bit,” he said.
“This is a tough shot,” Paler said, his body contorted in the shower as he twisted the super-wide-angle lens. The challenge, he said, was capturing the entire bathroom, showing would-be buyers the mix of stone, marble and bamboo finishes.
After using a remote to take a series of shots, Paler asked the agent to have a look. “It makes the bathroom look much bigger than it actually is,” Allison remarked.
In the living room, the two men debated the optimal configuration of the furniture. When Allison placed the fern on the floor, Paler objected. “Too loosey goosey,” he said.
The couch is a constant source of angst when photographing a living room, which can be overly dominated by furnishings. The challenge, Paler said, is to shoot the couch without making it look like “a gigantic slab in the room. If you’re not careful, it’ll look like a picture of a couch with a room behind it.”
Paler fussed with decorative pillows before removing them when he decided they obscured the image. “A sofa or couch is a really good indicator of the size of the room,” he observed.
In some cases, Paler will stage a single room with different lighting configurations, including both natural and artificial light, and then blend the resulting images into a single picture using Photoshop software. The final product looks even more vivid than any single photograph of the room.
“This is more of a proprietary technique,” he said. “I create raw material in order to get the shot that I want.”
Software is also used for other edits, from color correction and sharpening to erasing scuff marks on walls and wires from behind a television. But computer wizardry can’t be substituted for a good shot of the home.
“It’s a tricky business because we have to shoot what’s there,” said Paler. “[The property] can be utterly stunning or just awful and we have to really make the best of it.”