Q: We had to put our rental property on the market to sell because our tenants stopped paying and we fell behind on our mortgage payments. We have not received a purchase offer yet and we ran out of money to pay for repairs or even cut the grass. What should we do? Leonard, West Milford, NJ A: If you don’t have the money to make any home improvements then that’s not an option. Now that you’ve decided to sell your property, it doesn’t make sense to pour a lot of extra money into improving it. However, since you do not have any purchase offers, you should consider either 1. lowering your asking price or 2. spending a few hundred […]
continue reading Q: Our homeowners insurance premiums keep going up. Our deductible is high anyway. Do you think we really need property insurance? Darryl, Clifton, NJ A: The main purpose of property insurance is to protect against catastrophic or total loss. Despite the fact that higher premiums and higher deductibles make insurance seem less valuable, most people don’t have the financial resources to replace a property in the event of a total loss. Nevertheless, 12% of US homeowners don’t have homeowner’s insurance and I suspect that percentage will rise. People who have liquid assets sufficient to rebuild their home and remove the debris from a home destroyed by a catastrophic event can choose to forgo homeowners insurance–but for most people that is […]
continue reading Q: My wife and I have been saving for a down payment for a new home for quite some time. Now, mortgage rates are so high, we can’t afford any of the homes we had our eye on before. We should have bought before mortgage rates rose. What can be done to make housing more affordable? Keith, Winfield, NJ A: Mortgage rates are much higher than they were in the recent past and that does certainly reduce how much you can pay when you buy a home. The Federal Reserve has been actively trying to tame inflation for some time. Since March 2022, the central bank has increased its benchmark interest rate more than 10 times. The most recent inflation […]
continue reading Q: My wife was checking out security systems for our home and rental property. Do you think that’s necessary? Caleb, North Haledon, NJ A: When it comes to any additional property expense, it’s smart to weigh cost vs. benefit and make decisions based on actual rather than perceived risks. The range of prices for security systems is enormous ranging from under $25 to tens of thousands of dollars. For property owners, the 2 biggest risks are posed from burglars and porch pirates–if you have been a victim from either then I think it makes since to investigate an inexpensive but effective security system. But don’t go nuts–paying more money does not necessarily reduce your risk or increase your safety and […]
continue reading Q: My tenant ruined the floor in my rental apartment. Will my insurance policy pay for it? Wanda, Cranford, NJ A: Landlord insurance may cover unintentional damage caused by tenants, like an accidental kitchen fire for example, but it will not cover intentional damage or wear and tear. What does landlord insurance cover? If you rent out your residence on a full-time basis, you’ll need landlord insurance since homeowners insurance doesn’t cover non-owner occupied residences. Landlord insurance covers the structure of your rental property from damage caused by covered perils, including fire, a busted pipe, or bad weather. But when it comes to damage caused by your tenants, landlord insurance may be less likely to help cover the costs. Landlord […]
continue reading Q: I just got my first apartment. What does rental insurance actually cover? Marvin, Little Ferry, NJ A: Renter’s insurance does not cover major weather events like earthquakes, floods and landslides nor does it cover damage from riots or sinkholes. A renter’s policy also will not cover pest infestations (including bed bugs or rodents). However, it is possible to get separate insurance policies for events like floods. A renter’s policy also will not cover a roommate’s possessions if they aren’t named on the renter’s policy-basically anything damaged that does not belong to the person on the insurance policy will not be covered. It’s generally not a good idea to add roommates to a renter’s insurance policy unless they are family […]
continue reading Q: I just got my first apartment. What does rental insurance actually cover? Marvin, Little Ferry, NJ A: Renter’s insurance can be bought by anyone renting an apartment, condo, home or other living space. Renter’s insurance is normally cheaper than homeowner insurance. The central feature of renter’s insurance is coverage of personal belongings from unexpected damage and theft. What does renter’s insurance cover? Renter’s insurance generally provides four types of financial protection: Personal property damage: If a tenant’s personal property is damaged, renter’s insurance will cover the cost of the damage up to your policy’s limits. Personal liability: If someone is injured or property is damaged, and a tenant is blamed for the event, their policy will cover liability costs, […]
continue reading Q: My husband and I are buying a condo. Will there be a property management company to do the work? Cassandra, Jersey City, NJ A: The owners of a condominium through their condominium association can elect to hire a property management company to manage all or some of the affairs of a condominium’s building(s) and/or common areas. The owners of a condominium can also choose to self-manage the affairs of a condominium’s building(s) and/or its common areas. Smaller condo complexes with not many individual units and owners are better suited for self-management than complexes with many units and owners. Bigger condo complexes are more complicated to run and often have more moving parts and expenses to manage like cleaning, maintenance […]
continue reading Q: As more people work from home, what do you think will happen to the empty office spaces? Caitlin, Metuchen, NJ A: The biggest reason housing prices in the US are sky high for renters and home buyers is because US housing supply is millions of units short of housing demand. If there was enough housing supply to satisfy demand, housing prices for both buyers and renters would be much cheaper. Adaptive reuse is the process of transforming existing buildings for a new purpose. Here in NJ, which is the most densely populated US state, repurposing existing buildings for most productive uses has been happening for many years. In addition to increasing badly needed housing supply, adaptive reuse can be […]
continue reading Q: I want to get involved in real estate. Is it possible although I have a full time job? Gary, Edgewater, NJ A: Yes, you can make money in real estate part time by wholesaling property. To be a successful wholesaler, you don’t need much money, nor do you need good credit. Real estate wholesalers engage in a kind of arbitrage, selling or ‘assigning’ purchase contracts that they negotiate. After a wholesaler signs a contract to buy a property, he has an equitable interest in that property that he can then assign to another buyer willing to pay a higher price—the difference in price between what the original seller agreed to sell for and the price the buyer the wholesaler […]
continue reading Q: Do you think the bank failures that happened earlier this year will affect housing? Rajiv, Edison, NJ A: The largely non-regulated non-bank financial system now controls almost half of the world’s financial assets fueled by years of very low interest rates. Shadow banking was at the center of the global financial crisis when questionable mortgages were transformed and weaponized as complex securities that were resold and ultimately helped bring the global financial system to its knees. Non-bank financial institutions are big and highly leveraged right now. We now live in an interdependent world, so a liquidity crisis in one part of the financial system will always have repercussions in other parts as was the case during the global financial […]
continue reading Q: We’ve got several leaks in our roof. When we bought the home a few years back, I thought the roof was recently replaced. How long should a home’s roof last? Fay, Bloomfield, NJ A: A roof’s useful life expectancy depends on the type of roof as well as the quality, durability and type of material that is used in putting it up. Standard asphalt shingle roofs should last at least 20 years. Wood shingle and shake roofs typically last 20-30 years and metal roofs can last 40-50 years. One way to find the age of an existing roof is to go to the town’s building department and request the building permit that was filed when the roof was erected. […]
continue reading Q: Are housing rent prices finally going down? Helen, Hoboken, NJ A: The incredibly high rent price growth that occurred during the pandemic is slowing in many local real estate markets. Normally, rent prices increase at a pace slightly higher than inflation. Between 2010 & the start of the pandemic, most local real estate markets saw rent price increases between 3-4% annually. During the pandemic, rent prices skyrocketed driven by inflation showing double digit annual increases in many local real estate markets. Nevertheless, signs point to rent prices stabilizing particularly in local markets that saw the highest rent price increases during the pandemic due to many factors including temporary migration out of city centers. One factor that is slowing rent […]
continue reading Q: We received a foreclosure notice this month. I was surprised because our grandmother’s home is paid off. I know we owe taxes but I didn’t think they could foreclose for that. Earl, Orange, NJ A: Yes, Earl, theoretically any unpaid lien holder can file a foreclosure lawsuit on a property to recoup what is owed. Unfortunately, tax lien foreclosure is a faster, more expedited process than mortgage foreclosure so it’s important to act quickly to pay off the past due property taxes to force the plaintiff to cancel the lawsuit. There are 3 individuals that you have to worry about when facing a tax lien foreclosure: Tax Lienholder Foreclosure Attorney Bankruptcy Attorney The tax lienholder is normally an investor […]
continue reading Q: I’m trying to pull some money out of one of the properties I own. Do I have to provide collateral to get the money? Sam, Kenilworth, NJ A: Let’s start by defining what collateral is. Collateral is something of value used as a pledge by a borrower as a guarantee to repay a loan. 3 Types of Collateral: Mortgage note Assignment of Rent Personal guarantees Mortgage Notes: In the event of a default, the property the mortgage note is associated with can be liquidated to offset the lender’s loss. Assignment of Rents: Assignment of rents is an arrangement that guarantees a lender or investor the rights to income generated through the lease or rental of the associated property if […]
continue reading Q: How far do you think home prices will fall? Manny, Jersey City, NJ A: Every local real estate market is different. Home prices at any given point in time may be rising in one local market, stabilizing in another market and falling in another market. Even during the housing bubble that occurred in the early and mid 2000s after the dot com bust, there were local real estate markets where home prices were declining! There are certain real estate markets that in recent history have tended to have more home price volatility (i.e. Phoenix, Vegas, Bay Area)–I suspect home prices move more dramatically in these markets because they attract more out of town speculators. Many of the local markets […]
continue reading Happy 500th Episode! Special thanks to everyone in my Real Estate Insider family for tuning in and checking out my weekly podcast and video blog over the last 9 years! It has been a long, challenging but rewarding journey. It was an accident that I got involved in real estate in the first place (you can check out my bio if you’re interested in that back story). Today for my 500th podcast episode, we’re going to go through 7 things you can and cannot control in real estate. We’ll start by talking about 7 things you cannot control in real estate, which unfortunately but predictably are the real estate topics that you hear about most in the news. The […]
continue reading Q: My boyfriend and I have been trying to buy a home for a while. We found one in our price range, but it has mold, do you think that is a big deal. Shannon, Linden, NJ A: Exposure to mold can cause a variety of negative health effects particularly for people with respiratory problems and for people who are immuno-compromised. Here are 3 home health dangers to watch out for particularly in older homes: 1. Mold is the biggest risk in homes where humidity exists. You can use a dehumidifier to reduce moisture and mold within a home. I suggest you require the owner of the home you want to buy to ameliorate the mold issue before you buy. […]
continue reading Q: I recently bought my first home. I budgeted for my mortgage payments but the other home expenses are higher than I expected. Angel, Bayonne, NJ A: Congratulations on your new home, Angel. Unlike other assets, real estate is an expense-generating asset. Here are 5 ways to save on home-related expenses: 1. Install a smart thermostat. A smart thermostat allows you to better control the temperature in your home throughout the day and night which will reduce the cost of both heating and cooling 2. Install Ceiling fans. I personally prefer ceiling fans myself to air conditioning. Ceiling fans use 10% of the electricity air conditioners use, which will save you money on your electric bell 3. Insulate your tank […]
continue reading Q: Me and my siblings inherited my grandmother’s house. We were served with a foreclosure notice this month. I don’t understand why because the mortgage was paid off years ago and we have been paying the property taxes. Gail, Union, NJ A: Unfortunately, despite the fact that there is no mortgage on the property, all the other expenses associated with your grandmother’s home also have to be paid. A foreclosure lawsuit can be filed against a property for a past due mortgage, property taxes or for the following 3 little-known expenses: 1. unpaid water/sewer bill 2. Unpaid homeowner’s association dues or for 3. Unpaid condominium association dues I suggest you do a few things: 1. contact the tax collector […]
continue reading Q: My husband died a while back. A courier served me with a foreclosure notice a few weeks ago. I called the attorney on the notice and they said that my husband had a home equity line of credit on the house, which I was not aware of. Do I have to pay this? Edna, Hillside, NJ A: The first thing you should do if you haven’t already is to probate your husband’s estate. Probate is the court-supervised act of paying debts, closing accounts, and distributing the assets and belongings of an individual after their death. Generally speaking, assets such as real estate will either switch ownership to a beneficiary or be sold to pay for any debts. As part […]
continue reading Q: I’ve been looking for properties to fix and flip. The properties I’ve found so far need complete gut renovation which I’ve never done before. Do you think I should go for it even though I don’t have any experience? Gus, Bayonne, NJ A: I don’t think the first fix & flip rehab you do should be a complete gut renovation. You can always wholesale property for profit which does not require you actually buy or renovate the property. If you are going to buy, fix and flip a home, I suggest you buy a property that does not require too much renovation. You can also buy a home and do a light, cosmetic renovation. A cosmetic home renovation, also […]
continue reading Q: Gerald, do you think it is better to buy or rent a home right now? Erica, West Orange, NJ A: Generalized investment advice is not very useful. The correct answer to your question depends on your personal financial situation, your goals and your life plans. For some people, the correct answer right now is to buy, for others it is to rent. Over a long period of time, owning a primary residence is more beneficial financially than renting because of leveraged appreciation and tax advantages among other factors. However, owning real estate does limit your mobility to some extent and makes you financially responsible for home repairs and capital improvements rather than your landlord which is the case when […]
continue reading Q: How do all these recent bank failures affect housing? Carl, Weehawken, NJ A: Lending across the board may get tighter in the wake of the failures of SVB & Signature. However, mortgage loan underwriting has been much more measured and responsible since the 2008 financial crisis and mortgage interest rates have recently dropped which may entice more home buyers who may have been waiting on the sidelines to buy a home. Fannie Mae’s Economic and Strategic Research (ESR) Group has raised its first-quarter 2023 GDP forecast due to stronger-than-expected economic data. It also anticipates a modest recession in the second half of 2023. Ongoing banking instability may negatively affect jumbo mortgage loans and residential construction loans but residential real […]
continue reading Q: What do you expect for Spring housing this year, Gerald? Gail, Maplewood, NJ A: Residential real estate demand generally fluctuates seasonally with Spring home buying demand typically outpacing housing demand in summer, fall or winter. This Spring home buying season may be a little different than previous years. Weather this past winter was very mild in the local markets I work in which may have reduced pent up housing demand that often explodes in the Spring after a long, cold winter. Also, despite the recent spate of bank failures, mortgage interest rates have declined recently and The Mortgage Bankers Association (MBA) forecasts that mortgage rates are likely to trend down over the course of this year, with the 30-year […]
continue reading Q: Gerald, you said that home prices eventually have to level off at some point. When do you think that will happen? Liam, Clark, NJ A: Home prices have already begun to decline in some municipalities in NJ, particularly for homes selling for less than $400,000. At the high end of the NJ real estate market, the number of homes for sale is growing as the ratio of home buyers to home sellers is tipping to favor buyers. For homes selling for over $2.5 million this has already happened, so expect home sellers at these price points to either lower their offering prices or take their homes off the market. The number of homes for sale is also increasing for […]
continue reading Q: Gerald, I’m a realtor. I’m losing deals now, some already under contract because buyers are pulling out because of higher mortgage rates. Is there anything I can do? Madelyn, Mountainside, NJ A: Mortgage interest rates have almost tripled in recent history. Higher mortgage rates reduce the price a home buyer can afford to pay for a home. In addition, higher mortgage rates have reduced the number of homes for sale because many trade up buyers who want to sell their home and buy a bigger home are staying put because they don’t want to trade the lower mortgage interest rate they have on their current home for a more expensive home with a much higher mortgage interest rate. One […]
continue reading Q: We visited my grandmother recently and I saw mold growing in her home. What can we do? Elliot, Tewksbury NJ A: I’m not sure how bad the mold in your grandmother’s house is. If it’s bad, you should consider bringing in a specialist. If the mold is minor and you catch it early, mold can be removed from hard surfaces with household products, soap, water, or ideally a bleach solution. Bleach kills virtually every species of indoor mold. The problem is that if there is too much humidity and moisture in your grandmother’s home and the home is poorly ventilated, the mold will return. The way to control indoor mold growth is to control moisture. After you address the […]
continue reading Q: I have been trying to save the 20% down payment to buy a house for a long time. Are there any programs that can help me get my first home? Shamise, Union, NJ A: The typical home buyer spends over 6 years saving money for a down payment to buy a house. There are literally dozens of first-time home buyer grants and programs designed to assist 1st time home buyers that are sponsored and backed by both governments as well as public and private banks. Here are 3 kinds of first-time home buyer assistance programs: Low-down payment mortgages that require a down payment of 5 percent or less Mortgages that don’t require a down payment at all Mortgage loans […]
continue reading Q: I’ve been hearing about AI in the news a lot recently. How do you think artificial intelligence will affect real estate? Zach, Hoboken, NJ A: Artificial intelligence is already impacting residential real estate. Zillow’s Zestimate method, which unfortunately often provides wildly inaccurate property valuation estimates, is nevertheless built on AI technology. Here are 3 ways artificial intelligence may improve residential real estate moving forward: By providing curated recommendations to renters & home buyers. Artificial intelligence can tailor property listings based on buyer and renter preferences By automating and streamlining customer care, AI-powered chatbots can handle inquiries about rentals and homes for sale to help both realtors as well as renters and home buyers By automating and streamlining the mortgage […]
continue reading Q: We’re planning to sell our home. Seems like everyone who sells has an open house. Do you think it’s necessary? Sabrina, Passaic, NJ A: Many people mistakenly believe that you need to do an open house to sell a home–perception often becomes reality. Realtors throw open houses to please home sellers or because they buy into the misguided conventional wisdom that open houses are an effective way to sell a home. Open houses are normally a waste of time. The truth is that houses sell primarily based on 3 factors: 1) Buyer Awareness—if buyers don’t know about your house for sale, they won’t buy it 2) Buyer Preferences 3) Buyer Budget. Open houses can attract foot traffic—people may show […]
continue reading Q: Do you think now is a good or bad time to buy real estate? Frank, Prospect Park, NJ A: Nobody can predict the future, therefore neither you nor me nor anyone else can effectively time real estate markets or financial markets in any arena. Research shows that the cost of waiting for the perfect moment to invest exceeds the benefit of perfect timing even if that were possible. One huge real estate myth is that successful real estate investing is about timing the market and guessing right about future price appreciation. The successful investor makes the best possible decision today based on the best information available today. Hindsight is always 20:20, or as Warren Buffett says, “the rear view […]
continue reading Q: My wife and I have been trying unsuccessfully to buy a rental property for a while. Do you think we should try bidding at the sheriff sale auction? Dwayne, Leonia, NJ A: Most people assume that real estate auctions are a great place to buy properties at bargain prices. Auctions are convenient for sure—especially for the seller. Auctions purposely create a feeding-frenzy environment where potential buyers get caught up in a very public, competitive spectacle that ideally for the seller results in the property selling for the highest possible price. The objective of a bank foreclosure sale for example is to create an auction effect. An auction effect occurs when buyers get into a “gotta have it” mindset that […]
continue reading Q: I’ve been paying more and more money to heat my home. When do you think energy prices will go down? Ernie,Clark, NJ A: The cost of energy for the average American was up almost 15% in November from a year earlier. Energy prices have been higher lately due to many factors including the Russian invasion of Ukraine. I don’t know if or when energy prices will drop because they are driven largely by global supply and demand. If higher energy prices persist however, over time, home buyers will demand and pay more money for homes that are more energy efficient to lower their household expenses. Thanks for your question, Ernie. Thanks for your question, Wilbur. For more real estate […]
continue reading Q: Our water bill on our home went up a lot recently. What can I do to cut my home expenses? Wilbur, Hawthorne, NJ A: My water and garbage collection bill went up recently myself, Wilbur. Here are 3 tips to help you save on home-related expenses: Buy light bulbs that have earned the Energy Star for energy efficiency Buy a programmable thermostat to avoid wasting money heating your home when you aren’t there Wash your laundry in cold water instead of hot water Thanks for your question, Wilbur. For more real estate tips and information visit my blog at geraldlucas.com.
continue reading Q: Mortgage rates have more than doubled recently. When do you think mortgage rates will go down? Kim, Edgewater, NJ A: It’s hard to know exactly if and when mortgage rates will drop after many years of record low rates. Freddie Mac forecasts mortgage rates will drop from an average of 6.8% in the fourth quarter of 2022 to 6.2% in the fourth quarter of 2023 but only time will tell. Thanks for your question, Kim. For more real estate tips and information visit my blog at geraldlucas.com.
continue reading Q: What’s a good way to keep track of what’s going on in the real estate market? Lex, West New York, NJ A: The Housing Market Index (HMI) is one way to track the health of residential real estate. The HMI is a monthly-released weighted average of three separate components: 1) Current Single-Family Home Sales, 2) Single-Family Home Sales Projection for the Next Six Months, and 3) Traffic of Prospective Home Buyers that is released monthly. The HMI is a number between 0 and 100. The HMI has gone down every month since June 2022 and is 31 as of December 2022 down from 84 in December of 2021. The closer the HMI is to 100 the healthier the real […]
continue reading Q: What do you think the real estate market will be like next year? Evelyn, Moonachie, NJ A: I unfortunately don’t have a crystal ball and cannot predict the future. However, A 2023 housing forecast from Realtor.com predicted a 7.4% average for mortgage rates in 2023, which would push homebuyers’ monthly payments up and generally make homeownership more costly. Realtor.com economists also predict that rents nationwide will increase by 6.3%, while they expect median home prices to grow by 5.4% next year. Thanks for your question, Evelyn. For more real estate tips and information visit my blog at geraldlucas.com.
continue reading Here are 3 year-end real estate tips that’ll help you get through the winter: Inspect your roofs. Leaking or collapsing ceilings are a nightmare to deal with especially during the winter. It’s better to identify a smaller problem early before it gets worse and requires a more expensive remedy. Flush your water heaters. This is a cheap and easy procedure that is not very expensive. Flushing water heaters helps to control the buildup of mineral deposits, resulting in a more efficient heater. Service oil or gas heaters. Servicing heaters is an annual necessity. By servicing heaters regularly you will increase their useful life which will save you money in the long run. For more real estate tips and information visit […]
continue reading Q: Gerald, you said earlier that the number of homes available for sale on the market has been rising recently. How much has home availability increased and is it enough? Derek, Metuchen, NJ A: After a long period of record low housing inventory, the number of homes available for sale in NJ has increased this year by over 50%. Home inventories in Hudson County where my office is located are now about 3 months or more which is significantly higher than they were in most of the last few years. The tipping point where home prices stabilize is at about 6-7 months of home inventory supply. When home supply inventories exceed 6-7 months home prices start to drop. Higher supply […]
continue reading Q: I have been having a hard time finding a place to buy and my younger sister has been trying unsuccessfully to find an apartment. Why is there such a shortage of housing and what can be done about it? Crystal, Hoboken, NJ A: There is a housing shortage both for homes to buy as well as rentals particularly in major cities where demand for housing is typically higher. Despite this huge housing shortage there are lots of vacant, unused or underutilized lots in major cities. For example, NYC has over 75,000 vacant or underdeveloped lots. This problem stems in part from the skewed property tax system we have in the US that disincentivizes development and encourages land speculation. A […]
continue reading Q: It looks like home prices are going down now finally. How far will home prices go down? Victor, Livingston, NJ A: Home prices have cooled in many local real estate markets but not in all real estate markets. Every local real estate market is different and the pace of home price declines will vary from market to market. In fact, some local real estate markets may not see home price declines at all. It depends on the town and ultimately on the specific neighborhoods in each town. Averages are misleading and some towns and areas simply have more sustainable home buyer demand regardless of current macroeconomic conditions like interest rates and the current state of the economy. For more […]
continue reading A: Happy Thanksgiving 2022 to everyone in my real estate insider family! Here are 3 recent real estate trends I am thankful for this Thanksgiving: lower inflation Higher housing inventory home prices flattening and housing becoming more affordable
continue reading Q: Why did home prices go up so fast during the pandemic? Sam, Westfield, NJ A: There are several reasons home prices went up so fast during the pandemic, but one overlooked reason is the “investor mania” that was unleashed by speculative home buyers and investors. Many amateur real estate investors and buyers poured into local housing markets during the pandemic in hopes of building Airbnb and VRBO empires. In addition, Institutional investors ramped up their algorithm-driven home buying and rapidly expanded their residential real estate portfolios during Covid. All this increased demand for residential homes drove home prices higher than otherwise probably would have been. Thanks for your question, Sam. For more real estate tips and information visit […]
continue reading Q: With home prices going up so much, do you think buying a home is still a good investment? Valerie, Linden, NJ A: If you can reasonably afford to buy a home based on your current financial position, it’s difficult to beat the awesome power of leverage when you buy a home with a 30 year fixed mortgage. Mortgage leverage magnifies home appreciation unlike any other asset. You can borrow most of the purchase price for a home which amplifies your cash-on-cash return. Home prices in NJ rise on average about 4-5% annually. So, if you buy a $500,000 home with a 20% down payment of $100,000, the $20,000-$25,000 average annual increase in your home’s value works out to a […]
continue reading Q: Interest rates keep going up. When do you think rates will go back down? Bill, Kenilworth, NJ A: Many Fed watchers expect the Fed to lower interest rates in mid 2023 under the assumption that inflation falls back to the Fed’s 2% target. The direction interest rates will move depends on 2 things: 1) how persistent inflation is over the next 6-9 months and 2) if we are in a full blown recession by mid 2023. If inflation is lower, rates are likely to go down and if we are in a full blown recession in mid 2023, the Fed will likely lower rates. Thanks for your question, Bill. For more real estate tips and information visit my blog […]
continue reading Q: I have a rental apartment. I heard there is a new lead paint law for rentals. Is that true? Jack, Hackensack, NJ A: Lead is a toxic, naturally occurring element and heavy metal in our environment that was widely used in commercial products such as gasoline, paint, cosmetics, spices, and pottery. Lead exposure in children can cause nervous system and kidney damage, learning disabilities, hearing damage, attention-deficit disorder, decreased intelligence and problems with speech and language problems. Lead-based paint is usually not a hazard if it is in good condition, and the paint is not on an impact or friction surface, such as a window. Deteriorating lead-based paint (peeling, chipping, chalking, cracking, or damaged paint) is a hazard. Lead […]
continue reading Q: My grandmother lives alone and needs more income. Can she move into the apartment over her garage and rent out her house? Elmo, South Orange, NJ A: ADU stands for Accessory Dwelling Unit. Accessory dwelling units (ADUs) have been around for a very long time. An ADU is a secondary small dwelling on the same grounds or attached to a single-family house. ADUs are sometimes referred to as mother-in-law flats or granny flats. Examples of ADUs include: an apartment over the garage a cottage or tiny house in a home’s backyard (Note: ADUs can be tiny houses, but tiny houses aren’t always ADUs) a basement apartment Regardless of its physical form, an ADU is legally part of the same […]
continue reading Q: I read that lumber prices have fallen a lot. How will that affect residential real estate? Eric, Little Falls, NJ A: The Covid-19 pandemic caused lumber prices to skyrocket for a variety of reasons. Higher lumber prices meant that renovations, repairs, and new construction were all significantly more expensive which increased home prices. Wood framing is used to build 9 out of 10 single-family homes in America and the lumber price spike during the pandemic increased the average price of new single family homes by almost $20,000! Luckily, lumber prices recently fell to their pre pandemic levels. Despite the fact that housing activity has cooled this year, demand for housing is still relatively high in much of the country. […]
continue reading Q: My boyfriend and I are trying to buy a home. We don’t have much savings. Can our parents help us with the mortgage down payment? Kelly, Bloomingdale, NJ A: Family and friends can help home buyers with good credit and income who lack enough money for a down payment to purchase a home. A monetary gift from family or friends may help home buyers get a lower mortgage interest rate or eliminate the need for private mortgage insurance (PMI). You can use monetary gifts from friends or family members for your mortgage down payment, so long as you provide a signed statement to your lender that the money is a gift and not a loan. It is best to […]
continue reading Q: Do you think adjustable rate mortgages are a good idea? Sandy, Little Ferry, NJ A: An adjustable-rate mortgage (ARM) is a home loan with a variable interest rate that can fluctuate periodically based on the performance of a specific benchmark. Although ARMs generally have caps that limit how much the interest rate and/or monthly payments can rise per year or over the lifetime of the loan, I think they are way too risky for most home buyers particularly first time homebuyers. An ARM may make sense for some investors, but I have seen investors get burned by adjustable rate mortgages particularly by option ARM loans that were popular before the last financial crisis. Even a 30-year fixed rate mortgage […]
continue reading Q: I just read that housing affordability just reached a new low. What does that mean? Cliff, Bergenfield, NJ A: The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home based on the most recent home price and income data. An affordability index above 100 signifies that a family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment. The Housing Affordability Index dropped to 98.5 in June, its lowest rate since 1989. This means that it was more expensive to buy a U.S. home in June than it has been […]
continue reading Q: Gerald, you said that home building has slowed recently. How will that affect home prices and housing availability? Stan, Caldwell, NJ A: Housing starts fell almost 10% recently as higher construction costs continue to disincentivize builders from initiating new projects. Less home construction results in lower home inventory. Home foreclosure filings have increased recently, (higher home foreclosure filings normally increases home supply), but not enough to offset a pullback in home construction. Higher mortgage rates have further reduced home affordability. Nevertheless, I don’t expect NJ home prices in most local real estate markets to fall anytime soon despite threats of recession and potentially higher mortgage interest rates. I also expect housing inventory to continue to rise but at a […]
continue reading Q: Gerald, what do you expect will happen in the real estate market for the rest of 2022? Gail, Hoboken, NJ A: Home sales have declined significantly this year already, particularly for homes selling for less than $400,000 as rising mortgage interest rates have made it more difficult for millennial 1st-time home buyers to qualify for homeownership. Construction costs have increased 20% since last year, labor costs continue to climb and the time required to complete a new construction project has doubled recently. I expect housing sales will continue to slow and home inventory will continue to climb at the end of this year. Although home inventory levels are much higher than they have been in the recent past, they […]
continue reading Q: I have a tenant who hasn’t paid me rent in almost 2 years. I finally got a court date in landlord-tenant court. Is there any way to get the money he owes me? Candy, Elizabeth, NJ nd are we in one now? Charles, Berkeley Heights, NJ A: The most obvious remedy when a tenant is behind on rent is to file for eviction, Candy which is what you’ve already done. Even if you can finally evict your delinquent tenant, he still owes you almost 2 years worth of rent. A lease agreement is a binding contract and when a tenant stays in a landlord’s property and fails to pay, a landlord can sue the tenant in civil court to […]
continue reading Q: What is a housing recession and are we in one now? Charles, Berkeley Heights, NJ A: An economic recession is generally defined as two consecutive quarters of declines in Gross Domestic Product (GDP). A housing recession occurs when home sales decline for six straight months. Housing sales activity has in fact declined for six consecutive months, so yes we are currently in a housing recession. Nevertheless, homes continue to sell because there are still more buyers than there are sellers in most local real estate markets. Thanks for your question, Charles. For more real estate tips and information visit my blog at geraldlucas.com.
continue reading Q: My wife and I are buying a new home. Initially, the builder said we could make adjustments to the appliances we were getting installed but now he says that’s not possible. Kyle, Carlstadt, NJ A: More than 70% of contractors recently surveyed said they are facing at least one material shortage. Lumber was the most-cited material shortage, followed by electrical supplies. To keep construction projects from stalling, many builders and suppliers are limiting customer selections and requesting that clients make all selections up front. Some contractors are also eliminating homeowners’ ability to do change orders on their builds. Unfortunately, the supply chain issues that are the source of the problem will likely continue into 2023. Thanks for your question, […]
continue reading Q: I’ve been trying to get a mortgage loan for weeks. The mortgage broker I have been dealing with keeps making excuses and I am worried I’m going to lose the house I’m trying to buy. Silvana, Bloomfield, NJ A: An experienced mortgage broker will be familiar with current mortgage products available right now on the market and which mortgage will be best suited for you as a borrower based on your debt-to-income ratio and the preliminary information you provide. An inexperienced or incompetent mortgage broker will ask the same questions over and over again, struggle with simple math and will not be familiar with current mortgage loan products. I suggest you give the mortgage broker you are working with […]
continue reading Q: A lot of people are predicting a recession. If it happens, how will a recession affect real estate home prices? Stuart, Kenilworth, NJ A: Home prices have remained steady or risen during the majority of the last few recessions in the US. High mortgage rates can deter people from buying, but as the recessions of the ’80s and ’90s showed, when mortgage rates rose to almost 20%, high rates don’t mean demand or home prices will fall. What really determines how the real estate market is affected by recession is the impact it has on housing demand and home affordability. Nationally, today’s median income is around 30% of the median home price. In 1980, that number was almost 45%. […]
continue reading Q: Gerald, I’ve been a builder for a while. I finally found a nice big lot where there is an old single family home that needs to be torn down. I’d like to build at least 4 townhouses on the lot but the town only allows for single family homes. Corey, Westfield, NJ A: The acronym, ‘NIMBY’ stands for ‘not in my backyard’ and it is a nickname for a person who objects to something in the area where they live while raising no objections to something similar in other places. NIMBYism is natural and expected for many homeowners who want to protect their most valuable asset (their home). Unfortunately, NIMBYs play a large role in exacerbating our critical undersupply […]
continue reading Q: I am inheriting a home. Do you have any advice to share about the process? Elisabeth, Westfield, NJ A: Inheriting a house can bring some very complex challenges. There is a big difference in how an inherited house should be handled, based upon how you inherit the home. If you were given the house by deed when your relative passed, usually, there is no need to go through probate proceedings. your name should be on the title and therefore you can do whatever you want with the property. If you inherit the house through your loved one’s will, you have to go through probate. You will need to complete that probate process before you can take control of the […]
continue reading Q: Gerald, I have owned my condo for years. My building only has 6 condo units and the owners manage the building ourselves to save money. One of the owners is way behind on their monthly condo fees. Is there anything the other owners can do? Jackie, Elizabeth, NJ A: The simple answer to your question is yes, there is something you and the other owners in your building can do–you can record a lien for the unpaid condo fees on the unit owned by the delinquent owner. After you record a lien, you have the option of foreclosing on the condo unit in question. However, if the delinquent owner has a mortgage on their condo unit, your lien for […]
continue reading Q: I’m trying to buy my first home. I am really excited because I actually found a home that’s within my price range. The house is a fixer upper that needs work but my mortgage broker said I can still get a mortgage for it and I can actually borrow the money as part of my mortgage to make the repairs. Do you think that’s a good idea? Susan, Bloomfield, NJ A: Your mortgage broker is likely referencing a type of construction loan for residential home buyers called a 203K. Section 203(k) insurance allows homebuyers to finance both the purchase of a house as well as the cost of its renovation through one single mortgage. Conceptually, a 203K loan is […]
continue reading Q: My wife and I have had our rental property for a while. Our tenant moved out so I think it’s a good time to do renovations. Do you think we should renovate the entire place? Henry, Hackensack, NJ A: Paying for renovations and repairs is appropriate to maintain your rental property and to attract the best tenants. However, your return on investment (ROI) as a landlord is a function not just of the rent you collect but also the money you spend. The more money you spend, the lower your ROI will be. Over renovating a property (spending too much money on renovations) is the biggest mistake that landlords, particularly new landlords make. Many people mistakenly believe that every […]
continue reading Q: We just finished renovating our new rental property and started accepting tenant applications. One applicant we met seemed nice but kept complaining about their last landlord. When I looked at his background report, it showed that he had been evicted. What do you think we should do? Claire, Jersey City, NJ A: As a landlord, the 2 biggest potential risks you face from a tenant is 1. Non-payment of rent and 2. Damage to your property. A previous eviction is the #1 sign that someone will be a bad tenant, because it is proof that they were a bad tenant before. I’m not surprised this applicant complained about their last landlord because they obviously weren’t paying their rent. It’s […]
continue reading Q: Gerald, we signed a contract to buy a summer home last year. We expected the builder would be finished by now, but it has taken much longer than expected. Mortgage rates have gone up a lot. Can we back out and if we do, will we lose our deposit? Dalia, Edison, N A: Home buyers who signed contracts to buy newly constructed homes in 2021 are potentially facing almost double the mortgage payments they may have initially expected because mortgage interest rates have risen from 3% to almost 5.5% as the Federal Reserve started raising short term interest rates. There is always a greater mortgage interest rate risk whenever a real estate transaction takes longer to be completed. Labor […]
continue reading Q: I’m not a US citizen. Can I get a mortgage to buy a home? Carlos, Union, City, NJ A: Most people assume that people without U.S. citizenship can’t qualify for a mortgage to buy a home. In fact, there’s a clear path to non-US citizens becoming a homeowner without paying cash for a home through programs often referred to as foreign national mortgages. Foreign national mortgage programs offer loans for which no U.S. credit history is needed to apply. Foreign national mortgage programs normally require non citizen home buyers to put down a 20% minimum down payment that can be used for owner occupied or investment residential properties. Thanks for your question, Carlos. For more real estate tips […]
continue reading Q: My wife and I are buying our first home. Interest rates are going up. How long can we lock our mortgage interest rate? Caleb, Belleville, NJ A: Mortgage rates have increased significantly in the last year from historic lows. Lenders normally will let pre-approved home buyers lock the interest rate of their mortgage loan for between 2 weeks and 2 months. Lenders can theoretically offer a rate lock for as long as they choose. I have seen 120 day mortgage rate interest locks in real estate transactions I’ve been involved in, however, the borrower paid a fee for that extended rate lock. Lenders will always hedge to protect themselves. Thanks for your question, Caleb. For more real estate […]
continue reading Q: Do you think it makes sense to buy a modular home? Fay, East Brunswick, NJ A: A manufactured or modular home is a factory built home. A manufactured home is only meant to be moved once and is therefore different from a mobile home. Manufactured homes tend to be well built. Manufactured homes take less time to build and are much less expensive to build than a site built home. The potential drawback of modular homes is that the cost to finance the purchase of modular homes may be higher and it can be difficult to find suitable land to put modular homes on. Given the current shortage of available housing, modular or manufactured homes are one of the […]
continue reading Q: It’s been really hard for us to staff people at our restaurant for quite a while. Has the labor shortage affected real estate? Keith, Point Pleasant, NJ A: Unfortunately there are many industries that have more unfilled job openings than unemployed workers with experience looking for work. With respect to residential real estate, the labor shortage has affected home construction and home prices by 1) increasing construction time to complete newly constructed houses (which in turn lowers housing supply which results in higher home prices). 2) Labor shortages also have increased the price of available labor and therefore increased the cost to build which de-incentivizes builders, further lowers housing supply and also increases home prices. In addition, 3) without […]
continue reading Q: My sister and her husband are in a bind. They fell behind on their mortgage payments when my sister stopped working last year to stay home with their young kids and her husband lost his job around the same time. What should they do? Brenda, Paramus, NJ A: Hi Brenda, the first thing I think your sister and her husband should do is reach out to their lender or mortgage servicing company and find out what options they may offer to assist them. Your sister’s lender may offer forbearance or loan modification assistance that may help them and it’s most beneficial to homeowners to get that assistance as soon as possible when they fall behind on mortgage payments. The […]
continue reading Q: Mortgage rates have been going up recently. Do you think that makes now a bad time to buy real estate? Eric, Livingston, NJ A: When you borrow money to buy a home, higher interest rates reduce the amount of home you can buy. For every 1% increase in mortgage interest rates, your purchasing power as a homeowner declines by 9%. However, higher mortgage rates may present a silver lining in today’s US housing markets. Home prices in most of the US in the last few years have increased at unsustainable levels and low mortgage interest rates have probably exacerbated those home price increases. Higher mortgage rates will make it more difficult for many home buyers to purchase a home, […]
continue reading Q: Gerald, we just finished renovating a home we are going to now sell. It took a lot longer to do the renovation than we thought and ended up costing a lot more money than we planned for also. We put it on the market to sell and have received several offers, but I need to make more to make up for my losses, so I’m thinking about holding out for a higher offer. What do you think? Reggie, Orange, NJ A: Reggie, I have done many fix and flips so I understand where you’re coming from, however, you don’t get to decide how much money a buyer is going to pay for a property that you sell. The market […]
continue reading Q: Gerald, my ex-husband and I split up and I got the house but fell behind on mortgage payments because I only have one income instead of 2. The bank filed foreclosure against my home. An attorney told me I should file bankruptcy, what do you think? Cheryl, Tinton Falls, NJ A: It is appropriate and beneficial in certain circumstances to file bankruptcy. For example if you have enormous medical bills or very high credit card debt, it may very well make sense to file chapter 7 to eliminate the debt and start over. However there are severe and long lasting consequences from filing bankruptcy that can last for a decade. After you file bankruptcy, it’s very difficult to get […]
continue reading Q: I read somewhere that NJ home prices went up double digits last year. Is there anywhere in NJ where home prices aren’t going up? Rachel, Maplewood, NJ A: Actually, home prices in NJ went up double digits in both of the last 2 calendar years with an even bigger home price increase in 2021 than in 2020. However, there are places where housing demand is going down like in Sussex County and some other more rural parts of the state as more people return to the office and move back to cities as the pandemic is waning. Although there has been a reduction in housing demand in Sussex County and other outer ring areas, home inventory levels still have […]
continue reading Q: How do you think the invasion of Ukraine will affect real estate? Peter, Englewood, NJ A: Any war, especially one where civilians are explicitly targeted brings unfortunate death, destruction and displacement. Interest rates often go down in times of uncertainty, like they did during the initial Covid pandemic lockdowns because investors usually place more capital into safer assets like bonds. This would lead to declining mortgage rates or at a minimum a slowing of mortgage rate increases. It is also possible that a prolonged war in Ukraine may trigger a recession in the US although it’s too early to tell at this point how the conflict will last or when the conflict will end. During a recession, there are […]
continue reading Q: I hear a lot of talk about inflation lately. How will inflation affect homeowners like me? Mike, Rutherford, NJ A: Yes, the pandemic has had a big impact on economies worldwide and has resulted in much higher consumer prices for many items. The good news for homeowners is that historically, real estate has been a great hedge against inflation. In the 1970s when inflation was high, home prices outperformed consumer prices. Since the 70s, home price growth has matched or exceeded consumer price inflation. This is good news for homeowners because the appreciation of the value of your home, which for most people is by far their most valuable asset, in the long run is much more important than […]
continue reading Q: Gerald, I left my job last year to take another job that allowed me to be home with my kids. I have read that many people are quitting their current jobs or getting new jobs. How has this trend affected real estate? Margaret, Scotch Plains, NJ A: The Great Resignation is a phrase coined to describe the recent phenomenon of record high numbers of people leaving their jobs during the COVID-19 pandemic. Some of the people who have left their jobs during the Great resignation worked in real estate and home construction. Home construction projects have seen big delays during the pandemic anyway because of supply chain disruptions which have resulted in longer waits to receive building materials and […]
continue reading Q: Gerald, what is the best corporate entity to use for real estate transactions? Edward, Hillside, NJ A: The most appropriate corporate entity to use in a real estate transaction depends on what real estate transaction you’re doing. It also depends on your capital requirements, your time horizon, whether you’re doing the transaction by yourself or with partners. If you are doing a real estate deal with partners, the ideal entity may depend on the number of partners you have or need to get the deal done. Here are some facts on 2 often used entities in real estate transactions: S Corps & LLCs S Corporations are my least favorite entity for several reasons including the fact that termination of […]
continue reading Q: Gerald, we just closed on our first home. We got a ton of paperwork throughout the process, especially at the end when we finally got the keys. Which of the documents should we keep? Harriet, Belleville, NJ A: I’m going to give you a half dozen home-related documents you definitely should keep in a safe place: Hud-1 settlement statement title policy Deed Survey Mortgage or deed of trust (if you have one) Promissory note (if you have a mortgage or deed of trust) The HUD-1 Settlement Statement is a document that lists all charges and credits to the buyer and to the seller in a real estate transaction–you definitely should keep the Hud-1 from the purchase of your home […]
continue reading Q: Gerald, I am a realtor and it seems like it’s harder and harder to find residential units to buy and rent for my clients. Is there anything that can change that? Jessica, Mahwah, NJ A: Although residential rents and home pricing continue to climb at the moment, a cooling in the office market due to several factors including increased remote working has resulted in a higher supply of unused office space. The glut of office space has created an opportunity to create additional multi-family residential housing. In NJ, there are over 8 million square feet of office conversions in the pipeline for repurposing into residential, mixed-use and industrial space. Some municipalities have been better than others in adapting to […]
continue reading Q: My daughter said she is thinking about buying a tiny home. What do you think about the tiny home trend? Emma, Sparta, NJ A: The tiny-house movement is an architectural and social movement that advocates for downsizing living spaces. A tiny house is a dwelling unit with a maximum of 400 sq ft of floor area compared with the average single family home in the US which has between 2,000 and 2,500 sq ft. Tiny homes are becoming more and more popular. In fact, there is a TV show devoted entirely to the trend. The biggest challenge for tiny home owners is finding a place to put the home, particularly if the owner doesn’t own the land. A tiny […]
continue reading Q: Gerald, I have been a builder for over 20 years and the price of materials and labor are crazy right now. Do you think the price of lumber and other building materials will go down anytime soon? Joe, Point Pleasant, NJ A: After several months of price declines last spring and summer, lumber prices are skyrocketing once again. Lumber prices have almost tripled in the last 4 months. In fact, the latest wave of rising lumber prices adds almost $20,000 on average to the price of a new home which in turn reduces housing affordability especially for first time home buyers. Soaring lumber prices are unfortunately part of a bigger supply chain disruption problem caused by waves of the […]
continue reading Q: Gerald. We are in contract to sell our home and the buyer keeps delaying the closing. We’re moving and buying another home and can’t afford to wait any longer. What can we do? Monica, Roseland, NJ A: The first thing you should do is identify the closing date in the purchase contract you signed with the buyer you are selling your home to. If the closing date in the contract has passed and you’re using a real estate attorney, tell your attorney to send what’s called a time of the essence letter to the buyer’s attorney or the buyer directly if the buyer is not represented by an attorney. In New Jersey, the date set forth in a time […]
continue reading Q: I read that FHA had a racist lending policy. Is that true? Theresa, Montclair, NJ A: The Federal Housing Administration (FHA) operated the National Housing Act of 1934 that provided federal guarantees on mortgage loans to home buyers. From the very beginning, FHA limited federal housing mortgage loan assistance to White buyers denying mortgage loan assistance to Blacks. In fact, this Whites-only federal mortgage loan subsidy was codified in FHA’s manual. For decades, FHA refused to insure houses for Black people living in predominantly Black neighborhoods and also refused to insure houses in White neighborhoods that were deemed “too close” in proximity to Black neighborhoods. For example, in 1940, the FHA denied insurance to a private builder in Detroit […]
continue reading Q: Gerald, my brothers and sisters and I inherited my parents house and I just realized my sister has not been paying the property taxes like she was supposed to. I fell behind on my mortgage before and was able to modify my mortgage loan. Can we do the same thing in this situation? Annette, Linden, NJ A: Annette, unfortunately, municipal liens take precedence and subordinate even mortgage liens and the tax lien foreclosure process is faster and much more unforgiving than the foreclosure process is for delinquent mortgages where borrowers enjoy much more consumer protections. My first suggestion is that you get a payoff from the local tax collector where your parents’ home is located so you know exactly […]
continue reading Q: What should we expect in housing in 2022? Julie, Bayonne, NJ A: The Omicron covid-19 variant looms large over the economy overall in early 2022 and will likely extend the supply chain disruptions we’ve seen throughout the pandemic. Mortgage rates are likely to be volatile this year and if and when mortgage rates increase, it will in turn reduce housing affordability and likely increase rents. Personal incomes are rising massively and will likely continue to increase—personal incomes more than anything else drives housing markets because personal incomes are what allows home buyers to qualify for and pay down mortgages. Home sales are likely to increase in 2022 but at a slower pace than in 2020 or 2021 and home […]
continue reading Q: I’m recently retired and plan to spend most of the winter in Arizona. How can I keep the pipes in my house from freezing during the winter? Joe, Buffalo, NY A: Winter time in many colder places unfortunately means increased risk of pipes in your home or property freezing and bursting. Here are 5 tips to help prevent pipes in your property from freezing: Wrap pipes near exterior walls and in crawl spaces with pipe insulation or with heating tape. Keep your home heated when it’s cold even if you’re going away or leaving the house for a long period of time. Open cabinet doors below sinks to allow heat from the home to circulate. Cover or close […]
continue reading Q: My wife and I bought kitchen appliances and have to wait more than 6 weeks for them to be delivered, I assume because of the pandemic. Is there a way to get appliances faster? Brad, Watchung, NJ A: Real estate is one of many industries that have been affected by supply chain disruptions caused by the pandemic. Many appliance manufacturers have maintained lean inventories for a long time to minimize costs, so recent supply chain disruptions caused by the pandemic have made it difficult for them to keep up with recent increased demand. In addition, manufacturers and suppliers are operating with COVID-19 safety protocols that slow production. Independent appliance dealers are often faster and more reliable now during […]
continue reading Q: My wife and I are buying a new home. Our attorney is holding up the closing because he said he thinks we can get a better mortgage. Do you think he’s right? Earl, Mendham, NJ A: Attorneys play an important role in real estate transactions as legal advisors. I use real estate attorneys to review contracts and leases. An attorney’s job is to interpret the law–that’s it, nothing else. Mortgage financing should be left to mortgage brokers. The key to effectively managing an attorney is to make them stay in their narrow lane which is to give legal advice not financing advice, which is not their area of expertise. Thanks for your question, Earl. For more real estate […]
continue reading Q: I let my friend stay in my condo while I was away taking care of my mother. Now she won’t leave. How can I get her out? Jacqueline, Caldwell, NJ A: It doesn’t sound like your friend was a tenant–tenants have rights that occupants do not. Removal of unauthorized occupants requires pursuit of an ejectment action which is different from an eviction. Evictions normally take place in landlord-tenant court. Ejectment actions in NJ are filed in the special civil part of Superior Court. I strongly suggest you consult an experienced local real estate attorney for counsel on specific steps you should take to remove your friend. Thanks for your question, Jacqueline. For more real estate tips and information visit […]
continue reading Q: My grandparents are thinking about getting a reverse mortgage. Is it true they can lose their home after getting a reverse mortgage? Helen, Bridgewater, NJ A: The simple answer to your question is yes. If at any point during the loan period a reverse mortgage holder becomes delinquent on property taxes, homeowner’s insurance or HOA fees it could result in a default that could trigger a foreclosure action against the reverse mortgage holder. In addition, since one of the terms of a reverse mortgage is that the homeowner is required to live inside the home as their principal residence for most of the year, if the reverse mortgage holder spends the majority of the year living outside the property […]
continue reading Pandemic has been tough and a reminder of the fragility of life. Here are 3 things I’m grateful for Thanksgiving 2021: 1. None of my family or close friends died or got very ill with coronavirus and I didn’t get covid-19-I recognize that many other people were not so lucky. 2. I am not only vaccinated but boosted–the speed & efficacy of the covid-19 vaccines are nothing short of a miracle-especially for those of us in the US. 3. I’m fortunate to work in an industry (real estate) that was not devastated by the pandemic as some industries like travel & hospitality were especially at first. Happy Thanksgiving to all of you out there in my real estate insider family. […]
continue reading Q: Rents seemed to go down in many places during the pandemic. Do you think that will continue? Jules, Montvale, NJ A: Rents are actually rising precipitously in many local real estate markets now because of two main reasons: 1) jobs recovery (almost 90% of jobs slashed during the pandemic have been recovered 2) many first time home buyers can’t afford current home prices which have risen nationally 20-25% on average in the last year and job gains are creating more rental demand. In addition, the eviction moratorium has reduced the availability of rentals. High home sale prices have resulted in falling new mortgage applications and the % of home sales to first time home buyers has fallen recently. The […]
continue reading Q: I read that Zillow closed its iBuying arm. Does that surprise you? Curtis, Nyack, NY A: Another one bites the dust. Yes, Zillow announced last week that it would sunset its iBuying arm, which was its fix and flip business. Zillow also announced it will be laying off 25% of its staff. Zillow’s foray into house flipping is outside of their focus and capability and was doomed to fail from the beginning. Many Wall Street backed real estate start-ups end up overpaying for property so they can raise more money, hoping for short-term appreciation–they obviously don’t understand the difference between investing and speculating. I’m skeptical of most wall street backed real estate start-ups because residential real estate fundamentally is […]
continue reading Q: I got an offer for a home appliance warranty in the mail. Do you think that it’s worth the cost? Hector, Elizabeth, NJ A: The strength of a warranty or insurance of any kind ultimately depends on the legitimacy of whomever is offering it. Insurance companies are better equipped to process claims than an appliance company, so if you have a warranty directly with an appliance company, expect long wait times and red tape when something goes wrong with your appliance. In addition, expect to pay an additional service fee if your appliance breaks down in addition to the premium that you’ve been paying. I was an actuary for an insurance company in a former life and the fact […]
continue reading Q: I’m looking to buy a rental property. At the prices I’m seeing for properties, the rents won’t come close to covering my mortgage and costs. My cousin gets a lot of money for his place when he rents it on airbnb. I feel more comfortable now knowing that. Do you think airbnb is the way to go? Tim, West Orange, NJ A: For 6 hours on Oct 4th 2021 Facebook went down for 6 hours. There are many businesses who are dependent on Facebook who lost revenue during that outage. Likewise, in recent years there are many investors (often newbie investors) who overpaid for rental property hoping to cover their expenses and debt service by renting out a home […]
continue reading Q: Now that he is vaccinated, my son is moving back to Manhattan. The realtor he spoke with told him to prepare for a bidding war with other tenant applicants. Are there really bidding wars for apartments now? Harriet, Mendham, NJ A: Yes, it sounds crazy but there really are bidding wars now both for city apartments as well as for single family home rentals. After many people fled Manhattan during the pandemic particularly at the outset of when NYC was an epicenter for Covid spread, many people are being called back to work and others like your son, who are now vaccinated are being drawn back to the city for the same reasons they were drawn to cities in […]
continue reading Q: My friend’s home had major water damage from Hurricane Ida. Does homeowner’s insurance cover hurricane flooding? Ellen, Totowa, NJ A: Great question, Ellen. Private homeowners insurance policies typically do not cover flood damage. That exclusion also pertains to flooding brought on by or as a result of a hurricane. Typically, you have to purchase flood insurance separately. You may be able to purchase a separate flood insurance policy through the National Flood Insurance Program to help cover hurricane flood damage. The average cost of flood insurance through the National Flood Insurance Program (NFIP) is about $1,000 per year, but the amount you pay depends on your location. Flood and disaster insurance is becoming more and more important as climate […]
continue reading Q: What homes are in hottest demand right now? Lexi, Perth Amboy, N A: Average home inventory in NJ statewide is still less than 2 months which is very low and suggests high demand for homes at most price points. Now that Millennials dominate home buying now, you might think that entry level homes at or below $400,000-$500,000 would be the hottest commodity right now, however, there has been almost a 50% increase of sales of NJ homes in the $1mil-$2.5 mil price range. This surge in buying in the $1 million-$2.5 million price range is primarily due to trade up home buying activity. Trade up home buying occurs when a homeowner sells their home and then purchases a more […]
continue reading Q: Gerald, my nephew won the highest and best offer on a home he and his wife are buying. The appraisal came in lower than their bid price. What can they do? Frank, Tom’s River, NJ A: Assuming your nephew is not paying cash and is getting a mortgage to buy the home, if the appraisal comes in lower than the purchase price he offered and the seller accepted, his lender will likely decrease the amount he can borrow. As a result, he’ll likely have to pay more $ out of pocket or try to convince the seller to lower his asking price. Sometimes you can have some influence on an appraisal but only before the appraisal is actually done. […]
continue reading Q: Is there no end to rising real estate prices in NJ? Caleb, South Orange, NJ A: So far in 2021 home prices in NJ have risen 17%, which is the highest home price % increase in NJ since the 1980s. On average, home prices in NJ over the last 60 years have increased 4-5% a year, so the massive price increases we’ve seen recently cannot continue indefinitely. Ultimately, incomes underpin real estate prices, so when home prices go up faster than incomes prices must eventually fall to reach market equilibrium. Although NJ housing inventory has been rising this year, it’s still less than 2 months which is still very low historically. Home prices rise when inventory is lower than […]
continue reading Q: Gerald, how long do you think the current seller’s market in real estate will continue into the future? Andy, Greenwich, CT A: While there are certainly many more buyers than sellers in many local real estate markets nationwide, which is why home prices have been going up so fast in so many places, there really is no such thing as a seller’s market because buyers always ultimately determine price. Buyers always determine the price when assets are sold because the person with the money always decides the price. The value of a property is determined by the price a buyer is willing to pay for it. Even when there are many more buyers than sellers as there are now […]
continue reading Q: Gerald, a lot of people moved to suburban and rural areas with more space when the pandemic started. Has that trend continued? Martha, Manville, NJ A: People fled urban areas in 2020 to buy and to rent seeking perceived safety from the pandemic as well as more space for their families and for home office space. That initial trend during the pandemic has reversed itself and as I anticipated people are moving back to urban areas both to buy and to rent. For example, rental demand in Manhattan in summer 2021 was the highest it has been in 10 years. Hudson County, where my Jersey City office is located, has recently been the highest performing housing market for residential […]
continue reading Q: Gerald, I am a landlord who has been having trouble collecting rent since the pandemic started. Are rents headed up or down? Earl, Plainfield, NJ A: In July U.S. rents rose 7% for one bedroom apartments & rose almost 9% for 2 bedroom apartments year over year. As the economy improves, people are moving out of shared living situations seeking their own piece of terra firma. In addition, home prices have skyrocketed recently particularly in 2020 when the pandemic first hit and people were fleeing cities looking for more space. Eventually, as home prices climb, many home buyers, especially 1st time home buyers are priced out of the market, which is another reason rents are on the rise. Where […]
continue reading Q: Gerald, I heard that the NJ Gov. extended the eviction and foreclosure moratoriums again, is that true? Cassidy, Weehawken, NJ A: Under the first of two laws NJ Gov. Murphy signed in the first week of August, 2021 renters making less than 80% of the area’s median income will be shielded from eviction through Dec. 31, 2021 for rent owed between March 2020 and Dec. 31, 2021. Renters with income above 80% of the median income will see the eviction moratorium come to an end on Aug. 31, 2021. The measure the Gov. signed surprisingly had bipartisan support and was praised by both housing advocates and landlord groups like the NJ Apartment Association. For tenants who certify that they […]
continue reading Q: Gerald, we just bought our first piece a real estate–a condominium unit. We just sent in our first monthly condo association payment–will that cover our insurance? Duane, Rahway, NJ A: One of the main differences between homeowners and condo insurance is how much the insurance policy protects. Homeowner’s insurance normally includes coverage for both building structure & contents, however, a condominium’s structure is often shared between individual condo owners. When you own a home, you are responsible for both the inside and outside, including the land, garage and any other structures on the property. I’m not exactly sure how your condominium complex is set up, but normally the condominium association pays the annual insurance premiums via monthly condo dues, […]
continue reading Q: Gerald, how will the recent spread of the delta variant affect real estate? Oscar, Bayonne, NJ A: After things on the horizon were looking better for the summer and the rest of the year, vaccination rates plateaued and the delta variant which we knew was more transmissible has been spreading like wildfire. The damage that the delta variant will do both to the economy and real estate will vary from region to region based on vaccination rates and people’s behavior like mask wearing. Places that still have a large majority of unvaccinated residents like Louisiana will be affected more than states that have higher vaccination rates–ICUs and hospitals in unvaccinated areas are full or close to capacity. As we’ve […]
continue reading Q: My son just moved to the west coast. He and his wife want to buy a home out there. How are all the wildfires going to affect home prices and their ability to buy? Chauncey, Island Park, NY A: The effect wildfires have on residential real estate will depend on specific demand for houses in the areas where the wildfires occur. When property values are high, as they are in many parts of California for example, owners tend to rebuild rather than move away after a wildfire. Homeowners in areas like this are also more likely to have an insurance policy to assist them rebuild after a wildfire. Rebuilding has become such a common process in California that there […]
continue reading Q: Housing inventory seems to keep falling. Is that trend going to continue? Terry, Springfield, NJ A: Housing inventory in NJ has actually been rising so far in 2021 although housing inventory is still incredibly low historically. Housing inventory is nowhere near the equilibrium point of 6-7 months where home prices stabilize and beyond which home prices start to move downward. The recent increase in home inventory is being driven by the fact that home affordability is becoming more of an issue as home prices have been rising by double digit percentages. Double digit % home price changes can’t and won’t last forever and the sharp increase in home prices is finally starting to create some price resistance in real […]
continue reading Q: Prices of lots of things have gone up since the pandemic, should I expect to pay more for my homeowner’s insurance also? Eddie, Holmdel, NJ A: Insurers worldwide are constantly recalibrating the risk they insure for particularly now in the wake of the COVID-19 pandemic, which has changed many things in the world of insurance. The pandemic has reduced the risk of burglaries from happening because people have been home more often. The constant presence of residents also makes them more likely to immediately notice and address any structural problems on their property, which lowers the likelihood of filing claims. At the same time, one unexpected consequence of the pandemic was the rise in sewer backups–sewer backup coverage is […]
continue reading Q: Gerald, I really need help with minor repairs on my rental property. How can I find a reliable handyman? Doug, Hackensack, NJ A: A referral from another property owner who has worked with the handyman before is ideal because it’s based on past performance and quality. If you don’t have any referrals, put a handyman wanted sign in a window or in the yard of your rental property with a phone # or email for them to contact. You can also try online on craigslist or similar sites, but the most reliable handymen are usually local, so a sign on the property will only elicit responses from local people. Every handyman doesn’t have the same skill set and experience, […]
continue reading Q: Gerald, my neighbor said we can challenge our property taxes to get them lowered–is that true? How does that work? Jimmy, Montclair, NJ A: Yes, you can appeal your property taxes in either the Tax Court of NJ or your County Board of Taxation–there is an annual deadline to file a property tax appeal which normally falls around the 1st of May. A successful property tax appeal will demonstrate that your property’s assessed value is higher than your home’s current market value. You should do an analysis to determine your property’s realistic eligibility for a property tax reduction because the municipality where your property is located has the right to file a counterclaim to seek to increase your assessed […]
continue reading Q: Are the foreclosure & eviction moratoriums actually going to end at the end of June as scheduled? Frank, Woodland Park, NJ A: The CDC extended the eviction moratorium for one final month until the end of July and FHFA followed suit by extending the foreclosure moratorium until July 31st 2021. Both the CDC and FHFA indicated that these one month extensions are the last and final extensions. NAR (the National Association of REALTORS) as well as The National Apartment Association (NAA) have pushed to end the eviction moratorium. While the basic premise behind the foreclosure & eviction moratoriums was sound in preventing evictions and foreclosures in the middle of a deadly pandemic, some tenants not facing financial pressure have […]
continue reading Q: Gerald, you’ve said many times that home prices keep rising because housing inventory is so low. How many more homes do we need to meet current housing demand? Ezra, Old Tappan, NJ A: Median existing US home prices are up a mind-blowing 19% due in large measure to housing shortages. In a recent NAR (National Association of Realtors) study, the housing shortage we face now is about 5.5 million housing units! There are about 140 million total housing units in the US so 5.5 million is a sizable shortage. The study shows that the shortages exist in all categories of residential housing. The 5.5 million unit housing deficit includes a 2 million shortage of single family homes, a 1 […]
continue reading Q: I got a fine from the city because my tenants put garbage outside my property on the wrong day. Why should I have to pay this fine? Ken, Roselle, NJ A: I have been a landlord for 20 years and believe me I can relate and understand your grief, Ken. In addition to a lease, I require all my tenants to sign and initial a lengthy lease addendum. The lease addendum I make all my tenants sign contains provisions that make tenants responsible for city violations they commit like leaving trash out on the wrong day. Requiring tenants to sign and pledge their understanding that they are responsible for violations they commit does 2 things: 1) it spells things […]
continue reading Q: When the foreclosure moratorium finally ends will there be lots of bank owned property opportunities? Rose, Brick, NJ A: There will certainly be more bank-owned properties (aka REOs) than there are now because foreclosure sheriff sales stopped during the pandemic. However, since home inventory is still so low in most places in the US, we should expect banks to be greedy–looking for top dollar for every property they foreclose on and then sell. I anticipate that banks with their REOs will make the same mistakes that many home sellers are making now as home prices continue to climb–overpricing homes hoping someone will pay higher than market price. If and when that happens, it’s important to be patient, because when […]
continue reading Q: I am a landlord planning to sell a few of my single family homes so I can buy a multi-family property. I need the proceeds from the sales to buy the multi-family. The single family homes I’m planning to sell are different sizes and are located in different towns. Is there a way to figure out which single family homes are likely to sell the fastest? Curtis, Mobile, AL A: The speed at which you sell your single family homes depends mostly on how you price them. Homes that are priced correctly sell the fastest. To sell quickly, a home should be priced at or slightly below the price similar single family homes have recently sold for because they […]
continue reading Q: I am a ‘newbie’ real estate investor. I want to buy property but prices have been going up so much recently, I’m afraid of a crash. Frank, Englewood Cliffs, NJ A: The Economist John Kenneth Galbraith said, “Genius is a rising market.” When property values go up, investors tend to get sloppy about the prices they pay. Red hot real estate markets like the one many of us are living through now attract speculators and fools who think that they can’t lose if they invest in the right market at the right time. This is dangerous thinking that often leads to dangerous investor behavior which is why you are justifiably concerned, Frank. When you buy any asset at current […]
continue reading Q: I am looking for hard money to fund a house I want to fix and flip. I’ve been asking different hard money lenders what interest rate and how many points they charge. What else should I be researching? Carl, Bloomfield, NJ A: If you borrow hard money, there are more costs other than just interest and points. There are endless other fees hard money lenders can and often charge borrowers. Here are 6 other fees that hard money lenders charge: 1. appraisal fees 2. loan fees 3. administration fees 4. inspection fees 5. credit report fees 6. legal fees. That’s just a short list 6 hard money lender fees off the top of my head—-there may be other fees […]
continue reading Q: Gerald, I read that a judge cancelled the eviction moratorium. Can I evict my tenants who have not been paying now? Michael, Orange, NJ A: Yes, that is correct, a federal judge vacated the CDC’s eviction moratorium. With or without that order, you can and should file eviction paperwork if you have tenants who have failed to pay rent or work out a payment arrangement with you. By filing the paperwork now, when landlord-tenant courts open up again, cases should be brought in the order they were filed so it will allow you to get a place in line. It remains to be seen how things will proceed in the very short term after the ruling because the federal […]
continue reading Q: I want to buy a home. Given where home prices are now, I figure I can get more value by buying a home that is in poor condition and needs work. Is there a way to buy a home like that with a mortgage? Steve, Essex Fells, NJ A: Rather than paying high interest rates for an interim loan with short repayment terms and perhaps a big looming balloon payment due on the horizon, HUD Section 203(k) allows homebuyers to buy a house that needs repair or upgrading. Consumer construction loans like 203(k) offer a solution that insures buyers a single, long term, fixed or adjustable rate loan that covers both the acquisition and rehabilitation of a home at […]
continue reading Q: My husband and I have been trying to buy a home for months. There’s been a bidding war for every home we’ve tried to buy so far. Do you have any advice for winning the next home bidding war we face? Bridget, Wayne, NJ A: Because there is a severe shortage of single-family homes in the US right now (almost 4 million housing units!), many people now believe that home bidding wars are unavoidable. The problem with choosing to take part in a bidding war is that it allows other competing buyers to determine the price you pay for a home or property rather than you. For any home or property you buy, you should be the one deciding […]
continue reading Q: Gerald, I’ve heard you talk about the importance of home zoning reform before. What do you think about the White House’s $5 billion housing proposal? Annabella, Union City, NJ A: There is certainly a big residential housing shortage in the US right now. The number of homes for sale now is less than half the number of homes available for sale 15 years ago. The White House is mulling a $5 Billion plan to ease the national housing shortage by pushing local governments to allow apartment buildings in neighborhoods that are currently restricted to single-family homes. The proposal provides financial incentives to local governments that change zoning laws restricting many neighborhoods to single-family homes. Zoning laws were rare in […]
continue reading Q: As a realtor, I look forward to the spring which is usually the strongest home buying season of the year. With Covid, do you think spring buying will be strong in 2021 like in most years? Gladys, Basking Ridge, NJ A: Great question, Gladys. The reason that Spring is traditionally the strongest home buying season of the year is because it normally takes a few months to close on a property after a purchase offer has been accepted and home buyers with kids ideally want to be in their new homes before the start of the fall school year. The pandemic has disrupted both work schedules and school schedules and likely has also disrupted the predictable seasonality of home […]
continue reading Q: When do you think home prices will fall? Scott, Edgewater, NJ A: Whenever home prices increase faster than incomes, a home price correction is inevitable. Home prices in NJ rose almost 12% in 2020—this huge increase was not the result of local real estate market fundamentals, but rather was caused by fear of coronavirus. Although incomes in general did surprisingly increase in 2020, incomes certainly did not increase as much as NJ home prices. Therefore, sometime in the next few years perhaps in 2023 there will be a downward home price correction as local real estate markets in NJ approach market equilibrium. Thanks for your question, Scott. Good luck. For more real estate tips and information visit my blog […]
continue reading Q: Can we expect lots of foreclosures after the foreclosure moratorium is lifted like during the global financial crisis? Valerie, Edison, NJ A: Although mortgage delinquencies have tripled in NJ in the last year, the current mortgage delinquency rate now in NJ is 5.4% which is less than half the delinquency rate in 2013 after the global financial crisis which was 11.8%. Consequently, I don’t believe the foreclosure rate will be as high when the moratorium is lifted as during the global financial crisis after 2008. Nevertheless, foreclosures will inevitably increase after the foreclosure moratorium is lifted because so many people have lost their jobs and because all the foreclosures that were in process before the pandemic were temporarily postponed […]
continue reading Q: What can we expect will happen in real estate after everyone is vaccinated? Sandra, East Brunswick, NJ A: There are many homeowners who’d decided to sell who then pulled their homes off the market when the pandemic hit because they were concerned about letting strangers into their homes. There are also many homeowners who wanted to sell but didn’t over the last year for the same reason. After we’ve achieved herd immunity, many of these homeowners will put their homes on the market to sell which will provide much needed additional housing supply in local real estate markets nationwide. Thanks for your question, Sandra. Good luck. For more real estate tips and information visit my blog at geraldlucas.com.
continue reading Q: I heard they may roll back the property tax deduction limitation from the last tax bill. Is that true? What will the impact be on New Jersey real estate? Henry, Sayreville, NJ A: SALT stands for state and local tax. The 2017 tax reform bill capped SALT deductions at $10,000 so rolling back the SALT deduction limits would impact residential real estate in New Jersey particularly in North Jersey where property taxes are higher. In fact, six NJ Counties have property taxes that on average exceed $10,000 per year. Property taxes aside, the pandemic made many suburban locations more appealing to home buyers and if the SALT Deductibility Act is passed it will restore the pre-2017 deduction. If passed, […]
continue reading Q: I am looking for a partner for a fix and flip property that I have under contract. I spoke to someone who is interested but expects to make a lot more money than I think is possible given the comps and the estimated rehab cost. What do you think? Jimmy, Kearny, NJ A: Jimmy, you should thank this guy for showing interest and then run as fast as you can from him. If you and this person are not on the same page with respect to the facts of the fix and flip deal you have then you should not partner with him. Flipping houses is not rocket science, it’s based on basic math that primarily revolves on a […]
continue reading Q: Gerald, I have been a landlord in NYC for years. I bought my first property in North Jersey and was wondering how much of an extra security deposit I can collect for a pet? Alan, Brooklyn, NY A: According to NJ state law, a landlord may not require or accept more than 1 ½ times 1 month’s rent according to the terms of a lease as a security deposit. Every local real estate market has its own unique landlord-tenant laws and in NJ, the security deposit rule is clear—1 ½ months period—Even when you increase a tenant’s rent as a landlord, the additional amount of security deposit collected annually as additional security cannot be greater than 10 percent of […]
continue reading Q: How will the coronavirus vaccine rollout affect housing? Curtis, Woodland Park, NJ A: As COVID-19 vaccines slowly roll out, people are wondering what the impact will be on local housing markets. The chief economist at realtor.com recently said that “we’re going to settle somewhere in between where we were before COVID and where we were during COVID.” She went on to say that “as the risk of serious illness declines because more people are vaccinated, we expect to see more sellers,” who may have chosen to delay selling their homes during the pandemic. Additional housing supply from previously skittish sellers is critical now after housing inventories hit an all-time low this past December. The expansion of telecommuting amid the […]
continue reading Q: What do you think about the first time homeowner tax credit that is being discussed? Melissa, Rahway, NJ A: The housing industry is keeping a close eye on the Biden administration’s proposal of a $15,000 first-time home buyer tax credit. If the proposal is successfully passed, the $15,000 first-time homebuyer tax credit could be immediately available to homebuyers. Biden’s tax credit is more likely to pass now that democrats control all 3 branches of government. The first-time homebuyer tax credit proposal would obviously be beneficial to first time home buyers who may be struggling during the pandemic to save a sufficient down payment to buy, however, it may also make homes less affordable by pushing home prices higher. Increasing […]
continue reading Q: Many people during the pandemic are working from home. What’s going to happen to all the empty office buildings? Sarah, Glen Ridge, NJ A: As more and more office spaces are empty during the pandemic, New York Governor Andrew Cuomo has thrown his support behind a proposal to let commercial landlords convert office and hotel buildings in New York City to residential use. More and more businesses are re-evaluating their office space needs given that remote work has proven to be not only safer for employees but also more productive and less expensive for businesses. Converting unused commercial space for residential use is a very smart public policy development that will help alleviate the residential housing shortage that has […]
continue reading Q: Does it make a difference what I use to remove snow around my property? Calvin, Parsippany, NJ A: The 2 main snow and ice removal agents people use are rock salt and calcium chloride. The only real advantage of using rock salt over calcium chloride to remove snow and ice is that rock salt is a little cheaper. However, calcium chloride offers several advantages over rock salt: One of the most obvious advantages is that calcium can be effective at much colder temperatures than rock salt. Rock salt loses its effectiveness at temperatures below 15 degrees Fahrenheit. Also, rock salt poisons soil, damages trees and other vegetation, and damages concrete. For these reasons, I recommend using calcium chloride over […]
continue reading Q: Gerald, I have a fix and flip house under contract. Should I start the rehab now in the middle of winter? Larry, Old Tappan, NJ A: Almost all challenges you face in life are situational. Whether you should start doing the rehab right now in the middle of winter depends on several factors including your cost of capital, your daily holding costs, the availability of electrical power at the property and labor availability. If your cost of capital and/or holding costs are high, it may make sense to get started on the rehab immediately because every day you wait is more money out of your pocket. Dilapidated properties often don’t have electrical power and doing the rehab and keeping […]
continue reading Q: Gerald, I’m a newbie investor. I’ve been prospecting to find new deals and I can’t seem to get anywhere. Homeowners have been hanging up on me and yelling at me and it frustrates me which makes me less likely to keep prospecting and following up which I know I should be doing to get my first deal. Danny, Montville, NJ A: Developing any skill takes time and effort, whether it’s learning to walk as an infant, ride a bicycle as a child or drive a car as a teenager. If you fail your first driver’s license road test, it doesn’t mean that you’re never going to be able to drive a car. Your commitment to developing the skill you […]
continue reading Q: Gerald, why did home sales fall at the end of 2020. Vicky, New Brunswick, NJ A: In the Northeast, although pending home sales fell the last few months of 2020, sales are still up from a year ago. Also the sales decline was after 5 straight months of increases. All of these statistics initially are estimates that are often revised as more information comes in. The general market trend of increased home sales continues and is more important than month to month changes. Housing contract signings remain higher than a year ago due to worsening housing inventory shortages and rising home prices. Home prices reached a 14 year high in October 2020, both existing and new home sales should […]
continue reading Q: What do you expect for real estate in 2021, Gerald? Candy, Weehawken, NJ A: 2021 Real Estate Market Forecast 5 Key Areas To Consider: Housing Inventory Pandemic surges & vaccine rollout and implementation New Buyers Entering Marketplace Remote Work Migration There was a shortfall of 4 million newly constructed homes in 2020 nationwide so housing sales are likely to remain strong even if income and the greater economy don’t bounce back because housing inventory relative to demand continues to plummet. The only fix for this problem in the short run is additional housing supply. As with much of what has transpired for the last 9 months, local real estate markets will be affected in large measure by the pandemic […]
continue reading Q: 3 Year End Real Estate Tax Tips A: Year End Real Estate Tax Tip #1. Prepay quarterly estimated state tax payments. Disclaimer: I am not an accountant Consider paying your fourth-quarter estimated state income taxes or any outstanding state income taxes by the end of December. Your payments will be tax deductible for this tax year if you’re not subject to the alternative minimum tax (AMT). Year End Real Estate Tax Tip #2. Contribute the maximum amount of $ allowed to your retirement account There are very few investments better than tax-deferred retirement accounts because they compound your money over time free of taxes. The sooner you get your money into the retirement account, the sooner it has the […]
continue reading Q: Home prices seem to be going up still even during the pandemic, do you think this will continue? Will, Montclair, NJ A: Great question, Will. Housing demand is far outpacing supply right now which is why home prices in so many places continue to rise in many local real estate markets despite the pandemic and all the economic calamity that has gone with it. In Q3 2020, half of all listed properties sold within 3 weeks down from 1 month a year before and more than ⅔ of all listings went under contract in less than 30 days. However, the basic rules of real estate ultimately supersede short term trends. Right now home price growth is outpacing personal income […]
continue reading Q: Gerald, my realtor sent me a market analysis for our home that we are selling, but I think the price is too low because it doesn’t take into account the fact that we have a finished basement, new roof and new deck. I want to get as much money for our home as I can. Christine, Scotch Plains, NJ A: I agree that your finished basement, new roof and new deck are items that increase the appeal of your home to prospective buyers which is very important however, the value of your home which is what the comparative market analysis (CMA) indicates is based on what similar homes have recently sold for in your neighborhood. Both property appeal and […]
continue reading Q: My business partner and I are looking for our 1st rehab property to fix and flip. What should we be careful of with respect to the condition of the property before we buy? Carl, Rockaway, NJ A: The two most serious problems to be concerned with when you buy a property to fix and flip are structural and environmental problems. Because of potential structural or environmental problems, it’s a good idea to pay for a home inspection before you buy a property. Structural problems include foundation cracks and environmental damage may result from contamination from a leaking underground oil tank. A leaking underground oil tank can cost tens of thousands to remediate which can erase all your expected profits […]
continue reading A Very Special 2020 Thanksgiving Message: 2020 has been a very tough year for many obvious reasons amid the pandemic. I try to make gratitude a daily habit. At the end of every day, I try to write down at least one thing that I am grateful for. On this special Thanksgiving, I want to give humble thanks to my many blessings including: 1) the continued good health and happiness of my family and close friends 2) recently celebrating 20 years in the real estate business 3) the fact that unlike many other industries like tourism and hospitality, residential real estate was not devastated by the pandemic. I want to wish all of you in my real estate insider family […]
continue reading Q: Gerald, I have a deal I’m working on right now that will probably collapse because of a lien that we found out is attached to the property. Title searches can be expensive, is there a cheaper way? Tom, Cranford, NJ A: Great question, Tom. Charles Jones is a data trace company–you could have done what’s called a Charles Jones lien search on the property which will only cost about $10-20, a much cheaper alternative to paying for a full, comprehensive title search. You can pay for a Charles Jones property lien search at charlesjones.com Thanks for your question, Tom For more real estate tips and information visit my blog at geraldlucas.com.
continue reading Q: Which markets in North Jersey are hottest right now, Gerald? Holly, Wayne, NJ A: One of the things I track in the local real estate markets I operate in is housing inventory. Housing inventory is a measure of the number of months required for a local housing market to absorb the inventory of currently available unsold homes. The lower the housing inventory, typically, the hotter and more competitive the local real estate market. When housing inventory is very high, it normally foreshadows an impending reduction in home values whereas when housing inventory is very low, it normally foreshadows an increase in home values–the break-even point is about 6 months of housing inventory. I operate in 5 northeast Jersey Counties: […]
continue reading Q: Gerald, I’ve been paying hard money lenders high interest rates for my rehabs. I’d prefer to have some private lenders. What’s the key to getting private lenders? Eric, Tinton Falls, NJ A: Private lenders (in real estate) are people looking for additional income by passively investing in real estate. I wouldn’t necessarily assume that a private lender will necessarily have lower interest rates or better terms than a hard money lender however, since lending money is not their primary business and because they probably don’t have a lot overhead, you can often negotiate better terms when you borrow short term from a private lender–however, the devil is always in the details. That said, trust is the key to forging […]
continue reading Q:Gerald, I have been trying to wholesale for over a year and I can’t seem to find any deals. I had one deal that was about to close and then the seller’s cell phone was disconnected. Any advice? Mark, Mahwah, NJ A: In general when you are not getting the results you want, you need to change what you are doing–as a real estate investor, this normally requires getting more deliberate and aggressive rather than being passive and waiting for things to happen or for someone else to act. There are things in the world that we control and then there are things (most things) that we don’t control. Focus on what you control. Getting good real estate deals is […]
continue reading Q: Gerald, I want to be a real estate investor but there are no good deals in my market, I don’t have any investment capital or any experience. Adam, Bergenfield, NJ A: Nobody starts out with any experience when they do anything for the first time, Adam. As the philosopher, Lao-tzu said, “A journey of a thousand miles begins with a single step.” If you want to be a real estate investor you have to start. Whatever you set out to do, wherever you want to go, you have no choice but to start from where you are now regardless of your present circumstances. Here’s a little story to illustrate my point: Ed & Mark are friends from elementary school […]
continue reading Q: Gerald, mortgage rates are low but I don’t want to miss out on the lowest rates possible. Is now the best time to refinance my mortgage? Gary, Weehawken, NJ A: If your mortgage has a higher interest rate compared to the mortgage rate you can get now given your credit score and income, then refinancing could be a smart financial move. The truth is that everyone’s personal financial situation is different so it’s best to make decisions based on your personal situation not based on generic advice. Historically, the rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%, however, many lenders say a 1% savings is enough […]
continue reading Q: Gerald, I read a recent article about telecommuters leaving cities for Zoom towns. What is a Zoom town? Valerie, Providence, RI A: The pandemic is affecting home buyer demand in major ways as many Americans, particularly those with telecommuting options leave more expensive city centers like San Francisco. In Truckee, Calif., a mountain resort town outside of Lake Tahoe, home prices have risen by almost 25% since last year as Bay Area residents have moved away seeking more home space and lower home prices. Truckee has become a Zoom town, labeled as such because residents can work remotely in a desirable location without the need to live close to an office. Other Zoom town locations like The Hamptons, Cape […]
continue reading Q: My wife and I had been planning to sell our home soon but we pulled back when the pandemic lockdowns began. We still want to sell, what’s different about selling now in the pandemic? Ravi, Brooklyn A: Residential real estate has changed since the onslaught of the pandemic–one of those changes is the current foreclosure moratorium, which has effectively reduced the number of available homes for sale on the market. This reduction in available homes makes competition amongst buyers for houses that are currently for sale more fierce. This intense competition among buyers coupled with record low mortgage rates is making it easier for many homeowners to sell their homes right now. In my new book, “How To Sell […]
continue reading Q: When Will The Foreclosure Moratorium Expire? Tiffany, Edison, NJ A: The moratorium on single-family foreclosures for certain federally-backed mortgages has been extended until the end of December 2020. The extensions will benefit 25-30 million homeowners who have mortgages guaranteed by Fannie Mae and Freddie Mac. Nearly a third of homeowners and renters entered August with unpaid housing bills. Furloughs and job losses due to the pandemic are fueling mortgage and rent defaults. It’s anyone’s guess how long the foreclosure and eviction moratoriums will ultimately expire because the foreclosure moratorium could potentially be extended again at the end of this year. Hopefully, policy makers will signal the expiration of the foreclosure moratorium to give people more time to plan for […]
continue reading Q: Gerald, I just saw an article about a spike in zombie foreclosures this year during the pandemic. What’s a zombie foreclosure and what’s the impact? Derrick, Bayonne, NJ A: Zombie foreclosures rose recently to almost 4% of the over 200,000 homes already in the process of foreclosure–this step in the process before the foreclosure sheriff sale is called pre-foreclosure. A pre-foreclosure becomes a zombie foreclosure when the owner vacates the home when the foreclosure process begins, despite the fact that the property remains in the homeowner’s name. Zombie foreclosures were up 3% from Q2 2020, even though the overall number of homes in the process of foreclosure declined 16% due to the foreclosure moratorium. Vacated properties in foreclosure rose […]
continue reading Q: My brother who has been working in Silicon Valley moved to Idaho where rents are cheaper and is working from home. Will this trend lower housing prices in cities across the US? David, New Brunswick, NJ A: There was definitely an exodus of people from Manhattan in the early days of the pandemic particularly when infection rates were very high in March and April of this year as people migrate looking for more space–a similar phenomenon occurred in San Francisco. In both Manhattan and San Francisco, which are the two most expensive real estate markets in the US, housing inventory is nearly double what it was last year, as homes are staying on the market twice as long as […]
continue reading Q: Do you think rental properties are still a good investment now during the pandemic? Scott, Nyack, NY A: The strength of any investment depends on the numbers (ROI etc.) vis-a-vis the investor’s goals. The pandemic has certainly affected rental property, particularly multi-family rentals because tenant behavior has changed as a result of the pandemic. For example, now that more tenants are staying home during the pandemic, many of the costs and expenses generated in rental properties have increased for things like water, electricity and gas, trash removal as well as cleaning & disinfecting common areas used by tenants, like stairwells, elevators and lobbies. In addition, with so many more people working and learning from home, rental properties are facing […]
continue reading Q: Should I refinance now or wait for lower rates? Mark, Babylon, NY A: Fannie Mae and Freddie Mac are adding an additional .5% fee on most mortgage refinance loans that will raise costs for borrowers who refinance to take advantage of historically low rates. The mortgage giants claim that the new 0.5% fee is intended to mitigate their risk associated with projected losses due to the Covid-19 pandemic. Fannie and Freddie don’t originate loans, instead they buy mortgage loans from lenders, then wrap them into securities and guarantee the repayment of principal and interest to investors who buy the securities. The Mortgage Bankers Association, said the fee would raise costs for the typical borrower by $1,400. To avoid the […]
continue reading Q: I’m a realtor. Everyone is talking about whether schools will reopen fully this fall because of the Coronavirus shutdowns. Many of my buyers in the past have tried to time their closing so their kids don’t have to switch schools mid-year. Will the school re-openings affect home buying activity this fall? Christina, Summit, NJ A: COVID-19 has disrupted traditional home buying seasonality in a major way. Traditionally, the Spring has the highest home buyer demand as families as you pointed out often try to close on the homes they buy during the summer before the school year begins. The pandemic lockdown in the spring postponed the usually strong spring home buying market and the confusion around school reopenings may […]
continue reading Q: How long will the foreclosure moratorium last? Eileen, Palisades Park, NJ A: The foreclosure moratorium had been set to expire at the end of June and was extended through the end of August–it certainly can and may be extended again. At present, the moratorium on evictions and foreclosures seems to be having their intended effect. Foreclosure filings are currently at their lowest rate in 15 Years. The FHFA oversees Fannie Mae and Freddie Mac, as well as the 11 Federal Home Loan Banks. Together, these entities provide more than $6.4 trillion in aggregate funding for U.S. mortgage markets and financial institutions. Over 50 million Americans have filed for unemployment so far. Though new jobless claims have been slowing, the […]
continue reading Q: How does what the Fed does affect mortgage interest rates? Carl, Edison, NJ A: The Fed doesn’t set mortgage rates directly. The Fed sets the federal funds rate, which impacts short-term and variable interest rates. Other factors affect mortgage rates like price inflation as well as supply and demand–lenders for example may decrease interest rates to attract more business. The Fed’s monetary policy can increase or decrease interest rates which affect mortgage rates but only indirectly. Thanks for your question, Carl. For more real estate tips and information visit my blog at geraldlucas.com.
continue reading Q: More and more people are filing for unemployment now. How will this impact real estate? Cameron, Essex Fells, NJ A: The job market serves is one of the most important factors that determine how many people will buy homes. In general high unemployment creates lower expected future income and lower demand for housing overall. People who have unfortunately lost their jobs are unlikely to buy homes in the near future. While wealthy buyers may be shielded from the economic downturn that the pandemic has caused, they may be hesitant to spend money on property as we face economic uncertainty. The effect of the coronavirus on the housing market is hard to forecast, a lot depends on how deep the […]
continue reading Q: How has real estate changed because of Covid-19? Gail, Hempstead, NY A: We are still in the early innings of the pandemic but so far the same basic rules of residential real estate still apply (not sure the same can be said about commercial real estate, but that’s another discussion). As was the case before the pandemic, supply and demand affect residential real estate more than any other factor. Here are 3 salient changes I’ve noticed since restrictions in my local market have been lifting: 1. There is pent up demand that is driving sales and even bidding wars 2. Housing supply is even lower than before the pandemic as some property owners have pulled listings off the market […]
continue reading Q: With unemployment so high now, do you think people who sell their homes now should lower their asking price? Kevin, Palisades Park, NJ A: Every local real estate market is different and has and will respond to the pandemic and the economic fallout that results from it in its own way. What I’ve seen so far during the pandemic in north jersey is after the initial lockdown in March and April a rebound in buying activity in May and June due in part because the virus is currently under control in our area. There was pent up home buyer demand and even lower housing inventory than before the pandemic which so far has made home prices in our area […]
continue reading Q: How Will A 2nd Coronavirus Wave Affect Real Estate? Hector, Elizabeth, NJ A: In the US, we are unfortunately still dealing with the 1st wave of the Coronavirus because our preparation and response thus far has been so bad compared to the rest of the developed world. Any spike in Coronavirus will reduce mobility which will ultimately have a negative effect at least in the short term on real estate. If and when there is a 2nd wave of Covid-19, the effect will depend on what time of the year a second wave occurs in each local real estate market. If a second wave occurs during the holidays when real estate activity tends to slow anyway it will have […]
continue reading Q: Is it true that suburban homes are more valuable now than properties in cities because of what’s happening with coronavirus? Stan, Morris Plains, NJ A: So far, in the markets I operate in in North Jersey, there seems to have been a shift in buyer demand–higher demand for vacant homes, homes with backyards, homes with home office space and pools. However, the initial perceived changes in demand caused by the pandemic may or may not continue in their current trajectory. Although many people have already predicted a flight from cities to suburbs and more rural areas due to the initial impact of the virus on cities, right now most of the covid-19 hot spots tend to be in more […]
continue reading Q: Real estate sales have slowed a lot during the virus lockdown. Do you think real estate sales will continue to be slow for the rest of this year? Duncan, Greenwich, CT A: Residential real estate buying is typically seasonal with the strongest sales usually occurring in the Spring. Since most of the US was in Covid-19 lockdown for most of the Spring, it is likely that the Spring homebuying spree will shift to later in the year. This shift in demand may in fact occur this summer in places like NJ where I operate that have effectively contained the virus-at least for now. Coronavirus mitigation will have an inordinate effect on the economy and real estate for the foreseeable […]
continue reading Q: I noticed many big institutional buyers of property are holding back now during the pandemic. How much of an equity cushion do you need when you buy investment property now? Jimmy, Franklin Lakes, NJ A: With respect to residential property, more uncertainty requires more of an equity cushion when you buy to mitigate your risk. Take a note from the actions of hard money lenders (HMLs) recently who are lending at lower LTVs thereby requiring higher down payments from investor borrowers and are also requiring borrowers show much higher reserves from investors. The less certain you are about the true value of a property, the less you should pay for it–as a rule, investors should discount their purchase offer […]
continue reading Q: When do you think it makes sense to take money from retirement if you’ve been struggling financially during the Coronavirus pandemic? Carlos, Paterson, NJ A: You should always make financial decisions based on your specific financial and personal situation not based on generic advice you hear from others. Under the legislation Congress passed in March, you can withdraw up to $100,000 from retirement savings without triggering the 10% early withdrawal penalty that normally comes with it however, it’s prudent to liquidate retirement money only as a last resort–meaning, after all other possible avenues to get money fail. If you find yourself in a financial hole, the first thing you want to do is stop digging, so if you’ve lost […]
continue reading Q: Gerald, will New York City’s new rental laws affect real estate in NJ? Doug, Hoboken, NJ A: NYC recently approved a package of rent laws that affects NYC’s 5.4 million NY renters and landlords. Among other things the new laws affect rent increases, broker fees and evictions. The most powerful force in real estate and most markets is supply and demand. These new NYC laws already have resulted in many new york landlords and investors looking at other local markets to do business in CT, Long Island and NJ–I have certainly seen more competition from NY investors in the local real estate markets I operate in. The competition will certainly have an effect on demand as will the corona […]
continue reading Q: Do you think the Covid-19 pandemic will cause more home foreclosures? Victor, Bronx, NY A: In the short term, lenders will be eager to at least try to rework or modify mortgage loans particularly with the foreclosure moratorium that currently exists–this will stave off an increase in foreclosures for the time being. However, the mortgage forbearance that banks are currently offering is not debt forgiveness and at some point later this year or next year, those mortgage payments will be due–if borrowers are still unemployed or underemployed and have burned through their savings, there will be an expected increase in foreclosure actions with income or lack thereof as is normally the case being the biggest driver. Thanks for your […]
continue reading Q: How will Covid-19 affect rents? Hailey, Hoboken, NJ A: Every local real estate rental market is different with it’s own unique set of characteristics and laws so the effect of the Coronavirus like any exogenous factor will vary from place to place. It may be useful to think of how rents will be affected by Coronavirus in terms of the short term impact vs. medium and long time impact. In the short term, given that many places have instituted eviction moratoriums, landlords have no choice but to be patient. Smart landlords will be flexible, offer options to affected tenants while being clear and consistent–other landlords won’t and will ultimately suffer as a result. Regarding airbnb and similar short term […]
continue reading Q: Is now a good time to buy a home? Meredith, Clifton, NJ A: A recent gallup poll revealed that a record low percentage of Americans (both among homeowners and renters) thought that now was a good time to buy a home? This pessimism shows that the coronavirus blues have set in in many places understandably. Any big purchase like a home should be made with a focus on your individual financial goals and personal financial situation. Putting aside investment property for a moment, mortgage rates are at all time lows which makes now one of the best times to buy or refinance an owner-occupied home at a fixed interest rate. Every 1 point drop in interest rates increases your […]
continue reading Q: Gerald, when will we finally get past the Coronavirus epidemic? Dale, Orlando, Fl A: Contrary to popular belief, weather forecasts are reliably accurate. If there is a 30% chance of rain, it rains 30% of the time. The problem is that most people are looking for something that the weatherman and most health experts in the middle of the COV-19 crisis can’t provide: certainty. Expecting certainty is unrealistic and potentially dangerous because it gives people a false sense of security as they wait for things to magically play out the way they expect. People seem to naturally desire things they can’t have. The world we live in is a complex system with multiple variables that affect it that are […]
continue reading Q: Do mortgage forbearances that banks are offering apply to condo and homeowner association dues? Alice, Cresskill, NJ A: At the end of March, NJ Governor Murphy announced that Citigroup, JP Morgan Chase, US Bank, Wells Fargo and Bank of America agreed to a 90 day grace period due to the COVID-19 epidemic, where borrowers can lower or delay monthly mortgage payments. Many federal & state-chartered banks and credit unions also agreed to the mortgage forbearance period. Borrowers should reach out to your mortgage lender directly however to confirm that they agreed to the temporary forbearance grace period because it will vary from company to company. Unless the board of the condo or homeowner’s association has decided to allow for […]
continue reading Q: Gerald, I am a new wholesaler, how will the Coronavirus affect rehabbing? Derrick, Westfield, NJ A: During the Coronavirus crisis, private money is likely to be king at least for a while as hard money lender money sources dry up, this will certainly affect you at least indirectly as a wholesaler. Private lenders are typically individuals seeking additional income by passively investing in real estate. It’s a good idea to develop relationships with private lenders regardless of where your real estate market is–it takes time to build a relationship with a private lender–they’ll need to get comfortable with and trust you before they’ll lend their money to you–you can assuage private investors’ fears by being totally honest and upfront […]
continue reading Q: How will coronavirus affect home prices? Ed, Cranford, NJ A: Ed, coronavirus will cause a correction in the real estate market. Since real estate is a local phenomenon the impact on home prices will differ from place to place based on supply, demand, personal income and employment in each local real estate market. In NJ, after an almost 5% increase in home prices in 2019, the real estate valuations expert I follow predicts a 5-12% decrease in NJ home prices due to the coronavirus crisis. The good news is that record low mortgage interest rates and trillions of dollars of government stimulus will likely trigger a big rebound in home sales and home prices after the coronavirus is in […]
continue reading Q: How will the Coronavirus crisis affect mortgages? Diane, Scotch Plains, NJ A: The Director of FHFA said that Fannie Mae & Freddie Mac which guarantee almost half of US mortgages said they have resources to last through a quarantine lockdown of 12 weeks–he said that a lockdown longer than 2-3 months would be a real stress to the mortgage market like what we saw during the great recession. One big potential problem in the mortgage market lies with mortgage servicers who collect mortgage payments from borrowers and pass them onto investors. Mortgage servicers are required to pay mortgages even when borrowers are granted forbearance–Fannie & Freddie aren’t required to repay servicers for 6 months which may create liquidity problems […]
continue reading Q: How will the coronavirus affect the economy and real estate? Carl, Scotch Plains, NJ. A: It’s too early to tell the full extent of the effect on the economy and residential real estate but all signs point to a severe recession as bad or worse than the recession around the global financial crisis of 2008-2009. Mohamed El-Erian, who was CEO of the world’s biggest bond fund said recently that a global depression is possible. The problem is that there is no economic solution to this crisis–as long as millions of people are worrying about getting sick, you can’t fix the economy because there has been a breakdown of the mechanism of exchange upon which an economy depends. The key […]
continue reading Q: Gerald, I’m a realtor. I keep seeing businesses shut down because of Coronavirus–should realtors stop working? Karen, Bloomfield, NJ. A: Thanks for asking such an important question, Karen. To start things off, let’s set priorities: Keeping yourself, your family and your community safe and flattening the curve which means slowing down the spread of the coronavirus should be paramount to everyone–you, me and everyone else. The precautions that you are seeing more and more of (i.e. business closings etc.) serve that purpose–to slow the spread of the virus and we should all do our part to adhere to those precautions. To answer your question, here’s a hypothetical question that you and everyone else should ask themselves: Can you do […]
continue reading Q: I’m buying a house. The current owner’s water bill seems high. How can I lower the water bill when I own the property? Harry, Rahway, NJ A: Here are 3 ways to lower home water bills: Buy energy efficient appliances Use a dishwasher rather than washing dishes by hand. You use over 25 gallons of water when you wash dishes by hand versus less than 5 gallons of water with an energy efficient dishwasher Test your toilets and look for leaks on a regular basis. A tiny opening in your faucet could waste 100 gallons of water a day and most faucet drips can be fixed by just replacing a worn-out washer. For more real estate tips and information […]
continue reading Q: My husband and I are buying a home. Our mortgage guy said we need a jumbo loan. What is a jumbo loan and how is it different than a regular loan? Janice, Scotch Plains, NJ A: Fannie Mae and Freddie Mac set guidelines for mortgage loans. Loans that conform to those guidelines are called conforming loans—conforming loans make up the majority of residential loans. Loans that exceed the limits set for conforming loans that can be sold on the secondary mortgage market are called jumbo loans. Lenders typically are able to sell conforming mortgages in the secondary market, replenishing their credit lines in order to originate more loans. Jumbo loans don’t have a strong secondary market to sell to […]
continue reading Q: Is buying always better than renting? Sandy, Linden, NJ A: The first thing to consider whether you rent or buy is affordability—what can you reasonably afford? In some places like Manhattan or San Francisco, homeownership may be out of reach for many people because the price of land is so high. Overall, the benefits of homeownership certainly add up over time (tax deductions, wealth or equity creation etc.). It is unwise to think of renting vs. buying in a one size fits all way. As with all important life decisions, before considering whether to rent or buy, you should look honestly at your current personal situation—your income, your debt, your marital status and most importantly, your goals-short term and […]
continue reading Q: I have a tenant that continually smokes cigarettes and has pets despite the fact that both are violations of the terms of his lease. The tenant is section 8, does that mean I can’t evict him? Fred, Bristol, PA A: It’s in the best interest of a landlord to avoid eviction if possible. The first step I suggest you take (if you haven’t already) is notify the tenant in writing that smoking cigarettes and having a pet is a breach of his lease and grounds for eviction. The Section 8 rental assistance program gives tenants rent vouchers to help them afford housing, however, all tenants regardless of how they pay their rent are required to abide by the terms […]
continue reading Q: Hi Gerald, I found a great deal on a property that I want to buy. I’m satisfied that I did enough due diligence: I checked sold price comparables and the property is fully rented in an area where I know I can find other tenants. The problem is that my attorney is trying to convince me not to buy it. What do you think I should do? Kevin, Salt Lake City, Utah A: Good real estate attorneys play a critical role on your real estate team. There are some very good real estate attorneys and there are many real estate attorneys that are awful. I use attorneys to review contracts, but never to make business decisions—that’s my job as […]
continue reading Q: My daughter is finishing up her junior year in college. She is renting an apartment. How much can the landlord increase her rent? Lindsay, Delran, NJ A: If your daughter signed a written lease, her rent payments are fixed and can’t be increased throughout the term of the lease. If your daughter is renting month-to-month, her rent can’t be increased until the end of any given month. The best protection against rent increases is a longer term lease–leases can be as long as both parties decide. Landlord-tenant laws vary widely from state to state and they vary in different towns, cities and counties within states. In general, rents are determined by the law of supply and demand however, some […]
continue reading Q: Gerald, I made a commitment to build my real estate business but I am having a very tough time with bad tenants, contractors and attorneys. What am I doing wrong? Charlie, Linden, NJ A: Building any business is challenging. It’s easy to focus on the pain and frustration that normally accompany struggle, however I suggest you consider how much you are growing and developing personally and professionally as a result of these struggles you are dealing with in your real estate business. There is in fact an inextricable link between struggle and progress. When you exercise, you damage muscle fibers that your body repairs and replaces usually resulting in stronger muscles. When you learned to walk and ride a […]
continue reading Q: Gerald, how will climate change affect real estate? Evan, Toms River, NJ A: Climate experts predict that 2% of US homes are at risk of being underwater by 2100 and in low-lying coastal areas in places like Florida & Hawaii, over 10% of homes could be inundated by water. The fact is that rising water levels, heat waves, droughts and wildfires will for sure increase the cost to insure property and local government building ordinances and re-building guidelines will affect where and how property will be built in at risk areas like in coastal areas. In New Orleans for example, after hurricane Katrina, homes have been rebuilt at higher elevations, with storm shutters, stormproof windows and draining systems. Real […]
continue reading Q: Hi Gerald, I need to find a good contractor to do some property renovations. The last time I hired a contractor, he took forever to do the work and never finished even though we paid him in full. I’d do the work myself, but with our new baby and the increased hours I have to work on my new job, I just don’t have the time. What should I do? Steve, Hartford, Connecticut. A: Real estate is best done in writing rather than based on verbal agreements which can be easily misconstrued. My first piece of advice is for you to make any contractor you work with sign a written contract before any work is done or any money […]
continue reading Q: I’m a new landlord. I’m preparing to rent out an apartment in my new property. A friend of mine told me to avoid section 8 tenants. Can I refuse to rent to a tenant if he or she gets section 8 assistance? John, New Brunswick, New Jersey A: Hi John. In New Jersey you cannot discriminate based on a person’s source of income, thus refusing to rent your apartment to a tenant because they receive section 8 assistance would certainly violate that rule. Landlord tenant laws vary a great deal from place to place, so always consult the rules in the area where your property is located. As a landlord, it’s best to have a thorough written rental policy […]
continue reading Q: Gerald, I’m newbie real estate investor. I know you’ve said that I should work with investor-friendly realtors. What exactly is an investor-friendly realtor? Carlos, Union City, NJ A: Realtors are typically trying to maximize their commission checks while investors are typically trying to buy properties as cheap as possible (these are not the same goals). Consequently, realtors will often look at investors as time-wasters, which is why you should always be upfront about being an investor and never feel bad if a realtor doesn’t want to work with you–just move on to the next Realtor until you find one that is investor-friendly. Good realtors usually have a niche and for some realtors that niche is investors. Investor-friendly realtors are […]
continue reading Prepay January mortgage payment to increase your mortgage deduction this year Real estate investors should make more purchase offers while competition is lighter over the holidays–this will increase the likelihood your offers will be accepted Landlords, protect property’s indoor pipes this month and throughout the winter especially under sinks, in attics and crawl spaces, and on pipes along exterior walls. Pay special attention to basements, where over ⅓ all burst pipes occur. Merry Christmas. Happy Holidays! For more real estate tips and information visit my blog at geraldlucas.com.
continue reading Q: I’m buying my first home. Do I need a pre-qualification, a pre-approval or both? What’s the difference? Emma, Little Falls, NJ A: A pre-qualification is an estimate of what a buyer can afford to borrow to buy a home. A pre-approval is a conditional approval for a mortgage loan based on the documented proof a borrower/buyer supplies. Use a pre-qualification to determine what home price range you should be looking for homes. A pre-qualification is not binding. When you are ready to actually buy a home, get a pre-approval from a mortgage broker (brokers are typically better than banks because they have access to multiple lenders, banks and loan products). Having a pre-approval in hand shows home sellers and […]
continue reading Q: What’s the best way to find out if a property has an oil tank before you buy it? Randy, Hackensack, NJ A: Sometimes you can actually see an oil tank if it’s above ground like in a property’s basement. You can also contact the town where the property is located or the department of environmental protection to find out if there are any records of oil tanks being removed. Oil tanks are often underground, so the safest way to proceed is to hire a specialist to do a tank scan of the property–normally using a metal detector to locate underground tanks. If they find a tank, you’ll need someone to test the ground for contamination and worst case scenario […]
continue reading Q: I have lost several real estate deals recently to another investor in my area. My marketing and pitch focus on my ability to close in 30 days or less. The investor who got the last 2 deals didn’t even close for several months. What am I doing wrong? Cooper, North Brunswick, NJ A: How do you know that closing in under 30 days is what is most important to the sellers you are negotiating with?—that’s an assumption you’re making that may not be true. Despite their obvious usefulness in our daily lives, assumptions are imperfect short cuts that are often inaccurate. We can overuse assumptions or make an inaccurate assumption about a person or a situation. Nobody can predict […]
continue reading Q: I’m a realtor and real estate tends to slow down over Thanksgiving and the holidays. What can I do to boost my business and avoid the seasonal slowdown? Belinda, Clifton, NJ A: Here are 3 Thanksgiving real estate marketing tips to keep your business moving over Thanksgiving and the holidays: Send thank you cards to past clients. It’s a lot easier to win additional business from someone who is already familiar with you than it is to earn new business–this is low hanging fruit that you should take advantage of Send Thanksgiving gift basket to partners, investors and past clients–most people send holiday stuff around Christmas, so sending Thanksgiving baskets is a great way to differentiate yourself from all […]
continue reading Q: I am a realtor with a new listing–the homeowner is behind on their mortgage, how do I know if we’ll have to do a short sale? Crystal, Mount Holly, NJ A: Great question. Whether a short sale is necessary to sell the home depends primarily on two factors: 1) Net $ Proceeds From Sale and 2) Outstanding Lien Payoff Amounts. Unfortunately, both the net proceeds from the sale and the outstanding lien payoffs will occur in the future on the closing date and are currently unknown. When a borrower is in default, mortgage lien payoff balances typically skyrocket and increase on a daily basis due to unpaid interest, legal fees, property taxes etc. However, you can normally predict whether […]
continue reading Q: How will the new foreclosure legislation in NJ affect the process? Henry, Chatham, NJ A: Many of the new foreclosure law changes enacted in 2019 in NJ are procedural and are intended to help struggling homeowners facing foreclosure. Here are 3 of the new changes: 1) NJ’s foreclosure mediation program was strengthened 2) The statute of limitations for most residential foreclosure actions was reduced from 20 years to 6 years from the date the debtor defaults 3) the additional time granted for the two automatic adjournments that homeowners facing foreclosure can apply for to postpone a sheriff sale were doubled–each adjournment now results in a four week postponement–up from 2 weeks. Thanks for your question, Henry. For more real […]
continue reading Q: I read a few articles this year about more Wall Street layoffs. Will this affect NJ home prices? Curt, Berkeley Heights, NJ A: Every day over 300,000 people in NJ go into work in New York City. While the US labor market is historically strong, banks like HSBC & Deutsche Bank have laid off thousands of people this year. Wall Street certainly appears to be shrinking as investment management is expanding beyond New York City which may have an impact on home prices in some Jersey communities. Big luxury homes are the weakest sector in NJ housing markets as days on market for these homes is substantially higher than for other homes. There is a shift happening in housing […]
continue reading Q: My business partner and I are doing our first rehab. Do you have any tips to help us avoid mistakes other new rehabbers make? Carl, Point Pleasant, NJ A: Here are 3 mistakes that new rehabbers make that you should try to avoid: 1) underestimating rehab costs—no matter how many property rehabs you do, property renovations always seem to cost more money than you initially think they will, so it’s very important that you leave room for cost over-runs in your rehab planning 2) over improving property–when you rehab a property to sell, your goal is to maximize your profit which requires keeping your costs to a minimum. You should rehab a property to fit the character of the […]
continue reading Q: I have a new listing and the property is on the sheriff sale list. I don’t have much experience with foreclosures, what should I do to get this closed? Nancy, Bayonne, NJ A: I’ll start by differentiating between pre-foreclosures and REOs. With a pre-foreclosure, the homeowner still owns the house, whereas an REO, which stands for real estate owned is post-foreclosure and is owned typically by the lender or party that successfully foreclosed on the property. As with all listings, it’s important that you don’t over-price—although it may seem counterintuitive, lower listing prices typically result in higher sales prices because the listing will attract a wider pool of buyers. Pre-foreclosures like the one you just listed bring an additional […]
continue reading Q: Gerald, I really enjoy listening to your real estate podcast. I’ve been trying to do my first real estate deal done for a while, but I’m a newbie and I’m afraid of making a big mistake. Can you give me any advice? Jason, Kenilworth, NJ A: Since you already listen to my real estate podcast, then I’m sure you’ve heard me say that the key to getting real estate deals is making purchase offers on a regular basis and then following up on those offers—-that is easier said than done. Your mind is a powerful machine that can work to your benefit or work against you. Sounds like you are letting fear get the best of you. Most of […]
continue reading Q: I just bought a home with a fireplace–I’ve never had one before. What do I need to do to maintain it? Eddie, Westwood, NJ A: Whenever wood is burned in a fireplace, smoke goes up the chimney and a substance called creosote is deposited in the flue lining. Creosote is a mixture of tar and soot that can cause a chimney fire. Whether you’re burning wood or pellets or gas, smoke goes up the chimney and creosote builds up over time. Creosote is EXTREMELY flammable which is why it creates such a big fire risk. You can prevent chimney fires by cleaning your chimney–you can hire someone to do it or you can buy a chimney brush and fiberglass […]
continue reading Q: I read an article that more employed people are keeping their jobs, moving to cheaper places to live and telecommuting. Will telecommuting affect property values in both places? Henry, Charlotte, NC A: The percentage of people living in urban area working from home has increased over 40% in the last decade. Freelancers, consultants are moving to places like Charlotte, Nashville, Indianapolis, Reno and Boise from more expensive cities like New York, San Francisco, Seattle and Chicago because the cost of living is much lower. Ultimately, real estate boils down to supply and demand–so long as there are enough people to take the place of those who move out, people leaving higher priced cities won’t have much of a downward […]
continue reading Q: I met someone who told me that I could lower my property taxes. How does that process work? Susan, Montclair, NJ A: A tax appeal is the legal method through which you may be able to lower your property taxes. NJ property taxes are among the highest in the US. You can appeal your taxes if your property’s actual value is less than its assessed value. There’s no guarantee but you can appeal your property assessment with your County Board of Taxation. Most times the tax appeal filing needs to be done on or before April 1st of each year, but check with your County Board of Taxation for the correct date. Some Boards of Taxation require the property […]
continue reading Q: We found a home for sale online and it says that the bank owns the property. How is buying a bank owned property different than buying a regular home? Janet, Chula Vista, CA A: Here are 3 ways buying bank owned properties is different than buying a home from a regular seller: 1. Condensed inspection period–typically banks require home inspections be done in a shorter period of time when they sell property they own, 2. Non-refundable deposit–banks often require buyers to pay a non-refundable deposit when they sell properties they own 3. No prior owner knowledge of property, so caveat emptor–it’s always a good idea to get a thorough property inspection done before you buy a home but it […]
continue reading Q: I was reading an article about a real estate investment firm that rehabs and flips properties in areas after they’ve sustained a natural disaster–is that a good strategy? Todd, Corolla, NC A: Every local real estate market is different, so it’s very important that before you invest anywhere you do your homework first. Preparation is even more important before you invest in an area that has sustained a natural disaster because there are likely additional challenges you have to contend with like the lack of electrical power for example. Before even considering a disaster property investment, you’d want to line up and partner with local contractors, architects and speak with the local building department to find out exactly what’s […]
continue reading Q: I read that the new opportunity zones allow investors to avoid paying capital gains taxes-how are opportunity zones different from 1031 exchanges? Eugene, Cleveland, OH A: 1031 exchanges require an intermediary to hold onto proceeds that result from the sale of property while the seller lines up another investment, whereas funds invested in opportunity zones don’t need to be kept separate–investors just have to file Form 8949 with their income taxes. Another difference between opportunity zones and 1031 exchanges, which allow real estate investors to defer taxes on capital gains from the sale of property by reinvesting the proceeds from the sale into another property within 180 days is that 1031 exchanges don’t allow investors to permanently exclude profit […]
continue reading Q: I’m buying a home. Do you think I should get a 30 year or 15 year mortgage. Henry, Kissimmee, Fl A: Great question. You will pay your mortgage off twice as fast and pay considerably less interest with a 15 year mortgage than you will with a 30 year mortgage. However, when you sign a promissory note on a mortgage, you are making a commitment to making regular monthly payments come hell or high water. It’s very difficult to forecast 15 or 30 years into the future and life has a way of throwing unpredictable events and crises at you when you least expect them. In addition, your regular payments associated with your home extend behind principal and interest—they […]
continue reading Q: I am planning to refinance my home. I still have student loans, should I roll my student loans into my mortgage? Peter, Phoenix, AZ A: There are both pros and cons to rolling student loan debt into mortgage debt. Refinancing to eliminate school debt may be advantageous to the extent that student loans typically can’t be discharged in bankruptcy. Also, rolling student debt into a mortgage may allow borrowers to invest more money in tax advantaged retirement plans sooner which results in substantial long term financial benefits. However, there are drawbacks to replacing student loans with mortgage debt like not being able to defer repayment–you can normally defer student loan payments when a life event or circumstance arises making […]
continue reading Q: How will the fed’s new rate cut affect housing? Haley, Montauk, NY A: The Federal Reserve announced that it would cut interest rates for the first time since the last recession. Economists are split on the immediate impact it will have on the housing market—what else is new?! Borrowers with adjustable-rate mortgages and commercial real estate loans will benefit from the rate cut. The important issue is how and if the fed’s rate cut will affect mortgage rates. The chief economist at realtor.com doesn’t believe the Fed’s rate cut will lead to a drop in longer-term mortgage rates because the rate cut announcement was anticipated. However, a rise in mortgage rates could further weaken already slowing housing markets, as […]
continue reading Q: I have a good job and I’d like to own my own property, but real estate prices are so very high, it’s hard for me to justify paying that much money to own. Are there any other options for me? Jessica, Hoboken, NJ A: Most Americans of all ages want to realize the American dream by becoming homeowners. Millennials recently surpassed baby boomers as the biggest population group in the US. 3 of the biggest challenges millennial home buyers currently face despite still historically low interest rates are: 1) student loan debt has tripled in the last decade 2) starter homes are in short supply in many local real estate markets and 3) credit score requirements for home loans […]
continue reading Q: I hired a contractor to do some work on my property. I was excited when I hired him because this guy gave me by far the cheapest quote to do the work of anyone I spoke to. This guy turned out to be a liar and he doesn’t seem to know what he’s doing. The job has taken much longer than he promised. What should I do differently next time? Michael, New Rochelle, NY A: Unfortunately, almost everyone in real estate has had bad experiences with working with contractors, so don’t feel bad–it’s a learning experience that can help you grow and get wiser. The one thing you seem to have done which was smart was get multiple quotes […]
continue reading Q: Are algorithms radically transforming real estate as much as I’m reading and hearing lately? Cindy, Cambridge, MA A: It’s a good idea to take anything you read or hear in the media with a grain of salt–everyone has their own agenda and the agenda of most media purveyors is to get you to pay attention. At a high level, the only constant in the world is change, so algorithms and technology are certainly changing and transforming real estate and all other businesses. The important question is “to what extent are algorithms transforming residential real estate”? People typically buy based on emotion and then justify their buying decisions using logic–this applies especially to real estate given the enormous psychological and […]
continue reading Q: Where is the biggest risk in US real estate now? Craig, Greenbelt, MD A: The lending market has shifted dramatically over the past few years from domination by big banks to domination by non-banks, financial institutions that only make loans and do not offer deposit accounts. In some ways non-banks are more nimble and can offer more loan products than big banks—housing prices and the housing market would be significantly less dynamic without these non-traditional lenders. In 2011, 50% of all new mortgage money was loaned by the three biggest banks in the United States, by 2016, the share of loans originated by the three biggest banks had dropped to about 20%. The additional systemic risk lies in the […]
continue reading Q: My husband and I are buying our first home. Where will we get the best value for our money? Camille, Pennsauken, NJ A: It’s smart to focus on getting the best value for your money but you have to make sure you don’t skip one of the most important steps in the home buying process. Assuming you aren’t paying cash, your first step needs to be to get pre-approved for a mortgage. The pre-approval process will require examining both you and your husband’s credit profiles which will determine how much money you qualify to borrower from a lender which will determine the price range you can shop for a home in. If you get pre-approved early, you can fix […]
continue reading Q: I’m a new wholesaler looking for my first deal. Can you give me some tips to help me? Terrence, New Brunswick, NJ A: One of the most important concepts to internalize if you want to be a successful wholesaler is that you have to leave enough profit in a real estate deal to make the deal attractive enough for an end-buyer/investor to want to buy the property. The 70% rule is an essential part of the wholesaler’s formula, which first requires you to arrive at an accurate market value or after repair value (ARV) for the property in question. NOTE: I go into more detail about the wholesaler’s formula on page 73 and 74 of my book, “Real Estate […]
continue reading Q: My brother and I want to start investing in real estate. Should we wait for a market correction to start? John, Passaic, NJ A: Real estate investing isn’t for everyone, but if you are interested in investing, you should start immediately rather than procrastinating. There is no ideal time to start any business. If you are willing to make a commitment, then now is always the time to begin doing something worthwhile that has long term benefits. Bear in mind that the real estate strategies you employ will be different depending on where we are in the 4 stages of the real estate market cycle: recovery expansion hypersupply recession Many local real estate markets in the US are still […]
continue reading Q: Which rental assistance program is better for landlords, Section 8 or TRA? Lydia, Elizabeth, NJ A: There are rental assistance programs at the municipal, state and federal level that can help needy tenants pay rent. Whether you are a landlord or a tenant considering one of these programs you should familiarize yourself with them before you sign up—find out what the requirements are, what percentage of rent is paid and for what period of time. Based on my experience as a landlord, I prefer the section 8 program to TRA because TRA provides only temporary rental assistance whereas Section 8 typically provides assistance for the life of the tenancy so the risk to the landlord is lower. Thanks for […]
continue reading Q: I’m having trouble finding consistently reliable people for my local real estate team. What should I be looking for? Derek, Cranford, NJ A: No man is an island–you need competent people around you to be successful in real estate or any business. The competence of your team is as important as your individual competence! When I was a kid I loved sports and music and every day on the playground during recess I played some sport (football, kickball, soccer, basketball etc.) Every day at recess, all the kids who wanted to play would gather with a ball, then 2 kids would be chosen or self-appointed captain then each captain would alternate picking players until everyone who wanted to play […]
continue reading Q: Do you think Airbnb contributes to housing shortages in big cities? Nancy, Nashville, TN A: I like and use Airbnb when I travel because I prefer staying in a real place rather than a hotel whenever possible. That said, there is no question that Airbnb and other short term rental platforms distort local real estate markets where they operate because supply and demand are the two most important factors that affect real estate prices and Airbnb affects both supply and demand. The commercial use of Airbnb has more of a corrosive effect on real estate markets than individual owners trying to make extra money renting out their place which has enabled speculators to buy real estate for the sole […]
continue reading Q: I’ve got a bad leak in one of my properties but I can’t find any plumbers willing to work Sunday. Bill, Carteret, NJ A: There are more obvious things you need to know about a contractor before you hire them like their expertise, years of experience and whether they are professionally licensed to name a few but one of the most important things you must find out is when contractors are available to work–which days of the week they work or don’t work, when they go away on holidays or go on vacation because your knowledge of their availability is key to you getting your work completed. So for example, I have a list of plumbers that are willing […]
continue reading Q: Gerald, I have a real estate deal that I’ve been working on for a long time and it fell apart right before closing. What should I do? Michael, Somerville, NJ A: I would need more specific information in order to give you more specific advice, but in general, the first thing I would suggest is that you take an honest, unemotional look at the situation. My 3rd real estate commandment is “Use Logic And Never Let Emotions Affect Real Estate Decisions”–obviously you are upset at the moment given how much time and effort you’ve already expended, but you can’t let that affect the decisions you make now. The past is past, you can only live life going forward. If […]
continue reading Q: Gerald, in an earlier blog post, you said that mortgage lenders are more careful now than they were during the last housing bubble. How are things different now? Doug, Lancaster, PA A: Great question, Doug. Although I draw on my own experience operating my real estate business before, during and after the financial crisis, I’m learning more and more disturbing facts going through a study called The Role of Housing and Mortgage Markets in the Financial Crisis. One stunning thing I discovered from the research in that study was that 50% of the borrower information banks collected on mortgage loans during that period was incorrect! What that means is that not only were banks making careless loans but that […]
continue reading Q: Now that our home has appreciated some, my wife and I are considering tapping our increased equity to pay down some credit card debt. Should we get a home equity loan or HELOC? Are they the same thing? Casey, Roswell, GA A: Good question. Home equity loans and HELOCs are similar but they are not the same. Both home equity loans and HELOCs are types of secondary mortgages on a home, however, a home equity loan has a fixed interest rate, fixed loan amount and a fixed repayment schedule. On the other hand, a HELOC, which stands for a home equity line of credit operates like a credit card by offering a variable interest rate that allows you to […]
continue reading Q: Do you think we will avoid another mortgage crisis now because subprime lending isn’t so high like it was before the last financial crisis? Chad, Mendham, NJ A: Chad, there were many factors that contributed to the mortgage crisis of the last decade, one of the biggest, of course, being the creation of questionable mortgage backed securities, where one security instrument was divided into pieces and then sold separately to investors. But now a decade after it began, the Great Recession is now commonly blamed on a subprime mortgage crisis. The prevailing subprime crisis narrative is that the supply of credit to low-income households fueled increasing house prices, and was responsible for the crash. Narratives can be very persuasive […]
continue reading Q: Gerald, I’ve been a buyer’s agent for many years. Where do you think I should re-focus my efforts for the future? Kenny, Bayonne, NJ A: Millenials are finally buying homes–in terms of age they are the last generation to begin buying homes in a big way for obvious reasons including the global financial crisis, extraordinarily high school loan debt and the fact that real estate prices went down for 5 straight years as they were entering the workforce. Millennials are going to be the biggest group of home purchasers for at least the next decade and they are now pushing the US homeownership rate higher–homeownership rate has skyrocketed almost a full percentage point in the last year which is […]
continue reading Q: I’ve read that parts of the real estate market are softening. Is that true? Judy, Clifton, NJ A: Housing inventory is an indicator that suggests how long it will take to sell the homes currently for sale in a market based on current demand. Housing inventory levels at most price points in north jersey are still relatively low which is a sign that there is still room for growth. However, at the very high end, inventory levels are incredibly high—over 2 ½ years worth of inventory for homes priced at $2.5 million or higher. This shows that even with a thriving economy, McMansions have fallen out of favor and the new tax law with limits on SALT deductions has […]
continue reading Q: Gerald, my daughter has been working for ten years since college and still can’t afford to buy a home. Is there anything on the horizon that will make it easier for first time homebuyers to buy? Jessica, Fishkill, NY A: Jessica, since the financial crisis, banks have tended to cater to wealthier, higher income customers, however, jumbo loans, which are mortgages too large to be sold to Fannie Mae and Freddie Mac fell by more than 10% last year. The jumbo market does not have the demand it previously did–refinancings have slowed and the new tax law with limits to SALT deductions has reduced incentives to buy larger homes. Some banks have already begun to embrace multi-generational home loans, […]
continue reading Q: Gerald, we have never allowed pets in our rentals, but lately we’ve been getting more tenant applicants with pets. Do you think we should start allowing pets in our rentals? Stacy, King Of Prussia, PA A: Great question, Stacy. First and foremost, you should think through your property management policies and procedures long before you even take rental applications because it makes decision-making much easier. I have been a landlord for almost 20 years and have never allowed pets either because of the damage that pets can do to a property. In some local real estate markets you can mitigate the risk of allowing pets by making tenants with pets pay an additional security deposit, in other local markets […]
continue reading Q: My realtor wants me to stage the home I just rehabbed. Which areas inside the home should be staged? Selvin, Bladensburg, MD A: I often stage the houses I rehab and sell to retail buyers. The reason to stage a house is to make it look livable to potential buyers so they can picture themselves living there. Sometimes buyers will buy a house just because it was staged well. Staging normally allows you to sell a home faster, which is particularly important to investors who lose money every additional day a property sits on the market unsold. Staging is an art, so I don’t do it myself, I bring in someone else with experience to do it. It costs […]
continue reading Q: My tenant wrote me a check to pay his rent and the check bounced. What should I do? Eric, Orlando, FL. A: The best way to deal with situations like this is to have a property management policy in place that is written in the lease you have your tenants sign that addresses this potential issue before it actually happens. Now, if done correctly your lease will entitle you to charge a reasonable fee that should cover your bank’s bounced check charge, and then a little more for the hassle of dealing with the problem. I charge tenants a fee for writing a bad check–it’s written into my lease and I also stop accepting rent by check after a […]
continue reading Q: I’m looking for the right local real estate market to invest in. What do you think about using price-to-rent ratio to decide? Devon, Palo Alto, CA A: Price-to-rent ratio is the average ratio of the median purchase price divided by the median (average) annual rent in the area and is a measure that can be used to compare local real estate markets: Price-to-Rent Ratio = Median Sales Price/Median Annual Rent The usefulness of any calculation boils down to how accurate and representative the input data that goes into it is. One problem with using this ratio is that properties even within one local market are not uniform–there can be a huge variety of property types, property conditions and prices […]
continue reading Q: Gerald, some people say section 8 is great for landlords and others say it’s a disaster. Should I rent to section 8 tenants? Shane, Scotch Plains, NJ A: Although the Fair Housing Act doesn’t offer protection to tenants based on their source of income, more and more places in the US are adding that protection to local fair housing rules. Legal or not, I don’t think it’s smart business to disqualify a potential tenant based on their source of income. There are good and bad tenants within any group of applicants. One of the keys to being a successful landlord is having a well thought through, repeatable process to screen tenants. Section 8 is almost guaranteed money for landlords […]
continue reading Q: How does Amazon’s decision not to build a headquarters in Long Island City affect real estate locally? for Kimberly, Queens, NY A: Amazon said last week that they are cancelling plans to build a corporate headquarters in Long Island City, Queens. Anticipation about the new Amazon HQ drove higher real estate demand in the area as soon as it was announced in November as real estate brokers were banking on the ‘Amazon Effect’ as they were seeing an influx of people buying apartments in Long Island City. Signed condo sales contracts since the Amazon announcement were nearly triple from the same period last year. Amazon’s pull out demonstrates the dangers of speculation laid bare. Economist John Kenneth Galbraith said […]
continue reading Q: We just got back from vacation. While we were away we saw a property that I think would be a great rental investment. What do you think? Caroline, Bogota, NJ A: Property management is a hands-on endeavor and is challenging enough when your property is located near you. Managing property far away is more challenging and real estate expenses often end up costing more than they would in your local area. This doesn’t mean you can’t handle owning properties in far away places, it just means it’s more precarious. When you are a long distance landlord, the success of your investment is more dependent on your property manager and local team of contractors and handymen on the ground than […]
continue reading Q: Gerald, my wife and I are looking at buying a home–we haven’t decided whether we want to live in it or rent it out but thought we’d ask if there are any red flags we should look for to avoid? Kendrick, Columbia, MD A: Great question, Kendrick. There are a few red flags that I use to disqualify properties to buy–here are 3 of them: 1. Property with leaking or compromised oil tank (expensive environmental hazard) 2. Property located next to gas station (expensive environmental hazard) 3. Property located next to dry cleaners (expensive environmental hazard) If you have experience resolving these kinds of issues, these conditions may present an opportunity for you as an investor–for example, I met […]
continue reading Q: Gerald, I saw a headline that home sales dropped 10% in December. Is the real estate market going to crash? Edwin, Woodbridge, NJ A: One good thing about real estate is that things move more slowly than the stock market, so even if we are heading to a real estate market downturn it’s not going to happen overnight. It is true that December capped the lowest home sales nationally in 3 years which is worth noting, however real estate is a local phenomenon not a national one and the percentage downturn is a relative measure that followed a long period of robust home sales. Home sales have been very strong for a long time, so a sizable reduction doesn’t […]
continue reading Q: Gerald, we are buying a tenant occupied rental property. Do you have any advice for us? Carly, Weehawken, NJ A: When you buy rental property, you will often inherit existing tenants. The very first property I bought had a tenant living in it with a lease—although I initially planned to live in the property, the lease was still in effect when I closed so I became a landlord. Because you don’t know anything about the tenants already living in a rental property you buy, it’s important that you protect yourself. Here are 3 things you must do when you inherit tenants in a rental property: 1. Verify Rent Roll Rental property owners often misrepresent or outright lie about their […]
continue reading Q: Are there any new real estate opportunities to look for this year? Mitch, Succasunna, NJ A: New Code Section 1400Z, added by the new tax bill offers specific tax benefits to investors that invest in certain designated low income communities called Opportunity Zones including: Temporary Deferral of Capital Gains Tax Step-up in basis on deferred gain (up to 15%) Election to permanently exclude capital gain A list of all 8700+ Opportunity Zones can be found on the Department of Treasury Website. All the details have not yet all been fleshed out, but hopefully there will be more guidance issued later this year. For more real estate information and tips visit my blog at geraldlucas.com.
continue reading Q: Will China’s 20% vacancy rate affect things in the US? Bob, New Rochelle, NY A: China’s vacancy rate is actually higher than 20%, it’s over 22% which is the highest among any country in the world and amounts to over 50 million empty housing units! That certainly looks like a bubble to me. The way China’s 50 million vacant homes could affect us in the US is if there is a panic selloff which would certainly affect markets worldwide and could trigger a recession. US Real estate is affected more than anything else by income, jobs and the economy and a recession would certainly affect housing by reducing demand. Thanks for your question, Bob. For more real estate information and […]
continue reading Q: What can we expect in real estate in 2019, Gerald? Clarissa, Warren, NJ A: It’s important to remember that every local real estate market is different and driven by many factors, the most important of which is supply and demand. Many local real estate markets around the country have been cooling down recently after record price gains due primarily to lack of housing inventory. This lack of inventory has been artificially inflating prices as demand far exceeds supply. High end luxury home demand in my local real estate market in New Jersey has seen some cooling recently as some buyers have pulled back in reaction to the new tax law that limits state and local tax deductions, but on […]
continue reading 1. Winter is upon us so flush your water heaters. This is a cheap and easy procedure that only costs about $30. Flushing water heaters helps to control the buildup of mineral deposits, resulting in a more efficient heater. 2. At the end of the year, two ways for real estate professionals to reduce their tax burden is to pay more business-related expenses before the end of the year and defer income until early next year. For example, you can send invoices late in December so collections won’t occur until January of 2019 which will likely reduce your tax burden by reducing your taxable income for 2018. 3. Take advantage of reduced competition and real estate activity during the holidays […]
continue reading Despite what many real estate novices mistakenly believe, The Grinch would not be a successful landlord. Here are 3 landlord myths that the Grinch might employ that are financially counterproductive to landlords in the long run. Myth#1: To be a successful landlord, you have to squeeze every last dollar out of rents. Greedy landlords have vacant apartments. The market decides how much rent you’ll get as a landlord not you—the person with the money (in this case, the tenant) always decides the price. Being greedy as a landlord exacerbates vacancy. One extra month of vacancy resulting from holding out for slightly higher rent will often wipe out any additional rent you could collect for the year. The most successful landlords […]
continue reading Q: I just read an article in the Wall Street journal that loans issued on a short term basis have gone down the second half of the year and they’re saying that it’s a sign that the real estate market might be turning. How do you read that information? Crystal, Alexandria, VA A: That’s a good question, Crystal. I did actually read that article in the Wall Street Journal myself. Remember that when you read an article, you want to just take it as a data point and then add it to other data points that you have. Preferably, you want to give more credence to the local data that you gather in the local real estate markets where you’re […]
continue reading Q: Gerald, you often mention how important it is to keep track of demographic changes and trends. What changes do you see on the horizon and how can I take advantage of them? Kirsten, Philadelphia, PA A: You can and should profit from recognizing population and demographic trends. There are around 80 million baby boomers in the US now and almost a quarter of them have no savings. As thousands of baby boomers retire and exit the workforce every day with insufficient savings many will have no choice but to downsize and rent. You can profit from this trend by investing directly or indirectly in rental property. You can invest directly in rental property where Boomers want to live, or […]
continue reading Q: We are buying a rental property and need to hire an attorney and contractor to fix up the place. Any tips on what to ask potential candidates? Margie & Fred, North Middleton, PA A: The most important factor to determine before you hire anyone to do a job is their experience doing whatever it is you’re hiring them to do. So, before you hire anyone for any job, ask them if they’ve done the job before and if their answer is yes, ask them how many times they’ve done it, how long have they been doing it and when was the last time they did it? Notice, I didn’t say what most people ask which is “Can you do […]
continue reading Cicero said that gratitude is not only the greatest of all virtues, but the parent of all the others. Practicing showing gratitude elevates our happiness, enriches our life and well being. When you express gratitude for all you have you attract more good things into your life. Here are 3 things I’m especially grateful for this Thanksgiving: 1. My family & close friends (definitely my #1 priority) 2. My Thriving New Business (NNG Capital Fund) 3. All The Challenges I Face That Will Force Me To Grow I encourage you this thanksgiving to show your gratitude for all you have. Happy thanksgiving to you and everyone in your life!
continue reading Q: We’re planning for college for our little ones comparing investments including real estate. I’m looking for something that will double in value over the next decade–any suggestions? Doug, Manasquan, NJ A: The Rule Of 72 Shortcut to estimate the number of years required to double your money at an annual rate of return. Divide an interest rate into 72 to get the number of years required to double your money or divide the number of years to double your money into 72 to get the annual interest rate required to double your money. Examples: 9*8, 6*12, 24*3, 36*2 (8 years@9%, 9 years@8%, 6 years@12%, 12 years@6%, 3 years@24%, 24 years@3%, 2 years@36%, 36 years@2%) Thanks for your question, Doug. […]
continue reading There’s a new Rutgers University report that claims that suburban population growth is outpacing urban population growth, If that’s true, what does that mean for real estate? Cindy, Bloomfield, NJ A: According to the Rutgers Regional Report, “The Burbs Bounce Back,” after years of mostly urban growth, Census estimates for 2017 show that suburban population growth has surpassed that of urban areas. This is driven by many different factors including rising home prices and rents in urban areas and the fact that Millenials are starting new families and want more space. It’s important to put this report into perspective and look beyond the headline and general narrative as these kinds of reports often overgeneralize. For example, suburban areas that offer […]
continue reading Q: I’ve noticed recently that contractors and handymen seem to be charging very high prices for labor. How do I find the cheapest contractors and avoid the most expensive ones? Billy, Staten Island, NY A: Always bear in mind that the person with the money always decides the price so you’re never obligated to pay anyone’s else’s asking price. Plus, a contractor, particularly one you’ve never done business with is likely to test you to see if he can charge you more money and get away with–that’s to be expected. Depending on your cost of money, it may make sense to take the time and effort to interview more contractors to get more price quotes before you make a decision […]
continue reading Q: Is The Real Estate Market Slowing Down? Quentin, New Providence, NJ A: There really is no “real estate market,” every local real estate market is different and distinct, however some factors affect all real estate markets like interest rates which are rising. Interest rate increases tend to dampen real estate price increases because they reduce the purchasing power of home buyers who get mortgages. Every 1% increase in mortgage interest rates reduces home buyer purchasing power by 9%. For example, if you are currently able to afford to buy a $200,000 home and mortgage rates increase by 1%, your purchasing power would go down 9% or $18,000, meaning that you would now only be able to afford a home […]
continue reading Q: Did the IRS’ new proposed regulations shut down a state & local tax workaround? Bill, Red Bank, NJ A: Before the new tax law was passed, you could generally claim a deduction for taxes paid to state and local governments, but now the deduction for state and local taxes is limited to $10,000. Some states with higher local taxes like NJ have proposed potential workarounds to the new federal limit on the deduction for state and local taxes that include providing a credit to taxpayers for charitable contributions to a state-created charity in lieu of payment of state income tax-the taxpayer would then claim a federal charitable tax deduction for the payment. The IRS’s newly proposed regulations would shut […]
continue reading Q: Is Private Equity Lending Creating A New Financial Bubble? Sam, New Brunswick, NJ A: Let’s start by defining what a market bubble is: An asset bubble occurs when an assets price far exceeds the asset’s intrinsic value, which really is a calculated or measurable value. For example, during the real estate market bubble, NJ real estate prices in 2005 based on average annual appreciation reached 2020 levels. Since the global financial crisis there are many former bankers that have set up private equity shops that have been doing a lot of lending. These funds have filled the void left by banks who have tightened their lending standards. Asset values have risen quite a bit recently, but it makes sense […]
continue reading Q: How do you calculate cap rate for investment property and how is it related to net operating income? Sarah, Cooperstown, NY A: Let’s first define net operating income and cap rate: Net operating income (NOI) = (annual operating income)-(annual operating expenses) Annual operating income generated by a property after deducting operating expenses. Example: income from rents + income from parking + income from vending (washer, dryer, vending machine) Capitalization (Cap) Rate is the rate of return on real estate investment property based on income the property is expected to generate. Cap Rate = (Net operating income/property value) Also, Property Value = Net Operating Income/Cap Rate Cap rate is used to estimate a real estate investor’s potential return on investment […]
continue reading Q: Gerald, I’m selling a building we’ve owned for many years and are thinking about doing a 1031 exchange to avoid taxes. Any advice you can give? Jason, Clearwater, FL. A: Jason, 1031 exchanges allow you to defer capital gains not avoid taxes. Here are 3 keys to a successful 1031 exchange: 1. Your sale and subsequent purchase of ‘like kind’ property must be “qualified transactions” for you to be able to defer capital gains through a 1031 exchange, which means the property you sell must’ve been held for investment intent, so rehabs or fix and flips typically don’t qualify. 2. The property you sell and the one you buy in a 1031 exchange must be held by the same […]
continue reading Q: Gerald, my wife and I want to buy a rental property. Expensive neighborhoods, middle class neighborhoods or blighted neighborhoods: which neighborhood type is best to buy rentals? Clayton, Cliffside Park, NJ A: Clayton, the key to success as a landlord does not necessarily lie in the economic landscape of the neighborhood you choose to buy your rental property in. Success lies in the specific strategy you execute and implement as a landlord which should at least in part be based on the economic character of the neighborhood where your rental property is located. There are successful landlords in expensive high-end neighborhoods, working class areas and blighted neighborhoods and there are unsuccessful landlords in expensive, working class and blighted neighborhoods […]
continue reading Q: Gerald, you previously mentioned some of the disadvantages of reverse mortgages, are there any advantages? Hillary, Washington D.C. A: A reverse mortgage is a special type of home equity loan sold to homeowners aged 62 and older. Here are 3 advantages of reverse mortgages: It takes part of the equity in your home and converts it into cash payments The money you get is usually tax-free and generally won’t affect your Social Security or Medicare benefits. The loan doesn’t have to be repaid until you or your spouse sells the home, moves out, or dies. Here are 3 disadvantages of reverse mortgages: When you get a reverse mortgage, you don’t receive the full value of loan Higher-than-average closing costs, […]
continue reading Q: Gerald, I just bought my first rehab. Do you have any tips to help me? Ernie, East Rutherford, NJ A: Every day you own the property that isn’t generating income, it is costing you money, specifically holding costs like interest, property taxes, insurance, utilities etc. Here are 3 rehab preparation tips that’ll save you time and cut costs: 1. Before you buy, get contractors lined up with a solid contractor agreement with payments tied to completion of milestones so they can begin work immediately after you close. 2. Apply for construction permits and utility service early-before the rehab starts if possible. Be very nice to gatekeepers that can speed up or delay your rehab project including people who work […]
continue reading Q: Lots of people say the stock market is overvalued. Does that make real estate a good bet? Leonard, Scotch Plains, NJ A: I’m a real estate investor, so I think real estate is always a good investment so long as you choose the appropriate strategy for the current state of local real estate market you’re investing in. With more interest rate hikes on the horizon and inflation rising, some people are predicting a bear market for stocks–obviously a stock market decline is inevitable at some point anyway–it’s just that nobody knows exactly when it’s going to happen. Generally, real estate prices are not very well correlated with the stock market, which makes real estate a good hedge against stock […]
continue reading Q: Are home sales increasing everywhere nationally? Kelly, Cleveland, OH A: All residential real estate is local, so it’s important to take headlines with a grain of salt. While home sales may be generally trending up in many metropolitan areas nationally, there are always areas where sales are trending down–normally due to local economic conditions because jobs and income more than anything else drive home sales and home prices. Furthermore, even in areas where home sales are increasing, they aren’t necessarily increasing for all homes. Case in point, home prices and sales of luxury homes are falling. Home buyers just don’t have the appetite for big luxury homes and mcmansions that they once did. Trends don’t last forever and more […]
continue reading Q: Gerald, my mortgage broker told me that he offers stated income loans now. How will the return of stated income loans affect real estate? Carl, Bronx, NY A: Stated income loans are often cited as one of the main causes of the financial crisis of 2008. In the early and mid 2000s, banks approved home mortgages without verifying income, pay stubs or tax returns. Since the financial crisis, banks have tightened lending restrictions for mortgages. In fact, current regulations put lenders who fail to verify a borrower’s ability to repay a loan at risk of having those mortgages challenged in court. Stated income loans have made a comeback recently nonetheless. The Dodd-Frank Act of 2010 essentially made stated-income home […]
continue reading Q: Gerald, we are going away this month, can we write off our vacation as a real estate expense? Susan, Tinton Falls, NJ A: I am not a CPA, but I didn’t consult a friend of mine who is a CPA about your question and he said that you have to demonstrate that the purpose of your trip was real estate related in order for the trip to be tax deductible. This means you’d need to schedule real estate related appointments and meetings before you leave in order for your trip to be deductible. So, for example, if you attend a real estate seminar while on your trip that you’d like to deduct as a real estate expense, you’d need […]
continue reading Q: Bitcoin is all the rage now. Do you think blockchain technology will revolutionize real estate like many people are predicting? Sam, Cambridge, MA A: There has been a lot of hype recently regarding Bitcoin and its underlying blockchain technology because a lot of money has been spent speculating on bitcoin. To your question–I’ll point you to the first and second rule of technology from a fellow named Bill Gates who knows a thing or two about technology: “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” Unfortunately, real estate is not an […]
continue reading Q: Home prices in my area are crazy. Do you think home prices overvalued now? Kenny, San Jose, CA. A: In your city, San Jose’, Kenny home prices have risen faster than I have ever seen in the 18 years I’ve been doing real estate (80% in 5 years!) Home prices at any point in time reflect current demand, so the run up on prices in silicon valley where you are and in Seattle are largely the result of the tech boom. In your area and in other tech boom areas, the big risk to home values occurs if and when the tech sector takes a nosedive. More generally, the share of cities with overvalued housing markets now is half […]
continue reading Q: How will marijuana legalization in NJ affect real estate? Pat, Jersey City A: I don’t think marijuana legalization in NJ will affect residential real estate much but I think it will impact commercial real estate in several ways positively: 1) demand for warehouse and industrial space will continue to rise 2) as will demand for retail space for selling. Similar to what happened at the end of prohibition, the legalization of marijuana creates a whole new industry and increased competition for warehouse (growing) and retail space (selling). However, there are risks to commercial landlords who lease industrial, warehouse or retail space given that marijuana is not yet legalized at federal level. Thanks for your question, Pat. For more real […]
continue reading Q: Are home prices rising everywhere nationally? Sarah, Brooklyn, NY A: The Case-Shiller Index condo price index in New York City fell in April from March, down 0.5%. A one month dip does not a trend make, nevertheless it is remarkable that the one major city where prices have dipped is in the Big Apple where real estate prices have been on fire for some time. Incidentally, rents have also come down a little recently in Manhattan as well. In general, prices cannot continue to go up forever in any place which is why it’s so important that you track and monitor your local real estate market. Thanks for your question, Sarah. For more real estate information and tips visit my […]
continue reading Q: We’re moving to a new home because our family has grown and we need more space. We have the means to buy our new home and keep our existing home as a rental–would it make sense to do that? Wendy, Penns Grove, NJ A: 1. You can verify your home would generate lots of good tenant prospects. Tenants want the nicest place to live they can find just like homeowners (good schools, low crime, access to transportation are normally a plus). It’s a good idea to test the market with a rental ad 2. Positive cash flow. Owning any property, particularly a rental will generate expenses as well as capital improvements. Positive cash flow if put aside for a […]
continue reading Q: Gerald, why has construction labor become so expensive lately and how is this going to affect real estate going forward? Eric, Quincy, MA A: Despite the fact that according to latest data, there are as many available jobs in the US as there are job seekers, the reality is that the available labor force lacks the skills to fill many vacancies particularly as it relates to construction. The housing bubble fiasco of the last decade displaced many construction workers and disincentivized many younger people from pursuing construction labor work which has caused a skilled construction labor shortage. This labor shortage in turn disincentivizes builders from building which exacerbates housing inventory shortages which causes home prices to rise further, faster. […]
continue reading Q: Gerald, how can we tell if our home was a good investment? Melinda, Harrisburg, PA A: The home that you live in unless it’s a multi-unit home that generates income isn’t really an investment in a pure sense because it fulfills a basic need that you have. One of the main benefits of your primary residence is that you live in it and enjoy it. Investment properties and rental properties are a different matter—for these properties, it’s all about the numbers (ROI etc.) Buying a home to live in doesn’t make you a real estate speculator. If you can reasonably afford to buy and maintain your home and you enjoy living in it and it makes you happy, then […]
continue reading Q: Our sewer is backed up. Do we have to repair it or is it the municipality’s responsibility? Ed, Elizabeth, NJ A: Great question, Ed. It depends on where the blockage or break in a pipe is–if it’s in your home, it’s your responsibility. As the pipes move away from your home, it’s not as clear whose responsibility it is to make repairs. To find out for sure, call your local government or utility company. They will have a map containing a detailed breakdown of sewage lines in and around every home. If it’s a main sewer pipe causing a problem, contact the public water utility company in your area. It is their responsibility to repair or replace the sewer […]
continue reading Q: We’re buying our first investment property. What are the most important factors you think we should consider? Dave, Bayonne, NJ A: There are many factors, both quantitative and qualitative that you should consider before you even make an offer to buy an investment property, Dave. I’m going to give you 3 quantitative factors that you should consider before you buy investment property: 1. The 1st and most important quantitative factor is property market value. The safest way to determine property market value is to get an appraisal. The 2nd best way to determine property market value for smaller residential property is to get a comparative market analysis from a licensed realtor who is active in the area where the […]
continue reading Q: We’re buying our first investment property. What are the most important factors you think we should consider? Dave, Bayonne, NJ A: There are many factors, both quantitative and qualitative that you should analyze before you even make an offer to buy an investment property, Dave. I’m going to give you 3 qualitative factors that you should analyze and consider before you buy investment property: 1) The first qualitative factor is the local perception of the character of the neighborhood where property is located (i.e. is it family-friendly, quality of local schools, crime prevalence, proximity and access to transportation etc.). 2) The 2nd qualitative factors is the attractiveness of property to buyers and renters. All economic activity is driven by […]
continue reading Q: How will the gateway tunnel project affect NJ real estate prices? Carl, New Brunswick, NJ. A: The Gateway tunnel project is the planned expansion and renovation of the Northeast Corridor (NEC) rail line between Newark, NJ and New York City. The existing two-track rail line used by both Amtrak (AMTK) and New Jersey Transit (NJT) has reached full capacity. When completed, the Gateway tunnel project improvements would double train capacity, from 24 trains per hour to 48 and would allow for additional high-speed rail service. The Gateway Project is essential because all infrastructure has a useful life which means that a failure or collapse is imminent-it’s just a matter of time. Damage done to the existing tunnels by 2012’s […]
continue reading Q: Gerald, I’m a suburban realtor–everything that I read about Millenials seems to point to the idea that they prefer city living. Should I focus on finding urban properties for Milennial buyers? Karen, Rockaway, NJ A: Social Media and the Internet help spread “conventional wisdom” narratives faster than ever. One of those pervasive narratives is that all Millenials prefer to live in cities. There is evidence that supports this claim including the fact that many companies have relocated to urban cities to attract Milennial employees. In spite of this, the fact is that in the last year more than half of Millenial home buyers (52%) purchased homes in the suburbs and more than one fifth of these Millenials purchased homes […]
continue reading Q: What can be done to fix the housing shortage problem? Jay, Succasunna, New Jersey A: Housing prices are skyrocketing in many places around the country due in large measure to a housing supply shortage. Seattle is case in point–it’s seen housing prices double in less than a decade. There’s an interesting and timely solution to the housing shortage that has come from the tech industry in Seattle that shows a thorough understanding about one of the biggest causes of the problem. Seattle Tech 4 Housing is a non-profit working to change zoning laws in Seattle where over the last few years 100,000 new jobs were created but only about 30,000 new housing units were created. More than half of […]
continue reading Q: Gerald, you said that more than two thirds of NJ households are childless. What does this trend mean for residential real estate? Henry, Montvale, NJ A: Interesting question, Henry. More childless households means that space requirements for home buyers and renters are smaller, which means lower demand for McMansions and increased demand for condos, town houses and smaller homes. Unfortunately, builders in NJ are not building a lot of small or starter homes because the cost of land and labor are high and because land use laws in NJ make it harder to build. In addition, the length of time it takes to build a home in NJ has increased which increases the cost to builders making it less […]
continue reading Q: What is the main factor that drives NJ real estate prices? Kenny, Franklin Lakes, NJ A: Great question, Kenny. In general, income more than anything else drives real estate prices–put another way, jobs and the local economy drive real estate prices. Depending on where you are in NJ, the big job centers are what drive real estate prices. In north and central jersey that driver is the NYC economy. In south jersey to a lesser extent, the economy in Philadelphia and Atlantic City drive real estate prices. The biggest driver of real estate prices in the state is the New York City economy. Thanks for your question, Kenny. For more real estate information and tips visit my blog at […]
continue reading Q: Gerald, I just read that the homeownership rate in the US finally went up again after years of decline. What does this mean for real estate prices? Candy, Berkeley Heights, NJ A: Yes, homeownership recently went up from 63% to about 65%. 65% is not near the 69% homeownership rate we saw at the height of the real estate bubble, but it’s a welcome, healthy sign. Homeownership rates and rental rates are inversely related. When homeownership rates fall (as they did after the real estate bubble burst), rental rates rise and when homeownership rates rise, rental rates decline. So this increase in the homeownership rate will reduce the percentage of people who rent which, depending on which local market you’re […]
continue reading Q: How will a trade war affect real estate prices? Caleb, Short Hills, NJ A: Higher home construction costs contribute to rising home prices. Right now it costs significantly more money to build a new home than it did just a few years ago for a variety of reasons including the higher cost of land, a skilled labor shortage and the fact that there is a huge mismatch between where people want to live and where it’s easiest to build. Increased construction costs will exacerbate the housing shortage we are currently experiencing in many local real estate markets in the US. The construction industry accounted for 40% of all U.S. steel demand in 2017, so new steel tariffs and a […]
continue reading Q: Should You Co-Invest On Property With A Partner? Eric, White Plains, NY A: In general, two minds are better than one. You’re unlikely to see everything yourself, when someone else is also looking out over the horizon, they will probably see things that you miss and vice versa. Partnerships with the right people can be very beneficial to all involved for short term investments but can be problematic for longer term investments because people’s goals, priorities and personal commitments often change over time. More than 2 or 3 partners on a deal can be cumbersome as the saying goes, when there are too many cooks in the kitchen. You have to be careful who you partner with. The right […]
continue reading Q: Gerald, what do you predict for the spring NJ housing market? Josh, South Orange, NY A: Josh, remember, there really is no “housing market”. Every local real estate market is different and even within local real estate markets there are submarkets that don’t necessarily behave in the same way. That said, the media does affect how people think about real estate in a more general way. Here are 3 things I see for the Spring in real estate: 1. Demand to remain strong but perhaps not quite as strong as anticipated as people digest the impact of the new tax law that limits deductions on SALT (state & local taxes) 2. Continued housing inventory shortage for single family homes […]
continue reading Q: Gerald, I recently evicted a tenant. The tenant was months behind on rent and they really trashed the property. Should I go after them for my legal and court costs? Philip, Huntington Valley, PA A: Great question, Philip. In my view, charging delinquent tenants for legal and court costs first and foremost depends on whether you can legally charge for those costs where your property is located–landlord tenant laws vary widely from place to place so it’s your job to do the research to find that out. Assuming you can legally charge delinquent tenants for legal and court costs, the decision to do it or not depends in my view on how much those costs are and how much […]
continue reading Q: Gerald, real estate values have risen a lot lately, does it still make sense to buy real estate? Javier, West New York, NJ A: Whether it makes sense to invest in real estate, or any asset for that matter, depends on your specific financial goals and your personal financial situation. The big mistake most people make when anecdotally considering real estate from an investment perspective is looking solely at it in terms of property value appreciation. You often hear people lament about not having bought property in an area that has seen market values appreciate. When talking about real estate in these areas, people say things like, “I could have bought this property for X amount and now it […]
continue reading Q: Gerald, I’ve been looking for motivated property sellers. How can I tell if a seller is serious or not? Chloe, Madison, Wisconsin A: You are smart to target motivated sellers when prospecting for real estate deals. There are many homeowners who may place their property for sale just to test the market. The more motivated a seller is the more potential room there is as a buyer to negotiate. Determining the motivation level of a seller requires building rapport with the seller and inquiring about their specific personal situation. There is a big difference between a homeowner saying “I just want to see what I can get for my house” versus “I just got a new job halfway across […]
continue reading Q: Gerald, I’m a new real estate wholesaler and I’m having trouble closing my first deal. I’ve built my rehabber buyers list like you told me, but all the investors are passing on the deals I have under contract. What am I doing wrong? Craig, Rochester, MN A: Craig, if rehabbers are passing on your wholesale deals, one of 2 things is happening: 1) either you’re pushing deals in areas or neighborhoods that your buyers aren’t interested in or 2) your wholesale price is too high. Part of your job as a wholesaler is to find properties in neighborhoods that your investor buyers want to buy in. One of the biggest mistakes wholesalers, especially new wholesalers make is not leaving […]
continue reading Q: Gerald, you mentioned that the new tax bill passed by Congress limits mortgage interest deductions. Do you think that will affect luxury housing? Doug, Chicago, IL A: That’s a great question, Doug. Consider 5 housing tiers: 1. <$400K 2. $400-600K 3. $600K-$1mil 4. $1mil-$2.5mil 5. >$2.5mil) Very expensive housing I don’t think the top 2 housing tiers (i.e. McMansions) will be affected much by the new tax bill because people who buy those kinds of houses are not that price or tax sensitive. It’s worth it to note that home sales in those 2 top tiers aren’t doing as well as the other tiers in most places anyway. The 1st tier is not really affected by the mortgage interest […]
continue reading Q: Gerald, you’ve been writing about a housing shortage for a while. Why are builders not building enough houses to meet demand? Evan, Tinton Falls, NJ A: Evan, you can’t blame the low housing inventory levels in many local real estate markets on builders entirely, but insufficient construction is a big reason for sure. In addition to archaic zoning ordinances and homeowners who still don’t have enough equity to sell even if they wanted, one of the biggest reasons builders aren’t taking on enough new constructions projects to satisfy demand is that there is a shortage of skilled labor. Builders don’t do construction in a vacuum–they need land, permits from local municipalities, capital, building materials AND skilled labor to put […]
continue reading Q: Gerald, I want to invest in real estate without managing property. What do you think about investing in a REIT? Kwame’, Bowie, MD A: REITs were modeled after mutual funds. REITs buy, own and manage real estate and the main benefit is that REITs give individual investors a convenient way to invest in real estate passively. However, there 2 big dangers investing in REITs that include: 1. RECESSION VULNERABILITY REITs are highly vulnerable to recessions because publicly traded REITs are highly correlated to the stock market. Market recessions normally lead to a drop in REIT prices. REITs are susceptible to market shocks because REITs don’t have the flexibility to retain cash. Without liquidity, it’s difficult to weather market downturns. […]
continue reading Q: Gerald, who are the big winners under the new tax law that just passed? Sandra, NY, NY A: Under the new tax law, taxable income is likely to increase for most people but the rate percentages are lower which may offset tax increases. The best way to see how the new law will affect you is to scrutinize your own taxes before and after the new law to see how your tax burden changes. Here are 5 winners and 5 losers under the new tax law: New Tax Law Winners Corporations-tax rates lowered from 35% to 21% Corporations-AMT (alternative minimum tax) repealed Pass through entities-taxes under the new law are lowered by a 20% deduction for qualified business income […]
continue reading Q: Is Bitcoin A Better Investment Than Real Estate Now? Kevin, Nyack, NY A: Interesting question, Kevin. Before I answer your question, I want to draw a distinction between investing and speculating. Bitcoin investors, despite all the money that SOME of them have been making lately are speculators. Speculation is different than investing. I don’t speculate, I invest. That doesn’t mean that you can’t make money speculating–you certainly can, just like you can make money at the casino or the race track. However, the likelihood of losing money is much higher when you speculate unless you are very lucky and very disciplined. Warren Buffett’s mentor, Benjamin Graham defines an investment in his 1934 classic, “Security Analysis” as “one which, upon […]
continue reading Q: Gerald, what’s your 2018 forecast for the Real Estate Market? Cindy, Scotch Plains, NJ A: Happy New Year to you, Cindy and to everyone in my real estate insider family! Cindy, there is no “real estate market,” every local real estate market is unique and different. However, there are characteristics of my local market in North Jersey that you are seeing in many other places. One characteristic is low housing inventory–this is why home prices have been edging up so fast in so many places, because there simply isn’t enough available housing for sale to meet demand for a variety of reasons. I see no significant increase in residential family construction this year so I expect inventory levels to […]
continue reading Q: What’s the best way to get ahead in real estate this year? Craig, Livingston, NJ A: One key to succeeding in real estate 2018 is recognizing and understanding where things are in your local market now. In most places, there’s not as much housing inventory as there has been in the past, which means that the sell side tends to be easier, but buy side is more challenging. To deal with lower inventory and increased competition on the buy side necessitates doing more prospecting for leads to find motivated sellers, making more purchase offers and doing even more consistent and aggressive follow up with seller leads. Thanks for your question, Craig. For more real estate information and tips visit […]
continue reading There’s a unique opportunity right in front of you that you can take advantage of this week between Christmas and New Year. While everyone else is binge-eating and drinking you can and should make your real estate plan for next year: Focus on what you are going to do (the type of properties you want to focus on as well as the specific geographic areas you want to target as well) AND what you’re not going to do, because there are only 168 hours in a week and there are way more real estate opportunities in your life than you can ever realistically be able to pursue to get meaningful results so you have to choose. I know the fear […]
continue reading With just a few days before Christmas, I want to give you some contrarian advice that may give you a leg up on your real estate competition. Most people slow down right about now, which is fine, it’s ok and essential to recharge your battery–however, when you choose to shut down your real estate business is important. You see, if all the other real estate investors are slowing down now, doing what everyone else is doing is not necessarily a good recipe for success. On a practical level, if you’re still doing business when everyone else slows down, you have less competition to contend with and it’s easier to make an impact. For example, negotiators at banks on both bank […]
continue reading Q: Gerald, I spent the last few months trying to buy and close on a probate real estate deal. Just as I thought we were about to close another heir showed up making demands that were outside of what had been agreed upon. How do I avoid this kind of problem on the next deal? Kerry, Union, NJ A: Great question, Kerry. A home is sold in probate court when someone dies without a will or without bequeathing the property they own. When this happens, the state takes over and administers the property’s sale. The court normally then appoints an executor of the estate. It sounds like you were negotiating with someone who had some interest in or connection to […]
continue reading Q: Gerald, I’m building my real estate team of professionals. I already have a good real estate attorney, a general contractor and a good realtor. Who else do you think I need? Eddie, Sparta, NJ A: Good question, Eddie. First of all, it’s a good idea to have more than one of the power team members you’ve already chosen so that you are not too dependent on any one person. Many investors, particularly in places like north jersey where attorneys do the lion share of closings often overlook one specific key player on any serious investor’s real estate power team—that’s a reliable title company. That’s a mistake, because good title companies (plural because it’s never a good idea to have […]
continue reading Q: Gerald, my husband and I recently bought our first rehab property. My husband is a carpenter and general contractor so I’m not worried about the renovation. Do you have any tips for us so we avoid making mistakes? Janice, Wyckoff, NJ A: Hi Janice. Congratulations on starting your first rehab deal! In general, having a background as a contractor gives your husband a perspective on renovating that other new investors probably lack, however, the big mistake contractors often make when they buy and renovate properties themselves is over improving property–by that I mean, for example, installing custom, high-end cabinets and granite countertops in a home in a moderately priced working class neighborhood. Just because you can do something doesn’t […]
continue reading Q: How does Thanksgiving and the holidays affect real estate? Henry, Weehawken, NJ A: A couple of years ago, traffic data on realtor.com was examined around the holidays. Predictably, traffic was down on Thanksgiving and other holidays but the amount of the effect was mixed based on geographic region with respect to home search activity specifically. The very interesting finding that came from that analysis was that there was a surge in home search activity on Dec 28th, New Years Day and July 6th. The obvious conclusion to be drawn is that although home search and perhaps home buying activity temporarily slows down on Thanksgiving, Christmas & Independence Day and other holidays, it tends to pick up in a big […]
continue reading Q: Gerald, is crowdfunding a smart way to invest in real estate? Kathryn, King Of Prussia, PA A: The main benefit that real estate investing via crowdfunding offers is undeniable–the ability to invest passively in real estate with less capital. This is undoubtedly why real estate crowdfunding has received so much attention. However, if you invest in a real estate deal that is crowdfunded, you are at the mercy of the judgment and experience of the people who buy and manage the real estate in the crowdfunded deal or deals you are invested in. The fundamentals of real estate investing don’t change because crowdfunding has ushered in another way to fund investments. As far as I’m concerned, the jury is […]
continue reading Q: How Many Points Should You Pay For A Hard Money Loan? Jenna, Melbourne, FL. A: Hi Jenna. That’s a common question regarding hard money loans (HMLs). For starters, let’s not put the cart before the horse— it’s not about the points necessarily, it’s about the access to capital first and foremost. Make certain that you are only considering viable financing options before you begin comparing the specifics of different financing options. For example, a hard money loan that doesn’t charge any points is irrelevant to you if the lender requires you to pay 30% of the acquisition or rehab cost if you don’t have the 30%! That’s like buying an outfit for the Oscars even though you can’t get […]
continue reading Q: Gerald, it seems like many investors always seem to miss some critical aspect of what’s happening in the real estate market. What’s the biggest risk to investors now? Hank, Atlanta, GA A: Real estate prices have been soaring in many real estate markets nationwide. When real estate prices go up, people get restless and careless—investors, especially builders get sloppy on price and terms. Speculators rush in to hot real estate markets driven by the foolish notion that they can’t lose if they invest in the right market at the right time. This is dangerous thinking that leads to dangerous behavior. The biggest risk to investors in the US today lies in not adhering to the fundamental rules of real […]
continue reading Q: Gerald, I use airbnb for lodging when I travel sometimes. The tenant in my rental property is moving out soon–does it makes sense to convert my rental property into an airbnb property? Kendra, Roxbury, MA A: Great question, Kendra. Does it make sense to convert a traditional rental property into an airbnb property? I’m familiar with airbnb because I use airbnb a lot when I travel because I prefer to stay somewhere that is more like home rather than a hotel room. There are investors now that actually look for investment properties to buy specifically to offer on airbnb, VRBO, homeaway or other real estate app platforms. The main issue you have to recognize if you switch from a […]
continue reading Q: Gerald, I own coastal property, how can I protect myself from natural disasters like hurricanes? Keith, Nags Head, NC A: Good question, Keith. Having just weathered 3 disastrous hurricanes, it should be apparent to property owners everywhere that they need to have a disaster plan to protect their real estate from floods, earthquakes, hurricanes, tornadoes, high wind and manmade disasters like active shooter or terrorism. In each case, you should do 3 things in this order: 1) Identify your risk 2) Reduce your risk 3) Insure your risk. So, for example, you should assess your property’s flood risk for earthquake, hurricane, tornado, and high wind damage and then you should reduce your risk in each of those areas. For […]
continue reading Q: Gerald, I want to start flipping properties, but I need to get some private lenders lined up first. Do you have any tips you can share with me? Valerie, San Diego, CA. A: The first thing that you – or any investor – needs to do is to identify a good, profitable real estate deal to invest in. As far as lining up private lenders first before you do anything, that’s unlikely. “Give me money!” is not a compelling pitch to a potential private lender. In general, there are two things you need to prove to a private lender before they’re going to lend you money. The first thing is that the deal you are investing in is secure. You really […]
continue reading Q: Gerald, With all the major hurricanes that have happened this year, I was wondering if my property insurance covers hurricane damage? Derrick, Sea Girt, NJ A: That’s a great question, Derrick. The coverage that you get for a standard homeowner’s policy varies, so you always want to check it. But, typically it will cover windstorm damage from a hurricane for things like broken windows or a torn roof or damage from trees. Normally, a standard homeowner policy will cover those things. However, if you live in an area that’s prone to hurricanes like parts of Florida or Texas or even maybe where you are down on the Jersey shore, insurers can exclude that coverage from a standard homeowner’s policy. […]
continue reading Q: Gerald, we are in the market for a home but it seems like every home we’re interested in goes under contract before we can even make an appointment to see it. Is this just my imagination or is there a real housing shortage? What can be done about it? Olivia, Hazlet, NJ A: Housing inventory in the US is at a 20 year low. There is no one cause – there are several causes. The main cause being that builders just aren’t building enough inventory. Other factors include: 1) high land prices 2) archaic and stifling zoning ordinances in some places 3) tight lending environment, particularly for 1st time home buyers 4) lenders reluctant to lend on condo purchases […]
continue reading Q: Gerald, I’m working on my first real estate deal with a joint venture partner. My JV partner wants us to cancel the deal because of a minor title issue our attorney is obsessing over. I asked my friend who owns a title company and he says the title defect is no big deal and can be cured easily. But, our attorney really scared my JV partner and told him he should cancel the deal. What should I do? Christina, Mt. Vernon, NY. A: Attorneys,unfortunately, are trained more to find problems than they are to find solutions and that’s what many of them do. But, I think the bigger issue or concern should be that you and your JV partner are not […]
continue reading Q: Gerald, I’ve been having trouble finding and keeping contractors to work on my property rehabs. I just want reliable, inexpensive contractors who do good quality work. What am I doing wrong? Curtis, Union, N.J. A: That’s a good question, Curtis. All of us as investors are looking for contractors with those qualities. And let’s take a deeper dive on exactly what you’re looking at. So, you’re looking for reliable contractors who are inexpensive and do top quality work. I’d want that too, however, I’m not sure how realistic it is of an expectation consistently to have of a contractor. And the reason is pretty simple. Contractors are business people just like we are as investors. So, in the same […]
continue reading Q: Gerald, We’ve been watching the devastating Hurricane Harvey aftermath. Do rising sea levels make buying coastal property too dangerous? Ellen, Sea Girt, NJ. A: That’s a great question, Ellen. As economic losses in Texas and beyond continue to rise, some experts estimate that the losses may exceed $100 Billion dollars from this cataclysmic hurricane. You know, 100 years ago, most people preferred to live away from the water. In recent decades, as evidenced by property values, beach front property has become more desirable and more expensive. But, rising sea levels should change the way people think about waterfront property. At the end of the day, the desirability and the price of real estate boils down to supply and demand. […]
continue reading I often hear people say that they’re too old to do one thing or another. They’ll say, “When I was younger I’d do it, but I’m too old now.” I can’t help but speculate that many of these same folks at some point in the past used being too young as an excuse not to take some action. Now, being sick or being injured is a legitimate reason not to engage in certain activities. But, having been walking around on the planet a little longer than other people is NOT a legitimate reason. Age is a relative measure and has little meaning in and of itself. It’s just a number. So, a 9-year old is old to a 5 year-old. […]
continue reading Q: My cousin’s tenant wants to break his lease. I know a lease is a binding contract, but are there any good reasons to let a tenant break a lease? Quincy, Chesterbrook, PA. A: That’s a great question, Quincy. And you’re right, a lease is a binding contract. But to be an effective landlord, you have to embrace the world as it comes at you and not get bogged down in the theoretical idealism of how things are “supposed to be.” So, I’m going to give you an example where it would make sense to let a tenant break their lease. Let’s say you have a tenant and the tenant lost their job – they can’t pay the rent. Let’s say […]
continue reading Q: My wife and I are buying our first home. Our realtor told us that since a home is your most important investment, we should stretch financially and buy as much hime as we can. What do you think? Jordan, Albany, NY A: Well Jordan, I unfortunately have heard that terrible financial advice from realtors before myself. But, like a lot of quote, unquote “conventional wisdom,” it’s simply wrong. Now, to play Devil’s Advocate, I suppose if you knew that you were going to make more money in the future it might make sense to pay a little bit more than you could afford to buy a home. But, how can you be sure that you’re going to make more money? And […]
continue reading Q: Gerald, Since I’m planning to buy a home, I took your advice and got copies of my credit report from all three credit reporting agencies and went through them to look for mistakes that may hurt my mortgage application. Is there anything else that could affect my mortgage application? Glen, Bristol, PA. A: In addition to verifying the accuracy of what’s in your credit reports, you should also take a look at the CLUE report on the home that you want to by. CLUE stands for Comprehensive Loss Underwriting Exchange and it’s a database that insurance companies use to evaluate risk and to decide premium rates. And, if there’s a CLUE report on the home you want to buy, it […]
continue reading Q: Gerald, house prices have been rising for a while now. When is the next real estate market downturn going to happen? Wendy, Great Neck, NY. A: Wendy, based on the historic 18 year real estate cycle, most local real estate markets in America are still in the expansion phase of the 4 phase cycle. We have to go beyond expansion to the hyper-supply phase before we would be faced with another recession. Based on the 18 year cycle, we’re about 7 years from another real estate market downturn. Bear in mind, that the 18 year real estate cycle is just a framework, what really matters is what actually happens in your local real estate market. Thanks for your question, […]
continue reading Let’s celebrate independence day this by disconnecting, for a moment, from the electronic gadgets and devices that consume so many of our lives. I know it’s hard. Hard for me. Hard for you. Hard for everyone. It’s hard because clever designers and marketers deliberately built these devices to be irresistible. The truth is that multi-tasking is a myth. You can do more than one thing at once, but you can’t really focus on more than one thing at a time. Also, time and energy spent with your gadgets saps strength, willpower and effort that can be channeled toward something more productive than liking a cat video on YouTube, for example. Plus, it takes ramp up time to start a new […]
continue reading Q: Gerald, I want to buy a home and I don’t have much down payment money. I heard that you can get a mortgage with zero down payment, is that true? Harry, Toms River, NJ A: Harry, the simple answer to your question is yes-in some cases you can get a mortgage with zero down payment. If you are a veteran, the VA has 100% loan programs and USDA offers zero down payment mortgages for eligible rural and suburban homebuyers in qualifying areas. But beyond 100% loans, there are several low down payment loan options. FHA offers 3.5% down payment loans. And FNMA and Freddie Mac have down payments as low as 3% and 5%. Seller financing is also another […]
continue reading Decision fatigue represents the declining quality of decisions made by people after a long period of making decisions. Courtroom judges, for example have been shown to make poorer decisions later in the day versus early in the day. Albert Einstein and Steve Jobs notably reduced their clothing choices to just a few outfits in a deliberate attempt to limit the number of daily decisions they were forced to make. Everyday life is complicated enough–the key to productivity and sanity for that matter is simplification. There are only so many hours in a day and even the most active people don’t have a limitless store of energy. Consequently, it’s vital that you spend your most productive hours on your most important […]
continue reading Q: Gerald, I keep hearing in the media that home prices are skyrocketing. We bought our home at the height of the last market bubble in 2006 and I still don’t think we have any home equity. How many US homes are still underwater? Monica, Las Vegas, NV A: Good question, Monica. As of the 1st quarter 2017, over 5 million U.S. properties, almost 10% percent of all properties, were considered seriously underwater. That number is down more than 15% from a year earlier but that’s still quite a bit of people who are underwater. Some areas, like the rust belt in the Midwest for example, tend to have a higher percentage of underwater properties than other areas of the […]
continue reading Q: Gerald, we’re under contract to buy a short sale property. How much time do we have to close before the bank forecloses on the property? Bonnie, Totowa, NJ A: Great question Bonnie, the simple answer to your question is that it depends on how far along in the foreclosure process the borrower who owns the property you are buying is. In many places like North Jersey where you live, you can check the sheriff sale list online to see if there is a sheriff sale date scheduled—the foreclosure process is different in different states and areas but where you live, there normally has to be a sheriff sale scheduled before a property is actually foreclosed on. If there is […]
continue reading Q: Gerald, my wife and I are in the market for a home. Should we go to our credit union or a bank to get our loan? Kenny, Raleigh, NC. A: Credit unions are chartered to benefit their membership base so they’re more customer oriented than banks and they typically have lower mortgage interest rates than banks, but often take longer due to slower underwriting processes. Credit unions often keep their mortgages on their books whereas banks often sell off their mortgages—hence the better customer service at credit unions. You can normally get a mortgage loan faster at a regular bank than a credit union because banks are more likely to have automated underwriting processes and regular banks also tend […]
continue reading Q: Gerald, I want to buy a house but I have big student loans. Is there any hope for me? Dave, New Brunswick, NJ. A: Many homebuyers, especially first time home buyers are not comfortable taking on mortgage debt if they have student loans—for obvious reasons. Luckily for home shoppers with student loans, Fannie Mae recently announced changes to how student loan debt is treated that could make qualifying for a mortgage easier. Now, non-mortgage debts paid by another party for at least 12 months won’t be included in calculating debt-to-income ratio when you try to qualify for a mortgage. For example, if a parent pays on their son or daughter’s student loan, it won’t be counted against the debt-to-income […]
continue reading Q: Gerald. I went to the real estate auction for the first time—seeing all the confident investors bidding really intimidated me. Do you have any tips to getting a winning bid at a real estate auction? Karen, Hartford, Ct. A: Let’s start by defining what a win at a real estate auction is. For an investor trying to maximize returns, winning means buying property cheap enough to achieve their desired return. Winning doesn’t mean winning the auction bid—anyone can win an auction bid by paying too much—that’s a Pyrrhic victory. You win by buying at as low a price as you can. So, here is how you really win as an investor at a real estate auction—or at least how […]
continue reading Q: Why are home prices rising so fast in US cities? Cheryl, Austin, Tx A: As more people prefer living in urban areas, builders are running out of lots to build on in places that people want to live. Also, zoning rules tend to permit high density construction in cities more so than in the suburbs and more rural areas. This pushes up the price of land in urban areas. With land more costly, developers try to compensate for higher land prices by building high-end more expensive condos and apartments that are more profitable which continues to feed the cycle. At the end of the day, real estate pricing ultimately boils down to supply and demand. So, what’s the fix […]
continue reading Q: Gerald. My tenant missed a rent payment–he’s a good tenant and he’s always paid on time. He’s only 5 days late, but I’m worried. What should I do? Curt, Washington, DC A:Great question, Curt. Should you give more slack to a good tenant? Hell yeah, you should! Why? It’s not just for sentimental or to maintain good Karma reasons–although I have no problems with letting those things enter your mind. Remember my 1st real estate commandment: ”Real estate is more about people than it is about bricks & mortar.” (You can check out my other real estate commandments here: http://www.performanceproperty.com/about/) As CS Lewis said, “In our hearts we all know what’s right.” There’s nothing wrong with having empathy as a […]
continue reading Q: Gerald, my wife and I are looking at rental properties to buy. What’s a good cap rate for a rental property? Doug, Little Falls, NJ A: Great question. Let’s start by defining what cap rate (capitalization rate) is. A capitalization rate is the percentage of return from an investment when you divide the Net Operating Income (NOI) by the price you are paying for the property. Cap rates do not consider the costs of financing into the investment equation and in my opinion cash-on-cash return is a more useful statistic for a real estate investor. But since some buyers use financing and some buyers pay cash, cap rates are used more often because it allows you to make an […]
continue reading Q: Gerald, we just bought a rental property and I want to prepare myself for any eventuality. How long does it take to evict a tenant? Phil, Stamford, Ct. A: Landlord-tenant laws vary significantly from place to place, so the eviction process varies significantly from place to place as well. Tenants generally are allowed more time if the eviction is without cause, as opposed to evictions with cause. An example of an eviction without cause would be an eviction to allow a landlord to renovate a property. An example of an eviction with cause would be an eviction for non-payment of rent. In some places, there are eviction moratoriums during certain times of the year like around Christmas. Nobody, no […]
continue reading Q: Gerald, I heard you say that your new real estate fund invests in real estate and mortgage notes. How can a landlord like me benefit from mortgage notes? Henry, Kalamazoo, MI. A: Landlords can use their rents as collateral in a collateral assignment, which allows them to securitize and borrow against their rents as a landlord. Gerald Lucas & mortgage note expert, Fuquan Bilal reveal what every landlord should know about mortgage notes in this installment of Ask Gerald A Real Estate Question.
continue reading Q: Gerald, I found a good deal on a house that needs renovation. What’s the best way to finance a rehab? Derrick, Sparta, NJ A: Derrick, when you raise or borrow money, particularly on a rehab, the devil is in the details, so the best financing route will often depend on the terms. Generally speaking, you can try to raise money by taking on debt or you can partner and give away equity to raise money for the rehab. The best way to finance the rehab will depend on your financing agreement or your partnership agreement and the specifics of your real estate deal, for example, the amount of time you expect will be required to renovate and sell the […]
continue reading Q: Gerald, I just bought a rental property. Where can I get a good landlord-friendly lease? Monica, Oakland, CA. A: Finding the ideal rental property lease can be tough. There are many different types of rental leases that serve different purposes. Landlords generally want rental leases that protect their interests and leases are often written to favor one party or another, so landlords often look for landlord-friendly leases. However, in addition to protecting your interests as a landlord, it’s important to analyze your rental lease through the eyes of a judge, because if your lease isn’t deemed reasonable for both parties, then a judge is less likely to enforce the terms of your landlord-friendly lease. Also, landlord-tenant laws vary enormously […]
continue reading Q: Gerald, I want to leave our home to my kids, should I give it to them before or after I die? Dan, Peekskill, NY A: Dan, I’m sure you may have personal reasons for giving your home to your kids now as opposed to after you pass, so I’ll leave that up to you. If you expect to have a large estate when you die, gifting assets now and reducing the size of your estate may help you avoid estate tax. If you give your property to your kids now, their cost basis in your home will be the property value now. If you bequeath your property to your kids when you pass, their cost basis in the property will […]
continue reading Q: Gerald, I just read an article that said that 2017 could end up being the year of the great housing crash. What do you think? Andrew, Watertown, MA A: Andrew, real estate in general is an illiquid investment, which means that unlike in the stock market where a stock’s price could potentially drop to zero in one day, real estate prices really don’t move that fast. If we reached an inflection price and were headed toward a real estate market downturn and ultimately a housing crash, there would be indicators that we could see before that happened, like an increase in housing inventory for sale on the market. When houses sit on the market for a long time and […]
continue reading Q: I’m selling my property, the buyer just did an inspection and I got the inspection report with a ton of items they want me to repair. What should I do? Henry, San Diego, CA A: Real estate negotiations don’t necessarily end when you sign a purchase contract. Most real estate contracts contain an inspection clause that allows buyers the right to have the home they’re buying inspected for soundness. That way, if the inspection reveals a serious issue, you and the buyer can address it through renegotiations. After the inspections are complete, you have to decide if any problems found are worth renegotiating. Here’s the risk and opportunity to you as the seller: you are not obligated to address […]
continue reading Q: Gerald, lately I can’t find any property to buy, it seems like there’s nothing out there right now. What should I be doing to find good real estate deals? Carter, Passaic, NJ A: That’s a great question, Carter. It’s true that housing inventory is very low in many local real estate markets now for several reasons, not the least of which is because there are still many property owners who bought or refinanced at the height of the last real estate market bubble and therefore have little or no equity–these property owners are mostly sitting on the sidelines even if they want to sell because they’d have to reach into their pockets to pay off their underlying mortgage debt […]
continue reading Q: Gerald, my best friend got burned when real estate prices fell 10 years ago and I’m worried. Where’s the market now and is there a threat of another bubble? Frank, Park City, UT A: Frank, every local real estate market is different so I’m always reluctant to over-generalize, however, things are different than they were 10 years ago. In the last real estate market downturn, there was a real estate bubble and a credit bubble that burst and caused financial havoc. I am going to share with you the four phases of the real estate cycle and where most real estate markets in the US are now. There are four phases to the real estate cycle: 1. Recovery, 2. […]
continue reading Q: Gerald, I just got started investing in real estate. People say the Fed is going to raise interest rates. Is that going to happen and if it does should I be worried? Kendrick, Cuyahoga Falls, Ohio A: Hi Kendrick, I’m always reluctant to make predictions because unlike a lot of pundits you see on TV, I can’t predict the future however all signs point to another interest rate increase and Janet Yellen has intimated that a rate increase is likely to happen. The bigger and more important issue for you as a new investor is to understand where you have the most leverage and to then focus on those areas. Interest rates are one of 7 things you cannot […]
continue reading Q: Gerald, my cousin is selling a property he’s owned for a while that’s gone up in value, but he’s worried about paying taxes on the gain. Is there any way to avoid paying big taxes on the profit? Ted, Bozeman, MT A: That’s a great question, Ted. There are two IRS codes that may allow your cousin to exclude or defer taxes on the gain from selling his property. IRS code 121 allows you to exclude up to $250,000 as an individual ($500,000 if you file taxes jointly) of the gain from the sale of property that’s been used as a primary residence for at least two of the last five years before the sale. IRS code 1031 allows […]
continue reading Q: Gerald, we’ve been trying to sell our home for over a year. Our agent has been telling us to lower our price, but the market here is really hot and I don’t want to give it away. Our house is nicer than the other houses in our neighborhood, our backyard is bigger, our basement is finished and we have a beautiful custom deck. What is our real estate agent doing wrong? Kendrick, Upper Marlboro, MD A: I’m not sure whether your Realtor is any good or not, but the bigger issue is that even in a hot real estate market, buyers are always going to look for the best value they can find. I’m sure you are understandably proud […]
continue reading Q: Gerald, my mortgage broker is telling me that mortgage rates are going to go up and that I should buy a home now before they do. Even if rates go up a little, won’t they still be historically low? Should I buy now? Carrie, Boulder, CO A: Great question, Carrie. The simple answer to your 1st question is yes, even if mortgage rates go up a little they’ll still be historically low, however that doesn’t necessarily mean that you should buy now. You’ve got to look at your personal goals and financial situation to make an intelligent decision on whether to buy a home, but let’s look at how mortgage rate movements will affect your financial ability to buy. […]
continue reading Q: Gerald, we are about to sell our home. We’ve lived here for many years and there are some things that need fixing. Which renovations should we do before we sell our home? Emily, Portland, Oregon A: Hi Emily, that’s a great question and it’s one that I get asked all the time. The best approach is probably not what you expect. Most of us want to get the highest price we can for our property when we sell so we often assume that it’s in our best interest to do repairs and renovations before we sell. Although it may seem counterintuitive, in most cases it’s not in our best financial interest to do renovations right before we sell because […]
continue reading Q: Gerald, I heard interest rates are probably going to go up. Before they do, I’m thinking we should refinance again. Mortgage rates are lower now than they were when we last refinanced. Do you think we should refinance again now? Doug, Hempstead, NY A: Hi Doug. First of all, let’s define what “refinancing” really means. Refinancing a mortgage is not free, it’s a service that lenders charge you money for. When you refinance a mortgage, normally you are paying a lender a fee or a set of fees to lend you money against equity you have in your property. There’s a difference between spending and saving. Saving is the opposite of spending. If you go shopping and buy stuff […]
continue reading Q: Is Senior Citizen Housing A Good Real Estate Investment? Ernie, Pittsburgh, PA A: Good question, Ernie, but I would caution you not to generalize about broad real estate market niches. I understand that many investors, institutional and private investors have become interested in senior housing because of the powerful lure of an aging baby boomer population. I know some investors who have both made and lost money building and investing in over 55 communities. There are many factors that make a real estate investment sound and demographic trends are certainly one of them, but but you have to look further. You have to look at supply, demand, building and labor costs if you are building as well as cost […]
continue reading Q: Gerald, I’m about to buy a rental property and I was wondering if students make good tenants? Julian, King Of Prussia, PA A: Great question, Julian. First and foremost, you should always screen potential tenants regardless of what your general strategy is as a landlord. Your strategy as a landlord should be guided by the specifics in your local real estate market where your rental property is. If your rental property is in a college town, students may be the ideal tenants, however, since students tend to be more transitory, you’ll need to budget for higher turnover costs (painting, carpeting, wear and tear) and since younger students often don’t have credit history, you should consider requiring co-signers with established […]
continue reading Q: Gerald, what real estate opportunities should I be looking out for this year. Caleb, Scotch Plains, NJ A: Great question, Caleb. Let’s take a quick look at some demographic trends. Millennials (generally considered to be people ages 18-35) have recently overtaken Baby Boomers (people of ages 51-69) in sheer numbers. America’s population of people aged 90-and-older has almost tripled since 1980. One new trend is that older households and younger households are competing for housing in many of the same real estate markets. Many millennials still do not have sufficient income and established credit to buy real estate which is why multi-family housing is still a very strong real estate opportunity in 2017. Multi-family housing can satisfy both Millennials […]
continue reading Q: Gerald, I keep hearing that we may be in another real estate bubble and everyone’s talking about interest rates going up, what should I be looking out for in 2017? Jasmyn, Bowie, MD A: Hi Jasmyn, thanks for your question and happy new year. There are plenty of real estate trends on the horizon to keep an eye on but one of the biggest challenges to real estate in 2017 is housing affordability. Home prices on average nationally are rising at 5 percent annually, which is double the rise in income–as I’ve said before, when home price increases outpace personal incomes, there’s only a matter of time before home prices fall because people’s incomes simply can’t support those inflated […]
continue reading Q: Gerald, I’m a real estate professional. Do you have any year end real estate tips for me? Lance, New Bedford, MA A: Hi Lance, last week I mentioned that you can reduce your tax burden as a real estate professional for this current tax year by paying more of your business-related expenses before the end of this year and by deferring some of your income til next year. Here are 3 more year-end real estate tips that’ll get through the winter: 1) Flush your water heaters. This is a cheap and easy procedure that only costs about $30. Flushing water heaters helps to control the buildup of mineral deposits, resulting in a more efficient heater. 2) Service oil or […]
continue readingQ: Gerald, I’m a real estate professional. Do you have any year end real estate tips for me? Lance, New Bedford, MA A: Hi Lance. Two ways to reduce your tax burden as a real estate professional for this current tax year is to pay more of your business-related expenses before the end of this year and defer income til January of next year. For example, you can send invoices late in December so collections won’t occur til January of next year–doing this will reduce your tax burden by reducing your taxable income. Thanks for your question, Lance-stay tuned for next week when I’ll reveal another end of year real estate tip. For more real estate tips and information visit […]
continue reading Q: My buyer had some complications with his mortgage so it has taken longer than expected to close on a property I’m selling. Should I just wait until January to close for tax reasons? Nicole, Bridgeport, Ct. A: Hi Nicole, that’s a good question. I don’t know whether you are selling your personal residence or another property that you own–if you’re selling your personal residence, you’re eligible for a $250,000 exclusion on the gain when you sell as an individual or a $500,000 exclusion on the gain when you sell if you’re married and file your taxes jointly with your spouse. In answering your question, I’ll assume you are selling an investment property not your personal residence. If you close […]
continue reading Q: Gerald, I’ve been arguing with my business partner about what sales price to start with on a house we just rehabbed. We want to get the highest price we can, any suggestions? Reggie, South Orange, NJ A: Reggie, great question. Like you and your business partner, everyone wants to get the highest price they can when they sell a home. The a mistake that a lot of people make when they sell a home is overpricing their property. I understand the mistaken logic that many people use when they make this critical error–they figure, if their property is worth say $250,000, maybe I should put the property on the market at $300,000 and see if I get any takers? […]
continue reading Q: Gerald, you’ve said that real estate tends to slow down during the holidays, should I take my foot off the gas in my real estate business between Thanksgiving and New Years? Anderson, Pearl River, NY A: I’m glad you asked that question, Anderson. The simple answer is no, you shouldn’t slow down your real estate business during the holidays unless you have some non-business related reason to do so. Think about it, lower market activity means less competition for the motivated real estate investor. I am a contrarian by nature anyway–as I’ve said before, if you follow the herd, you’ll end up scraping shit off the bottom of your shoes, so if everyone else is slowing down, I suggest […]
continue reading Q: Gerald, I’m having a hard time finding good real estate deals, is now a bad time to invest? Karly, Cliffside Park, NJ A: Hi Karly, great question. It’s always a good time to invest in real estate, you just have to change your tactics and strategies depending on what’s going on in your local real estate market. I saved this question specifically for Thanksgiving week, because although housing inventory levels are low, which I’m sure is responsible for some of your frustration, there are some really good real estate trends to be thankful for–here are 3: 1) While the real estate investing buy-side is more challenging, the sell-side of the business because of low inventory and high demand is […]
continue reading Q: Gerald, interest rates are still very low, but I bought my home 10 years ago at the height of the real estate market bubble and I still don’t have any equity. Is there a way for me to refinance and take advantage of these low rates? Aaron, Worcester, MA A: Good question, Aaron. If your mortgage loan is owned by Fannie Mae or Freddie Mac, you may qualify for HARP refinancing with the Home Affordable Refinance Plan (HARP). The Home Affordable Refinance Program (HARP) was created to help homeowners who are current on their mortgage payments, but have little to no equity in their homes, refinance their mortgage. So, if you owe as much or more than your home […]
continue readingTuesday November 8th 2016 is election day–not a day too soon for many of you! It’s easy to get jaded and pessimistic about our elections. I often hear people of all political stripes gripe about how corrupt politicians are, how bad their choices are and how their vote doesn’t matter. There is some truth to those criticisms. Although circumstances could always be better, remember that they also have the potential to be a whole lot worse. Democracy can be frustrating but the alternative to democracy is normally worse. It is ok to complain though–you can voice your complaint in the voting booth. Politics is much simpler than many people think—-convince enough other people of the merits of your position and […]
continue reading Q: Gerald, it seems like real estate prices have been going up quite a bit lately. Is this another bubble? How can we tell? Jennifer, Islip, NY A: That’s a great question, Jennifer. Home prices in many places have been rising recently due in large measure to the fact that there is so little housing inventory available for sale because so many people bought at the height of the last market bubble and have little or no equity. To your question, what I’m going to do is give you a tell-tale sign of another real estate market bubble. Because household income is the biggest economic driver of residential real estate markets, a tell-tale sign of a real estate bubble occurs […]
continue reading Q: Gerald, I have a tenant that’s been a nightmare ever since she moved in–she’s always late on rent, only pays after I threaten to take her to court and she bothers and harasses the other tenants in the building. What should I do? Mattie, King Of Prussia, Pennsylvania. A: A healthy landlord-tenant relationship must be a symbiotic one. If you want good tenants, you have to be good landlord and it’s important as a landlord that you set and manage expectations from the beginning. That said, if you have a problem tenant, it’s normally in your best interest if you can to work out an agreement with the tenant to leave and avoid having to go to court where […]
continue reading Q: Gerald, my insurance and property taxes on my rental property went up this year and I’m barely breaking even every month. How can I make more money to offset these expense increases? Jason, Ridgewood, NJ A: Great question, Jason. The first thing you should look at is potentially increasing rents at your property, but you have to be careful because your ability to do that will really depend on your local rental market demand because as I’ve said many times before, the person with the money decides the price. In this case, potential tenants have the money and ultimately decide rental prices. So, if you raise rents way above what similar properties in your area are going for, your […]
continue reading Q: Gerald, I’m a new investor having trouble getting started and finding good real estate deals. What should I be focusing on? Caleb, Babylon, NY A: That’s a great question, Caleb. Real estate investors have to do lots of different things to be successful–we buy, sell, negotiate and manage property just to name a few things, but we can’t do any of those things until we locate actual real estate deals, which is why one of the most important and most overlooked role we play as real estate investors is the role of marketer to find real estate deals in the first place. All the other roles as buyer, seller, negotiator and property manager are obviously essential but until you […]
continue reading Q: Why Are So Few Houses For Sale Now? Stacy, Orange, NJ A: That’s a great question, Stacy. The very low housing inventory levels we’re seeing now are due primarily to the fact that despite the fact that housing prices have steadily increased in recent years, there are still quite a few homeowners who purchased or refinanced property at the height of the last real estate market bubble and as a result have very little or no home equity–what this in turn means is that for these homeowners to be able to sell their property, they would have to reach into their pockets to pay off their mortgage debt which effectively traps them and prevents them from being able to […]
continue reading Q: Gerald, I heard an economist recently say that the number of zombie foreclosures were going down. What The Hell Is A Zombie Foreclosure?! Jamie, Bayonne, NJ A: A zombie title is a real estate title that has stayed with the owner of a residential property after the mortgage lender has begun a foreclosure process (making the owner believe in some cases that they no longer own the property). If the lender does not finish the foreclosure process, the title to the property remains in zombie status, which means it remains in limbo, hence the phrase, zombie foreclosure. Some homeowners pack up and move when they receive a foreclosure notice because they assume the lender will take the property from […]
continue reading Q: Gerald, I’m trying to stay on top of the real estate market, how do I know when prices will start moving in the other direction? Stan, Utica, NY A: Good question, Stan. You are correct to monitor your local real estate market so you can stay ahead of the game and ahead of your competition. I’m going to give you 3 indicators that telegraph a possible inflection point resulting in real estate price changes: 1) Housing Inventory Levels: Home sale activity is the best leading indicator of real estate price trends–this is because buyers create the demand for housing that is directly linked with price movement. Housing inventory levels (# months required to sell the homes for sale in […]
continue reading Q: I own rental property and my insurance broker recommended I look into landlord liability insurance? What does landlord liability insurance cover? Cliff, Wayne, PA A: Good question, Cliff. Landlords can be hit with legal claims that can result from various causes (for example if someone slips, falls and gets hurts on your property). Not to be confused with homeowner’s or property owner’s insurance, landlord liability insurance covers the cost associated with your legal defense as a landlord. Landlord liability insurance helps you to protect your rental property investment in the event of a liability claim filed by a tenant or a visitor to your rental property. Thanks for your question, Cliff! For more real estate tips and information […]
continue reading Q: Gerald, I’m under contract to sell my home and it seems like I’ve been waiting forever for the buyer to finalize his mortgage. How much time should I give a buyer to get a mortgage? Claudio, Chicago, IL. A: That’s a great question, Claudio. As the saying goes, time is money–the longer you have to wait for your buyer, the more mortgage interest you have to pay on your own mortgage and the more you’ll be forced to pay in property taxes and other expenses associated with the property you are selling. For starters, you should vet any buyer you choose to sell to by making sure they provide a written mortgage pre-approval before you sign a contract. The […]
continue readingQ: Gerald, I own several properties jointly with my boyfriend. How much mortgage interest can we each write off on our taxes? Karen, San Bernardino, CA. A: Karen, unmarried couples can now deduct effectively twice as much of their mortgage and home interest on their tax returns, thanks to a recent change by the Internal Revenue Service. The law says taxpayers can deduct up to $1 million in mortgage debt and $100,000 in home equity financing, but the new IRS position on the mortgage deduction based on a ruling from a lawsuit brought by an unmarried California couple that co-own property, allows them now to deduct up to $2.2 million. This new IRS position presents a strange situation–get married and […]
continue readingQ: Gerald, how can I make the most of today’s low interest rates? Nirav, Somerville, MA A: That’s a great question, Nirav. One obvious way to take advantage of historically low rates is by purchasing real estate with a fixed rate mortgage. Nobody knows how interest rates will change in the future, but locking in a long-term mortgage at a low fixed rate is normally a smart move if you can afford the payments particularly if mortgage rates go up in the future. A less obvious effect of a low interest rate environment that truly savvy real estate investors recognize is that low interest rates often result in there being a lot of unemployed capital sitting on the sidelines looking […]
continue readingQ: Gerald, I have a client who’s worried about his credit, because his ex-wife who got the house after their divorce stopped paying the mortgage. Jenny, North Bergen, NJ A: Jenny, as part of a divorce settlement, one spouse often gets the marital residence. In many cases, both spouses signed the original mortgage note (check with your client to see if this occurred in his situation). Many people don’t realize that transferring title does not remove an ex spouse’s obligation on the note. Furthermore, if the spouse who got the house stops making mortgage payments, there’s no way for the other spouse to get the property back. One way for a spouse to protect themselves from this calamity is to […]
continue readingQ: Gerald, I’ve been trying and trying to get my real estate business going for a while, but things never seem to line up the way I need them to. What am I doing wrong? Scott, Poughkeepsie, NY A: That is a great question, Scott and it’s one that I get asked all the time from people like you who are frustrated trying to get started investing in real estate. The first thing you always want to avoid when you’re trying to accomplish anything is self-sabotage, because you can be your own worst enemy. To help you, let’s talk about the corridor principle and how it’s key to you finding opportunities and conquering your fears. In the 1980s, Robert Ronstadt […]
continue readingQ: How will this year’s election affect the real estate market? Deanna, Philadelphia, PA A: Hi Deanna, that’s a question I’ve been asked a lot this year. First, I want to point out that there really is no such thing as “the real estate market” because every local real estate market is different and it’s a mistake to generalize across different real estate markets. Local real estate market prices are driven by many factors, but the biggest factor is supply and demand. The one factor we can look at that does affect people across local real estate markets is mortgage rates. How will the election affect mortgage rates? I unfortunately am not able to predict the future, so I don’t […]
continue readingQ: Gerald, I’m in the process of buying a short sale in Jersey but there’s a foreclosure sheriff sale coming up this month and the bank claims there isn’t enough time to process the paperwork. What can I do? Marjorie, Kenilworth, NJ A: Great question, Marjorie. I’ve successfully negotiated hundreds of real estate short sales in my investing career and what a lot of people don’t know is that under New Jersey Statute, a Sheriff’s sale of a foreclosure property can be adjourned (which means postponed) twice by the Sheriff at the request of the homeowner for any reason. Once the two “free” adjournments have been exhausted, the homeowner may apply to the Court by Motion for further adjournments but […]
continue readingQ: Gerald, I’m trying to buy a junker property to rehab. The owner keeps telling me about how much the properties in the neighborhood are selling for and when I pointed out how bad her property looks she got really pissed off and won’t return my phone calls. SOS, need some help. Cory, Edison, NJ A: Cory, one fundamental rule that you must understand if you want to be successful as a real estate investor is that real estate is a lot more about people than it is about bricks and mortar. You may be absolutely right about the condition of this woman’s home, but it’s vital that you show respect and concern for her, particularly if this is the home […]
continue readingQ: Hi Gerald, My rehab costs have really been going up lately. It’s affecting my ability to do profitable rehab flips. What can I do? Lance, Fort Lee, NJ A: I hear you loud and clear, Lance. A useful way to analyze rehab costs is to separate the cost of renovation into its parts, which are labor costs and materials costs. The cost of both labor and materials varies from place to place, but I can certainly attest to higher labor costs lately in my market. Here are 3 ways to beat rising rehab costs: 1) buy building materials in bulk–you’ll save money, it may even make sense to team up with other rehabbers you know out there who are […]
continue readingThe month of July was named in honor of the Roman general, Julius Caesar. As real estate investors, here are some insights we can derive from the famous military leader’s life. Be Bold, Take Chances While sailing to Greece, Julius Caesar was kidnapped by pirates and held for ransom. When informed that the pirates intended to ask for 20 talents as ransom, Caesar insisted that he was worth at least 50. He maintained a friendly, joking relationship with the pirates while the money was being raised but warned them that he would track them down and have them crucified after he was released. After the ransom was paid, Caesar raised a fleet, pursued and captured the pirates, and had them crucified (as a sign of leniency, he first had their […]
continue readingQ: Hi Gerald, I’m a rehabber negotiating a purchase of a bank-owned property. The listing broker keeps telling me I have to raise my purchase offer price because the market is hot. I want to build a good relationship with him, should I offer more? Eddie, Florham Park, NJ A: Great question, Eddie. I understand the pressure you’re under today with rising home prices and low housing inventory. The listing agent’s goal is to get the house sold, so it makes sense that he wants you to make a higher offer. That makes his job easier with the bank. But in order to be successful as an investor, you have to think independently and you can’t afford to let other […]
continue readingQ: Gerald, my broker just gave me a tip on a fractured condo deal in Florida. Do you think these are safe real estate investments? Jack, Ashville, NC A: Interesting question, Jack. Let’s first define what we’re talking about for everyone out there. A fractured condo project is one in which only some of the individual condo units were sold by the initial real estate developer. The unsold units present both potential investment opportunity as well as potential risks. These fractured condo deals are appealing because an investor may be able buy them at a big discount from the price the developer initially sold the early units for. However, even if that’s the case, it doesn’t necessarily make it a […]
continue readingQ: Gerald, my friend had a fire in their rehab property and the insurance company is refusing to pay the claim, should he sue? Ebony, Maplewood, NJ A: Hi Ebony, great question. The key here is the insurance policy that your friend had. An insurance policy is a contract with specific clauses. If he lived up to his end of the bargain, then the insurance company should pay and if they don’t he should go after them. However, if one of the insurance policy clauses was violated (i.e. if the property was supposed to be occupied and was actually vacant for example) the bank may not be obligated to pay the claim. Insurance is a good business for insurers because […]
continue readingOver the years, I’ve come to realize that we do ourselves a disservice when we take on new projects before we finish important projects we’ve already begun. Over time, we end up with half-finished messes instead of certified accomplishments. This is why it’s best to complete any task worth doing as soon as humanly possible, even if it means taking on fewer projects. As the explorer Alex Mackenzie once said, “The key to successful time management is doing the most important task first and giving it your full concentration, to the exclusion of everything else.” Although it does require some discipline to avoid distractions, it’s well-worth the effort. As the Dalai Lama put it, “Desire without self- discipline leads to self-destruction.” The […]
continue readingQ: Gerald, everyone always says that you should pay off your mortgage early. I remember you saying there was a danger in doing so….why? Esther, Grand Rapids, MI A: That’s a great question, Esther and yes, the conventional wisdom from many people like Suze Orman for example is that you should try to pay your mortgage off early by making extra principal payments regularly. Before I present the danger of trying to pay off your mortgage early, I will acknowledge the benefit of lower monthly fixed costs when your mortgage is paid off. The danger lies in getting stuck or hitting a bump in the road financially before the mortgage is fully paid off. It’s like trying to swim across […]
continue readingQ: Gerald, my business partner and I are looking at a commercial property we want to buy. The cap rate for similar properties in this area is about 4% and this property yields almost 6% so we’re going to jump on it. Any last minute tips you can offer me? Robert, Short Hills, NJ A: Robert, first kudos to you for spending the time and effort to do your due diligence, because the numbers are critical for an investment property. The one concern I have regarding your potential investment is your debt service–in other words, how you are planning to finance the purchase. If you’re paying cash, I’m not as concerned, but if you are borrowing money to purchase this […]
continue readingQ: Gerald, My husband and I just got out of graduate school and are trying to buy our first home. There weren’t many homes available in our price range. We found a home we liked and were pre-approved for a mortgage but our loan was denied. Is it supposed to be this hard? Mary, Dallas, Tx A: Mary, I understand your frustration. Lower priced starter homes ideal for 1st time homeowners are hard to come by right now–starter homes as a percentage of all homes available in many real estate markets are at all-time lows. There are many factors that are contributing to this dynamic: Firstly, the cost of land has gone up in many real estate markets so builders often […]
continue readingQ: Gerald. If I buy a property at the sheriff sale and there are people living in the property, is the bank responsible for removing the residents? Dawn, Boston, MA A: Dawn, if a bidder purchases a home at a sheriff sale auction, he is responsible for evicting residents, not the lender because the lender never became the owner of the home. The new owner must go to court and use formal eviction proceedings to remove occupants of the foreclosed home. The lender is also not responsible for any damages the occupants inflict to the home while the new owner is trying to evict. There are many risks involved in buying foreclosed property at a sheriff sale that you should […]
continue readingQ: Gerald, I know you go to the Berkshire Hathaway Shareholder Meeting every year. What insights did you get from Warren Buffett about the real estate market? Elvin, Teaneck, NJ A: Yes, Elvin, I do go to the Berkshire Hathaway Annual Shareholder Meeting every year, often called The Woodstock Of Capitalism to hear Warren Buffett & Charlie Munger, the 2 smartest business minds on Planet Earth speak extemporaneously for 5 hours. In fact I just returned from the 2016 Berkshire Shareholder Meeting and as usual, Warren & Charlie did not disappoint this year-their wit and insight were well worth the trip. To answer your question, Warren Buffett was asked about a comment he made back at the 2012 shareholder meeting […]
continue readingQ: I’m about to go into contract to buy an investment property. The last rental property I bought turned out to be a disaster. I want things to work out better this time, do you have any advice for me? Carlos, Woodbridge, NJ A: Good question, Carlos. What you don’t know about a property or any asset that you buy can hurt you, so you definitely should always do all your homework BEFORE you buy. Most investors, when researching an investment property before they buy focus their attention solely on financial information (i.e. rental income and expenses)–obviously finances are critically important but are only part of the overall picture of a rental property. At the end of the day, to […]
continue readingQ: I’m going to the sheriff sale auction to see if I can buy an investment property on the cheap. Any tips you can give me? Calvin, Montclair, NJ A: Good question, Calvin. You have to be very careful at auctions because there’s usually at least one person at an auction dumb enough to pay too much—you never want to compete with idiots–better to let them win. Auctions use the law of supply and demand to work in the bank’s favor at the sheriff sale. Their objective is to create an auction effect. An auction effect occurs when buyers get into a “gotta have it” mindset that can pressure them into paying more than they should. People at the auction […]
continue readingQ: My wife and I found a really good deal on a condo 25% cheaper than what the last buyer paid for it. What do you think? Kenny, West Orange, NJ A: Well on the surface, a 25% discount definitely looks like a bargain, however, the market value of the condo may have been very different when the last buyer purchased it and residential property values are typically only valid for about 6 months. Another thing to consider is that there are hidden dangers in condominiums that you should be aware of–as a former condominium developer myself, I know this from experience. One big danger with condominiums that many people aren’t aware of is an underfunded association. Condominiums are normally […]
continue readingQ: Have you heard of or used a website that offers a list of private money lenders? Is this a scam? Louis, Mendham, NJ A: Louis, I’m not sure what particular website you’re referring to but generally speaking, you should always be skeptical of anything you see advertised on the Web particularly if you don’t have any way to verify the company or individual behind it. Here are 3 indicators that an online service may be fraudulent: 1) They have no physical address 2) They charge upfront advance fees 3) They exert pressure to act immediately–advance fee loan scammers, for example, will try to get you to send money or give out personal information (credit card number, bank account information […]
continue readingQ: I am looking into buying a duplex. I would be getting a loan but I would still like to put a downpayment of 10%-20% which I would like to find a private lender to pay for. Vicente, Pomona, California A: Vicente, traditional lenders often require borrowers to ‘source’ the money they contribute to the purchase of property and a lender may refuse to approve a loan where the entire down payment comes from even a gift or if the gift is not from a close family member. Generally, lenders want to know who else their borrowers are borrowing from and ultimately, your ability to borrow a down payment depends on the requirements of the primary lender you’re borrowing from. […]
continue readingQ: I have a property that I am interested in purchasing with a partner. Would I be able to get a hard money loan or would I be better off with a private lender? Jack, Morristown, NJ A: Good question, Jack. In general, hard money lenders are in the business of lending out money short term for profit–they often borrow and pay interest on the money that they lend too so they are incentivized to charge higher interest rates. Private lenders are typically individuals seeking additional income by passively investing in real estate. Ultimately, access to capital is more important than the amount you pay for it, so if you need money to fund a deal, anything is better than […]
continue readingQ: I’ve been negotiating the price on a house with a seller that wants a lot more money than the home is worth. What can I do to convince them their asking price is too high? Jody, Hillsborough, NJ A: That’s a great question, Jody–it’s one I often get asked from frustrated real estate investors who come to me for help. The truth is that you may not be able to convince the inflexible seller you’re negotiating with that their asking price is too high, but I want to bring up a bigger and more important point for you to consider….and that is who REALLY has the power in almost any real estate deal. In most situations, the person with […]
continue readingQ: What Percentage Will Banks Discount Foreclosed Homes? Jim, Alpharetta, Georgia A: When banks sell foreclosed homes, they are normally trying to minimize their losses by trying to get the highest price they can. Overtime, however, banks have no choice but to reduce the price of foreclosed property that has not yet sold, so the most patient real estate investors will earn the steepest discounts. In general, it’s wrong to think of target pricing for foreclosed property in terms of a % discount for several reasons including the fact that the bank’s estimated property value of a foreclosed property may be inaccurate. Banks have lots of foreclosed property that they have to dispose of, and banks are typically playing with […]
continue readingQ: Gerald, I remember you mentioning the #1 trick bad tenants use to trick landlords into renting to them but I forgot what it was. What was it? Chelsea, Sea Bright, NJ A: Great question, Chelsea. The #1 trick bad tenants use to trick a landlord to rent to them is….showing up with a big wad of cash and asking to move in right away. Now the reason, this is the #1 trick that bad tenants use is because a landlord’s main goal is to collect rental income and it’s very tempting to take money when someone is waving it in your face. The potential problem for landlords is that when someone shows up suddenly with a bunch of money […]
continue readingQ: I want to partner with other people on real estate deals that I find. What should I be looking for in a real estate partner? Brian, Westerville, Ohio A: A healthy partnership can benefit you as a real estate investor. Partnerships provide moral support and encourage creative brainstorming. It’s useful to get a second opinion on decisions you make in your real estate business, particularly when you start out. I’ve been involved in many partnerships over my real estate investing career. Here are the top 3 qualities you should look for in a real estate partner: Complementary skills: partnerships are most effective when each partner specializes in certain aspects of the business–this specialization is easier when partners bring different […]
continue readingQ: Trulia or Zillo? Which is better at estimating property values? Rich, Lakewood, NJ A: The amount of information, resources and tools available on Trulia and Zillow is enormous. Regrettably, the accuracy of the information on Zillow & Trulia often leaves much to be desired. Trulia & Zillow use algorithms, to approximate property values. Algorithms are mathematical formulas used for solving problems. Unfortunately, the property values that these algorithms produce are not consistently accurate. Here are three major difficulties with Trulia, Zillow and other public property search portals: 1. Their information Is Inconsistent Trulia and Zillow, by their own admission acknowledge that their estimates are wrong a large percentage of the time. So the risk is that a home buyer […]
continue readingI have seen many unfortunate homeowners who are behind on their mortgage payments lose thousands of dollars, in some cases tens of thousands of dollars to unscrupulous attorneys. The main way attorneys steal from people in foreclosure is by charging exorbitant upfront fees and then stringing them along charging more and more fees as time goes on. The attorneys then don’t deliver on promises that they made to homeowners. Often, people who find themselves in foreclosure are understandably afraid and sometimes desperate and are looking for honest help–many unethical attorneys exploit homeowners in this situation for their own financial gain. The best way for homeowners in foreclosure to avoid losing money to swindler attorneys is to never agree to pay […]
continue readingQ: Rock Salt Or Calcium Chloride: Which Is the Best snow/ice remover? Candy, Arlington, MA A: The 2 main snow and ice removal agents people use are rock salt (aka sodium chloride) and calcium chloride. The only real advantage of using rock salt over calcium chloride to remove snow and ice is that rock salt is a little cheaper. However, calcium chloride offers several advantages over rock salt: One of the most obvious advantages is that calcium can be effective at much colder temperatures than sodium chloride/rock salt. In fact, calcium chloride can be effective at temperatures as low as -25 degrees Fahrenheit, while rock salt loses its effectiveness at temperatures below 15 degrees Fahrenheit. Also, rock salt poisons soil, damages […]
continue readingQ: Gerald, I saw a bank-owned property that I want to try to buy. How much earnest money do I need to pay to buy a bank property? Rich, Hazlet, NJ A: That’s a great question, Rich. Bank-owned property transactions also known as REOs (which stands for real estate owned) are often more intimidating for the uninitiated than typical real estate purchases. There is no all-encompassing rule etched in stone when it comes to earnest money on REOs or any real estate transaction for that matter. Let’s first identify the purpose of an earnest money deposit, which is to show a seller that a buyer is serious about purchasing a property. When the transaction is finalized, the earnest money deposit […]
continue readingPeople with aspirations can, in general, be split into two groups: 1. Doers 2. Dreamers Doers make the world go ‘round. That said, dreaming isn’t all bad … and the truth is, most doers are also big dreamers. But the key is turning dreams into real-world action. You’ll never have the life you want — the career you want — the real estate business you want — if you spend your whole life just dreaming. You’re on my list and get my newsletter because you have dreams. You want to be a better real estate investor. You want to build a bigger real estate business. You want to grow your personal fortune. You want to live a better life. These […]
continue readingWhether you’re planning on buying a property short term or long term, there are costs of homeownership you should prepare yourself for ahead of time. In addition to mortgage payments if you borrow money to buy the property, there are additional costs that property owners often don’t expect. Here are 5 additional costs of homeownership you should expect to pay when you buy property. 1. Property Taxes When you rent, you are not responsible for the property taxes on the property, but when you become a homeowner, you’re expected to pay property taxes, so when you’re trying to determine what your property payments will be for the year, the quarter or monthly, don’t forget to factor in property taxes. 2. […]
continue readingWith a new year comes another set of New Year’s Resolutions You know, classics like •“This year, I’m going to get out of debt and save money.” •“This year, I’m going to lose 25 pounds and get in shape.” •“This year, I’m going to finally make some money in real estate.” The problem with New Year’s resolutions is that they rarely have a real plan behind them. The important question to ask yourself is HOW are you going to lose 25 pounds or finally make some money in real estate? Do you have a written plan to get those things done? Without a plan with tangible, measurable goals that you can work toward every day, it’s easy to fall victim […]
continue readingGerald Lucas here, with part 2 of my end of year real estate tax tips. Let’s first recap the 1st three end of year real estate tax tips I’ve already provided to you in my last episode: 1) Consider deferring income 2) Take some last minute tax deductions 3) Account for refinancings Tax Tip #4. Prepay quarterly estimated state tax payments. Consider paying your fourth-quarter estimated state income taxes and any outstanding balance by December 31. Your payments will be tax deductible for this tax year if you’re not subject to the alternative minimum tax (AMT). Tax Tip #5. Contribute the maximum to retirement accounts There may be no better investment than tax-deferred retirement accounts because they compound over time […]
continue readingFew days bring as much anticipation as Christmas Eve, especially for children who lie awake at night, waiting to get up at the crack of dawn to tear open their presents under the Christmas tree. The truth is that anticipation is a big part of fun for everyone. Pleasant anticipation is an important source of happiness. Having something to look forward to makes us feel good and creates a healthy atmosphere based on positive expectations. There are four key stages we experience when we enjoy an event: 1. Looking forward to the moment 2. Enjoying the moment 3. Sharing the moment with others 4. Looking back on the moment Having something to look forward to brings happiness into our lives […]
continue readingMany of you have been asking me for real estate tax tips as we get closer to the end of the year, So here are a few helpful end of year real estate tax tips: Tip #1. Consider deferring your income Income is taxed in the year it is received – so it may be advantageous to delay paying tax until tomorrow rather than paying it today particularly if you expect to be in the same or lower tax bracket next year. Your situation may vary depending on if you are an employee or if you are self-employed. If you are an employee, for tax purposes, you may want to consider deferring a year-end bonus until next year. If you […]
continue readingQ: Gerald, I just bought my first vacant rehab property. How should I protect the property from thieves while I do the renovation? Phil, Mahwah, NJ A: That’s a good question, Phil. What I’m going to do right now is give you 3 ways to protect a vacant property: Alarms: Install an electronic alarm security system. Alarms will deter individuals from attempting to enter your building and will quickly alert authorities if someone does break in. Live Security: this can be a security company that patrols the area around your property or an intimidating Dog you put in the property or having someone like a handyman live temporarily in the property. Lighting: Motion-activated lights and general lighting can help protect […]
continue readingIn spite of our many blessings, it’s easy to fall victim to negative thinking. Unfortunately, negative thoughts distract you, drain you of energy and keep you from being in the present moment. The more you give into your negative thoughts, the stronger they become. On the flip side, a small positive thought can have the opposite effect, blossoming into a positive and profitable outcome. When you start to have negative thoughts, it’s often hard to stop them. Shifting your focus from negative to positive thoughts is easier said than done, but it’s the only way to avoid going down an unnecessarily painful path. When you find your thoughts tumbling down a negative slippery slope, here are 5 tips to turn […]
continue readingI want to wish you and my entire Real Estate Insider Family a warm message of Thanksgiving. I cannot tell you enough how much I appreciate YOU. A single expression of gratitude is never really sufficient, so Thank You, Thank You, Thank You … that’s Thank You to the power of three for all you math aficionados! In our fast-paced world, it’s easy to take things for granted, but I have so many things to be thankful and grateful for … including a happy, healthy and loving family, supportive friends, amazing coaching students, consulting clients, and business partners. I’m grateful for the lifestyle that real estate has afforded me over the last 15 years I’ve been actively investing. I’m thankful […]
continue readingQ: Gerald, there was a fire in one of my rental properties. I have insurance, but I’ve heard terrible stories about insurance companies ripping off homeowners. How do I get the most money for my property insurance claim? Stacy, Toms River, NJ A: Stacy, I hear you loud and clear. One of my first jobs was working as an actuary at an insurance company. Insurance companies unfortunately do rip insureds off sometimes–their goal is to collect as much money in insurance premiums as possible and then pay out the lowest amount in claims. Here are 3 tips to help you get the most money from a property insurance claim: 1) carefully review your coverage 2) document damage with photos and […]
continue readingQ: Gerald, I have a property under contract to buy. I looked at all the numbers and I’m confident that it’s a good deal, but I’m not sure whether I should wholesale the property for a quick profit or rehab and then sell the property. Billy, Columbus, Ohio A: That’s a great question, Billy–this is something that I grapple with all the time myself as a full time investor–should I flip a property as is or take the time and money to rehab it and ideally make a bigger profit? When I make that decision, here are 3 factors I consider: 1) time of year 2) how many other rehab projects I have going on & most importantly 3) how much […]
continue readingQ: Gerald, I’m doing my first rehab and it’s costing me more money than I initially thought. What should I do if I run out of money in the middle of the rehab? Sunny, Garwood, NJ A: Sunny, rehabs normally end up costing more money than you initially expect, which is why it’s always a good idea to build in a cushion when you do your planning for cost overages. In your case, since you’re already in the middle of rehabbing, the best thing to do is take an honest look at all the additional renovations that you were planning to do and prioritize them. In other words, determine the most important items that need to be repaired or replaced to make your property marketable and […]
continue readingQ: Gerald, I’m trying to raise private money to fund my first rehab project. One of the questions one of my private lender prospects asked me was how long it will take to do the renovation. How long should it take to rehab a house? Josh, Garfield, NJ A: That’s a great question, Josh. The amount of time it will take the renovate your property will depend on a number of factors including how much work needs to be done to bring the property up to the standards of the neighborhood where it’s located. The time of year may play a role in how long it will take to renovate because renovations can be more problematic and time-consuming during winter […]
continue readingQ: Gerald, I’m trying to wholesale a property I have under contract to buy. I want to protect my deal from other investors who may try to go around me and steal it from me. Got any advice for me? Carmen, Reading, PA A: Hi Carmen, this is one of the most frequent questions I get from investors working on their first wholesale real estate deal . What I’m going to do is give you the #1 sign that another investor may be trying to steal your wholesale deal. Before I give that to you I want to make sure you are on solid ground yourself. The first question to ask yourself is: do you really have a good real […]
continue readingQ: Gerald, I hired a contractor to renovate our kitchen and bathroom. The first 2 guys I spoke with wanted half of the money upfront. How much upfront money should I give a contractor before he starts working? Robbie, Passaic, NJ A: That’s a great question, Robbie and as a full time real estate investor myself, it’s an issue that I deal with all the time. So, how much money should you give a real estate contractor before he starts working? The answer is as little money as possible. If you’ve been burned by contractors in past like most of us investors have who’ve been in the business for a while, you’ll understand why. As investors, we ideally would like […]
continue readingQ: My mortgage broker told me that it would be easier for me to qualify for an adjustable-rate mortgage. Should I get an adjustable-rate mortgage? Monica, Peekskill, NY A: Monica, your mortgage broker is correct that it will probably be easier for you to qualify for an adjustable-rate mortgage than a fixed rate mortgage, but just because it’s easier to qualify doesn’t mean that it’s a good idea. Just for the record, the mortgage payments on a fixed-rate mortgage stay flat and consistent throughout the life of your loan whereas the interest rate is subject to change on an adjustable-rate mortgage–therein lies the potential danger. When you get an adjustable-rate mortgage, you are gambling on your ability to pay a […]
continue readingQ: I’m at the point in my life where I want to buy a home. Is my credit score good enough to get a mortgage? Caroline, Tinton Falls, NJ A: Caroline, your correct that your credit score is the number that lenders use to estimate the risk of lending you money and is a key factor in determining whether you will get approved for a mortgage. However, many lenders view your credit score as just one piece in the puzzle, so a low score won’t necessarily prevent you from getting a mortgage. You can be approved for a mortgage with a lower credit score if, for example, you pay a big down payment and don’t have much other debt in […]
continue readingQ: Gerald, my company is relocating. We’re moving, so should we rent our home or just sell it? Brenda, Livingston, NJ A: That’s a great question, Brenda. I want you to consider 3 factors in making your decision on whether to try to rent or to sell your home: 1. What’s the rental demand for your home? You need to make sure there’s adequate demand to rent your place. If there isn’t, then renting isn’t a viable option. 2. Will rental income realistically cover and ideally exceed all the expenses on your current home (property taxes, mortgage payments, insurance cost, repairs etc.)? If you’re losing money every month, then it probably doesn’t make sense to rent and deal with all […]
continue readingQ: I recently got a mortgage loan quote, it’s higher than the national mortgage rate I saw posted everywhere. What gives? How do I get the lowest mortgage rate? Jeff, Hillsdale, NJ A: Good question, Jeff. When you see a very low loan offers or hear about the latest movement in interest rates in the media, take it with a grain of salt. Lenders price your loan with adjustments based on certain risk factors including: Your middle credit score Your loan size (how much money you’re borrowing) The loan product you qualify for The purpose of your loan (i.e. whether you are buying or refinancing) Whether you plan to live in the property or not So, the the riskier your […]
continue readingQ: My husband and I are debating whether to buy a timeshare or vacation home? Which is a better investment? Beth, Riverdale, NY A: That’s an interesting question, Beth. When we compare a vacation home to a timeshare, the difference is essentially full time versus part-time ownership. A vacation home requires full-time ownership which includes maintenance and upkeep year round but gives you more flexibility than a timeshare to use whenever you want rather than just on a particular week when you may not be available. Although a timeshare has limits on when you can use it, timeshares tend to be more affordable than buying a vacation home and work best for you if you know exactly when you’ll take […]
continue readingQ: I’m looking for a good real estate attorney because I’m buying a home. I’ve met with several attorneys so far, but they all kind of seem the same. I know there are some really bad attorneys out there-what signs should I look for to eliminate the bad apples? Jackie, Hagerstown, MD A: Jackie, I understand your challenge in trying to separate out the bad real estate attorneys. What I’m going to do is give you 3 signs a real estate attorney is no good: Attorney promises positive results in advance. Unless the real estate attorney you are talking to is Nostradamus, he cannot foretell the future, which means that he or she can’t promise you specific results in advance. […]
continue readingQ: Gerald, my wife and I are looking for a good Realtor to sell our home. Our next door neighbor had a bad experience with a realtor when they sold their home–how can we avoid that happening to us? James & Susan, Morristown, NJ A: James & Susan, I hear you loud and clear. To help you avoid working with losers, I’m going to give you 3 signs that a realtor is incompetent: Realtor lacks experience. Having prior experience is important particularly if and when a real estate transaction doesn’t go according to plan. If you can, you and your wife should avoid being guinea pigs and allowing your realtor learn their craft while they’re working with you. The Realtor […]
continue readingQ: I’m selling my house now. What repairs should I do now before I sell? Sam, Rockville, MD A: Sam, capital improvements in general only add about 50% of their cost to the value of your home, which means that they are normally a waste of money unless the repair issue is so important that it could scare away buyers. A roof leak so bad that when it rains outside, it rains inside your house or a bathroom or kitchen that hasn’t been updated since the 1970s may be good examples of repairs that you’ll need to do in order to make your property salable. However, if your home is livable and presentable, then unless you are a contractor, it’s […]
continue readingIdentify Things You Can And Cannot Control Do you ever worry about things that are beyond your control? Unfortunately, worrying creates physical and mental problems without providing any benefits. People often worry about both the past and the future instead of focusing what they can do in the present. There’s nothing you can do about the past—the clock can’t be turned back. Worrying about what might happen in the future is equally futile and creates mental monsters that can paralyze you. The truth is that there are some things that you have no control over and others that you have complete and total control over—knowing the difference and then acting on that realization is one of the keys to personal […]
continue readingQ: If something is wrong with my home when I sell, what should I do? Tim, Teaneck, NJ A: Tim, normally when you sell your home, you are obligated to disclose problems that could affect the property’s market value. In most states it’s illegal to conceal major physical defects in your property. For the most part, you’re only responsible for disclosing information that you are aware of. The extent to which you are responsible for finding defects in your home when you sell varies from state to state, so I strongly suggest you consult an experienced local real estate attorney and your state’s real estate commission or board to confirm disclosures you’re responsible for making. Thanks for your question, Tim, […]
continue readingQ: We’re about to sell our house. What price should we sell our home for? David & Danielle, Knoxville, TN A: Great question, David & Danielle. Everyone wants to get the highest price possible for their property when they sell it. Few people know how critical the way you price your property is to getting the highest price when you sell it. Here are 3 tips that will help you price your home so you can get top dollar for it when you sell it: Go out and look at similar properties for sale in your neighborhood. This will allow you to see what the eventual buyer of your house will see when they are out looking for properties to […]
continue readingQ: My mortgage application was denied. What can I do? Lloyd, Union, NJ A: Lloyd, it’s not the end of the world just because your mortgage application was denied. Lenders reject about 50% of refinance applications and about 30 percent of buyers who apply for a mortgage loan. Keep in mind that different lenders have different requirements, so you can apply with another lender or mortgage broker. It probably makes sense to try to find out why your mortgage application was denied—so ask. Also, the denial may not be based on you as a borrower, it may be the property itself, so go back to the lender or broker and find out why your application was denied, then take concrete […]
continue readingQ: Our local real estate market is really hot. We keep getting outbid for homes we want to buy. Do you have any advice on winning a home bidding war? Kate, Summit, NJ A: Hi Kate, I’m sure it’s frustrating to pick a house you like only to lose it to someone else. As far as bidding wars go, the first and most important piece of advice I’ll offer you is 1) set your financial boundaries before you start making offers to purchase—this will protect you from paying too much in the heat of the moment. 2) The second tip is to start strong & serious—you do not want to look like a tire-kicker in a home bidding war 3) […]
continue readingSummer is finally here! From backyard barbecues to beach trips, we associate summertime with having fun. Special summer moments remind us how important it is to have fun and play. When we reach a certain age, we often begin to starve ourselves of play. This comes at a huge cost, given the many important ways our brain and senses benefit from play. Play provides nourishment for both our body and our spirit. Recent Japanese research found that spending as little as two hours a month laughing or listening to your favorite music has as big an impact on blood pressure as eliminating salty foods, or even losing 10 pounds. Having fun is also a great creative engine that boosts our […]
continue readingQ: I’ve been paying rent for years now and have nothing to show for it. Real estate prices in my area seem to be going up, so should I buy now or keep renting? Kelly, Hoboken, NJ A: That’s a great question, Kelly. Although there are many tax benefits and wealth-building benefits to owning property, it’s important that you make financial decisions that are best for you based on your individual goals and your personal financial situation. With that in mind, here are 3 key factors that you should consider in deciding whether to buy now or continue renting: 1) What you can reasonably afford (this trumps all other factors and concerns) 2) How long you plan to stay—there are […]
continue readingAll of us dwell on the past from time to time. As we live our lives, it’s only natural that we sometimes cling to what once was. But when our desire to cling to the past affects our future, we begin an unhealthy battle with anchors that can hold us down and sink us. Dwelling on mistakes gives power to the past and can perpetuate behavior we may want to change. When you think about it, everything that happens occurs in the present. Memories of events are thoughts occurring in the present. Anger or hurt about the past is happening now. What’s amazing about this understanding is that it shows you that the way out of your suffering is always […]
continue readingQ: How much should closing costs be on a mortgage loan? Henry, North Bergen, NJ A: The closing costs associated with a mortgage are usually different for each customer based on the type of mortgage they get, the property location and the amount of the loan. Mortgage loan closing costs may include appraisal fees, title insurance fees, attorney fees, pre-paid interest and documentation fees – to name a few. During the process of getting a mortgage, you are supposed to receive a good faith estimate which itemizes your closing costs in advance of your closing date, so it’s important that you review your good faith estimate to make sure you aren’t being overcharged. Thanks for your question, Henry, good luck. […]
continue readingQ: How long should it take to get a mortgage loan? Veronica, Flushing, NY A: Well that’s a good question, Veronica. Mortgage approval is a multi-step process which includes underwriting, which can take some time. The lender or mortgage broker you choose and the number of applicants they have in their pipeline will impact how long it takes to get a mortgage as well as your individual financial situation. If, for example, your financial condition is very simple and straight-forward (i.e. your employment is stable and have no debt) the process will generally be faster and can take just a few weeks. However, if you’re situation is more complicated (i.e. you’re self-employed, own several other houses, have gone through a […]
continue readingQ: What interest rate should you pay for a hard money rehab loan? Victor, Dix Hills, NY A: That’s a great question, Victor and it’s one I hear all the time. The interest rates on hard money rehab loans vary a little from lender to lender, but generally speaking, the interest rate charged falls within the same range (12-15%). However, there’s a lot more to consider than just the interest rate you pay when you borrow money to renovate a property. The more important question is regarding the terms of the hard money loan itself, specifically, whether you have to make monthly or quarterly payments on the loan before you sell the property, whether the loan requires a personal guarantee […]
continue readingQ: Do LLCs Protect Property Owners From Personal Liability? Eric, Edison, NJ A: That’s a great question, Eric. As you may know, LLC is an acronym that stands for limited liability company. An LLC is a business structure that combines the pass-through taxation of a partnership with the limited liability of a corporation. LLC owners generally are protected from personal liability for business debts and claims, which means that if the business owes money or faces a lawsuit, only the assets of the business itself are at risk. Creditors usually can’t reach the personal assets of the LLC owners. However, LLC owners can lose this protection by acting illegally, unethically, or irresponsibly. So, to answer your question, Eric, it really […]
continue readingQ: As a real estate investor, why do you go all the way to Omaha, Nebraska every year to attend Berkshire Hathaway’s shareholder meeting? Ken, New York City, NY A: Well, that’s a great question, Ken. I am a Berkshire Hathaway shareholder and huge admirer of both Warren Buffet and his business partner Charlie Munger, who are 2 of the greatest business minds that have walked the planet earth. I’ve been going to Berkshire Hathaway’s Annual Shareholder meeting in Omaha for many years. Although Warren Buffett is primarily known as a stock market investor, Berkshire owns a real estate brokerage and Charlie Munger was himself a successful property developer. I sincerely believe that you get smarter and wiser by studying […]
continue readingQ: Gerald, I set up an appointment with a home inspection company to inspect a property we are buying. What items does a home inspection cover or not cover? Janice, Charlotte, North Carolina A: Janice, I’m glad you plan to pay for a home inspection—that’s the smart choice. The focus of a home inspection is on 3 broad areas: the structural, mechanical and electrical condition of the property. So, your home inspection should uncover structural, mechanical or electrical problems in the property you’re buying. However, the inspection is not designed to detect all flaws or problems that might exist in a home. I’m going to list 5 items a home inspector’s standard practice typically does not include: 1) Asbestos 2) […]
continue readingQ: Gerald, as we continue to search for a house, we’ve decided to take your advice and pay for a home inspection. How much should we pay for a home inspection? Brook, Flanders, NJ A: Brook, you’re smart to get a home inspection. The cost of doing a home inspection will vary from place to place, but I’ve found throughout the US, most home inspections cost between $350 and $550. I’d shop around, but the experience and competence of the inspection company is more important than the cost. I’ve been investing in real estate for 15 years and I still pay for home inspections when I buy just to benefit from another set of eyes. You may be able to […]
continue readingQ: Gerald, I’m about to sign a contract to buy a home. How much time do I have to do a home inspection? Harry, Chatham, NJ A: Good question, Harry. The amount of time you have to do a home inspection normally depends on what’s written in the contract that you sign. Purchase contracts for real estate usually include what is called an inspection contingency. For the record, home inspection contingencies are handled differently in different states in the US, so check the local customs and laws in the area you are planning to purchase your property. The home inspection contingency allows a home buyer to cancel the sale or try to negotiate repairs based on the results of a […]
continue readingQ: Gerald, my wife and I found a home we want to buy but it has an oil tank buried in the front yard. What should we do? Evan, Jersey City A: Good question, Evan. The first thing you should do if you’re buying a property with an oil tank is to do a soil test to check for contamination. There are underground oil tank inspection companies that specialize in this so it shouldn’t be hard for you to find a company in your area to do it. In addition to doing the soil test, to be safe, I would suggest removing the oil tank altogether before you close on the property. When you remove an oil tank, you want […]
continue readingQ: Gerald, I’m buying a property and trying to decide which real estate attorney to use. What should I be looking for? Dan, Saddlebrook, NJ A: That’s a great question, Dan. If you haven’t dealt with many real estate attorneys I can imagine they all probably seem the same to you. What I’m going to do is give you 3 qualities you should look for in choosing the right real estate attorney: 1) Real Estate Specialization: does the attorney specialize in real estate or are they a jack-of-all trades. In general, you want someone who specializes in real estate law, in the same way if you needed surgery, you’d probably want to choose a doctor who specialized in surgery rather […]
continue readingQ: I have a 30 year fixed rate mortgage, but at the beginning of this year, my monthly loan payment went up—how can my payment increase if I have a fixed-rate mortgage? Sarah, Washington, DC A: That’s a great question, Sarah. Although you have a fixed-rate mortgage, Sarah, which means that your interest rate can’t change, your monthly mortgage payment is normally comprised of other items that can change. I’m going to give you 3 Ways Your Fixed-Rate Mortgage Payments May Go Up: 1. A change in the escrow balance your bank charges you can affect your monthly payment. 2. A change in the cost of your property insurance can affect your loan payment if insurance is bundled into your […]
continue readingQ: I gave my contractor money to buy materials for a job he was going to do for me on my rental property—he won’t return my phone calls and seems to be avoiding me. What should I do? (3 Ways Contractors Can Steal From You) Elliott, Deer Valley, NY A: Elliott, unfortunately, if you are a real estate investor and employ contractors to work on property for you, there will probably come a time when you get ripped off by a contractor. I definitely have been ripped off before, so I know the painful feeling. Here are 3 ways that contractors can steal from you: 1. The first way is what seems to have happened to you—the contractor collects money […]
continue readingQ: Are reverse mortgages a good idea? (3 disadvantages of reverse mortgages) Sandy, Chicago, Illinois A: As with most financial decisions, the right answer to whether a reverse mortgage is a good idea or not depends on your individual circumstances and goals. Since there are so many commercials on TV singing the praises of reverse mortgages, in order to provide some balance, I’m going to give you 3 disadvantages of reverse mortgages: 1)High Fees: The upfront fees (closing, insurance and origination fees) for a Reverse Mortgage are fairly high–higher normally than the cost of refinancing a mortgage loan for example. 2) Even though you no longer have to make mortgage payments, you still have additional costs associated with your home—you […]
continue readingQ: How do I prevent pipes from freezing in my home? Phil, Manasquan, NJ A: Winter time in colder parts of the US unfortunately means dealing with the risk of pipes in your home or property freezing and bursting. I’m going to give you 5 tips to help prevent pipes in your property from freezing: 1. Wrap pipes near exterior walls and in crawl spaces with pipe insulation or with heating tape. 2. Keep your home heated when it’s cold even if you’re going away or leaving the house for a long period of time. 3. Open cabinet doors below sinks to allow heat from the home to circulate. 4. Cover or close open-air vents because freezing temperatures combined with […]
continue readingQ: Gerald, my daughter found tiny wings on the windowsill of our home-is it termites? -Ed, Stamford, Ct A: Hi Ed, You can often spot pest infestation in your home by looking closely at windows and baseboards. Insects like termites shed wings on walls and windowsills and carpenter ants often leave sawdust along baseboards. If your daughter found tiny wings, it may very well be termites. Time to call an exterminator. These types of infestations can be very costly if left unchecked and termites can actually cause structural damage to your property. So you should get an exterminator in as soon as possible. Thanks for your question, Ed—good luck. For more real estate tips and information, visit geraldlucas.com or performanceproperty.com. […]
continue readingQ: The bathroom floor in one of my rental apartments is spongy—what’s causing this? -Maria, Woodbridge, NJ A: Maria, the sponginess of your bathroom floor was probably caused by excess moisture in the bathroom. Excess moisture over time can create mold which can be hazardous to your health and can ruin flooring. There may be hidden water damage in your property near ceilings and in and around bathrooms. Excess moisture can come from a leaky toilet, a broken shower spout or a roof leak—it’s best to address these issues immediately by making necessary repairs or getting a dehumidifier because over time water can cause structural damage to your property. Thanks for your question, Maria—good luck. For more real estate tips […]
continue readingQ: Should I care about a foundation crack in my home? -Eugene, Harrisburg, PA A: Good question, Eugene. Cracks in the foundation of your home that are wider than 3/16 of an inch can be very serious. If you do have a foundation crack that’s wider than 3/16 of an inch you should immediately seek the assistance of a structural engineer to check things out. The longer you let structural problems in your house fester, the more expensive the remedy often is. Thanks for your question, Eugene—good luck. For more real estate tips and information, visit geraldlucas.com or performanceproperty.com. I’m Gerald Lucas and I’ll see you again soon.
continue readingQ: Can we write off our home improvements on our taxes? (IRS loophole that helps finance home repairs) Eli, Parsippany, NJ A: Good question, Eli. The IRS gives special tax treatment to certain types of loans for home improvements. Single filers can deduct up to $500,000 and married filers up to $1 million dollars of mortgage interest that’s used to buy, build or improve a first or second home. This may allow you to deduct interest paid on home repairs and improvements if for example you use a home equity line of credit to pay for the repairs. Thanks for your question, Eli—good luck. For more real estate tips and information, visit geraldlucas.com or performanceproperty.com. I’m Gerald Lucas and I’ll […]
continue readingQ: I want to make an offer on a property I found, should I start by just throwing out a price? (The first thing you must do before negotiating a real estate contract) Lily, Woodbridge, NJ A: That’s a great question, Lily. If you can deal directly with the seller of the property (sometimes you can sometimes you can’t) the first thing you want to do is ask lots of questions and try to build rapport with the seller. A successful negotiation is one where both parties are satisfied and happy to move forward—creating a win-win situation requires identifying what’s most important to both you and the other party and then writing down points you can both agree on. This […]
continue readingQ: How much down payment should you pay when you buy a property? -Heather, Babylon, NY A: There are lots of people who say that when you buy a property you should put down as much of a down payment as possible—some people say 20%, 25%, even 50%. I understand why people like Suze Orman, for example give that advice—it’s because your monthly mortgage payment will be lower if you pay a bigger down payment when you buy a property—that’s very logical and makes sense. Unfortunately, everyone, particularly 1st time home buyers don’t have a 20% down laying around to put down on a property particularly in higher price real estate markets. Another thing to consider is that money that […]
continue readingQ: How Much Profit You Should Make If You Flip A Property? Stuart Chicago, Illinois A: That’s a question I get a lot from my coaching students, Stuart. While there is no universal set profit amount that’s etched in stone that a real estate investor should make, your profit should be worth the time and effort you put in. The more work you have to do, the more profit you should require as an investor before you make a yes or no decision on a property. It’s also important to understand the right relationship between property price and your profit. So, in general the more you pay for a property, the more profit you should make—because risk and reward go […]
continue readingQ: Which properties will make me the most money? (The 3 Keys To Buying Property That Will Make You The Most Money) June, Freeport, NY A: Good question, June. There are many factors that play into whether you’ll make money on a property you buy, but here are 3 key ones: 1. Picking the right area/neighborhood/street. This is critical because the right area will make your property more attractive to tenants if it’s a rental property and more attractive to buyers whenever you choose to sell your property 2. Picking the right kind of property-based on your budget (what you can afford to buy and maintain while you own it) and your exit strategy—exit strategy just means what you ultimately […]
continue readingQ: How much in real estate expenses can I write off on my taxes every year? Part 2 (The 4 types of real estate investor definitions/classifications that the IRS has) -Pete, Caldwell, NJ A: In our last installment, Pete from Caldwell, NJ asked how much in real estate expenses could he write off every year and I said that he could write off as little as up to $25,000 and as much as however large his real estate loss is depending on his IRS classification—this is because the amount of real estate expenses that Pete can write off every depends in part on how the IRS categorizes him and his real estate activities. What I’m going to give you now […]
continue readingQ: How much in real estate expenses can I write off on my taxes every year? (Part 1) -Pete, Caldwell, NJ A: That’s a good question, Pete. The answer to your question is that you can write off as little as up to $25,000 and as much as however large your real estate loss is depending on your IRS classification. The amount of real estate expenses that you can write off every year on your taxes depends in part on how the IRS categorizes you and your real estate activities. In my next installment I’ll take this question further and reveal the 4 types of real estate investor definitions/classifications that the IRS has. Thanks for your question, Pete. Good luck. […]
continue readingQ: Can I raise my tenant’s rent every year, and if so by how much? Carrie, Bloomfield, NJ A: The key to being an effective landlord is knowing your local real estate market, where it is and hopefully where it’s going. While landlords would always like to raise their rents to increase their profits and sometimes to offset increases in their expenses, the market ultimately decides how much rent you can charge. If you charge too much rent relative to similar properties in your area, your property will sit vacant or your existing tenants may move out if they know they can pay cheaper rent for similar digs somewhere else. For this reason I strongly recommend that you monitor market […]
continue readingEvery year, millions of Americans gather for Thanksgiving to celebrate family, friends and connection. Thanksgiving is more than just a cultural tradition, however, and science now shows that celebrating Thanksgiving and practicing gratitude can elevate our levels of happiness. Gratitude enriches human life and mental well-being. Gratitude increases self-esteem and increases your energy levels. Gratitude elevates, energizes, inspires and transforms. Gratitude strengthens relationships, reduces stress and improves health. So how does gratitude improve health? On one level, it helps people to sleep better. A 2009 study of 401 people— 40% of whom had clinical sleep disorders— found that the most grateful people had better sleep quality, normalized sleep duration (not too long or too short), were able to fall asleep […]
continue readingQ: I’m trying to budget for my expenses this year. Is there a way for me to estimate the cost of homeowner’s insurance? -Gary, Wilmington, DE A: Gary, insurance rates vary a lot from place to place. But, there is a broad rule of thumb you can use to get a rough estimate of your annual homeowner’s insurance which is to divide the value of the home by 1,000 and then multiply the result by $3.50. Again, as I said, this will only give you a very rough estimate, and your premium will depend on where your house is located and other factors like how much insurance coverage you get—so I suggest to find out for sure you get a […]
continue readingQ: I’m buying a home after years of renting, what are the new expenses I need to be concerned about ? -Patricia, North Bergen, NJ A: That’s a good question, Patricia. I’m a big proponent of home ownership, there are many benefits that make it worthwhile, however, there are expenses that you’ll have to begin taking care of when you buy a home. Here are the 3 most overlooked real estate expenses: 1. Property Taxes Property taxes can be demanding because even if you’ve paid off you mortgage, you still owe what amounts to a monthly fee to the town or the municipality in which you reside. Remember, the bank doesn’t decide your property tax, the town or city where […]
continue readingQ: Gerald, when is the best time to sell a property? Gail, Rye, NY A: Gail, home buyers generally tend to come out in droves during the spring. Also, spring buyers with recently received tax refund checks in their bank accounts pay full price more often than at other times of the year. This may explain why more than half of those who move do so in the summer. Regardless of what time of year you choose to sell, the key to getting top dollar for your property is pricing—you must price it to sell, if you overprice a property it will most likely sit on the market regardless of the time of year. Thanks for your question, Gail. Good […]
continue readingQ: Gerald, we’re thinking about buying a property. When is the best time to buy a property? Neville, Princeton, NJ A: Neville, the best month to make an offer on a house is January. Fewer buyers are willing to house-hunt during the winter, so there’s less competition and fewer bidding wars. Sellers also tend to be more motivated than they will be in the spring, when there are more buyers. This may be because they’ve just received their credit card statements after a Christmas spending spree and are feeling the need to tighten their financial belt. Plus, their decision to try to sell their home in the winter means they’re willing to risk listing during a time of the year […]
continue readingQ: What’s the best legal entity to buy a property in? -Scott, Georgia A: In my opinion, an LLC, which stands for limited liability company is the best legal entity to buy property in because LLCs provide both liability protection and tax flexibility. In addition, I’ve found LLCs to be easier and cheaper to set up and maintain than other legal entities. Owning an LLC will require you to adhere to certain corporate formalities like preparing meeting minutes on a regular basis. As I said last time, it’s also a good idea to consult an experienced CPA and real estate attorney before you make a final decision. Thanks for your question, Scott. Good luck. For more real estate tips and […]
continue readingQ: I’m looking at rental properties to buy in my area. I’ve heard people say that you should never buy a property in your own name. Is it better to buy an investment property in your name or in a company name? -Scott, Atlanta, GA A: That’s a great question, Scott. When you buy an asset like real estate in a separate legal entity rather than in your own name, it does provide you with extra liability protection. However, buying a property in a company name does often limit the kind of financing you can get. Sometimes, for example, if you purchase a property in a short sale transaction, the bank won’t allow you to buy in a company name. […]
continue readingQ: We’re in the market for a new home. Should we go to a bank or use a mortgage broker to get a home loan? (Mortgage Broker Or Bank-Which Is Better?) Vincent, Union City, NJ A: That’s a great question, Vincent. The first place people normally turn when they want to get a mortgage is their local bank, normally because it’s the first thing that pops into their mind. However, most people want to get the lowest interest rate and best loan they possibly can when they buy a property and I’ve found that mortgage brokers normally are better than banks. The reason is simple, mortgage brokers work with a variety of lenders not just one, so they can shop […]
continue readingQ: Gerald, we finally got rid of a terrible tenant in our rental property-he didn’t pay for months and he tore the place up. We’re looking for a new tenant now, how can we avoid another disaster? -Patrick, Orlando, FL A: Sorry to hear about your trouble, Patrick. As a long-time landlord myself, I can certainly relate. What I’m going to do is give you three warning signs of a potential bad tenant: 1) The prospective tenant is in a hurry to move in right away-this often is because they just got kicked out of their last place. The key is to have rules and regulations and to stick to them. Never allow yourself to be rushed through your own […]
continue readingQ: How To Avoid Getting Ripped Off On A New Roof? Chris, Memphis, Tennessee A: Continuing from our last discussion on roof replacement based on Chris’ question, I’m going to give you some tips for finding a good roofer and protecting yourself with a solid contractor agreement. As I said in the last installment, a roof is one of the most expensive items to replace in a home. I suggest getting at least 3 quotes, from licensed contractors—you can probably get someone without a license to do the work cheaper but you’re taking a big risk that I wouldn’t recommend—I’ve cut corners before on houses that I’ve had renovated before and paid the price for it later. Getting referrals from […]
continue readingQ: I’ve been dealing with lots of roof leaks lately. When it rains hard, I sometimes have to put a pot down on the floor to catch all the water. How much does it cost to replace a roof? Chris, Memphis, Tennessee A: Good question, Chris. A roof is one of the most expensive items you’ll ever replace on a home, so I can understand why you’d want to know how much it’s gonna cost. I’m in the process of replacing a roof on a building I bought 8 years ago right now, so I know where you’re coming from. The first thing to consider is that material and labor costs will vary enormously from place to place- because it […]
continue readingQ: When I was saving and planning for our first home, I overlooked the insurance cost. Now with principal, interest and property tax payments, our family is stretched thin financially. How can we lower our homeowner’s insurance cost? (3 ways to lower your homeowner’s insurance): 3 Ways To Lower Homeowner’s Insurance-Gerald Lucas reveals Shaun, Boise, Idaho A: Great question, Shaun. I’m going to give you 3 tips for lowering your homeowner’s insurance: 1) Shop around, don’t just take the first quote that you get. It’s better to use a broker or agent who can search for the cheapest policy out there. 2) Make sure you’re not over insured. Being under insured can be dangerous if your property is damaged and […]
continue readingQ: Gerald, we had a really rough winter and just when I caught a break from record heating bills, the summer is in full swing. Do you have any tips to lower my utility bills in the summer? Charlie, Chicago, Illinois A: Great question, Charlie. I’m going to give you 3 tips to lower your utility bills during the summer: 1) Clean air-conditioning filters every month and check your air conditioner once a year to make sure that it’s functioning property. People often ignore their air conditioning system until something goes wrong, then they end up having to buy a new unit instead of making minor fixes. 2) If you need a new air conditioner, buy an energy-efficient one—it’ll lower […]
continue readingQ: Gerald, I’m looking at buying a home and because I’ve never seemed to have much luck negotiating when I bought a car, I’m nervous about the negotiation side of purchasing a property. Do you have any tips you can give me? – Larry, Sparta NJ A: That’s a great question, Larry and by the way it’s normal to be nervous about negotiating especially if you don’t have a lot of experience doing it-this applies to most people. There’s a myth about effective negotiating that a lot of people hold which is that being a good negotiator is about one person dominating and getting his or her way over the other person-that couldn’t be further from the truth. Effective negotiation […]
continue readingQ: Gerald, We are selling our home. Our Realtor wants to do a Sunday open house—with 3 small children a dog and a cat, it’s a real inconvenience but I don’t want to get in the way of selling our home. How important is holding an open house to selling a home? (Are open houses necessary?) Maryann, Bethesda, MD A: Hi Maryann, that’s a great question. Realtors normally just do open houses to please home sellers or because they just buy into the misguided conventional wisdom that open houses are effective. Open houses are normally a huge waste of time. The truth is that houses sell primarily based on 2 factors: 1) a home buyer’s preference and 2) a home […]
continue readingQ: Gerald, my wife and I recently signed a contract to buy a home, but we just found another home we like much better. Gary, New Rochelle, NY A: Hi Gary, normally when you sign a contract you are bound to perform based on the terms of the contract. However, most standard real estate contracts contain contingency clauses that may give you room to back out. The 2 most common contingencies that appear in written real estate contracts are mortgage contingencies and an inspection contingencies. If, for example, your purchase contract has a mortgage contingency and you can demonstrate that you were unable to obtain a mortgage or if your contract has an inspection clause and the seller is unable […]
continue readingQ: Gerald, I just had twins and it’s clear to me and my husband that we need a bigger place to live. We were thinking about putting in a new bathroom before we sell our current house so we can fetch a higher price. How much will a new bathroom increase our home’s property value?
continue readingQ: Gerald, we’re in the middle of buying a house and recently got a very long, detailed home inspection report. We really like the property but aren’t sure which items we should ask the seller to take care of. Can you give us some advice on the most important items in the inspection report we should focus on? A: That’s a good question. To make things easy for you, it’s useful to distinguish between the items in the inspection report that are cosmetic versus potentially serious. Home inspectors often include cosmetic items in the inspection reports so that the reports are longer, have more pages and look to be more thorough than they really are. So, cosmetic items include suggestions […]
continue readingQ: Gerald, my wife has been on me about renovating our kitchen. How much will a new kitchen increase our property value? A: Hi Doug, that’s a great question & it’s a question that I hear all the time. While it’s certainly true that if your kitchen is outdated or run down it will make your house much less desirable to buyers, however, it’s a bad idea to think of a home renovation like a new or updated kitchen as an investment-because as investments go, it’s a bad investment, because the returns are negative. When you make an investment, you normally want more money back than you put in, so if for example you invest $1, you’d like to get […]
continue readingQ: Gerald, I was watching one of those financial programs on TV the other day and one of the guests was saying that stocks have been proven to be a much better investment over time than real estate based on historical returns. Is that true? A: That’s a great question, Andrew. And just like you, I’ve heard people say that before also. The thing is that most of these kinds of studies & statistics that you will hear about the returns on real estate versus stocks are very misleading; for starters, they look at averages and your life isn’t made up of a set of averages, it’s made up of a specific set of things that happen to you that […]
continue readingQ: Gerald, we’ve taken the advice you gave us and increased the rents in our apartment building a little bit every year. Is there anything else we can do to increase the income that our rental property generates? Carol & Bill, Seattle, Washington A: Thanks to both Carol & Bill for your question. Here are 3 ways to increase rental property income: 1. Charge separately for parking spaces on your property, if local zoning laws allow, (this does not necessarily have to be a current tenant—you can enter into an agreement to provide paid parking for non-tenants) 2. Add additional storage space in your building and charge for it, either as a la cart additional rental source for current tenants […]
continue readingQ: Should I Stage My House Before I Sell It? Tommy, Orlando, FL A: Good question, Tommie. My simple answer to your question is yes, you should stage your home if you can afford it. Staging helps make a home easier to sell because people buy on emotion and staging makes it easier for potential buyers to picture themselves in a home. When staging, little things matter (ambiance, appearance and lighting all count). Also, less is often more—you don’t have to go overboard furnishing every inch of a home, just the basics, neat and presentable—it’s a good idea to leave enough empty space for your buyers to imagine their belongings in the house.
continue readingQ: How do I rent my apartment fast? Charles, Montville, NJ A:That’s a great question, Charles for all of the landlords out there. The best way to rent your apartment fast is to offer it and advertize it for rent at a slightly lower price than your competition—that is other landlords out there trying to rent a similarly sized apartment in the same area where your apartment is. This may seem strange I know, because as a landlord you want to maximize your profit, and to do that you may initially think that a higher asking price for your apartment will accomplish that. Unfortunately, it normally doesn’t, because your potential tenants looking for an apartment are going to shop around […]
continue readingQ: How much is my home really worth? Amy, Washington, DC A: Zillo, Trulia. Better than nothing, but to really find out the value of your property, you need to either get an appraisal or get a licensed Realtor with access to your local multiple listing service (MLS) to give you a comparative market analysis with recent sold price comparables. 90% of what goes into the current value of a residential property is what similar properties have sold for in the last 6 months—so the key to arriving at the most accurate estimate of your home’s current value is getting recent sold price comparables in your neighborhood and you can accomplish that by getting an appraisal or a comparative market […]
continue readingQ: Where is the best real estate market? Roger, Huntsville, Alabama A: Great question, Roger. I get this question all the time—the holy grail of real estate investing-how to find the best RE marketing to invest it. Most of the time, when you read an article about the best real estate markets to invest in, the writer is referencing an average like highest housing appreciation over the last year in a particular area or they may be referencing a prediction that someone has made about appreciation for the coming year. Unfortunately, the real world of RE investing isn’t quite so cut and dry because even within an area that are neighborhoods and streets that don’t follow the general trend. Also, […]
continue readingQ: We recently purchased a rental property. We’ve got an infant at home with another baby on the way. Our expenses seem to keep piling up, how can we reduce our rental property expenses? (3 ways to reduce rental property expenses)Darren, Fairfax, Virginia A: Great question, Darren, for all the landlords out there. Here are 3 ways to reduce rental property expenses: 1. Replace older toilets with more efficient low-flow models. Less water down the drain, means a lower water bill. 2. Tighten up your rental lease to make tenants responsible in writing for apartment damage 3. Separate the heating and the electric meters for each unit so that each renter pays their own heating & electric bill. Thanks for […]
continue readingQ: Is it better to have a written lease for a tenant or a month-to-month lease? Jason, Fort Wayne, Indiana A: Great question for all the landlords out there also for renters. A month 2 month agreement gives landlord and a tenant more flexibility and if you’re a landlord that may work to your advantage or disadvantage. If you have a good tenant, ideally you’d want to try to lock them into as long a lease as possible. If you have a bad tenant, a month-to-month lease gives you more flexibility to get rid of them, but remember, a tenant can cancel a month-to-month agreement with 30 days notice also. Screening your tenants is a best practice for successful landlords […]
continue readingQ: What’s the best way to find a new tenant fast? Kelly, Milwaukee, Wisconsin A: In my local market, I’ve found that a for rent sign (1) in the window of the house or apartment has worked best— Some other advertizing options: posting rental signs or banners(2), asking existing tenants for referrals (especially if they’re good tenants) (3), holding an open house(4), posting fliers at local businesses(5), place an ad in the local newspaper(6), craigslist(7), realtor(8), property mgmt company(9), add in a local penny saver (10). The effectiveness of each approach will vary, but in general, the more you advertize and the more ways you advertize, the better and the faster you’ll find a good tenant. Thanks for your question, […]
continue readingQ: I’ve been waiting for weeks to for my mortgage approval, if I’m denied, where else can I get the money to buy? Ken, Dover, New Hampshire A: Hi Ken, What I’m going to do for you is give you 5 different ways to finance a real estate purchase. The first is probably the most obvious choice, a bank, mortgage brokers, credit unions, hard money lenders (much higher interest rates & points—they are useful when you borrow for short periods of time particularly when you buy a property that needs substantial renovation) private investors, don’t assume that you’ll get lower rates, but it never hurts to check. Thanks for your question, ________, for more real estate tips, visit performanceproperty.com and […]
continue readingQ: Hi Gerald, I need to find a good contractor to do some property renovations. The last time I hired a contractor, he took forever to do the work and never finished even though we paid him in full. I’d do the work myself, but with our new baby and the increased hours I have to work on my new job, I just don’t have the time. How do I protect myself from getting ripped off by a contractor? Steve, Hartford, Connecticut. A: Hi Steve, first of all, don’t beat yourself up about what happened with the last contractor you hired—it’s water under the bridge and is something you can learn from. We all make mistakes and unfortunately even the […]
continue readingQ: Hi Gerald, I read somewhere that a condo is a stepping stone to a single family home. My boyfriend and I are thinking about buying a condo until we get married and start a family. How can we evaluate a condo’s resale and rental potential before we buy? Sandra, Philadelphia, PA A: Hi Sandra, All economic activity is driven by demand, so your ability to resell a condo or any property is based primarily on how attractive that property is or will be to eligible buyers in the future. Unfortunately, nobody can predict real estate market movements. The best we can do is make the most informed buying decision possible based on concrete, verifiable information available to us today. […]
continue readingQ: Hi Gerald, I’m buying my first house, I’m pretty handy, do I really need to get a home inspection? Zach, Minneapolis, MN A: Yes, although it does cost extra money that I’m sure you don’t want to spend, it makes sense to pay for a professional home inspector to inspect a property before you buy it. I’ve been a real estate investor for almost 15 years and even I can benefit from a 2nd set of eyes. I get home inspections on every property I buy. The home inspector should prepare a detailed report for you. To choose the best home inspection company in your area you may want to ask for referrals from people you know and trust […]
continue readingQ: The tenant that just moved out of our rental property had lots of animals, how do you remove pet odor from a house? Renee’, Albuquerque, NM A: Renee’, here are 3 ways to remove pet odor from a house 1 Baking soda. A natural odor absorber and a natural air freshener 2 Use a HEPA filter and change the furnace and A/C filters frequently. Airborne pet odor can get trapped in your air filters and recirculate the stench on a continuous basis. 3 Paint the house. This may sound drastic but when all else fails painting the interior of your home may be just what you needed. It’s probably a good idea to paint before you show your property […]
continue readingQ: My wife and I are having another baby and I really need more income. How can I generate more income using real estate? Curt, Billings, Montana A: Thanks for your question, Curt. I’m going to give you 3 ways to earn passive income using real estate? 1) Rental properties 2) Private loans 3) REITS-mention URF; REIT is a company that owns, and in most cases, operates income-producing real estate. REITs are normally required to distribute the majority of their profits every year so they are a good source of passive income. Thanks for your question, Curt. For more real estate tips and for information on my real estate coaching program, visit performanceproperty.com. I’m Gerald Lucas and I’ll see you […]
continue readingQ: I’m buying a house and I think it’s in a flood zone. I want to make sure that my family and I are protected. What does flood insurance cover? (3 important facts about flood insurance) Henry, Boulder, CO A: That’s a great real estate question, Henry and one that’s very important particularly given the more extreme weather we are experiencing as a result of global warming. I actually worked briefly as an actuary for an insurance company many years ago not long after Hurricane Andrew. So to answer your question, flood insurance covers direct physical loss caused by flood. What I’m going to do is I’m going to give you 3 important facts about flood insurance that you may […]
continue readingQ: I’ve been looking at rental properties to buy, I’m trying to budget my expenses and want to know how much it really cost to maintain a rental property? Carol, Tempe, Arizona A: That’s a great question, Carol. There are lots of factors that affect property maintenance costs. The condition of the property will influence the maintenance costs the property generates—so, newly built or newly renovated properties typically have lower maintenance costs than properties that haven’t been updated or renovated for a while. But I understand, before you actually own a property, it’s hard to know what assumptions to use to try to anticipate maintenance costs. I’ve owned many properties over my career as a RE investor and there are […]
continue readingProperty Management-5 Essential Contract Clauses Q: I don’t have the time to manage our property myself anymore so I’m thinking about hiring a company to do it. How should I protect myself? (5 clauses every property mgmt agreement must have) Jill, Little Rock, Arkansas A: That’s a great question, Jill. The first thing you’ll need to protect yourself is a written agreement or contract between you and the company or individual that will manage your property. Here are 5 items every property management agreement must have 1. parties to the contract, 2. beginning date of service 3. roles & responsibilities, 4. payment terms and 5. termination clause Thanks for your question, Jill. For more real estate tips and for information […]
continue readingQ: Hi Gerald, I found a great deal on a property that I want to buy. I’m satisfied that I did adequate due diligence: I checked sold price comparables and the property is fully rented in an area where I know I can find other tenants. The problem is that my attorney is trying to convince me not to buy it. What do you think I should do? Kevin, Salt Lake City, Utah Gerald: Hi Kevin, attorneys do not exist to give financial advice although they often do. An attorney’s job is to interpret the law. Unfortunately, attorneys thrive on power—this power is maximized by creating fear in their clients. The more frightened they make their client, the more their […]
continue readingQ: Hi Gerald, I need to find a good contractor to do some property renovations. The last time I hired a contractor, he took forever to do the work and never finished even though we paid him in full. I’d do the work myself, but with our new baby and the increased hours I have to work on my new job, I just don’t have the time. What should I do?Steve, Hartford, Connecticut. Gerald: Hi Steve, first of all, don’t beat yourself up about what happened with the last contractor you hired—it’s water under the bridge and is something you can learn from. We all make mistakes and unfortunately even the most seasoned real estate investors have had bad experiences […]
continue readingQ: Hi Gerald, my tenant is not happy about getting a rent increase although the lease she signed states that the Landlord is entitled to raise the rent. Of course we would like to keep a good relationship! How should I reply to this? Thanks in advance! Julie G: Excellent question Julie. You are correct to be concerned about maintaining a good relationship with your tenant. Firstly, you should openly acknowledge that you understand and appreciate how your tenant feels about the rent increase. I normally tell tenants in many communications that although I am a landlord, I know what it feels like to be a tenant because I have been a tenant in the past and I understand […]
continue readingQ: Hi Gerald, I read somewhere that a condo is a stepping stone to a single family home. My boyfriend and I are thinking about buying a condo until we get married and start a family. How can we evaluate a condo’s resale and rental potential before we buy? Sandra, Philadelphia, PA Gerald: Hi Sandra, All economic activity is driven by demand, so your ability to resell a condo or any property is based primarily on how attractive that property is or will be to eligible buyers in the future. Unfortunately, nobody can predict real estate market movements. The best we can do is make the most informed buying decision possible based on concrete, verifiable information available to us today. […]
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