Recent changes to the way Fair Isaac computes people’s credit score are welcomed, long overdue and benefit borrowers, creditors and real estate markets across the country. The revision to the credit score algorithm that eliminates medical bills from consideration is especially appropriate given the high incidence of mistakes and miscommunication. What a lot of people don’t know is that creditors report information to the 3 major credit reporting agencies on a voluntary and inconsistent basis which unfortunately means that mistakes are made all the time; AND the 3 big credit reporting agencies : Experian, Transunion and Equifax, really don’t have much of an incentive to fix mistakes on your credit report. The good news is that you can take control […]
continue readingRule of 72s: You can quickly calculate the number of years it will take for your real estate investment to double in value by dividing the annual % growth rate by 72: # years to double in value = 72/Rate of Growth. For example: At an 8% annual growth rate, your real estate investment will double in about 9 years (72/8=9) At an 12% annual growth rate, your real estate investment will double in about 6 years (72/12=6) At an 24% annual growth rate, your real estate investment will double in about 3 years (72/24=3)
continue readingThe Capitalization or Cap Rate for a property is the ratio between its net operating income (NOI) and the property’s value: Capitalization Rate = Net Operating Income/Value You can transpose the formula to solve for property value or net operating income: Property Value = Net Operating Income/Capitalization Rate Net Operating Income = Property Value*Capitalization Rate
continue readingUntapped home equity can be a dangerous temptation for homeowners and real estate investors. You have to be careful before you take on additional debt, even if it’s mortgage debt which is normally considered to be good debt, because when you do, you increase your monthly fixed payments. People often tap home equity to renovate or upgrade a property. This may be a very good idea if you’re renovating an income-generating property so that it earns more money for you. However, I have seen many people over-renovate their primary residence spending tens of thousands of dollars on over-the-top kitchens and bathrooms that they didn’t need and didn’t really increase the value of their home!—also, don’t forget, you’re supposed to pay […]
continue readingSalt used to remove ice during winter is often harmful to concrete surfaces.
continue readingThe recent cooling of the US housing market is as much the result of unrealistic earlier expectations of another impending real estate boom as anything else. The first signs of increased real estate activity sent journalists into a frenzy. Economic fundamentals not media hype drive real estate, as all economic activity ultimately is driven by demand. Also, every residential property market is different and some markets aren’t cooling right now. Housing affordability in many places has gone down which obviously has a dampening effect on demand particularly for first time home buyers who are essential to all residential real estate markets. Click here for the full article!
continue readingClassifying real estate expenditures as repairs rather than capital improvements often results in tax savings.
continue readingMore foreign buyers of US real estate is a natural consequence of increased global trade. In addition, housing bubbles in places like China make US real estate investment more attractive. The percentage of foreign buyer-driven real estate transactions throughout the United States is exaggerated. Foreign buyers are only buying in big numbers in a small select group of markets and they are only buying certain types of properties so their impact on US real estate in general is not as high as you may think. Ultimately, income and household formation are bigger drivers of real estate demand than foreign buyers. -Gerald Click here for the original article!
continue readingLandlords normally must deposit security deposits into an interest bearing account within 30 days of the receipt of the security deposit.
continue readingUse low-flow toilets to reduce your water bill or make your existing toilet more efficient by dropping a soda bottle filled with sand or water into the tank. It will use less water each time it flushes. -Gerald
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 readingReal Estate Tip: Use logic and never let emotions affect real estate investing decisions. -Gerald
continue readingThis latest data that shows a record low in real-estate-linked debt’s share of bank assets highlights the mortgage lending reluctance that we’ve been seeing in US real estate for quite some time. Unfortunately, good borrowers today are being penalized for the sins of the past. In a typical knee-jerk reaction, the pendulum has swung way too far in the other direction locking many responsible buyers, particularly younger, first time buyers out of the real estate market. The fact that Wells Fargo is cutting its minimum credit scores for loans backed by Fannie Mae and Freddie Mac however is a welcome sign. -Gerald Click here for the original article!
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 readingReal Estate Tip: Know when to walk away in a negotiation to purchase a property. When you walk away, a lot of times the other party will come back to you later on–and if and when they do, you’ll have an even stronger negotiating position to work from. -Gerald
continue readingCrowdsourcing, the practice of obtaining services, ideas, or content by soliciting contributions from a large group of people, especially from an on line community is shaking up the economic status quo in many ways. Crowdsourcing in commercial real estate is providing access to major real estate developments for individual investors previously locked out of that sector. As with any investment, there are risks, particularly now as these new crowdsourcing models evolve. Nevertheless, why should accredited investors have all the fun? A truly free market should allow access to these kinds of investments to regular people too. -Gerald Click here for the original article!
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 readingBefore you make offers to buy property, look at as many similar properties in that area as possible so you’ll have a solid frame of reference to make a reasonable bid. -Gerald
continue readingA lot has been written recently about the changing attitudes among Millenials regarding home ownership. This change is obviously driven primarily by current economic and credit realities in the US. The desire for home ownership is high among Millenials like previous generations, however, current economic circumstances make buying more difficult. Income ultimately drives everything in our economy—the American Dream of home ownership is alive and well but for many in the Millenial generation it is a dream deferred. -Gerald Click here for the original article!
continue readingIn a real estate transaction, don’t accept any piece of important data that is provided to you until you’ve gotten third party confirmation of it (i.e. lease-verified rental income numbers) -Gerald
continue readingOne of the main reasons real estate prices throughout much of the US have risen so precipitously recently is because of the lack of supply of houses to buy. That shortage of supply is due in large measure to the millions of homeowners whose mortgages are still underwater and are unable to sell. The ‘technical’ end to the recession occurred a long time ago but the mortgage crisis still looms large in many places particularly in working class and lower-income neighborhoods. -Gerald Click here for the original article!
continue readingMake clear to your home inspector that you’d never hire him to do repair work on your property. Otherwise, he may try to inflate or invent problems with your property in his inspection report and then try to get you to hire him to do the repair work. -Gerald
continue readingThe percentage of 1st time home buyers is shrinking. Tight lending standards are partially to blame. As a result of improved technology and globalization, the US economy requires fewer workers—this in turn is contributing to high unemployment among young adults. We’re still missing 1.3 million people working since the beginning of the recession and many of the jobs that have been created are low wage service jobs. Increasing job opportunities and income among young people is critical for the overall economy and is critical for sustaining a real estate recovery. When a young person buys their first home from someone who’s outgrown that home, the purchase and sale triggers another purchase and sale of a higher priced home—this is what […]
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 readingBefore you buy a previously owned property, call the local utility companies to try to get historical gas, electrical and water usage info. This will help you more accurately predict your operating expenses.
continue readingWe’re not out of the woods yet with respect to people being upside down on their mortgages. This is particularly true in many coastal real estate markets that tend to experience bigger price swings. In New Jersey, my home state, home prices tend to increase between 4-5% annually. Based on that average appreciation, New Jersey home prices at the height of the real estate market bubble in 2005 reached 2020 price levels! We have a ways to go, but I’m an eternal optimist and things are getting better. Click here for the original article!
continue readingDo a thorough title search before you buy a property to make sure that you get clear title free of outstanding liens or other encumbrances. -Gerald
continue readingRent-versus-buy declarations like this one from Trulia’s chief economist often paint a misleading picture for people trying to decide whether it’s time to purchase a home. The actual mortgage rate a borrower will pay depends on many factors that averaged mortgage rates don’t capture. In addition, rent prices, property taxes and home insurance rates vary greatly from place to place. If you’re buying property in a flood zone, you’ll have to add the additional cost of flood insurance to your calculation. It’s important that any prospective homeowner do their own individual rent-versus-buy determination based on their credit profile and local housing market. -Gerald Click here for the original article!
continue readingWhen you renovate a property, get multiple bids from several contractors–prepare a set of bidding instructions with a detailed scope of work, a start and finish date so you can compare bids effectively. -Gerald
continue readingNew Jersey is among several ‘judicial’ states in the US that process foreclosures in the court system. This judicial review provides a layer of protection for struggling homeowners, giving them more time to avoid foreclosure by working out loan modifications or by selling their homes via a negotiated settlement called a short sale. One consequence of this policy is much higher numbers of New Jersey homes in active or pre-foreclosure. The actual number of distressed homes varies enormously from city to city within New Jersey based on income and unemployment levels as well as local housing demand. The higher number of distressed homes also provides buying opportunities for savvy buyers and investors. -Gerald Click here for the original article!
continue readingHousing inventory is low in many real estate markets across the US now due to a number of factors: 1) many homeowners who bought or refinanced at the height of the real estate market are still upside down on their mortgages which prevents them from selling without doing a short sale 2) there is still substantial “shadow inventory” from unresolved pre-foreclosures particularly in states like New Jersey that adjudicate foreclosures in the court system 3) Many builders are reluctant to start new construction projects because of fear of tepid demand -Gerald Click here for the original article!
continue readingBefore you sign the closing documents for a mortgage, compare the settlement statement with the Good Faith Estimate to make sure there are no errors–these errors coincidentally favor the lender in most cases. Caveat Emptor 🙂 -Gerald
continue readingIt is often said that people make buying decisions with emotion and then justify them with logic. This is especially true for home purchases. This unfortunate tendency can be particularly destructive if you fall in love with a property that is intended strictly for investment and end up overpaying for it. Emotions must be held in check, and subdued with cold, calculated, logic when you are making buying decisions on investment property. -Gerald Click here for the original article!
continue readingGet a thorough home inspection before you buy real estate and get one before you pay for an appraisal just in case the inspection reveals something so major you decide against buying the property.
continue readingReal estate has always been a predictable way to build wealth. Real estate is also a good hedge against inflation. Other financial benefits of real estate investing include cash flow, tax benefits and leveraged asset appreciation. After a banner year on Wall Street, it shouldn’t surprise anyone that many stock investors are taking some of their profits off the table and looking to park them in a real, tangible asset like real estate. -Gerald Click here for the original article!
continue readingWhen you get a mortgage loan to buy a home, ask for a Good Faith Estimate so you can review all the terms on your loan offer and see the interest rate, payment and closing costs. -Gerald
continue readingWe’re still anxiously awaiting Congress’ extension of the Mortgage Forgiveness & Debt Relief Act (MFDRA) for 2014. I am optimistic that Congress will extend the MFDRA to provide relief to homeowners. Even without the extension of the MFDRA, the IRS allows exceptions that may eliminate any tax burden after the cancellation of mortgage debt. Ask your accountant about IRS Publication 908. -Gerald Click here for the original article!
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