May 17

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May 16

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May 15




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May 15



IF YOU HAVE QUESTIONS OR WOULD LIKE TO SEE THIS PROPERTY, CALL ROB O! 860-982-0288…/ml…/106/propertyid/G10022041/

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Mar 05

10 Things to Consider Before Buying Your First Investment Property

Everyone seems to know it. It’s on TV, it’s in the newspapers, and it’s on the radio: Real estate investing can do wonders for your financial future!  However, just because investing in real estate has a great reputation for delivering stellar returns and building great wealth doesn’t mean that all investments are created equal.

The secret to getting those great returns lies in understanding the fundamentals of what makes a great real estate investment and focusing on buying only the best real estate. This post will help you sort through the clutter by offering ten important considerations to think about before you buy your first investment property.

1. Are You Ready to Invest?

Investing in real estate can be lucrative, but it takes time and a lot of moneyInvesting in real estate is not for everyone. While you don’t need to be listed on the “Forbes Richest” list to buy a rental property, it’s still important that you have a firm grasp on your personal finances before investing in real estate. Real estate investing is not a “get rich quick” scheme, but an adventure that can span decades.

Only you can know if you are ready to start investing, so take a good inventory of your life, and if real estate can fit into your investment portfolio – great! Take time to get educated. Read real estate books, blogs, websites, and forums to get a firm grip on just what real estate investing is and how the most successful investors use real estate to build wealth.

2. Do You Have a Plan?

Perhaps the biggest reason many investors lose money – whether in stocks, mutual funds, real estate, or business – is due to lack of planning. You wouldn’t consider driving from Saskatchewan to Peru knowing only that the direction was “somewhere south.” A plan will help you get from where you are right now to the place you want to someday be.

3. What Kind of Property Should You Start With?

Real estate investing is an exciting field because of the many different niches and strategies you can use to customize your plan to fit your personality and position in life.

Perhaps you enjoy risk and would prefer a “fix and flip” business? Or maybe you are looking at long-term stability and would prefer investing in single-family rentals. Or, maybe you don’t want any involvement at all and would rather just “become the bank” by lending money to other investors and earning a passive return. There are hundreds of ways to invest in real estate, so find the strategy that best fits your lifestyle.

Here are some tips from about what kind of property you should buy:

  • Well-maintained homes – The time, effort and money required to bring fixer-uppers into good condition make it difficult to get a good ROI on them.
  • Avoid fancy, expensive homes – The higher the home price, the lower the net rental income is compared to it.
  • Buy as personal residences, change to rentals – Owner-occupants get the best financing, and living in the house gives you insight into what needs to be improved before you sell it.

Watch this short educational video to get some additional real estate investing tips:


4. What is the Neighborhood Like?

You’ve surely heard the old cliché: “Location, location, location.” The importance of this phrase is no less vital when choosing a real estate investment. You don’t need to necessarily buy a house in the most expensive area of town, but it’s important that you understand what the location is like.

Pro tip: Drive by your prospective property at different times of the day, on different weekdays, to ensure you are comfortable with the location and that it fits within your plan.

5. What are the Local Vacancy Rates?

One of the most costly expenses you are likely to face as a real estate investor is vacancy. However, vacancy is a normal part of an investor’s life and should be fully expected and prepared for.

Check with local property management companies to determine the average vacancy rate in the area where you are looking to buy. Set aside money each month for times when the unit is vacant so you won’t be surprised by the lack of income. Also seek to minimize vacancies by understanding what the local average market rent is and attempting to be just a little bit below average.

6. Do You Know All Your Investment Expenses?

A common mistake by many first-time real estate investors is underestimating their expenses. Sure, most investors know there will be repairs from time to time, but there are numerous other expenses you may need to account for. These include:

  • Water/sewer
  • Garbage
  • Utilities
  • Legal fees
  • Accounting
  • Evictions
  • Vacancies
  • Office supplies
  • Fuel
  • Scheduled maintenance
  • Capital improvements

A good rule of thumb to use when determining how much you should plan on spending for expenses is known as the “50% rule.” The 50% rule states that, on average over time, expenses on a property will equal 50 percent of the income. So if a property rents for $2,000 per month, you can assume $1000 in expenses per month before paying the mortgage payment.

Here’s another short video on how to use the 50% rule to estimate potential cash flows from a multifamily investment property:


7. How Will You Finance Your Property?

Real estate investors must decide whether they want to finance their properties with cash or mortgage loansThere are many different ways you can pay for an investment property. If you have the money, you can pay all cash and not deal with banks or loans.

However, if you don’t have all the cash needed or you’d rather utilize greater leverage, you can supply just the down payment and take out a mortgage to cover the remaining cost. If you do use a loan, be aware of the term and interest rate on the loan you are taking, and stay away from adjustable rate mortgages as they may go up, causing your payment to rise dramatically.

8. Should You Self-Manage or Hire a Professional Manager?

Whether or not you should manage your property is a personal decision largely dependent upon your plan, personality, skills, and availability. A typical property manager may cost between 7 and 10 percent of the monthly rent, but a good property manager should also decrease vacancy and have systems in place to make repairs less expensive. If you are undecided, always budget in management; if you decide you don’t like it, you’ve already planned for it.

9. Can You Be Your Own Bookkeeper?

Of all the great benefits real estate investing has going for it, easy paperwork is not one of them. Are you confident in your abilities to do the bookkeeping, or do you need to budget for a professional to keep track of the numbers?

10. Do You Have an Exit Strategy?

Finally, always start with the end in mind. This circles back to our discussion on “having a plan.” Know what you are going to do with the property before you buy it. Many investors, during the last housing boom, bought properties with only one plan – to sell soon for a higher price. When the market dropped, however, many of those investors lost their properties.

Always have multiple plans for your investment, and know exactly how you plan on making money with the investment. Will you pay it off slowly over 30 years? Will you rent it out each month for cash flow and sell it when the market peaks? Know what exit strategies are available for you, and plan, from the start, how you will exit.

Feb 17

New Loan Options Spell Opportunity for Home Buyers

As the country moves into year five of the re-regulated mortgage era, loan guidelines continue to become more flexible. If you’rebuying or refinancing a home, the following recent developments in expended loan options could affect you. In all cases, each lender’s guidelines will vary, so consult your loan officer to see if any of these fit your profile.

97-percent conforming loans for first-time buyers

In December, Fannie Mae and Freddie Mac rolled out 3-percent down programs targeted at first-time buyers. The loans require mortgage insurance and are capped at $417,000. But with a 3-percent down payment, that translates into a purchase price as high as $429,897.

Both Fannie and Freddie guides say the loans can be obtained with a credit score as low as 620, but each lender can layer its own guidelines on top of Fannie/Freddie guides, so you’ll need to ask your lender for its credit and other requirements.

90-percent jumbo loan with no mortgage insurance

For higher-earning home buyers who need to borrow more than the $417,000 conforming loan cap, an increasing number of jumbo lenders are adding the ability to lend 90 percent of a home’s value with loan amounts up to $1 million — and as high as $1.25 million for exceptional borrowers.

This translates into purchase price ranges of $1,111,111 to $1,388,888 with just 10 percent down and no mortgage insurance, which is a huge cost savings on larger loans. Borrowers typically must have a debt-to-income ratio of 35 percent or less, credit scores of 720 or greater, and at least 12 months cash reserves after the close. These programs are now available with most jumbo lenders.

Re-amortizing jumbo loans

Some large banks who keep their jumbo loans — instead of selling the loans after they close — have begun offering a re-amortization feature on jumbo loans over $417,000. Re-amortization means that your payment will decrease as you pay your loan down.

Depending on the lender, a loan balance pay-down from $5,000 to $20,000 will trigger a payment recalculation. This feature enables higher earners to lower their monthly budget as they chip away at their loan balance using extra income like bonuses or stock compensation. Previously, the only way to lower your payment as you paid your loan down was to use an interest-only loan, but those loans carry higher rates.

Cash recoup after a cash purchase

In some highly competitive U.S. housing markets, it’s been hard for financed offers to compete with cash offers, so buyers have chosen to pay cash, then refinance later. The refinance is normally categorized as a cash-out loan, which has a higher rate and lower loan-to-value ratios. But recently, cash recoup loans have become more mainstream, where a refinance after a cash purchase is given the same favorable rates and loan amount flexibility as a purchase loan.

Ask your lender if it can offer you purchase guidelines when refinancing right after a cash purchase. If you plan to do this, make sure you do it within 90 days of your purchase to comply with IRS mortgage interest deduction rules.

Non-occupying co-borrowers — aka “co-signers”

The ability to use a co-signer on a loan was a widely accessible Freddie Mac guideline that became less common post-crisis, and has returned to the mainstream in recent months as lenders have removed extra guidelines they were layering over this Freddie Mac guideline.

Some lenders allow a truly combined profile to qualify even if it means the co-signer has the majority of the qualifying income. But many lenders will still require the occupying co-borrower to have enough income to qualify for most of the obligation on their own. The co-signer is just there to get them over the hump.

If you need a truly combined profile in this scenario to make your deal work, make absolutely sure your lender is aware of this situation. Conversely, if you do qualify using your own income and mostly just need help with the down payment, make sure to check out the rules for using gift funds for a down payment.

Feb 16

Homeowner tax breaks appear safe, for now

Tax reform is revving up again on Capitol Hill, with the heads of key committees pledging to work toward a simpler and fairer tax code, possibly one with lower tax rates. Sounds intriguing.

But what might that mean for homeowners — many of whom benefit from tax breaks such as mortgage interest and property tax deductions, plus tax-free writeoffs of up to $250,000 or $500,000 of home sale capital gains, depending on whether they file returns as singles or married couples? Renters get none of these.

Homeowner writeoffs become targets for cutbacks or elimination whenever tax code reforms get serious attention because of their costs in uncollected federal revenues. The mortgage interest deduction alone cost the treasury $113.4 billion in fiscal 2015, property tax writeoffs $27.8 billion, according to estimates by the congressional Joint Committee on Taxation.

President Obama kicked off the tax legislative season with a budget proposal that would limit mortgage interest and other deductions for upper income taxpayers. No surprise there. He called for essentially the same change last year, and this year’s version was widely viewed as dead on arrival in a Congress controlled by Republicans.

But what might Republican tax reformers themselves have up their sleeves? Last February, the top Republican tax writer, Rep. Dave Camp of Michigan, the then-chairman of the Ways and Means Committee, came out with a massive tax code overhaul blueprint that would offer lower tax rates and a big increase in the standard deduction in exchange for drastic cutbacks in special-interest deductions and credits, including the benefits traditionally enjoyed by homeowners.
Camp’s plan would have shrunk marginal rates for most taxpayers to just two brackets, 10 percent and 25 percent; phased down mortgage interest deductions from the current $1 million limit on eligible mortgage amounts to $500,000; eliminated deductions on home equity loans and credit lines altogether; and stretched out the time period needed to qualify for tax-free capital gains exclusions from the present two years out of the preceding five years to five years out of the preceding eight years. Camp’s plan also would have eliminated homeowners’ writeoffs of local property tax payments and ended penalty-free withdrawals from IRAs to assist with first-time home purchases.

Camp retired from Congress at the end of the last session. His reform plans — considered too controversial to pass in an election year — never moved out of committee. But the impetus for some sort of wholesale reform of the sprawling Internal Revenue Code remains alive and well. Is anything likely or even possible this year, and if so, could it create problems for current or future owners?

Conversations with tax experts and Capitol Hill legislative analysts suggest a couple of things: There is bipartisan support for the broad concept of streamlining the tax code. The new Ways and Means Committee chairman, Rep. Paul Ryan, R-Wis., said on NBC’s “Meet the Press” that he is prepared to work on reforms with the White House — even compromise on some issues — “if we can find common ground.” Sen. Orrin Hatch, R-Utah, Senate Finance Committee chairman, has created working groups tasked with coming up with tax reform plans with the objective of introducing a bill, probably by late this spring.

And there is already common ground to build on: bipartisan support, including at the White House, for a broad package of tax changes affecting businesses. Treasury secretary Jack Lew recently said the administration could support reforms that lower top tax rates for big corporations, eliminate unfair loopholes and simplify the entire system for businesses. Republicans generally are on board but insist that small businesses be part of the solution.

So there’s a chance that a bipartisan corporate tax reform bill could be cobbled together this year, provided negotiations are completed before the start of the next presidential campaign season this fall.

What about comprehensive tax reforms for individuals of the type that inevitably would involve significant changes in current preferences for homeowners and tax increases for higher income households? Highly unlikely. Congressional Republicans and the White House have such conflicting views of the tax system — Obama wants to raise taxes on the wealthy, Republicans vehemently oppose any net new taxes — that coming together on a major reform package covering individuals would be nothing short of miraculous.

Bottom line: Homeowner tax breaks are safe for the time being, probably until 2017 at the earliest.

Feb 06

How to Determine What You Want in a Home

From the moment a first-time home buyer begins searching until the final closing papers are signed could be as short as three months or as long as three years.

Little boy choosing between a cupcake and appleAlong the way, the journey is filled with twists, turns and probably some bumps in the road. So how do you navigate the journey? Once you get “in the game,” you should start setting the top criteria for your home early on. Establishing your most important factors upfront will help you stay on track as you move through the home buying process. It also will help you know when to compromise and when to stick to your original list.

As the home buying process evolves, your criteria may change as well. Nobody ever gets everything on their list. In fact, many buyers, around the closing table, have a chuckle as they compare their original list of criteria to what they eventually got.

Here are the three phases of the home buying journey where your criteria will be established.

1. Dreaming

Leveraging the Internet and online listings, buyers in this next generation of real estate have the opportunity to consider all options, get a feel for what they want, see what’s out there and start to understand their must-haves, nice-to-haves and the bonus stuff.

As the journey evolves, you should begin to nail down requirements and prioritize your wants and needs. The search often changes, and part of the process is to learn what works and what doesn’t. But starting out with a fairly concrete, realistic “wish” list will inform your search.

2. Getting in the game

Any serious buyer working with a great local agent, and with a bank pre-approval in hand, will take the home search up a notch. At this point, it’s important to determine the two biggest pieces of the puzzle: price and location. Without these criteria, you’d simply be shooting from the hip.

Price trumps all criteria. What you can afford generally dictates where you’ll live as well as the type of home you’ll purchase. Location is one of the three magic words in real estate, and it comes a close second in the home search. The thing about location is that it can’t ever be taken away from you. But a home can be altered to adapt to a location. Many buyers, keen on a certain neighborhood or school district, will consider buying a home that needs work or one that’s not ideal for their situation simply to be in the right location.

3. Compromising

After determining price and location, a buyer needs to consider things such as number of bedrooms, bathrooms and the size of the home. While there are times when you’ll choose size over location, generally the location informs the size.

After that, considerations such as a finished basement, large lot, pool or open floor plan, while important, may get trumped because of location and price.

The important thing is to prioritize what you really must have vs. what you want to have. Also, try to think ahead. Are today’s top priorities likely to remain your top priorities a few years from now? Or would it make more sense to get a 3-bedroom house, for instance, instead of a 2-bedroom home, as you may have children later or might need a home office down the road.

It’s not easy to set your criteria for buying a home, given how important the purchase will be. But if you don’t, you’ll be all over the map in your home search, wasting valuable time and effort. And if you’re busy chasing properties that don’t really meet your needs, you may overlook something that does.

Feb 05

Buying a Home in 2015: 3 Resolutions to Make It Happen

Is 2015 the year you get serious about your home search? These three resolutions can help you pull it off.

Many home buyers enter and leave the real estate market several times before making a purchase. Priorities shift and — unlike a seller who signs an agreement and has a tangible product to sell — buyers aren’t necessarily tied to any timeframe, unless it’s self-imposed.

With the start of a new year, many on-and-off home shoppers resolve to intensify their search and finally purchase a home. Whether it’s because of a better-understood tax benefit, the realization of a big bonus or simply a frustrating rental situation, many buyers re-enter the market and get serious. Here are some resolutions for buyers who want to make 2015 the year of their new home.

Enlist an ally

Many buyers spend time in the dreaming phase of home shopping — looking at listings online, researching the mortgage process, running numbers and following the local market. But serious and active buyers hook up with a strong local agent to make it happen.

Agents can serve as a guiding light thanks to the wealth of market knowledge they bring to the table. A good local agent has completed dozens of transactions and understands the process and the market — not to mention the home buying process — like the back of their hand. If things go sideways, they will steer you in the right direction. Leverage their experience.

Balance feelings and data

There is so much (sometimes conflicting) real estate information available that it is easy to get overwhelmed. A home purchase is not the same as picking out a new tablet, smartphone or even a used car. Aside from the huge financial commitment of a home purchase, there are emotional and practical implications that may be less obvious.

You may walk through a designer kitchen and imagine your family having dinner there, or see a particular block and suddenly feel that you belong there. No spreadsheet or equation will account for those feelings, wishes or desires.

Trying to reconcile these feelings while analyzing potentially conflicting statistics, online data, blogs or forums will be a challenge. If you have a reliable local agent and have been looking for some time, you can feel confident in your market knowledge, while also trusting your instincts.

Abandon the notion of getting a deal

Everyone likes to get a great bargain. But in real estate, deals aren’t always easy to come by. Dozens of fragmented sellers — unaffected by inventory levels and with different motivations for selling — drive each market.

If you are continuously on the hunt for a “deal,” this could be a red flag that you are not ready to buy. If you need to purchase a car, you likely research car prices online before heading to the dealership. You understand that the values range, and attempt to get your car as close to the lower end of the range as possible. If not, you won’t be buying a car.

Will you wait another year to see where prices are? Probably not. Instead, you make a car purchase based on the best deal you can negotiate at that time.

The same goes with home buying. Buyers who spend considerable time learning the market will have experiential knowledge of what they can get for their money and where. They have a realistic view of the market.

Making a low-ball offer may be understandable when you first enter the market. You could be uninformed or nervous, and putting in a low offer is a way to test the waters. But if you’re continually making unrealistic offers, you need to ask yourself if you are ready to be a home buyer. Your low-ball offers may be your way of sabotaging your home buying prospects.

Every buyer is different, and real estate purchases are one part financial, one part emotional and one part practical. The road to buying a home is not a straight and narrow path, like buying a car. If you truly want to buy a home in 2015, dedicate yourself to the effort, and set yourself up for success.

Feb 04

Borrow Smart: 3 Options That Can Cut Your Mortgage Payment!

Recently, two new low down payment options became available to home buyers: Federal Housing Association (FHA) loans with mortgage insurance that was just lowered 0.5 percent, and Fannie Mae/Freddie Mac loans with 3 percent down. But home buyers with just a little more cash to put down have other options.

Borrower paid vs. lender paid mortgage insurance

Two Fannie/Freddie private mortgage insurance (PMI) options are worth exploring at the 5-percent down payment level. Borrower paid PMI is when the mortgage insurance is a separate line item. Lender paid PMI is when your rate is higher in exchange for the mortgage insurance being built into the rate.

Here’s how a Fannie/Freddie loan with borrower paid PMI compares to one with lender paid PMI, using the example of a $300,000 purchase with 5 percent down.

 Borrower Paid PMI *   Lender Paid PMI ***
 Loan Amount  $285,000  $285,000
 Rate  3.75%  4.125%
 Payment  $1,320  $1,381
 Mortgage Insurance  $128 **  $0
 Homeowners Insurance  $100  $100
 Property Taxes  $300  $300
 Total Monthly Cost Before Homeowner Tax  Deductions  $1,848  $1,781
 Total Monthly Cost After Tax Deductions  $1,491  $1,397
* Mortgage insurance separate   **  At PMI rate of .54% for 5% down   *** Mortgage insurance built into rate

Even though the lender paid PMI loan has a higher rate, it still costs $67 less than the borrower paid PMI loan on a total monthly cost basis, and also costs $94 less after homeowner tax deductions. One key reason is because borrower paid PMI isn’t tax deductible, but when you include mortgage insurance in the rate using lender paid PMI, you have more mortgage interest to deduct at tax time.


To avoid mortgage insurance all together, cap your first mortgage at 80 percent of the purchase price, then add a second mortgage, called a piggy-back mortgage. Presently, most lenders require this piggy-back structure to have combined loans capped at 90 percent of the purchase price.

Therefore, the first mortgage would be 80 percent, the second mortgage would be 10 percent, and you must put 10 percent down. This is often called an 80-10-10. Here’s what it would look like for a $300,000 purchase:

 First Loan  Second Loan
 Loan Amount  $240,000  $30,000
 Rate  3.625%  4.125%
 Payment  $1,095  $148
 Homeowners Insurance  $100
 Property Taxes  $300
 Total Monthly Cost Before Homeowner Tax Deductions  $1,643
 Total Monthly Cost After Tax Deductions  $1,305

10-percent down jumbo loan with no mortgage insurance

Paradoxically, lower loan amounts require second mortgages to avoid mortgage insurance, but “jumbo” loans greater than the $417,000 Fannie/Freddie loan cap can be a single loan up to 90 percent of a home’s value.

These loans are good for higher-earning home buyers in higher-priced markets. Most jumbo lenders now allow loan amounts up to $1 million and as high as $1.25 million for exceptional borrowers. This translates into purchase price ranges of $1,111,111 to $1,388,888 with just 10 percent down and no mortgage insurance, which saves several hundred dollars per month on larger loans.

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